(BBG) Blackstone’s Portugal Bet Pays Off as Malls Become Hot Property


(Bloomberg) — Even as many property investors were
shunning Portugal during its bailout years, the Blackstone Group
LP was buying.
The New York-based private equity firm began shopping for
malls in 2013 and that bet is now paying off: it agreed last
month to sell three shopping centers around Lisbon to Groupe
Auchan SA. It’s currently completing the sale of a fourth mall
to Spain’s Merlin Properties Socimi SA for as much as 450
million euros ($557 million), about twice the amount it paid,
according to people with knowledge of the matter.
“Some funds that bought shopping centers during the crisis
at a discount are now selling these assets to other foreign
funds as the economy recovers,’’ said Pedro Coelho, chief
executive officer of Lisbon-based Square Asset Management, which
has about 1 billion euros in real estate investments. “It was a
calculated risk, but it was still a risk. Now it’s a more core
investment with less risk and less return.’’
After Portugal sought a bailout in 2011, several mall
operators struggled with sales amid a recession and an
unemployment rate that peaked at 17.5 percent in 2013. It was
then that Blackstone began acquiring the first of four malls on
the outskirts of Lisbon. A few years later, when the economy
started to show signs of a solid recovery, other funds followed
Portugal’s economy expanded an estimated 2.6 percent in
2017, the fastest growth since 2000. Unemployment dropped to 7.8
percent in December, the lowest since 2004, according to
The year has barely begun and deals or possible
transactions involving malls have already surpassed 1 billion
euros, more than the total invested in 2017, according to
Cushman & Wakefield. Broker Jones Lang LaSalle forecasts
investment in commercial real estate in Portugal will reach a
record 2.5 billion euros this year, up from 1.9 billion euros in

Getting ‘Crazy’

From her small candy kiosk in the middle of an aisle in the
Dolce Vita Tejo mall in the Lisbon suburb of Amadora, Dariany
Santos is witnessing the revival of one of Portugal’s largest
shopping centers.
“Every day there are more visitors; on weekends it just
gets crazy,” the 31-year-old said as she gazed around a mall
that boasts 280 shops, an 11-screen cinema and a model city
where children can pretend to be adults. “There are so many
people, sometimes they bump into each other.”
The Almada Forum mall, which Blackstone is selling to
Merlin, has 230 stores and a food court that seats 1,200. An
official at Blackstone declined to comment on the firm’s
investments in Portugal.
Portugal’s first modern shopping center, called Amoreiras,
opened in Lisbon in 1985, the year before the country joined the
European Union. Today, the nation of about 10 million people has
120 malls and one of the highest densities of shopping centers
in Europe in terms of gross lettable area per inhabitant,
according to Cushman & Wakefield.
That’s providing options for investors. In January, Paris-
based AXA Investment Managers-Real Assets acquired Dolce Vita
Tejo, where Santos has her stand, for 230 million euros from
Baupost and the Eurofund Group. They’d paid 170 million euros
for the property two years earlier.

Higher Yields

“This acquisition is further evidence of our confidence in
the recovering southern European retail market,” said Hermann
Montenegro, CEO at AXA Real Estate Iberica SA.
There have also been various deals involving malls outside
Portugal. Unibail-Rodamco SE agreed to buy Australia’s Westfield
Corp. for $16 billion in December.
See also: Retail Mall Deals Kick Off Real Estate Sector
One factor attracting investors to Portuguese malls is that
they generally offer higher yields compared with similar
properties in other European markets, said Marta Costa, an
analyst at Cushman & Wakefield in Lisbon. Prime-level yields at
Portuguese malls stand at 4.9 percent, more than 3.5 percent in
France and 4.25 percent in the U.K., Belgium and Spain, Costa
The Socialist government’s decision to continue increasing
the minimum wage since taking office in 2015 may also be helping
sales at some malls. The Portuguese Council of Shopping Centers
sales index rose an estimated 10 percent in 2017.
“This proves that the idea that shopping malls would one
day disappear was totally wrong,” said Pedro Teixeira, secretary
general of the Portuguese Shopping Centers’ Association. “What
we’re witnessing today is the exact opposite.”
Still, a handful of shopping centers are struggling to
attract investors. Novo Banco SA has been trying to find a buyer
for the Beloura mall near Lisbon since 2014, according to weekly
newspaper Expresso. A spokesman for Novo Banco declined to
“Some of these empty malls stand as a testament to the
blunders that were made during the pre-crisis period in
Portugal,” said Coelho, who cited the Beloura mall as an
example. “Portugal is still healing some of the wounds from the
(Blackstone announced last week that Bloomberg LP Chairman
Peter Grauer will step down from its board after the investment
firm agreed to acquire a unit of Thomson Reuters Corp.)