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Two new outlet malls slated for Puerto Rico

By Kathryn Dube

Puerto Rico visitors tired of sun, sand and historic forts soon will have another activity: outlet shopping.

Prime Retail expects to complete its first outlet center in Puerto Rico by fall.

Two new outlet centers planned for the Caribbean island aim to capitalize on its growing retail opportunities and burgeoning tourism. Prime Outlets of Puerto Rico and Belz Factory Outlet World Canovanas are the first projects outside the continental United States for their respective developers, Baltimore-based Prime Retail and Memphis, Tenn.-based Belz Enterprises. Even though they will compete for the same retail dollar, both companies say they are confident there is enough untapped market opportunity to assure success.

"We decided to undertake the Puerto Rico development because of the market of 4 million people with no outlet opportunities," said Prime Retail CEO Abraham Rosenthal. "There is a significant additional population in the entire Caribbean basin. We can tap into these people, who may commute to Puerto Rico for a day."

Belz undertook the project "because the market in Puerto Rico is very strong," said Andrew J. Groveman, president of Belz Enterprises' Factory Outlet Division. "It's a tenant-driven location ...There is a strong local market and we are targeting the tourist dollar,'' he explained.

Both projects broke ground in May 1998: Prime Retail in Barceloneta, 35 miles west of San Juan, and Belz Enterprises in Canovanas, 15 miles east of San Juan.

An unanticipated roadblock, however -- Hurricane Georges, which devastated Puerto Rico last Sept. 21 -- altered the timetable for each development. Prime Retail, which expected to debut the first phase of its outlet mall in May 1999, now projects an opening by late fall of this year.

Belz expected to open the first phase of its project this fall. Revised plans call for the entire 345,000-square-foot complex, as well as an attached cinema multiplex, to open during late summer 2000.

Several factors convinced the companies that Puerto Rico was fertile ground for business expansion, including:

* Tourism: Puerto Rico is seen as a hub for Caribbean tourism. The island attracts more than 4 million visitors who spend an estimated $1.7 billion annually, according to Patricia Amjal, director of statistics and economic studies at The Puerto Rico Tourism Co., the San Juan-based state tourism agency.

Tourism expenditures increased by $400 million, an estimated 25%, from 1993 to 1997. San Juan is one of the busiest cruise-ship ports in the world, attracting an average of two cruise ships per day. New upscale hotels, such as The Embassy Suites and The Westin Rio Mar, also are seen as a magnet for visitors. The number of hotels has increased nearly 30% since 1994 and is projected to grow by another 45% by the year 2000, according to the 1992 Annual Report of the Tourism Industry in Outlying Areas, a federal publication.

* Personal Income: Personal income is growing at a faster rate for Puerto Ricans than for consumers on the mainland, according to estimates from Estudios Tecnicos, a private demographic vendor based in San Juan. Residents of Puerto Rico pay no income tax, so 94% of their income is disposable, compared to 87% on the U.S. mainland.

* Retail Growth: The island has less than 5 square feet of mall space per capita relative to the 19-square-foot average on the mainland, making operations on Puerto Rico a veritable gold mine for many U.S. retailers. Several U.S. retail chains, among them JC Penney, Sears, Walgreens, Western Auto and Marshalls, have top-performing stores there. Retail sales in Puerto Rico, close to $14 billion during 1996, have led to regional mall performance that far exceeds industry averages, according to the 1995 edition of the Census of Retail Trade for Puerto Rico, published by the Puerto Rico Tourism Co.

Puerto Rico's Plaza Las Americas is one of the most productive malls in the industry, with sales ranging from $650 to $750 a square foot. Other malls on the island have sales running from $350 to $450 per square foot.

The two new outlet centers under development, located some 50 miles apart, both aim to offer something new -- Prime Outlets marketed as the first outlet center on the island and Belz Factory Outlet World touted as the first enclosed outlet mall to offer shopping and entertainment opportunities.

"Many Puerto Ricans have traveled to the mainland and know the brand names, but opportunities for these [on the island] have been limited. Puerto Ricans have been denied these brands up to now. The depth of brands to be carried in these outlet malls will have people flocking to them," predicted retail development analyst H. Blount Hunter of Norfolk Va.-based H. Blount Hunter Retail and Real Estate Research Co.

Prime Outlets

Prime Retail's center will be located at the southeast corner of Expressway 22 and Rte. 204. The center's core customers will be the 75% of the island's population who are able to drive to the outlet center in less than an hour, with the balance of sales expected to come from visitors. The $60 million project will be constructed in three phases and will encompass 425,000 square feet when completed.

Prime Retail estimates that 2 million to 3 million people will visit Prime Outlets of Puerto Rico annually after the first phase is completed.

The 177,000 square feet in Phase 1 will include 50 stores and a food court, anticipated to open by November, in time for the 1999 holiday shopping season, said Brian Lewbart, Prime's director of public relations. According to Rosenthal, 70% of the Phase 1 space is leased by Prime Retail's typical mix of retailers, such as the Nike Factory Store and Gap Outlet. Other tenants will include factory-direct stores; retailers of discounted men's, women's and children's apparel; and stores selling housewares, electronics, gifts, shoes and other accessories.

The center will be constructed in the village style similar to other Prime Retail outlet centers, with rows of shops divided by landscaped courtyards. A children's playground also will be included. No target date is set for completion of the next two phases, of 80,000 and 100,000 square feet, respectively, with 70,000 square feet for outparcels.

Prime Retail is so optimistic about the business climate in Puerto Rico that the company is scouting for a second site on the island, Rosenthal said.

Belz Factory Outlet World

Belz Enterprises expects the Belz Factory Outlet World Canovanas "to be one of the outstanding developments in our entire portfolio," reported Groveman.

Destined to be a flagship for Belz, it will be the island's first enclosed factory outlet mall, encompassing 345,000 square feet and an attached multiplex theater.

The mall will be located on a 122-acre tract 15 miles east of San Juan, accessible off PR-3 in Canovanas. Highway 66 is expected to be extended to create a connector that will make the mall accessible from anywhere on the island. The center will have approximately 100 tenants, a mix of both outlet shopping stores and restaurants.

The Puerto Rico project will be a departure from traditional style malls that feature glass storefronts, Groveman said, "because it is a new design for us. We are trying to replicate an experience of old San Juan, a streetscape environment. There will be five pods, and each will be distinct, each replicating a different experience."

The food court will feature a rainforest entertainment theme, distinguished by rockscapes and waterfalls. Soltero Munoz Architects and Encino, Calif.-based Jerde Partnership designed the project.

The 32,000-square-foot theater complex will have 10 screens, all with state-of-the-art stadium-style seating. Locally based Carribbean Cinemas will operate the theaters.