At a glance
• Pipeline cash pot of €2.3bn will see Klepierre well placed to expand
• Shopping centre owner has no immediate plans to buy in the UK
• Introduction of new shareholder and its expertise will bring benefits
• Industry change will put consumer purchasing power under pressure
It is already one of Europe’s shopping centre owner and developer giants – and the Paris-based Klepierre is now set to get even bigger.
The company’s executive board chairman, Laurent Morel (right), reveals his opinions to Estates Gazette on the company’s half-year results, developing in the UK, the success of Primark, the expansion of rival Westfield, the influence of the Simon Property Group, and why Spain is a no-go area for the company in terms of development for at least the next five years.
Morel on results
In July Klepierre, which has 261 centres in 13 European countries, reported a €29.4 triple net NAV per share as at June (EPRA NAV €32.4), down 3% during H1 on a 0.6% fall in asset values; recurring earnings per share for the six months was €1.02, up 3% year-on-year, slightly better than expectations.
The group achieved 2.5% rental growth during the half-year for its malls, despite a 1.1% decline in retail sales by its tenants, both on a like-for-like basis and it is on track to meet a portfolio enhancement target of €1bn. Morel calls the results ‘decent’. They are, he says, “very much in line with analysts’ expectations”.
He adds: “The company has been through such a transformation in the past 18 months, they [analysts] expect us to transform, to grow, which is the case.”
Morel on expansion
With a pipeline cash pot of €2.3bn, Klepierre is well placed to expand – more through extensions to existing shopping centres rather than new build.
This year it has opened three extensions: Rives d’Arcins (Greater Bordeaux area, France), Vinterbro (Greater Oslo area, Norway) and Salanca (Perpignan, South of France)
It has also launched two new projects: Kristianstad (Sweden) and Romagna Center (Adriatic coast, northern Italy). Morel says Klepierre isn’t worried about Italy’s economic situation. “[Romagna] is densely populated, especially in the summer when non-Italians, Germans, French, go there for summer vacations. We have a case for [developing] those places – it’s a marginal business for Klepierre, but very successful being in places where we have significant tourist business coming in.”
He adds: “In Northern Italy there are a string of cities that are very wealthy and growing, such as Milan, Verona and Venice.
“The northern part is rich and entrepreneurial: households there are not indebted at all and this is something highly underestimated by some of the financial community. They see Italy as a single country – but it is not a single country.”
Scandinavia, as well as certain parts of France – Paris, Bordeaux, Toulouse, Montpellier, Marseille, Lyon – are high on the list. However, the same cannot be said of Spain, where it has 70 centres already. Morel says because of its economy the company “will not invest in Spain”. And what about further abroad, maybe South America? Morel laughs. “Well, why not, but I think we still have a lot to do in Europe.”
Morel on the UK
Would Klepierre consider developing or buying in the UK?
“The UK has those fundamentals like France, Holland, and Scandinavia, where you have this very important demographic growth, which is the underlying fixture we are working on. The only thing is that we don’t know the UK and we have to stick to what we know for the time being,” says Morel.
He adds: “Britain is already quite well equipped with shopping centres and shopping centre players and every time you look at the market you have to ask, what am I bringing to this market?”
Morel on Simon Property Group
In March 2012, US giant Simon Property Group, the largest owner of stateside malls and outlet centres, bought a 28.7% stake in Klepierre from BNP Paribas for about €1.5bn. Morel reveals that Klepierre “was very much ready for the change”.
“Klepierre had become very big, too big to be handled by a bank (BNP Paribas). This is not their business even though shareholders have been very supportive over the years.
“It had become very big for them – they probably felt uncomfortable to take responsibility. So it was right to let Klepierre be transformed into another company with a different ownership.” BNP still has a 22% stake.
“We have started to work with a new, strong shareholder – a leading shareholder with David Simon himself chairing the [supervisory] board of Klepierre, which means we benefit fully from the exceptional expertise of this leading player of shopping centres. It couldn’t be more effective for Klepierre to be attached to such a strong and expert shareholder.”
One of the immediate benefits, says Morel, has been help in choosing the right investments. “Although the European market is different [to the US], the way they handle an investment case is very helpful in determining what level of risk and reward we should target.”
Also helping Klepierre is the way Simon has developed the right marketing tools for their malls.
Morel says: “The typical American mall has a lot of programmes to enhance the revenue and shopping experience both in terms of customer loyalty, brand, and events in association with brands and retailers. Whenever we can we just copy and paste their expertise.”
But Morel is not worried about Klepierre becoming “too American”. “I don’t think so,” he says. “When you look at the leading brands today in our malls none of them are Americans.”
Morel on Westfield
Westfield has had a massive impact ?in the UK over the past 10 years, and Morel agrees the Australian shopping centre developer is “a very big competitor, and it’s one of the players on the market.”
“But, we are ourselves a big player in Europe, being backed by this huge Simon Property.”
Morel adds that he thinks Westfield has “done a very good job in London.”
“The good thing was to buy out a British developer (Chelsfield in 2004). Still, I think development is something you have to be a bit national to launch. So they were clever enough to buy out [Chelsfield] and to complete those assets (Stratford and White City).”
Retailers and Primark
Morel says that as consumer purchasing power is under pressure, the retail industry is facing significant change.?“The name of the game for us is to accelerate on leasing and be more active in partnership with the stronger retailers,” he says. The company has reviewed 1,000 new leases across all portfolios since January.
“Some retailers really take advantage of the current environment to change their business and gain market share. We have a few examples of that – H&M and the INDITEX Group – which includes Zara. We also have a very good partnership with Primark on the Continent. We have been successful with them in Spain and in Portugal and they have signed a new lease in France in the Créteil Soleil shopping centre in Paris.”
He says Klepierre is “about to sign a new lease with them…” but wouldn’t reveal where, adding: “We are aggressively working with them to provide sites as quickly as possible in the best locations now they have stated they would enter strongly into the French market. As a big player here we are giving them a number of opportunities.
“I predict Primark will have as ?much success in France as in the UK. They are the next success story in Continental Europe.”
