16 February 2015 – Expansión
The group Intu Properties is completing the exercise of its call option over a real estate project in Málaga, as part of a €2,500 million investment program launched by the British company to become the leading shopping centre operator in Spain.
The developer, which last year spent €613 million on the acquisition of Parque Principado (Asturias) and Puerto Venecia (Zaragoza) expects to hand over €41 million to the Peel Group for the purchase of a plot of land near Torremolinos, which has a licence for the construction of a retail and leisure complex measuring 175,000 square metres. According to the company, subsequent investment in this development, which will take three years to construct, will amount to €250 million.
In addition, Intu is considering other options to develop shopping centres in Vigo, Valencia and Mallorca. “Our objective is to become the market leader in the ownership, development and management of large regional (shopping) centres across Spain”, said the group. It is looking to replicate its model in the UK, where it operates 18 retail complexes all over the country.
HSBC estimates that the six shopping centres that Intu now owns or plans to acquire in Spain represent a total outlay of €2,500 million; the bank financed €320 million of the acquisitions in Asturias and Zaragoza. Stephen Bramley-Jackson, an analyst at the entity, said that “Intu’s real estate portfolio in Spain has the capacity to equal that of the current market leader for this type of property, Unibail-Rodamco, in terms of total investment”.
The Franco-Dutch group now has 16 (shopping) centres in Spain, after it sold the ones it owned in Albacete and Torrevieja last year. The average size of their shopping centres is smaller than those of Intu, which seeks to focus its investment in complexes measuring more than 100,000 square metres. In 2014, Unibail-Rodamco generated revenues of €147.1 million from the rental of its Spanish properties. Rental income from Parque Principado and Puerto Venecia amounted to €28.6 million.
The two other major players in this sector are Klepierre and Corio, which have invested around €500 million in shopping centres in Spain in recent years.
To maintain its role as market leader, Unibail-Rodamco has invested €600 million in several projects: it plans to expand two centres in Barcelona and construct two new centres in Palma de Mallorca and Benidorm. However, the firm has put the brakes on the development of the Oceania centre in Valencia.
Unibail and Intu seem set to share the market without competing directly in the same geographical areas. Intu, for example, has not yet launched any projects in Madrid or Barcelona, whereas its rival has a significant number of properties there. Meanwhile, Unibail does not have any centres in Asturias, Zaragoza, Malaga or Galicia. The slow down in the development of Oceania leaves the way open for Intu to develop its gigantic Puerto Mediterráneo centre, measuring 300,000 square metres in the Valencian town of Paterna. The two companies have parallel plans in Mallorca only, although Unibail’s Palma Springs centre is more advanced and looks set to open at the end of 2016.
According to Intu, the opportunity that it sees in Spain to launch new projects is focused on the regions “where ownership of shopping centres is fragmented and there is not currently a dominant destination for retail and leisure”.
With a market value of GBP 4,800 million (€6,480 million) and debt amounting to GBP 4,000 million, according to analysts at Investec, the British company is looking for partners for its Spanish ventures. The pension fund manager Canadian Pension Plan Investment Board acquired 50% of Parque Principado and may participate in other projects, according to HSBC. In addition, Intu Properties is evaluating the possibility of publicly listing its Spanish subsidiary or some of its (shopping) centres to secure foreign capital.
Some analysts wonder whether Intu has arrived too late in Spain, given that property prices are already recovering. The expected rental yield at Puerto Venecia (acquired in December 2014) is 5%, compared with 7.2% for Parque Principado, which was purchased in October 2013.
In terms of the next steps, Intu’s shareholders must approve the group’s purchase of the project in Malaga.
Original story: Expansión (by Roberto Casado)
Translation: Carmel Drake