Economy Watch: Blackstone Takes Amusement Parks

By: Dees Stribling, Contributing Editor

It seemed like an announcement from the good old days (2006, say): Blackstone Group L.P. is buying a sizable chunk of real estate. But it was in fact on Wednesday when the buyout giant told the world that it was going to spent some $2.7 billion to buy Anheuser-Busch InBev NV’s amusement parks.

The properties include the various SeaWorlds nationwide and the two Busch Gardens. The Belgian AB InBev had reportedly been looking to shed non-beer-related assets since it acquired Anheuser-Busch last year in a $52 billion deal, as part of a strategy to pay down some of the debt associated with that deal. But the contraction of the credit markets since last fall had put the kibosh on selling off the amusement parks until now.

According to the Wall Street Journal, Bank of America-Merrill Lynch, Barclays Capital, Deutsche Bank, Goldman Sachs Loan Partners and Mizuho Corporate Bank are providing the senior secured loan to the tune of $950 million; there’s also a $450 million mezz loan by Goldman Sachs Mezzanine Partners and Blackstone unit GSO Capital Partners. So it is a little like the good old days – that is, banks are willing to finance a relatively risky deal like this, betting that the public’s appetite for amusements will grow as the economy recovers.
Blackstone also owns a share of Universal Studios Orlando, and controls Merlin Entertainment Group Ltd., which operates Madame Tussauds wax museum and the London Eye Ferris Wheel.

Starwood Gets Green Light
Another acquisition that received the green light this week, as reported by CPE, was Starwood Capital Group’s purchase of an equity interest, along with partners TPG Capital, Perry Capital and WLR LeFrak, in a company that will hold the construction and real estate loans of the defunct Corus Bank.

The value of the deal is about $2.77 billion, which is about 60 percent of the unpaid principal balance of the loans. At that, it’s likely a handsome discount to replacement cost for the underlying properties. The portfolio consists of three kinds of assets–performing loans; physical properties; and loans that might default, but which will provide investors title to the properties.

“This investment is distinctive both because of a portfolio that’s unique in terms of its size and the quality of the underlying assets, and the FDIC-provided financing,” Kelvin Davis, partner with TPG, told CPE. “That being said, we certainly expect that the challenging economic environment will produce other compelling opportunities to invest in real estate-related assets, and we intend to explore them.”

Family Dollar Looks to the Middle
Family Dollar Stores Inc. had reasons to be cheerful about its latest quarter, ended August 19, as it saw earnings rise 13 percent, and comp-store sales increase 5 percent compared with the same quarter last year.

During Family Dollar’s Wednesday conference call, company chairman and CEO Howard R. Levine noted the success of the company’s strategy in adjusting its merchandising mix to address the needs of lower-income shoppers, but also the many new middle-income shoppers that have darkened its doors since the recession worsened last fall.

“Lower income customers are extremely sensitive to price and income changes and frequently lack the safety net of credit cards or home equity loans,” he noted. “Often, this impact is most apparent in the curtailing of higher-margin discretionary purchases. Today, more middle-income customers face many of these same challenges as they, too, have consolidated shopping trips, reduced discretionary purchases and increased their reliance on coupons and promotions for basic needs.”

Wall Street had a mixed day on Wednesday after considerable upward movement earlier in the week, but it wasn’t much of a down day. The Dow Jones Industrial Average was down 5.67 points, or a scant 0.06 percent, while the S&P 500 gained 0.27 percent and the Nasdaq was up 0.32 percent.