executive summary 10 november 2016 · shopping centres investment market 5 key factors the shopping...

@ 2016 Deloite Financial Advisory1 of 11

EXECUTIVE SUMMARY

10 November 2016


2Supply &

Demand

4Key Investment and Financing Drivers

3Shopping Centres Investment Market 5 Key

Factors

The Shopping Centre HandbookSpain 2016

EXECUTIVE SUMMARY

► Commercial Density in Spain is at 334 sqm/1000 inhab.

(2016YTD) with 8 recent openings in 2015-16.

► 10 out of the 32 new projects until 2019

are expected to be feasible.

► Most shopping centres nowadays aim to become a

Macro-Project, through:

i. Impressive building design.ii. Connection to target public and deep

understanding of the millennial mind-set.

iii. Becoming a category killer within the catchment area.

► Average Rents, Sales and Effort rates are experiencing a positive trend thanks to favourable macro-economic context.

Market Overview

1

► GDP growth: +3.2% 2015

► Unemployment rate decreasing by -5.5% (CAGR) since 2013.

► Exports growth: +4.5% 2015

► Household expenditure: +1.4% 2015

► Slight decrease in Consumer Confidence Index due to political uncertainty: 107.4 Dec-15 vs 96.3 Jun-16

► Footfall Index: +1.4% y-o-y average growth 2015-16

2014 vs 2015-16

Consolidation of the recovery in most macro-economic fundamentals

► EMEA region concentrates 29% of the total Retail

Investment volume (shopping centres + high street). Spain represents 8% of this amount.

► In Spain, Shopping Centres Investment volume (€3,028m 2016YTD) represents 34% of total non-residential investment.

► Deloitte took part in 50% of total S.C. transactions in Spain during 2015, and 50% during 2016YTD.

► Shopping Centres Transaction Pipeline for next years amounts to more than €4.000m

► Average S.C. Yields trend in Spain shows a higher volatilitycompared to other European

countries.

► Current yields compression context turns into “Core” investor profile as the main player during 2016YTD in Spain.

► Increasing financing appetite for yielding assets: more competitive conditions and

return of the traditional lenders for

development loans.

Full Due Diligence necessary to perform the optimum deal analysis:

► Financial Factors: NOI reconciliation► Business Performance: Income sustainability

analysis► Legal Factors: All intervenient contracts

analysis. Urban and legal risks analysis.► Tax Factors: Tax impact on results analysis► Technical Factors: Structural or technical

defects identifying and compliance with regulations analysis. (*) IMPORTANCE OF BREEAM CERTIFICATION.

2 of 11



EXECUTIVE SUMMARY

0%

2%

4%

6%

8%

5.0%

16.7% 9.1%

8.6% 8.1% 8.3% 14.3% 2.9%

15.8% 5.6%

5.3%

-

1,800

2,300

2,800

3,300

3,800

4,300

4,800

0

Lo

nd

on

Paris

Mu

nic

h

Ham

bu

rg

Fran

kfu

rt

Berli

n

Du

bli

n

Am

ste

rd

am

Mad

rid

Bru

sels

Mil

an

Lis

bo

n

Capital Valu

es G

row

th (

%)

2015 2

Q –

2016 2

Q

Min. 2007 Max. 2009 2015 2Q 2016 2Q

0.28%▼58 bps

0.66%▼61 bps

0.16%▼53 bps

0.47%▼55 bps

1.27%▼65 bps

1.71%▼7 bps

3.24%▲55 bps

0.41%▼57 bps

Retail Market: Capital Values analysisSource: Deloitte, Bloomberg

12€

17€

22€

27€

32€

37€

42€

80 bps 253 bps 314 bps 334 bps 354 bps 344 bps 284 bps 322 bps 253 bps 319 bps 209 bps. 106 bps

10 Year BondNov 2015 – Nov 2016

(8tt November 2016)

Dif. 10 years bond – Yield 2016 2Q

Cap

ital

Valu

e p

er

each

€1

of

ren

tYie

lds E

volu

tion (

%)

2015 2

Q –

2016 2

Q

Between 2014 and 2015 Europe has suffered a global yield

compression, which has produced important increases in Capital Values, apart from the effect

that could have had other market factors

such as the rent evolution.

