Out of retail, the Lowy clan bet on global equities
The former mall magnate’s eldest son tells of cutting ties with shopping centres, rescuing Ukrainian children with the corporate jet and touring with Judas Priest.
The billionaire Lowy family fortune has gone global.
Four years after Westfield co-founder Sir Frank Lowy made one of the most prescient deals in Australian corporate history when he began to sell out of shopping centres with the $US25bn ($35bn) takeover by Unibail-Rodamco, there is little trace left in financial terms of a seven decade connection with Australia.
As Sir Frank enjoys retirement in Tel Aviv, about $10bn held in the Lowy Financial Group is now managed from New York by his eldest son David Lowy. From a downtown office boasting views of the Hudson River looking west towards New Jersey, LFG is effectively a boutique funds manager that is long on concentrated global equities with some international technology company holdings and stakes in listed and private real estate.
But there is, at least for now, no room for sentiment given that LFG has no retail property assets in its portfolio, as David Lowy reveals to The Weekend Australian.
“It is fair to say that we have not had any retail investments since we sold our positions in Unibail and Scentre Group,” he says.
The family would look back with nostalgia on their Westfield days, he adds. But while a large picture of his father’s first delicatessen in Sydney’s Blacktown in the 1950s – the genesis of Westfield – adorns the entrance of the New York office, Lowy says the family has moved on.
“It was synonymous with the family, but things evolved over time,” he says.
“We have got a lot of memories and stories, and when we’re together we share the stories. We had a lot of success … and it was a good ride, a good business with a strong tailwind for a long time. And then it didn’t.”
Yet as the rise of online shopping and Covid-19 hits bricks and mortar retail hard, Lowy does say LFG would not rule out re-entering the sector – but only if the investment case stacks up.
“We’re open minded and I wouldn’t say we are looking for retail real estate but we look at things all the time and we can cover a lot of ground.”
In a wide-ranging interview, 67-year-old Lowy reveals for the first time how the Lowy family fortune derived from two big sales of stock in Westfield and then Scentre, the owner of the local Westfield malls – in 2018 and 2019 respectively – has led to LFG’s focus moving just about entirely away from Australia.
While he and his two brothers were born in Australia, the country where their father would become a business giant after co-founding Westfield with the late John Saunders and building it into a global shopping centre giant, the Lowy’s family’s international focus is even encapsulated by only two of Sir Frank’s 11 grandchildren living in Australia now.
“There has been such an evolution over the past 10 years. Dad lives in Israel and I have been here in New York for seven years,” Lowy says.
“My brother Peter has been in LA since the 1990s and (youngest brother) Steven is in Sydney. We are really an international family with our investment activities focused here in the US. This is the principal investment office and the investment team is based here.”
While there are administrative functions for LFG based outside Australia and also in Sydney, which remains the home of the Lowy Institute think tank and the family’s philanthropic interests, many of the long-time entities used to hold Westfield and Scentre shares were placed in liquidation last month, documents recently lodged with the corporate regulator show.
Now, the Lowy wealth is mostly held in a little more than dozen global stocks.
“Our investment strategy really is listed equities – global equities – and some technology and real estate holdings,” Lowy reveals.
“It’s about 60 per cent global equities, about 20 per cent growth technology, which has got some private and public (holdings) in it, and listed real estate.”
Lowy says the equity holdings are “the full range” of big caps and small caps and that LFG “is a long term holder” of its stocks.
“(It is) a concentrated long-term portfolio with about 15 to 20 in the global equities. There are some private technology investments as well.”
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While he is reluctant to reveal exactly which stocks LFG holds, Lowy does wince when asked if the family has shares in Netflix – the streaming giant has shed 49 per cent of its value in the last month, with shares down $US192.30.
“A lot of stocks are down lately,” Lowy says with a laugh.
“But I’ve been doing this for a long time now. In fact, I’ve been doing this for about 23 years and I was at Westfield for about 23 years before that. So we’ve seen quite a bit. We’ve had the first Dotcom boom, September 11, (the global financial crisis in) 2018. Covid.
“The world is an unpredictable place. So it is a conservative approach and we are looking to make good risk adjusted returns.”
Most of the technology holdings are public-listed or late stage pre-IPO private firms – “we have very little venture (capital) and I value liquidity from my public company days,” Lowy says – and LFG also put about $75m into Sydney-based Assembly Funds Management.
