At least four companies are considering bids for a controlling stake in the struggling retail-property giant, Centro Properties Group.

Bids are expected from Blackstone Group and General Electric’s GE Real Estate in the US, Australia’s Mirvac Group and Mulpha, a subsidiary of Malaysian conglomerate Mulpha International, informed sources said.

Other bidders are also likely to vie for Centro Properties as well as its various interests.

Centro is expected to collect formal bids “within several weeks”. Details of the planned bids weren’t available.

Blackstone and GE declined to comment. Mirvac and Mulpha didn’t immediately return messages seeking comment.

Link.

Previous Centro Posts:

• Feb. 28, 2008, Centro Shares Surge
• Feb. 15, 2008, Centro Wins Extension
• Jan. 15, 2008, Scott Out, Rufrano In at Centro
• Jan. 10, 2008, Daily Centro Update
• Jan. 9, 2008, UBS Cuts Stake in Centro
• Jan. 3, 2008, Centro: Morgan Stanley, Westfield Have Approached Firm
• Jan. 2, 2008, Centro Says Its Getting Offers
• Dec. 18, 2007, Another Round of Centro Coverage
• Dec. 17, 2007, Centro Hit by Credit Crunch
• May, 10, 2007, Centro’s Structure
• Feb. 28, 2007, Centro To Buy New Plan

The Urban Land Institute’s latest Capital Markets Update makes a case that the next red flags to look out for in the developing credit crunch are credit default swaps and monoline insurers.

That makes a lot of sense. Both the Financial Times and Wall St. Journal have had reams of coverage on both of these areas. Credit default swaps are derivatives that act like insurance for bonds. Basically, investors that bought subprime paper could go out and buy credit default swaps–in many cases from monoline insurers–that promised to pay the value of the bond if the bond itself defaulted. For that protection, investors would pay a monthly fee–usually a small percentage of the overall bond amount. In practice it sounds like a great idea. In reality, the monolines got overexposed to bad debt and there are doubts they’ll be able to pay out the swaps if defaults continue to play out and especially if they continue to spread to other kinds of bonds.

Anyway, the ULI piece has lots of good data in it and is very good at describing the contours of the problem. Here’s a taste:

There are an estimated $46 trillion—not billion—trillion in “notional amount” of Credit Default Swaps outstanding. Notional amount is the term used to describe the principal amount of the contract in the same way that an insurance policy has a face amount. Premium is the amount paid for the insurance. As in an insurance policy, no money changes hands in a CDS, except the premium, unless there is a credit default.

The easiest way to “visualize” a CDS is to think of it as a life insurance policy, assuming for this example a death benefit of $100,000. The $100,000 is the notional amount—a placeholder to remind us of what we will receive in the future when and if we make a claim (and our effective benefit for paying our annual premium all those years). In a CDS, instead of a benefit paid upon death, the notional amount is paid to the owner of the CDS if the “insured”—normally a corporation, government, or Sovereign credit—defaults on its obligations to a specific financial instrument, such as a bond, or files for protection in bankruptcy. A Credit Default Swap is normally utilized to hedge an existing risk—in the case of a CDS, the existing risk is ownership of the credit of the borrower (or debtor) underlying a financial instrument such as a bond. In the commodity markets, a farmer hedges himself against future price fluctuation by selling a contract which obligates him to deliver a certain amount of the commodity at a previously agreed upon price. If the value of the commodity increases, the farmer does not benefit as he has pre-sold his crop at a price negotiated today. If the price of the commodity decreases, the farmer profits as he receives the higher, negotiated contract price rather than the lower, market price. In a Credit Default Swap, an investor hedges himself by purchasing a CDS which protects him from a negative event such as a bankruptcy. However, his return is reduced by the amount of the annual premium charged by the counter-party in the CDS for the credit insurance provided. Alternatively, the investor suffers no loss in principal in the event of a bankruptcy as the CDS counter-party is responsible for paying him the notional amount.

Here’s an interesting piece from our sister publication. They use Real Capital Analytics’ data that January represented the lowest volume of retail property sales in four years as a jumping off point to examine what opportunities lie ahead for investors.

The conclusion:

A good place to watch for buying opportunities will be in secondary and tertiary markets, Haddigan says. In the flight to quality that typically occurs during times of trouble, retailers will focus their growth on major cities and the newest, best-quality properties. That means the greatest vacancy increases and price declines will occur at older properties and in secondary and tertiary markets.

Cap rates in those secondary and tertiary markets could rise 100 basis points this year, Marcus & Millichap predicts. “From the summer of 2007 through the end of this year, I wouldn’t be surprised if cap rates increase 125 basis points on the lower end of the market,” Haddigan says.

Nationally, cap rates have risen on retail properties since last fall. In the fourth quarter, average cap rates climbed to 7.2% from about 7.08% in the third quarter, according to research company Reis Inc.

You can see the full story here.

Excellent news from Australia today. There may be light at the end of the tunnel yet for Centro Properties Group. Shares of Centro Retail Group–one of the traded subsidiaries–surged when new CEO Glenn Rufrano laid out during a company conference call that potential losses from a one of its venture are $1.2 billlion, which is not as much as many had feared.

Centro Retail Group, a property trust whose parent company needs to refinance A$4.9 billion ($4.6 billion) of debt, rose as much as 90 percent in Sydney trading after announcing the maximum it can lose from a U.S. venture.

The trust can lose no more than $1.2 billion from its investment in Super LLC, a venture that runs many of Centro’s U.S. malls, Chief Executive Officer Glenn Rufrano said today on a conference call. Super LLC has total liabilities of $5 billion, Melbourne-based Centro Retail said.

