Some Malls Ban Lottery Ticket Sales; Sellers Upset

In a potential impediment to booming state lottery ticket sales, owners of many shopping malls, led by industry leader Ernest W. Hahn Inc. of San Diego, have barred ticket sales by their tenant stores across the state.

And despite the lottery fever that is sweeping California, prohibitions at other malls were under consideration Friday.

The mall owners, which operate seven centers in San Diego County, say lottery sales violate tenant leases, attract loiterers, plaster malls with unbecoming advertising and cut into store--and shopping center--profits.

Merchants, some of whom learned of the sales bans just hours before the lottery’s kickoff Thursday, argue that ticket sales attract customers, benefiting both the stores and the malls.

Some shops, like TNT T-Shirts in University Towne Centre, a Hahn-owned mall, are defying the restriction on ticket sales. “They had months and months to notify us,” said Richard Rogers, manager of the store. “We’re not doing it for the money. We’re just doing it to bring customers into the store.”

Lottery officials in Sacramento said Friday they were unaware of the malls’ restriction on sales. However, Bob Taylor, a lottery spokesman, said that most of the 20,000 sales locations in the state are convenience stores, supermarkets, or “mom and pop” retailers, not mall outlets.

Hahn sent letters to the hundreds of tenants in its 26 malls in California warning they would be violating their leases if they sold the $1 lottery tickets. The leases limit merchants to selling the types of goods--shoes, clothing or food, for instance--for which the businesses were established, said Hahn spokesman Kim Wenrick.

“We have a responsibility and desire to keep control of when and where things are sold and what is sold at our centers,” Wenrick said Friday. “It really has nothing to do with whether anybody is for or against the lottery. It comes down to a contractual agreement and trying to maintain our own policies.”

Hahn is considering a plan of leasing space in its malls to a tenant who would operate a mall information booth in exchange for the right to sell lottery tickets, she said. In the meantime, the company has made no decisions about taking legal action against stores that continue to sell tickets.

“This thing is getting blown way out of proportion,” she said. “We’re going to be able to work out arrangements or agreements with all our tenants to everybody’s satisfaction.”

The Tinder Box in University Towne Centre is abiding by the ban, but manager Mark Khachadoorian says he is losing business in the process.

“We felt it would bring a lot of traffic into the store and into the mall itself,” he said Friday. “We had a lot of people we had to turn away yesterday and today who wanted to buy tickets. Who knows where we could have gone from there with them?”

Besides University Towne Center, Hahn owns Horton Plaza and Parkway Plaza in the San Diego area.

May Centers, the May Co. division that operates Mission Valley Center and three other San Diego County malls in addition to five Los Angeles-area centers, has established an unwavering policy against lottery sales, except in supermarkets at its centers, said Jim Braun, regional manager.

“It tends to disrupt (tenants’) primary business and in fact detract from it,” Braun said. “It can also lead to loitering in the common area, which can detract from the business of neighboring tenants, and in addition create an undesirable situation in the common areas.”

Braun said Friday that he expected other major mall owners throughout California would prohibit ticket sales, based on bad experiences with lotteries in other states.

At a May Centers mall in Vancouver, Wash., ticket sales cut into tenants’ regular business, Braun said. “You’ve got your regular customers standing by while a $2 lottery winner is demanding to be paid off,” he said.

In turn, the loss for the stores meant less income for May Centers, whose rental payments are based in part on a percentage of store sales, Braun said.

Two or three stores are continuing to sell tickets, he said, at May Centers’ San Diego County malls, which include Mission Valley Center, Plaza Bonita in National City, La Jolla Village Square in La Jolla and Plaza Camino Real in Carlsbad. The company plans to take action against the stores, which Braun declined to name.

Ticket sales remained brisk Friday at several stores in Fashion Valley shopping center, but restrictions on the lottery were under consideration there, too, according to general manager Gene Kemp.

Stores in the mall may be given a choice, he said--to stop selling or to include lottery sales in the base on which their rent is calculated. The latter could be a losing bet, however, because most tenants pay 6% of their sales as rent, while the profit on the sale of each lottery ticket is only 5%.

“If he wants to lose that 1%, it might be great advertising,” Kemp said.

Mall officials said they were not concerned about being viewed as the grinches who denied California public education--the beneficiary of one-third of lottery proceeds--a jackpot in shopping center ticket sales.

“Since the customers who finally get to our regional centers will have probably gone by anywhere between 10 to 15 lottery outlets, namely convenience stores and liquor stores, we don’t feel we are impacting the sales of lottery tickets in the state through this policy whatsoever,” Braun said.