Vukile Property Fund’s Spanish subsidiary Castellana Properties, through its 70%-owned subsidiary Caminho Propício has reached an agreement with DWS Grundbesitz, a German company, to acquire for €63.32 million (Ri.36 billion) the shopping centre known as Forum Madeira, located in Funchal, Madeira, Portugal.

The acquisition is Vukile's fifth retail asset in Portugal since it entered the country last year, following seven years of growing its Spanish retail portfolio from its South African base.

Caminho will purchase all the shares of the property-owning company and the company housing the operations – namely, DB Real Estate Investment Madeira – Sociedade Imobiliaria, and DB Real Estate Investment Madeira – Sociedade Imobiliaria, Unipessoal Lda.

Forum Madeira is a shopping centre on the island of Madeira, Portugal, comprising a lettable area of 21,472 square metres. It is in the western part of Funchal, which is the capital city and the main residential and commercial area of Madeira.

The open-air three-floor centre is well-anchored by the Inditex group, Pingo Doce, and the most popular cinema on the island, Cinema NOS.

It sees a footfall of 5.4 million visits a year and strong sales of 4 694 square metres, serving a catchment of 250 000 residents as well as 2.3 million tourists annually. The centre is currently 100% occupied.

Vukile said the acquisition offered the opportunity to acquire a high-performing shopping centre on the island of Madeira, with low effort rates and high sales levels, showing strong potential for continued growth. The asset is the only centre on Madeira to offer the full suite of Inditex brands and is anchored by a strong Pingo Doce supermarket.

Madeira has been a leading growth area in Portugal, where GDP growth in the Autonomous Region of Madeira has been 23.4% since 2019. Unemployment on the island has fallen from 11.1% in 2017 to 5.9% in 2023.

The property is being acquired at an initial net operating income yield of 9.5%. When applying the anticipated interest cost on the proposed senior debt, the property is expected to deliver a cash-on-cash yield of 11.8%, before withholding tax and excluding transaction costs.

The acquisition will be funded by a combination of cash resources and in-country debt of €28m, representing a loan-to-value ratio of 38.5%. Caminho is 70% by Castellana and 30% by Rand Merchant Bank (RMB).

Business Report