It Takes A Village

Mitch D’Olier and Victoria Ward Ltd. bring a small-town feel and big-city profits to Hawaii retail.

March, 2001

To retail or not to retail?

That was the question posed by newly hired President and CEO Mitchell D’Olier to the board of directors of Victoria Ward Ltd. in 1993. The coming years were looking to be tough for the company, which owns, develops and manages 65 acres of Kakaako retail, office and industrial property.

Although sales at both the Ward Warehouse and nearby Ward Centre were doing well, a total of $59 million that year, Oahu’s retail world was getting increasingly cramped with the recent arrival of big-box players Costco, Kmart and Sports Authority. Ala Moana was just beginning the first phase of its $50 million expansion. And longtime tenant Gem’s was pulling out of the company’s huge space fronting Ward Avenue. And to make matters worse, the Aloha Tower Marketplace had just opened its doors and began siphoning off business from Victoria Ward’s restaurants, its traditional strength. The 60-plus-year-old company, which had invested so conservatively for so long, had to put up or shut down.

“Basically, Victoria Ward was turning into an oversized strip mall with a leaky Gem’s and a fish market as anchors,” says Marty Plotnick, retail analyst for Creative Resources Inc. “They found themselves in a bad position.”“The loss of Gem’s and its couple hundred thousand square feet of retail left us in a bad position to compete with our neighbors,” says D’Olier. “I thought that we would soon be out of retail altogether. I told our board that we really needed to get into the retail business in a big way or get out of it altogether.”

Fast forward almost eight years. The local economy is back and the visitors, too, and people are spending. In 2000, total retail sales at Ward Warehouse and Ward Centre were approximately $80 million and the total retail sales on all of Victoria Ward’s properties were in excess of $153 million. Gem’s has been replaced by Sports Authority, the highest grossing location in the chain’s western region. On the opposite end of Victoria Ward’s complex, its other anchor, Borders Books Music & Café sits in a space once used for meetings and occasional film screenings. Today, Borders Ward is the highest grossing bookstore in the state.

Good to his word, D’Olier and Victoria Ward got into retail in a big way and it is about to get bigger, $40 million bigger. In August 2001, Victoria Ward Ltd. will officially unveil its 156,000-square-foot Ward entertainment center, which began construction last May. Over half of the complex’s space, some 86,000 square feet, will be home to Consolidated Theatres’ new flagship megaplex, where D’Olier hopes to premier the summer World War II blockbuster Pearl Harbor. Victoria Ward officials are expecting more than 100,000 moviegoers per month will visit the center, boosting retail sales throughout their collection of shops and restaurants anywhere from 10 to 25 percent.
“When we started to plan this in 1993, we realized that there wasn’t a place here in Hawaii where you could go eat a meal and walk around and see a movie,” says D’Olier. “It gives us the critical mass, and we are much more significant and stronger.”Next door to the theaters will be the equally theatric Dave & Buster’s, a 38,000-square-foot behemoth that features a restaurant, bars and interactive entertainment attractions, everything from billiards and shuffleboard to dinner theater and computerized golf. The remaining space will be taken by retail, much of it fronting Auahi and Kamakee Streets. With the completion of the entertainment center, Victoria Ward’s retail space will increase to almost 600,000 square feet, nearly double the space in 1993.

But the project does much more than that. The Ward entertainment center is a very big piece in a complex and—until recently—disjointed puzzle, moving the company and the state’s retail world in a new direction. The center sits on what was once a large chunk of underused property that separated Ward Warehouse from Ward Centre, a sort of retailing no-buy zone that reinforced the idea that the two shopping centers were separate entities and not part of the same complex.

When the entertainment center is completed, Victoria Ward will have continuous retail space stretching down its length of Auahi Street, from Ward Avenue across nearly three city blocks ‘till the street meets back up with Ala Moana Boulevard. But, more importantly, this complex will be the hub of an urban shopping district with Auahi serving as its main thoroughfare. It will be Hawaii’s first example of main street retailing, an industry trend that started to heat up on the mainland in the late ’80s and has taken on a greater importance in recent years with on-line retailing keeping more and more shoppers at home.

“All over the country, the rise of main street retailing has been phenomenal,” says Plotnick. “It’s shopping in the village square, except now the general store with its cracker barrel and Franklin stove have been replaced by Starbucks and Jamba Juice.”

D’Olier points to Santa Monica’s Third Street Promenade and Beverly Hill’s Rodeo Drive as examples of urban shopping destinations that have combined retail with a distinctive sense of place. D’Olier’s shopping village, of course, will have its own local look and feel, characterized by company officials as contemporary Hawaiian with distinct echoes of the Islands’ past. The design of the entertainment center, for example, was influenced by the old Palama Theatre, downtown Honolulu’s Alexander & Baldwin Building, along with several other structures.

