Private equity company Blackstone sells out of Sydney’s Top Ryde City to IPGeneration

Private equity giant Blackstone is offloading Sydney’s Top Ryde City shopping complex to a buyer known for its centre turnarounds.

Blackstone is selling Top Ryde City shopping centre.

US private equity giant Blackstone is poised to sell Top Ryde City in Sydney’s northwest suburbs for more than $500m.

The company is putting active funds house IPGeneration into due diligence on the mall, and that company is working with new owner MA Financial to raise a fresh fund to hold the asset.

The big end of the shopping centre industry is performing well at the trading level after a tough period in which values were decimated by higher interest rates, the coronavirus crisis, and before that the rise of e-commerce.

Billions of dollars were wiped from major shopping centre companies and values are now stabilising at lower levels. Funds managers, such has IPGeneration, Haben and Fawkner have bought mid-sized subregional centres but the best value is now at the regional level, where deal-making restarted last year with the $900m sale of Westpoint in Sydney.

The Top Ryde City deal will show a yield of about 7 per cent at the price at which it has been agreed, which was well off a hoped for $750m when the complex was offered in 2018 and a mooted valuations of $1bn when the retail cycle peaked more than a decade ago.

Blackstone took control of the once-troubled centre in late 2012, buying the debt in a $341m play with receiver McGrathNicol, and then embarked on a revival project.

Top Ryde has ridden the fortunes of Australian retail property and was valued at more than $840m ahead of the global financial crisis.

Despite even higher valuations in this period the centre, developed by former BRW rich-lister John Beville’s private company, went into receivership. The replacement cost of developing a similar mall today would top $1bn and the land is not available in metropolitan Sydney.

Colliers’ Lachlan MacGillivray and JLL’s Nick Willis and Sam Hatcher are handling the sale but were unavailable for comment. The parties declined to comment.

Top Ryde City was billed as a defensive and convenience-based regional shopping centre which had been repositioned for growth by its private equity owner.

Blackstone stripped away the failed strategies pursued by the private developer and the mall is now anchored by top national retailers Coles, Woolworths, ALDI, Kmart, Big W and Event Cinemas, alongside 23 mini-majors and 152 specialty stores.

The centre’s moving annual turnover is about $486.9m after Blackstone undertook about $125m of phased redevelopments in the past 12 years. The mall sits under about 650 apartments.

Blackstone’s overhaul made the mall into a non discretionary based shopping centre focused on food, services, and entertainment – considered the “sweet spot” as fashion-based centres have suffered. It has also diversified with childcare, a swim school, fitness and medical services as well as a last mile hub.

IPGeneration is buying just as interest rates ease and it is continuing to make its name in buying early in the retail property cycle. It is also likely to fix up some quiet areas of Top Ryde, as it has done with other centres, before selling them profitably.

Fundraising by IPGeneration is expected to be aided by lower returns on term deposits by the time it launches an offer to investors, which would go across the broader MA Financial empire. The listed investment group agreed to buy the $2bn IPGeneration platform in May.

Blackstone is focused on other areas in Australia, most notably data centres where it acquired the AirTrunk operation in a $23bn deal and in gaming where it has committed to turning around Crown Resorts after tough times since its $8.9bn takeover.

The sale is far cry from 2017 when Blackstone hired investment banks and a real estate agent to sell its then $4bn portfolio of shopping centres. It considered both a float and trade sale but has instead gradually sold them down.

Originally published as Private equity company Blackstone sells out of Sydney’s Top Ryde City to IPGeneration