Thinking as Retailers, Investors, and Operators at the Same Time

ACROSS: How has Neinver’s business been affected by the Covid-19 crisis?

DANIEL LOSANTOS: The Covid-19 lockdown has impacted businesses around the world, and NEINVER is no exception. We were obliged to close all of our centers in Europe in March, except for some essential-goods shops at the retail parks in Spain and Poland. We did not get our entire portfolio up and running again until mid-June, which meant some our centers were closed for up to three months. There are substantial differences between centers, depending on how long they have been in operation since the lockdown and on external factors, such as border closures during the first months following the reopening. However, we believe that we are in the very lucky spectrum of recovery due to our diversified portfolio, both as a result of our locations as well as our brand mix. We have seen stable and progressive weekly increases in sales and footfall, as well as a growing demand for our outlet offer, every week since we resumed operations throughout the different countries in which we are located. We believe the outlet sector to be very resilient in uncertain times, and it is now strongly positioned to recover faster and better than regular retail in the coming months. However, markets still need to correctly assess the impact that lockdowns have had on the respective economies, and regular retail faces a significant challenge ahead that will likely accelerate its transformation into something really appealing and attractive – if it is to survive.

The impact has also been significant for many of our tenants. We have been following up with them rather closely from the very beginning, providing assistance is areas such as retailer liquidity relief agreements. We have worked on individual solutions with each brand, on a case-by-case basis, taking into consideration the particular situation of each center, the different national regulations, and the long-lasting relationships that we have always had with our tenants.

The current social distancing measures and travel limitations will inevitably have an impact, at least in the short term. In fact, we have already seen changes in consumption patterns. Consumer appetite is there, but safety is a priority for shoppers, and customers plan their visits much more carefully. Visits to our centers have become more productive, with shorter dwell times but higher spending per person. Our aim is, of course, to return to pre-pandemic sales volumes, while maintaining all sanitary requirements, but we need to stay alert, be smart, adapt, and thrive in the changing retail landscape, putting consumers at the center of all our decisions, as we have always done.

ACROSS: What are customers currently paying particular attention to?

LOSANTOS: This extraordinary situation has caused consumers to rethink their spending priorities. We are seeing that for consumers the shopping experience is now comprised of three elements: safety, product, and price. Purchases tend to be more rational in times like these, with promotions and discounts serving as clear incentives for consumers. This is a clear advantage for well-positioned outlet centers, which have proved more resilient than other retail channels in periods of economic uncertainty due to their “smart shopping” concept.

On the other hand, with the existing stock surplus, outlets serve as an optimal distribution channel to reduce brand inventory, complement brand distribution strategies, and prevent the decrease of brand awareness and market positioning. Brands will be more cautious with regard to expansion plans, and we will see fewer new store openings which was the trend even before the crisis. However, we are seeing interest from retailers, including those who were not in our portfolio before, who are looking into the pop-up format in an effort to expand with us. We have been working with our brand partners to get a better understanding of how their strategies have changed and to support them in managing their overstocks as well as in reconnecting with their consumers, while maintaining safe shopping environments.

We expect a consolidation in the market after the crisis has passed, in which the dominant big centers, both full price and outlet, will remain dominant, while some smaller operators will experience a decline; we may even see some centers closing their doors. Moreover, operators will need to think about how center evaluations will be done, especially in the full-price segment. Traditionally, center evaluations in the full-price segment were based on the minimum guaranteed rents, which are currently under pressure.

ACROSS: What safety measures have you implemented?

LOSANTOS: As previously mentioned, the health of our visitors and staff at the centers is our overall priority. Therefore, across our entire portfolio, we have launched the “Shop Safe, Stay Safe” program, which is an initiative that includes strict health and safety protocols to guarantee safe shopping for visitors as well as a safe workplace. It is based on a comprehensive list of measures that not only comply with the regulations of each national jurisdiction but are, in fact, even stricter. We have also worked closely with tenants to advise and support them in defining and implementing health and safety measures.

Our cleaning and safety standards have become vital criteria for consumers when deciding whether to visit our centers, and we aim to guarantee proper application of good practices. To that end, the hygiene and safety protocols and procedures implemented across our centers have been certified by official certification companies in an effort to validate the safety protocols across our entire portfolio.

A variety of hygiene measures have been put in place, including reinforced cleaning and sanitization of spaces, monitoring of air quality in indoor centers, availability of alcohol-based disinfectant dispensers, and placement of waste bins for used masks and gloves. Social distancing is guaranteed through strengthened security, marked waiting areas in front of shops and defined routes to walk through the centers. Each center’s capacity is monitored using our counting systems.

