3rd of 3 articles from afr today...

Hi all,

This is the last of the articles which have all appeared in the 'Australian Financial Review' newspaper today which I am typing out for the CNP threads as I consider them all good reads and good to keep for future reference/research.

Like I say, I have typed them out personally so please forgive any typing errors along the way! - Pie

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Source: The Australian Financial Review newspaper [Page 58]
Date: Wednesday, 16 July 2008

Article No. 3

First step on road to rebuilding
Comment
Robert Harley

If Centro chief executive Glenn Rufrano can consummate this deal, he will have made a solid step forward. But it is only a step.

This is one reason why the exuberance of yesterday morning's trading turned to caution as the day wore on.

The first good point is that Rufrano has actually been able to strike a deal.

Globally, transaction volumes have collapsed as debt and confidence has evaporated.

In fact, this deal would be the biggest struck by an Australian group since the credit crunch.

The second good point is the price.

The overall yield, of around 7.3 per cent, is above the 6.6 per cent at which the portfolio was previously valued, but the blow-out falls well short of the pessimistic estimates of some analysts.

It is a number that will give some comfort to Rufrano's banks and investors, and to investors across the battered real estate investment trust sector.

But there is a qualification. As is the case with most US transactions, the purchaser assumes some of the existing debt. In this case that debt is a big sweetener.

In effect the purchaser is buying the real estate at 2008 prices, and funding the purchase with now unobtainable 2006 debt.

The third good aspect is that Centro retains the management.

At the height of the hubris, Centro claimed its funds and property management business was worth $5 billion.

Today it is worth nothing.

But ultimately Centro has to rebuild some value in the management business if it is to survive.

Rufrano has done the sort of deal he promised the banks he could.


Ends.


Now take a very deep breath, make yourselves a nice hot cuppa, relax & put your feet up, and listen to "Some Nice Music" just to allow yourself enough time to digest it all s-l-o-w-l-y. LOL!!!

Cheers, [a very relieved] Pie :)