Archive | Centro

McNaughton leaps out of reject bin to run $A22 billion retail empire

Kiwi property executive Angus McNaughton leapt out of the reject bin on Monday to become chief executive of the $A22 billion Vicinity Centres Group, the entity resulting from the merger of Federation Centres and the Novion Property Group.

Mr McNaughton, who’d been chief executive of Novion, was dropped from the executive lineup in the June merger as Federation chief executive & managing director Steven Sewell took charge.

However, on Monday chairman Peter Hay announced the exit of Mr Sewell and immediate replacement by Mr McNaughton. Mr Sewell had already been dropped from the Vicinity board because of a limit of 8 directors.

Mr McNaughton spent 14 years at Kiwi Income Property Trust, 6 as chief executive of its management company, leaving for Singapore in 2008 in a step up within the Commonwealth Bank’s property group as head of the Sandalwood joint venture between Colonial First State Global Asset Management & Jones Lang LaSalle. From there he moved to Sydney as head of the bank’s wholesale property funds.

When Commonwealth decided to internalise management of its 3 property funds in 2013, a joint venture between Dexus Property Group & the Canada Pension Plan Investment Board took over the Commonwealth Property Office Fund, Kiwi Income Property internalised then corporatised as Kiwi Property Group Ltd, and Colonial First State property became Novion late last year, with Mr McNaughton as chief executive.

On the other side of the Vicinity merger, the Centro Properties Group expanded rapidly through to 2007, building a large US retail portfolio on top of its Australian business. As a consequence of the global financial crisis, Centro sold its $US9.4 billion US portfolio in 2011 to BRE Retail Holdings Inc, an affiliate of Blackstone Real Estate Partners VI LP, and survived in Australia through a scheme of arrangement with creditors. Mr Sewell took charge in 2012 and Federation emerged as the new name in January 2013.

The group (still called Federation) will release its annual results on Wednesday 19 August and will formally change its name to Vicinity Centres at the annual meeting in October.

Novion originated in 1994 as the Gandel Retail Trust, and the Gandel family remains closely involved in the business. The family jointly owns the Chadstone shopping centre in Melbourne, now with Vicinity, 4 family trusts hold 8.56% and John Gandel, who’d been the major shareholder at Novion, holds a total 13.8% interest & 2 board seats.

5 institutional holdings accounted for 69% of stapled securityholders listed immediately post-merger.

Mr Sewell was chief executive of Charter Hall Retail REIT (ex-Macquarie Countrywide Trust) for 5 years and national head of property management for QIC Property before taking on the rescue of Centro. He chairs the Shopping Centre Council of Australia.

The merged group owns & manages 102 Australian shopping centres. It announced the sale of one on Monday, the Queensland convenience centre Lutwyche City, to Abacus Property Group & Zenonos Group for $A65 million, and opens a new bus interchange & taxi rank at Chadstone today, the first step in the $A600 million redevelopment of that centre. The interchange will give shoppers a central point to access the centre from a network of 14 bus lines connecting to the suburban train network and Melbourne’s east & south.

Chadstone will also get 2 new parking areas in November, a 10-storey office block in mid-2016 and, in late 2016, a new retail precinct incorporating a Hoyts digital cinema complex, 2 dining precincts & over 100 retailers, including at least 3 new international flagship stores.

The group received planning approval from Monash City Council at the end of July for the $A500 million redevelopment of the co-owned Glen shopping centre.

Link: Federation Centres

Attribution: Company releases.

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Whole of Centro up for grabs

Published 5 November 2010

Centro Properties Group (CNP) has decided to run a formal competitive market process for its $A18.6 billion portfolio after fielding approaches from a number of parties with a variety of indicative expressions of interest.

The group & its managed funds are on death row: Property revaluations took Centro’s asset backing from negative $A2.91/security in June 2009 to negative $A3.12 at the June 2010 balance date – net equity of negative $A2.1 billion.

Centro manages a portfolio of 712 shopping centres in Australia, New Zealand & the US. Most are owned by Centro’s managed funds. About 60% of the portfolio by value is in the US. Centro is the second largest manager of retail property in Australia and the third largest manager of shopping centres in the US based on the gross lettable area of the centres.

Centro chairman Paul Cooper said yesterday the boards of the group – Centro Properties, CNP & Centro Retail Trust – were continuing to review potential restructure & recapitalisation initiatives, and hoped the formal process would bring interest from other parties to the surface.

Group chief executive & managing director Robert Tsenin said: “The process has been designed to maximise value for all stakeholders in the Centro Group. It is not possible to predict the eventual outcome of this competitive process as it could include the sale of all or part of the businesses, an investment in, or possibly a recapitalisation of, all or part of Centro.”

