Retail showing signs of expansion, says Centro

Centro Properties Group $25 billion portfolio includes the Kelston Shopping Centre in Auckland. Photo / Kenny Rodger

MELBOURNE - Centro Properties Group, which became one of the first casualties of the global credit crunch, says there are signs that the retail environment in the United States may be improving.

Centro, which is the second largest manager of retail property in Australia and the third largest manager of shopping centres in the United States, manages a A$20 billion ($25 billion) portfolio of 733 shopping centres in Australia, New Zealand and the US.

Two-thirds of the portfolio by value are in the US.

Centro global chief executive Glenn Rufano said at the group's annual meeting yesterday that the operating environment had been tough this year.

In the United States, occupancy levels in the shopping centres had declined, primarily as a result of retailer bankruptcies.

"[However,] we are seeing a stabilising retail environment in the US, with consumers starting to emerge and tenants, for the first time, considering expansion," Rufano said.

"We will be closely watching Christmas to see how these signs progress."

Centro booked a loss of A$3.54 billion in fiscal 2009.

Last week, Centro Properties warned that underlying profit for the year ending June 30, 2010, was expected to fall about 45 per cent from the underlying profit of A$229 million in the 2009 year.

Underlying profit excludes asset revaluations, impairments, mark-to-market adjustments of derivatives, foreign exchange impact on assets and liabilities, and restructuring costs.

Centro said last week that 60 per cent of the expected fall in underlying profit would be because of the significant appreciation in the Australian dollar, and the impact on fee income from asset sales and the full-year effect of the previous year's property devaluations.

Centro chairman Paul Cooper told security holders that Centro's gearing was too high and a restructure was required to reduce debt to sustainable levels.

"We will advise investors when the appointment of an adviser is made," he said.

Cooper said the matter of US$448 million in exchangeable notes that remained on issue - part of a US$500 million issue in June 2007 - and which mature in June 2010 was being considered as part of the group restructure.

Cooper also said that Centro's search for a new global chief executive was progressing well, after Rufano and Australian chief executive Tony Clarke advised they would not seek to renew their contracts when they expire in February 2010.

Cooper also referred to legal action by the Australian Securities & Investments Commission (Asic) against himself and fellow Centro director Jim Hall.

Cooper said the case concerned allegations that the defendants failed to exercise reasonable care and diligence when approving the annual report for the year ended June 30, 2007.

Cooper said the case did not concern any of the present activities of the company, and it was inappropriate for him to address the merits of the case at the annual meeting.

"I would invite all fair-minded people to recognise that these are untested allegations and, at this point, only one side of the story has been told based on the information available to Asic when they filed their action," Cooper said.

"I have spoken with all of the current and former non-executive directors named in the actions, and they intend joining me in rejecting the claims and strongly defending themselves against them."

Cooper said that, in relation to class actions against Centro, mediation talks took place in July and were expected to continue this month.

In October, Asic began action against eight present and former directors and executives of Centro Properties and Centro Retail Group alleging breaches of duty of care and a misstatement of about A$2.1 billion in debt in 2007.

Centro securities plunged more than 99 per cent from the end of 2007 after it revealed it was having trouble refinancing A$1.3 billion in debt, then said in January that its debt might be higher than it thought.

Centro's dramatic loss of value sparked legal actions from aggrieved shareholders over the property group's continuous disclosure obligations.

Asic began proceedings in the Federal Court in Melbourne, with a first hearing scheduled for November 20.

- AAP