As new development markets in the United States become scarce, retailers and developers are looking for international expansion opportunities. Shopping Center World has made a commitment to cover international markets in 2000, to enlighten our readers about the opportunities and challenges.
We begin with a Latin American roundtable, inviting participants involved in more than 10 state-of-the-art projects. Latin America, made up of 270 million people with spending power, was chosen because of its tremendous development potential. In consumption growth, Latin America is the second-strongest economy behind Asia, with a growth rate of 3.9% annually. With its stabilized political climate and improving financial markets, many say the region is poised for growth.
This roundtable was conducted by SCW in Miami.
SCW: What are the economic conditions in your region of Latin America?
Stan Eichelbaum: We rate Latin America as the world's most under-studied and under-stored market. Everybody knows about the masses of people - over 520 million population vs. 303 million in the United States and Canada - but the perception is of high levels of poverty and economic instability. We have sorted South America and Latin America and the Caribbean into two economies offering incredible consumption energy and development potential. Some areas need lots of assistance in economic development, but some developed areas have proven to have retail volume potential almost 100% higher than the United States, with lease rates at less than 100% more than the United States, CAM costs at 60% the rate of the United States and very mature shopping centers.
Anne Kelleher: The native-born residents of Puerto Rico are born U.S. citizens. The currency and direct-dial telecommunications system are the same as in the United States. Plaza Las Americas is an existing, urban-suburban shopping center being expanded in San Juan, which has more than 2 million residents in the area. The island of Puerto Rico has over 4 million residents and is under-stored. It will have the first Macy's off the mainland.
Alberto Poma: Roble International in Central America has 12 projects throughout Central America, which we consider to be one region. It is a mistake to view Central America country by country. If you consider there are 30 to 35 million people living throughout the region, the potential is vast. Central America is an area many people associate with government turmoil and other problems, but compared to a lot of the countries in Latin America or a lot of the situations in the United States, we are very similar now. We consider Central America a sleeping giant, a place Asian companies, U.S. companies and Latin American countries should be analyzing.
Alex Garcia: I'm going to talk from the perspective of Grupo Multiplan, owners of eight malls totaling about 3.1 million sq. ft. in six of the most important cities in Brazil. Last year was difficult in Brazil, but we still managed to open two malls. One was a state-of-the-art entertainment center in Rio de Janeiro. Of the 18 Latin American markets with a population of over 2 million, Brazil has seven of them. Multiplan is in all those markets. We also have three malls in the development stages, adding 1.2 million sq. ft. to our portfolio and going up in Porto Alegre, Curitaba, and Rio de Janeiro. We have another 600,000 sq. ft. expansion possibility in our existing malls. We think there's enormous opportunity in retail development and that the country is under-retailed. In Brazil, population 160 million, there are only 150 shopping centers. The retail per capita also is low. At our malls, the combined occupancy is 95%, with average sales at $100 per sq. ft., indicating the retail market is strong.
Pancho Motta: I'm Pancho Motta, representing a group from Panama involved in Pacific Mall. Panama is a relatively small country with only 3 million people. In the city of Panama itself, we have just over 1 million people. Panama has several great advantages. One is we're a dollar-based economy, and we have a large banking center. So financing is available at reasonable rates for long periods of time. Panama is also very American-based, because we have had the Panama Canal for over 85 years. We have quite a few American food chains already established, and we feel that the mall itself will be able to bring some American chains into a regional play out of Panama.
Marcelo Carvalho: We just survived a very tough year last year, with the devaluation of the real. We survived without losing any percentage of our GDP. We are expecting growth at 4% to 5% this year, depending on the dollar rate. We are about where we were in July of last year. At all the malls we manage, we have 25% vacancy. Our development company, Ancar, is seeing international companies coming in and having success.
Gonzalo Quinteros: Chile's GNP and retail sector has grown for five and four of the last six years, respectively. The next two years also are expected to grow substantially, at least 6.9%. The exchange rate also has remained stable, at between 476 and 502 Chilean pesos to the U.S. dollar. At present in Chile there are 22 shopping centers in all, with an area over 400,000 sq. ft. and with a total area of 14.4 million sq. ft.
SCW: How are international retailers coming into your region?
