By Michele Lerner

Arthur Coppola, president and chief executive officer of The Macerich Company, has established community service and involvement as the core of the corporate culture at the Santa Monica, CA-based retail REIT. Coppola believes, "If we don't open up to the community, the community won't open up to us." Recently, Coppola took time from overseeing Macerich's portfolio of 56 regional shopping malls and 21 community shopping centers to speak with Portfolio about the evolution of the mall business, and how he likes to spend his time away from the office.

Portfolio: You've been involved with regional shopping malls for 27 years. What's changed in the business? What's the same?
Coppola: One of the major changes has been the dramatic consolidation in the department store industry, plus a tremendous consolidation of ownership of malls in the hands of a few companies. It used to be that a variety of institutions and individuals owned malls, and now they are mostly owned by REITs. The industry used to be about pure development, now it's more about consolidating rather than building.

One thing that has stayed the same is the players. The people running the REITs are basically the same, and the players on the department store side are basically the same.

Portfolio: Why does Macerich invest primarily in regional shopping malls rather than smaller shopping centers?
Coppola: A regional mall, if well located, becomes the dominant property in the area, so you don't have to worry about anyone cutting into the market share. Plus, a large regional mall can afford to have someone on site to provide professional management and have the opportunity to develop the mall as a center for the community.

Portfolio: How has the regional shopping mall sector performed in this turbulent economy?
Coppola: This sector is doing extremely well. Public mall companies have seen consistent occupancy levels of 91 to 93 percent historically over the past 12 years, even during the last recession when we were facing an economy much worse than this. We've seen far fewer bankruptcies among the retailers this year than in the previous five years.

Portfolio: Last summer, Macerich acquired Westcor. How has this worked out so far?
Coppola: It couldn't have been better. Interest rates since the purchase have dropped, so we were able to lock in very attractive financing, and the merger/acquisition caused our company to grow by 40 percent in size. Sales went from $350 per square foot to $375 per square foot as a consequence of the merger. Plus, the top 100 people at Westcor are now part of Macerich and have brought in complementary talents to our staff. Westcor has significant market share in the Phoenix market like no other company, and Phoenix is the fastest growing city in the U.S.

Portfolio: What's the biggest challenge facing The Macerich Company in 2003?
Coppola: Our biggest project is a $275 million expansion of the Queens Center in Queens, NY. We're more than doubling the size of the operation, which is a challenge and an opportunity that will take us into 2004.

Portfolio: Many of your malls have been involved with charitable causes such as providing scholarships for graduating seniors, teaming with the Salvation Army to provide back-to-school supplies for needy children, and lots more. Is there a company wide effort to participate in these types of activities?
Coppola: We encourage the regional malls we own to become town centers, to not just be the economic hub of the community but the social hub of the community as well, which means becoming involved with charitable causes. This doesn't mean just writing a check to a charity, either. Each marketing and mall management group works with their customers and retailers to do what's right for that area. The large common areas and foot traffic we have in these malls enable them to become a place for people to meet and participate in activities that matter to their community. Any one of our properties sees over 15 million visitors per year.

Portfolio: You're both a lawyer and a CPA: why both? Which is most valuable to you in your position as CEO?
Coppola: When I was 18 and confused, my father recommended that I do both. Those are the languages of the business—legal and financial. My financial education has probably been more valuable because this is a numbers business, but the legal education teaches people how to persuade others and to think logically.

Portfolio: What do you do to get away from work and relax?
Coppola: I enjoy lots of outdoor activities, but I've been pretty much a "gym rat" for the last 10 years or so. I spend close to 10 to 12 hours a week on weight training and cardiovascular exercise, which helps me get rid of stress. I enjoy snow skiing, dabble at tennis and used to play golf more, too. I also like to hike in the mountains in Montecito every other weekend or so, where my family has a place. Once every year or so I try to get to the French Alps to ski or hike. Last year, I hiked the Grand Canyon from rim to rim, which is about 25 miles.

Portfolio: What are your favorite vacation spots?
Coppola: I have two favorite spots, Chamonix in the French Alps for skiing and hiking, and Rancho La Puerta in Tecate, Mexico, just south of San Diego. I've signed up to go to Rancho La Puerta each spring and fall for a week at a time. I come back totally refreshed. It's more holistic than a spa, and they provide six or seven hours a day of activities for the body and the mind. They offer yoga, massage and hiking and provide great vegetarian meals. I used to go to the beach in Hawaii for vacation, but I realized that I was changing the color of my skin but not much else.