Miller brothers create $10M pool for retail, restaurants – WestMill Capital

March 18, 2011

Washington Business Journal — by Michael Neibauer
Date: Friday, March 18, 2011

Daniel Miller, left, and Ben Miller, pictured with Zappa, are investing in smaller projects that contribute to a neighborhood’s overall development.

For Ben and Daniel Miller, WestMill Capital Partners LP is not their father’s company.

Not that they don’t appreciate everything their father taught them. They heap praise on Herb Miller, whose Western Development Corp. is responsible for Gallery Place, Georgetown Park, Washington Harbour, Market Square, various Mills malls and numerous other mega-projects in D.C. and beyond.

But WestMill Capital, which the brothers launched late last year, has a different mission, one, perhaps, more aligned with their younger demographic. Their focus is on the individual businesses — the restaurants, retail, consumer-centric venues that in critical mass create dynamic corridors — rather than on the mega-project that is Western’s longtime concentration.

WestMill in May will launch a $10 million fund, raised through local partners the Millers declined to disclose, to help local, proven entrepreneurs buy real estate in up-and-coming neighborhoods such as H Street NE, Bloomingdale and North Capitol Street. The Miller brothers expect to make five deals in 12 months — mostly with restaurants, but other businesses, they say, are welcome to apply.

“Most operators don’t get to own their own real estate,” Ben Miller, 34, said in an interview, joined by his brother and partner, Daniel, 23. “We want to make that possible.”

The deals will be structured like a typical joint venture, in which the operator puts in some equity, and the fund manager — in this case, WestMill — puts in the majority to buy or redevelop a building. When a restaurant is successful, equity in the real estate soars, Ben Miller said, but rarely does the restaurant owner benefit.

“It’s too much capital, and a different kind of capital, for a restaurateur to handle,” he said.

Said Daniel Miller: “For deals under $10 million, especially under $5 million, there’s no money there.”

Ben Miller, a University of Pennsylvania graduate, spent seven years with Western, two as its president. Daniel Miller, who has private sector experience with Credit Suisse and the Global Environment Fund, graduated from the Wharton School of Business in 2010. He could have gone to work for a high-powered equity fund, he said, but WestMill offered more: “Not sitting behind an Excel spreadsheet for 20 hours.”

“They pay you a lot,” he said, “but it’s not stimulating.”

Together, the brothers say they have the right mix of talent in real estate and finance to pick winning entrepreneurs and ventures in which to invest. They want to “back the guy who’s from the neighborhood,” to “find the operator who’s known to the community” and can work with the community to find support for their projects.

They will target underused buildings and vacant parcels, and they hope to partner with the owners of “the places we love” to open locations in, perhaps, neighborhoods not yet on others’ radars.

WestMill is based in Dupont Circle (it is building out a space over Kramerbooks) and has a staff of six, including two former Western employees — Jim Gdula, WestMill’s managing director for real estate, and Sean Garrett, an associate.

The fledgling firm’s first investment was the struggling Biltmore Square Mall in Asheville, N.C., which the Millers are working to fill with “premier outlet and value retailers.” In January, WestMill laid out $3.9 million to buy a 1-acre parcel in the 1200 block of H Street NE, which the Millers plan to redevelop as mixed-use once the existing AutoZone’s lease expires.

WestMill’s principals have a larger vision, one they’re not ready to unveil. Their father is semiretired, but they don’t want to take on Western’s portfolio, the elder Miller brother said: “You need to be nimble. If you had all those assets, you’d spend all your time asset managing.”

Herb Miller said his sons are smart, ethical and responsible. The key to anyone’s success, he said, is hard work and acting responsibly. And don’t read too much into WestMill starting small, he said.

“I started with small projects,” he said, “and grew quickly into big projects.”

Link: Miller brothers create $10M pool for retail, restaurants