direct property€¦ · centromcs direct property annual review 2010 centro mcs
TRANSCRIPT
CENTRO
MCSDIRECTPROPERTYANNUAL REVIEW 2010
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UAL REVIEW 2010
MCS 2010 4pp Cover ART.indd 1 28/09/10 1:50 PM
CONTENTS
Syndicate Directory and Portfolio Summary 1
Property Portfolio Maps 2
Funds Management Report 4
Funds Management Team 11
Corporate Governance 12
Notes on the Individual Syndicate Reports 16
Individual Syndicate Reports 18
Glossary 80
Directory Inside Back Cover
DIRECTORY
Responsible EntityCPT Manager LimitedABN 37 054 494 307
Board of DirectorsPaul Cooper (Chairman)Robert Tsenin (Group Chief Executive Officer & Managing Director)Anna BudulsSusan OliverJim HallRob Wylie
Centro MCS 21Centro MCS 22Centro MCS 23Centro MCS 24Centro MCS 25Centro MCS 26Centro MCS 27Centro MCS 28Centro MCS 32Centro MCS 33
Centro MCS 4Centro MCS 5Centro MCS 6Centro MCS 8Centro MCS 9Centro MCS 10Centro MCS 11Centro MCS 12Centro MCS 14Centro MCS 15Centro MCS 16
Centro MCS 17Centro MCS 18Centro MCS 19 UTCentro MCS 19 NZ/ICentro MCS 20Centro MCS 34Centro MCS 35Centro MCS 36Centro MCS 37Centro MCS 38Woodlands
Responsible EntityCentro MCS Manager LimitedABN 69 051 908 984
Board of DirectorsW Peter Day (Chairman)Paul Cooper Jim HallMichael HumphrisFraser MacKenzieBill Bowness
Company SecretaryElizabeth HouriganDimitri Kiriacoulacos
Registered OfficeCorporate Offices, 3rd Floor Centro The Glen 235 Springvale Road Glen Waverley Victoria 3150 Telephone +61 3 8847 0000Facsimile +61 3 9886 1234Toll Free (AUS) 1800 802 400Toll Free (NZ) 0800 449 605Email [email protected] centromcs.com.au
Corporate SolicitorsFreehills101 Collins StreetMelbourne Victoria 3000
AuditorsMoore StephensLevel 10, 530 Collins StreetMelbourne Victoria 3000
Ernst & YoungErnst & Young Building8 Exhibition StreetMelbourne Victoria 3000
Centro MCS Direct Property – ANNUAL REVIEW 2010 1
SYNDICATE DIRECTORY AND PORTFOLIO SUMMARY
Syndicate Net Asset Backing (NAB) as at 30 June
2010(1)
Forecast Distribution Return on Original Equity
for 2011(2)
Forecast 2011 Distribution
Return on Current NAB
Forecast Tax Advantaged
Portion for 2011(3)
Gearing Ratio as at 30 June
2010
Page
Centro MCS 4 $2.00 Nil Nil 0.00% 66.7% 18
Centro MCS 5 $2.17 12.00% 5.53% 100% 43.8% 20
Centro MCS 6(4) $1.42 10.00% 7.04% 12.00% 43.6% 22
Centro MCS 8 $1.99 12.00% 6.03% 100% 35.5% 24
Centro MCS 9 $1.01 Nil Nil 0.00% 59.5% 26
Centro MCS 10 $0.87 2.00% 2.30% 100% 51.6% 28
Centro MCS 11 $2.14 17.00% 7.94% 8.00% 36.4% 30
Centro MCS 12 $1.16 7.50% 6.47% 0.00% 53.7% 32
Centro MCS 14 $1.03 3.50% 3.40% 0.00% 31.6% 34
Centro MCS 15 $1.21 7.50% 6.20% 13.00% 13.2% 36
Centro MCS 16 $0.69 Nil Nil 0.00% 82.7% 38
Centro MCS 17 $1.25 6.00% 4.80% 26.00% 29.3% 40
Centro MCS 18 $1.04 5.00% 4.81% 22.00% 16.9% 42
Centro MCS 19 NZ/I $1.00 4.00% 4.00% 0.00% 36.5% 44
Centro MCS 19 UT $1.06 4.75% 4.48% 0.00% 48.4% 46
Centro MCS 20 $0.94 8.00% 8.51% 15.00% 47.2% 48
Centro MCS 21 $1.71 1.50% 0.88% 0.00% 50.0% 50
Centro MCS 22 $2.12 33.00% 15.57% 10.00% 37.7% 52
Centro MCS 23(5) $0.70 35.00% 5.00% 0.00% 57.0% 54
Centro MCS 25 $1.64 5.00% 3.05% 0.00% 51.7% 56
Centro MCS 26 $1.68 9.00% 5.36% 0.00% 36.7% 58
Centro MCS 27 $1.10 2.50% 2.27% 45.00% 61.9% 60
Centro MCS 28 $0.76 2.00% 2.63% 36.00% 58.3% 62
Centro MCS 32 $0.52 1.70% 3.27% 4.00% 56.9% 64
Centro MCS 33 $0.71 3.00% 4.23% 90.00% 59.9% 66
Centro MCS 34 $0.79 2.00% 2.53% 0.00% 67.5% 68
Centro MCS 35 $0.26 Nil Nil 0.00% 84.9% 70
Centro MCS 36 $0.24 1.70% 7.08% 23.00% 81.5% 72
Centro MCS 37 $0.56 4.00% 7.14% 100% 67.5% 74
Centro MCS 38 $0.18 Nil Nil 0.00% 95.2% 76
Woodlands $1.69 8.00% 4.73% 23.00% 53.8% 78
(1) NetAssetBacking(NAB)basedontheoriginal$1.00investment.
(2) Netreturnforecasttobepaidtoinvestors(ie:thecashdistribution).Theforecastnetreturnisbasedontheoriginal$1.00investedatthecommencementoftheSyndicateunlessstatedotherwiseintheseExplanatoryNotes.
(3) Theforecasttaxadvantagedcomponentisbasedonthenetreturnforecasttobepaidtoinvestors.Forfurtherdetails,pleaserefertoPage16.
(4) Thenetreturnisbasedonalotvalueof$0.80followingthecapitalreturnof$0.20afterthesaleofBigTopShowroomsin1999.
(5) Thenetreturnisbasedonalotvalueof$0.10followingthe$0.90returnofcapitalin2005.
Centro MCS Direct Property – ANNUAL REVIEW 20102
PROPERTY PORTFOLIO MAPS
AUSTRALASIAN PROPERTIES
Adelaide
MelbourneAustralian Corporate Office
Perth
Hobart
Sydney
Auckland
Wellington
Christchurch
Brisbane
Darwin
Western AustraliaRegionalOffice:Perth
11Properties
South AustraliaRegionalOffice:Adelaide
8Properties
Victoria/TasmaniaRegionalOffice:Melbourne
16Properties
QueenslandRegionalOffice:Brisbane
17Properties
New Zealand
2Properties
New South WalesRegionalOffice:Sydney
17Properties
Centro MCS Direct Property – ANNUAL REVIEW 2010 3
US PROPERTIES(TheUSPropertyPortfolioMapincludespropertiesheldbyCentroMCS32,35,36and38,whicharetheUSSyndicatesthatwereopentoretailinvestors)
West RegionRegionalOffice:SanDiego
17Properties
Central RegionRegionalOffice:Chicago
1Property
South RegionRegionalOffice:Orlando
1Property
Midwest RegionRegionalOffice:Detroit
2Properties
Southeast RegionRegionalOffice:Atlanta
10Properties
Northeast RegionRegionalOffice:Boston
14Properties
Mid Atlantic RegionRegionalOffice:Philadelphia
22Properties
Los Angeles
Orlando
Chicago
DetroitBoston
Philadelphia
New York CityUS Corporate Office
Atlanta
Centro MCS Direct Property – ANNUAL REVIEW 20104
FUNDS MANAGEMENT REPORT
Australian Portfolio & Market ReviewAt30June2010,theCentroMCSAustralianportfoliocomprisedof72centresvaluedatA$2.8billion.Theportfoliovaluationdeclined$25.5million(or0.9%)betweenDecember2009andJune2010onacomparablebasis(excludingassetsales).Recentretailpropertytransactionshaveprovidedagreaterlevelofsupportandguidanceforvaluerswhichwaslackinginthelast18months.Someofthesingleassettransactionsandone-offportfoliodealshaveshownsignsofimprovinginvestmentmarketconditions.
TheportfolioperformedverywellinFY10despitethechallengingoperatingenvironment,recordingcomparablenetoperatingincome(NOI)growthof2.4%,whichwasaboveourexpectationsfrom12monthsago.Occupancyincreasedto99.5%,continuingthenearfullyleasedtrendevidentacrosstheportfoliooverrecentyears.
Oneofthekeydriversofoursolidperformancefortheyearisattributabletosolidleasingresultsincludingrentalincomegrowthonleaserenewalsof6.3%.Over600leasingdealshavebeenachievedfortheyearwithmostrecentdealsalsoincluding5.0%annualrentalupliftsundertheirleasereviewstructure.
TheAustralianbusinesshasalsobenefittedbymaximisingtheeconomiesofscaleofournationalportfoliothroughconsolidatedtenderingofmajorservicecontractssuchascleaningandsecurityoperations.Wehavealsoinstigatedaportfolio-widecostsavingsprogrammetomaintaincontrollablecostsatlowerthanCPI.ThebenefitsofthesesavingsshouldbecomemoreapparentinFY11.
ConsumerspendingwasreducedinthelastsixmonthsofFY10,partlyattributabletotheimpactofthegovernmentstimuluspackagesinthecomparableperiodlastyearandtotheincreasesininterestrates.Wecontinuetoseeasimilaramountoffoottrafficinourcentresbutconsumersappearmorecautionaryintheirspending,particularlyinthespecialtyretailcategories.
Discountdepartmentstoreshavealsobeennegativelyimpacted,whichishighlightedthroughourportfolio’sexposuretoBigWandKmart,astheyweresignificantbeneficiariesofthestimuluspackagelastyear.Balancingthis,supermarketsalesarestillshowinggrowth,withColesrecordingthehighestgrowth.Weexpectthisgrowthtocontinueintothenextperiodduetotheongoingroll-outofColes’storeupgradesforsomecentresintheCentroMCSportfoliocombinedwiththeaggressivemarketingcompetitionbetweenColesandWoolworths.
TheoutlookforretailsalesinthefirsthalfofFY11appearstobesimilar,withmostretailersnotexpectinganysignificantsalesincreasesuntillate2010intheleadintoChristmas.Someretailersarealsoexpressingcautiontousduetouncertaintyregardingtheglobaleconomy.
OurstrategyforFY11istobuildonthestrongfundamentalsoftheportfoliowhicharesustainablerentallevelsandhighoccupancy,andwewillcontinuetoimprovecostefficiencieswherepossibleinordertodrivepropertyincomegrowth.
US Portfolio & Market ReviewAt30June2010,theCentroMCSUSportfoliocomprisedof141centresvaluedatUS$2.3billion.TheportfoliovaluationdeclinedUS$39.1million(or1.7%)betweenDecember2009andJune2010onacomparablebasis.
SalestransactionsintheUSremainbelowaverage,withalimitednumberofsalesactuallyconsummated.However,thetransactionsthathaveoccurredshowthemarketisstartingtostabilise,asevidencedbyonlyaslightdecreaseinvaluesforthehalfyearwhencomparedwithpriorperiods.
OverallUStrendsindicateagradualimprovementinconsumersaleshowever,ameaningfulimprovementinrealestatefundamentalsisexpectedtolag.TheUSCentroMCSportfoliodemonstratedreasonableperformanceinthisenvironment,withleasingvolumesconsistentwithhistoricproductivity.Duringtheyear,over500leaseswerecompletedfor275,000squaremetresofretailspaceandtheportfolioconcludedtheyear89.6%leased,slightlyaboveJune2009.Continuedweaknessfromcreditdeprivedsmallshopretailersandamoderatingsupplyanddemandimbalancecontributedtorentalincomedecliningby3.7%andcomparableNOIdecliningby5.0%.
TheCentroMCSportfoliosize,withassetslocatedacross30statescontinuestoprovideretailerswiththeretailspacenecessarytoexpandtheirfootprintsorintroducenewstoreconcepts.Ourstrongretailerrelationshipsarevitalintoday’seconomyasretailersareseekingsecurityandeaseofexecutionintheirrealestatestrategies.Leasingproductivitywashealthyandreflectedthere-leasingofapproximately16,000squaremetresofbigboxspace(spacegreaterthan1,000squaremetres)rejectedinbankruptcyduringFY09.
WithintheUS,therearenoteworthydifferencesinthepaceofeconomicrecoveryandretailerandconsumertrends.Asithasbeenthroughouttherecession,performanceintheNortheastandMid-Atlanticcontinuestobeaboveaveragewithstronganchorleasingactivityandimprovingrentlevelsdrivenbyalackofnewdevelopmentandconsiderableprogressinleasingspacevacatedbybankruptcy.
Centro MCS Direct Property – ANNUAL REVIEW 2010 5
TheMidwest,CentralandSoutheastmarketsarestillweak,withretailerinterestpredominantlyfromdiscountorientedretailers.
TheWestregionisshowingstrongoverallimprovementinpropertieslocatedindense,highbarriers-to-entrymarketssuchasLosAngelesandSanDiego.
Wearecautiouslyoptimisticaswelookaheadthrough2011.Despiteongoingemploymentconcernsandsluggishincomegrowth,overalltrendsindicateagradualimprovementinconsumersales.Calendaryear-to-date,storeclosingshavebeenfarmorebenignfornationalretailers,remainingatpre-recessionarylevels,whilelocalretailersarestillunderpressuregivenlimitedaccesstocapital.Whilstthereremainsalackofdepthinretailer’sgrowthplans,wedoexpecttoseesomeexpansionespeciallyfromvalueanddiscountorientedretailersgiventhemorefrugalUSconsumer.
FY11 Syndicate Distribution OutlookInFY11aroundhalfoftheAustraliansyndicates(13syndicates)areforecasttohaveincreasedorunchangeddistributionscomparedwiththebalanceforecastingdistributiondeclines.DistributionratesfortheUSsyndicatesareforecasttoremainunchanged(CentroMCS35andCentroMCS36)orreduced(CentroMCS32andCentroMCS38).
ThemainpositiveimpactonFY11distributionsrelatestocontinuingforecastnetpropertyincomegrowthforthevastmajorityofsyndicateassetscomparedwiththe2010financialyear.Aspropertymanagersweaimtopositivelyinfluencenetpropertyincome,retailerqualityandmix,occupancyandconditionofthepropertiesthrougheffectiveleasing,marketingandoperationalstrategies.Thismanagementfocusassistsinprotectingthevalueofsyndicatepropertieswhichultimatelyunderpinsthevalueofyoursyndicateinvestments.
Therearehowever,somecommonitemsthatcontinuetoimpactdistributionsforFY11including:
•Higher Cost of Debt–InterestratemarginschargedbylendersremainathistoricalhighswhichimpactsthosesyndicateswhererefinancinghasrecentlyoccurredorisduetooccurduringFY11.Ontopofthisimpact,interestratesincreased175basispointsoverthe12monthsto30June2010,increasingthedebtservicingcostonfloatingSyndicatedebt.
•Debt Principal Repayments–Insomecases,syndicategearingratios(calculatedastotalinterestbearingdebtovergrossassets)areoutsideourpreferredrange(of30%to50%)orcertainsyndicatedebttranchesincurhighinterestratemargins.Inmanyinstanceswearethereforeforecastingtomakedebtprincipalrepaymentsinordertoimprovethecapitalpositionofthesesyndicates.
• Capital Expenditure Funding –Wecontinuetofundcapitalexpenditureincludingleaseincentivesfromsyndicateearningsorprioryearcashreserves.Theextentoffundingrequiredreducestheamountofdistributableincomethatcanbepaidouttoinvestors.
• Retained Cash–Forthemajorityofsyndicateswenolongerpayout100%ofearningstoinvestors.Instead,aportionofearningsarepreservedas“retainedearnings”andwillbeusedtofundoperationalcapitalexpenditureand/orbuildupcashreservesinthesyndicatebankaccounts.
Syndicate Retail Sales ResultsAustralia
TheCentroMCSAustralianportfoliosalescontinuedtoshowsolidgrowthof4.6%forthe12monthsto30June2010.Salesgrowthbyretailercategorywas:
• SpecialtyStores: +7.1%
• MiniMajors: +5.9%
• DepartmentStores +4.5%
• Supermarkets: +2.8%
• DiscountDepartmentStores +2.2%
United States
Ingeneral,salesarenotreportedbyindividualretailersintheUS.TheUSCensusBureaureporteda7.5%increaseinoverallretailsalescomparedtothesameperiodayearagoinwhichoverallsalesdecreased11.1%.
SomeofthelargestgainsarereflectedintheindustrieshitthehardestbytheUSrecession,includingauto,electronics,andfurnituresalesalldisplayingpositivegrowthyearoveryear.Inaddition,healthandpersonalcare,aswellasgrocersalescontinuetoshowpositivegrowthforthesameperiod.
Centro MCS Direct Property – ANNUAL REVIEW 20106
FUNDS MANAGEMENT REPORT (continued)
Syndicate Leasing UpdateTheCentroMCSPropertyManagementandLeasingteamshavecompletedover1,100specialtyleasingdealsacrosstheCentroMCSSyndicateportfolioforthe12monthstoJune2010,leveragingoffstrongnationalretailerrelationshipsinAustralasiaandtheUS.
Leasingresultsfortheperiodareshownbelow:
Category Australia/NZ US
NumberofSpecialtyDeals(excludingMajorRetailers)
669 450
RenewalRentalGrowthforSpecialtyRetailers
6.3% 0.5%
LeaseRenewalRateforSpecialtyRetailers
80.2% 68.9%
PortfolioOccupancy 99.5% 89.6%
LeaseExpiryProfile(weightedbyincome)
4.91years 4.52years
TheoccupancyoftheAustralasianportfoliohasimprovedslightlyfrom98.9%at31December2009to99.5%at30June2010,whichhasassistedusinachievingstrongrentalincomegrowthwhenrenewingretailerleases.TheoccupancyoftheUSportfoliohasincreasedfrom87.1%at31December2009to89.6%at30June2010primarilyonthestrengthofourabilitytore-letbigboxspacelosttobankruptcy.
Property Revaluations
Overview
EachpropertyintheCentroMCSportfolioisindependentlyvaluedonanannualbasis,alternatingbetweenIndependentandDirectors’valuationssixmonthly.PropertiesreceivingDirectors’valuationsat30June2010weregenerallyindependentlyvaluedat31December2009andviceversa.
Aspropertymanagers,ourgreatestinfluenceisonthepropertyincome,retailerqualityandmix,occupancyandconditionoftheproperties.Onadaytodaybasisourmanagementteamsconcentrateonleasing,marketingandmaintainingthepropertiestoahighstandardtodrivebothretailsalesandpropertyincome.ThismanagementfocusassistsinprotectingthevalueofSyndicatepropertieswhichinturnunderpinsthevalueoftheSyndicateinvestments.
Valuation Results
Australian Valuation Results
At30June2010,57%oftheAustralianSyndicatepropertyportfoliowasvaluedindependentlywithDirectors’valuationscompletedforallotherproperties.Onacomparativebasis
(excludingpropertiesthatweresoldduringtherelevantperiods–referAssetSalesUpdateonPage8)theAustralianportfoliovaluedecreasedby$25.5millionor0.9%overthesixmonthsto30June2010andby$35.4millionor1.2%overthe12monthsto30June2010.Theportfolioweightedaveragecapitalisationratesoftened(increased)by15basispointsfrom7.94%to8.09%forthesixmonthsto30June2010andby21basispointsfrom7.88%to8.09%forthe12monthsto30June2010.TheportfolioNOIgrowthwas2.4%,whichcomparestheNOIforthe12monthsto30June2010tothe12monthsto30June2009.
Thesofteningincapitalisationrates,whicharepredominantlydrivenbyexternalmarketfactors,isthemajorreasonforthepropertydevaluations.Weareseeingthatpropertyincomegrowthhaslimitedthefulleffectsofincreasesincapitalisationrates.
Recentretailpropertytransactionshaveprovidedgreaterlevelofsupportandguidanceforvaluerswhichhadbeenlackinginthelast18months.Someofthesingleassettransactionsandoneoffportfoliodealshaveshownpromisingsignsofarebound.Despitegreaterclaritythanpriorhalvesthemarketstillremainsthininsomesectorsduetocontinuedeconomicuncertaintyandthisissomethingthatwewillagainmonitorcloselyoverthenext12months.
FordetailsontheNZpropertyvaluationresultspleaserefertotheCentroMCS20SyndicatereportonPage48.
United States Valuation Results
At30June2010,47%oftheUSSyndicatepropertyportfoliowasvaluedindependentlywithDirectors’valuationscompletedforallotherproperties.Onacomparativebasis,theUSportfoliovaluedecreasedbyUS$39.1millionor1.7%overthesixmonthsto30June2010andbyUS$132.4millionor5.4%overthe12monthsto30June2010.Theportfolioweightedaveragecapitalisationratesoftened(increased)by4basispointsfrom8.52%to8.56%forthesixmonthsto30June2010andby30basispointsfrom8.26%to8.56%forthe12monthsto30June2010.TheportfolioNOIdeclinedby5.0%whichcomparestheNOIforthe12monthsto30June2010tothe12monthsto30June2009.ThisNOIdeclinewaslargelyduetotheimpactofvacanciesresultingfromretailerbankruptciesduring2008and2009combinedwithgenerallylowerrentallevelswherewehavebeenabletore-leasevacanttenancies.
Thesaletransactionsthathaveoccurredshowthemarketisstartingtostabilise,evidencedbyonlyaslightdecreaseinvaluesforthehalfyearwhencomparedwithpriorperiods.
Centro MCS Direct Property – ANNUAL REVIEW 2010 7
Net Asset Backing (NAB) ImpactsTheweightedaverageAustralasianandUSNABsacrosstheSyndicateportfolioremainedunchangedfrom31December2009to30June2010,at$1.18and$0.27respectively.TheNABofeachSyndicateishighlightedinthetableonPage1,aswellasintheindividualSyndicatecommentaries.
Total Annual ReturnsTheaverageTotalAnnualReturnfortheAustralasianSyndicatesfortheyearto30June2010was5.7%(basedonanequalinvestmentineachSyndicate).Asillustratedbythechartbelow,thisisduetothedecreaseinpropertyvaluationsandtheresultantimpactonSyndicateNABs(whichismagnifiedbythelevelofgearingintheSyndicate).
Forthepastthreeandfivefinancialyears,theaverageTotalAnnualReturnfortheAustralasianSyndicateportfoliohasbeennegative6.7%andpositive6.1%perannumrespectively.
TheaverageTotalAnnualReturnfortheUSSyndicatesfortheyearto30June2010wasnegative16.4%(basedonanequalinvestmentineachSyndicate).ThisresultisalsoduetothedecreaseinpropertyvaluationsandtheresultantimpactonSyndicateNABs(whichismagnifiedbythelevelofgearingintheSyndicate)andalsoreflectstheimpactofUS$/A$foreignexchangeratemovementsovertheperiod.ThethreeyearaverageTotalAnnualReturnfortheUSSyndicateportfoliowasnegative28.4%.
TheaverageTotalAnnualReturnsreflectthecombinedreturnfromincomeandcapitalgrowth(ordecline)overagivenperiodandassumesthatdistributionincomereceivedduringtheperiodwasreinvestedatthesamereturnrate.
CapitalIncome
0.2%
1 Year
0%
3 Years 5 Years
-6.7% 6.1%
5.5%
5.7%
4.9%
-11.6% -1.1%
7.2%
CapitalIncome
4.2%
1 Year
0%
3 Years
-28.4%
-20.6%
-16.4%
4.5%
-32.8%Centro MCS Australasian Syndicate Performanceto 30 June 2010
Centro MCS US Syndicate Performanceto 30 June 2010
Source:Centro.BasedonnetreturnstoinvestorsfromanassetweightedinvestmentineachCentroMCSAustralasianSyndicatewithpublishedNABsfortheperiodofperformanceforoneyear,threeyearsandfiveyears.
Source:Centro.BasedonnetreturnstoinvestorsfromanassetweightedinvestmentineachCentroMCSUSSyndicatewithpublishedNABsfortheperiodofperformanceforoneyearandthreeyears.
Centro MCS Direct Property – ANNUAL REVIEW 20108
FUNDS MANAGEMENT REPORT (continued)
Asset Sales Update Overthelast12monthswehavesoldnineAustralianshoppingcentres,10hotelsandonesmalllandholdingforacombinedvalueof$356.71millionasdetailedinthetablebelow.
WehavenotsoldanyshoppingcentresinourretailUSSyndicates(CentroMCS32,35,36or38)duringtheyear.
Property Syndicate Sale Price ($m) Sale Date Reason for Sale
CentroWarringal CentroMCS14 $30.60 September2009 Toassistrefinancing
SamuelVillageShoppingCentre CentroMCS37 $6.20 September2009 TolowerSyndicatedebt
AliceSpringsLand CentroMCS10 $0.70 September2009 Toassistrefinancing
CentroRosebud CentroMCS18 $13.15 September2009 Toassistrefinancing
NewnhamHotel,SandsTavern,BrownsPlainsHotel,AspleyHotel,MorayfieldTavern
CentroMCS17 $31.75 November/December2009
Toassistrefinancing
DavidJonesPerth CentroMCS28 $114.50 January2010 TolowerSyndicatedebt
KoalaTavern CentroMCS17 $8.00 March2010 Toassistrefinancing
CentroMeadowHeights CentroMCS18 $12.30 May2010 Toassistrefinancing
KmartAliceSprings CentroMCS10 $15.85 June2010 Toreducedebtandfunddevelopmentworks
CentroCroydon CentroMCS8 $31.50 June2010 Tofundproposedunitredemption
BurleighTavern,RoyalMailTingalpa,TheClubHotel
CentroMCS8 $19.05 June2010 Tofundproposedunitredemption
CentroLakeMacquarie,MountHutton
CentroMCS24 $66.00 July2010 Syndicatewindup
MansfieldTavern CentroMCS8 $7.11 September2010 Tofundproposedunitredemption
Total $356.71
Financial Borrowings and DebtTheSyndicatesaregearedbetween13%and95%,withthemajoritylessthan60%.Wefeelthatgearinginthe30–50%rangeismostappropriateinthecurrentenvironment.DecreasingpropertyvalueshavepushedthegearingforseveralSyndicateshigherthanthisrange.Inthesecases,wearepursuingwaystoreducegearing,whichmayincludesellingassets.
