“You know what, we’re back,” said Los Angeles retail real estate impresario Rick Caruso, surveying the smaller-than-usual but not insignificant crowd on a recent weekday afternoon at The Grove, which reopened June 10. “We’re back,” he repeated for emphasis, eyes gazing out at his kingdom over a businesslike black face mask, while sitting at an outdoor table at a sushi restaurant.
Since 2002, The Grove has been a center for a city without one, drawing more visitors annually than Disneyland, who flock to the open-air shopping area and faux Main Street with dancing fountain and an old-time trolley ride, where fireworks blaze on the Fourth of July and it “snows” in sunny California at Christmastime.
After closing in March because of the coronavirus, The Grove was due to reopen June 1, but the plan was scrapped May 30 when the Black Lives Matter protest arrived on its doorstep. “It was scary, scary to watch…and anguishing,” said the civic-minded billionaire, who was a two-term president of the Los Angeles Police Commission from 2001 to 2005 and is serving on economic recovery task forces for both California Gov. Gavin Newsom and the White House.
The historic twin challenges of the pandemic and the call for racial equality have renewed Caruso’s interest in politics and he’s hinted at a run for mayor in 2022. “We are a nation called to duty,” he posted in a public letter to Angelenos about George Floyd’s killing, pledging to speak up to leaders who need to be held accountable, and recommit to his foundation’s philanthropic work with Operation Progress and SCS Noonan Scholars to deliver high-quality education to children in Watts and South Los Angeles.
In response to COVID-19, Caruso has enacted a stringent Health & Safety Standards policy at his properties overseen by an epidemiologist at USC’s Keck School of Medicine, and he is optimistic that The Grove and his other open-air centers, including Palisades Village and Americana at The Brand in Glendale, as well as his first hotel, the Rosewood Miramar Beach up the coast in Montecito, are indeed back for good.
At The Grove, the movie theater has yet to open; the trolley is grounded, and valet parking is unavailable. But there are other things on offer — like face masks (they’re mandatory in California) and hand sanitizer distributed by “physical distancing ambassadors” stationed around the property. (Community builder Caruso prefers “physical distancing” over “social distancing.”) Restaurants are open for (sparsely crowded) outdoor dining with the occasional temperature check, and while there aren’t any live family concerts yet, there are physically distant circles for sitting on the grass and enjoying a Cronut or Sprinkles cupcake.
Some retail tenants may be on more tenuous footing than others (J. Crew, for one), but Lululemon just moved in, and construction is under way for a still-under-wraps store next to Nordstrom. There weren’t a ton of shopping bags on a recent afternoon, but there was a 20-plus person line to get into the Nike store and plenty of selfie-taking going on in front of the famed fountain.
Caruso sat down with WWD to discuss his reopening strategy, retail formula and his outlook for an economic recovery, which he said will require an alignment between Wall Street and Main Street.
Rick Caruso: All of the properties have really bounced back very quickly. I was out at Palisades yesterday, it was very busy. Americana has been very busy, so it’s good.
WWD: There is no trolley and no valet, but you have some new touchpoints.
R.C.: We have ambassadors who will gently and nicely let people know you need to be distant. They’re walking around. And we have extensive cleaning protocols, and hand sanitizer everywhere. If you don’t have a mask, we have masks for you. Our first obligation is to keep everyone as safe as we can, we want everyone to feel welcome and safe. And I think people are going to go where they feel that way.
WWD: As part of your new protocols, you teamed up with a doctor from USC’s Keck School of Medicine. Do you think that’s the way to go now for property owners and retailers, to enlist some branded medical expertise?
R.C.: One hundred percent. We also hired a full-time registered nurse in infectious disease and all that R.N. is doing is working with our cleaning crews, making sure the protocols are followed. She travels around to all the properties, including the hotel. I don’t think that changes, even when the virus goes away or there is a vaccine or therapeutic, this whole idea that we care about you and are going to keep you safe and clean is critically important. We own our own restaurants, and at the hotel, when you put your head on the pillow, we want you to know you’re safe.
