The decision of luxury fashion design label Hermes of Paris to move to the Design District should bolster the district's growing reputation as a high-end shopping destination. Luring Hermes is a victory for Design District developer Craig Robins, a force behind the transformation of the former industrial neighborhood.

Hermes is following the lead of French designer Louis Vuitton, which plans to open a store in the district in the next two years. The pending arrival of the luxury retailers is the result of a decade of planning and millions of dollars invested by Robins, the largest property owner in the district.

Miami's Design district is slowly taking on the high-end fashion sheen of Bal. Harbour Shops. The. neighborhood north of downtown Miami will soon be home to Hermes, the ultra-luxury fashion retailer. Hermes is following the lead of French designer Louis Vuitton, which plans to open a store in the district in the next two years.

Scoring Hermes as a tenant is a victory for Design District developer Craig Robins, a force behind the transformation of the former in- Robins dustrial neighborhood. Robins, president and chief executive of Miami-based Dacra, confirmed Hermes will open a store in one of his buildings late next year.

He declined to give details on the deal, citing a confidentiality agreement.

Last month, Hermes signed leases for two Robins properties at 175 NE 40th St. and 163 NE 39th St. , according to documents filed with the Miami-Dade Clerk of Courts. The new addition to the district is likely to bolster the area's credibility among luxury retailers and its reputation as an up-and-coming shopping destination.

"These high-end tenants like to be next to each other," CB Richard Ellis broker Paco Diaz said. "Once one is coming and a second is coming a third and a fourth will follow." Diaz was not involved in the Hermes lease deal.

Hermes and Louis Vuitton will be venturing into an area that has for the last five years evolved into a hot spot for trendy restaurants, home decor brands and high-fashion designers. Some include Christian Louboutin, Y-3, Sebastian James, Fendi Casa and restaurants such as Michael's Genuine Food & Drink, Sra. Martinez and Fratelli Lyon.

Hermes currently has stores in exclusive Bal Harbour Shops and on Palm Beach's Worth Avenue, often referred to as Florida's Rodeo Drive. Hermes plans to leave Bal Harbour Shops for the Design District late next year. Bal Harbour Shops executives did not return phone calls.

TIMING, OPPORTUNITY
The district has come a long way from the late 1990s, when many home decor and furniture tenants abandoned it for the Design Center of the Americas in Dania Bea~h. The empty buildings depressed rental rates and property values.

Robins seized the opportunity, buying neglected properties and eventually amassing nearly 1 million square feet of land and about 700,000 square ieet of buildings. Shortly after arriving in the district, Robins hired noted Miami architect and urban planner Elizabeth PlaterZyberk, a co-founder of Duany PlaterZyberk & Co. and dean of the University of Miami's School of Architecture. Her
mission: create a master plan to turn the district into a dining and shopping destination.

"He spent north of 10 years on a vision, time, money and design," retail broker and investor Lyle Stem said. "He spent years putting in place the pieces that would make it attractive to the luxury players."

Stem. a principal with Miami Beach based Koniver Stem Group, knows well. They joined forces in the 1990s to help bring quality tenants to Miami Beach's Lincoln Road, now one the most successful pedestrian malls the nation.

The Design District got an important boost when thousands of residents moved into the new condos built along the Biscayne corridor and downtown Miami during the housing boom. When the market crashed in 2007, many of the unsold condos were filled with tenants. Stem said Robins has focused on revitalizing the district despite the nation's economic crisis.

"He is very committed to maintaining the course, not allowing the economy or easy deals to force him off ofhis path," he said. "He has been laser-like in his focus over the last decade."

When it comes to executing his vision, Robins not only looks to Europe to bring in tenants like Paris-based Hermes, but look there for financing as well.

Last year, he obtained a $45 million loan from the New York outpost of Paris based Credit Agricole by pledging 16 buildings in the Design District as collateral, including the two properties being leased by Hermes.

STRICT MALL POLICY
Hermes could be leaving Bal Harbour because the mall doesn't allow its tenants to have a second location in Miami Dade. That's the case for Louis Vuitton. which will be leaving the mall for freestanding stores in Aventura and the Design District.

Robins said Louis Vuitton will occupy one of his properties but declined to identify the location.

At a meeting of the Bal Harbour City Council early this year, Bal Harbour Shops executives said a Louis Vuitton representative indicated the company wanted to expand its store, but the mall didn't have the room.

Bal Harbour Shops is seeking city approval to double the size of the mall.

For now, every store that leaves Bal Harbour opens up an opportunity for prospective tenants.

"It doesn't signal the demise of Bal Harbour Shops," Stem said. "It just opens up space for tenants who were not able to get in in the past," he said.

Robins said Bal Harbour Shops and the district offer a different setting for tenants with different needs.

"Bal Harbour Shops is a great place, and I am sure it will continue to be a great property," he said. "The Design District is a neighborhood, not a mall, so they are very different type of properties."

RENTAL RATE TREND
As the Design District attracts highend retailers, rental rates are expected to become unaffordable for some of the area's existing businesses.

"Nobody wants to talk but people are afraid rents are going up and [existing] businesses will have to move," said Eric Garcia, director of Bobby Berk Home. a modem home decor store in the district.

Investor Adam Greenberg expects rental rates to rise soon so he is position himself to capitalize on the district's retail gentrification.

Greenberg and a group of investors recently paid nearly $3 million to acquire the distressed debt of six warehouses in Wynwood, a community few blocks south of the Design District. Greenberg and his partners plan to foreclose on the properties, take title and upgrade them. "The area is already seeing a lot of cool tenants that used to be in South Beach and in the Design District," he said.