PRINT THIS STORY:

CHANGE TEXT SIZE:

LOCAL FLAVORS

Forest City’s Hispanic Retail Group targets strong Latino markets

BY DEBRA HAZEL

The building of a new supermarket in an area that needs one is surely something to celebrate. But the grand opening of a Gigante at Hollywood Park Marketplace in February, in the Los Angeles suburb of Inglewood, means much more. This 47,000-square-foot Mexican grocery store is the first achievement of Hispanic Retail Group, an entity formed by Forest City Enterprises with two partners to develop projects in Hispanic markets.

Hispanic Retail, which was about five years in the making, is Forest City’s attempt to reach out to a group that many say they cannot afford to ignore.

“It’s a young, expanding population, and it became obvious we had to understand this population,” said Brian M. Jones, president of Forest City California, Los Angeles. “Their needs weren’t being met. We also figured out that a bunch of white guys speaking English wouldn’t do it. We had to form a company within a company.”

Forest City began studying the growth of Los Angeles’ Hispanic population about five years ago. The firm hired Andres Friedman, a Mexico City-born, Harvard-educated real estate professional, to oversee a three-pronged approach to the market. Forest City supplies the development expertise. It has joined The Legaspi Co., a Montebello, Calif.-based real estate services firm that specializes in marketing to Hispanics, and Beverly Hills, Calif.-based Streetscape Equities, which supplies the institutional background. The group launched officially last May.

The timing could not have been better, says Erica Prosper, director of strategy at Garcia 360 Degrees, a San Antonio-based Hispanic communications firm. According to the U.S. Census Bureau, Hispanics, which constituted 12.5 percent of the U.S. population in 2000, will grow to 14.6 percent by 2010 and to 17 percent by 2020.

“If it had been [done] earlier, Hispanics wouldn’t have had the demographic clout,” Prosper said.

But the Hispanic population of Inglewood (46 percent, according to the 2000 census) clearly needed attention, says Friedman. Marketing to Hispanics goes well beyond having a bilingual staff and signage in a center, he adds. It requires knowledge that can only be acquired on the ground. Even census figures do not give an accurate representation of the market, he says, because of the number of undocumented Hispanics in the area. Density can often make up for what would seem to be weak income figures.

“If you see [average household incomes of] $15,000 per year, it is not very encouraging,” Friedman said. “But if you visit, you see what the city is all about.”

The Hispanic community is not monolithic, he says. Different generations have their own spending patterns, and even architectural tastes vary among groups from different parts of Mexico. Hispanic Retail also has to see that its projects have appeal beyond Hispanic communities. Inglewood, for instance, has historically been a black neighborhood, and Hispanics are only 40 percent of the population. Accordingly, Hollywood Park Marketplace has tenants with universal appeal, including Home Depot, In-N-Out Burger, Staples and Target.

“In Los Angeles, there is so much crossover culture,” Friedman said. And Hispanics themselves want more than just goods from Mexico. “If you have three generations in a market, they love their enchiladas, but they also want Starbucks.”

Stores themselves will have to adapt their merchandise mix. Immigrants often favor fresh produce, but as the market matures, the desire for frozen foods grows, says Friedman. It helps that manufacturers, too, are beginning to understand the importance of the Hispanic market. Many products now have instructions and labels in both Spanish and English.

“Gigante brings in a lot of product people are familiar with but also will have American products,” Prosper said. “Hispanics may want to feel a closer connection [to their heritage], but they want the same quality goods.”

Gigante USA is a division of Mexico’s third-largest retailer, Grupo Gigante, which operates about 270 stores. (Gigante had wanted to open eight units annually in the U.S., but a decline in sales in Mexico slowed its expansion plans.)

Forest City’s investment partners in Hispanic Retail, which include the California State Teachers’ Retirement System, have injected $100 million to pursue development in markets with a 40 percent Hispanic population within a one-mile radius over the next 24 months. There is some flexibility on these criteria too. The Sacramento area, for example, has a significant Hispanic population, but it is more spread out geographically. Still, Hispanic Retail is looking for opportunities there.

The group has about 15 projects in the pipeline. Hispanic Retail’s centers are not likely to exceed 175,000 square feet, much smaller than typical Forest City centers, and supermarkets will probably be the anchors. The smaller size limits risk and provides the opportunity to learn more about doing business in Hispanic markets, executives say. For now, Hispanic Retail is looking for opportunities in California and later could expand to Arizona.

But the Hispanic population is growing in more than just the border states, Prosper says. Rising home prices in the traditional markets, such as Los Angeles and Houston, have led Hispanic immigrants to move inland to the Midwest, including such states as Indiana. That means that all developers should be looking at this market.

“The best way to integrate the Hispanic shoppers and preferences into malls is to find the chain that attracts Hispanics — ones with a lower price point and a more family orientation,” Prosper said.

But as with all centers, Hispanic Retail will have to adapt to each individual community. That’s something executives say they have succeeded in doing at Hollywood Park Marketplace, which caters to consumers that want a little bit of their homeland, while not rejecting the best of their new home. “It was really exciting to see the community’s reaction,” Friedman said. “People had tears in their eyes.”