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All Mall
Los Angeles Business Journal - December 4, 2006
By Daniel Miller, Staff Reporter
Retail mogul Rick Caruso makes waves - from his opening of the wildly successful Grove outdoor shopping mall in 2002 to his $100 million antitrust suite against General Growth Properties, which unsuccessfully opposed a similar mall he is building in Glendale. Before the Grove, he had marked success in Thousand Oaks and Calabasas. He also served as a commissioner for the Los Angeles Department of Water and Power and as a president of the Los Angeles Police Commission, which dismissed Los Angeles Police Chief Bernard C. Parks and hired successor William Bratton during his tenure. From a spacious office overlooking the Grove, Caruso, 47, discussed his life and business, including his latest battle: building a mall next to the historic Santa Anita Race Track in Arcadia. That project has been opposed by Westfield Group, the Australian company that owns a nearby mall. Recently Caruso lost two ballot measures in Arcadia, sponsored by Westfield, which means that paid parking at his development as well as the use of Las Vegas-style signs will be banned- but the project can still go forward. Caruso, who has four children and is of Italian descent, said that his sense of family is his inspiration and he wants his malls to make people feel like they are a part of something special.
Q: What do you think when you look out your window?
A: I expected the Grove to be successful; I didn't ever anticipate it to be as successful as it is. Our sales per square foot, if you rate it as a retail center, are huge. It's one of the most productive in the country. It's number two in the state. The other way you'd rate it, the Grove has become a part of the fabric of this town. All of a sudden, it's in the vocabulary of this town. The thing I am most proud of is that people feel an ownership. It's their Grove, their community, their downtown. People are desperate, especially in Los Angeles, to feel like they are part of a place.
Q: Did you know in Advance that it would fill that need?
A: Absolutely, because it goes back to the way I grew up. It was all about family and neighborhood, running into your neighbor, the chance of seeing someone getting coffee and hanging out. You don't have those gathering places in LA.
Q: Where did you grow up?
A: I started as a young kid in the Hollywood Hills. Then my parents moved to the Westside. A lot of it revolved around the lifestyle being Italian and how the family operated. The house was always full of family and friends. It (also) was the ability at the time to be a young kid in this town on a Saturday to say "See ya mom, see ya dad" and head down the street and meet friends and be back for dinner. I really miss that my kids can't do it as much. It was a simpler time.
Q: Have you always wanted to be a developer?
A: Honestly, I have always been interested in development for as long as I can remember. I was just wired that way. I have always loved buildings. Even when I practice law I knew it was not going to be a lifetime career and I wanted to transition into development. I think I was just born that way.
Q: Did your dad's business pursuits influence you?
A: He was in the car business. He was a car dealer for years and started Dollar Rent a Car. He's been a huge positive influence on my life and a great mentor from a business standpoint. I still talk to him about business and get advise from him.
Q: Did you pursue business in college?
A: At USC I was in the business school and I was fascinated with finance, economics, how financing worked and how deals got structured. The big influence at college is you learn how to learn and you learn how to listen. That's what I took away most from college.
Q: But you decided to go to law school after college?
A: The legal education gave me a great insight into the mechanics of development. I certainly saw it from the other side of the table. I never had any formal training in development. But frankly I think that's a strength. When I was starting doing development, I didn't know what the rules were, so I wasn't worried about breaking them.
Q: So what were your first projects like?
A: I started doing industrial land deals. They weren't as sexy or exciting as this. I got my start because my dad allowed me to buy real estate for my business and lease it back to him - they were basically parking lots to park rental cars.
Q: So how do you go from parking lost to the Grove?
A: It was an evolution of an idea at my first retail project (in 1992) Burton Place, where Loehmann's is. It was a very tight site with no public space and the idea was to build a nice building. Then we went out to Encino (on another project) and incorporated a fountain and a courtyard. The initial idea was based on Europe - going there and being amazed by people coming out in the afternoon in piazzas and hanging out. It was a sense of community, a sense of township. On every project we kept expanding that idea. You go to Glendale and it's the next evolution- a bigger park, more open space, more amenities and a higher level of design.
Q: Let's talk about your latest project in Arcadia. What is it going to be like?
