Rick Caruso isn’t one to hold back. He’s generally benevolent but has a big presence, from his gravelly voice to his height, his ego, his house, his yacht, his philanthropy — and his bank account (his estimated net worth is $4.8 billion).
The Los Angeles native, 59, inherited father Henry Caruso’s business and marketing savvy (the senior Caruso founded Dollar Rent A Car), and with it built the real estate company Caruso, whose properties include The Grove, which is ranked by Green Street as the second most-productive shopping destination in the U.S. with sales of $2,200 a square foot; The Americana at Brand, with sales of $1,700 a square foot; high-end residential complexes and Palisades Village, a study in downsized, local-serving retail-taiment.
The latter will open in the tony coastal community of Pacific Palisades on Sept. 22 with 50 tenants including Sephora, Carbon 38, Elyse Walker, Zimmermann, Cynthia Rowley, Jennifer Meyer, Botanica Bazaar, The Little Market and A.L.C., and dining options culled from Los Angeles’ top culinary talents.
“It’s going to set a new standard for retail, which I think will be copied around the country,” predicts Elyse Walker, whose original Pacific Palisades flagship is one of the highest-grossing multibrand stores in the country.
Caruso has another big project: His first foray into hospitality, opening later this year as well. Rosewood Miramar Beach Montecito, a 124-room, 37-suite resort owned by Caruso and operated in partnership with Rosewood Hotels & Resorts, will also boast a members-only club.
A visit to Caruso’s main home in Brentwood, Calif., offers a window into his vision for The Grove — the retail center bears some strong similarities to his Mediterranean-style estate, which also has a grassy central “park” but, unlike The Grove, no singing-and-dancing fountain and trolley. A walk through his Malibu residence gives a more exact preview of what Miramar will look like.
“We built this house six years ago to test the Miramar materials,” said Caruso of the beachfront, white-pillared, whitewashed brick abode, which is named “Miramar House.” All of Caruso’s homes have names, along with matching embroidered jackets that also bear the family crest (like the notepads next to each telephone, a sure sign of a hotelier-at-heart if there ever was one). “I keep them in here in case anyone gets cold,” he said, throwing open a foyer armoire and pulling out a black, polar fleece-lined zip-up.
Interior designer Diane Johnson was charged with decorating Caruso’s homes and the main building of the resort, dubbed the Manor House, so the blue and yellow pops of color punctuating the classic black-and-white motifs will be almost identical.
It was here, and at the construction office of Palisades Village, where the developer sat down to discuss his early influences, share his candid opinions and elaborate on his retail-and-beyond vision (including flying the friendly skies and perhaps another go at public office).
WWD: When you develop a property, do you already know what types of retailers should go where? What happens when they come in and say, “I love this spot. Can I have this?”
Rick Caruso: That happens. Every building will have a list of tenants that are prioritized by first choice, second choice, third and fourth choice. There’s a bit of an art and science of where you locate tenants and how you want people to move around and circulate. At the Grove, for example, it was very important to us to have Nordstrom on the corner that it’s on and to have the movie theater where the movie theater is. Nordstrom fought hard to be up against the parking structure because they wanted people to be able to park and go straight in. But I want people to get out of their car because the more I get them walking, the more they’re walking by a window and they’ll stop and shop. You know the little bridge that you walk over to go to Nordstrom? They fought that for probably nine months. They thought ladies wouldn’t walk over the bridge, but people love it. The retailers, we listen to a lot. But they’re in the business to make it the most convenient for their customer and we’re in the business to get the most sales on the property, including them. So the agendas are a little bit different. But they always end up aligned.
WWD: With your track record, is it still a battle?
R.C.: It’s certainly helped. I was on the phone yesterday with the chief executive officer of Sephora. He just called to say thank you because the numbers are so good at The Grove that we’re expanding [the store]. I told him he should go check out the Alo Yoga store across the way. It’s beautifully designed and they also built a yoga studio upstairs. So in Sephora, they’re thinking about adding other things in there.
WWD: Such as services?
