76% "Slump" in Centro Property (US Malls)

The understatement of the year award goes to this headline: Centro Shares Slump After Profit Forecast Cut.

Centro Properties Group, the owner of almost 700 U.S. malls, slumped 76 percent in Sydney trading after cutting its profit forecast as it struggles to refinance debt, the latest victim of the U.S. subprime mortgage rout.

The first-half dividend payment will be scrapped, and a decision on when to reinstate payments will be made after a review of the business, Melbourne-based Centro said in a statement today. The company's traditional sources of funding are "shut for business" Chairman Brian Healey said in the statement. Centro's board and management will undertake a strategic review of its business, the statement said.

The company, which owns shopping centers in about 40 U.S. states including the Roosevelt Mall in Philadelphia and Clearwater Mall in Florida, increased its debt to 44.1 percent of assets in fiscal 2007 from 29.78 a year earlier. It has more than A$5 billion in outstanding bonds and loans according to data compiled by Bloomberg.

"We never expected nor could reasonably anticipate that the sources of funding that have historically been available to us and many other companies would shut for business," Centro's Healey said in the statement.

A 76% decline is quite the "slump". Kiss this company goodbye. It is likely finished. For more on Commercial Real Estate, please see Implications of Commercial Real Estate Collapse. But the real story here is not the "slump" but the sudden drying up of financing for commercial real estate. This is not an inflationary event.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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