Under the leadership of new CEO Josip Kardun, Blackstone’s European retail platform Multi Corporation is seeking to evolve as a full-service provider for third parties. Gabriëlle Klaver and Erik de Boer met up with Kardun in Amsterdam to hear about the company's shift in focus.
Asked whether he has actually been to shopping centre ’t Gulpener Hart in the small southern Dutch town of Gulpen, Multi’s new CEO Josip Kardun grins: ‘You bet!’. The 3,000 m2 asset totalling 10 stores is part of the Dutch portfolio which Multi’s US owner Blackstone put up for sale earlier this year but later withdrew. Blackstone had hoped to fetch around €300 mln for the package of mostly smaller shopping centres and retail assets, but the bids, although ‘interesting’, were ‘too low’ says Kardun, who took over from Jaap Blokhuis as CEO of Multi Corporation in April.
‘The portfolio isn’t bad, it still makes a profit for us. We’re just waiting for a better moment to sell, and being part of Blackstone we have that luxury,’ he says. The decision to withdraw the Dutch portfolio came as sentiment in the European retail market turned, Kardun continues. ‘Around six months ago the market changed significantly. Up until then convenience retail assets had been traded actively but investors across Europe have become a lot more critical and are now looking far more at quality.’
The Dutch assets Blackstone is seeking to dispose of ‘do not deviate all that much’ from those in Multi’s overall portfolio, says Kardun. ‘But sometimes you buy something as part of a bigger package that you’re not entirely happy with. Some of the properties could also be sold as single assets to local players who are able to get more out of them.’
Nonetheless, given Blackstone’s weight in the market (close to €96 bn in real estate holdings worldwide) and long investment track record, selling properties is not a matter of urgency for the group, says Kardun, who previously headed listed shopping centre group Atrium European Real Estate. Investors have faith in the firm’s ability to achieve strong returns and are prepared to wait.
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PropertyEU Briefings at Mapic 2017
Redevco Stand (P-1.M51)
Consumer, Retail & Investment Trends
15 November, 1500-16.00
Retail Innovation & Technology
(16 November, 10.30-11.30)
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The US private equity giant’s ‘buy, fix and sell’ approach applies both to its opportunistic strategy of selling out after five years and its tactic of holding properties for 10-12 years as part of a core+ approach. ‘If Blackstone indicates that the time isn’t right to sell yet, its investors will follow,’ says Kardun.
Service platform
Since being acquired by Blackstone four years ago – initially by taking over loans totalling some €1 bn which were later converted into equity – Multi has evolved from a pure shopping centre developer to an asset manager and service platform specialising in retail. Kardun: ‘Multi’s debt burden was entirely appropriate for that time, but is no longer acceptable. If you look at the market now, there isn’t a single pure developer around anymore. Players such as ECE and Sonae Sierra are also structured differently.’
Multi currently manages €9.4 bn of retail assets, in all shapes and sizes. The portfolio comprises everything from retail parks and outlet centres to inner-city shopping centres and urban retail. In total, it encompasses 130 assets across 13 European countries, some of which are held on Multi’s balance sheet while others are held in four mixed-use Blackstone funds.
The German retail properties in particular, notes Kardun, are comparable with the Dutch assets in that they are generally smaller in size. ‘And the returns on the bigger assets are naturally better,’ he says.
Besides the €9.4 bn owned portfolio, Multi manages around €2.5 bn of retail assets for third parties, and it is this side of the business which Kardun intends to grow strongly in the coming years. The company already has mall management mandates from parties such as Dutch insurance group Nationale-Nederlanden, Germany’s Allianz, Union Investment and Commerz Real, as well as South African company Greenbay. Kardun expects to win a mandate shortly to manage retail assets worth around €300 mln on behalf of a third party.
Ties with retailers
But to belong to the top league of retail companies in Europe, Multi has to make up quite a bit of ground. The number one player, listed group Unibail-Rodamco, has €40 bn of assets, followed by Germany’s ECE at nearly €33 bn and French listed group Klépierre at €23 bn. Although these companies have different business models, all, including Multi, share the goal of wanting to cultivate strong ties with retailers. Multi’s platform now has the scale to do this, says Kardun, but further growth is desirable.
The retail veteran – Kardun previously also worked for ECE and the German business of Portugal’s Sonae Sierra – says there are ample opportunities for growth, given that the European market is set for a wave of consolidation. Of the 3,000 major shopping centres in Europe, market leader Unibail-Rodamco owns just 80. Further market concentration is therefore logical, he believes.
