What’s Behind Blackstone’s Interest in Mega?

The ongoing saga of the besieged Mega grocery chain got more interesting this week with the possibility of  Blackstone Group LP (NYSE: BX) buying the stores. The financial behemoth has been reported to be staking out various interests in Israel for a while. With Mega’s near-fire sale status and Blackstone’s “Buy it, Fix it, Sell it” approach, it could be a good turnaround opportunity.

Putting aside Blackstone’s interest in establishing its inaugural investment in Israel, the real attraction may be in Mega’s real estate. Earlier this year, the investor made a huge bet on retail centers, buying a $2 billion portfolio of U.S. grocery anchored, community centers, power centers, and free-standing properties. This was added to its earlier investment in  Brixmor Property Group Inc (NYSE: BRX). Lessons learned from those activities could be put to work on Israel’s #2 supermarket chain.

The Alon Blue Square Group (NYSE: BSI ) unit reported that sales dropped 9.1% in 2014 leading to an 11.3% decline in gross profits and an operating loss of NIS 29.6 million last year vs. an operating profit of NIS 43.9 million a year earlier.