A leading South African real estate investment trust (REIT) has expanded its Iberian footprint with a landmark acquisition in Madrid, securing a dominant retail asset in one of Europe’s fastest-growing capitals.
Vukile Property Fund, South Africa’s third-largest REIT, announced that its majority-owned subsidiary, Castellana Properties, will acquire Islazul Shopping Centre in a €318m (about R5.98bn) deal.
Ranked among the top 10 shopping centres in Spain, Islazul has received the highest global BREEAM (Building Research Establishment Environmental Assessment Method) certification and is recognised as the “most sustainable shopping centre in the world”.
“We were able to move decisively, supported by a favourable cost of capital in South Africa and rotating capital from the sale of our Spanish retail parks portfolio,” said Laurence Rapp, CEO of Vukile.
Located in a densely populated area of southern Madrid, the centre serves a catchment of more than 1.9-million people and attracts about 11.5-million visits annually.
Islazul complements Castellana’s Iberian portfolio and underscores the decisive implementation of a focused investment strategy that has transformed the portfolio
— Laurence Rapp, Vukile CEO
Supported by strong population growth, rising incomes and sustained tourism in the Spanish capital, it benefits from robust retail demand and excellent transport connectivity, with further infrastructure improvements planned.
Home to more than 180 retail and leisure brands, the centre is delivering solid trading performance. Integration into Castellana’s specialist asset management platform, alongside €23m in approved value-add projects expected to yield above 10%, is set to further enhance returns.
The acquisition, which is earnings accretive and fully funded from existing cash resources, is expected to conclude on April 30.
Islazul is being acquired from Nutwood Invest at an initial yield of 6.5%, delivering a cash-on-cash yield of more than 8%. Vukile said the transaction would not affect the forecast for the 2026 financial year.
“Islazul complements Castellana’s Iberian portfolio and underscores the decisive implementation of a focused investment strategy that has transformed the portfolio,” said Rapp.
With two-thirds of Vukile Property Fund’s assets and net property income generated in Spain and Portugal, the group continues to deepen its Iberian focus.
The 90,933m2 acquisition advances its capital recycling into higher-growth Spanish retail assets, following the recent €101m purchase of Berceo Shopping Centre in Logroño at a 7% yield.
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