Page 46 - Forbes Magazine-October 31, 2018

FORBES RICK CARUSO

tail has gotten sideways because it became the commodity. It WHILE RICK CARUSO WASN’T born into a real estate dy-
is not about being high tech; it is about understanding what nasty, he seemed destined for entrepreneurship. His fa-
your customer wants.” ther, Hank, went from sweeping up at the Farmers Mar-
Th e numbers suggest Caruso knows that lesson well. ket to starting Dollar Rent A Car. (He sold the company in
Th e Grove’s 58 stores and restaurants welcomed 20 million vis- 1990 to Chrysler for a reported $80 million and died last
itors last year, more than the Great Wall of China or Disney- year at 95.) Hank gave Rick, who got degrees in business at
land. Its $2,200 sales per square foot puts it behind only Mi- the University of Southern California and law at Pepper-
ami’s Bal Harbour Shops in the United States. American malls dine, his fi rst taste of real estate by having him buy land in
average about an 11% vacancy rate (excluding anchors), but southern California and lease it to the car rental operation.
Caruso says Th e Grove has a three-year waiting list. Most of When Rick lost his job in 1987—the law fi rm employing
the industry gives away space to glamorous anchor tenants; Ca- him collapsed fi nancially—the transition to a new career
ruso gives nothing away and also takes a percentage of sales. was relatively easy.
“You pay more, but you get more,” says Rocco Basilico, Caruso tried his hand at industrial real estate, but it bored
who runs retail for Ray-Ban in North America. He says the him. In 1992 he turned to retail with 333 La Cienega, in L.A.’s
brand’s tiny Grove location has the highest sales per square Beverly Grove neighborhood. He leased it to now-defunct
foot of any of his U.S. stores. Th e Grove’s Dominique Ansel Loehmann’s for two decades and is currently redeveloping the
bakery (of cronut fame) does more business than the New land as a mixed-use project scheduled to open in 2020.
York original, and the movie theater, which Caruso operates, With every new property Caruso opened through the
is among the ten most productive per seat in America. 1990s, he expanded the concept of what a shopping center
Th e Grove and his nine other lightly mortgaged shopping could be. Th e Encino Marketplace introduced green space
centers in the area have made Caruso worth $4 billion. Ca- and a fountain. Th e Promenade at Westlake was curved so
ruso hopes his four children, ages 18 to 28, will take over the you could see where you were heading as you walked. “De-
empire one day. He has hidden likenesses of his kids across velopers would build straight or fl at because it was less ex-
his properties—family Easter eggs that the average shopper pensive,” explains Caruso, who still considers himself a bit of
would never recognize but for which he has great pride. a real estate outsider. For the Commons at Calabasas, Caruso
If all of this success seems to contradict the further de- hired a Hollywood set designer.
cline and fall of brick-and-mortar retail in 2018, there’s good With Th e Grove, which opened in 2002, Caruso fi nally
reason. Caruso is among a few optimistic developers bet- put together all that he had learned. He got inspiration from
ting—at least until Amazon can deliver human interaction— Charleston, South Carolina, and Savannah, Georgia, trans-
that stores will continue to pay off . Indeed, Caruso insists lating wide streets and low building heights into his new
that Amazon is great for his business. Online retailers under- open-air shopping center, where a green-and-gold trolley de-
stand their customers, he says. His job is to understand the signed by one of Walt Disney’s Imagineers shuttles visitors
customers at his malls. the quarter-mile from one end of the mall to the other.
Th e Grove’s common area
THE MALL AT
ROCKINGHAM PARK adds up to an acre. Competi-
Salem, New Hampshire tors scoff ed at the wasted space,
Year built: 1991 but a movie studio recently paid
FORUM SHOPS Size: 1 million sq. ft.
AT CAESARS Owner: Simon Property Group $600,000 to use it for a two-day
Sales per sq. ft.: $2,170
THE GROVE Las Vegas stunt. A paid promotion this
Year built: 1992
Los Angeles Size: 670,000 sq. ft. summer involved a giant Ama-
Year built: 2002 Owner: Simon Property Group zon box, a Jeep Wrangler and the
Size: 575,000 Sales per sq. ft.: $1,615
sq. ft. latest Jurassic Park reboot. Caru-
Owner:
Rick Caruso so earns an estimated eight fi g-
Sales per sq. ft.: SHOPTIMISM IN AMERICA ures in annual revenue from ad-
$2,200
TRADITIONAL RETAIL MAY BE IN DECLINE, vertising at Th e Grove, accord-
BUT YOU WOULDN’T KNOW IT BASED ON THE
REVENUE AT THE HIGHEST-EARNING MALLS IN BAL ing to industry sources.
THE UNITED STATES. HARBOUR “As a company, philosoph-
SHOPS
ically, we are in the hospitali-
Miami Beach
Year built: 1965 ty business,” he explains. Empty
Size: 450,000 sq.ft.
On track: The Owner: stomachs and full hands are
Grove’s trolley Whitman Family among the main reasons shop-
features a Development
refurbished AVENTURA MALL Sales per sq. ft.: pers leave a retail property, so
1950s Boston
streetcar. Miami $3,185 Th e Grove has 25 con cierges to
Year built: 1983
Size: 2.8 million sq. ft. make dinner reservations and EDUCATION IMAGES/GETTY IMAGES
Owner: Turnberry
Sales per sq. ft.: $1,595 bring packages to shoppers’
FIGURES FOR SALES PER SQUARE FOOT ARE FOR 2016. SOURCE: GREEN STREET ADVISORS.
92 | FORBES OCTOBER 31, 2018