John Bucksbaum on Brazilian investment opportunities

By Marilyn Lewis

When General Growth Properties (NYSE: GGP) made the decision to expand internationally, why did you choose Brazil as the first location?
In 1985, I was invited to participate in Brazil’s first shopping center convention where I met with various local companies in the industry. I made subsequent return trips and met several owners and developers across the country.

When General Growth was considering international expansion, I immediately looked at Brazil because of the relationships we had built there over the years. It is very difficult to have successful international activity without strong local partners.

Have you encountered any obstacles in the three years that GGP has been in Brazil?
It has gone very smoothly. We recognize that it will not always be so easy in Brazil. There’s more volatility to the economy than we might experience here in the United States. However, today it’s a more stable economy than in the past.

What type of returns have you seen on your Brazilian investments?
We first invested with the Nacional Iguatemi Group in 2004. We became partners in the company’s two existing centers, which totaled 1.1 million square feet. We held varying percentages of ownership in each. Next, we made a 50 percent investment in their management company, Nacional Iguatemi Administradora, which not only manages their own properties but also manages centers for others.

General Growth formed a Brazilian joint venture with Nacional Iguatemi in August 2004 that we named Aliansce. It is a 50/50 venture that includes ownership interests in eight shopping centers. The partnership has assets of approximately $120 million and gross leasable area of 2.5 million square feet.

We liked the opportunities for new development that Nacional Iguatemi had in its portfolio. They were interested in General Growth’s capital and expertise, because we bring ideas and different styles to Brazil.

How do U.S. mall trends, particularly densification—the mixing of retail with hospitality, office and residential tenants—play out in Brazil?
Right now, those are things that are not anticipated in Brazil. That’s certainly not to say that they might not be in the future. The emphasis is more on accounting, construction, leasing, management and marketing.

How do malls across the world compare to one another?
Malls are very similar around the world. However, there are variations. For example, in different parts of the world, grocery stores are in some malls.

In Brazil, the mall is the center of the community. There is phenomenal traffic going into these centers, with high sales per square foot. Some of the country’s shopping centers are in suburban locations, but most are in the densely populated city centers. Additionally, Brazil’s mall industry is very much family owned, as it was in the U.S. in the pre-REIT era and there is consolidation in the industry much like the last 12 years in the United States.

John Bucksbaum has served as a director of the General Growth Properties since 1992, and has served as CEO since July 1999. Additionally, he is a member of the board of trustees and the Executive Committee of the International Council of Shopping Centers and has been named as the Chairman of the ICSC for the 2006–2007 term.

He is a trustee of the University of California Real Estate Center, the University of Chicago Hospitals, the Urban Land Institute and the National Association of Real Estate Investment Trusts and is a member of the National Realty Roundtable.