An overview

As at March 2010 Germany Abroad Total
* including expansions
** including office space
Leasable space in m2* 704,200 144,600 848,800
No. of shops* 1,620 550 2,170
Occupancy rate** 99% 99% 99%
Inhabitants in catchment area in millions 11,7 3,3 15,0
No. of centers 14 4 18

Customisation spanning several 10,000 m2

In real estate, as in retail, location has always played a pivotal role. Our tenants want to be wherever their customers expect them to be. Each of our 18 shopping centers is in its own prime location: the majority of our properties are in city centres, in places where people have been coming together for centuries to ply their trades. Often our centers are immediately adjacent to local pedestrian zones. Our portfolio also includes shopping centers in established out-of-town locations. These are properties that for many years now have represented a welcome change for customers from shopping in the city and they each have inter-regional significance.

Right from the very beginning, our focus with new projects is on the transport links for each property: in city centres, we seek out locations close to local public transport hubs. These might be central bus stations, which in Hameln and Passau, for example, are situated right alongside our properties. What is more, all our centers have their own parking facilities that offer visitors convenient parking on favourable terms, even in city centres, thereby ensuring good accessibility by car. Our out-of-town properties offer a huge number of free parking spaces. These particular locations are alongside motorways, making them very easy to reach. Parking spaces reserved for women and the disabled are offered as part of the service at all our shopping centers.

The tenant structure at each of our 18 properties is the result of a long and intensive process that is about specifically complementing the offering of the city centre in question. Our goal remains always to work with traders in the neighbourhood to make the entire location more attractive so that everyone can benefit from the increased appeal of the city centre as a whole. Our centers often play an active role in marketing and managing the city concerned, both financially and from the perspective of creative and personnel input. We are always keen to work with others in a spirit of fairness and partnership.

When we are designing our locations, one factor that always receives special attention is the architecture: specific plot requirements are just as important as the functional needs of our tenants. We also have a responsibility to the city that we are keen to fulfil. The shopping centers should blend in with their surroundings as much as possible, while also having an exterior that does justice to modern architecture. We work on this very closely with the relevant local authorities. The outcome is often an architectural gem, where even historical buildings can be carefully integrated into the center if possible, as is the case, for example, with the listed Intecta building, which is now part of the Altmarkt-Galerie in Dresden.

Our shopping centers also need to be impressive inside so that visitors and customers enjoy shopping there, first and foremost, and find them a pleasant place to be. To achieve this, we adopt a simple and timeless architecture that makes use of fine materials. Quiet rest areas and fountains invite people to pause a while, innovative lighting concepts create the right atmosphere in the mall to suit the time of day, and state-of-the-art climate control technology guarantees a pleasant temperature all year round. Everything is designed to make each visitor feel good and want to keep coming back. An ongoing modernisation and optimisation programme also ensures that our centers remain competitive and retain their value.

It goes without saying that we design our properties to suit all generations and that every visitor should feel they are in good hands, no matter what their age.

It goes without saying that we design our properties to suit all generations and that every visitor should feel they are in good hands, no matter what their age. Thanks to wide malls, escalators and lifts, it is possible to explore every corner of the center without too much effort, even with a pushchair or wheelchair. Play areas await our smallest visitors and invite shoppers to take some time out. Massage chairs are available for customers to use in the mall for a small fee, providing necessary relaxation as a break from shopping.

Green energy

We are particularly proud of the fact that, from 2011, all our German centers will be supplied with green electricity. With our foreign properties we are planning to switch to energy from renewable sources over the next few years. It is also our goal to continuously reduce the overall energy consumption of our properties and in so doing to cut CO2 emissions. To achieve this aim, we are using ultramodern technologies, such as heat exchangers and environmentally friendly lighting systems. We are also working with our tenants to try to keep reducing energy consumption in the individual shops as well.

Flexibility brings opportunities

Retail always involves change. Particularly in recent years, it has been evident that many retailers are considerably expanding their premises, enabling them to convert the shop from purely a retail area into an experience arena. For instance, customers are being given the opportunity more and more to spend time alone in the shop thoroughly testing the product they desire (entertainment electronics, for example). A further trend is the tendency for more intensive consultations, which take place, say, at a coffee bar integrated into the shop.

