Private equity firm Blackstone Group LP has bought nearly 600 U.S. shopping malls from Australia's debt-laden Centro Properties for $9.4 billion in one of the biggest global property deals since the credit crisis.

Blackstone, making its first major entry into U.S. retail real estate, was expected to recapitalize the portfolio of mainly neighborhood shopping centers before seeking a return on the investment in 3-5 years, Centro executives said on Tuesday.

Blackstone beat rival bidders including Morgan Stanley Real Estate which had teamed up with Starwood Capital Group as well as New York-based NRDC, a source familiar with the transaction told Reuters on Monday.

Centro did not name the other bidders on Tuesday but said it had received a number of bids for the assets and Centro's $9.4 billion offer was very compelling. The price was a 1.3 percent discount to their December 31 book value.

We went through a very exhaustive auction process in the U.S. We believe we have a very compelling offer from Blackstone ... That is really quite an extraordinary figure, Centro chief executive Robert Tsenin told reporters.

Centro's stapled securities ended 13 percent weaker at 13 cents, reversing early gains when the sale was first announced. The stock plunged from a peak above A$10 in 2007, around the time it bought the U.S. shopping centers when it acquired New Plan Excel Realty Trust for about $6.2 billion at the top of the market.

Centro Retail Trust securities closed 5 cents higher at 35.5 cents.

There is still uncertainty for Centro shareholders that's going to affect the volatility of the share price, said one fund manager who did not want to be identified.

CENTRO RECAPITALISING

The assets of 588 properties include 560 shopping centers, housing major grocers and retailers. Centro said it did not see much upside from the assets, which analysts say are struggling with weak occupancy rates and limp rent amid a patchy recovery in the U.S. commercial real estate market.

There's an opportunity to increase occupancy to something that's a little higher, Keefe, Bruyette & Woods analyst Benjamin Yang said.

And to the extent that these properties were under-managed, there might be an opportunity there to get rents back to market and maybe put in a better tenant base.

Debt-laden Centro will use the proceeds from the sale to recapitalize its Australian property assets, which includes mainly regional and sub-regional shopping centers which have different characteristics from the U.S. assets.

In a complex restructuring plan announced Tuesday, Centro said it was talking to lenders about creating a listed property portfolio in Australia and swap debt for equity in the new vehicle.

Centro said total equity proceeds from the sale, after paying down debt, would be $1.38 billion.

Centro was talking to its lenders about swapping debt for equity and abolishing the current co-ownership structure by consolidating its Australian assets into a single listed vehicle expected to contain about 40 shopping center assets worth around $4 billion.

Centro said it had also had interest from buyers in its Australian assets and was not ruling out further sales, although the plan outlined Tuesday was the preferred option for now.

The U.S. commercial real estate market began to rebound last year, but the recovery has been uneven. The highest quality properties in the most densely populated areas have recouped much of their lost value, while the rest have languished.

Centro is the latest example of Blackstone's rapidly expanding property empire, which includes the Hilton hotels chain, a 7.6 percent stake in U.S. regional mall owner General Growth Properties Inc and expanding holdings in U.S. warehouse and distribution centers.

Centro was one of corporate Australia's first casualties of the 2008 global credit crisis, having saddled itself with too much debt.

UBS, JPMorgan and Moelis & Co are advising Centro. Lawyers Simpson Thacher & Bartlett advised Blackstone on the transaction.

(Additional reporting by Ilaina Jones in New York and Eriko Amaha in Sydney; Editing by Ed Davies and Lincoln Feast)

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