Orion cashes in with Spanish sale

Orion Capital Managers has sold its Puerto Venecia shopping centre and retail park in Zaragoza in Spain to Intu for €451m.

The deal is a new landmark for the country’s real estate recovery with the sale reflecting a 5% yield, pricing unimaginable only six months ago. Having entered at its very nadir, the sale also shows Orion’s willingness to call the market, at a time when institutional and some opportunistic capital is still piling in.

Orion will have made a sizeable return on its investment. It bought half of the 2.3m sq ft mall in January 2011 from a consortium including Tommy Gallagher and Copsica Corporation for an undisclosed price and the remaining 50% from British Land in October last year for €144.5m. The divestment has been made by Orion’s Orion European Real Estate Fund III.

The fund manager is also in the process of selling its 70,000 sq m Plenilunio shopping centre in Madrid for €400m, which is expected to achieve a similar yield to the Puerto Venecia sale. Orion bought Plenilunio in May 2009 for €235m from Banif Immobiliare, the Santander-managed real estate fund that had frozen redemptions. The price at the time equated to a yield of 7.5%.

A €225m bridging loan has been obtained by Intu from one of its regular relationship banks, HSBC, which can exchange for a five-year term loan secured on the asset, with an all-in cost of debt estimated to be around 3.5%.

Intu said that it “would be giving consideration during 2015 to introducing an investment partner into Puerto Venecia”.

David Fischel, chief executive of Intu, said:

“The acquisition of the Puerto Venecia shopping centre following last year’s successful acquisition of Parque Principado, Oviedo, is another great addition for the group. The transaction substantially accelerates our activities in Spain, which is a country where we see major opportunities for the type of genuinely regional destination centre in which the group specialises, like intu Trafford Centre in the UK.

“Puerto Venecia represents such an asset, with an attractive combination of retail, restaurants and leisure. The centre is seeing strong growth in footfall and retailer sales from key names and provides an excellent template for the future development of sites we have under option, such as in Malaga where we expect to move the project forward significantly in 2015.”

Intu bought into Spain in October last year alongside CPPIB, acquiring Parque Principado Shopping Centre in Oviedo for €141.5m. At the time it said it would explore the possibility of establishing a Spanish REIT.

It also has options on four development sites in Malaga, which will be the first project and for which Intu may also soon look for an investment partner; Valencia; Palma and Vigo.