Mall operators begin taking projects off the shelves
Large mall operators plan to accelerate their investments in 2018, opening older projects they had put on the back burner last year. Multiplan starts to build next year a mall in Jacarepaguá, neighborhood in the western zone of Rio de Janeiro. The company’s intention to open a business in the area was known, but with the worsening of the crisis, the plan did not move forward. The investment is expected to range from R$400 million to R$500 million, Valor has learned.
Companies that spoke with Valor still don’t have plans to build malls from scratch. The latest big cycle of investments in new malls ended four years ago, when the last significant projects were announced.
In addition to resuming pending projects, the focus is on expanding existing malls, adding land space for future projects and increasing the number of renovations.
Iguatemi Empresa de Shopping Centers said its 2018 investments should be higher than this year’s, but didn’t elaborate. It is expected to announce its forecasts in January or February. “Capital expenditures tend to be higher [than in 2017], but we haven’t returned yet to levels prior to the crisis,” said Roberta Noronha, the company’s chief of investor relations, in a meeting with analysts.
Iguatemi has two new projects to open in 2018 and 2019 and that were on the back burner for over one year. The group plans to open an outlet mall in Tijucas, Santa Catarina, in late 2018 and another in Nova Lima, Minas Gerais, in the following year. The projects have been taken off the shelves after having reached a little more comfortable occupation rate — in Tijucas it is above 70%, compared with 50% a year ago, Valor has learned.
For that it also contributes the fact that outlets demand less cash disbursements than traditional malls. The companies have also been considering those two factors — total disbursement and occupation — before announcing the revival of old projects. Outlets demand average investment of R$100 million, about one-third of what is spent on the construction of a large mall in big cities.
As of September, Iguatemi had R$70 million in capital expenditures. The plan for the full year ranged from R$80 million to R$130 million. That is, it is probable the realized investment will be closer to the lower than the upper end. In 2012, before the recession, Iguatemi invested R$420 million.
The country’s largest mall operator, BRMalls, whose developments cater classes C and B, or middle and upper middle, says “the trend is of increase in investments” in 2018 from 2017, CEO Ruy Kameyama says.
Such increases partly owes to the company’s plan of opening in late 2018 its Shopping Estação Cuiabá, in Mato Grosso. The project was stalled for at least one year because of the crisis.
BRMalls considered strategic will get injections as part of the group’s search of more rational capital expenditures. In 2016, BRMalls invested about R$235 million. In 2017, it invested R$168 million through September. In 2014 and 2015 it had invested nearly R$500 million.
Mr. Kameyama prefers not to define a timeline for announcements of new projects, but said this is not likely to occur over the next few years. “I don’t see on the short-time horizon some announcement in that sense. This decline [of openings] is even positive because it reduces competition pressure in the sector.”
He says the economic outlook has improved and 2018 tends to be a year of recovery to retailers. “In this scenario, we should return to sales growth and earnings improvement. We have been for two years with drop in revenues, and in 2018 are likely to return to positive rates.” Through September, net sales at BRMalls were down 0.4%. In 2016, the same period had 5.3% decline.
“There was an improvement, but we are still cautious, considering we have elections, which produce uncertainties,” says Vicente Avellar, chief operating officer at BRMalls.
The management of General Shopping doesn’t see room for a rebound of its investments in 2018. “We have made some investments in switching stores and creating larger service areas in the developments. In terms of more significant volume, it is not the moment yet,” says Marcio Snioka, the company’s investor-relations officer.
Source: Valor Econômico