Centro to Buy New Plan Excel Realty for $3.7 Billion

Centro Properties Group, Australia's second-largest shopping center owner, agreed to buy New Plan Excel Realty Trust for $3.7 billion in cash to become the fifth- biggest mall owner in the U.S.

Centro will pay $33.15 a share for New Plan, 13 percent more than yesterday's closing price, the Melbourne-based company said in a statement today. The New York-based trust owns stakes in 467 shopping centers across 38 states. Including debt, the $6.2 billion deal is the biggest U.S. acquisition by an Australia- based real estate investment trust.

It is Centro's sixth U.S. acquisition in a series of deals since August 2003 that has transformed the company from an operator of regional centers in Australia into an international shopping mall owner. The transaction adds to more than $73 billion of real estate takeovers that have been announced globally this year, data compiled by Bloomberg shows.

``It's a good strategy if they can pull it off,'' said Rob Patterson, who manages the equivalent of $2.5 billion at Argo Investments Ltd. in Adelaide, including Centro. He said the company has ``a very good track record expanding in the U.S.''

Centro is making the acquisition together with Centro Retail Trust, which is run and 52 percent owned by the company. It will fund the deal selling A$1.25 billion ($985 million) in new shares in Centro and the trust, and raising a further A$750 million using a combination of fund inflows and hybrid financing.

Chief Executive Officer Andrew Scott said the global rout on share markets over the past day won't hamper his capacity to raise the money for the deal because the share offer is underwritten by JPMorgan Chase & Co.

Dividend Growth

Centro will acquire malls including the New Britain Village Square in Pennsylvania and Sun Plaza in Florida, and tenants such as Kroger Co., the biggest U.S. supermarket chain, and Wal-Mart Stores Inc., the world's largest retailer. About 71 percent of the centers are anchored by supermarkets, which are resistant to declines in discretionary spending.

``Boasting strong grocery anchor retailers including Kroger, Publix and Wal-Mart, the portfolio provides stable income to meet investor demand for retail property assets,'' Scott said.

The acquisition will increase forecast dividends in the next financial year by 10 percent and help reach 7 percent dividend growth in the following years, he said.

Shares of Centro climbed 59 percent over the past year, making it the best-performing property stock in Australia as it expanded in the U.S. and started new funds to accelerate profit growth. The stock was halted from trading today.

Heritage Acquisition

Centro has followed larger Australian rival Westfield Group, into the U.S. amid a dearth of expansion opportunities at home. In October, Scott acquired U.S. shopping center owner Heritage Property Investment for $1.83 billion, adding 157 malls in 27 U.S. states and providing him with assets to start at least three new property trusts.

Shares of the nine members of the Bloomberg Regional Mall Index in the U.S. have risen 24 percent in the past 12 months. Kimco Realty Corp., the largest U.S. owner of community shopping centers, had a 23 percent increase in fourth-quarter earnings as it tapped rising in U.S. retail sales, which help shopping-center landlords lift rents. U.S. retail sales last year rose 6.3 percent, according to the National Retail Federation.

source:www.bloomberg.com