A huge gamble on Markham Asian mall
Jun 19, 2009 04:30 AM
TONY WONG BUSINESS REPORTER
In the depths of the worst recession in decades, one of Canada's richest men is taking a $1 billion gamble on suburban Chinatown with plans for a massive mall and luxury hotel/condominium complex in the heart of Markham's shopping district.
Plans for the Remington Centre, an 800,000 square-foot Chinese-themed mall adjoining a 20-storey hotel and condo tower
, are expected to be announced by Toronto developer Rudy Bratty's Remington Group at a news conference today.
"We are really proud of this – we believe it will be the pre-eminent centre in North America," the 77-year-old Bratty said in an interview.
Bratty, ranked 58th on Canada's wealth list by Canadian Business magazine with a personal net worth of almost $1 billion, intends to knock down his existing 325,000 square foot Market Village mall at the corner of Kennedy Rd. and Steeles Ave., further shifting the centre of Toronto's Chinatown to the suburbs. The area is already home to three other large Chinese-themed malls.
Bratty's timing for a GTA project of this scale is all the more audacious considering most other retail and commercial builders have closed up shop as the weak economy and job losses sap consumer confidence.
"We're certainly taking a chance, particularly in today's market, and I don't kid myself that the credit markets have changed, but I think we're offering something different than what's out there," says the lawyer turned developer.
First, he'll have to contend with a banking sector that, having taken massive writedowns in recent months, is now famously cautious about lending money for any kind of development – even when the borrower happens to be Bratty.
John O'Bryan, vice-chair of broker CB Richard Ellis, says many large-scale commercial projects in Toronto are drying up because of lack of funding.
"Bankers are much more conservative and the biggest impediment (for builders) is financing," says O'Bryan.
But Bratty insists financing won't be a problem.
"The bankers know what we're planning, but we haven't worked out the details," he says.
Groundbreaking on the Markham project is likely 18 months to two years away.
Key to the business plan is that, unlike a traditional mall where the developer is the landlord, Bratty intends to sell the mall spaces, either to the retailers occupying the premises or outside investors – a structure commonly used in Asia to spread the ownership risk.
However, it's not quite a done deal yet. Bratty intends to start selling units this summer, but first he needs site-plan approval from the Town of Markham for phase one, while phase two will require rezoning for residential use.
And even if he meets sales targets and satisfies his bankers, he will have to contend with major competition from other malls, including an expansion by veteran developer Sheldon Esbin's Splendid China Tower across the street on the Scarborough side of Steeles Ave.
Esbin plans to break ground this summer, on a site formerly used by a Canadian Tire store, to expand his mall from 100,000 to 300,000 square feet
"I think Remington will do a great job. They're well financed and they're smart business people," says Esbin. "This area will be centre ice for the Chinese community."
Not far down the road at Middlefield and Steeles Ave., developer Terry Yiu is also building a new mall, the 435,000 square foot Landmark, billed as the next largest Asian mall in North America.
That scale of development is unprecedented in North America for Asian malls, and marks the first wave of massive building – some analysts say overbuilding – in more than a decade, in pace with Chinese migration first to Scarborough, then north to Markham and Richmond Hill.
"Can you have too many Chinese malls? Sure, but you can apply that argument to just about anything," says Bratty. "I'm confident this will work."
Bratty cites research by Remington that says 42 per cent of new immigrants from China come to the Toronto area, where there are already more than 430,000 of Chinese descent based on the 2001 census. By 2017 that number is forecast to be 735,000 residents.
Another finding is that Chinese consumers tend to be loyal, with almost half spending their dollars almost exclusively in Chinese-owned businesses.
Having all those malls close together creates a complementary usage that promotes more destination and tourist shopping, argues Bratty, who sees his mall becoming an "international draw."
"We looked at other malls across Canada and we learned from them and we wanted to do better," says Bratty.
Plans for the new mall are decidedly more upscale than the sometimes junky Asian retail condos that have dominated the Markham area. Some inspiration undoubtedly has come from Vancouver's Aberdeen Centre, a high-end condo and retail complex whose stores wouldn't look out of place in Yorkville.
But Bratty promises his mall will be more luxurious still, with thoughtful touches. Tour bus drivers bringing guests to the mall will be looked after, for example, courtesy of a private rest area where they can nap and shower, he says.
The new mall will be designed by Kohn Architects and will also have a vast outdoor public space with fountains – envisioned as a Times Square for the Asian-Canadian market.
Beside Bratty's Market Village complex is the 300,000 square foot Pacific Mall
, perhaps more famous as a shopping destination for the latest pirated DVDs.
While the Pacific Mall looks like a giant glass greenhouse, the existing Market Village looks like it was lifted from the set of Anne of Green Gables, arising from Bratty's goal at the time to fit his development into the farming roots of old Markham. The new mall, which will be rebranded the Remington Centre, will be connected to the Pacific Mall by a bridge.
So far, Markham council has been supportive of the scheme, although traffic congestion remains an issue.
Markham Councillor Alex Chiu says he likes the project, believing it would "bring a lot of tourism to Markham."
However, he acknowledges "traffic is always a concern in that area" and he has yet to see a traffic report by Remington's consultants.
Here's the existing Pacific Mall referenced in the article: