Sunday, August 18, 2002

Decade later, America sold on megamall




By Evan Ramstad
The Associated Press

        BLOOMINGTON, Minn. - Toy store owner Al Batzel thought the 4.2-million square-foot Mall of America would never work. It was too big and complicated to attract shoppers - and too expensive for retailers, he thought.

        But he visited the mall shortly after it opened and liked it. And when one of its leasing agents later stopped in his Rochester, Minn., store, Mr. Batzel decided to open a second shop, Al's Farm Toys, in the megamall. “A lot of people said we wouldn't make it,” he said.

        A lot of people said the same thing about the Mall of America itself. But with the 10th anniversary of the mall this month, those doubts are long gone. The skepticism that pervaded its development and construction is nearly forgotten.

        Today, the mall is one of the best-known shopping centers in the world. It draws 40 million people a year, more than Disney World and Disneyland combined, and is by far Minnesota's most-visited place.

        It transformed retailing in the Twin Cities and influenced mall designs around the world. It ended a nearly 40-year period in which innovation in mall design simply meant building something bigger.

        While its gigantic size certainly distinguishes the Mall of America, it succeeded by proving the irony that, with things to do besides shop in a mall, people tend to shop more. Over the past decade, hundreds of malls aimed to keep shoppers around longer by adding sit-down restaurants, multi-screen theaters and other entertainment as the Mall of America did.

        Its success lifted the fortune of its developers, particularly the company that is now majority owner, Indianapolis-based Simon Property Group. Simon went public in the mid-1990s and embarked on a $13 billion acquisition spree that expanded its portfolio to 250 malls.

        Few people imagined such results when the megamall was proposed by four businessman brothers - Bahman, Eskander, Nader and Raphael Ghermezian - from Canada in 1985. They were building, in phases, a similar giant mall in Edmonton at the time.

        The city of Bloomington had asked developers for ideas to reuse 78 acres left empty by the demolition of the Metropolitan Stadium, former home of the Minnesota Twins and Vikings. Others proposed office complexes, condominiums and a convention center. But the city selected the Ghermezians' megamall idea, and the brothers began looking for more support.

        Gov. Rudy Perpich provided crucial early backing, helping steer legislation for improvements around the property. And the city of Bloomington loaned money to speed road construction that was far down the state's schedule.

        The Ghermezians tried hardest to win validation from Dayton Hudson Corp. (now Target Corp.), the Minneapolis retail giant that anchored every other major mall in the Twin Cities with a Dayton's department store.

        For months in 1987, they tried to persuade Dayton's to take one of four anchor stores planned for the megamall. But Dayton's executives declined, in part because they already had two stores within five miles of the mall's site and in part because they didn't want the mall built.

        That didn't stop the Ghermezians. A few weeks later, Simon Property Group, then running about 70 U.S. malls, joined the venture. It helped attract Teachers Insurance and Annuity Association, which eventually took the biggest share of the financial risk as construction of the $650 million building began in 1989.

        “A lot of people thought it was going to be a flash in the pan at best,” said Buzz Anderson, a former state legislator who is now president of the Minnesota Retailers Association. “Today, it's a big economic engine.”

        From its opening on Aug. 11, 1992, the mall attracted both tourists and local residents in nearly equal numbers.

        Mall managers designed promotional events in European and Asian cities and hosted international journalists in Bloomington. They partnered with Northwest Airlines, based in a nearby suburb, to bring charter flights of visitors at peak shopping times.

        To make the mall visually appealing, the developers put parking garages on just two sides, rejecting an early plan to surround it with garages. They put the parking structures very close to the mall and built “express ramps” that let people zip to the level they want to shop, convenient for local shoppers who want to get in and out quickly.

        In addition to three anchors that were new to the Twin Cities - Nordstrom, Macy's and Bloomingdale's - the mall is peppered with unique stores like Al's Farm Toys. And in Minnesota's long winters, the mall's diversity of stores and entertainment is an antidote to cabin fever, a place where people can shed their coats and spend a long time doing a lot of different things.

        “It really is one of the few places in this entire region where you see everybody who lives here,” said Judith Martin, a professor of urban geography at the University of Minnesota and a former critic of the mall. “I don't think of it as a community space, but as a space where many communities find a place and see people who are not part of their community.”

        Initially, the megamall cut business at nearby malls and at stores in downtown Minneapolis and St. Paul. Retailers in downtown Minneapolis fought back with holiday parades and other promotions. But by mid-decade, the region's economy was booming and developers added stores and strip centers equivalent to two more megamalls.

        The Mall of America opened with 71 percent of its space leased. That grew to 83 percent at the end of its first year. It's now 99 percent leased with 520 stores, 20 sit-down restaurants and 30 fast-food places. Stephen Sterrett, Simon's chief financial officer, said sales per square foot are “significantly in excess of our portfolio average.”

        Today, the Ghermezians and Simon are fighting in court over a 1999 deal that made Simon majority owner of the mall. But they're also working together on a second phase to the mall - expecting to begin construction next year on a complex of hotel, office and fitness buildings that will connect to the megamall via skybridges.

       



New owner consolidates much of area taxi service
The waiting hurts in Piketon
Forgotten Piketon buildings reflect uncertainty in diffusion industry
- Decade later, America sold on megamall
On the move?
Tristate business notes
What's the Buzz?