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Shopping Centers Today -> October 2003
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SIMON TO CONTEST MOA RULING
BY DONNA MITCHELL
Simon Property Group says it will “vigorously contest” last month’s verdict by a federal judge giving the the Ghermezian family a controlling 50 percent stake in Mall of America.
The decision by Judge Paul Magnuson of the U.S. District Court in Minneappolis transfers control of the 4.2 million-square-foot megamall from Simon to the Ghermezian’s Triple Five Corp., which now replaces Simon as managing general partner.
The ruling holds that West Edmonton, Alberta-based Triple Five is entitled to buy the 27.5 percent stake that Simon bought from Teachers Insurance and Annuity Association in 1999. Triple Five has nine months to pay Simon $81.4 million for the stake, which the Ghermezians have affirmed they will buy.
In a prepared statement, Nader Ghermezian, one of four brothers who founded and own Triple Five, said his family is “thrilled and very gratified by the ruling. ... The future of the mall is in good hands. We’re looking forward to a smooth, harmonious transition and a cooperative relationship with our partners. We intend to work to make the mall even more successful for benefit of all of the mall’s partners and its tenants.”
The court valued the Bloomington, Minn., mall at $700 million, rejecting the $583 million figure that Simon had submitted.
Simon called the verdict “legally and factually wrong” and complained that the court’s remedies may affect parties not involved in the lawsuit.
Simon must hand over all net profits it has received since 1999 as a result of buying the 27.5 percent interest — including proceeds from the sale of a portion of the Met Center site to Ikea. Court officials will determine the amount at a later date, Magnuson said.
Worse still for Simon, which also manages the mall, the court ordered that the Ghermezians must receive 80 percent of the management fees from Mall of America, leaving Simon with 20 percent. Simon is also barred from conducting any extraordinary business involving the mall without Triple Five’s written consent.
The ruling opens the door for the Ghermezians — who own West Edmonton Mall, the world's biggest — to regain control of a mall that it conceived in the 1980s. They brought in Simon in 1997 to help co-develop the project, the largest mall in the United States.
Triple Five sued Simon after the Teachers transaction, which gave Simon 50 percent ownership, Teachers 27.5 percent and Triple Five 22.5 percent. The Ghermezians contended that the maneuver broke an agreement because Simon cut them out of the negotiations and did not disclose its intentions. The court agreed, finding that Simon breached its fiduciary responsibility.
Ian Ritter contributed to this story.
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