centro sale signals reit's return

I just what the board to ensure we dont get any diliution they can add extra value just ensure that value doesn't dilute current CER holders.
Not having one big owner with 51% vote should ensure the CER board is working in all our interest and they earn there fees for growing the company in a professional manner and reliable income earner for Super funds and others to invest in.
Bring on the Divis and will have a very good company ongoing.

Cheers
Hotlegs

Centro sale signals REIT's return as property sector becomes attractive again From: The Australian March 04, 2011 12:00AM

BLACKSTONE'S $US9.4 billion ($9.2bn) purchase of Centro Properties Group's US malls is the latest sign that Australian real estate investment trusts are eliminating debt from the takeover boom that started in 2005, cutting the cost of insuring against defaults to a 10-month low.
Credit-default swaps on Australia's five biggest property companies fell to an average of 129.8 basis points (1.298 per cent), after Melbourne-based Centro announced the sale on Monday.

The extra yield offered by nine Australian-dollar REIT bonds issued before 2010, compared with interbank borrowing costs, dropped 47 basis points over the past six months.

Companies in the S&P/ASX 200 A-REIT index cut debt by 56 per cent over the past two years, after $US74bn worth of purchases between 2005 and 2008 drove the average default swaps cost to as high as 763 basis points in April 2009. Real estate bonds returned 9.2 per cent over the past year, the sixth-best among 32 industry groups in Bank of America Merrill Lynch's index of Australian corporate debt.

"Centro was being rolled out as an example of the problems that still exist in the property sector," Morningstar head of REIT research Scott Courtney said.

"This resolution will result in increased willingness by banks to provide facilities to refinance debt, and the margins they're charging will continue to improve."

Centro says Blackstone's purchase of the 588 US malls allowed the company to agree with most creditors to swap debt for its 108 Australian shopping centres, aiming to resolve a two-year restructuring effort.

Centro, which had a stockmarket value of about $8.5bn in May 2007, says it will have $100 million to distribute to shareholders and minority interests if the asset swap goes ahead.

Blackstone, the world's largest private equity firm, is betting on a recovery in US commercial real estate after the subprime crisis.

The deal is another "sign the sector is slowly repairing itself"', said George Boubouras, the head of investment strategy at UBS's Australian wealth-management unit. "Private equity has moved into the sector in a sizeable transaction, which shows that people are buying into the sector and taking risk, and are finding value."

Relative yields for Australian REIT debt declined after the Centro deal. The extra yield offered by CFS Retail Property Trust's $440m of 2016 notes, the largest Australian-dollar bond outstanding among REITs, over similar-maturity government notes fell to 186 basis points on Tuesday, down 35 points this year and the smallest gap since the debt was sold in October.

The spread for Stockland Group's six-year notes due in 2015 shrank 96 basis points over the past year to 190.

"Centro being able to reduce gearing levels will be positive for the whole sector," said Bob Sahota, head of fixed interest at Challenger. "Banks have been taking a more aggressive view of providing financing to REITs."

The Markit iTraxx Australia index, which tracks costs to insure 25 Australian corporate bonds against non-payment, rose five basis points to 108 this year.

Australian property companies snapped up real estate worth about 10 per cent of the nation's 2005 gross domestic product from 2006 to 2008, led by $US26bn worth of US purchases. The buying spree backfired when the financial crisis froze credit markets after Lehman Brothers collapsed in September 2008.

The nation's biggest property firms, including shopping mall owners Westfield, Stockland and GPT, have paid off borrowings, sold assets and raised about $18bn in capital. Australian REITs lowered their net debt to $401.29 a share as of December 31, from $917.38 two years earlier.

"In the new, post-global financial crisis market, the level of leverage we've seen is considerably lower for REITs," Mr Sahota said. "The bigger REITs are now in a pretty good position."

Westfield, the world's largest shopping mall owner by assets, spun off Westfield Retail Trust in December to increase its earnings potential and cut the parent's liabilities by $4.4bn, partly by using the proceeds from a $2bn capital raising to pay back money borrowed to buy stakes in malls.

Stockland, Australia's biggest diversified property trust, is selling offices and industrial assets to focus on retail, residential and retirement businesses. Stockland reduced its debt to 20 per cent of total assets as of December 31, from 31 per cent two years ago.

GPT offloaded overseas assets over the past two years after it posted a a $3.25bn loss in 2008.

"The fact that Centro was out there was adding to the margins that banks were finding it necessary to charge," Morningstar's Courtney said.

"The fact that Blackstone was confident in the US property market shows the market is in recovery."