08/09
feelestate.de
German Shopping Centers:
Leasing in tough times
– what has changed?
Germany on its way into/out of a recession?
German Shopping Centers: Leasing in tough times – what has changed?
2
Development of sales in German retail
German Shopping Centers: Leasing in tough times – what has changed?
3
Company I Lease System
1
rent
General form of
lease contracts
for DES-tenants
turnover-linked rent
Participation in
sales growth of
retailil iindustry
d
CPI-linked minimum rent
0
1
ƒ
2
3
4
5
6
7
8
9
10
years
Lease standards:
ƒ
ƒ
ƒ
ƒ
10 years lease only
no break-up option
t
turnover-linked
li k d rents
t
minimum rents are CPI-linked
German Shopping Centers: Leasing in tough times – what has changed?
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Company I Lease System
ƒ
ƒ
ƒ
ƒ
avg. rent per sqm and year: €250
avg. turnover per sqm and year: €4,700
Rent-to-sales-ratio:
Rent
to sales ratio: 6.5
6.5-9.5%
9.5%
weighted maturity of rental contracts: >7 years
avg. German retail:
€3,330
€ million
5%
115 3
115.3
4%
92.9
3%
2%
2 6%
2.6%
57.9
95.8
90
2.8%
2.2%
72.1
1.8%
115
2.4%
2.0%
65
61.4
1%
0%
40
2003
2004
Revenue
2005
2006
2007
2008
Rate of turnover
turnover-linked
linked rent
German Shopping Centers: Leasing in tough times – what has changed?
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Shopping Centers I Tenants Structure Top 10 tenants*
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
Metro-Group
Douglas-Group
Peek & Cloppenburg
H&M
Inditex
New Yorker
Deichmann
dm-Drogeriemarkt
REWE
Engelhorn & Sturm
Low level of
dependence on
the top 10 tenants
5.1%
4.6%
2.7%
2.2%
2.0%
1.9%
1.9%
1.4%
1.3%
1.3%
O h tenants
Other
total
24.4%
total 75.6%
*in % of total rents as at 31 Dec 2008
German Shopping Centers: Leasing in tough times – what has changed?
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Shopping Centers I Maturity Distribution of Rental Contracts*
Long-term contracts
guarantee rental income
2014 et sqq:
69.4%
2009: 2.1%
2010: 2.3%
Weighted maturity
> 7 years
2011: 10.0%
2012: 12.8%
2013: 3.4%
*as % of rental income as at 31 Dec 2008
German Shopping Centers: Leasing in tough times – what has changed?
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Shopping Centers I Sector and Retailer Mix*
non-food/electronics
20%
Balanced sector and
retailer diversification
department stores
13%
food
7%
health & beauty
6%
catering
4%
fashion
49%
inter-/national
retailers
49%
services
1%
local
entrepreneurs
26%
regional retail
chains
25%
*in % of lettable space as at 31 Dec 2008
German Shopping Centers: Leasing in tough times – what has changed?
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Current situation in Germany
ƒ drop in demand (due to taxes, financial crisis, etc.)
ƒ decline in sales (up to -30 %)
ƒ increase in retail space (due to insolvencies of large-sized units)
ƒ closing
g down of shops ((due to decline in sales))
ƒ increasing fluctuation
ƒ demand for retail areas is concentrating on special locations
locations,
shop-sizes etc.
ƒ changes in sociodemographic structures
(e. g. age structure, size of households, etc.)
ƒ new forms of distribution
(e. g. Internet, Petrol stations, Teleshopping, etc.)
ƒ funding problems for tenants due to changes in bank policies
German Shopping Centers: Leasing in tough times – what has changed?
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Insolvencies of Retailers in Germany
ƒ Rising press
pressure
re on landlords d
due
e to increase in retail
space (especially large units)
German Shopping Centers: Leasing in tough times – what has changed?
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Karstadt as Tenant of Deutsche EuroShop
ƒ Main-Taunus-Zentrum:
approx 16.200 m², 2 levels, lease contract until 31.12.2026
ƒ Ph
Phoenix-Center
i C t Hamburg:
H b
approx 3.200 m², 1 level, right to cancel until 31.12.2009
German Shopping Centers: Leasing in tough times – what has changed?
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Karstadt as Neighbour of Deutsche EuroShop: Rhein-Neckar-Zentrum
German Shopping Centers: Leasing in tough times – what has changed?
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Karstadt as Neighbour of Deutsche EuroShop: Rathaus-Center Dessau
German Shopping Centers: Leasing in tough times – what has changed?
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How to react to the crisis – as tenant
German Shopping Centers: Leasing in tough times – what has changed?
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Strategies of still successful tenants
ƒ rent reduction program
ƒ rent reductions
ƒ optimizing
p
g the shop-portfolio
pp
ƒ suspension of rental index
( a precaution)
(as
ti )
/
ƒ closure of specific branches
ƒ expansion by higher subsidies
f
from
the
th landlord
l dl d
ƒ refusal of rent increases
German Shopping Centers: Leasing in tough times – what has changed?
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Successful tenants willing to expand
German Shopping Centers: Leasing in tough times – what has changed?
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How to react to the crisis – as landlord
ƒ creative and more effective marketing-activities
(by the center-management)
ƒ deferral of rent
ƒ payment plan agreement
ƒ (temporary) rent reductions
ƒ premature termination of contract
(with/without separation fee)
Î Every step has to be individual,
depending on the tenant's specific situation
German Shopping Centers: Leasing in tough times – what has changed?
