Nike Shoppers Form Long Line at L.A.’s Reopened Grove, Says Mall Owner

(Bloomberg) -- The crowds weren’t huge, but people came to spend money at the Grove, a Los Angeles shopping center owned by developer Rick Caruso. It reopened this week after a three-month shut down for the Covid-19 pandemic, including a final week to repair damage to stores by looters.

“There was about an hour-and-a-half wait at Nike yesterday to get in,” said Caruso, who owns 10 Southern California outdoor shopping centers as well as offices, apartments and a resort. “Our retailers are back to sales levels before closure -- both on the fashion side and the restaurant side.”

As consumers emerge from lockdown, the pre-existing conditions that afflicted many retail centers before the pandemic -- deserted department stores, tenant bankruptcies, e-commerce competition -- have only gotten worse. Growing numbers of mall owners have fallen behind on their debts as tenants stop paying rent or file for bankruptcy.

“This pandemic has just sped up the trajectory they were already on,” Caruso, 61, said in an interview.

Safe, Clean

The venues that survive will be those that provide a safe, clean and healthy place to spend money, according to Caruso, whose Grove center averaged sales of $2,460 per square foot in 2019.

“You want to spend your time in places that make you feel good and get away from bad news,” he said. “We provide a refuge.”

Health measures are key to consumers’ comfort levels post-pandemic, he said. All customers and employees are required to wear masks and maintain social distance. Store capacity is restricted, which lengthened the lines outside Nike. Restaurants only serve diners outdoors.

“That’s the best disinfectant there is for the coronavirus,” he said. “People have really responded to sitting outside and being in the sunshine.”

The outdoor model works in places with worse weather than Los Angeles, he said, noting that New York’s highest sales per square foot is along midtown streets like Fifth Avenue and Madison Avenue, rather than any of the city’s indoor malls. One problem in those areas has been landlords raising rents too high for retailers to survive, Caruso said.

Fair Treatment

At his malls, Caruso said he requires creditworthy tenants to pay rent on time while offering concessions to those that need assistance, especially small locally owned businesses. He’s rejected requests by tenants who tried to use the crisis to renegotiate leases, because the Grove has a waiting list, with a Lululemon store among the newest tenants.

“We don’t respond to leverage,” he said. “We respond to being fair.”

Well-heeled clients have also flocked to Caruso’s resort, the Rosewood Miramar Beach, which opened in 2019 near Santa Barbara, less than a two-hour drive from Los Angeles. Rates start at $1,400 a night and go as high as $12,000 for beachfront rooms.

“Last weekend, we were running at 100% occupancy,” he said.

On May 30, looters ransacked seven stores at the Grove, including a Nordstrom’s and an Apple outlet, when a peaceful protest against the police killing of George Floyd turned violent. The worst damage was suffered by small businesses outside his center, whose owners’ finances already were fragile following months of imposed lockdown, Caruso said.

‘Very Disappointing’

He took out a full-page ad in the Los Angeles Times calling for an end to systemic racism and injustice. He blamed unnamed civic leaders for letting things get out of control.

“It was anguishing to watch,” Caruso said. “I find it very disappointing our local governments failed to protect the protesters, failed to protect the residents, failed to protect the small businesses.”

It will take a long time for the city, the economy and the country to recover from what’s happened so far in 2020, he said.

“I couldn’t even dream it up,” Caruso said. “A pandemic across the world. And all the protest and the unrest. And then the election. It’s a crazy year.”

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