Bloomingdale’s Will Take Its Hip SoHo Prototype to California

Export SoHo beyond New York City? Bloomingdale’s says it’s possible. Nearly five years after launching its scaled-down, super-chic SoHo boutique, in lower Manhattan, Bloomingdale’s is expanding the concept. The company plans to open two more SoHo stores, one at Santa Monica (Calif.) Place in 2010, and the other at Georgetown Park, in the Georgetown district of Washington, D.C., in 2011.

SoHo offers a tightly edited assortment of men’s and women’s apparel, accessories, denim and cosmetics, all with a contemporary, high-fashion edge. In its attitude and direction, the store targets the trendy 20-to-30-something set. And unlike the typical full-line Bloomingdale’s department store, which measures about 200,000 square feet, SoHo measures a mere 80,000 square feet. In retail, at least, it seems that sometimes smaller is better.

“Part of the allure of SoHo is not just what we carry, but what we don’t,” said Charles Anderson, Bloomingdale’s senior vice president and director of stores. “It creates a very pointed assortment for the customer, and in many ways it’s the best of Bloomingdale’s.”

If Bloomingdale’s uptown flagship store is more old-school, showcasing everything from apparel to housewares and linens, then SoHo, with its smaller footprint and edgier appeal, has emerged as something of a sassy, super-hip little upstart. Yes, the store features top brands like Free People, Seven For All Mankind and True Religion. But there is also more flexibility on the retail floors there to try out such up-and-coming lines as Abaeté, Elizabeth & James, Junya Watanabe and Kitsuné.

“SoHo has become a laboratory,” said Anderson. “We’ve been able to try smaller designers, new ideas, and very often they become the inspiration for ideas that can be translated to our mainline stores.”

Analysts seem to agree. “It’s a little hipper than the core [Bloomingdale’s] offering,” said Kelly Tackett, a senior consultant and the lead soft-goods analyst at TNS Retail Forward, a Columbus, Ohio–based management consulting and market research firm. “They’re focused on a couple of different categories, and they have more of a contemporary bent to it, in terms of the brands and styles offered.”

The idea of a department store trying out a smaller, boutique-style format is nothing new, of course. Both Barney’s Co-Op, with 18 stores, and Neiman Marcus’ Cusp, which has three stores, also use trendy brands to cater to a younger crowd.

There is a reason these stores have developed a following, analysts say. It is because consumers find them easier to shop, preferring a smaller, more nuanced assortment to the sometimes overwhelming options of larger retailers.

“There’s a pushback onto big stores that offer everything — it’s almost too much hoice,” said Candace Corlett, a partner at WSL Strategic Retail, a retail consulting firm in New York City. One of her firm’s surveys asked respondents how they felt about going to stores that offer one-stop shopping. “One-third likes it a lot,” Corlett said, “but two-thirds are on the fence about it.”

Macy’s Inc., which owns Bloomingdale’s, will not divulge any numbers, but Anderson says SoHo’s average unit retail is higher than that of traditional Bloomingdale’s stores. That, he says, is a function of the concept’s tightly focused offerings. “The [SoHo] assortment is more upscale,” he said. “We’ve really pushed the envelope there. Our mainline stores have a larger presence of better sportswear business.”

Though there is definitely a young fashion customer for SoHo outside of New York City, sources say this is not a concept that will play just anywhere. Both the Santa Monica and Georgetown locations were chosen in part because they are strong contemporary markets, Anderson says. “They’re both very dynamic, and vibrant with youth,” Anderson said. “They also tend to be in areas that have other interesting things happening: entertainment venues, other retailers, and things that will bring in foot traffic.”

The SoHo store set to open at Santa Monica Place will be part of that center’s transformation from an enclosed mall to a high-fashion, open-air lifestyle center. The 105,000-square-foot SoHo will take over what is currently a Macy’s store. “With SoHo, they’ve achieved a store concept that offers well-appointed venues for very special fashion lines,” said Randy Brant, executive vice president of real estate at Macerich, which owns Santa Monica Place. “It comes across as having designer shops within shops.”

The third SoHo store, an 82,000-square-foot, three-level space, will be an anchor at Georgetown Park, which is also being renovated into an upscale urban fashion destination. “Georgetown is ready for high fashion,” said Ben Miller, president of Western Development, which owns Georgetown Park. “We’re taking a giant leap forward and making Georgetown Park a fashion and boutique destination for Washington, with SoHo as the anchor.”

