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El Niño a mixed bag for outlet centers

By Donald Finley

Reprinted from Value Retail News

There's good news and bad news about outlet centers and their tenants in the unusual weather effects of El Niño, especially in California and Florida.

First the bad news. Some centers have suffered wind and water damage, although the damage has been minor. And tenants at some centers have seen reduced sales because of flooded nearby highways and severe storms that kept shoppers away.

Now for the good news. Some of the milder rainstorms discouraged people from outdoor activities and instead they went shopping, resulting in increased sales at outlet centers. In a twist on that, heavier-than-normal snowfalls in the Sierras in eastern California have brought more skiers to mountain resorts, also resulting in increased sales at outlet centers.

El Niño, which is Spanish for "the Christ Child," is a warming of the sea-surface temperatures in the eastern tropical Pacific Ocean that occurs every few years for uncertain reasons. It disrupts normal weather patterns in various parts of the world. The 1997-1998 El Niño is the most severe on record.

As the pattern of El Niño's warmer surface water moved eastward in the Pacific last fall, it stacked up storm after storm that swept in across California, with rains and winds in lower elevations and snow in the mountains. The result was damaging flooding, mudslides and landslides.

Almost all parts of Florida, especially on the Gulf Coast, were repeatedly drenched and buffeted by El Niño storms. There has been some flooding, and in late February tornadoes in central Florida killed more than 40 people and inflicted extensive damage.

The mixed bag of news on El Niño's effects on the outlet industry comes from interviews in late February with various managers and developers of outlet centers in the parts of California and Florida most affected by the El Niño storms and weather.

Several centers in the two states reported minor damage.

For example, general manager Jeff Kurtz said El Niño weather caused water leaks in roofs and windows at Horizon Group's Lake Elsinore (Calif.) Outlet Center, "but nothing unusual." Jeff Bedingfield, manager of Belz Factory Outlet World in Orlando, Fla., also reported several roof leaks.

Some trees and other plants were blown over by winds at Desert Hills Premium Outlets in Cabazon, Calif., said Greg Link, vice president-operations for Roseland, N.J.-based developer Chelsea GCA Realty.

El Niño weather caused some brief power outages at Atascadero (Calif.) Factory Outlets, but the outages were so momentary that the center did not have to close, said Jim Turner, managing partner of Santa Barbara, Calif.-based developer Investec.

Damage was a little more serious at Chelsea GCA's Petaluma (Calif.) Village Premium Outlets. The flooding Petaluma River nearby resulted in several inches of water getting into about a dozen stores in the center Feb. 3, including Dress Barn, G.H. Bass shoes, Petite Sophisticate Outlet and Le Gourmet Chef.

A spokesman for Dress Barn said about three inches of water flooded the unit, but employees had already moved stock up off the floor after getting weather warnings of possible flooding. Bass Shoes had a couple of inches of water in the store and some merchandise was damaged. Because of the flooding, Petaluma Village Premium Outlets was closed for a day.

Even without damage, some centers reported reduced foot traffic and receipts at times because of El Niño-related events.

For example, Mr. Kurtz said foot traffic fell about 40% at Lake Elsinore Outlet Center during four inches of rain on a Monday when several roads and highways in the area were flooded and closed, preventing shoppers from getting to the center. Even those that came didn't stay long to shop.

Mr. Kurtz joked that "Californians are not used to this kind of rain. They are babies about this rain stuff and if it is raining like this, they don't go anywhere."

But other outlet center managers in California and Florida said that if the rain isn't too hard, it's good business for them. How can that be?

It's an old human-nature thing that shopping center managers and retailers have known for a long time.

Both California and Florida are outdoor recreation states, for both residents and tourists. Rainy, stormy weather discourages them from pursuing outdoor activities. So, many of them go shopping instead.

"In rainy weather, people who otherwise would go to [nearby] Disney World, Universal Studios or Sea World instead come out shopping in droves," said Mr. Bedingfield of Belz Factory Outlet World in Orlando.

"The hardest day of rain last week didn't cut our foot traffic. It may even have encouraged sales because people couldn't do outdoor things," said John Peterson, manager of the Great Mall of the Bay Area in Milpitas just north of San Jose, Calif. The 1.2-million-square-foot mall was recently sold by co-owners Ford Motor Land Development Corp. and Petrie-Dierman-Kughn, to Michael Swerdlow Co., Miami, and Colony Capital Co., Los Angeles.

Susan Black, manager of the Horizon Group's Pismo Beach (Calif.) Outlet Center, said, "After it rains for a while, people get tired of staying home and go shopping."

It's the same story in the Sunshine State of Florida.

"We have had a terribly rainy season," said Joyce Burnham, administrative assistant at the Imperial Bank of Commerce's Sarasota (Fla.) Outlet Center. "This is the nastiest winter weather we have had in my 12 years here."