R.C.: Yes, so not only do you go in to get your makeup…I don’t think I can say that yet. But they’re really reinventing because their volume is so significant there and it’s such an important store for them in the United States. They really want to up the presentation. So we spend the most time with retailers to push design, push experience, add new things, how you’re engaging the customer.
WWD: Sephora’s also opening a Sephora Studio concept at Palisades Village. Explain the “downsizing” element of that new development.
R.C.: One of the things we’ve done consistently there is to get everybody to size down and to be much more curated, much more specialized. The use of the space, much more efficient. We have storage down below so they don’t have to take up sales floor space. We want to get productivity on the sales floor. I think the retailers are not only going make a lot of money, they’re going to have a lot of fun being here.
WWD: What retailer wouldn’t want to make more sales in fewer square feet?
R.C.: Right, except as you know with retailers, they’ve been so formulaic for so many years — they get a footprint and then they start rolling out across the country. With really great retail, you become much more of a merchant, really customizing your presentation and your store to the community. It’s an evolution of retail going in a direction that is much more about being local-serving.
WWD: Would you say it’s the antithesis of a traditional “mall” model?
R.C.: The mall model used to be, can you get somebody within 15 miles to drive to you? They used to have these centric rings and study all this kind of baloney. People don’t live that way. I predicted that about five years ago, that malls were the walking dead and the mall people were very upset with me. But the handwriting has been on the wall for a while and it’s coming to roost.
WWD: Will we start to see other developers emulating this formula?
R.C.: It’s no different than people around the country and around the world emulating The Grove. We have Grove knockoffs from Dubai to Kansas City. The challenge that other people have, is they’re not willing to make the investment that it takes to make it really special. And these are very time-consuming, very detailed projects that are expensive, like this is all-brick sidewalk or taking all this real estate and making a park and putting all the parking downstairs. We actually made an extra level of parking down below. History is going to show that it was probably a mistake. As more and more people are using Ubers and driverless cars, I think parking is going to be less critical. But I think it was the right thing to do in terms of an important gesture to the community that we care and we don’t want to have a situation where people are parking in the neighborhoods.
WWD: How much of your design aesthetic is personal preference versus mirroring the community you’re in?
R.C.: Obviously, there’s a certain style I enjoy. But it gets mostly informed by the community that we’re building in. This is a coastal community and we need to build something that people can connect with and that feels relevant and right in terms of scale and architecture. It’s all relatively low-scale. Most of the new homes that are coming into the area now are influenced by a Nantucket style. We spent a lot of time in the whole sort of Eastern seaboard to look at the architecture and some of the detailing on it. I’d put up an image on a big projector and say, “Do you like this?” And if people say that’s no, then that’s out. We also don’t want everything to look alike. We want it to feel like the town was built over time. And the way to do that is to give the retailers a big amount of influence because we also want their brand to come through the architecture. I know what I like, but that doesn’t always mean it’s right. I try to be really open-minded and listen a lot.
WWD: Growing up, did you shop?
R.C: I didn’t have a background in real estate and I didn’t care about shopping. If I had, I wouldn’t have done what I’ve done in terms of design because I would’ve just worried about the efficiency of shopping. If I had grown up in the industry, I would’ve had a set of rules drilled into me and I wouldn’t have been able to create. Part of the mall problem today is they need to forget those rules and just focus on what the consumer wants and how that experience is. What I love is the energy of people congregating. It makes you feel alive; you want to be in that space.
WWD: What did you think you wanted to do when you grew up?
R.C.: I always wanted to be in real estate, but I never really knew what that meant. I knew that I loved buildings and I wanted to buy buildings. I always loved design. I always built model train sets and model cars every weekend. I just like putting things together and making things nice. And I’m a bit of a perfectionist.
WWD: What did you learn from your dad?
R.C.: My dad was an exceptional business person, but what I really took away from him was that he was a genius in marketing. He knew how to sell in a very subtle but powerful way. He was a car dealer and when he started Dollar Rent A Car, I saw his determination to compete against much bigger companies. Back in the early days, there were only Hertz, Avis and National when you were in an airport. Dad really went after that and was able to get in airports and then the company grew around the world. In my business, the big guys have been trying to put me out of business for years. Simon Properties, Taubman, tried to stop The Grove. General Growth tried to stop The Americana. Westfield has tried to stop us. They spent an amazing amount of time trying to stop competition rather than trying to be better than the competition.
