Vukile Islazul Madrid acquisition - Shore Africa

Vukile Property Fund Limited, the Johannesburg-listed retail REIT led by CEO Laurence Rapp, through its 99.7%-owned subsidiary Castellana Properties SOCIMI, S.A., has agreed to acquire Islazul Shopping Centre, a landmark retail destination in Madrid, Spain.

The transaction, executed with Nutwood Invest S.L., positions Castellana at the heart of one of Europe’s most dynamic retail markets and marks a strategic expansion of its Iberian portfolio.

Strategic entry into Madrid
The acquisition sees Castellana purchasing the entire issued share capital of Islazul HoldCo S.L.U., the property-owning entity behind Islazul Shopping Centre. The deal brings two dedicated property companies, Islazul Centro Comercial S.L. and Islazul Shopping S.L., under Castellana’s management.

With a gross asset value of €340 million ($401.28 million) and an agreed purchase consideration of €202.15 million ($238.58 million), the acquisition reflects a net initial yield of approximately 6.5% and an expected cash-on-cash yield above 8%, factoring in first-year capital expenditure.

Islazul, one of Spain’s top 10 shopping centres, spans 90,933 square meters of gross lettable area and benefits from full ownership without co-owners.

Located in southern Madrid within a densely populated residential node, the centre draws from a catchment of 600,000 residents and an extended reach of over 1.9 million within 15 minutes. Footfall exceeds 11.5 million visits annually, supported by excellent public transport links, 4,100 parking spaces, and a future Madrid Metro Line 11 stop scheduled for 2027.

Retail performance and growth potential
Islazul hosts over 180 brands across fashion, leisure, and food & beverage, including MediaMarkt, JD Sports, Zara, Stradivarius, Lidl, Yelmo Cines, and McDonald’s. The centre has low average rental levels of approximately €20 ($23.6) per square meter per month, suggesting potential for positive rent reversions.

Castellana plans to implement asset management initiatives focused on enhancing the retail mix, accessibility, customer experience, and ESG practices, expected to unlock additional net operating income of €2.2 million ($2.6 million) over five years.

Financing and capital deployment
The acquisition will be funded through a combination of existing cash resources and €163.2 million ($192.61 million) in local debt, representing a 48% loan-to-value ratio. A separate €12.5 million ($14.75 million) capital expenditure tranche will support Islazul’s ongoing enhancement program, projected to deliver a circa 10% return.

Completion of the acquisition is expected on April 30, 2026, with a portion of the purchase price deferred until December 15, 2026, ensuring a smooth transition and immediate integration into Castellana’s Iberian retail platform.

This acquisition underscores Vukile’s commitment to strategic expansion, high-quality retail assets, and long-term value creation in Europe’s leading metropolitan markets.