Bloomberg News

Blackstone’s Brixmor Plans $300 Million Retail Redevelopment

October 18, 2011

(Adds projected completion of Equity One deal in 13th paragraph.)

Oct. 18 (Bloomberg) -- Blackstone Group LP’s Brixmor Property Group Inc., the second-largest owner of U.S. neighborhood shopping centers, plans to spend about $300 million to redevelop properties, its chief executive officer said.

The company, which changed its name from Centro Properties Group U.S. last month after Blackstone’s $9 billion acquisition, plans to overhaul retail centers over the next five years to boost occupancy and income, Michael Carroll, CEO of New York- based Brixmor, said in an interview.

Blackstone bought the U.S. malls of Melbourne-based Centro Properties Group in June as the Australian company sought to pay debt incurred in an acquisition spree before the real estate slump. Centro’s financial constraints limited how much money the U.S. unit could put into its properties, Carroll said.

“We have not been able to really focus on operating for the last several years,” Carroll, whose company owns 585 shopping centers in 39 states, said by telephone. “It is a very unique time here in our company, effectively a new day where we can change the name, leave that former legacy behind and really try to reset this company to achieve its operating goals and really take it to a place that we want to take it to.”

Brixmor, whose properties are mostly anchored by grocery stores or discount chains, may eventually sell shares to the public. A variety of options will be explored, the CEO said.

“It’s a long way between where we are right now and the ultimate exit” that may occur in three to five years, Carroll said. “Clearly a public execution is a likely execution.”

The company doesn’t plan major changes to its portfolio, according to Carroll.

“We’re really more of an operating story here than an acquisition or disposition story,” he said.

Supermarket-Anchored Centers

Supermarket-anchored retail centers have attracted investors because of the perceived safety of properties that consumers have to visit for necessities in a slow-growing economy. Sales of such real estate in the first half of the year exceeded the total for all of 2010, according to research company Real Capital Analytics Inc.

Deals for community shopping centers have slowed amid a pullback in the market for commercial mortgage backed securities, according to Carroll.

Purchases of retail properties are “highly dependent on the CMBS market being open and functioning well,” he said. “Right now, it’s not functioning that well.”

Stockpiles of loans for new deals have shrunk amid volatility that’s increased since July as Europe’s leaders struggled to stem the region’s sovereign debt crisis. Bank of America Corp. cut its 2011 issuance forecast to $25 billion to $30 billion in August after predicting more than $40 billion in new sales.

Equity One Deal

Blackstone, the world’s largest public-equity firm, has agreed to acquire additional shopping centers since the Centro deal. Last month, it said it would buy 36 retail properties, mostly anchored by grocery stores, from North Miami Beach, Florida-based Equity One Inc. for $473.1 million. Equity One expects the deal to be completed by the end of the year.

Brixmor’s properties are 89 percent occupied, according to Carroll. That matches the U.S. average.

Vacancies at the country’s shopping centers have risen as such local retailers as dry cleaners and restaurants go out of business and reduced access to capital prevents other stores from taking their place. In the third quarter, the vacancy rate at community and neighborhood centers was 11 percent, the highest since 1990, according Reis Inc., a New York-based real estate research company.

Kimco Realty Corp., a New Hyde Park, New York-based real estate investment trust, is the largest owner of community shopping centers with 946 properties in the U.S., Canada, Mexico and South America.

--With assistance from Hui-yong Yu in Seattle and Sarah Mulholland in New York. Editors: Christine Maurus, Daniel Taub

To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net


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