Ghermezian Brothers' Las Vegas Megamall
ESKANDAR GHERMEZIAN is not happy. The head of the family-owned firm best known for building the WEST EDMONTON MALL, the world's biggest indoor shopping centre, is in Las Vegas to inspect his company's operations in its most important new market. And behind the closed door of a meeting room, Ghermezian is making his displeasure loudly apparent.
It is 9 a.m. and the August desert sun is already beating down hard on this utterly unremarkable two-storey building, tucked behind an International House of Pancakes in one of Vegas's sprawling suburbs. The temperature is on its way to 37 degrees, and yet the atmosphere in the air-conditioned offices of Triple Five Nevada Development Corp. seems more stifling than the air outside. A slight man in his mid-60s shuffling around the office in an open-necked dress shirt and a black baseball cap, Ghermezian doesn't look the part of the table-pounding taskmaster. But the grandfatherly demeanor is deceiving. When he appears in a doorway, his officers snap to attention.
Some tension is understandable, of course. You'd be edgy too if you were spending US$300 million to build an enormous shopping mall/entertainment complex in what may be the most dynamic and competitive retail market in the U.S. The Ghermezian family redefined the "megamall" with their 5.3-million-sq.-foot retail Goliath in the Alberta capital. Now they're raising the ante in Las Vegas - one of America's fastest-growing cities and the world capital of conspicuous consumption.
The project is dubbed the Great Mall of Las Vegas, and with plans calling for more than two million sq. feet, it will rival its big sisters - West Edmonton and Minnesota's Mall of America. Like them, the builders are quick to point out, it won't be just a mall but an attraction unto itself, with a skating rink, a concert venue and an elaborate luxury spa. The idea is to overwhelm the visitor. This is Las Vegas, after all, where ostentation is the norm.
"We are talking about an indoor mall not like any other indoor mall you have seen, with a Vegas kind of theme," explains Jean Marc Joveidi, senior executive vice-president at Triple Five Nevada. "We want to bring our experience from the West Edmonton Mall and Mall of America to this city."
As is his custom, Eskandar Ghermezian declined to talk about the project. But Joveidi, his designated spokesman, says a quick glance at the recent history of the Las Vegas area makes clear why Sin City is the Ghermezians' next frontier. Simply put, the city is in the midst of a development explosion. Since 1990, Clark County, which is made up almost entirely of Las Vegas and its suburbs, has seen its population more than double as the tourist industry has drawn the young and low property taxes the old. That expansion has been primarily responsible for making Nevada the fastest-growing state for 17 years running. Between 1991 and 2003, Nevada's economy grew at almost twice the average national rate. And the motor driving all that growth has been shoppers. Retail sales have jumped 65 per cent in just eight years, to US$26.1 billion last year.
Still, even in such a potent market, making the Great Mall a success won't be easy. The project is planned for the city's far northwest corner, in the heart of a thriving residential area but a 30-minute drive from Las Vegas Boulevard - the so-called Las Vegas Strip. There, within one mile of their hotels, tourists find an astounding array of retail options, with no fewer than five major malls: the Forum Shops at Caesar's Palace, Grand Canal Shoppes at the Venetian, the Desert Passage mall next to the Aladdin casino, the Mandalay Place and the mammoth Fashion Show mall right at the centre of Vegas visitor traffic. Wresting tourists' dollars away from such established outlets will be no simple task. What's more, history shows that megamalls don't always make money.
But then, the Ghermezians are no strangers to leaps of faith, or to confrontation. Triple Five is the creation of Jacob Ghermezian, a Jewish silk-rug salesman from Iran, who moved his family to Montreal in the 1960s in part to escape the rising tide of Islamic fundamentalism in his home country. A few years after arriving in Canada, he moved with his wife and four sons to Edmonton and struck it rich in real estate. By the late 1970s, the Ghermezian family had amassed the largest private portfolio of land in Alberta, and Jacob handed control of the company to his eldest son, Eskandar. Under Eskandar's leadership, Triple Five became known as a hard-nosed developer with a reputation for the dramatic, culminating in the opening of West Edmonton Mall in 1981, a sprawling complex featuring an indoor amusement park, a dolphin show and a hockey rink where the Edmonton Oilers hold practices.