Distributionsmayalsobereducedorsuspendedsothatearningscanbeusedtoreducedebtlevelsorfundcapitalexpenditure.Weworkproactivelywithourfinancierswhengearinglevelsapproachorexceedthemaximumgearinglevelsasassetsalesmaynotprovidethebestoutcomeforthefinanciersandinvestors.
EachSyndicatehasitsownexternalseniordebtfacilities,andaspreviouslyadvised,someSyndicateshavesubordinatedloansfromCentro.FordetailsregardingeachSyndicate’sdebtprofile,pleaserefertotheindividualSyndicatecommentariesinthisreport.
Securingnewdebtandevenachievingextensionsofexistingdebtfacilitiesremainsparticularlychallengingovertheshorttomediumterm.Thisisbecauselowliquidityindebtmarketsmeansthatmortgagefinancingisinshortsupply,resultinginhigherloanfacilitymargins(ontopofofficialinterestrates).ItisexpectedthathigherfinancingcostswillcontinuetoimpactSyndicatesthathavedebtfacilitiesmaturingduring2010and2011.
Centro MCS Direct Property – ANNUAL REVIEW 2010 9
RisksSyndicatesarenotimmunefromrisksincludingpotentialimpactsfrommaturingdebtandotherriskfactorssuchasthosehighlightedintheProductDisclosureStatement(PDS)foreachSyndicate.
HedgingManyoftheCentroMCSSyndicateshistoricallyenteredintohedgingcontractswithCentrobecauseCentrowasabletosourcehedgesfromtheexternalmarketatratesmorefavourablethanthosewhichcouldhavebeenachievedbyindividualSyndicates.Thesehedgeshaveincludedinterestrateandforeigncurrency(FX)exposuresforbothincomefrominvestments(incomehedges)andequityinpropertiesorfunds(equityhedges).
SyndicatesthatnolongerhaveanyinterestratehedgesorfixedratedebtandareexposedtofluctuationsinvariableinterestratesincludeCentroMCS4,5,6,8,11,12,14,15,19NZ,19UT,20,28and33.AllUSSyndicatesnolongerhaveFXincomehedges,andCentroMCS32,36and38nolongerhaveFXequityhedges.
Regulatory Guide 46 – Improving Disclosure for Unlisted Property Schemes
InSeptember2008,theAustralianSecurities&InvestmentsCommission(ASIC)releasedRegulatoryGuide46(RG46)settingouteightprinciplesforimproveddisclosuretohelpretailinvestorscomparerisksandreturnsacrossinvestmentsintheunlistedpropertysector.
CentroMCSwillcontinuetouseitswebsite(centromcs.com.au)toprovidethisdisclosuretoinvestors.PagesdetailingRG46disclosureforeachSyndicatewillbeupdatedontheCentroMCSwebsitebasedon30June2010information.Inaddition,manyoftheitemsarediscussedintheCentroMCShalfyearlyandannualreviews,investorcorrespondenceandtheInvestor Newsnewsletter.
Inparticular,theguidecoversthefollowingdisclosurerequirements:
•Disclosure Principle 1–GearingRatio–indicatestheextenttowhichaSyndicate’sassetsarefundedbyexternalliabilities.OngoingdisclosurewillcontinuetobeprovidedintheindividualSyndicatecommentaryinthehalfyearandannualreviews.
•Disclosure Principle 2–InterestCover–indicatestheSyndicate’sabilitytomeetinterestpaymentsfromearnings.ThisdisclosureiscoveredintheindividualSyndicatecommentaryinthehalfyearandannualreviews.
• Disclosure Principle 3–SyndicateBorrowing–providesinformationontheSyndicate’sborrowing,maturityandanyassociatedrisksincludingbreachesofloancovenants.ThisinformationwillcontinuetobeprovidedinthefinancialaccountswithrelevantdisclosureininvestorlettersandintheindividualSyndicatecommentaryinthehalfyearandannualreviews.
• Disclosure Principle 4–PortfolioDiversification–addressestheSyndicate’sinvestmentpracticesandportfoliorisks.VariousportfoliometricsareincludedinthehalfyearandannualSyndicatereports.RelevantportfoliorisksarecoveredintheSyndicateprospectusorsubsequentExplanatoryMemorandaorthroughongoinginvestorcommunication.
• Disclosure Principle 5–ValuationPolicy–assessesthereliabilityofthevaluations.TheCentroMCSvaluationpolicycoveringpropertyandSyndicateNABvaluationsiscontainedontheCentroMCSwebsite.SyndicateportfoliovaluationcommentaryisprovidedonPage6ofthisreportandintheindividualSyndicatereports.
• Disclosure Principle 6–RelatedPartyTransactions–fortheSyndicates,arelatedpartytransactionreferstotransactionssuchasinvestments,loans,feeagreementsorguaranteeswithotherCentroentities.ThisinformationwillbeprovidedintheRG46sectionoftheCentroMCSwebsite.
• Disclosure Principle 7–DistributionPractices–discloseswhetherdistributionshavebeenmadesolelyfromrealisedincomeorfromacombinationofrealisedincomeandareturnofcapitalfundedbyborrowingsorretainedearningsfromapriorfinancialyear.TheSeptember2010editionofInvestor NewsprovidedsignificantdisclosureoneachSyndicate’sdistributions.TheexistingCentroMCSdistributionmethodologyisthatdistributionswillgenerallynotbesupplementedwithareturnofcapitalcomponentfundedbycashreservesornewdebtfunding.
• Disclosure Principle 8–WithdrawalArrangements–discloseswhetheraSyndicatehaswithdrawalrights.Ifapplicable,theserightsaredisclosedinthePDS,prospectusorsubsequentExplanatoryMemorandacontainedontheCentroMCSwebsite.FurtherdisclosureonSyndicatewithdrawalarrangementswillbeprovidedintheRG46sectionoftheCentroMCSwebsite.
CentroMCSfullysupportsthedisclosurerequirementsunderthisguidewhichwebelievewillprovideongoingandmeaningfulinformationforinvestors.
Centro MCS Direct Property – ANNUAL REVIEW 201010
Investor CommunicationThroughitsvariouspublicationsandwebsite(centromcs.com.au),CentroMCScontinuestokeepinvestorsinformedabouttheperformanceoftheirinvestmentsandhowtheyarebeingimpactedbybroaderpropertyandfinancialmarketdevelopments.Investorsmayalsoreceivecorrespondenceonspecificmattersrelatingtotheirinvestmentssuchasrollovers,assetsales,developmentupdatesorotherstrategicproposals.
Investor Services TeamOurInvestorServicesTeamisavailabletoanswerquestionsinvestorsmayhaveabouttheirCentroMCSinvestments.
PleasecallthetollfreenumberduringbusinesshourstospeaktooneofourCentroMCSInvestorServicesOfficersoralternativelyyoucanaccessinformationfromthewebsite.
Centro Investor Services
Adviser Services TeamTheCentroAdviserServicesTeamisavailabletoanswerqueriesfromFinancialPlannersandAuthorisedRepresentativesthroughadedicatedphoneandemailserviceinadditiontoprovidingtimelyandvaluableinformationupdatesandclientreports.TheCentroAdviserServicesTeamcanbecontactedduringAustralianbusinesshours.
Centro Adviser Services
TollFree(Australia)1800 802 400
TollFree(NewZealand)0800 449 605
Telephone+61 3 8847 1802
Facsimile+61 3 8847 1868
Email:[email protected]
TollFree(Australia)1800 103 080
Telephone+61 3 8847 1806
Facsimile+61 3 8847 1871
Email:[email protected]
FUNDS MANAGEMENT REPORT (continued)
Centro MCS Direct Property – ANNUAL REVIEW 2010 11
FUNDS MANAGEMENT TEAM
Centro MCS – The TeamTheCentroMCSSyndicateFundsManagementteamisresponsiblefortheongoingmanagementof34retailpropertysyndicates.
WithAustralasianfundsundermanagementof$2.8billionandUSfundsundermanagementofUS$2.3billion,theteamoverseesatotalof212shoppingcentresacrossallthesyndicates.
Expertisewithintheteamcoversabroadspectrumincludingacquisitions,centremanagement,development,investmentmanagement,accountingandvaluations.
Theteamitself,whichincludesthreeexecutivesfromtheoriginalMCSPropertybusiness,hasover60yearsofcombinedpropertyexperience.
Gerard Condon BBus(Prop), GradDipAppFin/InvGeneral Manager – Syndicate Funds Management.
Gerardhas20yearsexperienceinthepropertyindustry.Gerard’sroleastheteam’sGeneralManagerseeshimbearingultimateresponsibilityforall34syndicates.Gerardoverseesthesyndicate,retaildistributionandinvestorservicesteams.
GerardwaspreviouslymanageroftheSyndicateFundsManagementteamandcommencedwithCentroin2003followingfiveyearswithMCSProperty.GerardhadnineyearsexperienceinvaluationspriortojoiningMCSProperty.
Andrew Lamont BBus (Prop Mgmt & Val), ANZIV Syndicate Fund Manager – Syndicates 4, 6, 10, 15, 18, 20, 28 & Woodlands
Andrewisresponsiblefortheday-to-daymanagementoftheteaminadditiontomanagingtheabovesyndicates.
HefirstjoinedMCSPropertyasanAssetManagerin2001beforegoingontoundertakevariousseniormanagementroleswithinCentro.Hispropertyindustryexperiencespans16years,someofthemabroad.
Alastair McIntosh BEng, BSc, MAppFinSyndicate Portfolio Manager – Syndicates 9, 19 NZ/I, 19 UT, 23, 32 & 35
AlastairjoinedtheCentroMCSteaminJuly2006.PriortothishespenttwoyearswithCarsonGroup.There,hewasaProjectManagerservingthebuildingandpropertyindustries.
Chris Brockett BBus(Acc & Bus Law), CA, SA FinSyndicate Portfolio Manager – Syndicates 8, 14, 21, 22, 25, 34 & 36
ChrisspenttwoyearsinLondonasaderivativesspecialistbeforejoiningCentroinDecember2005asaSeniorFinancialAccountant.HethenwentontojointheCentroMCSteaminDecember2006.
Warren Taylor BComm, GradDipAppFin/Inv, CPA, SA FinSyndicate Portfolio Manager – Syndicates 11, 12, 16, 17, 26, 33 & 38
Warren’sexperienceinportfoliomanagementstemsfromathreeyearroleasDevelopmentAnalystwithColonialFirstStatePropertyManagement.HejoinedtheCentroMCSteaminJanuary2007.
Vanessa VisenjouxB Bus (Acc), CPA Syndicate Portfolio Manager – Syndicates 5, 27, 37, 39 & 40
VanessafirstjoinedtheCentroMCSteamasaSyndicateAccountantin1999.BeforegoingontoundertaketheroleofManager-FinancialAccountant-Syndicates,shewasresponsibleforthemanagementandstatutoryreportingforallCentroMCSSyndicates.
VanessajoinedtheSyndicateFundsManagementteaminSeptember2009afterherreturnfrommaternityleave.
Centro Properties Group Executive CommitteeRobert Tsenin,ChiefExecutiveOfficer
Chris Nunn,GroupChiefFinancialOfficer
Mark Wilson,GeneralManagerPropertyOperations–Australia
Dimitri Kiriacoulacos,GroupGeneralCounsel
Gerard Condon,GeneralManagerSyndicateFundsManagement
Paul Belcher,GeneralManager–Finance
Michael Benett,GeneralManager–ListedFundsManagement
Sue Smith,GroupGeneralManagerHumanResources
Centro MCS Direct Property – ANNUAL REVIEW 201012
CORPORATE GOVERNANCE
TheBoardsofCPTManagerLimitedandCentroMCSManagerLimited,themanagersofthesyndicates,operateunderasetofwell-establishedcorporategovernancepolicieswhichcomplywiththeprinciplesandrequirementsoftheCorporationsAct(Act).TheBoardsreviewandasnecessary,updatetheircorporategovernancepoliciestoensuretheyaccordwithbestpractice,havingregardtorecentdevelopmentsbothinAustraliaandoverseas.Thisstatementoutlinesthemaincorporategovernancepracticesinplacethroughouttheyear.
AnumberofchartersandpoliciesareavailableinthecorporategovernancesectionoftheCentroMCSwebsiteatwww.centromcs.com.au.
EachoftheCentroMCSSyndicatesisaregisteredManagedInvestmentSchemeundertheAct.
Responsible EntitiesCPTManagerLimitedandCentroMCSManagerLimitedarewholly-ownedsubsidiariesofCentroPropertiesLimited(CentroortheGroup),whichformspartofthelistedentity,CentroPropertiesGroup.CPTManagerLimitedandCentroMCSManagerLimitedaretheresponsibleentities(theResponsibleEntities)oftheManagedInvestmentSchemesregisteredundertheActthatconstituteeachsyndicate(theSchemes).
EachResponsibleEntityismanagedbyaBoardofDirectors,accountabletothemembersoftheSchemes.TheResponsibleEntitiesareresponsiblefortheoverallCorporateGovernanceoftheSchemes,includingtheprotectionofmembers’interests,developingstrategicdirection,establishinggoalsformanagementandmonitoringtheachievementofthesegoals.TheResponsibleEntitieshavealsoestablishedaframeworkforthemanagementoftheSchemes,includingasystemofinternalcontrols,abusinessriskmanagementprocessandtheestablishmentofappropriateethicalstandards.
Primary Duties and ObligationsTheprimarydutiesandobligationsoftheResponsibleEntitiesinclude:
•ExercisingallduediligenceandvigilanceincarryingouttheirdutiesandinprotectingtherightsandinterestsofSchememembers,andinperformingtheirfunctionsandexercisingtheirpowersundertheSchemes’constitutionsinthebestinterestsofallmembers.
•Keepingorcausingtobekeptproperbooksofaccount,ensuringthefinancialreportsareauditedannuallybyanindependentregisteredauditorandsendingafinancialreportandacopyoftheauditors’reporttothoseSchemememberswhohavesorequestedeachyear.
•EnsuringthattheaffairsoftheResponsibleEntitiesarecarriedonandconductedinaproperandefficientmanner.
UndertheSchemes’constitutions,theResponsibleEntitiesarealsoresponsiblefortheday-to-dayoperationsoftheSchemesincluding:
•Ongoingmanagement,researchandselectionofpropertyinvestmentsanddisposals.
•Preparingallnoticesandreportstobeissuedtomembers.
Board Composition and MembershipBoardcompositionandtheindependenceofdirectorsisdeterminedusingtheprinciplesadoptedintheBoardCharter.
TheBoardssupporttheappointmentofindependentdirectorswhobringarangeofbusinessskillsandrelevantexperiencetotheResponsibleEntities.
CPT Manager Limited
TheBoardisresponsiblefortheoverallCorporateGovernanceofCPTManagerLimited.TheBoardmeetsataminimumonamonthlybasis,andisrequiredtodiscusspertinentbusinessdevelopmentsandissuesandreviewtheoperationsandperformanceoftheSchemes.
Overthereportingperiod,theBoardconsistedofsixDirectors.Until30September2009,theseDirectorswerePaulCooper(Chair),GrahamGoldie,JimHall,SamKavourakis,PeterWilkinson,andRobWylie.
On30September2009,GrahamGoldie,SamKavourakisandPeterWilkinsonretired.ThreenewDirectors,beingAnnaBuduls,SusanOliverandRobertTsenin,wereappointedtoreplacethemfrom1October2009.TheBoardincludesamajorityofindependentnon-executivedirectors,andtheChairoftheBoard,PaulCooper,isanindependentnon-executivedirector.FollowinghisappointmentasCentroGroupChiefExecutiveOfficerfrom1March2010,RobertTseninistheonlyexecutiveDirectoroftheBoardandisthereforenotconsideredtobeanindependentDirector(priortothattime,RobertTseninwasanon-executiveDirectorandwasconsideredtobeanindependentDirectorduringthatperiod).
Centro MCS Direct Property – ANNUAL REVIEW 2010 13
Centro MCS Manager Limited
TheBoardisresponsiblefortheoverallCorporateGovernanceofCentroMCSManagerLimited.ThisBoardalsomeetsataminimumonamonthlybasis,andisrequiredtodiscusspertinentbusinessdevelopmentsandissuesandreviewtheoperationsandperformanceoftheSchemes.
OverthereportingperiodtheBoardconsistedofamaximumofsixDirectors.Until30September2009,theseDirectorswerePaulCooper(Chair),GrahamGoldie,JimHall,SamKavourakis,andPeterWilkinson.
On30September2009,GrahamGoldie,SamKavourakisandPeterWilkinsonretired.ThreenewDirectors,beingPeterDay,MichaelHumphrisandFraserMacKenzie,wereappointedtoreplacethemfrom1October2009,andafourth,BillBownesswasappointedon6October2009.TheBoardwaschairedbyMrPaulCooperuntilOctober2009,andbyMrPeterDaysincethatdate.AllDirectors,includingtheChair,areindependentnon-executiveDirectors.
Board CommitteesTheResponsibleEntitieshaveestablishedanumberofcommitteestoassistwiththeimplementationoftheirCorporateGovernancepractices,including:
•AuditCommittee
•FinanceCommittee
•ManagedInvestmentsComplianceCommittee
•NominationCommittee
•RiskCommittee
Thesecommitteesareoutlinedbelowandhavewrittenchartersandoperatingproceduresthatarereviewedonaregularbasis.Theeffectivenessofeachcommitteeisalsoconstantlymonitored.
Audit CommitteesTheAuditCommitteeforCPTManagerLimitedconsistsofthreeofthenon-executiveDirectorsoftheBoard,beingJimHall,AnnaBudulsandRobWylie.TheCommitteewaschairedbyMrHallduringthereportingperiod.
TheCommitteeforCentroMCSManagerLimitedconsistsofthreeofthenon-executiveDirectorsoftheBoard,beingFraserMacKenzie,JimHallandMichaelHumphris.Duringthereportingperiod,thisCommitteewaschairedbyMrHalluntilOctober2009,andbyMrMacKenziesincethatdate.
TheChiefExecutiveOfficer,ChiefFinancialOfficer,GroupFinancialAccountingManager,ComplianceOfficer,Group
InternalAuditManagerandExternalAuditoralsoattendcommitteemeetingsbyinvitation.ThecommitteeregularlyreportstotheBoardsinrespectofmatterswithinitsresponsibilities.
TheBoardshaveadoptedanAuditCommitteeCharterwhichsetsouttheobjectives,responsibilitiesandfunctionsofthecommitteeinrelationtoauditmattersandidentifyingandmanagingcommercialrisks.TheCharteralsosetsouttheproceduresfortheselectionandappointmentoftheexternalauditorandfortherotationoftheexternalauditmanagingpartner.
TheChiefExecutiveOfficerandChiefFinancialOfficerhavereportedtotheBoardsthattheResponsibleEntities’riskmanagementandinternalcomplianceandcontrolsystemisoperatingefficientlyandeffectivelyinallmaterialrespects.
Finance CommitteesTheFinanceCommitteeforCPTManagerLimitedwasestablishedon1October2009withtheappointmentofnewBoardmembers.TheCommitteeconsistsofthreemembers,beingRobWylie,JimHallandSusanOliver.MrWyliealsochairstheCommittee.
TheFinanceCommitteeforCentroMCSManagerLimitedwasestablishedon1October2009withtheappointmentofnewBoardmembers.TheCommitteeconsistsofthreemembers,beingMichaelHumphris,JimHallandFraserMacKenzie.MrHumphrisalsochairstheCommittee.
AFinanceCommitteeCharterhasbeenadoptedwhichsetsoutthepurposeandpowersoftheCommittee.
Managed Investments Compliance CommitteesTheResponsibleEntitieshaveadoptedacomplianceplan,lodgedwiththeAustralianSecuritiesandInvestmentsCommission(ASIC),whichsetsouttheproceduresandsystemsusedtoensuretheResponsibleEntitiescompliancewithitsobligationsundertheActandtheSchemes’constitutions.TheResponsibleEntitiesmustoperateinaccordancewiththeCompliancePlanwhichismonitoredbybothaspeciallyconstitutedManagedInvestmentsComplianceCommitteeandtheCompliancePlanauditor.
TheCommitteeisresponsibleforensuringtheResponsibleEntity’scompliancewiththeCompliancePlan.
Until30September,theCommitteeforCPTManagerLimitedconsistedoffouroftheGroup’sDirectors,beingMessrsGrahamGoldie,PeterWilkinson,JimHallandRobWylie,andwaschairedbyMrGoldie.From1October2009,
Centro MCS Direct Property – ANNUAL REVIEW 201014
CORPORATE GOVERNANCE (Continued)
theCommitteeforCPTManagerLimitedconsistedofthreeoftheGroup’sDirectors,beingAnnaBuduls,whoalsochairstheCommittee,SusanOliver,andRobertTseninuntilhisappointmentasGroupChiefExecutiveOfficer.PaulCooperhasnowbeenappointedinMrTsenin’splace.
Until30September,theCommitteeforCentroMCSManagerLimitedconsistedofthreeDirectors,beingMessrsGrahamGoldie,PeterWilkinsonandJimHall,andwaschairedbyMrGoldie.FromOctober2009,theCommitteeforCentroMCSManagerLimitedconsistedofthreeDirectors,beingBillBowness,whoalsochairstheCommittee,PaulCooperandMichaelHumphris.
Throughmaintainingaseparatecommittee,Directorsacknowledgetheimportanceofthefinancialservicesindustry’sregulatoryregimeandtheirresponsibilitiesinprotectingtheinterestsofInvestors.
TheComplianceCommitteemeetsatleastquarterlytomonitorcomplianceandreviewtheadequacyofthecomplianceplan.Inaddition,theGroup’sComplianceOfficerisrequiredtoconfirmmonthlytotheChairoftheComplianceCommitteethatnomaterialbreacheshaveoccurredthatcouldcausefinancialdisadvantagetoanyinvestor.
Risk CommitteesTheRiskCommitteeforCPTManagerLimitedwasestablishedon1October2009andconsistsofthreeofthenon-executiveDirectorsoftheBoard,beingSusanOliver,AnnaBudulsandJimHall.TheCommitteewaschairedbyMsOliverduringthereportingperiod.TheChiefExecutiveOfficer,GroupChiefFinancialOfficer,GroupRiskandInternalAuditManageralsoattendcommitteemeetingsbyinvitation.TheCommitteeregularlyreportstotheBoardsinrespectofmatterswithinitsresponsibilities.
TheRiskCommitteeforCentroMCSManagerLimitedwasestablishedinOctober2009andconsistsofthreeofthenon-executiveDirectorsoftheBoard,beingJimHall,FraserMacKenzieandBillBowness.TheCommitteewaschairedbyMrHallduringthereportingperiod.TheChiefExecutiveOfficer,GroupChiefFinancialOfficer,GroupRiskManagerandGroupRiskandInternalAuditManageralsoattendcommitteemeetingsbyinvitation.TheCommitteeregularlyreportstotheBoardsinrespectofmatterswithinitsresponsibilities.
TheBoardshaveadoptedaRiskCommitteeCharterwhichsetsouttheobjectives,responsibilitiesandfunctionsofthecommitteeinrelationtoriskmanagementmatters,andidentifyingandmanagingmaterialbusinessrisksbothin
AustraliaandtheUnitedStates.TheCommitteeoverseestheRiskManagementandInternalControlFrameworkandreviewsitseffectiveness.
Internal Control FrameworkTheBoardsandmanagementrecognisethateffectiveriskmanagementandinternalcontrolsareanintegralpartofsoundmanagementpracticeandgoodcorporategovernanceastheyimprovedecisionmakingandenhanceoutcomesandaccountability.
TheBoardsareresponsiblefortheoverallRiskManagementandInternalControlFrameworkoftheResponsibleEntitieswhichincludesthefollowingactivities:
• Material Risks Register
TheBoardsandmanagementrecognisethattheResponsibleEntitiesmusthavearobustRiskManagementFrameworkinwhichmaterialrisksareproactivelyidentified,communicatedandmanaged.TheMaterialRiskRegisterisaneffectivemanagementtoolthatisusedtoidentifyandcommunicatematerialrisks.ItisupdatedonaquarterlybasisandisreportedtotheExecutiveCommitteeandtheBoardsviatheRiskCommittee.Itisalsousedtomonitormaterialrisksandriskmitigationstrategies.Itcoversbroadriskcategoriesincludingbusinesscontinuity,strategicobjectives,financial,peopleandoccupationalhealthandsafety,reputation,infrastructure,assetsandsystems,legalandregulatory.ManagementhasreportedtotheBoardsastotheeffectivenessofthecompany’smanagementofitsmaterialbusinessrisks.
• Internal Audit
TheInternalAuditfunctionprovidesindependentobjectiveassuranceandmakesrecommendationstoassisttheResponsibleEntitiesimprovetheirRiskManagementandInternalControlFramework.Italsotestscompliancewithinternalcontrols.TheAuditCommitteeandRiskCommitteereviewandapprovetheriskbasedStrategicInternalAuditProgrameachfinancialyear.TheCommitteesalsoreviewtheoutcomesofInternalAuditsperformedtoensurethatappropriateactionsaretakentomitigateidentifiedrisks.
• Compliance Plan
TheCompliancePlanappliestoalloftheregisteredmanagedinvestmentschemesintheGroup,andprovidesaframeworktoreviewandmonitortheinvestmentriskforinvestorsinthoseschemes.TheComplianceOfficerisresponsibleforperformingperiodicreviewsoftheGroup’scompliancewiththeprovisionsoftheCompliancePlan.
Centro MCS Direct Property – ANNUAL REVIEW 2010 15
• Continuous Disclosure
TheResponsibleEntitieshaveapolicythatallSchememembershaveequalaccesstotherelevantScheme’sinformation.AllmaterialinformationispostedtotheCentroMCSwebsite.
• Financial Reporting
ThereisacomprehensivebudgetingsystemwithanannualbudgetapprovedbytheDirectorsoftheResponsibleEntities.Monthlyactualresultsarereportedagainstbudgetandrevisedforecastsfortheyeararepreparedregularly.TheResponsibleEntitiesreporttoSchemememberssix-monthly.
• Personnel Quality & Integrity
TheResponsibleEntitiespoliciesaredetailedinaPoliciesandProceduresManual.Formalappraisalsareconductedatleastannuallyforallemployees.Inaddition,CentrohasinaplaceCodeofConductwhichsetsoutthestandardsofbehaviourexpectedfromallemployees.
