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Vaughan Mills

O

oct2gon

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well i will say that i caved in and went to vaughan mills for fun on the weekend and... what a dump! i honestly couldn't believe it. the 'themed' areas of the mall were so cheesy and fake it was sick. a couple friends i was with (who lived in the US) said this concept and feel was very American. in any event, i would never go back.

i did however enjoy a very delicious meal at szechuan szechuan. i was shocked to see they had a restaurant there. a rather nice one too. the one at FCP is amazing.
 
I've been to Vaughan Mills too, and I have to say that although it's "another mall", it does offer something that hasn't been put under one roof (to that extent). There's definitely space for an outlet-style supermall in Greater Toronto. I do agree with you, and think the "Neighbourhoods" are pretty useless, but at least they make an effort (to help people find their way in the racetrack, to make the mall "distinctive", what have you).

Add to my list of retail redos: Metropolis. This thing has got to be built. When I was a student at Ryerson, they were so hopeful of it being built by 2001 (?), and now I just want it to be over with. I'm sick of the hoarding and the waiting. The whole Yonge-Dundas to College stretech, in fact, could benefit from this type of renewal. What d'ya guys think?
 
More Mills malls to follow Vaughan Mills in Montreal, Vancouver, and Calgary. And news about Burlington Coat Factory (how very exciting).
___________________________
Caisse set to be a force in mega-malls
By ELIZABETH CHURCH
Tuesday, June 14, 2005 Updated at 8:30 PM EDT
From Wednesday's Globe and Mail

The Caisse de dépôt et placement du Québec plans to invest up to $1-billion to roll out three more mega-malls in major Canadian cities in the next four to six years with its U.S. partner Mills Corp.

The move follows the success of the joint venture's first project, Vaughan Mills, a huge 1.2-million-square-foot shopping, discount and entertainment complex north of Toronto and would include sites in Calgary, Vancouver and Montreal.

Paul Gleeson, vice-president for development of the pension fund's retail landlord Ivanhoe Cambridge, said in an interview Tuesday that the new projects would be similar in size and feel to Vaughan Mills and would likely include many of the same major retailers. He said he hopes construction on at least one site will begin next year, with an opening expected in the fall of 2007. While planning work is being done in all three cities, he said the Calgary location is the most advanced at this time.

“Hopefully we will have these three under way in the next four to six years at least,†he said.

Mr. Gleeson estimated costs for each project would run between $300-million and $350-million, based on his experience at the Toronto site.

Since opening its doors last fall, Vaughan Mills has attracted more than 6.5 million shoppers. More than half of those visitors travelled more than 16 kilometres to come, Mr. Gleeson said, confirming that the mall is attracting customers from much farther afield than a traditional regional mall. “We are drawing from an extremely wide trade area,†he said. “We are quite pleased with how it has performed.â€

The new mall, which is anchored by U.S. merchant Bass Pro Shops Outdoor World, also attracted 510 tour buses in its first seven months of operation.

Mr. Gleeson, who is speaking today at a meeting in Montreal of the International Council of Shopping Centers, said he also will announce the opening of a new retailer at Vaughan Mills. He would not provide further details, but industry insiders expect that U.S. clothing discounter Burlington Coat Factory Warehouse Corp. has finally decided that it will move into the mall.

Burlington was supposed to have been among the first major anchors when the mall opened.

But it never set up shop, pulling out at the last minute until it could confirm some other nearby Canadian locations at an acceptable price to the company, sources said.

While Vaughan Mills took eight years to get off the ground, Mr. Gleeson said he is optimistic that the next three malls will go up more quickly. Once land and municipal approvals are complete and leases signed, he said a new mall will take about 18 months to construct.

He said Vaughan Mills represented a new concept for Canada that combines entertainment and retail facilities, but its success should make the latest projects easier to sell.

“The retail community understands the product now,†he said. “We want to roll the project out and capitalize on the momentum that we have from Vaughan Mills.â€

Toronto-based retail consultant John Winter says that is a wise move, given the way consumers have reacted to the Toronto site.

“I think the performance in Toronto will make it easier to rent up the other sites,†he said.

Mr. Winter said Vaughan Mills' success shows how tired shoppers are of the same old power centre concept, ruled by large parking lots and big-box outlets. “There is a real appetite for good, new centres.â€

Still, that appetite may only be so big. Mr. Gleeson said the exclusive agreement Ivanhoe Cambridge has with Mills Corp., an Arlington, Va.-based developer, is only for four sites. He said there may be room for a plan B that involves malls in other locations, but he said to work, they would have be supported by a population of at least one million within its catchment area and be far away from the joint venture's other malls.

“Right now we want to focus on the highly populate areas,†he said.
 
With retail overload in the domestic market and fierce competition for high quality sites, U.S. retailers and developers increasingly are looking international for growth opportunities. Their first stop is usually not the Far East, Europe or even Mexico. It's Canada.


With a healthy economy and many cultural similarities, Canada is the natural choice for retailers and developers looking to expand. Only 80 miles north of Buffalo, New York, is Toronto, the engine of the Canadian economy.

The greater Toronto area has 20 percent of Canada's wealth and about a sixth of its population. It is the financial and business center of Canada with about 14 percent of the country's retail sales.

Toronto is also economically the strongest city in Canada with a growth rate of 5.3 percent in 2004.

The city is the gateway into Canada for U.S. retailers. “Every major U.S. chain that is in Canada started by coming into Toronto,†says Peter Woolford, vice president of policy development and research at the Retail Council of Canada.

Unlike the U.S., Canada is not over-retailed. According to an International Council of Shopping Center report, Canada has 14 square feet of retail space per person, while the U.S. has 21 square feet. “Competition isn't as great and therefore sales are higher,†says Tom Burns, senior vice president at JJ Barnicke Ltd., the nation's largest commercial real estate brokerage.

In fact, sales can be 10 percent to 40 percent higher in Canada, says Wendy Evans, president of retail services company Evans and Company Consulting.

