Seeking Cultural DNA
The Hispanic market in the U.S. is one that developers and retailers are finally waking up to.A consortium of three shopping center players has come together under the banner of Hispanic Retail Group to seek out Hispanic markets and develop centers.
Randall Shearin

There are an estimated 42 million people of Hispanic origin in the United States that represent a purchasing power approaching $800 billion per year. The U.S. Hispanic population has a larger gross national product (GNP) than Mexico.

Opening day at the Gigante supermarket in Inglewood, California, developed by Hispanic Retail Group, a consortium of Forest City, The Legaspi Company and Streetscape Equities.

The Hispanic population in the U.S. has become a culture of its own, with its own music, art, lingo, and even food. This also varies by geography in the U.S., says José Legaspi, president of The Legaspi Company, a leading Hispanic retail consulting firm and a partner in Hispanic Retail Group. The Hispanic culture in Texas is different from that in California, which is different from that in Florida, for instance. Retailers entering the Hispanic market must be extremely sensitive to the differences that exist in those markets.

“The Hispanic population tends to be very family oriented,” says Legaspi. “And this is not just the nuclear family; Hispanic families extend to parents, grandparents, aunts, uncles, cousins, and even neighbors and friends. Retailers have to be sensitive to this — you can't sell to the individual. You have to touch the needs of the family as a whole. When you build a shopping center, you have to have something for the entire family.”

Legaspi, along with Forest City's West Coast Division and Streetscape Equities, have combined their efforts to create the Hispanic Retail Group, a new venture that is developing shopping centers and retail sites in Hispanic neighborhoods in the western United States. The group's first centers are located in California and Arizona. Shopping Center Business recently met with Legaspi, as well as Brett Mayer, president of Streetscape Equities, and Andrés Friedman, vice president, Forest City Commercial – Western Region, who collectively serve as the directors of Hispanic Retail Group (HRG).

For José Legaspi, involvement in Hispanic areas is nothing new. He has been involved in developing retail in Hispanic areas for 28 years. He started by helping traditional inline strip center retailers, like Blockbuster, transition their goods and services into Hispanic neighborhoods. Andrés Friedman, a Chilean-born, Mexican-bred architect and developer, is heading up Forest City's presence in Hispanic Retail Group. Brett Mayer, whose company, Streetscape Equities, is also a partner in Hispanic Retail Group, says that his company's role in the venture is to fund the financial structure of the program. HRG's capital comes from its partners, which include CalSTRS, Sarofim, Forest City, Streetscape and The Legaspi Company.

“My role is from a financial perspective,” says Mayer. “José's role is to deal with the retailers, the neighborhoods and the relationships that we are building, and Forest City brings a worldly perspective to the group with all of its tenant relationships and force. Forest City is a very cutting-edge company that understands an opportunity when they see it.”

Hispanic Retail Group's first project was the development of a grocery store on a pad site in Inglewood, California. Through Legaspi's relationships with retailers, the group was able to land Mexican supermarket Gigante as the sole anchor of the project. Hispanic Retail Group developed the 47,000-square-foot supermarket. It has since sold the project, and a shopping center has been developed adjacent to it. Located 4 miles east of LAX, the Inglewood Gigante caters to its market. Approximately 46 percent of Inglewood's 115,000 residents are of Hispanic heritage. Within 1 mile of the center, 57 percent are of Hispanic origin. This is the kind of market that Hispanic Retail Group is in search of for future development.

For its part, Gigante saw the opportunity in the market as well. It saw the opportunity for the Inglewood store as excellent and worked with Hispanic Retail Group to do a reverse build-to-suit on the property. The store is a prototype of other markets that the retailer wants to build as it expands its presence in the U.S.

Gigante is not your ordinary grocery store. The store has large produce, bakery and meat departments unlike those found in conventional grocery stores. Studies show that the Hispanic market shops daily, as well as weekly, and that ingredients are usually bought fresh the day of preparation instead of weekly. There are also staples that Hispanic households like to buy more frequently so that they are ultra fresh. Tortillas, for example, are one product that Hispanic households buy frequently. There are numerous types of tortillas, from those that last for months, to those whose freshness will only keep a few days, and range from those made of corn or those made of flour. At Gigante, one can buy any type of tortilla, and even watch them being made in the store's bakery.

