Blackstone is poised to recover its investment in Top Ryde City as it launches a $340 million refinancing deal on the sprawling Sydney shopping centre that became emblematic of the excesses of the property boom era.
The New York-based private equity giant paid $341m for loans attached to the asset in November 2012, giving it ownership over one of the country’s largest malls.
It also ended a turbulent chapter on the retail development, which once commanded a valuation of more than $800m before it crumbled into bankruptcy and plunged its developer, Bevillesta, the company of former BRW rich-lister, John Beville, into insolvency.
By early 2012, loans on the mall’s $790m debt pile were changing hands for 40c in the $1. But Blackstone now stands to make a hefty profit on the property. The firm injected a sliver of equity into the initial purchase, leaning on Deutsche and Macquarie for $290m in loans.
According to sources, Top Ryde is worth $450m, a 32 per cent increase on the last sale price, meaning a successful refinancing would fully repay Blackstone’s relatively small cash outlay.
Yet some in the market question whether the mall, which has been pitched into fierce competition with the nearby Macquarie Centre, merits such a value.
The refinancing is intended to fund a further $50m in refurbishments as Myer, the anchor tenant, exits in favour of Coles and potentially Kmart — a move that risks transforming it into an over-sized neighbourhood shopping centre.
Goldman Sachs and Macquarie are the main contenders to underwrite the restructure, largely because Australian lenders remain reluctant to lend fresh money to an existing debt ownership structure.
Blackstone continues to hold the property’s debt as converting the stake into equity would trigger a potential tax liability.
Other lenders have also backed off, deterred by the firm’s demand for a tight margin on the refinancing.
Elsewhere in the private equity firm’s empire, the field is narrowing for one of Sydney’s leading residential conversion development sites, 1 Alfred Street, or Gold Fields House, at Circular Quay.
Sources said the iconic tower looks destined to fall into the hands of a single foreign group in a $400m-plus deal, with China’s Dalian Wanda tipped as a likely buyer.
This article first appeared in The Australian Business Review.