Parque Arauco S.A.

In 1979, José Said founded Parque Arauco S.A. (PASA), a real estate development firm that was incorporated in 1981. The following year, he and his associates, who included Tomás Fürst Freiwirth and the Martínez Perales brothers, opened the Parque Arauco Shopping Center in the Las Condes municipality of Santiago, which contained retail stores Gala-Sears and Muricy (later owned by Falabella and Almacenes París, respectively). Since the mall adjoins at Kennedy Avenue (Avenida Kennedy), it is often referred to as Parque Arauco Kennedy to distinguish it from the corporation. Aided by an overvalued Chilean peso and an economic free trade policy, Chile was saturated with inexpensive foreign products when Parque Arauco Kennedy was inaugurated, and those who could afford to buy filled the new mall. However, the Chilean economy was falling into deep recession. Around the same time, the company introduced Arauco Outlet Mall in Santiago's Maipú municipality. This commercial center did not perform well and was later converted into a shopping mall.

In 1997, PASA's partners decided to divide their Chilean holdings. The Said group acquired Fürst's 12% holding and turned over to Fürst its 14% share of Plaza Vespucio, which became the core property of Fürst's rival venture, Grupo Plaza (or Mall Plaza). The Said group now controlled 38% of PASA's outstanding shares. The Abumohor family, also active in textiles and, like the Saids, of Arab origin, held 10%. Two pension funds held a combined 24%. Parque Arauco Kennedy was Chile's largest shopping mall at the time, with annual sales of $500 million, while Plaza Vespucio ranked third, at $380 million. A medical tower was being constructed at Parque Arauco Kennedy, and an office building was being contemplated at a cost of $100 million. For Mall Arauco Maipú, PASA was considering building an additional medical tower and a high-rise apartment building. In 1999, PASA, in partnership with the Almacenes Paris and Ripley retail chain, completed the Marina Arauco Mall in Viña del Mar at a cost of $120 million. PASA malls accounted for 24% of Chile's shopping-center revenues in that year.

The Argentine economic crisis culminated in the government defaulting on its debt and the devaluation of the Argentine peso at the end of 2001. APSA's market value declined from $390 million to as low as $40 million. The damage to PASA's finances inspired a shakeup of the company's management. In an interview with the new general manager, Andrés Olivos, for the Chilean magazine La Capital in 2003, reporter Lorena Medel contended that "it was rumored that Parque Arauco had had a grade-10 earthquake. That its finances were delicate, and that shareholders couldn't believe the level of debt that was permitted to arise with respect to Arauco Salud" (the medical tower). Olivos denied the situation was ever as dire as some suspected and revealed that the company was opening a "gastronomical boulevard" for Parque Arauco Kennedy. He conceded that Arauco Maipú had failed as an outlet store center and had returned to its role as a traditional mall.

Olivos acknowledged that PASA had fallen behind Grupo Plaza and Cencosud S.A. in commercial real estate development in Chile. "Our strategy", he maintained, "is distinct, and we believe that to enter this headlong race by adding square meters doesn't necessarily add value. A good part of this growth only generates cannibalization, and many of the new investments won't pay off in any foreseeable amount of time." Olivos said that PASA maintained a 32% market share in Santiago, with annual sales of roughly $200 million, and 20 million annual customers for Arauco Kennedy, 15 million for Arauco Maipú, and 17 million for Marina Arauco. He added that the company had 45% of the mall market in Buenos Aires. Olivos revealed that PASA signed a contract with Arauco Salud's new owners that would permit it to recover the $2.5 million debt incurred while constructing the 13-story tower. The company was also contemplating construction of a dental-office building in Arauco Kennedy. In addition, PASA completed its gastronomical boulevard during late 2003.[1]

With the revival of the Argentine economy well underway, PASA was planning new shopping malls in Rosario, Neuquén, and Caballito, the latter two in collaboration with IRSA by means of APSA. Alto Rosario Shopping, completed in late 2004 in partnership with Coto Centro Integral de Comercialización S.A., was a conversion of an old railroad station within the original structure. APSA also had plans to enter Córdoba by purchasing land or acquiring one of three existing shopping centers. Sales from PASA properties were expected to reach $1.1 billion in 2004, with Argentina providing 38% of the total. All of APSA's properties were at least 96% leased. PASA's debt in Argentina was reduced from over $200 million in 2002 to about $28 million in 2003.