‘The more retail assets you have, the more leverage you have with retailers.’ That, together with cost efficiency, makes it attractive for owners with just a few shopping centres in their portfolios to transfer the management to a full-service organisation.
Challenged whether ‘full service’ means working hard for little return, Kardun responds: ‘We generate a stable cashflow from mall management activities. Besides, because others think that as well [that it means working hard for little return, ed.], it provides opportunities for growth for us. Having said that, managing shopping centres on a daily basis is something we love doing.’
Projects under development
The focus on management and the departure in September of seasoned developer and COO Heino Vink does not, however, mean that Multi has dropped development altogether. The company currently has around €1 bn of projects in the pipeline, including 34,000 m2 in Dublin, 22,000 m2 in Riga, 62,000 m2 in Gdansk and of course the 60,000 m2 Forum Rotterdam, housing a large Primark store, which is due to be completed in 2019. Kardun: ‘Our development activities consist mainly of expansions and redevelopments. Development is part of the game of adding value and we also do that for third parties.’
Managing for third parties is, however, not the only route to growth for Multi. Blackstone recently bought Finnish retail group Sponda, whose portfolio also includes some retail assets, for some €2 bn. ‘We were involved in assessing its retail assets and the expectation is that we will eventually also manage the properties,’ says Kardun.
Anti-cyclical investment
Blackstone’s strategy is to buy core real estate when others are selling out. Kardun: ‘For example, now is the time to buy in Ireland, when investors are all pulling out of the market due to Brexit. Core real estate remains core real estate, even in Ireland.’ The Multi chief says core assets in Europe are currently fetching yields of 5.0% or lower and are expected to stay at that level.
At the same time, Multi’s sales engine is also purring. Properties up for sale include Magnolia Park in the Polish city of Wroclaw and Multi’s Portuguese portfolio in Lisbon and the surrounding area. ‘That portfolio was acquired during the crisis and we are now going to make a good final yield on it.’
Asked about the sale of Multi itself, Kardun is reticent. ‘I don’t have any say on that, it’s a decision for Blackstone,’ he says. Looking into the proverbial crystal ball, he expects the company will, over a number of years, either be in the hands of a core investor who buys the full-service organisation together with the real estate, or still part of Blackstone. But it is clear, in his view, that Multi can survive only by focusing fully on providing services to retail property owners.
The sale over the summer of Blackstone’s logistics arm Logicor to China’s CIC for €12 bn is an example of what a wholesale disposal – including both service platform and real estate assets – could look like for Multi. Kardun: ‘The market for distribution centres is extremely liquid at the moment. That does not apply to retail real estate, however.’
Nor does an exit via a stock market flotation appear imminent, he says. ‘Many retail property companies are listed on the stock exchange, but with the exception of Unibail-Rodamco they are all trading below net asset value.’
Whatever Blackstone ultimately decides for Multi, is not Kardun’s concern, he insists. ‘My task is to make Multi the best full-service retail platform in Europe. And if that happens under the Blackstone flag, also in the long term, I would have absolutely no problem with that.’
Personal profile
Josip Kardun (43) was born in Split in Croatia, but grew up in Frankfurt where he also studied law. ‘I consider Frankfurt to be my home, but Amsterdam where I live now is a good second choice.’
Kardun succeeded Jaap Blokhuis as CEO of Multi Corporation in April of this year. He was previously a senior executive at CEE-focused Atrium European Real Estate for three years, first as COO and later as CEO. Prior to Atrium Kardun held various management and leadership positions both at German developer ECE, where he served as chief investment officer, and Portuguese group Sonae Sierra. ‘Through these different experiences, I learned to look beyond just developing,’ he says.
Kardun is a long-standing member of the ICSC and currently serves as vice president of the European advisory board. Besides Kardun, the management board of Multi now consists of Rüdiger Dany (chief operating officer) and Patrick van Dooyeweert (chief development officer / chief investment officer who is also responsible for Multi Turkey).
In terms of his own shopping habits, Kardun says he loves shoes but hates shopping. ‘I don’t take my shopping behaviour as a starting point for our strategy: if I did, I would develop the wrong products. Data and lots of conversations with stakeholders, including retailers of course, are a much better basis for decisions. Better to have too much information than too little; if you understand the business you have a far better idea of the risks.’