WWD: What can retailers do to encourage people to come back to stores again?
R.C.: They have to reinforce their stores are safe that they have cleaning protocols. All the things we’re doing, our stores have been doing the same. You see we have lines outside Nike, Nordstrom is very busy. The Grove, all of our properties were fortunate to have a great loyalty to them so people are going to return. Second to being safe, they have to be relevant. A lot of these retailers have taken the time to reinvent themselves, they’ve gotten better online, they have to deliver to stores and pick up in stores. All of that stuff is important and I don’t think any of it is going away. Omnichannel is an important way to do business.
WWD: How have retail sales been at the properties since they opened?
R.C.: Conversion has been very high. People who are showing up are showing up with a mission in mind. The mission is to shop.
WWD: Are all of the tenants paying their rent?
R.C.: The smaller tenants and restaurateurs we have given a lot of relief to and support and we want to continue to do that. We will continue to support them until they get back in business. The larger tenants who have the wherewithal and capital to pay, we expect to be paid. But our collections have gone up dramatically, so we are doing well.
WWD: Is there anyone you will have to kick out?
R.C.: There may be but I’m hoping not. We’re different because we’re not trying to operate a 2 million-square-foot indoor mall. We’re outdoors and people want to be outdoors.…The sunshine is a natural disinfectant so it gives people comfort to be here anyway, and our properties are 700,000 square feet and they are all best-in-class retailers. Are there a few in-pain points, like J. Crew, yes, but they also didn’t reject these leases because they know if they are going to come back, this is going to be a high likelihood where they will do well. So I think we are going to lose a couple of tenants unfortunately, but we have demand for space, we’re actually signing new leases. We just signed four new leases between here and Americana, so I’m optimistic.
WWD: Palisades Village is an even smaller, more elevated and locally tailored experience, with Elyse Walker Towne, A.L.C., Jennifer Meyer and several other first-time retailers. Is that approach still going to be relevant in the new world?
R.C.: More relevant than ever. The Palisades has gained the most momentum because you have the support of the local community and now more than ever people want to stay pretty close to home. But what we’re also seeing in the last week is the zip codes that are coming into shop at the Palisades have expanded. So the smaller nature of it — it’s charming, it’s safe and feels comfortable, we’ve got great retail and fashion — that’s really resonating. So we’re pulling a lot from Beverly Hills, Bel Air, we’re getting Calabasas. It’s a pretty significant draw.
WWD: So overall, since you opened in 2018, it’s performed up to what you expected?
R.C.: Oh yeah, we were on an enormous trajectory until we stopped, but we have retailers there now that are already back to pre-closure levels.
WWD: Like who?
R.C.: Elyse Walker Towne, there are about three or four that are back. And the restaurants, Blue Ribbon Sushi and Hank’s, are back to where they were.
WWD: There was a rumor that you gave incentives, lower rent or free rent to some tenants, to move in.
R.C.: We’ve never given free rent to anybody in my career, we never would!
WWD: Do you see the potential to replicate the Palisades model in other places?
R.C.: Yes, and that was always designed to be a new format, a little more forward-thinking, smaller stores. It’s worked as designed better than expected and we want to do more. We just need to find the locations where we can do it.
WWD: It’s not promoting elitism in a city that’s been accused of having an elitist problem?
R.C.: The beauty of our projects, no matter where they are located, is they are open to everybody. We don’t put turnstiles on them. You look here and the Palisades, it’s every race, creed and economic status. Not at all. We’re probably the most democratic of anybody.
WWD: You could see replicating it in other neighborhoods of Los Angeles that are not on the West Side?
R.C.: Oh yeah, absolutely.
WWD: What was it like to have the Black Lives Matter protests come to The Grove?
