SHELLY GARCIA Staff Reporter One of the first things Rick Caruso did when he began to develop the Promenade at Westlake Village was to ask nearby homeowners what they wanted in a shopping center. When they suggested a Bristol Farms market, Caruso went to the chain and invited them to sign on. Bristol Farms turned down the Santa Monica-based developer, saying that the area did not meet its marketing criteria. But when Caruso reported back to the homeowners, they were insistent. So Caruso enlisted the help of the community. He called the homeowners together, gave them the name and phone number of an executive at Bristol Farms, and encouraged the residents to call. “Tell him how much you want Bristol Farms out here,” Caruso recalls saying. The strategy worked, and Caruso Affiliated Holdings added The Promenade to a list of centers that includes the Encino Marketplace, Moorpark at Thousand Oaks and, most recently the Commons at Calabasas, centers other developers had tried for years and failed to complete because of community opposition. “It usually comes down to very little things that the homeowners want,” Caruso says, “and if you listen to them, my experience has been that you end up, for the most part, with a much better project.” Question: How do you approach development projects in these communities? Answer: Our tagline is, “We don’t build retail centers, we build the center of town.” The theory that I live by is that if we can build something that people want to come to for no other reason than just to hang out, then when they need to shop or want to shop, that’s where they’re going to come back. Q: What makes your developments town centers instead of shopping centers? A: We have over 1,000 trees on this property in Calabasas, and some of the trees are 40 and 50 feet high. You wouldn’t find that in a retail center. Where you would find that is in a resort. You go to a resort to get away and be in a nice place, and that’s what we want people to do here. So that comes down to the limestone we’re using on the buildings. It comes down to the Italian cobblestones. All of the lamp fixtures have been made in Italy and shipped over. There are hand-carved limestone columns going in throughout the project. The tiles that are on the roofs are handmade. There are seven bronze sculptures that we commissioned and four original limestone sculptures from the 18th century for the gardens that we imported from France. Q: Is it true that you hired a Hollywood set designer to help with the design of the Commons? A: I wanted to keep pushing the limits on the architectural style. So I hired Richard Sawyer and I said, “Give me a real upscale European street,” and it was gorgeous, but it would never work from a retail point of view. So I married him with our vice president of architecture, David Williams, and said, “OK, now make it work from a retail standpoint.” What (Sawyer) did for us is, he got us thinking about different materials like limestone finishes and different kinds of architectural designs that normally a retail architect wouldn’t think of. Q: Isn’t your approach very expensive? A: The normal retail center, a sprayed stucco structure with a couple little details on it, will cost $35 to $40 a foot. Our buildings run somewhere in the neighborhood of $90 to $100 a square foot. So it’s over twice as expensive. Q: How do you recoup those costs? A: We charge higher rents, twice as much (as other strip centers), but our tenants do a lot higher sales per square foot. In Westlake, retailers on average do a little over $400 (in sales) a square foot. That would be competitive with Century City. We have retailers in Westlake that are doing $1,000 a square foot. We have restaurants that are doing over $1,000 a foot. That’s really huge. Q: Still, that’s quite a large investment. How do you justify it in relation to the volatility of the retail marketplace? A: My view is, I’m going to own it forever. We’re willing to spend a lot more money because we’re going to own it for the long term vs. trying to flip it and sell it. The other trick is, I never take development risks. Our projects are usually 90 to 100 percent pre-leased before we start construction, which is different from a lot of developers. Q: Why have you focused on communities that are anti-development? A: I want to be in areas that have, one, a lot of barriers to entry because I hate competition. Two, I want little or no alternatives for our customers to go. And three, when they get on our property, we want to pamper them to death. It’s clean, it’s safe, it’s enjoyable, so we create a great amount of loyalty. Q: What are some of the things you’ve done to win over the communities where you’ve developed projects? A: The site in Encino was called Lake Hayvenhurst (because the previous developer had gone belly-up, leaving a big hole that filled with water when it rained). It was going to be a 400,000-square-foot office tower but homeowners fought them to the end. Instead, we proposed 100,000 square feet of retail, relatively high end, and listened to the homeowners. And the big complaint was whether the buildings would be along the street or pushed to the back with parking along the street. I gave the homeowners the option. Then the second issue was what kind of trees we would be putting in. My attitude was, they’ve got to look at the tree every day, so we took them out to a tree farm and I said, “Pick a tree.” Q: When you come into these projects do you aggressively solicit feedback from the homeowners? A: When we come into a project there’s usually been two or three developers before us, so we take advantage of all the groundwork that’s been laid. We do our homework. We know what people are upset about, what they like, what they don’t like. Then I hold a meeting and I just very simply ask them what they want. Most of the people who are living in these areas are really fairly sophisticated people, so they understand the business decisions you have to make. Nobody wants to spend a half-million dollars or a million on a home and then the only place you have to go is a Costco. You want to have a place where families can hang out and people feel safe and teenagers can be there, and there’s entertainment at night. We spend a lot of money on those things. That’s all part of a mix. Q: How did you get started in this business? A: I was a lawyer by trade. I practiced corporate finance and did a lot of work with real estate syndicators for six years. In those days it was a big thing to do the public limited partnerships, and I always enjoyed the other side of the table more than the legal side of the table. So I cut my teeth on mostly industrial developments, and I always had a passion for the retail side of it. The retail side is fun because people get to enjoy what you create. You can see a response to it. You can see pleasure gained by it, you see kids running around and enjoying it, and that’s what really motivates me every day.