Conflicts of InterestInaccordancewiththeAct,thecomplianceplansoftheSchemesandtheconstitutionsoftheResponsibleEntitiesandtheSchemes,DirectorsoftheResponsibleEntitiesmustkeeptheBoardsadvised,onanongoingbasis,ofanyinterestthatcouldpotentiallyconflictwiththoseoftheResponsibleEntities.TheResponsibleEntitieshaveadoptedaRelatedPartyTransactionsandConflictsofInterestPolicytoassistDirectorstodisclosepotentialconflictsofinterest.
Director EducationTheResponsibleEntitieshaveadoptedaprocesstoeducateDirectorsaboutthenatureoftheResponsibleEntities’business,currentissues,thecorporatestrategyandtheexpectationsoftheResponsibleEntitiesconcerningtheDirectors’performance.DirectorsoftheResponsibleEntitiesalsohavetheopportunitytovisitthesyndicatepropertiesandmeetwithmanagementtogainabetterunderstandingofbusinessoperations.
Independent Professional AdviceEachDirectorhastherighttoseekindependentprofessionaladviceattheexpenseoftheResponsibleEntities.However,priorapprovaloftherespectiveChairisrequired,whichisnottobeunreasonablywithheld.
Ethical StandardsAllDirectors,managersandemployeesofCentroareexpectedtoactwiththeutmostintegrityandobjectivity,andtoendeavouratalltimestoenhancethereputationandperformanceoftheResponsibleEntities.Centro’sCodeofConductsetsoutthestandardsofbehaviourexpectedfromallemployees.
Complaints Process
TheResponsibleEntitieshaveimplementedaComplaintsHandlingPolicythathasbeenpreparedinaccordancewithAustralianStandard.Inaddition,theResponsibleEntitiesremainmembersofanexternalComplaintsResolutionScheme.TheComplianceCommitteemonitorscompliancewiththeResponsibleEntities’ComplaintsHandlingPolicy.
Company SecretaryTheCompanySecretaryisMsElizabethHourigan,LLB.ElizabethisalsotheComplianceOfficerandSeniorLegalCounseloftheGroup.ElizabethjoinedCentroin2003andwasappointedtothepositionofCompanySecretaryinNovember2005.
MrDimitriKiriacoulacoswasappointedaCompanySecretaryon1April2010andMrPaulFlanigancontinuesasAssistantCompanySecretary.
Centro MCS Direct Property – ANNUAL REVIEW 201016
NOTES ON THE INDIVIDUAL SYNDICATE REPORTS
•Net Asset Backing (NAB) Policy–ForafullcopyoftheCentroMCSNABpolicy,pleaserefertotheCentroMCSwebsite(centromcs.com.au).
•Total Annual Returns (since inception)–Reflectthecombinedreturnfromincomeandcapitalgrowthoveragivenperiodandassumesthatdividendincomereceivedduringtheperiodwasreinvestedatthesamereturnrate.TotalAnnualReturnsareonlyprovidedforthosesyndicatesthathavebeeninexistenceformorethanthreeyears.
• FY11 Distribution Forecast –InvestorsshouldbeawarethatwhileitisCentroMCS’scurrentexpectationthattheincomeofsyndicateswillbesufficienttomeettheforecasts,changesineconomicandtradingconditionsmayinfluencetheseexpectations.ForUSsyndicates,changestotheforeigncurrencyexchangeratesmayincreasevolatilityindistributionrates.
• Distribution Return on Initial Equity / Distribution Return on the original $1.00 invested–Unlessotherwisespecified,thisdistributionrateisbasedontheoriginal$1.00investedatcommencementofthesyndicate.
•Distribution Return on Net Asset Backing (NAB)–TheDistributionReturnonNABisbasedonthecurrent30June2010NABoftheSyndicate.
•Tax Advantaged Portion–TheTaxAdvantagedPortionreportedisonlyanindicationofinvestors’forecasttaxadvantagedpositioninrelationtotheircashdistribution.Wheretheinvestmentinasyndicatehasborrowingsassociatedwithit(andtheborrowingsaremanagedoninvestors’behalfbytheResponsibleEntity),theTaxAdvantagedPortionquotedinthisreportreferstotheeffectivenontaxableamountofthecashdistributionreceivedbyinvestorseachyear(afterclaiminginterestdeductions).
Investorsshouldnotethattheactualtaxadvantagedportioncanvaryfromtheforecastprovidedduetoanumberoffactorsthatmaychangeduringtheforecastperiod,includingbutnotlimitedto:
•Thesaleofproperty
•Varianceincapitalexpenditure
•Varianceinsyndicateearnings
•Varianceinforecastdistributions
•Varianceininterestrepaymentsoninvestorloans
•Rolloverorterminationfees
Itisalsoimportantthatinvestorsunderstandthatthisisnottheamount(ortherate)thatshouldbeusedtodeterminethereductiontotheCapitalGainsTax(CGT)costbase.ThereductiontoyourCGTcostbaseisadvisedonyourAnnualTaxationStatementundertheheading‘TaxDeferredIncome’.InvestorsshouldrefertotheCentroMCSDirectPropertyAnnualTaxReturnGuideontheCentroMCSwebsite(centromcs.com.au).InvestorswhohavequeriesinrelationtothisinformationshouldcontactCentro’sInvestorServicesTeamorspeaktotheirtaxaccountant.
• Equivalent Pre-tax Return on Initial Equity / Equivalent Pre-tax Return on the Original $1.00 Invested–Theequivalentpre-taxreturnisbasedona46.5%marginalrate.
•NAB per Unit (based on the remaining units only) –AtjointmeetingsofnoteholdersandunitholdersforinvestorsinCentroMCS35,36and38heldinOctober2009,noteholdersvotedinfavourofcancellingtheunsecurednotesfromthesyndicateinvestmentstructurewitheffectfrom1July2009.TheNABperUnitreflectsthecurrentvalueoftheremainingunitsonly,followingthisnotecancellation.
• Syndicate Review Date –Thisdateorrangeofdatesisthemaximumpermittedtermofthesyndicateasgovernedbytheindividualsyndicateconstitutions.
• Top Retailers –Disclosurehasbeenprovidedforanysyndicatetenantsthatcontribute5%ormoreofnetpropertyincome.
•Property Portfolio Statistics –Wehaveincludedhistoricalannualportfolioresultsasat30June2007,2008,2009and2010.
• Gearing Ratio–ThegearingratiohasbeencalculatedinaccordancewithASICRG46whichstatesthatentitiesshoulddiscloseagearingratiofortheschemecalculatedusingthefollowingformula:
Totalinterestbearingliabilities
Totalassets
Investorsshouldnotethatexternalfinanciergearingratiocovenantsaregenerallybasedontheexternalfinancierdrawndebtasaproportionofthelatestindependentvaluationforthesecuredpropertyassets.
GearingRatio=
Centro MCS Direct Property – ANNUAL REVIEW 2010 17
•Interest Cover Ratio–TheinterestcoverratiohasbeencalculatedforthefinancialyearinaccordancewithASICRG46whichstatesthattheschemesinterestcovershouldbedisclosedandcalculatedusingthefollowingformula:
EBITDA–unrealisedgains+unrealisedlosses
Interestexpense
EBITDA=earningsbeforeinterest,tax,depreciationandamortisation.
Investorsshouldnotethatexternalfinancierinterestcovercovenantsaregenerallybasedontheaboveformulaalthoughthereareanumberofexceptionsundercertainexternalsyndicateloanse.g.completingacalculationbasedonnetpropertyincomeinsteadofEBITDAandcompletinga6or12monthtestataparticularpointintime.
AdditionaltermsaredefinedintheGlossarystartingonPage80ofthisreport.
•Debt Maturity Profile–ThissectionprovidesdisclosureonexternalfinancierandCentroPropertyTrustrelatedpartyloanterms,averageinterestratesasat30June2010andinterestratehedgingprofilesforsyndicateswithinterestratehedgesinplace.
InterestCover=
Centro MCS Direct Property – ANNUAL REVIEW 201018
CENTRO MCS 4
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 21.25% 21.75% 6.75% 7.00% Nil
Distribution Return on Net Asset Backing (NAB) 4.56% 4.99% 3.18% 3.50% Nil
Tax Advantaged Portion 34.13% 100% 100% 100% 0.00%
Equivalent Pre-tax Return on Initial Equity 24.94% 40.65% 12.62% 13.08% Nil
NAB $4.66 $4.36 $2.12 $2.00 -
Syndicate Commencement Date May 1996, rollovers occurred March 2002 and August 2007
Syndicate Review Date September 2012 – August 2014
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average Lease Expiry (by income)
Centro Seven Hills NSW 5.1% 100% $93,000,000(1) 8.25% 0.00% 5.97 years
CSIF-A Investment(2) Various 5.0% 99.4% $9,315,231 8.37% -16.83% 5.12 years
TOTAL 5.1% 99.7% $102,315,231 8.26% -1.81% 5.56 years
FY09 TOTAL 1.8% 99.6% $104,200,000 8.02% -23.9% 5.88 years
FY08 TOTAL (3) 1.5% 98.0% $114,000,000 6.25% -1.26% 6.02 years
FY07 TOTAL (3) 2.5% 98.7% $115,450,000 6.25% 19.51% 6.73 years
(1)IndependentvaluationundertakenbyColliersInternational.(2)EquityinvestmentintoCentroSyndicateInvestmentFund(CSIF-A).ForfurtherinformationonCSIF-ArefertotheFactSheetontheCentroMCSwebsiteunderSyndicate
Portfolio&RG46DisclosuresforCentroMCS4.(3)HistoricalstatisticsareforCentroSevenHillsonly.
NAB Change
Jun ‘10 $2.00
Dec ‘09 $2.00
Jun ‘09 $2.12
•Nil Distribution Forecast for FY11–Syndicatedebtservicingcostsareforecasttoincreaseby$880,000inFY11duetohigherfloatinginterestratesanda65basispointincreaseintheloanfacilitymarginfromMay2010.AdditionallynodistributionsareforecasttobereceivedfromtheSyndicate’sinvestmentintheCentroMCSInvestmentFund(CSIF-A)duetothehigh(77%)gearinginthisfund.ThecombinationofthesefactorsisplacingpressureontheSyndicate’sinterestcovercovenantunderitsexternaldebtfacilityandthereforenodistributionsareforecastforFY11.Intheeventthatabreachoftheinterestcovercovenantoccurs,theSyndicatemaysellitsCSIF-Ainvestment;agreeonawaiverofthebreachwiththeSyndicate’sexternalfinanciers;orelecttosellCentroSevenHillsandwinduptheSyndicate.
• Syndicate NAB Remains at $2.00–ComparedtoDecember2009,thevaluationofCentroSevenHillsremainedunchangedat$93.0millionandtheSyndicate’sCSIF-Ainvestmentdeclinedmarginallyby0.5%to$9.3millionduetopropertydevaluations.AccountingforotherminorSyndicatebalancesheetmovementsthe30June2010NABhasbeenmaintainedat$2.00.
• Seven Hills Fully Leased–CentroSevenHillsremainedfullyleasedwith22leasingdealscompletedforthe12monthstoJune2010contributingtonetpropertyincomegrowthof1.7%fortheyear.Retailsalesgrowthwasalsostrongwithanannualincreaserecordedof5.1%.WecontinuetoexpectsolidoperatingmetricsforFY11withnetpropertyincomegrowthof3.9%forecast.TheproposalfromColestoassigntheirsupermarketleasetoFoodWorkslastyeardidnotproceedandColescontinuestotradefromitsexistingtenancy.
• CSIF-A Portfolio Performance–TheCSIF-Aportfoliodevaluationwaslargelyduetothevaluationcapitalisationratesofteningfrom8.32%to8.37%overthesixmonthperiod.However,theportfoliooccupancyrateimprovedfrom99.1%to99.4%.DuetoCSIF-A’shigh77%gearingratioasatJune2010,allearningsarebeingredirectedtowardsdebtrepaymentandasaresult,nodistributionisforecastduringFY11.
FY11 Distribution Forecaston Initial Equity: Nil
Total Annual Return
since Inception: 17.13%
Centro MCS Direct Property – ANNUAL REVIEW 2010 19
CM
CS 4
DEBT INFORMATIONAllSyndicatedebtat30June2010wasatavariable(floating)interestrateof7.22%p.a.(includingweightedaveragemargin).
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio (1) 43.7% 65.7% 66.7%
Interest Cover Ratio 1.7 times 1.4 times 1.6 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity (1)
External Financier $39.77 million Nil 15 December 2011
Centro Property Trust $29.65 million Nil Payable at reasonable notice
TOTAL $69.42 million Nil 1.26 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
Woolworths18.3%
Other73.1%
Coles8.6%
TOP RETAILERSTotal % of Income 26.9%
Centro MCS Direct Property – ANNUAL REVIEW 201020
CENTRO MCS 5
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 15.75% 15.75% 12.00% 15.50% 12.00%
Distribution Return on Net Asset Backing (NAB) 6.08% 5.65% 5.71% 7.17% 5.53%
Tax Advantaged Portion 9.37% 0.34% 32.95% 0.00% 100%
Equivalent Pre-tax Return on Initial Equity 16.71% 15.80% 15.44% 15.50% 22.43%
NAB $2.59 $2.79 $2.10 $2.17 -
Syndicate Commencement Date December 1996, rollover occurred October 2003
Syndicate Review Date 31 October 2010
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation (1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Belmont Shopping Village VIC 1.6% 100% $37,000,000 7.75% 3.64% 2.16 years
Centro Launceston TAS 12.6% 100% $27,200,000 9.00% 1.87% 1.71 years
Centro Kurralta SA 4.3% 100% $27,090,000 7.50% 3.00% 1.06 years
Centro New Town TAS 11.2% 97.6% $21,000,000 9.00% -4.98% 1.65 years
TOTAL 7.3% 99.4% $112,290,000 8.23% 1.34% 1.66 years
NAB Change
Jun ‘10 $2.17
Dec ‘09 $2.15
Jun ‘09 $2.10
•Increase in NAB–ThevaluationsofallfourpropertiesremainedunchangedfromDecember2009.NotwithstandingthistheNABhasincreasedbytwocentsto$2.17duetootherpositivebalancesheetmovementsincludinganimprovementintheSyndicate’s30June2010cashposition.
•Syndicate End of Term–TheSyndicateisapproachingtheendofitssecondterm.Aletterwasmailedon23July2010informinginvestorsofourintentiontowinduptheSyndicate.However,priorto31October2010,additionalinformationwillbeprovidedonourfinalstrategywhichcouldinvolveafurtherproposaltoinvestors.
•Higher Debt Costs Impact Distribution –Forecastincreasesindebtservicingcostsof$910,000perannumhasresultedinareductiontotheforecastannualdistributionratefrom15.5%to12.0%.TheincreaseindebtservicingcostsisduetoahighermarginontheloanfacilityandanincreaseinthefloatinginterestratecomparedwithFY10.TheSyndicateforecastspaying$1.4millionforcapitalexpenditure(largelyforairconditioningworksatCentroKurralta)outofFY11earningsandprioryearcashreserves.
•Mixed Property Sales Results –PositiveannualsalesresultswererecordedforallSyndicateproperties.CentroLauncestonrecorded12.6%salesgrowthfortheyear,underpinnedbyColesandKmartsalesincreasesof11.2%and13.3%respectively.CentroNewTownsalesgrew11.2%bolsteredbyaverystrongperformancebyKmartwhichrecordedannualsalesgrowthof18.1%.CentroKurraltasaleswereup4.3%whileCentroBelmontrecordedmoderatesalesgrowthof1.6%duetoincreasedcompetitionfromtwonewColessupermarketsatWestfieldBayCityPlazaandManifoldHeights,andanewBigWatWestfieldBayCityPlaza.
• Occupancy–TheSyndicateis99.4%leasedwithonlyonevacancyacrosstheportfolio.Duringtheyear,19leaserenewalsandtwonewleaseswerecompletedatanaveragerental3%abovebudget.Over70%oftheSyndicateincomeissecuredbyWesfarmersthroughtheirColessupermarketandKmartdiscountdepartmentstorebusinesses.
FY11 Distribution Forecaston Initial Equity: 12.00%
Total Annual Return
since Inception: 16.32%
Centro MCS Direct Property – ANNUAL REVIEW 2010 21
CM
CS 5
PROPERTY PORTFOLIO STATISTICS (continued)Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation (1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
FY09 TOTAL 0.5% 100% $110,800,000 8.02% -15.55%(2) 2.22 years
FY08 TOTAL 3.1% 100% $131,200,000 6.97% 5.47%(2) 3.16 years
FY07 TOTAL 0.6% 100% $124,400,000 6.91% 5.87%(2) 3.88 years
(1)Directors’Valuations.(2)Valuationchangefrompriorperiod.
DEBT INFORMATIONAllSyndicatedebtat30June2010wasatavariable(floating)interestrateof7.04%p.a.(includingweightedaveragemargin).
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio (1) 36.0% 44.2% 43.8%
Interest Cover Ratio 2.4 times 2.4 times 2.8 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity (1)
External Financier $49.22 million Nil 15 December 2011
Centro Property Trust $2.13 million Nil Payable at reasonable notice
TOTAL $51.35 million Nil 1.46 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
TOP RETAILERSTotal % of Income 73.3%
Kmart43.1%
Other26.7%
Coles30.2%
Centro MCS Direct Property – ANNUAL REVIEW 201022
CENTRO MCS 6
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity(1) 13.30% 13.30% 9.50% 12.00% 10.00%
Distribution Return on Net Asset Backing (NAB) 6.43% 6.49% 6.74% 8.45% 7.04%
Tax Advantaged Portion 31.85% 27.19% 50.55% 13.02% 12.00%
Equivalent Pre-tax Return on Initial Equity 16.19% 16.44% 13.67% 13.36% 11.04%
NAB $2.07 $2.05 $1.41 $1.42 -
Syndicate Commencement Date June 1997, rollover occurred August 2004
Syndicate Review Date August 2009 – August 2011
(1)Theannualdistributionreturnisbasedontheremainingoriginalequityof$0.80followingthecapitalreturnof$0.20afterthesaleofBigTopShowroomsin1999.
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation (1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Brandon Park VIC 4.0% 100% $103,000,000 8.00% 2.59% 3.57 years
FY09 TOTAL -1.4% 100% $100,400,000 7.75% -19.49% 3.79 years
FY08 TOTAL 6.7% 100% $124,700,000 6.50% 1.30% 3.80 years
FY07 TOTAL 0.2% 99.6% $123,100,000 6.50% 11.00% 4.34 years
(1)Directors’valuation.
NAB Change
Jun ‘10 $1.42
Dec ‘09 $1.45
Jun ‘09 $1.41
• FY11 Distribution Forecast at 10.0%–TheFY11distributionrateforecastof10.0%hasbeenreducedfrom12.0%inFY10.Thisispredominantlyduetoincreasedforecastdebtservicingcostsof$780,000resultingfromhigherfloatinginterestratesanda65basispointincreaseintheloanfacilitymarginfromMay2010.TheFY11distributionratehowever,representsaforecast7.0%incomereturnonthe30June2010NABof$1.42.
• Annual Property Valuation Increase of 2.6%–AlthoughtheCentroBrandonParkvaluationdeclinedby$1.0millioncomparedto31December2009,anannualvaluationincreaseof$2.6millionwasrecordedsince30June2009.Thisvaluationgainwaslargelyduetostrongpropertyincomegrowthof3.9%forFY10.TheSyndicateNABhasremainedwithinthe$1.41to$1.45rangeoverthelast12monthperiod.
• Steady Centre Results –CentroBrandonParkcontinuestoperformwellandremainsfullyleasedheadingintoFY11.Wecompleted21leasingdealsforthe12monthstoJune2010andrecordedannualretailsalesgrowthof4.0%.WecontinuetoforecaststeadycentreperformanceforFY11withnetpropertyincomegrowthof1.7%budgetedforthefinancialyear.
FY11 Distribution Forecaston Initial Equity: 10.00%
Total Annual Return
since Inception: 14.96%
Centro MCS Direct Property – ANNUAL REVIEW 2010 23
CM
CS 6
DEBT INFORMATIONAllSyndicatedebtat30June2010wasatavariable(floating)interestrateof7.05%p.a.(includingweightedaveragemargin).
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio (1) 30.1% 43.0% 43.6%
Interest Cover Ratio 2.5 times 2.5 times 3.1 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity (1)
External Financier $44.34 million Nil 15 December 2011
Centro Property Trust $2.06 million Nil Payable at reasonable notice
TOTAL $46.40 million Nil 1.44 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
TOP RETAILERSTotal % of Income 23.7%
Kmart13.4%
Other76.3%
Coles10.3%
Centro MCS Direct Property – ANNUAL REVIEW 201024
CENTRO MCS 8
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 12.00% 12.25% 11.00% 12.50% 12.00%
Distribution Return on Net Asset Backing (NAB) 5.34% 5.24% 6.12% 6.28% 6.03%
Tax Advantaged Portion 14.22% 18.85% 29.39% 0.00% 100%
Equivalent Pre-tax Return on Initial Equity 13.56% 14.26% 13.81% 12.50% 22.43%
NAB $2.25 $2.34 $1.80 $1.99 -
Syndicate Commencement Date February 1998, rollover occurred May 2003
Syndicate Review Date May 2010
PROPERTY PORTFOLIO STATISTICS Property (1) State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation (2)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Northgate WA 4.2% 100% $45,500,000 8.12% -1.09% 3.79 years
Centro Albany QLD 10.1% 100% $40,750,000 8.00% 1.90% 2.39 years
Four Hotels (1) QLD N/A 100% $7,110,000 7.63% 9.38% 7.37 years
TOTAL 6.9% 100% $93,360,000 8.03% 0.93% 3.82 years
FY09 TOTAL (3) 4.9% 99.8% $137,100,000 8.11% -13.68% 4.24 years
FY08 TOTAL (3) 8.0% 100% $158,835,000 7.17% 2.98% 4.49 years
FY07 TOTAL (3) 3.1% 100% $154,235,000 6.71% 16.55% 4.81 years
(1)CentroCroydonwassoldon21June2010for$31.5millionandthreeoftheFourHotelswerealsosoldinJune2010(BurleighTavern,TingalpaHotelandWaterfordTavern)foracombinedtotalof$19.05million.
(2)Directors’valuationsadoptedfrom31May2010independentvaluations.(3)AllhistoricalstatisticsincludeCentroCroydonaswellasthreeoftheFourHotels(BurleighTavern,TingalpaHotelandWaterfordTavern).
NAB Change
Jun ‘10 $1.99
Dec ‘09 $1.83
Jun ‘09 $1.80
•Sale of Croydon and Four Hotels–Asoutlinedinourlettertoinvestorson15June2010,CentroCroydonwassoldfor$31.5millionon21June2010,12.5%abovethe31December2009bookvalue.TheFourHotelsweresoldinJuneandSeptember2010foracollectivepriceof$26.16million,inlinewiththe31December2009bookvalue.Thesesaleswerenecessaryaspartofaproposedsyndicaterestructurestrategytoprovideliquiditytoredeemunitsfromthoseinvestorswhoelecttoexitthesyndicateviaaproposedredemptionmechanism.ThisrestructureproposalwillbesubjecttoasuccessfulinvestorvoteforwhichaMeetingofInvestorsisexpectedtobeheldinlateNovember2010.
•Leasing Leads to Income Growth and Full Occupancy–Leasingactivityinthe12monthsto30June2010hascontributedto9.0%incomegrowthacrosstheremainingportfolioandasaresulttheportfolioiscurrently100%occupied.Atotalof18leasenegotiationsweresuccessfullycompletedinFY10,includingtennewleasesandeightleaserenewals.
•Solid Sales Growth Continues–SalesgrowthatCentroNorthgateandCentroAlbanyremainsolidwithincreasesof4.2%and10.1%respectively.AtCentroNorthgate,thesalesgrowthwasattributedtoColes,TargetandEBGames,reportingincreasesof0.6%,0.7%and8.6%respectivelywhileatCentroAlbany,thesalesgrowthwasunderpinnedbyColes,AlbanyCreekNewsandLiquorland,up0.9%,5.8%and9.4%respectively.
FY11 Distribution Forecaston Initial Equity: 12.00%
Total Annual Return
since Inception: 14.54%
Centro MCS Direct Property – ANNUAL REVIEW 2010 25
CM
CS 8
DEBT INFORMATIONAllSyndicatedebtat30June2010wasatavariable(floating)interestrateof7.04%p.a.(includingweightedaveragemargin).
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 35.5% 42.5% 35.5%
Interest Cover Ratio 2.3 times 2.4 times 2.9 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity (1)
External Financier $46.68 million Nil 15 December 2011
Centro Property Trust $1.77 million Nil Payable at reasonable notice
TOTAL $48.45 million Nil 1.44 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
TOP RETAILERSTotal % of Income 45.8%
Target14.0%
Coles31.8%
Other54.2%
Centro MCS Direct Property – ANNUAL REVIEW 201026
CENTRO MCS 9
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 9.50% 9.50% Nil Nil Nil
Distribution Return on Net Asset Backing (NAB) 6.01% 6.21% Nil Nil Nil
Tax Advantaged Portion 100% 73.76% 0.00% 0.00% 0.00%
Equivalent Pre-tax Return on Initial Equity 12.80% 15.59% Nil Nil Nil
NAB $1.58 $1.53 $0.95 $1.01 -
Syndicate Commencement Date October 1998
Syndicate Review Date November 2010 – November 2011
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation (1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Hollywood SA 2.8% 97.2% $82,950,000 8.58% 0.30% 4.25 years
Centro Gympie QLD 1.8% 99.7% $59,900,000 7.75% 1.53% 7.54 years
Centro Dianella WA N/A(2) 99.2% $57,500,000 8.25% 6.48% 5.34 years
TOTAL 2.4% 98.4% $200,350,000 8.24% 2.38% 5.47 years
FY09 TOTAL 10.9% 99.0% $195,700,000 7.99% -17.04% 5.61 years
FY08 TOTAL(3) 12.9% 99.3% $295,000,000 6.96% 2.43% 6.18 years
FY07 TOTAL(3) 3.1% 99.1% $288,000,000 6.70% 23.34% 5.96 years
(1)Directors’valuations.(2)Non-comparablesalesduetothebankruptcyofGoodFurnitureinFY10.(3)AllhistoricalstatisticsincludeHamiltonCentralandRaintreesShoppingCentre,whichweresoldon19December2008for$17.25millionand22December2008for$29.00
millionrespectively.