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Attribution: Company release, story written by Bob Dey for the Bob Dey Property Report.

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Investors want 3 Centro board seats to smooth way for refinancing by Chinese bank

Published 8 July 2009

5 shareholders together holding more than 5% of Centro Property Group have told the Australian group a leading Chinese bank could refinance it, but they want 3 board seats to help the process along.


The companies have requisitioned a general meeting to have their 3 nominees appointed to the Centro board, less than a fortnight after Centro announced it had appointed 3 directors following a 9-month search.


Centro has been struggling to stay alive since December 2007, when its big US investments turned to disaster. The whole group grew from $A9.9 billion of funds under management in January 2006 to $A26.6 billion at the end of 2007, following the acquisition of the US New Plan reit’s $A10 billion portfolio in April 2007, which made it the fifth-largest retail property owner & manager in the US.


That deal took Centro’s gearing to 59%. The debt level is still $A19.7 billion, but the share prices of both Centro Properties Group & Centro Retail Group have both been bumbling along around A9c. Just before a trading halt was called in December 2007, Centro Properties Group dropped from $A5.70 to $A1.36 and Centro Retail Group dropped from $A1.425 to A83c.


The Chinese bid has been spearheaded by Li Zhang, a Sydney-based investment manager who’s also secretary of the Centro Shareholders Association, formed this year, and is one of the 3 nominees for a Centro board seat.


He’s joined by Perth accountant Kieron Strahan & Yik Fan Ngai, director of BSF (BVI) Ltd. According to the release by the lead company of the 5 campaigning shareholders, Lumar Investments Pty Ltd, Ms Yik has worked for Hong Kong-listed K Wah International Holdings Ltd and “was instrumental in her company’s expansion into China. She will play a crucial role in achieving Centro’s potential refinancing & restructuring in the near future. Her expertise in company management and, more importantly, her corporate connections in Hong Kong & China, will assist smooth operations during Centro’s potential refinance.”


The Lumar statement said: “Our consistent efforts in the last 5 months have led to a major breakthrough. One of China’s top banks has shown significant interest & willingness to refinance Centro. Initial discussions between the Chinese bank & Centro’s Australian lenders have already taken place. However, having strong shareholder representation on the Centro board would help to ensure the potential refinancing deal with China is properly considered. It could also act as a preventative measure to protect shareholder interests in Centro’s future direction.”


The Lumar nominees said Centro had to address 3 critical issues immediately:


Flaws in its business modelWeaknesses in its investment strategy, andShortcomings in its risk control.


In a letter posted on the shareholders association website, the 3 nominees said Centro’s present predicament wasn’t just caused by the global financial crisis but was “an accident waiting to happen”.

They wrote: “This global financial crisis has taught shareholders a hard lesson that current company structures & regulations are not sufficient to protect their investments. In boom times, current company structures & regulations cannot stop companies going on reckless expansions for the best interests of executives & directors. Those expansions often inherit substantial risks to companies & shareholders. In tough times, companies often undertake rights issues or sell assets cheaply to destruct shareholders’ value. Those kinds of corporate behaviours have destroyed the fundamentals of investment ideology. Equity investment becomes no different from gambling. A possible way to revive equity investment is that shareholders start to take active roles in companies’ affairs. Shareholders are the real owners of companies. They cannot afford only to be passive investors and to watch their investments to evaporate into thin air.”


Centro’s own new trio


Centro said on 25 June Anna Buduls, Susan Oliver & Robert Tsenin would replace Graham Goldie, Sam Kavourakis & Peter Wilkinson on the board as soon as the annual accounts are finalised in September.


Ms Buduls has a finance & consulting background over 20 years, including positions with Macquarie Bank & Westpac and 4 years as a journalist & investment editor at the Australian Financial Review. Her numerous non-executive directorships include Mirvac Group Ltd.


Ms Oliver has more than 30 years’ experience in building & planning, including executive roles at the Australian Commission for the Future Ltd and the Victorian state government’s Ministry of Housing and Department of Industry, Technology & Resources.


Mr Tsenin has over 30 years’ experience in corporate finance, mergers & acquisitions and real estate in Australia & the UK. His executive roles included managing director of Goldman Sachs (Australia) Ltd, finance director of Lend Lease Corp Ltd and senior advisor on real estate-related matters for the Lazard Group in London. He’s also been a non-executive director of Telstra Corp Ltd, AXA Asia Pacific Holdings Ltd, Global Properties Fund and International Distressed Debt Fund, and is currently a non-executive director of Australian Infrastructure Fund, Sistema Hals JSC and Matrix European Real Estate Investment Trust.


