It’s hard not to like David Lowy. He is a scion of Australia’s second wealthiest family, but with his disheveled hair, and despite his age - 51 - he looks like a typical Aussie surfer. He has managed Westfield Holdings Ltd. (ASX: WSF) for 23 years, and is largely responsible for the success of the Lowy family’s shopping mall business. However, his real passion is playing the guitar in his rock’n’roll band, piloting his Spitfire, and performing aerobatic stunts.
David Lowy studied the largest deals of the past few years in Israel’s economy, but closed on only two of them. He knows what’s going on and is up with Israel’s domestic business gossip (such as the York Capital Management-Psagot Ofek-Gabriella Ravid affair). He has an impressive track record, but in contrast to others in Israel’s capital market, who like to blow their own trumpets even before achieving their first success, the advisors who surround Lowy had to work hard to get him to sit down for an interview. He really, but really, does not like exposure and frontal interviews, but tries to make his interlocutor feel at ease, and to talk about himself in spite of his natural inclination.
David Lowy is the eldest son of Frank Lowy, a Holocaust survivor who immigrated to Israel, served in the Palmach and then in the IDF Golani Brigade, before joining the rest of his family in Australia. With his partner, John Saunders, he set up a small goods business, and in 1959, they opened their first shopping center. The Westfield shopping mall empire now has 128 malls with 22,500 outlets, covering 60.5 million sq.m. in Australia, New Zealand, the UK, and the US. Westfield Holdings posted a net profit of $451 million on $6.9 billion revenue in 2005.
A large part of the credit for Westfield’s success, especially its expansion in the US, belongs to David Lowy, who managed the company for 23 years until 2000. After leaving Westfield, he went to LFG Holdings pty Ltd., the Lowy family’s private investment group, which “The Australian” says manages $500 million. He still has ties at Westfield; although has no management post, he serves as non-executive deputy chairman at the Westfield Group (ASX:WDC) and its affiliates Westfield Holdings, Westfield Trust (ASX:WFT) and Westfield America Trust (ASX: WFA).
Since LFG is a private company, most of its investments are not disclosed. Its most recent investment is Ion Asset Management, a hedge fund that LFG launched in Israel a few weeks ago in collaboration with Jonathan Half and Stephen Levey, both of whom Lowy headhunted from UBS.
“Globes”: Let’s start with Ion. How was the idea born?
David Lowy: “One of LFG’s activities is to set up fund management companies. We’ve done this before. In Australia, we established, under similar circumstances, PM Capital Ltd., with a manager who previously worked for a large Australian investment bank. The company is very successful. So this is something we’ve done before, and since we wanted to set up this business outside of our home market, it was an ideal opportunity to link up with people who had accumulated know-how in areas we know nothing about. In this way, both parties bring something to the table.”
That’s how you got Half and Levey.
“Yes. We looked for people with the right background and experience to join us in this business, especially experience in dealing with international investors outside Israel. I knew Jonathan and Stephen for quite some time beforehand, and I was impressed by their knowledge of the Israeli market and Israeli companies that operate outside the country. These are two experienced guys who know what they’re doing, have a history of outstanding performance, and I get along with them well. We spoke, they were looking for an opportunity, and we decided to set out on this road together.”
Will you be personally involved in managing Ion?
“Ion will be managed from Israel, by Stephen and Jonathan, who will take the investment decisions. LFG controls the business, and the strategic decisions and decisions on growing the business will mostly be our responsibility. I sit on the board, and my people will be involved in Ion’s management.”
Ion has an initial $30 million for investment. Do you have a target for how much money you want the fund to manage?
“That’s approximately the initial sum. I want to recruit more investors for the fund, certainly; this isn't a fund that will manage our money only. On the contrary, the business is to be an asset management business and study opportunities. Look, we have no particular figure that we want to reach - X million or Y billion. The amounts depend on Jonathan and Stephen’s performance; how much money they can attract.
“With a fund like this, you want to have a balance between the amount of money you manage and the return you make on the capital. The Israeli market isn't so large, and you are liable to be too big to achieve good performance. Very large funds can have good performance, but usually, the larger the fund, the harder it is to achieve good performance, and it tends to become more average, in line with the market. We want to beat the market, so there will be a balance between the ability to achieve good returns and opportunities in terms of market size.”
In contrast to the initial impression, Ion is a hedge fund. Why?
“A hedge fund can apply more aggressive strategies than the managers of mutual funds. It can sometimes pick strategies that aim at achieving certain returns and leverage them to exploit situations and opportunities. A mutual fund can’t do that. Again, this depends on the skills of the people making the investment decisions, and we know that they know what they’re doing.”
Do you intend to be involved in the management of your portfolio companies? To improve them?
“No. The idea is to buy stocks, hold them, assess opportunities, and sell, without involvement in the control and management of the businesses. That’s not the plan, or the level of Ion’s expertise, or mine. Nor are there specific sectors we’ll want to invest in. Stephen and Jonathan have vast experience in companies in different sectors, and a very good understanding of the market, because they’ve been involved in it for a very long time.”