R.C.: It was scary, and it was scary to watch, and anguishing, I’m grateful it wasn’t worse. We lost seven storefronts; our team did an amazing job and had everything repaired in a matter of days. Everything pristine as you can see in a matter of days. But my anger was more about what happened around us, because I am a big proponent of small business, and all of these small businesses on Fairfax, Beverly, Melrose, they had been closed for 10 weeks. It was the first weekend they could come back and open their stores. They were fully stocked up. And the fact that the city didn’t protect them, that there was so much looting and devastation, that really bothered me because all of our properties are part of a broader community and that’s what we take pride in. We want to be part of the fabric of the community where you don’t know where The Grove begins and ends, so to have our neighbors in that much pain was troubling. And I shared that frustration to the local authorities and I felt they failed us.
WWD: Do you think the LAPD should have handled it differently?
R.C.: I think the police were hampered by the local leaders. I know the LAPD, and I don’t know what the standing orders were and whatnot, but I think the local leaders are the ones accountable for it, whether they are the elected or appointed officials. It was tough to watch, especially being a former police commissioner. It was tough to watch.
WWD: Were you here that day?
R.C.: We had a family weekend away, and probably the hidden blessing in that I was limited to CNN, I couldn’t get a local station. So I wasn’t watching the local news as it was happening. I probably would have been more frustrated, so I was getting reports over my phone and watching it on CNN.
WWD: The National Guard was stationed here for a while afterward. Did you request that?
R.C.: That was organized by the police, those were located where they thought there were flashpoints. What I learned is the National Guard comes in where there has already been destruction. So they were here at the Farmer’s Market, which had a lot of graffiti and looting. I was glad to see them here, though. I think they were calming to the local community and a deterrent to people looking to do something bad.
WWD: What can we do to bring communities together and end police brutality?
R.C.: We have to acknowledge racism is systemic, it’s been part of our society and it’s wrong and we have to call it out. And we need to get some leaders together who are really smart and really care and create some unity. It’s not just about — and listen, there needs to be more police reform and there should be. The LAPD is a very good department, and we need to quickly root out where there’s bad cops. But we need to help the communities hurting the most, the underprivileged communities, we need to invest in them and give them opportunity, they need to have better education and health care. I dedicated my time and resources to education in the Black and Latino communities. We need to do more than that. There shouldn’t be so much of a difference between being here and being 20 minutes away, it’s just not right. We just have to acknowledge it and figure out ways to have everyone working together.
WWD: Do you have ideas about how you could incorporate businesses owned by people of color or businesses from other parts of the city into your properties?
R.C.: We’re very open to that. I’m a big proponent of small business, so I’m very into that. If you take a look at all of our properties, we get small businesses from every community. And we want to do more of that.
WWD: What should business in general be doing about fixing systemic racism?
R.C.: We should all get our hands a little dirty, support local businesses, families and schools. And I’m not talking about with just money, money is great, but actually go down and work there. Me and my family go to the schools, work with the kids, get to know the families. Walk around and see what the living conditions are like. It’s bad, it’s very tough. We first have to gain knowledge and insight, open our minds and our hearts, understand how people are suffering and how they have been struggling. If you see it with your own eyes, it will change you. You will become a better person. I’m not trying to be holier than thou, but for me, it’s changed my life. I can’t imagine what they live with every day, and through that struggle how so many of these young kids take off and succeed. We have 80 kids in college out of the projects at Watts, I’m talking about MIT, Harvard, Columbia, so we need to give people opportunity, an equal platform.
WWD: What’s your outlook for economic recovery?
R.C.: I think we are going to have a bumpy 2020, a bumpy 2021, who knows what will happen with the politics with the elected officials, so that will be up in the air. But I think there is a lot of optimism, and a lot of consumer confidence. I think if businesses readjust and retool and meet the customer where and how they want to be met, they are going to be mightily rewarded. Through that, the economy is going to come back. There has to be an alignment between Wall Street and Main Street. Wall Street can’t continue to do well unless Main Street does well, because every one of these small shops, they are buying product from somebody, getting deliveries from UPS, that fuels their business, so the more we can get alignment, the economy will go back again.
WWD: How do you build those bridges?