Drivers of the cross-border investment

increase:

Accessibility to credit and more attractive financing conditions

2

3

1

4

Yielding Assets are more attractive than Investment Grade

Dollar strength (For American investors) and Euro weakness

Political and financial uncertainly in certain regions

0.16%▼53 bps

0.16%▼53 bps

0.16%▼53 bps

1.20%▼83 bps

(4.4%)



EXECUTIVE SUMMARY

Diagonal Mar (Spain) with €495m of Investment

Volume was the main transaction of 2016 in Europe.

DIAGONAL MAR

Shopping Centre

BUYERDeutsche Bank

SELERNorthwood

87,075 sqm

MERRY HILL

Shopping Centre

BUYERIntu Properties

SELERQIC Real Estate

130,060 sqm

DA VINCI MARKET

Central Retail Park

BUYERM&G Real estate

SELERGWM – Elliot

25,1000 sqm

Diagonal Mar Shopping

Centre

BUYERDeutsche Bank

SELERNorthwood

87,075 sqm

VILLEBON

2 Retail Park

BUYERCrédit Agricole

SELERHammerson

130,060 sqm

SAVILLS

Portfolio

BUYERPatrizia Immobilien

SELERSavills Inv. Man.

183,000 sqm

€159m €208m €320m

€459m €495m

France Italy Germany United Kingdom Spain

European Investment Market

Diagonal Mar Shopping Centre

Switzerland0%

Russia1%

Poland1%

Ireland1%Belgium

1%

Sweden4%

Italy6%

Netherlands7%

Spain8%

Norway9%

France10%

Germany18%

United Kingdom33%

Switzerland

Russia

Poland

Ireland

Belgium

Sweden

Italy

Netherlands

Spain

Norway

France

Germany

United Kingdom

8% of the Total Retail Investmentof the analysed countries

Source: Deloitte

Source: Deloitte



EXECUTIVE SUMMARY

Spain with €2,704m of retail investment volume (Shopping Centre + High Street) is one of the most important players in the European Market.

European Investment Market

Top 5 deals per country (UK, Germany, France, Italy and Spain)

amount to €4,786m (2016YTD).

Top 5 Spanish Deals represents 27% of this investment

volume.

European Yiedls (2016YTD):

For more information see CHAPTER 4 (Key Investment and Financing Drivers)

in the full report.

