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Shopping Centers Today -> November 1999
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Vaughan Mills lacks heavyweight anchor
By Susan Thorne
Lorne
Braithwaite, left, CEO of Cambridge, and Larry Siegel, Mills' CEO,
show off a model of Vaughan Mills, their joint project outside Toronto.
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At a press conference just prior to the opening of ICSC's Canadian Convention, held in September in Toronto, The Mills Corp. and Cambridge Shopping Centres unveiled the tenant lineup for Vaughan Mills, the 1.4 million square-foot, 200-store shopping center to open in 2001 on a 200-acre site in the township of Vaughan in Toronto's northern suburbs.
Tenants signed at press time include Bed, Bath & Beyond; Group USA women's apparel; Off Rodeo Drive Beverly Hills designer fashions; Sun & Ski Sports; and Vans Skate Park, a sports and apparel concept with in-line skating course. Also joining the center is specialty women's apparel retailer BCBG. All of these retailers are represented at other Mills malls, with the exception of BCBG, which has a Montréal unit. The Vaughan Mills location is the first Canadian unit for each of them.
"New U.S. retailers for Cambridge are for real," said Lorne Braithwaite, president and CEO of Toronto-based Cambridge. "There's been a lot of discussion about whether we could do this," he said of the mall's actualization. "Well, it's happening."
Notably absent, however, are typical Mills anchor stores such as Marshall's, Nordstrom Rack or Saks Off-Fifth. Bed, Bath & Beyond will have the largest store area of these retailers at 45,000 square feet.
While the Vaughan Mills partners profess themselves well pleased with those tenants that have committed thus far, sources elsewhere express doubt about the project's ability to attract these tenants.
"Really these aren't anchors — at the end of the day they only account for 10% of the space," said Richard Talbot, managing director of Thomas Consultants, a retail consultancy in Unionville, Ontario. "I was a bit surprised; my guess was that there would be a Penney's or a Nordstrom Rack or Saks Off Fifth Avenue," he said.
Even so, for Canada, the Mills retail-dining-entertainment mix is a novel addition to the northern retail menu. The retail companies represented there could also bring a much-needed boost to the shopping center tenant selection north of the border, suggested Doug Annand, national partner with the Real Estate Advisory Practice of PriceWaterhouseCoopers, Toronto, and the peer reviewer in a market impact study of Vaughan Mills for the City of Vaughan and Region of York.
"In my view, with Eaton's and others falling off [the Toronto-based T. Eaton Co. went into receivership in July] and the slowing of [U.S.] retailers coming to Canada, from a Canadian shopping center owner's perspective, there aren't a lot of department stores to choose from," he said.
North of the border
Vaughan Mills could thus be the catalyst to bring a significant number of U.S. retailers over the border, and these companies will prefer to have more than one store in Canada for reasons of distribution, serving and administration, Annand said he feels. Consequently, they will look for additional sites in Canada — possibly setting up shop under another banner or vehicle of their company.
"This may be the ultimate opportunity for Canadian shopping center operators," he said. Arlington, Va.-based Mills itself could provide more such sites eventually, Annand said, if a long-term plan for four malls (Toronto, Vancouver, Calgary and Montréal) is implemented.
There is insufficient appeal in the lineup for either shoppers or potential tenants, Annand maintained. "These [stores] may be better than nothing but there doesn't seem to be anything that would make you want to drive from St. Catherine's [a town southwest of Toronto], for instance. And if you're a retailer, you want to know who the anchors are going to be."
The liquidation of the T. Eaton Co. could be creating reluctance on the part of potential retail tenants who are considering acquiring some Eaton's stores, he speculates.
"If Saks want to purchase 10 Eaton's stores, for example, they wouldn't want to compete against themselves in Canada" with a Vaughan Mills store, he reasoned.
Talbot is also skeptical about Vaughan Mills' planned half-and-half mix of Canadian and U.S.-based retailers. There are few Canadian retailers capable of generating alternative concepts for a Mills center, he said. Discount versions of well-known retail banners are not as common as in the U.S. (Dylex's new "Labels" chain is a rare exception), largely because of the smaller scale of operations of Canadian retailers compared with their U.S. counterparts, Talbot said. "That's why we don't have very many outlet malls."
Overcoming opposition
The project has not been without its opponents in the shopping center sector, either. An appeal to the Ontario Municipal Board, a provincial zoning authority, was supported by Toronto's Cadillac Fairview Corp., which was concerned that Vaughan Mills would be in competition with Cadillac's regional malls in and around its hometown. Bylaw changes limit Vaughan Mills to stores of 2,000 square feet or larger in at least 90% of its retail area, and specify that the center may not include traditional department stores or food (grocery) stores. This rules out a Saks Off Fifth, said Braithwaite. But he denied that the appeal had any effect on the original plans for Vaughan Mills. "None whatsoever," he said.
Moving across the border has meant a different kind of tenant recruitment process, said Mills' Executive Vice President Judith Berson, who is overseeing the merchandise mix. Potential retail tenants from the States need information about operating in Canada, such as details about bilingual packaging requirements or importing merchandise. "It's an educational process," she said. Canadians, on the other hand, are less familiar with the Mills mall concept and may need to be convinced of its credibility. The early announcement of tenants helps Mills and Cambridge to meet such concerns, she said. "We need to show the Canadians that we're coming."
Braithwaite and Mills' CEO Larry Siegel say they believe the mall will attract tourists as well as shoppers from a large segment of southern Ontario. Siegel pointed out that Mills' properties are leading tourist attractions in their states, and Canadians are frequent visitors whose spending is on par with that of U.S. shoppers.
"We are confident that residents in the area will support Vaughan Mills," he said.
The site near the intersection of east-west Highway 407 and north-south Highway 400 is particularly advantageous, said Braithwaite. "It takes a population of at least 2 million to support a project like this," he said. "If you look at a 20-mile radius from Vaughan Mills, you'll find 3.8 million people."
The sophistication of the market is also a key factor, he noted. "This is about value and price relationships, about selection and about the shopping experience."
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