Mumbai-based real estate company Phoenix Mills and private equity major Blackstone are scouting for mall acquisitions, persons familiar with the development have told FE. Among the properties that these players are eyeing include a mall in Coimbatore across 0.75 million sq ft and a plot that Larsen & Toubro (L&T) won as part of the metro rail project in Hyderabad. The plot in Hyderabad is being developed and L&T is hoping to monetise the property by subleasing it. The mall in Coimbatore, on the other hand, is fully operational and can be bought outright; market players estimate its value at between R400 crore and R500 crore. A query sent to L&T was not answered while senior officials at Phoenix Mills declined to comment. After building up one of the largest office portfolios in the country valued at estimated at $4 billion, Blackstone is now adding exposure to retail properties. Sources say the PE fund was negotiating with Xander for a purchase of the VR mall in Bengaluru earlier this year but talks fell through. This came soon after it acquired Alpha G Corp, whose portfolio included a mall each in Amritsar and Ahmedabad. Later, it snapped up L&T\u2019s Seawoods Grand Central mall in Navi Mumbai. Industry experts point out that with funds having chased a handful of commercial assets, yield rates over the past five years have been moved from 12% to 9.5%. Some\u00a0of the built- up, fully leased out offices that are located in premium micro markets now command a cap rate of 8%. In comparison, retail space remains relatively affordable, with cap rates currently in the region of 11%-12%. Investments will probably flow into mature assets first before moving into properties that are under construction, experts added. Although Blackstone is learnt to have had some rounds of talks with L&T, it is not in the DNA of the PE giant to sign up properties that are under construction. Typically, Blackstone follows a strict rule of the thumb wherein it only invests in projects that are built-up and income-generating. Rarely has it taken construction risk on a project. Phoenix\u2019s gameplan is somewhat different \u2014 given that it is a development company, it is more receptive to acquiring brownfield projects. Recently, Phoenix was in the race to bid for GMR\u2019s 2 million sq ft of retail mall space at Delhi\u2019s IGI Airport. \u201cPhoenix is looking for brownfield acquisitions because most of its mall projects are now mature and will not result in massive upsides,\u201d said one sector analyst who did not wish to be named. So far the company has been outbid in auctions and negotiations, he added. Typically, Phoenix has been known to be prudent when it comes to writing big cheques. Some experts said terms of payment in a subleasing arrangement are more attractive that a pure-play land purchase. Pankaj Renjhen, managing director of retail at JLL India, pointed out that unlike land deals, payment for a sublease arrangement would be for a longer tenure, a big advantage for developers, especially at a time when there is capital pressure. Still, as FE reported, GMR Infrastructure\u2019s auction to monetise 2 million sq ft of space at Delhi\u2019s airport could turn out to be a damp squib as bidders got cold feet with the large project cost estimate. One analyst said subleasing terms less than 30 years is not optimum, given that it takes five years to build a mall in the first place. Value can be derived from a 30-year initial lease, with a caveat to extend it to another one, this person said. The asking amount cannot be too large because there is no ownership; it\u2019s only a sublease arrangement. Subleasing, a well-established and popular way of executing infrastructure and hotel projects, is still a relatively new method in the retail space. Although a definite trend, acquisitions in the retail segment are not anticipated to be as large as the inflows into commercial offices given there are not more than 15 malls that are considered top performing with less than 5% vacancy. Industry watchers said tier-II towns definitely provide an opportunity, especially from large apparel brands like Zara and H&M, but multiple stores of the same brands might result in demand cannibalisation.