Orion buys BL's stake in massive Spanish mall

UK-based private equity firm Orion Capital Managers has bought out British Land from the 50-50 joint venture which owned the massive Puerto Venecia shopping centre and retail park in the northern Spanish city of Zaragoza.

Orion's European Real Estate III fund acquired British Land's 50% interest for €144.5 mln, in line with the asset’s latest valuation, according to Charles Maudsley, head of retail for British Land. ‘The disposal halves our (Continental) European exposure to 1%,’ he noted. The sale is part of the UK REIT’s plans to retreat from Continental Europe where it owns £255 mln (€300 mln) of retail holdings.

Following the deal, the asset is owned entirely by Orion’s fund. According to market sources, Orion decided to take full control of the scheme in order to facilitate a refinancing of the loan which is coming to maturity next year. The private equity firm had previously sought to refinance the mall in order to enhance the investment returns, but the debt restructuring was hampered by British Land’s uncertain position in the asset.

Orion finalised the acquisition of an initial 50% stake in Puerto Venecia in May 2011 from Spanish developer and investor Copcisa Corporaciónis for a price of around €48 mln. The project is owned by a company named Eurofund Investments Zaragoza which two years ago had total debt of €300 mln from a banking syndicate comprising Royal Bank of Scotland and a group of local lenders.

Originally launched in 2000, the joint project of Spain's Copcisa and British Land marked the UK REIT's first foray into the Spanish market.

Puerto Venecia currently comprises a 890,000 sq ft (82,600 m2) retail park which opened in 2008 and a 130,000 m2 fashion and leisure phase which opened in October 2012. The scheme generates annual rents of £16 mln.

British Land entered mainland Europe in 2005 with the purchase of Pillar Property, a retail specialist with assets in Spain and Italy. It still owns stakes in 10 retail parks, through its 65.3% interest in the Pillar Retail Europark Fund (PREF).

According to those who track the market, British Land is looking to sell both the assets and the property management business in a single package, with interested parties including retail specialists such as Henderson Global Investors which are looking to increase their exposure to Southern Europe.

PREF’s retail warehouses in Portugal, Spain, France and Italy have a combined value of £204 mln. In Portugal, the fund has five out-of-town retail parks, including the Sintra retail park near Lisbon. The 27,000 m2 Portimao Retail Park is in bad shape after it almost completely burned down in a fire in September last year.

In Spain, British Land's PREF currently owns the Nassica Retail and Leisure Park in Getafe to the south of Madrid, and the Vista Alegre Retail Park in Zamora. Both properties were refinanced last year with a new €61 mln loan from pbb Deutsche Pfandbriefbank. However, it is understood that the company's stake of roughly 60% in the 120,000 m2 Nueva Condomina in Murcia was handed back to the lender BNP Paribas after the loan backing the asset came to maturity in 2012.

British Land and PREF bought Nueva Condomina in March 2007 for nearly €350 mln, financing the deal with a €220 mln loan from Fortis Bank, currently known as BNP Paribas Fortis.