NEPI Rockcastle N.V. (NRP) Earnings Call Transcript & Summary

Hello, and a very warm welcome to all of you in NEPI Rockcastle's Capital Markets Day. It is a fantastic day to see you in this very beautiful city in this amazing hotel. It's a little bit dull outside or it has been this morning, but I can tell you that you will have anything but a dull morning ahead of you. We have a very, very exciting lineup indeed. My name is Tanya Beckett. I'm a BBC broadcaster. So my job is to help the flow of the event, but also to ask some difficult questions and make sure that you get out of today what it is that you're looking for. Now my first duty is to welcome our online audience and wave to them. Thank you very much indeed for joining us, and we hope you enjoy our journey this morning. I just want to go through some of the agenda with you, just to give you a picture. Now if you look on the back of your passes, you will find that you have the agenda. But just to talk you through some of our thinking. We start off with a bit of macro in this rather turbulent geopolitical and economic environment we find ourselves in. We drill into that and get a handle on what the big picture looks like. We also then talk about the changing trends of consumers and what they've been doing and how they've been thinking over the past few years and more importantly, how they're going to be thinking over the next 5 to 10 years. We will hear, of course, from the NEPI Rockcastle team as well, and we'll be drilling also into the investment environment. What does it mean to invest in this field at the moment? And what are the some of the parameters and the benchmarks that people are using at the moment. So I hope that, that's all clear. As I said, you've got it on the back of your passes. So if you need to orientate yourself at any point in the morning, then please feel free to do so. Now I've told you that we have our web audience. We will also be recording the event. So that means that we will be filming it. So there's a GDPR consent here. Should I just leave you a moment to look at that, so you're not rushed through it, but it is important -- it is an important point. So if you don't want to be photographed or recorded, then please feel free to tell us. Right now, you seem to be sitting in the dark. So I don't think there's going to be too much of an issue with it. Great. But we will, of course, be asking questions. So how are we going to do that? Well, we use a technology called Slido with which I'm very familiar indeed. If you scan this onto your phone, you don't have to download the app. But you can put questions in relating to the speakers. So for example, if we have Jens talking about geopolitics and economics, if you would like to ask a question during the time he's talking, just put it into Slido. However, we will also have microphones in the audience. So if you want to vocalize, you feel compelled to do that, you are also welcome to ask questions in those 2 ways. Now today, of course, is about consuming a picture of what we're looking at here. So I just wanted to go through, if I can, a few of the details of NEPI Rockcastle. But as I thought I would do that, what I thought it would be better to do is show you a video that outlines it more perfectly than I can. [Presentation]

So it has been an extraordinary story, and that extraordinary story is being led in this particular chapter and into the future by Marek Noetzel, who is the CEO. Please welcome him.

Good morning. Can you all hear me well? Yes. Thank you. Well, first of all, thank you all for coming. It is amazing for me to see you all in my beloved Warsaw, Poland in the Capital Markets Day of NEPI Rockcastle. But before I go into my opening speech, I thought why don't I share with you a bit on a personal note, having seen the movie for so many times now. I was watching this clip with the National Stadium, which used to be a huge bazaar and those of you who live in Warsaw at that time would remember, well, I guess this was my first experience with modern retail, which was shopping at the bazaar. I was buying movies and PC games, not necessarily that they were entirely legal, but it all started there. I would have never thought that in 25 years from then, I would be standing here in front of you in this beautiful hotel to tell you the amazing story of NEPI Rockcastle. So again, thank you for coming. We are thrilled to have you here. We are very happy to have so many of you. There is 100 of us here in the room and another 100 people registered, which is amazing. So thank you for coming. I'm very happy to welcome our dear investors, the representatives of banks, our dear Board members, most of the Board members and nonexecutive and executives are here with us today, amazing. And there are a lot of NEPI Rockcastle employees or I like to call us NEPI Rockers. So welcome to all of you. I hope you will have a good day today. And now some of you have been following NEPI for many years. But for some, the name of NEPI Rockcastle is new, but I hope long to be continued the story of following. But whatever the case is, we have one mission for today, and that is to leave you at the end of the conference, having answered one big question. Where is NEPI going from where it stands today? What is the future of NEPI? Or put differently, why are we here? And how could you be part of the journey that we want to picture to you today? And in order to do that properly, there are -- there's a lot of things we do today. We'll speak about numbers where my dear team, Anca, Eliza, Marius will tell you how super well they manage their respective business areas. And there is a reason for that. We have been building this company for 19 years to develop -- almost EUR 8.5 billion worth of assets, but we always say the biggest asset of the company are its people. And we are here today to show you what we have been doing historically, how have we built this asset, not tangible, but our employees that can take this company to a new chapter, and that is what the conference is today. But we will hear as well from futurist, from geopolitical specialists about what's actually going on and how the business model of NEPI fits in this so volatile world and why we believe we are well fit, well prepared to whatever the challenge may be in the future. So that would lay the foundation for what would be the cream on the cake, which is strategy for NEPI. What is our appetite? Where do we want to go? Why and why we do believe we have all the necessary competencies to get where we believe NEPI should be in 3 to 5 years from today. And I hope a lot of you will decide after the day that you want to be part of this journey. And please as well do use us. I mean, you are exposed to the team, obviously, but there are a lot of NEPI Rockcastle employees. There are Board members. Please do ask them questions. Please do take time with them. We are there here for you all day. So I hope you will use the time to your best benefit because we can speak every day. We all know each other. But I think it's very useful that you can speak to people who are actually responsible to making sure that every day, NEPI Rockcastle improves its performance. So I hope you will do so. So thank you. I will be back on the stage a few times introduced by Tanya, I'm sure. But with that being said, I would like to invite to the stage, Chairman of the Board, George, the stage is yours.

Good morning, everybody. Can you -- I tend to have a loud voice. I guess you can hear me. I hope so. Welcome to NEPI's Capital Markets Day, Dzien dobry... I kept saying dobry den over and over again when I was rehearsing because I used to work in Prague for a long time, and then I realized, no, that's not what I should say. So thank you for your time. As Marek said, we know it's an investment. You're taking a full day to be with us. We really, really appreciate that. We hope it's going to be an enlightening day with a lot of participation. You saw a video, Marek talked about it, but maybe again, why Poland Well, a major part of our portfolio is here in Poland, so it makes sense, right? And as you've also been following the company, you realize that a lot of our recent history has been written here in Poland. It's a very important market for us. And as Marek said, and I think I've got the numbers right, Marek, you started, what, 10 years ago, the office in Poland. So kind of as you talked about, it's a coming home for us as a company, and it's really, really great. Having been a Finance Director in the past, I know kind of what you need to do to prepare for these things and what you're looking to get from them. And I was thinking about it, there are really 3 things, and Marek touched on them before, strategy. So what is the strategy? What is the financial strength behind the strategy in the company? And who are the people that are actually delivering that? And let me touch a little bit on that from the Board's perspective. So strategy, we're not reinventing a strategy here. It's really a consistent approach. We're going into some new areas, which we're very excited about. But the fundamentals are the same, quality assets, financial prudence and really investment in people, investment in sustainability. These are all pillars of our strategy, something the Board reviews actively with management and our Board meetings, and we stand very much behind that. Then financial strength, and I look over at Eliza, amazing what's happening with our credit rating, prudent leverage, strong liquidity. All of these things, I kind of say liquidity is agility in these markets where we're actually able to take advantage of opportunities when they come our way. And that's something that's incredibly important. And you've seen us do that already, and you'll see us do that in the future. And then last, people. It's been quite a transitional and transformational year this year for us. And I'd like to start first before I say anything else, thanking again Rudiger Dany for everything that Rudy did for this company during his time here, very important transformation and leadership. But Rudy also did something together with the Board that was incredibly important, helping us develop our internal leadership. And you are -- I'm looking at 2 people here, Marek and Marius, both of whom were chosen for their roles, not by accident. I mean we work very, very hard on developing our team. We're incredibly proud of them. And I think the results are obviously going to pay off. I'll keep my words brief. One final challenge, though, use this day to its fullest. The team has been prepping. They're ready. They're ready for your questions. They get a lot of them from us. So I know they're able to answer them. So use the day wisely. Thank you very, very much for your time, and enjoy the day. Thank you.

George, thank you so much. So I promised you the macro picture at the beginning. We know that we live in a very challenging geopolitical environment. And of course, that has its challenges economically as well. The 2 are very closely related. So let's talk geopolitics and macroeconomics. Please welcome Jens Larsen.

