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U.S. VIRGIN ISLANDS ATTRACT BIG BOXES, LUXE STORES

By Steve Bergsman

When travel guide Frommer’s describes the U.S. Virgin Islands as the “shopping mecca of the Caribbean,” it is referring mainly to Charlotte Amalie, the capital of the island of St. Thomas, where the cruise ships dock and the tourists come to buy. But new retail development in Amalie aims for a broader mix of clientele, including locals, residents of neighboring islands and affluent visitors who have second homes in the Virgin Islands or arrive on their own yacht.

A few big-box retailers have already come to St. Thomas and report doing a roaring business by tapping into these divergent markets. The island now boasts two Kmarts, for instance, one of which anchors the island’s only fully enclosed center, Tutu Park Mall. At just 106,000 square feet, the store has consistently ranked in the top three out of 30 regional Kmart stores in sales terms, says Bill Mahaffey, one of the principals who own the mall. “We think we are number one in the whole chain on sales per square foot.” The unit typically posts about $395 in sales per square foot.

Home Depot came to St. Thomas in December 2003 and has been very successful, says William Otto, who as owner of David Jones Real Estate helped lure Home Depot to the island. “They were very reluctant to come here, because they didn’t understand the nature of our business,” Otto said. “We had to walk them through the demographics of St. Thomas plus the neighboring islands, because those residents also come here to shop.”

The island has a population of 50,000, but sales at the Tutu Park Mall Kmart are more akin to those of a population five times that size, says Mahaffey. “That’s because St. Thomas is really the gateway shopping location for down islands, and that includes BVI [British Virgin Islands], St. Kitts, Dominica and all the Lesser Antilles.”

Not so long ago, islanders had to come to the mainland to do much of their shopping. “If I remember correctly, about 17 percent of total Home Depot sales in south Florida came from the Virgin Islands and other places in the Caribbean,” Otto said. “When factoring in the cost of airfare and shipping materials, they made the wise decision to have a presence here.”

Otto helped draw PriceSmart to the island too, in 2001; Cost-U-Less, another warehouse-club-type store, has also done well there.

Aiming for a completely different market is Yacht Haven Grande, a $180 million mixed-use development at Amalie on the bay, where the cruise ships arrive. Yacht Haven Grande will eventually include a marina for yachts, along with offices, condominiums, a hotel and some 78,000 square feet of upscale retail and restaurants. The first phase opened in March, including the marina and some of the stores. The owner of Yacht Haven Grande is Fort Lauderdale, Fla.-based Island Global Yachting, an affiliate of Island Capital Group, of New York City. Andrew Farkas, formerly chairman and CEO of Insignia Financial Group, founded both companies.

The project will eventually contain 40 shops, 14 of which were open in June, says Alex Andrade, general manager of Yacht Haven Grande. Among the stores that have already opened or signed leases are Bebe, Bulgari, Chico’s, Coach, Diamonds International, Louis Vuitton and White House Black Market.

“This is a high-end shopping location,” said Andrade. “What we wanted to create was a destination where you can park your boat, come and eat and shop. We are also located right next to the cruise ship dock. That’s why we built here, to get all three markets — yachters, cruise ship tourists and the high-income families who live on the island during the year.”

Meanwhile, the 470,000-square-foot (including outlying buildings) Tutu Park Mall, which opened in 1993, has expansion plans of it own, involving a 27-acre parcel behind it. “The government is building a new library just beyond the Plaza Extra Foods at the west entrance to the mall, and with it will come a new road,” said Donna Liska, the mall’s general manager. “We have plans to add space to the mall once the road is finalized.”

Currently, all the outparcels are full, and the mall itself is 95 percent occupied with a mix of national and local retailers, plus some service providers, including a post office, a family clinic and the largest laundry on the island. Liska declined to specify what the expansion is to include, beyond mentioning talks with a bookstore chain.

In short, the Virgin Islands might be a vacation resort for most people, but it is a place of increasingly hard work for retail developers and retailers.