Bal Harbour Shops vs. the Design District

Floto + Warner

For decades the Whitman family–owned Bal Harbour Shops stood as an impenetrable fortress of high fashion, ruling over its occupants with a diamond fist. Until recently, that is, when labels like Louis Vuitton, Céline and Dior led a mass exodus to the burgeoning Design District and rewrote the rules for retailers in Miami.

Listen carefully. Beneath the murmuring surf and rustling palms are less soothing sounds: Construction cranes, not flamingos. Concrete mixers pouring condos, not plastic buckets shaping sand castles. Sniper fire drowning out children’s laughter.

Sniper fire?

Miami’s sultry calm deceives. A guerrilla war rages, fueled by the city’s epochal growth. In the last dozen years or so, inspired in no small part by Miami’s re-branding as a winter wonderland for the international art elite, tidal waves of wealth have washed up here: Latin-Americans­ coming north, Europeans and Russians flying west, northerners seeing it all fresh. And the newcomers and their new money have the giants of luxury retail—Vuitton, Cartier, Hermès, all of them—in a state of battle readiness.

The prize is a bigger share of what all concerned consider one of the top three luxury retail markets in America (after New York and, arguably, L.A.). And that’s ignited a retail free-for-all, nowhere more evident than in the cloak-and-dagger conflict pitting the Bal Harbour Shops above Miami Beach, long the most productive and admired mall in America, against an under-construction upstart. Though it’s been a troubled, if much-publicized, work-in-progress for more than a decade, the Design District, nine miles away, in Miami proper, is now emerging as a real threat to Bal Harbour’s only half century of dominance.

Their respective owners—Bal Harbour’s farsighted Whitman family and the Design District’s developers, Craig Robins, a Miami law school graduate-turned-profit-making historic preservationist, and his partner, LVMH, and its chairman, Bernard Arnault—profess great admiration for each other. But truth be told, theirs is a struggle to the death between committed opponents, each utterly convinced of their right to rule Miami retail.

The man behind the Design District gives the impression he’s as low-key as his press clippings say he’s not. Bald, bespectacled Craig Robins, 51, is dressed in browns and purples, albeit ones labeled­ Lanvin and Hermès, as he warmly welcomes a visitor to his art-stuffed offices in the heart of his ’hood. But he also allows glimpses of sharp angles.

For instance, one piece of his staggering contemporary art collection, a canvas hung in the lobby of Dacra, his self-described “creative development” company, references an old-school rap with the painted words “We don’t need no water/let the motherfucker burn/THE END.”

No shrinking violet, our Craig.

His self-confidence stands on a foundation of achievement. One of two sons of a successful Miami real estate developer, he grew up on the exclusive Star Island, fell in love with art and urban design during a year in Barcelona, parked himself in law school in the mid-’80s because he felt too young to go into business, and emerged wracked with doubt about whether either of his passions, art and real estate, would be a viable career. The first was impractical, the second boring. Then he met Tony Goldman and saw how to combine them into a life that would be anything but.

Goldman, the New York developer credited with reviving SoHo, was buying up large swaths of what would soon be known as South Beach. In 1987 Goldman became “my partner and a mentor,” says Robins, and he and his brother soon became “the most significant property holders in the revitalization” of the neighborhood. When their acquisitions ended, they owned about 60 buildings. From Goldman, Robins learned that if he invested in culture, commerce would follow. He rented studios to artists at cut-rate prices and claims Keith Haring was his first commercial tenant. By the mid-’90s, Robins was looking elsewhere. “I realized there was no place for South Beach to go except over the bridge” to the adjacent city of Miami. “People thought we were totally crazy.”

He started buying vacant properties on 12 square blocks, bordering Wynwood and Edgewater, that had been a wholesale furniture district for decades until a mall in Fort Lau­der­dale lured most of its vendors away. Rob­ins vowed to bring the furniture back to what had long been called the Design District. The interior design industry was “a racket,” he says. The public wasn’t allowed into showrooms, and decorators who were got kickbacks from manufacturers. “I thought it shouldn’t be hidden away and jacked up; it should be on the street,” Robins says. He started restoring old buildings (to date, about 20 have been refurbished), and by 1998 the showrooms were returning; when Holly Hunt, a designer for interior design collections, opened one in 2000, “that immediately legitimized us,” he says.

