LOS ANGELES — Rick Caruso, a leading developer of so-called lifestyle centers that are open-air and mix retail, residential and entertainment, plans to invest $1 billion in six new projects over the next five years in California, including shopping and residential developments next to racetracks at Santa Anita Park in Arcadia and Golden Gate Fields on San Francisco Bay.

Caruso, 45, president and chief executive of Caruso Affiliated Holdings, is a lawyer and a former president of the Los Angeles Police Commission. He built the 575,000-square-foot Grove next to the historic Farmers Market in Los Angeles, with annual sales of $750 a square foot, and is in a battle with General Growth Properties over a $300 million lifestyle center in Glendale, Calif.

Critics say his projects increase car traffic, hurt small businesses and have a Disney-like appearance. The developer, who is married and has four children, is a Republican and a self-proclaimed fan of California Gov. Arnold Schwarzenegger. Caruso has been the focus of speculation that he might seek elective office, including a race for mayor of Los Angeles. He declined to comment. His father is Henry Caruso, the founder of Dollar Rent-a-Car. Caruso spoke with WWD about how to get the best from retailers, what customers really want and California’s business climate.

WWD: What is your philosophy?

Rick Caruso: We don’t want to be a typical retail developer. And we don’t want to become too institutionalized. We don’t want to be just stamping these things out and just dealing with the typical [retail] suspects. We really want to be with the best of the best. This is the basic premise: If you can get people to be on your property for no other reason than to gather and meet friends and enjoy the day, then you give them a sense of ownership, and then that’s where they go back and shop, go back and dine and go back and be entertained.

WWD: Are retailers in line with that thinking?

R.C.: The retailers said, ‘You’re nuts. You want people in and out. You want to turn [over] that parking lot.’ And I said, ‘Well, that doesn’t sound right to me, because it seems like if I can keep them on the property longer, they’ll spend more money.’ And that’s what we do. Our sales figures are staggering. Our retailers have had increases of 30 to 40 percent. And it’s consistent on all our [eight retail] properties. The Grove alone sees 18 million people a year. Our job is making sure we get a lot of people to the front door of the retailer. And then it’s up to the retailer.

This story first appeared in the July 28, 2004 issue of WWD. Subscribe Today.

WWD: What do people really want?

R.C.: I think in California, it’s a center of town. We don’t have an urban experience. People have adopted this place [the Grove] as the heart of the city. And I think that’s true. A guy yesterday came up to me and said, ‘You gave us a downtown.’

WWD: Are lifestyle centers overtaking traditional malls?

R.C.: I can’t speak for my competitors but, by and large, they’re scared to death to get away from the mall format. Simon [Property Group] is being the most progressive. They’ve said they’re not building any more indoor malls and building only outdoor centers and lifestyle centers. And there’s a reason for it. I’m doing it because early on I thought it was the right thing to do, and it’s been validated over and over again by the consumer. We’re doing it now because we know it’s what the customer wants. It’s what the retailer wants. I look at it this way: What are the most vibrant shopping areas? What has the highest sales per square foot? It’s always the street. I don’t care if it’s in the middle of Cleveland or Chicago on Michigan Avenue or New York, whether there is a blizzard or it’s 90 degrees, it’s always that street.

WWD: How do you get good retailers?

R.C.: Here’s an example. In the beginning, Herb [Fink, owner of Rodeo Drive boutique Theodore] said he would never come here [to the Grove], right? That’s Herb. He said, ‘Listen, I’m not going to be mandated by [open] hours. I’m on Rodeo Drive. I open when I want to open. I close when I want to close.’ I thought, what if we didn’t demand the hours? If we do our job well, we’ll get the people here and they’ll want to stay open. If you trust a real merchant, they’ll stay open. Give them the flexibility to be who they are and they’ll reward you every time.

WWD: California gets heat for being antibusiness. Is this true?

R.C.: California had gotten really expensive to do business. The workers’ comp was out of control. The whole insurance industry was out of control. There were just a lot of problems. We looked at making investments in other states, more business-friendly states. But, based on what Schwarzenegger has done in the last five or six months since he’s been in office, it has really turned us around. Business is now being welcomed and workers’ comp is coming down. It’s still challenging, because it’s a state that’s in demand. I want to be in areas that are challenging; otherwise, everybody would be there. That’s the way I look at it. To me, California is a very, very safe bet because of its diversity of economics, the size of its economy, the location and its climate.

WWD: What do you think of the proposed ordinance banning Wal-Mart Supercenters in Los Angeles?

R.C.: They should be able to expand. I think competition is good. I think the jobs they create are good. I don’t understand cities at all. I think it’s bordering on socialism, certainly on arrogance. To say we don’t want those jobs ’cause they’re not good jobs…I think you let people who need the jobs decide that. Who the hell are the elected officials to be making those kinds of decisions? Now, you look at Inglewood — they took it to a vote of the people and the people made a decision, that’s fine. [Inglewood residents voted against the construction of a Wal-Mart Supercenter in April.] But L.A. is considering the ordinance. That’s ridiculous. Sam Walton was successful because he gave consumers what they wanted. So when has that become a crime? It makes no sense to me. And if the little person thinks they’re going to get squeezed out, I disagree. The little person is going to figure out how to compete against Wal-Mart. They’re going to give better service, create better product. It’s not all about price.

WWD: What’s your biggest dislike?

R.C.: I hate pessimism. When somebody tells me it can’t be done, it gets under my skin. I go nuts. There’s always a solution. We have ideas in the morning and implement them by the afternoon. I like a can-do, entrepreneurial experience. There’s always a solution.