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A recent headline in The Washington Post — “Homicides are falling in many big cities. In D.C., they’re rising” — struck a chord with Gary Rappaport.
The commercial real estate veteran and D.C.-area transplant didn’t dispute the facts citied by the newspaper, but still, Rappaport wondered: How do you convince prospective retailers and investors to commit to opening a new store in a place plagued by such problems?
“It was a really very negative article for people that are trying to decide should they should invest money and open a retail store in Washington, D.C., right now?” he said.
That cycle of closings and openings — the latest closures caused by Covid-induced work-from-home trends and concerns about crime — is nothing new for Rappaport, who has has navigated plenty of ebbs and flows in Greater Washington's retail real estate market over the past five decades.
The Brooklyn, New York, native moved to the Washington area in 1973, and he's worked hard over the years, with the aid of executives including Henry Fonvielle, to build his eponymously named firm into the largest manager of non-mall retail properties in the region. He knows better than others what it will take for the D.C. area to get back on top again, and the answer is more complex than just getting federal government workers back into their offices and converting older buildings into residences.
“We definitely have to get a handle on more than just teleworking,” Rappaport said. “We’ve got to get a handle on crime — both violent crime and retail theft — because we need to give our retailers confidence and comfort that their employees and customers will be safe.”
Rappaport recently authored the third edition of “Investing in Retail Properties,” which began shipping to readers this week. The 600-page text book packed with real-life case studies of properties the McLean-based developer has invested in over the years, interspersed with personal history about the man whose projects have impacted the lives of so many across the Greater Washington region.
I recently interviewed Rappaport about the stories behind those projects, and what lessons apply as city leaders and private developers seek a way forward amid elevated vacancy rates and sluggish efforts to get people back into downtown office space. He and his firm persevered through multiple setbacks with projects like Skyland Town Center, where it landed Lidl after losing Walmart as its first anchor tenant, and along the H Street corridor, ravaged by riots and disinvestment following Martin Luther King Jr.’s assassination in 1968.
Rappaport was tapped by the quasi-governmental Redevelopment Land Authority in the early 1980s to redevelop a two-block assemblage between Eight and 10th streets NE. It drew retailers including a Dart Drug store into what became a 32,000-square-foot, single-level retail center, helping catalyze the corridor’s revitalization. As the market rebounded further, it later redeveloped the site into a larger, multifamily-over-retail project called Avec at 901 H St. NE.
At the time, Rappaport was going around the country, giving speeches for the International Council of Shopping Centers in support of reinvesting in urban cores amid a wave of disinvestment in those areas and a shift toward the suburbs. A big message to developers, retailers and investors was to start coming back into the nation's cities and main streets again.
“It’s complicated, but there’s a need for retail because retail is the base of stability and the catalyst for growth of our communities. Many of the jurisdictions are truly committed, understanding that it’s like a three-legged stool. If we have the support of the public sector, a commitment by a developer and commitments by retailers, we can be successful bringing back and revitalizing our cities," he said.
Those early efforts were hindered by smaller acts of violence and vandalism, but Rappaport, with the city’s support, worked to respond to those incidents and maintain a safe place for retailers, their customers, and the surrounding neighborhood.
“We kept those parking lights on every night,” he said. “We kept the center clean and we painted over immediately any graffiti that occurred. Every day, we made that center safe and helped at least with the beginnings of the revitalization of H Street.”
The son of a tie manufacturer, Rappaport was the first in his family to earn a college degree, graduating from Syracuse University with a business degree. He’d planned to get into the garment business, but wound up in Washington, first in the home building business, then gravitating into commercial real estate.
He bought his first retail property, the Milford Mill Shopping Center in suburban Baltimore, for $1.5 million in 1984. Then, as now, he had plenty of his own skin in the game. He put in $35,000 of his own money and rounded up more than a dozen partners to match that for the equity needed to acquire the property. The 41,644-square-foot center there now, anchored by the Alco Clothing Outlet, is one of 200 properties that make up Rappaport’s current portfolio.
Here's more of our conversation, edited for space and clarity.
What do you hope people will take away from your new book? I hope that people who read the book find inspiration not only in following my model but also in using it as a guide to help them discover the right road for them. That’s just as satisfying to me as if they did exactly what I did.
On partnering with Chris Smith and WC Smith: I’ve never met anyone as committed to the success of this city, especially in Wards 7 and 8, as Chris Smith, with his involvement in the Skyland Workforce Center and THEARC. I needed his expertise and his knowledge of mixed-use development to make Skyland Town Center the success it is today.
On the challenges and setbacks at Skyland: I’ve had challenging developments in the past, but I believe that if we don't undertake projects like Skyland Town Center, people living in underserved neighborhoods who have the means to leave will do so, and those areas will first stagnate and then deteriorate. When the government and the private sector work together and make a commitment to support such projects, it brings stability and growth to those communities.
Were there times, like after Walmart pulled out at Skyland, that you feared throwing good money after bad? Absolutely. Chris Smith basically said, “Gary, we need to do this. We’re going to get it done.” And he has been the best partner I’ve ever had. He’s entrepreneurial, like me. He’s signing on loans, like me.
On downtown D.C. versus the suburbs? There’s no question that today there is a true difference between retail downtown and retail in the suburbs. First because of Covid, and even with President Biden's efforts to encourage the federal government to increase downtown employee presence, people have not come back to work to the extent necessary to make our downtown retail as strong as our suburban retail.
Contrast suburban retail to downtown D.C.: Retail sales have shifted from the city to the suburbs. Our suburban shopping centers are all 95% leased and they’re doing very well while the first-floor retail that we're leasing downtown is not. And we have lots of second-generation restaurant space that’s not leased, and we have many tenants that are still paying only percentage rent.
But there are bright spots for D.C. retail? In those areas, especially the ballpark area, there's a substantial residential base and they’re doing well. But go down into the central business district heading towards Seventh Street, where we have more office and less residential, the challenges become evident. The primary issue is that many people have not returned to the office yet. But then what’s even more disappointing is crime. It is scary, because stores are closing for various reasons, ranging from social issues to incidents of retail theft. When you walk into some of these stores, you see many items behind plastic that can only be accessed with an employee.
So, what’s your pitch to prospective retailers reading all those negative headlines? Our cities are still opportunities for retail success. We have to work together with retailers, landlords and the public sector, and figure out how to be successful. It is not easy, but it is necessary that we are committed to our cities. I have been speaking about this commitment that must be made for my entire career, and I am just as bullish today as I was 40 years ago.
On Covid’s impact? I am proud, looking back, of the philosophy of our company during Covid — we are going to save as many tenants and their businesses as we can. Our strategy during Covid involved closing stores temporarily, providing rent abatements and deferrals, and ultimately reopening these stores. We believed that people would return to their businesses and customers would return to shop — and we were right.
And about the landlord-tenant relationship? We have a responsibility as landlords because, with many of our tenants, especially our mom-and-pop tenants, we are a large part of their success or failure. The most important is not the bottom line; it is not the last dollar. It’s to be a human being and be proud of how we work with and care for our tenants, our partners, our employees, our vendors, and everybody we work with. I want to be remembered, first as a good man, then maybe as well as a good businessman. Nothing is more important than one’s reputation.
S.F. leased in the metro area in 2022
| Rank | Prior Rank | Name/URL |
|---|---|---|
1 | 1 | JLL |
2 | 2 | CBRE Group Inc. |
3 | 3 | Cushman & Wakefield |
