NEW YORK TIMES - September 14, 2003
From a Texas "Trump", Plans That Amaze
...continued from Published News
Some developers with grand dreams, like Donald Trump, put their mark on urban America by building the tallest, boldest buildings around.
Then there is Tilman Fertitta, who has brought two things to downtown Houston that it never had before: a 90-foot Ferris wheel and a miniature train that chugs through a tunnel in a tank filled with sharks.
Mr. Fertitta, the chief executive and largest shareholder of Landry's Restaurants, Inc., develops what are known as “eatertainment” projects, and as part of his grand vision, he is buying or signing long-term leases on prime coastal properties nationwide.
But his most vigorous activity so far is in Texas. In Houston, the neon-trimmed Ferris wheel appeared six months ago as part of a seven-acre entertainment complex on the banks of Buffalo Bayou. It is joined by a merry-go-round, an aquarium, carnival games, two restaurants, a ballroom and, most spectacularly, the shark train.
“I said to myself, ‘Kids love trains and kids love sharks; why not drive a train through shark?’” said Mr. Fertitta, sitting proudly in the little train as sharks swam menacingly around his head.
Mr. Fertitta, 46, builds developments that can transform entire towns. Five years ago, he opened a 40-acre boardwalk of shops, restaurants and rides in the coastal town of Kemah, southeast of Houston. To cope with weekend crowds of up to 50,000 people, Kemah, a once-sleepy shrimping village, had to double the size of its police force, to 20. On Galveston Island, Landry’s accumulated six blocks along the seawall and built a complex of restaurants and attractions, including a fake volcano that erupts every half-hour in the evenings.
Mr. Fertitta himself owns a 22-acre beachfront resort in Galveston and is building a 70,000-square-foot convention center next to it. Farther down the Texas coast, in Corpus Christi, his company has proposed to lease the city marina and build an entertainment complex on the surrounding 10 acres.
All this activity has generated no small measure of controversy, and Mr. Fertitta finds himself parrying criticism from two sides: preservationists who deride his projects as tacky, and financial analysts who question whether they make business sense.
But he shows no signs of backing away from any of them, and he has a solid base of support. Just about everywhere he goes, municipal authorities are desperate for his investments and the jobs and tax revenue they create.
Certainly, his detractors don’t mince words. “Tilman Fertitta is like the Donald Trump of the Southwest,” said Frances Farenthold, known as Sissy, who represented Corpus Christi in the Texas Legislature from 1968 to 1973 and is a staunch opponent of the proposed deal in that city. “He’s taking over the whole Gulf Coast and putting up Ferris wheels. I can’t think that’s the highest and best use of our shoreline.”
Neither can Cynthia Fowler, a Houston resident and board member of Scenic America, a nonprofit group dedicated to preserving the landscapes and architectural character of communities. She called Mr. Fertitta’s $40 million midway-style complex in her city’s business district “just plain cheesy and wildly inappropriate for that location.”
And Gary L. Gray, a management consultant and Kemah resident, dismissed the “glitzy tourist trap that’s cheapened the character and ruined the old, salty flavor of this town.”
Such barbs clearly wound Mr. Fertitta, who defends his projects with the intensity of a misunderstood artist. “There’s nothing cheesy about them,” he said, seeming both intimidating and imploring with his steel-gray eyes, boyish buzz cut and tendency to lean into his listener.
Slings come from stock analysts, too. They contend that he should stick to restaurants, which include the chains Landry’s Seafood House, Joe’s Crab Shack, The Crab House, Willie G's Seafood & Steak House, Cadillac Bar, Rainforest Café, Charley’s Crab, Chart House and Salt Grass Steak House. “A shark train and erupting volcano are really cool, but you’ve got to wonder what the longevity of these things are,” said Barry Stouffer, a restaurant analyst in Nashville for BB&T Capital Markets.
A look at Mr. Fertitta’s past entertainment projects shows that he knows how to negotiate favorable deals.The development in Houston, for example, is on city land for which Landry’s has a 40-year lease that is fixed at $150,000 a year; in most commercial leases, the price rises along with property values. The city, which is suffering from falling tax revenues, even persuaded the Texas Department of Transportation to let the company build a pay-parking lot under a nearby highway overpass.
“We clearly needed something that would draw people downtown and the sales taxes that would go along with that,” said Annise Parker, a Houston City councilwoman.
Mr. Fertitta has received sweeteners elsewhere, too. Kemah sold his company a waterfront street for $300,000, a price that city officials described as “heavily discounted.” Galveston is providing the financing for the convention center that Mr. Fertitta is building. His company will operate it using proceeds from the city’s hotel occupancy tax and will receive half the profits. And he has refused to budge on demands that Corpus Christi limit competition and make $20 million in improvements to the city-owned marina before he invests acent. Under pressure from activists like Ms. Farenthold, otherwise eager city officials there told him that they need some concessions before they can consider any deal.
Local governments tend to be eager to sign on with Mr. Fertitta because his brainstorms promise to bring in revenue. Landry’s is the largest private employer in Galveston, and Roger Quiroga, the city’s mayor, said its investments had prompted “the biggest economic boom we’ve seen in decades.” In Houston, there are long lines at the shark train on weekends and evenings in the previously moribund downtown.
The outlook isn’t all rosy. The crowds at the Kemah entertainment complex has fallen off, for example, Landry’s debt has risen sharply this year, its cash balance has shrunk and its restaurant sales, which still account for most of its business, have tapered off.
The company says it expects sales to rebound and to top $1 billion this year. Mr. Fertitta’s food empire now includes 285 restaurants in 36 states. For a while in the mid-1990’s, he gained national attention by having lavish fund-raisers at his Houston home for President Bill Clinton.
Landry’s went public in 1993, and today Mr. Fertitta owns 21 percent of the stock, a stake worth $127 million at the current share price of $22, up from a low of $4 in 1999. He is annoyed by analysts’ criticism of his company’s relatively low rate of return on its restaurant investment, saying that while his better-performing rivals gravitate to suburban strip malls, he is buying prime coastal real estate. “I can’t sail a boat 100 miles along the coast of the United States without hitting one of my restaurants,” he boasted.
Mr. Fertitta has been buying up struggling restaurant chains at a furious pace recently – “bottom feeding,” in the words of Bob Goldin, a restaurant consultant at Technomic Inc. in Chicago. He continues to look for entertainment outlets, even getting into a bidding war in March with Ripley Entertainment Inc. of Orlando, Fla., for a bankrupt aquarium in Denver and ultimately paying $13.6 million, triple the asking price, to buy it. What many of his purchases have in common is water – whether sloshing in giant fish tanks or lapping on nearby shores, from the beach in Malibu, Calif., to the Hudson River. (The company has Chart House restaurants in Dobbs Ferry, N.Y., and Weehawken, NJ)
Mr. Fertitta’s detractors fear that he now has Trump-style casinos in mind and will push for legalized gambling in Texas. Asked about that, he slapped both hands on a table and said, “Show me where I’ve been lobbying for gambling.” But, he added: “If gambling does come, I’m not going to sit by while someone next door beats my brains out.”
Mr. Fertitta’s developments evoke Las Vegas in their grandiosity, and he is involved in every detail. He flies in his helicopter among his properties, where minions scurry behind him jotting down his orders, as when he asked that a piece of granted be installed over a slightly scuffed section of Sheetrock at the Houston complex.
“He once tore out the same wall four times before he was satisfied,” said Matthew D. Wiggins, who leases property to Mr. Fertitta in Kemah. “I couldn’t see anything wrong with any of them, but that’s why he’s got his pile of money and my pile is a whole lot smaller.”