Miller’s Megamall Combined Outlets, Off-pricers

Originally posted in Shopping Centers Today on May 2004
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Where others saw a roadblock, Herbert S. Miller recognized an opportunity.

In the early 1980s, off-price retailers and factory outlet stores needed sales of more than $200 per square foot to suc­ceed, but not even regional malls could count on bringing in that kind of money.

Miller, then president of Washington, D.C.–based Western Development Corp. (today The Mills Corp.), and his team brought off-pricers and factory outlet operators together for the first time in a new kind of shopping center — one com­bining outlet center bargain prices with the size and unique-to-the-market tenants of a regional mall, The idea was to hold down expenses while creating the critical mass that tenants need to prosper.

Potomac Mills, the first of Mills’ value megamalls, opened in 1985 in Prince William, Va., about 30 miles outside Washington, but not before the company had overcome a number of obstacles.

“The outlet people didn’t want to be near off-price, and the off-pricers didn’t want to be near factory outlets,” Miller recalls. He and his people had to play to both audiences.

“We told the outlet people it would be called Dale City Mall and would be out in the country,” Miller said. “With off-price people, we called it theWashington Outlet Mall and emphasized that it was near the city.”

The company held down the cost of building Potomac Mills by some 40 per­cent compared with the typical regional mall by assigning much of the design work to an engineer instead of an architect.

Potomac Mills opened with 650,000 square feet of space and was so successful, Miller says, that construction didn’t real­ly stop for years as the company added square footage. Today the center covers more than 2 million square feet and is Virginia’s No. 3 tourist attraction.

Emerging from an industrywide credit crunch as a REIT in 1994, Western Development was renamed Mills.

Miller credits three members of his team with making vital contributions to the Mills centers and other Western Development projects: Laurence C. Siegel, who has been Mills’ CEO since 1995, the year Miller retired, but who was responsible For outlet anchors back then; Courtney Lord, who handled leasing for small specialty shops; and Alan Perlstine, who was in charge of off-price anchors.

Lord says Siegel was “instrumental in coming up with the value concept,” while Miller is “one of the great vision­aries of the industry” for his work on the Mills concept and on urban centers. Since he retired from Mills, Miller has been active as a developer in Washington and worked to bring the Mills concept to Asia.

Each Mills center is distinguished by certain “local embellishments” that pay homage to its area. The Blues National Hockey League team practices on a rink in the St. Louis Mills center, for exam­ple. At Colorado Mills, the Waldron Children’s Playhouse presents live the­ater 365 days a year.

“We have added entertainment that encourages people to bring the family,” said Siegel. “They stay longer and buy more.”

Mills has also found ways to harness its centers to market brands, selling the Discover Mills naming rights to Discover Financial Services, for instance.

Last year Mills became one of the first American REITs to build a center in Europe with its opening of Madrid Xanacki, in Spain. Two Mills centers are slated to open this year — Cincinnati Mills and Vaughan Mills. Further, says Siegel, the company has two international deals in the works. In the future, he adds, the company will devote a third of its resources to Mills concept cen­ters, a third to regional malls and a third to centers abroad.