Blackstone Cedes Control Of $1.1B Irish Shopping Mall
Blackstone has given up control of one of Europe’s largest shopping centres due to declining values, making it the latest in a long string of firms to be hit by the woes of the retail property sector.
Lender Goldman Sachs is close to taking control of the 1.2M SF Blanchardstown Centre in Dublin. Goldman’s merchant banking division, which includes its property business, has notified the Irish Competition and Consumer Protection Commission of its intention to take over the centre, Irish state broadcaster RTE reports.
The Irish Independent reported in August that Goldman was in talks about a consensual deal to take over Blanchardstown. The centre and two adjacent retail parks have about 180 stores.
Blackstone’s fourth European real estate opportunity fund bought the asset for €950M ($1.1B) from Green Property, the property company of veteran investors Stephen Vernon and Pat Gunne, in 2016.
The deal was undertaken with €767M of debt. Morgan Stanley provided a €580M senior loan, which was then syndicated to banks and insurance companies like Allied Irish Bank and AIG. Goldman provided a junior loan which at the time totalled about €150M.
Goldman is able to take control of the centre because the value has fallen below the level of the debt it holds.
In a statement about the process, the bank said it is acquiring an “excellent asset in a prime location with a very strong mix of high-quality retailers.”
“Our intention is to invest in the refurbishment of the centre to enhance the shopping experience and ensure that it remains as a world-class retail destination,” it added. “We have great confidence in the future prospects of the centre.”
The deal highlights the extent of the fall in values of even the best retail assets in the most resilient markets, a big part of which has been brought about by the coronavirus pandemic.
Before the onset of the virus, there had been little sign in Dublin of the troubles common in the retail sectors of the U.S. and the UK, as consumer confidence in Ireland was buoyed by low unemployment and rising wages.
It also marks a significant turnaround in fortunes when it comes to investing in Ireland for Blackstone. The investor made big profits buying businesses and assets in the country in the wake of the last financial crisis, including the assets of Michael O’Flynn, which it took over after buying the developer’s debt.
Blackstone has to a large degree steered clear of the retail sector since the financial crisis because of value declines like that seen at Blanchardstown. It said in the spring that only 15% of its portfolio was in the retail and hospitality sectors.