We'll hold and manage high quality retail assets: David Fischel
Capital Shopping Centres Group Plc (CSC), a UK FTSE-100 company with over £7 billion assets (around Rs 60,800 crore), formed a joint venture with Provogue (India) in 2007 — Prozone CSC — for developing shopping centres, residential colonies and commercial offices in tier II and III cities in India. Now, Prozone CSC, with over Rs 1,500 crore of land bank and assets, has decided to get listed on the Indian bourses. David Fischel, chief executive of CSC Group, talks to Dilip Kumar Jha in an interview. Edited excerpts:
What is the rationale behind the demerger?
Prozone CSC has been through a well-managed incubation period and is poised for a new phase of growth. We thought it would be easier for investors to understand the property portfolio de-linked from the Provogue retail business. We hope the listing of a separate company will unlock additional value for our shareholders. In Prozone CSC, promoters of Provogue will hold 35.08 per cent, CSC 32.38 per cent and the balance with the public.
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How do you differentiate Prozone CSC from the existing Indian players?
Our centres are built with an ownership vision of 20 years. Such developments have proven stable. We have experienced property adjacent to major retail centres draws residential, commercial and hospitality projects. Therefore, we acquired additional land banks around our locations. Prozone CSC has commenced development of residential and commercial assets to sell them and create debt-free retail assets. Our balance sheet is virtually debt-free unlike other players in this industry. In addition to projects under development, we are looking at growth via acquisitions.
What is your strategy, going forward?
Prozone CSC has six projects under various stages of development in Aurangabad, Coimbatore, Nagpur, Indore, Jaipur and Mysore. The combined land bank has a development potential of 17.9 million square feet. Currently, one retail centre is operational in Aurangabad. We are positioning Prozone CSC as India’s leading developer, owner and manager of high quality shopping centres, focused on India’s emerging cities. We will utilise retail, residential and commercial developments in our business model. In the UK, CSC owns 14 retail properties including 10 of the top 25 regional shopping centres and posseses 35 years of experience of global operations. This unique operation model will surely benefit India. Prozone CSC will emerge as a leader in the Indian retail infrastructure market. We will create, hold and manage high quality retail assets for delivering value to our shareholders. In 10 years, I expect Prozone CSC to have a strong geographic spread of mixed-use developments in operation across India.
How is Prozone CSC’s strategy linked to your large experience?
In the UK, regional retail super centres represent about 17 per cent of retail space, but contribute to around 40 per cent of non-food retail. Retailers in these locations, once the consumer franchise is established, are less prone to switch locations and sticky assets are created. Such assets have proven to attract strong yields. In India, we expect yield compression as the retail market matures in line with urbanisation and strong real growth in retail rents.
A project must be fully planned to reduce construction time and minimise interest burden. We design incorporating immediate parking needs and additional spaces that can be added later at lower cost.
What do you mean by sticky assets?
It is a real estate asset that has sustainable growth in value and is difficult to replicate. Once the retail assets surrounded with residential complex become established, it’s difficult for another player to enter in the vicinity, yielding the first-mover an advantage.
What is the key development philosophy of Prozone CSC?
In retail, we design around the shopper, focusing on comfort, convenience and value. By delivering a rewarding shopping experience, we will develop long-term relationships with India’s retail community and establish retail property assets with strong future value. In residential, we will provide quality contemporary family homes. Our gated colonies are designed with large open spaces -private gardens and sporting areas. The cash flows from these assets offset retail construction costs and fuel land acquisitions.
Is Prozone CSC focusing only in tier II & III cities?
India has 17 per cent of the world’s population but only three per cent of the world’s land mass. This is fuelling an urbanisation anticipated to result in over 50 per cent of India’s population being urbanised by 2020. This puts pressure on real estate prices in metros like Mumbai and Delhi and is expected to give rise to new urban centres in tier II and tier III cities. Hence, our focus presently remains on tier II and III cities.