Thank you very much, and thank you very much for the opportunity to speak to you today. I've been given the opportunity to give you an extensive briefing on the geopolitical environment, and that tends to be a pretty depressing affair. But I will try to -- and that's an important message for you to dampen some of that pessimism that invariably comes out when you discuss politics with a bit of macroeconomics and market optimism. My job as Head of Geoeconomics at Eurasia Group is to try to connect all those political calls that are really the core of our research at Eurasia Group with the macro and market outlook. So hopefully making the politics at geopolitics and the politics relevant to you and relevant to understanding the environment in which NEPI is operating. There's obviously a lot going on. Unfortunately, it matters. Operational excellence is not enough. You need a sense of the broader environment, not just local politics, which I'm sure you're all familiar with. Many of you will be much better at Polish, Romanian and maybe indeed Spanish politics than I am. But I want to try to contextualize that with some global views. It will affect strategy. It will affect the way businesses are organized, supply chains and so on. And of course, the consumer cares, particularly when it manifests itself in higher prices. So I'm going to start at a very high level with the geopolitical environment and talk about our broad concepts, but over the course of the next 40 minutes or so, drill into how that matters and end up on an outlook that is closer to you in terms of the macro outlook, in terms of the market outlook with some comments on what's happening in the key markets in which this firm operates. The lens throughout is going to be what's relevant for Europe and for this company, but it is very much a global context. Please do submit your questions. I think that's the most fun part of the session. And I hope that at the end of it, we will have enough time to look at that. I will certainly make sure that we make up for some of the time we have already spent. It's very tempting when you talk to geopolitics to start with the conflict, start in the Middle East, start with the war. But I think the conflicts are symptomatic of a G-Zero world. That's very much our organizing framework. It's the end of a world where the U.S. is the sole leading power. And importantly, no one else is able to step up and fill that vacuum. There's no collective. There's no individual countries that can do that. The multilateral organizations are weaker. They struggle with legitimacy. Coordination is harder than it's been in the past. The U.S.-China strategic conflict remains much the central feature. There's a vacuum of global leadership, a vacuum of coordination. Importantly, the U.S., which used to be the anchor and the source of stability is now a source of volatility and of geoeconomic risk unlike what it was in the past. The U.S. is more unpredictable. It's seen by its partners as less reliable. And importantly, it's unwilling to unwind the global economic and financial order that it created. It wants to remain at the center. Dollar dominance is very much part of the story, but there is a stronger focus on the U.S., on America first and on a different strategy. So is it all about Trump? No, G-Zero wasn't created by Trump. It won't disappear with Trump. Some of it is specific to Trump and his behavior, but much of it is structural. And what I want to emphasize and what I think is important for investors when you're thinking about the longer-term context is that this is a new global and economic financial environment with more frequent crisis and supply shocks of the kind that we've been experiencing this year. Those are the ones that push up costs, and we have persistent cost pressures and push up inflation. So consumers are struggling with affordability, they disrupt -- potentially disrupt growth. Governments now using economic policy for strategic and security purposes. So gone are the days of thinking about efficiency, level playing field, competition and free trade, there's a focus on national resilience, on defense, on tech strategy, on energy independence. That creates new spending and investment needs, and indeed, it creates opportunities. It creates growth. It's a politically challenging reallocation of resources and consumers are feeling that. If you need to invest more in your defense, in your AI strategies, then that's going to come -- those resources are going to come from somewhere, putting even more pressure on consumers that are already struggling with high prices. That happens in an environment where the demand for capital from outside for AI spending and more broadly is rising sharply. Companies are also focusing on that resilience. They are increasing their spending on technology, but they are also in their strategies increasingly reflecting this new economic environment. They're willing to incur costs in order to demonstrate their resilience in order to show that they can cope with those big shocks. So all in all, it's a more volatile world, higher real and nominal interest rates, reflecting the volatility, but also the strong demand for resources. It's more higher on average, I think, and more volatile inflation, not 1970s, but volatile inflation and continued pressures for more government spending, a feature that's very relevant to the markets that you are operating in. So as I said, much of this is structural. This is not just about Trump, but the willingness of the U.S. to course and put pressure on his allies through tariffs, through the threats to sovereignty like we saw in Greenland, through the pressures on security and the need for others, including the EU to step up on defense spending is really the novelty. Mark Carney covered -- captured the zeitgeist in his Davos speech back in January when he said we are in the midst of a rupture, not a transition, capturing the idea that this is not a temporary but a lasting phenomenon. A broad loss of confidence in the U.S. as a reliable ally. This is what this chart on the right shows is how strikingly with my own country, Denmark at the top, showing how that confidence in the U.S. as a trusted ally has shrunk. It shifted somewhat towards being a partner. But the striking thing, as I said, is seen more a rival than as an ally. That really matters because it drives strategy. I should say, by the way, Poland, as you will know, is a strong exception. You still see a much stronger orientation, a much stronger support or much stronger perception of the U.S. as an ally in Poland than you do elsewhere. Carney's idea very much is one of diversification because diversification would reduce U.S. leverage, would give Canada better opportunities. And that is applied not just in their context, but more broadly, the idea that you want to reduce your exposure to any individual country to reduce their leverage in the negotiation, whether it's over tariffs or whether it's over security. From a European perspective, that applies to the U.S. but also more broadly. Will this outlast Trump? I think a democratic administration in the next -- after the next presidential election would have other priorities, certainly on energy transition, on AI transition. But it would be -- it might be far less hostile to Europe and to its ally more open to collaboration. But I think the key here is it would keep a strong domestic focus and continue to use industrial policy tools. On China, the Democrats might be even stricter. So don't think of this as going away when Trump disappears or changes behavior. Certainly, with Democrats, it might be different. With a new Republican administration, I think you might find that they would take an even tougher stance on Europe. The routings, the understanding, the views on Europe are strongly held when you look at the speeches and works of Vance and Rubio potential contenders in the election. So don't think of this as going away. Think of this as a, frankly, a source of volatility in the relationship, but also a challenge. So the idea that pushback has become -- is a good strategy, I think, has become more prevalent. In the beginning of this Trump administration, the sense was that we were being rolled over. But when we're thinking of the global environment now, I think the strategy of standing up and pushing back has proven to be more successful. That's reining in Trump in the foreign policy space and behind the view that we are probably past peak Trump, if you want, in terms of leverage in the foreign policy space. Notice I've popped a question mark at the end. I think the last few weeks may lead us to question that. But the idea is that in the key issue and the key conflicts and the key tensions that we have seen in the global economy over the last year, we may be past the peak Trump. I'll come back to each conflict because each of them matter in more detail in a second, but emphasizing the idea in the Iran conflict, the idea that Iranian resilience, the fact that Iran could spread the conflict, could step up withstand U.S. and Israeli pressure has emphasized to the U.S. and to the world that this was a strategic mistake and has given Iran leverage that it's very willing to use. That means that there's no easy exit. It means that escalation risk is rising, as I'll come to in a second. On Ukraine, we have had the U.S. blowing hot and cold on Ukraine. You will remember the incident with President Zelenskyy back in the spring of last year and obviously, also the pressure right now Europe has picked up the financial tap that the U.S. has dropped, supplies more of the intelligence and weapons, but Ukraine remains critically dependent on the U.S. So what the U.S. decides in that space is important. The context I wanted to emphasize with this slide is that one way of reading the Ukrainian strategy is that standing up and being clear about your demands, about your position, your role might be a better strategy, and that's how we read the reaction. Trump, of course, might restrain U.S. support. We think it's likely that Ukraine will still have sufficient capacity over the winter from Europe and from the U.S., but it's certainly a struggle. Standing up has worked. We think and will probably work, but it's a very challenging issue. On trade, I think this is perhaps the strongest indication of how the response of China, China's leverage, particularly China's leverage in rare earths and critical minerals have given them leverage over U.S. that has been used very effectively. And that leverage is basically -- that leverage that came from China, but also from a market reaction has pushed back on Trump's approach to tariffs has led him to back off. There's also, of course, a domestic constraint that has come from the court striking down his use of tariff tools. But the critical bit for this conversation is that China has used this leverage and is willing to continue to do that and is tying the U.S. into a truce. So we think on foreign policy, broadly speaking, we are past peak Trump. That doesn't mean that things are settled. Trump still has very considerable leverage, but we think his influence is waning. On the domestic front, we have an upcoming midterm election. That doesn't constrain, we think, Trump much in the foreign policy space after the midterm elections, but are critical to the short-term outcomes. I'll discuss that in a second. We think the Democrats are almost certain to win the House. We put 90% probability on that and are now favorites for the Senate. So that means on balance, we are more likely to have a democratic sweep than a -- certainly more than a Republican sweep, but with a very strong chance of a split house. Does Trump care? We think he does to an extent, but mostly because it can weaken his grip on the MAGA base. For him and his approach, it's been very important to retain that control of the Republican Party. A loss threatens his political legacy. It reduces his capacity to choose the next leader of the Republican Party. And it puts him and his family and his business connections at greater risk. But we don't think it constrains him that much in the political space. Yes, the legislative agenda in the U.S. will be harder, but he's done much of what he wants. It does mean that fiscal policy in the U.S. might be a bit more expansionary. But for what Trump really cares about, I think the main issue is that there will be more investigations, there will be attempts and impeachment, maybe not of Trump, but of other administration members. And if the Senate flips, which is a tight call, if it flips, nominations get much harder. So constraints there, but not so much constraints in the foreign policy space. The U.S. elections are really important. It's an important event for Trump because it threatens his grip on the Republican party, but it doesn't in and of itself change his approach to trade or to foreign policy. I'm going to look at each of the conflicts in a little more detail now because they have important implications for the macro outlook in a way that affects your markets very directly. So these are our Middle East scenarios. We love probabilities at Eurasia Group. So you will see probabilities dotted throughout this presentation. Escalation -- after the midterms, we think it's now a base case. It's not a major escalation. It's not the U.S. entering into a land war, but it's an escalation that could lead to higher oil prices at least temporarily. A limited deal, like the one we had in the spring is a lower probability. I unfortunately flipped the 2 around. So the limited deal should be 20%, but still an unlikely outcome at this stage. We think we need to go much further through the conflict before we get to the case where the U.S. and Iran settles. Iran has got this leverage that I talked about earlier. They want to preserve that. The U.S., we think in order to settle this, will have to make more uncomfortable compromises that potentially leaves Iran with some leverage. That is not a desired political outcome for the U.S. They're not willing to make that concession now. If they can get the traffic out, if they can make -- move commodities out of the Strait of Hormuz. Without that agreement, they'd rather do that. They have been successful, somewhat successful, but Iran has continued to assert its influence. So we think, first, there will be an escalation, then we are back in standoff before potentially we end with a limited deal. The point is this disruption continues through next year. That matters a lot for oil prices. It matters for commodities more broadly. The conflict with the Houthis, which is currently a conflict between the Saudis and the Houthis matter for that. It can affect oil export capacity. It can affect the capacity to move commodities out of the Strait of Hormuz and export through alternative routes. We think that's likely to escalate. We put the probability of major escalation at 60%. When I look at that arguably, we are already in the major escalation scenario. That could amplify that impact on oil and commodity prices that matters a lot for inflation, for the affordability agenda in the U.S. critically, but also here. Diesel is the current focus point, particularly in the U.S. is driving -- I'll come to that in a second. When I talk to about Ukraine, it's very important there, one of Trump's key motivations. But it's not just a political tool, of course, diesel, petrol prices, energy prices matter critically for the consumer. In the short term, it pushes energy costs up. I think you should expect this to be a reminder to everyone that relying on Middle Eastern energy is a risky approach and that you would be better off finding alternative sources. So I think over time, this creates further incentives for the greening of the economy. I know Trump is obviously not in favor of green energy. The U.S. has chosen a very particular approach to that. But when you're looking at it from a European perspective, the green energy transition remains important, not just for the sake of reducing emissions, but also for the sake of having greater energy independence. The Russia-Ukraine war also feeds into this energy and commodity price issue, including on food commodities because both Russia and Ukraine are such critical food commodity exporters. Ukraine is now much better able to hit Russia's energy and export infrastructure. And we expect that despite the pressure they're currently being put under by the U.S., they will continue to do that. We see from the Russian side, a strong incentive to escalate, if anything, somewhat encouraged by Trump's alignment with Russia in the last few weeks with the pressure that Trump is putting on Zelenskyy. So we expect an escalation of that conflict through the winter. We don't expect this to settle anytime soon. Trump announced an energy truce. It didn't have any traction. We don't think that such a truce is coming anytime soon. So the -- for the main macro scenario is really the idea of this creeping mobilization from the side of the Russians is important. I think it's also important to think of what we call hybrid warfare, the fact that Russia considers this a conflict with Western Europe as a whole and is willing to continue with those attacks on energy -- not just energy, on infrastructure in Europe, including digital infrastructure. This is a continued feature that, of course, you here in Poland and Eastern Europe face more strongly than others. And as I said, from our perspective, this intensifies before it settles. And even when it settles, we don't mean that we'll have a final settlement by the spring of next year. We mean that by the spring of next year, we think that a general exhaustion will set in. Russia will step up, but also find that the enormous loss of manpower, the enormous fiscal costs that come with this war will be pushing them towards a peace. The elite in Russia are getting more concerned about that. Putin has shown an extraordinary resistance to the idea, but we think that eventually, he will feel that, too. The balance for Ukraine is now very fine. A month or 2 ago, with U.S., European support, it looked like a better basis for an escalation, like a better basis for negotiation. That's less clear now. But our call at this point is that despite the shift in U.S. positions, we think that Ukraine will continue on the current path, but it is going to be a very delicate situation. Longer term and for the broader European perspective, the security pressure from Russia clearly continues. It is a rising Russian threat, not so much of strikes on NATO territory or indeed tactical nuclear use. We put that at 5%, which is kind of the lowest number we use. Even for my taste, that's a very high number. But the point is that the conflict with Russia is real and it's real in the minds of European and U.S. policymakers. Europeans have understood not only that threat, but also that the U.S. wants Europe to play a bigger role in its own defense. I'm working my way down the conflicts coming to trade, which is fortunately a less gruesome affair than the conflicts we've talked about thus far. So Trump erected a tariff wall. It used a tool, which was called international economic -- the International Economic Powers Act to impose these tariffs. The Supreme Court struck them down. We started off after those at 15.5%. They were struck down, but the Trump administration has used other tariff tools for sectors and tariff tools for nations that they perceive to be trading unfairly, in an unfair manner with the U.S. have reimposed that and are bringing -- likely to bring back further tariffs that reflect what they say, countries that have overcapacity. So basically reerecting that tariff wall that was crushed by the IEEPA ruling. For me, the most important thing is not whether it's 14.2 and actually, it might be a little bit lower than 14.2%. The critical point is that, that tariff war has been erected. We don't think Trump is for the turning by the courts or indeed by conviction. And I don't think that Democrats are going to look at trade very differently. When you have erected a tariff wall, it is very hard to get rid of it again. So I think this is a semipermanent feature. You should think of it as that as something that is a lasting change in the environment. I promise you some good news. So here's a little bit of good news. I thought that there was a real risk that when the U.S. had launched that new approach to trade and tariff that, that would