Carolyn Cummins April 28, 2008 Page 1 of 2 LISTED property...

Carolyn Cummins
April 28, 2008
Page 1 of 2
LISTED property trusts and retail investors are lining up to start negotiations with the beleaguered Centro Properties Group to make offers for its shopping centre assets as the group moves to refinance its crippling debt.

Wednesday is D-day for Centro. It must get approval from the banks to extend its $4.2 billion debt repayment, or face receivership.

However the directors, led by the chief executive, Glenn Rufrano, have expressed confidence that they will be able to successfully negotiate with the Australian banks to roll over the deadline to September 30, or later, to avoid going into receivership.

But in another blow for the crippled group comes the news that the US litigation funder Commonwealth Legal Funding is to team with the law firm Slater & Gordon to represent investors who bought Centro Properties and Centro Retail Trust stapled securities between August 7 last year and February 15 this year.

The litigation funder IMF has also said it would back another law firm, Maurice Blackburn, to run the class actions on behalf of investors who bought shares in the groups during the six months to February, in what would be the first major legal action linked to the global credit crunch.

The action may be avoided if Centro can start selling some of its assets to recoup the cash.

In documents obtained by the Herald, Mr Rufrano has confirmed there are 28 assets in the Centro Australia Wholesale Fund that will be on the block as part of his refinancing program.

The highest-valued centre is the Centro Galleria in Western Australia, worth $293 million, according to asset schedule documents that potential buyers have been sent, followed by Centro Bankstown, which is valued at $290 million.

Of the 28 centres - 25 of which Centro jointly owns with the listed Centro Retail Trust and in some cases its unlisted Diversified Property Fund - three are half-owned by private investors.

The unlisted developer Salta Properties bought a half-share of the Victoria Gardens centre in Richmond, Victoria, in 2007, while retail investor Bob Ell owns a half-share in the Centro Tuggeranong Hyperdome in Canberra, valued at $218 million, and Centro Hervey Bay, Queensland, valued at $36 million.

These properties are not included in the sale as Mr Ell and Salta Properties have pre-emptive contracts in place and would get first right to buy out Centro.

Other assets on the list include Centro's first centre, The Glen, in Glen Waverley, Melbourne, valued at $206 million, the Colonnades in South Australia worth $185 million, Mandurah in Western Australia, valued at $117 million, and Centro Roselands in NSW, valued at $175 million.

Property analysts believe the Galleria and Mandurah centres will be keenly sought, followed by Colonnades and The Glen.

Buyers are said to be private institutions such as the Industry Superannuation Property Trust, although its managers have said they are overweight in the retail sector, GE Capital, and various private groups such as Mr Ell, Lang Walker, the Besen family, the Berger family and John Beville, among others. These groups are believed to be cashed up and are unlikely to face the same hurdles in raising funds in the present debt climate as their listed competitors.

Of the listed trusts, GPT, Stockland, Westfield, Mirvac and CFS Retail Trust are said to be running the ruler over the 25 centres. But they face a tougher task, not just in raising the funds but because they would also have to appease the Australian Competition and Consumer Commission.

In a recent note to clients, Macquarie Equities said it had assumed the banks would provide Centro with a further extension, but warned that valuation of the group was "sensitive" to movements in asset values: "We believe the most appropriate valuation [for the overall group] is 0c to 50c per share, as asset values are likely to decline further."