High Barriers to Entry


One reason why Toronto is not over-saturated is the high barriers to entry. Its progressive political environment can create a less-than-friendly business climate. Recently, Sam Zell, founder of Equity Office Properties, the world's largest office REIT, said he would never do business in Canada due to the nation's onerous taxes. While Canadian companies do not have to pay for employee healthcare, thanks to socialized medicine, business taxes can be 5 percent higher than in the States.

In Toronto, real estates taxes can average about C$20 a square foot (about US$16.41), says Tom Johnson, president of Thomas Johnson Realty Ltd.

The Canadian labor force also tends to be more unionized than in the U.S., and labor laws makes it more difficult to fire an employee.

Canadian laws on development also are restrictive, especially if a zoning change is required. “It could take years to get zoning changed, because the public process could frustrate the whole thing and it could be very costly for the request change,†says Burns. “It's a cumbersome process that you might not win.â€

Many communities have zoning regulations placing large retail centers in designated areas; much like the United States. It is difficult, however, to get land-use codes changed to build outside designated zones. For example, the public-input part of the process can be very lengthy.

“It can be done, but it's not for the faint of heart,†says John Morrison, senior vice president of the Oxford Retail Group.

In addition, U.S. retailers also have to deal with potentially expensive distribution logistics. Canada is slightly larger than the U.S. in terms of land, but only has one-tenth the population. This leads to high distribution costs.

For example, if a company imports apparel goods into the states under U.S. quota, it can't export those goods to Canada. Therefore, a company such as Gap Inc. has to import its jeans directly to Canada. Apparel items usually have to be shipped into Vancouver, which is 2,700 miles west of Toronto. Due to the distance and lack of major city centers, the cost of distribution is often too high for retailers.

For those retailers who do venture into Canada, however, the success rate is high; about 95 percent survive, says Evans.

“You have to come in through acquisition or partnering,†he says. Wal-Mart Stores Inc. bought its way into the market in 1994 when it purchased 122 Woolco stores from Woolworth's.

Mills Makes its Move


Recently, The Mills Corp. entered into Toronto by partnering with Ivanhoe Cambridge, a Canadian retail development company that is owned by a private pension fund. The two companies built the 1.2 million-square-foot Vaughan Mills about 12 miles northwest of Toronto. Vaughan Mills opened in early November.

The mall introduces such new U.S. retailers to the Canadian market as Lucky Strike Lanes, Burlington Coat Factory and a 140,000-square-foot Bass Pro Shop, which should be a hit with the country's many outdoor enthusiasts.

CANADA RETAIL SALES YEAR-TO-DATE (THROUGH 9/04)* Selected Categories 2004 2003 Change
Drug Stores $13.47 $12.48 7.90%
Department Stores 11.76 11.07 6.20%
Other Gen. Merchandise 11.62 11.01 9.50%
Furniture 7.45 6.81 9.50%
Electronics 6.08 5.90 3.00%
Apparel 11.01 10.61 3.70%
Sporting Goods, Hobby, Music and Book 4.85 4.75 2.20%
Home Improvement 12.62 11.48 9.90%
*Figures are in billions of U.S. dollars.
Source: J.C. Williams Group


“Vaughan Mills is the best of big boxes and unique retailers such as Bass Pro,†says Steve Jacobsen, Mills Corp. executive vice president. “There is also a good mix of American and Canadian retailers. I look at Vaughan Mills as a collection of the best retailers of North America.â€

Vaughan Mills is the first enclosed mall built in Canada in 14 years, proving how difficult it is to build large-scale shopping centers here.

Vaughan Mills is also unusual because it is one of the few Canadian malls that is owned, at least partially, by a publicly traded REIT. Most malls in Canada tend to be owned by private pensions funds.

One of Canada's largest pension funds, the Ontario Municipal Employees Retirement System (OMERS) with 350,000 members, co-owns with an unnamed institutional investor three of Toronto's largest malls: the 1.6 million-square-foot Square One Shopping Centre, the 1.4 million-square-foot Yorkdale Shopping Centre and the 1.7 million-square-foot Scarborough Town Centre. Yorkdale has the highest sales productivity of any enclosed mall in Canada at $900 dollars a square foot (US$738) .

Pension funds started buying malls during the recession of the early 1990s when public real estate companies came under financial pressure, said Morrison of Oxford Retail Group, which is the retail division of OMERS.

The only significant retail REIT in Canada is RioCan, which owns most of the country's power centers. Big box U.S. retailers, such as Home Depot and Costco, usually tenant these centers, located in the periphery of the greater metropolitan areas.

However, due to severe winters, enclosed malls tend to be the preference of most Canadian shoppers. “A climate-controlled enclosed shopping center with over 250 stores and underground parking is much more compelling to a shopper than an outdoor power center where you have to literally drive from store to store,†says Morrison.

While enclosed malls remain retail hot spots, Toronto also has an active downtown core. “Our cities are more dense than in the U.S.,†says Brent Houlden, consumer business practice leader for Deloitte Consulting in Canada. “Toronto is a very centric city where we have a downtown center which is very much alive.â€

Offices and condos are sprouting up along Lake Ontario and Yonge Street, the city's main drag. Retailers are following. Recently, Swedish clothier H&M opened a 28,000-square-foot store on Yonge Street at Toronto Eaton Centre, one of Canada's largest malls and tourist attractions. Located at the intersection of Yonge and Dundas streets, the area is a retail mecca in the city with rents around $100 (about US$82).

Other international retailers such as Zara and The Body Shop also have opened up in Toronto's downtown.

H&M also opened a 13,000-square-foot store in midtown Toronto on Bloor Street, often referred to as the city's “Fifth Avenue.†On Bloor Street, rents can go well beyond the city average of C$50 (US$41.01) per square foot to almost C$200 (US$164).

Apple Crosses the Border


About 180 U.S. retailers operate in Canada; most of whom started in Toronto. Recently, Apple Corp. said it would enter Canada with two stores in the Toronto area by mid-2005.

