Centro sells US based properties

Posted On Thursday, 17 July 2008 02:00 Published by
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Australian shopping center operator Centro is selling dozens of properties in the United States at 10 percent less than their earlier book value owing to an ongoing global credit crunch struggle.

Centro said it would sell 29 of 31 properties owned by Centro America Fund, a wholesale fund managed by the group, comprising 5.1 million square feet based located in 15 US states, for $714 million to an undisclosed private real estate investment adviser. Proceeds from the sale - which excludes Centro's partial share of Independence Mall, in North Carolina, and Elk Park Center, in Minnesota - will be used to pay off debts. 

Centro, Australia's second-largest shopping mall owner after Westfield Group, has more than $8.23 billion of syndicated funds under management but has been struggling to refinance debt. It has until Dec. 15 to repay $2.2 billion owed to its Australian creditors and about $450 million to U.S. private placement noteholders.

Though the deal itself represents just a small portion of the Melbourne-based listed property trust's portfolio - 29 of its more than 665 centers in the U.S. cmprising a 106.5-million-square-foot portfolio - it has broader implications for the company and for the U.S. retail real estate investment market.

The deal also sheds a little light on retail real estate pricing in the current climate. Retail real estate investment sales volume has dropped considerably because of the credit crunch. In May, the most recent month for which statistics are available, investment sales of retail properties totaled $1.3 billion, down 70 percent compared to the same period a year ago, reports Real Capital Analytics. Prices have dropped as well and the bid/ask gap between buyers and sellers means there is little consensus on where property values should be. Some estimates are that prices are down 5 percent to 10 percent for prime assets and up to 20 percent for lower quality assets

Some analysts warned the company was not out of trouble yet.

"They are still up to their neck in debt," said ABN Amro analyst Bill Bishop and despite the deal's relatively small size, it is at least reflective of "Centro really pushing hard to get their balance sheet into shape" says another senior real estate analyst.


Publisher: eProp
Source: Centro/forbes.com/REtraffic

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