L.A.'s Walt Disney of Shopping: Rick Caruso on Expansion Plans, Whose Advice He Seeks in Hollywood
The billionaire developer of L.A.'s The Grove — which draws more yearly visitors than Disneyland and generates the second-highest revenue per square foot of any shopping center in the U.S. — now has his sights on Los Angeles' wealthy Pacific Palisades neighborhood as the visionary goes after the one thing he still hasn't won: critical respect.
This story first appeared in the May 29 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
Los Angeles has the beaches, the hills and another outdoor wonder that every tourist visits: The Grove. With its Neo-Deco facades, chiming trolley and dancing fountains, the shopping center often has been likened to the Disneyland of retail. Except instead of Mickey and Minnie, it's Gwen Stefani, Halle Berry and Jessica Alba wandering the cobbled walkways around Barneys New York and the Apple Store. The Grove actually gets more visitors than the Happiest Place on Earth (20 million versus 16 million in 2013), but more important, the property drives business; in a 2014 analysis conducted by real estate research firm Green Street Advisors, the 600,000-square-foot shopping center ranked No. 2 in the U.S. for revenue per square foot (behind Bal Harbour Shops in Florida). In a city that famously lacks a center, it's arguably Los Angeles' de facto town square — to the rapture of many, the horror of others.
If Walt Disney was the visionary behind theme park America, developer Rick Caruso — who has made a fortune (pegged between $1.7 billion and $3 billion) on teeming open-air retail centers across Los Angeles County, with The Grove as his crown jewel — is his shopping equivalent. One who speaks in the fluent corporate lingo of Robert Iger: "Market share is interesting and important," says Caruso. "But what's more important is 'heart share,' the emotional connection."
No wonder Caruso, 55, is so drawn to Hollywood. He has a habit of calling up entertainment players he admires for pick-your-brain lunches (Imagine's Brian Grazer, Marvel's Kevin Feige, Lionsgate's Kevin Beggs), and his properties, 3 million square feet of retail, draw from his enchantment with cinematic production. "We learned a lot from studio lighting," he says. "We're probably the largest buyer of pink lights in the world. People look better, and it provides a warm glow." During the late 1990s, he hired veteran production designer Richard Sawyer (The Two Jakes, The Three Amigos) to help execute his retail visions. "He is probably the closest developer that might equate to a director-producer," says Sawyer. "One key thing I brought from motion pictures to real estate is just massaging things until they feel right."
Whatever you do, don't insult Caruso by suggesting he and his 200-plus employees at privately held Caruso Affiliated build malls. He insists that they construct narratives, scenes, feelings and moods (that co-exist with tenants who on average reportedly make more than $2,000 in sales per square foot). "We're in the content and experience business," he says. "We're never in the shopping business. The minute we say that, we're going to start following those rules."
He has brought his vision to Calabasas (The Commons) and to Marina del Rey (Waterside) and now is scouting properties in the oft-filmed, formerly dystopian, rapidly gentrifying downtown L.A. Arts District: "You can't invent that — those old warehouses, that backlot."
Twice an hour, shoppers at The Grove are treated to dancing fountains that are synchronized to show tunes by Frank Sinatra and Dean Martin.
Today, Caruso is strolling Swarthmore Avenue in Pacific Palisades, the site of his next project, now under construction and set to open in fall 2017. "It's just 10 minutes from my house in Brentwood, so this one is that much more personal," says Caruso of his plan for this stretch, which despite the neighborhood's exclusivity (the current median home value, according to Zillow, is $2.5 million) has fallen into discordant decay over decades due to prolonged legal squabbling among the previous ownership group.
Studded with Cape Cod mansions and gleaming white picket fences, the district, nicknamed Mayberry With Money, is thick with Hollywood players, a perfect habitat for a builder whose industry friends include Jerry Weintraub and Jimmy Iovine. Steven Spielberg lives blocks from Tom Hanks, J.J. Abrams near Diane Keaton; resident Larry David's vision of one percent Westside foibles, Curb Your Enthusiasm, was set here.
