INTU PROPERTIES PLC - Acquisition of Puerto Venecia Shopping Centre, Zaragoza, Spain for 451 Million

Acquisition of Puerto Venecia Shopping Centre, Zaragoza, Spain for €451 Million

INTU PROPERTIES PLC
(Registration number UK3685527)
ISIN Code: GB0006834344
JSE Code:      ITU


24 DECEMBER 2014


INTU PROPERTIES PLC


ACQUISITION OF PUERTO VENECIA SHOPPING CENTRE, ZARAGOZA, SPAIN FOR
€451 MILLION


Introduction
Intu Properties plc (“Intu”) announces that it has exchanged contracts with an entity indirectly
fully owned by the Orion European Real Estate Fund III C.V. (a fund managed by Orion
Capital Managers) to acquire Puerto Venecia shopping centre and retail park in Zaragoza,
Spain for €451 million. This represents a net initial yield of 5.0% based on net rental income
of €22.4 million. Eurofund, our development partner in Spain, was closely involved in the
original development of this award winning centre which opened in 2008 (retail park) and
2012 (shopping centre).
A €225 million bridging loan has been obtained from HSBC, which Intu can exchange for a
five year term loan secured on the asset, with the all-in cost of debt estimated to be around
3.5 per cent. The balance of the consideration will be met from Intu’s existing resources. The
acquisition, which is scheduled to complete in January 2015, is expected to be earnings
accretive.
Intu, in partnership with Eurofund, has options on four development sites in Malaga,
Valencia, Palma and Vigo. The Puerto Venecia acquisition substantially strengthens Intu’s
market position in Spain, ahead of embarking on the first of these projects which is likely to
be the Malaga site.
Intu will be giving consideration during 2015 to introducing an investment partner into Puerto
Venecia and possibly the development site at Malaga.


David Fischel, Chief Executive of Intu, commented:
 “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.”


Investment strategy
-   The acquisition of Puerto Venecia, along with our existing ownership of Parque
    Principado, Oviedo, takes our ownership to two of the top ten centres in Spain,
    positioning Intu as an increasingly significant regional shopping centre landlord in Spain.
-   Zaragoza is in the middle of the Aragon region of Spain, a key centre of economic
    activity due to its strategic position mid-way between Madrid, Barcelona, Valencia and
    Bilbao. The Aragon region is sixth in the ranking of Spanish GDP with a higher earning
    and spending power than the national average.
-   The increased scale of our activities in Spain as a result of this acquisition provides an
    excellent platform for our potential development projects where we have options on four
    major sites.
-   The acquisition is expected to be earnings accretive.
-   The centre has only opened recently and is seeing strong growth in footfall and retail
    sales from key names.
-   The centre was let and opened during a difficult period for the Spanish economy and the
    rental levels are not regarded as demanding, indicating scope for increases as the
    market recovers and the centre becomes fully established in its region.
-   We believe Puerto Venecia provides ample asset management opportunities including
    tenant repositioning, reconfiguring smaller units and developing some remaining plots of
    land.
-   Ownership of Puerto Venecia should benefit the Group’s overall brand and digital
    positioning. The centre fits well with Intu’s focus on major regional destinations, such as
    intu Trafford Centre, offering shoppers a full day out with a wide range of retail,
    restaurants and leisure opportunities.


Key facts on Puerto Venecia
Puerto Venecia is the regional retail and leisure destination for the Aragon and surrounding
regions and one of the top ten shopping centres in Spain. Situated eight kilometres to the
south of Zaragoza, with direct frontage onto the city’s ring road, it has an expected footfall
this year of some 18 million customer visits, an increase of over 15 per cent year on year,
from a catchment of over one million people.
The asset comprises a retail park and shopping centre which has a strong fashion mall and
adjoining leisure and restaurant area. The retail park was opened in 2008 and won the Best
Retail Park award at the 2010 Spanish Shopping Centre Awards. The fashion mall and
leisure and restaurant area are situated over two floors and surround a central lake. The
shopping centre was opened in 2012 and won Best Retail and Leisure Development
Worldwide at the 2013 Mapic Awards.
The centre and retail park provides a trading area of 200,000 square metres. This
transaction involves acquiring approximately 120,000 square metres, with the remaining
area owner occupied, including sites sold to Ikea, Leroy Merlin, Porcelanosa, El Corte Ingles
and Hipercor. The scheme is home to over 200 shops, restaurants and leisure operators,
including the Inditex brands, Primark, H&M and Apple. The asset has over 10,000 car park
spaces.
Occupancy, by rent, amounts to over 95 per cent in the shopping centre and around 90 per
cent in the retail park.