Macy’s is also rolling out several more traditional Bloomingdale’s stores. The company’s first Arizona store will open next fall in the new CityNorth development, in Phoenix. A 150,000-square-foot, three-level store is to open at Westfield Valley Fair, in the San Jose–Santa Clara area of California, in the fall of 2011.

Bloomingdale’s first overseas store will open in February 2010, at The Dubai (United Arab Emirates) Mall. The mall will contain two Bloomingdale’s stores: a three-level, 146,000-square-foot, apparel and accessories store, and a one-level, 54,000-square-foot home store.

Why the focus on Bloomingdale’s now? “They’re shifting some of the real estate emphasis to the stronger Bloomingdale’s concept,” said Tackett. “Bloomingdale’s certainly has been doing a bit better than Macy’s over the past two years. Bloomingdale’s has really tried to turn around their business, and they’ve largely been successful. They’ve increased their emphasis on hot categories, such as contemporary apparel, growing off of a relatively small store base, just 40 stores in 11 states.”

Macy’s, by contrast, like other traditional department store chains, has been hurting. In October Macy’s lowered its estimate for fall same-store sales, saying it expects them to drop about 3 percent to 6 percent, worse than the previously estimated 1 percent decline. The company’s same-store sales for August and September combined fell 5.8 percent.

This might not seem the most logical time to be expanding a luxury brand, with the U.S. in financial disarray, though it may represent the long view. Analysts are predicting slow going for the next year or two, with a possibility that retail sales will pick up again sometime around 2010.

“[SoHo] will open as we’re beginning to cycle out of the retail challenges we’re having now,” said Ken Nisch, chairman of JGA, a Southfield, Mich.–based retail brand and design consulting firm. “So actually, their timing will be slightly early to brilliant, if everything happens right.”

Still, SoHo’s expansion pace will not increase, even once the economy does turn around. “We’re not looking for any type of dramatic rollout,” said Anderson. “SoHo is a one- or two-at-a-time proposition, no more than that. Bloomingdale’s may be a big, iconic name, but we still have just 40 stores.

Herb & Ben Miller

As we continue to examine the impact the nation’s financial meltdown is having on different parts of the Washington, DC economy, Sonya Bernhardt and I had a very interesting lunch with Herb and Ben Miller of Western Development Corporation. The father and son combination are truly at the forefront of the District’s commercial real estate market. However, to think of Herb and Ben as Commercial developers is a terrible understatement. They are in fact urban planners whose vision is stamped on the area with developments like Georgetown Park, Gallery Place, Washington Harbor and Market Square. Today Ben runs the day to day operations while Herb seeks new opportunities throughout the region.

From the mid 1980’s until 1995 Herb Miller was CEO of the Mills Corporation. In that position he developed the Mills concept of value oriented super regional malls in Washington, Philadelphia, Fort Lauderdale, and Chicago. Herb retired from the Mills Corporation in 1995 focusing his energies on the revitalization of Washington, DC.

At present, even in a difficult business environment, Herb is very excited about the opportunities in Georgetown and the Penn Quarter area. He has just repurchased the Georgetown Park mall where he promises, “a blending of retail and art in what will be a very interactive shopping experience.” While the refurbishing will take 3 years, the senior Miller promises “cutting edge retail being anchored by Bloomingdales Soho.”  Miller tells us, “negotiations are under way for another anchor making Georgetown Park a destination shopping location.”

Both Ben and Herb are concerned about the way the District’s highway system seems to isolate certain parts of the city. This is most notable as Herb points out in “parts of Foggy Bottom and the Southwest waterfront.”  Linking a project to the surrounding community is critical in Herb’s view and he points to Gallery Place as a symbol “of what good development can be, in which the history and soul of an urban area are preserved.”  As Herb sees it this will be the “challenge in the future development of the Nationals Ball Park and the Southwest Waterfront.”

Ben readily admits that the current business environment is very difficult, but he sees strong growth in the future generated by “the excitement of the Obama Presidency. This will help lead to a further economic revival in Washington.”  Herb goes a step further talking about a huge influx of “tourism fueled by a rock star President who is almost universally admired.”

Herb believes the Obama Presidency can lead “a regional boom.” He points out that “Washington, DC; Virginia; Maryland and Delaware are poised for growth, especially if all the federal grant money directed to the region can translate into commercialization.”

So while current conditions are difficult, Herb and Ben Miller are very optimistic about the future and are very busy looking for new opportunities.

Bloomie’s to bring ‘SoHo’ to M Street

Macy’s Inc., the owner of the Bloomingdale’s department store chain, announced last Wednesday that a “SoHo concept” version of Bloomingdale’s will open at the revamped Georgetown Park retail complex in August 2011.

The D.C. store, the company noted in a news release, will be only the second of its type outside Manhattan. Ben Miller, the developer of Georgetown Park, said last week that the then unannounced department store would “provide an anchor” for the other shops in the complex.

Bloomingdale’s spokesperson Sharon Bateman said that D.C. shoppers will not get a replica of the four-year old New York store. Rather, the new Bloomingdale’s will offer a “merchandise mix tailored to D,C. and to Georgetown.”

Still uncertain is the city’s level of involvement in the project. When developers were courting department store Nordstrom last year, officials were prepared to offer at least $20 million in subsidies to the retail giant.

City spokesperson Sean Madigan wrote in an e-mail to The Current that no discussions have taken place yet about a financing package for Bloomingdale’s.

Ward 2 Council member Jack Evans was involved in last year’s negotiations with Nordstrom but would not comment on whether similar financial incentives should be offered to Bloomingdale’s. “We’ll have to see what happens.” Evans said. He added that the announcement was a welcome one. “It’ll be a great addition there,” he said.

Doug Smith. executive director of the Georgetown Business Improvement District, said he was “pleasantly surprised” by last week’s announcement.

“It’s great that a store of that national prominence is looking at our marketplace as a place to do business,” said Smith.

The Manhattan store offers clothing from designers that typically appeal to younger shoppers: Zac Posen, John Varvatos and Rock Republic, among others.

The Georgetown store will not necessarily focus on that demographic, said Bateman. The Georgetown store, like the one in Sotto, will have a smaller footprint than the traditional Bloomingdale’s found else wherein the Washington area. Those stores, said Bateman, typically range from 150,000 square feet to 200,000 square feet. The Georgetown store will be 82,000 square feet.

Space constraints demand that some departments be left out. In the Georgetown Park Bloomingdale’s, there will be no children’s department or home department.

The result said Bateman, is a “tightly edited” mix that will suit the store’s spruced-up home:  “The developers are looking at Georgetown Park as an urban fashion destination,” Bateman said.

Bloomingdale’s to Come to Georgetown Mall

Bloomingdale’s announced plans yesterday to open a store in the Shops at Georgetown Park in the next three years, providing a boost to a shopping center that had become overshadowed by its trendier neighbors.

The high-end retail chain, which is owned by Macy’s, said the three-level, 82,000-square-foot store is expected to be completed in August 2011. It will be modeled after Bloomingdale’s concept store in New York’s SoHo neighborhood and carry select men’s and women’s contemporary apparel and accessories.

“Georgetown Park really needs a shot in the arm of having a great anchor,” said Herbert S. Miller of Western Development, which owns the property and negotiated the deal. “We have a chance . . . to turn it into the highest fashion and trend center in the whole Washington area.”

Developers have long been on the hunt for a department store to anchor Georgetown Park. The mall has upgraded its tenants in recent years with retailers such as chic boutique Intermix and fast-fashion H&M. However, it faces increasingly stiff competition from Tysons Corner and the new row of luxury retailers in Chevy Chase.

Miller tried to lure rival Nordstrom to the shopping center, meeting with representatives from the Seattle-based company during an annual retailing conference in Las Vegas last year. But the deal would have cost the city as much as $20 million in so-called tax increment financing, which allows the city government to sell bonds that are later repaid by the development’s taxes.

The Bloomingdale’s deal would not be as expensive for the city, Miller said, but he did not give a specific number. He said improvements are needed for the mall and store site, walkways along the C&O Canal and security.

Miller said he has broached the topic with Deputy Mayor Neil O. Albert, who oversees planning and economic development, and D.C. Council member Jack Evans, whose district includes Georgetown. A spokesman for Albert’s office said the city has not committed to any financing plan.

Miller began courting Bloomingdale’s about a year and a half ago, flying to New York to visit chief executive Michael Gould and scoping out the SoHo store. Miller said Gould recently stayed with his son at the Four Seasons hotel in Georgetown and fell in love with the neighborhood.

“It just validates that D.C. is an international market,” said Keith Sellers, senior vice president for retail and real estate development at the Washington D.C. Economic Partnership.

Bloomingdale’s opened its third store in the Washington area in Chevy Chase two years ago. It also has locations in Tysons Corner Center and White Flint Mall. Those stores are much larger than the one proposed for Georgetown and carry home furnishings as well.

The Georgetown store will be one of only two locations in the country modeled after the SoHo store. The other will be in Santa Monica, Calif., and will open in 2010.

