CENTRO is still up to its neck in debt, analysts said the Centro America Fund sale will generate a meagre $250 – $300 million to repay back the $6.6 billion of debt it owes.
Centro yesterday sold 29 of the 31 properties, a wholesale fund managed to a private real estate investment advisor. The price of $US714 million ($A735 million) was a 10% discount to previous book value.
Centro had a 46.65% direct interest in CAF, the other 50% is owned by the Centro Direct Property Funds. As a result, the sale will generate $340 million.
All up, an analyst who did not wish to be named told Australian Property Journal Centro will receive between $250 million to $300 million, after payment of the secured debt, to repay its own debt which is estimated to be $6.6 billion.
“The sale had very little effect… $250-$300 million is a drop in the ocean if you look at how much debt Centro owes.
“Centro’s future is still in the hands of lenders,”
The sentiment was shared by other analysts.
“They are still up to their neck in debt,” ABN AMRO’s analyst Bill Bishop told Associated Press.
Meanwhile, Centro’s chief executive Glenn Rufrano said the sale is a key step in providing
liquidity to Centro’s balance sheet.
But analyst said the discount sale is a reflection of Centro’s lenders wish to get as much value as they can out of the group, whilst they can.
“Centro and the lenders are avoiding the word ‘fire sale’ but this is exactly what today’s (July 15) sale is, an organised and orderly fire sale process.
“The banks are in there and trying to get their hands on as much equity as they can,” the analyst added.
The next line of sales will come from the Centro Australia Wholesale Fund which owns the Centro Bankstown in Sydney, Centro Galleria and Centro Halls Head in
Analysts were unable to speculate whether Centro will sell those properties for a discount or whether the property values will hold up.
“It is a buyers market, so we’ll just have to wait and see,” the analyst concluded.
Meanwhile, CAF’s 29 properties aggregate 5.1 million sq ft and is diversified across 15 states. The agreement excludes CAF’s partial share of Independence Mall, located in
Centro will continue to provide management and leasing services for the 29 assets for a minimum of one year in exchange for market fees.
Settlement is scheduled to occur in late September to October 2008.
Centro shares rose 1.5 cents to close at 24.5 cents.
Australian Property Journal