Carvalho: The European companies came in about 20 years ago, and now with the move of Casono, you have a French company. We have Wal-Mart coming in, simply the most successful case of international retailing. We have only one player with a lot of success, McDonald's. The others are either suffering or going out of the market. The market is there, but the local retailers are either small- or medium-sized and there aren't too many large local retailers with finances to grow. In Uruguay, you have a lot of small countries going global much faster.
Wal-Mart came to Brazil five or six years ago, and they had a tough time in the beginning. They were doing Halloween promotions when there is no Halloween in the country. Sometimes they think what would bring them success in the United States will be so in the other countries. I would suggest they find local partners to ease their way in.
J.C. Penney acquired the majority in Renner in 1998 and kept the same CEO. That was a very interesting move, to understand the market before doing anything. In the case of Outback Steakhouse, that's a very successful company, and they kept the local guy, who used to be the McDonald's man.
Motta: In Panama, we have something similar. Sears, after leaving the market, came back after 10 or 15 years. Instead of coming in as Sears itself, the company came in mixed with a local group of investors. They have opened up in two different shopping centers, competing against local department stores but getting back into the market where they were completely out five years ago.
Garcia: Our group is a joint-venture partner in GameWorks, and the group was instrumental in the design, mix and caliber of high-tech equipment. What was done is more upscale than what you're going to see in the GameWorks in the United States, much more food-based and product-based than game-based.
Most of these U.S. chains enter Central America through local investors and a regional franchise, which definitely helps the U.S. companies, because local investors know each company or the region in general. On average, the North American companies that are with us throughout Central America can probably sell up to $200,000 a month in probably a 650 or 750 sq. ft. store. Fast-food restaurants, such as Pizza Hut, McDonald's, Burger King and Domino's Pizza, have been very successful in our malls. It helped us in Central America to participate in the Conference of the Americas at the ICSC convention in Las Vegas.
Kelleher: In Puerto Rico, many of the U.S. department stores establish a local franchisee and control the franchise for the island. That seems to help them in the management of their business on the island.
Quinteros: Retail in Chile has attained substantial maturity, with very good local brands as well as international brands, such as Tommy Hilfiger, Polo, Esprit, Nautica, Nine West, Cat, Nike, Guess, Ruby Tuesday, as well as European brands such as Ross, Lacoste, Zara, Sephora, Pringle, and Don Algodon. All these and other brands develop strong competition together, with three large local brands of department stores, Falabella, Almacenes Paris and Ripley. Some of these brands have expanded to countries such as Peru and Argentina.
SCW: Have any successful retailers not done local partnering?
Kelleher: The department stores don't do local partnering in Puerto Rico, and that includes Sears, J.C. Penney, Macy's, Marshalls, Kmart and Wal-Mart.
Eichelbaum: As we look at the players that have expanded, fast-food and sit-down dining at reasonable price points have been the leaders. Fast-food success depends on how simple the operation is to implement in other regions of the world. But then you turn around and look at Carrefour, which is probably the most complex retailer to operate on a world standard, and they've proven almost anybody can globalize. It's amazing that Outback could be successful in Argentina and Brazil, with that region's great pride in its meat products. They've gone in as an American restaurant carrying an Australian steak concept to the heartland of beef-eating to great levels of success. So it's a matter of how much you study and adapt.
SCW: Why is Puerto Rico one of the first points of entry for American retailers?
Kelleher: Because doing business in Puerto Rico is very much like doing business in the United States. A business can be operated from a base in Puerto Rico or from a base in the Southeastern part of the United States, in many cases. Some retailers from the Southeast, particularly Florida, choose to make a market entry into Puerto Rico because Puerto Rico is only 1,000 miles and a two-hour flight from Miami. They can stick their toes in the water before going into other countries. Another factor is the proven success of Plaza Las Americas. At the high volumes, over $700 dollars per sq. ft., it is a safe investment towards expansion. Many of the stores at Plaza are the No. 1 stores in their chains from the United States. Not only Sears and J.C. Penney, but many of the small store retailers have their No. 1 store at Plaza.
SCW: What are some typical concerns of retailers coming into the market?
Carvalho: American retailers are used to large stores, like Blockbuster, but in Rio the stores are not as large. J.C. Penney is operating now with a chain it bought with an average of 32,500 sq. ft. per store, and the company was used to a much bigger area. U.S. retailers are going to be concerned about adequate space. Smaller stores are how the market works. We have a higher sales percentage per sq. ft. in a smaller store and a higher occupancy cost. Another thing you have to understand is the behaviors of the population: very simple things, such as how they live their lives, what is important to them, what's not.