A: Arcadia feels like a small town. It has to feel much less urban than the Grove. It has to have a lower scale. The horse track influence plays a great part. The track has a very strong, bold architecture that we are going to pick up on. It has to be a little more Old World - it has to read the 1930's since that was when the track was built. Actually, I am probably most excited about the architecture.
Q: Where you disappointed with the outcome of ballot measures N and P in Arcadia?
A: Not really. It was silly. It was Westfield's way of trying to destroy the financial aspects of our project and also scare people by saying there are going to be Las Vegas style billboards. We never had Las Vegas style billboards in the project. They said that if we charge for parking, people would start parking in the residential neighborhoods. That never happens. It doesn't matter. It doesn't change the financial wherewithal of the project. We didn't even engage.
Q: But you did engage in Glendale, where a ballot measure sponsored by Glendale Growth Properties would have killed your project but failed to pass last year.
A: They took me on. We fought back and defended ourselves and we won. It sounds corny but it's true: I was raised with a strong sense of right and wrong and I felt from the very beginning that what they were doing was wrong. Just because they are a big company with a lot of money doesn't mean they have the right to stop people from building a business. I don't think they ever expected we had the moral fiber or the financial capability to fight back. It was a bad bet on their part.
Q: You need innovation to stay ahead of the curve, so what's new in Glendale?
A: What we are building out there in Glendale is going to be a great, unique project for the area. It is going to exceed what is happening at the Grove. A lot of it is about continuing to up the level of service on these properties. Just like when we introduced a concierge here at the Grove, nobody had done it before in a big way, akin to a hotel. That's the same way we are going to operate the residential component.
Q: Give me an example of what you mean.
A: We are going to operate rental and condos no different than if you lived in a hotel. You're going to be able to come home after a long day, pick up the phone, call the concierge, order a meal and have it brought up to you. That's just one of the ideas of how we are trying to reinvent these places.
Q: What are your prospects for your antitrust suit against General Growth?
A: I think we win. There is clear and convincing evidence that they were interfering with our retailers. We will probably be in court in the next couple of months.
Q: Is the traditional indoor mall a thing of the past?
A: I don't think malls go out of business, I don't think the malls go away. Here's the problem with malls: they are run by families - second and third generation now. All they know is how to build an indoor mall. That's all they've done their whole lives, that's the way they were trained. They can't figure out how to do an outdoor format. They have to show earnings growth on a quarterly basis and they aren't building any more product. The lazy response is to stop competitors and you'll own the market. And that's what these guys are doing.
Q: How do you look back on your time serving on the city boards and commissions?
A: My experience at the Department of Water and Power was probably the most beneficial real life business experience I could have ever had. I became a commissioner when I was young. I was 25 when I was first appointed by Tom Bradley. You are in a public realm, but you are operating a multi-billion dollar business. Everything we do at this company revolves around government relations and entitlements, so it really was the best learning experience I had. I was there for 13 years.
Q: While you were president of the Police Commission, you voted to fire Bernard Parks and hire Bill Bratton as police chief. How do you think he is doing, especially considering the recent televised coverage of police beatings?
A: If I had to rate Bill, I'd rate him as exceptional. If I had a company and wanted to hire a great CEO, I'd hire Bill Bratton.
Q: Have you ever contemplated a career in politics?
A: At the right time, under the right circumstances the answer would be yes. It's not the right time now. My priority now is my business, my family. I've got four young kids. I want to be at home seeing them. I don't want to be at endless dinners every night.
Q: What is a typical day like?
A: It starts around 6:30 or 7 a.m., getting up and taking the kids to school. I do carpool every morning. I work out for an hour and then get into the office. I work until about 7 p.m. and get home around a quarter to eight and have dinner and spend time with the family. Once they go to bed and it's quiet, I go back to the den and do work until midnight or one in the morning.
Q: How do you view your time with your kids?
A: It's the number one priority. I take them to school in the morning. And I don't schedule things that interrupt that for the most part. From Friday night to Sunday is family time.
Q: I understand you've memorialized your family in your projects?
A: Oh yes, all the time. There is something for the family on every one of our projects. So, if you look at the medallions up there on the top of the Grove, each one is a bust of my kids and my wife. We don't publicize it. The four kids are up there and my wife is in the middle. So there is always something for the kids.
Q: What's you next homage to them?
A: It's always a surprise. I've got to figure it out for Glendale.
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