Property shake-up as Centro and GPT face home truths
The Age
Friday August 7, 2009
CENTRO Property's American chief executive, Glenn Rufrano, arrived in Melbourne in January 2008 and thought he would be gone in six weeks. He had a suitcase and not many high hopes.Centro, with founder Andrew Scott at the helm, was the first victim of the global financial crash in December 2007, with a debt bill of more than $4 billion and no cash.Yesterday, after a tough 18 months of securing the retail landlord's future by convincing the banks to roll over $4.8 billion of debt, Mr Rufrano decided he wanted to go home.He told the Centro board he would not renew his contract when its ends in February, but would stay on if no appointment had been made by then. He said he had no other jobs, although he is a director of US-based General Growth Properties.Centro has engaged international recruitment agency Egon Zehnder to search for a new chief executive.Tony Clarke, the head of Australian operations, who was brought in to help work through the restructure, is also leaving.Centro chairman Paul Cooper said the change at the helm would not be a distraction for investors or financiers and the group was now working on its long-term growth strategy.Also turning to home, though for different reasons, is GPT Group, the worst-performing Australian property trust this year.The Sydney-based company, which last month exited its European joint venture with Babcock & Brown International, said yesterday it would sell all its offshore investments. As of December, 20 per cent of its assets were overseas. GPT shares climbed 3.5, or nearly 7 per cent, to 54 on the news."It's a strategy that investors are looking for from GPT," said Macquarie Group analyst Callum Bramah, who has an "outperform" rating on the stock. "The key for growth for GPT, once they remove those non-core assets, will be all about driving efficiency and maximising earnings out of portfolios, combined with . . . acquisitions."GPT invested in US and European properties, which were among the worst hit when global property values tumbled and borrowing costs spiked because of the credit crunch. GPT last month wrote down $1.16 billion on its investment in the joint venture with Babcock & Brown, adding to $2.15 billion in write-downs announced in February."The last couple of years have been disappointing for investors across the real estate sector," chief executive Michael Cameron said. "GPT is now returning to what it does best."It had already sold $700 million of assets since December, the company said. Properties it is still trying to sell include a portfolio of Dutch office and industrial buildings, the Australian Homemaker City shopping centres and the US part of its venture with Babcock & Brown.The sale of those assets is likely to take at least 12 months, Mr Bramah said. "Until that is completed, results and valuations will be muddied," he said.GPT last week cut the valuation of the Australian real estate holdings it wants to keep by 6.2 per cent, or $560 million, and the holdings it wants to sell by 15.2 per cent, or $230 million, compared with their values six months earlier.It sold $1.7 billion of new shares in June, giving it enough money to meet all its commitments to December 31 next year, including about $2.4 billion of debt maturities.
© 2009 The Age
