30/09/2014 – El Confidencial
This is the most wanted retail plot in Madrid. Located in the middle of the Paseo de la Castellana avenue, between the tower of BBVA and the Nuevos Ministerios stop of the Cercanias light railway and just in front of a El Corte Ingles department store, the spot is perfect for grand commercial brands, above all the fashion ones.
Current owner of the property, public railway firm Adif, has been granted a permission from the Government to sell the piece of land. The sale process is expected to conclude in November.
With an asking price of €40 million, an excellent location at few minutes walk from the Santiago Bernabeu stadium, the 10.200 square meter plot may become the battlefield for textile giants.
Moreover, the land includes 25.000 square meters more underground, which may be converted into a huge parking in the Azca Complex in the heart of the capital, adjacently to such iconic skyscrapers as the Torre Picasso tower (also known as the Torre BBVA, although the bank had sold it before moving to the Las Tablas neighborhood), the Torre Europa tower or the Edificio Mahou building.
‘The location is unbeatable for any fashion retailer. All the more that, according to a survey carried out by portal Modaes.es, 90% of clothing brands declared an intention of increasing sales in Spain’, says Patricio Palomar, research and investment strategy director at CBRE España.
Real estate market points at Inditex, Mango or H&M as the sure competitors for the plot. El Corte Ingles already has got an enormous establishment at the location and the odds are almost null that it will submit any bid.
Mango, owned by Isak Andic, has lately purchased another extremely attractive property in Madrid, at the corner of the Orense and the Raimundo Fernandez Villaverde streets. When it comes to Zara and H&M, they have also dominated the Golden Mile (the Orense st.).
The Buyer Profile
So, what kind of buyers will attend the tender? Basically, there are two options. Firstly, the purchaser will directly develop the real estate project with their own funds or with external financing provided by a bank or an investment fund. Secondly, the developer will be also the owner of the project and they will rent the building to an interested operator in exchange for a share in profits.
However, also a forward funding project strategy could work out in this case. One one hand, there would be an agreement between the developer and the retailer. The first would implement a turn-key project for the latter. Simultanously, there would be a settlement between the investor and the developer to buy the project once finished and occupied by the retailer. Then, the investor would acquire the property bringing sure return and they could participate in the operation financing.
Nowadays, there are operators like H&M, Primark or Fnac which could be interested in purchasing the plot but land and developing are not their core business. Almost none of them owns the property they rent, except for singular units. Unlike Mango or Inditex, they have no family office to buy assets.
Who could finance the operation? Well, only several investment funds are presently able to assume the developer risk: AXA REIM, Meyer Bergman, LGSI, British Land, Rodamco, Redevco, ING Real Estate, etc. Also, Adif as a Public Private Partnership (PPP) could do that. Together with Riofisa and under the name of Vialia, the railway firm has developed many shopping centers at various train stations.
However, it is highly likely that Amancio Ortega himself will attend the bidding. Reasons are few. Firstly, because the Nuevos Ministerios spot has been the must for a Zara shop for long. Secondly, because the future property fits in Inditex’s stretegy to invest in major buildings. Thirdly, because the plot is situated on the other side of the Paseo de la Castellana avenue, on the Paseo de la Habana avenue, where the group’s Massimo Dutti clothing brand already exists. Furthermore, the purchase would mean a knock-off to El Corte Ingles, standing just next to the terrain. And finally, because Azca has become one of the favorites of Pontegadea, the investment arm of Mr. Ortega which bought the Torre Picasso tower and is the landlord of Fnac, having a store in front of the plot on sale.
Original article: El Confidencial (by R. Ugalde & E. Sanz)
Translation: AURA REE