intu properties has announced that it has exchanged and completed contracts with entities of the Ivanhoé Cambridge Group to acquire Xanadú shopping centre in Madrid, Spain, along with its associated management company and the SnowZone operating company, for a total cash consideration of €530 million, before working capital and other adjustments.
The centre itself, excluding the management company and SnowZone business, was externally valued on 1 February 2017 at €526 million, which represents an initial yield for the centre of 4.3 per cent based on its annual net rental income of €23 million.
A €263 million five year term loan with Santander, BBVA, Credit Agricole and Caixabank has been secured on the asset, with the all-in cost of debt estimated to be around 2.0 per cent. The balance of the consideration will be met from intu’s existing resources. The acquisition is expected to be earnings accretive.
intu is looking to introduce an investment partner into Xanadú and are currently progressing discussions with potential partners.
David Fischel, intu Chief Executive, commented:
“The acquisition of Xanadú is an excellent addition to intu’s growing portfolio of leading regional shopping centres in Spain, taking our ownership to three of the country’s top ten centres and now including one in the country’s capital city. Xanadú’s market position as an attractive shopping and leisure destination covering a major sector of Madrid fits well with our strategy of focusing on prime regional shopping centres in both the UK and Spain. We see a number of compelling opportunities to further enhance Xanadú’s status, such as improving the leisure and catering offering, with a Nickelodeon theme park and an aquarium due to open in 2017, and ensuring an enticing retail mix, which we believe will drive increased footfall and dwell time and ultimately improve rental levels and capital values.”
Investment strategy for Spain
- The acquisition of Xanadú, along with the existing ownership of intu’s Asturias, Oviedo and Puerto Venecia, Zaragoza, takes intu’s ownership to three of the top ten centres in Spain, positioning intu as one of the leading regional shopping centre landlords in Spain.
- The centre fits well with their focus on major regional destinations in both the UK and Spain, such as intu Trafford Centre and Puerto Venecia, offering shoppers a full day out with a wide range of retail, restaurant and leisure opportunities.
- Located in the south-west area of Madrid, Xanadú is the major shopping and leisure destination in its core catchment of 1.2 million people that covers some of the wealthiest areas of the city. Average disposable income is 18 per cent above the Spanish average and the unemployment rate is 8 per cent below the national average. The centre is located within one of the fastest growing and densely populated areas of the city.
- The key asset management initiatives for the centre revolve around enhancing its status as a truly regional retail and leisure resort. Improving the catering and leisure along with ensuring that the centre delivers an enticing retail mix will drive increased footfall and dwell time, ultimately improving rental levels and capital values.
- The acquisition is expected to be earnings accretive and offers good reversionary potential over the medium term, with further growth opportunity from our key asset management initiatives.
intu in Spain
In October 2013, when intu acquired what is now called intu Asturias, they highlighted that the Spanish shopping centre market offers opportunities to create a quality business of scale which has the potential to generate superior total returns over the medium term. intu now owns three of Spain’s top ten shopping centres, with Xanadú added to their two existing centres which are generating strong returns.
Similar to their approach in the UK, their aim is to be the leading owner, developer and manager of regionally pre-eminent shopping centre destinations for a significant number of the major areas of Spain. Eighty per cent of the country’s retail expenditure comes from ten key catchment areas.
Ownership of the largest Spanish shopping centres is still fragmented and many regions do not have a prime retail and leisure destination. The committed pipeline of prime shopping centre developments across Spain is at a low level and we believe the opportunity exists to develop and build new schemes in a number of key regions of Spain.
In addition to the three top ten centres that intu owns, they have a development site near Malaga and options on sites in Valencia, Vigo and Palma. Construction of intu Costa del Sol, near Malaga is expected to start in the next 12 months.
In recent years, the Spanish economy has had significant growth making it one of Europe’s fastest growing economies. Forecasts suggest that this is expected to continue in 2017. For the consumer, unemployment is at its lowest level for several years and household spending remains solid. This in turn benefits retail sales which are further enhanced by record levels of tourists.