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Outlet Man on the Old Continent
Local Developer Joey Kaempfer Finds Success in Europe With Discount Malls

By Anne Swardson
Washington Post Foreign Service
Tuesday, October 5, 1999; Page E01

ROUBAIX, France—Joey Kaempfer is looking at his new shopping mall, and he's not entirely pleased.

"Fix it," he snaps to a subordinate, pointing to some exposed wiring on the ceiling of the entryway to the parking garage. Walking on, he lists other details he wants perfected immediately.

"Are you taking notes?" he asks the minion.

Yes.

"Let me see," Kaempfer says, peering at the young man's empty hands.

Uh, they're in the car.

"Here's a pen," Kaempfer says, and he hands him one. "Be sure to give it back."

J.W. "Joey" Kaempfer hasn't changed since the days he made, lost and remade a fortune in Washington commercial real estate. But he's changing Europe.

Kaempfer and the company he heads, BAA McArthurGlen, are bringing a new idea to the Old Continent: designer discount shopping. Just last week, Kaempfer and local dignitaries celebrated the opening of the firm's second discount mall in France. Five already are operating in Britain, as is a mall in Parndorf, Austria. Construction is underway on an Italian mall near Milan. Joey Kaempfer is Europe's biggest outlet man.

Consumers are flocking to the centers, and they are buying. European shoppers, as it turns out, are just as happy as Americans to save 30 percent and more from the full retail price. Perhaps happier, since Britain has some of the highest prices in the developed world and sales in France are allowed only twice a year, by law.

Kaempfer has achieved this breakthrough with the same tenacity that made him one of Washington's best-known real estate developers in the booming years a decade ago. The man who at his low point was $1 billion in debt now is renovating a house he has just bought in London and stays at the Hotel Ritz when he comes to Paris.

McArthurGlen's idea is simple: Build the same kind of discount malls that bring shoppers roaring down Interstate 95 to Potomac Mills. That is, far enough from traditional boutiques that big-name designers feel safe enough to offer oversupplied or outdated merchandise at substantially reduced prices.

The American model, it turned out, needed to be modified a bit to succeed in Europe. First, there is no such thing as "far away" here. A mall as far from London as Potomac Mills is from Washington would be practically in Wales.

Second, European political leaders are deeply worried about sucking business out of their historic center cities. France imposed a near-moratorium on shopping-mall construction in 1997, for instance. Permits for big malls take years to obtain everywhere in Europe; McArthurGlen has been trying for four years in Germany with little to show for it.

Europeans also do not always see the value of keen retail competition, especially in regions where existing competitors are influential in local government.

"Especially in France but also for Europe in general, the three American real estate rules of location, location, location are instead politics, politics, politics," said J. Byrne Murphy, deputy chief executive of McArthurGlen.

It took three years to complete McArthurGlen's first French mall, in Troyes, mostly because the process of gaining approvals dragged on so long. The Roubaix mall took four years even though local officials were almost unanimously for it.

When Kaempfer's Washington company renovated the historic Warner Theater, many thought "it was the most complex development project ever done in Washington," Murphy said. "Roubaix and Troyes were infinitely more complicated."

Kaempfer began in Europe almost by chance, when friend and outlet-mall developer Alan Glen asked him to handle the company's expansion to Europe. Murphy set up in Paris in 1993, operating out of the third bedroom of the family apartment, "no fax, no phone, no French, no fun."

Two days after he arrived, the French government laid out its first proposal to freeze construction of new malls. The company decided to launch its operations in Britain. It went into partnership with British Airport Authorities, which injected a healthy $500 million of capital.

Many European developers told Kaempfer the concept wouldn't work in Europe, that shoppers buying quality goods were willing to pay quality prices and wouldn't travel to pay less. It had seemed obvious to Kaempfer; he had seen a twin to the $800 Armani raincoat his wife bought him at Barney's in New York selling for $1,700 in Paris. But before starting, the firm did extensive market research to test the proposition that Europeans were no different from Americans when it came to bargain hunting. "It turns out everyone likes paying 70 cents instead of a dollar," he said. Or, he could have added, 70 centimes instead of a franc, or 70 pence instead of a pound.

In France, bargain malls were not unknown, but they tended to be fairly low-rent.

McArthurGlen "introduced quality low-discount shopping in France," said French developer Jean-Louis Solal, who himself started up a discount center in suburban Paris that went bust because customers didn't like the bargain ambiance. "It's important to get a good setting so the shopper feels there is an atmosphere of quality."

The Roubaix mall, for instance, mirrors the architectural styles of the town. In fact, it is the town. Unlike most outlet centers, it is built in the center city, with an outdoor pedestrian street running up the middle and a subway and tramway that link it with the nearby large city of Lille. Forty-five of the 60 stores in the first phase are open for business; 20 more are to be built next year.

The mall in Troyes has 3 million visitors a year, and annual sales have grown from $40 million to $60 million in three years. People come from all over France. Every Saturday, a bus leaves Paris's Place de la Concorde filled with shoppers for the hour-and-a-half drive to Troyes and its Versace, Ralph Lauren and Armani stores.

Kaempfer, who moved his family to London last year because he was weary of commuting from Washington to Europe once a month, likes living in Europe and plans to stay for a while, but maybe not doing this. He has two or three other ideas he wants to pursue, he said.

"I like the creative burst of the first couple of years" of a new venture, he said, "the staffing and design. Then at some point it starts to become exactly the same thing. . . . I don't think of myself as a brilliant natural manager."

Kaempfer is riding high these days, but he did have a fall recently. It was on the stairs of his new London home six weeks ago. He broke his leg--and had to enjoy his day of triumph on crutches.

© Copyright 1999 The Washington Post Company

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