But legitimacy didn’t bring South Beach–like crowds. Critics felt the sun-blasted urban district, surrounded by poverty-stricken, crime-ridden neighborhoods, was desolate and unwelcoming; as bad as South Beach had once been, it still sat on the beach. But Robins had a different vision: “We needed a creative lab where interesting things could happen,” so he again lured artists, commissioned architecture and public art and, most significantly, helped organize Art Basel Miami Beach, which launched in late 2002. Robins staged events for the fair in the Design District, promoting both.

Three years later Robins started Design Miami, a design-as-art show, as an adjunct to Art Basel, and put his girlfriend at the time, Ambra Medda, the daughter of an Italian gallerist, in charge. Though Robins downplays her role—“She was very young; she didn’t know too much”—Medda nudged the district into fashion when she reeled in the Italian fashion house Fendi as a sponsor. “My relationships allowed us to build the Design District and Design Miami in a way that was spectacular,” she says, “but Craig should probably tell the story. He needs this more than I do.”

Fendi’s then-CEO, Michael Burke, had started his career in real estate, working for Jean Leon Arnault and his son Bernard, who, after succeeding his father, began the luxury buying binge that has made LVMH what it is today, starting with its purchase of the company that owned Christian Dior. Burke was put in charge of Dior USA, and in 2003 he took over Fendi after LVMH bought it. Burke thought the Design District, with its furniture stores and art galleries and Robins’s plans to enhance the area (the much-admired Michael’s Genuine restaurant would open in 2007), were terrific. He opened a showroom for Fendi Casa in 2004, and in 2008 agreed to sponsor Design Miami.

Burke, now chairman of Louis Vuitton, and Robins quickly grew even closer. LVMH had a problem with Miami’s Bal Harbour Shops—and Arnault and Burke thought Robins might be its solution.

Matthew Whitman Lazenby, 37, CEO of the Whitman Family Development, which owns Bal Harbour Shops, works alongside his grandfather Stanley Whitman, 95, and his uncle Randy, the holding company’s chairman and managing partner of the mall itself. Stanley’s father, a Sears, Roebuck catalogue printer, first visited Miami Beach in 1912, moved there in 1918 and started buying real estate. Among his properties were buildings on Lincoln Road near the beach, then “the epicenter of luxury” retail, says Lazenby.

In 1946 the tiny village of Bal Harbour was incorporated, and Stanley Whitman began to develop 16 acres that were originally intended to house a gas station and grocery store, but he had a different idea. Lincoln Road was deteriorating, and its tenants were decamping to Palm Beach, so he conceived Bal Harbour Shops—a luxuriously landscaped, inward-facing-yet-open-air mall—to keep them. When it opened in 1965, Whitman’s tenants were mostly multi-brand stores and big-name retailers like FAO Schwarz. Saks and Neiman Marcus arrived as anchor tenants­ in the ’70s. In 1977 Gucci became Bal Harbour’s first European fashion brand. Louis Vuitton followed.

Like most mall owners in America, Whitman issued leases with radius restrictions, clauses that bar stores from opening additional outlets nearby. They originally prohibited their tenants from opening anywhere in Dade and Broward counties, and south of Worth Avenue in Palm Beach County, and later shrank the protected zone to 20 miles. Still, in 1983, Bal Harbour built a second level, bringing its square footage to 450,000 to accommodate raging demand for its stores.

Over the years competitors challenged Bal Harbour and failed, settling for less prestigious stores and brands or closing altogether. Their locations all lacked a crucial ingredient. “We love our local customers,” says Lazenby, “but the only way luxury works is with tourists.” Bal Harbour’s position, between beach and bay, and its leases were a one-two punch. Like the Design District, Bal Harbour also contains restaurants. (Carpaccio packs in crowds.) But unlike Robins’s neighborhood, it also has nearby hotels, including the St. Regis. That puts luxury-driven customers literally on Bal Harbour’s doorstep.

In 2002 a developer opened Merrick Park in Coral Gables, just south of Miami, and sued Bal Harbour Shops, trying to break its radius restrictions. A federal court settlement upheld Bal Harbour’s leases but let tenants open second locations—in Merrick Park. A competing developer says that Merrick Park paid the Whitmans $250,000 for each store that opened. “But they only paid for Burberry, Tiffany and Gucci,” he says. “Everyone else got stuck” at Bal Harbour. That looked like a victory for the Whitmans. But then, Lazenby acknowledges, “the world became a bit more complicated.”

Shortly after Lazenby joined the family firm in 2003, taking over from his uncle the key chore of leasing stores, the Whitmans started feeling pressure to expand again. Louis Vuitton, in particular, was doing so well in its 4,600-square-foot store, it started asking for—and then demanding—more space. The Whitmans initiated talks with a neighboring church about acquiring its site on the southwest corner of the mall’s parcel. But those discussions moved slowly while the conversations with Vuitton accelerated and the Whitmans’ response was deemed insufficient.

