Triple Five Group Ltd. History

Company Perspectives:

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Key Dates:

1917:

Jacob Ghermezian establishes his own business in Iran.

1920:

Ghermezian erects his first multi-use facility in Tehran.

1940s:Jacob Ghermezian moves to the United States with his family.

1959:

Ghermezian relocates to Edmonton, Alberta, Canada.

1965:

Ghermezian establishes a real estate development focus with Germez Developments (later named Triple Five).

1981:

Triple Five Group opens Phase I of West Edmonton Mall, followed by Phase II in 1983 and Phase III in 1985.

1989:

Triple Five breaks ground for the Mall of America.

1992:

The Mall of America opens in Bloomington, Minnesota; Ghermezian family is awarded the Great Canadian Order of Canada Award.

2001:

West Edmonton Mall records its best year ever.

Company History:

Triple Five Group Ltd. of Edmonton, Alberta, Canada, is most widely recognized as the owner of the world's largest mega-mall, recreation, and amusement complex--the West Edmonton Mall. The 5.2 million-square-foot mall is a mixed-use, tourism, retail, and entertainment center that attracts more than 60 million visitors annually. Triple Five also has ownership in the Mall of America in Bloomington, Minnesota, the largest mall in the United States. Triple Five owns and operates several other shopping and entertainment complexes, hotels, and commercial, industrial, and residential properties throughout the United States and Canada. The private company is owned by the Ghermezian family, a large, close-knit orthodox Jewish family, who emigrated from Iran. The company web site lists Triple Five Group divisions in technology, venture capital, mining, real estate, and banking, in addition to the two mega-malls. The many arms of the business appear to overlap considerably. The technology division, for instance, offers "venture capital" for technology businesses such as multimedia, telecommunications, biotechnology, Internet, fiber optics, networking, e-commerce, and more. Triple Five also owns Peoples Trust, a federally regulated and chartered bank with several branches throughout Canada, and First Nuclear Corporation, which pursues growth in resource development and exploration.

From Rugs to Real Estate: 1920s-60s

The roots of Triple Five corporation began with family patriarch Jacob Ghermezian, who was just 17 years old in 1919 when he started the business in Iran. In the 1920s he erected what could later be seen as the small-scale model of his grandiose-scale mega-malls. It was a multi-use, retail-apartment-office-recreational complex in Tehran. Family history has it that in 1943 that complex hosted an historic meeting of Franklin Roosevelt, Winston Churchill, and Joseph Stalin, which resulted in a united action against the Nazis.

Ghermezian left Iran with his family in the late 1940s and settled in New York. His oldest sons later moved to Montreal for education at McGill University and to begin establishing a business there. The family business of importing Persian rugs was flourishing. By 1964 they owned 16 retail stores throughout the United States and Canada.

Between the 1950s and 1970s, these carpet importers transformed their business focus to real estate development. In 1965 Jacob Ghermezian established a real estate business, Germez Developments, which was later named Triple Five, to purchase land and resell it to builders in the Ottawa area. Two years later Jacob and the oldest of his four sons moved to Edmonton and began purchasing land there, beginning with a hotel and other properties. Thanks to the region's oil boom in the 1970s, the Ghermezians' real estate investments prospered. Eventually the entire family moved to Edmonton--Jacob's four sons Raphael, Eskander, Nader, and Bahman and their families. In addition to two hotels and the Northtown Mall in Edmonton, they opened several boutiques in major cities throughout Canada and the United States and developed more shopping centers, office buildings, and residential communities.

According to author Peter C. Newman in his 1998 book Titans, "Their flagship Triple Five Corp. was formed with the backing of 551 silent partners, Iranians who needed a secret conduit to reinvest their wealth in order to avoid Iran's notoriously capricious habit of retroactive taxation." The actual founding date is unclear, as is the meaning of the name Triple Five. A 20th anniversary publication of the West Edmonton Mall offers this guess as an explanation: Triple Five is the "business of three countries, plus the sum of four brothers and a father." The true meaning, however, remains a mystery.

