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Dos Lagos shopping center facing tough first years(Press-Enterprise, The (Riverside, CA) (KRT) Via Thomson Dialog NewsEdge) Jan. 20--More than a year after The Promenade Shops at Dos Lagos opened along Interstate 15 in Corona, many of the tenants in the upscale shopping center are struggling and even more are complaining that not enough people know the place exists. The 360,000-square-foot lakeside center, designed to resemble a traditional Main Street, has run into the headwinds of a weakening economy and housing crash. Many merchants, even some achieving their sales goals, lament that because the center was developed in a quarry, it can't be seen from the freeway. Making that worse, they say, the project suffers from inadequate signage and marketing. "It was poor planning. They thought they would build this and the people would come and it doesn't happen," said Angela Myers, owner of Bella's Boutique, one of more than 70 tenants at Dos Lagos, which was created as a "lifestyle center." Myers said her store at Dos Lagos is losing money with no turning point in sight. Typically shopping centers sign smaller retailers to three- to five-year leases while a national chain's lease runs 10 years on average. Before the shopping center opened Oct. 6, 2006, its developer, Poag & McEwen, talked about the debut of a second phase of 200,000 square feet of new stores in the fall of 2008, Myers and other merchants recalled. But now Terry McEwen, president of Poag & McEwen, said it is uncertain when stores will be built on the empty field to the south. Also he said the size of a future expansion is undetermined. McEwen said most of the national chain retailers, including Victoria's Secret and Brighton Collectibles, are doing very well, although he acknowledged that some tenants, especially smaller retailers without national marketing arms, are not. He said the center got off to a slow start because the restaurants were delayed. Visitors bought hot dogs and popcorn from vendors at the grand opening. The first restaurant opened a week later, but most didn't open for many months. Since May three restaurants -- Wood Ranch BBQ & Grill, Taps Fish House & Brewery and Citrus City Grille -- have made their debut. Another, Miguel's, is in development and a final restaurant has yet to be announced. Trader Joe's, which was much anticipated by the community, didn't open until November, more than a year after the center's grand opening. Another expected traffic generator for the center, a 15-screen movie house operated by Krikorian Premiere Theaters, has been unable to match the blockbuster movies shown by the Edwards Theater at Crossings at Corona, a shopping center just to the north of Dos Lagos. Matthew Godinez, an assistant manager at the Krikorian, said theater employees frequently are sent home early because there aren't enough moviegoers to keep them busy. Based in Memphis, Tenn., Poag & McEwen says it originated the "lifestyle center." It is described as a scenic outdoor shopping area that is friendly to pedestrians and offers a mix of upscale shops, restaurants and entertainment. Unlike an indoor mall, the "pure" lifestyle center does not have department stores but depends on the synergy of popular national boutiques like Ann Taylor, Coldwater Creek, Coach and others geared for the upper middle-income shopper. Restaurants and stores also were counting on planned office buildings nearby to boost their lunchtime business. However, David Mudgett, a principal in Timberline Commercial Real Estate, which is partnering with Dos Lagos master developer SE Corp to build the Lakeshore Plaza office park, said so far he has no leases signed for the first 155,000-square-foot building scheduled to open early next month. Mudgett said he is negotiating with prospective tenants but the market for office space in Corona has softened since the office complex was planned. At Z Gallerie, assistant store manager Kristy Guerrero said the home furnishings store opened with strong sales that diminished dramatically with the drop-off in housing construction. She said the store started with about 32 sales people, then over the summer laid off all but 10. Inland Economist John Husing said the timing of the Dos Lagos center, which was expected to demonstrate the growing household income and sophistication of western Riverside County, "has been terrible." Riverside County's once booming retail "turned on a dime," Husing said. Sales growth, he said, rose to 13.4 percent in the first quarter of 2006, compared to the first quarter of 2005, then plunged to .3 percent in the fourth quarter of 2006 when the Dos Lagos shopping center opened. Retail sales in the county fell almost 2 percent in the first quarter of 2007, the latest period for which there is data, compared to a year earlier. Husing said he believes the busted housing market is the major cause for the drop-off in retail sales. He said the Dos Lagos center probably is harmed by exceptionally heavy foreclosures in communities along the I nterstate 15 corridor. Matt Landers, senior manager of real estate for Opus West, which in the spring is opening another lifestyle center in Chino Hills, said it is common knowledge among local retailers that the Dos Lagos center is underperforming, despite having a "great lineup" of shops and a "great developer." Landers said the center opened ahead of additional housing planned in Temescal Valley that was needed to provide sufficient customers. He noted that much of the home construction in the center's market area is now on hold. Longer term, Dos Lagos is in a growth area and will succeed, he added. McEwen disagreed that the center is premature. "Our market research showed sufficient demographics there to support the project right now," he said. Patty