INVESTING in RETAIL a Special Supplement to PERE Magazine QIC GLOBAL REAL ESTATE

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INVESTING in RETAIL a Special Supplement to PERE Magazine QIC GLOBAL REAL ESTATE JULY 2018 | perenews.com FOR THE WORLD’S PRIVATE REAL ESTATE MARKETS Sponsors: Meyer Bergman NEINVER QIC Savills Investment Management Virtuous Retail South Asia Yardi INVESTING IN RETAIL A special supplement to PERE magazine QIC GLOBAL REAL ESTATE. REINVENTING RETAIL. Where most see shopping malls, we see opportunities to transform communities into thriving lifestyle, entertainment and retail destinations. For over 27 years, we have focused on identifying the right retail assets, ready for growth, and maximising their potential for our clients. With $15.7 billion real estate assets under management*, our established platform in the U.S. and proven track record in Australia have equipped us with the specialist expertise to reinvent the strongest local retail opportunities. We do this to deliver investors the outcomes they seek. QIC. Global Diversified Alternatives. Global Real Estate Global Infrastructure Global Private Capital Global Liquid Strategies qic.com Global Multi-Asset Reza Basharzad Leonie Wilkinson Director, Investment Specialist, Director, Investment Specialist, Global Clients & Marketing Global Real Estate T +1 818 621 3832 T +61 434 079 357 E [email protected] E [email protected] QIC Limited ACN 130 539 123 (“QIC”) is a wholesale funds manager and its products and services are not directly available to, and this communication is not intended for, retail investors. Past performance is not an indication of future performance. For more information about QIC, our approach and regulatory framework, please refer to our website www.qic.com or contact us directly. *As at 31 March 2018. EDITOR’S LETTER Reinventing retail Reinvention sounds positive. Surprised? The trouble with retail is we have become accustomed to reading gloomy headlines about big- name stores scaling back or closing down completely. Marks & Spencer, House of Fraser and Debenhams, national treasures for many shoppers in the UK, have recently announced they are shutting branches all over the country. In the US, even the iconic Macy’s is cherrypicking which of its stores to keep open. Other well-known brand names, such as Toys R Us, are disappearing completely. On both sides of the Atlantic, a trip to many a suburban high street or mall can be a depressing experience with boarded-up store fronts and closing down signs an all too common sight. One wonders whether there will be any left to visit soon. Simply, we have become hardwired into associating retail with failure. But we are being blindsided. Among the negative rhetoric, there is a positive, though complex, tale. One of a sector in transition, modernizing and repositioning for a new age of retail involving more online shopping and catering to new consumer habits. This does not mean the physical store is destined for the morgue. In the words of Unibail-Rodamco’s CEO Christophe Cuvillier in a recent interview, only “boring retail is dying.” To survive, traditional retailers will need to think creatively about their offering and use of space to attract customers and investment. And there are examples throughout this report of many doing just that: omni-channeling, experiential shopping, pop-up stores, flexible leasing structures and carefully selecting locations of stores, to name a few. For real estate managers and institutional investors, it is more important than ever to analyze the underlying mega-trends and consumer behavior patterns driving the retail revolution. This will be key to finding assets that can deliver long-term value-add performance. Not an easy task, and not without risk, in a sector in the midst of change. Enjoy the report Helen Lewer Special Projects Editor INVESTING IN RETAIL | PERE 1 IN THIS ISSUE ISSN 1558-7177 New York 4 A year in retail 23 Blurring lines www.perenews.com 130 West 42nd Street The top stories as featured on The demarcation between retail and Senior Editor Suite 450 Jonathan Brasse New York, NY 10036 PERENews.com over the last 12 logistics is eroding and will impact +44 20 7566 4278 +1 212 645 1919 [email protected] months future real estate decisions, writes Fax: +1 212 633 2904 James Markby, managing director Special Projects Editor 6 A tale of two malls Helen Lewer Londonw of Logistics Capital Partners +44 20 7566 5478 100 Wood St, [email protected] Prospects for A/B grade malls are London EC2V 7AN 24 The outlet opportunity Contributing Reporters: +44 20 7566 5444 far from distressed, says Matthew Lisa Fu Fax: +44 20 7566 5455 Strotton, global director, capital, Although still a niche asset class, Evelyn Lee Meghan Morris at QIC Global Real Estate, but C/D outlets are an exciting investment Mark Cooper Hong Kong Stuart Watson 19F On Hing Building malls will struggle prospect says Vanessa Gelado, fund, 1 On Hing Terrace strategy and investment director at Managing Editor – Production 10 Retail: Five things Mike Simlett Central Neinver +44 20 7566 5457 Hong Kong [email protected] you should know Tel: +852 2153 3240 Design & Production Manager Navigating the sector in 2018 is a 26 The generation game Glen Reynolds challenging task, writes Helen Lewer Retailers and retail landlords spend +44 20 7167 2039 PERE is published 10 times a year by PEI [email protected] much time thinking about how to 12 Best behavior To find out more about PEI please visit: cater to millennials. Yet a growing Head of Marketing Solutions www.thisisPEI.com In the rapidly shifting landscape Real Assets Group older demographic is significantly Nick Hayes of the retail sector, an up-to- underserved, writes Mark Cooper +44 20 7566 5448 Printed by [email protected] Stephens & George Print Group the minute understanding of www.stephensandgeorge.co.uk 27 Dataroom: Marketing Solutions Manager consumer and retailer attitudes PERE is the foundation of a successful Trending eastwards Annie Liu + 852 2153 3843 © PEI 2018 investment strategy, argues Meyer The global retail deal market is [email protected] Bergman CEO Markus Meijer. moving toward Asia-Pacific. RCA’s Subscriptions and reprints John Kral ‘PERE’ and ‘Private Equity Real Estate’ Stuart Watson reports senior vice-president Jim Costello +1 646 545 6297 are registered trademarks and must not analyzes the data [email protected] be used without permission from PEI 14 Who's looking for a REIT? Andrew Adamson In the wake of two major retail 28 Retail shakeout is +8 522 153 3141 No statement in this magazine is to be [email protected] construed as a recommendation to buy real estate investment trust breeding creativity or sell securities. Neither this publication Chris Grant takeovers, Meghan Morris and Lisa Savvy landlords are turning vacant +44 20 7167 2035 nor any part of it may be reproduced or [email protected] transmitted in any form or by any means, Fu examine how ripe the M&A locations into opportunities using electronic or mechanical, including Customer Service environment is for more deals emerging formats and technology Fran Hobson photocopying, recording, or by any to keep assets financially stable, +44 20 7566 5444 information storage or retrieval system, 16 Shopping on the [email protected] without the prior permission of the attractive and relevant, writes Brian subcontinent An Nguyen publisher. Whilst every effort has been Sutherland, industry principal of +1 212 645 1919 made to ensure its accuracy, the publisher Indian retail is beginning to excite [email protected] Yardi Elevate and contributors accept no responsibility investors. Virtuous Retail South For subscription information for the accuracy of the content in this visit www.perenews.com magazine. Readers should also be Asia’s chairman Siddharth Yog gives 30 Moving the needle aware that external contributors may tips on how to crack a sector with Four significant transactions and represent firms that may have an interest Editorial Director enormous possibilities, but also why they matter Philip Borel in companies and/or their securities [email protected] mentioned in their contributions herein. daunting obstacles. By Stuart Watson 32 Luxury comes back Head of Research & Analytics Cancellation policy: you can cancel your Dan Gunner 18 Logistics efficiency into fashion subscription at any time during the first [email protected] three months of subscribing and you key to healthy retail After a torrid four years, Hong Publishing Director will receive a refund of 70 per cent of the Investors in retail properties must Kong’s luxury retail market is Paul McLean total annual subscription fee. Thereafter, [email protected] no refund is available. Any cancellation understand the role an efficient supply bottoming out and attracting value- Chief Executive request needs to be sent in writing [fax, mail chain plays in the future health of add investors. Mark Cooper reports Tim McLoughlin or email] to the subscriptions departments [email protected] their tenants, writes Nathan Kane, in either our London or New York offices. 34 Retail by numbers Managing Director – Americas director of research at Realterm Colm Gilmore 2018 gets off to a better start after a [email protected] 20 Riding the wave disappointing 2017 Managing Director – Asia Not all retail assets are in structural Chris Petersen 36 The millennial factor [email protected] decline. There are opportunities for attractive returns commensurate for In the coming decade, millennials the risk undertaken, argues Savills will reshape real estate markets in IM’s Kiran Patel. Stuart Watson ways that are still being imagined, reports writes Melissa Reagen, head of research, Americas, at TH Real ® 22 Prime targets Estate Shopping centers and outlets present exceptional opportunities for investors looking to the long- MIX term, says Roland Fuchs, head of Paper from responsible sources European real estate finance at FSC® C020438 Allianz Real Estate 2 PERE | INVESTING IN RETAIL Investment Management Investment transparency improves on Yardi® InvestorPlus™ Get complete insight into portfolio and investor health and quickly respond to investor inquiries with an easy-to- deploy customer relationship management and mobile business intelligence solution.
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