The Making of the First Mega-Mall: 1979-85

The Ghermezians' early real estate investments paid off. In 1979 Canada's provincial government purchased undeveloped land from Triple Five, giving the family a reported $18 million profit, which they used to finance their dream of building Canada's largest shopping center, the West Edmonton Mall. They had been lobbying the local government for concessions and trying to maneuver several obstacles to build the planned 225-store mall. They were successful in getting tax concessions, rezoning, and land purchase deals to secure enough acreage to build the mall.

Phase I of the West Edmonton Mall opened in July 1981. The 1.1 million-square-foot facility offered 220 stores and services and was modeled after a typical Persian bazaar serving as a hub at the center of town. The mall reportedly cost Triple Five about $200 million to build. The new mall was a success, grossing $113 million in revenues the first year. Phase II followed in September 1983. It increased the Mall's size by 1.13 million square feet and included an ice skating rink, amusement park, and another 240 shops and services. A full-scale replica of Bourbon Street in New Orleans was another popular feature of Phase II. Phase II cost the Ghermezians another $250 million.

But that was not enough to fulfill the grand dreams of Triple Five's owners. After months of debate with local officials over Phase III, the Ghermezians were eventually successful at negotiating the plans with a $20 million concession package. Phase III featured a water park, submarine ride, dolphin tank, golf course, and hotel. The brothers bolstered their lobbying efforts by promising to donate all profits from the amusement park to local charities. They also pledged to build a $600 million shopping and office complex in downtown Edmonton, with an Eaton's department store as the primary anchor. They were, however, demanding massive tax concessions from the local government, which were narrowly approved. The government later granted Triple Five $30 million worth of tax and parking concessions to build the Eaton Center Mall. Phase III of the West Edmonton Mall opened in September 1985. The mall had grown to 5.2 million square feet, occupying a total of 120 acres.

1985: Opening of People's Trust Company

In the midst of all the mall development, Triple Five announced plans in 1985 to open a trust company called People's Trust Company. The first branch was located in the West Edmonton Mall, and the bank eventually spread across Canada. At the time of the trust opening, Triple Five Managing Director Nader Ghermezian hinted that Triple Five might some day become a publicly traded corporation.

In 1986 Triple Five completed the Fantasyland luxury hotel, which was attached to the West Edmonton Mall's phase III arm. The Fantasyland Hotel, with 350 rooms, offered guests executive-style guest rooms or "fantasy" suites featuring decorative themes of different countries, time periods, and interests, such as Roman, Arabian, Polynesian, and Eskimo rooms.

By the mid-1980s the West Edmonton Mall boasted visitor statistics exceeding the number of tourists visiting nearby Banff National Park. The mall's estimated economic impact annually in the province was $1.2 billion. Despite the West Edmonton Mall's notoriety as the site of the planet's largest mall, parking lot, indoor wave pool, indoor lake, and world-record status amusement park and roller coaster, the $700 million mall was straining company finances. The company issued a $400 million bond offer, Canada's largest to date, which was unsuccessful in attracting investors. The bond offer was withdrawn as the province was in recession. Triple Five eventually negotiated with the banks for a $450 million loan refinance package.

The process of making the Edmonton mega-mall a reality created and reinforced the mystique of the very private Ghermezian family. The brothers gained a public reputation as big dreamers, shrewd salesmen, extremely aggressive businessmen, and relentless and obviously successful lobbyists for government concessions. It was no surprise, then, that they took that formula on the road.

1986-92: Selling the Mega-Mall Model

Not ones to rest on their laurels, the Ghermezians were busy hatching dreams of mega-retail centers in other communities. In 1986 they were chosen to develop the Mall of America in Bloomington, a suburb of Minneapolis, Minnesota. It would be the largest indoor mall in the United States with more than 200 specialty stores, an amusement park, and convention center (which was later dropped from the proposal). The mall would be built on the vacant site of the former Metropolitan Stadium, where Minnesota's professional baseball and football teams once played. Bloomingdale's and Nordstrom (which had no Minnesota presence at that time) agreed to be anchor stores.

But the road to building the mall was not a smooth one, and the Ghermezians had to work hard to make all the pieces fit. Triple Five leaders lobbied state and local officials doggedly for direct subsidies and tax breaks. The city of Bloomington granted Triple Five $60 million in municipal aid and concessions to build there. Minnesota legislators, however, rejected providing any operating subsidies to the developers and reduced the size of the initial development proposal. They did, however, authorize use of funds for improvements on and around the mall site.

