The owner of the Lakeside shopping centre made a bold pitch into austerity-stricken Spain today, armed with the financial firepower of a huge Canadian pension fund.
Intu Properties, which owns 16 shopping centres across the UK, has spent €162 million (£101 million) on the Parque Principado Shopping Centre in Asturias, northern Spain — one of the nation’s top 10 shopping centres with nine million visitors a year. Tenants include Ikea, Primark, Zara and H&M.
The company has joined Canada’s CPPIB pension fund, which manages C$188.9 billion (£114 billion), on the deal. It also has options on sites to build more retail centres in Malaga, Valencia and Vigo. Intu is looking for partners to help replicate its model of UK regional shopping centres in Spain without extending its balance sheet too far and sacrificing investment at home, potentially pooling assets into a tax efficient Spanish real estate investment trust.
Spain’s debt-laden banks were bailed out last year, and its economy has only just emerged from a two-year recession. It is expected to return to growth next year, but unemployment is still above 26 per cent and private consumption is not forecast to return to growth until 2015.
But Intu, which bought Parque Principado on an attractive yield of 7.2 per cent, highlighted Spain’s lack of shopping-centre developments in the pipeline as well as limited competition for existing centres. Chief executive David Fischel said the deal “firmly establishes our presence on the ground in a country where we see considerable growth opportunities in the regional shopping centre industry”.
CPPIB’s head of real estate investment Graeme Eadie said that the purchase was “an attractive entry point to the Spanish retail market”.
Intu shares were flat today at 321.65p. Canaccord Genuity analyst Sue Munden said: “We see the tie-up with CPPIB as positive as we have felt that it would be useful for Intu to partially divest some of its UK assets in order to help fund the necessary upgrade of some of its UK centres.
“However, the short term implications for funding and the inevitable distraction of management time will be less helpful for the UK portfolio.”