The last time investors and retailers devoted millions of dollars to Knox Street, Gary Friedman was there.
Friedman was head of Pottery Barn in 1995, and the chain’s expansion into Texas started on Knox Street that year. Crate & Barrel, the Apple Store and others came later.
Friedman was back on Knox Street a week ago, kicking off another round of building blocks.
Now chairman and CEO of RH, previously known as Restoration Hardware, Friedman opened a 70,000-square-foot, three-level RH furniture gallery and rooftop restaurant on Knox that cost almost $40 million. “We’re going to be here a long time,” he said.
RH used its own capital to build the store on a 40-year ground lease. The company can come back and put parking underground and use the garage behind it for something else.
It could be anything.
Friedman’s stated plan is to turn RH from a $3 billion-a-year company to a $20 billion global brand. It went public as a furniture retailer at $24 a share in 2012 and now trades at more than $620.
He’s moving the company in some unexpected directions.
In New York City this fall, RH is opening what Friedman calls a “re-conceptualized hotel” with privacy at its core and “no lobby, no meetings or conventions.”
The company now charter-leases Gulfstream jets and named them RH1 and RH2. And it’s almost finished with RH3, a luxury yacht that will be available for charter in the Caribbean in the summer and the Mediterranean in the winter.
The pandemic delayed RH’s expansion into Europe, but now it plans to open furniture galleries in Paris and London next year.
Earlier this year in Aspen, RH made a $105 million initial investment to build what Friedman calls an “ecosystem.” It will have retail, a guesthouse, a bath house and spa, restaurants and residences that include fully furnished four-bedroom homes.
Real estate is a big part of Friedman’s vision. The property portfolio in Aspen will make RH a developer and a landlord, he said.
“If we could have bought property on Knox Street, we would have, but Michael Dell and others beat us to it,” Friedman said.
Dell’s family investment firm, MSD Capital of New York, and Dallas-based real estate firms The Retail Connection and Trammell Crow Co. together purchased about 70% of the Knox Street neighborhood over the past two years, including buildings on Cole and McKinney avenues and Travis Street. Separately, Weir’s 12-story tower with retail on the first two levels is expected to be finished by the end of the year.
‘You want to go inside’
Friedman says he “loves” Knox Street for its “sense of identity, architecture and humanity.” He compares the shopping experience to “windowless department stores and malls.”
He made the Knox RH store smaller to create outdoor spaces on either side instead of building to the lot line. He still believes in physical retail, adding that “everybody’s store is the same size online.”
“You drive by Knox Street, and you look at how big and beautiful our store is, and you want to go inside,” he said.
He believes Dallas will be one of the top five RH galleries, up there with New York, Los Angeles, Chicago and Houston.
Friedman said no decision has been made yet about the 12,000-square-foot store in Plano’s Shops at Willow Bend, which opened in 2012. For the most part, RH has been closing legacy galleries, he said, but the Plano location is “a little bigger and newer.”
Houston is getting a new store, but Friedman said he can’t disclose the location yet. RH opened in Houston’s Highland Village in 2011. That 17,000-square-foot store will be replaced with one that’s four times as big, he said.
“Dallas is a super-sophisticated, worldly city. I would live here if I wasn’t entrenched in California,” he said. “If I were a young person just starting out my career, I’d be in Dallas.” His twin daughters just finished their freshman year at Southern Methodist University, and his favorite local restaurant is Toulouse on Knox.
Getting passed over
Friedman’s connection to Dallas is broader than his history with one of Dallas’ best-known streets for shopping and entertainment. There are people here who were involved in a huge turning point in his career.
By the mid-1990s, Friedman was known around the country for leading a turnaround at Pottery Barn. It was losing money on its catalog until he began to open bigger stores to house the breadth of the retailer’s brand. He was also known for creating another Williams Sonoma brand, West Elm.
But in 2001, he was passed over for the CEO job at the parent company, Williams Sonoma, and he left.
“Howard Lester [founder of Williams Sonoma] broke my heart,” Friedman said.
It was Dallas investors who snapped up Friedman, who started his retail career in 1977 as a stock boy at a Gap store in Santa Rosa, Calif., to succeed the founder of Restoration Hardware, Stephen Gordon, as CEO.
Dallas investor Ray Hemmig was an original board member of Restoration Hardware in 1994 when he and Dallas investors Edward “Rusty” Rose III and Marshall Payne funded the expansion of the California-based upscale hardware, accessories and furniture store.
Mark Masinter, managing member of Dallas-based Open Realty Advisors, was helping Gordon find sites for new stores, including the original Restoration Hardware that opened on Knox in 1996. Masinter had pitched Restoration Hardware as an investment prospect to Payne and the others at Cardinal Investments Co. and has advised RH on its new stores from the beginning.
Gordon had an eye for decorative accessories, odd knickknacks, toys and hardware, but the brand had stalled, and its stock crashed. Friedman was 43 years old when he joined Restoration Hardware in 2001. He says he invested all the money he had at the time, $5 million, in it, and went to work.
Hemmig was on the board of Restoration Hardware until 2008 and was instrumental in hiring Friedman. The company was taken private in 2008 by private equity firm L Catterton. Hemmig led a special board committee that negotiated the sale, which included a clause that Friedman stay on as CEO. (The company went public again in 2012.)
“It’s been absolutely incredible to be a part of Gary’s vision for RH. There’s nobody like him,” Masinter said. “He’s the visionary of visionaries.”
Hemmig, who is founder of Dallas-based Retail & Restaurant Growth Capital, said he remains a fan. He was at the RH grand opening this month, and the two friends had lunch at the RH rooftop restaurant.
“Gary was on an island somewhere, maybe Mykonos, when we were negotiating with him,” Hemmig said. “In Gary, we found a visionary, not an item category buyer, which was the strength of the founder.
“What’s ironic is that the guy hired at William Sonoma when Gary was passed over didn’t last long,” Hemmig said, “and Gary, he’s had a fabulous 20 years.”
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