09 Apr 2018

Shopping Around – Finding Value In Retail

"We may buy an asset that seems expensive, but we see an angle to create value"

Marcus Meijer, Chief Executive Officer of Meyer Bergman

Investment management firm Meyer Bergman focuses on finding under-valued and under-appreciated assets. The key, the company says, is to think hard about where retailers might actually want to locate.

‘We focus on established locations that we think offer opportunities to add value for our investors,’ says Marcus Meijer, chief executive officer of Meyer Bergman. ‘Sometimes we buy because we have a strong feeling that it will become a prime location. Sometimes we buy an asset that might seem expensive, but we see an angle to create value.’
The revival in the fortunes of Burlington Arcade (see panel) exemplifies how Meijer believes this value-add approach can work. ‘As a retail specialist, we think hard about where retailers want to be and we look for investments that capitalise on this,’ he says. ‘This often puts us ahead of the pack. We can afford to be patient and focus on the right locations, looking for the right assets.’

Meyer Bergman has a long history of investing in urban mixed-use developments, starting with its predecessor firm MAB Development in 1970. Meyer Bergman as an investment management firm launched in 2004. Its first fund, which focused on shopping centres, closed in 2008. The second, which had significant exposure to high street assets, closed in 2014. MBERP III has raised over €300 mln since its first close in December 2015.

‘We follow retail trends very conscientiously,’ says Meijer. ‘We aim to provide our investors with a diversified mix of strong retail investments. Alongside re-leasing and repositioning, we have also opted for exposure to select development opportunities that provide longer term gain.’ The rationale for each investment, however, can be markedly different. Meyer Bergman entered the Polish market in 2010 because the economy was strong, investing in the Galeria Katowicka shopping centre partly because of its public transport links. The centre is on top of the second busiest train station in the country and the regional bus terminal, and also has excellent tram access. ‘We knew whatever happened on the periphery, nothing was going to challenge Galeria Katowicka as the dominant city centre location,’ says Meijer.
By contrast, the Whiteleys shopping centre in London offered a great way to capitalise on the mismatch between the existing retail offering and the area’s potential – with its location close to Hyde Park, Notting Hill and Paddington station. ‘We have always preferred dominant cities like London and Paris,’ says Meijer. ‘And in areas where prices have gone up considerably, we look for locations that appear to be underpriced compared with other locations with similar attributes. It really is all about location, location, location.

To that end, Meyer Bergman is focusing on Western Europe, the Nordics and the UK. After all, big cities will continue to thrive, says Meijer. ‘In London, for example, wealth is spreading outwards into the East End which used to be considered seriously deprived. And while the economic situation in France has been challenging, with elections next year, Paris will also be in for a boost. If you buy in core locations, your investment will always come good and attractive pricing will return more quickly.

The success of established locations is a sharp contrast to the problems suffered by many smaller towns, where shopping centres and high streets are typified by high vacancy and a poor selection of retailers. ‘The strong retailers don’t see the need to be there and there is not much you can do about that,’ says Meijer. ‘There is simply too much retail, which has been held up by cheap debt.

The impact of online retail, particularly on white goods, should not be underestimated either. Bricks-and-mortar shopping has become much more experience oriented and retailers with a unique format have benefited. Shopping centres are offering more leisure, and food-and-beverage options. Outlet centres are focusing on creating a positive atmosphere and interactive technology in stores and malls is an added draw.

Flexibility, says Meijer, is key. ‘Years ago, leases ran from 20 to 25 years. Now they have gone down to five to 10 years. I would not be surprised if they have gone down again to three to five years in another 10 years time.’ Landlords, he says, have to be open to this. ‘You have to be creative about how you fill your space.’

"We may buy an asset that seems expensive, but we see an angle to create value"

Marcus Meijer, Chief Executive Officer of Meyer Bergman

Previous article Next article