Private equity firm Blackstone Group LP has bought nearly 600 US shopping malls from Australia’s debt-laden Centro Properties for US$9.4 billion in one of the biggest global property deals since the credit crisis.
Blackstone, making its first major entry into US retail real estate, was expected to recapitalize the portfolio of mainly neighborhood shopping centers before seeking a return on the investment in three to five years, Centro executives said yesterday.
“We went through a very exhaustive auction process in the US. We believe we have a very compelling offer from Blackstone ... That is really quite an extraordinary figure,” Centro chief executive Robert Tsenin told reporters.
The price was a 1.3 percent discount to their Dec. 31 book value. Centro Retail Trust securities closed US$0.05 higher at US$0.355.
The assets of 588 properties include 560 shopping centers, housing major grocers and retailers. Centro said it did not see much upside from the assets, which analysts say are struggling with weak occupancy rates and limp rent amid a patchy recovery in the US commercial real estate market.
“There’s an opportunity to increase occupancy to something that’s a little higher,” Keefe, Bruyette & Woods analyst Benjamin Yang said. “And to the extent that these properties were under-managed, there might be an opportunity there to get rents back to market and maybe put in a better tenant base.”
Debt-laden Centro will use the proceeds from the sale to recapitalize its Australian property assets, which includes mainly regional and sub-regional shopping centers that have different characteristics from the US assets.
Centro said total equity proceeds from the sale, after paying down debt, would be US$1.38 billion.
The US commercial real estate market began to rebound last year, but the recovery has been uneven. The highest quality properties in the most densely populated areas have recouped much of their lost value, while the rest have languished.
Centro is the latest example of Blackstone’s rapidly expanding property empire, which includes the Hilton hotels chain, a 7.6 percent stake in US regional mall owner General Growth Properties Inc and expanding holdings in US warehouse and distribution centers.
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