Buy, improve, sell: A tale of two centers

LONDON-BASED Resolution Property completed the sale in February of its two outlet centers in France, McArthurGlen Designer Outlets Troyes and McArthurGlen Designer Outlets Roubaix. Ares Management, an €84 billion publicly traded global-asset manager that has invested in European outlet centers in the past, paid more than €200 million for the two projects. McArthurGlen, which developed the centers in 1995 and 1999 respectively, will continue to manage, market and lease them.

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Resolution had acquired ownership of both properties from Henderson Global Investor’s European Outlet Mall Fund, the rst, the Troyes center, in 2010 for €85.5 million, and the second, the Rou- baix center, in 2011 for €23 million. That tidy pro t in just ve years de- rives from Resolution’s ability to create opportunities that increased sales by 35 percent at both centers and net operating income by 40 percent at Troyes and by 50 percent at Roubaix. Michel Nangia, principal at Resolution Property, explained to IOJ how it happened. “When we went for Troyes, it was surprising to the industry given how mature the asset was,” he said, “but we’d already identi ed lots of angles by asking ourselves, ‘how can we add value here?’ It was simple, really. We knew that many of the leases were signed with franchisees and licensees – there must have been 40 or 50 of them in the center. With the right capex budget allocated to this initiative, it was really low-hanging fruit. We could now afford to sit down with the brands themselves and replace the franchisees and licensees.”

The next step was to increase the center’s occupancy. Part of this task was to unlock the center’s two isolated, standalone terraces, which meant acquiring two plots of land and obtaining permits. “France can be a nightmare on planning,” Nangia said, “but we accomplished it all in just 18 months.”

When approached in 2011 about buying Roubaix, “It was a no-brainer for us,” he said. “We knew Roubaix had a dif cult past, primarily because of the long-held opinion that it was in a dangerous, dirty suburb of Lille. Coupled with that, the center was smack in the middle of a city center – it broke all the historic outlet rules that tenants adhere to. But we saw its unbelievable catchment of more than 10 million people within a 90-minute drive. We knew that with the right business plan and capital we could make it saleable.”

First on the Roubaix list was acquiring the property outright – it had been a lease-hold. Second was to make the project look and feel like an outlet center by wresting it away from the local municipality that controlled its maintenance and security. Once that was done (“It took a week to convince them to turn it over to us,” Nangia said, “and a year to get through French red tape.”), Resolution spent €2 million on lighting, landscaping, security and adding gates to the property.

Occupancy at both centers shot up, going to 99 percent from 83 percent with a much stronger brand line-up, including Armani, Furla, Gant, Hugo Boss and Tommy Hil ger at Troyes, the Kooples and Esprit at Roubaix, and L’Oreal at both centers.

The Roubaix transformation is a textbook repositioning story. “It was an asset that had been frowned upon, but local perception really shifted,” he said. “People from Lille who would never have considered shopping there before are now regulars. That’s the proof that what we did was right.”

Resolution has two existing outlet centers in its portfolio, Rosada Factory Outlet in the Netherlands, now under- going an expansion that will open in May, and Designer Outlet Soltau, near Hamburg. Resolution is also undertak- ing a rst phase 1 outlet development, Hon eur Outlet Centre in Normandy, France, which starts construction in late April and will open in summer 2017.

“We started pre-leasing Hon eur last summer, and it’s already almost 50 percent pre-let,” Nangia said.

posted on: May 27 2016 | posted by: admin