The global credit crisis “has moved closer to claiming its first property victim”, said Jonathan Russell in The Daily Telegraph.
Australia’s second-biggest shopping centre investor, Centro Property Group, shocked the market this week by revealing that it was struggling to refinance its debt. Jitters over subprime exposure have meant that traditional sources of funding are “shut for business”, said the group’s chairman Brian Healey.
The stock plunged on the news. As a fund manager commented: “A real-estate stock down 75% in one day is not something you expect to see.” The shares dropped another 40% on Tuesday.
What went wrong
Essentially, Centro bought a lot of property with a lot of debt at the wrong time in the cycle, as one analyst told Russell. In April, it paid A$3.4bn for New Plan, a US mall owner and manager. With short-term debt on the latest deal expiring this month, the group has only been able to obtain an interim extension to 15 February. And if it is to secure longer-term financing, it will have to reduce its substantial debt load.
Centro is now considering a fire sale of prime assets and “the vultures have started circling”, said Carolyn Cummins and Danny John in the Sydney Morning Herald. Centro, said Callum Bramah of Macquarie Group, “is no longer in charge of its own destiny”.
ASX:CNP; 12m change -86%