Shopping Centers Today -> March 2004
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AND SO, ON TO THE NEXT 50 YEARS ...

John Bucksbaum (left) with his father, Matthew, at General Growth’s 2003 management conference in Las Vegas.
When brothers Matthew and Martin Bucksbaum stumbled into the nascent shopping center business 50 years ago, they could hardly have imagined that they would come to preside over the industry’s second-largest company, with $6 billion in market capitalization, 149 million square feet of retail space across 41 states and 4,000 employees.

But though the company is vastly larger than it was even a decade ago, observers say its corporate culture, known for a high level of integrity and strong employee and management ownership, has changed little since the early days. Matthew Bucksbaum is chairman, and his son, John, who grew up in the business, is CEO. Martin was chairman until his death in 1995.

In a conversation with SCT, Matthew and John Bucksbaum talked about issues ranging from the shape and future prospects of the industry to the state of the economy.

What are the biggest challenges facing the industry over the next five to 10 years?

J.B.: Overbuilding of retail properties in general. We’ve seen the problems that that has created in the past.

M.B.: Globalization is also a challenge. Where are the jobs going to come from in this country? I don’t know. We are seeing some of the worst of globalization at the present time. Hopefully, we will be able to adjust, but the adjustment process will probably be very painful.

Department stores have been on the decline in recent years. How has that affected traffic at malls? What role will department stores play at malls in 20 years?

J.B.: The department store industry has had its share of difficulty. But when I look at our malls, the performance of most of the department stores in our centers is really quite good. A lot of the problems tend to be in stores that are located outside the mall — in freestanding, older downtown locations. They continue to be important to mall operators and owners, and I don’t believe they are going away.

M.B.: They have to take a look at who their customers are today. The consumer’s expenditures are going to different categories, like electronics and home-related goods, and a lot of the department stores have failed to accommodate the consumer in those areas. Low interest rates are causing a huge expansion in housing. Yet many of the department stores, which at one time were the suppliers of the furniture and household goods, have gone out of that business. It’s a matter of them remerchandising and appropriating space better. Who needs a new sweater today? I think they could quit selling sweaters, and everybody [would] be kept warm for many years to come.

How is General Growth, one of the first companies in the industry to bring Target to its malls, dealing with the growing threat posed by Wal-Mart?

J.B.: I wish that we could have more Wal-Marts be part of our centers. Unfortunately, we don’t, because they move ahead and build their own store and open before we were able to turn a spade of dirt. They will be a formidable force in retail for quite some time. We have to be a bit like the neighborhood lumber store when Home Depot came into the market. There are certain things Wal-Mart can’t offer to people, whether it is the sit-down dining experience, movie theaters or Gap or Hot Topic.

Is the economy turning a corner?

M.B.: Sales are holding up, but I don’t see where the jobs are coming from. We have to have people working if we are going to continue to prosper. I just came back from China, and it is almost scary to see what that country is doing in terms of the jobs they are creating. They have competitive advantage in cost. So I’m not really optimistic that we are turning the corner. It will take some great leadership, and I don’t know if we have that.

J.B.: I’ve been quite pessimistic since mid-year 2000. I’ve been surprised during the last 36 to 40 months that we have been able to maintain the level of business that we have and that the consumer has been able to spend in the manner they have.

Do you see more opportunity in the United States for mall development?

J.B.: There is still too much retail being built, whether it is enclosed or not. The most exciting area is the redevelopment and expansion of existing centers.

Both of you have a significant stake in the company. Why is that important?

J.B.: We are not making decisions with anyone else’s money that we wouldn’t make with our own. In order for us to profit, everyone else has to profit as well. Neither Matthew nor I take options and have relatively low salaries. We’d rather see the success go to shareholders and employees. We’ll get ours as well, but we don’t need to pile on.

We’ve seen quite a bit of corporate malfeasance recently. Is the worst over?

J.B.: I’m afraid we’ve only seen the beginning. I’m grateful that I’ve seen it done right, having had the great fortune of watching Matthew and Martin for close to 50 years.

Are you doing anything different at the corporate level with regard to standards governing conduct and ethics?

J.B.: With regard to the Sarbanes-Oxley Act of 2002, there are certain rules one has to follow and certain things that you can implement over time. A lot of companies have chosen to accelerate that and we are one of them. The CEO and the CFO are required to sign statements each quarter attesting to the validity of the numbers and the like. We have extended the requirement well down the line within this company. It’s a great system of checks and balances, and one that I would hope would keep us forever out of trouble.

— AR

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