unravel the global trade order. And by and large, that has not happened. The U.S. has erected tariff wars. You have seen responses, but you've also seen deals with the U.S. And globally, the situation is one of more trade deals rather than fewer. So one of my fears of a much broader fragmentation have actually been replaced by this notion of diversification where countries are looking to work together in a different way. So the U.S. is not replaceable for Europe, the U.S. and a trade deal with the U.S. is critical. The U.S. as an anchor for the financial -- global financial and economic system is absolutely critical. I think it's important not to think of the current policy environment in which -- as one in which that is totally abandoned, that's false. I think you should think of Europe as diversifying, finding other trade partners, making sure it's got other means of channeling its investments and savings is not the end of the global order in that sense, but it is a change in the environment in which you are operating. So that was trade. China, before looking at the U.S., China and more important for you, the European relationship with China, let's just remind ourselves of the Chinese economic policy approach and why that is such a problem. So China has this focus on output in key strategic sectors. Tech, green tech are critical sectors, autos, very important, green energy, as I said, both in tech, but also in terms of energy production. We think China is going to stick to that approach. The problem with that is it produces enormous capacity in these critical sectors. And that, in turn, creates enormous global oversupply in those sectors, and that has very direct impact on the U.S. and on Europe. The other side, domestic demand received relatively less support. We think China will do enough in terms of domestic stimulus, in terms of addressing domestic balance sheet issues to keep the show on the road, but never enough to turn China back into that source of final demand that made it such an important export destination for Europe. So think of it as not enough demand support, not enough balance sheet adjustment, not enough domestic reform, but a lot of pressure on export sectors, ever rising trade surpluses. That's what the chart on the left shows that China's share -- China's trade surplus keeps rising. It was EUR 365 billion -- $365 billion with Europe last year, $1 billion a day, an amazing number, obviously putting pressure on European -- on Europe as a trade partner. European industry faces the supply, this subsidized supply, this excess supply, but it's also, I think, critically increasingly excellent supply. So Chinese cars are great. They're not just cheap, they're also great and using the latest technology, what used to be a competition on labor cost is now a much broader competitiveness issue for Europe where technology investment is absolutely critical. Europe is divided on how to respond. German industry have historically emphasized market access, technology sharing, so a friendly approach with China that is now shifting and Berlin is converging on a harder line with what we've seen elsewhere in Europe, strikingly in France. So that's the background for these calls that we have on the strategic relationship between China and the U.S. and the EU and China. So for now, this year, the incentives in China -- in the relationship between China and the U.S. is one of a truce. So the idea being that the U.S. doesn't want further economic disruption, had the experience last year with the trade war and didn't enjoy that very much. China, for its part, wants to continue its economic policy strategy. So it doesn't want to see that disrupted, certainly not have political disruption into next year's reelection of Xi. So at the moment, the incentives are for truce in the relationship between China and the U.S., and we won't see that being a source of global volatility in the way that it was last year. But when you're looking over the longer term, this managed decoupling remains the base case. So this is the strategic competition between the 2 continues. The U.S. does not like China's increasing strength and importance. China wants on its side wants strategic independence. So that creates a tension, and we think over time, that will manifest itself again, certainly if you have a change in administration. So what about the EU? As I said, I've been a bit slow on changing approach, has seen China as much as an opportunity as a threat. But now with the pressure that you're seeing from Chinese technology and Chinese exports, the accepted case and our base case is one where you have a what we call a managed confrontation. So not a trade war, not going to be a massive market event. But it's basically an environment in which you will see increasing frictions on trade between the EU and China and investments, in particular, integration of supply chains and so on. This month's deal on hybrid car, hybrid cars is sort of an indication. It's a deal that eases immediate tensions, addresses some of the problems. It is a trade friction. It does reduce the imports of Chinese cars. And over time, we will see that kind of safeguard becoming more prevalent. We will see restrictions on Chinese investment from Europe, but we'll also see China being increasingly restrictive with the EU. So responding in kind, a measured escalation where you see the trade relationship gradually deteriorate. That matters a lot for Europe. It matters a lot, in particular for Germany, the engine of European growth. So that's all the crisis. Now for the optimism. AI surely will rescue us all with productivity gains. If you're looking at the macro outlook to which I'm going to turn now, you will see that if you could just have much stronger productivity growth, you would get higher income growth, you'll get stronger revenue growth for governments and all would be good. But I think the fear rightly is wasted resources, a speculative boom, increasing social and human costs and the risk of the end of the world. So there's a wide range of issues coming out of AI and the boom in AI and the hopes for AI. And a lot hangs in this. From a policy perspective, the perspective, I think we have most to offer in. The challenge are really huge. How do you manage risks from a policy perspective, whether it's financial or indeed existential risks. that no common regulatory agenda, the U.S. and China are vying for dominance and everyone else is engaged in this national competition, making sure that they are at the frontier, if not of development of models, then at least in the application of AI. We don't see that changing. Is it a bubble? Views will differ hugely on that. I tried to demonstrate that give you a sense of that by putting other -- well, I think most of them are bubbles or at least extraordinary valuations. And on that metric, it doesn't look so bad. But I do think that the massive investments we have seen have been critical for global growth and for global trade that is a risk. We don't think it's a risk at this shape, at this point in time. But over time, and that over time could be over the next coming years, you could see a sharp moderation in that investment spending, which has been so critical. A realization perhaps that profits may not grow quite as quickly as thought or a political backlash. You're certainly seeing that in the U.S. currently. We don't think it's restricting AI growth now, but it could do that over the coming years. I think more broadly, the issue of disruption and K-shape is the K-shape, the idea that some gain a lot and a lot gain very little is a very powerful concept. Even if you're looking at statistics and seeing real incomes are actually improving, the perception, and that is true in the U.S., but also strikingly in Europe, the perception that the middle and lower middle class are not benefiting from AI growth, this is yet another factor that is turning the screw on the middle class is a very, very powerful one. And I think that that could be to lead to a political backlash. That's important if you're investing in AI, but it's also important if you're exposed to consumers whose sentiment depends critically on income growth and on that sense of making progress. So look at it from a macro perspective. This is an investment surge in developed markets, which is welcome. Of course, mostly at this point, an investment surge in the U.S., but it's spreading. More technology surely is good for growth. But because of the nature of this growth, it does trigger a lot of political issues and issues, I think, for the sectors that you care about in today's context. One of the factors of this investment boom, of course, is that it increases resource pressures. And that is one of the factors combined with others, including the inflationary impact of the shocks from the Middle East, including the policy response, the monetary policy response to those inflation shocks that have lifted interest rates. This has been going on for 5 years, arguably, but it's certainly been intensifying over the course of this year with the Middle East crisis being critical. Higher interest rates means a higher fiscal burden, and that's what I tried to illustrate with interest rate expenditures rising on the left. Europe actually looks okay. I think, obviously, Poland and Romania have very particular challenges within Europe on the fiscal front. I'll return to those in a second. The U.S. is the country that sticks out. Even if you didn't care about the U.S., the fact that the interest spending rises so much means there are more pressures on resources, increased interest rate risk. If you look at that chart, it says more fiscal risk, and I think it says that, that will be a continued source of pressure on interest rates in the U.S. and globally. In Europe, markets are watching France, testing the political coherence and the ability to manage fiscal resources. Elsewhere in Europe, including Poland, Romania, deficits are large and indeed, fiscal consolidation isn't immediately forthcoming. The strategic priorities I talked about earlier will make that tension even more prevalent. So that brings me to Europe. I've described a bunch of external threats, crisis, China, China and the U.S., China and Europe, the energy transition and climate change, competitiveness pressures in this brave new world and indeed higher interest rates. That has led to a reappraisal of European policy, European economic policy, whether it's on security, on energy independence, on tech, on defense. So the commission's competitiveness agenda is really a response to those pressures, shaped materially by the Draghi report that really helps shape a new, I think, a new consensus around policy objectives in Europe. That doesn't mean that it's a perfect transition. That doesn't mean implementation is strong. Europe doesn't have the strategic capacity that the U.S. and China have. But they do -- there is, I think, a renewed focus on this competitiveness angle that is driving a reallocation, a gradual reallocation of resources. We try to monitor that. We look at the European Commission's strategies and papers and initiatives in a whole -- in a number of areas, many of which I've touched on today and try to assess what kind of progress is being made on that front. And we see sort of a glass half full. So some progress is being made. The pace, as I said, is clearly not as high as elsewhere in the world, but there is some progress. That relies critically on a shared understanding of priorities. The biggest threat to that shared understanding of priorities is a sweep of populist governments. So the joint action on defense, on strategy, on energy transition will be much harder to reach if you had a President Le Pen or outside the EU, a Prime Minister Farage. The chart on the left is a sort of very crude summary of the current pressures. Strikingly, France is the issue. And of course, we are facing elections in France next year and in a number of European governments over the next 12 months. In France, it is still early days to call that election. Our base case is just about that Edouard Philippe of the center will win in the runoff on the 2nd of May. We attach 40% probability to that. But Le Pen, who is leading in the polls, who clearly has momentum is right behind. Our probability is 35%. And I think if you're looking at betting markets, her probability is way higher than that. Poles are going her way. The riots we've seen in the last few weeks are strengthening her hand, if anything. So I think it is a great question, how a President Le Pen would fare given the domestic pressures she would face, given her -- the external pressures she would face. On the domestic economic policy front, she is -- she hasn't got a very coherent strategy. She has proposed some spending that no one really believes. But we think that over time, particularly if the poll swing even further her way so that she looks like she's going to win, she will start clarifying her approach more and try to avoid having a financial crisis right on the doorstep when she takes -- if she were to take over. So she will respond, we think, in very broad terms, and at this stage, it has to be very broad terms with a framework that would be compliant with achieving debt sustainability with meeting the criteria of the European Commission, opening up for support, some acknowledgment of the effort from the European side, but importantly, support from the ECB if there is a sense of the market crisis. So that would be -- I would call that the most benign possible outcome. That's still a hugely uncertain outcome. And I think even if you're not in the French market, you have to think of that in the context of Europe. The consequences for Europe, even if the financial market risks are contained are significant. She is very anti-EU. She would deliberately undermine -- work to undermine the EU institutions. She would be less -- much less willing to spend on supporting Ukraine. If she has tailwinds from other European governments, perhaps including from a shift in government here, then I think that would put Ukraine in a much more precarious situation, but arguably undermine the case for this EU agenda. For now, as I said, policy is shifting in the right direction, but longer term, less obvious. Let me finish with the 3 economies that matter most directly here. I'm not an expert on Poland, Romania and Spain, but I think when you're looking at the economic trends globally and in Europe, we can draw a lot of inference. Germany is the largest export market for Poland and Romania, a critical one for Spain. And German industry is woven into the fabric of Central European supply chains. The news here is mixed. The good news is that the German government, despite its weakness, despite the fact that Merz looks politically very exposed, continues to stick to its commitment to investment spending, EUR 500 billion over 10 years and to its commitment on defense spending. So investment spending and defense spending underpin German growth, not strong, but not terrible either. Challenging politics means that overall, Germany is -- if it's anything, it's a modest tailwind or maybe an anchor. Germany is not going to be proactive. They're not going to be proposing a new NextGenerationEU program anytime soon and certainly not if you had a shift in France. That, I think, makes the relative picture even more striking. I thought I would just have a look at the growth experience. The video talked about that looking back. When you're looking forward, you can see that Poland and Romania in the yellow and blue in the consensus, in this case, in the IMF forecast, pardon me, are going to perform stronger than Eastern European peers. Spain has long outperformed euro area peers, and we think the IMF things is going to continue to do that. Politically -- sorry, in Poland, we talked about the European -- the example of European growth success. It is striking how growth has remained resilient, how unemployment has remained low. Of course, EU funds are important for that. Defense spending is important for that. And these things are going to continue, but the constraint -- the fiscal constraint with the deficit around 7% of GDP is real. And I think with consolidation likely not to happen until after the general election of this year, at that point, the quest for consolidation will be stronger. Rising interest rates, very high deficits, even if debt levels are low, will mean that, that fiscal pressure will materialize. At the moment, with the cohabitation and a government and a President with different priorities, the progress has been slower. We think, as I said, that next year's election is the point at which the fiscal picture will be reassessed. We don't think there will be much tightening before that. Our base case this far out is that Civic Coalition remains the largest party, but what is happening on the right wing is very clearly decisive. Whoever governs Poland will remain committed to NATO to being a major defense spender firmly anchored in the EU. So I don't think it's in that sense, it's fundamentally questions the investment case, but certainly, the fiscal outlook will be key. That is also true in Romania. You will see that the growth story in Romania this year hasn't been so great. That reflects the need for a fiscal adjustment in a country that runs a very large deficit. Again, debt levels are not the issue, but sustained large deficits and the demonstrated inability to deal with them are critical. And I think from an investor perspective, you can't ignore the prospect for a further downgrade that would make the investment case harder. So the political developments there, the fact that Romania got a government yesterday is obviously critical. And over time, to find a solution for the fiscal challenges is critical. Spain has been the standout performer. If you look at the politics, it looks strikingly confrontational. And Pedro Sanchez, the Prime Minister has not been able to put in place a budget. But he has been able to fiscally consolidate. He has -- Spain has seen strong growth. You have seen immigration as a key driver of that, but you've also seen real income growth. If you look at the current election campaign, you would have thought Spain was in a right economic miss, but that is not true overall. It's true when you're looking at affordability and housing. So critical issues there. Spain votes, we see a 70% probability that the People's Party will lead the next government, so you'll have a center right government. So that's 3 economies that are outperforming their peers. All 3 are in flux. All 3 exposed to those geopolitical forces, the oil price shock that I talked about, but also, I think, critically facing the fiscal challenges that come on the back of that and that come with very high interest rates. So let me conclude. Despite all the risks that I have just filled you up with, the growth outlook has been robust. I think on balance, that continues because I don't think the pullback in AI is coming. It's partly because companies are adapting to this much more volatile environment, investing in resilience, if you want. That's costly, but it's also investment and it also creates opportunities. So economies have proven more resilient, underpinning GDP growth, underpinning global trade growth, underpinning a benign market outcome. But it is a high inflation. It is a high interest rate environment. I don't see downside risks to interest rates at this point. I don't think that's going to ease anytime soon. Monetary tightening is driving near-term rates up, fiscal issues, investment -- fiscal issues are persistent, investment is putting upward pressure. So a sharp cyclical slowdown of the kind that investors certainly wouldn't fancy could be the answer that would drive interest rates down, but I don't think we are at that point yet. Longer term, as I said, it's a very challenging environment, but it is also one of resource reallocation, one in which countries that are agile, are able to respond to circumstances will fare well. And that applies critically too at the corporate level. If you can design strategies that take advantage of the reallocation of resources, if you can find pockets, countries, sectors of strong growth, then this is a very interesting environment. Of course, interest rates are high, but that's also a reflection of higher investment and higher growth. I'll stop here, and we should see if there are questions.