The parking lot of a traditional shopping center in the same region was flooded, but the Sarasota Outlet Center has had no damage from the storms, other than a few minor roof leaks. Some sales associates at the center have had difficulty getting to work, however, because of flooded roads.

Despite the storms and rains, Burnham said, foot traffic has been higher than normal and sales figures appear to be up.

Mills Corp.'s giant Sawgrass Mills at Sunrise, Fla., east of Fort Lauderdale and inland from the Atlantic Coast, has not had as much stormy weather and rain as the Gulf Coast of the state, said General Manager Kem Blue. In any case, he said, sales and foot traffic in the nearly 2-million-square-foot megamall have gone up during the El Niño-spawned weather.

Snow is of no concern in Florida, but in the High Sierrras in eastern California, El Niño storms produced heavier than normal snowfalls that have attracted skiers in unusually large numbers. When they're not on the slopes, many of them head out to do some shopping.

"El Niño has been a positive for us at Mammoth Lakes. Skiing has been fabulous," said Christi Woodards, general manager of Chelsea GCA's Mammoth Premium Outlets center in the ski resort community.

Another mountain outlet center not upset about the extra snow is Casteel Corp.'s Factory Stores at the Y in South Lake Tahoe, Calif., another community that relies heavily on the ski trade.

Gary Casteel, owner of the converted strip center, said the snow pack is 30% above normal this season and sales at the shopping center are up because of the extra skiers.

The National Weather Service issued its first El Niño advisory in May of last year. That gave shopping-center managers in California, Florida and other states time to prepare for the unusual weather phenomenon.

Dennis McGovern, assistant general manager of the Mills Corp.'s Ontario (Calif.) Mills said the mall's management "tried to be as proactive as possible" in getting ready for El Niño. That included a $10,000 project to pressure wash all the storm sewers, culverts and drains to prevent flood backups.

Mr. McGovern also said the mall stocked up on plywood, duct tape, flashlight batteries and other similar supplies it might need in an emergency.

"Early last fall, we filled hundreds of sandbags and stored them on the site," said Ms. Black of the Pismo Beach Outlet Center. "We bought a lot of buckets to handle leaks and we did some preventive maintenance on the roofs" of the three-year-old village center.

In the mountains, "We didn't have to do anything to get ready for El Niño because our property is always ready for winter," Ms. Woodards said about Mammoth Premium Outlets.

But at another Chelsea GCA property she manages at a lower elevation, Folsom (Calif.) Premium Outlets east of Sacramento, "We double-checked our roofs, checked storm drains, got sand bags filled, bought extra rain gear and enhanced some supplies that we always keep on hand anyway, so we can be extra-prepared," she said.

"The whole region is better prepared" than in 1982-83, the last major El Niño to affect California, said Ms. Woodards. She remembers that one well because it caused her home swimming pool in Los Angeles to overflow and flood her living room.

Many California shopping centers have emergency and evacuation plans already in place because of the threat of earthquakes. These can be adapted in case of flooding, wind or tornado damage or electrical outages in an El Niño storm.

At Burnham Pacific Properties' San Diego Factory Outlet Center in San Ysidro, Calif., heavy rains and flooding in the area, especially in nearby Mexico, cause problems for retail tenants by preventing their employees from getting to and from work.

Property manager Irene Stallard-Rodriguez said this is especially a problem for employees living south of the border because most Mexican roads in the area are not paved and can be impassable after heavy rains.

She said some stores in her center have used the threat of El Niño weather to have special sales of umbrellas and other rain gear. The Atascadero Factory Outlets center has been giving away promotional umbrellas with "El Niño Shelter" printed on them.

Ms. Stallard-Rodriguez, now in her third year as president of the San Ysidro Chamber of Commerce, has made sure the chamber has provided merchants and businesses with pertinent El Niño information, such as emergency phone numbers and where to get sandbags.

The Lake Buena Vista Factory Stores center in Orlando is doing some charity work following the killer tornadoes in February in central Florida.

Jeff Sherrin, chairman and CEO of Coral Springs, Fla.-based developer Venture Outlet Centers, said the center serving as a drop-off point for people who want to donate food, clothing and other items for tornado

victims.

There were no reports of any employees of outlet centers or retailers being killed or injured in the severe El Niño weather in California or Florida, but many had difficulty getting to and from work.

Peggy Wimberly, manager of Prime Retail's Oxnard (Calif.) Factory Outlet, said one El Niño storm came close to home for her administrative assistant, Kim Herrera, when her whole neighborhood in Santa Paula had to be evacuated because of a flooding creek. But three hours later when Herrera went back in, she found that her home had not been flooded.