While most are successful, some U.S. retailers do falter; especially those who don't do their homework. “Some have come into the market and stumbled and learned the expensive way how to do business,†says Evans. “There are different holidays, different customs, different cultures.â€

The Sports Authority Inc., for example, did not do well in Toronto, partly because it did not cater to the more European tastes of its customers, says Evans. “Toronto is more European in its taste and buying habits,†says Evans. “There is a French influence in both food and fashion. Some of their active wear was too basic, not fashion forward enough.â€

U.S. retailers that do succeed in Canada, such as Gap have put local management in place to keep an ear to the ground, says Evans.

“Few U.S. retailers who have entered here and have failed,†says Houlden.

DEMOGRAPHIC OVERVIEW



Toronto Metro Population 2001: 5.28 million

Projected Population 2011: 6.26 million

Currency Rate: $1 Canada = $0.82 U.S. (as of Dec. 27)

Average Earnings: C$51,112 (US$41,945)

Total Retail Sales: C$33 billion (US $27.1 billion); 14 percent of Canada's total retail sales

Ontario Population: 12.3 million (about equal to that of Illinois)


Source: City of Toronto, Statistics Canada
 
Yorkdale's Holt Renfrew is 64,545 sq ft (source: www.20vic.com/le_sub/0210...ykdsc.pdf, which is strange that it's up since 20 Vic is no longer the mall's manager), and Sherway's is 33,670 sq ft (source: www.cfspace.com/pdf/plans...plan.pdf).

Speaking of Holt Renfrew, here's an announcement of their Last Call going into Vaughan Mills. I'd rather have outlets all together than just scattered everywhere (I think the one that's moving's at Steeles between Bathurst and Yonge?).
____________
Holt Renfrew Last Call to Open at Vaughan Mills

TORONTO, June 15 /CNW/ - Holt Renfrew, Canada's premier specialty
retailer, announced today that they will open a 28,100 square foot Last Call
location at Vaughan Mills, one of the largest shopping and entertainment
destinations in the region. The new Last Call location will open in October
2005, transitioning from their current location in Thornhill, Ontario.
"Holt Renfrew is revitalizing many areas of the business, including our
Last Call location, to better serve our customers," said Caryn Lerner,
President of Holt Renfrew & Co., Limited. "Vaughan Mills has established
itself as a major force in the Canadian retail landscape and the fit for
Holt Renfrew Last Call is a natural."
"Holt Renfrew is an institution in Canadian retailing and it is with
great pride that we welcome them to Vaughan Mills," said René Tremblay,
President and CEO, Ivanhoe Cambridge. "As the first enclosed shopping centre
to open in Canada in 14 years, Vaughan Mills strives to bring a new vitality
to the Canadian retail market, a goal we are achieving by bringing on board
such forward-thinking retailers as Holt Renfrew."
"The Mills is pleased to welcome Holt Renfrew Last Call to the
spectacular Vaughan Mills, our first mall in Canada," said Laurence C. Siegel,
chairman and CEO of The Mills Corporation. "We continue to build relationships
with leading retailers around the world, to provide the best possible retail
mix at our innovative shopping destinations."
Sol Nayman of S.D. Nayman Management Inc. served as the exclusive advisor
on this transaction.
Vaughan Mills is located at 1 Bass Pro Mills Drive in Vaughan, Ontario,
32 kilometres north of downtown Toronto, at the corner of Highway 400 and
Rutherford Road. The centre is open Monday to Saturday, 10:00 a.m. - 9:00 p.m.
and Sunday, 11:00 a.m. - 7:00 p.m. For information call 905-879-2110 or visit
www.vaughanmills.com.

About Vaughan Mills

Vaughan Mills is the first enclosed regional shopping centre built in
Canada in more than 14 years. The 1.2 million-square-foot enclosed shopping,
leisure and entertainment destination features 16 anchor tenants and more than
200 stores, restaurants and entertainment venues. Many are the first of their
kind in Canada, including Bass Pro Shops Outdoor World, NASCAR SpeedPark,
Lucky Strike Lanes and Hudson's Bay Company's designer Depot. The centre also
features the world's largest Tommy Hilfiger Outlet. Located at the southeast
corner of Highway 400 and Rutherford Road, in the City of Vaughan, Ontario,
Vaughan Mills is owned by a 50/50 joint venture between The Mills Corporation
and Ivanhoe Cambridge.

About Holt Renfrew

Holt Renfrew delights its customers with beautiful fashions presented in
style. For over 165 years, Holt Renfrew has been renowned for offering its
customers the highest standard of excellence in customer service, merchandise
quality and selection in its 9 locations across Canada including: Toronto (3),
Ottawa, Montreal, Quebec City, Vancouver, Calgary and Edmonton. Holt Renfrew
Last Call has locations in Winnipeg and Toronto.
For additional information on Holt Renfrew please visit our website
www.holtrenfrew.com.
 
Old Navy's outlet also opening at Vaughan Mills. It can only be a matter of time before Banana Republic opens an outlet at Vaughan Mills, and Gap Outlet's lease at 400 & 7 runs out, and moves north, as well as Club Monaco Outlet's.
 
Well, some stuff will stay there I think, like the big box stores. But the outlets belong at Vaughan Mills. If only it were all concentrated in one area, it'd be so much better... One of the provisions of Vaughan Mills is that it can't have traditional anchors, which I guess means Wal-Mart, The Bay, Sears, etc. I guess that means no general merchandise retailers. My prediction for the few holes that will result from outlets moving to Vaughan Mills: more big boxes like Michael's and Pier 1.
 
07 / 21 / 2005 - Vol. 1, No. 14 - Ontario Edition
Mall giant to unveil better 'mousetraps'
Ontario foothold sells U.S. firm on Canadian sites
By Laura Severs - For Business Edge
Published: 07/07/2005 - Vol. 5, No. 26

It's a mall world, after all.

Following a 14-year drought when no regional shopping centres - enclosed malls generally anchored by one or two department stores of at least 100,000 sq. ft. - were built in Canada, The Mills Corp. of Arlington, Va., is about to expand its concept of market-dominant retail and entertainment destinations in Canada after gaining a foothold in Ontario last November.

