Houston Chronicle - October 20, 2002
CEO casts his net for downtown: City, Fertitta bank on Kemah theme
...continued from Published News
Meet the P.T. Barnum of fried shrimp.
With the chutzpah of a sideshow barker, Tilman Fertitta, the one-time seller of women’s dresses and vitamins, has used Ferris wheels, aquariums, miniature trains, dancing waiters and mechanical gorillas to transform two sleepy Houston area eateries into an international restaurant empire.
A boaster, a benefactor, a friend of Bill Clinton, Fertitta has propelled his Landry’s Restaurants Inc., which also owns Joe’s Crab Shack, Willie G’s and Rainforest Cafe, to revenues topping $765 million. Recent acquisitions, including Saltgrass steakhouses, boosted the Houston-based company’s holdings to 275 restaurants in 35 states.
Now Fertitta is poised to extend his dining-entertainment formula – modeled loosely on his highly successful Kemah Boardwalk, opened in 1999 – to Galveston, Corpus Christi and downtown Houston.
“We want to be fun,” Fertitta said of his expansion plans.
Already a Ferris wheel has joined the acclaimed architecture of I.M. Pei and Philip Johnson on the city’s skyline. Rising from scrub land across Buffalo Bayou from Wortham Theater Center, the 100-foot-tall ride marks the site of Fertitta’s $30 million aquarium/restaurant/entertainment complex set to open in January.
The project includes the 500,000-gallon Downtown Aquarium, two restaurants, a 200-foot-tall observation tower, a carousel, dancing fountains and a diesel-powered miniature train.
The aquarium project complements Fertitta’s ongoing $37 million conversion of the derelict Houston World Trade Center, adjacent to Minute Maid Park, into a baseball-themed boutique hotel. Development of the 202-room hotel, which will open late next year, is being assisted by a $710,000 city tax break.
While plans for the Houston, Galveston and Corpus Christi projects have drawn praise from boosters; they also have generated controversy.
In Galveston, ground will be broken in mid-November for a $32 million beachfront convention center. The joint project between Landry’s and the city, to open in 2004, will supplant the Moody Gardens convention center as the city’s chief convention venue. Elections to determine whether to enlarge Moody or build a new center pitted Fertitta against the Moody foundation, run by one of Galveston’s most powerful families. The debate has sharply divided the community for two years.
The new facility will be surrounded by Fertitta restaurants and hotels, including the “Four Diamond” San Luis.
The Galveston City Council this week also will consider a $500,000 Fertitta bid to buy the down-at-the-heels, city-owned Flagship Hotel. The plan to remodel the hotel, adding restaurant and entertainment components, is expected to win approval.
Fertitta’s proposal to join the city of Corpus Christi in developing its T- and L-head marinas as a $37 million restaurant and entertainment complex hit a snag when critics objected to land-lease arrangements. A proposition requiring a public vote on long-term leases will be on November’s ballot.
In Houston, Fertitta’s Downtown Aquarium, which will provide significantly more tank space than the nonprofit Texas State Aquarium in Corpus Christi and the private, for-profit Dallas World Aquarium, is the latest in a national aquarium-building boom that has or will put facilities in Denver, Atlanta, Corpus Christi and Long Beach, California.
Cathy Coleman, chairwoman of the Washington, D.C.-based International Downtown Association, noted that Houston’s combination of restaurants, carnival rides and the aquarium may be unique.
“I’ve not heard of anything exactly like it in the nation,” she said. “That’s good for Houston.”
Fertitta said Houston, despite the construction of sports facilities and a rebirth of nightlife, has given little emphasis to making downtown a tourist destination.
“Up until now, when conventioneers came to Houston, all they could do for fun was go to the Galleria,” he said. “If we want people to come downtown, it has to be fun.”
Bob Eury, Houston Downtown Management District president, added that the aquarium likely will be a magnet for families with children, and “help round out downtown.”
Still, the project has drawn negative attention.
City Councilwoman Annise Parker said she will voice concerns to the council – possibly as early as this week – about Fertitta’s planned observation tower.
“When council gave final go-ahead, we left a clause in the contract that changes as necessary could be made with the approval of the Convention and Entertainment Facilities Department,” she said. “I would assume that the rest of council thought, as I did, that this allowed for minor changes here and there.
“I don’t consider a 200-foot observation tower a minor change. My big concern is I didn’t know about it, and as a council member, that offends me.”
Parker said she has requested to see plans for the tower.
“I don’t know if I’m opposed to it or not,” she said. “But I don’t believe it was the intent of the council to cede a major design factor like that to department directors.”
Parks said the tower might be stopped by withholding city-building permits.
