With multiple headwinds (increased grocer competition, less demand from traditional big box and mall retailers, Amazon) facing shopping centers, who are the winners and losers? How will the industry evolve over the next 5 to 10 years?

1. 1Empowering investors to take charge of
their grocery-anchored assets
Session 1 – introduction to Power
Session 2 – what Power tells us about Lidl’s expansion in the US
Session 3 – utilizing Power to address Concerns and Opportunities
Overview:
• Industry Headwinds (concerns and opportunities)
• Problems Case Study – Trade Area headwinds
• Solutions Case Study - Empowering Investors
• MSA Case Study - Headwinds in Indianapolis
• Sample “Good Health” portfolio check up
• Additional Resources
As goes the grocer,
So goes the center

2. 2Current industry headwinds present both
challenges and opportunities
Competitive Incursions
(e.g. Lidl US Expansion, HEB expansion in Dallas,
Publix expanding in Charlotte and Richmond,
Sprouts engaged in a national expansion)
Specialized Niche Offerings
(e.g. Limited Assortment – Aldi, Natural Organic –
Sprouts, Quality Service – Wegmans, Trader Joe’s,
Dollar Stores competing with General Grocery)
E-Commerce
(e.g. Amazon Go, Amazon Express, Walmart “Click and
Collect” and Kroger “Click List”)
Reduced Cap X
(e.g. Kroger reducing by 35% new store expansions, Walmart $6.8B Cap X in
2016 but projects only 6.1 in 2018, Whole Foods Cap X 4.5% in 2016 vs. 4%
in 2017)
Format Diversification
(e.g. Wegmans with 140k sq. ft. but now opening 60k sq. ft., Kroger moving
from 50k sq. ft. to Marketplace format with 120k sq. ft. Kroger – Main & Vine,
Marketplace, Fresh Fare, Rulers, Food 4 Less)
Consolidations
(e.g. mergers Ahold/Delhaize, Kroger’s acquisition of Roundy’s/Mariano’s,
Speculation of Albertson’s/Sprouts)
It’s getting harder to
compete successfully in
the middle

3. 3Problems – trade area case study
exemplifying most of the current headwinds
Center Type: Upscale Specialty Retailers (Williams-Sonoma, Chico’s, Ann Taylor,
White House | Black Market, GAP, Talbots)
Location: Dallas Ft. Worth
Retail Anchor: (Kroger) Industry Leader
Sales: Currently $360k/week and trending down due to competitive changes
Competition: The immediate trade area has 4 grocers:
Trader Joe’s (284) doing $600k/week
Whole Foods (181) doing $1M per week and
Market Street - a strong quality service provider (116) $670k/week
Size: 50k square feet
Format: Conventional (plain vanilla offering)
Market Fit: Quality Service
Power: (77)
Chain Power: (109)
Store Ranking: 3rd lowest among its 89 sister stores
Operator Strategy: Consolidation
Reduced Cap X
Active Incursions: HEB is expanding in the trade area; a total of 26 new stores over the
next 3 to 5 years
E-commerce: Hitting hard

4. 4Solutions - Action and Empowerment
Shopping center owners need to be proactive in protecting their
grocery-anchored investments. To do so – they need to be
empowered with data-backed insights.
What is the right action to take with this tenant?
- Empowers the investor to enlighten the tenant
- Suggests actions the investor and tenant could take together
- Aligns the interests of both the tenant and the investor
What strategic options do we have?
Example - Tenant Upgrade :
New Tenant: Sprouts (140)
$385k / week
compatible format and better co-tenant synergy
30k square feet
Tenant
remodel
Fit Format
Change
Amenities
Expansion /
Contraction
Improve Co-
tenant synergy
Shopping
Experience
Tenant
Upgrade