NAB Change
Jun ‘10 $1.01
Dec ‘09 $1.00
Jun ‘09 $0.95
•Debt Facility Breach Resolved–Theexternalfinancierhasagreedtoreducetheinterestcoverratio(ICR)covenant,sothattheSyndicate’sexternaldebtfacilityisnolongerinbreach.TosecurethisagreementitwasnecessarytoagreetousetheSyndicate’sforecastearningsforFY11andFY12(afterthepaymentofcapitalexpenditure)toreducetheexternaldebtprincipal.Asaconsequence,theSyndicateisnotforecastingtopaydistributionstoinvestorsinFY11.
•End of Syndicate Term in November 2011 –InNovember2008,InvestorsapprovedathreeyearextensionoftheSyndicateterm,duetothedepressedstateoftheAustralianpropertyinvestmentmarket.
• Portfolio Revaluations Increase Syndicate NAB–The2.4%increaseinthepropertyportfoliovaluehasresultedintheSyndicateNABincreasingfrom$0.95at30June2009to$1.01at30June2010.
• Potential Land Sale at Centro Dianella–CentroDianellaislocatedintheCityofStirlingandthelocalCouncilhasrecentlyrezonedavacantlandparceladjoiningthecentretoresidential,increasingthevalueofthisland.Weareintheprocessofappointingagentstosellthislandasaresidentialdevelopmentopportunity,andthesaleproceedswillthenlikelybeallocatedforcapitalexpenditureandpartialretirementofdebt.
FY11 Distribution Forecaston Initial Equity: Nil
Total Annual Return
since Inception: 8.88%
Centro MCS Direct Property – ANNUAL REVIEW 2010 27
CM
CS 9
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was9.56%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 57.9% 61.9% 59.5%
Interest Cover Ratio(2) 1.6 times 1.4 times 1.3 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.(2)Asat31December2009theSyndicatewasinbreachofitsICRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity (1)
External Financier $114.23 million $2.47 million 15 December 2011
Centro Property Trust $17.19 million(2) Nil Payable at reasonable notice
TOTAL $131.42 million $2.47 million 1.40 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.(2)Includes$2.88millionofinterestbearingtradedebt.
FIXED INTEREST RATE HEDGE SUMMARY
TOP RETAILERSTotal % of Income 21.8%
Averag
eFixed
Rate
(%)
(A$ Millions)
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
103% 103% 103% 103% 103% 103% 103%
83%
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13
Percentage Hedged
0
20
40
60
80
100
120
140
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
Woolworths15.3%
Other78.2%
Target6.5%
Centro MCS Direct Property – ANNUAL REVIEW 201028
CENTRO MCS 10
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 10.50% 10.50% 8.50% 5.00% 2.00%
Distribution Return on Net Asset Backing (NAB) 6.44% 7.00% 8.59% 5.75% 2.30%
Tax Advantaged Portion 49.81% 54.51% 45.99% 100% 100%
Equivalent Pre-tax Return on Initial Equity 15.61% 15.47% 11.90% 9.35% 3.74%
NAB $1.63 $1.50 $0.99 $0.87 -
Syndicate Commencement Date April 1999, rollover occurred June 2006
Syndicate Review Date July 2011 – June 2013
PROPERTY PORTFOLIO STATISTICS Property (1) State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation (2)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Lennox NSW 1.8% 97.8% $44,500,000 7.75% 4.71% 6.99 years
Maitland Hunter Mall NSW -4.8% 98.9% $12,000,000 11.00% -33.70% 1.00 years
TOTAL -0.5% 98.5% $56,500,000 8.44% -6.77% 4.81 years
FY09 TOTAL(3) 1.4% 99.4% $77,000,000 8.65% -18.43% 3.50 years
FY08 TOTAL(3) 3.9% 99.0% $94,400,000 7.39% -4.07% 4.27 years
FY07 TOTAL(3) -4.3% 98.8% $98,400,000 7.06% 5.77% 5.10 years
(1)KmartAliceSpringswassoldon15June2010for$15.85millionandadjoiningvacantlandwassoldon21September2009for$700,000.(2)IndependentvaluationsundertakenbyColliersInternationalatCentroLennoxandm3propertyatMaitlandHunterMall.(3)AllhistoricalstatisticsincludeKmartAliceSprings.
NAB Change
Jun ‘10 $0. 87
Dec ‘09 $1.00
Jun ‘09 $0.99
• Valuation Write Down at Maitland Hunter Mall Impacts NAB–TheMaitlandHunterMallvaluationdeclinedby$6.1millionovertheyear,to$12.0millionasat30June2010.ThevaluationdeclinewaslargelyduetolowermarketrentalforecastsatMaitlandHunterMallfortheFoodworkssupermarketandKmartdiscountdepartmentstorefromtheirNovember2010leaseexpiries,combinedwithanexpectationthatsignificantcapitalexpenditurewillberequiredinthemediumtermtosecurelongtermleasecommitmentsfromtheseanchorretailers.Ontheotherhand,thevaluationofCentroLennoxincreasedby$2.0millionoverthesame12monthperiod.Consequently,theSyndicateNABisnow$0.87,significantlylowerthanthe31December2009NABof$1.00.
• FY11 Distribution Forecast Reduced–TheSyndicatedistributionforecasthasbeenreducedfrom5.0%inFY10to2.0%forFY11,largelyduetothelowerpropertyincomeforecastatMaitlandHunterMall.Otherfactorsimpactingonthedistributionforecastinclude
anexpectationthat$1.3millionofcapitalexpenditurewillberequiredandfundedfromacombinationofSyndicateearningsandprioryearcashreserves.PartofthiscapitalexpenditurerelatestoasaleconditionforKmartAliceSpringswherewearerequiredtorebuildanexternalsandstonewallthatwasstormdamagedearlierintheyear.
• Asset Management Update–Asadvisedinourletterdated23June2010,KmartAliceSpringswassoldfor$15.85millioninJune2010,inlinewiththe31December2009bookvaluation.ThesaleproceedswerepredominantlyusedtoretireSyndicatedebt,howevertheSyndicatefinanciersagreedthat$3.1millionoftheproceedscanbereinvestedintotheSyndicateportfolioinordertocompleteaWoolworthssupermarketexpansionatCentroLennox.TheWoolworthssupermarkethastradedstronglyandthisexpansionof750squaremetresto3,600squaremetresisforecasttoaddfurthervaluetoCentroLennox.Developmentworkshavenowcommencedwiththeexpansionanticipatedtobecompletedbyearly2011.
FY11 Distribution Forecaston Initial Equity: 2.00%
Total Annual Return
since Inception: 9.23%
Centro MCS Direct Property – ANNUAL REVIEW 2010 29
CM
CS 10
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was10.38%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio 46.1% 56.6% 51.6%
Interest Cover Ratio 2.0 times 1.9 times 1.7 times
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity
External Financier $32.53 million Nil 21 December 2011
FIXED INTEREST RATE HEDGE SUMMARY
TOP RETAILERSTotal % of Income 59.9%
132%132%132%132%132%132%132%132% 132%
67%
Averag
eFixed
Rate
(%)
(A$ Millions)
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13
Percentage Hedged
0
5
10
15
20
25
30
35
40
45
50
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
Kmart29.2%
Other40.1%
Aldi5.3%
Woolworths16.3%
FoodWorks9.1%
Centro MCS Direct Property – ANNUAL REVIEW 201030
CENTRO MCS 11
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 12.50% 12.75% 13.25% 16.50% 17.00%
Distribution Return on Net Asset Backing (NAB) 4.31% 4.26% 5.24% 7.71% 7.94%
Tax Advantaged Portion 14.35% 1.96% 29.32% 19.31% 8.00%
Equivalent Pre-tax Return on Initial Equity 14.06% 12.97% 16.63% 19.27% 18.18%
NAB $2.90 $2.99 $2.53 $2.14 -
Syndicate Commencement Date March 2000
Syndicate Review Date March 2010 (proposal March 2012)(1)
(1)SubjecttoapprovalatinvestormeetingplannedforNovember2010.
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation (1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average Lease Expiry (by income)
Centro Surfers Paradise QLD -0.9% 99.7% $185,100,000 8.25% -11.18% 5.07 years
FY09 TOTAL 8.7% 98.3% $208,400,000 7.50% -9.39% 3.74 years
FY08 TOTAL 13.7% 100% $230,000,000 6.50% 1.10% 3.46 years
FY07 TOTAL 6.4% 96.4% $227,500,000 6.25% 30.30% 3.65 years
(1)Directors’valuation.
NAB Change
Jun ‘10 $2.14
Dec ‘09 $2.42
Jun ‘09 $2.53
•�Syndicate Term Extension –�As�previously�advised,�despite�an�extensive�domestic�and�international�sales�campaign�we�were�unable�to�secure�an�acceptable�sale�price�for�Centro�Surfers�Paradise.�While�there�was�buyer�interest�in�the�Centre,�low�offers�reflected�the�limited�financing�and�liquidity�available�in�the�current�economic�climate�for�assets�valued�in�excess�of�$150�million.��We�will�be�recommending�to�investors�that�the�Syndicate�term�be�extended�for�up�to�a�further�two�years�to�enable�a�sale�at�a�time�when�market�conditions�may�have�improved.�Investors�will�receive�information�about�the�extension�shortly�with�an�investor�meeting�planned�for�November�2010.
•�Valuation Decline Impacts NAB –�Centro�Surfers�Paradise�has�been�valued�at�$185.1�million�at�30�June�2010,�a�11.2%�valuation�decline�from�30�June�2009.�Income�at�the�Centre�has�not�fallen,�however�the�capitalisation�rate�which�buyers�will�pay�for�this�income��has�softened.�We�believe�this�represents�a�fair�value�for�Centro�Surfers�Paradise�given�current�economic�conditions�and�the�valuation�is�in�line�with�initial�offers�
received�for�the�Centre.�The�drop�in�the�30�June�2010�valuation�has�led�to�an�11.6%�fall�in�the�Syndicate�NAB�since�31�December�2009.�The�unit�price�remains�much�higher�compared�to�what�investors�would�have�received�if�the�highest�final�offer�for�the�Centre�during�the�sales�process�was�accepted.�
•�Strong Leasing Results Despite Competition�–�Despite�marketing�Centro�Surfers�Paradise�for�sale,��we�have�continued�to�actively�manage�the�Centre�including�completing�23�lease�deals�with�income�10%�above�prior�year�rental�levels�and�an�increased�occupancy�rate�of�99.7%.
•�Participation in Gold Coast Foreshore Works�–�We�recently�agreed�to�the�Gold�Coast�City�Council’s�request�to�remove�an�old�pedestrian�bridge�linking�the�Centre�to�the�foreshore.�The�bridge,�which�was�rarely�used,�was�demolished�at�the�Council’s�cost�and�now�opens�important�sight�lines�to�our�Centre�from�the�foreshore.�The�Gold�Coast�City�Council’s�$20�million�redevelopment�of�the�precinct�will�assist�us�in�increasing�rents�at�the�foreshore�end�of�the�Centre.
FY11 Distribution Forecaston Initial Equity: 17.00%
Total Annual Return
since Inception: 16.54%
Centro MCS Direct Property – ANNUAL REVIEW 2010 31
CM
CS 11
DEBT INFORMATIONAllSyndicatedebtat30June2010wasatavariable(floating)interestrateof7.03%p.a.(includingweightedaveragemargin).
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio (1) 29.2% 32.7% 36.4%
Interest Cover Ratio 2.5 times 2.9 times 3.6 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity (1)
External Financier $68.20 million Nil 15 December 2011
Centro Property Trust $1.86 million Nil Payable at reasonable notice
TOTAL $70.06 million Nil 1.45 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
TOP RETAILERSTotal % of Income 20.1%
Timezone9.0%
Other79.9%
Surfers Paradise Tavern5.8%
Secure Parking5.3%
Centro MCS Direct Property – ANNUAL REVIEW 201032
CENTRO MCS 12
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 10.00% 10.00% 7.00% 8.00% 7.50%
Distribution Return on Net Asset Backing (NAB) 6.41% 6.49% 6.61% 6.90% 6.47%
Tax Advantaged Portion 25.91% 39.16% 56.22% 22.35% 0.00%
Equivalent Pre-tax Return on Initial Equity 12.25% 13.40% 10.42% 9.55% 7.50%
NAB $1.56 $1.54 $1.06 $1.16 -
Syndicate Commencement Date April 2000
Syndicate Review Date April 2010(1)
(1)InitialSyndicatetermended14April2010.AninvestormeetingwillbeheldinDecembertovoteonaproposaltorollovertheSyndicateforanothertermofbetweenfivetosixyearswhileallowingthoseinvestorswhowishtoexitnowtodoso.
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation (2)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Oakleigh VIC N/A(1) 99.3% $37,500,000 8.75% 3.88% 6.87 years
Centro St Agnes SA 8.0% 99.0% $30,675,000 8.50% 2.25% 3.45 years
Centro Glenorchy TAS 1.4% 100% $18,500,000 8.75% Nil 9.59 years
TOTAL 5.1% 99.4% $86,675,000 8.66% 2.45% 6.27 years
FY09 TOTAL 6.9% 99.9% $84,600,000 8.55% -15.23% 5.78 years
FY08 TOTAL 4.2% 98.1% $99,800,000 7.15% 5.72% 2.77 years
FY07 TOTAL 4.5% 99.6% $94,400,000 7.00% 9.26% 3.28 years
(1)SalesgrowthforCentroOakleighisnotcomparableduetorecentdevelopment.(2)IndependentvaluationsundertakenbySavillsatCentroOakleighandCBRichardEllisatCentroGlenorchy.Directors’valuationundertakenatCentroStAgnesduetothe
propertybeingmarketedforsale.
NAB Change
Jun ‘10 $1.16
Dec ‘09 $1.12
Jun ‘09 $1.06
•Sale of Centro St Agnes–AspreviouslyadvisedweplacedCentroStAgnesonthemarketforsale.WereceivedseveralreasonableoffersfortheCentreandwecurrentlyhaveonepartycompletingexclusiveduediligence.WehopetohaveanunconditionalofferforCentroStAgnesduringOctober2010.
• Rollover Progress–WearecurrentlypreparingaproposalforinvestorstocontinuetheSyndicateforafurthertermprovidinginvestorswhoelectedtoremainintheSyndicatetheopportunitytodosowhilstaccommodatingthoseinvestorswhoelectedtoexit.ThisproposalisreliantonsellingCentroStAgnesandwillrequireinvestorapproval,withaninvestormeetingplannedforDecember2010.IfthesaleofCentroStAgnesdoesnotproceedorifthevoteontherestructureproposalisunsuccessful,thentheremainingpropertiesbeingCentroOakleighandCentroGlenorchywillbeplacedonthemarketforsaleandtheSyndicatewillbewoundup.
•Successful Leasing Drives Income Growth–DuringFY10,28leasingdealswerecompletedacrossthepropertyportfoliowithincomeonthesedeals11.4%aboveprioryearrentallevels.Thepropertyportfoliois99.4%occupiedwithalongweightedaverageleaseexpiryof6.27years.
• Centro Oakleigh Continues to Impress–SalesatbothColesandWoolworthsatCentroOakleighcontinuetogrowbeyondexpectation,withColessalesincreasingdespiteanewfulllineWoolworthsbeingintroducedaspartoftherecentredevelopment.Overallsupermarketsalesaremuchhigherpostredevelopment,whichhasenabledustoattractnewandhigherpayingspecialtyretailerstoCentroOakleigh.
FY11 Distribution Forecaston Initial Equity: 7.50%
Total Annual Return
since Inception: 10.81%
Centro MCS Direct Property – ANNUAL REVIEW 2010 33
CM
CS 12
DEBT INFORMATIONAllSyndicatedebtat30June2010wasatavariable(floating)interestrateof7.24%p.a.(includingweightedaveragemargin).
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 44.3% 55.1% 53.7%
Interest Cover Ratio 2.2 times 2.2 times 2.4 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity (1)
External Financier $40.52 million Nil 15 December 2011
Centro Property Trust $8.49 million Nil Payable at reasonable notice
TOTAL $49.01 million Nil 1.38 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
TOP RETAILERSTotal % of Income 52.5%
Other47.5%
Coles29.7%
Woolworths22.8%
Centro MCS Direct Property – ANNUAL REVIEW 201034
CENTRO MCS 14
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 9.30% 9.35% 2.35% 4.00% 3.50%
Distribution Return on Net Asset Backing (NAB) 5.85% 5.81% 2.32% 3.88% 3.40%
Tax Advantaged Portion 58.93% 100% 0.00% 57.42% 0.00%
Equivalent Pre-tax Return on Initial Equity 14.06% 17.48% 2.35% 6.00% 3.50%
NAB $1.59 $1.61 $1.01 $1.03 -
Syndicate Commencement Date January 2001, rollover occurred August 2007
Syndicate Review Date September 2012 – August 2014
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Stirlings WA 26.7% 98.3% $27,400,000 8.25% -1.62% 4.42 years
Centro Kalamunda WA 0.9% 100% $21,700,000 8.50% 3.33% 3.53 years
CSIF-A Investment(2) Various 5.0% 99.4% $2,608,265 8.37% -16.83% 5.12 years
Chapman Way WA N/A 100% $1,600,000 N/A -11.11% 0.00 years
TOTAL 4.3% 99.4% $53,308,265 8.36% -0.89% 4.95 years
FY09 TOTAL(3) 8.5% 99.6% $84,286,000 8.01% -17.96% 3.53 years
FY08 TOTAL(3) (4) 12.5% 98.0% $126,540,000 6.96% 6.24% 3.97 years
FY07 TOTAL(3) (4) 3.7% 97.9% $113,045,000 6.75% 17.15% 3.65 years
(1)Directors’valuation.(2)EquityinvestmentintoCentroSyndicateInvestmentFund(CSIF-A).ForfurtherinformationonCSIF-ArefertotheFactSheetontheCentroMCSwebsiteunderSyndicate
Portfolio&RG46DisclosuresforCentroMCS14.(3)HistoricalstatisticsincludeCentroKincumberandCentroWarringalwhichweresoldinJune2009for$21.4millionandinSeptember2009for$30.6millionrespectively.(4)HistoricalstatisticsexcludeCSIF-Ainvestment.
NAB Change
Jun ‘10 $1.03
Dec ‘09 $0.99
Jun ‘09 $1.01
•Strong Sales Growth at Stirlings–SalesgrowthatCentroStirlingscontinuestoremainstrong.ThisgrowthisunderpinnedbyWoolworths(+8.9%)aswellasthespecialtyretailerswhichcollectivelycontributedtowardsthesalesgrowth.
•Competition Impacts Coles at Kalamunda–AtCentroKalamunda,salesgrowthof0.9%forFY10waslargelyunderpinnedbythestrongperformanceofFlightCentre(+19.7%)andRedDotStore(+2.5%).However,thesestrongresultswereoffsetbytheperformanceofColes(-4.5%)asaresultofincreasedcompetitionfromarecentlyrefurbishedWoolworthssupermarketonekilometreaway.Tocombatthiscompetition,wehaveforecastcapitalexpenditureoverthecomingfinancialyearsonvariousrefurbishmentprojectstoenhancethepresentationoftheCentre.
•Increased Capital Expenditure Reduces Distribution–ForecastFY11earningsareexpectedtoincreaseby$250,000comparedtoFY10duetoareductionininterestcostandfundexpenses.However,anincreaseincapitalexpenditureof$780,000forecastinFY11tobefundedfromtheSyndicate’searnings,hasresultedinadecreaseintheannualdistributionrateto3.50%.ThemajorityofFY11’scapitalexpenditurewillbeallocatedforthereplacementoftheairconditioningsystematCentroStirlingsaswellasnecessaryrefurbishmentworksatCentroKalamunda.Thisongoingcapitalexpenditureisimportantformaintainingasafeenvironment,ahighoccupancyrateandensuringapleasantshoppingexperienceforourcustomers.
•Successful Refinancing–TheSyndicate’sseniordebtfacilitywasrecentlyextendedwiththeexistingfinancierforafurther12monthsfrom30September2010to30September2011.
FY11 Distribution Forecaston Initial Equity: 3.50%
Total Annual Return
since Inception: 8.70%
Centro MCS Direct Property – ANNUAL REVIEW 2010 35
CM
CS 14
DEBT INFORMATIONAllSyndicatedebtat30June2010wasatavariable(floating)interestrateof7.77%p.a.(includingweightedaveragemargin).
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 53.7% 55.5% 31.6%
Interest Cover Ratio 1.8 times 1.5 times 2.2 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity(1)
External Financier $17.20 million Nil 30 September 2011
Centro Property Trust $0.36 million Nil Payable at reasonable notice
TOTAL $17.56 million Nil 1.25 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
TOP RETAILERS
Total % of Income 48.4%
Other51.6%
Woolworths36.5%
Coles11.9%
Centro MCS Direct Property – ANNUAL REVIEW 201036
CENTRO MCS 15
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 10.00% 10.00% 11.88%(1) 7.50% 7.50%
Distribution Return on Net Asset Backing (NAB) 5.46% 6.10% 9.98% 6.20% 6.20%
Tax Advantaged Portion 50.47% 91.59% 0.00% 11.04% 13.00%
Equivalent Pre-tax Return on Initial Equity 15.65% 17.96% 11.88% 8.22% 8.35%
NAB $1.83 $1.64 $1.19 $1.21 -
Syndicate Commencement Date April 2001
Syndicate Review Date April 2012
(1)Includesaspecialdistributionof2.375centsresultingfromthesaleofCentroRingwood.
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Meadow Mews TAS 6.9% 99.5% $33,800,000 8.50% 2.42% 3.85 years
FY09 TOTAL 7.0% 100% $33,000,000 8.25% -12.47% 3.87 years
FY08 TOTAL(2) 4.2% 100% $88,000,000 7.11% -2.98% 3.23 years
FY07 TOTAL(2) 4.8% 100% $90,700,000 6.75% 12.11% 4.53 years
(1)IndependentvaluationundertakenbyCBRichardEllis.(2)HistoricalstatisticsincludeCentroRingwoodwhichwassoldon27February2009for$39.0million.
NAB Change
Jun ‘10 $1.21
Dec ‘09 $1.19
Jun ‘09 $1.19
•Centro Meadow Mews Valuation Growth –TheCentroMeadowMewsvaluationimproved2.4%to$33.8millionoverthe12monthstoJune2010duetostrongannualpropertyincomegrowthof5.8%.Thiswaspartiallyoffsetbya25basispointsofteninginthecapitalisationrateto8.50%.TheSyndicateNABincreasedbytwocentsto$1.21.
•Syndicate Debt Refinancing Terms Agreed–CommercialtermshavebeenagreedtorefinancetheSyndicate’sdebtfacilityforathreeyearperiodfromOctober2010.AlthoughthisloanextensionisbeyondtheforecastSyndicateReviewDateofApril2012,thereareminimalearlyrepaymentfeesintheeventthattheSyndicateiswounduppriortotheloanexpirydate.Syndicatedistributionscontinuetobeforecastat7.5%oninitialequityforFY11,inlinewiththeactualdistributionrateachievedforFY10.
•Strong Centro Meadow Mews Results–CentroMeadowMewscontinuestoperformstronglywithannualsalesgrowthof6.9%andnearfulloccupancyat99.5%.Nineleasedealswerecompletedoverthe12monthperiodwithrentalgrowthforrenewedleasesof10.7%comparedtothepriorrentals.Thesepositiveleasingresultshavecontributedtoforecastpropertyincomegrowthof4.0%forFY11.
FY11 Distribution Forecaston Initial Equity: 7.50%
Total Annual Return
since Inception: 11.24%
Centro MCS Direct Property – ANNUAL REVIEW 2010 37
CM
CS 15
DEBT INFORMATIONAllSyndicatedebtat30June2010wasatavariable(floating)interestrateof7.83%p.a.(includingweightedaveragemargin).
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio 45.8% 13.2% 13.2%
Interest Cover Ratio 1.8 times 2.0 times 8.1 times
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity
External Financier $4.67 million Nil 31 December 2010
TOP RETAILERS
Total % of Income 55.4%
Other44.6%
Coles55.4%
Centro MCS Direct Property – ANNUAL REVIEW 201038
CENTRO MCS 16
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 12.00% 12.00% Nil Nil Nil
Distribution Return on Net Asset Backing (NAB) 8.51% 8.28% Nil Nil Nil
Tax Advantaged Portion 1.79% 100% 0.00% 0.00% 0.00%
Equivalent Pre-tax Return on Initial Equity 12.19% 22.43% Nil Nil Nil
NAB $1.41 $1.45 $0.80 $0.69 -
Syndicate Commencement Date May 2001
Syndicate Review Date May 2007 – May 2011
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(2)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Toormina NSW N/A(1) 99.4% $68,000,000 8.00% -4.23% 7.04 years
FY09 TOTAL N/A(1) 99.3% $71,000,000 7.50% 10.25% 7.93 years
FY08 TOTAL(3) N/A(1) N/A $64,251,000 6.75% 74.24% 7.30 years
FY07 TOTAL 4.5% 100% $36,875,000 6.75% 6.88% 2.68 years
(1)SalesgrowthforCentroToorminaisnotcomparableduetorecentdevelopment.(2)Directors’valuation.(3)OccupancyrateisnotavailableforFY08duringredevelopmentofCentre.
NAB Change
Jun ‘10 $0.69
Dec ‘09 $0.67
Jun ‘09 $0.80
•Impending Coles Lease Expiry–TheColessupermarketleaseatCentroToorminawillexpireinJune2011.WearecurrentlyinnegotiationwithColestosecurealongtermlease.ThenewleasewillsecureamajorportionofincomefortheCentreandassistinmaximisingthevalueoftheproperty.
•Distribution Update–DuetotheSyndicate’shighgearinglevelof82.1%andtheimpendingexpiryoftheColeslease,wehavedecidedtocontinuetosuspenddistributionpaymentsinFY11.SyndicateearningswillbeusedtorepayexternaldebtandreducethegearingratioorpayforcapitalexpenditureworksrequiredtosecureanewleasewithColes.
•Future Strategy of Syndicate –Wearecurrentlyconsideringoptionsthatareinthebestinterestsofinvestorsandwillprovideanupdatebytheendof2010toinvestors.OurfirstpriorityistosecurealongtermleasewithColesthatwillassistinmaximisingvalueforSyndicateinvestors.Dependingoninterestrates,incomefromtheColesleaseandthereforeourabilitytodistributetoinvestors,wemayconsidersellingCentroToorminaandwindinguptheSyndicate.
