Executive Summary
Centro Comercial Chipichape is a popular shopping mall in Cali, Colombia receiving on average more than 1.3 million monthly visitors to shop in the 410 stores comprising 52k m² (i.e., 560k ft²) of gross leasable area (“GLA”).
The mall’s interesting history is as a former strategic train station for the Pacific Railway of Colombia which was owned by Swiss-based Impala Terminals.
The city of Cali is the third largest economy in Colombia comprising around 9.8% (i.e., $30 billion) of the country’s economy. Its 2.26 million inhabitants have poverty rates below the national average, but higher than the larger economic engines of Bogota and Medellin, with 60% of the population living off less than $165 per month.
Cali contains 14 shopping centers totaling 427,047 m² (i.e., 4.6 million ft²) of GLA. This represents a saturation of 188 m² per 1000 inhabitants which is the lowest of the country’s four major cities.
A significant threat on the horizon for Chipichape is the $140 million Mallplaza Cali expected to open in 2024 and be anchored by IKEA.
Chipichape, like the majority (i.e., 85%) of shopping malls in Cali, is owned by multiple owners through a horizontal ownership structure.
Introduction to Chipichape
Centro Comercial Chipichape is a popular shopping mall in Cali, Colombia receiving on average more than 1.3 million monthly visitors to shop in the 410 stores comprising 52k m² (i.e., 560k ft²) of gross leasable area (“GLA”). The mall has 1,700 parking spaces giving it a parking ratio of 3.27 per 100 m² GLA (i.e., 3.04 per 1000 ft² GLA). The relatively low parking ratio is supported by the existence of adequate motorcycle and bicycle parking, and that many shoppers arrive by taxi or public transportation. The mall also has 16 escalators, 48 food brands, 54 kiosks, and a ten-screen Multiplex Cinema.
Figure 1: Ariel View of Chipichape Mall
The mall’s interesting history is as a former strategic train station for the Pacific Railway of Colombia which was owned by Swiss-based Impala Terminals. The Chipichape terminal was built in 1836 to be a major repair depot, and before it was shuttered was able to repair 85% of parts of the serviced trains. In 1992, the Central Mortgage Bank held title and sold the parcel with structures to a group of Colombian investors and industrialists for purposes of constructing a modern shopping mall. The sale was controversial at the time as the purchase price (i.e., COP 11 billion) was nearly one fifth of the land’s value.
Figure 2: Ariel View of the Chipichape Train Station
The mall opened to the public on November 17, 1995. Some of the original buildings still stand and are incorporated into the architectural elements of the shopping mall. There is a train car in the food court, and for the children a train ride which snakes through the busy corridors.
Figure 3: Train Design Element in the Chipichape Food Court
The city of Cali is the third largest economy in Colombia comprising around 9.8% (i.e., $30 billion) of the country’s economy. Its 2.26 million inhabitants have poverty rates below the national average, but higher than the larger economic engines of Bogota and Medellin, with 60% of the population living off less than $165 per month. At the same time, it is the city with the highest number of high-income and wealthy families in Colombia representing 7% of the total. The city contains 14 shopping centers totaling 427,047 m² (i.e., 4.6 million ft²) of GLA. This represents a saturation of 188 m² per 1000 inhabitants which is the lowest of the country’s four major cities.
Development History
When the mall opened in 1995 it had 150 stores and was anchored by Almacenes Super Ley, a popular Colombian supermarket chain acquired by Exito in 2001. One year later, in 1996, the mall was expanded to 250 stores and the parking spaces increased to 1,950 from 1,000. Hollywood Casino was added in 2004.
Figure 4: Hollywood Casino Storefront
A major series of expansion works occurred from 2006 to 2016 including the construction of the La Bodega Ocho section of the mall. These works added a significant number of new shops (i.e., 132 shops and 600 parking spaces) and GLA (e.g., Gym Bodytech, American Eagle, Ktronix, gourmet zone of the food court) and interior improvements including new water features. Hotel Spiwak, a 267 room hotel with events space, was opened in 2009 on land contributed by the mall in exchange for the hotel developer’s delivery of a commensurate amount of new retail GLA and common areas connecting the two projects.
Figure 5: Hotel Spiwak
The Future: Opportunities and Threats
Footfall to the mall has recovered to pre-lockdown levels. 2022 was a successful year for the mall resulting in the addition of twenty-five brands including a medical services company, several popular restaurants, Dkny, Adidas, Toy Smart, and a trampoline entertainment offering. The mall has a waitlist and not enough supply to fill the demand.