Fertitta dismissed controversy surrounding his projects by saying, “Whatever you say, 40 percent always disagree.”
At 45, Fertitta’s physique still hints at high school athleticism. He stands in the center of the miniature train’s tracks, scanning the aquamarine depths of shark tanks that surround him.
“If I were a fish,” Fertitta mused in response to a question; “I’d be a shark – but a good shark, not a mean shark.”
Some might quibble with the metaphor – one observer familiar with Fertitta’s Galveston career described him as “an octopus” – but the meaning remains the same.
“He has a very aggressive style,” said George Mitchell, the oilman-real estate tycoon credited with saving many of the Island city’s historic structures. “He’s very talented, creative.”
Fertitta, Galveston College Professor M. Theron Waddell noted, characteristically “plays things close to his vest.” Though a benefactor of the University of Texas Medical Branch at Galveston and the Democratic Party – he once hosted a $10,000-a-plate dinner headlined by President Clinton – Fertitta routinely sidesteps the high-society spotlight.
Fertitta’s business, those who know him said, is business. To which he added, “My hobby is business.”
“I don’t have the ability to change oil in a car,” he said, “but I know how to make money running a business.”
The business sensibility appeared early. As a child, Fertitta lugged his grandfather’s briefcase around the house in imitation of the family’s more senior businessmen. Through a career marked by dizzying highs and stomach-wrenching lows, he has exhibited blithe self-assurance and resilience, often weathering the worst blows with his characteristic lopsided grin.
Fertitta’s father, Vic, recalled his son’s early after-school apprenticeship at Pier 23, the families Galveston restaurant.
“He was just always very, very focused on business,” the elder Fertitta recalled. “He’d hang out in the kitchen. He’d get with the people in the kitchen peeling shrimp, learning how to make the stuffing for crabs. Then he’d go out front and seat people.”
Finally, one day when Fertitta was about 16, his father recalled, “He told his mother – I’ll never forget this – to ‘tell Daddy to go home. He’s kind of getting in the way.”
Vic Fertitta never owned more than one restaurant, and he marvels at his son’s success.
“I thought you had to be there 24 hours a day,” he said. “I understood the restaurant, but he was a businessman as much as he was a restaurant man. He knew how to get in there and develop a restaurant and move on, develop another and move on.”
Fertitta is a Galveston native, and his roots are sunk deep in the island’s romantic if somewhat unsavory past. Fertitta’s great-great uncles were immigrant barbers, Sam and Rose Maceo, impresarios of a bootlegging and gambling empire that spanned more than three decades and ended in a state crackdown in summer 1957.
Though mobsters, they are warmly recalled in Galveston’s collective memory as almost avuncular figures who protectively watched over and guided their city.
(To Fertitta’s chagrin, his rivals often allude to this part of his family history. Without prompting, Doug McLeod, chairman of Moody Gardens Inc., interrupted his discussion of issues related to the civic center debate to note Fertitta’s Maceo connections. Then, after perfunctorily praising his accomplishments, he observed, “We’re not necessarily ones to sing his praises.”)
Fertitta spent his youth in Galveston, then moved with his family to Houston in 1974. After several years, the Fertitta’s returned to the island.
GQ Magazine staff writer Robert Draper knew Fertitta when they attended suburban Houston’s Westchester High School.
“You could say, overall, that at that age he had no shortage of self-confidence,” said Draper, who now lives in Asheville, N.C. “He was not terribly interested in high school cliques. He was largely defining himself.”
Fertitta drove a flashy muscle car and dated one of the school’s most beautiful girls. A standout neither in academics nor sports, even as a teen he exuded an ambition to make money. He was cocky, Draper remembered, but “not suffocatingly so.”
“He would sit in back of the class reading the Wall Street Journal,” Draper said. “The rest of us couldn’t even spell ‘Dow Jones.’ ” While most students working on the school’s newspaper styled themselves iconoclastic rebels, Fertitta energetically sold ads, cheerfully pocketing his commissions.
Draper was not surprised when the businessman arrived at his class’s 10th reunion in a limousine.
“Now he doesn’t have to prove his wealth anymore,” Draper said. “He doesn’t have to flash his cash or be ostentatious, except for his house in River Oaks.”
(Fertitta, his wife, Paige, and their four children live in an 18,000-square-foot River Oaks mansion valued in excess of $10 million.)
After studying business at Texas Tech University and hotel management at the University of Houston, Fertitta launched his first business – a Spring Branch women’s apparel shop. Quickly he moved on to hawking Shaklee vitamins – opening shops in strip shopping centers all over town and winning a white Cadillac from the company for his salesmanship.
