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Nexus Select Trust (NXST) has entered into an agreement to acquire a 100% stake in the under-construction Galaxy Complex, Guwahati, for Rs16bn. The asset comprises a 0.5msf retail mall and a 164-key Hyatt Regency Hotel. The acquisition is at an implied cap rate of 8.25-8.5% and marks its second underconstruction acquisition after Nexus Runwal Gardens Mall in MMR. It also reflects NXST’s focus on the high-potential consumption markets of the East and Northeast regions. The acquisition also underscores NXST’s goal of expanding its portfolio to 18–20msf by FY30, with an incremental NOI addition of Rs10bn. We have already factored potential acquisitions into our valuation and reiterate BUY with an unchanged TP of Rs190, based on the NOI capitalization method, using cap rates of 7.0% for retail assets and 8.0% for the commercial and hospitality portfolio.

Transaction details

NXST is acquiring the under-construction complex comprising 0.5msf of retail space and a 164-key Hyatt Regency hotel for Rs16bn. Construction is expected to be completed in 4QFY28, with rentals expected from FY29. The consideration will be paid upon completion of construction and receipt of necessary approvals and will be funded through ~40% debt, with the balance through fresh unit issuance and a unit swap. The acquisition implies a cap rate of 8.25–8.5% for the mall and an 11.5–12.5x EBITDA multiple for the hotel. The mall is already 30% pre-leased to major brands.

Focus on high-potential East region consumption market

Guwahati has a population of 2.2mn, with a per capita income of $7000, and accounts for 45% of Assam’s gross state domestic product, according to the company. The city has limited grade A retail supply, with City Center being the largest mall with 0.4-0.45msf of leasing area. Guwahati remains a preferred destination for brands expanding their presence in the East. The acquisition highlights NXST’s focus on capitalizing on the East region’s high consumption potential, where the unorganized market remains the dominant retail channel.

Rs6bn incremental NOI visibility from East region acquisitions

NXST’s current operational retail portfolio stands at 10.96msf (including Diamond Plaza), and the company targets 18-20msf of leasable area by FY30, with an additional Rs10bn of NOI. It has already entered into agreements for 2 under-construction assets (Galaxy Complex and Runwal Garden Mall) with a combined leasable area of 1.2msf. The company has identified 8 retail assets across India for potential acquisition, with a combined NOI of Rs8bn. Of these, 4 assets in East India are in the pipeline, with a gross leasable area of 2.6msf and Rs 6bn incremental NOI (Rs 6bn NOI includes Diamond Plaza and Galaxy complex). These are expected to be announced over the next 6-8 months, with most of the assets already operational/constructed.

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