Yesterday, it fashioned a retail revolution with an off-price megamall that became the largest tourist attraction in Virginia. Today, The Mills Corporation of Arlington, Va. - a $2.0 billion company with seven existing super-regional megamalls and seven more currently in development - has refined and evolved its creative ideas and cutting-edge concept of "destination shopping" into concrete, wildly successful results that incarnate the next generation of retailing.
"Mills' shopping and entertainment adventures excite consumers and entice them to spend an average of three hours each visit at a Mills mall, versus less than 45 minutes at a regional mall," claims Larry Siegel, chief executive officer of The Mills Corporation, today one of the nation's fastest growing, publicly traded mall developers. "Most people don't go out just for the function of shopping. They want to have fun. So we think like show business: We bring people in by being creative, exciting and unique."
Mills calls this approach "shoppertainment," a combination of amusement park and shoppers' paradise. Dynamic theme restaurants and night clubs, multiplex theaters, live entertainment, interactive retailers, and 200 trend-setting stores from all categories of retail - including five times as many anchors as other super-regional malls - are at the core of every Mills project. Each Mills location successfully attracts shoppers from about a 40-mile primary market, more than twice the distance compared to traditional regional malls, and is customized in decor and array of merchants to suit the different tastes of various geographical regions. Each project also welcomes 3,000 to 4,000 tour buses a year as well as tens of thousands of foreign visitors.
Nowhere is The Mills Corporation's emphasis on the shopping adventure more evident than at its newest creations: Grapevine Mills (in Dallas/Fort Worth), a $203 million (project cost) megamall that opened in October 1997, and the $191 million (project cost) Arizona Mills, which opened in Tempe, Ariz., in November 1997, with its more than 115 acres of shopping and entertainment under one roof. Both feature more restaurants, clubs, theaters, games, activities and - well, show-biz - than any other Mills location, and perhaps any other mall in the world. On just their opening days, the two projects drew one quarter of a million shoppers each, demonstrating that people indeed do want an exciting shopping experience.
Mills' next project, The Block (formerly called CityMills), opening in Orange, Calif., (just three miles from Disneyland) in fall 1998, consummates more than a decade of Mills achievements and initiates a new product type for the company: an urban-based, open-air promenade with 60 percent of its space devoted solely to entertainment.
Two additional Mills projects slated to open in 1999 - Concord Mills in Concord, N.C., and Katy Mills in Houston - also accentuate fun, destination shopping and will double the number of Mills locations in just three years.
Averaging 1.7 million sq. ft. of gross leasable area (GLA), Mills' super-regional retail and entertainment-filled megamalls draw 17.5 million to 20 million visitors each annually. Mills' specialty stores generated average annual sales of $340 per sq. ft. in 1997, up from $307 in 1996, and $291 in 1995. Sawgrass Mills, Florida's No. 2 tourist attraction after Disney World, boasts annual sales of $450 per sq. ft., almost twice the U.S. average.
Philadelphia's Franklin Mills prevails as the state's top tourist attraction, as does Potomac Mills in Virginia. Gurnee Mills, located between Chicago and Milwaukee, is the biggest tour bus destination in the state of Illinois. Ontario Mills (Ontario, Calif., near Los Angeles) drew 17.3 million visitors in 1997, more than the 15.2 million that visited Disneyland during its 50th anniversary last year. Neither Grapevine Mills nor Arizona Mills have been open a full year but already are rivaling their states' crowning tourist destinations for first place.
About 80 percent of Mills stores are found only at Mills sites, with more than 50 retailers and manufacturers opening their first stores at a Mills megamall.
The Mills Corporation functions as an UPREIT, or umbrella partnership real estate investment trust. The company is the sole general partner and owns controlling interest (57 percent) in the Mills Limited Partnership, through which it conducts its operations. The Mills Corporation's portfolio comprises 12.8 million sq. ft. of GLA in 11 states, including 11 community shopping centers that it also owns and operates. The company plans to unleash three Mills superregional megamalls every two years, at an average cost of $200 million each.
