Hybrid malls: shopping plus fun Shopping: Mills Corp. has created seven outlet centers that have become entertainment and tourist attractions. Now, the company wants to bring its successful formula to Maryland.

THE BALTIMORE SUN

As attractions go, it's bigger than Disneyland. It draws bus loads of tourists with money to spend. And, like the Anaheim, Calif., granddaddy of theme parks, it promises hours of family entertainment and total sensory overload -- from videos to virtual games. But Ontario Mills, 40 miles east of Los Angeles, is neither theme park nor Disney creation.

To its Arlington, Va.-based developers, the huge value mall represents the next generation of outlet shopping centers. The Mills Corp., which wants to build a smaller-scale version of Ontario Mills near Baltimore-Washington International Airport, has spent more than a decade inventing and fine-tuning its mall hybrid. The enclosed centers have evolved from the pilot Potomac Mills in Virginia to the latest model combining a heavy dose of glitzy entertainment with discount versions of Saks Fifth Avenue and Neiman Marcus.

At Ontario Mills, which is the size of 38 football fields, shoppers parade through color-coordinated, themed retail "neighborhoods" on Mills' trademark wood floors. Those who tire of bargain hunting at 200 manufacturer outlets and off-price shops can opt for the Rainforest Cafe, Dave & Busters virtual arcade, GameWorks, an IMAX theater or movie multiplexes with 52 screens. Then there's the zoo -- the American Wilderness Experience -- that is part natural history museum, part adventure shop, with a themed eatery.

The lure of an "experience" combined with savings on name brands draws about 18 million to 23 million people a year to each of Mills' seven centers. Some drive hours to get to the centers.

With each new center, loyal tenants from earlier malls have signed on and specialty store sales have soared. In nearly every state that has Mills malls, they have become one of the top tourist destinations.

In Maryland, where Mills is proposing the $200 million Arundel Mills, government and tourism officials hope for a similar phenomenon. If the project moves forward -- a zoning hearing is set for tomorrow in Anne Arundel County -- the entertainment and outlet complex is expected to generate 4,000 jobs and nearly $20 million in annual sales, entertainment and property taxes. Maryland officials also view the mall as a major draw for the state, a boost to area hotel business and airport traffic.

"There's no question this would be put on European tour agendas," said Rick Morgan, chief executive officer of the Anne Arundel Economic Development Corp., who envisions shoppers driving from Maryland's bordering states. "People come to Baltimore and Washington to visit Camden Yards and the Smithsonian, and retail is extremely popular. Normally, a mall will take away from another mall, but this would be a source of tourism and money in the market."

Dean Kenderdine, the state's assistant economic development secretary for tourism, traveled to Ontario Mills to take a look.

"There were a substantial number of motor coaches pulling up -- and Ontario is not exactly in the heart of things in terms of Southern California," Kenderdine said. "There's no reason why that same offering can't work for Maryland."

It's no accident that Ontario Mills is a regular stop on the tour bus circuit and draws more visitors than Disneyland -- 17.3 million last year compared with Disney's 15 million. Mills stations a tourism director at Ontario and the other malls. When Ontario's mall managers learned that a regular tour group drove by every Sunday at 10 a.m. -- an hour before the mall opened -- the mall changed its hours. Now, tourists file off buses empty-handed, head to a luggage outlet and fill their new empty suitcases with new clothes. Typically, shoppers drive up to 60 miles and stay an average of 3 1/2 hours, with entertainment tenants spurring business during slow times.

When Mills opened Arizona Mills in Tempe last year, it brought in a new mix of shops, dining and entertainment. "It has filled a niche," said Brent DeRaad, spokesman for the Greater Phoenix Convention and Visitors Bureau. "From our standpoint, it definitely is a valuable attraction."

But what's the appeal of more shopping centers in a nation considered to have too many by most measures?

The answer is fun, says Laurence C. Siegel, Mills' chief executive officer, who is credited with masterminding the Mills formula and coining the term "shoppertainment."

Siegel disagrees that the United States has too many malls. "It's much more over-copied than over-stored," he said. "One of the problems with U.S. retail is you have the same experience every five or 15 miles. Why would you pass one to shop in another?

