Retail Traffic

SCW CASE STUDY: Triple Threat

Every Monopoly player covets Boardwalk and Park Place. Owning just one of those swanky addresses can make you a fistful of money when visitors drop in, but having both in your portfolio — well, that's synergy.

In the heavily populated suburbs south of Los Angeles, The Macerich Co. is applying that own-it-all strategy to retailing. The Santa Monica-based company operates three super-regional malls within a few minutes' drive of each other. And, by carefully monitoring factors such as tenant mix and seeking ways to share promotional and service costs across properties, Macerich has brought a pile of cash to its side of the game board.

The Triplets, as Macerich calls them — Lakewood Center in Lakewood, Los Cerritos Center in Cerritos and Stonewood Center in Downey — work as one by pooling staff, buying supplies and services together, combining marketing and creating whatever other synergies they can. The payoff: greater efficiency and lower costs.

Macerich acquired Los Cerritos in 1997 and Stonewood in 1999, and Lakewood is a longtime Macerich flagship. Lakewood's 10 million customer visits accounted for 42 percent of the REIT's combined 2001 sales of $1.04 billion. Los Cerritos followed with 36 percent of the total and Stonewood with 22 percent.

Lakewood also is the biggest physically, with a GLA of 1.8 million square feet, followed by Los Cerritos at 1.3 million and Stonewood at 927,000. All three malls have Mervyn's and Robinsons-May as anchors; Lakewood also has Nordstrom, Macy's and Sears; Los Cerritos has Macy's, JCPenney and Albertsons; and Stonewood has Sears and JCPenney.

Economies of scale

Macerich isn't alone in its desire to achieve operating efficiencies through clustering. “Everybody's trying to do it,” says Louis Taylor, senior real estate analyst with Deutsche Bank-North America. “As public companies come to own an increasing number of malls in the U.S., they're not just buying any old mall. They're trying to buy ones with a strategic purpose.”

For example, Simon Property Group last year added Boston's Copley Place and Newton's The Mall at Chestnut Hill to its portfolio, which already included 12 Massachusetts properties. Australian developer Westfield is following suit, buying centers in a single metropolitan area — St. Louis, for example — to achieve economies of scale and more marketing bang for the buck.

It might seem as if clustered properties are competing against one another. But in Los Angeles County, there are plenty of shoppers to go round, and the company has succeeded in melding the malls into a dominant force that consistently draws crowds.

The Triplets' neighborhood is indeed crowded — and prosperous. According to demographic research firm CACI, more than six million people lived within a 15-mile radius of Downey in 2000, a number it believes will grow 5 percent by 2005. In the same period, CACI projects that the average household income in the area will rise from $53,554 to $69,771.

“You're looking at one of the densest areas of southern California, and that's why it works for them,” says Reza Etedali, senior vice president for Sperry Van Ness in southern California. “It's an area that a lot of retailers are catching on to, and if you want to be in the area you've got to talk to them.”

Macerich's Triplets At-a-Glance Location Built Sq. Ft. Sales Per Sq. Ft. Occupancy Average Rent
Lakewood Center Mall Lakewood, Calif. 1951 2 million $353 98% $20-$100 sq. ft
Los Cerritos Center Cerritos, Calif. 1971 1.3 million $416 99% $25-$75 sq. ft.
Stonewood Center Downey, Calif. 1958 928,000 $353 80% $40-$100 sq. ft.
Source: National Research Bureau

Henry Lichtman, Macerich's vice president of property management in southern California, agrees that the joint ownership has big advantages: “The arrangement allows us more leverage and negotiating power with retailers. We can allow the retailers to control a market just through us.”

When the arrangement was being developed, Lichtman says, “We knew there was going to be added value in our ability to deal with merchants. We knew, for instance, that this would be effective in dealing with someone like the Gap, which should be in all three of the centers.”

All for one and one for all

The company's game plan is to take advantage of that strength, at the same time squeezing as much efficiency as possible out of the joint ownership and maintaining each mall's identity.

Marketing has been combined so that all three malls are advertised together — in effect reducing each property's costs by two thirds. The savings were used last year for “Shopping3,” a campaign that covered the media gamut, from television (on 11 cable systems) to print (in English and Spanish) to billboards, radio and even theaters. (The malls' website, appropriately, is

One example of the malls' combined clout came in late 2000, when they linked holiday promotions to the Universal film Dr. Suess' How the Grinch Stole Christmas.

Macerich negotiated rights for mall events featuring original costumes from the movie. “None of the malls could have afforded to do that on their own,” says Lichtman. Together, they have a marketing budget of $3 million.

The triple-teaming has been a boon to customer service, Macerich says. Guest services' staff provide shoppers with information for all three malls, and gift certificates can be used at any of them — a convenience that resulted in the malls' certificate sales rising between 23 and 38 percent in 2001, to a total of $2.1 million.

Pooling the properties' accounting resources produced similar benefits — especially in the collection of accounts receivable, which Macerich says now average below 1 percent at Los Cerritos and Stonewood, though slightly higher at Lakewood.

With the malls so near one another — Los Cerritos and Stonewood are farthest apart at seven miles — it also was possible to combine in-house maintenance crews and reduce outsourcing tasks like painting. Security forces operate as one, offering flexibility during special events. And HVAC, parking lot sweeping, landscaping and other services are done under common contracts, which Macerich says has saved $185,000 annually.

Lichtman says Macerich plans to apply some of the same operating principles to its Santa Monica Place and Westside Pavilion properties, which are six miles apart, and to the Oaks Mall in Thousand Oaks and Pacific View in Ventura, which are separated by about 25 miles.

For Lichtman, the birth of the Triplets has been a joyous event. “There is no element of this program that's been negative or even marginal,” he says. “It's been a huge win for Macerich, and one of those rare things that are right for the merchants, for the company and for the customers.”

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