At Bal Harbour Shops,things change and stay constant.
This story first appeared in the November 11, 2015 issue of WWD. Subscribe Today.
The focus on luxury and upscale clientele and the serenity of the tropical garden setting will always be there. Yet as Stanley Whitman, the visionary developer of Bal Harbour Shops,pointed out, “We are doubling the amount of space we have. That is a big deal. It’s going to be fantastic.”
This year, Bal Harbour Shops, widely considered the world’s most productive shopping center and among the few driven purely by the luxury lifestyle, marks its golden anniversary. It’s impossible to celebrate the property without celebrating the tenacious and audacious Stanley Whitman, who turns 97 on Nov. 15 and comes to work at least three days a week.
Fifty years ago, Whitman saw the potential in luxury long before the rest of the shopping-center industry caught on. He saw Miami’s Lincoln Road retail enclave losing relevance and affluence and real estate values rising to the north by Bal Harbour. He sensed Miami as a tourist mecca would only grow, and that tourism and luxury would be a potent combination.
In 1957, he purchased an odd, L-shaped 16-acre plot of land in Bal Harbour on the site of a former prisoner-of-war camp
for $2 a foot — at the time, a record price for retail property. Despite never developing a shopping center before, he came up with the concept of bringing high-end Fifth Avenue retailers to north Miami. He fired his architects who advocated a traditional enclosed, air-conditioned mall format and hired other architects who came up with an open-air plan, considered radical then due to what would be expected for Florida’s hot, steamy climate. He’s made Bal Harbour Shops an experience that transcends typical shopping and transacting, a place to see and be seen, and a mecca for world-class, high-end brands seeking retail space.
I broke all the shopping center rules,” said Stanley. “What I did not break was Economics 101. I was the first to charge for parking. If I had not charged for parking, the lot would have filled up with retail employees, hotel clerks. I wanted to protect my customers.” He took it further, putting palm trees in the parking lot. “It wasn’t just for the aesthetics. Florida is hot as hell. This is the tropics.
Let’s give them some shade.” Wind patterns were researched by a University of Miami professor so Bal Harbour Shops, located at
9700 Collins Avenue across from the beach, could be designed to capture the sea breeze and cool off visitors.
“Let’s put it another way. I had no believers. None. Zero,” said Stanley.
Over lunch one recent afternoon at The Grill at Bal Harbour inside Bal Harbour Shops, three generations of the Whitman family — Stanley, his 71-year-old son Randy, and his 39-year-old grandson Matthew Whitman Lazenby — discussed 50 years in business and the challenges ahead. They talked about the proposed and long-contemplated expansion seen, nearly doubling the size of the center from approximately 450,000 square to 850,000 square feet; becoming partners in Miami’s Brickell City Centre to grow the family business; the decline in international tourism; the proliferation of luxury, and the enduring and distinct character of Bal Harbour Shops.
The expansion now seems closer to reality, but has been entangled in politics and community issues. A 50,000-square-foot Barneys New York, they said, is expected to become the third anchor inside Bal Harbour Shops, along with Saks Fifth Avenue and Neiman Marcus, though a Barneys lease depends on the expansion being green-lighted. Barneys would include a Fred’s restaurant. The project also entails relocating Saks to a larger space, adding designer shops while giving additional space to many existing shops.
The Whitman family business has always been a one-trick pony. However, two years ago, in a shift from their singular focus on Bal Harbour Shops, the family became codevelopers and equity partners in the 500,000-square-foot retail component of the 5.4 million-square-foot Brickell City Centre, a mixed-use project being built in Miami’s financial center and codeveloped by Swire Properties and Simon Property Group. The Whitmans are bringing their high-end retail expertise to help lease that shopping center, and see that skill set as having legs so they could potentially work on other projects, in or outside of Florida. It’s a recognition that the distribution on luxury is getting wider, that Bal Harbour Shops has greater competition than it used to, particularly with the rise of the Aventura Mall and the Miami Design District, and that growth avenues must be sought.