"We've learned entertainment and retail is not necessarily attaching a restaurant or movie theater to a shopping center," he said. "It's as much getting the retailers themselves to be entertaining."

Siegel has courted tenants such as Bass Pro Shops Outdoor World, where shoppers at Gurnee Mills in Illinois can learn to fish for trout in the in-store stream or fly-fish in largemouth bass pools, then buy their equipment.

"You add something like that to your shopping center, you have something nobody else has, and it's more than just a place to go and buy a nice pair of wool socks," Siegel said. "That's the direction we're going -- creating a shopping experience that's entertaining and fun and participatory and very theme-park like."

The formula appears to be paying off for Mills, which converted to a real estate investment trust three years ago. Last year, revenue reached $166 million and funds from operations -- essentially net income plus depreciation, an important gauge of a REIT's operating performance -- jumped 32 percent to $74 million. Rental revenue, total tenant sales and sales per square foot at specialty stores have grown since 1995, and occupancy averages 96 percent.

"They are very successful, the [shopper] traffic counts are enormous and the tour business is big business for them," said Mark A. Millman, president of Millman Search Group Inc., a search firm for outlet retailers.

Taking a chance

Persistence, some luck and an understanding of retail that stems from Siegel's upbringing as the son of a department store executive kicked off Mills' impressive run. The company took a chance in 1985 on what would become Potomac Mills, now Virginia's top tourist attraction.

"The thing just took off, and people started running bus tours down there," said David Fick, senior financial analyst with Legg Mason Wood Walker Inc. in Baltimore. "Tenants started flocking to the center. The value element was becoming more important, particularly in the late '80s and early '90s. The Mills guys realized this was something different that nobody else was doing, and consumer demand was greater than anybody could have anticipated."

In 1990, Mills opened Sawgrass Mills near Fort Lauderdale, Fla. It boasts the company's best sales, counts half its shoppers from overseas and draws tour buses equipped with trailers to cart visitors' purchases. "Mills realized a critical element was the tourist shopper," Fick said.

The 1.4 million-square-foot Arundel Mills would take Mills' evolution to a new level. It would probably use Mills' newer "racetrack" design, stores lining a circular track and shoppers passing through two central megastores. But Siegel said last week that Arundel also might incorporate elements of Mills' latest prototype, "The Block," a Main Street-style, upscale entertainment and shopping venue set to debut this year in Orange, Calif.

Closer to people

"The corridor between Baltimore and Washington is one of the most vibrant in the U.S.," Siegel said. "There are a whole potpourri of shoppers we don't serve now. There's room for what we do."

But Mills' new strategy of building closer to the population base could pose a new challenge: It could be difficult to attract the factory-outlet tenant that might be restricted from opening too close to department stores that sell its brands, Fick said.

If they win approval to open the center, Mills officials say, they would not begin leasing to tenants until after buying the 380 acres the company has under option near the Baltimore-Washington Parkway and Route 100. Construction would begin next year at the earliest.

The 200-store lineup probably would feature many Mills heavy-hitters. Stores could include Off Rodeo Drive Beverly Hills, the Clearance Center from Neiman Marcus, Virgin Records Megastore, Nautica and J. C. Penney Catalog outlet. A mix of 10 entertainment stores and theme restaurants could include AMC Multiplex Theater, Wolfgang Puck Cafe, Planet Hollywood, Rainforest Cafe, GameWorks and the American Wilderness Experience.

Mills needs conditional zoning on the commercial property and approval for a tax-incentive financing district to issue bonds to cover most of the planned $30 million road improvements. Under legislation sponsored by the district's representative, Councilman George F. Bachman, Mills would service the bonds if there would be a tax shortfall.

Less opposition

Community opposition to the privately financed project has decreased as Mills has worked with community groups and has promised to build a neighborhood shopping center and help pay for improvements to the nearby Route 175 and Ridge Road.

Area retailers still express concern about the competition with regional malls, from Marley Station to The Mall in Columbia.

County officials argue that the Mills project would be a different type of mall.

"Mills is a different type of shopping enterprise," Bachman said. "It is something new, and that's why they're catching on so fast."

Pub Date: 8/02/98

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