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New Trends in the retail sector
German Shopping Centers: Leasing in tough times – what has changed?
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Verticalization
ƒ International sourcing of goods
ƒ Skipping of intermediate trade levels
ƒ Rapid sourcing of goods
(e.g. ZARA: from first product-idea to shop in 16 days)
German Shopping Centers: Leasing in tough times – what has changed?
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Monolabel-/Lifestyle-Stores
German Shopping Centers: Leasing in tough times – what has changed?
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Specialisation
… of products on offer and of target groups
German Shopping Centers: Leasing in tough times – what has changed?
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International operating tenants
AIGLE
Sacha
TANEO
German Shopping Centers: Leasing in tough times – what has changed?
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Labelshops - producers and retailers
German Shopping Centers: Leasing in tough times – what has changed?
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Current trends in the leasing of shopping centers
ƒ more variety of shops
ƒ size (of shops) DOES matter
ƒ agglomeration of chain stores / verticalization
ƒ less market actors
ƒ international expansion
ƒ strategic partnership of tenants and landlords
ƒ accelerating change of markets
ƒ overall
overall-concept
concept of architecture, tenant
tenant-mix
mix
and professional center-management
German Shopping Centers: Leasing in tough times – what has changed?
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Successful leasing of shopping centers in tough times is all about...
… replacing outdated shop-concepts
German Shopping Centers: Leasing in tough times – what has changed?
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Successful leasing of shopping centers in tough times is all about...
… selecting new and innovative concepts
German Shopping Centers: Leasing in tough times – what has changed?
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Successful leasing of shopping centers in tough times is all about...
… selecting new and innovative concepts
German Shopping Centers: Leasing in tough times – what has changed?
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Successful leasing of shopping centers in tough times is all about...
… change to latest shop design
German Shopping Centers: Leasing in tough times – what has changed?
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Successful leasing of shopping centers in tough times is all about...
… change to most demanded assortment of goods
German Shopping Centers: Leasing in tough times – what has changed?
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Successful leasing of shopping centers in tough times is all about...
… ideal targeting
German Shopping Centers: Leasing in tough times – what has changed?
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Successful leasing of shopping centers in tough times is all about...
… selecting the most popular brands
German Shopping Centers: Leasing in tough times – what has changed?
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Successful leasing of shopping centers in tough times is all about...
… maximum utilisation of space
German Shopping Centers: Leasing in tough times – what has changed?
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Successful leasing of shopping centers in tough times is all about...
… ideal customer-approach
German Shopping Centers: Leasing in tough times – what has changed?
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Successful leasing of shopping centers in tough times is all about...
… latest front- and light-design
German Shopping Centers: Leasing in tough times – what has changed?
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Successful leasing of shopping centers in tough times is all about...
… modifying the variety of shops by trading-up
German Shopping Centers: Leasing in tough times – what has changed?
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Consequences for landlords
ƒ Flexibility
• Rapidity in retail (replaceability)
• New p
profile of requirements
q
((size,, specific
p
location,, etc.))
• New trends / assortments of goods
ƒ Creating of
• Structures of supply (variety of retail space, etc.)
• Added
Add d value
l ffor retailers
t il
• Overall high quality concept of architecture,
variety of shops, quality level
ƒ and always:
y focus on the
German Shopping Centers: Leasing in tough times – what has changed?
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Consequences for the rent-level
Example: Altmarkt-Galerie Dresden
ƒ Average rent in 2002 (opening):
25 62 € per sqm and month
25.62
ƒ Average rent predicted for extension:
30.42 € per sqm and month
Î
If you have the right product
yyou can achieve the right
g p
price,,
even in tough times
German Shopping Centers: Leasing in tough times – what has changed?
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Extension of the Altmarkt-Galerie Dresden
ƒ The lettable area is set to increase by approx
approx. 32,000
32 000 m²
(currently approx. 44,500 m²), allowing some 90 new
shops to open
ƒ Expansion includes 3
3,000
000 m² office space and 5
5,000
000 m²
for a hotel
ƒ Approx. €155 million total investment volume
(
(approx.
€77 5 million
€77.5
illi ffor DES)
German Shopping Centers: Leasing in tough times – what has changed?
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Conclusion
German Shopping Centers:
Leasing in tough times
– what has changed?
Not much.
It has always been challenging...
German Shopping Centers: Leasing in tough times – what has changed?
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Appendix I Contact
Deutsche EuroShop AG
Investor & Public Relations
Oderfelder Straße 23
20149 Hamburg
Claus-Matthias Böge
Chief Executive Officer
Tel. +49 (40) 41 35 79 - 20 / -22
Fax +49 ((40)) 41 35 79 - 29
E-Mail: [email protected]
Web: www.deutsche-euroshop.com
Olaf G. Borkers
Chief Financial Officer
Important Notice: Forward-Looking Statements
Statements in this presentation relating to future status or
circumstances, including statements regarding management’s
ment
s plans and objectives for future operations
operations, sales
and earnings figures, are forward-looking statements of
goals and expectations based on estimates, assumptions
and the anticipated effects of future events on current and
developing circumstances and do not necessarily predict
future results.
Patrick Kiss
Head of Investor & Public Relations
Many factors could cause the actual results to be materially
different from those that may be expressed or implied by
such statements.
Deutsche EuroShop does not intend to update these
forward-looking statements and does not assume any
obligation
bli ti to
t do
d so.
German Shopping Centers: Leasing in tough times – what has changed?
Nicolas Lissner
Manager Investor & Public Relations
40