Avenue Turnaround Slowly Shaping Up

More than three years ago, the new owners of the Shops at Palos Verdes in affluent Rolling Hills Estates, Calif., decided to peel the roof off the aging mall, put in upscale Saks Fifth Avenue and add brand-name retailers Tommy Hilfiger and Gap.

Today, one question dogs officials at Cousins Properties, the developer of the renamed Avenue of the Peninsula shopping center in southwest Los Angeles County: Where is everybody?

The $78 million makeover is still not attracting the critical mass of shoppers Cousins would have liked. The company admits the blame lies squarely on its shoulders.

“Our PR approach during construction was inadequate,” said Mike Cohn, senior vice president of the Atlanta-based developer. “We didn’t do an effective job of communicating to the local residents what we were building, why we were changing formats and what our message was. That led to some resistance at first and then some reluctance to patronize.”

To combat the chilly reception it has received, the outdoor mall has implemented a new marketing campaign to tout its roster of tenants. The center is 88 percent occupied, and the arrival of a Borders bookstore this fall will raise tenancy to 92 percent.

Last year, Cousins began working with a marketing firm to more aggressively promote the center as a lifestyle and brand it as the “Avenue of Famous Names,” where shoppers would find retailers exclusive to the area. Late last year, 30-second cable spots appeared on the Discovery Channel, CNN, A&E and other cable networks. The campaign included advertisements in local newspapers and a periodic, 50,000-piece direct mail letter.

The messages have had an impact, according to Cohn. Though he wouldn’t release sales or traffic figures, he noted that both have increased year-to-date. The center’s comparative-store sales rose about 4 1/2 percent last year, he said.

“The campaign was well-received and proj-ect awareness is getting out there,” Cohn said. “Our sales are in excess of what we would have projected at this point.”

Still, analysts say the center is not hitting the national average of mall sales-per-square-foot, which is $341, according to the International Council of Shopping Centers.

“This is the right place in theory given the income, so we’re scratching our heads—it’s not clear why this center isn’t working better,” said David Shulman, a senior real estate investment trust analyst at Lehman Brothers.

Part of the reason is competition. The Avenue’s location gives it access to enviable demographics, with an average household income of $100,900 in the area, but the center must outdraw other nearby malls, including Del Amo Fashion Center in Torrance, Manhattan Village Mall in Manhattan Beach, and the Galleria at South Bay in Redondo Beach, many of which are sprucing up their own properties.

Currently, Del Amo Fashion Center is in the planning stages for the renovation of 200,000 square feet of space following the closure of its Montgomery Ward department store last year. Manhattan Village Mall is in the midst of a major overhaul with the removal of its food court, a new beach-oriented design theme and the addition of retailers Williams-Sonoma, Pottery Barn, Ann Taylor Loft, White House/Black Market and Origins, according to Rosemary Lackow, senior planner with the city of Manhattan Beach.

In addition, Cohn sites a few issues that prevented the Avenue from a stronger start. After closing the existing center, which had already lost Macy’s and Robinsons-May, in late 1998, Cousins embarked on its nine-month renovation, promising new retailers they would open the revamped mall before Christmas of 1999.

The Avenue did open, but with only about a dozen tenants, including Talbots, Ann Taylor, Chico’s and Saks Fifth Avenue. At 30 percent occupancy, it was a tough sell considering the 13-screen Regal Cinemas didn’t open until April 2000, which was later than planned.

“Sales were actually decent [that first year] with what retailers we had,” said Cohn, adding that it was “disappointing for both parties” that the theaters didn’t open on time.

Sales did continue to rise with the arrival of J. Jill, Gap, Banana Republic, J. Crew, Williams-Sonoma and Pottery Barn in the next year but not at the clip mall owners had anticipated.

Along the way, a few stores have come and gone either due to the wrong fit or their own financial woes. Upscale stereo retailer Bang & Olufsen only lasted a few months. Pure Linens, an upscale division of Strouds’ linens, closed as part of the company’s reorganization efforts following bankruptcy. And People’s Pottery, a purveyor of handcrafted items, shut down when the company closed all 47 locations last year after declaring bankruptcy.

It also didn’t help that the Avenue’s marketing team was originally stationed out of Atlanta and not at mall headquarters in Palos Verdes, close to the center. Cousins counted on the success of its other Avenue centers on the East Coast to translate into awareness at its newest venue, a strategy that backfired.

“We realized very quickly that the right way to market a specialty center wasn’t cross-country,” Cohn said.

That led to the partnership with an Irvine, Calif.-based marketing firm, the Lapin Consulting Group. The firm’s owner, Judi Lapin, is the senior marketing consultant at the center and plans to broaden its marketing campaign this year to reach more people outside of those in the immediate community.

So far, the existing national chain stores and smaller boutiques at the mall report they have had mixed results.

Saks Fifth Avenue, one of the first stores to open at the site, says the location has proven to be a learning experience in terms of tweaking the inventory mix. The “Main Street” concept store occupies 42,000 square feet—a smaller version of its traditional units, which means all departments don’t carry a full line of wares. General manager Kathy Watson has more than doubled the contemporary line and scaled back the formalwear and suiting in the men’s department, replacing tuxedos with items from Zegna Sport, Ralph Lauren and Tommy Bahama.

In fact, Watson said the store’s bridge collection does well with items from Dana Buchman, Ellen Tracy and Saks private-label line Real Clothes.

“We’re not as label-driven as our sister stores,” Watson said. “It’s not a Beverly Hills client here. Most folks say they’re not Beverly Hills and they’re proud of it.”

She said she remains optimistic about the center’s sales growth and hopes to see that translate to the store.

“[Sales are] still shy of what we’d like to be doing in a Main Street store,” Watson said.

The loose-fitting, flowing looks of Chico’s have met with a strong response, says general manager Carol Nonlov. Along with the company’s name recognition, she credits her active outreach to the community with fashion shows at country clubs and for civic groups as a key component in building awareness of the 3,000-square-foot store.

“Our store has come into its own, and there’s been a greater sense of traffic as people discover it,” Nonlov said. “We’ve been very happy with our results, and our sales have been increasing year over year.”

Competing with large retailers is never easy, says Lindy Cardinale, the owner of the Katelyn’s boutique, which carries designs from Sigrid Olson, Karen Kane, Votre Nom and Michael Stars. But Cardinale believes the mall’s lack of stores that carry a mixed variety of designers has only helped her sales, which have hit about $600,000 a year.

“I’m glad I made the decision to open here,” she said. “Outdoor centers are getting more and more popular, and once people visit us, they keep coming back.”