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    Pelorus launches attack on big Centro syndicate
    Email Print Normal font Large font AdvertisementEli Greenblat
    March 6, 2008

    CENTRO Properties Group's grip on its lucrative stable of property syndicates was severely weakened last night when Pelorus Property Group won enough shareholder support to challenge Centro's control of a $232 million investment vehicle.

    It is the third and biggest to date of Centro's 36 syndicates to be raided by the Sydney-based Pelorus, which will ask unit holders to remove the debt-ridden Centro as manager at a meeting slated for April 10.

    Pelorus and other potential raiders threaten to punch a hole in Centro's already shaky balance sheet by grabbing the management rights and the fees that flow from them. For the half-year, Centro posted revenue of $255.8 million, of which about $70 million was sourced from acting as the responsible entity and manager of its property syndicates. The syndicates have a combined value of more than $8.5 billion.

    It comes as media-shy Centro chief executive Glenn Rufrano held a series of meetings yesterday with analysts who still cover the company, taking questions on its recent profit result. Centro last week unveiled a $1.1 billion loss for the first half, as a result of big write-downs and a drop in the value of its shopping centres.

    Through an alliance with New Zealand financial services group Money Managers, Pelorus has secured enough unit holder support to call a meeting to dislodge Centro as the manager of MCS 19 NZ/I, which owns shares in Australian shopping centres totalling $23.7 million, and MCS 16, which owns the $35 million Centro Toormina in NSW.

    Pelorus said last night investors holding 12.7% of MCS 11 had rallied to call for a meeting next month where they would seek to reduce the management fees linked to the syndicate and replace Centro with Pelorus as the manager.

    MCS 11 owns the Paradise Centre in Surfers Paradise, a property recently valued at $232 million. The property, whose main tenant is Woolworths, was bought eight years ago for $88 million. It has been one of the best-performing syndicates for Centro, with units tripling since inception to $3 just recently.

    It is estimated that Centro earns about $1 million a year in fees from MCS 11 and — like its other funds — is entitled to property management, performance, rollover and wind-up fees. Centro has mooted changes to this structure that could add other fees.

    Pelorus chief executive Stuart Brown said it was in the best interests of investors to separate the management of Centro MCS 11 from Centro and its funding issues.

    "Clearly, Centro has issues which have already affected these syndicates," he said. "By their own admission, the hedging situation could increase interest costs and reduce net asset backing, and separating the management from Centro's problems is the safest route for investors."

    He rejected suggestions Pelorus did not have the experience to run the syndicates, arguing it had arranged and managed syndicated property investments for more than 10 years.

    Centro has a 28% stake in the syndicates and will use it to defeat the resolution. Pelorus says Centro is not entitled to vote and it could take action to block Centro from voting. Mr Rufrano declined to comment.
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