Ámbitos del Patrimonio Cultural Inmaterial

LTD, CMBS SERIES 2006-1

In a first for the Australian market, Centro Properties Group (“Centro”) established in December 2006 a conduit for the securitisation of pools of payment obligation which are ultimately secured by commercial properties. This is similar to multi-loan conduit programs common in the US. The transaction is the securitisation of a portfolio of thirteen real estate backed financings to twelve obligors (Centro and its associated direct property vehicles) (Figure 4.3). Each financing is backed by between one and eleven retail properties located in major Australian cities and regional centres. The proceeds of the issue totalling AU$899.8 million were used to refinance bank debt facilities and for general working capital.

Centro is a retail property investment organisation specialising in investment, management and development of shopping centres and is listed on the Australian stock exchange. Currently, Centro’s portfolio includes properties in Australia, New Zealand and the US valued at approximately AU$15.8 billion. Centro has previously issued CMBS under Centro Capital Pty Limited and MCS Capital Pty Limited with over AU$1 billion outstanding.

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Figure 4.3: Centro Shopping Centre Securities Ltd. CMBS Series 2006 - 1

Structure EUR Investors Currency Swap Provider Centro Loan Note Issuer AUD Investor CMBS Issuer Series 2006-1 Obligators Properties Issuer Security Trustee Obligator Security Trustee Issuer Charge Redeemable Loan Notes

Class A-1, A-2, B, C, D, E Notes Principal + Interest Principal + Interest Class A-3 Notes Security Cross Currency Swap Obligator Charges (s) + Mortgages Master Loan Note Sale Agreement DPP + Interest Redemption

Source: Standard and Poor’s (2006c)

Details of the Centro Shopping Centre Securities Ltd. CMBS Series 2006-1 issue are shown in Table 4.2. The issue had a depth of seven tranches from AAA to BBB-, with one AAA tranche denominated in Euro’s targeting European investors. A cross currency swap was entered into with BNP Sydney to swap the Euro notes with Australian dollars.

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Table 4.2: Centro Shopping Centre Securities Ltd. CMBS Series 2006 - 1 Issue

Details

Centro Shopping Centre Securities Ltd - CMBS Series 2006-1

Issue Date: December 2006

Term-to-Maturity: 3-5 years

Property Type: 13 mortgage facilities secured against 47 retail properties and 1 bulky goods centre.

Size: 669,154 m²

Aggregate Market Value: AU$1,670.14m

Issue Size: AU$899.6m

Tranche: AMOUNT LTV DSCR BBSW AAA AU$250m 43.1% 1.7 19bp AAA AU$300m 43.1% 1.6 24bp AAA AU$170m (EUR €100m) 43.1% 1.6 18bp AA AU$37.0m 45.3% 1.6 28bp A AU$62.0m 49.1% 1.4 40bp BBB AU$52.6m 52.2% 1.4 65bp BBB- AU$26.0m 53.9% 1.3 85bp

Interest Type: Floating rate

Occupancy Rate: 98.6%

Weighted Average Unexpired Lease Term: 5.9 years

Liquidity Facility: AU$42m or 4.7% of issued debt

Refinance Constant: 8-11%

Largest Tenant (% of Net Income): 17.8%

Property Diversity (Largest single exposure): AU$299m or 17.9% of portfolio value Net Income from Top 5 Tenants: 38.6%

Geographic Diversity:

New South Wales 29%

Queensland 18%

Western Australia 22%

Victoria 14%

South Australia 16%

Herfindahl Property Type Index (HHPT): 1.000 Herfindahl Geographic Region Index (HHGR): 0.210

Source: Author’s compilation from Standard and Poor’s (2006c)

Further details of the portfolio’s backing the issue are shown in Table 4.3. The portfolio, though sector specific with an HHPT of 1, is well diversified in terms of property sub- class having a discount department store, neighbourhood shopping centres, liquor outlets, a warehouse distribution centre, and regional and sub-regional shopping centres. Majority of the properties are anchored by investment grade tenants, with the largest

88 tenant contributing 17.8% of net income and the top 5 tenants contributing 38.6% of net income. The average occupancy rate of the portfolio is 98.6%.