“Miami is entering a new phase and hopefully, we will rise to the occasion,” said Matthew, operating partner, president and chief executive officer of Whitman Family Development LLC, who joined the family business in 2003 after working with Robert K. Futterman & Associates LLC and Taubman Centers. “Having found a partner in Swire is one of the most fortuitous things that has happened to us. Brickell has long been identified as sort of filling the hole in the doughnut,” meaning there are several malls to the north, south and west of Miami, though nothing within miles of Brickell. The plan is to create a five-level center with a core luxury component anchored by a 100,000-square-foot Saks.
According to Randy, managing director of Whitman Family Development, “It won’t open as ‘Bal Harbour Shops South’ because that would be unresponsive to the marketplace and not what Brickell needs. It should be a place to buy anything and everything,” including luxury, but not excluding premium and other high-end categories. Valentino, Chopard and Armani are among the tenants announced so far, but more of what the Whitmans characterize as premium brands will be disclosed, hypothetically, brands like Williams-Sonoma and Pottery Barn.
Asked why there was never another project in the Whitman family portfolio until recently, Stanley explained, “Sure, I looked at New York, Los Angeles, Worth Avenue, where there was high-end shopping. I once got a call from the Howard Hughes Corp.,” on a project opportunity in Las Vegas. “But I got spoiled with Miami. Miami has more international tourists than New York City. That’s what makes us run. I saw that opportunity. That was the meat of the coconut.”
Many shopping centers around the country must rethink their space and come up with alternative uses to draw greater traffic and raise productivity. But that’s far from the case at Bal Harbour Shops, which continues to lead the industry, hovering around $3,000 in sales per square foot.
“The world has gotten a lot smaller,” said Matthew. “Many of our [retailers] recognize that the customer who enters their Bal Harbour store is likely the same customer that shops them in Milan or Paris or London. So how do you differentiate those stores and make them special? Obviously, it’s a dilemma that faces brands and prudent shopping center owners and operators. How do you stand out? I don’t think for us the prudent thing is to reinvent ourselves. I think the thing to do is continue on that course of creating a compelling destination for the next 50 years. It’s time to improve the product, and we think the way to do it is by this expansion.
“All of our stores want to be significantly larger — two, three, four, five times the size they used to be, he added. “You can’t do that in the existing space unless you talk about taking 100 stores and reducing the count to 50, and then the consumer loses. Clearly, the ratio of store count to square footage is changing. So if we have 100 stores today in around 200,000 square feet of mall store space and we add another 150,000 square feet of mall store space, you’d think we’d be adding around 75 stores if they would all stay the same size, but that is not what we are doing. It will be closer to 40 stores [coming on board] so a lot of the existing stores get bigger, and a lot of stores that belong here will come in. We may have somewhere between 30 and 50 new stores. We are in the process of finalizing some of those major leases.”
KEEPING IN CHARACTER
“For us to go from 450,000 to 850,000 square feet is huge, though from our perspective we are still a tiny, intimate shopping center on a human scale, which I think people like,” said Matthew. “Even on the most maddening day of the year, it’s hard to find someone here who doesn’t want to be here. There is a sense of calm that people feel in this environment that is probably what we are most proud of. There are these fortress centers throughout the country that do very well, but people hate going through. The key to our expansion is to make sure we never go down that road. We don’t ever want to lose that intimacy and create an experience that is just so overwhelming that it kills the soul of the place.”
The Whitmans have been actively working with the city for a decade in getting approvals.
“It is a complicated process because we are attempting to utilize the land under the Village Hall,” Matthew explained. “It’s publicly owned land, therefore it requires a public vote. Due west of Saks is the Church by the Sea, and due west of the church is the Village Hall. We have made an agreement with the church. We are seeking to include the land under the Village Hall as part of our application. Getting that scheduled has not been easy.”
The Whitmans had to purchase the land beneath the church and need to find an alternative site that meets the approval of the city and community residents. They also must work out with the city where to relocate the Village Hall, but own real estate that could house it. Traffic has been another issue, but the expansion calls for an additional driveway into the mall parking lot, and lengthening of the existing access road off Collins Avenue into the parking lot to avoid traffic backing up onto the avenue.
