Venerable mall owner continues its aggressive acquisition and redevelopment strategy.

By Upendra Mishra

After gobbling up nearly two dozen shopping centers in less than a year, Westfield America, a subsidiary of Westfield America Trust, shows no signs of abating its aggressive acquisition strategy.

The Westfield America portfolio, which included just seven U.S. malls in 1993, now consists of 61 centers totaling 62 million sq. ft. -- much of which was acquired within the past year. For the past two years, Westfield America finished in the top 5 of our annual Top Shopping Center Owners survey.

"There are a number of properties that will become available in the next few years that we will be interested in purchasing," says Peter Lowy, CEO of Westfield America. Lowy declined to name potential targets, but said his firm usually invests in markets that it's already in, or scouts acquisition targets with substantial redevelopment potential.

The Los Angeles-based firm isn't afraid to spend big bucks. For $2.5 billion, Westfield America recently completed the acquisition of 14 shopping centers from the Dutch property owner Rodamco North America. The deal was part of Rodamco's disposition of 35 centers in a joint sale to Westfield, Simon Property Group and The Rouse Co. in May 2002. In addition, Westfield purchased nine centers from Cleveland-based Richard E. Jacobs Group for $756 million in April 2002.

According to James Koury, retail investment specialist and senior vice president at Boston-based real estate services firm Spaulding & Slye, Westfield's acquisition strategy is right on target. "It does not surprise me if they're aggressively pursuing quality shopping centers," Koury said. "Retail real estate is counter-cyclical to the office market, and the office market is currently down."

Also central to Westfield America's growth in the United States has been its key redevelopment initiatives. The firm currently is spending about $500 million on the redevelopment of several centers, and plans to increase that amount as it revamps its new acquisitions. Westfield America plans to spend about $1.2 billion upgrading the Rodamco portfolio and about $300 million on the Jacobs portfolio. The firm typically re-invests about 50% of the acquisition cost in the renovation of its properties, Lowy says.

In addition to acquiring properties with redevelopment potential, Westfield America aims to cluster its malls in key markets, all of which are branded under the "Westfield Shoppingtown" name. Westfield America now owns 11 centers in Los Angeles, eight in San Diego, six in St. Louis and four in Chicago. According to Lowy, this strategy provides greater branding and leasing opportunities and helps balance the portfolio geographically.

Westfield America also has focused on diversifying its portfolio globally. Its acquisition of the U.S. retail portfolio of Rodamco illustrates the expanding nature of retail property ownership, Lowy says. "It's the truly international nature of mall business. Here is an Australian company (Westfield), doing a transaction in Holland with a Dutch company (Rodamco), which owns malls in the United States."