In 1997, The Mills Corporation's Funds From Operations (FFO) - a standard measure of operating performance for REITs - jumped 31.7 percent to $74.1 million, or $1.95 per share, up from $56.3 million, or $1.69 per share, in 1996. Net income for 1997 made an incredible jump to $16.4 million, up from $8.2 million in 1996. Total tenant sales for 1997 increased to $1.92 billion compared to $1.6 billion in 1996. Including Grapevine Mills and Arizona Mills, total tenant sales for 1997 were $2.05 billion.
Creating Concepts Among the specialty stores enjoying continued growth and success at Mills properties are AnnTaylor Loft, Brooks Brothers, Gap Outlet, Old Navy, bebe Outlet and 9 West Outlet. Also among the retailers building their brands from one Mills project to the next are Bed, Bath & Beyond, Burlington Coat Factory, JCPenney Outlet Store, Last Call! Neiman Marcus, The Sports Authority, T.J. Maxx, and Spiegel Outlet Store.
A strong relationship with national brands like these allows The Mills Corporation to initiate and incubate novel retailing concepts, such as Off 5th-Saks Fifth Avenue Outlet, an off-price outlet idea triggered by Mills executives; Off Rodeo Drive, an indoor replica of Beverly Hills' shopping paradise, also triggered by Mills executives; GameWorks, the interactive, cyber-age, adult game emporium traditionally found in urban venues; and Virgin Megastores, the first of 61 Virgin music and video stores established in a non-urban location.
Off 5th unveiled its first location in Franklin Mills 10 years ago. It is now a 39-store chain accounting for 12 percent of the company's total sales, and is thriving in several Mills projects and other retail centers around the country.
Siegel explains how his company identified the Off 5th-Saks Fifth Avenue Outlet concept: "We were looking for a well-known, well-established, sexy retailer to anchor the fashion runs of our projects. We approached Saks Fifth Avenue's management in 1988 about diversifying and opening an off-price store. They agreed that diversification would help their mainframe stores but were afraid of diluting the Saks name.
"Creating the off-price locations did just the opposite: they created more awareness of Saks in their marketplaces, expanded the company's customer base and increased sales. It's been a terrific experience for them, and for us."
Similarly for Off Rodeo Drive, Mills executives formulated the new concept when reading about Rodeo Drive in a Los Angeles city magazine. Believing an off-price replica of the famed shopping area would flourish at a Mills megamall, Mills canvassed several Rodeo Drive retailers about the concept. Yosef Tar, owner of the most stores on Rodeo Drive - and the most expensive ones - also believed, and invested thousands of dollars to create the first Off Rodeo Drive in Ontario Mills in 1996. Ceilings painted blue and white with clouds, and cobblestone walkways leading to quaint boutique outlets of designs by Bernini, Giorgio Armani, Gianni Versace, Gianfranco Ferre and more, are part of the dazzling Off Rodeo Drive experience, now committed to being a part of every Mills location.
The GameWorks concept already established by Sega and the DreamWorks studios of Steven Spielberg, Jeffrey Katzenberg and David Geffen was a joint venture that "everyone wanted a part of," says Siegel. "We approached GameWorks, and they agreed that our megamalls easily compared to the large tourist and theme park destinations they preferred. Of the five GameWorks locations now thriving around the world, three are in Mills megamalls, with their newest concept - Stage 35 - slated for our next project, The Block."
When leasing Ontario Mills, Siegel's team set its sights on Virgin Records, with its Paris location - the largest music store in the world, generating over $100 million a year - and its downtown London and Times Square, New York locations, the world's second and third largest music stores respectively. Virgin's effective, fun-filled approach to shopping and its success in these urban locations convinced Mills executives that Virgin would be a vigorous partner that would do well in a non-urban destination shopping mecca such as the Mills.
"We became the first developer to persuade this company to locate in a suburban location," Siegel says. "Mills projects now drive so much traffic through Virgin Megastores' doors that the music and video company has achieved an entire second tier of growth they didn't realize was available.
"In an age when other music store chains are closing their doors, Virgin Megastores are flourishing by becoming the place people want to shop," observes Siegel. "Just like our centers, they create a festive, interactive atmosphere that draws consumers in."
Continues the confident CEO, "We breed creativity. We're the retail scientist of our industry that finds emerging brands, diamonds in the rough, and cultivates a retail loyalty that allows us to take these successes from one Mills to the next.
"Stores that open new concepts at the Mills, and even traditional retailers that join us, know that Mills projects provide a homogeneous pipeline of success that flows from project to project."
Sharing in Success: the Ogden Joint Venture With tenants, Mills believes it should be sharing in the potential profits of these scores of new businesses it has helped incubate. Thinking like a venture capitalist, the company offers its concepts, experience and customer base to nurture new businesses for retailers ... in return for equity in those businesses.
One example is the joint venture announced February 1998 between Mills and Ogden Corporation, one of the world's largest providers of food and beverage concession services, to own and operate food and beverage, retail and entertainment venues. The new venture will master lease and operate all new and existing (asthey become available) food courts, push carts and kiosks at Mills properties, third-party retail facilities, and the food and retail at airports, both national and international, where Ogden has or will obtain the food, beverage and retail concessions. Some Ogden-controlled concession contracts developed for theme parks, stadiums, arenas and amphitheaters are also part of the deal.
An initial result of the deal may include a roll-out at Argentina's Buenos Aires airport, one of the largest international airports in the world. Argentina is privatizing its country's 33 airports and recently awarded Ogden with the food, beverage and retail contract at Buenos Aires, an opportunity to be joint ventured with Mills through the companies' recent agreement.
Besides its current food court activities at Mills projects, Ogden also owns and operates American Wilderness Experience, a themed restaurant, retail store and educational park at Ontario Mills and soon to open in Grapevine Mills. This successful and unique concept offers food and retail; displays 70 species of live animals, plants, scents, climates; and offers a simulation theater, rides, videos and interactive exhibits.
Radically Enhanced Retail/Entertainment Fusion The ferociously impressive American Wilderness Experience seems a soft roar compared to the dozens of spectacular entertainment venues Mills has recently implemented to create environments where people want to be.
Among the more outstanding is the fun-filled Dave & Busters restaurant, which is larger than a football field. It offers great food; world-class pocket billiards; full-swing indoor golf simulators; table shuffleboard; and more than 200 interactive amusements, including virtual reality, classic carnival games and simulator rides.
Speaking of spectacular, at GameWorks' Vertical Reality game station, up to 12 players are strapped into chairs that rise and fall as much as 24 feet as players battle each other in a realistic video display.
Bass Pro Shops Outdoor World will soon open its 28-acre Outdoor World at Grapevine Mills, the second of several Mills locations it will join. The store replicates the great outdoors, with a four-story waterfall, 64,000-gallon reflecting pool and aquarium, a meandering stream, rock formations, live birds, taxidermy displays, fully encased archery range, indoor rifle range, and a full-scale, two-story log cabin with working water wheel and trout pool. A similar Bass Pro Shop opened in Gurnee Mills last October, a project estimated to draw 6 million visitors and $80 million in its first year.
At the sensational Rainforest Cafe theme restaurant and retail store, live and animated wildlife sounds and special effects, lush vegetation and jungle vines help create a tropical rain forest, with a thunderstorm starting every fifteen minutes. The Rainforest Cafe has expanded into four Mills megamalls.
The Wolfgang Puck Cafe features unique, sculpted, gourmet food. Wolfgang Puck, the famed master chef and restaurateur, chose Ontario Mills for his first location within a mall, and is expanding to The Block as well as to Sawgrass Mills.
Also exciting shoppers at various Mills locations are a four-story-tall iWERKS screen; IMAX large-format movie theater; AMC 30-screen movie complexes; and food courts larger than an acre, generating $15 million to $20 million per year, per food court.