# Country Asset GLA (sqm) Price (€m) Vendor Buyer

1 Spain Diagonal Mar 87,085 495 Northwood Deutsche Bank

2 United Kingdom Merry Hill 130,060 459 QIC Real Estate Intu Properties Plc

3 United Kingdom Grand Central 40,412 377 Birmingham City Council Hammerson Plc

4 Spain Gonuri Portfolio 135,000 358 Gonuri Harizartean Invesco Cor Fund

5 United Kingdom Liverpool One 167,220 337 Hermes REIM Abu Dhabi Investment

6 Germany Savills Portfolio 183,000 320 Savills Investment Management Patrizia Immobilien

7 Italy Da Vinci Market

Central Retail Park 25.100 208 GWM - Elliot M&G Real estate

8 Spain Eroski Portfolio 234,785 205 Eroski Carmila

9 United Kingdom Intu Bromley 43,013 200 Intu Properties Plc Alaska Permanent Fund

10 Germany Forum Hanau n.a. 200 HBB Hamburg Trust

11 United Kingdom Grand Central 40,412 188 Hammerson Plc CPPIB

12 Germany HFS 18 n.a. 160 WealthCap RE Management Revcap

13 France Villebon 2 47,500 159 Hammerson France Crédit Agricole Assurances

14 Germany Gisele Portfolio n.a. 150 Family Office U.K. A&M Captiva

15 Germany Designer Outlets Wolfsburg n.a. 150 Europa Capital Invesco

16 Spain Gran Vía de Vigo 41,000 145 Oaktree LAR - SOCIMI

17 France Portefeuille d’actifs commerciaux 77,000 144 n.a. Frey

18 Spain Luz del Tajo (sin cines) 39,000 107 Sonae Sierra CBRE Global Investors

19 Italy Meraville Retail Park 35.975 100 Orion European RE Fund TH European Cities Fund

20 Italy Centro Commerciale i Gigli 24.800 82 Gruppo Pam Euriconmmercial Properties

21 Italy Centro Commerciale Collestrada 26.500 82 Fondo Etrusco - Fabrica SGR Eurocommercial Properties NV

22 France Les Sentiers de Claye-Souilly 18,000 56 n.a. Frey

23 France So Green 18,023 49 n.a. Imocompartners

24 Italy Buonvento Shopping centre 20.000 30 HIG capital via savills IM SGr European Value Added Fund

25 France Cap Liévin 17,360 25 n.a. Imocompartners

CountryPrime Yield- 2016 YTD

Minimumlast

10 years

France (*) 4.00% 4.00%

Germany 3.90% 3.90%

UK 5.25% 4.45%

Belgium 4.25% 4.25%

Spain 4.50% 4.25%

Sweden 4.25% 4.25%

Italy (*) 5.25% 4.50%

Source: Deloitte

Source: Deloitte


644 687 365 867

2,297 1,894 3,028 1,467

591 571

751

2,242

1,263

619 1,460

1,056

544

807

2,520 5,313 3,883

150

279

88

120

596

674

359

750

576

519

607

897

2,702

1,145

4,470

3,189

2,087

3,151

8,552

11,845

9,033

-

2,000

4,000

6,000

8,000

10,000

12,000

2010 2011 2012 2013 2014 2015 2016YTD

Retail Shopping Centre

Retail High Street

Offices

Logistic

Hotels


EXECUTIVE SUMMARY

In 2016 it is not expected to reach the transactional volume achieved in 2015, but investment volume is likely to reach 10 billions by the end of the year.

Top 10 Spanish deals:

# ASSET PRICE (€m) GLA (sqm) TYPOLIGY

1 Diagonal Mar 495 87,085 Prime

2 Gonuri Portfolio 358 135,000 n.a.

3 Eroski Portfolio 205 234,785 n.a.

4 Gran Vía de Vigo 145 41,000 Prime

5 Luz del Tajo 107 39,000 Leading Sec.

6 L´Aljub 100 43,800 Prime

7 Féstival Park 100 31,933 Leading Sec.

8 Bogaris Portfolio 95 84,218 Secondary

9 Hispania Portfolio 77 29,796 Secondary

10 ABC Serrano 73 14,000 Secondary

Total Shopping Centre investment volume in Spain as at 2016YTD: €3,028m

A total pipeline investment volume of €4,067m is expected to be transacted in Spain

Spanish Investment Market

34%

66%

Shopping Centres

Remaining non-residential typologies

+ 60%Source: Deloitte

Source: Deloitte

Short Term Medium Term Long Term TOTAL

38%

€4,067m47%

15%

Source: Deloitte



EXECUTIVE SUMMARY

Recovery on consumption indicators is finally having a slight impact on rents

Source: Deloitte

Rental Market

As sales experiment

significant increases, retailers

improve their business

performance, with the

subsequent decrease on

effort rates

Average Rents Prime S.C.

FASHION & ACCESSORIES

RESTAURANTSSERVICES SUPERMARKET HYPERMARKET

Avera

ge R

ents

tre

nd

IN

DEX

BA

SIS

10

0 (

20

14

)

vs

Avera

ge R

ents

tre

nd

IN

DEX

BA

SIS

10

0 (

20

14

)

Average Rents Secondary S.C.