FY11 Distribution Forecaston Initial Equity: Nil
Total Annual Return
since Inception: 6.37%
Centro MCS Direct Property – ANNUAL REVIEW 2010 39
CM
CS 16
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was7.27%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 42.5% 80.0% 82.1%
Interest Cover Ratio 2.8 times 1.5 times 1.5 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity(1)
External Financier $43.12 million Nil 15 December 2011
Centro Property Trust $15.23 million Nil Payable at reasonable notice
TOTAL $58.35 million Nil 1.34 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
FIXED INTEREST RATE HEDGE SUMMARY
Averag
eFixed
Rate
(%)
(A$ Millions)
25%
26% 26%
20%
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec12 Mar 13 Jun 135.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
Percentage Hedged
0
10
20
30
40
50
60
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
TOP RETAILERS
Total % of Income 59.0%
Other41.0%
Coles26.9%
Woolworths12.3%
Kmart11.1%
Blooms The Chemist8.7%
Centro MCS Direct Property – ANNUAL REVIEW 201040
CENTRO MCS 17
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 9.05% 9.05% 7.00% 6.00% 6.00%
Distribution Return on Net Asset Backing (NAB) 6.11% 6.20% 6.09% 4.80% 4.80%
Tax Advantaged Portion 49.00% 50.82% 49.18% Nil 26.00%
Equivalent Pre-tax Return on Initial Equity 12.90% 13.05% 9.99% 6.00% 7.36%
NAB $1.48 $1.46 $1.15 $1.25 -
Syndicate Commencement Date October 2001
Syndicate Review Date October 2007 – October 2011
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
2 Liquorland Outlets(2) QLD N/A 100% $24,700,000 8.13% 0.60% 5.61 years
Centro Townsville QLD -3.8% 98.9% $36,400,000 8.25% -0.55% 2.45 years
Centro Newcomb VIC 7.2% 100% $26,000,000 7.75% 1.56% 8.43 years
Centro Albion Park NSW 2.4% 100% $15,400,000 8.50% 5.48% 6.75 years
TOTAL 1.2% 99.6% $102,500,000 8.13% 1.13% 5.22 years
FY09 TOTAL(3) 7.2% 99.8% $137,800,000 7.91% -12.29% 6.08 years
FY08 TOTAL(3) 7.6% 99.4% $157,100,000 6.74% 3.08% 6.90 years
FY07 TOTAL(3) 0.3% 99.9% $152,412,856 6.65% 15.20% 6.29 years
(1)Independentvaluationsundertakenbym3propertyforLiquorlandOutlets,Directors’valuationsforremainderofassets.(2)The2Liquorlandoutletswerepreviously8Liquorlandoutlets.ThefollowingpropertiesweresoldduringFY10–AspleyHotel,BrownsPlainHotel,MoreyfieldTavern,Newham
Hotel,theSandsHotelandKoalaTavernforatotalof$39.7million.(3)Allhistoricalstatisticsincludethe8LiquorlandOutlets.
NAB Change
Jun ‘10 $1.25
Dec ‘09 $1.21
Jun ‘09 $1.15
•Sale of Liquorland Outlets –DuringFY10sixLiquorlandOutletsweresoldfor$39.7million,9.1%abovetheirbookvalue.TheremainingtwoLiquorlandOutlets(RunawayBayTavernandWallabyHotel)haverecentlybeenmarketedforsale.WecurrentlyhaveonepartycompletingexclusiveduediligenceonRunawayBayTavern.
•Debt Facility Update–ProceedsfrompreviousLiquorlandOutletsaleshavereducedtheexternaldebtfrom$64.2millionto$25.5million.CombinedwiththeproceedsfromapossiblesaleofRunawayBayTavern,weanticipatethatapproximately$10millionofexternaldebtwillneedtoberefinancedinFY11.Withthedebtmarketsstillconstrained,smalldebtswillbeeasiertofinanceandshouldattractlowerinterestratemargins.
•Mixed Sales Growth Across Property Portfolio –CentroNewcombcontinuestoperformstronglywiththenewAldi/Woolworthssupermarketcombinationprovidinga‘pointofdifference’forthelocalcommunity.CentroTownsvillesaleshaverecentlycomeunderpressure(3.8%drop)duetoacompetingcentrerecentlycompletingamajorredevelopment.
•Strong Leasing Results Drive Income–FY10sawthecompletionof15leasedeals,withincomefromthesedeals14.0%aboveprioryearrentallevels.Thequalityoftheseassetsissupportedbytheir99.6%occupancyrateandweightedaverageleaseexpiryofoverfiveyears.
FY11 Distribution Forecaston Initial Equity: 6.00%
Total Annual Return
since Inception: 11.10%
Centro MCS Direct Property – ANNUAL REVIEW 2010 41
CM
CS 17
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was11.24%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio (1) 40.3% 49.7% 29.3%
Interest Cover Ratio 2.1 times 2.0 times 2.0 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity(1)
External Financier $25.50 million Nil 20 December 2010
Centro Property Trust $5.18 million Nil Payable at reasonable notice
TOTAL $30.68 million Nil 0.47 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
FIXED INTEREST RATE HEDGE SUMMARY
Averag
eFixed
Rate
(%)
(A$ Millions)
196% 196% 196% 196% 196% 196% 196% 196%
170%
Sep 10 Dec 10 Mar 11 Jun 11 Sep11 Dec 11 Mar 12 Jun 12 Sep 12 Dec12 Mar 13 Jun 13
Percentage Hedged
0
10
20
30
40
50
60
70
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
TOP RETAILERS
Total % of Income 55.5%
Other44.5%
Woolworths/Safeway16.5%
Kmart13.9%
Runaway Bay Hotel10.4%
Coles9.5%
Wallaby Hotel5.2%
Centro MCS Direct Property – ANNUAL REVIEW 201042
CENTRO MCS 18
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 8.00% 8.00% 6.50% 5.20%(1) 5.00%
Distribution Return on Net Asset Backing (NAB) 6.40% 6.84% 6.50% 5.00% 4.81%
Tax Advantaged Portion 55.34% 47.98% 46.63% 0.00% 22.00%
Equivalent Pre-tax Return on Initial Equity 11.13% 11.34% 9.13% 5.20% 5.96%
NAB $1.25 $1.17 $1.00 $1.04 -
Syndicate Commencement Date March 2002
Syndicate Review Date April 2008 – March 2012
(1)Includesaspecialdistributionof1.20centsperunitfollowingthesaleofCentroMeadowHeights.
PROPERTY PORTFOLIO STATISTICS Property(1) State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(2)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
The Gateway Shopping Village VIC 14.9% 95.3% $26,000,000 8.50% 0.00% 2.81 years
Centro Hilton SA 14.9% 100% $16,750,000 7.50% 4.69% 5.67 years
TOTAL 14.9% 96.7% $42,750,000 8.11% 1.79% 3.84 years
FY09 TOTAL(3) 5.5% 99.7% $66,100,000 8.30% -9.70% 3.70 years
FY08 TOTAL(3) 3.3% 99.5% $73,200,000 7.49% -0.54% 3.59 years
FY07 TOTAL(3) 2.9% 99.8% $73,600,000 7.08% 16.83% 4.00 years
(1)CentroRosebudwassoldon21September2009for$13.15millionandCentroMeadowHeightswassoldon13May2010for$12.30million.(2)IndependentvaluationundertakenbySavillsatTheGatewayShoppingVillageandJonesLangLasalleatCentroHilton.(3)AllhistoricalstatisticsincludeCentroRosebudandCentroMeadowHeights.
NAB Change
Jun ‘10 $1.04
Dec ‘09 $1.00
Jun ‘09 $1.00
•Portfolio Sale Results–Asadvisedinourletterdated17May2010,thesaleofCentroMeadowHeightssuccessfullysettledon13May2010.Thesalepriceof$12.3millionwas2.5%abovethe31December2009bookvaluationof$12.0million.CentroRosebudwasalsosoldinSeptember2009for$13.15million,6.9%abovethe30June2009bookvaluationof$12.3million.SaleproceedsfrombothtransactionswereusedtoretireSyndicatedebtandreducedtheSyndicategearingratioto16.9%at30June2010.
•FY11 Distribution Forecast at 5.0%–Investorsareforecasttoreceivea5.0%distributionrateforFY11,supportedbyforecastpropertyincomegrowthatTheGatewayShoppingVillageandCentroHiltonof2.4%and1.2%respectively.Thiscomparestoafinaldistributionrateof5.2%forFY10,whichincludedaspecialdistributionof1.2centsperunitresultingfromthesaleofCentroMeadowHeights.
•Valuation Increases Improve NAB–TheportfoliovaluationforTheGatewayShoppingVillageandCentroHiltonincreasedby2.3%overthesixmonthsto30June2010and1.8%overthe12monthperiod.ThisresultedinaslightimprovementtotheSyndicateNABfrom$1.00to$1.04.
•Syndicate Debt Refinance Discussions Continue–TheSyndicate’sCommercialMortgageBackedSecurities(CMBS)debtfacilitymaturesinDecember2010,andweareinadvanceddiscussionswithnewlenderstorefinancethisfacility.Wewillinforminvestorsoncerefinancinghasbeencompleted.
•Portfolio Leasing and Performance Update–AspreviouslyreportedwewereplanningtointroduceasecondsupermarketoperatoratTheGatewayShoppingVillage.However,thisproposalisnolongerproceedingandwearenowworkingonalternativestrategiestoleasethevacantspace.Notwithstandingthis,eightleasedealswerecompletedattheCentreduringFY10contributingtostrongpropertyincomegrowthof6.8%.CentroHiltoncontinuestoperformstronglywithannualsalesgrowthof14.9%overtheyear,underpinnedbytheWoolworthssupermarketperformance(up4.7%).TheCentreremainsfullyleasedandrecorded7.3%incomegrowthcomparedtotheprioryear.
FY11 Distribution Forecaston Initial Equity: 5.00%
Total Annual Return
since Inception: 7.92%
Centro MCS Direct Property – ANNUAL REVIEW 2010 43
CM
CS 18
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was12.89%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 41.7% 48.0% 16.9%
Interest Cover Ratio 2.2 times 2.0 times 2.0 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity(1)
External Financier $6.42 million Nil 21 December 2010
Centro Property Trust $0.99 million Nil Payable at reasonable notice
TOTAL $7.41 million Nil 0.55 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
FIXED INTEREST RATE HEDGE SUMMARY
Averag
eFixed
Rate
(%)
(A$ Millions)
337% 337% 337% 337% 337%
281%
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec12 Mar 13 Jun 13
Percentage Hedged
0
5
10
15
20
25
30
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
TOP RETAILERS
Total % of Income 41.0%
Other59.0%
Coles20.2%
Woolworths15.6%
BP Express5.2%
Centro MCS Direct Property – ANNUAL REVIEW 201044
CENTRO MCS 19 NZ/I
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 8.80% 8.80% 7.50% 7.50% 4.00%
Distribution Return on Net Asset Backing (NAB) 6.38% 6.99% 7.50% 7.50% 4.00%
Tax Advantaged Portion 42.37% 35.84% 26.50% 52.09% 0.00%
Equivalent Pre-tax Return on Initial Equity 12.04% 11.80% 9.23% 10.90% 4.00%
NAB $1.38 $1.26 $1.00 $1.00 -
Syndicate Commencement Date November 2002
Syndicate Review Date July 2009 – July 2011
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Warners Bay (30%) NSW 6.7% 98.9% $6,960,000 8.25% -7.72% 6.71 years
Centro Cat & Fiddle (30%) TAS 0.3% 98.4% $8,100,000 8.50% 11.11% 3.27 years
Centro Gladstone (30%) QLD 2.3% 97.9% $4,818,000 8.50% -4.12% 3.43 years
TOTAL 3.71% 98.4% $19,878,000 8.41% 0.11% 4.39 years
FY09 TOTAL 0.2% 98.7% $19,857,000 8.34% -13.36% 3.55 years
FY08 TOTAL 5.2% 99.4% $22,920,000 7.55% -3.29% 4.00 years
FY07 TOTAL(2) 6.3% 98.7% $23,700,000 7.14% 6.90% 4.05 years
(1)IndependentvaluationsundertakenbyJonesLangLaSalleatCentroCatandFiddleandCentroWarnersBayandUrbisatCentroGladstone.(2)AllstatisticsexcludeCentroEverton(30%)whichwassoldon30June2006for$7.2m(30%of24.0million).
NAB Change
Jun ‘10 $1.00
Dec ‘09 $0.96
Jun ‘09 $1.00
•Syndicate Valuation Movement–Thevalueofthepropertyportfolioincreasedby0.1%overthetwelvemonthsto30June2010.The11.1%valuationincreaseforCentroCatandFiddlehasbeenoffsetbyvaluationdeclinesatCentroGladstoneandCentroWarnersBayof4.1%and7.7%respectively.Theminorportfoliovaluationmovement,hasresultedintheNABremainingat$1.00asitwasinJune2009,howevertheNABincreasedby4.2%from$0.96atDecember2009.
•Centro Cat & Fiddle Marketed for Sale–Aswestatedinourlettertoinvestorsdated8September2010,wehavemarketedCentroCat&Fiddleforsale.CentroMCS19UTownsa50%interestinElizabethPlazawhichisalsobeingmarketedforsale.GiventhestrategicimportanceofElizabethPlazatoCentroCat&Fiddle(theyareeffectivelyadjoiningbuildingsandprovideaseamlessshoppingexperiencetoTasmanians),webelievenowisanopportunetimetomarketbothpropertiestogetherasaninvestmentopportunity.
•Debt Refinancing Negotiations–TheSyndicate’sexternaldebtfacilitymatureson28December2010.Wehavecommencednegotiationswiththefinanciertoextendthedebtfacility.ShouldCentroCat&Fiddlesellatitscurrentvaluation,thesaleproceedswillbeusedtoretiredebt,reducingtheSyndicatedebttozero.
•End of Syndicate Term in November 2011–TheSyndicateisapproachingtheendofitsinitialtermandmusteitherbeextended,rolledoverorwoundup.WearecurrentlyworkingthroughtheoptionsavailablefortheSyndicateandwewillwritetoInvestorspriorto15May2011toadviseourproposedstrategy.
FY11 Distribution Forecaston Initial Equity: 4.00%
Total Annual Return
since Inception: 8.35%
Centro MCS Direct Property – ANNUAL REVIEW 2010 45
CM
CS 19 N
Z/I
DEBT INFORMATIONAlloftheSyndicatedebtat30June2010wasatavariable(floating)interestrateof5.12%p.a.(includingweightedaveragemargin).
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 31.5% 36.6% 36.5%
Interest Cover Ratio 3.2 times 3.5 times 4.4 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity
External Financier $7.70 million $0.11 million 28 December 2010
TOP RETAILERS
Total % of Income 18.9%
Other81.1%
Coles13.1%
Woolworths5.8%
Centro MCS Direct Property – ANNUAL REVIEW 201046
CENTRO MCS 19 UT
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 8.60% 8.60% 8.00% 8.00% 4.75%
Distribution Return on Net Asset Backing (NAB) 6.19% 7.05% 7.62% 7.55% 4.48%
Tax Advantaged Portion 51.17% 36.01% 28.11% 17.65% 0.00%
Equivalent Pre-tax Return on Initial Equity 12.42% 11.29% 9.95% 9.23% 4.75%
NAB $1.39 $1.22 $1.05 $1.06 -
Syndicate Commencement Date June 2002
Syndicate Review Date June 2010 – June 2011
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Melville Plaza Shopping Centre WA 0.3% 99.7% $22,780,000 8.25% -0.96% 3.82 years
Centro Kiama NSW 11.5% 100% $23,500,000 7.88% 2.93% 4.00 years
Centro Warners Bay (70%) NSW 6.7% 98.9% $16,240,000 8.25% -7.72% 6.71 years
Centro Cat & Fiddle (70%) TAS 0.3% 98.4% $18,900,000 8.50% 11.11% 3.27 years
NAB Change
Jun ‘10 $1.06
Dec ‘09 $1.01
Jun ‘09 $1.05
•Syndicate Valuation Movement–Thevalueofthepropertyportfolioincreasedby1.0%overthe12monthsto30June2010.TherewassomevolatilityacrosstheSyndicateportfolio,withthevalueofCentrepointShoppingCentredecliningby15.9%duetothecapitalisationrateincreasingby200basispoints,howeverthiswasoffsetbyincreasesforCentroCat&Fiddle(11.1%),ElizabethPlaza(11.5%)andAltoneParkShoppingCentre(13.3%).Theportfoliovaluationmovement,magnifiedbytheSyndicate’s48.4%gearingratio,hasresultedina1.0%increaseintheSyndicateNABfrom$1.05to$1.06forthe12monthperiod.
•IGA Supermarket Enters Altone Park–WehavesecuredanIGAsupermarkettotakeupthevacancyleftbythebankruptcyofAltoneContinentallastyear.TheIGAsupermarketoperatoriscurrentlyfittingoutthestorewhichisanticipatedtoopeninOctober2010.ThispositiveoutcomehasresultedintheoccupancylevelattheCentreincreasingfrom74.4%inDecember2009to100%atJune2010.
•Assets Marketed for Sale–Asstatedinourlettertoinvestorsdated8September2010,theSyndicate’s50%interestinElizabethPlazaisbeingjointlymarketedforsalewiththeRetirementBenefitsFund’s50%interest.GiventhestrategicimportanceofElizabethPlazatoCentroCat&Fiddle(theyareeffectivelyadjoining
buildingsandprovideaseamlessshoppingexperiencetoTasmanians),webelievethatitisanopportunetimetoalsomarketCentroCat&Fiddleforsale.WearealsolookingtosellCentrepointShoppingCentre,whichisasmallnon-coreassetlocatedinWarragul,Victoria.
•Debt Refinancing Negotiations–TheSyndicate’sexternaldebtfacilitymatureson28December2010.Wehavecommencednegotiationswiththefinanciertoextendthedebtfacility.ShouldCentroCat&Fiddle,ElizabethPlazaandCentrepointshoppingcentreallsellattheircurrentvaluations,andtheproceedsusedtoretiredebt,theforecastloantovalueratiowouldbereducedto30.0%.
•Sales Growth Across the Syndicate Portfolio–TheSyndicateportfoliorecordedsalesgrowthof5.0%overthe12monthsto30June2010.PleasingsalesgrowthwasachievedatCentroKiama(11.5%),ElizabethPlaza(10.7%),CentroWarnersBay(6.7%)andDeniliquinPlaza(5.2%).
•End of Syndicate Term in June 2011–TheSyndicateisapproachingtheendofitsinitialtermanditmusteitherbeextended,rolledoverorwoundup.WearecurrentlyworkingthroughtheavailableoptionsfortheSyndicateandwilladviseInvestorspriorto24March2011regardingourproposedcourseofaction.
FY11 Distribution Forecaston Initial Equity: 4.75%
Total Annual Return
since Inception: 8.99%
Centro MCS Direct Property – ANNUAL REVIEW 2010 47
CM
CS 19 U
T
DEBT INFORMATIONAllSyndicatedebtat30June2010wasatavariable(floating)interestrateof5.13%p.a.(includingweightedaveragemargin).
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 45.8% 48.9% 48.4%
Interest Cover Ratio 2.2 times 2.5 times 2.9 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity(1)
External Financier $64.40 million $0.11 million 28 December 2010
Centro Property Trust $1.79 million Nil Payable at reasonable notice
TOTAL $66.19 million $0.11 million 0.51 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
TOP RETAILERS
Total % of Income 39.4%
PROPERTY PORTFOLIO STATISTICS (continued)Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Altone Park Shopping Centre WA N/A(2) 100% $15,300,000 9.50% 13.33% 4.73 years
Centro Gladstone (70%) QLD 2.3% 97.9% $11,242,000 8.50% -4.12% 3.43 years
Centrepoint Shopping Centre VIC 3.4% 100% $9,500,000 9.75% -15.93% 4.71 years
Deniliquin Plaza Shopping Centre NSW 5.2% 100% $7,500,000 9.00% 0.00% 5.08 years
Elizabeth Plaza (50%) TAS 10.7% 100% $7,250,000 8.50% 11.54% 1.93 years
TOTAL 5.0% 99.4% $132,212,000 8.53% 0.95% 4.21 years
FY09 TOTAL 3.8% 99.1% $130,963,000 8.29% -9.61% 4.24 years
FY08 TOTAL 8.8% 99.6% $144,880,000 7.47% -2.27% 4.46 years
FY07 TOTAL(3) 5.7% 97.3% $148,250,000 7.05% 8.78% 4.55 years
(1)IndependentvaluationsundertakenbyJonesLangLaSalleatCentroCatandFiddle,ElizabethPlaza,CentroWarnersBayandDeniliquinPlaza,KnightFrankatCentroKiamaandCentrepoint,UrbisatCentroGladstone,AltoneParkandMevillePlaza.
(2)NoncomparablesalesduetothebankruptcyofAltoneContinentalsupermarketduringFY10.(3)AllstatisticsexcludeCentroEverton(70%)whichwassoldon30June2006,for$16.8m(70%of$24.0million).
Other60.6% Woolworths
19.3%
Coles20.1%
Centro MCS Direct Property – ANNUAL REVIEW 201048
CENTRO MCS 20
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 9.00% 9.00% 4.00% 9.50%(1) 8.00%
Distribution Return on Net Asset Backing (NAB) 6.93% 9.00% 4.40% 10.11% 8.51%
Tax Advantaged Portion 71.62% 72.67% 7.80% 0.00% 15.00%
Equivalent Pre-tax Return on Initial Equity 14.08% 15.37% 4.27% 9.50% 9.04%
NAB $1.30 $1.00 $0.91 $0.94 -
Syndicate Commencement Date May 2003
Syndicate Review Date May 2009 – May 2013
(1)Includesaspecialdistributionof2.0centsperunitfollowinganequityhedgecloseoutinJuly2010.
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Porirua MegaCentre Stages 2, 3 & 4 NZ N/A(2) 98.6% $31,500,000 9.25% -1.87% 2.66 years
Kelston Shopping Centre NZ 4.5% 97.9% $22,100,000 9.00% 8.33% 8.69 years
TOTAL 4.5% 98.4% $53,600,000 9.15% 2.10% 5.22 years
FY09 TOTAL 4.5% 99.0% $52,500,000 9.44% -5.75% 2.70 years
FY08 TOTAL 5.0% 99.0% $55,700,000 8.10% -12.28% 2.75 years
FY07 TOTAL 0.1% 99.0% $63,500,000 7.73% 9.67% N/A
(1)Directorsvaluationsexpressedin$NZ.(2)SalesarenotreportedatPoriruaMegaCentre.
NAB Change
Jun ‘10 $0.94
Dec ‘09 $0.94
Jun ‘09 $0.91
•FY11 Distribution Forecast at 8.0%–Investorsareforecasttoreceivean8.0%distributionrateforFY11(or8.5%onthecurrentSyndicateNAB).Thiscomparestoafinaldistributionrateof9.5%forFY10,whichincludedaspecialdistributionof2.0centsperunitresultingfromanequityhedgecloseoutinJuly2009.
•Static NAB Valuation–Apropertyportfoliovaluationincreaseof2.1%wasrecordedforthe12monthstoJune2010,althoughpropertyvaluationsremainedlargelyunchangedcomparedtoDecember2009.TheSyndicateNABwasmaintainedat$0.94.
•Property Portfolio Update–KelstonShoppingCentrecontinuestorecordpositivesalesgrowthof4.5%underpinnedbythere-brandedCountdownsupermarketwhichrecordedanannualsalesincreaseof2.7%.ThelongstandingvacancyatPoriruaMegaCentrehasnowbeenleasedtoanationalretailerGuthrieBowron,NewZealand’sleadinghomedecoratingspecialiststore.FollowingtheiranticipatedstoreopeninginOctober2010theCentrewillbefullyleased.
FY11 Distribution Forecaston Initial Equity: 8.00%
Total Annual Return
since Inception: 7.42%
Centro MCS Direct Property – ANNUAL REVIEW 2010 49
CM
CS 20
DEBT INFORMATIONAllSyndicatedebtat30June2010wasatavariable(floating)interestrateof4.82%p.a.(includingweightedaveragemargin).
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio 52.5% 55.5% 47.2%
Interest Cover Ratio 2.0 times 2.0 times 3.4 times
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity
External Financier NZ$26.46 million Nil 15 December 2011
TOP RETAILERS
Total % of Income 39.6%
Other60.4%
Countdown18.9%
The Warehouse14.6%
Briscoes6.1%
Centro MCS Direct Property – ANNUAL REVIEW 201050
CENTRO MCS 21
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 10.80% 10.80% 7.50% 4.50% 1.50%
Distribution Return on Net Asset Backing (NAB) 4.93% 5.05% 4.69% 2.63% 0.88%
Tax Advantaged Portion 46.17% 33.44% 3.58% 15.00% 0.00%
Equivalent Pre-tax Return on Initial Equity 15.13% 13.94% 7.73% 5.09% 1.50%
NAB $2.19 $2.14 $1.62 $1.71 -
Syndicate Commencement Date July 1998, rollover occurred June 2004
Syndicate Review Date June 2009 – June 2011
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Roselands (50% interest) NSW 3.5% 100% $152,500,000 7.25% 1.67% 4.86 years
FY09 TOTAL 1.4% 100% $150,000,000 7.00% -13.04% 4.94 years
FY08 TOTAL 8.2% 99.6% $172,500,000 6.00% -1.43% 5.36 years
FY07 TOTAL 1.4% 99.8% $175,000,000 6.00% 7.69% 5.31 years
(1)IndependentvaluationundertakenbySavills.
NAB Change
Jun ‘10 $1.71
Dec ‘09 $1.69
Jun ‘09 $1.62
•Higher Debt Costs Impacts Syndicate Earnings–AlthoughtheincomederivedfromCentroRoselandsisforecasttoincreaseinFY11,thecostofdebtisalsoforecasttoincreaseby$1.2millionduetoahigherinterestratemarginassociatedwiththedebtrefinancinginDecember2009.ThishasresultedinadecreaseintheSyndicate’searningsaswellasareductionintheFY11distributionrateto1.50%.
•Syndicate Nears End of Second Term–TheSyndicate’sendtermisapproachingandweareconsideringvariousstrategiesforinvestors.WewillwritetoinvestorspriortoJune2011outliningourproposedcourseofaction.
•Active Leasing Maintains Full Occupancy–Strongleasingactivityduringthe12monthsto30June2010resultedinthesuccessfulnegotiationof36leasedeals,including12newleasesand24leaserenewals.Thisleasingactivityhascontributedtomaintainingthe100%occupancyrateatCentroRoselands.