Partnering with Montreal-based Ivanhoe Cambridge, the principal real estate subsidiary of the Caisse de dépôt et placement du Québec, the two companies are ready to go out on a build-it-and-they-will-come shopping spree.

New Mills malls are on the drawing board for Calgary, Vancouver and Montreal, and retail analysts expect these to be very similar to the Vaughan Mills entry, a 1.2-million-sq.-ft. enclosed mall with 16 anchor tenants and more than 200 stores, restaurants and entertainment venues. The mall is situated about 30 kilometres north of Toronto.

"Ivanhoe Cambridge and The Mills Corp. have an exclusive arrangement to develop four Mills centres across Canada in the provinces of Ontario, B.C., Alberta and Quebec. Based on the success of Vaughan Mills, we are evaluating sites in Calgary, Quebec and elsewhere," says Rebecca Sullivan, director of public/government relations for The Mills Corp.

The Mills concept includes traditional retailers, off-price stores such as Winners and outlet shops, along with a strong entertainment component.

Vaughan Mills introduced Canadians to the NASCAR SpeedPark theme park, which features a state-of-the-art indoor-outdoor go-cart track, and Lucky Strike Lanes, a bowling mecca. On the retail side, offerings include Canada's first Burlington Coat Factory, the world's largest Tommy Hilfiger Outlet and a series of other firsts: The country's first Tommy Bahama outlet, the first Town Shoes outlet in Canada and the first Benetton outlet on this side of the border.

To lure the men in, Canada got its first Bass Pro Shops Outdoor World, described as an outdoorsman's paradise complete with a live trout pond, natural waterfall and in-store fishing demonstrations.

Toronto-based retail analyst Ed Strapagiel, executive vice-president of Kubas Consultants, calls the Mills mall "the new version of West Edmonton Mall. It's simply the latest better mousetrap, the latest big invention. Basically, it's the next big thing."

Strapagiel says he's not surprised new malls are being built despite the fact so-called power centres - groupings of big-box category stores such as Wal-Mart or Best Buy - have been responsible for increasing the retail presence in most cities and towns.

"Yes, there is room for them (the Mills malls) in retail," Strapagiel says. "Like many other industries, somebody who comes along and builds a better mousetrap will win the day. It's not so much a question of room in the market. The market will create the room and pull back from a less desirable alternative."

He doesn't describe the Mills operation as a typical mall - one with department store anchors at each end. "The Mills approach is lots of big stores with big footprints, with separate exterior entrances. It's not quite the same thing," he says.

Plans are to move ahead with the Calgary entry first, retail analysts say, pointing to land Ivanhoe Cambridge already has on hand.

Project officials concur but would not comment on where this Mills mall would be constructed. "Plans are most advanced in Calgary, where we hope to open in 2007," a company representative said.

Retail specialists Alistair Corbett and Chris Thompson, both with CB Richard Ellis in Calgary, suggest a chunk of land located at Deerfoot Trail and Country Hills Boulevard is the likely choice.

"They've (Ivanhoe Cambridge) had it for a long time. We're assuming that's the site they're talking about. It makes the most sense," they told Business Edge.

Corbett and Thompson say they are not surprised by Mills' interest in Calgary, noting the city is high on the Canadian retail radar screen.

"Calgary is very much the flavour of the month for retailers looking at coming in. Our retail vacancy rate is at 3.9 per cent and that's a bit of a high," they said, pointing to space being vacated because retailers are looking at relocating to Calgary's new power centre, Deerfoot Meadows, only 15 minutes down the road from the potential Mills location. Both would be adjacent to different sections of Deerfoot Trail, the road that links Highway 2 between Calgary and Edmonton.

"Anytime that (vacancy) rate gets below six per cent, we're in a demand hole and we can't get it up fast enough," Corbett and Thompson add.

Vancouver-based retail analyst Blake Hudema, president of Hudema Consulting Group Limited, says he's not surprised that Calgary could get a Mills mall before Vancouver.

"One of the big issues in Vancouver is finding a large site," says Hudema. "Calgary has an undeveloped site that has zoning to permit an enclosed shopping centre approaching one million square feet."

He also predicts Montreal will likely be Mills and Ivanhoe Cambridge's next target after Calgary, citing an abundance of land just outside Greater Montreal.

"Their preferred location would be off a major arterial freeway, or ideally at intersection of two major highways," says Hudema, asked where the Vancouver version would likely be built.

"They probably want to be on the Trans-Canada Highway, they probably want to be central to the populations of Surrey and Langley. That's probably where they want to go, but that's from the ideal perspective.

"There's a very limited supply of development land. We have a comprehensive land-use plan for the region. Any land available for a 50- to 70-acre site is probably going to be $1 million- plus per acre."

Hudema says he doesn't expect the Mills concept to hit Vancouver until somewhere between 2010 and 2015, depending on how long it takes to find a suitable piece of land.

He expects the project to open in the Montreal region by 2010 and calls a 2007 opening for a Calgary Mills about "as aggressive as you can get."
 
http://urbantoronto.ca/showthread.php?t=6370

But is Vancouver as sprawled as Toronto is? I mean, there's 3-4 million more people in Greater Toronto!
 
Notice how for all the hype about Vaughn mills and it's "unique experience" it settled in to it's real roll, just another local mall.
 
true, true, and true (though I still think Vaughan Mills is quite different, just because it doesn't have the traditional anchors of Sears, the Bay, and Wal-Mart).
 
From yesterday's New York Times

By TERRY PRISTIN
Published: September 7, 2005

Correction Appended


VAUGHAN, Ontario - The new Vaughan Mills mall in this fast-growing Toronto suburb - the first enclosed mall to open in Canada since 1990 - houses many familiar American retail names. Several of them are brands that have ventured north of the border only in the last five years, including the Children's Place, Tommy Bahama, Build-a-Bear Workshop, Linens 'n Things and Old Navy.

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Steve Payne for The New York Times
The Children's Place also has a spot in the Vaughan Mills mall.
The enormous Bass Pro Shops Outdoor World, where Kodiak bears stand guard and customers can choose among hundreds of fishing poles, is the first store in Canada for the sporting goods chain, which is based in Springfield, Mo.

