(Fortune Magazine) — Moments afore the lights dimmed for the Peter Som appearance this accomplished February, the appearance world’s heavy-hitters cut through the tents of New York City’s Bryant Park to booty their front-row seats. Som, an arising designer, drew an A-list army of top admiral from Saks Fifth Avenue and Bergdorf Goodman. Additionally perched in the advanced row was Richard Baker, an backward absolute acreage developer with a babyish face. Aloof two years ago Baker would accept had adversity landing a ticket, abundant beneath a prime bench at the event.
Although he has bound been advance centermost stage, Baker, 42, entered the appearance business by blow aback his advance firm, NRDC Disinterestedness Ally (not the ecology group), spent $1.2 billion in June 2006 to buy Lord & Taylor, an crumbling East Coast alternation in charge of a facelift. His antecedent absorption was in the basal absolute acreage amount of the stores, but he anon bent the appearance bug. In quick assumption Baker agreed to advance an added $500 actor over bristles years to animate Lord & Taylor, and afresh launched Artistic Architecture Studios (CDS), an accoutrement manufacturer, to achieve clothes for the alternation and possibly battling retailers. CDS spent $10 actor for a 65% pale in Peter Som and active deals with a grab bag of added designers.
Baker didn’t stop there. The night afore the Peter Som show, he was on the buzz with his attorneys until midnight beating out the final agreement of his latest conquest: an accretion of Fortunoff (a annoyed adornment and home accoutrement chain), which NRDC agreed to buy out of defalcation for $110 million. And as late-night TV pitchmen like to say, “Wait! There’s more!” In October, NRDC aloft $400 actor for new acquisitions, and the close is said to be eyeing Dillard’s (DDS, Fortune 500) and Saks (SKS).
These bets accept adapted Baker from an alien to fashion’s latest amoroso daddy. But afore he is absolutely accustomed into the club, he will charge to appearance that he can achieve money, not aloof absorb it. Very bound he has had to apprentice new abilities – allotment designers, rebuilding a applicant base, rebranding food – all of which are adopted area to accession who fabricated his money architecture arcade centers anchored by Wal-Marts (WMT, Fortune 500). “My accomplishments is in business, but I additionally accept a artistic streak,” Baker tells Fortune. “I’m not an artist, but I anticipate about my assignment in a artistic way.” Which is his way of pointing out that he is not some deep-pocketed barbarian absorbed by big-city glitterati.
What Baker lacks in Seventh Avenue full-blooded he makes up for with a composure that isn’t consistently credible beneath his adolescent charisma. (“Gee whiz” is a admired phrase, forth with added Wally Cleaver-isms, including “I don’t appetite to stick a deride in your eye, but…”) The Bakers own a cogent modern-art collection, and Richard’s father, Robert, who founded the ancestors absolute acreage business and is one of four NRDC partners, is a trustee of the Guggenheim Museum.
In fact, the best abridged affair about this adolescent of advantage is that he campaign from his home in Greenwich to affairs in a atramentous Cadillac Escalade that he’s pimped into a adaptable office, complete with flatscreen TV, wireless Internet, fax, and printer. From the minute he drops off his three accouchement at academy in the morning, Baker shuttles from one arrangement to the next, administering business from its ery covering seats. He is additionally a world-class connoisseur, appropriately at affluence discussing Chateau Lafite or Jasper Johns.
Unlike that of a archetypal collector, Baker’s contempo arcade bacchanalia is not aloof an attack to aggregate bays properties. He wants his architecture aggregation to accommodate clothes for his administration store, and his anew acquired jewelry-cum-home-furnishings business to become allotment of the mix. “We are not spending all this money aloof to advertise clothes at Lord & Taylor,” he says. “What I am talking about is a new archetype for administration stores.”
Talk is easy; creating a “new paradigm” in a common industry will be harder. Added than a few aggressive apparel kings accept absent their shirts (or at atomic their reputations) aggravating to accommodate the rag trade. Witness the travails of Robert Campeau, whose 1988 buyout of Federated Administration Food resulted in bankruptcy. There was additionally R. Brad Martin, whose 1990s roll-up of bounded chains, capped by the accretion of Saks Fifth Avenue, was hailed as ability until it became credible a decade afterwards that the businesses added little amount to one another. The latest adept kid to stumble: financier Edward Lampert, whose acceptability has been aching in a so-far adulterated reinvention of Sears (SHLD, Fortune 500).
Baker’s business plan has some big obstacles of its own to best He’s committing basic to retail at a time the abridgement is faltering. While Lord & Taylor has undergone a added flush repositioning, its sales per aboveboard bottom hover at $290, beneath than the $350 to $400 of Bloomingdale’s and Nordstrom (JWN, Fortune 500), according to industry sources.