Despite the state and local aid, Triple Five had difficulty securing all of the necessary financing for the Mall of America. Finally in November 1987 Triple Five Group announced that it had partnered with American retail developer Melvin Simon and Associates of Indianapolis and with Teachers Insurance and Annuity Association (TIAA) to finance the project. Triple Five and Simon each held 22.5 ownership, and TIAA held the majority 55 percent share. Simon was given management control of the mall. The price tag of the 4.2 million-square-foot Mall of America was estimated at $600 million. They broke ground in Bloomington in 1989. Completion was expected in 1992.

While the Mall of America was being developed, the Ghermezians also floated proposals to build mega-mall entertainment complexes in upstate New York and Toronto, apparently pitting the New York and Canadian officials at odds for the project. For these proposals the Ghermezians were asking for tax concessions, reduced price of government-owned properties, and commitments from local public officials to create utility services and new roads to the shopping centers. Despite Triple Five's aggressive, persistent lobbying and sales pitches, its proposals for building additional mega-malls in England, Moscow, Germany, and even Beijing encountered roadblocks, as did the plans for New York, Ontario, and California. Rumors began circulating about the developer having tax problems related to the expensive West Edmonton Mall.

In 1992 Mall of America opened with fanfare and crowds of shoppers. Also that year the Ghermezians, particularly father Jacob, were honored for their contributions in development and other community-building projects throughout western Canada. The Governor General of Canada presented them with the Great Canadian Order of Canada Award.

1994-96: Financial Questions and Silver Spring Proposal

Talk of the West Edmonton Mall's financial problems tainted the company's positive public relations. The mall was reportedly $9 million in arrears for property tax payments, as high debt payments decreased Triple Five's cash flow. In 1994, the company apparently defaulted on $450 million worth of loans on the West Edmonton Mall. In addition, the store vacancy rate was growing as several mall tenants left. Evidently the company had difficulty finding another lender when their bank, Royal Trust, failed. Alternative refinancing was eventually secured. During this time Triple Five sold several real estate holdings in Edmonton to offset the lack of mall profits, selling a handful of retail, hotel, and housing complexes in Edmonton.

Triple Five continued pursuing leads for erecting mega-malls, giving its pitch a theme of urban renewal in Silver Spring, Maryland. Billed in part to revitalize an economically precarious downtown area, Triple Five proposed building a two million-square-foot retail and entertainment complex--the American Dream Mall. With an estimated cost of $600 million, this mall would include a skating rink, indoor amusement park, indoor wave pool, more than 20 movie theaters, and a 500-room hotel.

Again the Ghermezian brothers pushed hard with their sales and lobbying efforts to make the American Dream Mall a reality. Critics of the Silver Spring project publicly raised questions about the company's financial stability, particularly the recent loan default. Company officials admitted that they were in "technical default" on the loan, but said the problem was due to the bankruptcy of their primary lender, and added that they were able to refinance with another bank at a lower interest rate. Triple Five's PR image in Silver Spring improved somewhat, when in November 1995 an independent consultant's report gave the company's finances a positive report, indicating that their main asset, the West Edmonton Mall, was financially healthy.

Planning on the American Dream Mall moved ahead and evolved to include a multimedia educational facility, sports club, and wellness center. The local 46-member advisory board approved the project in early 1996, requesting the addition of a performing arts center and mini-golf course. Although the local community was still divided on the project, Triple Five explored using either taxable or tax-exempt bonds backed by project revenues to cover approximately half the costs. The project was later postponed and then canceled in late 1996 due to lack of private sector investors to help finance the project.

1998: West Edmonton Mall Beginning a Turnaround

Despite the failure of the once promising Silver Spring project, financial troubles of the West Edmonton Mall had begun to turn around, improving the overall health and stability of the company. The mall got a makeover of sorts, with Triple Five investing $18.3 million in renovations and maintenance and giving it a smaller retail focus. The Ghermezians reduced retail presence at the mall from 80 to 60 percent and created more round-the-clock uses for the mall, primarily through entertainment venues. Entertainment additions included a bowling alley and the Palace Casino with slot machines, poker games, and blackjack tables. Although available retail space was less, the overall store vacancy rate declined to just 3 percent.