Websites: Centro Properties Group

Centro Shareholders Association


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Attribution: Centro, shareholders association & Lumar releases, story written by Bob Dey for the Bob Dey Property Report.

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Centro changes the chook in charge as its woes extend

Published 15 January 2008

Centro Properties Group chief executive Andrew Scott resigned today, his departure price discounted like those of the battered Australian retail property owner’s stocks.


He’s been replaced by Glenn Rufrano, who was chief executive of US reit New Plan when Centro took it over last year and stayed on to become head of Centro US.


The handover of executive control came a month after the Melbourne-based Centro disclosed that 2 of its lenders would only extend their loans until 15 February – and that Centro’s US private placement noteholders, collectively owed $US450 million, were claiming defaults had occurred.


Centro didn’t concede that there had been any defaults, but entered into an agreement with the noteholders under which they will refrain from taking action through to 15 February (or later, if agreed).


Centro said the Australian & US lenders who refused a rollover in December were now considering an extension beyond 15 February.


The financial troubles have now landed Centro in a position where it can’t extend maturing FX hedges. Its $US4.473 billion of net FX equity exposure to $A/$US rate movements was 99.2% hedged but is down to 80.7% hedged.


Centro also owned up to the wrong classification of $600 million of interest-bearing liabilities in its 18 September 2007 release of the June audited financial statements, where it said $A1.097 billion was current & $A2.507 billion was non-current.


Meanwhile Centro’s advisor on its strategic options, Lazard Carnegie Wylie, has reported extensive interest from “high-quality & credible” potential investors for a range of the various options the board is considering. A number of them should start due diligence soon.


The potential sale of the group’s interests in the Centro Australia Wholesale Fund, and its Centro America Fund. had also attracted strong interest from both domestic & international investors.


Centro chairman Brian Healey said Mr Scott had agreed to an $A1.5 million payment when he ceases employment and another $A1.5 million on 31 March (he’s staying as a consultant until then), plus accrued salary or other entitlements – much less than his contract had entitled him to.


Mr Scott’s package for the June 2007 year totalled $A3.6 million and he’d increased his company loan to buy shares from $A5.9 million to $A10.6 million. Mr Rufrano has agreed to take over on a $US1.2 million salary, a short-term incentive of up to 150% of annual salary & a long-term incentive of 1 million options to acquire securities under the Centro executive option plan.


Earlier stories:

14 January 2008: Centro trading halted

2 January 2008: Centro seeks expressions of interest, including carve-up & total sale

19 December 2007: Centro head units down 86% as refinancing fails


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Attribution: Company release, story written by Bob Dey for this website.

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Centro trading halted

Published 14 January 2008

Trading in the 2 stapled securities of Centro Properties Group was suspended at the troubled Australian retail property investor’s request on Friday, pending an announcement.


Centro asked the ASX that the trading halt remain in place until the earlier of Centro making that announcement or opening of the market on Tuesday 15 January.


Centro has 2 securities – Centro Properties Group & Central Retail Group.


Last story:

2 January 2008: Centro seeks expressions of interest, including carve-up & total sale


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Attribution: Company statement, story written by Bob Dey for this website.

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Centro seeks expressions of interest, including carve-up & total sale

Published 2 January 2008

Centro Properties Group said today it would invite expressions of interest for key alternatives available to it as the board & management undertake a strategic review in the wake of the group’s failure to secure long-term rollovers of $A3.9 billion of loans.


The options include the breakup of the group & sale of the whole of Centro.


Centro chairman Brian Healey said today: “In recent days we have received a significant number of unsolicited expressions of interest from a range of strategic & financial investors in potential investments in the group and certain of our assets. Therefore, as part of the strategic review process, Centro is now seeking expressions of interest for key alternatives available to it.


“This will enable interested parties to substantiate their interest and for all such proposals to be evaluated from the perspective of the best interests of all Centro stakeholders.


“The board believes it is appropriate to adopt a process that allows the effective evaluation of any expression of interest on an equal basis and to ensure consideration of a wide range of alternatives for the best interests of all stakeholders. Expressions of interest are therefore being sought for either or both:


a whole-of-group review, including a recapitalisation, equity issuance or acquisition of Centro, orthe acquisition of the group’s interests in its Australian & US wholesale funds.

“Parties wishing to participate in this process should contact Centro or its advisors, Lazard Carnegie Wylie.”


Centro’s stock prices collapsed in the week before Christmas on the revelation that the group couldn’t refinance billions of dollars of loans beyond February.