While the Whitmans have always envisioned Bal Harbour Shops expanding horizontally, the center has grown vertically. In 1983, a 100,000-square-foot second level was constructed giving Randy the tough task of wooing European designer boutiques to the new space. “Oh, I thought, ‘that poor man,’” recalled Stanley. “They all want to be on the first level.”
The solution was to extend the parking deck to the second level so people leaving their cars would be right by the second-level stores. “When Chanel was renovating its store on the first level, they took a temporary space on the second level and their sales were better,” Stanley said.
Still, the bigger picture has always been for horizontal expansion. “The day my grandfather bought this land, he was knocking on the church’s door and said, ‘Hey, let’s talk.’ So it really has been 50 years in the making in terms of his securing his initial vision,” Matthew said.
As the family grows its business, it’s working on repairing its relationship with LVMH Moët Hennessy Louis Vuitton, which a few years ago removed its designer boutiques from Bal Harbour Shops and relocated them in Miami’s emerging Design District and the Aventura Mall, in the wake of a dispute involving radius clauses.
The family is said to be tough in tenant negotiations, taking the approach that brands need Bal Harbour Shops more than the center needs the brands. Rekindling the LVMH relationship could benefit Bal Harbour Shops as it expands, as well as other projects that Whitman Family Development tackles.
“On occasion, they may have overplayed their hand with some of the vendors with stores, particularly LVMH and a few others like Hermès,” said one retail source. “They ended up losing. I don’t think they had to be as aggressive as they were.”
Brooks Brothers was another tenant that left after some trying negotiations over space and charges.
“They do charge a lot. They believe the best will do the largest volume and believe rent should be a function of how much sales they do,” said one real estate expert.
“We’re not pushovers,” acknowledged Matthew. “Whether it’s development, leasing or working with vendors, we are in the business of negotiating. We reached a point a long time ago, frankly, where we had enjoyed an excess of demand, and not enough supply of space so we went through a process that began in the early 2000s of going tenant by tenant and analyzing the ones that weren’t performing. Every month we are trying to assess who is working in this market and who isn’t. For us, it’s never really been a rent-driven discussion. We always want to provide to the customers the stores they want. We are constantly analyzing sales. We do look at monthly reports, but they are never actionable, which is why we always talk about rolling 12-month figures, sales per square foot and sales volume. That’s when you start seeing real trends.”
MONITORING THE MIX
Ten to 12 years ago, “We started calling the tenants who were consistently underperforming and first saying, ‘Do you acknowledge you are underperforming?’ and if you don’t know, you should, and what can we do to help. So we always try to help first,” Matthew said. “Maybe they are not aware of promotional events that we are doing, the marketing opportunities, but at some point in time, if it’s not working, we get concerned. We are constantly trying to improve the mix. We look at how our individual categories are performing. If we lose a tenant in the home category, we ask ourselves, ‘Is that a good thing or do we need to replace?’ We are constantly trying to find the balance.”
The last original tenant was FAO Schwarz, which closed eight years ago, though there are several such as Gucci, Saks and Neiman’s that have been in Bal Harbour Shops for around four decades. Neiman’s opened in 1971 and Saks opened in 1976. “For better or worse, Bal Harbour Shops for 50 years has become a place where many brands want to be, despite their performance. Sometimes we have to say, ‘I am sorry,’” noted Matthew.
Regarding radius clauses as a source of friction with certain tenants, “In my mind, it’s much ado about nothing,” Matthew said. “There is not a shopping center on the planet that does not have a radius clause. Any tenant who is paying its landlord a percentage of sales as rent, the landlord is naturally concerned that they don’t open a competing store across the street because then there goes the rent. That’s the industry standard. The only thing about us that is a little different is we say it’s the uniqueness of the experience that drives us. In some instances we say to tenants, ‘Listen: If your plan is to come to Miami and open up half-a-dozen stores, that’s great, but we don’t want you. But if I have other choices with tenants who just want to have one store with me, that’s what I am going to do because that’s who we have always been.”
