Securities in the embattled shopping centre group Centro Properties/Centro Retail Trust are under pressure as the group faces more trouble staying afloat in the growing troubles besetting local and world financial markets.
Centro’s chances of survival are under increasing pressure with the $700 million sale of its America Fund looking less likely.
Those malls have failed to sell to a provisional buyer, in a deal announced in mid-July. Last week it failed to sell a flagship Sydney retail mall.
So it’s no wonder the group’s listed securities were again crunched yesterday (both were poor performers last week). Centro Properties fell 3.3 cents or 31% to a record low of 7.2 cents. Centro Retail securities plunged 31% to 10 cents, down 4.5 cents.
Last week it failed to reveal to the market that an attempt to sell Bankstown Square shopping centre complex in Sydney’s southwest had failed and the sale aborted because of lowball offers: the news was conveyed to the part owners, via a related website of the MCS 28 investment syndicate.
Then, according to a weekend report of a webcast Friday to a group of fund investors and reported in the media this morning, the sale of US shopping centres valued at more than $US700 million had fallen over.
Centro Properties manages almost 800 malls worth $22.6 billion in Australia, New Zealand and in the US where it is the fifth-biggest shopping mall owner.
The Australian newspaper broke the news yesterday, reporting:
"CENTRO’S much vaunted $US714 million ($887 million) US shopping centre fire sale is far from certain, with chief executive Glenn Rufrano warning yesterday that even if the sale went ahead it would be at a lower price.
"Mr Rufrano said the contingent sale agreement had left Centro at the mercy of the markets, making it unable to give any assurances that the sale of 29 properties across 15 states would be finalised.
"But the Centro chief said there was more certainty about the buyer wanting to pay less than the $US714 million price agreed in mid-July.
"We expect the buyer to re-negotiate the price," he said.
And that proved to be true because Centro reported to the ASX that:
"On 15 July 2008, Centro Properties Group (Centro) announced that it had entered into a contingent agreement for the sale of the Centro America Fund (CAF) portfolio to a private real estate investment advisor. The agreement was subject to certain closing conditions, including a due diligence period and lender consent.
"Centro now advises that the due diligence period has expired and the purchaser has elected to terminate the agreement.
“Notwithstanding termination of the agreement, discussions between Centro and the purchaser are continuing. No assurance can be given that those discussions will result in the parties entering into a further agreement for sale or as to the terms of any further agreement, if entered into."
Centro failed to remind people reading yesterday’s statement was the provisional sale price of $US714 million and the pertinent fact that that price was a discount.
Now it is facing demands for a further discount, that’s if the buyer comes back with a new offer.
"The contract price of US$714 million represents a 10% discount to previous book value." Centro said in the July 15 statement.
Now there’s no asset sales, except some $US66 million worth of property earlier in the year, and the company and its associated retail trust, Centro Retail Trust, have a deadline of September 30 approaching. It has to convince its lenders by trhen to extend the December 15 deadline for a recapitalisation plan.
Centro has already had a total of four debt extensions from its lenders.
With the problems surrounding Lehman Brothers and Merrill Lynch, there’s no certainty any deal or restructure proposal will be available by September 30 or December 15 when the recapitalisation plan is supposed to be in place.
In the July announcement Centro said that it had entered into an agreement to sell 29 of the 31 properties in the Centro America Fund (“CAF”), a wholesale fund managed by the Centro group, to a private real estate investment advisor. Centro’s direct interest in CAF is 46.65%, excluding Centro’s holding in the Centro Direct Property Funds.
"The 29 properties aggregate 5.1 million square feet and span 15 states. The agreement excludes CAF’s partial share of Independence Mall, located in Wilmington, North Carolina, and Elk Park Center, located in Elk River, Minnesota, which will continue to be held by the fund. In connection with the sale, Centro will provide management and leasing services for the 29 assets for a minimum of one year in exchange for market fees.
"The contract price of US$714 million represents a 10% discount to previous book value. Centro expects to use the net proceeds to pay down outstanding indebtedness.
“The agreement has been approved by CAF’s investors and is subject to certain closing conditions, including a due diligence period and lender consent, and there can be no assurance that the transaction will be consummated. Settlement is scheduled to occur in late September to October 2008."
So no deal in the US and no chance of one here in Australia and none likely here for months.
There’s tens of billions of dollars of property on the market of being touted by the likes of GPT, some of the Macquarie and Babcock and Brown funds, MFS/Octivar, City Pacific, Westpoint, Mirvac and a host of other groups, fai