The Centro Properties Group share price dropped 86% in 2 days, from $A5.70 to A80.5c, but closed at $A1.04 today. Centro Retail Group, created from the merger of Centro Retail Trust & Centro Shopping America Trust, dropped 54%, from $A1.425 to A65c, but closed at $A1 today.


Website: Centro


Earlier story:

19 December 2007: Centro head units down 86% as refinancing fails


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Attribution: Company statements. presentation, story written by Bob Dey for this website.

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Centro head units down 86% as refinancing fails

Published 19 December 2007

Australian retail property leader Centro’s unit prices collapsed this week after the board said it couldn’t refinance billions of dollars of loans and its first option was to sell off assets.


Centro Properties Group dropped from $A5.70 to $A1.36 and Centro Retail Group dropped from $A1.425 to A83c (down 42%, recovering A2c to close at A85c), from the close last Thursday before a trading halt was called, to the close on Monday. At the close on Tuesday, the group unit price was down another A55.5c to A80.5c (down 86% in 2 days) and the retail group price was down another A20c to A65c (down 54% in 2 days).


Just 10 days earlier, in its quarterly update, Centro proudly detailed the October merger between 2 of its trusts, Centro Retail Trust & Centro Shopping America Trust, which created a trust with $A3.8 billion market capitalisation and an $A10.1 billion portfolio (including its New Zealand assets), “offering enhanced liquidity & growth opportunities”.


The whole group grew from $A9.9 billion of funds under management in January 2006 to $A26.6 billion this month, following the acquisition of the US New Plan reit’s $A10 billion portfolio in April, which made it the fifth-largest retail property owner & manager in the US.


One of the important figures in the new age of debt fragility was its gearing, up a notch post-merger to 59.1%.


Centro, like other Australian property entities which invested heavily overseas, didn’t just look for assets for a passive portfolio. All of them have been working their portfolios, looking for development opportunities to increase the return.


For the September 2007 quarter, Centro managed centres showed overall sales growth of 6%. Moving annual turnover growth was 4.9%, with sales of $A10.3 billion for the September year.


But on Thursday Centro called a trading halt because it had reviewed its earnings projections and “completed certain refinancing arrangements”. Chairman Brian Healey said in a presentation on Monday: “Increased costs associated with the extension of the debt facilities, and expected costs of the refinancing, will have an adverse effect on Centro’s earnings & forecast distributions. In addition, restrictions imposed on Centro’s capital expenditure under the terms of the financing extension will restrict Centro from carrying out some of its growth plans in the US which had been expected to generate higher earnings. As a result, Centro’s operating distributable profit/security has been revised downward from A47c/security to A40.6c/security. This represents a slight increase of 2.1% on the 2007 distribution of A39.8c/security.”


Mr Healey said Centro wouldn’t pay a distribution for the December half and it’s stopped withdrawals from its funds.


The key announcement was the failure to roll over $A3.9 billion of loans because the US commercial-paper-backed securities market has collapsed. Centro managed to get extensions of those loans to 15 February.


Centro’s debt maturities are:


$A3.9 billion on 15 February$A3.4 billion within 12 months$A10.6 billion beyond 12 months.

Mr Healey said: “Centro is continuing to negotiate the refinancing of $A1.3 billion in Centro maturing facilities and has obtained an interim extension until 15 February of all facilities maturing prior to that date. In addition, US joint-venture facilities have also been similarly extended. Tightened credit conditions have, however, had the effect that negotiation of a comprehensive refinancing package of these short-term facilities has not yet occurred.


“It has become clear that to secure longer-term financing in the current illiquid credit market, Centro will need to reduce its gearing level significantly. The funding extension will allow Centro’s board & management to undertake a review of options available to secure the long-term capital structure of Centro & its managed funds and to reduce the current gearing levels.


“These options may include asset sales, joint ventures & equity injections. A complete review of the overall structure of the group will also be undertaken. The restructure & refinancing is forecast to incur a one-off cost of $A40 million. These have been excluded from the 2008 forecast operating distributable profit.


“In the meantime, Centro’s $A26.6 billion managed property portfolio is performing well and in line with expectations, reflective of the strong cashflows & defensive characteristics of non-discretionary food- & convenience-based retail property.”


Mr Healey said the board & management took the view in August that it would be able to roll over its debt on attractive terms through the US CMBS markets: “We never expected, nor could reasonably anticipate, that the sources of funding that have historically been available to us & many other companies would shut for business.


“Even following the onset of turbulence in international credit markets, we completed a $US300 million, 10-year CMBS issue on reasonable terms, reinforcing our confidence that it would be more cost-effective to wait for the debt markets to settle. “Up until late last week, we were of the view that our short-term debt obligations could be refinanced on a long-term basis.