Retrofitting for Ecology: Diplomacy Helps ‘Green’ D.C. Firms

Laurel Colless has energy to burn, and all she really wants to do with it is save energy for others while reducing the Washington region’s carbon footprint.

It’s not surprising these days for someone to embrace eco-friendly living, but it is unusual even in globally conscious times for a socially active diplomat’s wife – Ms. Colless is married to Pekka Lintu, Finland’s ambassador to the United States – to be a social activist in the field on behalf of a city and country that is not her own.

A former high-level employee of Nokia Corp., the Finnish telecommunications giant, she was recruited a year ago by Virginia Tech to be head of its Research Development Sustainable Technologies group in Alexandria. Nine months ago, the group announced an ambitious plan – duly reported in the press – to reduce greenhouse gas emissions in the area’s existing buildings by between 20 and 50 percent.

The project, called the Energy Efficiency Partnership of Greater Washington (EEP), aims to be a match of convenience and good conscience since the three sides involved – private, public and nonprofit institutions – are meant to benefit equally. The core partners are Hannon Armstrong and Co. of Annapolis, investors for financing ($500 million as needed for building retrofits over the first five years); Pepco Energy Services Inc., primarily for energy audits; and Virginia Tech for leadership, research and education.

A great deal of encouragement to proceed, Ms. Colless notes, came from the nonprofit sector “and how they were willing to give of their own time and money,” a fact she says she found “very surprising” in contrast to Europe, where countries rely more heavily on government action. Calvin Cafritz, chairman and CEO of the Morris & Gwendolyn Cafritz Foundation, gave EEP a grant of $50,000 so she could hire an assistant.

One aspect of the story not published in October was how this began, coincidentally, at a gala fundraiser on behalf of child trafficking that took place in a downtown hotel. Ms. Colless, wearing what she calls “my Finnish ambassador’s wife hat,” found herself seated beside a managing partner of JGB Co., a large Washington-area developer.

“I’d been thinking about energy reduction in buildings as a way of really attacking climate change,” she says. “I was convinced that there was a business case and a lot of easy wins out there.”

Indeed, JBG Co., she learned, recently had commissioned an internal audit of this kind. They arranged to meet the following week. Her idea, she says, “was to get building owners to do retrofitting on their own terms – this is sometimes misunderstood – and get a long-term payback.”

Ms. Colless’ life since then has seemed like one long meeting as operations got into high gear. Her handbag routinely is stuffed with briefing materials, social notes – and diapers. The tall, linguistically adept, Australian-born brunette met her husband while working as a journalist in Tokyo where he then was posted. They are parents of two young girls, one born in July 2006 in Sibley Memorial Hospital.

Through Nokia, she was active with the International Youth Foundation. She currently is on the board of the nonprofit Institute for Sustainable Communities. Her association with Virginia Tech is her first connection to academia, apart from growing up in New Zealand as the daughter of a university professor.

“I call her pleasantly pushy,” says James Bohland, vice president and executive director of Virginia Tech’s National Capital Region (NCR) operations and Ms. Colless’ boss. “She has contacts, but equally important she has that gift – she can get results.”

Buildings that have signed on to date include Western Development Corp.’s Georgetown Park mall, Meridian House International, the Brookings Institution and L’Enfant Plaza. Pledges to retrofit some 600 government, commercial and nonprofit-owned buildings – or a total of 74 million square feet – represent the estimated carbon equivalent “of 45,000 cars being taken off the road,” Ms. Colless says. (Some of these pledging entities will be monitored by EEP, but not necessarily make use of the partners’ expertise.)

Problems arise over the fact that, in her view, “middle management has trouble getting their act together.” An eight- to 10-year payback is not conventional in a business that “has a tendency to think in two- to three-year cycles.”

Forty percent of the carbon emissions in most American cities come from buildings, and project officials hope to tackle 100 buildings in the next five years. An average retrofit costs between $1 million and $5 million, although it can go much higher depending on the challenges a building presents.

A retrofit, which generally includes an audit preliminary to any physical changes, “is very much an engineering process, a multistep matter. It means you analyze and upgrade the energy infrastructure – electricity, gas, water, etc. – and look at those systems to see if they can be made more efficient,” says Pat Sweeney, vice president of business development for Pepco Energy Services, one of EEP’s partners.

Ms. Colless is counting on the image factor to kick in as well.

“Building tenants will eventually wake up and not want to be in a brown building,” she says.