Centro Retail, which has $1.1 billion of debt it must repay to U.S. creditors by Sept. 30 at the latest, has been tarred by the plunge in the value of its Sydney-based parent Centro Properties Group. The Australian owner of more than 700 U.S. malls has lost 90 percent of its value since saying in December it was struggling to raise funds amid the global credit squeeze.

Link.

Previous Centro Posts:

• Feb. 15, 2008, Centro Wins Extension
• Jan. 15, 2008, Scott Out, Rufrano In at Centro
• Jan. 10, 2008, Daily Centro Update
• Jan. 9, 2008, UBS Cuts Stake in Centro
• Jan. 3, 2008, Centro: Morgan Stanley, Westfield Have Approached Firm
• Jan. 2, 2008, Centro Says Its Getting Offers
• Dec. 18, 2007, Another Round of Centro Coverage
• Dec. 17, 2007, Centro Hit by Credit Crunch
• May, 10, 2007, Centro’s Structure
• Feb. 28, 2007, Centro To Buy New Plan

I’ve got it linked in my blog roll, but if you haven’t checked it out already, you really should look at the The Mall Hall of Fame.

As the “curator” describes it, “One of many classic mall and retro retail internet sites, the MALL HALL OF FAME is a ‘Mid-mod’ mall museum, covering shopping centers of America’s mid-20th century (1950-1979). There are short articles, a few photos, and at least one physical layout drawing for every mall inducted. Please feel free to post any additional info you may be aware of.”

There are now more than 200 malls featured on the site. For each mall there is a ton of great information–photos, site plans and history of the property. It’s a labor of love. And it’s extremely well done.

The roster of retailers closing stores continues to get larger. The most recent name: Zale, which is closing 105 stores.

Jewelry retailer Zale says it will cut more than 200 positions and close 105 stores in 2008, in an effort to save more than $65 million a year.

The company says it will eliminate 140 filled and 85 open positions, or 20% of the staff at its headquarters in Irving, Texas. Most of the $4 million in severance-related and other costs from the initiative will be recorded in the company’s fiscal third quarter ending April 30.

There’s a thought-provoking post over at ULI’s blog, The Ground Floor, that takes up the question of whether denser developments breed more crime.

The story is in response to a new study that shows that “residents of high-rise apartments are much more likely to be victims of crime — specifically street crime. The effect remains similar after statistically adjusting for poverty, demographics and public housing: It’s the height of the building itself that matters.” The report was featured in a Washington Post story.

So what are the best ways to design compact, densely populated, walkable communities which are attractive, safe and lively? One thing clearly needed is enough housing so people live in the community; this is what creates the “24/7″ communities which have been shown to be most successful over time. What are the best ways to do this while reducing crime and enhancing public safety?

Population density brings “eyes on the street” which generally reduces crime. It is better to walk around at night where other people are also walking, not down lonely alleys. More population density also supports more stores and activities — movies, restaurants, and the like — which bring lights, life and more people. One of the biggest mistakes of many new suburban town centers is the failure to include enough housing, with the result that there are not enough people to support the stores and restaurants needed to keep the center economically and socially vital.

The only way to bring in population density is to build up. Single family homes, even town homes lined up side by side with party walls, do not give the density in a walkable range to support stores and services and have eyes on the street. It takes apartments and condos to do that. This means at least mid-rise construction, and in some places true high rise buildings.

A few weeks ago we linked to a story outlining Wal-Mart’s clinic plans. Now RNCentral has put up an interesting analysis of that plan looking at 20 Surprising Ways Wal-Mart Clinics Will Affect US Healthcare.

Big-box behemoth Wal-Mart has ventured into the healthcare realm, offering low-cost, walk-in clinics in more and more of its stores every day. Although Wal-Mart medicine may not sound like a great idea at first, these clinics can bring good changes to the health care industry, like insurance-free care, eased emergency rooms, and more widespread treatments. Of course, the plan is not without its drawbacks, creating a “Wal-Mart effect” on small practitioners, as well as a race to the bottom. Here, we’ll take a good look at some of the implications you might not have thought about.

1. More immunizations: With immunizations available at Wal-Mart, they’re much more convenient for those that may not have time to go to the doctor. As a result, more people will be immunized, and the risk of contagious disease will be lowered.

For the rest of the list, go here.

Inland American Real Estate Trust Inc. has raised its stake in Cedar Shopping Centers Inc. to 12.3 percent, according to a filing with the Securities and Exchange Commission Wednesday.

Inland American beneficially owns 5.4 million shares, or a 12.3 percent stake based on 44.2 million shares outstanding as of Nov. 2.

Previously, the company reported owning about 5 million shares, or an 11.3 percent stake in the Port Washington, N.Y.-based shopping-center real estate investment trust.

Last month, Inland American, a REIT affiliate of Inland Real Estate Group of Cos., said it may seek control of Cedar through a cash tender offer, a possible merger or acquisition or through representation on the company’s board.

Link.

In about 40 minutes, every Starbucks in the country is going to close down. But don’t worry. They’ll be back. However, nationally every Starbucks will be conducting a three hour training session for all company employees.

Warning to Starbucks junkies who usually get a fix on their way home from work: You’re out of luck on Tuesday.

Starbucks, which last week announced 600 layoffs, plans to temporarily close its 7,100 U.S. stores on Tuesday for three hours of employee training.

The coffee chain said the in-store training program which will begin at 5:30 p.m. local time, would foster enthusiasm in its 135,000 U.S. employees and improve the quality of drinks made by Starbucks baristas.

“We believe that this is a bold demonstration of our commitment to our core and a reaffirmation of our coffee leadership,” said chief executive Howard Schultz in a statement.

Link.