REAL ESTATE: Desert Hills outlets in expansion mode

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1 Home > Business > Business Headlines REAL ESTATE: Desert Hills outlets in expansion mode DEBRA GRUSZECKI/STAFF PHOTO The iconic stairway to Desert Hills Premium Outlets in Cabazon curve toward land that will feature a four-story parking garage in The construction project is part of a $100 million expansion that's underway in the premiere outlet center. 1 of 10 BY DEBRA GRUSZECKI STAFF WRITER Published: December 26, 2012; 10:02 AM The Desert Hills Premium Outlets and Cabazon Outlets shopping centers were a few minutes into Monday, and three international travelers were already shoving boxes of Pumas they bought into the trunk of their rented vehicle. This is spectacular, Ariel Carranza, of Argentina, said in a warm, Latin accent.

2 Carranza and two other travelers from Mexico City, who drove to Cabazon from Disneyland in Anaheim, each planned to fork out $300 on designer merchandise. We ll go higher if we need to, Jorge Carmargo said. It depends on what we see. Four hours later, Carranza said the excursion scored as high on the destination list as did Cars Land in Disney California Adventures Park. As the Argentine shopper leaned against a stucco wall outside All Saints, with shopping bags from Diesel and Guess at his feet, Carranza said the discounts were so enticing he had already spent $1,500. The shopping is buenísimo, he said. Thirty yards away, a contingent of Asian travelers set six Coach shopping bags next to a park bench in a promenade as the PA system broke into the steady stream of Christmas music to welcome shoppers in Spanish, Chinese, Japanese, Korean and Milanese. Desert Hills is one of those unique shopping destinations due to its merchant mix, said Michele Rothstein, senior vice president of marketing for Simon Property Group s Premium Outlets. It has a stellar roster of designer brands that s pretty unmatched. There are just a handful of outlet centers in the world with a similar blend of brands. It puts Desert Hills in a class all its own. Desert Hills, with 130 stores, trumpets a long line of high-end stores like Eli Tahari, Giorgio Armani, Jimmy Choo, TAGHeuer, Loro Piana, Prada, Versace and Burberry and stores that appeal to middle-income shoppers. This year, it welcomed White House Black Market, Hurley, Porshe Design, Splendid and Luggage Factory to the scene. The nearby Cabazon Outlets, owned by Newport Beach-based mall operator Craig Realty Group, added GoLite to its line-up of 20 stores in a center directly east of Desert Hills. Tour buses and mini-vans pull up at the Desert Hills curb regularly. The nearby Morongo Casino Resort & Spa runs a shuttle to and from the outlet stores for its gamblers and hotel guests. Expansion underway And 2013 promises even more allure.

3 Owner Simon Property Group started its $100 million expansion as the Christmas shopping season began, an effort that in its own respect, markets new stores or more convenience in the coming years. Bulldozers are already reshaping land north of Desert Hills for a four-story parking garage. Next, interior parking lots will be filled in to build a two-sided interior structure. This 45- store centerpiece, measuring 146,000-square-feet, will be finished in Simon Property Group, which owns or has an interest in 331 retail real estate properties in North America and Asia, in August 2012 described Desert Hills as one of the most successful outlet centers in the nation. Sales at that time were approaching $1,000 per square foot, Rothstein said, remarking: That s a pretty sexy number. By comparison, Simon s third quarter sales for all of its U.S. malls and outlets were $562 per square foot, a 9.3 percent gain over the same quarter in Outlets are an interesting business, she said, explaining that when times are good shoppers gravitate toward brands. When times are a little tougher, people do their homework, become value-orientated and work a little harder to shop for quality. Outlets aren t resistant to fluctuations, but they are positioned for sway in the economy. Economic stamina The expansion, expected to add 500 jobs, seems a solid clue of economic stamina and prowess in a locale that s ridden out tough times. David Stones, chairman and chief executive, said Simon Property Group had 16.4 percent growth in funds from its operations in the third quarter, as its retail real estate platform strengthened around the globe. About $1 billion will be spent on development and redevelopment in Expect similar spending in 2013 and 2014, Stones said. Besides Desert Hills, three other expansions began at Premium Outlets in Orlando, Aurora, Ill., and the Seattle region. Work on a St. Louis area outlet center began in Chesterfield, Mo. Simon rolled out plans for its first outlet in Sao Paulo, Brazil. And other projects remained underway in Shisui, Japan, Chandler, Ariz., Toronto, Canada and Busan, Korea.

4 An upscale outlet center opened in Texas City under a 50/50 partnership with Tanger Factory Outlet Center. This week, Simon revealed it acquired two Paragon Outlets assets, one $100 million center in Grand Prairie, Texas, and another outlet in Livermore Valley. The International Council of Shopping Centers in a 2011 report said expansion is occurring as shoppers are finding their way back to malls, citing retail sales numbers that registered nearly $2.3 trillion in 2010, up from $2.2 trillion in Tourism also benefits This year s retail sales numbers are expected to trend up, given national retail forecasts holiday spending will be in the 3.5 percent to 4 percent range. One pin in the seam has been tourism. Kari Smith, executive director of Morongo Casino Resort marketing, said significant cross-promotional activities with Simon drives people into both properties from multiple directions that, plus more than 77,000 people travel past the center on I-10 every day. Morongo offers a daily shuttle service to Desert Hills and operates a kiosk on site. A lot can be said for the neon glow in the desert oasis. This month, Morongo Casino rolled out a new Three of a Kind marketing package. For $159, guests get a three-night stay Monday through Thursday, a $30 gaming credit and $25 Desert Hills gift card. The kiosk presents a way for clients to join the Winner s Circle, netting $10 in free slot play or a $10 dining credit at Morongo, along with one entry in a weekly drawing for a $500 Desert Hills shopping spree. Besides the cross-promotional work that s been done with Morongo and Palm Springs tourism bureaus, shoppers are directed to other malls and outlet centers. It s no coincidence that the names include Simon properties, such as: Brea Mall, Laguna Hills Mall, Ontario Mills and The Outlets at Orange. DESERT HILLS PREMIUM OUTLETS MAJOR METRO AREAS: Palm Springs, 18 miles east; Los Angeles, 75 miles west RADIUS POPULATION: 15 MILES: 205,825; 30 miles: 1.3 million; 60 miles: 6.2 million; 100 miles: 19 million AVERAGE HOUSEHOLD INCOME: 30-mile average, $66,685

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