Blackstone Buys Melbourne Mall for $333 Million - Wall Street Journal- India

Asset manager Blackstone Group LP has bought an Australian mall from Lend Lease Group for 360 million Australian dollars (US$333 million), people familiar with the matter said Tuesday.

Blackstone snapped up Melbourne's Greensborough Plaza—which counts electronics and furniture retailer Harvey Norman Ltd., supermarket chains Coles and Aldi, and cinema operator Hoyts among its main tenants—from an unlisted Lend Lease fund. That follows the U.S.-based firm's A$341 million purchase in October of the Top Ryde City mall in Sydney from receivers McGrathNicol, and its 2011 acquisition of real-estate investment manager Valad Property Group for around A$800 million.

Lend Lease

Greensborough Plaza's main tenants include electronics and furniture retailer Harvey Norman, supermarket chains Coles and Aldi and cinema operator Hoyts.

The Wall Street Journal reported in April that Blackstone was seeking to raise up to US$4 billion, twice what it originally indicated, for the largest real-estate fund solely targeting Asia.

With interest rates globally near record lows, real-estate funds such as those managed by Blackstone and the Carlyle Group are in high demand as investors seek yield. Blackstone projected a net annual return of 18% for its $13.3 billion global fund that concluded fund raising in 2012.

Competition for Australian retail assets is heating up, as a depreciating currency makes the country more appealing to investors like pension funds, which are already active there.

"There's certainly a huge appetite for retail centers at the moment," said Steven Lerche, CBRE's Australian director of retail investments. "There continues to be a huge weight of overseas money looking at those types of properties as uncertainty surrounding other asset classes leads them back to bricks and mortar."

"Retail properties are tightly held," he added. "There's not much available at the moment."

Australians' spending at online retailers is running at about 6.1% of their spending at brick-and-mortar retailers, according to the National Australia Bank Online Retail Sales Index.

A flurry of activity over the past two months includes Lend Lease's A$397 million purchase of a 50% stake in Erina Fair mall in New South Wales, and Challenger Ltd.'s A$602 million purchase of 50% stakes in six regional malls from Federation Centres Ltd. Lend Lease bought on behalf of National Pension Service of Korea, while Challenger is managing those assets for the Abu Dhabi Investment Authority. Last October, the Abu Dhabi authority and the Canada Pension Plan Investment Board paid A$436 million each for stakes in the unlisted AMP Capital Retail Trust, which owns malls in New South Wales and Queensland states.

"Management teams are focused on core businesses, given how tough the operating environment is—so if prices are holding up, they're more open to selling," said Maxim Asset Management managing director Winston Sammut, a Lend Lease shareholder.

Sovereign and pension funds aren't the only buyers pursuing high-yielding Australian property. Other alternative asset managers and the principal arms of investment banks have been actively buying Australian real-estate loans.

In late 2011, Lloyds Banking Group's Australian subsidiary BOS International sold A$1.7 billion of distressed property loans to Morgan Stanley Real Estate and a consortium made up of Goldman Sachs and Brookfield Asset Management . In mid-2012, BOS International sold a similar portfolio with a face value of A$1.8 billion to funds managed by the Blackstone Group and Morgan Stanley.