The radius clause “was never a contentious conversation until Vuitton came to us and said ‘here is what we are going to do because we are Vuitton’ and then we said, ‘Good luck. We don’t want to stand in your way.”
Radius restrictions, noted Matthew, have shrunken every 10 years or so. “Right now, it’s no longer measured in terms of drawing a ring around the center and saying its ‘X number of miles,’ because the reality is, if you have spent any time driving through town you can go five miles to the west and get there in 10 minutes, and you can go five miles to the south, and get there in an hour-and-a-half. It’s almost irrelevant, the radial distance. What’s relevant is how long it takes you to drive here. We took a map and said, what is a reasonable 15-minute or so drive to get here? It doesn’t go any farther south than 20 miles, and in some cases it’s probably less than 10, and the same thing to the north.”
“Here’s the real problem,” said Randy. “It’s called public ownership. When a company goes public, it’s got to grow. Gigantic [private] corporations essentially have the same objective, like a Richemont. You get so big, whether you are privately or publicly held, it’s just about driving growth. When you get right down to it, there are two things that clearly define luxury: one is price and the other is limited distribution. Louis Vuitton was down this road before Mr. [Bernard] Arnault owned it. And nobody wanted the stuff. Gucci has been down that road, too. Frankly, it’s hard to find a luxury store operator of any size that isn’t experiencing that problem.”
The world of luxury and retail was far different more than a half-century ago. Stanley’s father, a Chicago printer who built a successful business largely by printing the Sears Roebuck catalogue, decided he’d had enough of Midwest winters and relocated to Miami. He retired from the printing company, but still owned it and died when Stanley was attending Duke University. His strong-willed mother instilled in Stanley a wisdom about business when women were rarely associated with business acumen.
Stanley married his college sweetheart, entered the navy during World War II, and his son Randy was born while Stanley was off at sea. Stanley’s daughter Gwen was born after he returned from the war. That’s when the elder Whitman got to work buying and selling real estate throughout South Florida. Some buildings he bought and sold four times. He was good at flipping and also good as a hired broker.
He was working out of a building in Surfside, just across the street from Bal Harbour Shops, when Robert Graham, the owner of the land under Bal Harbour Shops and the original developer of the Village of Bal Harbour, asked Stanley to help him create a shopping center.
“Graham approached him, on a fee basis, to do this. Not that my grandfather had any shopping experience but he was commercially savvy,” Matthew recounted. “My grandfather said, ‘I’ll help you but I want to be 50-50 partners or let’s not talk any further.’ It ultimately ended with my grandfather owning that land outright.”
Stanley sensed that Lincoln Road to the south of Bal Harbour, which had long been the Fifth Avenue of Miami, was floundering. Tenants were moving out and buildings were owned by different owners, creating a pastiche with no shared vision.
“My whole idea was to create a Lincoln Road North,” Stanley said. “From the 1920s until 1945, Lincoln Road had a lot of the highest-end Fifth Avenue merchants. I went after all of them.”
“Martha was the key,” Stanley said, recalling the former carriage trade specialty shop that carried the finest and most expensive American and European designers. “Martha, in some 10,000 square feet, sold millions of dollars of inventory.” When he toured the center with Stanley Marcus, the late chairman of Neiman Marcus and great retail impresario, they walked by Martha’s and eyed the couture. According to Stanley, Marcus turned to him and said, “For us, that’s only image-building. We lose money on it.”
Apparently, that’s not the case nowadays with Neiman’s current designer offerings. “Bal Harbour is definitely one of our most productive stores from a sales-per-square-foot perspective,” said Karen Katz, chief executive officer of the Neiman Marcus Group Inc. “Bal Harbour was our first store outside Texas. We have an alterations department that has the most beautiful views to the beach. It’s also our only store that doesn’t have any escalators. When Stanley Marcus built the store, he didn’t want to take up any space with escalators. Surprisingly, to this very day, our customers just seem fine with using our elevators.”
