Freeport was founded and joined the London Stock Exchange in 1994.
It is presently one of the leaders in the European designer outlet sector.
In this interview, Iestyn Roberts, Chief executive, develops the place and the positioning which Freeport occupies in the European Factory Outlet Sector.
Magdus: Could you comment briefly on Freeportâs foundation and its development in the Designer Outlet sector?
Like all good businesses, we think the future is more interesting than the past! The UK was the first European country to build mall based factory outlets, Freeport plc was one of the leaders in that process together with McArthurGlen and developed 6 centres across the UK. Finance was raised through the London Stock Exchange. By 2004, the UK had become a mature market with few new opportunities, so we decided to focus on the faster growing markets of continental Europe and divested the UK centres. With no assets in the UK market and ambitions to grow in continental Europe, Freeport group moved its head office to Monaco in 2005. Monaco seemed a logical choice although we will continue to review our structures.
It has been reported that the Freeport group was to be bought by the Carlyle group this year. Is Freeport interested in finding a purchaser or was this merely an opportunity due to interest shown by Carlyle?
Raising finance through the London Stock Exchange for new developments has become more difficult for us, our shareholders felt we should be looking at becoming a private company again in order to exploit the opportunities we have. Since September 2007, we have become a wholly owned part of the Carlyle group. This is a very exciting situation as Carlyle not only has access to financial resources but also is an experienced developer able to supplement and enhance our skills.
The past few months have been a difficult time for the group, with your previous PDG being judged for misappropriation of funds. On the stock exchange, Freeport shares have been falling. Are you concerned that the groupâs image will be affected by recent events? What message would the group like to put across today particularly to its shareholders and investors?
I suppose the takeover by Carlyle puts much of this in the past, but the Chairman and I have spent a great deal of time talking to our shareholders who understand and endorse our strategy for restoring the companyâs reputation. I believe we have done a good job for the public shareholders of Freeport plc, and they appreciate our efforts to restore value.
The Freeport group is currently present in 3 countries: Sweden, the Czech Republic and Portugal . Why and how did your launching in each of these 3 countries take place? Did you encounter difficulties during your establishment in these 3 countries?
Ultimately, all property investment has an element of opportunism, we have a strategy of building centres where there are strong catchments. These three were the first that we were able to gain permissions after a process of researching the market and discussion for site owners, local authorities etc. Every centre and shopping culture has its own peculiarities (not necessarily âdifficultiesâ!). I think the key difference that we encountered was that outside the UK we found ourselves dealing with franchise owners rather than the master brand. This can distort the flow of stock which is crucial to the sales performance â and thus our rental income. We have learnt that it is very important that even when the direct relationship is with the local franchise partner, the master brand must accept the outlet store as part of the strategy and be prepared to support it with appropriate stock as necessary.
What is the positioning of the group concerning the offer? How do you distinguish yourselves from competitors and faced with the growing uniformity of the offer at designer outlets? Are there specificities depending on the country in terms of designer outlets in Europe, particularly in the countries where the group is established? If so, how did you adapt?
We are firmly positioned in the middle to upper market, focusing on customers who are prosperous and enjoy shopping for aspirational brands. It is hard to distinguish ourselves from our competitors, who often have very similar targets, although I suspect this is less a problem for our customers, who generally will shop the outlet closest to tem. Our key differentiation tends to be the emphasis we put on quality of environment and the total shopping experience. Of course â every country is different in terms of behaviour â when people like to shop, how they pay, the brands that appeal, service levels etc. But many more things are the same! People like to shop, they love a great brand at an exceptional price, they want car parking, good customer service, plenty of stock to chose from, fashion is the key driver of visit and purchase, sportswear is a consistently strong business â I could go on for a long time!
The groupâs name âFreeport Leisure plcâ represents perfectly the groupâs objective to encourage the image of designer outlets as âfun shoppingâ (associating retailing with leisure activities). The outlet in Lisbon is a very good example. Will you be continuing in this objective in future projects?
Freeport Leisure is the old name, but we will continue to think hard about why our customers come. All outlet shopping has a strong element of leisure, it is about shopping for pleasure not about a functional purchase. We want our centres to reflect this in a complete way â leisure is not just about cinemas and bowling, it is also about an environment which is pleasant to spend time in, a product offer which is fun and eclectic. Specific leisure facilities can be difficult to justify economically if you donât recognise that it is about bringing more people in and having them stay longer. We have great ideas for more leisure â a wax works in the Czech Republic, Natural History Museum exhibitions in Portugal, five a side football pitches. It also becomes a real addition to the local community and weâre still improving our existing centres as well as designing it into new centres.
How would you evaluate the future for the designer outlet sector in Europe in the near future (5 to 10 years)? What do you think Freeportâs involvement will be?
Remains a fast growing sector, centre of gravity of new development will shift eastwards as ânew europeâ grows in prosperity. Freeport is well positioned to be a leading player with major growth in âcore Eurozoneâ especially France as well as the being able to use Czech Republic as a springboard to the East. Gothenburg gives us access to Scandinavia and the north-east of Europe. The sector may well consolidate and with Carlyleâs support we may even look at acquiring other, existing centres to strengthen our grip on key markets.
The group is in the process of creating several designer outlet projects in France, notably in Roppenheim (67) and Cannet des Maures (83). In face of the difficulties encountered for the Roppenheim project (several years procedure), due to the French legislation (one of the most restrictive in Europe), why develop projects in France? Within such a context, wouldnât it be easier to set up in another country?
The process is both an opportunity and a problem. An opportunity because it means that such projects are carefully considered in relation to their local market, there will not be too much building so each centre should be successful. A problem because it takes time and money, but it is worth it because the French consumer is prosperous and aspirational and really enjoys outlets.
How would you analyse the market situation in France at the moment and the opportunities open to you compared with other European markets? How are your projects progressing?
France is not saturated and I would expect 15-20 more outlets be developed in France. There are plenty of high quality opportunities across Europe, although some markets eg Italy have become very developed very quickly. Outside the Eurozone there are already successful outlets, but the economics of these schemes have to be carefully managed. Concerning our projects, itâs very exciting â building permit granted at Roppenheim, moving ahead with the planning process in Le Cannet and we have at least 3 more projects under detailed evaluation.
Concerning your project at Cannet des Maures, several competitors agree that this would be a very interesting site. Since there cannot be numerous similar projects in the south east of France, there is great interest to appropriate your project. What do the Directors of Freeport think about this?
We see this as a strategic project, vital to the future of the company and an important chance to build a second project in france. We have no intention of selling out!
Interview by Caroline Lamy for Magdus, november 2007
For more information about Freeport: