bs article any comments, page-2

I also posted this on another CNP thread this morning:-


Source: The Australian Financial Review newspaper

Write-offs cut unlisted fund guarantees
Thursday, 17 April 2007
Ben Wilmot and Mathew Dunckley

Guarantees provided last year by Centro Properties Group to its two major unlisted property funds, valued at almost $700 million, could be worthless.

In the December-half accounts of the $2.3 billion Centro Direct Property Fund and the $1.7 billion Centro Director Property Fund International, auditors Pricewaterhouse-Coopers noted there was "significant uncertainty" about the value of the guarantees.

In each of its reviews, PwC warned that " the ability of the trust to realise the value of the financial guarantee as stated in the financial statements is uncertain and may be materially affected were Centro not to be a going concern".

The guarantees were put in place by Centro when it arranged investments for the DPF and DPFI in the listed Centro Retail Trust last year.

Through a special-purpose vehicle, known as Centro Retail Investment Trust, DPF invested $230 million and DPFI $730 million in centres owned by Centro Retail Trust.

At the time, Centro told investors the guarantees would give them exposure to Centro Retail Trust's assets without the volatility risk of simply owning shares in the listed trust. But the crashing security prices of both listed vehicles have caused the unlisted funds to make heavy write-offs.

The DPFI crashed to a net loss before finance costs of $175.6 million for the half. At the end of December, the guarantee for the fund was valued at $223.6 million but was $473 million last month.

The DPF fell to a net loss before finance costs of $68.9 million for the half. At the end of December, the guarantee for that fund was valued at $145.9 million but this had blown out to $222 million last month.

Last December, both funds were also frozen as Centro flagged its difficulties in refinancing $3.9 billion of debt.

A spokesman for the group said: "Given the issues with Centro and CER [Centro Retail Trust], it was deemed prudent to reduce the carrying value of both the DPF and DPFI's investment in CRIT below the current NAB [net asset backing] value.

"These adjustments have been reflected in the current daily unit price. We are valuing their investment as a long-term direct property investment and accordingly have not adopted the current market value of CER for valuation purposes."

Although the guarantees are unlikely to be called, property analysts said the funds would remain frozen for a significant period.

Adviser Edge's head of property, Louis Christopher, said: "I really believe they're going to be frozen for a long time ... we're talking at least 12 months."


Ends.

Cheers, Pie :-)