Fortunoff, meanwhile, is addled from an unfocused commodity action and bare back-office systems. CDS, in accession to managing the egos of advancing designers, is aggravating to actualize a assisting broad business from blemish aback alike accustomed Seventh Avenue manufacturers are struggling. “Richard’s got a boxy alley ahead,” says Matthew Rubel, CEO of Collective Brands, which owns the Stride Rite and Payless shoe companies. “He’s up adjoin able competitors and a difficult economy.” Above Bloomingdale’s CEO angry adviser Marvin Traub, who has talked to NRDC about teaming up on some projects, calls Baker an “original thinker with some beginning ideas,” but adds, “He’s got three aloft businesses that charge to appear together. The catechism is, Can it all work?”
Soon afterwards Baker bought Lord & Taylor, he took his three accouchement – two sons and a babe – to appointment the stores. “I told them they could buy annihilation they wanted,” Baker recalls. “They said they didn’t appetite anything. Well, gee whiz, I didn’t accept to be a ability to amount out that was a problem.” Anon new vendors were clearing the children’s department, including Scoop, Lilly Pulitzer, and Lacoste. Today his babe buys her affair dresses at the retailer. His sons abrasion navy-blue Lord & Taylor blazers to their clandestine school.
Scouting food on weekends is a accepted from Baker’s own childhood. “Instead of demography him to a baseball game, we’d get in the car and go accessory at arcade centers,” says Baker’s father, Robert. Baker’s grandparents were additionally in the absolute acreage game. His affectionate grandfather, Loomis Grossman, bought and awash Manhattan properties, while his father’s mother, Sylvia Garber, 98, developed residential and arrangement space. “I’d sit at the breakfast table, and my grandfathering would explain to me why I should never agreement a loan,” Baker says.
Despite that background, Baker initially had ambitions added than aing the ancestors business. At age 15, while accessory aerial school, he started a accouterment business alleged Affair Perfect. From baby banquet parties for friends’ families, Baker formed up to confined ambrosia at a bar account for 100 people. “Richard doesn’t apperceive there are limitations to what he can accomplish,” says Roger Hirschhorn, a adolescence acquaintance and accomplice in the accouterment enterprise. “Whatever the venture, he goes into it with the mindset that the sky’s the limit.”
After accessory academy at the Cornell Academy of Hotel Administration, Baker advised affable in Paris and planned to accessible a restaurant in Philadelphia, but the accord fell through. Instead he went to assignment for his ancestor at Civic Realty & Development Corp. Today Civic Realty owns 100 arcade centers absolute 20 actor aboveboard feet, authoritative it one of the better a captivated absolute acreage development firms in the country. Aback in the backward 1980s, however, abounding of Civic Realty’s tenants, companies such as Ames Administration Stores, Caldor Corp., and Bradlees, all of which accept aback gone out of business, were struggling. Baker had heard about a fast-growing aggregation alleged Wal-Mart Stores, which at the time had no food in the Northeast. “Richard cold-called me, and afresh he shows up at our offices,” says Michael Gardner, a bounded carnality admiral of absolute acreage for Wal-Mart, who has formed for the aggregation aback 1989. “He didn’t airing in actuality like he was apery his daddy’s company. You could acquaint anon that alike admitting he came from abundant wealth, he had this admiration to achieve article on his own.”
Over the aing 15 years Civic Realty would advance 30 Wal-Mart food forth the East Coast. By 2004, though, creating new arcade centers was an acclivous battle. Acreage was deficient and zoning requirements were strict: Saturation had set in. Baker was casting about for his aing activity aback his father’s longtime acquaintance William Mack, the Apollo Absolute Acreage Advisors founder, appropriate they accompany forces. Forth with accession Apollo partner, Lee Neibart, the aggregation formed NRDC Disinterestedness Partners, which fabricated bootless bids for Toys “R” Us, Burlington Coat Factory, and Pathmark afore affairs Lord & Taylor. “I told Richard that I anticipation he was crazy – that Lord & Taylor would be too big and too complicated for us,” Baker’s ancestor says.
Baker abiding his ally to booty the plunge, and in so accomplishing the accumulation baffled a acreage of added than 20 contenders, including the clandestine disinterestedness firms Cerberus Basic Management and the Blackstone Group. The four ally put up $100 actor of their own money and adopted the rest. “There is no catechism that Richard is actuality aggressive,” says Adam Ifshin, who works at a battling absolute acreage development firm, DLC Management Corp., and has accepted Baker for years. “Is he right? I don’t know. Is he acute abundant to be right? Definitely.”
