Shopping's Center

By Wendy Tanaka
Philadelphia Inquirer Staff Writer

Once a month, high school friends Brian Adams, Lauren Herb and Alex Foimoyer make the pilgrimage from Reading for their fix of glitz and glamour. Their destination: the King of Prussia mall.

"Reading - it doesn't have any of this stuff," Foimoyer, 16, said as she shopped recently at the mall's Armani Exchange and Tiffany & Co. stores. "You definitely take more out of your bank account when you come here."

Shoppers spend more than $1 billion a year at the 42-year-old mall, still the largest on the East Coast and third-largest in the country, according to the International Council of Shopping Centers. Only South Coast Plaza in Costa Mesa, Calif., and Mall of America near Minneapolis are bigger in terms of leasable space, the council said.

And despite the current shakeout in the retail industry, with recent mergers and buyouts affecting six of King of Prussia's eight major department stores, the mall is well-positioned to weather any changes that might result, according to analysts, mall executives and tenants.

Mall tenant Sears was bought by Kmart for $12 billion in March. Neiman Marcus agreed in May to be acquired by two private equity firms for $5 billion. Federated Department Stores Inc. and May Department Stores Co., which together own mall tenants Macy's, Bloomingdale's, Lord & Taylor and Strawbridge's, are in the process of merging in a deal valued at $11 billion.

While last week's announcement that nine Strawbridge's stores - including the King of Prussia store - were put up for sale sealed the fate of one mall tenant caught in the merger frenzy, some experts said King of Prussia would not be harmed.

"There will always be different adjustments," said Brian Ford, a partner with consulting firm Ernst & Young L.L.P., who specializes in retailing.

"But space will never be empty in King of Prussia."

Mall general manager Bob Hart said he had a waiting list of retailers ready to move in as openings arose. Simon Property Group Inc., the Indianapolis real estate investment trust that has a 12.4 percent ownership stake in the mall, said in its 2004 annual report that occupancy at King of Prussia was at 96.8 percent.

Kravco Simon Co., which manages the King of Prussia mall and other area malls, would not discuss possible new tenants for the 215,000-square-foot Strawbridge's space, but it was confident it would find a replacement.

Before the Strawbridge's news, Hart had said: "There's a lot of demand for our property."

So what's the attraction?

Shoppers cite the mall's location (at the intersection of the Pennsylvania Turnpike, Route 202 and the Schuylkill Expressway) and the number and diversity of its offerings. Among its 400 stores and restaurants are many high-end names - including some, such as Neiman Marcus and Versace, that have no other locations in the Philadelphia region - along with all of the typical mall fare.

"It has everything in it," said Jennifer Walker, 28, who regularly treks to King of Prussia from Wilmington.

The mall says 20 percent to 25 percent of its customers are tourists, some of whom arrive on the 1,000 tour buses that visit each year. Five million people live within a 100-mile radius.

The 200-acre mall - it actually consists of two adjacent, enclosed shopping centers, the Plaza and the Court - contributed $7 million in taxes to Upper Merion last year. About 6,000 people work there.

When Urban Outfitters Inc., the hot Philadelphia retailer, decided to open its first mall store in the area in 2002, it chose King of Prussia.

"They have a prime location, in terms of transportation," said Richard Hayne, founder and president of Urban Outfitters. "When you look at the numbers of people who have access to the King of Prussia mall fairly easily, it's incredibly powerful."

Crate & Barrel has had a store at the mall since 2000.

"Once we determine a market makes sense for us, we're looking to open in the center of gravity," said Peter Rusnak, director of real estate for the home retailer.

Many chains noted that their King of Prussia store is among their highest in sales. Sue Ertell, a manager at Rampage, a young women's clothing retailer, said the King of Prussia store was among its best. "It's in the Top 10 for the company," she said.

Patti Rozecki, store manager at upscale baby boutique The Right Start, said it was sometimes a chicken-and-egg issue for retailers.

"We are a high-volume store because we're in King of Prussia," she said. "King of Prussia mall is a big attraction."

The Plaza came first, established in 1963 by mall developer Kravco Co., and housed department stores E.J. Korvette and J.C. Penney, plus an Acme supermarket. The Court opened in 1981 with Bloomingdale's as its centerpiece.

In 2003, Simon Property Group increased its ownership in Kravco, changing Kravco's business name to Kravco Simon Co.

Today, Kravco Simon manages the mall, which is owned by a private partnership called King of Prussia Associates. Another private partnership, PS Court Associates, owns the Pavilion, which houses Borders Books & Music, Urban Outfitters, and Cheesecake Factory.

Ten years ago, the mall began focusing on attracting more high-end retailers, so they in turn could attract the growing number of higher-income shoppers in the region. It now has some of the world's most exclusive retailers, including Burberry, Cartier, Hermes and Louis Vuitton.

It also features:

About 2.62 million square feet of leasable space, according to the shopping center council - 2.85 million if the attached Pavilion is included, according to the mall.

More than 13,000 parking spaces.

Shoppers with average household incomes of $70,000.

Average annual sales per square foot of $512 for stores in the Plaza, excluding department stores, and $470 per square foot at Court shops, according to the council. The national average is $366.

Hart said the council's average revenue figures for the mall were low; some luxury retailers there have sales of more than $4,000 per square foot, he said.

He declined to say exactly how much the mall has spent on maintenance and advertising, but said it had a multimillion-dollar marketing budget. It changes its billboard advertisement on the westbound Schuylkill Expressway every two months, and it continually updates its glossy store directory brochure.

"What King of Prussia has been able to do," said Ernst & Young's Ford, "is take an area that was farm country, redevelop it into a significant regional shopping center, and then turn it into the regional shopping center in the country."

Shop Till You Drop
The nation's biggest shopping centers, measured by gross leasable area (in millions of square feet):

1. South Coast Plaza, Costa Mesa, Calif. 2.80
2. Mall of America, Bloomington, Minn. 2.78
3. Plaza and Court, King of Prussia *2.62
4. The Galleria, Houston 2.40
5. Woodfield, Schaumburg, Ill. 2.22
6. Roosevelt Field Mall, Garden City, N.Y. 2.19
7. Sawgrass Mills, Sunrise, Fla. 2.17
8. Del Amo Fashion Center, Torrance, Calif. 2.10
9. Lakewood Center Mall, Lakewood, Calif. 2.09
10. Scottsdale Fashion Square, Scottsdale, Ariz. 2.05

* King of Prussia mall operators say that if their Pavilion is included, they have 2.85 million square feet of leasable space.

SOURCE: International Council of Shopping Centers.

Anchors Aplenty
Major department stores at King of Prussia mall:

The Plaza
J.C. Penney
Lord & Taylor
Neiman Marcus
Nordstrom
Sears
Strawbridge's

The Court
Bloomingdale's
Macy's