We are able to provide customised solutions to meet the demand for ever more varied spaces: in our centers we can provide all tenants with the exact floor plan they need to realise their concepts. And we can even be flexible over the years. It is possible to adapt virtually any retail space, making it bigger or smaller, without major effort or expense by shifting the internal walls. Reducing a larger retail space, for example, creates an opportunity to integrate a new concept into the shopping center.

This is one of the main distinctions between our concept and the traditional shopping street with its rigid floor plans that have to be put up with the way they are. It is often the case that certain retailers wait until a shopping center has been erected before entering the market in a city because of a lack of suitable spaces for them beforehand in the city centre. The whole of the retail sector in the city centre ultimately benefits from the resultant addition to the offering.

Best locations

The catchment areas around our centers are home to 15 million people, just under 12 million of them in Germany. This gives us access in theory to 13% of the German population.

A location's catchment area is a major factor for us when it comes to selecting an investment: this is ascertained according to standardised rules for all shopping centers and represents the number of potential customers for the location in question. One of the considerations is what journey times a potential customer in the region would accept for the corresponding range of products. The influence of the relevant local competitive situation also has to be taken into account.

Our 10 largest tenants

Diagram The 10 largest tenants
Enlarge picture

With a share of 7.1%, the Metro Group is our biggest tenant. It is one of the most important international retailers and is represented in a large number of our centers by its selling brands Media Markt and Saturn (consumer electronics), Realhypermarket and Galeria Kaufhof department store. Behind this in second place is the Douglas Group, one of Europe's leading retailers, which, with its divisions Douglas perfumeries, Thalia bookshops, Christ jewellery shops, AppelrathCüpper fashion stores and Hussel confectioners, is a tenant of our centers and has a share of 4.6% in our overall rental volume.

Our rental agreement portfolio is very diversified: our top 10 tenants are responsible for considerably less than a third of our rental income, which shows that there is no dependency on individual tenants.

Long-term rental agreements

Diagram Long-term rental agreements
Enlarge picture

The rental agreements that we sign with our tenants tend to have a standard term of ten years. As at 31 December 2010 the weighted residual term of the rental agreements in our portfolio was 6.4 years, with 59.9 % of our rental agreements being secured until at least 2016.

External management of the shopping centers

Management of our 18 shopping centers has been outsourced to our partner ECE Projektmanagement. ECE has also been commissioned to execute the expansion of our centers in Dresden and Sulzbach as well as the development of the A10 Triangle in Wildau.

ECE has been developing, planning, implementing, renting out and managing shopping centers since 1965. With 132 facilities currently under its management, the company is Europe’s leader for shopping centers.

Deutsche EuroShop benefits from this experience both inside Germany and abroad. Thanks to our streamlined structure, we are therefore able to focus on our core business and competence, portfolio management.

www.ece.com

Optimisation, not maximisation

One of the core tasks of center management is putting together the right combination of shops to suit the property and the local area. This mix of tenants and sectors is tailored perfectly to the location in each case and is constantly refined. It is the result of a precise analysis of the local retail sector.

Center management is also about identifying the wishes and needs of customers. We always create space in our centers for retailers from sectors that, on account of current rents in prime locations, can scarcely be found in city centres anymore, such as toy and porcelain shops. This also enables us to give new businesses and niche concepts an opportunity.

There is one key area in which we set ourselves apart from the majority of building owners in the pedestrian zone: as long-term investors, it is our goal to achieve permanent rent optimisation rather than short-term maximisation. We want to offer our customers and visitors an attractive mix. Rather than focus on each shop space in isolation, we look at the property as a whole. The rent in each case is calculated primarily on the basis of the sales potential of the sector to which the tenant belongs as well as of its location within the shopping center.

