Warburg Pincus is betting $125 million on the growth of retail in Indonesia.
The private equity giant is teaming with real estate firm Nirvana Development to create a joint venture that will “build and develop a best-in-class retail platform in Indonesia,” according to a statement.
Pincus has the option to invest another $75 million into the venture, which will put together hypermarket-anchored shopping malls in the island nation’s second- and third-tier cities. The companies intend to “capitalize on the growth potential driven by rapid urbanization, emerging consumption and outsize economic growth in these areas.”
The partnership, subject to shareholder approval and expected to close in the second quarter, will expand Nirvana’s operations and be seeded with four operating assets and other projects under development.
“With this plan, we will seek to enhance and expand our retail relationships to further deliver quality service and growth to our tenants and stakeholders,” said Wilson Effendy, chief executive officer of Nirvana.
Warburg Pincus managing director Jeffrey Perlman added that, “With a rapidly expanding middle class and a nascent modern retail sector outside of Jakarta, there is a meaningful opportunity to contribute to Indonesia’s consumption transformation.”
Indonesia ranked 15th in A.T. Kearney’s 2014 Global Retail Development Index and was described by the consultancy as a “bright market with challenges” and a “strong retail market in the mid-to-long term.”
“Underpenetrated tier-two cities are starting to see growth in modern retail,” the consultancy said in its annual ranking of developing markets. “Local department store Matahari Putra Prima and developer PT Lippo Karawaci plan to expand aggressively to untapped markets in smaller cities and on the outskirts of Jakarta, the largest city.”
South Korea’s Lotte Shopping, France’s Galeries Lafayette and Japan’s Uniqlo all entered the market in 2013.