UK mall owner Capital Shopping Centres' purchase of an option on a Spanish site from its largest shareholder has drawn a chorus of misgivings from analysts and investors who cite a questionable rationale and a potential conflict of interest.

CSC said on Wednesday it bought a three year option for a retail development plot in Malaga, Spain, for 2.5 million euros (2.06 million pounds) from Peel Group, who owns one-fifth of CSC and whose founder and biggest shareholder John Whittaker is CSC's deputy chairman.

Whittaker stands to receive an initial 10 million euros from the deal after having spent the last 20 years working on and assembling the 74 acre site, as CSC's option purchase also included a refundable deposit of 7.5 million euros.

We do not like transactions between shareholders or management teams and the company, and the equity market does not tend to reward these, J.P. Morgan Cazenove analyst Harm Meijer said.

His team's inbox almost exploded and phone kept ringing with investor queries on the same day, many of whom were concerned over the decision to invest in Spain and CSC's corporate governance, Meijer said in a note.

The company, the UK's biggest mall owner by square footage, owns 10 of Britain's top 25 shopping centres including Trafford Centre in Manchester and Metrocentre in Gateshead. Exercising the option would mark CSC's first foray into Europe.

I'm very confused by the deal, Jefferies International analyst Robert Duncan told Reuters. Most investors seem to be negative on the transaction.

He said developing the mixed-use Malaga scheme, which includes a shopping centre, homes and a hotel, would likely cost CSC about 110 million euros, money he said could be better spent on the company's UK portfolio.

The viability of building a shopping centre in debt-riddled Spain was also questionable given the ongoing economic problems facing the euro zone, Liberum Capital analyst Alison Watson said.

CSC's shareholders are due to meet on February 17 to vote on the deal. Yesterday we put out a full detailed circular which has been approved by all the regulatory bodies and we do not comment on analyst notes, a spokesman for CSC told Reuters.

These criticisms of CSC comes after Deutsche Bank AG analyst Martin Allen said the company was over-estimating its rental values in October.

Shares in CSC closed up 2.5 percent, outperforming the wider index of UK property stocks <.FTELUK> which was 1.4 percent higher.

(Reporting by Brenda Goh; Editing by Jon Loades-Carter)