Centro Retail Australia (CRF), formed last year from the restructure of Centro Properties Group, will focus on fixing up its shopping centers, which were left largely unimproved during a four-year battle against bankruptcy.
The company will spend at least A$300 million ($311 million) in the next five years to redevelop and expand some of the 83 malls it owns or operates, Chief Executive Officer Steven Sewell said in a telephone interview from Sydney yesterday. Centro Retail, which began trading on the Australian stock exchange on Dec. 5, yesterday reported a net loss of A$222.9 million for the period from then until June 30, mostly due to costs associated with the restructure.
“Over the last 4 1/2 years, there’s been very little, less than A$50 million, spent on refurbishment or expansion,” said Sewell, who took over as the CEO in February. “There’s a very large degree of unlocked potential within those properties. That’s the key focus.”
Investors and creditors of Centro Properties and its funds in November approved its plan to erase A$2.9 billion of debt accumulated during a U.S. buying spree in 2006 and 2007. That allowed senior lenders, mostly hedge funds, to exchange the debt they held for ownership of almost three-quarters of the new entity.
The hedge funds have mostly sold out and now account for a fifth of shareholders, Sewell said.
Centro Retail shares rose 0.5 percent at A$2.11 as of 10:47 a.m. in Sydney, a 4.5 percent discount to the value of its assets as of June 30.
“There are some juicy development opportunities within their existing portfolio, so this is a smart strategy,” said Stuart Cartledge, Melbourne-based managing director of Phoenix Portfolios, which owns Centro Retail shares. “It’s also lower risk by virtue of the fact that they know and understand those centers.”
The company, which yesterday reported underlying earnings of A$123.2 million in its first seven months of operations, has no intentions of developing new malls, Sewell said. It plans to acquire as much as A$1.2 billion of properties that are held in its managed syndicates in the next seven years, if investors choose to exit them as their terms end, Sewell said. The group had investments of A$487 million in 26 syndicates, which it also manages, as of June 30.
Centro Retail is considering rebranding itself and its shopping centers to drop the Centro name, spokesman Mario Papaleo said by telephone today. The new brand will be announced in December, the Australian newspaper reported today, citing Sewell.
Centro Retail, which in May sold 50 percent stakes in three malls for A$690.4 million to Perron Group, is in talks with other investors on potential future partnerships, Sewell said, adding that the company is able to fund its planned redevelopments with existing cash and debt facilities.
The company yesterday said asset sales had allowed it to repay part of its debt and reach an agreement with lenders to raise its debt facility to A$1.8 billion from A$1 billion, split between three- and five-year maturities.
Centro Retail expects to be in a position in the second half of 2013 to seek an investment-grade credit rating, which will give it access to longer-dated debt than is available from Australian banks, Sewell said.
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