“The only way to do it was to kick out other stores,” says Lazenby, “and [terminating leases] was not in our best interests.”

When Vuitton decided to open a concession in Neiman Marcus in Coral Gables instead, Burke says, the Whitmans threatened to move the brand to the second level when its lease expired. The family was threatened in turn. LVMH made it clear that if Vuitton didn’t get a much bigger store, it and the firm’s other brands might all leave—for the Design District.

A story is told that Randy—then CEO of Whitman Family Development—responded by asking Robins to tell Arnault to “go @uck himself.” That’s almost too good to be true in a narrative like this. Robins won’t comment. “It may have actually been worse than that,” says Burke. Lazenby acknowledges he’s heard the story and suggests Randy’s comment was a joke.

Regardless, what happened next was not.

Robins says he had always planned to bring fashion to his Design District. Yohji Yamamoto’s Y-3 line opened in 2007, and Marni and Tomas Maier soon followed. But these were niche, not mainstream designer brands, and likely had little interest in the haute-bourgeois Bal Harbour. By 2010 Christian Louboutin and Maison Martin Margiela had opened, too. “They wanted something different than a pigeonhole of a box in a mall,” says Robins. “I realized the opportunity to collaborate with fashion” would “bring the District to a whole new level.” But again, it wasn’t South Beach.

Detractors disdain the District still. “It’s not user-friendly,” says a retail expert. “It’s on the way to nowhere. Fancy ladies didn’t want to walk there. It’s not as easy as ‘build it and they will come.’ The Design District isn’t going to happen.”

Not until the king of fashion, Arnault, decreed that it would. Robins actually “had a limited view of its potential,” suggests Louis Vuitton chairman Burke. “He always wanted art, design, entertainment, food, fashion, but he wasn’t thinking Dior, Vuitton and Fendi. So we were both frustrated when we started talking.”

Miami was also in the Great Recession doldrums; in 2009 nobody would invest. But Burke saw an opportunity and approached L Real Estate, a global development and private equity fund just launched by LVMH. LVMH is only a minority investor, but Arnault is deeply invested individually. Burke won’t confirm that straight out but acknowledges it’s true. “If I were an investor, I’d insist on Mr. Arnault being personally involved,” he says puckishly.

L Real Estate, which had previously invested only in Asia, bought 50 percent of the District—and promptly turned it into the vast construction site it will remain through 2016. Sixteen new buildings were recently turned over to the brands that have leased them. Twenty more should be open in two years.

Arnault was immediately hands-on, says a knowledgeable source. He personally ordered the LVMH brands to close their Bal Harbour stores and move when their leases expired. Vuitton, Céline, Dior and Marc by Marc Jacobs have already done so. Dior Homme, Berluti and Loewe, which never had Miami outlets, have joined their siblings. Fendi, which has an ongoing lease, remains at Bal Harbour but won the right to open a second outlet in the Bloomingdale’s at the still-growing Aventura Mall, just north of Miami. Thomas Pink remains, and Bulgari and Loro Piana, which both recently signed new leases at Bal Harbour, appear to be the exceptions that prove LVMH’s bye-bye-Bal Harbour rule. Arnault didn’t stop there; he started “picking up the phone personally,” the source continues, to call competitors like Richemont, owner of Cartier. Robins did the same, sweet-talking Robert Chavez, CEO of Hermès USA, into leaving Bal Harbour, even though Hermès and LVMH were at odds over LVMH’s stake in the brand, which was 23 percent before LVMH agreed to redistribute most of its shares in September.

Chavez was lured from a 4,300-square-foot store to a 13,000-square-foot, three-story building, for which “he’s paying basically nothing,” says the knowledgeable source. Burke allows only that Hermès was given a “most-favored-nation” deal to bed down with the enemy. “Nothing in life is free,” insists Chavez. “My job is to do what’s best for Hermès.”

Back in his office, Robins shows off a map of his District stippled with big fashion names—only some of whom have signed or been issued leases. He spits out their names like bullets aimed at the Whitmans: Tom Ford (“exclusive to us”), Brioni (“will get a waiver of the radius restriction”), Loro Piana (“has a waiver”), Tiffany & Co. (“has a waiver or will close, which is better”), Valentino (“waiver”), Bulgari (“waiver”) and so on.