The construction of new GLA is actively being explored through two projects. One is to complete a ten story building which began in 2017, and was halted due to the lockdowns with only four floors being completed. The additional GLA will likely consist of offices, but housing for the elderly is also being considered along with other uses.
The second project is to bulk up the mall with more GLA by increasing efficiencies and developing presently undeveloped parcels. Five architecture firms are working on designs and the aim is to add 15k m² of retail GLA, parking, and common areas. Once the board of directors approve the designs, developers will be approached to carry out and fund the works.
A significant threat on the horizon for Chipichape is the $140 million Mallplaza Cali expected to open in 2024 and be anchored by IKEA. Mallplaza is a major Chilean mall owner and developer with seventeen shopping malls in Chile, and four each in Colombia and Peru. The developer first brought IKEA to Chile and is now bringing two to Colombia, one each to Bogota and Cali. Mallplaza Cali will have 67k m² of GLA with IKEA comprising 15k m².
Figure 6: Mallplaza Cali Rendering
Although the malls are far apart, and in different trading catchments, the impact on Chipichape is likely to be negative. The major problem is the Granada and San Antonio catchment areas are high-end and are virtually equidistant to Chipichape and Mallplaza Cali. IKEA will be an attractive draw card for the new mall, and any traffic Chipichape hopes to draw from the south must first drive by Mallplaza Cali and continue for another 20 minutes or more to reach Chipichape.
Figure 7: Position of Chipichape and Mallplaza Cali to Valuable Trading Areas
Horizontal Ownership Discussion
Chipichape, like the majority (i.e., 85%) of shopping malls in Cali, is owned by multiple owners through a horizontal ownership structure. This structure derives its name from the Horizontal Property Regulations in the Colombian Civil Code. It isn’t that the owners own shares in the holding company which holds and controls the mall, instead each owner owns individual shops or sections of the mall. These situations occur due to fundraising challenges with debt (e.g., mortgage, construction, permanent) and equity at the time of funding for new development. In these cases, it’s not uncommon for the developer to presale the individual shops and then receive short-term funding to be repaid shortly after the mall is completed with proceeds from the shop sales. This funding model is also common in multi-family and hospitality developments in Colombia and throughout Latin America.
In the case of Chipichape, the mall has around 300 owners who own individual shops and are responsible for their upkeep and leasing. The owners pay fees to the mall trust for delivery of maintenance, security, utilities and similar services. The fees and rights of each owner are generally proportional to the size of the shops owned, but not in every case. The larger owners (e.g., anchors) are able to have their will expressed by virtue of their relatively dominant ownership percentage of the mall’s GLA, and also favorable terms negotiated for certain owners when the horizontal structure was created.
There are several negative implications for Chipichape from this ownership scheme. Center management would likely find more cooperation from the large owners in times of distress when hard work is required, and less cooperation in boom times. Moving shops and tenants around for the betterment of the mall could be challenging and require each affected owner’s consent. Since the mall doesn’t have leases with the tenants, collecting sales data from each tenant can’t be compelled by a lease as is normally the case where the tenant relationship is with the mall. Retaining top management talent is confounded by the reality that talented people tend to avoid roles which require navigating complicated bureaucracies in order for decisions to be made or approved. The new IKEA-anchored Mallplaza Cali will not have these constraints as it will be fully owned, controlled and managed by the developer. Mallplaza is a sophisticated mall owner with deep experiences and the ability to make decisions quickly and impartially will provide it a strategic competitive advantage.
One way Chipichape might remove some of the issues associated with horizontal ownership is to unify the titles. This would require a savvy, well-funded and patient shopping mall investor to align with Bancolombia, the largest owner at Chipichape owning 12% of the GLA, and the mall trust which owns an additional 10%. That consortium may have success in compelling the other owners to sell a sufficient number of shops in order to gain a supermajority ownership and control interest.
Modernly in Colombia, horizontal ownership schemes are structured to avoid many of the aforementioned downsides through the use of trusts and carefully worded mandatory management agreements. The Spiwak Hotel connected to Chipichape was structured in such a manner whereby the developer sold each hotel room to mostly retail investors, with the sales agreement containing a condition that a certain independent management company be appointed by each of the owners. Certain developers of commercial properties in Medellin have used trust structures to achieve similar outcomes.