This is an excellent time for activity in financial services, especially in Israel following the Bachar capital market and banking reform.
“The financial services sector is a growing business worldwide, especially in countries where employees are mandated to put aside part of their salaries into a pension fund. Pension funds are seeking investment opportunities globally, and not only in their home markets. I think that that the Israeli market is a very good market. Although classified as an emerging market, it more mature than an emerging market, and has the opportunities of a developed market. That is why there’s demand from the global market, investment institutions, government agencies, and private individuals, to invest part of their capital in markets like Israel, and especially in Israeli companies. People know them from outside Israel, because some of them are very well known and operate around the world, are traded on Nasdaq or on the bourses in other countries, so its an international opportunity.
“There’s a lot of investment action in Israel now, and I think there are good reasons for this. Israel’s a good place to invest in; there are a lot of good opportunities. Every place in the world has its pluses and minuses, and from our perspective, we have a lot of confidence in the Israeli economy, and this is a good place to invest in, irrespective of the other reasons you’d want to be here.”
Where does the name “Ion” come from?
“Stephen and Jonathan came up with the name. I asked them what we ought to call our business, and they said, ‘Ion’, which is an atom with a positive charge.”
Was the decision to found Ion a business decision, or based on a desire to do something for Israel?
“It was a pragmatic business decision, because there are very good opportunities here. I like to visit Israel, I greatly enjoy being here. We’re a Zionist family with a sense of commitment to Israel, and with a very strong emotional attachment to Israel, but business is another matter. Business is business, and the two things are not exactly linked. The establishment of Ion was a business decision unrelated to the fact that we love to come here. It’s a business decision, and we expect business success.”
The Lowy family’s attorney in Israel, Adv. David Hodak, who has become a close friend and hosted the interview in his office, intervened at this point. “I have a different perception of you, because you could have founded a similar hedge fund in Europe, Eastern Europe, China, or anyplace. Something brought you to Israel.”
Lowy replies, “True. I love coming here, and when I come, I love doing business, so the things may be linked.”
A lot of deals examined; one made
A lot has been written in the Israeli economic press about the Lowy family, usually when the name comes up in connection with one of the huge transactions that have been set up in recent years. In most cases, David Lowy says with a smile, “There were speculations that we were examining a deal that we had no interest in.” He nevertheless confirms that he considered the largest deals of all, in banking.
The Lowy family was mentioned in the first tender, which was cancelled, for the privatization of Israel Discount Bank (TASE: DSCT). A few years later, the Lowys were mentioned in the second tender, which was won by the Bronfman-Schron consortium. The Lowys were recruited as partners with Kardan NV (TASE: KRNV;AEX:KARD) in a takeover attempt of IDB Holding Corp. Ltd. (TASE:IDBH), but the deal was called off and Nochi Dankner took over the company.
Lowy negotiated with the Safra family to acquire control of First International Bank of Israel (TASE: FTIN1;FTIN5), but the bank was ultimately sold to Zadik Bino and Australia’s Liberman family. Lately, LFG was mentioned as a potential candidate in the Bank Leumi (TASE: LUMI) privatization tender, and as a holder in the controlling interest that Cerberus Capital Management LP-Gabriel Capital Management consortium is trying to assemble. Again, the matter was quickly dropped from the agenda.
In fact, LFG has made only one transaction in Israel to date: an investment in start-up Advanced Metal Technology Ltd. (AMT) (now Global Micro Wire Technologies Ltd.). “I’m a very close friend of Avihu Bin Nun. We’re both pilots; that’s how we met. I invested in the company when he became its chairman. This was a small, but very interesting, investment. The company has a lot venture capital investors, including Shamrock Holdings and Elron Electronic Industries Ltd. (Nasdaq: ELRN; TASE: ELRN), as well as us.”
You examined a lot of deals. Why didn’t you close any?
“I examined a lot of deals and assessed several opportunities. I tend to check thoroughly before making a deal. I like to get into the details. I’m quite conservative.”
The deals were too risky?
“I wouldn’t say risky, but maybe we weren’t ready for them. They were large and complex deals. In general, LFG doesn’t take a controlling position.
“Most of the opportunities we saw in Israel were linked to the element of control. We didn’t close the banking deals we looked at not because we didn’t like the companies, or because they weren’t very good opportunities, but because of our priorities and agenda at that point in time.”
Were you deterred by having to deal with Israel’s regulators, such as the Bank of Israel?
“No. I feel comfortable with the regulators. I have no problem with them. We often work with regulators, especially in our family’s core business, Westfield. Our experience with Israel’s regulators was good. It wasn’t that we felt uncomfortable; on the contrary. I haven’t found that regulation here is different from anywhere else. They have a job to do, and we understand and appreciate that.”
Are there other deals you’d like to do in Israel?
“I constantly examine opportunities that might suit what we do, but in principle, we’re now concentrating on Ion. If other opportunities arise that fit in with what we want to do, we’ll look at them.”
Published by Globes [online], Israel business news - www.globes.co.il - on July 5, 2006
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