Yeah, that's how I remember it as a teenager in the late 90s. I mean, I was from the sticks back then, so my view of the Yonge-Dundas intersection of the era is probably biased, but I remember the seediness of the intersection began to encroach into the mall by the north atrium. Panhandlers used to ask me for change in there, and chuggers (aka: people who canvass/harass for donations on the street) began to operate inside there too.I think CF also wanted to decrease the size of the Dundas Mall atrium in order to reduce loitering. Perhaps hard to believe now, but it was actually becoming a spot for gang activity/gatherings and occasional violence.
Like all things involving demolition of notable buildings, we can look at those optimistic pictures from the late 1970s and wonder aloud why CF ever allowed the desecration of the north atrium, but it seemed like a sensible thing to do in the late 1990s.