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A SPANISH GIANT IS FORMED

Spain’s Securities and Exchange Commission approved Barcelona-based Grupo Colonial’s €2 billion ($2.7 billion) takeover of Spanish real estate group Riofisa. The deal will create one of Spain’s largest property companies in real estate value terms, with a combined portfolio valued at €14.85 billion. Riofisa’s 22-property portfolio includes a venture with Metrovacesa to build Atlantys (right), a shopping center in Madrid that is set to become Spain’s largest, at 180,000 square meters (1.9 million square feet), upon completion in 2010. Colonial, formed in February from the merger of Inmobiliaria Colonial and Grupo Inmocaral. Colonial’s properties, valued at about €9 billion in total, are located largely in metropolitan areas of Europe, including Barcelona, Madrid and Paris. The February Colonial merger cost the company €3.76 billion.

RED-HOT 1031 STREAK SLOWS

There’s no denying that some of the exuberance has drained away from the 1031 exchange market involving retail properties. “The market had been going gangbusters,” said Phil Voorhees, senior vice president at the CB Richard Ellis Newport Beach, Calif., office. “But this year I’d say that the volume of 1031 exchange deals might be down as much as 25 percent compared with last year.” Why the slowdown? Some say prospective exchanges can’t be completed in time because too few high-quality retail properties are on the market, or because the competition for those properties is too great. Even so, Class-A retail remains in demand, particularly from institutional investors, he says. The slump in apartment sales is another factor, says Randy Blankstein, president of the Northbrook, Ill.-based Boulder Group and Bounder Net Lease Funds. “A lot of the wind has gone out of the sails of the condo conversion market in a lot of places, so apartment sales are soft,” Blankstein said. “Since one of the most consistent pools of retail property 1031 buyers in recent years has come from sellers of apartment buildings, that’s causing a slowdown of retail 1031 exchanges.” Despite the slowdown, there is still a lot of retail 1031 activity, just not at the stellar pace of recent years, Voorhees says. “People got used to a steady increase every year. That’s over for now.”

— Dees Stribling

U.S. OPEN-AIR VACANCY CLIMBS

Vacancies edged up at U.S. open-air centers during the second quarter, while mall occupancy remained flat, according to New York City-based Reis, a real estate research firm. Open-air center vacancies were 7.3 percent, up from 7.2 percent the preceding quarter and 6.9 percent a year ago. Rents at open-air centers increased 0.8 percent in the second quarter from the first quarter, to $17.42 a square foot. Mall vacancy, meanwhile, was flat at 5.6 percent, and rents rose 0.9 percent from the first quarter to the second, to $40.27 per square foot. Net absorption (the change in the amount of overall occupied retail space) was 3 million square feet in the second quarter, down from an average of 5 million square feet over the past several quarters.