‘It’s a disaster, that’s what it is. I’m a great believer in Barack Obama, but he’s sure started with a mess. ’

That is JW Kaempfer’s assessment of the economic climate. But despite his uncertainty, ‘Joey’, as McArthurGlen’s straight talking American chairman is better known, opened the first phase of a 177,605 sq ft (16,500 sq m) Berlin shopping outlet last month alongside the company’s joint venture partner, Henderson’s European Outlet Mall Fund.

Designer Outlet Berlin – in Brandenburg, on the outskirts of the German capital – is McArthurGlen’s 18th outlet, and takes its total portfolio of managed or owned assets to more than 4.3m sq ft (400,000 sq m) across seven European countries.

McArthurGlen specialises in designer outlets selling discounted, branded goods directly from the manufacturers. Twelve of the outlets it manages are held in the Henderson European Outlet Mall Fund. McArthurGlen either develops assets for the fund and then sells them to it, or project manages developments using Henderson cash and shares in the profit.

Kaempfer says that the partnership is healthy because of the two firms’ contrasting styles. ‘They are a very proper, detail-oriented property company,’ he says. ‘And they are becoming better and better at being developers. They think they’re developers. We, however, do not think we are financiers.’

Kaempfer is confident that outlet malls will be resistant to the global downturn, and the crowd that queued for hours before the opening of the Berlin scheme suggest he is right. ‘Even if things are tough, you need to buy shoes for your children,’ he says.

Europeans are not from Mars

Kaempfer founded the London-based company in 1993 and was adamant he could make a success of the format in Europe.

‘We heard so often that in the UK and France no-one would want to buy stuff at a discount, that people wanted to pay full price for things – no joke. We did some basic research and focus groups to make sure that people from the UK and France hadn’t been transported from Mars and it turned out, just like everyone else if they can get a discounted price, that they’d feel good about it.’

But Kaempfer is not trying to pretend that developing in the current market is easy. He claims to have a mountain of equity to spend. But, like many other investors, he is finding debt difficult to get hold of.

‘I don’t want to say we have unlimited equity, but we have a couple of hundred million dollars to invest. But spending it depends on getting $500m-$600m of debt, and that’s hard to find. The response from bankers is that construction risk is too high. Just give me the money!’

Although frustrated by his bankers, Kaempfer is at least more cheerful about the current administration governing the US.

‘Obama is a good progressive. I think he’s a liberal Democrat. I think he believes in things like negotiation instead of war. I don’t want you to think I didn’t like Cheney and Bush … but I didn’t like Cheney and Bush.’

By David Hatcher

Source: www.propertyweek.com, 03.07.2009