Then he unveils a secret weapon. It’s a by-product of another legal dispute, this one over a private jet. The plane was co-owned by Robins and another developer and managed by Turnberry Associates, owned by the Soffer family. They also own the Fontaine-bleau Miami Beach hotel and the Aventura Mall. The jet owners owed fees, and the Soffers sued. Robins settled, and in the process fell for Jackie Soffer, one of Turnberry’s two sibling principals. Robins says absent the lawsuit, “I wouldn’t have a girlfriend or a deal with Aventura.” He says he then helped facilitate the deal that has brands leaving Bal Harbour and being greeted with open arms at Aventura. “The Design District doesn’t have radius restrictions,” he explains, “because we recognize that Miami is a two- or three-location market.” It appears that the Whitmans have reached the same conclusion. Tiffany & Co. recently opened in Aventura and signed a Design District lease but remains in Bal Harbour.

Lazenby knew all along that LVMH was talking to Robins: “They were open about it. They said, ‘Do you want to partner with us?’ Arnault doesn’t do anything flippantly, and I have a lot of respect for Craig’s vision. So we went to the Design District and kicked the tires. But we couldn’t help but come back to reality. You need tourists and affluent locals, and we didn’t see either.”

And what about Robins’s claims about Bal Harbour waiving its lease terms? “I’m going to give Craig the courtesy of not commenting,” says Lazenby. “The more successful Miami becomes, it’s good for us.” A little later in the conversation he adds, “I’ll concede a coming around on our part.”

For now, the outlook is sunny at Bal Harbour. Sales per square foot have done nothing but rise, the loss of LVMH notwithstanding. The waiting list is still long. Lazenby sounds fairly certain no competitor has since passed the $2,920 per square foot it was earning in May 2014. The deal with the church is done. Subject only to a final municipal approval, Bal Harbour Shops will expand, accommodating 40 new stores, and Barneys New York will join as a third anchor. The family has also agreed to codevelop Brickell City Centre’s mall, part of a nine-acre, $1.05 billion mixed-use project in the downtown Miami business district, which is already bustling with Latin- and South-Americans, hotels, major businesses and public transport.

It’s generally acknowledged that Miami’s recent rapid growth left it without enough luxury stores. But many question whether too much luxe won’t turn out to be as bad as too little, whether the Design District, Bal Harbour, Brickell City Centre and Aventura won’t become duplicative luxury ghettos, all filled with the same goods that tourists can buy all around the world. That may be why those fiercely competing for the high-end customer spend so much time looking over their shoulders, saying the Whitmans abuse their power or deriding the Design District as “Craigland.” But the Whitmans and Robins are not the problem. The problem is more likely the boom-and-bust cycles that have defined Miami since its founding 120 years ago. Rich Russians and South-Americans are fueling its growth today, but nobody can say what tomorrow will bring.

“Miami has gone from under-retailed to over-retailed in a very short time,” says Hanna Struever, founder of Retail Portfolio Solutions, a luxury retail and real estate consulting company. And she finds it worrisome. “There’s too much going on and not enough qualified consumers to go around. Each proposition needs to fill a void to be successful. But there aren’t that many voids. There will be winners and losers.”

But that’s true of all wars, isn’t it?

And Then There Is the Luxury Island

The Design District and Brickell City Centre aren’t the only developments seeking to sate Miami’s luxe cravings. I heard about Island Gardens from Barbara Cirkva, a division president at Chanel, a longtime tenant of Bal Harbour Shops. It’s said in fancy retail circles that Chanel’s Bal Harbour store is its highest-earning outlet in America. Though he won’t reveal a number, Matthew Whitman Lazenby characterizes the brand’s Miami volume as “nothing short of staggering.” But Chanel still considers alternatives, and late this spring, Cirkva found a promising one—a 24-acre site on Watson Island, which overlooks Government Cut, the cruise ship channel into Port Miami.

For more than a decade, a Turkish mall developer, Mehmet Bayraktar, has been trying to build Island Gardens, a complex of hotels, condos, retail and restaurants surrounding a marina—the first one in Miami deep enough to accommodate the superyachts the über-wealthy lately love. Many think and some hope it will never happen. Support has waxed and waned, and financial partners have come and gone since Bayraktar first won a contest to build it in 2001. He even spoke to LVMH before the 2008 market crash. Now his plan is to build the marina with his own money—he’s spent $70 million so far, he says—open it in 2015, then seek a partner to finance the rest. Cirkva isn’t saying if Chanel would consider it. “We still have a radius restriction,” she notes. Surely, that’s not a message for the Whitmans.