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Shopping Centers Today -> December 2005
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WHEN DISASTER STRIKES
Storms demonstrate the value of a retail center crisis-management plan
By Steve McLinden
In the wake of the half dozen major hurricanes that smashed the Gulf and Atlantic coasts this year and last, shopping centers from harborside to the inland states are dusting off crisis-management manuals to determine how they can make the best of a worst-case scenario.
But one thing became apparent to the managers of centers hit by the historic and deadly Katrina: There is no textbook way to handle waves of chaos. Despite this, some owners found that careful preparations, a quick response time and even a little luck went a long way in helping to restore order and get stores reopened.
Officials at Edgewater Mall, in Biloxi, Miss., about 15 miles from the center of Katrina’s landfall, knew they would probably incur wind and rain damage from the approaching Category 4 hurricane. They never dreamed a storm surge would climb the seawall and inundate the property, however. Edgewater (so named because it is about 100 yards from the Gulf) took in over a foot of water, and large chunks of the roof were blown off. “Everybody was gauging the storm on Hurricane Camille, which was a Category 5,” said, Terry Powell, the mall’s general manager, referring to a 1969 storm. “But we learned that they’re all different.”
Powell and Montgomery, Ala.-based Jim Wilson & Associates, the mall’s leasing and management firm, closed the facility on the Friday before the storm, but security and other mall personnel remained on-site until mid afternoon on Sunday before deciding to vacate. The storm struck early the next morning, and Powell, whose home was leveled to its foundation, managed to wind his way through a maze of blocked roads to return to the premises by 2:30 p.m., as did the head of security. “We both looked at it all and said, ‘Where do we start?’ ”
In the meantime, Wilson & Associates headquarters was becoming a makeshift communications hub for mall and store employees. “There was no power in the Biloxi area, so we set up a Web site and did e-mail blasts where we’d update employees and corporate employees we could reach,” said company spokeswoman Kay Yarbrough. “They, in turn, could update others, and word spread pretty fast. We felt it was vital to set up a communication line as soon as possible. We knew people would want information, and they’d want to know the condition of their stores.”
The mall suffered neither looting nor injuries. But like Powell, many workers lost their homes. The company brought in work crews, housing them and some mall personnel in trailers. Powell and his family were among those who took shelter there. Though the floodwater in the mall went no higher than a foot and half, contractors advised tearing out the wallboard panels up to four feet high to avoid the spread of mold, and the owners consented.
Powell learned that some crises simply defy precedent. “It’s how you react immediately afterwards that’s most important,” he said. Before Katrina hit, Powell called friends in the retail industry in Florida to talk about the previous year’s Hurricane Ivan and learn what they might have done differently. Those conversations disclosed above all that no two hurricanes behave exactly alike, he says.
Edgewater reopened in mid-November, though Sears and a few other stores were able to open earlier. Powell says he feels fortunate that the mall weathered the storm as well as it did, given that it is located on Highway 90, the road casino barges floated onto and over. As of early November, Powell was still living in the trailer. His post-hurricane philosophy has become, “Just keep stepping forward and don’t look back,” he says.
Most New Orleans centers had extensive crisis plans in place but many face a tough road to recovery nonetheless. Katrina devastated the area’s enclosed malls, shutting down about 5 million square feet of retail space for two months or more.
The upscale Shops at Canal Place got hit worst. Fires and looting have knocked the mall out of commission until sometime this coming year. Fire damage at the center’s 100,000-square-foot Saks Fifth Avenue anchor store, which will be rebuilt, has been estimated at $20 million. Firefighters had little or no water pressure but managed to save much of the center through “a heroic effort,” says Canal Place co-owner Darryl Berger.
“We had a hurricane-preparation plan in place, but no one can reasonably claim that anything could have prepared us for this extraordinary, once-in-a-lifetime event,” said Berger. “But the most important thing that we know about crisis management is that there’s no time to sit around regretting what occurred. That becomes immaterial. Like a family in crisis, you just have to become incredibly focused, pull together and move forward.”