We do have some time for questions, and I would encourage you please to put your hands up if you have a question, and I'll come to you. My first one is this. There are many things happening at the moment on the political scene and of course, the economic scene and some very vivid characters at the center of that, Le Pen and Trump being 2 of them. But what's interesting always about business is that it has its own dynamic that it's able to thrive sometimes and see opportunity in difficult circumstances. Out of all of the risks that you've highlighted, what are the leading indicators? What as we would say are the canaries in the coal mine that tell us that something is about to change? Are there things that leap out to you?

Well, I would -- so I want to start with the positive. Things that leap out to me is...

Which is surprising because he's lived in the U.K. for a long time and we very rarely start with positives.

If you look at...

It's the Danish bit that's still...

If you look at politics, we spent most of our time doing that, it is very challenging. But when you get a chance to talk to leadership of companies, and we are fortunate to do that. So I spent part of my time talking to investors, but also a good chunk of my time talking to Boards, risk committees and so on. They are acknowledging this more difficult reality. The macroeconomic reality. They are dealing with the political risks. They are creating opportunities. So it is, for me, the the underappreciated fact is that, that resilience is becoming embedded. It's very hard to demonstrate in data. But when you're talking to boards, you see that much more prevalently. So all the shocks I've talked about have had impact. When you're looking back over the last few years, the trade war last year was a big deal, but it turned out to not have as big an impact on growth as we thought. The Middle East crisis, we thought it would have a massive impact on growth in emerging markets and in Europe. And so far, it has not fingers crossed. It may -- and I'm outlining the reason why to be worried. I think that's the near-term biggest risk is that you get another knock on supply chains, on commodity markets from the combined conflicts. But the economy has turned out to be much more resilient. Some of that is AI spending. But I think a lot of that is the fact that companies, the corporate sector has responded to this new environment and are much more resilient than we would have seen to the same sort of shocks, say, 10 years ago.

