Centro goes big with US property deal

Centro Property Group has launched its $1 billion MCS 38 property syndicate, the largest to enter the Australian market to date.

With the consensus view that the domestic listed property sector has been saturated, Centro’s aggressive push into the United States is part of a growing emphasis among investors keen to access listed property in global economies.

Tony Torney, Centro’s managing director unlisted funds and shared services, believes the most significant aspect of the deal is its broad scope.

“It’s probably the most diverse in terms of geographic and asset [base]. It’s a great mix with good diversity across 20 properties in 13 states, with most concentration on the north-east and some on west coast and down in Florida as well,” he said.

“The most significant component is that it is an optimal blend of retail assets from the food-based convenience centres, some homemaker centres, all the way through to some regional centres as well.”

According to Torney, the large scale of the venture, which now also includes the US-based Heritage REIT, also has the advantage of enabling Centro to attract superior retailers to its property portfolio.

“The scale we will have after Heritage - close to 260 centres - puts us in a good position in terms of building on the relationships we currently have from a national platform,” he said.

When asked about any investor concern about the potential of a hard-landing for the US economy and its impact on such a deal, Torney said Centro was quite comfortable with its risk profile.

He is confident with the accuracy of recent speculation from commentators, including the Federal Reserve, that the US economy would experience a soft landing rather than a crash.

“. . . Our belief is . . .along with most commentators, including the Fed, that there’s an expectation that the slowdown will be a soft landing rather than a hard landing,” Torney said.

He pointed out that Centro’s strong bent towards non-discretionary or the discount end within Australia and the US would also mitigate the risk.

“Retail tends to perform well even during times of economic stress. At the end of the day, people have to continue to have to eat.”

The MCS 38 syndicate may also herald a potential move into other global markets.

Torney hinted that Centro could be looking at leveraging its stronger presence in the US to tap into other international markets, with Canada and even potentially Europe on its radar-screen.