WWD: In addition to your father, did you have other mentors?
R.C: When I was a commissioner [for the Los Angeles Department of Water and Power, in 1985], Tom Bradley was the mayor. In terms of how his quiet leadership was also effective, and how he lived by integrity, he was my role model. He had a presence to him; when he walked into a room you knew it by his gentleman subtlety, but he also carried a big stick.
WWD: How would you describe your management style?
R.C.: It’s hands-on. I like details and I balance that with big picture. I instill trust, and there’s a lot of collaboration, but I’m very results-oriented.
WWD: What’s the best piece of advice you’ve received?
R.C.: As a young man in college, I’d made a mistake and was trying to talk my way out of it. My adviser said, “Admit you were wrong early, apologize and move on.” It was a very liberating piece of advice. We all make mistakes; own up to it and move on.
WWD: How do you feel about your first foray into hospitality with the Miramar project?
R.C.: It’s just a logical expansion of what we do. I’ve always believed our core business is to make people happy. So that gives us permission to go do a whole bunch of things. We get to be in the hotel business, the retail business, the residential business, the office business. It’s not done without a lot of study, work and research and making sure that we’re informed. But one of the things I promote to everybody in the company, is I want people to be radically free to think about new ways to reinvent certain businesses. I want a certain amount of audacity. And if we do that, maybe 50 percent of the ideas are crazy but it promotes sitting around a table and creating new ideas. And I don’t think we should ever tolerate anything being mediocre. So if you said to me, can you do something that isn’t real estate-based? Yeah, we’ve talked a lot about that.
WWD: Do you mean not things that are land-based?
R.C.: I look at industries and I ask myself, what industries have a need for great customer service, where people are really pampered and taken care of? On the top of the list are the airlines. You couldn’t make the experience much worse. From the moment you try to book a flight to getting into your car, driving to the airport, trying to park, to getting in a terminal, to going through TSA, getting on the plane. I remember having to put on a coat and tie to go on a plane. I’m not suggesting you should still do that again, but there was this excitement and thrill and elegance of flying. Why can’t you do that again? I’ve thought about reinventing the whole airline experience.
It ties into how we’re transporting people to our resort, to shop and how we connect it. We have an interesting ecosystem — millions of people shopping with us, some that live with us, some that work with us, and now there will be some that vacation with us. I can move them around in a very unique way. For example, if you live at 8500 Burton Way, you get certain privileges, say, to eat at our restaurants or use Miramar Club. We want your resort experience to start on the way there, so we’re going to allow you to check in at the Palisades and give you a car for free. We’re going to take your luggage and you drive up the coast and take your time. By the time you get to your bungalow, your clothes are in the closet, everything is pressed, whatever you want to snack on is in the kitchen. Why does the experience need to be a hassle? And why should you ever touch your luggage again?
WWD: Why stop there? If you were flying in from New York, you’ll have to get there from New York somehow.
R.C.: Right. You’re on our plane, on our experience and we’re landing you and putting you in a car. All of us in business tend to start forming a bunker of “I’m in this business.” And the minute you say you’re in this business, it takes away the radical freedom to think outside the bunker. I don’t want to say I’m in a swim lane. If my customer is over here, I want to swim over there to my customer. I don’t want to force them into my swim lane.
WWD: What was the strategy behind partnering with Rosewood?
R.C.: We’re taking big risks, making significant investments. I’m not betting other people’s money. What brand can we align with that gives me a global footprint and is unique, that will really respect the fact that we’re the owner? Ritz Carlton’s fallen into a formula and Four Seasons, the same thing. Rosewood has not only a global view but knows how to tap into every location being unique. I also get the benefit of associating Miramar with really iconic properties like the Crillon and The Carlyle. At the same time, they gave me the ultimate control on management decisions.