106.2

107.2

99.7 100.0

103.0

104.2

95.0

95.7

102.3

103.3

94

96

98

100

102

104

106

108

2014 2015 2016YTD

99.0

99.9

101.7 101.7

98.8

99.5

95.0 95.0

102.3 102.3

94

95

96

97

98

99

100

101

102

103

2014 2015 2016YTD

CONSUMER

CONFIDENCE

INDEX 94.2 points

(base 100)

UNEMPLOYMENT

RATEDecreasing by 5.5% (CAGR) since 2013

PUBLIC

DEBT2015 Drops 6.8%

comparedwith its max.

in 2009

EXPORTSGrowth of 4.5% (2014 – 2015)

GDPGrowth of

3.2% in 2015

FOOTFALLRecovery with

positive yearly

variations

EXPENDITURERecovery of most

consumption groups

during 2013-2015

GROWTH

EFFORT RATESHousehold E.R. being reduced

For more information see CHAPTER 2 (Supply & Demand) with the full rental market analysis based on Deloitte Database.

Analysis sample size: 4,123 units (only 2015-2016YTD information)



EXECUTIVE SUMMARY

(1) Balloon need to cover the high funding costs during the loan´s life. (an smaller balloon will mean a bigger annual debt service)(2) Sustainable LTV to face the debt service with high funding costs (A bigger LTV will mean a bigger debt service)

Main

Conditio

ns

LTV

Upfront Fee

Spread

2014

<50%(1) 50%-60% 55%-60%

2015 2016

250-300pbs 150-200pbs 50-150pbs

400-600pbs 225-350pbs 150-275pbs

Framework

Main Players

Balloon 70%(2) 60% 65%-100%

Credit Access Constraints

Financing Upturn

Institutional Investors / Debt Funds

Banking / Assurance Companies

2013

55%-65%

50-150pbs

120-225pbs

65%-100%

Source: Deloitte

P&L reconstruction Restructure of the Financial Sector

Fundamentals improvement

Alternative to the fixed income / bond yields

Development loans: Traditional lenders are coming

back

Senior DebtYielding assets: 2016 more and

more competitive

MAIN DRIVERS FOR THE INCREASING LENDING APPETITE

Monetary Policy: QE, low funding costs, etc.

Excess of Liquidity: Increase of the transactional activity

Arrival of new sponsors

FINANCIAL SECTOR

REAL ESTATE INVESTMENT MARKET

MACROECONOMIC ENVIRONMENT

Yielding assets: Improvement of the financing terms

Financing Market



EXECUTIVE SUMMARY

Source: Deloitte

Most active players during 2016YTD that are

expected to keep active:

Main Players:

Equity

Debt

Core38.3%

Core+38.3%

Value Added21.9%

Opportunistic1.4%

Core

60.3%

Core+

20.5%

Value Added

17.5%

Opportunistic

1.6%

2015 2016YTD

Core 599

Core+ 599

Value Added 343

Opportunistic 22

Core 1,225

Core+ 416

Value Added 356

Opportunistic 33

(€m) (€m)

INVESTOR PROFILE IS CHANGING:

Source: Deloitte


Source: Deloitte

WHITE

ELEPHANT

VS

SUCCESFULL

PROJECT


EXECUTIVE SUMMARY

The shopping center is not just a PLACE, but also a PRODUCT, which must be

adapted to a changeable market.

Shopping Centres have a cycle. Malls can

die or survive depending on the ability

to adapt.

BUILDING

DESIGN

CONNECTION

TO TARGET

PUBLIC

BECOME A CATEGORY

KILLER

THE KEY FOR SUCCESS

Source: Deloitte

10 of 11



Javier García-Mateo, MRICS

PartnerFinancial Advisory ‖ Real Estate

[email protected]

Tel: +34 91 443 26 74Mob: +34 659 90 02 15

For more information, please, visit www.deloitte.es

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To obtain the full report please contact:

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