Franklin Mills, Gurnee Mills, Potomac Mills and Sawgrass Mills today are undergoing merchandising initiatives that will deliver increased shoppertainment, energizing the sites and driving sales higher.
At Sawgrass Mills, for example, an approximately 300,000-sq.-ft., $60 million "Entertainment Phase," slated to open later this year, will bring GameWorks, American Wilderness Experience, Wolfgang Puck Cafe, a 24-screen movie theater expansion and a host of other adventures.
Siegel notes that many of the retail concepts joining Mills projects are introducing more entertainment which Siegel calls "participatory retailing." He offers Bass Pro's strategy of interacting with its merchandise as an example. "Participatory retailing will be the wave of the future over the next few years as people walk into stores to buy and want to be entertained at the same time."
The Block, A New Product Type The Mills' thrust in shoppertainment and all the other good ideas it has refined, as well as lots of new ideas, are coming together in the company's latest masterpiece: The Block at Orange, opening later this year in Orange, Calif. Both a summation of its accomplishments as well as a complete departure from its traditional product type, The Block will devote 60 percent of its 800,000-sq.-ft. space to dining and entertainment and 40 percent to a core of retail and specialty shops. The $167 million project is the Mills' first Block in an urban location. It will feature a non-traditional mix of Mills stores, with an emphasis on independent, one-of-a-kind, upscale retailers.
Several new concepts will premier in Orange County with The Block: Ron Jon Surf Shops, Stage 35 by GameWorks, Dave & Buster's and Cafe Tu Tu Tango. The 25,000-sq.-ft. Stage 35 by GameWorks features a Hollywood-style film set inspired by the legendary GameWorks sound stage on the Universal Studios backlot. Cafe Tu Tu Tango is California's debut of this Miami-based chain of eateries, highlighted by an energetic Barcelona atmosphere with art and live performances. An AMC 30-screen movie complex and Wolfgang Puck Cafe/Express are also among the venues that will amuse the 11.6 million people living within 40 miles of The Block, its millions of other guests, and Mill's traditional draw of international visitors.
Future Mills Projects Following The Block at Orange, the next of the company's retail and entertainment-filled megamalls to "wow" shoppers will be Concord Mills of Concord, N.C. Opening in fall 1999, the 1.4 million-sq.-ft. project is expected to draw 18 million visitors annually, produce 3,500 full- and part-time jobs, and generate $300 million in retail sales and $18 million in sales taxes annually. Its up to 18 anchors include Burlington Coat Factory, The Sports Authority, Bed, Bath & Beyond, Marshalls, T.J. Maxx, Group USA,Rainforest Cafe and Books-A-Million.
Mills Project At A Glance The 1.6 million-sq.-ft. Katy Mills of Houston, also scheduled to open fall 1999, will feature a 130,000-sq.-ft. Bass Pro Shops Outdoor World; Rainforest Cafe; GameWorks; a 6,000-seat AMC movie theater; Off Rodeo Drive Beverly Hills; a Virgin Megastore, offering the Houston area's largest selection of music and video titles; Bed, Bath & Beyond; Marshalls; and Burlington Coat Factory, with other tenants to sign on. Katy Mills and Grapevine Mills represent an investment in Texas of more than $500 million and are expected to generate more than $1 billion in sales taxes over the next 20 years.
The $200 million Opry Mills, slated to open in 2000, will occupy two-thirds of Nashville, Tenn.'s existing Opryland theme park property, owned by Gaylord Entertainment Co. Based in Nashville, Gaylord is an entertainment, hotel and convention business giant that recently spun off The Nashville Network and Country Music Television to Westinghouse Electric Corp. in a $1.55 billion stock deal. The joint development project between Mills and Gaylord Entertainment will blend its retail and entertainment offerings with a Grand Ole Opry flair, and dramatically expand and enhance one of the most well-known destinations in the world. Opry Mills is expected to create 5,000 permanent jobs and produce an annual payroll of $65 million, and $22 million annually in tax revenues.
