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Caribbean renewal follows disaster

By Debra Hazel

ST. THOMAS, Virgin Islands -- To the casual visitor, the Caribbean island of St. Thomas would appear to have it all -- sand, sun, and friendly, English-speaking locals.

But residents have a different view. The island has a total of three movie screens and, thanks to the devastation caused by Hurricane Marilyn in 1995, precious little retail.

The destruction, however, has had one advantage for developers in St. Thomas -- the chance to rebuild. One firm, locally-based Lockhart Cos., is doing just that, bringing more mainland retailers and lifestyle concepts to the island.

The firm is redeveloping the Lockhart Gardens shopping center to appeal not only to the tourist trade, but to local residents and employees of the ships that dock nearby.

The center, destroyed by Hurricane Marilyn in 1995, is being rebuilt with community-oriented retail, including the second Kmart on St. Thomas. (Kmart's other location on the island is at Tutu Park Mall, the only enclosed regional center on St. Thomas.)

One section of the center, which is located on the eastern edge of Charlotte Amalie, already is completed and waiting for tenants. A 30,000-square-foot Grand Union, which had been a tenant in the original project, will be relocated to a different end of the strip center.

Kmart is replacing a Woolworth store that closed in November. In addition to its other location on St. Thomas, Kmart has units in St. Croix, Puerto Rico and Guam.

The center also will accommodate smaller local retailers in sites of 500 square feet to 1,000 square feet. Already in the center are Foot Locker and Banco Popular.

Elsewhere on the island, Lockhart is building the first phase of its Market Square East center. The first, and perhaps most important part of the project to the local community, will be the addition of a seven-screen Caribbean Cinemas theater in the fall. St. Thomas now has just one three-screen cinema on the entire island.

Ironically, while the island is a playground for tourists, there really isn't very much for local teenagers to do once they leave the beach.

"The movie theater has caused the most excitement," said John P. deJongh Jr., president and COO of The Lockhart Cos., the largest owner of shopping centers on the island.

Phase 1 of Market Square East also will include a Cost-U-Less warehouse store, which is relocating from a Hurricane Marilyn-damaged site. Both Market East and Lockhart Gardens will be complete by the end of the year. The firm will then focus on residential development in 1999, Mr. deJongh said.

Despite the threats of hurricanes, retailers have much to find on the island.

St. Thomas has the highest per capita income in the region, at $21,000, even though tourism declined immediately after the storm, Mr. deJongh said.

"There is a tremendous amount of activity," Mr. deJongh said, referring to the area's robust economy.

It hasn't been easy. Even though St. Thomas is both a U.S. territory and a major port, getting mainland retailers to cross the Caribbean Sea remains a challenge.

The destruction of much of St. Thomas during the hurricane left a bad taste in some retailers' mouths, Mr. deJongh explained. Between 1995 and mid-1997, concerns about higher insurance costs left some chains concerned about locating here.

That now seems to have abated as chains see the potential of St. Thomas and other islands.

"The stateside retailers coming here have done business in Puerto Rico for a long time," he said.

In addition, "Puerto Rico and the Virgin Islands are the shopping locations for other islands," Mr. deJongh observed.

Puerto Rico, too, is seeing activity from a mainland developer.

"There's no question about it, the lead time to execute leases is longer than in the mainland United States," said Andrew J. Groveman, senior vice president of marketing and administration for Memphis-based Belz Enterprises.

The firm is building a factory outlet center on Puerto Rico, to open in the spring of 1999.

The Puerto Rico Belz Factory Outlet Center will total 315,000 square feet in its first phase, with the potential of up to 750,000 square feet.

"It will be an intra-island destination for local residents, an inter-island destination for surrounding islands, and a draw for the tourist community," Mr. Groveman added.

Despite difficulties in persuading tenants to try the islands, the potential is there, say both Mr. deJongh and Mr. Groveman.

"In each and every case, every tenant that has done due diligence in Puerto Rico has seen that it's a superb retail market, a dynamic, healthy market," Mr. Groveman added.

It helps that Belz is a private company, he notes.

"Because we're not a REIT, we have the good fortune of not having to perform for the Street. We picked up the site with the most potential," Mr. Groveman said.

Meanwhile, Lockhart's initial public offering of 2 million shares became effective earlier this year.

"This will pay off some debt. We're also picking up Premium Finance Co. because the cost of insurance is so high," Mr. deJongh said.

Both of Lockhart's projects will be complete by the end of the year.