Amid excitement, past shadow hovers over Nebraska Crossing Outlets

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Posted: Sunday, October 20, 2013 12:00 am

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Brenda Ostransky's shopping excursions to the outlet mall in Lake Ozark, Mo., are history, or will be in less than four weeks.

“I'll still be going to Kansas City to visit my daughter, but I won't be stopping at the Ozark mall anymore,” Ostransky said.

The Gretna resident plans instead to shop at Nebraska Crossing Outlets, opening Nov. 15. “Right down the road, at our fingertips,” said Ostransky, owner of Salon DeMarco in Gretna.

“We're so excited. We're nervous about (spending) our paychecks,” Ostransky said, adding that she and many of her clients are eager to shop at Michael Kors, Coach and Borsheims Boutique.

Gretna's beauty salons, restaurants and smoke shops are abuzz with talk of the new shopping center.

More than 70 retail outlets and restaurants will occupy the new shopping center, a $112 million investment at the intersection of Interstate 80 and U.S. Highways 6 and 31. The center boasts a state-of-the-art mobile shopping application that promises to be the digital glue linking retailers and shoppers who choose to opt into the center's ultrafast CenturyLink broadband network or take advantage of its free, personalized digital style consultant, StyleSeek.com.

But will this new high-tech mall prove a success? Can it draw shoppers from a 150-mile radius and generate more than $150 million in yearly sales, the outlet center's projected annual revenue?

This isn't the first time the air has hummed with “outlet mall” anticipation. In 1993, Nebraska Crossing Outlets' predecessor, a 150,000-square-foot outlet mall on the same property, opened with more than 50 tenants amid a hail of fanfare.

“When it first opened, it was very nice. There were a variety of stores,” Ostransky said.

Skeptics of the new center abound, penning comments on The World-Herald's Facebook page that predict the new center will suffer the same fate as the mall that was demolished last spring — a big splash followed by decline; rapid turnover; the closing of key stores; and an eventual dearth of shoppers.

Katja Musgrove was a new mother in 1993, and the first outlet mall helped clothe her son.

“I remember they had a Bugle Boy store, a Carter's and a Mikasa store,” she said. “Even when I lived in South Omaha, I used to go there.”

By the time her son entered elementary school, however, many of the mall's stores had started closing. “The next thing you know it had dwindled down to a couple places,” Musgrove said.

As the brand name stores disappeared, so too did interest in shopping there. “People stopped coming,” Ostransky said.

By 2007, the year Frank Krejci of Omaha's Century Development purchased a 75 percent interest in the mall for the bargain price of $3.8 million, it was a shadow of its original self. Storefronts were empty — “they never filled them,” Ostransky said, and when they did, “they filled them with local craft stores. It became more like a craft center than an outlet center.”

“They had so much turnover, they couldn't keep people in there,” said Don Dennhardt of Omaha, who shopped at the old mall's Champion store for sweat pants and shirts in the 1990s.

But this time, an army of eager customers says it will be different.

Ostransky enthusiastically cites Borsheims' decision to open an outlet store at the new center. “That speaks volumes,” she said, “If they believe in it, it's a go.”

Krejci and developer Rod Yates, head of OTB Destination, are resolute — their center will be a long-term success.

“The location is good. All the growth is heading southwest in Omaha. It's not going to trip up,” Krejci said.

Ask Yates and Krejci about the center's top three features and they list its oval, pedestrian-friendly configuration; its 70 stores, including 40 new-to-Nebraska brands such as Kate Spade New York and Michael Kors; and the mobile shopping experience the high-tech center will offer visitors.

As the clock ticks down to opening day, the 350,000-square-foot outlet center is a hub of activity, its 1,500 parking spaces filled with utility vans and concrete trucks.

Retailers and restaurateurs expect to start moving into their storefronts the first week of November. Ken Sharpe, the current owner of three Auntie Anne's pretzel bakery franchises, two in Omaha and one in Lincoln, is opening a fourth store at Nebraska Crossing.

Sharpe, initially skeptical, opted into the project “once we saw the names that were coming in,” he said.

Sharpe, who moved to Omaha in 2001, said he visited the old mall once or twice. “It didn't have a mix of appealing stores,” he said. “If I were to compare what was in the mall then as compared to the mix of stores that's coming in now, it's not even on the same playing field. What we have now is some big national retailers, including some big ones that are not currently in the market.”

“The focus that Frank and I have is long-term,” Yates said. “As generational owners we plan to expand the center. We plan constantly to remarket it.”

They envision plugging the outflow of dollars that now goes to outlet centers in other states, including Iowa and Kansas.

“Omaha clearly has a leakage problem in terms of the amount of money leaving Omaha because people are shopping elsewhere. We're going to reverse some of that,” said Brian Smith, OTB's chief digital officer.

Yates said there are partnerships in the pipeline with bus companies and hotels to offer daylong and weekend excursions to Nebraska Crossing. Plans to expand the center by 100,000 square feet are already being mulled.

“I have retailers that want to get into the center that can't be in the first phase,” Yates said.

Analysts say the new shopping center's design, retail tenant mix and square footage are in line with the industry's best practices.

“Today's outlet centers are starting out at about 350,000 square feet, and then almost immediately announcing plans to expand by about 100,000 square feet,” said Ann Natunewicz, vice president of retail services at Colliers International's San Francisco office. Nebraska Crossing's outdoor, oval racetrack design is also a tried-and-true industry standard. The linear layout of the old Gretna outlet mall has fallen from favor, Natunewicz said.

Outlet malls are the new destination for shoppers. Nationwide, there are about 179 outlet centers, with 40 to 50 other projects in the pipeline, Natunewicz said.

