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Strategic alliance for three Australian regional shopping centres

AUSTRALIA, 13 APRIL 2012 – In the largest real estate portfolio property play in Australia sale since the DFO sale  in 2010, Centro Retail Australia have appointed Simon Rooney of Jones Lang LaSalle to conduct a strategic, global expression of interest sale process, to secure a 50% ownership stake for three of Centro’s flagship regional assets, with all property level services to be provided by the group’s existing fully integrated management platform.

The three assets have a combined total book value of more than AU$1.3 billion.

As part of a new strategic initiative, the group will initiate discussions with a number of domestic, offshore and wholesale real estate institutional investors, seeking capital partners to jointly own a small number of its quality Australian shopping centres.

Co-owners will be sought to potentially acquire up to a 50% ownership stake in three assets, Galleria in Perth, The Glen in Melbourne and Colonnades in Adelaide. The group’s strategic objective of realising these funds is to unlock capital and income growth potential that exists across the portfolio, maximising the group’s return on equity.

Capital realised from these co-ownership alliances will be used to reduce gearing, further strengthening the group’s balance sheet, providing flexibility to reinvest into development and growth opportunities across the broader portfolio and potentially for various other capital management initiatives.

Mr Rooney, Australian Head of Retail Investments for Jones Lang LaSalle said, “The opportunity to aquire strategic stakes in three high quality regional assets will be highly sought  both domestically and from offshore.”

“The Centro capital partner strategy is an ongoing example of large A-REIT's recycling capital and retaining management by selling down part or whole shares in core regional assets at book value or a premium to book value.”

“What it also demonstrates is that institutional investors view the current period as a window of opportunity to secure strategic exposure to the dominant, core regional shopping centre market that traditionally is rarely traded.”

Retail transaction volumes in Australia totaled AU$3.2 billion in 2011 with a further AU$537.8 million recorded so far in 2012. The Myer Centre Brisbane 50% sale at AU$366m, is the largest retail transaction since Lend Lease’s APPF Retail acquired a 50% interest in Cairns Central (AU$ 261 million) from Westfield Group in October 2011. It is also the largest retail agency transaction since the 50% sale of Northland Shopping Centre (AU$ 455 million) to CPPIB in May 2011.

“As a result of this continuing demand, we expect keen interest in this current Centro sale process and other major owners will  pursue this strategy of ‘capital recycling’ in order to fund expansions, refurbishments and/or to retire debt,” said Mr Rooney.

Asset Summary:

Galleria, Western Australia
– 8km north-east of Perth.  A 2-level centre with major chains including Myer, Target, Kmart, Woolworth, Coles and Greater Union.  It caters for  Main Trade Area (MTA) of 247,000 residents. 

Colonnades, South Australia – 35km south of Adelaide.  A 2-level centre with major chains including Myer, Coles, Woolworths, Big W and Kmart.  It caters for a Main Trade Area (MTA) of 147, 735 residents.  Located in Noarlunga which is considered the CBD of the southern suburbs of Adelaide. The property was constructed in 1979 and underwent a major redevelopment in 2006.

The Glen, Victoria – 20 km south-east of Melbourne.  Located in popular Glen Waverley.  A 2-level centre with an office tenancy.  Major chains represented include David Jones, Target, Coles and Woolworths.  The Woolworths and Coles stores were refurbished in 2010 and 2011 respectively.  It caters for a MTA of 183,000 residents.