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Dear Securityholder
The past few months have been very busy at Centro. Much has been accomplished and
much is underway. Since I last wrote to you in March, four key events have occurred. They
are:
1. Financing Extension: The most important achievement in this area is that $2.3 billion
in aggregate owed to the Australian lending group and US$450 million owed to US
private placement noteholders has been extended to 15 December 2008. This is a
good and expected outcome and provides us with breathing space to operate the
business and provide long term liquidity.
Also of significance is that Centro MCS has completed the refinancing of a $331
million debt facility for eight syndicates. The facility has been refinanced for two years
and matures in April 2010.
2. New Chairman: Paul Cooper has been unanimously elected Chairman by your Board
of Directors. Mr Cooper will assume the chairmanship upon the retirement of the
current Chairman, Brian Healey, on 30 June 2008. Please refer to centro.com.au for
more detail on Mr Cooper’s background.
3. Executive Committee Appointments: Ross Johnston and Gerard Condon have
been appointed to the Centro Executive Committee (EC).
Gerard is currently General Manager – Syndicate Funds Management and Ross takes
on a newly created role as Head of Strategy Implementation.
Ross will be responsible for coordinating the implementation of Centro’s strategic plan
which will allow the other EC members to focus on running their business areas to
maximum efficiency.
Gerard and Ross join recently appointed Chief Financial Officer Tony Clarke as the
newest members of the EC.
4. Coordination Committee: A Coordination Committee with executives from both
Australia and the US meets twice weekly to address the issues facing the Group. This
committee is the most senior management group for Centro globally.
Strategic Plan
The primary emphasis of our strategic plan is to effectively operate our underlying businesses
while providing liquidity to our balance sheet.
The financing extensions now allow us to concentrate on executing key components of the
above:
�� Raising Equity
In the last six months, we have sold US$66 million of US shopping centres and land
parcels, primarily out of the Super LLC joint venture.
We recently revised our strategy in relation to the sale of the Centro Australia Wholesale
Fund (CAWF) to include sales of smaller portfolios and/or individual assets in addition to
sourcing equity investments at the Group level and selling the Centro America Fund
portfolio.
We anticipate that marketing smaller pieces of CAWF will attract more buyers with an
ability to obtain debt financing. The recent extensions allow us the time to pursue these
various options to achieve the best possible outcome for investors.
�� Reviewing the Company Structure
We are examining ways to simplify some of the inter-relationships between our managed
funds.
�� Simplification
The Centro Direct Property Fund (DPF) and Centro Direct Property Fund International
(DPFI) have converted all equity notes on issue to ordinary units. We believe this is a
good outcome for investors as it helps simplify the Funds’ capital structures and removes
a potential debt obligation of the Funds. There is now only one class of unit on issue in
both funds. Centro now owns 56.1% of the DPF and 65.8% of the DPFI.
As a consequence of Centro’s ownership interest in the ordinary units in DPF and DPFI
exceeding 50%, a number of investments which were previously equity accounted or
carried at fair value through profit and loss will now be consolidated by Centro at 30 June
2008. These include DPF, DPFI, Centro Super LLC, Centro America Fund, Centro
Australia Wholesale Fund and a number of Centro MCS syndicates. This will not result in
a change to Centro’s underlying result or net assets attributable to members.
�� Improving Transparency
We have undertaken to be direct, clear and concise in our communications and
announcements. In our half yearly results announcements, we now provide Supplemental
Information and Portfolio Assessments which include detailed information on Centro, CER
and our managed funds so that investors have a complete picture of our property
portfolios, structure, investments and borrowings.
Business Plans
We are currently finalising the Centro business plan for FY09. This is a thorough process
starting with individual business plans for each shopping centre that are then rolled up into
individual business plans for each managed fund culminating in the Centro business plan.
The business plans form the operating blueprint and budget for each shopping centre,
business unit and department within Centro. The primary driver for the business planning
process is to maximise value and profitability in each asset and business unit.
Recap of Recent Information*
Date Item
26 June 2008
Centro advised that it had elected to not make the coupon payment
due 30 June 2008 on its Exchangeable Notes. This option was
elected to conserve liquidity and against the background of Centro’s
declaration of a nil distribution for the six months to 30 June 2008.
As a result of choosing this option, Centro is prohibited from making
any distribution to ordinary stapled securityholders until such time as
the missed payment has been made.