All sides benefit from this system: as the landloaround we are able to build a relationship of trust with our tenants for the long term; our tenants benefit from high visitor numbers achieved due to the varied mix; and our customers appreciate the very wide choice of shops. These range from different fashion concepts to accessories and health and beauty retailers, right through to professional services such as bank and post office branches. There are also various dining options for our guests: cafés, fast-food restaurants and ice-cream parlours supply refreshment or nourishment inbetween shopping.

Sector diversity

Diagrams Retail mix and Regional tenant mix
Enlarge picture

The fashion industry dominates our retail mix at 48.0%. The fashion expertise of our centers is confirmed time and again in customer surveys. It is one reason why customers are willing to travel sometimes long distances from the surrounding area to enjoy the wide selection and the quality of the professional advice.

The individual tenant mix provides each of our centers with a character all of its own. In our shopping centers, we always make sure that there is a healthy blend of regional and local traders as well as national and international chain stores. This contrasts starkly with the main shopping streets, where, according to studies in Germany, chain stores occupy over 90% of the retail space in some cases. The small-scale structure of our centers offers visitors something different each time and the opportunity to satisfy a vast range of consumer needs.

Well-known tenants

Our tenants are a decisive success factor. They include Aldi, Apple, Bench, Bijou Brigitte, Breuninger, Burger King, C&A, Christ, dm-drogerie markt, Deutsche Post, Deutsche Telekom, Douglas, Esprit, Fielmann, Gerry Weber, Görtz, H&M, Hollister, Jack&Jones, Media Markt, Marc O’Polo, New Yorker, Nordsee, Peek & Cloppenburg, REWE, Saturn, s.Oliver, Subway, Thalia, Timberland, TK Maxx, Tom Tailor, Tommy Hilfiger, Vero Moda, Vodafone, WMF and Zara.

Shopping as a leisure activity

At our centers, visitors can always rely on standard opening hours, unlike in the traditional city centre where each individual retailer decides for itself how long it will be open. Whether it is an optician or a travel agency, every tenant will be open to visitors for the center's full opening hours. This too is a strategic advantage that is appreciated particularly by customers who have to come a long way.

In the center itself, the focus is always on service. There are Service Points manned by friendly staff who can answer any questions about the facility. Gift vouchers can be purchased here, and in many of our centers there is also the opportunity to hire pushchairs. Customers can feel safe at all times thanks to the deployment of discreet security personnel. Baby changing rooms, customer toilets and cash machines complete the offering. Cleanliness at all times is a given.

Every one of our tenants is automatically also a member of the marketing association of the center in question. This means that each tenant pays a share of the center's marketing costs and plays an active role in a marketing strategy committee. This plans events together with the center management, making the shopping center into a lively marketplace: fashion shows, art exhibitions, countrythemed weeks and information events dealing with a whole range of topics provide visitors with new impressions and experiences time and again. Local associations and municipal authorities are also involved in the plans and given the opportunity to represent themselves in the center. The lavish center decorations for the Easter and Christmas periods are among the projects handled by the marketing associations.

Another important area of the work is coordinating a coherent advertising presence for the center as a whole as well as editing a center newspaper, which is distributed as an insert in regional daily newspapers in the catchment area and provides readers with regular and professional updates on events and news relating to the center. Radio ads, adverts on and inside local public transport, and illuminated advertising posters ensure that the advertising measures reach a large audience.

Investment lines

Deutsche EuroShop’s key investment guidelines can be summarised as follows:

  • Deutsche EuroShop invests exclusively in shopping centers.
  • The minimum property size is 15,000 m2 of which no more than 15% may be office space or other non-commercial usage.
  • The locations must feature a catchment area of at least 300,000 inhabitants.
  • Shopping center projects are only purchased when an executable construction authorization can be produced and 40% of the leasable space is secured by long-term legally binding lease contracts.
  • Project developments without the right to build or that cannot facilitate pre-letting can be taken over as a joint venture. Project development costs may not exceed 5% in individual cases or 10% in total of the Deutsche EuroShop equity.
  • The main countr y of investment is Germany. In the long-term, investments in the rest of Europe may not exceed 25% of the total investment volume.

Continue reading: Aktivities in the centers

Back to: Our portfolio

History

My Annual Report