CMBS Market Claims an Australian Casualty

Foreign stocks are becoming increasingly popular among retail investors, for

good reason, as the dollar continues to weaken. After all, if the US dollar

slumps against the Australian dollar, say, then a stock which goes nowhere in

Aussie-dollar terms can still do very well from the point of view of a US investor.

But it’s worth remembering, as the

case of Centro exemplifies this morning, that the key question is not where

a company is located, or what currency its stock is denominated in: the key

question is rather where a company does business. Centro is an Australian company,

but its shares fell 76% today as a result of its US shopping-center liabilities.

Here’s Andrew

Harrison in the WSJ:

Centro Properties — which after an aggressive acquisition spree is the fifth-largest

mall owner in the U.S., where about 65% of its assets are located — said

it will curb its growth plans there and may sell some U.S. assets…

"The conditions being experienced around the world in credit and debt

markets have made it difficult to refinance," Chief Executive Andrew

Scott told reporters in a conference call. The US$80 billion-a-month commercial

mortgage-backed securities market has "effectively closed," Mr.

Scott said.

Mish pulls no punches this morning: "kiss this company goodbye,"

he writes.

If the CMBS market remains closed, it’s certainly hard to see how Centro can

continue as a going concern: it’s managed to push

off the day of reckoning until February 15 by tapping the expensive bank-debt

market, but after that things look grim. As Jesse

Eisinger says in the latest issue of Portfolio, the CMBS market looks as

though it’s going to get much worse before it gets any better.

(HT: Joel David Parsons)

This entry was posted in commercial property. Bookmark the permalink.