By Neil Callanan - Mar 5, 2013 6:55 AM ET - Bloomberg
Value Retail, the outlet center
developer 22 percent owned by Hammerson Plc (HMSO), plans to invest
about 500 million euros ($650 million) through 2015 in China and
Europe as it takes advantage of growing spending power in the
world’s second-biggest economy.
The company will spend about 350 million euros in China
with local partners, Chairman Scott Malkin said by e-mail.
Tenants at outlet malls sell year-old luxury apparel by designer
labels like Prada, Jimmy Choo and Burberry at discounts of 60
percent or more.
Value Retail is expanding into China as the country’s
middle class grows rapidly and designer goods fetch higher
prices than they do in Europe. The company, whose sales rose
about 18.3 percent last year, plans to open centers in cities
including Shanghai, Beijing and Hong Kong.
“The Chinese aren’t spending money on hotel rooms or
restaurants, they want to go home taking products and gifts,”
the chairman said.
The net asset value of London-based Hammerson would have
fallen last year without its Value Retail stake, Espirito Santo
Investment Bank analysts including Michael Burt wrote in a note
to clients last week. “Growth in NAV was entirely accounted for
by Value Retail, offsetting modest valuation declines in the
U.K. retail assets,” the analysts wrote.
Morgan Bone, a spokesman for Hammerson, declined to comment
on the Espirito Santo note.
Annual sales at Value Retail’s European outlets are almost
three times higher than the region’s average of 3,600 euros a
square meter because of its focus on luxury brands, according to
research by industry adviser FSP Retail. The company charges
retailers as much as 18 percent of the price of each item sold
at the malls, boosting the value of its properties.
Value Retail will spend about 150 million euros expanding
European outlets, Malkin said. That includes a 33 percent
increase in the size of a mall near Barcelona, Hammerson said
last week in a statement. Value Retail is also planning to add
space at Kildare, near Dublin, by about 60 percent, according to
a filing to the country’s planning appeals board.
The company’s first Chinese mall at Suzhou is about 20
minutes from Shanghai by train and is due to open early next
year, according to its website. Value Retail’s total asset value
is about 2.8 billion euros, Hammerson said in last week’s
statement.
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