That's my experience, too, when I talk to Boards is their ability to rewire and rethink and have that as part of their mentality is really quite extraordinary. Am I seeing any hands going up? Because if I'm not, there is -- there are a couple of questions that have come in via Slido. Now the first one is what is the most likely evolution for the current sovereign debt turbulence. Now you talked there about bond differentials between, for example, France and the U.S. and so on. How large a role is that going to play, do you think this cost of debt and the fact that we see the yields going up?

I think that interest rates are likely to remain high. If I have to identify risks to interest rates, I see them on the upside at this point rather than the downside. That long-term interest rates could go up further rather than go down. And I think fiscal, I think AI spend, investment spending are critical drivers, but also, of course, and in the last 6 months, say, the inflationary impulse and the associated monetary policy response is that upside risk. So the sovereign matters. The sovereign risk matters. But I think sovereign risk, first and foremost, differentiate the weakest. When you have -- when you have an environment in which rates are rising, then you will start to see the cracks appearing. And then you can end up like you do now with the politically and fiscally most exposed responding strikingly, Romania and Poland haven't actually seen markets react as strongly as you have in France. And I think that's to do with the dysfunctional French politics, the fact that markets and I cannot really identify a political answer to the issues. So you end up with this pressure and you see the cracks. So I think the question is then when do the cracks become the drivers? And most of these incidents will be sufficiently small. If it's a small emerging market, it doesn't matter that much, but France is clearly not the case. France is clearly systemic. France is clearly big. France matters to the EU, to markets. And so that's one I'm going to be watching.

Okay. There is a question here about property values. With respect, I'm going to ask that of a later guest rather than Jens. Okay. But if Trump is voted out, the gist of the question is this, if Mr. Trump is voted out and we get a different leader, let's assume that it's a Democrat, I think that's the basis of the question. Could that change things fundamentally? Would that fundamentally change your outlook?

So I think it's certainly one of the factors that could -- that would change political priorities very strongly. As I've hinted in the in the presentation, I don't think we should over-index on the Democrats returning things to, if you want, pre-Trump normal. Trump is special for sure, but U.S. policy has been drifting in this direction. The protectionism was started arguably under Obama and certainly, Biden did more of it. Industrial policy was amplified under Biden. Trump started it, but Biden made it a much bigger feature. So I think you should think of many of those features of U.S. policy as being the same. I think what is different, likely different is that at least as I read, as we read, current Republican thinking on Europe is much more hostile to Europe, is looking to weaken rather than strengthen Europe as an entity. Certainly have individual allies and will want to deal with individual countries, but much less focused on strengthening Europe. The Democrats, I think, will take a different perspective on that. So I think that from the perspective of this conversation is very important. But again, I don't think we should over-index on things returning to some form of -- some sort of...

Click back to whether...

Click back to globalization heaven. No, this is a continued challenging geopolitical environment.

Okay. There is also a question of the impact of inflation on consumers. Again, with respect, I'm going to ask that of a later guest.

Actually, I wouldn't -- I think that's a very important point. So we can measure inflation and the inflationary impact has not been nearly as big as I feared it might have been in part because commodity prices have not risen as much as I thought they would. It's also because central banks have managed to anchor inflation expectations. But anchoring inflation expectations, what that means is essentially asking to take workers and firms to take the shift in terms of trade, the commodity price shocks on the chin, so either reduce profits or reduce wages. So I see that as a bigger story from the consumer perspective of that pressure on consumers that are intensifying. So the key -- election issue in Spain is housing and housing affordability. You can -- I can look at inflation and say, it could have been worse, but for the average voter, that really, really matters. And I think it matters in the way they express themselves politically. It could also matter in the way they are expressing themselves in terms of consumption choices. So far, again, resilience, great. Consumption demand has been quite strong. But the combination of very messy politics, commodity price shocks and, of course, higher interest rates, I think are dampener and certainly a risk I would be looking out for when I'm thinking about the consumption outlook.

Okay. And we'll look at consumer trends a bit later on. There's a final question, and then I must let you go to a break. And that is the impact of climate change. You didn't really talk about resilience to climate change, but is that going to be a fundamental part of economic response?

I think so. And you're right to pick me up on it. I also didn't say very much about AI. There's a limit to -- there's just a lot going on. I think climate change is a huge deal. I think it's been deprioritized certainly in the U.S., but also in Europe because the concern has been about energy security, not climate change. It's been about lowering consumer costs rather than achieving the best outcome. I think over time, this will -- the issue of climate change and the response to climate change will reassert itself. So when you're making investment decisions now, when you're making construction decisions now, you obviously have to condition not just on the fact that climate change is real and it is getting even more real, if you want, the impact, the physical impact on your locations is going to be bigger. The impact on markets is going to be bigger, but also that the regulatory and the regulatory agenda, the transition agenda will come back in force, simply reflecting the fact that climate change is there and that the importance will increase.

Jens Larsen, thank you very much indeed.

Thank you.

Right. So my job now is to ask you to indulge in a comfort break. There's -- if you'd like to move outside, we're going to run some technical rehearsals. So it might be a bit loud or lots of flashing lights in here. So I would ask you to leave the room and enjoy conversations and a bit of networking outside and return, if you wouldn't mind, please, in 10 minutes, and I will herd you back in. Thank you very much indeed. See you soon. [Break]

So, hello again. We've rounded up some of the geopolitical and the macroeconomic challenges, but also established that really business has its own dynamic as does the consumer. So, now we're going to talk a little bit more about shoppers. Please welcome Doug Stephens.