•Steady Growth in Centre Sales–CentroRoselands’retailersgenerallyreportedpositivesalesresultsforFY10,withtotalsalesincreasingby3.5%.Coles,FlightCentre,Sydney’sBestandTheRejectShopallrecordedstronggrowthof6.4%,8.3%,7.2%and2.8%respectively.Thisgrowthhowever,waspartlyoffsetbythesalesresultsofMyerandFoodforLess,bothofwhichrecordednegativesalesgrowthof4.4%and3.4%respectively.
FY11 Distribution Forecaston Initial Equity: 1.50%
Total Annual Return
since Inception: 13.72%
Centro MCS Direct Property – ANNUAL REVIEW 2010 51
CM
CS 21
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was9.43%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 42.4% 50.2% 50.0%
Interest Cover Ratio 1.8 times 1.9 times 1.6 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity(1)
External Financier $73.64 million Nil 21 December 2011
Centro Property Trust $2.14 million Nil Payable at reasonable notice
Centro Property Trust $0.50 million Nil Payable at reasonable notice
TOTAL $76.28 million Nil 1.46 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
FIXED INTEREST RATE HEDGE SUMMARY
TOP RETAILERS
Total % of Income 24.8%
79% 79% 79% 79% 79%
69%
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec12 Mar 13 Jun 13
Percentage Hedged
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
0
10
20
30
40
50
60
70
80
Averag
eFixed
Rate
(%)
(A$ Millions)
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
Other75.2%
Myer12.7%
Target6.1%
Coles6.0%
Centro MCS Direct Property – ANNUAL REVIEW 201052
CENTRO MCS 22
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 25.25% 26.50% 28.50% 33.00% 33.00%
Distribution Return on Net Asset Backing (NAB) 11.80% 11.94% 13.77% 15.57% 15.57%
Tax Advantaged Portion 8.72% 9.12% 7.31% 11.71% 10.00%
Equivalent Pre-tax Return on Initial Equity 27.16% 28.60% 30.31% 36.36% 35.87%
NAB $2.14 $2.22 $2.07 $2.12 -
Syndicate Commencement Date April 1998, rollover occurred March 2005
Syndicate Review Date Mar 2010 – Mar 2012
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Kidman Park Distribution Centre SA N/A 100% $40,500,000 10.00% 1.00% 5.51 years
FY09 TOTAL N/A 100% $40,100,000 10.25% -6.74% 6.51 years
FY08 TOTAL N/A 100% $43,000,000 9.50% 2.38% 7.51 years
FY07 TOTAL N/A 100% $42,000,000 9.50% 6.33% 8.51 years
(1)IndependentvaluationundertakenbyCBRichardEllis.
NAB Change
Jun ‘10 $2.12
Dec ‘09 $2.01
Jun ‘09 $2.07
•Steady Annual Return–TheSyndicatecontinuestoprovidehealthyreturnstoinvestorswitha24.1%totalannualreturnfortheyearto30June2010.Thisreturntoinvestorscomprisedastrongincomecomponentof21.2%andamodestcapitalreturnof2.9%.SinceitscommencementtheSyndicatehasachievedanaveragetotalannualreturnof22.4%perannum.
•Metcash Strong Profit Results–Metcash,theSyndicate’ssingletenant,recentlyannounceditsfullyearprofitresultstoApril2010andachievedanincreaseinsalesturnoverof4.9%anda12.4%increaseinnetprofitaftertaxcomparedtothesameperiodlastyear.ThisisanothersolidperformanceforthenationalgroceryandliquordistributorandhasreaffirmedtheSyndicate’sabilitytosupportits33%forecastdistributionforFY11.
FY11 Distribution Forecaston Initial Equity: 33.00%
Total Annual Return
since Inception: 22.41%
Centro MCS Direct Property – ANNUAL REVIEW 2010 53
CM
CS 22
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was6.31%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio 36.0% 37.5% 37.7%
Interest Cover Ratio 4.1 times 4.4 times 5.0 times
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity
External Financier $16.22 million Nil 21 December 2011
FIXED INTEREST RATE HEDGE SUMMARY
MetcashTrading100%
TOP RETAILERS
Total % of Income 100%
62% 62% 62% 62% 62% 62% 62% 62% 62%
53%
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec12 Mar 13 Jun 13
Percentage Hedged
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
0
2
4
6
8
10
12
14
16
18
Averag
eFixed
Rate
(%)
(A$ Millions)
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
Centro MCS Direct Property – ANNUAL REVIEW 201054
CENTRO MCS 23
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity (1) 48.00% 49.00% 30.00% 35.00% 35.00%
Distribution Return on Net Asset Backing (NAB) 4.85% 5.05% 3.95% 5.00% 5.00%
Tax Advantaged Portion 79.67% 37.36% 47.95% 5.75% 0.00%
Equivalent Pre-tax Return on Initial Equity 64.55% 64.91% 42.52% 36.75% 35.00%
NAB $0.99 $0.97 $0.76 $0.70 -
Syndicate Commencement Date May 1999, rollover occurred May 2005
Syndicate Review Date April 2010 – April 2011
(1)Theannualdistributionreturnisbasedontheremainingoriginalequityof$0.10followingthereturnofcapitalin2005of$0.90afterthesaleofWhitsundayShoppingCentre.
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Dubbo NSW 3.4% 100% $37,200,000 8.25% - 3.38% 3.07 years
FY09 TOTAL(2) 5.8% 100% $38,500,000 8.00% -10.26% 3.57 years
FY08 TOTAL(2) 6.7% 99.4% $42,900,000 7.00% -0.23% 4.06 years
FY07 TOTAL(2) -2.3% 100% $43,000,000 6.75% 11.69% 4.44 years
(1)Directors’valuation.(2)AllstatisticsexcludeWhitsundayShoppingCentrewhichwassoldin2005.
NAB Change
Jun ‘10 $0.70
Dec ‘09 $0.70
Jun ‘09 $0.76
•Syndicate NAB Declines–Overthe12monthsto30June2010,thevalueofCentroDubbodeclinedby3.4%duetothecapitalisationratesoftening25basispointsfrom8.0%to8.25%.ThevaluationdeclineandtheSyndicate’sgearingof57.0%hasresultedina7.9%reductionintheSyndicateNABto$0.70.
•Sales Growth at Centro Dubbo–CentroDubbohasexperienceda3.4%increaseinsalesoverthe12monthstoJune2009,withtheTargetstore’ssalesincreasingby2.1%,theColessupermarketsalesup3.4%andspecialtyretailersalesincreasingby3.1%.
•100% Occupancy Maintained–CentroDubboremains100%leased,withnineleasedealscompletedoverthepast12months,comprisingoffournewleasesandfiveleaserenewals.
•End of Syndicate Term in April 2011–TheSyndicateisapproachingtheendofitscurrenttermanditmusteitherbeextended,rolledoverorwoundup.WearecurrentlyworkingthroughthestrategicoptionsavailablefortheSyndicateandwilladviseInvestorspriortoFebruary2011regardingourproposedcourseofaction
FY11 Distribution Forecaston Initial Equity: 35.00%
Total Annual Return
since Inception: 19.62%
Centro MCS Direct Property – ANNUAL REVIEW 2010 55
CM
CS 23
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was6.73%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio (1) 49.4% 55.4% 57.0%
Interest Cover Ratio 1.6 times 1.6 times 1.7 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity
External Financier $21.73 million Nil 15 December 2011
FIXED INTEREST RATE HEDGE SUMMARY
TOP RETAILERS
Total % of Income 50.4%
92% 92% 92% 92% 92%
81%
Averag
eFixed
Rate
(%)
(A$ Millions)
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec12 Mar 13 Jun 13
Percentage Hedged
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
0
5
10
15
20
25
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
Other49.6%
Target23.4%
Coles21.6%
Lawlers Family Pharmacy5.4%
Centro MCS Direct Property – ANNUAL REVIEW 201056
CENTRO MCS 25
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 11.00% 12.00% 6.00% 5.00% 5.00%
Distribution Return on Net Asset Backing (NAB) 5.14% 5.66% 3.80% 3.05% 3.05%
Tax Advantaged Portion 100% 77.46% 100% 58.16% 0.00%
Equivalent Pre-tax Return on Initial Equity 20.56% 20.08% 11.21% 7.53% 5.00%
NAB $2.14 $2.12 $1.60 $1.64 -
Syndicate Commencement Date July 2001, rollover occurred June 2007
Syndicate Review Date June 2012 – June 2014
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Karratha (50%) WA 5.0% 100% $43,250,000 7.75% 5.81% 7.15 years
Centro Raymond Terrace NSW 11.7% 96.4% $26,100,000 8.50% 2.35% 6.25 years
Centro Oxenford QLD 1.1% 100% $21,000,000 8.00% 1.94% 5.37 years
Centro Emerald Village (50%) QLD 7.5% 100% $12,000,000 8.50% -7.69% 2.28 years
CSIF-A Investment (2) Various 5.0% 99.4% $7,452,185 8.37% -16.83% 5.12 years
Centro Emerald Market (50%) QLD 8.7% 100% $7,250,000 8.75% -3.33% 4.60 years
TOTAL 5.7% 99.5% $117,052,185 8.14% 0.53% 5.98 years
NAB Change
Jun ‘10 $1.64
Dec ‘09 $1.55
Jun ‘09 $1.60
•Solid Syndicate Sales Growth–Salesperformanceremainsstrongwithannualgrowthacrosstheportfolioof5.3%.Syndicategrowthwashighlightedby:
•Annualsalesgrowthof11.7%atCentroRaymondTerraceduetostrongperformancesfromWoolworthsandGoLo,up6.9%and21.9%respectively.
•ColesandTargetCountryunderpinnedthegrowthatCentroEmeraldMarket,withannualsalesgrowthof10.1%and3.0%respectively.
•CentroEmeraldVillage’sannualsalesgrowthof7.5%waslargelyduetoWoolworthsandPharmacyFirst,up3.4%and38.2%respectively.
•CentroKarratha’ssalesgrowthof5.0%,attributabletothestrongperformancesofWoolworths,ColesandTargetCountry,allreportingincreasesof10.2%,6.3%and6.1%respectively.
•Leasing Activity Contributes to Income Growth –Inthe12monthsto30June2010atotalof31leasedealsweresuccessfullynegotiatedacrosstheportfolioincluding21newleasesand10leaserenewals.Collectively,theseleasedealscontributedto19.1%incomegrowthacrosstheportfolio.
•Emerald Retail Development Update –AsupdatedintheCentro MCS Direct Property Half Yearly Review December 2009,theSyndicatelodgedanobjectiontothedevelopmentofanewsub-regionalshoppingcentreinEmerald.ThisobjectionwasunsuccessfulinthePlanning&EnvironmentCourtofQueensland.AnappealwasthenlodgedagainstthisdecisionwiththeCourtofAppealbutthiswasalsounsuccessful.
Althoughwewereunabletoreversethedevelopmentapproval,ourobjectionshavedelayedconstructionandtheopeningdateofthenewdevelopmentbyovertwoyears.WeremainoftheviewthatthisdevelopmentwillhaveanimpactonCentroEmeraldVillageandCentroEmeraldMarket.
FY11 Distribution Forecaston Initial Equity: 5.00%
Total Annual Return
since Inception: 14.03%
Centro MCS Direct Property – ANNUAL REVIEW 2010 57
CM
CS 25
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at31December2009was6.53%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio (1) 45.5% 52.1% 51.7%
Interest Cover Ratio 2.0 times 1.8 times 1.9 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity(1)
External Financier $62.36 million Nil 21 December 2011
Centro Property Trust $0.31 million Nil Payable at reasonable notice
TOTAL $62.67 million Nil 1.47 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
FIXED INTEREST RATE HEDGE SUMMARY
TOP RETAILERS
Total % of Income 39.3%
Averag
eFixed
Rate
(%)
(A$ Millions)
98% 98% 98% 98% 98%
66%
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec12 Mar 13 Jun 13
Percentage Hedged
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
0
10
20
30
40
50
60
70
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
PROPERTY PORTFOLIO STATISTICS (continued)Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
FY09 TOTAL 15.7% 99.7% $116,435,000 7.94% -13.17% 5.68 years
FY08 TOTAL(3) 12.0% 99.5% $134,100,000 7.23% 2.22% 5.96 years
FY07 TOTAL(3) 10.0% 99.6% $113,187,500 6.89% 14.16% 5.51 years
(1)IndependentvaluationundertakenbyCBRichardEllisatCentroRaymondTerrace,SavillsatCentroKarrathaandUrbisatCentroEmeraldVillage,CentroEmeraldMarketandCentroOxenford.
(2)EquityinvestmentintoCentroSyndicateInvestmentFund(CSIF-A).ForfurtherinformationonCSIF-ArefertotheFactSheetontheCentroMCSwebsiteundertheSyndicatePortfolio&RG46DisclosuresforCentroMCS25.
(3)HistoricalstatisticsexcludeCSIF-Ainvestment.
Other60.7%
Woolworths33.3%
Coles6.0%
Centro MCS Direct Property – ANNUAL REVIEW 201058
CENTRO MCS 26
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 9.80% 10.50% 7.97% 9.23% 9.00%
Distribution Return on Net Asset Backing (NAB) 5.30% 5.00% 4.95% 5.49% 5.36%
Tax Advantaged Portion 33.02% 69.93% 10.73% 0.07% 0.00%
Equivalent Pre-tax Return on Initial Equity 12.61% 16.88% 8.71% 9.24% 9.00%
NAB $1.85 $2.10 $1.61 $1.68 -
Syndicate Commencement Date February 2002, rollover occurred April 2008
Syndicate Review Date March 2013 – March 2015
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Maddington (76%) WA 14.2% 100% $65,135,080 8.25% -0.58% 2.23 years
Centro Indooroopilly QLD 11.1% 98.5% $44,200,000 8.25% -1.78% 4.00 years
Woolworths Tweed Heads NSW N/A(2) 100% $13,800,000 7.50% 11.29% 17.68 years
TOTAL 13.7% 99.5% $123,135,080 8.17% 0.18% 5.09 years
FY09 TOTAL 5.0% 99.7% $122,916,880 8.16% -15.49% 4.81 years
FY08 TOTAL 7.7% 100% $145,449,960 6.72% 7.99% 5.28 years
FY07 TOTAL 6.2% 100% $134,682,160 6.69% 11.60% 4.20 years
(1)Directors’valuations.(2)AnnualsalesgrowthforWoolworthsTweedHeadsisnotcomparableduetorecentdevelopment.
NAB Change
Jun ‘10 $1.68
Dec ‘09 $1.60
Jun ‘09 $1.61
•Strong Sales Growth Across Syndicate Portfolio–Animpressive13.7%salesgrowthwasrecordedacrosstheSyndicateportfolioforFY10.CentroMaddingtonsalesgrowthof14.2%waslargelyattributabletonewspecialtyretailersandColeswhousetheirCentroMaddingtonstoreasabaseforinternethomedeliveryservice.ThegrowthinColessalesassistedwitha44%increaseinFY10percentagerentforCentroMaddington.CentroIndooroopilly’ssalescontinuetogrowstronglyduetopopulationgrowthintheCentre’stradecatchmentareaandanumberofpastsuccessfultenancyreconfigurations.
•Major Lease Renewal Progressing Well at Centro Maddington–NegotiationscontinuewithKmartandweexpectasuccessfulrenewaloutcomepriortotheirleaseexpiryinDecember2010.Fivenewleasedealsand15leaserenewalswerecompletedacrosstheSyndicatepropertyportfolio,onaverage16%abovetheprioryearrentals.
• 5.0% Syndicate NAB Increase –TheoverallincreaseinvaluationscontributedtotheSyndicateNABimproving5.0%to$1.68inFY10.The11.3%riseinthevalueforWoolworthsTweedHeadsreflectsastrongincreaseindemandforsupermarket-onlyassetsbeingpurchasedbyprivateinvestors.
• 9.0% Distribution Maintained –Despitehighercapitalexpenditureandforecastdebtrepayments,anincreaseinincomewillenableustoagainforecasta9.0%distributionrateinFY11.Aspecialdistributionof0.23centswaspaidattheendofFY10duetoSyndicateearningsexceedingtaxableincome.
FY11 Distribution Forecaston Initial Equity: 9.00%
Total Annual Return
since Inception: 14.37%
Centro MCS Direct Property – ANNUAL REVIEW 2010 59
CM
CS 26
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was7.00%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 30.2% 37.0% 36.7%
Interest Cover Ratio 2.6 times 2.5 times 2.6 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.GearingratioisforCMCS26Groupwhichincludes100%ofCentroMaddington.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity(1)
External Financier $54.42 million Nil 15 December 2011
Centro Property Trust $2.72 million Nil Payable at reasonable notice
TOTAL $57.14 million Nil 1.44 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
FIXED INTEREST RATE HEDGE SUMMARY
TOP RETAILERS
Total % of Income 28.3%Averag
eFixed
Rate
(%)
(A$ Millions)
95% 95% 95% 95% 95%
83%
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec12 Mar 13 Jun 13
Percentage Hedged
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
0
10
20
30
40
50
60
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
Other71.7%
Woolworths19.5%
Kmart8.8%
Centro MCS Direct Property – ANNUAL REVIEW 201060
CENTRO MCS 27
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 8.50% 8.50% 7.00% 5.50% 2.50%
Distribution Return on Net Asset Backing (NAB) 5.78% 5.48% 6.09% 5.04% 2.27%
Tax Advantaged Portion 100% 43.38% 15.19% 19.00% 45.00%
Equivalent Pre-tax Return on Initial Equity 15.79% 11.70% 7.92% 5.83% 3.48%
NAB $1.47 $1.55 $1.15 $1.10 -
Syndicate Commencement Date April 1999, rollover occurred April 2006
Syndicate Review Date May 2011 – April 2013
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Sunshine Marketplace VIC -4.8% 100% $87,000,000 8.00% -4.39% 5.81 years
FY09 TOTAL 10.5% 100% $91,000,000 7.75% -13.33%(2) 6.02 years
FY08 TOTAL 8.8% 100% $105,000,000 6.50% 2.94%(2) 6.37 years
FY07 TOTAL 4.6% 100% $102,000,000 6.50% 14.61%(2) 7.12 years
(1)IndependentvaluationundertakenbyCBRichardEllis.(2)Valuationchangefrompriorperiod.
NAB Change
Jun ‘10 $1.10
Dec ‘09 $1.15
Jun ‘09 $1.15
• Syndicate NAB Reduced–ThevaluationofSunshineMarketplacedeclinedby4.4%overtheyeartoJune2010.Thisvaluationmovement,magnifiedbytheSyndicate’s62.6%gearingratio,hasresultedina4.3%reductionintheSyndicateNABfrom$1.15to$1.10.
• Higher Debt Costs Impact Distribution–WeanticipateasubstantialincreaseinthecostofdebtfollowingtherequiredDecember2010refinancingofthisasset.Asaresult,thedistributionforecasthasdecreasedfrom5.5%to2.5%.Theforecastdistributionrateof2.5%isforthesixmonthstoDecember2010.Investorsshouldnotethatareviseddistributionratemaybeadvisedoncetherefinancehasbeenachieved.SunshineMarketplaceisbeingmarketedforsaleandifrefinancingcannotbesecuredatacceptablepricing,thepropertywillbesoldandtheSyndicatewillbewoundup.
• Property Performance Update –SunshineMarketplacewasimpactedbysometemporarystoreclosuresduetoraindamageearlierthisyearandthiscontributedtoadeclineof4.8%inannualsalesgrowth.ThenearbyWaterGardensShoppingCentreandtherecentlydevelopedneighbouringSunshinePlaza,hasalsoimpactedWoolworthsandBigWsales.Ontheotherhand,VillageCinemasexperiencedsubstantialsalesincreasefortheyear.TheCentreisfullyleased,with17leaserenewalsandsixnewdealscompletedduringtheyearatabovebudgetrental.
FY11 Distribution Forecaston Initial Equity: 2.50%
Total Annual Return
since Inception: 16.78%
Centro MCS Direct Property – ANNUAL REVIEW 2010 61
CM
CS 27
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was6.47%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio (1) 50.9% 59.5% 61.9%
Interest Cover Ratio 1.7 times 1.9 times 1.9 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity(1)
External Financier $54.02 million Nil 20 December 2010
Centro Property Trust $1.08 million Nil Payable at reasonable notice
TOTAL $55.10 million Nil 0.47 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
FIXED INTEREST RATE HEDGE SUMMARY
TOP RETAILERS
Total % of Income 47.6%Averag
eFixed
Rate
(%)
(A$ Millions)
95% 95% 95% 95%
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec12 Mar 13 Jun 13
Percentage Hedged
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
0
10
20
30
40
50
60
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
Other52.5%
Village Cinemas27.6%
Woolworths10.0%
Big W9.9%
Centro MCS Direct Property – ANNUAL REVIEW 201062
CENTRO MCS 28
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 8.45% 6.35% 2.52% 1.00% 2.00%
Distribution Return on Net Asset Backing (NAB) 6.22% 4.89% 3.55% 1.32% 2.63%
Tax Advantaged Portion 100% 100% 100% 0.00% 36.00%
Equivalent Pre-tax Return on Initial Equity 15.79% 12.00% 4.71% 1.00% 2.63%
NAB $1.36 $1.30 $0.71 $0.76 -
Syndicate Commencement Date January 2003
Syndicate Review Date June 2012
PROPERTY PORTFOLIO STATISTICS Property(1) State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(2)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Bankstown (50%) NSW N/A(3) 99.9% $260,000,000 7.00% 0.97% 5.24 years
Perth City Central (50%) WA -6.5% 63.4% $27,100,000 8.50% -9.67% 5.56 years
TOTAL -6.5% 94.9% $287,100,000 7.14% -0.14% 5.27 years
FY09 TOTAL(4) 5.8% 95.7% $402,040,000 7.17% -16.15% 4.58 years
FY08 TOTAL(4) 7.5% 98.7% $482,869,077 6.25% 4.99% 4.79 years
FY07 TOTAL(4) 7.1% 100% $459,900,000 6.01% 11.67%(5) 4.19 years
(1)DavidJonesPerthwassoldon20January2010for$114.5million.(2)IndependentvaluationundertakenbySavillsatCentroBankstownandUrbisatPerthCityCentral.(3)SalesgrowthforCentroBankstownisnotcomparableduetopreviousdevelopment.(4)AllhistoricalstatisticsincludeDavidJonesPerth.(5)FY07valuationgrowthexcludesthepurchaseofthe50%interestinPerthCityCentreinFebruary2007.
NAB Change
Jun ‘10 $0.76
Dec ‘09 $0.73
Jun ‘09 $0.71
•Sale of David Jones Perth–Asadvisedinourletterof15February2010,DavidJonesPerthwassoldon20January2010for$114.5million.AllsaleproceedswereusedtoretireSyndicatedebtwhichhasreducedtheSyndicategearingratioto58%,substantiallylowerthanitsprevious71%gearingratioasatDecember2009.
•Portfolio Update –TheSyndicate’s50%shareofPerthCityCentralwasdevaluedby$2.9millionoverthe12monthstoJune2010largelyoffsetbya$2.5millionvaluationincreaseintheSyndicate’s50%shareofCentroBankstown.CentroBankstownisbenefittingfromnearfulloccupancywithstrong4.0%propertyincomegrowthbudgetedforFY11.PerthCityCentralhasbeenimpactedbytherecentdepartureoftheDepartmentofImmigration&Citizenshipfromitsupperlevelofficesandcurrentleasingprogresshasbeenslowtodate.Asaresult,weareforecastingareductioninFY11propertyincomeof$460,000comparedwithFY10.Investorsshouldnotehowever,thattheremainderoftheofficefloorsandretailcomponentoftheCentreremainfullyleased.
•FY11 Distributions Forecast at 2.0%–ThesaleofDavidJonesPerthprovidedadditionalcashflowbenefitstotheSyndicatethroughalowerloanfacilitymarginallowingdistributionstorecommencefromtheMarch2010quarter.WearenowforecastingFY11distributionsof2.0%,inlinewithdistributionspaidduringFY10.DistributionsremaincomparativelylowcomparedwithFY07andFY08mainlydueto:
•ReducedincomeforecastatPerthCityCentralresultingfromthecurrentlargeofficevacancy;and
•Portfoliocapitalexpenditureof$4.9millionforecasttobefundedfromSyndicateearningsandprioryearcashreserves.
FY11 Distribution Forecaston Initial Equity: 2.00%
Total Annual Return
since Inception: 3.71%
Centro MCS Direct Property – ANNUAL REVIEW 2010 63
CM
CS 28
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was7.13%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 57.1% 68.0% 58.3%
Interest Cover Ratio 1.6 times 1.7 times 1.3 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity(1)
External Financier $171.90 million Nil 15 December 2011
Centro Property Trust $0.90 million Nil Payable at reasonable notice
TOTAL $172.80 million Nil 1.46 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
FIXED INTEREST RATE HEDGE SUMMARY
TOP RETAILERS
Total % of Income 7.2%Averag
eFixed
Rate
(%)
(A$ Millions)
72% 72% 72% 72% 72% 72% 72% 72%
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec12 Mar 13 Jun 13
Percentage Hedged
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
0
20
40
60
80
100
120
140
160
180
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
Other92.8%
Woolworths7.2%
Centro MCS Direct Property – ANNUAL REVIEW 201064
CENTRO MCS 32
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on the Original $1.00 Invested 9.25% 9.25% 3.48% 2.52% 1.70%
Distribution Return on Net Asset Backing (NAB) 7.01% 7.40% 6.00% 4.85% 3.27%
Tax Advantaged Portion 60.45% 16.41% 21.68% 65.84% 4.00%
Equivalent Pre-tax Return on Initial Equity 14.07% 10.57% 4.14% 3.96% 1.76%
NAB $1.32 $1.25 $0.58 $0.52 -
Syndicate Commencement Date October 2003
Syndicate Review Date October 2008 – October 2010
PROPERTY PORTFOLIO STATISTICS Property State Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Mira Mesa Mall California 99.3% $42,011,200 7.50% 3.33% 5.50 years
Gateway Plaza California 97.2% $32,912,000 7.00% 2.41% 3.69 years
The Esplanade Shopping Centre California 90.5% $33,790,871 7.25% 14.26% 4.02 years
Puente Hills Town Center East & West California 90.8% $24,006,400 8.50% -0.20% 3.23 years
Ocean View Plaza California 96.9% $22,844,800 7.50% 4.19% 4.12 years
Gateway Plaza, Santa Fe Springs California 100% $16,504,400 8.50% -1.73% 11.82 years
NAB Change
Jun ‘10 $0.52
Dec ‘09 $0.49
Jun ‘09 $0.58
•California Market Conditions–CaliforniacontinuestobeoneofthestatesthathasbeensignificantlyimpactedbytherecessionintheUS.Whilsthomeforeclosuresandunemploymentcontinuetoimpact,California’sdiverseregionaleconomyhascreatedanenvironmenttailoredforopportunisticretailers.Theseretailershavebeenabletotakeadvantageofthelargesupplyofbigboxretailspace,andlowerrents,toexpandormoveintomoredenseandmaturemarkets.Barrierstoentryhavehistoricallybeenhightobreakthroughinthesemarkets.ThecoastalandurbanregionsofCalifornia,wherethevastmajorityofCentroMCS32propertiesarelocated,havebeenthemostsoughtafterbyretailers.
