Canada’s biggest mall owner gambled on American Dream. Then came COVID

All three properties combine retail shops with amusement park attractions. The American Dream’s approximately three million square feet includes attractions like a DreamWorks water park, Angry Birds mini golf, Legoland and an indoor ski slope plus some 450 retailers such as Levi’s, Sephora, H&M and Zara. 

But, of course, the March 19 grand opening didn’t happen. A global pandemic happened instead. The venue was shut down March 16 along with all casinos, gyms, and movie theatres in the state. 

Now an October 1 reopening is planned, but it comes amid financial turmoil.

Mortgage not paid since May

All three of the Ghermezians’ entertainment/shopping venues have been linked together in a financial arrangement that shows signs of weakness. 

In order to help finance American Dream, the family’s company, Triple Five Group, mortgaged both West Edmonton Mall and Mall of America. According to Trepp LLP, a data company that tracks commercial mortgages, Triple Five has missed payments on the $1.4 billion US Mall of America loan since May. The status of finances at West Edmonton Mall aren’t clear. 

“The Ghermezians have a very complex business empire, and shopping centres are part of it, but it’s a privately owned company so we don’t have all the information,” says Nick Egelanian, a retail consultant in Annapolis, Maryland, who’s been watching Triple Five’s gamble closely. “But it looks like this situation could put all the properties into default.”

Both Goldman Sachs and JPMorgan Chase, the New York City-based investment firms that helped arrange construction loans for the Ghermezians, declined a CBC News request for comment. 

Lineups for ski hill

Members of the Ghermezian family aren’t talking either. They are “extremely busy” with the new October 1 grand opening plan for American Dream, according to a spokesperson. The venue’s chief creative officer, Ken Downing, is handling media interviews, and he insists all is well in hand.  

“The team is super-excited,” he said in an interview from Manhattan. “We’ve been wanting to reintroduce and reopen to the public, and we want to do it the right way.”

WATCH | Dianne Buckner tours American Dream megamall under construction in 2018:

The launch of American Dream was planned to happen in stages, and a few of the attractions did indeed open in the fall of 2019. Retailers and the remainder of the theme park’s attractions had originally been intended to open with a bang in March. For now, admittance to the entire megamall is restricted to a quarter of its capacity due to COVID.

“I don’t think you’d be able to find many large projects like ours that haven’t been touched by COVID,” said Downing. 

He points to the sole attraction that reopened on September 1 this year, the indoor ski hill, and says people have been waiting in line as early as 8:00 a.m. with their skis and snowboards. “People love that ski slope,” said Downing. “It’s been as busy as it can be with 25 per cent capacity.”  

But even before the economic catastrophe of the pandemic, there was plenty of skepticism about the wisdom of opening the new mall amid a climate marked by multiple major retailers seeking bankruptcy protection or liquidating assets.  Besides, there are already more than enough malls in the state, according to Jeff Tittel of the New Jersey chapter of environmental group Sierra Club. He says there’s no way American Dream will solve the financial predicament for all three of the Ghermezians’ properties. 

Wrong place, wrong time

“People going to New York City want to go to the Radio City Music Hall or the Empire State Building,” he said. “They’re not going to get on a bus and come to New Jersey.”  

The Sierra Club has opposed American Dream from day one due to its impact on wetlands in the area. “It’s always been the wrong project in the wrong place at the wrong time,” said Tittel.

But the Ghermezian family — whose patriarch arrived in Canada from Iran in the 1950s and built Triple Five along with a fortune in real estate development, with the help of his four sons and now grandsons — is not easily discouraged.

In the late 1990s, they spent four years battling a lawsuit brought by the Alberta Treasury Board and emerged triumphant. And before West Edmonton Mall and Mall of America were built, there was doubt either of those venues would ever work. Both have been remarkably successful, ranked as top tourist attractions. 

The future of malls

Steve Rappaport, a New Jersey commercial real estate broker who specializes in retail leasing, says talk of malls being doomed is off-base.

“People love to congregate,” said Rappaport. “It’s always been about much more than shopping at a mall. They are places where people go to mall-walk in the morning, and teenagers go there after school just to hang out.”

He believes profitability at American Dream will be a struggle, but he says he has no doubt the Ghermezians will stay the course. “I don’t think that all of the sudden they’re going to say all is lost and just hand the keys back.”

There is, however, that matter of the mortgages. Late payments on an almost $1.4 billion loan are no small thing.

The managing director of Trepp LLP, Manus Clancy, says everything hinges on the lenders. 

“They have to assess does the borrower want the property, and do they have the financial ability to keep this thing going? Or are we better to take the property over and find a new team to run it?”

Some in the industry believe that only the Ghermezians have the experience to run unique destinations such as American Dream, West Edmonton Mall and Mall of America, with their distinctive mix of retail and theme park attractions.

Clancy isn’t convinced.

“We do have big players in the U.S., like Simon and Brookfield; they are operators of high-end malls in the U.S. So there are people that would be candidates,” he said, if the lenders lose confidence in Triple Five Group.

In Edmonton, the executive director of the Building Owners and Management Association, Percy Woods, has faith in the family. 

“They might have their PhD in dealing with financial situations,” he said. “They always come out OK. They’re very smart. And they’ve been very successful.”