PRINT THIS STORY:

CHANGE TEXT SIZE:

THE FAMILY WAY

In Latin America, mall development is the latest calling for evolving family enterprises

By María Bird Picó

Real estate development is very much a family affair in Latin America. Many prominent mall development firms are owned by dynasties, but most of these got their start in other lines of business, with development being a relatively late calling.

There is a certain kind of logic to the dominance of such families in this industry. They own strategic land and, in countries where commercial loans are expensive and difficult to obtain, are among the few with the resources to build malls. Furthermore, mall development has given them a way to diversify.

“Many of our mall developers are family-owned companies that have been forced to evolve,” said Arnold Moreno, president of Cámara Venezolana de Centros Comerciales, Comerciantes y Afines (Chamber of Shopping Centers, Retailers and Affiliates). “It’s the formula to remain alive in countries susceptible to the fluctuations of the currency and economic contractions that make certain types of business burdensome.”

The Latin American shopping center industry is particularly attractive now because of the rapid growth of the middle class and its consumption levels. The industry is also a good hedge against economic downturns, mall executives say, because people keep shopping thanks to burgeoning underground economies.

Prominent families with investments in shopping centers — and a lot besides — in the region include:

The Mexican Cababie family, owners of the Mexico City-based construction giant Gicsa

The Poma family’s Grupo Roble, Central America’s dominant mall developer and car dealership operator

The Fonalledas family in Puerto Rico, which in 1968 opened one of Latin America’s first malls, Plaza Las Américas, on its dairy farm

The Brescia and Wiese families, both of which have branched out into retail in their native Peru

The Jereissati family in Brazil, which owns several shopping centers, including a stake in Latin America’s ritziest mall, Iguatemi São Paulo, and also has investments in telecommunications and other sectors

One of Chile’s leading family wineries, the 149-year-old Cousiño Macul Winery, owned by the Cousiño family, which is developing the 642-acre Parque Cousiño Macul, a mixed-use project containing 8,000 housing units and Chile’s second lifestyle center, Paseo Quilín.

The Deller family, which built Ecuador’s first shopping center, Quicentro, in the capital city of Quito. It also built Centro Comercial San Marino, that country’s first lifestyle center. Current patriarch Alberto Deller established the family fortune by founding Delltex Industrial, which is still a major exporter of blankets to the U.S.

A housing boom in most of the region is accelerating the construction of shopping centers, and often the same companies that build the houses also build the malls. That is the case with Mexico City-based Grupo Frisa, which started building houses half a century ago, says Edgar Rodríguez, director of operations for Frisa’s shopping center division.

Nearly 30 years ago Grupo Frisa built its first shopping center, the 28,322-square-meter Multiplaza Valle Dorado, in the Arboleda section of Mexico City. Since then, 16 shopping centers have followed in cities like Acapulco, Cancún and Tijuana, and one each is being built in Oaxaca and Guadalajara. The Oaxaca mall, the 8,700-square-meter Multiplaza, opened in February.

Though most of the malls have been erected on land long held by the Rivera Torres family (the principal shareholders of Grupo Frisa), those in Oaxaca and Guadalajara are on land bought specifically for the retail properties. That is one more sign that the company has become a full-fledged mall developer and operator, says Rodríguez. He says shopping centers ring up about a third of Grupo Frisa’s annual revenues, though he declines to give figures.

“Our goal is to continue to have a strong growth in this sector,” said Rodríguez. Like other developers, the group says it is looking for more opportunities outside Mexico City.

The springboard for the Wiese family was the financial services industry. The family invests in the banking, pensions and insurance sectors. The Wieses also had a disused 140,000-square-meter grain warehouse in the north of Lima. In 2000 the family’s company, Inmuebles Panamericana, commissioned a study to evaluate options for the land and saw there was an opportunity for a shopping center in the area, which is outside Lima’s traditional retail sections. North Lima is home to 2 million people, a quarter of the city’s total population.

The $25 million Mega Plaza opened in 2002 with 38,000 square meters of gross leasable area. The mall, which has since grown by an additional 10,000 square meters, was expected to achieve some $170 million in sales last year, according to Percy Vigil, general manager of Mega Plaza. This year the owners plan to add an additional 12,000 square meters.

“The mall has had a major impact not only on the province but also on our company,” said Vigil. “The grain business was once a good market, but it is too dependent on outside factors, such as the fluctuations of the market.”

For the development and management of the mall, the company has been advised by Victor & Schellenberger, a Rio de Janeiro-based shopping center management and consulting firm.

The family is currently focusing on its relatively new mall, but it has not ruled out building others, says Vigil.

Peru’s Brachi family, which has been involved in mining and the development of offices and housing through its Administración de Empresas, opened its first mall last March, the 22,000-square-meter Molina Plaza, in the Zamboya district of Lima.

“We felt this was the moment to build the mall,” said Gianfrando Cochella, manager of the real estate division. “There is a revival in the housing construction, particularly for the low and middle classes that, in turn, is spurring demand for new shopping centers.”

The company is now contemplating the construction of a 30,000-square-meter mall on Javier Prado Avenue in Lima.

Meanwhile, Cámara Venezolana de Centros Comerciales, Comerciantes y Afines head Moreno presides over his own family group, Mantex. The 50-year-old public company was in manufacturing until five years ago when it decided to make use of its real estate holdings. Mantex made threads, chemical products and cigarette filters, but called it quits when currency devaluations made the business too costly. Mantex co-owns Centro Comercial Buenaventura on the outskirts of Caracas and owns two Metropolis shopping centers in the municipalities of San Diego and Iribarren.

“Why shopping centers?” asked Moreno. “Because we realized there was a huge demand for a new breed of shopping centers to be opened all year round and offer ample parking and security.”

There was also a demand for shopping centers that would lease the space to retailers rather than sell it, he says. And the truth is that few developers can undertake a mall development, because commercial loans must be repaid relatively quickly. “If it costs you $35 million to build a mall with 40,000 to 50,000 square meters, you must pay off the loan in three years and wait between 10 and 12 years for a return on your investment,” said Moreno. “Only solid companies with a long track record can manage that kind of investment, besides having the capital and credit references.”

Payoff is starting to show off now that mall sales are growing at a fast clip, Moreno says. Venezuela’s last market study shows that malls rang up 30 percent of all retail sales last year, excluding auto sales, up fivefold from 6 percent in 1998, Moreno says.

Similar shifts are being reported across Latin America, all of which is making for a lot of happy families.

© 2008 ICSC. All rights reserved. | Terms and Conditions | Privacy Policy | Contact ICSC | ICSC Home |