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Kris Hudson, Jeffrey McCracken | February 28, 2008
AT least four companies are considering bids for a controlling stake in the struggling retail-property giant, Centro Properties Group.
Bids are expected from Blackstone Group and General Electric's GE Real Estate in the US, Australia’s Mirvac Group and Mulpha, a subsidiary of Malaysian conglomerate Mulpha International, informed sources said.
Other bidders are also likely to vie for Centro Properties (ASX: CNP: quote) as well as its various interests.
Centro is expected to collect formal bids “within several weeks”. Details of the planned bids weren't available.
Blackstone and GE declined to comment. Mirvac and Mulpha didn't immediately return messages seeking comment.
Centro, a high-profile casualty of the credit crunch in commercial real estate, expanded in the past decade to become one of the world's largest retail landlords, owning 128 shopping centres in Australia and New Zealand and 682 in the US.
The company, which borrowed heavily, has assets under management worth $US24.7 billion ($26.2 billion) and debt of $US16.9 billion.
Centro shares had traded as high as $10 last year on the Australian Securities Exchange. Late this afternoon in Sydney, Centro shares were trading at 57 cents on an increase of 14 per cent.
Centro's problems stem from its use of $US3.4 billion in short-term debt to finance its acquisition last year of New York-based New Plan Excel Realty Trust for $US3.7 billion.
Centro failed to attract investors quickly enough to buy the New Plan properties off its books before the debt came due.
The company received extensions from its lenders to April 30 to allow it more time to attempt to raise capital. In addition to the short-term debt from the New Plan deal, Centro has $US3.7 billion in debt coming due this year.
Melbourne-based Centro fuelled its growth through heavy reliance on debt financing and by recruiting outside investors into investment funds that own the majority share of properties it acquires.
Centro has retained a minority stake in the properties and charges the funds fees to manage, lease and develop them.
The company announced last December that it hoped to raise capital by selling its interests in two funds.
Centro owns 50 per cent of one, which holds 28 Australian shopping centres valued at more than $US2.3 billion. The other, of which Centro owns 91 per cent, holds 32 US shopping centres valued at nearly $US1.1 billion.
Recently, potential bidders have become interested in acquiring a controlling stake in Centro itself. One possibility is a cash infusion in return for equity. But with Centro's shares at current levels and Centro needing significant capital, such an exchange would result in the outside investor holding the majority of Centro's shares.
Centro is being advised by Lazard and its Australian division, Lazard Carnegie Wylie.
It also faces a hostile effort to wrest away management of 10 of its investment funds that cater to retail investors. The funds own properties collectively valued at more than $US900 million.
New Zealand's Money Managers Investment Advisors has called for a special meeting of investors in the 10 funds to vote out Centro as the manager, in objection to fees Centro charges and its failure to maintain hedges to protect the funds' value.
Money Managers proposes to replace Centro with Pelorus Property Group, an investment management group in Sydney. Centro sent a letter to the funds' investors disputing the need for a meeting and calling on them to withdraw support for the effort.
CNP Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
