Miriam Steffens January 3, 2008 CENTRO PROPERTIES GROUP finally...

Miriam Steffens
January 3, 2008

CENTRO PROPERTIES GROUP finally raised the white flag yesterday, putting up the "For Sale" sign as it seeks to find a way out of its financing crisis within the next six weeks.

Centro and its advisers at Lazard Carnegie Wylie have asked for expressions of interest to buy the company or its stakes in two Australian and US wholesale funds, which hold $3.8 billion worth of shopping centres. Other options were a recapitalisation, or finding white knights who would invest in the company, the embattled property trust said.

Centro's shares closed 3c higher at $1.04 yesterday, although they traded as high as $1.24, following their dramatic slide of nearly 90 per cent in the final weeks of last year which reduced its market value to less than $900 million from $8.5 billion in May.

Its chief executive, Andrew Scott, has until February 15 to come up with a rescue plan to refinance $3.9 billion in debt amid the global credit crunch.

He said yesterday that management had decided to collect expressions of interest after receiving several offers from a range of domestic and international investors.

"We have established a process under which all of these proposals can be considered," he said.

Sources close to Centro said the company was still seeking to avoid a firesale of individual shopping centres like The Glen in Melbourne, or Bankstown in Sydney, trophy assets that would be highly sought after by rivals like Westfield or Stockland.

Selling its stakes in the unlisted Centro America Fund and Centro Australia Wholesale Fund, rather than dumping individual centres, would let Centro keep the management rights for the centres, a valuable source of income.

"I'm sure selling centres outright would be a last resort," said John Snowden, a manager of property stocks at Centro's largest shareholder, Colonial First State. But Centro could get "some very good prices" for the Australian centres amid a dearth of available quality retail assets, he said.

Centro needs to raise at least $1.4 billion in cash to satisfy its lenders for a debt refinancing, according to Merrill Lynch. The two unlisted funds were the "most likely and readily available sources of equity", the broker said when Centro revealed its problems last month. Centro owns the two funds together with some other property funds that it manages. It could expect about $1 billion in proceeds from selling its stakes in the funds, and might sell off a chunk of its 25 per cent holding in its listed offshoot, Centro Retail Trust, to make up for the rest, Merrill said.

Australian trusts including Westfield, Stockland and Colonial First State are believed to have stuck up their hands to get a piece of the company's $26 billion portfolio, sniffing a rare opportunity to acquire quality Australian assets. There was also interest from international property investors, hedge funds and debt providers, industry sources said.