Heron City Sale Fails to Spark Interest amongst Investors

12 December 2017 – El Confidencial

A concept too unique for a market that is used to something a lot more familiar. That is the moral that can be drawn from the decision by Heron International, the property developer behind the famous Heron City centres, to put into quarantine the sales process of the three leisure centres that it owns in Spain.

The offers received by the British company fall well below its expectations, which has caused it to reconsider its whole strategy and take the decision, last week, to suspend the current sales process, according to sources familiar with proceedings.

As El Confidencial revealed in September, the British company engaged CBRE to find a buyer for its whole portfolio, which comprises Heron City Las Rozas (Madrid), Heron City Paterna (Valencia) and Heron Diversia Alcobendas (Madrid), and which has a valuation of between €230 million and €250 million.

Nevertheless, the appetite in the market has been lower than anticipated because the usual suspects who typically participate in these types of operations (large international funds and Socimis) actually specialise in shopping centres, whose casuistry differs from those of leisure centres, and where lots of investment opportunities are still emerging.

In 2017 alone, with less than a month to go before the end of the year, 17 transactions involving shopping centres and retail parks have been closed across Spain, according to data from the trade association AECC, led by giants such as Xanadú. Moreover, during the next two years, around twenty new centres are expected to open and six centres are due to be expanded, which will see an additional gross leasable area come onto the market of more than 2 million m2.

The result has been that Heron International has decided to suspend the sales process and redefine its strategy. The three Heron City complexes, which span a combined gross leasable area of 84,000 m2, have 6,100 parking spaces, receive more than 12 million visitors per year, and represent a brand that arrived in Spain almost three decades ago with a very specific leisure concept, based on cinemas and a restaurant offer that tries to distance itself from classic fast food.

Since its arrival in Spain, Heron International has only starred in one operation, involving the sale of one of its leisure centred, namely Heron City in Barcelona, which it sold to Babcock & Brown and GPT at the end of 2006 for €138 million. Almost a decade later, as El Confidencial revealed, that complex was acquired by ASG, the Spanish subsidiary of Activum, a deal that represented that firm’s first operation in the Catalan capital.

The leisure centre in Barcelona, as well as those in Las Rozas and Paterna were all built by the British company. In the case of Diversia, it purchased that centre in 2003 in conjunction with Realia (50%) and a decade ago it took over all of the share capital when it also acquired the stake owned by FCC’s subsidiary.

Original story: El Confidencial (by R. Ugalde)

Translation: Carmel Drake

Heron International Engages CBRE To Sell All Its Assets In Spain

11 September 2017 – El Confidencial

The group that revolutionised the concept of shopping centres in Spain has completed its cycle in our country. The British firm Heron International, the developer of the Heron City retail and leisure spaces, has decided to divest all of its establishments in Spain. To this end, it has just engaged CBRE to organise a restricted sales process, in which only a limited number of investors, who have already been selected, are going to be invited to participate.

Sources at the real estate consultancy acknowledge that they have been awarded the exclusive mandate for this process, but they declined to comment further. Nevertheless, sources familiar with the process say that all of the potential buyers on the closed list (which includes major investors, Socimis and institutional funds)have now been contacted and that the portfolio is worth between €230 million and €250 million.

Specifically, the portfolio comprises the Heron City Las Rozas centre (Madrid), the Heron City Paterna centre (Valencia) and Heron Diversia Alcobendas (Madrid), which have a combined gross leasable area of 84,000 m2, along with 6,100 parking spaces and more than 12 million visitors per year. Those figures make this transaction one of the most important in the retail segment at the moment.

The operation includes the right to use the Heron City brand, which will allow the new owner to continue to fly the flag of a concept that arrived in our country almost three decades ago. It represents more than just a shopping centre, since it also encompasses leisure, restaurants and experiences, and is committed to outdoor spaces and partnerships with iconic brands.

For example, in terms of cinemas, Heron always works with Kinépolis and Cinesa to develop large, high-end cinema complexes; whilst Virgin is its typical travelling companion for gyms; moreover, the gastronomic offering always includes some premium concepts, steering clear of classic fast food.

History in Spain

Since it first arrived in Spain, Heron International has only starred in one sale operation involving a retail centre, that of Heron City Barcelona, which it sold at the end of 2006 to Babcock & Brown and GPT for €138 million. Almost a decade later, that complex was acquired by ASG, the Spanish subsidiary of Activum, in that firm’s first operation in the Catalan capital.

Both the Catalan centre as well as those in Las Rozas and Paterna were constructed by the British company, whereas Diversia was purchased in 2003 in a 50:50 alliance with Realia; a decade ago, Heron took over all of the share capital, after it acquired the 50% stake from FCC’s subsidiary.

Nevertheless, although the property developer is known for its retail centres, its history in Spain goes well behind that concept and is directly linked to the turbulent times of the 1980s and the purchase that it made then of the real estate division of Rumasa, as well as of Las Torres de Colón.

Following those acquisitions, it made a commitment to the Government to undertake investments in our country amounting to 30,000 million pesetas (equivalent to €180 million), an agreement it more than fulfilled with the development of its shopping centres. Moreover, its good work in our country also includes the construction of several hotels that, subsequently, have been sold.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake