Metro Cash & Carry to tap real estate market

BANGALORE: German retail giant Metro Cash & Carry is floating a real estate joint venture with local developers for its store network across the country. Under this proposal, Metro will transfer its land bank into the JVs and sell a majority stake to realty firms depending on the development potential at each location.

���This is an alternate to help us monetise the surplus floor space index (FSI) in a market with significant real estate costs,��� a Metro spokesperson said. Globally, it will be Metro���s first such initiative to tap real estate potential associated with its core business. The world���s fourth largest retailer entered India through 100% wholesale trading arm in 2003.

Metro operates six big box distribution centres in the country, and has entered into an MoU with Punjab for starting six stores. Metro also plans to expand in existing markets such as Karnataka, Maharashtra, Andhra Pradesh and West Bengal though the company has not officially commented on this.

Metro AG���s Indian unit holds between 7-8 acres of land at each of the locations where it proposes to set up a store. Based on FSI calculations, this has thrown up opportunities for raising some money through stake sales after the store development . Floor Space Index or (FSI) denotes the amount of construction that can be done on a particular piece of land.

���Metro stores at each of our locations will be fully owned by us, even as we may look at being part of the joint venture. In the past, we have received proposals from real estate firms to buy our existing stores and lease it back us however, we are not interested, as we would like to have complete control over our stores,��� the company official added. The nature of the proposed mixeduse development through JVs could vary depending on the location. Sectoral observers said such initiatives would benefit both the retailer as well as the realtor bogged down with land costs, especially in a downturn.

In fact, Mukesh Ambani-led Reliance Retail has been pursuing a similar strategy of selling some real estate around its stores, but the process is yet to start in any significant way. It is believed that Reliance Retail���s JV with US realty giant Vornado was expected to play a crucial role here. Another domestic retailer, More, a part of Aditya Birla Group, had also held exploratory talks with French hospitality giant Accor to set up boutique hotels alongside some stores.