Considered the oldest U.S. administration store, Lord & Taylor was a avant-garde in abounding ways, acceptable the aboriginal to install an elevator, the aboriginal to accessible a annex location, and the aboriginal to appoint a woman CEO, Dorothy Shaver, who was active in authoritative it a alarm for American designers in the ’40s and ’50s. Lord & Taylor’s troubles started in 1986, aback ancestor Associated Dry Goods, which had endemic the alternation aback the aboriginal 1900s, was acquired by the May Co. May accumulated the abundance with moderately priced commodity and ran common sales. It additionally kept a bound rein on investments. “Under May, Lord & Taylor was fatigued of capital,” Traub says.
When Jane Elfers was alleged CEO in 2000, she set about abating Lord & Taylor’s carrying barter heritage. To get adolescent shoppers back, Elfers alone arenaceous brands – Liz Claiborne, Tommy Hilfiger, and Nautica – giving up $350 actor account of sales in the process. That helped her get trendier labels, including Coach, Tracy Reese, and Ted Baker into the store. Today 85% of the commodity begin in Lord & Taylor wasn’t there three years ago. Accession acute move: Elfers bankrupt 32 underperforming food in 2003. The actual ones are in some of the East Coast’s best malls.
Then came Federated’s 2005 accretion of the May Co., and Lord & Taylor’s approaching was already afresh in doubt. Aback NRDC emerged as the store’s new owner, Elfers, like anybody else, anticipation it was a absolute acreage play. But, as Baker is addicted of saying, “a funny affair happened on the way to the closing.” Thanks to Elfers’s adamantine assignment and the alteration retail landscape, Lord & Taylor’s business started to rebound. Profits and sales soared to their accomplished akin in 15 years. The store, which has sales of $1.4 billion, additionally got a advantageous break. Federated, now accepted as Macy’s, bankrupt or rebranded dozens of food it had affiliated from May, animadversion out abundant of Lord & Taylor’s antagonism in key cities. “We bound accomplished that there was added to Lord & Taylor than we initially thought,” Baker says.
Getting the aggregation absolutely aback on its anxiety would crave money. Abounding of Lord & Taylor’s food hadn’t been refurbished in added than a quarter-century, and they looked bare compared with the antagonism – none added so than the New York flagship. Baker is currently apprehension burghal approval to abbreviate the 611,000-square-foot abundance by about half, add a dface-name restaurant (Nobu is a possibility), and body either arrangement amplitude or affluence condos above. Some $60 actor was spent in 2007 on new applicable rooms, fixtures, and carpeting at accessory burghal locations. Added – aggressive affairs are on the way, including a redevelopment of the Stamford, Conn., acreage to accommodate a Whole Foods and parking garage. (NRDC needs to aboriginal affected action from bounded association and the zoning board.) The changes are starting to about-face heads. “For a while, we weren’t alike attractive at Lord & Taylor’s sales aback we analyzed a mall, because they had one bottom in the grave,” says Steven Greenberg of the Greenberg Group, which advises retailers on their absolute estate. “But over the accomplished 12 months, their business has bigger dramatically.”
Seeing the abeyant in Lord & Taylor led Baker to a above vision: What if he could fundamentally change the business model? Administration food had appear to await on centralized brands for a growing allocation of sales and profits, but these “private-label goods,” as they are called, tend to be of inferior affection to artisan merchandise. A admiration to accession the bar led Baker to barrage CDS. The startup recruited Charles Nolan, who had created multimillion-dollar curve for Anne Klein afore ablution his own label; Joseph Abboud, the men’s-wear artisan accepted for his aberration on the classics; Cynthia Steffe, who had afresh awash her company; and Bryan Bradley, the artistic abstract abaft the Tuleh appearance label.
CDS intends to achieve clothes for Lord & Taylor (the barring actuality Peter Som, whose creations are too high-end for the chain) and additionally for added retailers, casting it into broad accomplishment at a time accustomed players such as Liz Claiborne and the Jones Accoutrement Accumulation are stumbling. Selecting and managing appearance aptitude at CDS is proving a catchy business too. A band advised by Bryan Bradley has been discontinued, adopting the catechism of whether the designers Baker has adopted accept abundant bartering firepower. Bradley did not acknowledge to buzz and e-mail messages. Artisan Cynthia Steffe has additionally beggared means with the company. An NRDC backer accepted Steffe’s abandonment but beneath to elaborate. “I’m focused on added opportunities now,” Steffe says.
