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SHAPING TOMORROW’S MALLS

PRIME RETAIL’S CARL CHUDNOFSKY TAKES ON THE FIRM’S 10 FULL-PRICED CENTERS

By Jennifer Hopfinger

When Prime Retail went looking for someone to run its full-price malls, the Baltimore-based firm discovered that word of mouth was the best search strategy. In fact, two words in particular emerged again and again from many a mouth: Carl Chudnofsky. ”People in the industry kept telling us that Carl was the best person for the job and that he was looking for a new challenge,” said Bob Brvenik, Prime Retail’s president.

Chudnofsky has some 30 years of retail and shopping center experience, and he will need every day of it in his new job. ”The industry is waiting for the next evolution of the regional mall, and we’re building a new business model,” Brvenik said. Prime Retail believes that this redefinition of the regional mall will involve taking a lifestyle approach and bringing in more restaurants, hotels and entertainment.

”Some of our malls were built 30 years ago, and communities have changed drastically in that time,” said Chudnofsky. ”My biggest challenge is to figure out what tomorrow’s malls should look like. The secondary markets where we operate have become much more competitive, so we need to reposition our properties so they’re a step ahead of the competition.”

Baltimore-based Prime Retail, a subsidiary of The Lightstone Group and the parent company of Prime Outlets, owns 21 outlet centers and 10 full-price malls, totaling some 15 million square feet. The firm has been working to reposition its outlet centers though renovations, expansion and remerchandising, and now it is doing the same on the full-price side. In June Prime Retail named Chudnofsky executive vice president and managing director of the mall division. He will oversee Prime Retail’s full-price mall portfolio.

Chudnofsky says the 682,000-square-foot Brazos Mall, in Lake Jackson, Texas, south of Houston, will be a template for the firm’s full-price mall renovations. Brazos Mall houses about 70 retailers, including Dillard’s and JCPenney, and a 14-screen movie theater. The interior renovation was completed in August, and now the firm is working to expand the exterior with a hotel and some open-air retail.

In August Prime Retail announced plans to roll out about 2 million square feet of outlet center and full-price mall projects over the next two years. The firm’s enclosed Orlando, Fla., outlet center, Prime Outlets International, will be renovated as an open-air, lifestyle outlet center. The center contains about 1 million square feet of retail space, making it the largest outlet center in the U.S. The first phase, completed in August, included the addition of new retailers, such as Calphalon, Neiman Marcus and Starbucks. The second phase, which is slated for completion next spring, will include a Bath & Body Works and a J. Crew Factory Store.

The company also plans to expand and renovate outlet centers next year in St. Augustine, Fla., in Williamsburg, Va., and in Puerto Rico and to open two outlets, in California and Texas, the year after. Prime Retail purchased its 10 regional malls over the past three years. The company has no target number, but it does plan to keep expanding the full-price portfolio by acquiring existing malls and breaking ground on new ones, including a new mall in Hermitage, Pa., that will be a 500,000-square-foot lifestyle and power center and is set for completion in 2009.

Brvenik says Chudnofsky was chosen because of his expertise in managing a large portfolio. ”Carl has a world of experience in owning and operating shopping centers,” Brvenik said. ”People who have been through several business cycles can see around the corner and anticipate what’s going to happen next.”

Chudnofsky ventured into the shopping center industry when New England Development, a mall ownership and development firm based in Newton, Mass., lured him away from Filene’s, the now-renamed department store chain owned by Federated Department Stores. Chudnofsky says that he was content at the time with his position as a senior manager and an executive board member of Filene’s. But the opportunity to leap into the mall business intrigued him, and he never regretted making the change. ”I feel like I got my master’s degree from New England Development, and I couldn’t have picked a better place to do it,” Chudnofsky said.

Chudnofsky spent 13 years at New England Development, including a season as president of the WellsPark Group, where he managed a portfolio of 50 malls, totaling 30 million square feet. WellsPark was created after the 1996 merger between the property management, leasing and marketing operations of New England Development and the New York City-based O’Connor Group. (WellsPark was a privately owned national mall management and leasing company. New England Development and the O’Connor Group owned their retail properties separately.) ”I joined New England Development when we had six malls, and we ended up with 50,” said Chudnofsky. ”The growth in the 1990s was tremendous. I would say I’m most proud of the group of people we put together and what we, as a team, accomplished in those years.”

Adrienne Davis-Brody, president of ADB Marketing Communications, Chestnut Hill, Mass., worked with Chudnofsky for 10 years when she was New England Development’s chief marketing officer. She, too, remembers the company’s camaraderie fondly. ”Carl’s skill at team-building is his best attribute,” Davis-Brody said. ”He has a keen eye for talent and knows how to establish a good corporate culture. Carl has the magic touch when it comes to creating an esprit de corps that few companies have.”

When New England Development sold 14 malls to Simon Property Group for $1.7 billion in 1999, WellsPark was disbanded and Chudnofsky founded his own consulting firm, CB Ventures, which conducted due diligence for shopping center industry clients. (For reasons of confidentiality, he declined to name clients.)

In addition to being president and chief executive of CB Ventures, Chudnofsky launched Mall Radio Network, a mall music and sound provider, in 2002. Chudnofsky noticed that though advertisers used all kinds of visuals to promote their products and services in shopping centers, few used audio. He saw mall sound systems as a huge untapped advertising opportunity.

Mall Radio Network, based in Natick, Mass., delivers customized programming — music interspersed with ads — to some 150 malls across the country. The programming, broadcast over the Internet from Mall Radio Network’s central location to each shopping center’s public sound system, is played in the hallways, rest rooms, parking garages, food courts and similar areas. Advertisers include Estée Lauder and Macy’s, as well as local banks and car dealerships. Some advertisers are located in the shopping centers, others outside of them. Chudnofsky is no longer involved in the operations of Mall Radio Network, though he remains its chairman.

Chudnofsky, a Boston native and a graduate of the School of Business at Northeastern University, in Boston, lives in the suburb of Sudbury with his wife of 30 years. He is working toward a master’s degree in Judaic studies at Hebrew College and will continue to reside in the Boston area while commuting to Prime Retail’s Baltimore offices.