Unconventional trouble

Special Report Four years of delays in opening stores and restaurants in the exterior of the Washington Convention Center have prompted it to revamp the way it does business.

Only half of the 12 planned shops in the 4½-year-old Washington Convention Center are open, with two more expected to open in the fall. Store owners and the Washington Convention Center Authority (WCCA) say tenants have been stalled by delays in connecting utilities and finishing construction on the spaces.

The delays have had big consequences for the tenants, neighbors and the convention center itself, which opened in March 2003 with promises of neighborhood retail. The approximately 20,000 square feet of ground-floor retail space at the Convention Center cost, on average, about $32 per square foot per year, according to the WCCA. That means for the retail spaces not leased, about $640,000 in revenue is lost annually.

Because of the problems, the WCCA sought approval from its advisory board and D.C. Council member Kwame R. Brown — chairman of the economic development committee, which oversees the center — to talk to national retailers about leasing the remaining four spaces, said WCCA spokeswoman Lana Ostrander. Previously, the WCCA was targeting only local small disadvantaged businesses, but officials say they think national retailers or existing businesses may have an easier time opening.

Mr. Brown, at-large Democrat, insisted that small and local businesses will still have first dibs on the space if they want it.

The WCCA also said it will build the last four spaces to tenants’ specifications, for plumbing, electric, and heating and cooling systems inside their shops. The WCCA cut this work from the original construction of the convention center because of budget problems. The first eight tenants had to do that work and pay for it themselves.

The change will be more expensive — the WCCA estimates it will cost about $236,000 total — but the agency contends that doing the construction will cut down on problems because the tenants will have less to do themselves.

And the WCCA has assigned staffers to work full time on the retail project. Until recently, staffers had to work on both convention and retail projects.

The WCCA declined to estimate when the remaining spaces — which its members hope will be filled with tenants such as shoe shops or florists — would be leased.

’Very long process’

The process of signing retailers and opening their doors has been a long road.

“It’s a very, very long process,” said Hanny Chan, who spent two years trying to open the Old Dominion Brewhouse and Chan’s Mongolian Grill and Tokyo Sushi after signing a lease.

The Convention Center, under pressure to finish the building by March 2003 without going too far over budget, didn’t install utilities inside the retail spaces. That construction was left to the tenants and the WCCA to negotiate on a store-by-store basis, according to the WCCA.

Mr. Chan said his restaurant openings were delayed by problems with installing utilities and high turnover at the Convention Center, which meant he was always dealing with someone new — a sentiment echoed by other tenants. The WCCA has had four acting and permanent general managers since it opened in 2003.

At least three tenants say the WCCA hasn’t installed the utilities it promised in the leases, leaving one, Mr. Chan, with a $70,000 bill to install electric utilities. The WCCA says it will grant rent credit to tenants for utilities it promised to provide in the lease.

Mr. Chan said he received a letter of default late last month, giving him eight days to pay three months of back rent. He said he had been in back-and-forth discussions with the WCCA about the rent and the utilities since late spring.

He, and some of the other tenants who didn’t want their names published, said they regret signing the leases.

“It’s to the point that they don’t know what the [heck] is going on,” he said. “Nobody is an expert on the retail side. There is so much turnover with their personnel. What can you do?”

Alexander M. Padro, a local advisory neighborhood commissioner and executive director of Shaw Main Streets, a nonprofit organization with a goal of revitalizing the Shaw neighborhood, attributed the delays to a lack of retail knowledge.

“The fact is, the Convention Center is in the business of providing space for conferences and exhibits and trade shows,” he said. “That’s what its forte is, and that’s what its emphasis has to be. As a result, leasing retail space was never one of their strengths, and they haven’t treated it with the respect and emphasis needed to have a successful program.”

He said he understands the problems retailers have recounted in dealing with the convention center, including oral agreements that have not come to fruition.

“The Washington Convention Center Authority is that kind of authority, that, unless you’ve got it in writing, they won’t own up to promises made in the past,” he said.

The WCCA said part of its reforms include putting tenant-landlord agreements or problems in writing to avoid confusion.

Mr. Brown attributed the delays to “a lack of attention.”

“I’m very unhappy with the process and the pace of the retail, but I’m optimistic that the problems the small businesses are facing are [starting to be] addressed,” he said.

Mr. Brown said he has an oversight hearing on the Washington Convention Center planned for the fall, when the council return from recess.

“If we can get a stadium up and going, clearly we can do the build-outs at the convention center,” he said, referring to the Washington Nationals’ new baseball stadium under construction in Southeast. “We cannot afford to go another year without these small retailers open.”

Build-out bungles

The WCCA attributes the delays to the fact that it was strongly encouraged by the D.C. Council, its neighbors and its own mission to lease the spaces to local, small and disadvantaged businesses.

Not only was the pool of applicants smaller than if there weren’t restrictions, but some small or new business owners don’t know the ins and outs of signing leases and doing construction on the inside of the retail spaces, called “build-out.”

“The slow pace of our build-out likely affected the initial attractiveness of our retail spaces,” Ms. Ostrander said, adding that leveling floors and bringing utilities to the tenants’ walls were “extremely long and difficult tasks.”

The WCCA, which receives its funding from conventions, as well as taxes on D.C. hotel and restaurant tabs, said it doesn’t believe it has lost money on the retail.

“We consider our retail program to be a long-term investment in our community, measured not only by the income it generates for us but more importantly by the growth it spurs and the quality of life it creates in our Shaw neighborhood,” Ms. Ostrander said.

But the WCCA said the delays are not entirely its fault.

“Our tenants have had challenges with their own build-out responsibilities, including changing the interior design of their spaces as their build-out progressed, problems with finding and retaining contractors, difficulties with scheduling their contractors and difficulties with delivery of their equipment and/or supplies,” Ms. Ostrander said.

The WCCA said — and many of the tenants confirmed — it has helped its retailers at considerable expense in ways not promised in the leases, such as removing and reinstalling windows to allow for fixtures to be moved in, storing equipment and fixtures for more than a year and assisting with the complex city permitting and inspection process.

In one instance, the WCCA loaned heavy equipment to tenants to help with construction at an estimated cost of $32,000.

The WCCA has also started a marketing program to advertise the eight WCCA retailers and 39 other businesses within a two-block radius. The WCCA declined to disclose a cost for the campaign.

The advertising campaign will include print and online ads, signage at the building, advertising on Circulator buses and brochures for community groups, Ms. Ostrander said.