Opportunities for Intu in Spain
As we highlighted in October 2013, when we acquired Parque Principado in Oviedo,
Northern Spain, the Spanish shopping centre market offers opportunities to create a quality
business of scale which has the potential to generate superior total returns over the medium
term.
Similar to our approach in the UK, our aim is to be the leading owner, developer and
manager of regionally pre-eminent shopping centre destinations for a significant number of
the major areas of Spain. Eighty per cent of the country’s retail expenditure comes from ten
key catchment areas. We believe such expansion will be beneficial to the Group’s overall
brand and digital positioning.
Ownership of the largest Spanish shopping centres is fragmented and many regions do not
have a pre-eminent retail and leisure destination. The committed pipeline of prime shopping
centre developments across Spain is at a low level and we believe the opportunity exists to
develop and build new schemes in a number of key regions of Spain.
In addition to the two top ten centres that Intu now owns, we also have development options
on four sites in Malaga, Valencia, Vigo and Palma. We continue to work on bringing these
developments forward to the point where we can consider exercising the options, with the
Malaga site at the most advanced stage.


Spanish economy
Spain has returned to economic growth following six to seven difficult years of rising
unemployment, salary deflation and depressed consumer spending. While the Eurozone
continues to have economic challenges, Spain benefits from high quality infrastructure and
outperformed the Eurozone in 2014, with Q3 2014 being the fifth consecutive quarter of year
on year growth in GDP in Spain. The increase in business activity has led to unemployment
reducing and consumer confidence has reached its highest level since 2001 with
improvements in disposable income and recovering house prices reinforcing this optimism.
Aragon’s economy relies mainly on service and industrial sectors, key areas being
automotive logistics, transport, renewable energy and service providers. Unemployment in
the region has run at lower levels than the national average over the previous ten years,
currently around 18 per cent, against the national average of around 25 per cent. Income per
capita is approximately 10 per cent higher than the Spanish average giving the local
population greater spending power.


Parque Principado (one year on)
In October 2013, in partnership with the Canada Pension Plan Investment Board, we
purchased Parque Principado shopping centre in Oviedo, in the Asturias region of Spain for
€162 million. It is a top ten centre and the prime retail destination in the Asturias region. The
implied initial yield at purchase was 7.2 per cent and occupancy was 97 per cent.
As noted above, the Spanish economy has improved over the last year and the centre is
estimated to have increased in value by approximately 30 per cent since acquisition and we
have seen improved retailer demand with occupancy currently at 99 per cent.


Malaga site
Intu has until 15 February 2015 to exercise the option on the site at Malaga. The current
masterplan envisages a shopping resort style development of some 175,000 square metres
modelled on the Puerto Venecia asset combining retail with strong leisure attractions.
The site is excellently located on the main highway connecting all of the Costa del Sol. The
proposed development would have a catchment of three million residents along with a
further nine million tourist visits to the area per annum. We have been engaging with key
retailers and seen strong interest from them.
If Intu exercises the option, which is subject to shareholder approval, we anticipate that
infrastructure works would begin in 2015 with the main contract following thereafter. The
estimated overall construction contract would be in the region of €250 million, with a two to
three year build period. We expect to obtain development finance for this project and, as
mentioned above, are considering the introduction of an investment partner.

Conference call

A conference call for analysts and investors will be held today at 08:30 GMT.
A copy of this announcement and presentation are available for download from our website
at intugroup.co.uk




Enquiries
Intu Properties plc
David Fischel      Chief Executive                                                        +44 (0)20 7960 1207
Matthew Roberts         Chief Financial Officer                                           +44 (0)20 7960 1353
Adrian Croft            Head of Investor Relations                                        +44 (0)20 7960 1212


Public relations
UK:                     Giles Sanderson/Justin Griffiths, Powerscourt                     +44 (0)20 7250 1446
SA:                     Frédéric Cornet, Instinctif Partners                                +27 (0)11 447 3030


Sponsor:
Merrill Lynch South Africa (Pty) Ltd


Notes for editors
Intu owns and operates many of the very best shopping centres, in many of the strongest locations right across
the UK, including nine of the top 20. You can find the UK’s top retailers in our shopping centres, alongside some
of the world’s most iconic global brands.
With over 21 million sq ft of retail space, our centres attract over 400 million customer visits a year and more than
half of the UK population visit one of our centres each year.
At the forefront of UK shopping centre evolution since the 1970s, our focus is on creating compelling destinations
for customers with added theatre.
Our nationwide consumer facing shopping centre brand - intu - is transforming our customer experience and
digital proposition, including a transactional website with a view to providing the UK’s leading shopping centre
experience both on and off-line at 15 centres
We have an investment plan of £1.2 billion over the next ten years with projects at most of our centres.
Almost 100,000 people are employed at our centres across the UK and we are fully committed to supporting our
local communities and the wider environment through meaningful and hands-on initiatives.
For further information see www.intugroup.co.uk
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