Forest City brings clout and a national development name to the deals. When communities see that a company like Forest City is behind Hispanic Retail Group, they become interested, says Friedman. Friedman estimates that when presenting a project, 50 percent of his time is spent educating retailers on the impact that the Hispanic market is having on retail. The directors of Hispanic Retail Group — Mayer, Legaspi and Friedman — say that every project that HRG does has to be approached holistically — they must be intrinsic to the community. Retailers cannot just build a traditional store and hope that Hispanics like it. The group cannot build a traditional center and hope that the community likes it. They must educate each tenant and make sure that they are committed to serving the needs of the market; otherwise the center will not be successful.

“It is not as easy as putting a national supermarket chain in place. It must have elements that appeal to the market in order to act as the true anchor of bringing people in,” says Legaspi.

Hispanic Retail Group has a number of projects underway. The group is repositioning a 140,000-square-foot shopping center in Coachella, California. The project consists of a former Kmart location and a former grocery store. HRG leased the grocery store to Cardenas grocery, a Hispanic grocer, and has leased other space at the center, which is located in a market that is 95 percent Hispanic. HRG received a unanimous vote from the city for its project. The city saw the vision for the project, and saw that HRG's answer was the correct one for the market, the city and the Hispanic community.

“California is the Mecca for Hispanic retail,” says Mayer. “It is where most of the successful Hispanic retailers started out, and it is where they feel most comfortable. Now, California is becoming competitive and these guys are learning that they have to expand to new areas to achieve more success.”

In Yuma, Arizona, where HRG has just purchased a 250,000-square-foot existing mall, an 18-month repositioning is underway to target the unique demographic.

“The city is very excited about this project and has been most welcoming,” said Friedman.

HRG is about to commit to another 18-month redevelopment of a 180,000-square-foot mall in El Centro, California, which is 75 percent Hispanic. The project will include an added anchor.   HRG plans to eventually double the mall's current GLA.

“When we go to an area, we try to locate the ‘cultural DNA',” says Legaspi. “Once we find that, we build a center around its needs and wants. When we choose an architect, a site and a look and feel, we do it around that cultural DNA.”

Making sure that the center is what the community needs is paramount to its success. As any developer knows, if you build something that the community doesn't want or need, no one will shop there.

“The community really reacts to a center if it is done right,” says Legaspi. “They feel it is a communal place, where the families can enjoy it. Some centers might see 5,000 people on a Sunday, just walking around. If we implement everything that we have learned through our combined experience, it works.”

INSIDE GIGANTE Inside the Gigante supermarket developed by Hispanic Retail Group in Inglewood, California. While in Inglewood, Shopping Center Business took a tour of the Gigante Supermarket built by Hispanic Retail Group. Gigante, based in Mexico, has been expanding in select markets of Southern California in recent years. Gigante differs from typical supermarkets in that it focuses on the Hispanic market by having specialized departments that cater to their needs. For one thing, aisles are wider so that the entire family can shop together. Customer service is high on the list. At Gigante, for instance, shoppers can visit the bakery, where all items are made from scratch, or the butcher to have their meat cut a specific way. The vegetables also have a short shelf life because Hispanics shop more frequently and require ripe ingredients. Cheese is another area of wide selection. Gigante has a lot of products that are U.S. products that are marketed and sold in Mexico, Central America and South America. Smart companies, like Colgate-Palmolive, have created products for the Hispanic market, like Fabuloso, a household cleaner that is regularly available in Hispanic markets. Other products, like Procter & Gamble's Ariel detergent, are manufactured for Latin America, but are sold at Gigante in the U.S. “Hispanics are very loyal to brands, and they want to buy the best for their families,” says Legaspi. “It is very important to bring the national brands that Hispanics want.” — Randall Shearin

©2006 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.