Poma: I would think, in viewing Central America, the economic profile of the region is very important. The GDP as a percentage of growth and the interest rates are extremely important. It impressed me when I heard the Moody's investment ratings of certain countries in Central America compared to countries in Latin America. Chile has a BAA1 investment grade.
Eichelbaum: Another big issue is retailers' confidence in the standards of the developers and their management capabilities. A lot of retailers have gone to conventions, met developers of questionable value and haven't figured out that there are truly in almost every region several mature developers operating to world standards. Retailers also get concerned about the lease formalities in Latin America vs. in other areas where the retailer is often fighting the developer to loosen the lease. In most negotiations in Latin America, retailers want levels of tightening to have confidence in the endurance of the entire project.
Carvalho: The two differences created by the market: We charge key money when the market allows us to, and the legal system protects tenants from being kicked out of their lease.
Motta: The Europeans are looking more to Latin America than the Americans. I think the Spaniards, because they speak the language, find it's easier to understand what's going on. They have lived with devaluation, while the Americans have not. In our region, with the exception of Panama and Puerto Rico, we have to live with devaluation and price it into our merchandise and into our rents.
Eichelbaum: Everyone is scared about devaluations in Latin America, the problems in Brazil last year being exemplary. In actuality, as you go through most of Latin America, the down cycle for the sake of retailer performance is still 60% above the productivity throughout the United States. The average sales would be almost double the United States' and would be almost three times when you average it out among mature developers. The CAM costs likewise are lower, the rent rates on an occupancy cost base are some of the lowest around the world and the retailer, likewise, benefits from a lower labor cost. Unlike in the United States, where competition deteriorates the margin, Latin American margins are preserved because the market is under-serviced and will pay any price, especially for brand products.
Carvalho: We have very good local retailers, but they are not supported by a capital market allowing them to grow as fast as their management capability or their sense of market. We are very good in most areas of retail, and a joint venture or some kind of acquisition where you can give these companies access to money would be very interesting.
Poma: The large success of our shopping centers is due to the local chains that have entered with us throughout the Central American region. We consider that in Central America there are a lot of local retailers that in some cases have as many as 40 stores with us throughout Central America. We at this present moment don't have J.C. Penney, and we don't have Macy's, but we do have very strong local anchor stores, such as Siman, a Salvadorian-based anchor which is probably the strongest in Central America. They are with us mostly in El Salvador, where we have six projects. We promote that we are the only developers of shopping centers in Central America and the only chain of shopping centers throughout Central America. Throughout these 30 years, as we've grown, all these local retailers have grown. A lot of them probably started with us in El Salvador, then went with us in our move to Costa Rica, to Honduras and Nicaragua. They trust us as developers. Costa Ricans move to El Salvador because they've analyzed El Salvador as an expansion point and realize the only way they can move successfully is to enter our projects.
SCW: Do you try to get a certain percentage mix of local and international retailers?
Eichelbaum: The local specialty retailer is much healthier throughout Latin America than in the United States, mainly because the anchor is neither as cut-throat nor as strong in margin erosion in price competition. Also, the market does not have the inundation of big boxes yet, so the specialty retailer has the primary format throughout all of Latin America. The exception is the small grocery, which has been overtaken by the hypermarket.
Carvalho: In Brazil, on the fashion side, we have developed a different system of distribution by not having anchor stores. At Multiplan, a company operating in Brazil with 60 franchise companies and 600 "multi-brand" stores, we developed in our fashion market more retailers carrying three, four or five important brands. Many department stores in smaller cities have a 700 sq. ft. store carrying five brands.
Eichelbaum: I consider Brazil to have some of the best retail savvy anywhere, because its retailers make very clear statements, with stores named things like "Boys and Girls" or "Tonight's the Night" for their lingerie shop. You are talking about very strong connections with the consumer.
Kelleher: In Puerto Rico, most of the enclosed shopping centers are anchored by a U.S. retailer, but the mix of small stores within the center is a combination of very strong locals in all categories of merchandise and the national tenants. At Plaza Las Americas and at the Empresas Fonalledas company's other shopping center on the island, which is Plaza Del Caribe in Ponce on the south side of Puerto Rico, the owner of the property is committed to working with local retailers to give them opportunities to expand within the center or to bring in second concepts.
