For Designer Style, It's All Outlet - Value Retail News

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SNapShOT ON ChiNa (continued from page 32) center in China – Florentia Village – in June, between Beijing and Tianjin (see page 30). Its second center will be in Shanghai’s Pudong, close to the future site of Shanghai Disneyland. There are at least four more planned Florentia Villages. n Richly Field, a Hong Kong-listed development fund, has partnered with U.S.-based Horizon Group Properties to develop Globe Outlets across China. the first of its 10 planned centers will be in Changsha. n Outlet China Ltd., a joint venture between state-owned Beijing Capital Group and Government of Singapore Investment Corporation, will use the operation expertise of UK-based Freeport Retail and France-based Société de Cooperation Commerciale et d’Ingenierie pour les Marques (SCCIM) to develop at least 10 Ballet Towns, planned to be upscale mixed-use, mid-density new towns anchored with outlet centers. n Japan-based Mitsui is showing interest in further expanding its Chinese outlet business, in addition to its first center in Ningbo. n Private player The Outlet! Company, led by a former executive of Simon Property Group’s Chelsea platform, is rapidly acquiring lands with local partners. In addition to two projects in Taiwan, The Outlet!’s first project in mainland China most likely will be in Wuhan, opening in the fall of 2012. The developer has planned at least five other outlet projects as well. n UK-based developer GVA also recently announced its interest in the Chinese outlet business. Increasing partnerships The operation situation these years has proved that all types of developers have unique advantages and shortcomings. To win this sophisticated market, it is increasingly difficult to achieve success independently. Partnerships are often formed in accordance with the challenges. State-owned enterprises can usually leverage their government background to acquire land and financing from state-owned banks. However, it takes time for them to be introduced to international retailers. In response, they seek international partners. For example, Bailian partnered with Wharf Holdings and Walton Brown in its early outlet operation and Outlet China Ltd. is now 34 InternAtIOnAl Outlet JOurnAl Fall 2011 the influx of top brands into China’s FOCs bodes well for the sector. cooperating with Freeport and SCCIM. Private companies often come with abundant equity and strong local relationships. However, their shortcomings are leasing and management, so they usually engage third-party agencies or directly hire people with retail experience to address this issue. Foreign companies wanting to enter the Chinese outlet industry frequently have great relationships with international retailers. However, they need time to understand such China-specific issues as local franchise agreements and complicated tax codes. Thus, they seek local partners. For instance, RDM has partnered with Waitex (a Chinese supply chain and apparel operator), and Mitsui has partnered with Shanshan (a Chinese apparel-manufacturer). Failed and distressed centers Some outlet centers face multiple challenges after they open. Some aren’t properly designed, are difficult to access, have an unqualified management team, have the wrong retail channels, or are overwhelmed by other outlet competitors. At least two outlet centers were closed during the past 12 months. They are Chongqing Windsor Outlets (closed in July of 2010) and Qingdao Kingcity Outlets (closed in January of 2011). Qingdao Kingcity is a textbook example of a failed Chinese outlet project: First, being part of a large suburban mixed-use development, the center was not initially designed as an outlet mall. It was designated outlet when the developer failed to find enough fullprice anchor tenants. Second, it is just a few miles from Kingcity, an enclosed outlet mall that Shengwen opened a few months later. During development, neither center was aware of the other. Third, the leasing team had a tight schedule that it couldn’t meet, so the management team purchased inventory and opened stores to occupy space. Fourth, it takes time, typically up to three years, for an outlet mall in China to mature and prosper and Kingcity simply couldn’t sustain for such a long time. Many more outlet centers in China, especially those run by inexperienced local developers or rapidly expanding commercial real estate developers, are having the same issues as Qingdao Kingcity. High vacancy, low sales and low quality of brands will continue to trouble these distressed centers. These congenitally defective outlet malls will be difficult to turn around. retailers’ entry into outlet channels Chinese outlet developers and owners have long been struggling with the retail channels of global brands. Dealing with distributors makes it hard to get genuine products and good discounts for consumers. On the other side, there is a broader effort by major international retailers to abandon the licensing model and increase direct ownership in China. Thus, along with new flagship stores and direct-owned stores rapidly opening in every major Chinese city, retailers are seriously assessing the outlet channels in China. As of January 2011, the ratio of full-price stores to outlet stores is about 6:1 for luxury brands in first-tier Chinese cities (see chart). Currently, several high-quality outlet centers in major cities have housed a number of luxury retailers, a sign that Chinese outlet centers are being recognized by world-class tenants. China’s outlet industry is rapidly evolving: Chain developers are setting ambitious plans, often with partnerships to ensure the quality of the centers. Lowquality centers quitting the market and high-quality centers are attracting international retailers. All developers, investors, retailers and consultants are learning that careful and detailed due diligence of outlet retailing is a must before carrying out any business plans. c This industry update is a follow-up of The Rise of Factory Outlet Centers in Mainland China, which appeared in Vol. 17, No. 2, 2010 of ICSC Retail Property Insights and was excerpted in the Fall 2010 IOJ.
