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Brad M. Hutensky ICSC Chairman May 9, 2013 22 nd Annual Connecticut Commercial Real Estate Conference Slide 2 Retail Real Estate Overview The International Context Internets Impact on Bricks & Mortar The Opportunities in US/CT Retail Slide 3 Why Is Retail Exploding Globally? Slide 4 Have Seen Growth First Hand In Brazil: 44 Malls in next 24 months In Brazil: 44 Malls in next 24 months In Middle East: Malls being built EVERYWHERE! In Middle East: Malls being built EVERYWHERE! In China: 24.5 Million Sq. Ft. in Tianjin In China: 24.5 Million Sq. Ft. in Tianjin Slide 5 Shopping Center Space Under Construction 1.Tianjin, China 2.Shenyang, China 3.Chengdu, China 4. Abu Dhabi, UAE 5.Wuhan, China 6.Hanoi, Vietnam 7.Beijing, China 8.Shanghai China 9.Kuala Lumpur, Malaysia 10-14 Xian, Shenzhen, Chongqing, Nanjing, Guangzhou China Source: CBRE 24.5 mm sf Slide 6 Retailer: The Growing Middle Class $21 Trillion (Today) Global Middle Class Spending Projections $56 Trillion (2030) Slide 7 Year-Over-Year Retail Sales Source: ICSC Slide 8 GLA Per Capita GLA Per Capita 24.76 Slide 9 Mall Development 2007-2012 Slide 10 Every market is different Customers Wants & Needs Customers Wants & Needs Governments laws Governments laws Industry Norms Industry Norms Slide 11 World Speaks Language of Retail 1 ) Product 2) Price 3) Convenience 4) Service 5) Experience Slide 12 The Threat of E-Commerce Slide 13 Will E-Commerce make Bricks & Mortar Retail Irrelevant? Slide 14 Brick-and-mortar stores serve customers who end up buying online The internet has made shops obsolete in some towns Retail is dead, long live retail Slide 15 The Internets Growing Share of Retail Sales 5.2% 1.6 % Source: U.S. Census Slide 16 Showrooming: visit the store, study the product, shop online for the lowest price Slide 17 Retailer Bankruptcies & Store Closures Slide 18 BUT HERES THE TRUTH Slide 19 Retailers Still Expanding Retailer Number of Units - Next 24 months Subway5,000 Dollar General1,300 Five Guys Burger and Fries1,200 T-Mobile600 Walgreens571 Zara450 Taco Bell400 Wal-Mart300 T.J. Maxx150 Famous Footwear100 Macys20 Source: RBC Capital Markets Slide 20 Where We Buy Depends on What We are Buying Buy on the Internet books, music, shoes computer software, video games Buy at Stores Mens suit, hair cuts, home furnishings, groceries, apparel, pharmaceuticals Slide 21 Need for Human Contact Trip to the Mall Slide 22 Need for Human Contact Trip to the Theater Slide 23 Advantages of the Store Immediate gratification Cash purchasers Exchange/return Omni Channel Slide 24 Retailers with Major B&M Presence Are 12 of the Top 20 Highest Online Sellers Source: The Top 500 List Slide 25 Conclusion Customer is changing Successful retailers are changing too Internet is driving efficiencies in pricing, inventory and customization Slide 26 U.S. Retail Real Estate Markets Slide 27 U.S. Retail Real Estate Market in Brief 113,355 Shopping Centers = 7.5 Billion sq ft of GLA in 2013 Creates 18 Million Jobs Modest sales increases Minimal New Development Only 1 Mall opens in 2012 About 46 new open air centers open YTD Slide 28 Three Observations About U.S. Retail R.E. Markets We dont need more supply, mostly Bifurcation of Capital A Properties get lots of attention Non-stabilized, smaller market, lesser tenants get little attention Lender Balance Sheets are swollen Slide 29 Where are the opportunities? Redevelopment (aging stock; best locations) Urban/Mixed Use Serve the new population growth Slide 30 Repositioning Opportunities Slide 31 Age of U.S. Shopping Centers ~80% More than 15 years old Slide 32 e-Commerce Creates Opportunity As store sizes become smaller Re-tenanting upside More locations per market More new development Slide 33 Why Governments Embrace Retail Real Estate $1 million in sales$1 million in sales at a brick-and-mortar store nearly 4 jobs creates nearly 4 jobs. Catalyst for other uses (residential & office) tax revenue Retail attracts visitors and related businesses and generates tax revenue. Slide 34 Opportunity from Population Growth Slide 35 ~203 million people ~309 million people ~440 million people 1970-2010 2010-2050 Growth US Total Population Redevelopment (aging stock; best locations) Slide 36 Retail In Connecticut Follows US Trends Older stock: Lots of opportunity for redevelopment Population: we will get less than our share Urban/Mixed Use: Blue Back Square: West Hartford, CT Storrs Center: Mansfield, CT Front Street: Hartford, CT Slide 37 International Council of Shopping Centers in Brief Slide 38 Total ICSC Membership 59,000+ U.S. 81% Other 5% Canada 6% Europe 7% Slide 39 ICSC World Wide In 2012: 350 meetings; 100K+ attendees In 2012: 350 meetings; 100K+ attendees RECon Las Vegas, USA 32K registrants RECon Las Vegas, USA 32K registrants $57MM annual budget $57MM annual budget Slide 40 ICSC Goal: Members Success Networking: a business of relationships Education: Learn from the experienced Research: All the information you need Slide 41 Some Final Thoughts Retail Real Estate Truly Global: In Different Stages of Maturity (US most mature) Retail Real Estate Truly Global: In Different Stages of Maturity (US most mature) Massive Change = Massive Opportunity Massive Change = Massive Opportunity ICSC: Goal to help US & Growing International Members Prosper at Whatever Stage ICSC: Goal to help US & Growing International Members Prosper at Whatever Stage Slide 42 THANK YOU!