The 27,000-population Palisades, a community that is 88.6 percent white (compared with L.A.'s overall 49.8 percent) and has an average household income of $168,000, inspires Norman Rockwell fever dreams in Caruso, a master contriver of nostalgia who lights up as he strides through the area, outlining his plans as he is eagerly accosted by adoring locals. A boyish earnestness permeates his exquisitely custom-tailored suit. "There's a cohesiveness to the Palisades that I've never seen in any area that we've ever developed. It has nothing to do with the wealth," he proclaims, before pinwheeling in reverie: "They have their own flag! An honorary mayor! Their own Fourth of July parade! It's just so beautiful, so basic, so steeped in family values. It's a big slice of American pie."
In all of his projects, Caruso, a devout Catholic father of four married to wife Tina for 28 years, has tapped into and profited from a certain conservatism, or at least a tug of traditionalism, in the heart of ostensibly liberal Los Angeles. (Caruso, a once and future potential candidate for L.A. mayor, cut commercials for the 2013 race before deciding he didn't want to burden his family. The Republican turned independent has said, "I don't think either party has the right answers.") The wealthy son of the founder of Dollar Rent a Car who grew up in the Hollywood Hills and Beverly Hills, he worked for years as a real estate attorney after an undergrad stint at USC and Pepperdine Law School, then broke into the property game with a small duplex in Westwood. These days, he marches through every property in his far-flung fiefdom at least twice a month, lieutenants in tow, avid about micromanaging the upkeep of sensory details, whether it's the body language of valet staff or a bit of gum on the sidewalk.
Caruso's seduction of Los Angeles is rooted in Capraesque sincerity ("I believe that everybody is aspirational"). His own aspirations have worked out brilliantly; he owns a 13,500-square-foot home in Brentwood Park and a 216-foot superyacht, Invictus, with six bedrooms and a grand piano. His achievements in the retail sphere call to mind century-ago department-store-sector disrupter Harry Selfridge (portrayed by Jeremy Piven on PBS' Mr. Selfridge), who similarly modernized and democratized ideals of allure and desire into places where people feel comfortable — before purchasing a corset, of course, or today, yoga pants.
The Americana at Brand, located in Glendale, surrounds a 2-acre park and has an animated fountain, a trolley-car shuttle and a 238-unit luxury apartment complex.
Caruso's aesthetic makes him easy to caricature; indeed, he has been crucified on real estate and urbanism websites. "I thought he was this Mr. Burns of urbanism, plotting this evil empire of his malls, taking over for this authentic architecture of this city — the fakeness and the idealized main street," says Alissa Walker, urbanism editor at Gizmodo, who admits she's come full circle since meeting Caruso. "It really bothers people who are looking at design and urbanism and the city."
Yet Caruso is no Donald Trump; he has depth and an ideology. Paco Underhill, author of Call of the Mall and a top scholar of retail environments, notes that Caruso's market achievement with his work is "his awareness of place-making," his ability to build shopping centers that let people "just exist in a different world."
Adds Anne Sweeney, former president of Disney-ABC Television Group and a longtime Caruso pal: "His spaces are stories. People don't just go to shop. They sit, they watch, they take in the environments. In a city where we're limited on public spaces, it becomes more special. I doubt anyone would call them malls."
Caruso bought 3 acres of downtown Palisades, including a full block of both sides of Swarthmore, despite the legal tussling and attendant NIMBY whispering. He's notorious for his disarming charm at community meetings; locals concerned that, heaven forbid, something so down-market as a Trader Joe's might arrive now hail a conquering hero. (One speed bump: His firm had to recut a promotional video to add diversity when an outcry arose over the lack of nonwhite faces. Caruso is direct about the snafu: "We should have been more sensitive to that. It certainly wasn't intended.")
Instead of the Italianate or deco flair he has cultivated on previous retail efforts, for the Palisades he's favoring an East Coast mien fitting for the neighborhood: a whiff of Greenwich, Conn., or Rye, N.Y. Elsewhere, his expansion plans include an in-the-works $155 million, 20-story luxury condo tower adjacent to the Beverly Center on La Cienega Boulevard and a revival of the beachfront Miramar hotel in celebrity-stocked Montecito, just east of Santa Barbara.
He calls his strategy — to integrate his Palisades plan around existing streets for the first time and to populate it with "smaller, more curated" (and higher-end) merchandisers rather than the national chains he's known for (J.Crew, Nordstrom) — "a pivot project," as he abandons a formula that has worked so well in the past.