John Christmas, CFO of Hannon Armstrong, is the one “with whom I often now walk the streets regularly looking for disciples,” proselytizing how green technology is the financially smart option and how “the Financial Times recently cited retrofitted buildings as a new asset class for institutional investment.”

“We’re bouncing around the Beltway talking to anyone who will listen,” says Mr. Christmas.

The advantage of a partnership, he says, is having so many resources – “equipment, procurement, contracting and so on” – available. The challenge on the commercial side, he notes, is that “you have to do building to building” and, to date, emissions from “trucks or cars have been the target of public attention, but not buildings.” To date, he says, his firm has “about 20 entities locally and across the country in some stage of auditing or retrofitting.”

City Leaders Detail Efforts to Lure Nordstrom

District officials are hoping to lure the Nordstrom department store chain to the District, but they’re divided on a location.

Council members Jack Evans and Kwame Brown say Nordstrom officials have expressed strong interest in Western Development’s The Shops at Georgetown Park and that the company has no interest in the old convention center site — Mayor Adrian Fenty’s preferred location.

Fenty mentioned his interest in drawing the highend department store to the convention center site during a community meeting in Foggy Bottom late last month.

“We do want Nordstrom in the city, but we think we have a better site in the old convention center,” he said in response to a question about city financing for a Georgetown location. “Then no debt would be needed.”

Asked about those comments, at-large Council member Brown said he and Ward 2’s Evans had met with Nordstrom officials at a Las Vegas shopping center convention and “they flat-out said … that they are not interested.”

Brown said Nordstrom officials did not think plans for the downtown site, which call for office and residential buildings with street-level retail of over 275,000 square feet, a hotel and possibly a library, would attract the type of customers they want.

“I asked [them], ‘Is there anything we could do to make [you] go downtown?’” Brown said. “They said no. ‘Our suppliers know Georgetown. We know Georgetown.’”

Nordstrom representatives have repeatedly told the media that they, like most of their competitors, do not discuss possible locations publicly.

A spokesperson for the deputy mayor for planning and economic development declined to comment about any specific location. “We would love to see Nordstrom come to Washington,” he said. “We are not picking out a site.”

The Georgetown option

Brown said in an interview that a Nordstrom store in Georgetown would need to receive financial help from the city’s tax-increment financing or “TIF” program, possibly about $20 million. Through that program, the city would float bonds to be financed by the increase in sales taxes generated by the store.

Western Development has been planning a major renovation of the indoor shopping mall, which has frontage on the south side of M Street and then dips two stories underground. In an interview, Western Development president Ben Miller said his firm plans to establish a task force with representatives from the advisory neighborhood commission, Citizens Association of Georgetown and Georgetown Business Association “to determine the highest and best use for Georgetown Park.”

“We have been talking to different retailers to see if they are interested in Georgetown Park,” Miller continued. “Nordstrom is interested, but it’s a little early to say how much of a TIF we would need.”

 

He said the chain would likely require financial assistance to open in Washington because of the way the market for department stores operates.

Major department stores usually get their sites for practically nothing when they build in suburban shopping centers, Miller said. “And they are given tens of millions of dollars [by the shopping center developers] to build out their stores.”

The stores then draw customers to the mall’s smaller stores, which pay rent. Part of the rent is used to cover the department store payments, he explained.

“Department stores are having to adopt their model for urban locations, but they are not used to paying real rent,” Miller said. “ … There is no way we can bring Nordstrom’s into an urban location like Georgetown without the city’s support. It is just impossible.”

Miller said Western Development has not calculated how much help it would need. “We haven’t submitted for anything in the way of a TIF. … I don’t know where the $20 million number came from.”

Evans said the number was mentioned during conversations he and Brown had with Nordstrom officials but was not meant to be precise.

Miller said his company would make a number of improvements to Georgetown Park if Nordstrom were to locate there.

“We would have to redo the 25-, 30-year-old garage to add parking spaces, which is critical for Georgetown. There are a bunch of public improvements that would benefit us and the rest of Georgetown. … Some might go into the hard costs of building out the shell for Nordstrom’s to make it ready for them to build out their store,” he said, adding that the area’s sewer system also needs improvements.

Why city funds?

The city currently has $200 million available for tax-increment financing, according to Evans and Brown.

When asked why the city should use that money for an already prosperous area like Georgetown, Miller answered, “It’s not about Georgetown compared with Georgia Avenue. It’s Georgetown compared with Chevy Chase, [Md.,] and Tysons Corner.”

Georgetown Park itself, he added, “could support more than a $100 million TIF” because of the amount of sales tax revenue it creates.

