BUSINESS

Glitter without gold

The novelty has worn off the world’s largest mall

DEIRDRE McMURDY July 29 1991
BUSINESS

Glitter without gold

The novelty has worn off the world’s largest mall

DEIRDRE McMURDY July 29 1991

Glitter without gold

BUSINESS

The novelty has worn off the world’s largest mall

When it opened in 1981, one of the project’s developers described it as “the eighth wonder of the world.” In fact, the 121-acre, 800-store West Edmonton Mall, which includes a hotel and a huge indoor amusement park, is still the world’s largest shopping centre. Built by Edmonton’s four Iranian-born Ghermezian brothers, the mall rapidly became a magnet for local shoppers as well as for tourists from around the world. But now, with the mail’s 10th anniversary just weeks away, it seems to have lost some of its glitter. Dozens of stores in the shopping complex are vacant, and many of those remaining acknowledge that they are having difficulty paying their rent. Moreover, the Ghermezians, once the most talked-about shopping-mall developers in North America, have given up control of two other major Edmonton property developments in the past eight months. Said a Vancouver-based retail consultant: “There are definite chinks in the Ghermezian armor.” Like many shopping-centre developers, the Ghermezians—Raphael, Bahman, Eskander and Nader—have been hurt by the decline in

retail sales caused by the recession. At the same time, the novelty of visiting an amusement park inside a shopping centre seems to have worn off for many local residents. “People get bored with the same old rides,” says Adam Finn, a marketing professor at the University of Alberta. Finn, who has studied the mall since it opened, adds that he is convinced that it has failed to generate the hoped-for profits. “The problem is that the mall is so big that it is hard to keep it fully leased,” he says. “I’ve heard that there are some stores that haven’t paid their rent in a year.”

The Ghermezians have declined to comment on their current predicament, and their familyheld development company, Triple Five Corp. Ltd., keeps its financial position private. But company chairman Eskander Ghermezian appeared before Edmonton city councillors last month to ask for a six-month deferral of the mall’s $7.6-million 1991 property tax bill and an exemption from late-payment penalty charges of $540,000. Ghermezian added that some of the shopping complex’s tenants were in arrears on their tax payments to the mall’s

management. He also threatened to shut down the mall’s water park and amusement rides. “I’m telling you, I’m converting this in five years to another business,” Ghermezian said of the amusement park.

Still, the city’s politicians unanimously rejected the Ghermezians’ demands. Declared Edmonton Alderman Sheila McKay: “I admire Triple Five Corp.—the Ghermezians are marketing geniuses. But I’m very glad we have taken the stand we have so that all businesses can be on a level playing field.” A spokesman for Edmonton’s property-tax records office declined to say last week whether Triple Five had since paid its 1991 taxes in full.

The other Ghermezian Edmonton-area properties to run into problems recently include an office tower and apartment complex. In November, the family sold its 50-per-cent stake in Edmonton’s Eaton Centre, a downtown retail and office complex, to Confederation Life Insurance Co. of Toronto for $1. Confederation Life had previously held a $150million mortgage on the property. And in February, the Ghermezians gave up their ownership of West Edmonton Village, a 1,176-unit apartment development, to the Alberta Mortgage and Housing Corp. The agency provided a $60-million mortgage in 1981 to finance the project, but a spokesman said that the development’s market value had fallen to $51 million by the time the agency took it over.

Those two transactions have led some analysts to express doubt about the long-term

financial viability of the West Edmonton Mall. Robert Hawkesworth, a finance critic for the provincial New Democratic Party, for one, says that he is worried because the Alberta government currently has more than $75.5 million invested in the mall. A provincially owned financial institution, Alberta Treasury Branches, has provided $25.5 million in lines of

credit to the Ghermezians and $50 million for the fourth mortgage on the mall. In partnership with other lenders, it also holds a $ 50-million third mortgage on the development.

According to some real estate analysts, the Ghermezians are now trying to find buyers for several of their other properties in the Edmonton area. They still own several hotels, restau-

rants and smaller shopping centres in the city. Searching for new opportunities, three of the brothers moved to Toronto in 1989. The family later purchased two parcels of land in nearby Mississauga, Ont., and announced plans to build houses and apartments on the sites.

Over the years, the Ghermezians have sought public assistance to help build similar large shopping and entertainment complexes around the world, including southern Ontario, upstate New York, Britain, Germany, the Soviet Union and China. But each of those projects foundered when local government officials declined the family’s requests for public funding.

Now, much of the Ghermezians’ attention appears to be focused on the so-called Mall of America, a $720-million shopping and entertainment complex set to open next year in Bloomington, Minn. The four brothers, who conceived of the project in 1985, had planned _ to own and operate the mall themselves, but in g 1987 they agreed to share control with a jointz venture partner, Indianapolis-based Melvin Si~ mon & Associates Inc. With more than 400 stores, 12,000 parking spaces and an indoor theme park inspired by the comic-strip character Snoopy, the development will be the biggest shopping mall in the United States. Despite their setbacks in Edmonton, the Ghermezians clearly believe that one-stop shopping utopias are the way of the future.

ELAINE O’FARRELL

DEIRDRE McMURDY with ELAINE O’FARRELL in Edmonton