The Blackstone Group has agreed to purchase 36 shopping centres, located primarily in the Southeastern US, for $473.1 million from Equity One, a North Miami Beach, Florida-based owner and developer of shopping centres. The purchase price includes the assumption of mortgage loans with an aggregate principal balance of approximately $177.4 million as of 30 June.
The acquisition, which is scheduled to close in the fourth quarter, will be one of the first deals on behalf of Blackstone Real Estate Partners (BREP) VII, which has not yet funded a transaction. Blackstone held a first close on more than $4 billion for its latest global real estate fund in August, four months after the firm officially announced the start of fundraising. Investors included the New Jersey Division of Investment, which agreed to commit $300 million in July, and the Pennsylvania Public School Employees’ Retirement System, which approved a commitment of up to $300 million to the fund in June.
Blackstone declined to comment on fundraising, but sources familiar with the situation said an additional amount is expected to be committed by the end of October, with a final close projected for the first half of 2012. Given the pace of its fundraising, BREP VII will be at least the size of its previous global opportunity fund, BREP VI, which closed on $10.9 billion in February 2007 and is now fully invested, sources said.
The shopping centres, which total about 3.9 million square feet, are located primarily in Georgia and Florida, with additional properties in North Carolina, South Carolina, Alabama, Tennessee and Maryland. The portfolio – comprising assets ranging from the 41,250-square-foot Belfair II in Bluffton, South Carolina to the 731,678-square-foot Carolina Pavilion in Charlotte – generated net operating income of about $35.4 million for the 12-month period ended 30 June.
For Blackstone, the transaction “was an opportunity to buy a large portfolio of primarily Publix-anchored neighbourhood centres,” which typically trade at a premium, a company official said. The capitalisation rate of the properties – likely to exceed 7.5 percent going forward – also was attractive.
The current average occupancy rate of the portfolio is approximately 91 percent, compared to an average occupancy of 97 percent in 2006. Blackstone, which acquired the properties below replacement costs, is assuming the portfolio will gain 250 basis points in occupancy over its five-year hold period, according to the official. Additionally, the firm will be managing the assets through its Centro platform, acquired through its March purchase of Sydney-based Centro Property Group’s US assets for $9.4 billion on behalf of BREP VI.
Equity One plans to use proceeds from the sale to pay off debt, finance redevelopment projects and future acquisitions and for other corporate purposes. “We are very pleased to enter into this transaction with Blackstone,” said Jeff Olson, chief executive of Equity One, in a statement. “This sale significantly advances our strategic plan to concentrate our portfolio in the urban retail markets of New York, Miami, Boston, San Francisco and Los Angeles.”