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WWD Real Estate Review issue 10/13/2008

Luxury mall owner and operator Iguatemi is riding the wave of Brazil’s growing affluence and consumers’ appetite for luxury goods.

This story first appeared in the October 13, 2008 issue of WWD.  Subscribe Today.

The South American country’s growing economy makes Brazil a nation of voracious shoppers, which is reflected in Iguatemi Empresa de Shopping Center SA’s gains. Net income in 2007 rose 83.6 percent to $25.7 million from $14 million in the previous year. However, net income would have been even higher if not for expenses related to Iguatemi’s February 2007 initial public offering, which reduced earnings by $11.9 million. Revenues were up 42.3 percent to $70.7 million from $49.7 million in 2006. Dollar figures have been converted from the Brazilian real at average exchange for their respective periods.

Brazil, the world’s 10th largest economy, has the highest gross domestic product in Latin America — $1.65 trillion.

“Latin America’s overall high net worth population grew faster than the global average, expanding by 10.2 percent in 2006,” said Carlos Jereissati, president of Iguatemi. “Wealth in the region grew by 23.2 percent. This growth means more room for luxury brands. We’re in the opposite moment as the United States economy. We still have so much room to grow in Brazil. We have 11 malls and five under construction….We’re going to double the company’s size in three years.”

Iguatemi is a division of the family-owned Grupo Jereissati, which is involved in commercial real estate, commodities and telecommunications. Iguatemi became the first Brazilian company in its sector to go public last year, Jereissati said. Plans for growth include building new centers and continued acquisitions such as last year’s Market Place Shopping Center and Market Place Towers in São Paulo.

The jewel of Jereissati’s crown is Iguatemi São Paulo, a shopping mall with monumental entrances for maximum natural light. The center, which is the site of São Paulo Fashion Week, is located in São Paulo’s most affluent neighborhood, the Jardins district. Iguatemi is building a mall, J.K. Iguatemi, in the Itaim section of the city, and has set the opening for 2010. Other malls are also planned for Brasilia, the nation’s capital, and Alphaville. Jereissati said Louis Vuitton, Ferragamo and Ermenegildo Zegna have committed to the Brasilia mall, which will join their existing Brazilian locations in São Paulo and Rio de Janeiro.

Iguatemi São Paulo features 350 stores, including Louis Vuitton, Tiffany & Co., Ferragamo, Burberry, Miu Miu, Bulgari, Marc Jacobs, Stella McCartney and Alexander McQueen, along with Brazilian brands such as Carlos Miele, Tufi Duek and Rosa Chá. Gucci will open a 6,000-square-foot store at Iguatemi in November, its first unit in South America. Average sales at Iguatemi São Paulo are $2,000 to $2,500 a square foot, Jereissati said.

“Brazil is definitely now considered to be one of the world’s most dynamic emerging markets for the luxury sector,” said Mark Lee, chief executive officer of Gucci, who is stepping down Dec. 31. “According to a recent Nielsen survey, Gucci is one of the three most desired luxury brands in the country. The Iguatemi mall represents the best overall environment for luxury fashion brands in Brazil. We are delighted to be entering the market with our first directly owned and operated store.”

Brazil’s bulging middle and upper classes have enabled Iguatemi to expand the São Paulo center.

“In 1998, Louis Vuitton decided to open its first store in Brazil at Iguatemi because we felt it was the best partner,” said Frédéric Morelle, president of Louis Vuitton Latin America and South Africa. “History proved us right…our Iguatemi store has been performing beyond projected earnings consistently since we opened and it’s been expanded twice.”

Tiffany “opened its first store in Brazil in 2001,” said Patricia Assui, general manager of Tiffany & Co., Brazil. “In order to have a successful launch, we needed to partner with a solid organization that understood and performed well in the luxury market. Iguatemi was a natural choice…its clientele is perfect for Tiffany. It has helped us venture into a new market and facilitated our efforts in promoting and developing our brand to the Brazilian client.”

Jereissati said part of Iguatemi’s success is rooted in the nontraditional designs of its centers. Unlike conventional malls, which are built like track and field ovals where consumers walk around and around, Iguatemi malls are designed with lots of corners, hidden alleys and gardens that are meant to be explored. Stores are clustered around “town squares.”

Iguatemi São Paulo features a palm tree-shaded entrance meant to evoke an upscale hotel and a huge outdoor garden. “The valet service entrance looks like you’re entering a hotel lobby,” Jereissati said. The movie theater has lots of wood and brass elements as well as sofas for lounging.

Iguatemi has made a science of customer service, bringing unexpected amenities to those accustomed to being indulged. “I look at a lot of hotels and department stores for ideas: the Four Seasons, the Ritz-Carlton and the Aman chains,” Jereissati said.

A concierge desk books personal shoppers, provides gift-wrapping and makes dinner reservations. Consumers picking up their cars from the valet will find two bottles of cold water in the cup holders, a welcome touch in the tropical climate. A loyalty program, Iguatemi 1, enables customers to exchange sales receipts for valet parking credits. There’s Pik’s, a children’s area operated by Iguatemi, “a safe place where kids can engage in such activities as cooking, T-shirt making or hairstyling while moms shop,” Jereissati said. Gloved elevator operators, a throwback to more elegant times “lend a human touch,” he added.

Jereissati makes it his business to be familiar with the interests of Iguatemi shoppers. “Our customer loves contemporary art,” he said. “We have a space inside the mall and every 15 days there’s a new exhibition. We’re knit into the fiber of the fashion industry and involved in everything related to fashion, art and culture.”

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