•Leasing and Marketing–Inthe12monthsto30June2010,wehavesuccessfullysecured92newandrenewalleasesforover50,000squaremetresofspace,includingnearly9,300squaremetresof‘bigbox’space(spaces1,000squaremetresorgreater)vacatedduetopriorbankruptciesacrosstheportfolio.WithastrongmixofnationalandregionalretailerstakingadvantageofCalifornia’scurrentmarketconditions,occupancyintheCentroMCS32portfolioiswellabovetheCentroUSaveragewhichdemonstratestherelativestrengthoftheregion.
•Syndicate Review in October 2010–TheSyndicateisapproachingtheendofitsinitialtermanditmusteitherbeextended,rolledoverorwoundup.WearecurrentlyworkingthroughtheoptionsavailablefortheSyndicateandwewillwritetoinvestorsinduecoursetoadviseofourproposedstrategyandfuturecourseofaction.
•Debt Facility Refinance/Covenants–TheunsecuredUS$20.5milliondebtfacilitywasrecentlyextendedfor12monthsfrom31December2010to31December2011.Commencing1August2010,monthlydebtprincipalrepaymentsofUS$60,000willbemade.
Asat30June2010,the“NetWorth”covenantforthisfacilitywasclosetotheminimumrequirement.IftheREITPropertyvaluesweretofallby3.4%,thiscovenantwouldlikelybebreached.Ifabreachweretooccurandwewereunabletonegotiateawaiverwiththefinancier,thefacilitymaybecomedueandpayableandsomeREITPropertymayneedtobesoldtorepaytheloan.
FY11 Distribution Forecaston the Original $1.00 Invested:
Total Annual Return
since Inception: 0.06%
1.70%
Centro MCS Direct Property – ANNUAL REVIEW 2010 65
CM
CS 32
PROPERTY PORTFOLIO STATISTICS (continued)Property State Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Vallejo Corners California 89.6% $9,776,800 7.75% -13.86% 5.03 years
Pacoima Center California 100% $10,890,000 7.50% 2.27% 7.63 years
University Mall California 88.5% $11,374,000 6.25% 12.98% 4.57 years
California Oaks Center California 90.3% $9,728,400 7.50% 0.50% 3.41 years
Santa Paula Shopping Center California 100% $8,905,600 8.00% 0.55% 4.61 years
Lompoc Shopping Center California 86.6% $9,002,400 8.50% 3.33% 7.06 years
Felicita Plaza California 95.8% $7,356,800 7.50% 9.35% 5.80 years
San Bernardino Center California 100% $5,566,000 7.75% -4.17% 5.43 years
Country Hills Shopping Center California 87.2% $5,178,800 8.25% 20.22% 9.56 years
TOTAL 95.3% $249,848,471 7.59% 3.54% 5.24 years
FY09 TOTAL 92.9% $241,298,200 7.84% -23.17% 4.93 years
FY08 TOTAL 97.2% $316,971,750 6.13% -3.35% N/A
FY07 TOTAL 99.2% $327,957,000 5.85% 10.85% N/A
(1)IndependentvaluationsexpressedinUS$andincludinggroundleases(figuresreflect48.4%ownership)undertakenbyWeiserRealtyAdvisorsLLC(US).
DEBT INFORMATIONAlloftheSyndicate’sUS$debtwasataweightedaveragefixedinterestrateof4.95%p.a.(includingmargin)asat30June2010.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio 44.3% 58.1% 56.9%
Interest Cover Ratio 2.3 times 2.1 times 2.0 times
DEBT MATURITY PROFILE
Financier Loan Facility Amount(1) Undrawn Amount Loan Maturity
External Financier US$68.97 million Nil 1 May 2011
External Financier US$65.58 million Nil 1 May 2014
External Financier US$14.52 million US$4.60 million 31 December 2011
US$ TOTAL US$149.07 million US$4.60 million 2.22 years
(1)TheUS$figuresreflect48.4%ownership.
Centro MCS Direct Property – ANNUAL REVIEW 201066
CENTRO MCS 33
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 8.00% 8.00% 6.75% 3.00% 3.00%
Distribution Return on Net Asset Backing (NAB) 6.50% 7.08% 8.43% 4.23% 4.23%
Tax Advantaged Portion 50.58% 77.30% 66.00% 76.00% 90.00%
Equivalent Pre-tax Return on Initial Equity 11.52% 13.37% 10.62% 4.98% 5.35%
NAB $1.23 $1.13 $0.80 $0.71 -
Syndicate Commencement Date June 2004
Syndicate Review Date June 2011
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Keilor VIC 2.0% 100% $59,350,000 8.25% -8.87% 3.77 years
Centro Arndale (50%) SA 4.9% 99.1% $48,000,000 8.50% -8.57% 3.38 years
Centro Lutwyche (50%) QLD N/A(2) 99.9% $30,000,000 7.75% -6.25% 5.42 years
Centro Burnie TAS 3.7% 99.7% $18,600,000 9.50% 2.20% 2.94 years
Centro Flinders WA -1.2% 100% $17,000,000 8.25% Nil 2.30 years
Centro Milton QLD -5.5% 100% $17,250,000 7.50% 4.55% 3.06 years
TOTAL 2.7% 99.6% $190,200,000 8.29% -5.53% 3.60 years
FY09 TOTAL 4.5% 98.8% $201,325,000 8.10% -16.57% 3.66 years
NAB Change
Jun ‘10 $0.71
Dec ‘09 $0.78
Jun ‘09 $0.80
•Syndicate Valuation Declines Impact NAB –Thevaluationofthepropertyportfoliodeclined5.5%overtheyearto30June2010.Thisvaluationmovement,magnifiedbytheSyndicates60%gearinglevel,hasresultedinan11.3%dropintheSyndicateNABfrom$0.80to$0.71.The8.9%dropinCentroKeilor’svaluationreflectsincreasedcompetitioninitstradecatchmentandthe8.6%declineforCentroArndaleisaresultofincreasedcapitalexpenditureanticipatedtosecurenewleasesforWoolworthsandBigW.The6.3%fallinCentroLutwyche’svaluationisduetoweakeningdemandforofficespacewhichrepresentsamajorportionofthelettableareaatthiscentre.
•3.0% Distribution Rate Maintained in FY11–TheFY11distributionratewillbemaintainedat3.0%ascapitalexpenditureinFY11continuestobefundedfromearnings.TheSyndicate’sgearinglevelhasincreasedduetovaluationdeclinesandweconsideritprudenttocontinueusingSyndicateearningstopayforthisexpenditure.
•Major Capital Expenditure in FY11–TheSyndicateisforecasttoincur$3.5millionofcapitalexpenditureinFY11,someofwhichrelatestocarriedoverworksfromFY10.CentroArndalerequires$1.5mforanescalatorupgrade,airconditioningworksandleaseincentives.ThiscapitalexpenditureiscrucialtosecurelongtermleaseswithWoolworthsandBigW.CentroKeilorrequires$1.0millionofleaseincentivesandlessorworkstosecurenewtenantsandincreasesalesgrowth.
•Future Syndicate Strategy–TheSyndicatetermisduetoendinJune2011.WearecurrentlyconsideringstrategiesfortheSyndicate.FurtherinformationwillbeprovidedtoinvestorsinthesecondhalfofFY11.
•Successful Leasing Helps Drive Property Portfolio Sales –IntroducinganumberofkeytenantssuchasDickSmithatCentroArndaleandCottonOnatCentroBurniehashelpeddrivea2.7%increaseinsalesacrosstheSyndicateportfolio.DespitestronglocalcompetitionsalesatCentroKeiloralsoincreasedduringFY10.
FY11 Distribution Forecaston Initial Equity: 3.00%
Total Annual Return
since Inception: 2.55%
Centro MCS Direct Property – ANNUAL REVIEW 2010 67
CM
CS 33
PROPERTY PORTFOLIO STATISTICS (continued)Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
FY08 TOTAL 4.7% 99.9% $241,300,000 6.85% 0.25% 3.84 years
FY07 TOTAL 1.9% 99.5% $240,700,000 6.63% 8.79% 4.09 years
(1)IndependentvaluationsundertakenbyCBREatCentroArndale,CentroKeilor,CentroFlindersandCentroBurnieandUrbisatCentroLutwycheandCentroMilton.(2)AnnualsalesgrowthforCentroLutwycheisnotcomparableduetorecentdevelopment.
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was7.54%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 46.9% 56.9% 59.9%
Interest Cover Ratio 1.8 times 2.1 times 1.7 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity(1)
External Financier $123.00 million $5.05 million 15 December 2011
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
FIXED INTEREST RATE HEDGE SUMMARY
TOP RETAILERS
Total % of Income 29.9%
Averag
eFixed
Rate
(%)
(A$ Millions)
78% 78% 78% 78% 78%73%
46% 46%
1%
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec12 Mar 13 Jun 13
Percentage Hedged
0
20
40
60
80
100
120
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
Other70.1%
Kmart10.0%
Coles14.9%
Big W5.0%
Centro MCS Direct Property – ANNUAL REVIEW 201068
CENTRO MCS 34
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 8.00% 8.25% 4.50% 4.00% 2.00%
Distribution Return on Net Asset Backing (NAB) 5.97% 6.55% 5.92% 5.06% 2.53%
Tax Advantaged Portion 45.37% 71.37% 75.42% 5.33% 0.00%
Equivalent Pre-tax Return on Initial Equity 11.15% 13.37% 7.45% 4.19% 2.00%
NAB $1.34 $1.26 $0.76 $0.79 -
Syndicate Commencement Date December 2004
Syndicate Review Date December 2009 – December 2011
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Pinelands QLD 7.0% 100% $28,000,000 8.25% 2.18% 4.77 years
Centro Port Pirie SA N/A 97.4% $23,100,000 8.75% -1.70% 9.13 years
Centro Woodcroft NSW 8.4% 100% $19,700,000 8.25% -1.01% 3.28 years
Centro Lismore NSW 0.9% 96.7% $16,500,000 9.25% 3.13% 4.02 years
Centro Emerald Village (50%) QLD 7.5% 100% $12,000,000 8.50% -7.69% 2.28 years
Coles Morwell VIC 1.6% 100% $9,100,000 9.50% 2.25% 2.87 years
Centro Emerald Market (50%) QLD 8.7% 100% $7,250,000 8.75% -3.33% 4.60 years
NAB Change
Jun ‘10 $0.79
Dec ‘09 $0.75
Jun ‘09 $0.76
•Continued Sales Growth Across the Portfolio –Salesperformancehasremainedsolidwithannualgrowthacrosstheportfolioof5.2%.Syndicategrowthwashighlightedby:
•CentroWoodcroftannualsalesgrowthof8.4%duetostrongperformancesfromColesandLiquorland,up4.1%and5.5%respectively.
•ColesandTargetCountryunderpinnedthegrowthatCentroEmeraldMarket,withannualsalesgrowthof10.1%and3.0%respectively.
•CentroEmeraldVillage’sannualsalesgrowthof7.5%waslargelyasaresultofWoolworthsandPharmacyFirstincreasesinsalesof3.4%and38.2%respectively.
•AtCentroPinelands,theCentre’s7.0%salesgrowthwasunderpinnedbythespecialtyretailers.
•Update on Objection to Emerald Retail Development –AsupdatedintheCentro MCS Direct Property Half Yearly Review December 2009,theSyndicatelodgedanobjectiontothedevelopmentofanewsub-regionalshoppingcentreinEmerald.ThisobjectionwasunsuccessfulinthePlanning&EnvironmentCourtofQueensland.AnappealwasthenlodgedagainstthisdecisionwiththeCourtofAppealbutthiswasalsounsuccessful.
Althoughwewereunabletoreversethedevelopmentapproval,ourobjectionshavedelayedconstructionandtheopeningdateofthenewdevelopmentbyovertwoyears.WeremainoftheviewthatthisdevelopmentwillhaveanimpactonCentroEmeraldVillageandCentroEmeraldMarket.
•Debt Repayment Leads to Decrease in FY11 Distribution–InordertoreducetheSyndicate’shighgearingratio,weareforecastingtorepay$840,000ofdebtinFY11outofSyndicateearnings.ThiswillresultinadecreaseintheforecastFY11distributionrateto2.0%,howeveritwillassisttheSyndicateaheadofitsrequiredDecember2011refinance.
FY11 Distribution Forecaston Initial Equity: 2.00%
Total Annual Return
since Inception: 3.06%
Centro MCS Direct Property – ANNUAL REVIEW 2010 69
CM
CS 34
DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was7.13%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 54.3% 68.4% 67.8%
Interest Cover Ratio 1.8 times 1.7 times 1.6 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity(1)
External Financier $72.50 million Nil 21 December 2011
Centro Property Trust $8.17 million Nil Payable at reasonable notice
TOTAL $80.67 million Nil 1.43 years
(1)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
FIXED INTEREST RATE HEDGE SUMMARY
TOP RETAILERS
Total % of Income 39.4%
Averag
eFixed
Rate
(%)
(A$ Millions)
83% 83% 83% 83% 83%
56%
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec12 Mar 13 Jun 13
Percentage Hedged
0
10
20
30
40
50
60
70
80
90
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
PROPERTY PORTFOLIO STATISTICS (continued)Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
TOTAL 5.2% 98.9% $115,650,000 8.65% -0.47% 4.79 years
FY09 TOTAL 11.2% 99.4% $116,200,000 8.49% -17.55% 4.45 years
FY08 TOTAL 6.9% 99.1% $140,927,510 7.17% 5.11% 3.07 years
FY07 TOTAL 0.2% 98.8% $134,075,000 6.96% 12.06% 3.42 years
(1)IndependentvaluationundertakenbyUrbisatCentroEmeraldVillageandCentroEmeraldMarket.Directors’valuationsforallotherproperties.
Other60.6%
Coles21.9%
Woolworths12.1%
Kmart5.4%
Centro MCS Direct Property – ANNUAL REVIEW 201070
CENTRO MCS 35
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on the Original $1.00 Invested 8.55% 8.60% 5.72% Nil Nil
Distribution Return on NAB per Investment 7.31% 8.60% 17.33% Nil Nil
Tax Advantaged Portion 79.22% 76.48% 79.69% 0.00% 0.00%
Equivalent Pre-tax Return on the Original $1.00 Invested 14.44% 14.32% 9.66% Nil Nil
NAB per Investment (based on the Original $1.00 Invested)(1) $1.17 $1.00 $0.33 $0.26 -
NAB per Unit (based on the remaining units only)(2) $2.32 $1.97 $0.66 $0.51 -
Syndicate Commencement Date April 2005
Syndicate Review Date April 2010 – April 2012
(1)TheNABperInvestment(basedontheoriginal$1.00invested)istheNABthatwehavealwaysreportedtoinvestors.Itreflectsthecurrentvalueofyouroriginal$1.00investmentintotheSyndicate(comprisingof$0.495unsecurednotesand$0.505units)e.g.$10,000originalinvestmentcomprisedof4,950unsecurednotesand5,050units.10,000x$0.26=$2,600,thecurrentvalueofyourinvestment.
(2)AtthejointmeetingofnoteholdersandunitholdersinCentroMCS35heldon30October2009,noteholdersvotedinfavourofcancellingtheunsecurednotesfromtheSyndicateinvestmentstructurewitheffectfrom1July2009.TheNABperUnitreflectsthecurrentvalueoftheunitse.g.ofthe$10,000originalinvestmentonlythe5,050Unitsremain.5,050unitsx$0.51=$2,600,thecurrentvalueofyourinvestment.
NAB Change
Jun ‘10 $0.26
Dec ‘09 $0.24
Jun ‘09 $0.33
•Georgia Market Conditions–GeorgiaisstillfeelingtheeffectsoftheUSrecessionevidentbythestate’sunemploymentrateof10.3%at30June2010,abovethenationalaverageof9.5%.MetroAtlanta,thesub-marketwheretheSyndicatepropertiesarelocatedhasanunemploymentrateof10.3%,consistentwiththestateofGeorgia.Subsequentlythereislittlechangeintheretailleasingmarketwithlargeinventoriesofvacant‘bigbox’space(1,000squaremetresorgreater),andfew‘bigbox’dealsinFY10.
•Metro Atlanta Big Box Retail Leasing Environment–Theongoingeconomicclimatecontinuestocontributetothedifficultretailleasingenvironmentandthelargesupplyof‘bigbox’spacevacanciesintheMetroAtlantasub-market.Inthe12monthsto30June2010,wehavebeensuccessfulinsecuringone‘bigbox’dealatBarrettPlacewithMichaels,anationalretailer,replacingLinensn’Thingswholeftduetobankruptcy.Thereremainsalargeinventoryof‘bigbox’spaceavailableintheMetroAtlantasubmarkethowever,therearenowsomeretailerswhoarelookingattakingadvantageoftheseopportunities.WearecontinuingtomoveclosertoleasinguptheremainingmajorvacanciesatbothVenturePointeandBarrettPlace.
PROPERTY PORTFOLIO STATISTICS Property State Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Mansell Crossing Georgia 97.5% $46,560,000 8.00% -5.14% 4.13 years
Barrett Place Georgia 81.5% $17,654,000 9.00% -18.75% 2.83 years
Venture Pointe Georgia 46.4% $9,797,000 8.50% 4.12% 6.94 years
TOTAL 81.7% $74,011,000 8.30% -7.74% 4.05 years
FY09 TOTAL 93.1% $80,219,000 8.50% -27.58% 4.40 years
FY08 TOTAL 99.6% $110,774,000 6.83% -7.57% 4.15 years
FY07 TOTAL 99.4% $119,843,500 6.33% 11.11% 4.95 years
(1)IndependentvaluationsexpressedinUS$(figuresreflect97%ownership)undertakenbyWeiserRealtyAdvisorsLLC(US).
FY11 Distribution Forecaston the Original $1.00 Invested:
Total Annual Return
since Inception: -13.25%
Nil
Centro MCS Direct Property – ANNUAL REVIEW 2010 71
CM
CS 35
DEBT INFORMATIONAlloftheSyndicate’sUS$debtwasataweightedaveragefixedinterestrateof5.83%p.a.(includingmargin)asat30June2010.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 58.1% 79.7% 84.9%
Interest Cover Ratio 2.1 times 1.9 times 1.6 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Thereisnogearingorinterestcoverratiocovenantfortheseniordebt.
DEBT MATURITY PROFILE
Financier Loan Facility Amount(1) Undrawn Amount Loan Maturity
External Financier US$64.00 million Nil 1 April 2015
External Financier US$2.60 million Nil 1 February 2011
US$ TOTAL US$66.60 million Nil 4.59 years
(1)TheUS$figuresreflect97%ownership.
TOP RETAILERS
Total % of Income 55.4%
Other44.6%
Barnes & Noble7.1%
AMC Theatres14.1%
The Sports Authority11.4%Office Max8.0%
Best Buy7.7%
American Signature Home7.1%
Centro MCS Direct Property – ANNUAL REVIEW 201072
CENTRO MCS 36
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on the Original $1.00 Invested 8.30% 5.60% 1.98% 1.70% 1.70%
Distribution Return on NAB per Investment 8.30% 6.75% 5.82% 7.08% 7.08%
Tax Advantaged Portion 79.61% 71.83% 0.00% 100% 23.00%
Equivalent Pre-tax Return on the Original $1.00 Invested 14.04% 9.10% 1.98% 3.18% 2.04%
NAB per Investment (based on the original $1.00 invested)(1) $1.00 $0.83 $0.34 $0.24 -
NAB per Unit (based on the remaining units only)(2) N/A N/A $0.53 $0.38 -
Syndicate Commencement Date August 2005
Syndicate Review Date June 2011 – June 2012
(1)TheNABperInvestment(basedontheoriginal$1.00invested)istheNABthatwehavealwaysreportedtoinvestors.Itreflectsthecurrentvalueofyouroriginal$1.00investmentintotheSyndicate(comprisingof$0.36unsecurednotesand$0.64units)e.g.$10,000originalinvestmentcomprisedof3,600unsecurednotesand6,400units.10,000x$0.24=$2,400,thecurrentvalueofyourinvestment.
(2)AtthejointmeetingofNoteholdersandUnitholdersinCentroMCS36heldon9October2009,NoteholdersvotedinfavourofcancellingtheunsecurednotesfromtheSyndicateinvestmentstructurewitheffectfrom1July2009.TheNABperUnitreflectsthecurrentvalueoftheunitse.g.Ofthe$10,000originalinvestmentonlythe6,400unitsremain.6,400unitsx$0.375=$2,400,thecurrentvalueofyourinvestment.
NAB Change
Jun ‘10 $0.24
Dec ‘09 $0.24
Jun ‘09 $0.34
•Regional Market Conditions–ThroughtheUSeconomicrecession,theNortheastandMidAtlanticregionshaveoutperformedtheUSaveragesintermsofbothunemploymentandhomeforeclosures.Thiscontinuedforthe12monthsending30June2010.ThesestrengthsarearesultofbothadenseandmaturemarketwheretheCentroMCS36portfolioisprimarilylocated.Despitetheportfolio’srelativestrengths,therehasbeennochangeinthelagtimeittakestobackfillvacant‘bigbox’spaces(shopsgreaterthan1,000squaremetres)andasaresultoccupancyhasdeclinedby3.3%inthesecondhalfofFY10duetomultiplebigboxvacancies.Manyofthesespacescurrentlyhavereplacementtenantslinedup.
•Leasing and Marketing–Inthe12monthsto30June2010,wehavebeensuccessfulinsecuring68newandrenewalleasestotalingover32,500squaremetresofretailspace.Inaddition,rentalrateswereupby2.2%inFY10onthestrengthofrenewalleasesexecuted.Thisfurtherillustratesthestrengthoftheportfolio’spropertiesandgeographicpositionasretailersarewillingtopayincreasedrentstomaintainapresenceinthemarket.
•Capital Works and Anchor Lease Enhances Bensalem Square–ThedecisiontospendapproximatelyUS$360,000oncapitalworksatBensalemSquarehasbeenvindicatedwiththesuccessfulleasenegotiationofRedner’sMarket(areputableregionalgrocer),adealthathasfilledalongtermvacancyleftbythepreviousgrocer.Asaresultofthisnewleasedeal,thecentreisnow97.7%occupied.
PROPERTY PORTFOLIO STATISTICS Property State Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Park Hills Plaza Pennsylvania 94.3% $19,109,000 8.50% 1.03% 4.70 years
Whitemarsh Shopping Centre Pennsylvania 100% $12,707,000 8.00% 5.43% 7.19 years
Kline Plaza Pennsylvania 78.1% $11,446,000 8.75% -6.35% 6.18 years
County Line Plaza Pennsylvania 98.6% $10,573,000 8.75% -4.39% 4.29 years
Collegeville Shopping Centre Pennsylvania 88.7% $9,845,000 N/A -29.02% 3.26 years
North Penn Marketplace Pennsylvania 90.5% $8,148,000 8.75% -6.67% 4.35 years
Cherry Square Pennsylvania 96.9% $7,857,000 8.75% -4.71% 4.68 years
FY11 Distribution Forecaston the Original $1.00 Invested:
Total Annual Return
since Inception: -17.81%
1.70%
Centro MCS Direct Property – ANNUAL REVIEW 2010 73
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DEBT INFORMATIONAlloftheSyndicate’s$USdebtwasataweightedaveragefixedinterestrateof5.88%p.a.(includingmargin)asat30June2010.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 63.5% 80.7% 81.5%
Interest Cover Ratio 2.1 times 1.8 times 1.7 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.Asat31December2009,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount(1) Undrawn Amount Loan Maturity
External Financier US$159.59 million Nil 1 January 2016
External Financier US$11.55 million Nil 1 January 2013
External Financier US$7.04 million Nil 1 May 2018
External Financier US$7.28 million Nil 1 January 2014
External Financier US$3.72 million Nil 1 June 2012
External Financier US$2.62 million Nil 1 April 2014
US$ TOTAL US$191.80 million Nil 5.25 years
(1)TheUS$figuresreflect97%ownership.
PROPERTY PORTFOLIO STATISTICS (continued)Property State Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Bensalem Square Pennsylvania 97.7% $6,741,500 8.00% -1.42% 12.70 years
Gilbertsville Shopping Centre Pennsylvania 91.8% $6,305,000 8.75% -3.70% 3.56 years
Woodbourne Square Pennsylvania 100% $5,650,250 8.75% -0.43% 3.34 years
Chalfont Village Pennsylvania 50.5% $4,462,000 9.00% 1.10% 3.65 years
69th Street Plaza Pennsylvania 96.9% $3,492,000 9.00% -2.70% 4.50 years
New Holland Shopping Center Pennsylvania 95.2% $3,055,500 9.00% -17.11% 1.42 years
Commerce Plaza Pennsylvania 100% $2,425,000 7.00% 3.09% 14.43 years
Mt Carmel Plaza Pennsylvania 28.0% $1,115,500 10.00% -9.80% 4.31 years
Highridge Plaza New York 92.5% $18,915,000 7.25% 8.33% 3.63 years
North Ridge Plaza New York 100% $11,640,000 8.00% 0.00% 4.07 years
A&P Mamaroneck New York 100% $3,104,000 6.50% 0.00% 0.75 years
Port Washington New York 100% $1,358,000 6.50% 75.01% 2.92 years
Christmas Tree Plaza Connecticut 86.4% $17,654,000 8.50% -12.08% 4.90 years
Killingly Plaza Connecticut 27.1% $5,529,000 9.25% -18.57% 1.57 years
Milford Center Connecticut 100% $1,527,750 N/A 14.55% 4.17 years
North Park Center Georgia 91.1% $10,936,750 9.00% 2.50% 2.76 years
Holcomb Bridge Crossing Georgia 80.9% $6,208,000 10.00% 5.35% 6.97 years
Park Plaza Georgia 82.4% $3,831,500 10.25% -22.93% 1.33 years
Rio Grande Plaza New Jersey 89.8% $12,125,000 9.00% -13.71% 3.69 years
Springfield Supermarket New Jersey 100% $4,365,000 7.50% 9.76% 12.76 years
Magnolia Plaza North Carolina 56.2% $2,376,500 13.00% -14.04% 1.60 years
East Main Center South Carolina 36.3% $1,474,400 10.25% -4.40% 4.80 years
Culpeper Town Square Virginia 98.4% $9,573,900 9.75% -5.10% 5.35 years
TOTAL 86.1% $223,551,050 8.60% -4.70% 4.78 years
FY09 TOTAL 88.2% $234,584,800 8.36% -22.39% 4.60 years
FY08 TOTAL 89.7% $302,252,000 7.09% -10.37% N/A
FY07 TOTAL 91.7% $337,225,350 7.02% 5.40% N/A
(1)IndependentvaluationsexpressedinUS$(figuresreflect97%ownership)undertakenbyCushman&Wakefield(US).