SCW: Where is the typical source of capital coming from, and what sorts of alternative arrangements are there?
Carvalho: In Brazil, that's very easy: There is no capital. Three or four years ago, we started to have access to some grants, but the devaluation of the currency last year made a lot of those grants run away. We have a state bank that is supposed to help develop the economy, and they do part of the business but not too much. A long-term finance deal is over five years. It's tough and people grow slowly, but they play an important role on the development of shopping centers. On a capital market, we are very behind with what's going on in the United States.
Quinteros: A great percentage of financing comes from the banking area, because Chile compares favorably with the other countries of the region. Local investors also have a good predisposition to make strategic unions with international operators.
Motta: In Panama, we are very lucky because we are dollar-based and have over 100 banks in Panama. So funding is usually not a major problem. We are able to leverage out 15 or 20 years at reasonable interest rates. And we have a bond market where we can float bonds locally and go out a little longer on terms.
Garcia: If you look at the malls and the projects of these developers, you find they are relatively debt-free. That's what makes a tremendous investment in some of these real estate companies in Brazil. We've been fortunate to be able to build our projects with equity investors such as Shell Oil, IBM and other Brazilian pension funds. Also, Banco Bozano Simonson has been a very good partner with us throughout the projects. Normally we have to rely on capital investments to get the projects built.
Poma: In Central America you do have capital available. In our case, we deal with three or four local banks and with CitiBank and Scotia Bank and a lot of other banks that are interested in investing throughout the region. If we consider the local bank situation, normally I would say they ask for between 10% to 20% equity on the investment. Although I don't know what the percentage is for our company, for the general population the interest rates are about 15% or 16%. In El Salvador, you have 15% to 16% equity, in local currency, but El Salvador has had a stable currency for about the past nine years.
Eichelbaum: The payback period as you develop pro formas in the region is much quicker because the readiness of investment hinges on fluctuation within the markets. The biggest problem of outside sources coming in is the immediate return demands of Wall Street or other financial markets. If you look at any tenure stretch of Latin America, it far exceeds U.S. demands for return.
SCW: Are Latin American developers interested in partnering with American developers?
Carvalho: This has been happening. Two months ago, there was a large degree of development with a Portuguese company that became a capital partner in Emplanta. A lot of Brazilian developers have been talking with American developers or American banks.
Those deals will happen, but it is a matter of time until people feel safer. We are in a very interesting year of considering standardizing the free-dollar rate.
Garcia: American developers are tremendously interested right now in investing in Latin America. I know Simon has been down there, and First Equity has been down there, and we've been talking with them and several other groups. We'll probably see something take shape very shortly .
Motta: In any development plan, when one needs capital I'm sure they are always willing to open the doors. I don't think anyone feels we can do the whole market by ourselves.
SCW: Are European investors also in the region?
Eichelbaum: Sonae, which represents a large development group in Europe, is a major retailer in South America. You can imagine their eventual interest in the market.
SCW: What kinds of entertainment retailing concepts are successful in your countries and where do you see the trend headed?
Garcia: The shift to entertainment is a definite trend. We have just inaugurated an entertainment center of roughly 200,000 sq. ft. in Rio, adjacent to Barra Shopping, which is itself a big traffic generator, drawing about 20 million people a year. The entertainment center, called New York City Center, is anchored by a 35,000 sq. ft. GameWorks. We also have the Universal International Multiplex with 18-screens, state-of-the-art stadium seating and Dolby sound.
Destination restaurants, such as Outback, are also important. Studio 54 is going to be opening there soon. We have a plaza with sort of an empty theater for light performances and community gatherings, which are also very important in that mix. Since opening in November, we are getting traffic of about 500,000 people per month, and some of the restaurants are experiencing record sales.
We're also working the entertainment mix into our new projects. We are making them more consumer friendly in terms of traffic and the transfers between the different parts of the center. We are adding more space for community events and trying to lengthen the stay of the shoppers.
Eichelbaum: In Latin America, developers have attacked entertainment with pragmatism and caution. They operate at safer capitalization levels and with an understanding of how it ties to the rest of the mix. Unlike in the United States, where the population is aging and we're trying to throw them youthful entertainment, the entertainment concept is right on target to the Latin population.