One business led to another. While visiting one of his vitamin shops, Fertitta happened into a neighboring video arcade, where frenzied teens popped quarter after quarter into Pac Man machines. He asked how he could get into the business. Soon, he owned 400 machines, each generating about $200 a week.
By the early 1980’s Fertitta was riding Houston’s construction boom as a builder of hotels, houses and strip shopping centers. Then, he said, “the world came to an end.”
He is vague on the depth of his oil-bust woes, although some published accounts placed his debt in excess of $10 million.
“Thank God the banks failed,” Fertitta said, noting that the banking collapse threw outstanding notes into the hands of the FDIC. Through that stroke of luck – and astute legal maneuvering – Fertitta was able to pay his debts at a discount and avoid financial meltdown.
Throughout those days of travail, he desperately searched for another helium balloon of opportunity. He found it in 1986 in the form of Bill and Floyd Landry, Louisiana brothers who had cashed in on the Cajun dining craze with their Landry’s and Willie G’s restaurants.
By that time, partners in the restaurant were squabbling. Fertitta sold his interest in a Galveston hotel project to acquire $400,000 to buy the business.
Draper, in a 1997 profile of Fertitta appearing in Texas Monthly, noted Fertitta employed a “thumbs on” technique in managing the restaurant company, which soon added units in Galveston, Corpus Christi, San Antonio and Kemah.
On at least two occasions, he emptied garbage cans on kitchen floors to prove his allegations that busboys were tossing out silverware with the scraps.
Then he tipped the workers for cleaning up the mess.
By the late 1990’s, Fertitta was soaring. For three consecutive years, Fortune listed Landry’s among its 200 best small companies. The company opened its 100th restaurant in 1997.
In January 1999, Landry’s reached its apogee with the opening of the Kemah Boardwalk.
With five restaurants, a hotel, a 50,000-gallon aquarium, a 65-foot Ferris wheel, and the ubiquitous dancing fountains, Fertitta’s 30-acre entertainment complex made the tiny Galveston Bay town a tourist mecca.
“I said to myself, ‘What can I do to make this unique?’ ” Fertitta said of the planning process as the project evolved. “I decided to create a boardwalk unlike any other boardwalk. Think about them – how many boardwalks go in a loop? You need retail, amusements, food and people. If you build the right project, people will come.”
Now as many as the 4 million visitors a year stroll the boardwalk to patronize restaurants and boutiques. The project has generated so much sales tax, some of which is returned to the city by the state, that Kemah property tax rate has plummeted from 26 cents per $100 valuation in 1998 to little more than 7 cents this year.
Mayor Bill King said consideration was given to eliminating the tax entirely, but other perks – such as free garbage pickup – required that some property tax revenue be maintained.
Predictably, business leaders are delighted.
“Nothing but good has come from it,” said Clear Lake Area Chamber of Commerce CEO Claudette Alderman.
But, noted King, “There are the obvious headaches: congestion, parking. We have a population of 2,500, but sometimes our population jumps to 100,000. We have a very large – 30 officers – police force.”
Longtime resident Bryan Sawyer frequently brings concerns about the boardwalk before the Kemah City Council. While acknowledging the project is well-designed and managed, he complained that it bullies the city on matters such as the placement of signs.
So congested is the town on weekends, he added, that he rarely leaves his home.
Fertitta hopes to replicate the success of Kemah’s boardwalk in Houston, Galveston and Corpus Christi.
Officials in those cities hope he succeeds.
That’s especially true in Galveston, a poor city – 44 percent of its population earns less than $25,000 annually – that relies heavily on tourism. Jeff Sjostrom, president of the Galveston Economic Development Partnership, noted that 45 percent of the city’s revenue comes from sales and hotel-motel taxes.
Over the next decade, Sjostrom said the convention center should bring the city new jobs and new restaurants and generate $178 million in retail sales.
Fertitta is constructing a Rainforest Café to join the Landry’s Seafood House and two Landry’s-owned hotels that flank the convention site.
Fertitta’s proposed development of the Flagship Hotel, which extends over the Gulf of Mexico on a pier, will loosely resemble the Kemah project.
Though little more than 20 miles separate Galveston from Kemah and Kemah from Houston, Fertitta expressed little concern that his entertainment centers will compete with one another.
“The tourism industry isn’t what it was 50 years ago,” he said. “People couldn’t move around as easily. Now they’ve got wonderful cars that they want to drive. People have easy access to the area through airports.”
“There are about 4 million people who live in this area, and within a 300-mile radius we’ve got the fourth-, sixth- and ninth-largest cities in America. That’s why I’m doing more of these projects in this area.”
This is the land of opportunity.”