American retailers have been entering the Canadian market in increasing numbers in recent years, a trend fueled by pressure to expand, the growing saturation of markets in the United States and easing trade restrictions after adoption of the North American Free Trade Agreement.

Still, retailers like Ann Taylor and Bed, Bath & Beyond, which are staples of other shopping and entertainment malls owned by the Mills Corporation in places like Sunrise, Fla., and Ontario, Calif., are nowhere to be found at Vaughan Mills, or at any other Canadian mall, for that matter.

About 200 American brands are now available in Canada, about one-fourth of them newcomers since 2000, according to Robert J. Boyle, the director of market research for Ivanhoe Cambridge of Montreal, co-owner of Vaughan Mills. (Ivanhoe Cambridge is the real estate arm of Caisse de dépôt et placement du Québec, the country's biggest pension fund manager.) European brands like H.& M., Sephora and Zara are also rapidly making inroads here, just as they are in the United States.

But Mr. Boyle estimates that only about a third of the top 100 American brands have made the trip north. Even though Toronto is a mere hour away from New York by air, its leading malls - Yorkdale Shopping Center, on the outskirts of the city, and Eaton Centre, in the heart of downtown - have retained a Canadian flavor, with mostly home-grown chains.

Some American retailers do very well at the big-box outdoor shopping centers that began popping up in Canadian suburbs in the late 1990's. At RioCan, a real estate investment trust based in Toronto, which owns 196 strip malls and big-box shopping properties across Canada (30 of them built in a joint venture with the Kimco Realty Corporation, a REIT based in New Hyde Park, N.Y.), the leading revenue-producer is Wal-Mart. Three other American companies are among the top 10, including A.& P. (which has been in Canada since the 1920's); the TJX Companies, the parent of the off-price retailer T. J. Maxx (whose Canadian divisions are Winners and Home Sense); and Staples. But Target does not operate in Canada, and Kmart had stores in Canada but closed them.

Loblaws, the dominant supermarket chain, has been able so far to keep Wal-Mart from opening its superstores in Canada by creating a new model known as Loblaws Real Canadian Superstore, said Jean Lambert, a Quebecer who manages global research for the International Council of Shopping Centers in New York.

Because of its proximity and its economic prosperity, Canada might seem to be a natural market for American retailers. But real estate specialists say many have chosen to stay away for reasons both geographical and cultural.

With most of Canada's 32.8 million people concentrated in a few urban areas that are far from one another - about a third of the country's population lives in Toronto, Montreal and Vancouver - distribution can be a real headache.

"The biggest issue for U.S. retailers," said Blair Hodgson, a retail real estate broker at a Toronto company, Oberfeld Snowcap, "is, Why stretch so much geographically to have five stores, when I could put five stores in a much smaller area in California?"

Canada also has much less shopping center space than its neighbor to the south - about 12.5 square feet per capita, compared with about 20 square feet in the United States, retail specialists say. The pace of new construction is slower in Canada because it is more difficult to get property rezoned for commercial use, financing is less widely available and the pool of potential tenants is smaller, said Edward Sonshine, the president and chief executive of RioCan. In addition, he said, "the opposition to urban sprawl is more advanced here."

Other retail specialists say there is less chance of overbuilding because pension funds, the leading mall developers in Canada, tend to be more cautious than the publicly traded companies that own most malls in the United States.

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Cultural differences between the two countries go far beyond the language requirements that apply to Quebec, where the staff must be bilingual and labels must be printed in French as well as English. In part because they are so heavily taxed, Canadians have less disposable income than Americans. "We're much more middle-income earners," Mr. Boyle said. "We're very price conscious, very value conscious."

Canadians also dine out less frequently, so mall operators have not attracted the restaurant chains like P. F. Chang's or the Cheesecake Factory that in the United States are increasingly replacing department stores as anchor tenants, said Tony Grossi, an executive vice president of Cadillac Fairview, a prominent mall operator owned by the Ontario Teachers' Pension Plan Board.

Laurence C. Siegel, the president and chief executive of Mills, points out that many Canadians do their shopping downtown rather than at suburban malls. "You have more vibrant center cities in Canada than you do here," he said.

For Mills, a company that likes to mix full-price and outlet retailers, opening in Canada has posed some challenges. Operating costs, including taxes, are higher at Vaughan than at other Mills properties, which has served to deter some off-price retailers, said Ross Nussbaum, a REIT analyst at Banc of America Securities.

Mr. Siegel said that Mills and Ivanhoe Cambridge hope eventually to open additional malls in Montreal, Calgary and Vancouver. Having a bigger presence in the country may make it easier for the company to attract discount retailers like Burlington Coat Factory, which backed out of plans to open its first Canadian store at Vaughan Mills.

Do Canadians prefer to buy Canadian? Developers and brokers who are aggressively pursuing American chains point out that American Eagle Outfitters does very well in Canada.

But they say that Canada, in an effort to preserve its cultural heritage, is not likely to allow a Barnes & Noble to compete with its own Indigo Books and Music chain, whose stores have a section called "Why the World Needs More Canada."

And when Best Buy bought a well-established electronics retailer called Future Shop - a typical way for United States chains to enter the Canadian market - it did not change the name of the stores.

Mr. Sonshine recalled the outcry last year when it was rumored that Target would buy Canada's venerable Hudson Bay Company, the owner of the Bay, a department store. But he said the public did not show its loyalty by rushing to the stores. "The Bay is as Canadian as you can get," he said, "but their sales went down, anyway."
 
Something of note viz. Vaughan Mills...
online.wsj.com/article_em...zQ0Wj.html

Market Decline
How a Glitzy Mall Developer
Built Its Way Into Big Trouble

Mills Corp. Courted Shoppers
With Mini Golf, Massages;
Now Banks Crack Down
'Larry, He Is a Salesman'
By RYAN CHITTUM and JENNIFER S. FORSYTH
April 14, 2006; Page A1

As recently as last summer, Mills Corp. was soaring.

