Hope springs eternal at Centro Properties Group.
The group, which was the first listed casualties of the global credit crunch back in late 2007, says there are signs the retail environment in the United States may be improving.
Not big signs, tiddlers, it would seem from comments at yestereday’s AGM.
Centro, which is the second largest manager of retail property in Australia and the third largest manager of shopping centres in the US, manages a $20 billion portfolio of 733 shopping centres in Australia, New Zealand and the US. Two-thirds of the portfolio by value are located are the US.
Centro global chief executive Glenn Rufrano told the group’s AGM yesterday that the general operating environment had been tough in 2009, especially in the US where occupancy levels in its shopping centres fell, primarily as a result of retailer bankruptcies.
"(However,) we are seeing a stabilising retail environment in the US, with consumers starting to emerge and tenants, for the first time, considering expansion," Mr Rufrano said.
"We will be closely watching Christmas to see how these signs progress."
The comments are a repeat of similar remarks made last week in a trading update that revealed a drop in underlying profit for the year, thanks to the very strong Australian dollar.
Centro booked a loss of $3.54 billion in fiscal 2009.
Last week, Centro warned that its underlying profit for the year ending June 30, 2010, was expected to fall about 45% from an underlying profit of $229 million in the year to June 30, 2009 year.
Centro also said 60% of the expected fall in underlying profit would be due to the rise in the Australian dollar, with the remainder due primarily to the impact on fee income both of asset sales and the full-year effect of prior-year property devaluations.
Centro’s guarded optimism about the coming Thanksgiving Christmas season could be misplaced.
US retail sales edged up 0.2% in October (excluding autos and petrol), after a sharp fall in September.
Rival Australian mall operator, Westfield, revealed last week that it had been forced to offer rent cuts and holidays to try and maintain occupancy levels at its 55 or so malls across the US, an indication that times remain very tough.
Its US occupancy rate was around 92%; Centro said yesterday its rate in the US was 89%, which is not all that good for such a big operator.
Centro chairman Paul Cooper told securityholders at the AGM that the company’s gearing was too high and a restructure was required to reduce debt to sustainable levels.
"A restructuring of the Group will be required in order to get our debt down to sustainable levels.
"To accomplish this, your Board recently invited a number of adviser firms to present their credentials to the Group. These presentations will occur shortly, and we will advise investors when the appointment of an adviser is made.
"We will then work with the appointed firm to assess the best and most appropriate restructuring. I emphasise that we are in the assessment phase at this time, and that no transaction is imminent," Mr Cooper said.
Mr Cooper said the matter of $US448 million in exchangeable notes that remained on issue – part of a $US500 million issue in June 2007 – which mature in June 2010 was being considered as part of the overall group restructure.
Mr Cooper also said Centro’s search for a new global chief executive was progressing very well, after Mr Rufrano and Australian chief executive Tony Clarke earlier this year advised they would not seek to renew their contracts, which expire in February 2010.
In October, ASIC launched action against eight current and former directors and executives of Centro Properties and Centro Retail Group alleging breaches of duty of care and a misstatement of about $2.1 billion in debt in 2007.
Mr Cooper said the non-executive directors charged would defend the charges vigorously.
ASIC launched proceedings in the Federal Court in Melbourne, with a first hearing scheduled for this Friday, November 20.
Centro securities closed unchanged at 31 cents yesterday.
