Klépierre’s Executive Board Chairman, Jean-Marc Jestin, is a man with a plan. Since arriving in 2012 as Chief Operating Officer, he has been overseeing a wholesale transformation of the shopping centre business. Following a major shift in the shareholding, Jestin then oversaw a significant consolidation in sites and a 60% value increase in asset portfolio value. But, while this is seemingly an impossible uptick in performance, it is a result of a new and strict four-pillar strategy and careful, methodical implementation.
“There will never be one single action that changes your destiny,” says Jestin referring to the Shop. Meet. Connect. vision that has formed the backbone of this transformation. “It will always be a series of actions, and you must have a team capable of working across the entire mosaic.”
The Shop. Meet. Connect. vision is a relatively recent encapsulation of what Klépierre is trying to achieve from a consumer-facing perspective. The aim is to flourish in spite of, and because of, the changing nature of retail – shifting consumer expectations and the ever-increasing rise of e-commerce. It is ultimately about refocusing away from simply shopping and towards creating places in which people socialise, establish relationships and connect with others, and really to be at the heart of the community served.
“We believe that shopping centres must get back to their urban attribute. They need to integrate much more with the city and accommodate a variety of uses rather than just being single-purpose. E-commerce is an advancing and important value proposition for customers, but the physical retail areas that will still be there tomorrow are the ones where something is really happening.”
In rising to the challenge of this changing landscape, the vision includes four key areas of focus. Firstly, putting retail first: pulling out all the stops on the commercial offer, helping stores and clients (the retailers) to reinvent what a store actually is and keeping the sense of wonder in shopping. The second is all about play: bringing shopping centres to life through events, partnerships and entertainment.
Joining these is the improvement of the physical space and ensuring that Klépierre’s sites are constantly kept up to date to make them welcoming environments. And finally, ensuring the sustainable and societal development through their Act for Good policy, which has pillars for planet, territory or community, and people, whether that be Klépierre employees, retailers and their employees or the customers.
It is these elements of the vision that Jestin believes will set apart the physical shopping environment from the ever-increasing march of e-commerce. But the rise of internet shopping is far from something that he is shying away from. It’s his belief that the hybrid model will continue to be the best model for consumers. “It’s not one against the other,” he says. “It’s the one with the other.”
However, this muddling through trying to find the best balance between online and physical is one of the reasons he points to for the ‘store of the future’ not having been completely determined yet. The challenge of how online and in-store offers can truly reflect each other, he explains, is a long process at which we have not yet arrived.
Beyond Shop. Meet. Connect.
But there is much more to the strategy than Shop. Meet. Connect. Operational elements of the strategy point to a man who is not afraid to make tough, and at times counter-intuitive, decisions to deliver stronger returns. For example, reducing Klépierre’s portfolio of assets by a factor of three and almost abolishing the green field development pipeline might not seem, at first glance, as a sure way to foster growth.
Jestin explains: “In 2012 we had 330 shopping centres. So, by adopting a determined and aggressive sales and acquisition programme, we have been able to create the best in class portfolio rotation over the last six years, significantly reduce our liability and materially grow the size of our company. We now have only 120 shopping centres, but the value of our portfolio has increased from EUR 15 billion to EUR 24 billion. This turnaround in such a short time is almost unheard of and is something of which we are incredibly proud.”
The success of the consolidation programme is partly down to its ideation, which was done almost in partnership with its clients – the retailers. The relationship the company has with its clients is a huge focus for Jestin, who regularly personally meets them to discuss their challenges, hopes, needs and ambitions.
“Brands such as H&M, Inditex, Primark and Sephora achieve very significant sales figures within our malls, and we have a shared loyalty to one another. But to continue to be the best landlord we can be, we need to stay on top of what they need, how they operate, what advances they are making and where they want to be. This learning curve is partly what has paved the way to the consolidation of our portfolio. Our clients want to be in large cities with a potential catchment of around one million, with a per capita income approximately 20% higher than the average and with growing populations. So that’s exactly where we focused.”
This added factor of ‘growing populations’ is key to Klépierre’s portfolio approach, which has also seen them almost abolish the greenfield projects in the development pipeline to focus instead on the refurbishment, expansion and reinvention of existing centres. The idea behind this is simple: if you’ve focused the portfolio in growing centres, you need to grow too to accommodate and stay attractive. This means that you also need to focus the portfolio on high-quality assets, having a certain degree of evolution, flexibility and modularity.
This reinvention has recently included the extension of the Val d’Europe shopping centre just five minutes from Disneyland Paris, the restructuring of the Hoog Catharijne Centre in Utrecht and two extensions underway and scheduled for completion in 2019 (Créteil Soleil in South East Paris and Gran Reno in Bologna, Northern Italy).
As a result, Jestin believes Klépierre now has a near perfect match between their assets and their clients, without the outliers that appeal to some clients and not to others.
Consolidation and a focus on reinvention have also been achieved while exercising financial discipline, which Jestin sees as an essential mindset to avoiding ‘trouble’. He acknowledged that maintaining this discipline might be challenging in a time when credit is inexpensive, prices are soaring and companies are praised for financing growth through debt. Yet he was and still is resolute in his commitment to reducing financial leverage and keeping the company finances in a place where they can continue to consolidate and invest with no pressure on the balance sheet, debt cost or rating.
Klépierre has been on a journey that has transformed the company into what it now claims is a pan-European leader in shopping centres. The market eagerly awaits what the next part of the journey will bring.