By Allison Landa

In addition to serving as chief executive officer of General Growth Properties (NYSE: GGP), John Bucksbaum is an avid cyclist and skier. When Portfolio caught up with Bucksbaum earlier this summer, he was preparing a trip to France. “I go over each year and ride the Alps or the Pyrenees,” he says. “What I enjoy about the trip is the challenge. The riding is very difficult and you can challenge yourself to ride faster than last year. It feels good to ride better; you know you have accomplished something, just like when you have done well in business.”

When he’s not cycling in Europe, Bucksbaum is leading General Growth, a REIT that develops, operates and manages shopping malls in 44 states—a total of 185 regional shopping malls comprising 200 million square feet of retail space.

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Age: 50 Children: Two sons, ages nine and six. Last Book Read: “Do Not Disturb” by Strategic Hotels & Resorts’ (NYSE: BEE) president and CEO Laurence Geller Last Movie Watched: “Titanic” Professional Associations: Chairman of the International Council of Shopping Centers (ICSC); Trustee, Urban Land Institute; Executive committee, National Association of Real Estate Investment Trusts (NAREIT); Advisory board chair, University of Pennsylvania, Wharton School of Business, Zell/Lurie Real Estate Center; Member, Real Estate Roundtable; Member, University of California Real Estate Center Advisory Board; Board of USA Cycling; Board of USA Skiing; Board of University of Chicago Hospitals; Board of LaSalle Bank

Portfolio: Your father and uncle founded General Growth in 1954. Today, the company’s niche is shopping centers. Has this focus been consistent?
Bucksbaum: In the past, we were involved in not only shopping centers but also some office buildings and hotels. Then, in the early 1970s, one of our board members, Warren Buffett, felt the company’s best opportunities rested with our shopping centers. He suggested that we focus on the centers and they would give us the opportunity to have the franchise retail facility in the marketplace.

Should we have continued on with a variety of real-estate assets? It was certainly possible, but retail was always the dominant piece and Buffett made good sense. General Growth started in the middle markets, as opposed to large metro areas, and we tended to be the only mall in the marketplace. We had the franchise in those communities and it proved to be very successful.

Portfolio: What else attracts you to shopping centers?
Bucksbaum: Retail malls are our primary interest because there is a barrier to entry in the mall business that doesn’t exist in other facets of real estate. You can build an office building without signing tenants. The same can be said for apartments and for industrial properties. However, when developing malls, you need to have the retailers in line before you start a project. After completing several malls, our relationships became stronger with the department stores and retailers thus allowing us to build more centers.

Another reason we have stayed with shopping centers is the stability of cash flow. Other types of real estate have much more volatility in terms of their cyclicality while regional shopping malls have shown a very steady upward trend of cash flow. Financing for these projects is more readily available because investors and financial institutions appreciate the stability of cash. It is a combination of these things that keep us in the mall business.

Portfolio: You’ve expanded from the mid-sized regions where you began–places like Appleton, Wis., Columbia, Mo., and Des Moines, Iowa. Today you have a foothold in 22 out of the top 25 U.S. markets. What do you consider an ideal location these days?
Bucksbaum: There’s no one set of criteria that defines what is best. We are in a national business. We have national retail chains that expect us to locate their stores around the country. The more locations we can provide to generate high sales productivity, the better chance we both have of being profitable.

The most ideal market is one where we can have the dominant retail facility, whether it’s a small city or a large city. The most important thing is that we’re the shopping center owner of choice for the retailer.

Portfolio: Why were you heavily involved in development for the first 40 years of business?
Bucksbaum: From 1954 to 1994, our business was about developing malls from the ground up. We would work with the department stores and look for markets where they needed to be represented, and we would evaluate the competition. If we did our job correctly, we would build a new shopping center in the area, have the right retail lineup with the right specialty retailers and that would take care of the retail needs of the community for a great many years from the mall perspective. We wouldn’t see a lot of competition or a second mall being built in the markets we entered.

Today, we are probably more interested in looking at existing centers. We have had more opportunities to have multiple centers in the same city. I think that’s always advantageous. You can provide the retailers with everything they need in a given area. We try to focus on getting that concentration today because of our geographic diversity.

Portfolio: What are some of the changes that have hit your industry over the last decade?
Bucksbaum: The biggest change—and challenge—over the years has been the increase in retail competition. There are a lot more retail projects in the marketplace, from strip centers and big-box to discount centers and outlet stores, with the latest trend in lifestyle centers. Let’s not forget the Internet. All of this is competition for discretionary spending dollars.

We are presently in the most active era of redevelopment in the history of malls. It’s wonderful. We have the opportunity to reinvent, reinvigorate and revitalize our properties. Also, the basic architecture is changing. We are incorporating many outdoor and outward facing village concepts into the mall, and the anchor stores are changing too.

Historically, there have been between four and six department stores to a mall, and today it might be two department stores, plus a Barnes & Noble, a Cheesecake Factory, a P.F. Chang’s, a theater and a large sporting-goods store. These retailers and similar retail concepts are becoming every bit the anchor as the department stores have been.

Portfolio: What is your consolidation theory?
Bucksbaum: We were involved with the first major consolidation transaction in 1994. We acquired a 40 percent interest in CenterMark Properties. This was a $1 billion-dollar deal involving 18 shopping centers. That was the beginning. The following year, we acquired Homart Development Co., in Chicago, and it was a $1.8 billion deal involving 36 properties. These deals began the consolidation within the mall industry of today. Between 60 percent and 70 percent of regional malls are now owned by approximately eight companies.

Portfolio: As you move into the future, what family values do you hold most dear?
Bucksbaum: Integrity and honesty.