Quinteros: Entertainment has become an anchor of our malls in Argentina and Chile. The concept comprises not only young people but also higher age groups, 45 years and older. Under the entertainment umbrella, we include antique malls, artists' live shows, meetings of writers, painters, thematic samples and others.
Kelleher: As part of the Plaza Las Americas expansion, we are integrating entertainment components, but we are not doing an entertainment wing. The first large bookstore, Borders, opened in Puerto Rico a couple of weeks ago. Under construction right next to it is a flagship Old Navy store. Two Old Navy stores are open on the island, but ours will be the largest. In that same area will be 13 new theaters and restaurants adjacent to a five-level parking structure with parking for 3,500 cars. Not too many steps from there will be the new Macy's store. So we have integrated the elements of entertainment within the existing shopping center.
Poma: In Central America, as a first step in dealing with entertainment, Cinemark, which is the second- or third-largest movie theater chain, has been very interested in entering the Central American region. We've opened 45 or 50 screens with them throughout our shopping centers in Central America. At this moment, we are in the development phase of a high-level entertainment and shopping center in which about 35% of the shopping center is going to be dedicated to entertainment - movie theaters, three orfour sit-down restaurants, coffee shops, commercial spaces for stores and anchors, something similar to a GameWorks and - something that is very important - a high-level entertainment area. We've analyzed the numbers and, if you go out the radius of 2km from the shopping center, you have a combined monthly family income of around $40 million for the entire population.
Eichelbaum: In Latin America, the population understands shopper-tainment much better than the rest of the world, where theaters and restaurants and nightclubs are the definition of entertainment. A vacant department store became an 11-dealership car retailer that sold the most cars in a single location in South America, driving sales volumes in men's stores way up in that wing. Baja shopping also includes a chapel, which certainly qualifies in some way as entertainment to people. Grupo Roble has banking centers with six and seven banks together, which qualify as entertainment to a customer interested in investment stability, and the cybercafes and other specialties. Recognize that in Central America, and especially Panama, the home is a very important factor in everybody's life, with more extensive decoration than most regions. The entire back of the Panama center expansion will be a multi-unit home decorating center facing onto the parking lot to preserve the margin of those tenants and to permit carry-away.
SCW: How do your region's management and marketing styles differ from those in the United States?
Carvalho: Leasing is a tougher business. We add more stores, and we have more stores in general. The turnover of stores is about 10% per year. We want the bottom 10% to leave them all and the new 10% to get in. That's something we push, and it's been a very interesting thing for the market. The consumers like to see new things coming in. We're also doing a better job with kiosks. Now it's over 10%.
There has been a very interesting move in the past few years toward selling merchandising spaces. We have malls in Brazil where the areas of the parking lot are named Coke, Diet Coke and other types of products. We are selling parking spaces over the telephone and selling space all over the mall.
We develop corporate identities between the malls of the city. For the winter sale, we get together all the malls and we do one promotion. In some cities we still own only 50% to 60% of the total retail, so we are fighting against the streets. We got together to promote our sale.
There are a lot of moves toward getting closer to the community, especially with children's programs. We have a place where we hold 100 kids from the community every day, like a day care. It has been very successful with the press and the local community. We also have a school that teaches teenagers gardening to take care of the mall. The companies are looking more at their communities, and this is happening a lot.
Garcia: Our group is hands-on when it comes to the management of the mall. Through our management company, we offer services such as fashion consulting for the stores. We have sales staff and store manager trainings, which you don't see a lot of in the States.
The Brazilian developers are creative and lavish in their presentations. We have something called the "Christmas initiative" promotion, over a 30-day period having drawings to give away cars every day at our four malls. This year, Brazilian developers gave away 135 cars to customers turning in sales receipts. We had another 30-day promotion where we gave away vacations to Disney World. For each $75 purchase, the customers got two tickets to watch a choreographed Disney show in a 60-foot tall castle and amphitheater built in front of the center for the Christmas season. The increase in sales - in a bad year in Brazil - was $32 million. Many areas in Latin America use a strong level of competitive strategizing.
Carvalho: Because there is a limited amount of money, a lot of exchange involves merchandising. I buy cars and give space in the mall to the car dealer. People have been very creative - we gave away boats, a house with a car in the garage, apartments - trying to figure out what the competitor is going to do and making the first move.
