Monday, December 17, 2007

"Honey, I Shrunk The Company" Centro Properties Down 76 Per Cent

Another one in the series Honey, I Shrunk The Company"....

Ein weiterer Kandidat aus der Serie Honey, I Shrunk The Company".....

Flashback March 2007
Centro Properties of Australia is set to become the fifth-largest operator of shopping centres in the US after agreeing to buy New Plan Excel Realty Trust for $3.7bn in cash. The deal is the biggest acquisition to date by an Australian real estate investment trust in the US. Including debt, it amounts to $6.2bn. Centro said it would finance the takeover by issuing new shares worth A$1.25bn in both the company and the trust, as well as raising a further A$750m from fund inflows and hybrid financing. JPMorgan Chase will underwrite the share offering.
Shopping for subprime victims, down under FT Alphaville
Anyone still needing to be convinced that synthetic financial strife has real world consequences could look down under on Monday - to Centro Properties, the Australian shopping mall operator. A cut in its 2008 earnings forecast of 13.6 per cent caused a 76 per cent plunge in its share price - bringing Centro’s market cap down from A$4.82bn to A$1.15bn.


Centro Properties Group, the owner of 700 U.S. shopping malls, slumped 76 percent in Sydney trading and said it's struggling to refinance debt because of the collapse in the U.S. subprime housing market.

With A$26.6bn of property on its books, the company is having to face up to sharply higher financing costs and is already looking at selling its US acquisitions to private equity buyers, although no names were mentioned. As recently as March it paid US$6.2bn to acquire New Plan Excel Realty Trust.

Taken from todays Centro Presentation

Centro said it had won an extension for all of its maturing debt - but only up until February 15. Refinancing talk continuing in the meantime. Chairman Brian Healey said:

Tightened credit conditions have…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.

Last week, Merrill Lynch said that it had doubts about Centro’s business model and rating agency Standard & Poor’s put the group on credit watch, causing a temporary suspension of Centro’s shares.

> I assume they will have to update their statement on securitisation ( and others) from their euphoric annual 2007 review

> Sieht ganz so aus als wenn die Aussagen zum Verbriefungsmodell in dem rückblickend mehr als amüsanten Rückblick für das Jahr 2007 nicht mehr ganz aktuell sind

The 2007 financial year has seen retail property continue to deliver strong total returns to investors.”
Brian Healey, Chairman

The benefits of using a CMBS funding arrangement compared to traditional
bank debt are:

It is more flexible;
• It involves less administration; and
• It has more generous loan covenants.

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Anonymous Anonymous said...


Yes, another amazing story.

Up until now I have followed the news about the housing bubble, the credit crisis, usw, always with an eye open to see how I might trade profitably on these events, also sometimes enjoying a bit of Schadenfreude. But suddenly today I had another emotion: I feel sorry for the many workers who will lose their jobs -- people who played no real primary, driving role in creating this mess, but who suffer its consequences nonetheless. And I think the job losses are really only beginning...

3:13 AM  
Blogger jmf said...

Moin Eh,

i agree.

The part that frustrates me is that way too many managers that have made big bets that went wrong or just didn´t understand what they were doing still get some kind of golden parachute.

3:28 AM  
Anonymous Anonymous said...


A must read article in the WSJ.

3:57 AM  
Blogger jmf said...

Here are some stunning photos on commercial real estate in California

An Elk Grove Commercial Real Estate Photolog

5:39 AM  
Anonymous Anonymous said...

Hey JMF, great post, great links. Stay well!!!

10:41 AM  
Blogger jmf said...

Moin Vega,


Stock down another 40 per cent.....

10:08 PM  
Blogger jmf said...

Centro, Facing Debt Deadline, Won't Rush Asset Sales

Centro is the worst performer on the 1,960-member MSCI World Index this year while the trust, Centro Retail Group, is the 6th biggest loser.

10:38 PM  
Anonymous Anonymous said...

You should post a graph of the stock price. It's Wiley Coyote trajectory.

2:21 PM  

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