Blackstone To Buy Centro Malls For $9.4 Billion (BX)

Steve Schwarzman led private equity firm the Blackstone Group BX has struck a deal to buy nearly 600 U.S. based strip malls and other properties from Australia's Centro Property Group for around $9.4 billion. According to sources, the PE firm beat out a rival bid from a consortium which included Morgan Stanley's real estate arm, and Starwood Capital. The portfolio of real estate assets is said to include 560 U.S. shopping centers. The $9.4 billion price tag is equal to the properties' current book value. The portfolio is not considered to contain premium real estate assets, and this could provide an opportunity for Blackstone. While prime commercial real estate held up fairly well in the market downturn, and has since recouped much of its lost value, lesser quality assets are still struggling with weak occupancy and rental rates. Benjamin Yang, analyst at Keefe, Bruyette & Woods, said that this deal could pay off handsomely if these lesser quality properties experience a rebound in the coming years. "To the extent that they are looking for some meaningful return, probably in the double-digit territory, they're not going to get those type of returns getting the "A" quality properties," Yang said. "There's an opportunity to increase occupancy to something that's a little higher," he 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."