Doughty Hanson abandons EUR 500m Madrid mall project

European private equity group Doughty Hanson has decided not to exercise its option to develop the Valdebebas shopping centre project in northeastern Madrid, a company spokesperson told PropertyEU.

The decision to abandon the project is linked to delays in the development of the adjacent residential units.

'The owners of the housing element have just started development,' the company official said. He added: 'Given the size of the shopping centre project in relation to our real estate business, we felt that it was too much exposure to one asset at this time and furthermore the development no longer fulfilled the risk-adjusted returns sought by our investors.'

He said Doughty Hanson is 'still interested in investing in Spain going forward but is likely to pursue investments with an existing income'.

The large-scale project, that was in the early stages of design by architects Chapman Taylor, was planned to offer some 140,000 m² of gross retail space on completion in 2015. The total investment cost for the scheme was estimated at some EUR 500 mln.

Doughty Hanson won an option to develop the site in May 2010 and work was initially planned to begin in the first quarter of 2012. C&W and CBRE were appointed as marketing agents.

The city of Madrid will now be looking for a new developer for the project, which has been on the drawing board for years, and is said to be considering offers from other retail centre specialists. In 2006, local property groups Metrovacesa and Riofisa won the construction contract but decided to pull out of the project two years later as a result of tight credit conditions and the property downturn in the country.