23 June 2008 CER advised that its Distribution Reinvestment Plan (DRP) will not
operate for the June 2008 Distribution.
Date Item
19 June 2008
CPT Manager Limited, as responsible entity for the Centro Property
Trust and Centro Properties Limited (Centro) resolved not to pay a
distribution to ordinary securityholders for the six months ended 30
June 2008.
13 June 2008 Centro announced election of new Chairman and Executive
Committee appointments.
6 June 2008
Centro MCS confirmed that it had completed the refinancing of a
$331 million debt facility for eight syndicates. The facility has been
refinanced for two years and will mature in April 2010. Additional
funding for forecast operational capital expenditure during the term
of the loan was also approved.
2 June 2008
Centro announced that additional liquidity facilities have been
provided by its financiers and that certain inter-creditor
arrangements have been agreed between the financiers. Centro
also confirmed the extension of $2.3 billion in aggregate owed to the
Australian lending group and US$450 million owed to US private
placement noteholders to 15 December 2008 (see below for the
conditions of these extensions).
26 May 2008
Centro announced that it will vigorously defend a class action claim
brought against Centro Properties Limited, CPT Manager Limited
(Responsible Entity for Centro Property Trust, Centro Retail Limited)
and Centro MCS Manager Limited (Responsible Entity for CER).
This is a separate claim than the one announced on 12 May.
20 May 2008
Centro announced March quarter portfolio and sales statistics for its
managed portfolio. Stabilised Net Operating Income growth was
4.7% in Australia and 2.1% in the US. Stabilised occupancy was
99.5% in Australia and 91.7% in the US. For the Australian
managed portfolio, annual sales growth was 7.1%. These results
show that our shopping centre portfolio is performing well both in
Australasia and the US.
12 May 2008
Centro announced that it will vigorously defend the class action
claim against Centro Properties Limited and CPT Manager Limited
(Responsible Entity for Centro Property Trust).
8 May 2008 Centro announced the extension of Australian bank facilities and US
private placement notes to 15 December 2008.
2 May 2008
The Centro Direct Property Fund (DPF) and Direct Property Fund
International (DPFI) announced March quarter distributions of 0.55
cents and 0.7 cents per unit respectively.
28 April 2008
Centro MCS announced that all syndicates would pay the full
forecast distributions except for three which have no direct investors
outside of Centro and its managed funds.
18 April 2008 Centro MCS confirmed that the Centro MCS 26 syndicate had rolled
over for a further period of five years.
31 March 2008
Centro announced that its private placement noteholders had
released a guarantee for $450 million provided by a CER controlled
entity. This announcement simply showed that Centro had fulfilled a
commitment it made to CER in February.
Date Item
28 March 2008
Pelorus abandoned the meetings it had scheduled to try to replace
Centro subsidiaries as Responsible Entity of three Centro MCS
Syndicates. We are heartened by the overwhelming support
investors in these syndicates showed for Centro MCS to remain
Responsible Entity. Based upon the proxies received, none of the
resolutions would have passed if the meetings had been held and
not abandoned by Pelorus.
*For complete announcements and information, please visit the Centro website
(centro.com.au).
Conditions of Financing Extensions
The financing extensions to 15 December 2008 mentioned above are subject to the conditions
outlined in our 8 May 2008 announcement whereby the following must occur by 30 September
2008:
�� The Australian financiers and US private placement noteholders must be satisfied as to
Centro’s progress in implementing its strategic plan;
�� The US lending group, which is owed in aggregate US$1.1 billion (A$1.2 billion)
associated with Centro’s joint venture with CER, agreeing to further extend those facilities
from 30 September 2008 to a date no earlier than 15 December 2008; and
�� The Australian financiers, US private placement noteholders and the US lending group
reaching a further agreement by 30 September 2008 on the terms on which assets can be
sold and the proceeds of such sales applied after that date.
Moving Ahead
Centro expects to announce its full year results on Thursday, 28 August 2008. Between now
and then, I look forward to completing our business planning process and making progress in
our strategic plan.
As always, if you have any questions please feel to ring the Investor Services team on
1800 802 400 (+61 3 8847 1802 for international callers) or email us at
[email protected].
Sincerely,
Glenn Rufrano
Chief Executive Officer