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Blackstone Said to Agree to Buy Valad for $764 Million

Blackstone Group LP agreed to buy Valad Property Group for about A$700 million ($764 million) including assumed debt, said two people with knowledge of the deal, its first major acquisition of real estate in Australia.

The people, who asked not to be identified, declined to say how much Blackstone will pay on a per-share basis because the buyout of the Sydney-based company hasn’t been announced. Valad, whose stock-market value is A$133 million, has about A$500 million of debt, according to the people.

Stephen Schwarzman, Blackstone’s chairman and chief executive officer, told investors on a March 8 conference call that the New York-based buyout firm will continue to “aggressively deploy capital” in real estate as prices recover with the economy. A fourfold increase in profit from its real estate funds helped Blackstone post its best quarterly results since going public in 2007, the company said April 21.

Blackstone fell 34 cents, or 1.7 percent, to $19.15 at 4:15 p.m. in New York Stock Exchange composite trading. The stock, which yesterday reached its highest price since May 2008, has returned 41 percent including dividends in the past year.

Valad oversees about A$8 billion of real estate, including office buildings and industrial properties, mainly in Australia, according to its website. It also manages unlisted property funds in Australia and Europe.

‘Material Transaction’

Valad is in talks with a third party “in relation to a material transaction regarding the whole of the Valad business,” the company said today in a letter asking the Australian Stock Exchange to halt trading of its stock. The shares closed yesterday at A$1.155, down 57 percent in the past year.

Blackstone bought A$165 million of Valad convertible notes from Kimco Realty Corp., said New Hyde Park, New York-based Kimco yesterday in a statement. Peter Rose, a spokesman for New York-based Blackstone, declined today to comment.

Blackstone, the world’s largest private-equity firm, is scheduled to complete its $9.4 billion purchase of the U.S. shopping centers of Australia’s Centro Properties Group around mid-year.

Centro is Blackstone’s largest real estate deal since 2007, when it bought the hotel chain since renamed Hilton Worldwide and Equity Office Properties Trust. Both Centro and Valad struggled to repay debt after the global property market tumbled from late 2007 to 2009.

Valad Resignation

Peter Hurley resigned as managing director of Valad on April 18 after his proposal for a management-led buyout of the company’s European unit failed. Valad in December called the proposal “incomplete.”

Buying Valad would add to Blackstone’s acquisitions last year of 180 warehouse properties from Denver-based ProLogis and investments in hotel chain Extended Stay Inc. and mall owner General Growth Properties Inc. In November, Blackstone took over the management of $2 billion of Asian real estate assets from Bank of America Merrill Lynch.

Blackstone is planning to raise its next real estate fund, with a target of about $10 billion, later this year. The company has the largest real estate business of the big private-equity firms, with $33.2 billion under management at the end of 2010.

“I think from just talking with people in the marketplace on a regular basis that a lot of investors are looking for a way to take advantage of this asset class,” Schwarzman said on March 8.

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