FOR PROFESSIONAL ADVISERS ONLY Pan-European The Fund's 250,000 sq m portfolio comprises 11 highly successful pan-European designer outlet centres in Italy, Germany, Austria, The Netherlands, Belgium and the UK. ITALY; SERRAVALLE, BARBERINO, CASTEL ROMANO | AUSTRIA; PARNDORF | THE NETHERLANDS; ROERMOND GERMANY; BERLIN, HAMBURG | BELGIUM; DOC LUXEMBOURG | UK; CHESHIRE OAKS, SWINDON, BRIDGEND www.henderson.com/property European Outlet Mall Fund Following the success of Designer Outlet Berlin, Henderson and McArthurGlen are developing a second Designer Outlet scheme in Germany. The first phase in Neumünster, Hamburg will total around 100 retail units, with a GLA of 20,000 sq m. It will be launched in autumn 2012 with the creation of 750 jobs and will be followed by a second phase with a GLA of 6,000 sq m thereafter. David Williams Fund Manager European Outlet Mall Fund Tel: +44 (0)20 7818 6423 david.williams@henderson.com Jamie Acheson Asset Manager European Outlet Mall Fund Tel: +44 (0)20 7818 3394 jamie.acheson@henderson.com Issued and approved by Henderson Global Investors and is solely for the use of professionals, defined as Eligible Counterparties or Professionals as per the Guidance for Authorised Firms made under the Financial Services and Markets Act 2000, and is not for general public distribution. Any other persons who receive this document should not rely on or act upon its contents. • Please remember that past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested. Tax assumptions may change if the law changes and the value of tax relief will depend upon individual circumstances. Due to the specialist nature of property investment, in certain circumstances there may be constraints on the redemption or switching of units/shares in the fund(s). The funds invest in a specialist sector that may be less liquid and produce more volatile performance than an investment in other investment sectors. The value of capital and income will fluctuate as property values and rental income rise and fall. The valuation of property is generally a matter of valuer’s opinion rather than fact. The amount raised when a property is sold may be less than the valuation. • Henderson Global Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), Henderson Fund Management Limited (reg. no. 2607112), Henderson Investment Funds Limited (reg. no. 2678531), Henderson Investment Management Limited (reg. no. 1795354), Henderson Alternative Investment Advisor Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE), Gartmore Investment Limited (reg. no. 1508030), Gartmore Fund Managers Limited (reg. no. 1137353), (each incorporated and registered in England and Wales with registered office 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Services Authority to provide investment products and services. Telephone calls may be recorded and monitored.
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Page 5 and 6: © Value Retail PLC 2010 THE Chic O
Page 7 and 8: the McArthurGlen Retail Academy, wh
Page 9 and 10: Coruna The Syle Outlets has a tenan
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Page 15 and 16: OVER THE TOP UNDER THE RADAR FASHIO
Page 17 and 18: McArthurGlen’s Kaempfer discusses
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Page 29 and 30: fered a caution on going overboard
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