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TALISMAN, FASHION OUTLET: LOVE AT FIRST SIGHT

BY LINDA HUMPHERS

Sales per square foot have risen to $450 from $300 since 2001.

Simon Property Group, Chelsea Property Group’s partner in the Las Vegas Premium Outlets that opened on the Strip last month (see story), is hardly the only mall developer making a foray into outlet centers. Coral Gables, Fla.-based Talisman Cos. is among those ranks.

The first time Talisman President James Schlesinger set his eyes on Fashion Outlet Las Vegas in March 2000, he was entranced.

“What a sight,” Schlesinger recalls. “It was unlike any center I’d ever seen,” he said, citing everything from the road signage to the polished opaque concrete floors reflecting 4,000 track lights. “I fell in love right then.”

(Talisman’s portfolio, which totals 5 million square feet, includes power centers and regional malls in Atlanta; Baltimore; Knoxville, Tenn.; Miami; and Minneapolis, as well as Las Vegas.)

His 25 years of experience in retail real estate notwithstanding, Schlesinger says he has never been so taken with a project as he was with Fashion Outlet — nestled in the mountains 30 miles south of Las Vegas and adjacent to MGM Mirage’s Primm Resorts on Interstate 15. His immediate response was to shop the center. His next was to invest in it. By September 2000 he had bought it from TrizecHahn and Gordon Cos. for more than $100 per square foot, with financing from GMAC Commercial Mortgage.

“I was hooked,” he said. “I thought the center would do better with an independent owner who would take the time to nurture it. But I also immediately realized that the center’s morale had dipped precariously low. It simply hadn’t been properly marketed — TrizecHahn basically considered it to be an orphan project that didn’t fit in their plans.”

Though Schlesinger has a strong record for reviving tired projects, he is the first to admit that he was a neophyte in the outlet sector.

“The first thing I had to do was hire a team,” he said, “which I did by dipping into Prime Retail. Prime did a good job with marketing when it was strong, so I went after their best people.” (Baltimore-based Prime Retail, an owner of 37 outlets, has long suffered from declining revenues and occupancy. The firm announced in July that the Lakewood, N.J.-based Lightstone Group would be acquiring it.)

Former Prime executives who are now part of the Fashion Outlets crew include Ann M. Ackerman, CMD, director of marketing; Bradford R. Freeman, the center’s general manager; Christine C. Szalay, tourism director; and Glenn C. Miller, CMD, on-site marketing director. Schlesinger also hired on a consulting basis Jeannie M. Fillatti, president of her own leasing company, CenterPlan, and a key leasing person on various Mills Corp. projects.

“I had two problems,” he said. “I had to get the consumers’ interest, then reinvent the mall for the tenants so that they knew there was a real team on board.”

The team’s first priority was to analyze the mall’s appeal and customer base. Originally designed to be a premium-brand center, the project was heavily dependent on Japanese tourists. “I instantly recognized that the Japanese would stop coming, because there were so many [financial] issues over there. I knew we had to broaden our approach.”

So a three-step plan emerged: develop an international marketing program specifically targeting Chinese and Mexican tourists; capitalize on the center’s location, especially the 28 million motorists who drive by on I-15, the only connector road between Los Angeles and Las Vegas; and attract locals, who comprised less than 5 percent of Fashion Outlet’s customer base. “It doesn’t take a rocket scientist to see that with 1.5 million people in the market, we should be getting more locals,” he said. “The center is an easy drive, really, and no more time-consuming than maneuvering around Las Vegas.”

Schlesinger says he knew that leasing and marketing would have to work in tandem to draw in the newly targeted customers, so he started remerchandising.

“Like most outlet centers, we attract mostly women, and that’s not surprising,” he said. “But I thought we should be getting more family traffic, so we’ve really diversified our merchandising.”

The company created a family wing with Maternity Works and added more junior fashion. There are also ABC Children’s Fashion, Benzene, Izod, KB Toy and Old Navy, “to attract the younger, middle-market audience,” he said.

