Centro Sells its Malls in US

Submitted by Craig Strzelecki on 15 July, 2008 - 09:45

Troubled Centro Properties Group has decided to go ahead with its sell-off of its US properties to reduce its debts. It has announced that it shall sell 29 of its 31 properties in Centro America Fund (CAF) at a 10 percent discount of its book value. Centro America Fund (CAF) is a wholesale fund managed by the Centro Group where Centro Properties held 46.65 percent stakes. Centro Properties has decided to go ahead with its plans to sell its assets to a private real estate investment advisor in order to provide liquidity to the balance sheet and pay down its outstanding indebtedness. It had fallen victim to the global credit crunch earlier this as its shares had slumped 74 percent this year when it revealed its debt problems.

Centro and its affiliate, Centro Retail Trust had made rapid expansions in the US with heavy borrowings from the market. However, the credit market started drying up and the company started facing problems since December when it found itself unable to procure refinancing for its maturing debt. It existing debts close to $5.3 billion fall due on December 15 this year.

According to the Australian Securities Exchange, the book value of the asset sales would be US$714 million (A$735 million) which would be at 10 percent discount of the properties' book value. Centro had put the value of its CAF assets to $1.2 billion earlier on its website. Although Centro has decided to sell its assets, however, it shall continue to provide management and leasing services for the 29 malls for at least one year which would be considerable source of revenue for the company.

A spokesman for Centro Group also confirmed to Reuters that talks were on for company's sale of local shopping centre assets with Centro Wholesale Funds were also going on that were valued at $2.6 billion.

Centro, the Melbourne-based mall owner had recorded biggest gains at the stock exchange when its announced last month that it shall sell its assets. It had won an A$6.6 billion debt extension earlier this year from its bankers.

The share prices of Centro Properties surged as much as 35 percent after its announcement to sell its assets.