Westwood restructures portfolio for institutional market

The LA-based property company has formed a company akin to a private real estate investment trust, with plans to diversify its capital base to include institutional capital.

Los Angeles-based Westwood Financial has finished a significant restructuring to consolidate most of its retail holdings into a $1.2 billion company, the firm said earlier this month.

The property firm, founded in 1970, consolidated 280 entities that include 77 retail centers into a single limited liability company that co-chief executive officer Joe Dykstra likened to a private real estate investment trust in an interview with PERE.

The company’s 500-plus investors were largely moderate to high net worth individuals and family offices, but the restructuring positions the company to partner with institutional capital for the first time.

“It’s harder and harder for a small investor to make a large investment into a significant number of properties,” Randy Banchik, Westwood’s co-CEO, told PERE. “It’s easier for institutions to have a perspective that is able to navigate all of the issues that require discussion and do the underwriting required when you’re buying a shopping center in today’s world… Large investors allow for scale and more strategic thinking, and they offer liquidity.”

Dykstra said that institutional investment could come in multiple forms, including an off-balance sheet joint venture, or a transaction that creates liquidity for some of Westwood’s existing investors.

After the restructuring, which included succession planning and streamlining operations, the new firm is more “institutionally comprehensible,” Dykstra said. Westwood removed the two founders, now in their 70s, from loan guarantees, and put a new governance structure in place. A single holding company allows the firm to operate with more flexibility and access more financing options, Dykstra said.

“It was big and complicated and the dust is still settling, but the results will be incredibly valuable for a lot of people,” he said.

Westwood largely focuses on value-add retail across 25 states in neighborhoods anchored by markets and grocery stores. The firm’s most recent publicly disclosed transaction was the July purchase of Village Place Brookhaven, a three-story retail building in Atlanta, for $18 million, according to real estate data provider Real Capital Analytics.

Now, the firm plans to make acquisitions in the US’s top metropolitan statistical areas and sell off several geographically outlying properties, according to a statement earlier this month. Westwood will also upgrade its technology to better partner with institutions.