VIP cocktail parties, DJs, dancers, fashion shows, balloons and much more — opening day at the Canadian-owned U.S. megamall called American Dream had been planned for maximum effect and excitement.
The project in New Jersey, just across the bridge from Manhattan, was nine years in the making, and patterned on the West Edmonton Mall and the Mall of America in Minneapolis, the other two well-known destinations owned by the wealthy Ghermezian family of Edmonton.
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 theaters in the state.
Now an October 1 reopening is planned, but it comes amid financial turmoil.
Mortgage not paid since March
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 March. 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:
Dianne Buckner reports on the latest massive project from the Ghermezian family 5:39
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.”
Snowboarders and skiers pictured at the grand opening of Big Snow last December. The attraction shut down in March due to the pandemic, and reopened on Sept. 1. (Seth Wenig/The Associated Press)
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.
Don Ghermezian of Edmonton’s Triple Five Group, on site in 2018 at the construction of the American Dream megamall in New Jersey. The West Edmonton Mall, also owned by his family, has been used as collateral to help fund construction in a financial arrangement that now looks shaky due to COVID-19. (Jon Castell/CBC News)
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.”
The view of Manhattan from Triple Five Group’s offices in New Jersey, located next to American Dream. ( Jon Castell/CBC News)
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.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
