The €176m deal that's seeing the expansion of Portugal's retail market

Source: Supplied.

In a landmark transaction, Castellana will acquire the assets from a Harbert European Real Estate Fund subsidiary at an attractive initial yield of around 9%, which is expected to deliver a compelling cash-on-cash yield of some 10% in euros.

Laurence Rapp, chief executive officer of Vukile, comments, “We have clearly signalled our confidence in the Iberian Peninsula and the good opportunities it holds. We are thrilled to capitalise on this opportunity in Portugal, extending and complementing the strong platform that Castellana has already established in Spain.”

Rapp adds, “Building on our successes in Spain, Castellana's robust and proven on-the-ground management capability make this expansion a natural progression. With a strong team, experienced in the Portuguese market, we are perfectly positioned for this next step.”

The Portuguese retail property portfolio includes two shopping centres in Lisbon and one in Porto, all with great retail fundamentals including dominant market positions, excellent locations, easy access, great visibility, attractive tenants and strong and loyal shopper bases.

Lisbon retail expansion

Castellana is acquiring RioSul, a two-storey shopping centre in Seixal, southern Lisbon. Similarly, in the north of Lisbon, Castellana is acquiring Loures, also a two-storey shopping centre.

Both feature an exceptional list of national tenants including Zara, Bershka, Pull&Bear, Stradivarius, Foot Locker and C&A, as well as various popular food offerings and a cinema multiplex. In both cases, the centres are tenanted by grocery anchor, Continente Hypermarket, which owns its own stores.

RioSul attracts an annual footfall of nearly 8 million consumers and achieves sales of around €98m a year in a market where both the population and its spending power is growing. Loures is in a growth-node of Greater Lisbon and busy undergoing preparations to be integrated into a new metro station, set to open in 2026.

Castellana is also acquiring 8a Avenida, the only shopping centre in São João da Madeira, an industrial and manufacturing town south of Porto. Its strong tenant mix includes national brands Lefties, Bershka, Pull&Bear, Stradivarius, Cortefiel and C&A, together with a selection of well-loved food choices and a cinema multiplex.

Similar to the Lisbon assets, the centre is shadow-anchored by Continente Hypermarket. 8a Avenida boasts an annual footfall of 6 million people, generating sales of around €58m.

The assets will be held in a subsidiary, in which Castellana will have an 80% interest and RMB Investments & Advisory the remaining 20% interest.

Iberian asset growth

Vukile's commitment to customers shines through in its convenient, community-focused, needs-based retail centres. It entered this transaction with an existing portfolio of 32 urban, commuter, township, and rural malls in South Africa and its Castellana portfolio of 15 shopping centres in Spain.

With the three new shopping centres acquired in Portugal, post the transaction, around 64% of Vukile’s assets will be located in the Iberian Peninsula, and almost 56% of its property net operating income will be in euros.

Rapp confirms that Vukile remains committed to its stated strategy in South Africa, Spain and now Portugal and continues to evaluate opportunities that are strategically aligned and financially accretive.

The transaction remains subject to the usual conditions precedent and is expected to close on Tuesday, 1 October 2024.