Expert Q&A: Taking the Fast Lane
Nov 1, 2007 12:00 PM, Andrew Scott CEO, Centro Properties Group
Australia-based Centro Properties Group earlier this year acquired New Plan Excel Realty Trust. As a result, despite operating in the U.S. for less than five years, the company is now one of the top owners of retail real estate in the country. Retail Traffic caught up with Centro CEO Andrew Scott recently when he was in New York. Here's what he had to say.
Retail Traffic: What's the read you're getting in your portfolio in terms of retailer sales?
Andrew Scott: The malls and lifestyle centers — which we don't have a lot of — for July and August said they were not doing that great. But we've had strong feedback from retailers in our grocery-anchored centers, which is the majority of the portfolio.
RT: How has the integration of the Centro and New Plan platforms worked out?
Scott: The integration has gone extremely well. [Former New Plan CEO] Glenn [Rufrano] and his team have done a tremendous job as has the old Centro Watt team. It's fair to say we've decided in a number of places to create teams that are “best of breed” in terms of individuals, in terms of systems and in terms of the way we operate. For example, the head of leasing is an ex-Kramont guy, the heads of two divisions — because we added some to the six divisions New Plan had — are headed by two Heritage guys…. So it's very much a blend.
RT: How would you describe Centro's approach to doing business?
Scott: We believed the culture of the two organizations — Centro and New Plan — was remarkably similar. At Centro, our culture is based on three precepts. One, we're customer-focused. When you own shopping centers, that's retailers. And New Plan was as retailer-focused as any group we've come across in the United States.
Secondly, we focus on “value-add” opportunities. We believe that development and continued redevelopment are necessary for retail property. You have to continue to provide services to retailers. Lastly, we don't want too much hierarchy…. We tend to have people that work together rather than for someone else.
RT: Where does Centro's money come from?
Scott: It's bizarre to think, but most people don't realize that Australia, with a population of 20 million people, was in fact the largest investor in property in the U.S. last year. Our government 10 to 15 years ago put things in place that maybe some other countries would have liked to have done. In all of our paychecks, 9 percent of income goes into pension plans called superannuation funds.
RT: And why invest internationally?
Scott: The pension fund model means that our limited property trusts, or A-REITs, are continuously raising capital…. Already, 70 percent of the investment-grade property in Australia is in our A-REITs…. Now, 43 percent of the assets in our A-REITs are actually international assets. If it hadn't been that way, everything in Australia would have been bid up like crazy.
RT: Does that mean you're looking for more opportunities in the United States?
Scott: In terms of growth, we will be back down to our target leverage range by Christmas, which is in the 35 percent to 45 percent range…. We are always interested in making new acquisitions as long as the individual properties make sense…. But we go and walk properties, go and check the retailers, find out as much as we possibly can and that will really allow us to move to an understanding of the retailers.
