JSE-listed retail-focused real estate investment trust (Reit) Vukile Property Fund's majority-owned subsidiary Castellana will acquire the Berceo Shopping Centre, in the city of Longrono, La Rioja, in northern Spain.

This is the first deal in a firm pipeline of acquisitions of higher-growth Iberian shopping centres, as part of Vukile's ongoing capital recycling, with the acquisitions to be fully funded by the €279-million sale of its Spanish retail park portfolio and existing cash resources, Vukile says.

Vukile intends to redeploy proceeds from the retail parks transaction, together with cash resources from its October 2025 capital raise, into fully funded Iberian shopping centre acquisitions, says Vukile Property Fund CEO Laurence Rapp.

The shopping centre is being acquired from Euronext Paris-listed Barings Core Spain by Castellana for €101-million at a 7% yield.

Castellana has expanded its Iberian footprint, while increasing the average size and value of its assets, and its investment portfolio has grown to nearly €2-billion in assets.

New shopping centre developments in Spain remains highly constrained, which limits availability, supports relative value, keeps pricing attractive and creates growth opportunities for local specialists, such as Castellana.

This is particularly significant for Castellana, given its strong track record of value-add investment in Spanish and Portuguese shopping centres, Vukile says.

Berceo is the dominant shopping centre in its area, where it enjoys little competition and serves a large and growing catchment area with a market distinguished by high per capita income.

Of the centre’s 49 416 m², Castellana will own 34 416 m², with the remaining portion owned and occupied by Carrefour hypermarket. The high-performing centre is anchored by top brands like Zara, Primark and MediaMarkt.

The acquisition strengthens Castellana’s portfolio by diversifying it in the north of Spain. It also presents value-add opportunity, including enhancing the food and beverage and leisure component.

“This rotation of capital into accretive acquisitions of well aligned, higher-growth assets, reinforces Vukile’s strategic growth as a European retail property specialist. We see higher growth potential and better value in the Iberian shopping centre segment,” says Rapp.

DISPOSAL TO ARES
Castellana had concluded an unconditional agreement to dispose of its portfolio of retail parks across Spain to investment management firm Ares Management Corporate for a cash purchase consideration of €279-million, representing a disposal yield of 7.1%.

This portfolio includes Vukile’s inaugural Spanish assets, which served as an entry point into the country’s retail property market. Since acquiring it in 2017, Castellana’s management has increased net operating income by around 23%, or €3.7-million, and implemented a range of value-enhancing asset management initiatives.

The disposal transaction is value-accretive for Castellana and furthers Vukile’s asset rotation.

The agreed sales price, in line with current external valuations, represents a 13% uplift in the portfolio’s net asset value under Castellana’s ownership, which coincided with some of the most challenging conditions seen in this market, including Covid-19 and higher interest rates driven by Russia's invasion of Ukraine.

As Castellana grew, these retail parks have become less strategically important to the group.

With the prevailing keen investor appetite for retail parks in Spain driving up asset pricing, it created a unique opportunity for Castellana to divest at accretive levels, Vukile says.

Further, Ares has contracted Castellana to provide asset and property management for the retail park portfolio under a five-year agreement from the disposal date, which is set for April 1.

Vukile has R54-billion in property assets, with about two-thirds of its assets and net property income generated in Spain and Portugal by Castellana Properties.

In 2024, it sold its stake in Lar Espana, generating a capital profit and redeploying proceeds into the largest shopping centre in Spain’s Valencia province, namely the Bonaire Shopping Centre, which is trading strongly under Castellana’s ownership.