Council member Brown suggested use of some of the tax-increment financing funded by Georgetown Park to help underserved neighborhoods, where the taxes generated by new retail would not be sufficient to pay off the bonds.

 

“Kwame’s idea of letting a Georgetown Park TIF underwrite the needs of other areas is right on,” said Miller.

Evans pointed out that Brown’s approach would require legislative changes. Currently, each tax-increment financing project must be self-financing.

“A $20 million TIF for Nordstrom’s in Georgetown Park could be supported by the center’s potential of $110 million,” Brown said. “If you need, say, $20 million for Nordstrom’s, you would still have $90 million left over for other underserved areas where a TIF cannot be supported. … To me that could be a win-win.”

A study by Basile Baumann Prost & Associates Inc., a public/private development advisory firm hired by Western Development, estimates that by adding Nordstrom, Georgetown Park would see a yearly sales increase of over $159 million, yielding the District over $9.7 million in sales taxes.

The report says additional shoppers attracted by the department store and more high-quality retail in Georgetown Park likely would make purchases of over $60 million in the Georgetown area outside of the center, yielding almost $3.5 million in additional sales taxes.

Georgetown vs. downtown

Miller said Nordstorm is interested in the city because of recent demographic changes. “The city has gotten a lot younger. It could now support a real fashion center that would compete with Tysons Corner.”

But he also said: “The only place in Washington that’s viable for international fashion is Georgetown. We’re envisioning a Soho-style fashion center [at Georgetown Park], if we can land an appropriate department store.”

He noted that stores like Nordstrom “want to be in a place with the energy of Georgetown with tourists, students and restaurants.”

Brown agreed, saying Georgetown would be more likely than downtown to draw desired customers into the city from the suburbs.

“Shoppers wouldn’t leave Pentagon City or Tysons Corner for the old convention center, but they would for Georgetown,” he said.“Nordstrom’s will be anchor to a number of other retail shops. It will attract more people.”

Evans said Nordstrom management does not believe their store alone can attract a sufficient number of shoppers to make it profitable. The company told city officials they are looking to locate in an area that is already a “destination — such as Georgetown.”

“They have no interest in being out there by themselves,” Evans said.

 

Lawsuit

A complicating factor in the financing debate may be a lawsuit Western Development has filed against the city over a rejected proposal for a real estate development near the new baseball stadium.

In response to a question, Evans said he doubts the Fenty administration would offer the company tax-increment financing while the suit is pending. “I would not think the city would entertain any kind of economic incentives for any company that is currently suing the city.”

He said Western Development should drop the lawsuit, but not as a quid pro quo. Then, he added, he would favor a serious consideration of tax-increment financing for a Nordstrom in Georgetown Park.

Miller could not be reached for comment on Evans’ statement.

Opposition

Ed Lazere of the D.C. Fiscal Policy Institute, a budget-analysis group generally linked with liberal causes, has objected to city financial support for a Georgetown Nordstrom.

Lazere said in an interview that if the project can generate enough revenue to justify a $100 millionplus tax-increment financing bond issue, Western Development“should be able to finance the project on [its] own.”

“You pay consultants to get what you want,” Lazere added, referring to Basile Baumann Prost.“You cannot put a single dime of trust into future projections [recommended by] consultants who are paid for by the beneficiaries of the outcome.”

Miller Makes Nordstrom Part of his D.C. Utopia

Herb Miller has visions.

He sees happy diners eating and drinking at restaurants terraced over the C&O canal in Georgetown.

He sees Georgetown Park, the enclosed mall he now controls, serving as both a place to buy edgy fashion and view the latest modern art.

He sees the District of Columbia government helping to make his dreams come true with tax breaks.

Whether or not you have visions, you might see Miller’s ideas in brick, glass and mortar by 2010. A local developer who’s made his mark across the country, Miller usually builds what he wants and gets the government to help.

Believe it or not, Georgetown might need D.C.’s help. Our landmark shopping and dining destination suddenly has competition from resurgent parts of town. Don’t forget that Georgetown, with its nose pointing to the sky, fought a Metro stop, in order to keep out the riffraff in the 1970s. Thirty years later, Georgetown is suffering from its elitist tendencies.

Herb Miller has had a front-row seat on Georgetown’s falling fortunes. It’s not a stretch to call Miller Washington’s preeminent retail magnate.

Born in Silver Spring in 1943, he went to Blair High and George Washington University. “When I was a kid,” he tells me, “Georgia Avenue was the hot area.”