Table 4.3: Centro Shopping Centre Securities Ltd. CMBS Series 2006 - 1

Property Portfolios Syndicate

Name

No. of Properties

Property Type Facility

Term (Years) Facility Required (AU$m) Net Passing Income (p.a) (AU$m) Occupancy Rate (%) Market Value (AU$m)

CMCS 10 3 Discount department store, sub-regional and neighbourhood shopping centre(SC)

3 45.17 6.5 98.8 93.03

CMCS 17 11 Eight liquor outlets, sub- regional SC, two neighbourhood SCs

3 64.15 9.5 99.9 130.80

CMCS 18 4 Neighbourhood SCs 3 31.42 4.8 99.8 60.97

CMCS 21 1 Regional SC 3 73.64 9.9 99.8 162.98

CMCS 22 1 Warehouse distribution center 3 16.22 4.6 100.0 39.50

CMCS 23 1 Sub-regional SC 5 21.73 2.8 100.0 37.00

CMCS 25 5 Four neighbourhood SCs, one sub-regional SC

5 41.11 7.4 99.6 96.58

CMCS 26 3 Freestanding supermarket, sub-regional SC, bulky goods center

5 54.42 8.6 100.0 120.65

CMCS 27 1 Sub-regional center 4 54.02 6.2 100.0 89.00

CMCS 34 7 Neighbourhood SC 5 72.50 9.0 99.8 111.55

CMCS 37 6 Five neighbourhood SCs, one bulky goods center

5 98.90 10.3 99.2 148.70

CER

Conduit 1 2 One regional SC, one neighbourhood SC

4 171.08 17.2 99.8 299.00

CER

Conduit 2 5 One regional SC, five neighbourhood SCS

3 155.44 15.7 99.6 280.40

Total 48 $899.80 $112.5 98.6% $1,670.14

Source: Standard and Poor’s (2006c)

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Figure 4.4: Centro Shopping Centres: Centro Galleria and Centro Colonnades

Centro Galleria – Part of CER Facility 1 Centro Colonnades – Part of CER Facility 2

In line with Standard and Poor’s (2006c), the following are deduced as strengths, weaknesses and mitigants of the issue:

i) Strengths:

• Well diversified portfolio in terms of debt facilities (13 facilities to 12 obligators), underlying real estate (50 underlying property interests in 48 unique properties) and facility maturity.

• Underlying real estate security consists of 47 well located retail facilities and 1 bulky goods centre, with an HHGR of 0.210.

• Well diversified tenant pool; the largest tenant represents 17.8% of net income. The average lease maturity period of 5.9 years was in excess of the maximum final maturity period of 5 years.

• The transaction benefits from staggered maturity dates of the facilities with maturity of the underlying facilities being spread over 3 years (years 3 to 5) with the maximum maturity by facility size occurring in any single year being 41% in year three.

• The transaction benefits from a professional asset manager with a strong track record in the retail sector whose interests are tightly aligned to those of noteholders.

90 ii) Weaknesses:

• Each financing, with the exception of the CER Facility 1 and CER Facility 2, are not cross collateralised with other facilities and as a result noteholders could be adversely impacted by a single obligator default.

• Interest swaps are undertaken at the obligator level and in each case are entered into with an unrated counterparty in CPT.

• DSCR and LTV for each facility varies widely from 1.3x to 1.7x and 43.1% to 53.9%, respectively. The default of a single facility could cause a default on one or more classes of notes.

iii) Mitigants:

• The notes have been sized on an individual basis and do not rely on cross collateralisation for credit protection.

• While interest rate hedging is done at the obligator level with an unrated counterparty, strict parameters have been placed on each obligator requiring them to find alternate hedging arrangements should conditions change and for the swap counterparty to cash collateralise the swap should rates rise above 7.5%.

• Market risk on issuer cash flows is mitigated by the provision of an AU$42 million liquidity facility, covering 8 months of note payments.

The issue was fully subscribed, with the AAA notes priced at 19 bp and BBB- notes at 85 bp over 3 month BBSW. Final maturity of the notes is June 2013.