By Pedro Caupers, Director of Investment and Asset Management at Sonae Sierra
In the current European economic environment, in which uncertainty has not yet completely disappeared and where we face various global threats, with emerging countries showing more and more signs of exhaustion, European companies in all sectors must pay careful attention to their investment strategy and specialise in areas, in which they have the potential to become leaders at a global level. In most sectors, we are more and more in a globalised world, which requires greater specialisation, in order to maintain or improve the competitive position.
Moreover, the arrival of new international investors from regions with large amounts of available capital for investments, such as Southeast Asia, the Middle East and the United States, but with a significant lack of knowledge regarding local markets, is causing a natural evolution in the structure of several companies, created and established in Europe, which are now fully aware of the need to adapt their activities to the new reality of the sector. We have witnessed numerous asset acquisitions by companies or funds from these parts of the world which required the expertise of local companies to take over the needed specialised work of the sector, either due to their lack of knowledge of the local market or to their lack of an internal structure inside the country.
In this context, the establishment of alliances between the new investors who wish to invest in the European shopping centre market and the European companies that have been developing and managing shopping centres in the continent for more than 20 years, seems to be the natural way going forward. In this sense and given the type of projects, long-term alliances should be established, to be carried out over a rather long period of time and requiring a large amount of intense work, in order to reposition the asset and implement the identified value creation opportunities.
In this sense, the most important strength of specialised European companies is their high level of knowledge and skills to manage shopping centres. This is clearly an asset class where the required skills are extremely important and are more difficult to ensure. An important existing portfolio under management ensures the necessary trust of the new investors in the skills of the service provider, a necessary condition for the establishment of a long-lasting relationship.
Likewise, the privileged contacts with local tenants and the capacity to attract them to the new shopping centres will also be determining factors. Achieving a good tenant mix, with the appropriate balance between major international firms and local businesses, is one of the key secrets for the future success of a shopping centre.
Furthermore, to guarantee the success of this type of alliance, between the foreign investors and the specialised local company, a relationship of mutual trust must be created, with the sharing of all information that is relevant for the development of the project being pursued. The service provider should not be just a simple supplier, but should instead take on the role of a real partner of the foreign investor. For this purpose, on many occasions it is essential for the service provider to acquire a small stake of the project ownership in which it is involved, in order to share risks and align interests. By assuming a greater commitment, the service provider also generates trust, which has positive repercussions in the management of the assets.
This type of long-term alliance can generate strong ties between the investors and other stakeholders of both companies. In addition, for the foreign investors it also serves as intensive training on the dynamics of the local market, offering them a valuable experience which will be of use to carry out new projects later on in the same country or in surrounding countries.
Note should be made that one of the advantages of this type of alliance is that it minimises the risks in respect to the challenges that the project entails. Knowledge of the local market, together with other decisive factors for the future growth of a shopping centre, are key to the success of any new project. This is where the specialised service provider company will contribute with all the value-added potential it can bring to the table.
In conclusion, we can expect that new foreign investors will continue to enter the shopping centre sector in Europe. In this sense, the experience and knowledge of the local market will be the main competitive advantage of European specialised companies that wish to increase their turnover through long-term partnerships with those new foreign investors. We believe this trend will be more and more the new paradigm for specialised European companies that are or seek to become international benchmarks for the sector. pc