Source: The Australian Financial Review newspaper [Page 49] Date: Tuesday 22 April 2008
US woes to hit Centro shopping malls Mathew Dunckley
Centro Property Group chief executive Glenn Rufrano has conceded that income growth at its 650 US shopping centres will suffer from that country's economic downturn.
In an admission that could complicate the group's search for new equity, Mr Rufrano said that although a softening economy had not yet affected the US malls, that was expected to change.
"We will have a downturn, the extent of which no one knows," he said. "We will lose some occupancy and net operating income growth. We are going to have some consumer downturn but we haven't felt it yet."
Analysts predict the uncertainty over the company's exposure to a slowing American economy could prove telling in the value of any eventual transaction.
Mr Rufrano made the comments during an otherwise generally upbeat briefing on Friday before the April 30 expiry of a funding agreement with the group's Australian-based lenders.
Centro is looking to reduce debt and achieve a long-term funding arrangement with all its financiers through selling its interests in the Centro Australia Wholesale Fund and the Centro America Fund as well as courting large new investors.
Mr Rufrano said both occupancy and net operating income had held steady through February, but the company was concerned about the number of tenants.
One was embattled homewares retailer Linen'n'Things, which had 19 outlets in Centro centres.
"The only way to deal with a downturn is to diversify," Mr Rufrano said. "We are very careful in our portfolio so we don't have any overweights in tenancies."
Centro's top 10 tenants took up less than 10 per cent of its centres and the biggest occupiers were clothing store TJ Maxx, grocery chain Kroger and Wal-Mart.
Mr Rufrano said Kroger reported growth of more than 5 per cent in its most recent quarterly figures.
He played down recent filings for bankruptcy by eight US retailers, saying it was a small proportion out of a market with 10,000 operators.
Meanwhile, rumours have continued to swirl about an offer to buy into the group at a price of about $1, prompting a notice to the Australian Securities Exchange yesterday from Centro stressing that no deal had been done.
An analysis by Macquarie Research Equities released yesterday put an estimated valuation on Centro shares at between 0c and 50c.
The report said the company's share price was extremely sensitive to asset values and pointed to operating earnings risks from a weaker tenancy environment.
Centro's shares closed up marginally to 42.5c yesterday.
Ends.
Cheers, Pie :-)
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