A prime mixed-use asset for sale on Castellana, Madrid's main avenue, has sparked a fierce bidding war among international investors eager to re-enter the Spanish property market at rock-bottom prices.

A prime mixed-use asset for sale on Castellana, Madrid's main avenue, has sparked a fierce bidding war among international investors eager to re-enter the Spanish property market at rock-bottom prices.

Castellana 200, an office and retail complex formerly owned by bankrupt property group Reyal-Urbis before being repossessed by banks Banco Santander, Banco Bilbao Vizcaya Argentaria and the Bankia Group, has attracted over 20 offers exclusively from foreign investors in a sales process which is being run by agents CBRE and Knight Frank.

'We are in the final stage of the sale and the asset has drawn strong interest,' Adolfo Ramirez Escudero, president of CBRE Spain, said during the MIPIM trade fair. 'This is a good example of what investors are looking for, which is properties offering upside potential through asset management.'

He declined to provide further details on the transaction process.

US investors Pimco and Perella Weinberg, as well as Anchorage Capital Partners from Australia are believed to have been shortlisted for the asset, which is expected to fetch around €150 mln.

Castellana 200 consists of two office buildings totalling 21,500 m2 and a 8,500 m2 retail element with tenants including H&M, Media-Saturn and Mediamarkt. The office section, which boasts CBRE as a tenant, is 15% vacant. It also includes 800 parking spaces and a 18,000 m2 hotel which is currently without an operator.

The asset is believed to have involved a development cost for Reyal-Urbis of around €300 mln.

Spain is witnessing increasing activity on the part of foreign investors and growing competition is starting to pressure yields, according to those who track the market.

European asset manager CBRE Global Investors is believed to be divesting the 84,900 m2 El Boulevard regional shopping centre in Vitoria, Northern Spain, for a yield below 6.75% after having received a dozen bids for the asset, which comprises 161 shops and 4,000 parking spaces.

That figure compares to a net initial yield of 7.2% paid by a joint venture of Intu and CPPIB for the Parque Principado regional mall in Oviedo in northern Spain in late 2013.

'In the prime office sector, we could see investors bid below 6%, which compares to 6.5% only a few months ago,' commented Luis Espadas of agent Savills in Spain. A wide array of global capital sources is looking at Spain at the moment and international banks are contacting potential bidders to offer loans, he added.

'Even US investors are now soft opportunity funds, because there is so much capital chasing the same product that they have to bid higher,' Espadas commented. The occupier market also looks promising, he noted, with the market reporting rental growth for the first time in 35 quarters.