property revaluations

As I mentioned earlier, the DPF and DPFI are showing drops of 6.54% and 11.91% respectively.

Using these figures, we can do some rough maths to try and get a feel for how much Centro is writing down the US and Australian assets. I emphasise this is rough and I suggest you work your own numbers to see if you come out with similar.

We could safely assume that the 11.9% drop in DPF represents the drop in the US assets because of the property ownership within the fund. Remember that the entire US portfolio was revalued at the end of last half so we are only talking about drop in value this half. 11.9% would represent around a 6% drop in values (assuming a 50% leverage in the underlying funds).

We cannot assume that the DPF drop equates exactly to the drop in the Australian assets. The complexity here is that that DPF owns 27% of DPFI and has 11% of its funds in CRIT, 2.9% in CER and 1.8% in CNP. When you remove the 27%, drop the value of CRIT by 10% and write-off 75% of the value of CNP and CER (roughly the drop in SP since 1/1/08), it seems to indicate that there has been a minimal drop in the value of Australian assets of around 0.6%. This would certainly support the transactional evidence that Oz properties are selling at or around book value.

Remember that DPF and DPFI are equity accounted so we can assume that the drop in unit value will result in an equivalent drop in CNP carrying value. Whilst it's still a bit early, by our estimates this will equate to a ~$120m write down in the CNP carrying value of DFPI and around $80m in DPF. These will be offset in part by the operating profit of each, which we estimate to be about $80m in total. So the net equity accounted loss for the two would be in the region of $120m.

SuperLLC is also equity accounted but to work out the net movement, we take a 5.5% drop on the $2.38bn of assets, which equates to about $130m. This will be partly offset by $25m in operating profit which nets out to $105m, effectively wiping out all but $40m of the equity in SuperLLC (well done Andrew Scott). This also assumes there are no further impairment provisions for SuperLLC (which accounted for $578m of the $1.1bn loss last half). This is anyones guess.

So, at this stage on very, very rough numbers we should be looking at around $225m of write-downs across the three equity accounted investments - DPF, DPFI and SuperLLC. This does not include the CER holding, nor the domestic portfolio, both of which require some more work. It also does not include the CNP holding in CAF or CAWF, which may (or may not) be sold by year-end. Remember that last half the write-downs were $460m, but this also included the carrying value of CER.

I emphasise this is very rough and intended to only supplement your own research. These figures represent property revaluations ONLY and obviously do not take into account any other items on the income statement.

I think there are far too many unknowns to try and work out a P&L number for the half but if I had to take a stab, I'd say at this stage (bearing in mind the absence of ANY information from the company) the numbers will be significantly better than the $1.1bn last half. The caveats here are further impairment charges for SuperLLC, derivative revaluations, extension/advisor fees and any legal or other provisions required.