Down and out in the Distillery District
After three years of lacklustre sales, some tenants are ditching the historic east-side complex
PAUL WALDIE
June 24, 2006
Meredith Heron was convinced that the Distillery District would be another Yorkville when she opened her store at the historic site in early 2004.
But after two years of paltry sales and squabbles with the property's owners, Ms. Heron pulled out and moved into a building at Queen Street and Gladstone Avenue.
"More people walk by here in an hour than would go by that part of town in a week," said Ms. Heron, an interior designer who runs Red Heron Essentials.
Since moving in there a few months ago, she has been joined by six other former Distillery tenants and 13 more have contacted her to ask about relocating.
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"We call it the 'ex-stillery,' " joked Annie Smith, who runs Mona's Dog Boutique and moved into the building in May.
Asked to describe her three years at the Distillery, Ms. Smith replied: "It's been a struggle from day one, an absolute miserable struggle. It's just been awful."
When it opened in May of 2003, the Distillery District was hailed as an innovative mix of boutiques, galleries and restaurants spread among 44 Victorian-era buildings on a 13-acre site. But three years later, tenants are complaining that the district, which is slated to expand its retail space significantly in the next few years, is still struggling to attract patrons.
The original owners, Cityscape Property Management Corp. and developer Bill Wiener, bought the property for $11-million and had big plans for it, including major renovations, retail opportunities and condominiums.
But the project soon ran into financial pressure and the partners became embroiled in a legal fight over money, control and personalities. The feud was resolved in October, 2004, when Mr. Wiener sold his interest to Cityscape and its new partner, Dundee Realty Management Corp.
Many tenants say the arrival of Dundee has brought badly needed stability and professional management to the Distillery. They credit Dundee for making numerous improvements to the site, including better lighting, new sidewalks and landscaping. And they say the district has broadened its appeal by adding events such as the Distillery Arts Walk and venues such as the George Brown Theatre School and Soulpepper Theatre Company.
As for those who left: "Some people are just whingers and complainers," said Derek Jessop, who runs the Gibsone Jessop Gallery. "There are always difficulties when you are doing anything that's new and innovative. It's not like moving in and renting a place at the Eaton Centre, for heaven's sake. What did they expect?"
But other tenants say the Distillery isn't living up to its potential. In their letter to the property owners, a group of 28 retailers said pedestrian traffic has been so low this spring that on some weekdays as few as five people visited their stores. "It has become a fact of life for most retail tenants here at the Distillery District that on-site traffic has been steadily declining to the point that many of us are seriously questioning the viability of the Distillery as a retail site," said the letter, which did not include the names of the retailers but was signed "anonymous" 28 times.
It added that the store owners are in such rough financial shape they may not be able to stay in business beyond this summer. The group said the district has unlimited promise, but it wants the property owners to hire a "retail development consultant" to develop a plan for the site.
Some tenants also privately complain about significant increases in lease rates -- rents are comparable to others areas of the city, they say, but are already too high given the low customer traffic.
Jason Lester, an executive at Dundee who oversees the Distillery, said he understands the retailers' concerns, but he wonders why they would want to make their gripes public. "All it's going to do is poison their water," he said. "If it doesn't work for a few, that shouldn't jade it for everybody else."
Some tenants saw the letter as sour grapes from those who can't make it. "If you want traffic, go to Harbourfront and sell hot dogs," said one, who asked not to be identified.
"What's developing here is something that's a higher level than someone who needs the traffic."
Another group of tenants issued a statement to The Globe and Mail rejecting the criticisms by the retailers and backing the owners.
"We are thrilled with the improvements made at the Distillery over the last number of years and we all plan to be tenants here long into the future," said the statement, signed by 20 tenants.
"Please note that there is no community in the city where every tenant is either happy or successful."
Mr. Lester said the Distillery has come a long way in recent months, "and those who haven't been able to make it work have moved on."
He said sales are up at many businesses and several are expanding, even tripling in size.
"If these tenants did not have the confidence in where things are going at the Distillery, they would not have sunk as much money as they have," he said.
Mr. Lester acknowledged that some lease rates are increasing, but he said the ownership group is sensitive to the needs of the tenants. "Some of the [original] leases were on extremely favourable terms because they just wanted to fill the space," he said. "Today, we are bringing them up to market."
The Distillery is still evolving and many of the original plans are under way, including construction of a 32-storey condominium building. There are plans to add more condos, possibly a hotel and a four-storey retail-business complex called the Ribbon Building.
Within a few years, the amount of retail space at the Distillery is expected to almost triple, from its current level of 60,000 square feet. Mr. Lester said Dundee is so convinced that the east side of the downtown core is on the verge of major growth that the company has been snapping up property in the area.
"We really believe strongly in the downtown east side right now," he said.
Syd Beder, who owns Lileo clothing store, said he loves the Distillery and couldn't imagine being anywhere else. But he acknowledged that it hasn't been easy financially. "Since we've opened, it has been a challenge. We would like to grow, and it's kind of frustrating. But there are obstacles in a new area."
Mr. Beder cited parking as the biggest concern, noting that condo construction has drastically reduced available parking for customers.
"In two years, [the Distillery] will be magnificent," he said, referring to the various development plans. "But some of us down here are going to have a real tough go over the next two years unless they make some concentrated effort to fix the parking problem and to make people aware that it's a great place to visit."
