Executives of General Growth Properties probably won’t admit it, but they never should have picked that big fight with Rick Caruso.
In fact, they should have welcomed him to Glendale with a gala ball, polished his car and paid his tailor for a year. Well, maybe just a month, considering what the L.A. mall developer must spend for his fine bespoke suits.
After all, since Caruso’s mall, Americana at Brand, opened three years ago, it has been good for General Growth’s mall across the street.
As you can read in the article on Page 1 of this issue, retail experts point out that the two malls together attract business for each other, probably more than they would if they were separated by miles.
The magic of situating similar stores together is well-known in retailing. Rather than having one lonely shoestore, it’s better to cluster a half-dozen shoestores together in one mall. That way, a shoe emporium is created; customers are attracted to the wide choice.
Much the same principle can apply to entire malls, if conditions are right. In the case of General Growth’s Galleria and Caruso’s Americana, they’re next to each other so customers easily can walk between them, and they’re complementary – they appeal to customers with somewhat different budgets. It’s a good, symbiotic situation.
No doubt a fair number of folks are attracted to the glamorous Americana, where they ooh and ahh at the upscale stores, then walk over to the Galleria, where they buy stuff at the more midscale shops. Makes you wonder if the Galleria is the one to benefit the most from this arrangement.
Looking back, it is mystifying how General Growth – a retail company – so underestimated the clustering magic and decided to fight Caruso years ago. What followed from that decision was like a scene from an action movie, when a bully picks a fight with an unassuming guy who’s played by Steven Seagal.
You may recall General Growth bankrolled a referendum campaign, putting Caruso’s project up to a public vote. Glendale voters in 2004 sided with Caruso. But General Growth didn’t stop. It followed with a lawsuit claiming the city’s selection of Caruso’s project was an unfair process. Caruso countersued, accusing General Growth of intimidating prospective tenants, specifically the Cheesecake Factory, from opening in Americana.
Jurors a few years ago sided with Caruso big time. He eventually got $48 million from General Growth.
General Growth finally stopped fighting. But now you have to wonder if the fight is really finished.
Caruso recently lured Nordstrom from the Galleria. What’s more, he bought Nordstrom’s existing space in the Galleria. That makes Caruso a tenant in General Growth’s mall – with a tenant’s rights.
Now, Caruso has plans for the soon-to-be-vacant space. As you can read in the aforementioned article, Caruso would “like to see it come down and opened up, make it much more exciting and relevant to the way people shop today.”
He also described the Galleria as tired and in need of a freshening. “There’s no doubt it’s a great mall, but it could be a lot better.”
To which a spokeswoman responded that “he only owns the one building” and “doesn’t … control what comes in here.”
OK, so those aren’t exactly fighting words. But they’re close. They’re not the words General Growth should be using.
Executives of General Growth were wrong to fight Caruso years ago. And they’d be wrong to fight him now that he’s in the Galleria. Given Caruso’s impressive accomplishments – the Grove, etc. – the General Growth people should welcome him in, accept his suggestions, cover his tailor account.
They’d probably find that they’d benefit by having Caruso as a partner instead of a combatant.
Charles Crumpley is editor of the Business Journal. He can be reached at firstname.lastname@example.org.
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