Thank you very much, Tanya. And thank you, Marek and Cristina, for having me. It's wonderful to be with you, my first time in Poland. So, thank you very much for graciously hosting me. Yes, we're going to talk about the future of physical retail with particular attention to the shopping center. But first, let me just tell you a little bit about me. For about the last 20 years, my company, Retail Prophet, has sat at the intersection of retail, technology, demographics, economics, media and more recently, the political landscape out of necessity because it's having an impact on how we consume, how we spend, how we shop. But look, I have to share something with you because a lot of what I talk about is the future. And a lot of what I do is I try and synthesize trends at that intersection and take those insights to corporations, brands, institutions so that they can anticipate the future and build strategy to meet it. But it's a really hard job. And I'll tell you why. As a futurist, oftentimes you're projecting, say, 10 or 20 years into the future. And you're saying things very often that people think are crazy, right, that you're just out of your mind. And that's the first problem. The second problem is if in 10 or 20 years, you were right, nobody remembers. So, you lose both ways. So, along the way, I've tried to document in books my hits and misses, whether I'm right or whether I'm wrong, at least there's a living memory. But when Marek and his team called and asked me to be here, I checked out their business and that word 'forward' really stood out to me, "building forward," because it implies to me that this is an organization that is open to the future and maybe even open to hearing crazy things about the future. So let's talk about the reality for shopping centers first and foremost. And through the front part of this presentation, and first, I'm going to say right upfront, I'm not the expert in this region. The experts in this region are sitting in the room. So, I am using Poland here as a proxy for some of the things that are happening in the region, just so we're aware of that. But as I was looking over some research, this really stood out to me, this quote. And it sort of -- what was impressive to me about this is that I could have read that in North America in the 1980s or '90s, and it would have made perfect sense in that era. Because there was a compression going on. What we were finding at that time was that there were really 2 kinds of retail centers that were really prospering at that time. One was, kind of, the super regional mall, malls like the Mall of America, which is just this enormous complex that's very entertainment-based, very leisure-based, very prompted to tourist visits. So, that was the one extreme. And then at the other end, you had the power center, as we called it, which was, kind of, the retail park, right, which was much more mission-driven where consumers were going on a mission to find specific things and very much shopping driven. And so it seems to me that, that in a very, very short period of time is where this market has accelerated to, where we have these enormous super regional centers that are delivering premium experiences. And on the other hand, we have a lot of growth in the retail park sector across the entire region. We're seeing a lot of growth in retail parks. And what is being squeezed is the legacy malls. A lot of the, sort of, traditional legacy malls are being squeezed out of the market by these 2 other kinds of properties. But something else is happening in this market that I find really interesting, too. In the North American market, we had about 30 years on the ground with concepts like this to build out, to create massive amounts of GLA in the market before e-commerce really took root. And when it did, it was Amazon primarily, right? Amazon was the real e-commerce engine at the time. And Amazon even at the beginning wasn't all that impressive. But in this market, we've seen, sort of, a parabolic jump in e-commerce in a very, very short period of time. So, what's happening in the CEE is that we're building out physical space while at the same time, e-commerce and digital commerce is growing exponentially. So, the 2 have to, kind of, marry themselves together. And so where we in the West are just now starting to build micro fulfillment centers in stores and in retail parks, it's already happening in this region. But there's another difference, too, and that is that e-commerce is not just, sort of, an indexed website of products anymore, the way it was in the early 2000s with Amazon, where you would just, sort of, search for a product and find the product listing and buy it, it has now crossed into entertainment, right? Across all these platforms now, products and shopping are built right into the entertainment experience. And let's be honest, there's really nothing now that you can't buy online. I mean things that only a decade ago, if somebody told you that you were going to buy a $50,000 Rolex from an individual on the other side of the planet who you had never met, you'd have thought they were out of their mind. But today, we're buying luxury items, EUR 76 billion in luxury items transacted online in 2025 alone. So, anything you want now, you can buy online. And don't take my word for it. Here, I want you to do something for me this evening when you get back to your room or you get back to your home. Go to the Google search bar and type into the Google search bar the craziest thing that you can think of. And I promise you, there's a product out there that will match that description, ship to your door, next-day delivery, no problem. So, the way I think of the world that we live in today and the way I think it's instructive to think about the world we live in today is that today, media in all of its forms, whether it's a video clip, whether it's a digital ad, whether it's a product placement in a movie, all of those things now constitute a store. In 3/4 of all cases in this region, when a consumer has an idea to buy something, their first stop is to go online. And maybe they'll find a store and visit that store or maybe they'll make the purchase right away. So, media is becoming the store. And that opens up a question, and that is, what is the new role of the store in a world where everything becomes a store, and we'll talk about that in a minute. Let's talk about the reality for consumers. And certainly, I sat through the economic presentation earlier, which was fantastic, and I don't want to pretend to add a tremendous amount to that. But my observation for what it's worth is this, you are so lucky because you have a middle class in this region, a growing middle class, which is astonishing coming from the West, where we saw over the last 45 years, our middle class evaporate. We started in the 1960s and '70s with a very, very strong prosperous middle class that drove the growth of brands like Walmart and Costco and Target and other brands, the same thing across Europe and the U.K., Western Europe. But in this region, you have a growing middle class. And all I can say is hang on to it, fight for that because that prosperity is what ultimately is going to drive the health of all businesses in the region. But if we look at the Polish consumer for a moment, I mean, all the indicators are very good, right? Wage growth is good. Debt reduction is good. The fundamental health of the consumer is very good and yet sentiment is low, right? Sentiment is a negative 10. So, you wonder why is that the case, right? It seems like their financial lives are pretty good. But the backdrop, of course, which our previous speaker went into phenomenal detail about, is that the world is in chaos right now. We have just a constant drumbeat every day of uncertainty, whether it's the war in Ukraine, whether it's the war in Iran. I'm a Canadian. So, we have what is a developing authoritarian state to the south of us. And in many respects, we're a population of 46 million people. We basically are the North American Ukraine. Trump has even made threats about invading Canada. So, Canadian consumers are really tight with their resources right now as well. And we're not going out and living the high life because we're trying to also reserve our resources. So, the 2 takeaways are, for me anyway, protect and lobby politically to support your middle class because it's the engine of growth, certainly for shopping centers in the region and for brands. And secondly, I don't think that this uncertainty is going to go away next year. I don't think it's going to go away with one election. I think that Trump and Putin and Xi are meeting for a reason that is, in theory, about spheres of influence. It's about dividing up the world. So, hopefully, the good people of the world will stand up in resistance against that. But now let's talk about the reality for brands and retailers because they have their own reality here as well. In Poland, for example, there were PLN 11 billion spent in 2025 on digital media, PLN 11 billion. Now that's a huge jump, right? We're seeing dollars flowing out of traditional media into digital media. About 60% now of all ad spend is digital media. And that takes various forms. It may be search engine marketing. It might be retail media networks, which we're hearing more and more about now, whether it's sites like Allegro or Amazon that are charging out media placement on their sites. And it may be, of course, social media that they're spending that money on. And the cost of that, and this is important to the future of the shopping center, the cost of that media has become exponentially greater year-over-year. Every year, the cost of that media is rising, every year, brands are having to spend more to reach and connect with consumers and to garner some, sort of, a meaningful relationship with consumers. But here's the catch. Here's the dirty secret, the advertising industry doesn't want brands and retailers to know about. And that is that about 64% of every single dollar that is spent on digital media, programmatic media in particular, so media that hunts for consumers never reaches a consumer. Almost $0.65 on every dollar is basically thrown in the garbage. It never reaches the consumer. A lot of that is spent on placement fees. A lot of it gets eaten up by exchanges. A lot of it is just bad targeting. It just hits the wrong person or it's a bad adjacency. Your ad shows up with something that is completely counterintuitive to what should be adjacent to your message, your brand. So, it's ineffective. And about 30% of European brands now report that reaching customers is becoming increasingly hard online. And so they're having to reach for different kinds of media. We're seeing more video media, more influencer marketing, right, going and hiring influencers to channel your product to consumers for you. But the truth of the matter is brands are finding it really hard to break from this old traditional world where you had to advertise in order to reach a consumer. And it's going to be particularly difficult for brands because this is the world we're moving into, a world where consumers increasingly are going to be using shopping agents, AI agents or AI search to find products. I believe within 5 years, we will all have our own subscription agent that manages our finances, manages our consumption, plans our vacations, rents that car for us when we're in Spain. Whatever the case may be, it will be our agent, and we will trust them because they will know us implicitly. They will find products and present them to us and say, here, this will be perfect for you, and we will simply go ahead and buy them. I lied to the AV team. I told them I had no sound. I do have sound. So, you're not going to hear this video, but I'll explain it to you, okay? We'll do it the old school way. So, this is Visa's CEO, Ryan McInerney. And what he is explaining -- and if you read lips anyone in the audience, maybe you can interpret. But what he is explaining to this host is that Visa is rolling out an agentic AI credit card that will actually buy things for you. You will simply give it permission. So, you will say, "I want to go to the Taylor Swift concert on June 22, find tickets and go ahead and buy them," and your credit card with your permission will go ahead and make that purchase. They go out and find products for you and simply buy them for you within parameters of permission, agentic AI credit cards. So, the impact on brands, when you think about the old marketing funnel, how many of you attended a business school at some point, marketing school, right? So, we all learned about the funnel, right, that there were these steps, these decided steps that a consumer went through from awareness all the way through to the purchase. And in between, you spent an awful lot on media to get them to buy your product. But when you think forward to a world of agentic AI, simply going and finding you something that it knows is perfect for you based on your preferences, your needs, your budget, presenting it to you and you trust your agent so implicitly, you just pull the trigger on the purchase, we circumvent the entire funnel. We go from awareness to purchase in a heartbeat. And so if you're a marketer, all of a sudden, you're seeing the effectiveness of your advertising plummet. We're expecting to see drops as much as 47% in the effectiveness of reaching consumers. And we're already starting to see this now, about 50% of all search involves AI. So, even if you go to Google today and you search for something, you're getting an AI summary, whether you ask for it or not, right? And oftentimes, within that AI summary, there's a link directly to a product. But this sets up a different dynamic as well. And this is important to understand. Everything is freemium, right? You can subscribe to YouTube -- but if you don't want to get ads, then you buy a premium account, right? You pay a certain amount each month, you see no ads. The same is going to apply to AI. You will be able to subscribe to an agent. And for a monthly cost, you'll get no advertising at all. But that sets up a situation then where advertising is going to be divided along economic lines. In other words, the wealthy will get great information that informs their purchase, that helps them become more responsible and informed consumers and the poor will get all the ads. What does that mean if you're a marketer? It means that your advertising now is going to the consumer with the least intent or the least capability in some cases of buying your product. So, now let's talk about the shopping center response to these problems, and we'll look at it from a few different angles. First of all, I think it's informative to understand how the North American market because they're confronted with all these issues as well, all the same conditions. Let's look at how the North American market addressed this. And as is the case most often in the U.S., the U.S. is a market where they think they can kill every problem with capital. Just give me more capital, I can build something bigger. And if I build something enormous, consumers will come. So, here was one of the things they built. It's called the American Dream in East Rutherford, New Jersey. It cost $5 billion to build this center. It's enormous. It's a graveyard. Nobody goes. There are $46 million in past due on their interest payments on their debt. And there's actually -- I think one of their loans is coming due, I think it's this week, and they may not make the call on that loan. So, novelty gets old really fast. Building an amusement park of a mall, and we've seen this happen in other places, too. The West Edmonton Mall in Canada is another example of, sort of, an amusement novelty mall, but it wears off. And if you don't have super high tourism, which the U.S. is not getting right now, then that, kind of, a project is not worth it. They built another thing in New York called Hudson Yards. Has anyone been to Hudson Yards? What was it like when you were there? Was it vibrant? Was it packed with people? You probably could have shot off a cannon, right, and not hit anyone with it. Yes. I mean they built this at huge cost, right, this mega project, and they had to wind up selling 400,000 square feet of the center to Wells Fargo just to get it off the books because they couldn't fill the space. They wanted to anchor it with a Neiman Marcus store, high-end luxury brand, and that didn't work out. Neiman Marcus went bankrupt, and so the whole plan fell apart from there. So, in the U.S., about 25 or more percent right now of all malls are in distress. That compression that I was talking about, the super regional at one end and parks at the other end and then AI, agentic AI and e-commerce in the middle is putting the squeeze on that middle percentage of malls, and they are in trouble. In Canada, it, sort of, followed more along the same division that we find along income and wealth. We have a growing degree of income and wealth polarization in Canada. So, retail has simply chased it with off-price malls at one end and high, high-end luxury at the other end. But the problem is that on the luxury end, you can only ever hit about 10% to 20% of consumers, right? That's the high net worth consumer is about 10% to 20% of the population and your market can only support so many off-price malls as well. So, it's inherently rate limited. Looking at the U.K. and across Western Europe, we find more of a focus on facility, right, trying to figure out what do we do with these spaces? What can we do to make them feel renewed, right? So, we're finding that they're maybe reviving their sense of placemaking. Let's make the place look nicer, make it look more distinct. They're tapping into media revenue now, more digital signage, more placement, more things they can charge brands for in the space. They're looking at mixed-use developments, right? And this is a theme that we see across the industry right now, where they're taking what is basically a decaying shopping center asset and saying, but if we just build housing around it, that will raise the value, right? That will raise the market value, but it doesn't address the core problem of the center itself. And then in some cases, they're changing out the anchor tenant, right? So, where it might have been a department store and now department stores are failing, they're saying, okay, maybe it's a bowling alley, maybe it's a kids play zone or a gym or a grocery store. So, they're not addressing the core problem. They're trying to dress the core problem up in Western Europe and the U.K. And by the way, in the U.K. right now, e-commerce is 28% of total retail, 28%. I remember arguing with people 10 or 15 years ago when e-commerce was about 2%, and I was saying it was going to go to 10% and people thought I was out of my mind. Now it's almost 30 cents of every dollar spent. Now let's talk about the Chinese experience because the Chinese experience was more about function. And the Chinese had, sort of, an interesting problem. Between 2009 and 2024, they built an enormous amount of shopping complexes, just a huge amount of gross leasable space built in China over that period of time. But the same, sort of, thing happened as is happening in this region, and that is that e-commerce was growing right alongside it. And so they found themselves at a certain point with way too much retail square footage, about 40 malls, I think, closed in China in 2024 alone. And so the Chinese solution was, well, what we'll do is we'll just make everything in the space connected, right? We'll connect everything to technology. And essentially, the physical space will just become a showroom, right? The store will become just a physical showroom for things that people will buy online. Every store is basically an excuse to pull out your smartphone or use another screen in the mall. And in the West, we were regaling that. We were saying, "Oh my God, that's amazing. The Chinese have figured it out. They figured out the future of the shopping center, but they didn't. Because what they were really contributing to was a digital overdose that was already happening in the Chinese market. Chinese Gen Z spends 6 hours a day on social media as it is, right? And we were giving them in the market more reasons to be on screens in a physical shopping space. That's a complete paradox. And it was contributing to a terrible mental health crisis in China, loneliness, anxiety, depression to the point where the government between '21 and 2023 actually took action on it and started limiting by law the amount of time that young people could spend on their screens. So, are you feeling inspired yet? Have I made you feel good about the future? Well, you should. You should. Because I think -- and Marek is probably sitting there thinking "What is he saying," right? 