He went to work as a broker out of college. At 24 he flew to Dallas and helped persuade Stanley Marcus to bring his Neiman and Marcus store to Mazza Gallery at the corner of Wisconsin and Western.

In 1967, he founded Western Development and started building strip shopping centers. Ever dropped a few dollars at Potomac Mills? Miller minted the first “big box” mall development and built them around the country.

In 1979, the corner of Wisconsin and M streets, Georgetown’s intersection, was a bus garage. Miller bought it and built Georgetown Park two years later. Since then, he’s developed Washington Harbor, Market Square on Pennsylvania Avenue and, most recently, Gallery Place.

Miller sold Georgetown Park to a Sears in 1986, but he kept the option to buy it back. “It took them 20 years to screw it up,” he says. “They walled off the place. You can’t tell it’s a shopping center.”

Miller bought it back in March, fresh off his failure to develop around the Washington Nationals’ new ballpark. A longtime resident of Georgetown, he went to community meetings.

“It’s their community. What do they want to see?”

Miller sees a boutique hotel, maybe condos – and a Nordstrom. But he also sees a $20 million tax break from the city, like a similar contribution that greased the deal to create Gallery Place.

He faces a fight. Bean counter Natwar Gandhi has warned against such breaks, because they increase the city’s debt. But Miller can count on political support from almost every council member, especially Jack Evans, his neighbor and friend.

My vision is a shopping trip to Nordstrom in three years – and dinner over the canal.

 

Rebuilding on M Street

The owners of the Shops at Georgetown Park are preparing a dramatic remake to their property. Western Development Corp, which constructed the M Street center, repurchased the property in March.

Retail trends have changed dramatically over the past two decades, a fact that is recognized by Ben Miller and other company officials. “it’s like a fortress,” he explained in an interview, it needs to be opened up and connected to the neighborhood.”

The company is working on the plans, but the general concept seems positive for the neighborhood and the city. A design that better conforms to Georgetown’s historic character and provides more streetfront access would make a dramatic improvement. So, too, would opening up the center to the C&O Canal, as described by officials consulted as part of the planning process.

Particularly exciting is the prospect of high-end retailer Nordstrom establishing is D.C. location in Georgetown, which would create an anchor for the Shops at Georgetown Park.

Indeed, we support the idea of city aid for the renovations through incentives such as tax increment financing. as long as Western Development lands a high-end department store such as Nordstrom. Tax increment financing would allow the government to use part of the development’s future property and sales taxes – revenue the city would otherwise not receive – to repay bonds to finance the project. The city desperately needs to improve its tax base – and to keep District residents from fleeing to the suburbs to shop. This would clearly do so, and it might even attract suburban Nordstrom fans more interested in strolling through historic Georgetown than the expansive Tysons Corner.

D.C. in Talks to Bring Nordstrom to Georgetown; Mall Deal Could Open Other Shops

Nordstrom and a prominent local developer are negotiating to bring the high-end department store chain to a shopping mall in Georgetown, and the District could contribute at least $20 million to the deal, D.C. officials said yesterday.

The new store would be part of a major remodeling planned for the Shops at Georgetown Park, at M Street and Wisconsin Avenue NW, the officials said. The mall houses an H&M clothing store, Victoria’s Secret, the upscale Dean & Deluca, a number of other stores and a branch of the Department of Motor Vehicles.

Council members Jack Evans (D-Ward 2) and Kwame R. Brown (D-At Large) said they discussed the plan at a meeting this week with representatives of Seattle-based Nordstrom and Western Development Corp., which took control of the mall in March. It would be the first Nordstrom in the District, though the chain has six stores in the capital region.

The meeting took place in Las Vegas during the convention of the International Council of Shopping Centers, an annual conference that attracts city officials and developers. Mayor Adrian M. Fenty (D), Evans, Brown and other council members attended.

Evans, discussing the deal, said Georgetown Park has struggled recently and could benefit from Nordstrom’s entry. “It needs an anchor,” he said.

Western Development is reported to be planning major changes to upgrade the mall, which was built in the 1980s. A Western spokesman confirmed the negotiations but said Herbert S. Miller, a company official, could not be reached for further comment.

Michael Boyd, a spokesman for Nordstrom, said the chain does not discuss negotiations until a letter of intent has been signed. But generally speaking, “when we are looking at a location, we’re looking for strong competition,” he said. “We look for a location . . . that already has entertainment and restaurants that draw customers.”

The description fits Georgetown, a major tourist attraction in the District known for its restaurants and nightlife.

The possible redevelopment of Georgetown Park could also include new shops, as well as new restaurants along the Chesapeake & Ohio Canal on the southern boundary of the mall, Evans said.

