Bonjour! I’m writing to you today from above the Atlantic Ocean, somewhere between Paris and New York City.
I’m returning from a four-day stay in Paris, where I was on a mission to get a “boots on the ground” tour of the retail sector and its current situation there.
Here at Intelligent Income Daily, this kind of boots-on-the-ground research is exactly what gives me and my analysts an edge in investing trends. We seek out investments that have rock solid financials and defensible positions in the market.
By visiting on site where the action is and talking to the people managing these businesses and properties, we can better understand whether it makes a sound investment right now.
All to equip you with the knowledge you need to earn reliable income – whether the source is at home or abroad – and sleep well at night.
Today, I’ll tell you what I saw in the retail sector in the heart of France. And a little-known way to play this trend right from your portfolio.
Signs That Retail Is Recovering
Paris truly is a beautiful place that lives up to its reputation as the “City of Art.” There are museums, galleries, and public landmarks around every corner. Even the buildings are works of art and masterpieces of architecture.
One of the iconic locations I visited was the Galeries Lafayette.
This popular destination originally opened in 1893 on the corner of rue La Fayette and rue de la Chaussée d’Antin. It offers more than 750,000 square feet (equivalent to 13 football fields) of shopping and dining space. The mall features a massive, elaborately designed glass dome that reaches 10 stories high (140 ft).
And it was packed with customers looking to buy gifts for Christmas.
The fact that people still want to go shopping in a mall even when there’s a pandemic, a war, sky-high inflation, and dozens of online options speaks volumes about the value of these properties.
And one of the companies I was there to get more intel on was real estate investment trust (REIT) Klépierre. It’s one of the largest retail landlords in Europe with around 150 properties in 14 countries.
Brad scoping out a Klépierre-owned shopping center in Paris
My trip to Paris reinforced my belief that the company will not just survive – but continue to thrive. Here’s why…
A Way to Play Europe’s Retail Demand Growth
Many investors worried the issues I mentioned above – inflation, lockdowns, the rise of ecommerce – would make malls obsolete. And while that may be true for the cookie-cutter low-tier malls… It’s a completely different story for the high-end destination shopping malls.
Those luxury, one-of-a-kind properties are exactly the types of investments that Klépierre’s biggest shareholder focuses on: Simon Property Group (SPG).
Simon Property is a REIT that owns many upscale malls and shopping centers. And it owns a 22.4% stake in Klépierre.
So while both Simon Property and Klépierre took a massive hit when COVID lockdowns were in place… their focus on high-end retail properties allowed their businesses to quickly recover.
This is what our European research affiliate AlphaValue had to say about Klépierre’s performance over the past two years:
The well-diversified portfolio in Europe could spread the impact of retail’s long-term e-commerce revolution. The rising vacancy was contained in FY 2020-22 and so were declining rents. Rents should benefit from 4-5% inflation indexation in 2022-23. Klépierre looks on track to pay a 100% cash dividend in 2023.
Even though the company lost a lot of tenants during the pandemic and had to reduce rents, it is now benefiting from inflation and set to continue paying its dividend. That gives me confidence in the moat that Simon Property and Klépierre have around their fortress business… and in the overall retail trend in the European markets.
Now, Klépierre is too focused on the European markets for us to target as an investment. A better way to invest in high-end retail is through Simon Property Group. Aside from its stake in Klépierre, Simon also owns nearly 200 malls in the U.S. and 33 properties in Europe, Asia and Canada.
Happy SWAN (sleep well at night) investing,
Brad Thomas
Editor, Intelligent Income Daily
P.S. While I was in Paris, I had to take the opportunity to see the most famous piece of art in the world: Leonardo Da Vinci’s “Mona Lisa.”
Brad in front of the world’s most famous portrait
The “Mona Lisa” is on display in the Louvre, which was originally built in the late 12th to 13th century as a fortress under Phillip II and later converted into the primary residence of the French kings.
If it were an investment, the “Mona Lisa” is exactly the kind of asset we’d love to own: housed within a fortress, survived for centuries, maintains its strong brand recognition, and consistently earning income from those coming to see it.
For a list of investment opportunities that align with the “Mona Lisa,” check out our Intelligent Income Investor portfolio here. Our focus is on finding safe and secure dividends to create a growing income stream that will passively support your lifestyle with stress-free investments.