'get them off." But honestly, I think what I've laid out here are the keys. These are the keys. These are the gaps and the mistakes that have been made around the world that I think can be solved in this region. And so I humbly offer what I think are potentially 6 keys to the future of what the shopping center could look like, not today, not tomorrow, but I do believe at some point on the horizon, this is going to become necessary. So, first of all, let's talk about the makeup of the tenancies in those centers. And my advocacy is don't chase trends, serve needs, serve human needs. There's a tendency in the market that I've noticed anyway in the shopping center market where it's all about let's find the next hot tenant, right, whether that's some fashion retailer that's really hot or some food hall concept that's really, really popular. But those things are just ephemeral, sort of, expressions of the need. They are not the need itself, and we need to start identifying the need. And the first thing we have to admit is that at some point, and because this happens in every market, the consumer is not going to need the shopping center to broker the relationship anymore between themselves and the brand. They will and they are able to form that relationship and transact themselves. That doesn't mean that the shopping centers still won't be vital. It's just not going to be vital for that purpose alone, but there are a whole host of new needs. For brands, brands are looking for meaningful consumer engagements, not a report from Facebook that says they got 0.5 million impressions when there was no uptick in their sales at all. They're looking for measurable impressions, warm bodies crossing the threshold into their spaces and interacting with their people and their products. They're especially looking for exposure to young consumers, right? They want to make those vital connections for the future consumer. They're looking for consumer intelligence and insights so that they can better plan their inventories, better plan their product development. And they're certainly looking for lower customer acquisition costs than they are paying online. For the consumer, the consumer has a whole new host of needs as well. And I would argue one of the most prominent and profound needs that we have today is the need for social connection. I think we all feel less socially connected than we did even 5 years ago, even before the pandemic. We feel this sense that we've just lost something in our lives. So, I think we're looking for community -- we need entertainment as a distraction from, my God, the news cycle every day. We just need fun and joy in our lives. We still need expertise. We've got all the product information online that we want. We've got it all here in the palm of our hand, but that isn't expertise. That's just facts and figures. If I'm buying outdoor gear, I want to talk to somebody who goes climbing or cycling. I want to talk to someone who's used the product. I think we're looking for disconnection from technology. I think we're looking for reasons to put our phones away and just have a meaningful visceral experience, whether it's with food or whether it's with products or whether it's with some form of entertainment. I think we're also missing the fear of missing out. We don't have a fear of missing out on anything anymore. If we miss the Academy Awards, whatever, we'll look at the highlights on YouTube tomorrow. If we miss the debut of the next Drake album or something, whatever, we'll download it from Spotify a week from now. We don't fear missing out on anything. I think the mall can be the center of things that are here and then they're gone. And if you miss it, you missed it. And that's good. We want that back in our lives, that sense of, no, I want to go. I want to see it. I want to be there when it happens. And I think we're looking for both time well spent, and I think we're looking for time well saved. Tell me, how many of you feel like you have less time now than you did before the pandemic? How many of you feel more rushed in your day? What are the rest of you doing? Just slacking off at home, what's going on? Why is it only me? No, I think we want to use our time efficiently, right? We want to spend our time efficiently. So, the point I'm getting at is this. We need to think in the shopping center industry in 2 completely different realms. It's not to say that they can't intersect or overlap, but the consumer has, sort of, 2 compartmentalized constellations of needs, right? On the one hand, we have super high utility needs. That's cognitive defaults. That's very much a brain thing, not a heart thing. I think about, "Oh, I need something and I don't want to spend a lot of money." I want to save money on that thing. In my world, that would be Walmart. I'd say, okay, well, I'm just going to go to Walmart and see if they have it because I know it will be cheap. In this world, maybe it's Biedronka, right? Maybe that's the top of mind alternative to save money on something, right, the discount house. The other one is I want to save time. In my world, that's Amazon. If I need it and I want it tomorrow, I'm going to go to Amazon. In this market, perhaps that's Allegro. The last one is I just don't want to think about it too much. I don't want to have to go out and shop and think and decide. So, in my world, that might be, say, an H&M or someone like that, just a fast fashion retailer. And in this market, maybe it's a Pepco, just top of mind, that's the brand that pops to mind. That is a very valuable constellation of needs for the consumer. So, we have to address those needs with shopping. We have to give them these high utility centers where they know they can save time, save money and not have to think about it too much. But the other constellation of needs is all about the super high fidelity, the emotional defaults in our lives, right, where it's about culture and community, belonging, inclusion, where we want to feel part of something by going and shopping with a particular brand, we feel like we are part of that brand community. And that aligns with our values and maybe gives us a sense of inspiration. There's also the idea of just distraction and fun. We want to go and shop at this store instead of that store because this one is more fun, right? They've turned it into a fun experience, and it brings me joy to go into that store. And that is particularly important in this market because the same thing is happening here. Kids are spending an awful lot of time online, and that is creating that same sense of loneliness and disconnection from their networks, from their friends, from society. And I believe the shopping center can be the antidote to that problem. And that's a worthy cause on humanity's part. And it's not just speculation because we've already seen it work in China. Young Chinese kids are flocking back to centers that are saying, "Forget about the screens, guys, put away your phones. This is about social, physical, visceral, real, come back to the mall," and they are. They're taking malls that were in distress and they're actually lifting their sales because the focus is now on social. And maybe it's just about expertise. I want that experience of going and talking to someone who shares my passion for this sport or this product category. And I just want to go and talk to someone who lives and breathes it just like I do and get that sense of knowledge and insight, and that feeds my sense of self-esteem. And sometimes, it's just about beauty. It's just about design. I just want to go and I want to peruse beautiful things, pieces of art that are products. And so when you start to put this into the vernacular of brands, Patagonia is a cultural brand that identifies its consumers by shared values, right? Decathlon, great example of a brand that plays on the idea of play that allows you to come in and try things, do things. It's a fun environment. Mo61, has anyone heard of Mo61? Yes. So, a brand that allows you to come in and play with fragrances, play with cosmetics, formulate your own with their help, with their guidance and expertise. And then finally, someone like Dyson, going to either a blowout studio or one of their beautiful gallery stores. So, getting back to what I said before, where I said media is the store. The reciprocal of that or the corollary to that is that the store is media. The store is probably the most powerful form of media that there is in the market. I mean, compare what is happening in that Culture Kings store in Australia to a Facebook ad, there's no comparison. That is not only the most powerful form of media, I would argue it's the most measurable and manageable. So, we have to think in terms of these 2 realms. That's the first key. The second key is that the competition in the shopping center market is no longer just where people spend money. It's wherever they spend time. And here's a shocking statistic. The average Gen Z in the Central and Eastern European zone is spending 1,186 hours per year on social media. That equates to 49 full days, 24-hour days on social media. It's a terribly addictive mousetrap is what Mark Zuckerberg and his colleagues have built. But the thing about it is Facebook is an incredibly asset-light product, but it garners enormous amounts of data. And that's why brands are initially attracted to it. Facebook collects 52,000 different data points about every person that uses Facebook, 52,000 different attributes. On the other hand, shopping centers are very asset heavy, but they tend to be very data light. There's lots going on in there, right? There's a lot of interaction, but very little of it really gets measured in a meaningful way apart from just, sort of, anonymized data and aggregate, sort of, navigation data where people are going. So, the second key is that up till now, what we've done in the commercial real estate industry is we have built, monetized and maintained space. But going forward, my belief is that what we have to do is build, monetize and measure audiences. And that's a different, sort of, muscle that we have to start flexing. So, #3, that brings us to the revenue model for the shopping center. And we have to admit to ourselves that the revenue model for the shopping center was built in a pre-Internet world, right? The idea that you build the asset, you divide the asset, you rent the asset and maintain it. The model looks something like this, base rent, percent rent, specialty leasing, add in some CAM costs, right? And that's your asset valuation, basically, your income and your asset valuation might look like this. These are just theoretical figures, don't hold me to them or anything just for the purposes of example. But that's the way the shopping center might play out. But what if all of a sudden we started thinking about the shopping center not just as a monolithic building that collects rent. What if we started to think of it as a media, data, entertainment and hospitality company? Totally different perspective. Now what if all of a sudden, the shopping center was a media network, right? If I said brands are media, stores are media. The shopping center is the media network, right? It's the one that's bringing all of these brands together. And that could be programmatic advertising now that is sold within the center. It could be brand activations that are sponsored and all of the data that can be collected around that, and we'll talk more about the data in a moment. What if we are now in the business of live ticketed paid experiences? Shopping centers have traditionally said everything needs to be free, right? Come for free picture with Santa, come for a free Easter egg hunt. But what if we got into the business of building incredible experiences that people were willing to pay for, and it actually became a revenue stream? What if we started selling memberships to the mall, not just a free loyalty program that you get just for showing up, but a membership program or a subscription program where you actually get perks and rewards and gifts and special access? What if we became a content business where the whole center was a studio where every day, there was content being produced and pumped outside the walls? What if we created studios in the center where influencers could come in and promote brands within the center and put that content up on YouTube? What if we became community based where we were offering classes. We were offering education to people in the community where they could come in and maybe even have conferences in the mall, we could become that facility? What if there was a digital twin of the mall and it was a full e-com platform? Now that sounds crazy, but some shopping centers have gotten close to doing it already, having an e-commerce platform where people 20 miles away can be shopping on the mall and come in and collect their goods. It's just a matter of bringing retailers together to make that happen. What about place-based services, health, spas, last mile delivery and logistics. The list goes on and on and on, plus rent, right? You still get your rent, but now you have potentially all these other channels of revenue. When you add it all up, it might look something like that. Maybe I'm being optimistic. Maybe I'm trying to sell you too hard. I don't know. But I think that could be the future. But it's not just about the lift in revenue, it's about the lift in relevance. It's about all these services now that keep the mall vibrant and relevant for a new era of consumers. So, we have -- do we have wraps or something? What's going on here? -- number four, the center is the anchor. Forget about who's the anchor tenant. It's not grocery, it's not fitness, it's not the department store. The center is the anchor. In 2017, I met this fellow his name is Mark Toro. He's the principal at Toro Property (sic) [ Development ] Company in Alpharetta, Georgia. And he built a complex called Avalon, incredibly successful complex. When I met Mark, I said, "How long have you been in the commercial real estate industry?" And he said, "I'm not in the commercial real estate business." I said, "You're a mall developer." And he said, "No, I'm in the entertainment business." And when I started talking to Mark more, I thought, first of all, this guy is, kind of, wacky. But when I started talking to him more, I realized what he was talking about. He does 260 events a year at Avalon, 260 events a year. And some of them are bringing audiences as many as 20,000 people may show up for a specific event. He's building these enormous paid, in many cases, ticketed in many cases, events that are paying for themselves, maybe sporting events, social events, you name it. So, I believe the center of this -- the future of the center looks more like this, where community is what drives commerce, where sponsored experiences are driving expenditures, where interaction is generating consumer information and data, data that can inform the brands that sit under our roof. So, talk about time well spent, money well spent, that to me is what that future looks like. And again, there are already signs that this is working in China. The experience is the product. Kids are flocking to these malls that are offering these kinds of experiences. And again, there's no reason that in the slow hours within the center that they couldn't be turned into studios where you're building content that then gets to life outside the center and people are then able to shop live video directly from the center. #5, hospitality is what powers the data flywheel. So, we get a lot of people going through centers, right? But as I said, we don't know, in many cases, an awful lot about them. If we're lucky, we're maybe getting a MAC address from their device, maybe we're picking up an e-mail here and there. We're getting a license plate pulling into the parking lot, but we don't really know much about that consumer. I was in South Korea recently, and I was doing some work with the Lotte Corporation. There are basically 3 huge corporations in South Korea that build and own everything. Lotte is one of them. Hyundai is another, and there's another one, Samsung, I think, is the other one. But Lotte, they build shopping centers and they focus on member packages. You can become a member of the mall. You get private entry, valet parking. You get your own lounges that look like -- I mean, they look like incredible Emirates, sort of, lounges for shoppers. And the amount of data they get is unbelievable, right? The consumer is willing all of a sudden, when you belong somewhere, when you belong to the club, even if it's just $20 a month or something that you're paying, like what you might pay for Netflix, you're willing now to give up way more data. Finally, number six, I believe that we will know when we've gotten to the future of the shopping center when we stop calling it a shopping center. When we drop the word shopping, we will know we're there. Here's a quote for you. This is from another European. He said, "I am often called the father of the shopping mall, but would like to take this opportunity to disclaim paternity once and for all. I refuse to pay alimony to those bastard developments. They destroyed our cities." Does anyone know who said that? That was Victor Gruen. Victor Gruen was an immigrant to the United States. He fled Vienna in the midst of the war and fled to the United States, and he built a lot of the stores on Fifth Avenue. He designed and built a lot of the existing stores on Fifth Avenue. And in 1956, he built the Southdale Center. It was the first enclosed climate-controlled mall in the United States. It was in Edina, Minnesota of all places. This guy from Vienna in Edina, Minnesota, you've never been to Edina, Minnesota, don't go. Don't. It's just cold. So, his -- he was disappointed because his vision was not that it was just going to become a commercial outlet, but that it would be like a City Square where people would go and they'd commune and they'd gather and they'd see art exhibits and watch shows and it, kind of, become, sort of, the piazza, right, in the middle of the U.S. suburbs, and it just didn't play out that way. So, my belief is we have a choice. We have a choice in the future. We can build this, and this will work. This will work. For the foreseeable future, this setup will work. But I believe that the future looks more like this. I believe that the future of the center is that it becomes not just the center of commerce, not just the center of community, not just the center of entertainment, it becomes the center of life. And when we get to that point, we will know that we're home. Now I just want to say one last thing in the 49 seconds that I have remaining, and that is this. A lot of people ask me about this notion of futurism. And I think a lot of people think that it's just sort of about making educated guesses about what comes next, right? Sometimes you're wrong, sometimes you're right. But I don't think it's that at all. I don't think that futurism is about predicting the future you get. I really believe it's about understanding what's happening now, being really honest with yourself about that current state. And then from that, it's about deciding about what future you want to engineer. It's about engineering the future that you want. And your future, ladies and gentlemen, begins right now. Thank you very much for your time. I appreciate it. Thank you.

