September 10, 20209pmThe AustralianUS private equity firms...

September 10, 2020
9pm

The Australian

US private equity firms looking at Australian shopping centres

Major funds out of the US that search for M&A bargains include groups such as Apollo Global Management, Blackstone, Brookfield, Kohlberg Kravis Roberts, Warburg Pincus and Starwood Capital.

Apollo is known to have been keen to get a foothold in Australia’s real estate sector for some time, while Starwood, Blackstone, Warburg Pincus and Brookfield are already major investors.

Blackstone made a windfall with its investment in Sydney’s Top Ryde shopping centre, offloading the mall about two years ago for about $700m after buying the debt of the troubled asset amid the global financial crisis and then paying $341m for the mall.

However, other Australian malls were not purchased as cheaply and it tried to sell an Australian retail property portfolio in 2017 for $4bn through UBS. It suspended the plans when buyers did not meet its price expectations.

The understanding at this stage is that major US-based groups are only testing the waters when it comes to transactions, with some experts saying deals were likely to occur next year if they did happen.

This would coincide with the government’s COVID-19 subsidies coming to an end.

Some point to the $6.3bn Vicinity Centres as the most likely target.

Chief executive Grant Kelley was previously the co-head of Asia Pacific for Apollo Global Management.

However, any transaction would require the blessing of 15 per cent shareholder John Gandel, which also co-owns Melbourne’s Chadstone shopping centre with Vicinity.

US private equity firms are also sizing up opportunities closer to home.

This week, Simon Property Group and Brookfield Property Partners agreed to buy US department store chain JC Penney out of bankruptcy for $US800m ($1.1bn).

Both groups were landlords to the struggling retailer, but the retailer also owned its own properties.

The deal is set to see the parties own about 490 of JC Penney’s 650 stores outright.

They will lease 160 other stores plus distribution centres from the lenders, which will own those assets in return for forgiving some of JC Penney’s $US5bn in debt, according to the Wall Street Journal.

It will be interesting to see if similar examples are seen in the Australian market next year.