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

British Groups Invest Heavily In Spain’s RE Sector

9 May 2017 – Expansión

The Grosvenor group is embarking on its first residential project in Spain, developing luxury homes in Madrid. It is following in the footsteps of other compatriot companies such as Intu, Taylor Wimpey and Benson Elliot.

One of the latest real estate companies to show its commitment to Spain has a history that spans 340 years. The firm in question is Grosvenor, the centuries-old British firm, which closed its first investment in the Spanish residential sector about two months ago.

The project chosen by Grosvenor for its arrival in Spain is a luxury residential development on the Golden Mile of Madrid. To this end, Grosvenor, through its subsidiary Grosvenor Europe, completed the purchase of a plot of land measuring around 820 m2, located at number 53 on Calle Jorge Juan, for the development of six exclusive apartments and one penthouse with views over the Retiro Park. (…).

Grosvenor’s operation on Jorge Juan forms part of a joint venture signed by the Asian firm Amcorp in July 2016, whereby it undertook to invest €70 million during the first phase. “We hope to build a significant real estate portfolio in Spain during 2017”, said sources at the British group, which was founded in 1677 by Sir Thomas Grosvenor, and which is nowadays one of the largest landowners in the United Kingdom.

In light of this commitment to Spain, Grosvenor, which has four divisions through which it operates in Europe, Asia, America and the United Kingdom, has strengthened its office in Madrid, led by Fátima Sáez del Cano, by hiring Miguel Silmi, who formerly served in interim roles at firms such as Altamira, owned by Banco Santander. (…).

Investment

Grosvenor’s commitment to Spain is not a unique case amongst the large British groups. “Investors from the United Kingdom have always liked the Spanish real estate market and they have invested throughout the economic cycle. For example, Heron International, which is known today for the shopping centres that it built in Madrid, Barcelona and Valencia, used to hold a significant portfolio of office buildings in Madrid, in the 1990s”, said Javier García-Mateo, Partner in Financial Advisory at Deloitte. (…).

Meanwhile, Benson Elliot has been present since 2011. That fund has just closed the purchase of the Hotel Silken Diagonal, together with the joint venture between Walton Street and Highgate. Previously, BE had purchased two other assets in Barcelona, which it has now sold. “Another British firm, London Regional, has purchased hotels and offices in Spain and has also taken advantage of the cycle to sell them at a profit”, said Rafael Bou, Partner in Real Estate at PwC.

“Having invested more than €2,147 million since 2011, British funds are the second most significant international investor in the Spanish real estate market, after the United States (…)”, according to Savills. During the first quarter of 2017, British firms have already made real estate purchases amounting to €550 million, according to Deloitte.

One example of this commitment is the return of British Land to Spain, which last year purchased the Nueva Condomina shopping centre in Murcia, and the more than €120 million that has been invested by the UK & European Investment group in operations in Madrid, Barcelona and Marbella. (…).

In addition to real estate companies and investment funds, some of the large British insurance companies are also placing their focus on the Spanish real estate sector, such as the case of Prudential and Aviva, which just closed the purchase of the Tormes shopping centre in Salamanca.

Original story: Expansión (by Rocío Ruiz)

Translation: Carmel Drake