EUROPE – The €162m acquisition of a Spanish shopping centre by the Canadian Pension Plan Investment Board (CPPIB) and Intu is expected to mark a resurgence in institutional investment in retail assets in Spain and Italy.
The 75,000 sqm Parque Principado in Asturias was sold to a joint venture between CPPIB and Intu, a UK real estate investment trust (REIT), by existing owners Sierra Fund and CBRE Iberian Value Added Fund.
The deal was one of the two Spanish shopping centre transactions in due diligence, the other being Urbil, a 20,000 sqm asset in San Sebastian being acquired by UBS Global Asset Management on behalf of German institutional investor E.ON.
According to Henderson Global Investors, which released a report this week making the case for investing in Spanish and Italian shopping centres, both deals are being priced with yields of 7% or higher.
"Institutional investors are now returning, and a couple of deals in due diligence should set the prime tone for shopping centres and parks going forwards," the report said.
"The timing is now right to invest [to] take advantage of yield-driven capital growth. The recovery in prime yields will take place quickly, ahead of economic stability and the recovery in retail sales and will perhaps leave a narrow six-month window to invest."
Graeme Eadie, head of real estate investments at CPPIB, said the Parque Principado transactions was "an opportunity to acquire a prime regional shopping centre in Spain and is in line with our global retail strategy to invest in high-quality assets that are leaders in their catchment area".
He added: "This is an attractive entry point to the Spanish retail market."
Stefan Wundrak, director of research at Henderson, said the risk premium for Spain and Italy was higher than that of most other major European countries, but that "expected returns should compensate for the risk".
He added: "Capital uplift will drive short-term performance as yields respond to lower risk aversion, and rental growth will contribute to performance after retail sales and retailer confidence recover."
According to the report, the required return for Spanish and Italian shopping-centre investments, once pricing in risks and bond yields, should be close to 9%.