Its giant retail and entertainment complex near Ft. Lauderdale, Fla., drew more visitors than Disney World, the mall company told analysts. Its development pipeline popped out a blockbuster project nearly every year. Its stock performance was the envy of the industry.

Larry Siegel, its 52-year-old chief executive, was credited with injecting new life into the nation's tired mall industry. His "shoppertainment" retailing formula offered customers more than just stores. There was glow-in-the-dark miniature golf, simulated Nascar driving and dining in faux rain forests. His staid competitors took notice.


But now Mills, a real-estate investment trust based in Arlington, Va., is drawing attention for different reasons. Its recent developments have largely been flops. One in five employees has left or been laid off, including its development director, raising doubts about whether it can finish the projects it hasn't already abandoned. Last month, the Securities and Exchange Commission launched an investigation into its accounting practices. Its stock has plummeted 55% over the past eight months. On Wednesday, its lenders forced it to slash dividend payouts and to submit biweekly financial reports while it readies itself for a likely sale.

Mr. Siegel stumbled during one of the hottest real-estate markets in years by pushing into markets that were either too small or too competitive to support the company's mammoth malls. Mills compounded its problems, say investors and analysts, by focusing more on development than on managing its existing properties. Its current struggles raise questions about whether its unique and expensive approach to retailing can survive.

"I think their projects are the most creative of any developer out there," says Warren Weiner, executive vice president of Philadelphia-based Deb Shops Inc., which has 340 teen fashion stores nationwide and six in Mills properties. "The question is: Is it possible to be that creative and be financially successful?"

Mills, which has 42 malls in the U.S. and abroad, has said it is exploring "strategic alternatives," but declines to elaborate on disclosures it has already made about its current financial troubles. Mr. Siegel declined to be interviewed for this article.

In recent years, mall companies have performed well as consumers continued to spend despite recession, terrorism and the war in Iraq. The nation's major mall developers -- now big public companies mostly run by the scions of the original mall magnates -- expanded primarily by buying other mall companies.

Mr. Siegel decided to expand by building new properties. A balding, gregarious Philadelphia native, he got his start in retailing as a leasing agent for a predecessor company of Mills, and ascended to the chief executive position shortly after Mills went public in 1994.

Mr. Siegel saw most malls as ho-hum rectangles with four large anchor stores. The outlet malls that came in the 1980s and '90s, which carried name brands at discount prices, often offered no place to eat or sit down. Mr. Siegel decided to marry two concepts: to build full-service malls with food courts and even massage zones and skateboard parks, then fill them with outlet retailers.

He wasn't the only mall developer to explore ways to combine retailing and entertainment. The Simon family of Indianapolis and Sheldon Gordon of Greenwich, Conn., were also moving in that direction. But Mr. Siegel became one of its most enthusiastic proponents.

He pursued retailers not typically found in malls, such as Bass Pro Shops, which offers a 60,000-gallon aquarium and an archery range along with its outdoor supplies. Mills was one of the first mall companies to offer prominent space to IMAX theaters instead of sticking movie theatres in an unused corner of the parking lot, says Paco Underhill, who runs a New York-based retail consulting firm, Envirosell Inc., and has written about the mall industry.

Shoppers flocked to Mills's early projects, such as Potomac Mills near Washington, D.C., and Sawgrass Mills outside Fort Lauderdale. So Mr. Siegel picked up the development pace. After building just four large malls between 1985 and 1995, over the next decade Mills built 13 malls and converted two more to its shoppertainment formula.

Mr. Siegel planned on an especially large scale. Mills's properties typically sprawl over about 1.5 million square feet, compared with about 1 million square feet for other major regional malls. At its enormous Xanadu project now under construction in the New Jersey Meadowlands, the company spent some $120 million or more before it even won the right to develop the site, analysts estimate. Mills promised an indoor ski slope, a roller coaster and a 300-foot-tall Ferris wheel.

More Vulnerable

While a typical large mall draws customers from a 10- to 20-mile radius, many Mills malls are so big they need to draw from a larger area to attract enough customers. As a result, Mills became more vulnerable to new competitors, including outlet centers, discount stores and the hot new model -- open-air "lifestyle centers," which adhere to a "Main Street" approach, with stores opening onto a street, says Steven H. Gartner, president of Metro Commercial Real Estate Inc., a Conshohocken, Penn., retail consultant. And high gas prices made shoppers less willing to drive long distances for a deal on a pair of blue jeans.

To stand out from the crowd and draw traffic, Mills began adding more entertainment components. But the entertainment offerings took away valuable retail space, pushing down average sales per square foot at the properties.

All along, Mills had been attempting to lure more shoppers by allotting more space than a typical mall does to anchor tenants, which usually pay lower rent than smaller specialty stores and post lower sales per square foot. As a result, Mills's properties brought in an average of about $370 of annual sales per square foot in 2004, below the average for regional mall REITs.

Its aggressive development mentality rendered the management of its existing properties a second priority, analysts say. "They focused more on the next great development and less on continuing to run the properties they had and [getting] the full values out of those properties," says Rich Moore, an analyst with New York-based RBC Capital Markets.

Mills took on projects in Singapore, Madrid and Scotland in an effort to become a global REIT. In the U.S., it was becoming difficult to find large new markets where the Mills concept would still be novel. Mills pushed into the outskirts of the Pittsburgh and St. Louis markets, which already had quality malls and didn't have enough demand to support newcomers. Last year, in Pittsburgh, Mills resorted to its first-ever "soft opening," starting operations without a big marketing campaign due to a low number of retail tenants.

Mills's growth plans began to outpace its ability to finance new projects, forcing the company to borrow more and enter into joint ventures that gave its partners preferred returns. Mills had little margin for error in its developments. The company's ratio of debt to market capitalization reached 72%, compared with 53% for the average regional mall REIT, according to Harris Nesbitt, the U.S. research and investment-banking subsidiary of Toronto-based BMO Financial Group.

Newer projects struggled. In Lakewood, Colo., Mills had projected Colorado Mills to have annual sales of about $300 million. The mall, which opened in late 2002, so far has generated average annual sales of $215 million, says city spokeswoman Stacie Oulton. The expected $4.5 million in annual sales taxes from the mall has averaged only $3.2 million, she says. Malls in St. Louis and Cincinnati also fell short of company projections.