“While we understand the difficulty that this presents to our securityholders, the underlying retail property assets & performance of the business remains strong.”


Australian investors weren’t averse to their property trusts expanding overseas by the heavy use of debt, but the Australian media will relentlessly savage a cripple, as happened to Lend Lease.


In one commentary yesterday, Crikey founder & columnist Stephen Mayne put it this way: “Make no mistake about it, this is the biggest crisis to ever hit Australia’s funds-management & property industries. If our second-biggest shopping centre company can’t survive, is anyone safe?”


He listed Centro’s major unitholders, pointing out the potential flow-on of damage. In Centro Properties Group, they are ING 8%, Commonwealth Bank 6.42%, Deutsche Bank 5.8% & Barclays 5.14%. In Centro Retail Group they are Commonwealth Bank 12.95%, Barclays 9.32%, Macquarie Group 5.76%, UBS Nominees 5.09% & AMP 5.03%.


Mr Mayne concluded: “They have all taken a huge haircut. There is no way Centro can recover from the crisis of confidence that will flow from borrowing too much money to become the fifth-biggest shopping-centre owner in the US.


“Centro will be bought by someone like Westfield or Macquarie Bank because the credibility of managing director Andrew Scott, the former property boss at Coles Myer, is now shot.”


Websites: Centro


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Attribution: Company statements. presentation, story written by Bob Dey for this website.

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Centro expands in US with $US6.2 billion New Plan deal

Published 2 March 2007

Melbourne-based Centro Properties Group has entered a definitive agreement to acquire US shopping centre specialist New Plan Excel Realty Trust Inc for $US6.2 billion, at $US33.15 cash/share.

The price is a 12.9% premium on New Plan’s 27 February closing price and a 12.3% premium over the average for the previous 30 days.

New Plan chief executive Glenn Rufrano said the trust had significantly repositioned itself in recent years, recycling $US5 billion of capital and increasing the intrinsic value of its portfolio. “We have built a best-in-class national platform & regional operating system, extensively grown our assets under management, created a leading redevelopment programme and enhanced our retailer relationships. Today’s transaction recognises the underlying value of our portfolio, in particular our operating platform, and accomplishes our ultimate objective of maximising shareholder value.”

Centro has already grown a US portfolio, buying Kramont Realty Trust & Heritage Property Investment Trust, and establishing an $A1 billion syndicated portfolio last year, managed by its US joint venture, Centro Watt.

New Plan is one of the largest real estate companies in the US, focusing on the ownership, management & development of community & neighbourhood shopping centres. It has 467 properties, including 177 held through joint ventures, and total assets of $US3.5 billion.

Centro is Australia’s largest manager of retail property investment syndicates, with over 80% market share, and is a leading manager of direct property funds & wholesale funds which invest in its retail properties in Australia, New Zealand & the US. It has market capitalisation of $A8.1 billion and funds under management of $A15.6 billion.

Websites: New Plan

Centro Property Group


Earlier stories:

8 September 2006: Centro creates $A1 billion US retail portfolio fund

Centro launches $A100 million syndicate, available to NZ investors


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Attribution: Company statement, story written by Bob Dey for this website.

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Centro commits to Queensland centre on 7.5% yield

Centro Property Group has agreed to buy a new sub-regional shopping centre at Airlie Beach, Queensland, for $A54.12 million at a 7.5% yield on completion.

Centro will buy the land now the development agreement has been signed, and fund the development through construction.

The Cannonvale Marketplace centre will be developed by Melbourne-based Lascorp (specialist retail developers Michael & Mathew Lasky). Lascorp has sold 7 projects to Centro.

Cannonvale Marketplace will have 11,282m² on anchors & specialties plus 11,620m² of bulk retail.

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Centro buys Barrington Mall in Christchurch at 8.8%

Centro Properties Group has bought the Barrington Mall in Christchurch for $24 million, at an 8.8% yield, one of 3 deals in Australia, New Zealand & the US for which it’s just raised $A20 million.

Group chairman Brian Healey said the new capital, the first raised since Centro merged with the Prime Retail Group, would be used to fund:

$A240 million redevelopment of its Australian portfolio
acquisition of 3 power centres in Atlanta for $US100 million, and
the $NZ24 million Barrington purchase.

The Australian redevelopments are at the Colonnades, Bankstown & Roselands shopping centres and will provide a stabilised 8% yield.

The US properties are intended to be offered to investors through the unlisted Centro MCS syndication fund.

Mr Healey said Centro saw the New Zealand property as also being suitable to place in a future unlisted fund.

Website: Centro

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