Eichelbaum: As with the Crusade of the Children, efforts at Nova America in Rio de Janeiro and some other programs, there is a realization of the many people who do not have spending power who could be shown the potential of shopping centers if they are helped forward. Ancar has been a leader in working with that community and bringing youth into education and into skilled labor and other opportunities, realizing it's good for the country and for the future of stores and shopping centers.
SCW: What do you see as the potential for each country or region?
Kelleher: Retail development potential is tremendous in Puerto Rico. That Macy's is bringing its first store off the U.S. mainland to Puerto Rico is a testament. Many U.S. retailers have expressed great interest in the property and will be opening their first stores there. As I was walking through the shopping center a couple of years ago with the chairman of Macy's, he said they see an opportunity both in what is already represented and in what's not there yet.
Poma: The Central American region is a sleeping lion, with huge amounts of potential, especially in countries like Nicaragua and Honduras, and a lot of potential in El Salvador and Costa Rica. Bit by bit, we are going to get more North American investors, and even a lot of South American investors.
Quinteros: The average rate of vacancy in Chile is not over 4.5% in the 14.4 million sq. ft. of space. The opportunities are great, if investors come in and utilize the local know-how that is available.
Garcia: In Brazil, inflation is under control, the currency is gaining steadily on the dollar and short-term interest rates are down. We see growth in tenant sales. There's opportunity for investors to come in and get very good rates of return.
Motta: In Panama, the opportunities are great. We feel we will be able to bring more American stores to Panama, the dollar-based economy of Panama will allow this expansion to take place quickly.
Carvalho: Brazil is growing, but there is a lot of space in our market. When our telephone companies became private two years ago, we had 2 million phones in the country. Today we have 18 million phones. We are a lot of people, and we are a spending animal. Just ask the retailers in Miami.
Eichelbaum: Globalization is a major reality in the millennium, and Latin America is at the forefront because it has a large, under-serviced population with proven volumes and a development maturity.
Stan Eichelbaum President, Marketing Developments, Cincinnati
Anne Kelleher Leasing Consultant, Plaza Las Americas, San Juan, Puerto Rico
Alberto Poma Marketing & Sales Manager, Metro Centro, Grupo Roble International, San Salvador, El Salvador
Alex Garcia Chief Operating Officer, Grupo Multiplan, Rio de Janeiro, Brazil
Pancho Motta Principal/Investor, Desarrollo Bahia, Panama City, Panama
Marcelo Carvalho Director, Ancar, Rio de Janeiro, Brazil
Gonzalo Quinteros Chief Operating Officer, Parque Arauco, Santiago, Chile
Home Depot snags SAM's Club sites The Home Depot and Wal-Mart have now confirmed that they have a deal for The Home Depot's purchase of the three SAM's Club sites in Argentina. The deal is a boost for The Home Depot's expansion plans as the company can now have six locations open within a year of opening its first store, which is under construction in Barracas. The SAM's units are in Avellaneda, San Justo and Constituyentes.
Hoyts to open 25 screens Hoyts General Cinema has announced its year 2000 expansion plan for Argentina includes three complexes totaling 25 screens. In July, eight screens will open in Salta's Nueva Noa center, while in August the company will open eight more in Temperley in conjunction with hypermarket Coto. By the end of the year Hoyts will team up again with Coto in Lanus with a nine-screen complex.
Homecenter Sodimac to enter Argentina Chile-based Homecenter Sodimac plans to open its first Argentina unit this year and expects overall sales to grow by 18%. The chain plans to spend up to $100 million in 2000 on new store openings, remodels and supply chain management improvements. Sodimac already owns three sites in Argentina and operates in Peru and Colombia. Earnings for 1999 fell 14% while overall sales for the year grew 3%.
Paulmann plans $35 million Chile Center Horst Paulmann has filed preliminary development plans for yet another Chilean project, this time for a site at Bilbao and Padre Hurtado in the Las Condes suburb of Santiago. The $35 million project calls for the construction of a Jumbo hypermarket and an Easy homecenter. The move could strengthen Jumbo's market- leading presence in the affluent eastern suburbs and will likely compete head-on with Lider's (D&S) planned store in La Reina, which is scheduled to open in May. Paulmann now has at least five new centers in the early stages of development throughout Chile.