According to Plotnick, this type of back-to-the-future retailing appeals to people’s inherent need for human interaction, being part of a larger community—needs not served by modern, conventional shopping malls, which are designed to keep shoppers in perpetual motion. Plotnick notes that the Ward shopping village’s prime location, reachable from several of the city’s main arteries as a major advantage that is enjoyed by few other locations. Add to that the proposed development of a world-class aquarium and medical school on state land in Kakaako that may transform the area into a hub of business and visitor activity. And with Ala Moana Shopping Center, the retailing juggernaught with over 25 million visits a year, just down the street, a shopping village may be the more appropriate niche for Victoria Ward.

“Right now we look like a bunch of geniuses,” says Jeffrey C. Dinsmore, chief financial officer for Victoria Ward Ltd. “But we aren’t fooling ourselves. That’s how the business is. A tax law changes or the market shifts and you either look very smart or very, very dumb.”

According to Dinsmore, the evolution of Ward’s shopping village was characteristic of the smallish company’s (Victoria Ward Ltd. has 58 employees and reported $29 million in gross revenues in 1999.) flexible strategy that swayed with the prevailing winds of the marketplace. A myriad of development schemes have been proposed over the past four decades, including an Embarcadero-like high-density monstrosity proposed in the ’60s that was to run along Ala Moana Boulevard. But Dinsmore believes that it wasn’t until recently that the company found a development plan that addressed the properties’ strengths and weaknesses.

Actually, the company’s current development plan originally called for a conventional mall with national names like Saks Fifth Avenue and Nordstrom’s serving as its anchors. But, according to Dinsmore, Ala Moana’s earlier lavish expansion plans along Kapiolani Boulevard and the disappointing opening of the center’s Neiman Marcus department store discouraged Victoria Ward’s mainland partners. The company didn’t have the resources to build such a mall on its own and started to look elsewhere. It didn’t have to look far.

“We basically tried to make lemonade out of lemons. Well, not exactly lemons,” says Dinsmore. “Ward Warehouse and Ward Centre were doing well. But they were doing well separately.”

With Sports Authority (opened in 1994) and Borders (1995) as its new anchors and successful re-tenanting, which developed an enviable mix of national names with local vendors, sales surged. In 1996, D’Olier added the Ward Village Shops at the corner of Auahi and Kamakee Streets, which include Starbucks, famous North Shore eatery Kua Aina along with clothing and outdoor retailers Crazy Shirts, Roxy and Powder Edge among others. D’Olier readily admits that the addition of the stand-alone minimall was a move made merely to increase his critical mass and not part of some grand strategy. He was caught off guard on just how well sales at the small, simply designed mall would be. At Ward Village Shops, individual tenants average more than $1,000 per square foot in sales, just about twice the dollar amount for tenants in Ward’s other properties.

The minimall’s original anchor, Computer City, took in an average of $2,000 per square foot. The store became the top performer in the nationwide chain. Later, Pier 1 Imports, which took over the space in 1998, also became the top seller in the nation for its company.

There was something to this village concept and that something could finally get Victoria Ward’s retail cogs, which had been moving well individually, turning together.

“Sit down for a couple of hours at Starbucks with a cup of coffee and you’ll be surprised at how many people you’ll run into and these will be people from all over the island,” says Plotnick. “It’s drawing a crowd and it’s attracting them from far away.”

“It’s about having good tenants and a good location,” says D’Olier. “It’s also about people wanting to be around each other. But to be honest, we haven’t quite figured it out but it’s working. This business is about hard work, good planning and a little luck.”

Even though Victoria Ward may have location, timing and luck and on its side, there is no guarantee for the success of its extended shopping village. According to Peter M.K. Kaanapu, Jr., director, Assurance Based Advisory Services, KPMG, the success of its experiment in main street retailing will all depend on how Victoria Ward executes its concept.

“I’ve seen, read and heard about literally dozens of very, very similar shopping areas,” says Kaanapu. “It comes down to being all about ambiance—mimes, musicians, magicians that sort of thing. It’s about a feeling you generate.

“I think Victoria Ward has all the pieces,” continues Kaanapu. “But it has to have some kind of cohesive theme and atmosphere that will bring everything together.”

According to D’Olier, if the entertainment center continues to be a success after two years of operation, look for the shopping village to grow and grow substantially. An extensive renovation of Ward Warehouse and the construction of additional parking would be next. If things continue to go well, within five years D’Olier is looking at developing high-rise residential towers on both ends of Auahi, turning his village into a real town square. He estimates the projects will cost somewhere in the neighborhood of $100 million apiece.

“The market will determine what we develop and in what order we develop it,” says D’Olier. “We have the vision. It’s just a matter of people believing in it.”


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