Brown said discussions about the project had focused on a design that would be in character with Georgetown, a community of brick sidewalks, townhouses and mansions.

Meanwhile, D.C. officials discussed financial support to help the project. “We’re looking at different kinds of subsidy,” Evans said.

Officials compared the case with the construction of Gallery Place — the successful Chinatown development of condominiums, restaurants, a movie theater and bowling alley — built with the help of $73.6 million in bonds sold through the tax increment financing (TIF) program.

D.C. officials discussed a possible TIF for the Georgetown project as one of a number of other developments around the city, including Fort Totten and Shaw.

The program allows the D.C. government to sell bonds, which are later repaid by the development’s taxes. A potential problem with the new development involves an ongoing conflict with Western Development. Miller sued the District last year for $40 million after D.C. officials abandoned his plan to develop a mix of condominiums and shops above parking garages at the new baseball stadium for the Washington Nationals along the Anacostia River.

Nordstrom opened its first store in the Washington region at Tysons Corner in 1988 and most recently opened a store at Dulles Town Center in 2002, Boyd said. Other local stores are in Pentagon City, Montgomery Mall in Bethesda, Annapolis and Columbia.

The chain, which has 155 stores in 27 states, reported $8.6 billion in sales in the 2006 fiscal year, and profit of $1.1 billion.

“We generally locate in suburban areas, but were are in some downtowns,” Boyd said, including Seattle, San Francisco and Portland, Ore.

Miller’s Megamall Combined Outlets, Off-pricers

Where others saw a roadblock, Herbert S. Miller recognized an opportunity.

In the early 1980s, off-price retailers and factory outlet stores needed sales of more than $200 per square foot to suc­ceed, but not even regional malls could count on bringing in that kind of money.

Miller, then president of Washington, D.C.–based Western Development Corp. (today The Mills Corp.), and his team brought off-pricers and factory outlet operators together for the first time in a new kind of shopping center — one com­bining outlet center bargain prices with the size and unique-to-the-market tenants of a regional mall, The idea was to hold down expenses while creating the critical mass that tenants need to prosper.

Potomac Mills, the first of Mills’ value megamalls, opened in 1985 in Prince William, Va., about 30 miles outside Washington, but not before the company had overcome a number of obstacles.

“The outlet people didn’t want to be near off-price, and the off-pricers didn’t want to be near factory outlets,” Miller recalls. He and his people had to play to both audiences.

“We told the outlet people it would be called Dale City Mall and would be out in the country,” Miller said. “With off-price people, we called it theWashington Outlet Mall and emphasized that it was near the city.”

The company held down the cost of building Potomac Mills by some 40 per­cent compared with the typical regional mall by assigning much of the design work to an engineer instead of an architect.

Potomac Mills opened with 650,000 square feet of space and was so successful, Miller says, that construction didn’t real­ly stop for years as the company added square footage. Today the center covers more than 2 million square feet and is Virginia’s No. 3 tourist attraction.

Emerging from an industrywide credit crunch as a REIT in 1994, Western Development was renamed Mills.

Miller credits three members of his team with making vital contributions to the Mills centers and other Western Development projects: Laurence C. Siegel, who has been Mills’ CEO since 1995, the year Miller retired, but who was responsible For outlet anchors back then; Courtney Lord, who handled leasing for small specialty shops; and Alan Perlstine, who was in charge of off-price anchors.

Lord says Siegel was “instrumental in coming up with the value concept,” while Miller is “one of the great vision­aries of the industry” for his work on the Mills concept and on urban centers. Since he retired from Mills, Miller has been active as a developer in Washington and worked to bring the Mills concept to Asia.

Each Mills center is distinguished by certain “local embellishments” that pay homage to its area. The Blues National Hockey League team practices on a rink in the St. Louis Mills center, for exam­ple. At Colorado Mills, the Waldron Children’s Playhouse presents live the­ater 365 days a year.

“We have added entertainment that encourages people to bring the family,” said Siegel. “They stay longer and buy more.”

Mills has also found ways to harness its centers to market brands, selling the Discover Mills naming rights to Discover Financial Services, for instance.

Last year Mills became one of the first American REITs to build a center in Europe with its opening of Madrid Xanacki, in Spain. Two Mills centers are slated to open this year — Cincinnati Mills and Vaughan Mills. Further, says Siegel, the company has two international deals in the works. In the future, he adds, the company will devote a third of its resources to Mills concept cen­ters, a third to regional malls and a third to centers abroad.