NEW YORK — In the time it takes most developers to build a single mall, the Westfield Group will invest roughly $10 billion in redevelopment and expansion of its existing global portfolio.
The Sydney, Australia, company, which has interests in 128 shopping centers in Australia, New Zealand, the U.K. and the U.S., has a singular goal: to penetrate mature markets with clusters of shopping centers and continue reinvesting in them to make them as profitable and relevant as possible. It plans to spend $1.5 billion every year for the next three years in the U.S. alone, and has $5 billion worth of redevelopment now under construction around the globe.
“This is a company that understands that what’s important is not just buying properties and building, but building profitably,” said James Ratner, executive vice president and director of Forest City Enterprises, which is in a joint venture with Westfield on a major project in San Francisco. “And they have a great portfolio. They have intensified the uses and densities of their properties by redeveloping all over the country. I’m sure they will continue to be one of the major forces in the U.S. market.”
To an uneducated eye, the numbers might seem astounding, given that no new properties are being added to the portfolio. And though Westfield traditionally has focused on redevelopment, it hasn’t always avoided big portfolio acquisitions. In 1994, the company spent $1 billion on nearly 20 properties when it acquired the CenterMark retail portfolio. In 1998, its big-ticket purchase was a dozen West Coast malls from Trizec Hahn for $1.4 billion. In 2002, it closed on the nearly billion-dollar Rodamco North America retail portfolio, and just a year later joined forces with another powerful real estate investment trust, Simon Property Group, in an unsuccessful bid to take over Taubman Centers.
But these days, Westfield is concentrating on reinvesting in and rejuvenating its existing properties as the most logical — and most profitable — way to grow. Despite two significant transactions in the past few years — General Growth Properties nabbed the $12 billion Rouse Co. and the Mills Corp. acquired the $1.3 billion General Motors Pension Trust group of malls, Westfield avoided the investment frenzy.
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But even without any recent major mergers or acquisitions, Westfield has built a global portfolio worth more than $38 billion. Westfield is considered the world’s largest retail property group by equity market capitalization, and it is the largest Australian property group listed on the Australian Stock Exchange. Reinvesting, not buying, is clearly working.
“We’ve passed on a lot of the major assets sold in the past few years,” said Peter Lowy, group managing director of the company. “We didn’t believe we could get the returns we needed, and we’d rather spend our cash on our own properties.”
And Westfield does spend, with innovative, and profitable, results. Stateside, it was the first mall developer to include atypical anchors in traditional regional malls, developing the first bi-level Wal-Mart for a mall, and it was the first developer to put a new Target and a Neiman Marcus in the same property.
Other design concepts soon will roll out to more of its malls — at Westfield Century City, the company revamped the traditional mall food court concept, and has replaced the traditional vendor-carryout system with what it calls a “dining terrace,” a restaurant-style atmosphere with china, silverware and table service from upscale food merchants. “This is the next level up. This is what food service should be,” said Lowy.
In downtown San Francisco, the company is flexing its design muscle at Westfield San Francisco Centre, an urban shopping center it is redeveloping in a joint venture with Forest City. There it is restoring a more than century-old historic dome, adding a gourmet supermarket to the center and developing directly on top of a train station.
“Westfield is an extremely inventive, creative and organized company,” said Forest City’s Ratner. “I think they’ve been an incredibly positive force for the shopping center industry in this country, and they’ve brought ideas that have proven to be very, very effective in the market.”
Such U.S. projects as Westfield Century City and Westfield San Francisco Centre are using the design and retailing principles the company is integrating into projects in Europe and Australia. For example, Westfield is building the 1.2-million-square-foot Westfield White City in London, a $2.7 billion development slated to open in mid-2008. The center will feature Marks & Spencer, a department store company that also operates supermarkets, as one of its anchors, in addition to restaurants, theaters and public space.
An almost $3 billion price tag might seem high for a single development, but given Westfield’s model of redeveloping in mature markets, projects such as White City can command the company’s attention — and dollars — without harming other ventures.
“We’re not spending a lot of time and effort in looking at emerging markets,” said Lowy. “A company, no matter how large it is, needs to make sure it focuses its resources where it’s going to benefit the company the most. We’re very conscious of our human resources and where we’re concentrating our capital. So if we’re building a $2.7 billion mall, we’re not going to have our best guys running around China trying to find the next new trend. We are focusing on issues at hand.”