The center is increasing the number of food tenants, with a 275-seat Evel Knievel Xperience Café, celebrating America’s most famous daredevil, that opened in August, as well as an International House of Pancakes and a Subway that are scheduled to open in the center’s outparcels this year. The food court has been filled out, and the center now offers a dozen food retailers, including Mrs. Field’s, Panda Express, Sbarro and Starbucks.

The new owner is also adding to the powerful draw of the premium tenants inherited from TrizecHahn — Burberry, Escada, Neiman Marcus Last Call, Polo, St. John and Tod’s among them — by bringing in BCBG, Coach, Cole Hahn, Tahari, Tommy Bahama and others.

Meanwhile, the center established marketing partnerships with local casino-hotels, tour operators and other organizations, and established shuttle buses. Schlesinger estimates that his company has spent $1.5 million on marketing and leasing since acquiring the project, yet some of the center’s most revenue-generating programs, particularly the partnerships, haven’t been costly.

“Fortunately, we’ve got the power of MGM Mirage behind us,” he said, citing but one example of a partnership program. “They send their high rollers to our center. We get things from them you can’t buy.”

The center has been ranked as having the nation’s No. 1 VIP Tourism program by Shop America Alliance, a marketing partnership comprising 300 U.S. shopping centers. In addition, Fashion Outlets received two important awards in 2002: the SASI Award (also from Shop America Alliance), for the VIP program, and a 2002 MAXI Merit Award from ICSC, recognizing excellence in consumer and trade advertising worldwide for its “Up to 75 Percent Off” campaign.

According to Schlesinger, the center now gets visits from more than 5,000 domestic and international tour groups, for a total of 173,830 customers annually. Since September 2001, sales have risen to $450 per square foot from $300 per square foot, while tenant occupancy has climbed to 97 percent from 60 percent.

“One hundred percent occupancy is just around the corner,” Schlesinger said. “We have two very small spaces left that are in the commitment stage now.” In just two years, the Talisman team has signed 39 new tenants, for a total of 132,141 square feet.

Schlesinger says he is convinced that his location is a gem.

“Vehicular traffic on I-15 has increased 8.6 percent since [Sept. 11], which devastated many tourism areas,” he said. He points out that one-third of the traffic on I-15 now exits at Primm. “We recovered very quickly, because we’re not so dependent on fly-in traffic. The increase in traffic on I-15 is directly attributable, I believe, to the changes in air travel. The population of Las Vegas has moved south, and Henderson, which is a rapidly growing southern suburb, is just a 15-minute drive from here. We’ve become their regional mall.”

Some tenants also express their satisfaction with the center.

“Our Wilsons Leather Outlet there continues to perform above our expectations,” said Brian R. Bootay, vice president of real estate and construction. “Not only did we start off strong at the center, but we have continued to show sales increases in 2001.”

“I strongly support the center,” said Jodi Sandman, a former vice president at Escada who has since left the company. “It’s a unique center with one of the strongest upscale designer tenant mixes in our industry.”

Schlesinger says he is well aware that 2003 is a soft year for retailing, but he adds that he’s smitten by the outlet industry and is seriously planning the center’s second phase. That could include some bigger boxes and local or regional retailers which, to date, have not gone into outlet centers.

“I’m enjoying this industry more than I ever thought I would,” he said. “It’s more challenging than a power center, which is like watching paint dry. In those centers, once you have tenants, you step back and let them do the marketing. Outlet centers are more fun than regional malls, where all your energy is concentrated on a five-mile radius. This is true entrepreneurship. You have to have marketing savvy, and you really talk to your tenants.

“Am I making money yet? Yes, I am,” he said. “And I’m having fun. I’ve never had more joy, satisfaction or pleasure in running any business.”

Linda Humphers is editor-in-chief of Value Retail News, in which this article originally appeared.

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