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FAST TIMES AT WEM

Alberta’s economy is thriving, and so is West Edmonton Mall

BY SUSAN THORNE

West Edmonton Mall’s mixture of commerce and fantasy is on display in its Europa Boulevard (above) and Deep Sea Adventure (right). The latter offers visitors submarine rides.

Canada’s West Edmonton Mall is on the move again. Free at last from a long-standing lawsuit, the 5.3 million-square-foot retail and entertainment center is riding high on Alberta’s wave of economic growth and preparing to take on new initiatives.

In December the mall reached a settlement in a four-year legal battle over financing with its chief lender, the Alberta Treasury Branches, or ATB, a province-owned financial services provider.

“We’re happy to put that behind us, and we’re really going to start pushing ahead now,” said Don Ghermezian, executive vice president of West Edmonton Mall Property, the mall’s owner, and son of Eskander, CEO of the family’s business interests. “I have never been as optimistic about our success in sales and traffic.”

There is a good basis for such confidence in Alberta’s economic boom, which has buoyed retail sales. Propelled by the oil and gas sector, Greater Edmonton experienced a 3 percent jump in population (30,000 new inhabitants) between 2000 and 2002, bringing the total population to 953,000, according to the city of Edmonton. Gross domestic product in 2002 grew by 3.5 percent, according to the Ottawa-based Conference Board of Canada. The organization also predicts 3.8 percent GDP growth for the city in 2003 and an annualized 3 percent increase for 2004 through 2007.

“With the [low Canadian] dollar the way it is and the strong economy in Alberta, it’s been an unbelievable few years,” Don Ghermezian said. Even the Sept. 11 terrorist attacks on the United States didn’t hurt sales. Instead, they encouraged Alberta’s 3 million inhabitants to stay home to shop in the months following. The mall’s sales currently average just under C$500 ($332) per square foot, with about 22 million visitors per year, Don Ghermezian said. The average sales-per-square-foot figure for Canadian malls overall in 2002 was C$451, according to ICSC’s latest Canadian Mall Sales Report. Half the mall’s visitors come from within a 30-mile radius, while an additional 25 percent are from elsewhere in the Canadian West, so the local and regional economies are key to its health.

The mall is thriving, opined Doug Fogg, a partner at real estate consulting firm J.J. Barnicke Edmonton. The only cloud on the horizon, he notes, is the purchase by Toronto-based First Pro Shopping Centres of a 70-acre site in West Edmonton, where rezoning has opened the way for development of a Wal-Mart-anchored shopping center.

But West Edmonton Mall is doing some interesting things with its retail. The newest major feature is the Chinatown marketplace that opened in December with a wide range of specialty merchants and a 55,000-square-foot T&T Asian Supermarket as anchor. (T&T is a 10-year-old, Richmond, British Columbia-based chain with 10 locations in Canada.) Gold lions and a dragon’s head greet visitors at the entrances, and the 12,000-square-foot plaza is organized according to feng shui principles. Like Bourbon Street, the mall’s nightclub district added in 1985, Chinatown lets West Edmonton Mall tap into a new customer demographic, observes its general manager and chief operations officer, Gary Hanson. The Asian community is Edmonton’s largest ethnic minority. Chinatown is near the mall’s casino, which also draws Asian-Canadians.

The mall’s owners are not putting all their eggs in the retail basket, however. Retail has been downsized as a share of the mall’s total area, from 80 percent in 1994 to 60 percent today. The mall offers seven amusement venues, including Deep Sea Adventure, Dolphin Lagoon and World Waterpark, and entertainment was emphasized in the mall’s fourth revitalization phase (completed in 2000), which brought in such large-format leisure retailers as Chapters, HMV and an IMAX 3D Theater.

With the ATB lawsuit settled, Ghermezian says he can now focus on a long-term multiuse vision for the mall. Plans call for a $145 million, 10-year development program that will add 300,000 square feet of retail, a third hotel, 500 apartments, an 8,000-seat sport and exhibition facility, and a 12-story office building, plus more parking.

This shift to a mixed-use center approach offers the security of further diversification, while building on such successes as the mall’s two hotels, Hanson said. The 355-room Fantasy Hotel averages 96 percent occupancy. The City approved the expansion in November, and construction of the third hotel will begin this fall.

West Edmonton Mall Property (affiliated with the Ghermezians’ Triple Five Group) enjoys a significant advantage as a private, family-owned company, Don Ghermezian said, because it can review new ideas efficiently.

Eskander, 62, whose father, Jacob, brought the family to Canada from a turbulent Iran in the 1950s, has run the family businesses with his siblings, Nader, Raphael and Bahman. Now the company is seeing a transition to another generation, with the accession of Don, 29, and his brother David, 30, vice president of Triple 5 Group’s U.S. operations.

The face-to-face relationship the owners have with their staff and tenants continues, Don Ghermezian said.

“Anybody can come see us anytime,” he said. Such inside input is one of the owners’ best sources of new ideas, he said. The mall’s management originally proposed the coming sports-entertainment complex, for instance.

For all the efforts to diversify, retail remains important to the mall. Hanson says the 800-store lineup maintains a 2.6 percent vacancy rate and has averaged yearly sales per square foot increases of 5 percent over the past five years. Women’s mid- and lower-price apparel, including over 100 women’s shoes and handbag stores, is the strongest merchandise category. The mall boasts Edmonton’s only Banana Republic, Stone Ridge and Tristan & America stores. New tenants include the first Canadian unit of Los Angeles-based young women’s apparel chain Forever 21 and JYSK, a Danish home goods store similar to Ikea.

The mall has also brought in such large-format tenants as Brick Warehouse, Famous Players and Sport Chek, which are normally considered big-box or strip center players. Additional store spaces of 100,000 to 200,000 square feet are planned for large-format retailers on the third floor. In addition, C$80 million to C$100 million is slated over the next few years for an aggressive renovation of common areas and the exterior.

And in a sign that the mall has truly put its past behind it, Don Ghermezian says he doesn’t rule out ATB as a source for this next phase. “We believe we will continue to have good relations with them in the future.”

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