Over the past decade or so, malls built by Mills have earned the company about 20% less than it projected, estimates Greg Andrews of Green Street Advisors, a Newport Beach, Calif., real-estate research firm.

Some investors and analysts became skeptical of Mr. Siegel's promises. "Larry, he is a salesman," says Dionisio Meneses, an investment manager with Global Real Analytics LLC in San Francisco, which holds an undisclosed number of Mills shares. "You have to discount some percentage of what he says."

The SEC investigation begun in March has added to the uneasiness of investors. Company filings indicate about a dozen areas of accounting are under review, including revenue recognition, lease accounting and cost capitalization. Mills capitalized its pre-development costs to spread them over several years, for instance, rather than expensing them all at once like most real estate companies do. Mills says it may have to restate six years of financial results.

Investors and analysts have also expressed frustration over company disclosure about joint-venture deals with partners, saying a lack of details makes it difficult to accurately value the company's assets.

As its problems mounted, Mills faced increasing competition from other companies pursuing similar strategies for merging retail and entertainment. Rajendra Sisodia, a professor of marketing at Bentley College in Waltham, Mass., notes that there are now IMAX theaters in a chain of furniture stores in the Boston area.

New Formulas

Moreover, new retail formulas are gaining popularity. Mr. Gartner, president of Metro Commercial, a Philadelphia-based retail consultant, contends that "the behemoth mall is clearly giving way to more manageable, accessible and open-air centers."

"It isn't that the huge center doesn't have a future. It's just that it's no longer a slam-dunk proposition that it used to be," says Mr. Underhill, the retail consultant. "The shopping malls that are being built in the U.S. now are being built basically to steal other people's markets."

The pact Mills struck with its lenders earlier this week makes it likely that the company will be sold, analysts and investors say. Some assets are expected to be coveted by competitors. The bank deal included a refinancing of Sawgrass Mills that valued that property alone at $780 million. "Sawgrass is 10% of the value of this company," says David Fick, an analyst with St. Louis-based Stifel Nicolaus who was once Mills's chief financial officer. "It's worth more than all their bad stuff combined, times three."

Many of its competitors, including Simon Property Group Inc. of Indianapolis and Vornado Realty Trust of New York, are taking a look at the company, which owns 51 million square feet of property in the U.S. and abroad.

"The issue that somebody's going to have to decide is: Does the model work or not?" says David Lichtenstein, owner of Lightstone Group, Lakewood, N.J., one of the largest private owners of real estate in the U.S., who says he intends to bid. "I think the buyer is going to have to be convinced that Larry Siegel's dream can become reality and not a nightmare. He's an absolute visionary. But very often the first visionary isn't successful."

Write to Ryan Chittum at ryan.chittum@wsj.com
 
Courtesy:Toronto Star
Apr. 27, 2006
TONY WONG
BUSINESS REPORTER

Mall developer goes solo

It's not by choice, but lately Paul Gleeson finds himself in the position of having to pay more attention than normal to his business partners south of the border.

The vice-president of development for real estate developer Ivanhoe Cambridge has an agreement to build three giant malls across Canada with Arlington, Va., based Mills Corp. similar to their first major joint venture, Vaughan Mills.

Despite a sluggish start, the mall, just north of Toronto, has emerged as one of the more successful retail operations to open in the Greater Toronto Area and the first enclosed centre to open in 14 years.

But Mills Corp., which has been credited with revolutionizing the retail business by promoting the idea of shopping as entertainment, finds itself on financially shaky ground of late.

Hedge funds are hovering, a sale of the company may be imminent and the U.S. Securities and Exchange Commission has launched an investigation of the company's accounting practices.

"We are obviously watching closely what's happening," Gleeson said in a recent interview. What transpires will affect Ivanhoe Cambridge.

But in a candid moment, Gleeson makes one thing clear: Ivanhoe Cambridge plans to go ahead with plans to build more malls, whether its U.S. partner is along for the ride or not.

"Hopefully, they will be aboard, but we believe in the concept and we are prepared to do it on our own," says Gleeson. "Our agreement does not prevent us from building centres in Canada that are similar to Vaughan Mills."

A Mills Corp. spokesperson was not available for comment yesterday.

Ivanhoe Cambridge is a subsidiary of Quebec pension fund Caisse de dépôt et placement du Québec. Development costs for Vaughan Mills of $355 million were split between the two companies, which each have a half ownership.

Ivanhoe has a master agreement with Mills Corp. to build sites in the Calgary, Montreal and Vancouver areas. One location, just outside Calgary, is currently undergoing zoning for a 1.1 million square foot centre slotted for construction this year and a summer 2008 opening, says Gleeson.

"It's business as usual."

No one doubts Ivanhoe Cambridge has the financial muscle to go it alone. The company has a portfolio of 43 centres with a market value of $7 billion. But some industry insiders are wondering whether the company has the expertise to attract and package the big U.S. retailers, which has been a specialty of the Mills Corp. team.

At the moment, Mills staff continue to work with Ivanhoe Cambridge staff, Gleeson says.

"We are quite prepared to deliver a Mills-type project moving forward," Gleeson says. "Both companies had active roles in developing Vaughan Mills, and we will be using essentially the same team to deliver the other projects."

Gleeson says Ivanhoe Cambridge was active in small store leasing, while Mills was more involved in trying to attract big American retailers.

The 1.2 million-square-foot Vaughan Mills project near Canada's Wonderland has become a popular draw for tourists and shoppers with retailers such as Bass Pro Shops Outdoor World and Holt Renfrew Last Call.

The venture has been so successful that Ivanhoe Cambridge may expand the mall by another 200,000 square feet, he says.

(The largest mall in Canada and the world remains the West Edmonton Mall at 3.8 million square feet.)

Still, while Vaughan Mills has been a financial success for both companies, it took eight years to get off the ground.

"It did have its challenges finding tenants and it was struggling to get up to a decent opening at first," says John Crombie, national retail director for real estate company Cushman & Wakefield LePage Inc.