Centro MCS Direct Property – ANNUAL REVIEW 201074
CENTRO MCS 37
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 7.00% 7.05% 4.00% 4.00% 4.00%
Distribution Return on Net Asset Backing (NAB) 7.00% 7.67% 6.78% 7.14% 7.14%
Tax Advantaged Portion 100% 100% 100% 100% 100%
Equivalent Pre-tax Return on Initial Equity 13.08% 13.18% 7.48% 7.48% 7.48%
NAB $1.00 $0.92 $0.59 $0.56 -
Syndicate Commencement Date May 2006
Syndicate Review Date May 2011 – May 2013
PROPERTY PORTFOLIO STATISTICS Property(2) State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average Lease Expiry (by income)
Centro Albury NSW 0.4% 100% $50,400,000 8.00% 0.10% 3.35 years
Centro Newton SA -1.5% 100% $29,700,000 7.75% -4.50% 4.39 years
Centro Gladstone Home QLD 9.4% 100% $26,000,000 8.50% 0.00% 6.51 years
Centro Whites Hill QLD 3.6% 100% $15,550,000 8.00% 2.98% 9.84 years
Centro Monier Village QLD 1.3% 100% $12,500,000 8.25% -2.34% 6.61 years
TOTAL 1.8% 100% $134,150,000 8.10% -0.89%(3) 5.35 years
FY09 TOTAL(4) 4.8% 95.0% $141,550,000 7.88% -13.16% 4.78 Years
FY08 TOTAL(4) 6.1% 99.3% $163,000,000 6.90% -1.20% 5.35 years
FY07 TOTAL(4) 3.3% 99.3% $164,980,000 6.60% 10.95% 5.95 years
(1)IndependentvaluationsundertakenbySavillsatCentroAlbury,CBRichardEllisatCentroNewton,UrbisatWhitesHillShoppingCentreandMonierRoadShoppingVillageandColliersatCentroHomeGladstone.
(2)SamuelVillagewassoldinSeptember2009for$6.2m.(3)Valuation%basedonthefiveremainingpropertiesexcludingSamuelVillage.(4)AllhistoricalstatisticsincludeSamualVillage.
NAB Change
Jun ‘10 $0.56
Dec ‘09 $0.59
Jun ‘09 $0.71
•Mixed Portfolio Valuation Results–AlltheSyndicatepropertieswereindependentlyvaluedat30June2010.Theportfoliovaluationdeclineof0.89%wasmainlyduetotheimpactofsofteningcapitalisationrates,offsetbypropertyincomegrowth.Capitalisationratesareinfluencedbycurrentinvestmentmarketconditionsandcomparablesalestransactions,andtakeintoaccountcompetition,centrequalityandperformance.ThepropertyvaluationdeclineshavecontributedtoafallintheNABfrom$0.59to$0.56.
•Strong Sales Growth at Centro Gladstone Home–Syndicateportfoliosalesincreasedby1.8%forthe12monthsto30June2010underpinnedbysalesgrowthof9.4%and3.6%atCentroGladstoneHomeandCentroWhitesHillrespectively.Inparticular,arecenttenancyremixatGladstoneHometointroducenewstrongnationalandlocalbulkygoodretailersintothevacantshopshassuccessfullyincreasedfoottrafficandconsumerspending.
•Portfolio Occupancy at 100%–TheSyndicatepropertiesarenowfullyleasedreflectinga1.9%improvementinportfoliooccupancysinceDecember2009.Totalleasingactivityincluded12leaserenewalsand16newdealsatanaveragerentallevel6.8%abovebudget.NewretailersintroducedincludeCityPetWorldandPillowTalkatGladstoneHome,anewVeterinaryclinicatCentroMonierandDickSmithatCentroAlbury.ThenewDickSmithleaseatCentroAlburywillassistindrivingupCentresalesandshouldhelptomitigateanyimpactfromJBHiFiwhichrecentlyopenedanewstoreoppositeourCentre.
•Limited Exit Opportunity Available in FY11–TheLimitedExitOpportunitywillagainbeavailableforinvestorsinCentroMCS37.InvestorsshouldhavealreadyreceivedinformationregardingtheopportunitywhichwillcommencefromthepublishingofthefinalNAB(totheCentroMCSwebsiteon16September2010).InvestorshaveuntilmidOctobertoapplyfortheredemption.
FY11 Distribution Forecaston Initial Equity: 4.00%
Total Annual Return
since Inception: -6.80%
Centro MCS Direct Property – ANNUAL REVIEW 2010 75
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DEBT INFORMATIONTheaverageinterestrateforallSyndicatedebt(includingweightedaveragemargin)at30June2010was5.74%p.a.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 59.6% 69.3% 67.5%
Interest Cover Ratio 1.9 times 1.8 times 1.9 times
(1)Asat30June2010,theSyndicatewaswithinitsLVRcovenant.
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity
External Financier $92.68 million Nil 20 December 2011
FIXED INTEREST RATE HEDGE SUMMARY
TOP RETAILERS
Total % of Income 52.2%Averag
eFixed
Rate
(%)
(A$ Millions)
103% 103% 103% 103% 103% 103% 103%
71%
Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec12 Mar 13 Jun 13
Percentage Hedged
0
20
40
60
80
100
120
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
Current Debt
Fixed InterestRate Hedging
Average Fixed RateExcluding Margin
Other47.8%
Coles6.0%
Woolworths15.0%
Kmart10.1%
Foodland7.2%
Bunnings Warehouse7.1%
Target6.8%
Centro MCS Direct Property – ANNUAL REVIEW 201076
CENTRO MCS 38
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on the Original $1.00 Invested 7.65% 7.75% 3.79% 0.70% Nil
Distribution Return on NAB per Investment N/A 8.33% 15.79% 3.88% Nil
Tax Advantaged Portion 99.98% 67.10% 98.51% 99.52% 0.00%
Equivalent Pre-tax Return on the original $1.00 invested 14.30% 12.27% 7.04% 1.31% Nil
NAB per Investment (based on the Original $1.00 Invested)(1) N/A $0.93 $0.24 $0.18 -
NAB per Unit (based on the remaining units only)(2) N/A N/A $0.37 $0.28 -
Syndicate Commencement Date October 2006
Syndicate Review Date June 2012 – June 2016
(1)TheNABperInvestment(basedontheoriginal$1.00invested)istheNABthatwehavealwaysreportedtoinvestors.Itreflectsthecurrentvalueofyouroriginal$1.00investmentintotheSyndicate(comprisingof$0.35unsecurednotesand$0.65units).Forexample$10,000originalinvestmentcomprisedof3,500unsecurednotesand6,500units.10,000x$0.18=$1,800,thecurrentvalueofyourinvestment.
(2)AtthejointmeetingofnoteholdersandunitholdersinCentroMCS38heldon30October2009,noteholdersvotedinfavourofcancellingtheunsecurednotesfromtheSyndicateinvestmentstructurewitheffectfrom1July2009.TheNABperUnitreflectsthecurrentvalueoftheunits.Forexampleofthe$10,000originalinvestmentonlythe6,500Unitsremain.6,500unitsx$0.28=$1,800,thecurrentvalueofyourinvestment.
NAB Change
Jun ‘10 $0.18
Dec ‘09 $0.20
Jun ‘09 $0.24
•Distributions Suspended in FY11–DuetolowerincomefromthepropertyportfolioandacontinuinghighAustralianDollarwehavemadethedecisiontosuspenddistributionsinFY11.Distributableincome,whichisforecasttobelowerthanFY10,willbedivertedtorepaydebtandfundcapitalexpenditure.Whilstweunderstandthedifficultythisdecisionmaycause,webelievetherepaymentofdebtandfundingofcapitalexpenditurefromearningsisprudentgiventhehighSyndicategearinglevel.
•Lower Valuations Impact NAB–Overallvaluationsfell3.2%inFY10.Someindependentvaluationsformallassetsat30June2010actuallyincreased,whichhasbeenthefirstsignthatvaluationsoverallmayhavehittheirlowestpointintheUS.ThefallinvaluationshascontributedtoadropintheNABfrom$0.24atJune2009to$0.18atJune2010.
•Limited Exit Opportunity Available in FY11–TheLimitedExitOpportunitywillagainbeavailableforinvestorsinCentroMCS38.InvestorsshouldhavealreadyreceivedinformationregardingtheopportunitywhichwillcommencefromthepublishingofthefinalNAB(inmidSeptember).InvestorshaveuntilmidOctobertoapplyfortheredemption.
•Leasing and Market Conditions –AcrosstheCentroMCS38propertyportfoliowehavesuccessfullysecured75newandrenewalleasestotaling15,800squaremetresduringFY10.Occupancylevelsacrosstheportfoliohaveincreased,howeveradecreaseddemandforvacantspacehasreducedtheincomeonnewleaseswhichhasimpactednetpropertyincomeandthereforedistributableincome.LeasingvacantspaceinmallpropertiesisexpectedtocontinuetobetoughinFY11.
PROPERTY PORTFOLIO STATISTICS Property State Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Enfield Square Connecticut 97.6% $45,182,399 10.00% -4.51% 6.49 years
Eagle Rock Plaza California 96.5% $42,770,197 10.25% 0.00% 3.47 years
Midway Mall Ohio 64.3% $44,069,075 8.50% 6.50% 3.53 years
Town Square New York 91.1% $37,110,800 8.50% -1.55% 4.18 years
Independence Mall North Carolina 84.9% $36,744,360 8.00% -1.68% 3.26 years
West Park Mall Missouri 75.1% $32,286,396 8.50% -10.77% 3.53 years
Lakewood Plaza New Jersey 91.7% $30,518,750 8.25% -7.82% 4.17 years
FY11 Distribution Forecaston the Original $1.00 Invested:
Total Annual Return
since Inception: -30.84%
Nil
Centro MCS Direct Property – ANNUAL REVIEW 2010 77
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DEBT INFORMATIONAlloftheSyndicate’sUS$debtwasataweightedaveragefixedinterestrateof6.35%p.a.(includingmargin)asat30June2010.
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio(1) 55.8% 87.5% 95.2%
Interest Cover Ratio 1.7 times 1.5 times 1.2 times
(1)Forexternalfinancierdebtloancovenantpurposes,CentroPropertyTrustdebtisnotincluded.ThereisnoLVRorICRcovenantsforfacilitiesunderCentroMCS38.
DEBT MATURITY PROFILE
Financier Loan Facility Amount(1) Undrawn Amount Loan Maturity(2)
External Financier US$340.90 million Nil 1 July 2016
External Financier US$38.40 million Nil 1 November 2016
External Financier US$18.50 million Nil 5 August 2011
External Financier US$10.40 million Nil 1 December 2027
External Financier US$9.80 million Nil 01 February 2012
Centro Property Trust US$3.90 million Nil Payable at reasonable notice
US$ TOTAL US$421.90 million Nil 6.0 years
Centro Property Trust A$10.00 million Nil Payable at reasonable notice
A$ TOTAL A$10.00 million Nil 1 year
(1)TheUS$figuresreflect97.7%ownership.TheA$figuresreflect100%ownership.(2)CentroPropertyTrustloancalculatedat12monthsloanmaturity.
PROPERTY PORTFOLIO STATISTICS (continued)Property State Occupancy
Rate (by area)30 June 2010
Valuation(1) 30 June 2010 Capitalisation
Rate
% Valuation Change (from 30 June 2009)
Weighted Average Lease
Expiry (by income)
Richland Mall Ohio 94.3% $26,568,094 8.50% -2.93% 3.74 years
Westland Town Center Colorado 95.5% $21,153,156 8.00% 6.65% 7.88 years
North Dover Delaware 100% $19,287,850 8.50% -1.73% 4.44 years
Parkway Plaza 1 New York 100% $16,602,200 8.75% 2.11% 7.14 years
Campus Plaza New York 97.2% $15,625,600 8.50% -3.00% 4.71 years
Century Plaza Florida 84.9% $13,184,100 9.50% -5.59% 2.53 years
Shoppes at Vestal New York 100% $12,695,800 8.75% 4.00% 1.98 years
Parkway Plaza Connecticut 87.9% $9,521,850 8.00% -9.72% 5.15 years
Village at Mableton Georgia 86.0% $6,958,275 10.50% -28.75% 3.59 years
Campus Village Maryland 91.4% $5,664,280 9.25% 3.57% 4.58 years
Plymouth Plaza Pennsylvania 100% $5,444,545 9.00% 7.21% 3.61 years
Pier One New York 100% $2,636,820 8.50% 12.50% 1.58 years
TOTAL 87.6% $424,024,547 8.84% -3.91% 4.34 years
FY09 TOTAL 84.1% $441,272,881 8.86% -35.14% 4.68 years
FY08 TOTAL 85.8% $680,327,881 7.11% -8.54% 4.98 years
FY07 TOTAL(2) 94.4% $743,881,110 6.77% 6.21% 5.33 years
(1)IndependentvaluationsexpressedinUS$(figuresreflect97.7%ownership)undertakenbyCushmanandWakefield(US).(2)HistoricalstatisticsexcludeMallatCrossCountywhichwassoldinDecember2007forUS$80million.
Centro MCS Direct Property – ANNUAL REVIEW 201078
WOODLANDS
SYNDICATE UPDATE
KEY SYNDICATE STATISTICSYear Ending 30 June Actual 2007 Actual 2008 Actual 2009 Actual 2010 Forecast 2011
Distribution Return on Initial Equity 9.50% 9.60% 9.00% 11.00% 8.00%
Distribution Return on Net Asset Backing (NAB) 4.77% 4.47% 5.42% 6.51% 4.73%
Tax Advantaged Portion 38.37% 100% 100% 81.58% 23.00%
Equivalent Pre-tax Return on Initial Equity 12.67% 17.94% 16.82% 18.80% 9.60%
NAB $1.99 $2.15 $1.66 $1.69 -
Syndicate Commencement Date August 1995, rollover occurred August 2007
Syndicate Review Date August 2012 – August 2014
PROPERTY PORTFOLIO STATISTICS Property State Centre Sales
Growth Occupancy
Rate (by area)
30 June 2010 Valuation(1)
30 June 2010 Capitalisation
Rate
% Valuation Change
(from 30 June 2009)
Weighted Average
Lease Expiry (by income)
Centro Woodlands QLD 6.0% 100% $17,000,000 8.00% 1.80% 4.22 years
FY09 TOTAL 9.7% 100% $16,700,000 8.00% -13.25% 4.85 years
FY08 TOTAL 18.4% 100% $19,250,000 7.00% 4.34% 5.71 years
FY07 TOTAL 14.0% 100% $18,450,000 6.75% 19.03% 6.16 years
(1)Independentvaluationundertakenbym3property.
NAB Change
Jun ‘10 $1.69
Dec ‘09 $1.66
Jun ‘09 $1.66
• Centro Woodlands Valuation Growth–TheCentroWoodlandsvaluationincreasedby1.8%to$17.0millionoverthe12monthstoJune2010,largelyduetopropertyincomegrowth.Thisvaluationincreasecombinedwiththereleaseofaprovisionforanticipatedlegalfeesrelatingtoanappealagainstaproposedcompetingdevelopment(seebelow),resultedinNABgrowthofthreecentsto$1.69.
•Appeal to Proposed Competing Development Settled–Werecentlysettledourappealagainstanapprovedsupermarketanddiscountdepartmentstoredevelopmentproposedforanadjoiningsite.ThesettlementpreventsanybuildingworksbeingcommencedpriortoJuly2011andnopartoftheproposeddevelopmentispermittedtobeopenforbusinessuntilatleastJuly2012.TheongoingprojectdelaywillgiveustheopportunitytosecuremorefavourableleasetermswithWoolworthsandkeyspecialtyretailersaheadoftheirFY11andFY12leaseexpiries.
•Syndicate Debt Refinancing Extension–CommercialtermshavebeenagreedtoextendtheSyndicate’sdebtfacilitywiththeexistingfinancierforafurthersixmonthsto31March2011.Wearecontinuingtopursueotherrefinanceopportunities,however,inthecurrentenvironmentthereisnoguaranteethatthedebtcanberefinancedorthatarefinanceproposalwillnecessarilybeininvestor’sbestinterests.IfthisoccursthenthepropertymayneedtobesoldandtheSyndicatewoundup.
• Performance Update and FY11 Distributions–AlthoughCentroWoodlandshasperformedwelloverthepast12monthswithannualsalesgrowthof6.0%andstrongpropertyincomegrowthof10.2%wearenowbudgetingforpropertyincometoreduceby3.2%overFY11,duetoincreasedcompetitionfromthenewWoolworthsanchoredStocklandsNorthShoredevelopment,expectedtoopenbyApril2011.Syndicatedebtservicingcostsarealsoanticipatedtoincreasebyaround$205,000perannumasaresultofhigherfloatinginterestrates,ahigherinterestratemarginandexpensesassociatedwiththeSeptember2010refinancing.Thesefactorshaveallcontributedtoaforecastdistributionreductionfrom11.0%inFY10to8.0%forFY11.
FY11 Distribution Forecaston Initial Equity: 8.00%
Total Annual Return
since Inception: N/A
Centro MCS Direct Property – ANNUAL REVIEW 2010 79
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S
DEBT INFORMATIONAllSyndicatedebtat30June2010wasatavariable(floating)interestrateof6.60%p.a.(includingweightedaveragemargin).
Period Ending 30 June 2008 30 June 2009 30 June 2010
Gearing Ratio 44.8% 55.3% 53.8%
Interest Cover Ratio 1.9 times 1.8 times 2.2 times
DEBT MATURITY PROFILE
Financier Loan Facility Amount Undrawn Amount Loan Maturity
External Financier $9.75 million Nil 30 September 2010
TOP RETAILERS
Total % of Income 68.6%
Woodlands Plus Petrol5.1%
Calanna Pharmacy5.4%
Woodlands Surgery5.1%
Woolworths46.4%
Woodlands Newsagency6.6%
Other31.4%
Centro MCS Direct Property – ANNUAL REVIEW 201080
ABN–AustralianBusinessNumber.
A$–AustralianDollars.
Anchor Tenant–Typicallyaretailer(oftenasupermarket,departmentstoreordiscountdepartmentstore)withalettableareagreaterthan1,000m2.
ASIC–AustralianSecurities&InvestmentsCommission–ASICenforcesandregulatescompanyandfinancialserviceslawstoprotectconsumers,investorsandcreditors.
Assets–Theresourcesownedbyacompany,fundorperson.Assetscanbetangible,e.g.cash,investments,propertyandequipment,orintangible,forexamplegoodwill,patents.
Capitalisation Rate–Thecapitalisationrateisthepercentagenumberusedtodeterminethecurrentvalueofapropertybasedonassessedmarketnetoperatingincome.Thisisthereforetheinvestor’syieldontheirinvestment.
Centro (CNP)–CentroPropertiesGroupbeingCentroPropertiesLimited(ABN45078590682)andCentroPropertyTrust(ARSN091043793)andallotherentitiescontrolledbyeachofthem.
Centro MCS–ThedirectpropertydivisionofCentro,consistingofCentroMCSManagerLimited(ABN69051908984)andCPTManagerLimited(ABN37054494307).
CMBS–CommercialMortgageBackedSecurities.
Community Centre–AcommunitycentreprovidesawiderrangeofgoodsandservicesthanaNeighbourhoodCentre.Communitycentrestypicallyincludeasupermarket,juniordepartmentstore,varietystore,superpharmacyordiscountdepartmentstoresasanchortenants.
CSIF–CentroSyndicateInvestmentFund.
Distributions–IncomepaymentsmadebyCentro’smanagedfundstoinvestors.
Foreign Exchange (FX)–Systemoftradinginandconvertingthecurrencyofonecountryintothatofanother.
Gearing Ratio–Thegearingratioisgenerallyexpressedasapercentageandiscalculatedastheproportionoftotalfunddebttofundassets.
Hedge–Astrategyusedtooffsetfinancialriskssuchasmovementsininterestratesorforeigncurrencyexchange(FX)rates.CommonhedgingstrategiesadoptedbyCentroMCSincludetheuseofinterestrateswaps,FXrateforwardsandcrosscurrencyswaps,whichareeffectivelyusedtofixinterestratesorforeigncurrencyexchangeratesforthelifeoftheswap.Theseswapsaregenerallyindependentofthedebtfacilities,soaswapmaturitydatemaybedifferenttothetermofthedebtfacility.
ICR–InterestCoverageRatio–Aratiousedtodeterminehoweasilyanentitycanpayinterestonoutstandingdebt.
Theinterestcoverageratioiscalculatedbydividingtheentity’searningsbeforeinterestandtaxes(EBIT)ofoneperiodbytheentity’sinterestexpenseofthesameperiod.
Initial Syndicate Term–Thefirsttermofthesyndicate,usuallybeinganywherebetweensevenandtenyears.
LVR–LoantoValueRatio.
Major (tenant or retailer)–Generallyasupermarket,departmentstoreoradiscountdepartmentstoretenantwithalettableareagreaterthan1,000m2.
Mini Major –AretailerwithalargenationalchainthatoccupiesasmallerNetLettableAreathanthemajorstores.
NAB –TheNAB(orNetAssetBacking)isthemeasureusedtoreflectthefairvalueofasyndicateorfundinvestment.TheuseofaNABmethodologydifferssomewhatfromtheaccountingnormofaNetTangibleAssets(NTA)figure(NTAbeingsimplythetotaltangibleassetsofacompanyortrustonaperunitbasis).ThoughNABisquitecloselyalignedwithNTA,itisadjustedforseveralfactorssuchasactualorlikelypropertyacquisitioncosts,structuringandestablishmentcosts,exitandsuccessfeesandsellingcosts.AlloftheseadjustmentsensurethattheNABmeasureisbestabletoreflecttheilliquidfixedtermnatureofsyndicates.
Neighbourhood Centre–Aneighbourhoodcentrefeaturesasupermarketastheanchortenantinadditiontospecialtyretailersthatfocusontheday-to-dayneedsoftheimmediateneighbourhood.Thetypicalsizeofaneighbourhoodcentreis5,000-6,000m2.
NOI –NetOperatingIncome–Propertyrevenueslesspropertyexpenses,excludingdebtservice,depreciationandcapitalexpenditure.
Specialty Retailer–Typicallyaretailerwithalettableareaoflessthan1,000m2.
Subordinated Debt–Debtthatiseitherunsecuredorhasalowerprioritythanthatofanotherdebtclaimonthesameassetorproperty.
Syndicate–Adirectpropertyinvestmentvehiclewherebyinvestors’fundsarepooledoverasetgroupofpropertiesforafixedterm.Thisisnormallyadministeredbyaresponsibleentitywithownershipvestedwithacustodianonbehalfofinvestors.
Tax advantaged–Thenon-assessabledistributioncomponentreceivedbyinvestors.Thisamountgenerallydoesnotformpartofaninvestor’staxableincomeintheyearofreceipt.Itnormallycomprisesoftaxdeferredincomeattributabletodepreciationandcapitalallowancesthatwillreducetheinvestor’sCGTcostbaseintheunitsandtaxfreeamountsrelatingtothecapitalgainsdiscountthatwillnotaffecttheCGTcostbase.
US$–USDollars.
GLOSSARY
CONTENTS
Syndicate Directory and Portfolio Summary 1
Property Portfolio Maps 2
Funds Management Report 4
Funds Management Team 11
Corporate Governance 12
Notes on the Individual Syndicate Reports 16
Individual Syndicate Reports 18
Glossary 80
Directory Inside Back Cover
DIRECTORY
Responsible EntityCPT Manager LimitedABN 37 054 494 307
Board of DirectorsPaul Cooper (Chairman)Robert Tsenin (Group Chief Executive Officer & Managing Director)Anna BudulsSusan OliverJim HallRob Wylie
Centro MCS 21Centro MCS 22Centro MCS 23Centro MCS 24Centro MCS 25Centro MCS 26Centro MCS 27Centro MCS 28Centro MCS 32Centro MCS 33
Centro MCS 4Centro MCS 5Centro MCS 6Centro MCS 8Centro MCS 9Centro MCS 10Centro MCS 11Centro MCS 12Centro MCS 14Centro MCS 15Centro MCS 16
Centro MCS 17Centro MCS 18Centro MCS 19 UTCentro MCS 19 NZ/ICentro MCS 20Centro MCS 34Centro MCS 35Centro MCS 36Centro MCS 37Centro MCS 38Woodlands
Responsible EntityCentro MCS Manager LimitedABN 69 051 908 984
Board of DirectorsW Peter Day (Chairman)Paul Cooper Jim HallMichael HumphrisFraser MacKenzieBill Bowness
Company SecretaryElizabeth HouriganDimitri Kiriacoulacos
Registered OfficeCorporate Offices, 3rd Floor Centro The Glen 235 Springvale Road Glen Waverley Victoria 3150 Telephone +61 3 8847 0000Facsimile +61 3 9886 1234Toll Free (AUS) 1800 802 400Toll Free (NZ) 0800 449 605Email [email protected] centromcs.com.au
AuditorsMoore StephensLevel 10, 530 Collins StreetMelbourne Victoria 3000
Ernst & YoungErnst & Young Building8 Exhibition StreetMelbourne Victoria 3000
This information has been produced without taking into account any person’s objectives, financial situation or needs and because of that, you should, before acting on this information consider the appropriateness of the information having regard to your own objectives, financial situation and needs.
Past performance is not a reliable indicator of future performance.
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