The Next Generation Of Malls: Westfield Shoppingtowns

David, please share with our readers background on Westfield's portfolio in Southern California as well as where you see retail development opportunities in the near future.

Westfield is a global shopping center developer/owner/operator with 116 centers around the world, 66 of which are located in the United States. We have 25 centers in the state of California comprising over 23 million square feet of retail properties and accounting for over $6 billion in retail sales. In the Los Angeles region, we own five centers, which account for approximately four million square feet and provide almost $1 billion of sales in the city of Los Angeles.

Century City is the site of one your investment; could you describe why and what's envisioned by Westfield and by when.

We acquired Century City about a year-and-a-half ago, which is a center that has not had appreciable reinvestment since the mid-80s when the initial AMC movie theatre and the marketplace development was put in place. We're planning a complete renovation of the center, including creating a new AMC theatre. In addition, we will add approximately 70,000 square feet of new shops, primarily through the conversion of the old theatre box into second level retail. Construction has commenced and will be complete in Fall 2006.

David, if our readers were in attendance at a 2004 shopping center conference, what would be the take away? How different from the present Mall is/will be the next generation retail center?

I think the term "evolution" is the key issue in any shopping center ownership or redevelopment scenario. Retail is an ever-evolving concept. Today's consumers and retailers change, and those owner/operators who are prepared to reinvest can maintain the quality and significance of their shopping centers.

As we look at our properties today and continue to look at the retail environment, those planners, owners and retailers who are looking in the rearview mirror for ideas or trends are, frankly, an accident waiting to happen. If you look back over the last 15 years in terms of regional malls, the consolidation of the department store industry has been significant. Fifteen years ago, we had names like Broadway, Bullocks, Robinsons, and Montgomery Wards-all companies that do not exist today. Lifestyle tenants-such as bookstores, theaters, and restaurants-are becoming greater components of regional shopping centers due to the change in consumer taste and spending habits. As we develop our shopping centers, these are the elements we seek to integrate.

AOL-Time Warner Center has opened in Manhattan and redevelopment is being proposed in the core of downtown- Grand Avenue. Does the AOL-Time Warner Center provide a model for downtown Los Angeles?

The AOL-Time Warner Center is a little unique in that Manhattan really has never had an enclosed regional mall or shopping district. The Center features a Whole Foods market in the basement, which is a perfect example of things that we see occurring on the retail landscape. If we look at customers today, people are looking for convenience. Bringing food into shopping centers is an important and emerging trend in our business. If you look across the world, whether it's the hypermarkets of Europe, of South America or Australia, food retailing inside shopping centers mixed with discount retailers and full priced fashion is commonplace.

That's a perfect segue to a question about municipal ordinances, like one the City of L.A. is considering, aimed at limiting the ability of entities like Wal-Mart to create super centers within city boundaries. What's Westfield's take on such ordinances, most specifically, Los Angeles'?

Based on what we've seen, the L.A. ordinance is directed towards limitations on nontaxable merchandise. At many of many our centers, nontaxable merchandise is becoming a greater component of contemporary retailers' formats. Target has just opened a brand new store at La Brea and Santa Monica, which features a large section devoted to nontaxable goods. Under the ordinance as it's currently being rumored to be drafted, this would be a non-allowable use.

Sears believes their future is in a new concept called Sears Grand, which has up to 20% of the floor area devoted to nontaxable items. As we look at some of the reuse of existing retail assets that are in a community, such as all the Montgomery Wards that went bankrupt, many are being reconstituted as retail with nontaxable goods. While the city may have certain reasons-and there may be some valid reasons to support their ordinance-the draft language in certain situations will have overreaching, negative unintended consequences.

Let's take a moment to talk about the future place/role of supermarkets. One thinks of California and one thinks of supermarkets. How are they likely to evolve as a retail outlet over the next 20 years?

I think supermarkets are going to continue to have a major role in our communities. Convenience is still a major aspect of most grocery shopping today. We have had very little success integrating full service grocery stores into our centers, primarily from the operators' concerns over convenience. On the other hand, some retailers, such as Target and Sears, view integrating food retail into their nontraditional formats as a convenience for their customers. If you look at the great concepts like Harrod's Food Hall in London or David Jones in Australia, there are department stores in other parts of the world providing that opportunity.

Let's turn our attention to Westfield's other properties in the basin, specifically, Topanga Plaza and the Promenade. Your plans there?

We have been working on a major expansion of Topanga, and we would like to start construction later this year. We acquired the Montgomery Wards store out of its bankruptcy, and that has provided us the opportunity for an expansion to the east of the existing center along Owensmouth Street.

We recently went through an expansion and renovation of the Promenade. For right now, the property is functioning quite well as an entertainment and restaurant facility. We have a property in between those two malls on which we would like to begin some redevelopment efforts as well and those are in the early planning stages. All told, between the three properties, we have a very large investment in the Valley. So, as we begin to look at ordinances that restrict land-uses, we have to be very concerned about how they may be applicable to our properties.

Share your take on the investment opportunities available in Southern California for Westfield?

If you look at the demographics and all of the statistics that demographers are putting forth in terms of growth projections for the Southern California area, we see our investment in all of Southern California as very strong. As population growth continues, retail needs will continue to grow. We believe that proper redevelopment of the centers can meet those needs without increasing the sprawl or the urban planning issues related to new development outside of these core retail districts.

Your comments lead to a question about the role of city planning in the decision making both by host communities and by developers like Westfield. Are there sufficient public incentives in our metro areas to encourage the building of in-fill, mixed-use retail/residential centers? Are there too many disincentives?

Well, certain properties have been developed along those lines. If you look at the several block area around Century City between the high-density residential, high-rise office and the retail component, it's about as mixed-use as any property in Los Angeles. Our Century City property provides a needed component to that high-density area of Century City. So, we don't believe every property has to have multiple uses on it in order to function as a component of a mixed-use development. Certain other suburban properties have incorporated housing in a mixed-use redevelopment, such as the Paseo Colorado in Pasadena, and it's quite successful. You have to take these things on a case-by-case basis.

Lastly, comment for us on the present capacity of cities to positively partner with developers like Westfield to produce retail developments that are sited well, designed appropriately for the community, and profitable? With budget constraints stripping planning agencies of talent, is the public sector capable of adding to the planning process- of being a constructive partner with the private sector?

I think so. As we go back to redevelop these centers, they have the infrastructure for many of the needs of these retail facilities. But it takes a certain amount of leadership to be able to marshal a project through the approval process, especially in light of the opposition from neighborhood groups that may not want change in any form or fashion. There's a delicate balance between proper change, responsible change and good design, as well as a recognition that change is inevitable. And, in a lot of instances failure to change creates the blight that eventually requires more complex, and more costly, applications of redevelopment and land-use policies.