In 1998 Triple Five completed Phase IV of the mall, bringing total square feet to 5.3 million. Phase IV offered an IMAX theater, more restaurants and specialty stores, and mega-versions of traditionally smaller stores.

In the late 1990s Triple Five pursued smaller development projects in other cities such as Las Vegas and Phoenix. These were large retail-focused projects, not mega-malls. Triple Five's development firm in Nevada opened a large retail center in Las Vegas with an 18-screen movie theater, restaurants, a hotel, a public library, and a fine arts museum. Another Triple Five Nevada development, called Peccole Town Center, featured high-priced boutiques, professional offices, restaurants, art galleries, and an outdoor amphitheater. Triple Five officials continued to spread novel mall concepts throughout the United States. In Mesa, Arizona, they proposed a $200 million trendy urban village where people could live, work, shop, and find plenty of entertainment opportunities.

1998-2001: On Both Sides of Legal Disputes

In 1998 The Ghermezians were served a lawsuit by the Alberta Treasury Branch (owned by the province) alleging that the family bribed a former bank official to obtain a loan when the West Edmonton Mall was financially struggling. The suit contended the former bank superintendent received money from the Ghermezians after he approved a controversial $300 million refinancing package in 1994. The Ghermezians and the former superintendent countersued and denied any wrongdoing.

Meanwhile in Minnesota, Triple Five found itself on the initiating end of a lawsuit, this time with Mall of America business partner Simon Property Group. Their suit accused Simon Property and related businesses of secretly negotiating a deal to obtain majority ownership of the Mall of America to keep Triple Five from future potential profits. Apparently, TIAA sold 27.5 percent of its share in the property to Simon without the Ghermezians' knowledge, giving Simon majority ownership of the Mall of America. By mid-2002, neither the Alberta or Minnesota lawsuit had been resolved.

2001 and Beyond: The Future of the Malls and Triple Five Looking Bright

Despite the court battle with Simon Properties, the companies continued to pursue developing phase II of the Mall of America, which was still in the early planning stages. Despite skepticism by many Minnesotans, the mega-mall, which was made a reality by Triple Five, had been an unquestionable success. In less than ten years it became the nation's most popular tourist attraction with more annual visitors (an estimated 42.5 million) than Disney World, Graceland, and the Grand Canyon attracted together. An economic impact report on the Mall indicated that it attracted more than 2.5 million international visitors annually and resulted in $1.4 billion of positive economic impact for the state. Twin Cities business spinoffs from the mall increased sales tax revenues and helped create an estimated 10,000 new jobs in the area.

The West Edmonton Mall also was thriving. The mall recorded its best year ever in 2001, setting new records for sales, revenue, and visitor traffic, with the lowest vacancy rate in its history. The mall's performance was aided by the fact that Alberta boasted North America's lowest unemployment rate. Although most of North America was experiencing a recession, northern Alberta's oil resources were driving its healthy economy. Triple Five also had plans to continue the growth of the West Edmonton Mall property, hoping to add stadiums, a professional office tower, an adult living residence, and another hotel.

At the beginning of the 21st century Triple Five's corporate offices were located in the West Edmonton Mall. The company had satellite offices in California, Washington, Colorado, Minnesota, Arizona, Nevada, New York, and Florida, working on a variety of development projects. Hotels were common development projects, but to own a string of cookie-cutter hotel properties would be contrary to the innovative Ghermezian spirit. Triple Five's hotels, often constructed along with shopping and entertainment facilities, were designed to complement specific market opportunities and needs, such as an all-suite hotel, convention facility, or apartment hotel.

Triple Five's Peoples Trust Bank, a federally regulated and government CDIC insured chartered trust company, had offices in Vancouver, Calgary, Victoria, Edmonton, and Toronto. Peoples Trust provided investment and lending services, estate and trust asset management, and mortgage servicing, plus other banking services, and had in excess of $1 billion of assets directly held or under management.