Jumbo, Easy open first phase of 'El Portal de Escobar' Jumbo and Easy have opened their newest units in the Buenos Aires suburb of Escobar as the first phase of what will eventually be a 200-store shopping center including a cinema and bowling alley. The Jumbo unit is a 9,685 sq. meter, or nearly 32,000 sq. ft., hypermarket, the ninth in Argentina. The opening of Easy brings the homecenter's Argentina store count to 12.
Bookstore signs deal for former theater Argentina's largest book retailer will occupy the prime real estate of the Gran Splendid Theater on Avenida Santa Fe. El Ateneo, which is part of the Yenny bookstore chain, will have 1,500 sq. meters (5,000 sq. ft.) of sales area and a 300 sq. meter (1,000 sq. ft.) bar whose operator has not yet been identified. The Gran Splendid, one of Buenos Aires' best known theaters, was built in 1919. The bookstore is expected to open in June or July of this year.
Goldman Sachs eyes $100 million deal in Argentina Goldman Sachs may invest an additional $100 million in Argentina's largest shopping center owner, Alto Palermo. Funds will likely be used for new development projects in Rosario and Neuquen. Goldman currently controls 6% of the Alto Palermo, other investors include IRSA (45%), AFJP (12%) and Parque Arauco (27%).
Alto Palermo - Perez Cuesta merger talks ended Merger discussions between Argentina's two largest shopping center development and management companies reportedly have hit a roadblock. The discussions between Alto Palermo and Perez Cuesta would have created a managed portfolio of the top centers throughout all of Argentina. Alto Palermo's portfolio largely consists of centers in the capital of Buenos Aires, while Perez Cuesta is strongest in the regions with managed properties in Mendoza, Bahia Blanca and a new project in San Juan. Alto Palermo currently owns 25% of Perez Cuesta SACI that in turn owns 51% of Bahia Blanca Plaza and 100% of Mendoza Plaza.
Carrefour, Sony involved in tax evasion investigation A crackdown on falsification of importation documents and tax evasion has involved Sony, Carrefour and electronics retailer Ventura. The investigation deals with goods being imported by phantom companies that falsify the value of the merchandise in order to pay lower import taxes and in turn sell the merchandise to retailers. The retailers are being investigated for taking receipt of the merchandise for less than the amounts shown on invoices, allowing them to claim higher value-added tax credits.
Dismal sales may change plans in Argentina With record sales off 30% so far this year and a 15% decline overall including books and electronics, Musimundo may be rethinking its planned 25-store expansion in Argentina. Industry trade group Capif said sales were down nearly 20% in 1999 and off 11.6% in January. Second-tier music stores in Argentina, such as Amigos de la Musica, Quatro, Shower and Temas, have had their credit lines severed and are in negotiations with the recording companies to extend their payment terms.
Coto to expand in provinces Argentina's largest nationally owned grocer, Coto, has retained Lehman Brothers to issue $150 million in bonds to finance its expansion into the provinces.
Coto, a private holding of Alfredo Coto, has annual sales of approximately $1.3 billion. The chain is apparently negotiating the purchase of the bankrupt Mar del Plata chain Aragone.
Furniture retailer CIC exploring new stores with D&S Chilean furniture manufacturer and retailer CIC is contemplating the development of four new stores in conjunction with supermarket chain D&S. Three stores would be located next to Lider hypermarket units, in Puente Alto, Pajaritos and Concepcion, with an additional unit in La Florida adjacent to an Ekono supermarket. The planned expansion is consistent with CIC's goal of closing its mall-based units and looking for less expensive real estate.
Drugstore consolidations likely to continue, pharmacy group reports According to the trade organization Union of Chilean Pharmacies, consolidation within the drugstore industry is likely to continue with the Conosur chain, one of the most likely takeover candidates. Chile's pharmaceutical market is valued at approximately $520 million, 82% of which is controlled by the 500 stores operated by the country's three top chains. Conosur, the fourth-largest chain, controls 4% of the market with its 40 stores. It is also likely that the top chains will continue their expansion outside of Chile in markets such as Brazil, Peru and Argentina.
Sources for the Andean Retail Report include La Nacion (Argentina), Clarin (Argentina), Ambito Financiero (Argentina), El Diaro (Chile), Estrategia (Chile), El Mercurio (Chile), La Hora (Chile), Capital (Chile), Reuters and Business Wire.