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Mall of America planning entertainment expansion

By Debra Hazel

It may have been the most-hyped shopping center ever opened, the not-so-modestly named Mall of America, a 4.2 million-square-foot behemoth encompassing traditional retail and entertainment. Its Aug. 11, 1992 debut came after years of delays, the addition of a co-developer, and the renovation of most of its neighboring, and competing, centers. Some questioned whether the center had come just a bit too late to capture its market.

But since it opened its doors, the megamall has changed, adapted and shaken out, as most centers do. And, amazingly, it is looking to expand.

Mall of America's facility has not changed all that much -- it's still a large rectangular box, anchored by Sears, Nordstrom, Macy's and Bloomingdales, with Knott's Camp Snoopy taking up 1.6 million square feet of the center court. Underwater World, a 1.2 million gallon underground aquarium, opened in 1994.

To ease customer orientation, the center is still divided by courts: North Garden, West Market, East Broadway and South Avenue.

But much of the small shop retail has changed. The mall opened with 333 stores. Today, "We have over 500 stores. It is 97% leased," said Maureen Bausch, assistant general manager of the center. Sales exceed $500 per square foot.

Some names have changed -- the restaurant that opened as Blackhawk's now houses a Napa Valley Grill, for example. The food court has changed, and additional space was built out for Planet Hollywood and Rainforest Cafe.

Other tenants have changed as well.

"Retail by its very nature has always been fresh. We've really worked hard to bring in the newest, hottest retail: the Hot Topics, the Wet Seals, Steve Madden, Old Navy," Bausch said.

Another source of retail has been the entrepreneur incubator program begun even prior to the center's opening. The goal was to encourage the development of new retail, an understandable aim with nearly 1 million square feet of small shop space to fill prior to opening.

The program was launched with 19 tenants, and a large percentage of the original group remain with the center, she said. However, the entrepreneur program itself doesn't exist in its original format.

"At 97% leased, we no longer have the in-line spaces," said Kathy Rusche, the program's director.

Some situations haven't changed at all: Tourism remains critical to the center, though the origins of the tourists themselves have shifted.

"Tourism is up a little. Before, it was 30% to 35% of our business. Now it's more like 35% to 40%. Before, we had a lot of visitors from Japan. Now it's London and elsewhere in Europe," Bausch said. "China also was good for us last year, and so was South America."

But perhaps the most important change may take place by year-end: In August, Simon announced that it is in "active negotiations" to acquire 50% of Teachers Insurance and Annuity Association-College Retirement Equities Fund's $650 million stake in the mall. The deal, if it does go through, could be complete late this year.

"We think this is the best center in this country," David Simon, the firm's CEO, told analysts. "It also is a very strategic point for many of our Simon Brand Ventures and sponsorship programs."

Concerns that the center would overwhelm the market have been unfounded. The center itself claims that it brings in $1.2 billion in retail, hotel and restaurant sales that otherwise would never have come to its hometown of Bloomington, Minn. Outside observers agree.

"Overall, the mall has blown the balloon up larger for retail sales. The Mall of America has done well. But so has the other retail in the area. Southdale, Ridgedale, Rosedale all remain dominant," reported Michael Scott, senior vice president of retail for United Properties, a Twin Cities brokerage firm.

"I'd say it hasn't hurt retail in other centers. Shoppers are shopping centers in their neighborhood, then on special occasions going to Mall of America. Certainly, the surrounding five-state area comes to the mall for special occasions and holidays," Scott said.

And expansion is on the way.

"We've only had 8% to 10% turnover each year, and there are a lot of retailers who would like to be here," Bausch said.

Plans for Phase 2 are still very much in the air, according to John Wheeler, vice president of the megamall. However, co-owner and center manager Simon Property Group of is seeking to develop a 53-acre site at the former Metropolitan Sports center. Likely components include hotels, entertainment and theme retail, the Hyperport showcase for technology firms (SCT, August 1998) and restaurants. The Metropolitan Airport Commission, which does own the land, recently voted to swap that parcel with a 33-acre site owned by the megamall.

Mall management hopes to have construction under way by 2002, or even earlier.

The Mall of America opened Underwater World, a 1.2 million-gallon underground aquarium, in 1994.