WWD: Such as putting a members-only club within the hotel?
R.C.: Now that they’ve seen that, they want to get in the club business. The original Miramar [which was razed when Caruso bought the property] had a club but it didn’t ever have a building. We actually reissued keys to people who claimed that they were members so they could go down to the beach. We never knew if they really were or not, but it wasn’t worth arguing about. We want to become part of the fabric of the community as quickly as we can. And you only get to do that if you respect the history of the community. But we’re going reinvent the club, with a beautiful clubhouse and great food. I want people 20 years from now to look back on it and say, “That’s where my kid got their swimming lessons and that’s where we had the summer barbecues on the beach.” That’s part of enriching lives. That’s what drives us. And thank god we can make money doing it.
WWD: Do you ever worry about making costly mistakes?
R.C.: I wake up scared every day. We have to have a really healthy dose of fear and never be complacent or feel entitled. Because the minute you think you know better, you’re on a really slippery slope down to the bottom of the bucket.
WWD: Do you see this hotel concept expanding outside of California?
R.C: I see it going in places that are really unique and so there will never be a lot of them. There’s not a lot of Pacific Palisades in the United States. Are we looking for them? Yes. Same with Miramar. There are not a lot of 16 acres on the beach. Might there be an incredible spot up in Napa? We’re going to investigate all of that if we get it under our belt and operating. But it’s tough finding the real estate.
WWD: What if someone in another country presented you with an opportunity?
R.C.: I would always consider. But part of our formula that’s worked is that we have been close to the properties from a management standpoint, so physically able to get on the properties and make sure that our standards are being met at all times. The farther away that we get from home, the more careful I would be. It doesn’t mean I wouldn’t do it.
WWD: In terms of enriching people’s lives, you’ve done public service. Is being back in office something you’ve thought about?
R.C: I love public service. I enjoyed being the head of DWP [the Los Angeles Department of Water and Power], and I loved being a police commissioner. I turned it down twice because I was worried about my family, about their safety. Then finally I decided to do it and I’m really glad I did. So if there’s another opportunity down the road that makes sense, I’m certainly open to it.
WWD: How would you balance being a businessman in the private sector with being in a public office?
R.C.: Well, commissioner is appointed. I haven’t been elected to anything. The freedom that I had would drive the elected officials crazy, because I was doing things that they did not like. I would just tell them, “If you don’t like what I’m doing, fire me. But I’m gonna do what’s right.” They got their backs up with that, but they couldn’t stop it because elected officials, by definition, are in the business of being reelected. They have one agenda. And if by chance along the way, good things happen, great. But they’re not waking up in the morning saying, “I’m gonna go do what’s really right for the community even if I lose my job.” Not that I’m a saint, it’s just that I had this freedom. So if I ever did get into political office, I don’t know how long I would last, but the first four years would be fun.
WWD: What do you think about “politics” and what’s going on in the national government?
R.C.: It’s an interesting cocktail conversation. I’m on the record with what I think about Trump and there’s no secret to that. We have interesting debates as a family around the dinner table and with friends.
WWD: Where would you like to see the country go in the next presidential term?
R.C.: I think there needs to be a civility and a process in government that actually rewards working together. The most frustrating thing to me is you’ve got a group on one side, you’ve got a group on the other side, and it’s a constant battle. Congress is now in session three days a week so everybody can get back home instead of everyone living in the capital. Spouses don’t know each other, kids don’t know each other. There’s no sense of community or collaboration. Putting aside what I think policy should be, it would be interesting to figure out how you get people to literally work together. Reagan coming across the aisle with Tip O’Neill, that was a legendary move. Everybody thought, “Oh my god, I can’t believe Reagan and Tip O’Neill have just become best friends.” But they got great work done.
WWD: You essentially can run your own social experiments on your properties.
R.C.: We try to create happy places. The tone gets set at the top. Any government office, the tone at the top is not a healthy tone. And that sets the stage for everything. I think that’s a huge problem in national politics right now.
WWD: We’ve only got four-year terms, though.
R.C.: Yeah, that’s right. Thank god.