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Centro's Largest Shareholder Holds Stock Amid Plunge (Update1)

By Laura Cochrane

Jan. 24 (Bloomberg) -- Centro Properties Group's largest shareholder, Colonial First State, held onto its entire stake in the Australian owner of U.S. malls amid a 94 percent plunge in the stock because it still sees value in the company.

John Snowden, who manages the equivalent of $6.9 billion as head of property securities at Sydney-based Colonial, said his funds retained their 8.3 percent stake in Centro because the mall owner's Australian assets will provide ``significant value'' if the company can better manage its debt.

Centro's eight most profitable shopping centers are in Australia, where retail sales increased for a sixth month in November, spurred by unemployment at a three-decade low as the economy enters its 17th year of growth. Cashflow from malls including Centro Galleria in Perth and Centro Bankstown in Sydney will keep the company afloat if it succeeds in refinancing A$3.9 billion ($3.4 billion) of debt by a Feb. 15 deadline imposed by bankers, Snowden said in an interview yesterday.

``Their assets are good quality and are performing well; we are very focused on cashflow, which we see as a starting point to determine where relative value lies,'' Snowden said.

Still, the health of the Australian assets may mean they are the easiest for Centro to sell to pay off debt. Simon Garing, an analysts at UBS AG, said Jan. 2 that Centro had a better chance of selling Australian shopping centers near book value than U.S. malls.

The value of Colonial's Centro holding has slumped to A$25 million from A$400 million on Dec. 12, when the company halted trading in its shares, later saying it had failed to refinance the A$3.9 billion of debt because of the global credit squeeze.

Diversified Portfolio

The stake in Melbourne-based Centro that Snowden manages is held in several property funds and comprises less than two percent of his portfolio, he said

``We hold very diversified global portfolios,'' Snowden said. Colonial and its parent Commonwealth Bank of Australia together hold a total of 96.8 million Centro shares, equal to an 11.5 percent stake, according to Bloomberg data.

Centro gained 4.5 Australian cents to 40 cents at 10:51 a.m. in Sydney. The company has lost A$8.2 billion in market value since the stock peaked at A$10.06 on May 7 last year.

Snowden said the biggest challenge for Centro suitors is the company's ``Byzantine maze of debt.''

Centro comprises 34 property syndicates, three wholesale funds, two unlisted property funds and one listed property fund, according to its website. Former Chief Executive Officer Andrew Scott used this structure to control the $9 billion of malls he acquired in the past two years and the management fees they generated.

New Chief

Centro on Jan. 15 appointed Glenn Rufrano, who had run the company's U.S. trust, to replace Scott.

``Glenn Rufrano is regarded as a shrewd and capable manager,'' Snowden said. ``I'm given heart and encouragement by Rufrano moving to Australia and moving his family here. And he's got the respect of the U.S. banks.''

Rufrano plans to hold a briefing with journalists in Melbourne today.

Scott spearheaded Centro's 10-year expansion from an Australian shopping center operator to the fifth-largest owner of malls in the U.S, where almost two-thirds of the company's A$26.6 billion of assets under management are situated. Centro's biggest acquisition was the $3.7 billion purchase of New Plan Excel Realty Trust last year