MAGAZINE Neinver sees few ‘unique’ development opportunities becoming increasingly complex

In late November last year, Spanish developer-investor Neinver announced it had acquired a portfolio of six outlet centres with a market value of €700 mln together with its joint venture partner TH Real Estate. The Neinver-TH outlet portfolio is now believed to have a total value of around €1.2 bn.

Prior to its partnership with TH Real Estate, Neinver had a joint venture with developer MAB, part of Rabobank’s real estate business, which was set up in 2010 to develop a number of outlets across Europe. When the Dutch bank decided to wind up MAB, this created an opening in 2014 for TH Real Estate – the amalgamation of the former Henderson property business with that of US financial group TIAA – to enter as the institutional backer.

Partnerships appear to be the name of the game in the outlet centre sector. European market leader McArthurglen has US listed shopping centre giant Simon Property on side as a major backer while the third-largest outlet operator in Europe – Via Outlets – is a joint venture of UK REIT Hammerson, Dutch pension investor APG, retail investor Meyer Bergman and Value Retail. Heavyweight investors such as Blackstone, Ares Management and Invesco-BVK are also muscling into the outlet segment.

Neinver is already market leader in Spain and Poland and is now consolidating its position as Europe’s second-largest outlet operator. In this article, Neinver’s CEO Daniel Losantos discusses how the company has grown in the past decade.

What have been the key milestones for Neinver in the past 10 years?
‘Neinver’s achievements over the past 10 years have been outstanding: not only have we consolidated our business and expanded, but we have also strengthened our business model, which helped see us through the recession.

In 2007 Neinver launched a specialised investment fund focused on outlet centres, retail warehouses and stand-alone retail properties: the IRUS European Retail Property Fund, which was recently honoured as the ‘Fund of the Year – Overall’ for its excellent performance, skilled management, and originality of offering.

In recent years, the company has continued its international expansion strategy in Europe, bringing our outlet projects to new markets such as Germany (2009), France (2010), and more recently, the Netherlands and the Czech Republic. We have also bolstered our presence in markets where we were already operating. In Poland, for instance, we developed four new projects in recent years, one of which was a huge challenge involving an indoor shopping centre integrated with a railway station and bus terminal. At the end of 2016, we opened Viladecans The Style Outlets, the first outlet centre in the metropolitan area of Barcelona.

We are also proud to see how our specialisation and management model are valued by international investors and market stakeholders, who have trusted Neinver as a key partner for strategic alliances in both the retail property market (such as TH Real Estate and KKR) and industrial and logistics (Colony Capital). Our level of specialisation and expertise has drawn the attention of partners such as Grupo Lar and ITG who have recently trusted Neinver to operate their outlet centres, Fashion Outlet Barakaldo in Spain and Halle Leipzig The Style Outlets in Germany, respectively.’

What do you see as the key developments in the European outlet sector in the past decade?
‘The outlet industry has grown stronger over the past 10 years, not just in terms of the centres but also their operations and their value as an investment. Brands have increasingly focused on outlets in the past decade, often making them a key channel in their distribution strategy. For investors, the excellent performance of outlet centres, even in recent recessionary periods, has positioned this type of asset as one of the most valuable in the retail sector.

The centres’ design, products and services have had a major upgrade over the past decade. In recent years, sustainable architecture and design have gained importance in the market, accompanied by the growth of sustainability certifications. Outlet centres now also offer additional services and facilities aimed at the tourist and leisure markets.’

How do you see the outlet real estate sector developing in Europe and globally in the next decade?
‘In Europe, further sector consolidation is expected, with incredible opportunities for acquiring individual assets and small portfolios to integrate into larger operating portfolios managed by experienced management. A few unique opportunities still exist for developing outlet centres in Europe. Yet, these will decrease over time and become more and more complex. Developing successful outlet centres today requires a mix of entrepreneurial/development corporate DNA and highly specialised asset management skills – all necessary to successfully manage the different phases involved in the entire property cycle.

Also, the retail market is evolving from the physical experience to the omni-channel one. Consumers are rapidly adopting new shopping habits by using new technologies and digital tools. As online retail gains momentum, the operators and retailers will face a real challenge in the coming years.
Accordingly, we have started work to implement an omni-channel strategy as the next step in our management model. Through our own tailored system, we are responding to the new relationship model between shoppers and brands. We accompany our consumers throughout their shopping process, whether it occurs at physical centres or through an online channel. This omni-channel management will give brands a 360° view of their customers’ consumption patterns and habits.’

What do you see as the key threats and opportunities facing the outlet industry in the next decade?
‘The good performance and resilience of the outlet assets, together with brands’ and investors’ increasing interest in them, reflect a growing awareness of this type of asset. This has increased the risk of new players entering the sector with the wrong idea that anyone can manage outlet assets. In fact, they require a specific, specialised approach to asset management, involving intensive strategies for leasing, well-targeted marketing and tourism, as well as efficient property management. The long process of developing a property – from pre-development to opening – and the increasing demands by investors and authorities regarding criteria such as good governance, strong sustainable development and long-term commitment, are other key issues facing the sector today. Our company is meeting these challenges by setting up strategic partnerships and by managing all its properties in accordance with sustainability standards such as BREEAM or ISO.

Looking ahead, new online channels and the fast growth of online sales – with forecasts of a strong increase over the next 10 years – mean news ways of conducting business in the retail sector. E-commerce and all the new online formats have come to stay, but these new tools are there for all of us.

Our challenge is to take advantage of them and improve our model. Those that can adapt to changed circumstances will have access to greater opportunities and growing purchasing power. Those that cannot keep up the pace will probably lose out. Hence, one of the greatest challenges facing the retail and outlet trade is online sales.’

The interview appears in the February 2017 edition of PropertyEU Magazine