Global institutions beaten in bid for Centro properties

A portfolio of 50 percent stakes in three of Centro Retail Australia’s marquee shopping centres has been sold to Stan Perron, the Perth-based billionaire, ahead of investors such as TIAA-CREF, CPPIB and Australian fund manager QIC, in deal valued at A$690.4 million.

Stan Perron, the Perth-based billionaire, has beaten some of the world’s largest institutional investors to a 50 percent stake in three shopping centres in Australia from Centro Retail Australia in a deal valued at A$690.4 million (€539.87 million; $686.12 million).

According to news outlets including Reuters and The Australian, groups including US pension fund TIAA-CREF, Canada Pension Plan Investment Board and Australian fund manager QIC, were in the hunt for the half-stakes in Centro’s marquee shopping centres Colonnades in South Australia, The Glen in Victoria and Galleria in Western Australia before being pipped to the deal.

The investment by Perron Group reflects a 3.7 percent premium to book value and an average yield of 6.1 percent. Perron said: “I am delighted to have formed this alliance with Centro and look forward to working together to explore future development opportunities at each of these high-quality shopping centre assets.”

The sale represents the latest chapter in Centro’s efforts to stabilise following years of tumult stemming from its aggressive global expansion in the lead-up to the global financial crisis. Structurally, the company looks somewhat different today following various offloads including, notably, the $9.4 billion sale of its US retail portfolio to The Blackstone Group last March. In 2008, Centro Property Group – a precursor company to Centro Retail Australia – laboured under a debt pile of A$18 billion, although, via sales, restructurings and refinancings, it has since been able to reduce its borrowings. Today, Centro Retail Australia is structured as an A-REIT trading on the Australian Securities Exchange.

Centro’s chief executive officer, Steven Sewell said in an announcement of the sale to Perron Group that the proceeds would enable Centro Retail Australia to reduce its gearing to approximately 26 percent. Describing the transaction as a “redefining event” he said the sale would set Centro Retail Australia “in a position to progress with its pipeline of redevelopment projects across its portfolio of quality Australian shopping centres”. Sewell said: “Centro Retail Australia is now well positioned to seek an investment grade credit rating and to restructure its core lending facility.”

In total, Central Retail Australia has A$6.7 billion of shopping centres under management managed by 600 staff across offices in Melbourne, Sydney, Brisbane, Perth and Adelaide.

The transaction was brokered by Jones Lang LaSalle. Simon Rooney, Australia head of retail investments at the firm said the deal was demonstrative of investors recognising a window of opportunity to “secure strategic exposure to the dominant, core regional shopping centre market that is traditionally rarely traded.” He said: “For investors, we believe that this is a strong window of opportunity to obtain partial and/or whole interests in quality Australian regional shopping centres that will probably only be open for another 12 to 18 months until other sources of funds become more available and/or A-REITs recap again.”