“Outlet centers are the only thing being built,” said David Ober, president of the Council of Developers of Outlet Centers & Retailers. “Why? Because they are successful.”

He said that in the last seven years, only one enclosed, or covered, regional mall, which usually includes several department stores, has been built in North America — in Salt Lake City — compared with 39 outlet centers.

“Since 2007, since the recession, 17 million to 18 million women have shopped in the last seven days at an outlet center. That's more than visit regional malls on a weekly basis,” Ober said. “The average outlet center shopper spends three hours and 40 minutes at an outlet center, versus about 60 minutes at a regional mall. Outlet centers are not hangouts. People go to shop.”

In the last four years, sales at North America's 205 outlet centers have increased to $27.6 billion from $19.9 billion in 2009, up 28 percent, according to the International Council of Shopping Centers.

“While most retail sectors have contended with modest growth since the recession, the outlet center sector is on fire,” Michael P. Kercheval, the council's president and chief executive, said this month.

In the last decade, there's been a rush of new retailers entering the outlet business, Ann Taylor, Loft, Forever 21, Ober said.

Many retailers with outlet versions of their stores now derive more than 50 percent of revenue from their outlets, motivating them to keep their outlet and factory stores stocked with relevant, seasonal offerings.

In addition, retailers that operate outlet stores are less territorial, dropping radius restrictions between their full-line and outlet stores, a change that's allowed developers to build outlet centers closer to metropolitan areas.

“Twenty years ago, your typical outlet center was in the middle of nowhere and was a “couple of hours' drive” from major population centers, Natunewicz said.

Perhaps most important, outlet management strategy has also undergone a significant change.

A well-situated outlet center is like the offspring of a prize-winning heifer: It may have good genes, but if it's not cared for, it's unlikely to thrive.

“There wasn't always the understanding that outlet centers require a lot of hands-on marketing. They are not good cash cows. You can't just walk away — that's understood now,” said Linda Humphers, editor-in-chief of Value Retail News, a trade publication.

“You have to market to the locals, to shoppers who are 90 minutes away, three hours away,” Humphers said.

You have to pay close attention to what the stores are doing, Humphers said. Are the inventory levels where they should be? You don't want low inventory and empty shelves. Is the merchandise in keeping with the season? Gone are the days of merchandise seconds, grade B products and out-of-season offerings.

“Rod Yates has really good management skills. He's into the marketing end of it,” Humphers said.

Yates helped engineer the retail mix at the Legends Outlets Kansas City, which opened in 2006 as part of the Village West shopping and entertainment complex. The tourist mecca, which is anchored by Nebraska Furniture Mart, Cabela's, the NASCAR Kansas Speedway and other attractions, draws more than 12 million visitors each year, according to the Kansas City Convention and Visitors Association.

The Legends outlet and factory store roster includes Saks Fifth Avenue OFF 5TH, J. Crew, Under Armour, Nike Factory, Adidas, Loft, Chico's Outlet, Brooks Brothers Factory Store, Gap Outlet, Banana Republic Factory Store, Forever 21, Ann Taylor Factory Store and Tommy Hilfiger — some of the same outlets that will occupy Nebraska Crossing Outlets.

Earlier this year, investment firm KKR & Co. purchased the Legends outlet center at a foreclosure auction for $131.5 million, Bloomberg News reported.

According to the Kansas City Business Journal, in May 2012 U.S. Bank “filed a lawsuit ... seeking to foreclose.” The bank alleged that “Legends owners owe $179.4 million and the property is worth between $95 million and $112.5 million,” the business journal reported.

Humphers said the sale is not an indicator that the outlet mall was floundering. Retail centers that opened their doors just before the Great Recession faced unique problems, including retail tenants who were forced to ask for lower rents because of reduced sales. Bloomberg reported in February that Legends had a “vacancy rate of about 5 percent,” compared with a retail vacancy rate of 9 percent in the Kansas City metropolitan area.

Consumers' perception of outlet malls also has changed in the last 20 years.

In 2006, Consumer Reports conducted its first review of outlets and concluded they offer quality merchandise. The magazine's latest survey, in 2011, found that 75 percent of shoppers described the items they purchased there as “excellent or very good.” Only 11 percent “judged outlet goods slightly poorer” than regular stores.

Musgrove, for one, believes Nebraska Crossing Outlets' retail mix has hit the mark.

“People go to outlet malls and rave about the deals they get there,” Musgrove said. “We might have that this go-round. You've got those big names there.”

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The Nebraska Crossing countdown

» Oct. 26: Nebraska Crossing Outlets will hold a job fair from 2 p.m. to 5 p.m. at Gretna High School, 11335 S. 204th St. More than two dozen outlet store retailers are expected to participate.

» Nov. 14: A VIP event will feature a fashion show and a performance from Eve, a Grammy award-winning rapper and songwriter. The fashion show, called FirstLOOK and produced by Omaha Fashion Week producer Brook Hudson, will feature 60 head-to-toe looks from the center's retailers. Attendees will be able to shop from their seats with a new mobile app powered by StyleSeek.com.

The invitation-only event will start at 6 p.m. in what will become the Old Navy store in early 2014. It will include complimentary valet parking, cocktails and canapes, interactive retail booths and swag bags with gifts and discount offers. Members of the public can sign up to receive an invitation at www.nexoutlets.com.

» Nov. 15: Nebraska Crossing Outlets opens to the public at 10 a.m. A ribbon-cutting event is scheduled for 9 a.m. The shopping center will be open Mondays through Saturdays from 10 a.m. to 9 p.m. and Sundays from 11 a.m. to 6 p.m.

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Correction: An earlier version of this story had an incorrect date for the Outlets' job fair.

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