Caruso says his Palisades project will be filled with smaller-format boutiques and "interesting" restaurants that aren't anywhere else in the region. He proudly notes that he's turned down offers to replicate The Grove across the country — "that would be like telling Spielberg, 'Pump out more movies': It would just be so mentally boring to go cookie-cutter; who cares?"
Urbanists knock his shopping centers as sentimental theme parks — ersatz, privatized civic fantasies. (A characteristic comment posted on Curbed mused that "The Grove is a microcosm of L.A.: a hyperartificial creation striving for an imagined authenticity that never existed in the first place.") Caruso, though, is keen to his critics but not especially prickly about them, bandying the populist's belief in the rightness of the crowd. "A lot of the experts criticize The Grove, that it was manufactured," says Caruso. "Well, somehow 20 million people a year seem to feel it's real and it's right. We transport them to a better place."
This block of Swarthmore Avenue, between Sunset Boulevard and Monument Street, will anchor Caruso’s development in the Palisades.
Waldo Fernandez, a top Hollywood interior designer (Brad Pitt, Tobey Maguire) with such corporate clients as Soho House and Spago, has assisted Caruso on a few projects. "Rick knows what the public needs," says Fernandez. "Everything is thought out. It's impeccable."
Designer Diane von Furstenberg, a tenant at The Grove and Americana at Brand in Glendale, says Caruso's properties indeed have special character. "His places are very much the personality of the owner: his charisma, his intelligence, his family-centeredness," says von Furstenberg. "He's Italian, you know?"
Caruso says that he's trying to re-create a kind of golden moment he first remembers from a sunset visit to Rome's Piazza del Popolo as a teen. "All of a sudden everything just starts happening — the cafes start lighting up, kids start riding their bikes, it all just came to life." He says this at a cafe at The Grove, his Tom Ford shades glinting as he gazes across a piazza he's conjured. "I want to contribute to that."
Sentimentality is core to Caruso's enterprise. It explains The Grove's old-timey trolley designed by original Disney Imagineer George McGinnis. Recently, there have been talks and feasibility studies done with the city's Department of Transportation about expanding the rail to LACMA and West Hollywood. The trolley, along with other not obviously transactional Caruso decisions such as free blankets for families taking selfies on manicured grass next to the dancing fountains ("I'd never do AstroTurf; nobody would want to sit on that"), are meant to "slow you down, so you'll spend the day. The original model for shopping centers was to get people in and out as quickly as possible, to keep turning that parking lot. My model is the opposite."
An artist’s conception of the Caruso project, which is set to be completed in fall 2017.
Generally affable, he nonetheless won't hesitate to criticize his competitors, which include downtown's AEG-owned L.A. Live ("It's ugly and too big") as well as the super-contemporary Westfield Century City mall, run by his retail nemesis, Peter Lowy. "His saying is, 'If it grows or flows, it goes,' " Caruso says of his philosophical archrival's comparative antipathy for spending on greenery and waterworks at his properties. "He puts a cash register on everything. The minute you do that, you are destined to be in a race to the bottom." (Lowy declined comment.)
Like any good producer or director, Caruso always is determined to see his vision come to life. Inspired by the historic movie palaces along downtown L.A.'s Broadway, Caruso parted ways with the Loews chain, his original exhibition partner at The Grove, during construction. Loews wouldn't go in for his grand vision — "I told my team, 'They're going to build something really cheap' " — so he financed the theater complex himself (Pacific Theatres now runs the location): crystal chandeliers up the wazoo, a lobby with soaring 35-foot-tall ceilings, an ornately lit marquee and old-school uniforms. "We want glamour back in going to the movies. Now it becomes the No. 1 theater in the Western United States," says Caruso (citing internal figures of revenue per seat). "Same damn movies, same damn popcorn."
But this is not the same damn shopping mall — or "lifestyle center," as Caruso prefers. It's now 2 p.m. There are mothers pushing Bugaboos, couples of all ages holding hands, kids shrieking in delight. No one seems rushed or harried. And people are carrying shopping bags. Lots of them. "Glamour incorporates a lot of things," he says, seated under an umbrella on a restaurant terrace across from that profitable theater, his synchronized fountains in between, an aspirational hum of humanity playing out on his stage set before him. "It's a sense of scale, it's a sense of light, it's a sense of beauty. But also, importantly: Time slows down. It lets you take life in."