More than a year after Michael Carroll assumed the post of Centro U.S. president and CEO, Centro Properties Group’s U.S. division appears to be on the road to recovery.

When Carroll took over as CEO in March 2009, he said his top priority would be stabilizing the firm’s U.S. portfolio and improving occupancies throughout its centers. During the past 18 months, Centro has been able to lease more than half of its empty big box spaces to new tenants, in addition to divesting of its non-core assets. But it still has work to do. Approximately 40 percent of its boxes remain vacant and the firm is also dealing with vacancies among its in-line tenants.

“We still have to focus on leasing, it really is a time when [leasing] has never been more important,” says Carroll. “As an industry, we’ve lost a lot of occupancy to this recession; there is an awful lot of supply in the marketplace today, so we’ve got a very focused plan to deal with all of this. We think it’s the best use of our efforts and capital right now.”

In many ways, Centro U.S.’ recent performance mirrors that of U.S.-based shopping center REITs and reflects the gradually improving conditions in the marketplace. In July, Centro’s U.S. group, which includes Super LLC and its subsidiary Centro NP, secured a one-year extension on $2.3 billion in debt and a new $659 million term loan. The new loan features a fixed interest rate of 6.57 percent and is secured by 76 Centro assets. The deal represents the largest single borrower retail financing transaction in the U.S. since the start of the credit crisis, according to Carroll. In his view, it also validates the high quality of Centro’s centers.

Overall, Centro Properties Group, which over-leveraged during the real estate boom and almost careened into bankruptcy, still faces a $16.6 billion debt load. As the company unwinds its debt commitments, it might consider splitting its U.S. and Australian division, according to published reports. Carroll would not comment on the possibility.

For most of the last year, Centro U.S. has worked on improving its portfolio metrics. From July 2009 through March 2010, Centro U.S. sold 12 properties it considered non-core. The firm then used the $149 million in proceeds to pay down part of its debt. As of March 31, Centro operated more than 600 centers in the U.S. totaling 99 million square feet. The firm will continue to evaluate its portfolio on an ongoing basis, but the bulk of its dispositions has been dealt with, according to Carroll.

Centro’s leasing team is also trying to improve occupancy levels. In the wake of massive retailer bankruptcies and liquidations that occurred in U.S. in the first half of 2009, Centro got back approximately 2.5 million square feet of empty big box space. A year later, roughly 60 percent of that space has been spoken for through new deals with expanding retailers including Bed, Bath & Beyond, hhgregg, T.J. Maxx, Forever 21, Best Buy and others. Still, as of March, the occupancy rate for Centro’s U.S. portfolio stood at 89.7 percent, a decrease of 60 basis points over the previous quarter. (Centro will report its metrics for the quarter ended June 30 next week.)

Carroll says that he feels encouraged by the pick-up in leasing activity among U.S. national retailers in the past few months. Due to a lack of new development projects, large format retailers have been more willing to sign up for second-generation space, making it easier to clean up the mess left by the bankruptcies of Circuit City, Linens ‘n Things, and others.

“We are returning to a more normalized level of store openings,” Carroll says. “Over the past 18 months, retailers were primarily focused on opportunistic spot deals. What we are starting to see is more of a strategic view, where the retailers are looking at opening a market, whatever that market is. That requires much more of a strategic set-up: they need to put together a handful of deals in the market to be able to do that. They need multiple stores and they are committed to it.”

In addition, Centro has been signing a high volume of temporary leases, in the hope that retailers who sign up for temporary deals will in some cases turn into permanent tenants. Carroll brings up the Holiday Express stores run by Toys ‘R’ Us as an example.

“The small format toy stores have gone out of business, so it’s a nice way to add a unique retailer that hasn’t been present for a number of years into the shopping center mix,” he notes.

Carroll estimates that from June 2009 through June 2010, Centro U.S. has signed approximately 180 temporary leases.

In spite of increased leasing demand, however, Centro continues to feel the pressure on its rental rates. During the quarter ended March 31, rental income for its U.S. portfolio fell 1.9 percent. Same-store NOI growth for stabilized properties went down 5.6 percent.

“We certainly still have a ways to go before landlords and tenants are truly back to an equilibrium because we’ve got so much space on the market,” Carroll says. “We have excess capacity that will continue to put pressure on rents.”

During the second quarter of 2010, national vacancy rate for U.S. neighborhood and community centers reached 10.9 percent. Effective rents fell 0.5 percent.