Asked if Neiman’s will change its footprint with the proposed Bal Harbour Shops expansion, Katz replied, “We stay very in touch with the Whitman family. As those plans get solidified, we will make some decisions. The fact that Bal Harbour is still family-owned really says something about the family and center and the vision.”
Saks Fifth Avenue, on the other hand, plans to relocate to a new wing of the shopping center, a move enabled by the expansion, and will put up a three-level, 180,000-square-foot unit seen opening in fall 2019. The existing store has 142,277 square feet. “Bal Harbour has been a key market for Saks Fifth Avenue,” said Marc Metrick, president of Saks Fifth Avenue.
EXPANSION NEARING REALITY
“Saks agreed to several iterations of plans,” says Matthew. “One presumes that the Village Hall remains; the other presumes that we get that site, and they could move west, to where the Village Hall was, and that creates more retail space. Saks gets a more favorable store design and we get an extra 40,000 square feet of retail space.”
Asked how long they have been working on this horizontal expansion, Stanley replied, “I have a terrible time pinpointing that.” But he says one of the first things he did when he bought the property was to get a building mover from Chicago to check out the church and discuss moving it off the property. “They laughed at me and said, ‘Don’t you realize you could build a new church and it would cost less than moving it.’”
“It took 45 years to get an agreement with the church,” Matthew added. “At the end of the day, they didn’t really know what they wanted. We had to just keep guessing and we finally got it right. What they ended up wanting was a brand-new building designed by us.”
Asked where the church will go, Matthew replied, “That’s been the billion-dollar question,” and an issue entangled in getting city approval and facing some local dissent. “There is a guy that lives in an apartment not far from here, sort of adjoining our property, and he doesn’t like hearing the church bells,” added Randy.
“We think we have found a solution that the church is still digesting that puts them in a place that they will be happy, the town will be happy and everybody will live happily ever after,” Matthew concluded.
While contending with getting the expansion off the ground, there is the immediate challenge of day-to-day business and the decline in tourist spending due to the strength of the dollar and difficulties in some international economies, particularly Brazil and Russia. “We are down about 6 percent from where we were this time last year. In this market, that is something I am personally very happy about,” said Matthew. “We have been hovering around $3,000 a square foot for the last couple of years,” while the average regional mall generates around $450 a foot, according to the International Council of Shopping Centers.
Asked if they can compensate for the decline in tourism with added strategies, Randy offered, “Not really. If you are losing tourists, you are losing tourists.”
But Stanley said, “We offset with our restaurants, which draw local business.”
Tenants who are stepping up special events, Matthew noted, do particularly well when they tie in with charities. “That tends to activate the local market. In any given week, there are a dozen events. There is that awareness that with the currency inefficiencies, targeting the strong dollar makes a lot of sense now.”
Economic trends aside, “Bal Harbour never loses its cachet, and won’t even if the Miami Design Center does well over time,” said Michael Gould, former chairman and ceo of Bloomingdale’s. “It’s never gone down in quality.”
Stanley always tried to woo Bloomingdale’s into Bal Harbour Shops, but Gould said, “Our customer is much more in Aventura. We never did a deal, but we became friends. Every time we talked, whether he was wishing me Happy Birthday or I was saying Happy New Year, he always would bring it up and ask, ‘When are you bringing Bloomingdale’s to Bal Harbour?’”
Stanley’s drive is also evident to Laura Pomerantz, vice chairman and head of strategic accounts at Cushman Wakefield. She visited Bal Harbour Shops three-and-a-half years ago, first talking with Matthew about how her consulting service at the time, which was her own, could help Bal Harbour Shops. “In comes Stanley, tough as nails,” Pomerantz recalled. “He just had both knees replaced — bandages still on, using a cane. He was just amazing. Another person in his condition wouldn’t have been out at all.”
But Stanley has always kept pressing forward through the decades. “It doesn’t feel like 50 years have gone by because to me, this hasn’t been a business,” he said. “It’s been a love affair.”