Berger, who also developed and is co-owner of the 22-acre Marketplace at Jackson Brewery, says that riverfront property is not slated to reopen until at least the first quarter. “We’re still trying to get our arms around all the damage. One of the problems is, we’re having a tough time finding contractors.”
Some suburban properties fared a little better. At Lakeside Shopping Center, in Metairie, near New Orleans, a security force remained inside the blacked-out mall during and after the storm, chasing noises and deterring looters, says mall spokeswoman Tricia Thriffiley. Only a few detached stores, such as Starbucks and Earthsavers, suffered looting.
Although Katrina ripped apart sections of the mall’s roof, destroying millions of dollars in inventory, portions of the shopping center reopened by Oct. 28. At press time anchors Dillard’s and JCPenney were scheduled for a late-November opening.
Clearview Mall, Metairie, was able to reopen by early October. As at Lakeside, management and security stayed to drive off looters. A 2002 expansion and renovation to meet new building codes also helped minimize hurricane damage, mall officials told local media.
Equity One, a North Miami Beach, Fla.-based shopping center REIT, had six Louisiana centers damaged by Katrina and 34 Florida centers affected by October’s Hurricane Wilma. The company has crisis-management systems “that are embedded with employees at our centers,” said Doron Valero, Equity One’s president and COO. “We have manuals and drills, and everyone knows their roles, ranging from what you do when the first hurricane alert comes to how you respond to the disaster — with satellite phones, communications and access to critical data.”
In most cases, damage at the centers was limited to landscaping, signage and roofing. Sometimes, though, it is easier to deal with a center that has been totaled, Valero says. “We have insurance for loss of rent, but most of the hits we took were not major,” Valero said. “But they still cost us a few hundred thousand dollars each. That adds up. It’s one thing to have a ruined property. It’s another thing to spend money on cleanup, where you get no value for your investment.” After the storms, people from surrounding areas routinely dumped refuse on mall premises. “All this is going to be passed on to tenants, and you hope they won’t get to a point where they are unable to afford it.”
Still, the retail industry is far better prepared for such crises than a decade ago, Valero says, citing better communications technology and more cooperation and information-sharing between retail companies through ICSC and other industry sources. Upgraded construction standards also helped. “In south Florida, properties built since the ’90s weathered the storms much better,” Valero said. “We used to hear people complaining about all the Florida codes, but now they aren’t.”
Of rats and men
Acts of God leave less of a negative impression on customers than do acts of man, says emergency-preparedness expert David Silver, president of Silver Communications, a public relations firm. “What happened in Mississippi and New Orleans, while a terrible crisis, is easier for businesses to recover from a public relations perspective, because you’re dealing only with physical rebuilding,” Silver said.
Social incidents, Silver says, which can include age, gender and racial discrimination or chronic crime, can leave longer-lasting psychological effects on shoppers and may be much tougher for centers to reconcile. Silver, who designs crisis-response protocol for retail facilities and tenants, has helped centers mitigate disasters that include the 1989 San Francisco earthquake, gang violence, the takeover of a California center by a horde of rats and the crashing of a small airplane through a center’s roof during the Christmas season.
At an urban shopping center one Friday afternoon, a shooting incident in the mall’s main court left a gang member dead, Silver recalls. The manager had taken crisis-management training, and rather than being unavailable to the media, he deployed the “three C’s” of crisis communication: compassion, control and cooperation.
“He was compassionate by showing concern for the pain and suffering of the victim’s family,” Silver said. “He took control by stating that an incident like that had never happened there before and numbering the steps that would be taken so it wouldn’t happen again. And he showed cooperation by pledging to cooperate with law enforcement.”
The result: The town’s major daily published an editorial lauding the mall’s response. “It’s always best to be upfront,” Silver said.
At press time, developers were seeing some of their crisis management paying off. General Growth Properties was hard at work on the reopening of its Riverwalk by Thanksgiving, even though renovations there are to continue through 2006. And The Mills Corp.’s Esplanade mall, in Kenner, La., reopened in late October with 75 percent of its tenants in operation.
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