Doug, that was fantastic. Absolutely fantastic.

Thank you.

Thank you so much. Now I can't see terribly well into the audience. So if you have questions, there's a question immediately there. Yes, please.

I'm Valerie Jacob from Bernstein. I think a lot of the trends you described are very much in line with Unibail Westfield strategy. This is what they've been doing for the past few years, and this now accounts for a meaningful part of their income. And so my question is, do you think this is a coincidence that they have the big malls that are very well suited to the future of retail that you described? And -- or do you think that this is going to expand to smaller malls, more local? And if not, what do you think the future is for mall that are cannot sort of evolve into this future you're describing?

Okay. So is it for all malls everywhere, is the question.

I think you're going to see 2 things happen in conjunction. If we think -- I don't think anyone ever thought -- many -- very few people thought that we'd have a U.K. market where there's 28%, nearly 30% e-commerce, right? So that in itself, I think, at some point, if you have a center that isn't really viable as becoming some huge experiential stage, it may more and more become a logistics hub for e-commerce purchasing, right? It's local, it's convenient. And I think along the way, we're going to be -- well, for example, Walmart right now is actually adding third-party marketplace vendors to its backroom assortment, its logistics hubs within its stores. So it's expanding beyond the inventory that sits on the shelves within the stores, and it's starting to add third-party marketplace vendors with top-selling items in that area. So we're already starting to see that transition. So I don't necessarily think every center is going to be necessarily converted into an experiential center. But I think the ones that do are going to really have to push the envelope in terms of what they're delivering.

What struck me as well when you were saying about the experience is that people are looking for sensory experiences. They're looking to touch, you were talking about perfume that they want to touch things, they want to smell things and taste things. And that's what, of course, the physical environment can offer, which the online environment absolutely cannot offer.

Exactly. Yes. And they want to do those things together. You see I was telling somebody the other day, there's a really beautiful, beautiful garden center near where we live. It's an enormous garden center, and they offer workshops. And it was just come in and make a fall urn of flowers and plants and that sort of thing. And one of my wife's friends canceled and she said, "Can you come with us?" And so it was me, one other guy and about 50 women at this garden center making these urns. But honestly, these groups of women came together and they were having a blast doing this. And I thought to myself, why couldn't this be in a shopping center.

Yes. Yes. But garden centers have become very popular in the U.K.

Huge. Yes.

And not just for older people like me. Any other questions, please? Yes, please forgive -- you do feel free to shout because it's not always easy for me to see that. Yes, please.

Peter [indiscernible]. Do you believe there's like an end number or final number to the percentage of the market that e-commerce can capture?

Right. Is it close to peaking out? The percentage -- I think your question is online retail, when will it start to level out? At what level?

Yes.

Yes. I wondered that.

I think in certain categories, we're close already. I think in certain categories that are more difficult online purchases just by virtue of the product, we're probably bumping the ceiling already. But in other categories, it could be infinite, it really could. There are certain things that you think why am I even going to the store to buy this, right? I can make the decision online. I'll give you a good example. I'm sort of the wrist watch enthusiast. I don't know if anyone else in the audience.

Wrist watches.

Wrist watches. Yes. And that market, the online market for wrist watches has just exploded, right, because you get incredibly good information about the piece. You get a guarantee from eBay that it's authentic. It's been checked out, that sort of thing. So I mean, we can buy with confidence in those categories. So I see what do I get when I go to a jewelry store. Half the time, I get somebody who doesn't really know much about the product. So I think in certain categories, it could be 50%, 60%, 70%. In other categories, it might stay 15%...

One of the things, there's a shop in the U.K. called B&Q, I think it's called DIY now. But anyway, you go there, it's just -- it used to be really confusing for somebody like me because I didn't know what I was trying to buy and I wander up and down and nobody could help. They've hired a load of older people who are retired, who do their homes themselves. And they love to chat and they know everything about everything. And it's a wonderful experience, and it's turned it into being something quite joyful for me now, going there and talking to all of these older people saying, well, I didn't like that, and I did like this. It's very nice. I mean that's how in need I am with socialization. But anyway, that's another story. Any other questions, please? Yes. Yes.

[indiscernible] a quick question about the transition from the traditional shopping center to this new digital network. How do you see the financing of all this investment required to collect the data and become this...

Where is the money coming from to launch?

Who's going to pay? Who's going to pay tenant or the owner?

Not me. I'm not going to pay for it. No, I think you have to -- I think it's legitimate to start small, right? I don't think that you set out and say, okay, here's our slate of 200 events that we're going to run this year. But I think you have to sort of make the transition from saying rather than having a free Christmas ornament decorating thing for kids, what if we tried having a world-famous artist come in and really make it an enormous thing and see if people are willing to pay for that. I think you have to test the waters and see what the consumer sensibility is for ticketed events, first and foremost. I think you have to test out the waters with membership, right? Everybody is welcome to the mall. But if you were willing to pay $15 a month, $20 a month, what could that give you in return? And what kind of data would a consumer be willing to share or opt into if they felt it was going to improve their experience materially within the mall, right? So I think it's a question of testing, iteration. Markets are different, centers are different, regions are different, but you have to test it out and make that transition slowly.

Yes. A final question. I think I have 2 minutes left. Is there another hand out there that I should be paying attention to?

I think, everybody is thirsty for a beer.

Everybody is thirsty. Probably not a beer. But Doug, I want to thank you very much indeed for coming to talk to us.