Also slated for 2000 is Candlestick Mills in the San Francisco area. Candlestick Mills will be integrated with a 75,000-seat football stadium and is the first pro-sports and shopping mall combination ever developed in the United States.
Vaughan Mills, the Mill's first project outside the U.S., is destined to be Canada's next great tourist attraction when it opens in late 2000 in the City of Vaughan, Ontario. Located on a 180-acre site just north of downtown Toronto and directly across the street from Paramount's Wonderland Themepark, the $175 million, 1.4 million-sq.-ft. project will be the typical Mills su per-megamall format, featuring a cast of entertainment venues and 15 to 20 anchors of 25,000 sq. ft. to 125,000 sq. ft. each. The project is being developed in conjunction with Cambridge Shopping Centres Limited of Toronto, one of Canada's leading owners and managers of revenue-producing properties, principally regional shopping centers.
The New Jersey/New York area will have the 2.1 million-sq.-ft. Meadowlands Mills project open in 2000, with a 600,000-sq.-ft. entertainment component jointly designed and developed by Ogden Entertainment and Virgin Entertainment Group. Commitments from more than a dozen retailers have been announced, including OFF 5th-Saks Fifth Avenue Outlet, The Sports Authority, Burlington Coat Factory, Bed, Bath & Beyond, Off Rodeo Drive, Group USA, T.J. Maxx, and The Wiz.
Twenty miles south of Boston, a Mills retail and entertainment project yet to be named is in predevelopment on the grounds of the former South Weymouth Naval Air Station.
"People say the U.S. is overstored, but we believe it's over-copied," asserts Siegel. "Developers and retailers can stimulate traffic with great new ideas that prompt consumers to drive a little further to a different and fun shopping experience. As long as developers and retailers concentrate on new technologies of retail, without copying old ones, there is still a lot of work to be done both in the U.S. and internationally."
International Development Beyond the U.S. horizon - in addition to Canada's Vaughan Mills - The Mills Corporation's wide angle view sees projects in South America, Europe and Asia as part of its megamall development picture.
"Business potential overseas, especially retail, is huge. We're just now scratching the surface," states Siegel. "For starters, we are trying to associate ourselves with larger-than-life international locations to develop projects that will offer additional venues to consumers. Our strategy overseas is to partner with owners of notable facilities in categories like entertainment, sports, exposition and others," Siegel reveals.
He adds that in most countries, malls resemble those operated in the U.S. back in 1965, emphasizing the endless retail and entertainment opportunities available, especially in the foreign markets initially targeted.A Commitment to Community Service
Whether on U.S. or foreign soil, The Mills Corporation believes strongly in community participation in the markets it serves, providing and raising significant contributions and services for local civic, charitable and community groups. Among its activities are cystic fibrosis walk-a-thons; a child abuse prevention effort; American Cancer Society's Jail N' Bail; Working on Wishes (helps high school students complete their education); a pediatric primary care program; walking clubs; community rooms; kids clubs; coin donations from mall fountains; and much more. In support of the Houston area, The Mills Corporation presented checks for $200,000 to the Katy Prairie Conservancy for the acquisition and preservation of 554 acres of land in the Cypress Creek Watershed and $300,000 to Fort Bend County for police cars, fire engines and related expenses.
Up-to-date news about these community projects and other Mills activities can be found on Mills' comprehensive website: www.millscorp.com. Launched August 1997, the site offers immediate, 24-hour access to corporate, financial and press information, direct links to Mills project websites, and more.
Visitors to Mills' online treasury of information will be fascinated by the company's perpetual activity, especially those who remember the excitement when a single off-price megamall, Potomac Mills, opened back in 1985. Since then, Mills projects have become an impressive portfolio of the most productive shopping environments in the world, with little direct competition. The company is committed to maintaining and evolving its leadership position as it continues to carve its cutting edge concepts that will define the next generation of retailing.