Blackstone Group, the private equity giant, has called off the sale of its $3.5 billion Australian shopping mall portfolio. The primary reason was the speculated arrival of Amazon.com, which scared buyers against investing in physical or brick-and-mortar stores.
Reportedly, not many buyers showed interest in purchasing the 10-mall package. Many buyers are of the opinion that once Amazon hits the Australian markets, traction into the malls would be significantly reduced.
The cancellation is also an indication of the stress in Australia’s east-coast real estate market, where population growth and booming property prices have pinned landlords’ profits for years. Blackstone has decided to renovate the malls instead of going ahead with the sale. It hopes to upgrade the malls and add a couple of restaurants and food joints.
“They had strong offers, but only for individual assets, not for the whole 10 (malls). There’s been a hit on retail-sector sentiment because of the emergence of Amazon,” a source told Reuters.
Blackstone’s assets, which include shopping malls in Sydney and Melbourne, were acquired in 2011 when the firm swooped on troubled property players Valad Property Group and Centro Properties. Since then, Australian retail landlords such as Scentre Group and Stockland Corp Ltd have enjoyed steady profits as population growth supported retail spending and a booming real estate market increased land values.
However, the company decided to sell its malls in April after the property market hit a peak and as Amazon announced the planned launch of its online shopfront service in Australia.
“The lay of the land had shifted I suspect,” said property investor Winston Sammut, managing director of Folkestone Maxim Asset Management. “Of course you want to sell at the peak and I think it looks like the peak has passed.”
“Australia does not have the oversupply of malls that the U.S. has, but you get the picture,” said Sholto Maconochie, head of real estate research at brokerage CLSA. “It’s a tough ask to get a portfolio sale away at book value in our view.”