Run by former Westfield chief operating officer Michale Gutman, Assembly invests in real estate equity and debt deals.
Some habits do die hard though, as Lowy admits when he is looking at potential stock buys.
“What I do is benchmark everything I look at, to a really good mall – pre-online (shopping). Take any of the Westfield centres, in London, the US or Australia. They had the characteristics of really good investments.
“Once you established them, they were hard to compete with. You created a franchise. The value of the rental stream was not based on the supply and demand of retail space. It was based on the amount of business a retailer could do in the mall, which wasn’t a function of the square metres that they rented. So we were able to manage the centres and develop them and grow them as the market grew and it was an unbelievably good business.”
Yet while he is coy on the details of LFG’s exact annual returns for its portfolio, Lowy does say it has outperformed one important index.
“We’re it in for the long term and if I go back to the beginning we have substantially exceeded the index … the S&P500 since we have started.”
That would imply a return of more than about 340 per cent since Lowy stepped down as Westfield managing director in 1999, after the family had sold about $450m of Westfield shares in August 1998 to gain the funds for Lowy to invest via LFG.
Lowy had started working at Westfield in 1976, taking his last exam for his commerce degree at the University of NSW on a Friday before his father sent him to work in Brisbane the following Monday. He moved to the US in 1977 when Westfield acquired its first mall in the US, Trumbull Shopping Park in Connecticut, and stayed for four years before returning to an executive position in Australia.
Two decades later, Lowy was keen to help the family diversify its assets and LFG was eventually formed.
“I always had a bent for the investment business anyway and we didn’t have an investor relations department in those days; I used to do it. So I said ‘I’m talking to the institutional investors and getting all the hard questions, I want to be on that side of the table. I want to ask the questions.’”
His first investment was buying convertible notes in the then high-flying telco One.Tel, which would later collapse – but not before Lowy had made a handsome return.
LFG opened its doors in New York in 2007 in shared space and four years later established its own independent office. Lowy himself moved to New York in 2015 and now oversees a team of about 10 analysts and stockpickers.
“Early on I started investing in global equities rather than just Australian equities (so) I felt like I really couldn’t really manage a global investment business in Sydney. I didn’t like waking up when the day had happened,” Lowy says.
There would be few Australians anywhere in the world managing about $10bn that have Lowy’s eclectic range of interests.
A qualified commercial pilot and one-time aerobatic aviator, Lowy is a reserve member of the Royal Australian Air Force as a flight lieutenant. He recently flew humanitarian flights on his Gulfstream G650 corporate jet from Israel to Moldova to rescue newborn Ukrainian children, and has also flown for the Mercy Flights non-profit organisation in the US.
Boasting rock star looks and shoulder length hair – and AC/DC’s seminal “Back in Black” as his phone ringtone – Lowy is preparing for his band The Dead Daisies to tour Europe over the Northern Hemisphere summer in support of Foreigner and Judas Priest.
While he concedes he won’t mix aviation with hard rock – “I don’t fly and do the music on the same day, it is the wrong headspace” – Lowy does have to put the touring lifestyle aside to oversee the family portfolio.
“The rock and roll day starts at 5 o’clock in the afternoon when you go to the venue and do a soundcheck. The other guys in the band will probably sleep, but I will wake up and do my (investment) stuff. I’ll make calls and talk to the guys here in New York. I have to do it, it’s my job.”
Lowy says he visits his father every month in Israel and says Sir Frank, now 91, is in good health after recovering from a recent bout of Covid-19.
“He’s fully recovered and I think he’s stronger than he has been in many years. His mind is 100 per cent sharp. He’s on the ball, enough to take us to task. He has a very vibrant social life there too,” he says.
“Dad was worried about (being nostalgic about Westfield). But I don’t think he thinks about it now. He’s always been a forward thinker. He’s always looked ahead. And unlike most people like him, entrepreneurs who built a massive business, he’s got more flexible of mind and open to change as he’s got older. I think that’s his secret.”
In that way, Lowy says there are no plans for any of his children or the wider Lowy family to take over from him at LFG when he eventually retires, even if it continues to manage the family money.
“We have no specific desire for that, and it has never been part of any plan of ours. On the contrary, we never think about it. My dad and my brothers, we are a team, but we have never had any ambition (regarding succession). I never ever want to hear the word ‘dynasty’.
“It is a basic philosophy we have. Buy good companies, buy them well and hold them. That’s it. Just try to keep it simple.”
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