[Source: www.theaustralian.com.au/business]Centro to divest...

[Source: www.theaustralian.com.au/business]

Centro to divest assets as investors desert syndicates
Turi Condon
From: The Australian
June 10, 2010 12:00AM


Centro Nepean shopping centre complex at Penrith in Sydney's west.
Picture: Tracee Lea Source: The Australian

DEBT-LADEN Centro Properties Group is about to launch a marketing campaign to sell its syndicates management business, which controls $3.2 billion of Australian shopping centres.

The troubled group may have to sell more than $1bn of centres as investors desert syndicates whose life terms will expire in the next 18 months.

This will force the group to seek a new partner, according to industry sources.

Sources said Centro had approached fund manager Charter Hall, which has been in expansion mode buying the management of two of Macquarie Group listed property trusts, ahead of a more formal campaign.

Charter Hall declined to comment yesterday.

Parties that may be interested are Colonial First State, AMP and Challenger, which have retail distribution networks.

Other possible contenders are Lend Lease and GPT.

Industry sources said JP Morgan and Moelis & Company -- which Centro Properties appointed in December to advise on a restructure -- also had been appointed to sell the syndicates business

Briefing documents are expected to go out this month, but it is unclear whether a joint-venture partner is being sought or the whole business offered.

Centro manages 35 syndicates with $3.2bn of assets in Australia and $US2.5bn ($3.03bn) in the US.

Centro communications manager Andrew Scannell declined to comment, saying the group would update the market at the end of its assessment phase, which is expected mid year.

UBS was also appointed in December, but to advise listed satellite trust Centro Retail Trust.

This year Centro syndicates have either sold or are negotiating to sell more than $400 million worth of centres.

Last week The Australian reported the $200m Centro Surfers Paradise -- owned by Centro MCS 11 Syndicate -- was under negotiation.

In a letter to investors in March, Centro said the term of the syndicate had ended that month and that investors who wanted to sell their units had outweighed new buyers, resulting in the property being offered for sale.

A new syndicates management partner would provide the tarnished Centro with "respectability" and, hopefully stem the flow of disgruntled unitholders, sources said.

The move comes as advisers are understood to have delivered a preliminary report to Centro on options for the wider restructure of the group.

The one broker that still covers Centro, JP Morgan, pointed out in a February research note that new chief executive Robert Tsenin is "incentivised" to execute a restructure plan.

Mr Tsenin, who started at the company in March and is yet to speak publicly in his new role, will earn a base salary of $1.2m a year, but will receive 25 per cent of a $5.5m cash long-term incentive when Centro's board accepts a restructure plan.

Centro's troubles hit in December 2007, when it was unable to refinance $3.9bn worth of debt in the deteriorating credit market.

A rescue package finalised last year delivered 90 per cent of the company to Centro's lenders.

Through a group of highly leveraged and interlinked trusts and businesses, Centro controls 718 shopping centres in Australia and the US with a combined value of $18bn, according to last year's accounts. Under the Centro umbrella are two listed property trusts, 35 syndicates, two direct property funds and two wholesale funds.

The uncertainty surrounding litigation -- by the corporate watchdog the Australian Securities and Investments Commission and in two separate class actions -- is one of the big stumbling blocks to any restructuring plans, sources said yesterday.

Advisers are believed to have put up plans to separate the Australian and US businesses.

The $US10bn of assets in the US could be broken out and bundled for a trade sale or rolled into a new vehicle with internal management when markets recover.


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