Although founder Jacob Ghermezian died in January 2000 at the age of 97, his sons continued doing business in the "outside the box" spirit with which their father founded the company. The West Edmonton Mall's 20th Anniversary celebration booklet described Jacob as "a visionary, the quintessential cross between dreamer and businessman. And the existence of the Mall is a testament to his uncanny ability to marry the fantastic and the whimsical with community spirit and an eye on the bottom line." No doubt the Ghermezian brothers would (as the anniversary booklet promised) "continue to entertain ideas about businesses that will take them beyond the common and into the extraordinary."

Principal Subsidiaries: Triam Development Corporation; Triple Five Nevada Development Corporation; Triple Five National Development Corporation; Triple Five Florida Development Corporation; First Nuclear Corporation; Peoples Trust of Canada; West Edmonton Mall Property Inc.

Principal Divisions: West Edmonton Mall and Mall of America; Technology; Resource Development and Mining; Venture Capital; Real Estate Division; Finance and Banking.

Principal Competitors: General Growth Properties; The Rouse Company; Simon Property Group, Inc.

Further Reading:

• "American Dream Mall: Breaking the Mold for Urban Renewal," Stores, May 1996, pp. 60-61.
• Carlisle, Tamsin, "Canadian Mall Hit with Creditor Suit Over Receivership," Wall Street Journal, August 27, 1998.
• ------, "Property Report: Gamble by the World's Biggest Mall Pays Off," Wall Street Journal, March 7, 1997, p. B1.
• Denton, Herbert, "Invasion of the Mammoth Shopping Malls; Creators of Edmonton Center Seek to Build Replicas in Minnesota, Upstate New York," Washington Post, August 10, 1986, p. K7.
• Finkel, David, "Mall Is Beautiful," Washington Post, December 10, 1995, p. W16.
• "Ghermezians and Triple Five Reveal Plans to Open Trust Firm," Toronto Star, September 11, 1985, p. E3.
• Henton, Darcy, "Mall Bankruptcy Probers Smell a Rat," Montreal Gazette, June 18, 2001, p. A9.
• Hutchinson, Brian, "Trouble in Big Mall Country," Canadian Business, September 1994, p. 68.
• Laucius, Joanne, "West Edmonton Mall a Family Legacy," Ottawa Citizen, January 4, 2000, p. A5.
• "Mall Mogul Dies at 97," Toronto Star, January 4, 2000.
• "The Mall of Dreams," Economist, May 4, 1996, p. 23.
• Moore, Janet, "Ghermezian Brothers Are Still at It, Chasing Their Big Retail Dreams," Minneapolis Star and Tribune, August 4, 1997 p. 6A.
• Moore, Janet, and Phelps, David, "Mega Brawl; A Lawsuit Over the Sale of a Stake in Bloomington's Mall of America," Minneapolis Star and Tribune, April 9, 2000, p. 1D.
• Newman, Peter C., Titans, New York: Viking Press, 1998.
• "Obituaries: Jacob Ghermezian; Built World's Largest Mall," Los Angeles Times, January 10, 2000.
• Padgett, Mike, "Canadian Builder Plans Unique Mesa Destination," Business Journal (Phoenix), October 30, 1998, p. 4.
• Pinney, Gregor W., and Randy Furst, "Two Bills Offer No Direct Aid to Mall," Minneapolis Star and Tribune, February 14, 1986, p. 1A.
• Pressler, Margaret Webb, "Thinking Big: Brothers Propose a Mega-Mall in Silver Spring," Washington Post, September 4, 1995, p. 1.
• Pressler, Margaret Webb, and Louis Aguilar, "Mall Builder's Finances Called Sound; Consultant's Report Boosts Supporters of Huge Silver Spring Complex," Washington Post, November 29, 1995, p. F01.
• Queenan, Joe, "Will Wonders Never Cease?," Forbes, September 4, 1989, p. 72.
• Resnick, Amy B., "Builder of Maryland Mall Complex Looks into Partial Bond Financing," Bond Buyer, October 22, 1996, p. 3.
• ------, "Plans for Maryland Mall Scrapped Due to Lack of Private Funds," Bond Buyer, November 13, 1996, p. 3.

Source: International Directory of Company Histories, Vol. 49. St. James Press, 2003.

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