BUSINESS

Blue-sky planning

Alberta’s Ghermezians prepare to expand

JOHN DALY August 21 1989
BUSINESS

Blue-sky planning

Alberta’s Ghermezians prepare to expand

JOHN DALY August 21 1989

Blue-sky planning

BUSINESS

Alberta’s Ghermezians prepare to expand

For Edmonton’s irrepressible Ghermezian brothers, it has been a dream delayed. Since they completed their mammoth West Edmonton Mall in 1985—which Nader Ghermezian described as the “eighth wonder of the world”—the four Iranian-born brothers have doggedly tried to duplicate their spectacular blend of shops and amusement parks outside of Alberta. But efforts to expand their $2-billion empire have often been frustrated. And they have been hampered by their inability to convert the huge short-term, high-interest debt that they incurred to build the Edmonton mall into long-term debt with lower interest costs. In the fall of 1986, the brothers’ Triple Five Corp.

Ltd. withdrew a $400-million public bond issue after it failed to sell. The onerous debt load also made it more difficult for the Ghermezians to build other mega-malls.

But, earlier this month, Citibank Canada announced that it has finally sold a $350million issue of mortgage bonds and arranged another $100 million in long-term loans for Triple Five—the largest such private placement in Canadian history.

The package converts all the outstanding debt on the mall to a five-year term. The Ghermezians will have to pay 11.3-per-cent interest on the first $300 million of bonds,

11.6 per cent on the next $50 million and a floating rate on the remainder. Jeff Zelikovitz, vice-president of investment banking for Citibank Canada, said that the package will provide significant savings for Triple Five, which has been paying about three percentage points more than the 11.3 per cent to extend its short-term bank loans since its previous bond issue failed. The refinancing will also make it easier for the Ghermezians to expand into Central Canada and abroad.

But the elusive and secretive brothers were not anxious to celebrate their victory publicly last week. Even the usually outspoken Nader Ghermezian did not respond to requests by Maclean ’s for comment. And a spokesman for Triple Five would only answer some written questions on the condition that she not be

identified. Still, the successful placement clearly is a vote of confidence in the Ghermezians by several large Ontario-based financial institutions. Royal Trustco, London Life Insurance Co. and Citibank Canada itself have agreed to take up the bulk of the first $350 million worth of bonds. And a consortium of banks led by the

Bank of Montreal has agreed to lend the brothers $50 million.

The Alberta Treasury Branches, a provincially owned financial institution, has also agreed to convert a still-outstanding $50-million loan to the Ghermezians into a third mortgage. That action drew sharp criticism from opposition Alberta MLAs last week. Said Alberta NDP Leader Raymond Martin: “We’re going from a callable loan to a third mortgage, which is much riskier. If something did happen to West Edmonton Mall, we’d be the last to get our money back.” But Citibank’s Zelikovitz said that the treasury branch has secured its loan with other Triple Five real-estate assets.

For the Ghermezians, the activity took place following two setbacks in Europe. In June, the

brothers’ proposal to build a $ 1.8-billion, ninemillion-square-foot shopping and entertainment centre in Oberhausen, West Germany, was rejected by the state government of North Rhine-Westphalia, which called for new bids on the project. At the same time, the city council of Leeds, England, shelved the Ghermezians’ $5.8-billion plan to build a shopping, office and leisure centre on a 100-acre downtown site.

Still, the Ghermezians celebrated at least a partial victory in Bloomington, Minn. In June, Nader Ghermezian attended the groundbreaking ceremony for a $720-million Mall of America, which the family is budding in partnership with Indiana-based shopping-mall developer Melvin Simon & Associates Inc.—and which Nader proclaimed the “ninth wonder of the world.” But even at 4.2 million square feet, the Bloomington mall is only half the size that the Ghermezians originally proposed. And when it is complete in 1992, the brothers will own only 25 per cent of the mall.

But the Ghermezians clearly retain their appetite for expansion. In June, Triple Five announced plans for a $1.7-billion “leisure resort community” in Edmonton, which will include 7,500 housing units. And, after a three-year absence, they are tentatively stepping back into the Toronto area. In 1986, they scrapped plans for a 10million-square-foot mall in suburban Mississauga, Ont., after several Toronto developers—including Hammerson Canada Inc., Cambridge Shopping Centres Ltd. and Cadillac Fairview Corp. Ltd.—banded together to oppose the Ghermezians’ demands for $200 million in concessions from the Ontario ^ government.

2 But, earlier this year, two of the brothers—Raphael and Eskander (the fourth is Bahman, and they are all in their 40s)—established residences in Toronto. And Triple Five recently bought two parcels of land in Mississauga totalling about 120 acres. But, so far, the Ghermezians’ only project in the area is a relatively modest plan to build houses and apartments on one of the sites.

Since they arrived in Canada and began selling rugs door-to-door in Montreal in the early 1960s, the combative brothers have always persisted even in the face of failure. Now that part of their debt load has been lifted, it will undoubtedly renew their determination to build new wonders across North America.

KERRY DIOTTE

JOHN DALY with KERRY DIOTTE in Edmonton