Published November 3, 2004 in Los Angeles Times on front page of Business News

Westfield Spening to Let Visitors Shop in 'Hy-Style'
By Roger Vincent, Times Staff Writer

When shoppers want to spruce up their homes, they head to the mall for a pick-me-up: a lamp for the living room, towels for the bathroom, a new set of dishes.

Sometimes, it's the mall itself that needs a little sprucing — to keep the shoppers shopping. That's the logic behind Westfield Group's plan to spend as much as $6 billion in the next five years upgrading many of the 124 shopping centers in its portfolio.

Having gone on a buying binge of its own — it has more than doubled its U.S. collection since 1994 by acquiring 40 malls — the Sydney, Australia-based company will devote more than $1 billion to renovating seven of the 26 malls it owns in California.

Westfield is hoping to win over shoppers being lured by outdoor "lifestyle" malls that aim to resemble small-town downtowns, such as the Grove in the Fairfax District of Los Angeles.

"The lifestyle guys are killing us," said Richard Green, Westfield's vice chairman of operations.

Westfield's response is what it calls Hy-Style (the "Hy" is for hybrid), a part mall, part lifestyle center that incorporates many elements of the latter, such as entertainment businesses, fine dining and concierges.

All of those are part of the just-completed $113-million expansion of Westfield Shoppingtown Santa Anita in Arcadia, to which the company added an AMC movie theater complex, 30 new stores and five restaurants. New tenants include the first California restaurant of Portland, Ore.-based McGrath's Fish House and Borders Books & Music Cafe, along with Sport Chalet, Bacchus Wine & Champagne Bistro and Dave & Busters, a game emporium and restaurant.

The expansion also brought an outdoor restaurant plaza, a food court in a two-story atrium, a new retail wing and a $500,000 double-decker Victorian-style merry-go-round with hand-painted circus animals. In addition, there's valet parking, reserved parking for expectant mothers and a spacious family restroom with pint-size potties, couches, a large television and private nursing areas with diaper changing facilities and bottle warmers.

"They really have outdone themselves, especially in the nursery bathrooms," said Cindy Bowen of Monrovia, who says she visits the mall about four times a week with her grandchildren. "What an improvement for the community."

The concierge, a popular feature at the Grove, offers free services that include making dinner reservations and carrying bags for overloaded shoppers. In keeping with Westfield's emphasis on courting families, concierges also hand out emergency diapers, baby wipes and lip balm.

Elsewhere in California, the company is putting $410 million into an upgrade of Westfield San Francisco Centre, which will incorporate the adjacent historic Emporium building and add a Bloomingdales, and more than $230 million into expanding Westfield Shoppingtown Topanga in Canoga Park, where the plan is to relocate Nordstrom and two anchor retailers and 100 specialty stores.

At Westfield Shoppingtown Century City, construction underway includes an enlarged AMC movie theater, a bigger Gelson's market and a new food court. And in El Cajon, Westfield Shoppingtown Parkway now boasts a Wal-Mart and 10 other new stores. It's Wal-Mart's first newly built store in a regional mall.

The inclusion of Wal-Mart and other discount retailers in shopping malls is part of a shift in the industry. Just a few years ago, mall owners interested in creating a top-tier property wouldn't have dreamed of mixing upscale tenants with stores that sold low-priced goods. But after more than a decade of consolidation in the department store industry, mall landlords have been forced to look for alternatives to fill anchor spaces.

"We want to be at a shopping center that is a compelling place to shop," said Nordstrom spokeswoman Deniz Anders. Seattle-based Nordstrom will share a mall with Target for the first time in 2006, when both stores are completed at Irvine Spectrum Center, she said.

Westfield isn't alone in its push to give its properties face-lifts.

"Our experience is that a remodel will attract more customers and typically attracts better retailers," Randy Brant, a senior vice president of Macerich Co., owner of the Westside Pavilion and Santa Monica Place, both of which have overhauls planned.

Shoppers will abandon malls if they don't see improvements every seven to 10 years, said Peter Lowy, managing director of Westfield.

"Our philosophy is that we buy malls from other companies and then bring our skills to bear reinvesting capital, expanding and redeveloping them," Lowy said.

Westfield was founded in 1958 by Lowy's father, Frank, and his partner, John Saunders, a pair of delicatessen operators who wanted to build their own store. They quickly expanded into other retail development and were first listed on the Australian stock exchange in 1960. By this year, Westfield had evolved into three public companies that held and managed assets in Australia, New Zealand, Britain and the United States.

Those entities were combined in July to form Westfield Group, which Frank Lowy said was necessary to give the company the size and financial heft to grow in the United States and Europe. (Costs of the transaction left the combined companies with a fiscal 2004 loss of $196.4 million Australian dollars ($135.6 million) on sales of $1.25 billion ($863 million)

"Westfield is one of the bluest of blue-chip companies in Australia," said analyst Brian Cahill of Moody's Investors Service in Sydney. "They have a long track record of delivering on their core business strategies."

U.S. analysts don't follow the company regularly, but real estate investment trust specialist Greg Andrews of Green Street Advisors Inc. said Westfield's willingness to spend millions of dollars to improve its properties in this country "shows they have a lot of confidence in their ability to generate strong returns from those kind of investments."

The upgrades also could be a bit of an inoculation against a competing mall planned by Los Angeles developer Rick Caruso, builder of the Grove. In May, Caruso announced plans to build a $400-million "lifestyle center" near the entrance to the Santa Anita Park racetrack, a short hike from Westfield's property.

Caruso said he hoped to have city approvals by December and to start construction next year. He says his project won't hurt Westfield.

"Malls will always have more stores than outdoor centers have, so there will always be a need for the mall," he said. "An outdoor center adjacent to the mall only helps the mall in terms of traffic."

Westfield is reserving judgment but may end up opposing Caruso's proposal. "We haven't seen his plan yet," Green said.

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(BEGIN TEXT OF INFOBOX)

Malls around the world

• Company: Westfield

• Founded: 1958

• Headquarters: Sydney, Australia

• Operations: World's largest operator of shopping centers with 124 malls in Australia, New Zealand, Britain, the United States

• Ownership: Publicly traded in Australia, controlled by the Lowy family

• Southland holdings: Shopping centers in Arcadia, Canoga Park, Carlsbad, Century City, Culver City, Eagle Rock,

El Cajon, Escondido, National City, Palm Desert, San Diego (four), Sherman Oaks, West Covina (two), Woodland Hills

• Financials : Lost $196.4 million in Australian dollars ($135.6 million) on sales of $1.25 billion ($863 million) in fiscal 2004

Source: Westfield company reports