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Blackstone makes $400m China mall play

The global real estate giant has made its second investment in a Chinese real estate company since the summer, acquiring a 40-percent stake in Shenzhen-based retail developer SCP.

The Blackstone Group has bought a 40 percent stake in SCP Company, a shopping mall owner, operator and developer in China, on behalf of the firm’s maiden Asia fund. The investment represents Blackstone’s largest mall investment in the Asia-Pacific to date.

The size of the deal was not disclosed, but PERE understands the New York-based firm paid approximately $400 million for its stake. SCP has a total asset value of more than $2 billion. 

It was the fifth deal transacted by Blackstone for its debut Asia fund, Blackstone Real Estate Partners (BREP) Asia. When completed, it will mean the firm has committed 20 percent of its $3.5 billion target equity haul for the vehicle.

Shenzhen-based SCP, formerly known as SZITIC Commercial Property, has developed approximately 43 million square feet of shopping malls over the past decade, and currently owns and manages 19 shopping malls across the country. The vacancy rate in these malls is approximately 5 percent, with tenants including US retail giant Walmart and clothes store H&M.

The investment by Blackstone is not the company’s first engagement by private equity investors. Others to have invested with SCP have included Morgan Stanley, the Carlyle Group and Harvest Capital Partners. Carlyle will continue to partner with SCP on a project basis, Ding added. However, once the deal closes, Blackstone will be the sole international investor in the company, said Chris Heady, senior managing director and head of real estate Asia at Blackstone.

He said at a press conference: “These malls are an important strategy for us because they are not luxury malls. They are designed to address demand from the rising middle class in China.” 

“Retail sales have grown on average by 16 percent per annum over the past ten years, however there are only a few high quality shopping mall managers in China and SCP is one of the most experienced,” Heady said. He said Blackstone hopes to work with SCP in “both organic growth and new acquisitions,” and suggested that Blackstone could continue to support SCP financially should the opportunity for new developments arise.

Blackstone most recently tendered a HK$2.5 billion (€242 million; $322 million) bid to take private Hong Kong-listed Tysan Holdings.

The firm is currently seeking $3.5 billion for its BREP Asia, which held a first close on $1.5 billion in June.