Mageleno, manager of Track 'N Trail, an outdoor shoe and clothing shop, was folding shirts in an empty store on a recent weekday evening. "People come by and talk about how tough the housing market is. People here are losing their houses. We have plenty of time to chat," she said. Mageleno said business picked up with the opening of more restaurants, but the store is not seeing nearly as much sales improvement as she had hoped. At American Eagle Outfitters, assistant manager Marysol Martinez said the center has tried to woo shoppers with art events, a farmers market in the parking lot, and carolers, musicians and a lighted tree at Christmas. McEwen, who denies the center has lagged in its marketing efforts, also listed concerts, promotional parties and a widely advertised giveaway of $30,000 in gift cards to shoppers to kick off the holiday buying season on Black Friday. Sales at the center have risen, he said, with sixteen tenants reporting at least a 10 percent increase in business in November 2007 over November 2006. But Martinez and other store managers said the center sorely needs more traffic. Regular customers are happy with the availability of parking spaces in front of the stores, Martinez said with a laugh: "They love that they can drive up and come right in." Jeff and Leslie Willett, Corona residents who live close to the center, were walking their pit bull, Lilly, along the storefronts after work. They said that from the freeway it is not possible to appreciate the outdoor mall with its fountain and lakes. "Once you get here it is great," Leslie said. Rosa Garcia, owner of Salsa-Mar Mexican Food and Grill, blamed the management of the center and the economy for her continuing losses since she opened in November 2006. Garcia said smaller Dos Lagos retailers have met and brainstormed marketing ideas that the mall management has shot down. Her suggestions include "a choo-choo train" to attract shoppers with children and distributing booklets of coupons to surrounding neighborhoods that can be used at the stores. Garcia said because the Dos Lagos shopping center sign beside the freeway is small and doesn't name any of the high-profile stores, people hunting for the center often wind up at the Crossings, which has more visible major retailers and large, colorful signs. Lacy Lynch, manager of the Skechers shoe store, said the center also needs more men's stores, a fast-food court and maybe a department store such as Nordstrom. "We are hoping things get better but something has to change, that's for sure," she said. Not every store manager is unhappy. Corinne Nickels, manager of Clarks shoe store, said her first year sales results were "fantastic" although the British chain that specializes in comfort shoes does little advertising and relies mostly on word of mouth. Nickels said she was aware that other merchants are not making their sales goals. She said she believes, in time, the community will learn to appreciate the benefits of a lifestyle center, which she said include an outdoor environment and shops that give customer service. Jerry Ramirez, franchise owner of the Rocky Mountain Chocolate Factory, said he would like to see more for teens, who he said prefer the Crossings. Still, Ramirez said he broke even his first year at Dos Lagos and in recent months he has been pleased to see new restaurants, more events at the center's outdoor amphitheater and some films with a bigger draw at the movie house. Also Pinkberry, a gourmet yogurt shop, and The Counter, a gourmet burger restaurant, and Vilano Luggage are scheduled to open this year. Representatives of Ann Taylor Loft, Coach, Banana Republic and Trader Joe's declined to discuss sales at their Dos Lagos stores and others did not answer calls. Most said as public companies it is against their policy to provide information on individual outlets. Sales at Chico's and White House/Black Market, upscale women's clothing stores, "are below where we expected to be," said Brian Sorlie, vice president of real estate for Chico's FAS, Inc. He added that his company has "a long history of success in Poag & McEwen centers so we are hopeful that these stores will perform." Poag & McEwen is working to get upgraded signage and will beef up marketing for Dos Lagos in 2008, McEwen said. The center is over 95 percent leased, he said, and more shops and restaurants are coming. He forecasted sales growth for the center this year, although in "the single digits" because of a slower economy. Ali Sahabi, president and chief executive of SE Corp., master developer of the Dos Lagos community, said the shopping center is going through "a natural evolution." He said it is "becoming a destination but it doesn't happen overnight." Several retailers and restaurant operators in Dos Lagos said they plan to do more advertising. "I am doing my own thing," said Juan Torres, general manger of T.G.I. Friday's, to improve business that has declined at the restaurant since it opened on New Year's Eve 2006. He said he is offering free meal tickets to schools to pass out to students as rewards. Don Myers, president of Taps Fish House & Brewery, which opened before Thanksgiving, said, "It is tough for me to complain because we have been very busy and very fortunate." Myers nonetheless agreed with other tenants that marketing by the Dos Lagos management could be more effective and he called the freeway sign "ridiculous." But he said long before opening day he began promoting the restaurant, which he said cost $7.5 million to build. "I don't care what they are doing at the mall to market themselves," he said. "I can't afford to wait." To see more of The Press-Enterprise, or to subscribe to the newspaper, go to http://www.PE.com. Copyright (c) 2008, The Press-Enterprise, Riverside, Calif. 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