ACROSS: Let’s switch gears and focus on Amsterdam The Style Outlets, which is scheduled to open in 2020. What is the current status of the project?

LOSANTOS: Throughout the lockdown, we have worked hard to advance the development of Amsterdam The Style Outlets and to remain on course in order to open at the end of this year. A large part of the construction has been completed. The final facades of the units will soon be finished, and the brickwork in the parking garage and inside the center are being finalized. The units will soon be ready for handover to the tenants. The scheme will be counted as another one of our flagship centers, with its unique location in an incredible catchment area. It is the only outlet development in the Greater Amsterdam region that combines a strong and high-income catchment area of 12 million people with proximity to Amsterdam’s Schiphol airport as well as easy access to the Dutch capital and Haarlem.

ACROSS: What is the status of Alpes The Style Outlets?

LOSANTOS: The French market and Alpes The Style Outlets are both very strategic for NEINVER. Looking ahead, resuming development in the Alps will require a clearer outlook and understanding on how the macroeconomic effects of the health crisis and lockdown have affected financial stakeholders and our brand partners and, ultimately, how consumers will respond to the retail experience over the next few months. The scheme is in an early stage of development, and, given that construction normally takes 18 to 20 months, meeting the Q2 2021 scheduled opening date of Alpes The Style Outlets is not realistic. However, we are optimistic that we will have a clearer picture and be able to review the schedule before the end of the year – when Amsterdam The Style Outlets has become a successful reality. Sometimes, it is better to take one step at a time to make sure you do not stumble as a result of trying to cover uncertain ground.

Despite the circumstances, our commitment to this project and to being a partner for the region has remained unchanged. Our aim is to put our energy and effort into developing and operating this scheme – making it a unique destination in the region.

ACROSS: Is there any news regarding your other outlet center brands, namely Factory?

LOSANTOS: Our Factory centers in Poland were among the first in our portfolio to reopen after the lockdown and have shown positive trends in sales and footfall since then, with differences from last year gradually narrowing. Moreover, during the lockdown, we completed the rebranding of Silesia Outlet, our youngest outlet center, which reopened as Factory Gliwice. Changing the center’s name and visual identity to Factory’s popular red-and-white logo should increase its recognition. The center, which recently won the “Project of The Year – Fashion Outlet Centre” prize at the EuropaProperty CEE Retail Awards, features 12,000 sq m of retail space and is home to more than 60 shops that represent well-known domestic and international brands.

ACROSS: You have been the CEO of Neinver for nearly five years. What are some of your key findings?

LOSANTOS: Being at the forefront of NEINVER has been both personally and professionally challenging, yet simultaneously enriching. These last few months have probably been the hardest ones since I started my job many years ago. Apart from having to blindly navigate through these dark and uncertain times, we were unexpectedly hit by the loss of my father, our Chairman and Founder, José María Losantos. He was and will continue to be an inspiration to all of us. He was both generous and tenacious, and he always dedicated all of his energy to developing and expanding NEINVER as well as everything else that he touched. He always thought about the ways in which doing business could give back to everyone around him, and that is likely one of the reasons he was so loved by everyone who knew or worked for him. He was a great man, full of enthusiasm – a visionary who turned everything he touched into an opportunity. Our personal tribute to him will be to continue working on the legacy that he left behind and to always try to remain humble enough to help others who are in need.

NEINVER has innovation embedded in its DNA, going beyond market expectations and anticipating market and investor needs before they even become aware of them. We never take success for granted, and we work on things as if it was our first time doing so. I think this is, in part, what has driven the company’s growth. The outlet industry is a very particular sector in which we need to balance many factors in order to build a sustainable growth strategy. We must think as retailers, as investors, and as real estate operators – all at the same time. This includes putting consumers at the center, understanding brand needs, maximizing value for our investment partners, and creating long-term value for the communities in which we operate. Thinking creatively to resolve each challenge is crucial to building the right equation.

However, nothing that we have achieved would have been possible without a positive attitude and an excellent team: a team that shows commitment and passion, as well as the courage to think creatively and to innovate, because innovation starts with each one of us. Our people are the driving force behind our success and are the best ambassadors of NEINVER’s values. Therefore, we have to continue to be true to ourselves and those values in order to keep attracting and retaining the best – those who take pride in being fundamental to NEINVER’s success.