Private equity firm Blackstone Group LP has struck a deal to buy nearly 600 U.S. shopping malls and other properties from Australia's Centro Property Group for about $9.4 billion, a person with direct knowledge of the transaction said Monday.
Blackstone beat rival bidders that include Morgan Stanley Real Estate, which had teamed up with Starwood Capital Group, and New York-based NRDC, according to the person, who was not authorized to talk to the media and did not want to be identified.
The portfolio includes 560 U.S. shopping centers, whose tenants include grocery store operators such as Kroger Co., Safeway Inc., and Koninklijke Ahold NV, which owns Stop & Shop and Giant.
It is the latest addition to Blackstone's rapidly expanding property empire, which includes the Hilton hotels chain. A sale would allow Centro to reduce its large debt load.
Centro shares were halted ahead of an expected announcement on Tuesday. Blackstone shares were unchanged in trading before the U.S. markets opened.
A Centro spokeswoman declined to comment, while Blackstone officials were not immediately available.
The $9.4 billion purchase price equals book value for the assets, the source said, confirming a report in the Wall Street Journal.
The mall sector has weathered the U.S. commercial real estate downturn better than most, but still faces pressure as consumers struggle with high unemployment and rising energy prices and turn increasingly to online shopping.
While consumer confidence is at a three-year high, this has not triggered robust economic growth. Last week, the U.S. government said the economy grew at a lower-than-expected 2.8 percent annualized rate in the fourth quarter.
REAL ESTATE PRESENCE
Centro was one of corporate Australia's first casualties of the 2008 global credit crisis, having saddled itself with too much debt.
The company said last week that its total portfolio was valued at A$16.5 billion (US$16.8 billion), while it has A$16 billion (US$16.3 billion) in debt.
Any asset sales would need approval from Centro's lenders, now mainly hedge and distressed debt funds.
Blackstone is unusual among private equity firms in having a large number of real estate investments. It oversaw $33.2 billion of real estate assets at year-end, up 63 percent from a year earlier, according to a Friday regulatory filing.
Earlier this month, Blackstone said it was seeing a recovery in office and hospitality sectors, and concerns about inflation are making real estate a more attractive investment.
The company said its current real estate fund, Blackstone Real Estate Partners VI, was about 70 percent invested, and that it plans to start fundraising for a seventh fund this year.
Last year, Blackstone bought 180 properties from ProLogis for $1.01 billion and paid Eaton Vance Corp $900 million for industrial real estate.
Blackstone acquired Hilton for $26 billion at the peak of the buyout bubble in July 2007.
UBS, JPMorgan and Moelis & Co. are advising Centro on the asset sale.
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