R.C.: You have to get larger businesses that are dependent on smaller ones to have programs to support them. Just like we did. We leaned in, we said to small businesses, don’t worry about rent, build your business back up, reach out to your customers, and it’s happening. The patios have people on them. UPS could say, if you’re a small business, we’re going to give you a 75 percent discount the next 90 days. The better your customers are doing, the better you are going to do.
WWD: Will luxury will be slower to recover?
R.C.: I think there are still people who will want luxury. I do think there is probably a bit of a shift in everybody’s mind on priorities. We have all lived through this pandemic where there is a silent killer and you know people who have got sick or died, and it does readjust your priorities quickly. But I don’t think luxury is going away. Human nature is people will want some nice things. All the boats will rise in the tide.
WWD: How do you keep the community sense that your properties are known for, in a time when people have to be distant?
R.C.: You set out rules that make sense from a science standpoint, so everyone understands it and is respectful. You also have to believe in people self-regulating. We need human contact, fellowship and conversation. And you have to create beautiful spaces; it doesn’t happen overnight.
WWD: How do you rate the response to the economic crisis?
R.C.: Gavin [Newsom] is doing a good job. But he has a very tough task ahead of him — he’s going to have a massive budget deficit. The federal government, especially the Treasury, the federal support that’s been out there financially, has been good. It’s been a savior. The small business loans have really kept the economy going. The amount of money the Treasury has put into the economy has stabilized the economy.
WWD: Do you think that needs to keep going and not stop now?
R.C.: Yes, absolutely.
WWD: Has this crisis moment made you think seriously about entering politics?
R.C.: Right now, my focus is on getting the properties opened up, and getting the neighborhoods around us supported. I want to lean into Operation Progress and what we do in the inner city, that’s my focus. The election is a couple of years away, so I’ve got time.
WWD: What are your benchmarks for evaluating how your business is recovering?
R.C.: Our little micro-set is going to be the performance of our properties. We have been open a week, the numbers are better than I expected. If that continues, it will be a positive sign.
WWD: Can you share any numbers?
WWD: What has warmed your heart?
R.C.: Honestly, this does. It’s a good crowd here. Like Elyse Walker getting back to her numbers, the restaurants getting back. That’s a positive sign. We’ve created and have an atmosphere that gives people the opportunity to come back. We have a platform that motivates people to come out and that’s what you need right now, because all of us are still a little scared, right? You hear bad news every day, you come here, there is no bad news. That’s why people come here!
WWD: Do you think fashion will have a harder time bouncing back?
R.C.: I think technology will continue to take off, because we’re all dependent on it, so are the Apples and Samsungs. Home improvement is doing well. The biggest issue for fashion or any store is are you relevant to your customer? Or are you a disconnect that people don’t think about? Then you have to reinvent yourself.
WWD: Do you see a day when there might not be a J. Crew or Gap at The Grove?
R.C.: Gap is super productive, we just got their numbers. This is a really big store for them, at The Grove, and it bounced back quickly. J. Crew, historically I have loved that brand, I was a massive fan and still am of Mickey Drexler. But they have to reinvent themselves. It just depends with innovation and ingenuity if they can connect with the customer again. They had it once, I’m sure they can do it again.
WWD: I heard the rates at your hotel in Montecito are higher than they were the last time last year, and you’re almost at full occupancy.
R.C.: It’s off the charts. You have a beautiful resort on a beautiful beach that’s an hour and a half away from millions of people. Right now, and this isn’t going to change for a long time, people want to get in their car and drive and not go to an airport, not get on a plane, not hassle traveling and we’re booked. We’re slammed and actually hiring more people because we are so busy up there. The spa is not open, but the pool, the beaches, bar and restaurants are open. The trick up there is God created a beautiful set, our team did an incredible job designing it and it’s all outdoors. You don’t have to share a corridor or elevator, you walk straight to your room, you are standing on that beach and watch the sunset, it’s pretty glorious.
WWD: Do you see more of a merging of hospitality and retail in the future?
R.C.: Absolutely, and we have been doing that for years.