Mills opens gigantic mall in Spain

Madrid project detailed at Las Vegas convention

May 20, 2003|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

LAS VEGAS - Madrid has museums and bullfights, but what people for miles around the Spanish capital have really hungered for, in Larry Siegel's view, is a mall unlike one they've ever seen.

Yesterday, the chairman of the Mills Corp., builder of Arundel Mills, peddled his company's vision to American retailers gathered here for the International Council of Shopping Centers convention.

Madrid Xanadu - thought to be the first major retail project in Europe by a U.S. developer - is expected to pave the way for at least five more entertainment-infused Mills malls across Spain and Italy.

Showcasing the project at the convention, the largest meeting of retailers and landlords in the United States, should help generate more interest from U.S. retailers looking to expand overseas, Siegel said yesterday.

Xanadu drew about 250,000 people over its weekend opening to its 220 stores, 30 restaurants, a 15-screen cinema, indoor go-carts, high-tech bowling and the world's second-largest snow dome for winter sports.

Siegel says he expects the mall - which is 96 percent leased - to be his company's most visited project, luring as many as 40 million people a year.

"There are not a lot of malls in Europe, and when you build one ... people look and pay attention," he said.

While it has 20 projects in the United States, Arlington, Va.-based Mills Corp. says its brand of "shoppertainment" is sorely lacking in Europe. Fewer than a half-dozen malls in all of Europe compare with the 1.4 million-square-foot Xanadu in size - and none have a large entertainment component, Siegel said.

Analysts agree that parts of Europe, in particular Spain and Italy, are ripe for retail expansion as burgeoning populations move to the suburbs - and seek out affordable entertainment.

At the same time, Siegel says, European retailers have been expanding, making it an easier proposition to fill up a large mall. And the advent of the euro has helped further, Siegel said.

"Retailers are crossing boundaries now like never before," he said.

The Madrid project includes retailers from Spain as well as Italy, Sweden, Portugal, Argentina and France, and well-known U.S. brands such as Nike, Skechers and Tommy Hilfiger. Some retailers, including Spain's Inditex and the United Kingdom's Arcadia Group, will for the first time open all their retail chains under one roof.

The mall features entertainment such as Neverland, an indoor theme park for children; Chiqui Park, also for children; and the Bulebar nightclub, where one cover charge buys entry to 10 themed bars.

Snow sports

The centerpiece of the project, the Parque de Nieve Madrid Xanadu, opened as Europe's largest indoor snow sports facility, rising 17 stories with varying slopes and a cafe where shoppers can gather around a fireplace and watch the action.

"We think the property will probably be the best project the company has ever developed," said David Fick, a managing director for Legg Mason Wood Walker in Baltimore.

But some analysts questioned whether consumers near Madrid and elsewhere in Europe will flock to the mall by the tens of millions each year, and even more importantly, spend.

One risk "is whether the Spanish culture will accept it as much as everyone would like to believe it will," said Richard C. Moore, a senior vice president with McDonald Investments in Cleveland.

Mills is confident enough in Xanadu to push ahead with its European strategy. The company is exploring sites in Seville, Valencia and Barcelona, Spain, and in Rome and Florence, and expects to build a mall similar to Madrid Xanadu in Milan. It also plans a mixed-use retail, residential and hotel project in Milan.

"People live outside their homes in Europe," Siegel said yesterday.

Siegel and other retail development experts say fewer new malls have been built in Europe than in the United States because the approval process has traditionally been extremely difficult - thanks in part to strong opposition from merchants in core downtown areas. Madrid has less than six square feet of retail space per person, compared with 23 square feet of store space per person in the United States.

Xanadu's development would have been nearly impossible, Mills said, without the cooperation of local partners and governments.

In fact, Mills was recruited by its joint venture partner, Parcelatoria de Gonzalo Chacon SA, a Spanish real estate developer that owns the site in Arroyomolinos, a suburb of Madrid. The developer researched mall development companies extensively before approaching Mills. The Spanish company will manage and develop the Snow Dome.

Competitive lead

"Had they just gone over and said `We're here from the U.S. and we're here to save you and build a mall for you,' I would have been extremely skeptical," said Moore of McDonald Investments.

"There's no question this puts them way ahead of their U.S. competition overseas," he added. "What they've basically done is gotten three or four years ahead of everyone else."

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