"I think they were hoping to get a lot more established American brands across the border."

But while some of the bigger American retailers may have decided to stay away, the mall has flourished in an environment that has been extremely favourable to retail, says Crombie.

"If they decided to sell, there is a lot of money out there looking to buy good quality retail," Crombie says.

"Have values gone up since they built? The Canadian story is still sound because this is quite a valuable asset," says Jamie Ziegel, vice-president of investment for Cushman & Wakefield LePage.

A recent study by Ryerson University shows that suburban shopping centres dominate retail in the Greater Toronto area as the population moves from around 5 million today to a projected 7.5 million in 2030.

"This provides lots of opportunity for developers to create the kind of lifestyle malls and entertainment centres since much of this growth is in the suburbs," says Tony Hernandez, director of the Centre for Commercial Activity at Ryerson University.

Hernandez says one reason for the success of Vaughan Mills is that it manages to differentiate itself from other Canadian malls.

"A typical Canadian mall has a degree of sameness to it, with similar retailers, but Vaughan has managed to offer something different," Hernandez says.

Gleeson would not comment on whether Ivanhoe Cambridge would purchase the half ownership of Vaughan Mills that it does not already own.

"There is normally some kind of provision set up that if something were to happen to one partner, the other partner would have the first chance to buy into the asset," says Cushman's Ziegel.

Last month, the U.S. Securities and Exchange Commission launched an investigation into Mills Corp.'s accounting practices.

The company said in January that it would restate financial results for 2000 through 2005 because of accounting errors, its second restatement in less than a year.

Earlier this year the company said its board hired Goldman, Sachs & Co. and JP Morgan Securities Inc. to look at strategic options including selling the company.

The stock has plummeted by more than half over the last year and one in five employees have been laid off in a massive restructuring.

Analysts say the company expanded too fast into markets that were too small to support the mammoth "shoppertainment" structure that the typical Mills mall needed.

Gleeson said unlike the U.S. market, malls such as Vaughan Mills are still unusual in Canada.
 
From: www.thestar.com/NASApp/cs...9048863851
________________
Ivanhoe in mall mega-deals
Properties in Madrid, Glasgow
Aug. 15, 2006. 07:06 AM
TONY WONG
BUSINESS REPORTER

Canadian developer Ivanhoe Cambridge has agreed to purchase three mega shopping malls — including Vaughan Mills, one of the largest in the Greater Toronto Area — for $981 million (U.S.).
In one of the largest deals of its kind, the Canadian company yesterday confirmed the signing of a letter of intent with Maryland-based Mills Corp., which is under investigation on allegations of accounting irregularities. The deal is worth $1.1 billion (Canadian).
Ivanhoe Cambridge wants to own all of the popular Vaughan Mills mall, the St. Enoch Centre in Glasgow, Scotland; and the Madrid Xanadu in Madrid, Spain.
"This is something that has been in line with diversifying our investment activities abroad," Ivanhoe spokesperson Nancy Defoy said in an interview. "This is yet another step in that direction."
Vaughan Mills and St. Enoch are owned in a 50-50 partnership between the two developers. Madrid Xanadu is wholly owned by Mills.
It had been publicly exploring options over the last several months on whether to sell all or part of itself over, and this is its first divestment.
"Clearly, if you are in Ivanhoe's position, what you want to do is control your own destiny, and that's what they did," said Peter Senst, vice-president of CB Richard Ellis.
Given Mills's financial troubles, Ivanhoe would have ended up with "just about any partner" if the property were sold off, which would not be a strategically wise position, Senst said. "This way, you get to control management."
Mills last week made a series of writedowns and reported financial problems with a U.S. project.
Ivanhoe, by virtue of being a partner, also benefited by getting a reasonable price on the deal without "having to compete with 20 other institutions for the choice properties. It's not a distress price, but it's a reasonable price," Senst said.
Ivanhoe has the option to sell a portion of the malls in the future, if diversification seems a good idea, he said, and is in position to buy any other Mills properties that may be available.
Mills spokesperson David Douglas declined to say whether his company would attempt to dispose of other properties.
"We are not going to speculate at this time."
The cash-strapped company will pocket about $500 million (U.S.) from the sale after project costs and paying down debt.
Ivanhoe, a subsidiary of Quebec pension fund Caisse de dépôt et placement du Québec, has a master agreement to build three more mega lifestyle malls with Mills in the Calgary, Vancouver and Montreal areas.
"The master agreement is still in place, so, technically, we could still partner with Mills in the future," Defoy said.
In an interview in April, Ivanhoe vice-president of development Paul Gleeson said his company was willing to forge ahead with those projects whether Mills was able to or not.
"Hopefully, they will be on board, but we believe in the concept and we are prepared to do it on our own," Gleeson said.
The purchase deal, which could close as early as the end of the month, is subject to final approval by each firm's board of directors. The deal values the three properties at approximately $1.5 billion. Defoy said it was the largest deal in recent memory for Ivanhoe.
Mills, one of the largest shopping-mall developers in the world, is credited with revolutionizing retailing by packaging shopping as entertainment.
The company is under investigation by the United States Securities and Exchange Commission. Shares of the real estate investment trust are down more than 60 per cent over the last year after Mills revealed the probe into the company's accounting.
Mills has recently fired its chief operating officer and members of its development team and has delayed quarterly earnings reports.
Despite a slow start, Vaughan Mills, the first enclosed regional mall to open in the Greater Toronto Area in 14 years, has been a success.
In July, Mills and Ivanhoe unveiled a plan to expand Glasgow's St. Enoch Centre from 750,000 square feet to about 1 million, transforming the mall into one of the largest in the United Kingdom. The project is expected to cost more than $200 million (Canadian).
Defoy said Ivanhoe already has expertise in Madrid with the co-ownership of a 900,000-square-foot mall in the city.
"The deal in Madrid makes sense, since they can have some economies of scale and lock in the competition," Senst said.
Deep-pocketed Ivanhoe has 43 centres with a market value of more than $7 billion.
 

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