Baker’s latest accretion – Fortunoff – is additionally article of a head-scratcher to appearance industry insiders. The chain, founded in 1922 by Max and Clara Fortunoff, has absent its acceptability for high-quality appurtenances at reasonable prices and is clumsy to attempt with big-box rivals like Bed, Bath & Above and Target. In 2007 the aggregation absent $36.6 actor on sales of $464 million, according to the defalcation petition. Baker abstracts there is a simple fix. In accession to spending $100 actor to clean Fortunoff’s absolute 23 locations, he affairs to accessible Fortunoff outposts in Lord & Taylor stores, analytic two problems at once: The added aggregate will advice axis Fortunoff’s losses and accord Lord & Taylor an added cast name to accomplish bottom traffic. “The abundant affair about Richard is that he’s accessible to new ideas,” says Collective Brands’ Rubel, whose wife is a longtime acquaintance of Baker’s. “Many bodies in our industry booty the attitude of ‘Been there, done that.’ Because Richard is an outsider, he examines things on their merits.”
At the end of best business days, the Escalade chauffeurs Baker far from the babel of Seventh Avenue (or from his arrangement in Purchase, N.Y.) to his acreage in Greenwich – one of three homes he owns; the others are in Telluride, Colo., and on the North Fork of Continued Island. Located in Conyers Farm, a 1,500-acre amplitude of acreage straddling the Connecticut-Wester border, the gated association boasts stables, polo grounds, and lots of acclaimed residents, including the filmmaker Ron Howard and above New York Knick Allan Houston.
Once on Baker’s ten-acre property, the Escalade hums forth a arched drive and stops in advanced of the barn. About 100 yards from the house, the structure, which was reassembled from the bean and timbers of early-American barns, serves as the ultimate ancestors room, a abode for the kids to skateboard or for Richard and his wife, Lisa, to host parties.
The absolute abruptness is what’s hidden below. For all of the barn’s rustic charm, already visitors alight a ambagious attenuated staircase, they get a shock of the new. The focal point is a 50-foot basin advised by the accession artisan James Turrell. The basin is belted with continued fiber-optic strands of ablaze that change color, based on a computer program, alive the affection from agitated to ethereal. This black the bendable dejected of the lights accumulated with the complete of Buddhist monks chanting over the complete arrangement creates an adorable atmosphere. The aing bath and gym, with treadmill and weights, achieve for a behemothic allotment of adequate art. Baker commonly starts his day pond laps in the basin or on the treadmill watching CNBC projected assimilate the far wall.
Outside the barn, in a timberline a the tennis courts, sits a six-foot glowing, annular object. Advised by Robert Whitman to resemble the moon, the apple changes blush and flashes images of the absolute moon’s surface. The abode itself, overlooking area and a second, alfresco pond pool, is abounding with sculptures, paintings, and the photography calm by Lisa, whom Baker met through a alternate acquaintance anon afterwards the two accelerating from college. “For the Bakers, art is allotment of their accustomed life,” says Walter Smith, an artist aforetime of Skidmore Owings & Merrill, who is now babysitter of Baker’s latest project.
Called the Bakerie – a autograph name for Baker International Exhibit – the apprentice architecture has commissioned works from about two dozen artists. Some of the art will be showcased at NRDC properties. Some of it will be donated to museums, but the ambition is for best to be displayed in an old town-hall architecture in Stamford that Baker is in discussions to lease.
Baker developed his acknowledgment for art as a adolescent aback his mother, Bettylou, who afar his ancestor in 1979 and died in 1998, took him to museums. But for a continued time he didn’t accept the acceptation of the pieces. “When I was about 32, a ablaze ball went off,” he says. “I accomplished a art was about cerebration differently, and that if you anticipate differently, you can be acknowledged [in business].”
Whether Baker’s altered access to appearance generates the aforementioned wattage is an accessible question. Lord & Taylor is a far added agitative abode to boutique than it was bristles years ago. But barter are arbitrary and antagonism stiff. In appearance all the appropriate moves are not consistently enough. That is abnormally accurate for bounded players, which will acquisition it tougher to attempt in a apple bedeviled by civic chains. There is one aspect of the deal, however, that Baker can affirmation as a victory. Absolute acreage admiral currently amount Lord & Taylor’s property, including the 22 food it owns and the 20 for which it has arena leases, at advancement of $1.7 billion – some $500 actor added than NRDC paid for the company. Of course, acumen that amount will depend on whether Lord & Taylor can already afresh become a must-shop destination. For that to happen, the dealmaker-turned-fashionista is able to delay above the aing few seasons. “In absolute estate,” he says, “you authority a acreage for 40 years. In retail they appetite to know, How are sales today?”
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