New Delhi and Mumbai: Blackstone and Brookfield are among the bulge-bracket global private equity investors that are in stake-purchase talks with about half a dozen malls in India as part of their broader strategy to launch retail REITs, three people familiar with the matter told ET. Among the targeted malls are Marina Mall, (Chennai), Brookefields Mall (Coimbatore), DB Mall (Bhopal) and Logix Mall (Noida).“REIT is the best way to free up the capital and both malls and funds are trying to leverage the current situation to their advantage,” said Shubhranshu Pani, Managing Director-Retail (India), JLL, adding that Blackstone is the biggest player already with about 9 million square feet of retail space. According to CRISIL, malls in India have debt of Rs 4,200 crore but their revenues are set to halve this fiscal. “We are in discussions with Blackstone and want to exit from the existing mall. We feel Blackstone might want to club it with others for a possible REIT,” said Abdul Wadood of Chennai’s Marina Mall.Logix and DB Mall have said they weren’t in talks with the funds while Brookefields Mall said it had exploratory chats with some funds earlier. Both Blackstone and Brookfield declined to comment.“Some of the foreign funds are in talks with malls to buy a stake and then they will launch a REIT. Malls are also looking for funds to continue operations and this would be the best time for them to exit the business. This is also the best opportunity for shopping mall developers to unlock assets. The money derived out of sales from such projects can be diverted into various other developers which need funds,” said Susil S Dungarwal, Chief Mall Mechanic, Beyond Squarefeet, a mall advisory and mall management company.Another mall consultant aware of the development said Blackstone is eyeing opportunities in both tier-I and -II cities. The sizes of these assets vary from 2 lakh sq ft to 1 million sq ft, depending on the location.“These are the two major funds in the market for quality assets but other investors are also looking for the right asset. Foreign investors are eyeing independent malls that are willing to give majority stake,” said the consultant. Over the past few years, Blackstone has emerged as the most aggressive institutional investor in India’s real estate sector, picking up properties across major cities in deals that are turning out to be benchmarks in the sector. The company owns India’s biggest portfolio of income-producing office assets across key property markets of Noida, Mumbai, Pune and Bengaluru.“We are seeing funds actively exploring the opportunity to sell commercial/retail assets to REITs for some of their assets where the investments have reached the exit end of the investment cycle,” said Zulfiqar Shivji, founder of boutique audit and consulting firm ZADN & Associates. “In many cases, rental incomes are suppressed at this point of time due to the current pandemic. And that makes it difficult to settle on price based on expected rents beyond these uncertain times. But people would negotiate clauses for pricing formula considering the levels at which rentals would stabilise in next two years,” adds Shivji.“This would enable deals that otherwise will be stuck with disagreement on rent potential of assets or the funds not willing to take haircuts if valuations of rent yielding assets are done at current suppressed rentals for a limited period of uncertainty.”Lawyers involved with such deals say that the valuations are attractive and some discussions are happening, but funds are also willing to explore new investment opportunities. “Funds and developers may also look to monetize logistics and warehousing assets through REITs or divestments. These assets have performed relatively better during the lockdown, and tend to have a more stable tenant base,” adds Sudip Mahapatra, partner at law firm S&R Associates. According to CRISIL, much of the impact on mall revenue is because multiplexes, food courts, restaurants and gaming zones have not yet opened in many locations as per government orders. These businesses, which contribute 22% to the total revenues, have borne the brunt of the impact on operations due to social distancing and are also expected to take the longest to recover.