Developer S. Jon Gerstenfeld's two-and-a-half-year search for a restaurant to adorn his downtown Washington office building is over. It ended where it began.
Frustrated in his quest for a perfect ground-floor tenant, Gerstenfeld is putting $1.5 million on the line at the Southern Building, 805 15th St. NW, and creating a restaurant of his own.
Gerstenfeld's decision to venture beyond the familiar business of bricks and mortar into the realm of pesto and pizza reflects a growing tension in the downtown real estate industry.
Gaping spaces are waiting for restaurants and retailers in expensive new office buildings, and much more space is on the way. Developers covet elegant shops and restaurants that will make their buildings more attractive to image-conscious office tenants, such as law firms. But retailers who fit the bill are hard to find.
As a result, developers may wait indefinitely for the ideal deal -- all the while turning away businesses that would gladly lease the space.
The pattern has ominous implications for a D.C. policy adopted last year requiring developers to set aside as much as 20 percent of the space in future office projects in an 18-block area of downtown Washington for retailers.
The aim of the policy was to enliven the downtown and draw more shoppers into the city. That aim could be subverted if developers leave vacant "dead spots" in their projects, or if they compromise by bringing in tenants like bank branches, dry cleaners and card shops, which cater to office workers without adding a lot of excitement to the city scene.
Gerstenfeld spent millions of dollars rebuilding the interior of the historic Southern Building, which was erected in 1912, and he reserved the ground floor for retail. The decision was essentially his own. Although it required government approval, the project was undertaken long before the retail policy took effect, and even later, it fell outside the boundaries of the 18-block retail district.
When the ornate building reopened its doors in the spring of 1987, Gerstenfeld knew what he wanted. "I just wanted to have first-class, high-profile retail tenants," he said. But the tenants Gerstenfeld had in mind, like Britches and Arthur A. Adler Inc., upscale clothing stores, "didn't seem to want to rent in this location," he said.
So the large picture windows that face the sidewalks on 15th and H streets NW stayed painted white.
"You need the kind of tenant who looks at home with mahogany and marble," said Armond Spikell, a retail expert with the Smithy Braedon brokerage company. "I think he's better off leaving vacant space on his first floor than having a retailer that might risk devaluing the office space above."
Alienating just one prospective office tenant or shaving a fraction off office rents can be disastrous, but forgoing the income from retail leases is seldom fatal, Spikell said.
Eventually, Gerstenfeld leased slivers of space to a travel agency and a florist. He even lowered his standards to admit a copy shop, but there he drew the line.
Federal Express seemed willing to locate in the Southern Building, but Gerstenfeld worried about the constant traffic from trucks and messengers. "I thought it would be detrimental to the building," he said. There were discussions with an office supply company, but the developer rejected that prospect, too. "I didn't want to rent to an office supply house," he said.
"He didn't want someone selling such mundane things as paper clips and rubber bands," Spikell said.
Gerstenfeld made better progress with the office space, which is about 90 percent leased. The tenants include a law firm and the Federal Retirement Thrift Investment Board, which manages pension money for government employees.
Several months ago, Gerstenfeld requested a meeting with restaurateur Paul J. Cohn of Capital Management and Development, the company behind Paolo's, J. Paul's, the River Club and the Georgetown Seafood Grill. Gerstenfeld and Cohn talked over lunch on rival turf: the McPherson Grill, which the Oliver Carr Co. owns and manages in an office building it renovated at McPherson Square.
Cohn told Gerstenfeld that his company couldn't make a major investment on 15th Street because it was committed to several other new restaurants from Reston to Baltimore. Cohn said in an interview that he also was reluctant to compete with himself by opening a downtown restaurant that resembled one of his Georgetown establishments. "It was not a location I would have gone to," Cohn said.
However, if Gerstenfeld was willing to put up the money, Cohn suggested, Capital Management would agree to run the place for him.
Gerstenfeld retired to consider Cohn's offer. It didn't take long for him to accept. "I looked all over, and I could not find a restaurant that was willing to put up the capital" to create something new at the Southern Building, Gerstenfeld said.
He's calling it Notte Luna, Italian for "Night Moon." Come November, Gerstenfeld hopes it will help him capture the hearts of the tenants who have eluded him, because more than half of the Southern Building's retail space is still waiting for the right taker.