Could you tell us something about yourself and about Metro Properties?
I joined Metro in June 2011 working as a Regional Director in charge of Western Europe, UK, Denmark, Netherlands, Belgium, France, Spain, Portugal and Italy. Last year in July I took over the position of the CEO of METRO PROPERTIES.
Before joining Metro, I worked for six years as a Managing Director for Redevco France and Redevco Switzerland. Before that I worked in real estate investment with AXA, in charge of third party firm management and with retailers like Carrefour and a few others. So most of my experience is in retail real estate, but I also have some experience in investment.
Does Metro manage real estate properties as well as developing?
We do manage a significant part of the real estate portfolio, but not for all sales lines of METRO GROUP. For example in Germany we do the whole branch for METRO Cash & Carry, Real, Galeria Kaufhof, but for example Media-Saturn has a different business model. Looking at our portfolio, we have 620 properties in ownership by end of 2012, of which 75% of the METRO cash & carry stores are owned by the group. If you look at Real, it’s the other way around, 25% is in ownership, and 75% is rented from third-party landlords. At Galeria Kaufhof, our department store chain, is 50%-50%. So, basically Germany is owned, Belgium is rented out from Redevco. Media-Saturn is mostly renting from third-party landlords with the exception of a few stores.
Our team is quite big, close to 3,000 people to cover the whole geography: 1,700 Metro Properties employees and 1,300 employees of METRO Cash & Carry in the area expansion and construction who also work for Metro Properties.
Is your focus mostly in Western Europe or also in Turkey through your subsidiary?
In terms of expansion, we focus mainly on three countries: China, Russia, and Turkey. Of course we open stores in countries in Western Europe as well, such as Belgium, Spain or France, but our main focus remains on the dynamic growth markets of Asia and Eastern Europe.
On the other hand, we are involved in redevelopment projects. We look at our whole portfolio and explore the potential for mixed-use projects in properties that we have had for 10, 20 maybe 20-25 years. We have such opportunities in developing countries like China, Russia or Turkey, but also in countries like Germany or Spain.
And of course, we always do transactions. Sometimes it may seem surprising that we sell properties. But our strategy is to buy, develop a lot and invest; we divest selected real estate assets in mature markets while, at the same time, we open METRO Cash & Carry stores in fast growing markets such as China, Russia and Turkey. With companies which are rented out to third parties, we just sell.
So you’re always in this process of looking for partners?
Exactly, because of the market dynamics we need to be strongly connected to the business. That’s the exciting part of METRO PROPERTIES; on the one hand it’s part of a big retail group, so we don’t have the problem of vacancy and on the other hand, we really do real estate, creating value from active asset management of our properties.
How do you see things in Western Europe since you are also focused there? Is the real estate market recovering?
I think that the real estate market is recovering. We recently did a sale and buyback transaction in France in the end of last year with a club of international investors and insurance companies and it was a success. It was structured as a fund that we set up in 2011 and the fund managers sold the shares at the end of 2012. So there is appetite; we can see that if you have customer relevant properties that are professionally managed and well documented, it’s just natural that there is money to be invested in real estate. It’s just that more and more people have disciplined investment approaches and of course, you manage to sell properties if you have the right properties.
What does the future hold for Metro Properties?
The future has two main axes for us: we will keep opening new stores in our three focus countries China, Russia and Turkey and also a few in other countries like India or Belgium. On the other hand, we are looking at redevelopment opportunities, whether in Turkey, Russia or China but also in major countries like Germany. We see relevant development opportunities there and we want to focus on them because these will support the business. When you redevelop a shopping mall or you increase its attractiveness, it will appeal to more people but it will also create some additional real estate value.
What about your competitors? Are there a lot of players you are competing against?
Interestingly, ECE, which is one of our biggest competitors, is actually a partner. We have a common structure in Germany called EMC, which is a joint venture of the two companies and it is a retail park management company. ECE has no experience in this business, we had some but on the other hand we wanted to benefit from their knowledge of the shopping center market and of their access to tenants and retailers and it works.
So what exactly are you looking for right now?
In fact, we really need to talk to all the people in this business. You need to know the other players; for example, we might think of turning one of our office buildings into a hotel, which is a sector where we have no experience, so we would need to talk to a relevant company. If we extend or redevelop a shopping center or a shopping gallery, we need to have contact with the tenants in order to perfectly understand what their expectations are. We also need real estate advisors.
More and more of our work is done in collaboration with architects and designers, because it’s not only the project’s function that matters but we also like to think of them in terms of the future. So we collaborate with architects, partner developers and partner investors. Investors help us sell some properties or they want to team up.
We do not focus on owning property; our portfolio is big. We invest every year in real estate and divest. Divesting takes place according to the development potential of the property. If it’s developed, it might be a good idea to sell.