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Altagamma, Developer Set Travel Retail Deal

Retail developer McArthur Glen and Italy's luxury goods association Altagamma will today unveil a joint venture to penetrate developing markets and explore travel retail in an upscale new format.

MILAN — Retail developer McArthur Glen and Italy’s luxury goods association Altagamma will today unveil a joint venture to penetrate developing markets and explore travel retail in an upscale new format. McArthur Glen also plans to venture into full-price malls, a new strategy for the developer, which operates 15 designer outlet malls in Europe.

“With Altagamma, we want to create special opportunities in developing countries, a safe environment conducive to business,” Joey Kaempfer, chairman of McArthur Glen, told WWD in an exclusive interview. “The partnership capitalizes on the combined strengths of Italy’s leading fashion brands and McArthur Glen’s experience in development and distribution. It eliminates individual risk and lengthy, unilateral lease negotiations.”

Kaempfer pointed to India and Eastern European countries as markets with potential for the partnership. The executive said the first investment in a full-price mall in India would be in the range of 60 million to 90 million euros, or $80.6 million to $1 billion at current exchange rate, although no project has been confirmed. Warsaw is one potential city for the venture, according to the executive.

“Working as a team with an operating partner will allow the Altagamma brands, although recognizable and appealing in those countries, to enter markets that lack infrastructures,” said Leonardo Ferragamo, the group’s chairman. “It allows our members to experiment with new retail strategies, crucial to their growth, and it is an opportunity to explore new territories with the benefit of critical mass and rapid entry-to-market potential.”

Kaempfer said the two partners were also finalizing an agreement with an international airport where the first tax-free luxury mall is set to open in February (the location has yet to be disclosed). “The retail space, between 22,000 and 43,000 square feet, will carry the Altagamma brands, at full price, but tax-free,” said Kaempfer. The mall will be called Collezioni and be designed by the McArthur Glen organization.

The Altagamma association includes fashion and luxury brands Alberta Ferretti, Bottega Veneta, Bulgari, Emilio Pucci, Ermenegildo Zegna, Etro, Fendi, Salvatore Ferragamo, Gianfranco Ferré, Tod’s, Valentino and Versace, in addition to nonfashion companies such as Alessi and Driade.

“Travel retail is a mature market, but it’s in an expansion mode,” said Ferragamo. “To enter this market, it’s important to identify quality projects, efficiently managed.”

Ferragamo praised McArthur Glen for the caliber of its projects, many of which are in Italy. The partners plan to open stores in five or six airports by the end of 2009. Kaempfer said the investment in the first travel retail Collezioni luxury mall would range from 10 million to 15 million euros, or $13.4 million to $20.1 million.

“We are very excited about this project and have added a number of people on our staff,” said Kaempfer, who plans to open restaurants and other businesses “conducive to shopping” in the Collezioni mall.

“For the Altagamma brands, the opening of boutiques is a pivotal factor in the growth of their businesses,” said Armando Branchini, general secretary of Altagamma and luxury goods analyst. “This agreement will help them expand also in those markets that don’t have a local structure.”

A third plan is to create a different kind of designer venue that would be a luxury-driven, full-price mall in developed countries. “We are moving toward smaller and more rarefied malls carrying fashion in the upper end of the market,” said Kaempfer.

The partnership coincides with the groundbreaking last week for McArthur Glen’s latest outlet mall in Noventa, 25 miles from Venice, in one of the wealthiest regions of the country. The mall is scheduled to open in fall 2008. The outlet will draw inspiration from local, traditional 16th-century Venetian architecture, with porticos, Palladian-style facades and multiple bowled fountains.

The opening phase, a retail area of almost 49,000 square feet, will include 30 stores, two restaurants, a bar and a playground, among other amenities.

McArthur Glen, with reported sales of 2.3 billion euros, or $3.09 billion, last year, will invest 55 million to 60 million euros, or $74 million to $80.6 million, in the first phase of the Noventa di Piave outlet. The Noventa outlet, the group’s fourth in the country, follows others in Barberino del Mugello, close to Florence; Serravalle, between Milan and Genova, and Castel Romano, outside Rome. Upcoming malls are scheduled to open in Turin, in spring 2009; in Naples, where groundbreaking is set for fall 2007, and in Sicily. An outlet in Athens will open in early 2009. “Building usually lasts from nine to 15 months,” said Kaempfer.

The existing outlets carry 650 brands in more than 1,200 stores in Berlin; Roubaix, France, and Ashford, Swindon and Cheshire Oaks in the U.K. Savings on brands range from 30 percent to 70 percent.

Kaempfer said the perception of designer outlets had changed “tremendously” over the past few years. “Designers now realize outlets don’t tarnish the image of the brand; they actually enhance and protect it and bring more profitability,” he said. As for American brands, Kaempfer said the ones that work here were “those that are internationally known: Polo Ralph Lauren, Levi’s, Timberland, Nike, Reebok, Liz Claiborne, Calvin Klein, Donna Karan — a range that you think of as international.”

The executive said companies usually agreed to long-term contracts. “Between 8 1/2 and 14 years is the average rent period,” he said, adding that revenues range from 5,000 euros to 8,000 euros, or $6,720 to $10,752, per square meter per year.