5. 5Shopping Center Owners need to be aware
of what’s going on in their MSA
Kevin Coupe Morning News Beat
Retailers that do not question every aspect of their businesses including formats that may have served them well in the past
are the one’s that are the most likely to find themselves on the road to irrelevance.
2013 a watershed year
for grocery-anchored
shopping centers in
Indianapolis:
- Wal Mart introduced its
Neighborhood Market
- Fresh Market expanded
- Wal Mart expanded their Super
Center Presence
- Mejier was opening a new store
- Whole Foods was remodeling
and refreshing its stores
- Two Aldi’s were opening
- Giant Eagle entered with a
Quality Service Concept called
Market District
- Fresh Thyme began opening new
stores
Local chain of 72 total stores
44 stores in Indianapolis
Controlled 14.5% of the market
(77) Power – the lowest of the
Conventional Operators
Ignored the niche operators
Stayed with their 10-12 year old format
Made no new investment
Took no competitive stance
By the time their president
acknowledged a need to invest and
refresh their stores it was too late
On their road to bankruptcy
National Chain of 2800 stores
44 stores in Indianapolis
Controlled 30.6 % of the market
(111) Power
Remodeled most vulnerable
stores increased power in those
stores by 10 points
Added 4 Marketplace stores
Remained vital even with most
of its operations remaining in a
conventional format
Recognized and addressed the
headwinds and remained vital
Was unaware and ignored the
headwinds to their own peril

6. 6A routine “Good Health” checkup
Store Data
Store Performance
Market Data
Demographics
Financial Performance
Power
Competition
Sales
Size
Location
FIT
Data-Backed Insights:
- Dispose
- Invest
- Maintain
25% or more need
some serious thought
and attention

7. 7
- Primary data collection
- Collect more data
- Refresh the data every 12-18 months
- Maintain predictive models for the top 200 MSAs
- What’s happening in Dallas or Indianapolis is happening
to a greater or lesser extent in every MSA
One investor’s challenge is another
investor’s opportunity
The difference is being armed with the data-backed insights
you need to recognize the opportunity
In Conclusion – How do we know these
things?

8. 8
Additional
References on
Gravity Modelling and
Competitive Power…

9. 9Competitive power and gravity modeling are
the de-facto standard in the grocery industry
Highly Accurate Predictive Model
Allows you to pose a variety of “What if?” scenarios
- What if this store closes?
- Can this location be backfilled?
- Which operators would be the most likely candidates?
- Is my current grocery-anchor the right tenant for this center?
- How can I help my grocery tenant compete more effectively?
- How can the right grocery-anchor increase the value of the whole center?
- Do I have the right synergies between my co-tenants and my anchor grocer?
- Are we vulnerable to losing this tenant?
Brand
Format
SKUs
Merchandising
Facilities
Services
Quality
Size
Parking
Access
Egress
Departments
Staffing
Cleanliness
Lighting
End Caps
Open Check Stands
Customer Service
Location
Style and Design
Shopping Experience
Loyalty Programs
Technology …
The relationship between
Flow, Mass and Distance
Mass is
much more
than size

10. 10Applying Competitive Power and Gravity
Modeling to the investor
• Evaluation of your current Grocery Anchored portfolio
(opportunities and threats)
• Insights with rationale
• recommendations to Dispose / Maintain / Invest
• Explore your untapped grocery-anchored potential
• Acquisitions
• Dispositions
• Improvements
• Data Mining
• Unrecognized Opportunities
• Off Market Opportunities
1. Portfolio “good-health” check up
2. Develop and qualify an effective
grocery-anchored strategy
3. Power-Based Insights
4. Leverage your
Power-Based Insights
• Power Informs Leasing
• Power informs Property Management
• Power gets more out of your External Brokers
• Power is a measure of performance
• Power makes prediction possible
• Power allows you to explore possibilities
• Power informs Strategy
• Power informs investment
• Power exposes vulnerability
• Power informs backfill opportunities
• Power helps establish a favorable market CAP
• Power allows you to drive the conversation

11. 11Knowledge is Power…
MTN thanks
Barclays for
facilitating this
series and each of
you for
participating.
Thank you all!