As the company grew larger and more ambitious, it also grew more controversial. Twice, Triple Five was accused of bribing officials to gain support for projects. In one instance it was exonerated, and the other was settled out of court in 2002. In the U.S., meanwhile, the firm's co-development with Simon Property Group of the Mall of America, that country's largest shopping mall, ended in a nasty court battle for control; the Ghermezians won earlier this year. But, like West Edmonton Mall in the early 1990s, the Mall of America has fallen on hard times of late. Its vacancy rate has ballooned to almost 10 per cent. Triple Five is now vowing to restore the "magic" of the megamall - something that will be vital to making the Vegas project work.
ON THE WALL of Jean Marc Joveidi's small office is an eight-sq.-foot aerial map detailing every inch of land in the greater Las Vegas area, with colour-coded notes denoting the company's various holdings. Those include a large outdoor shopping centre in west Las Vegas, called Boca Park, and a smaller retail development nearby. And in the top left corner of the map is a notation that simply says "The Site."
The Site seems a long way from the heart of the city, where tourists and locals can shop in both large and boutique stores while soaking up the excitement of the city. Getting people to travel some 30 km to The Site is a challenge Triple Five overcame in both of its suburban megamalls, Joveidi says. It's all about creating environments that lure people in, he says, and the company spares no expense to make that happen.
That's why, when the Nevada government banned the use of precious water supplies for outdoor fountains, the company didn't hesitate to truck water in from out of state so the fountains at Boca Park wouldn't run dry. "People probably think we're crazy to spend that on water," says Joveidi. "But when you're driving through the desert and you see green and you see water, subconsciously you think, this is somewhere that I want to park and stay."
No one is more enthusiastic about Triple Five's plans than the city's tourism officials. Fast as Las Vegas has grown, its prosperity remains closely tied to the gaming industry. Retail can help diversify the economy, explains Erika Yowell, manager at the Las Vegas Convention and Visitors Authority. "Fifteen years ago there were only two states in which you could engage in gambling. Today there is some form of legalized gambling in 48 of 50 states. If people are just interested in gambling, they don't have to come to Las Vegas."
They will keep coming, however, if the city can provide a broad range of attractions, she says. That's why tourism officials have begun aggressively marketing Vegas as a destination for so-called "shoppertainment": themed malls featuring such embellishments as the marble columns and elaborate statues of the Forum Shops, or the gondola rides of the Canal Shoppes - or the sheer size and elegant detailing envisioned for the Great Mall. "When you look at vacation spending, shopping is a huge part," Yowell says. "Our research shows people spend more on shopping when they're vacationing here than they do on sightseeing and shows combined."
But with legalized gambling spreading around the world, and with the threat of terrorist attacks hanging over travel, one question haunts almost everyone in Las Vegas: what if all that tourist traffic dried up? This year, a record 37 million people are expected to visit the city - 15 times the population of Toronto. Any sudden drop in the flow of tourists would have vast and devastating economic consequences.
"The risk is that the bottom falls out of the southern Nevada economy," says Jeremy Aguero, principal analyst with Applied Analysis, a Vegas-based economic consulting firm. "With any rapid rise comes the potential for rapid decline, and our economy is extremely narrow. Many people who live here are dependent, directly or indirectly, on the gaming industry. If something were to happen to it, be it terrorism or competition or regulation, it'd ripple through the economy."
The Triple Five brass are well aware of such worries, but on this sweltering August day, Joveidi has more immediate concerns than the sustainability of the Vegas boom. He has an angry boss to contend with. After just 15 minutes, Ghermezian summons Joveidi from a meeting with a reporter. When Joveidi returns, he politely cuts the discussion short. "I'm sorry," he says, "but I have to attend to an emergency situation." On the way out, he dismisses all the risks with a calm confidence. The tourists will keep coming, the city will keep growing, and the Great Mall of Las Vegas will be a glitzy addition to the city's sparkling landscape. (Still, a few weeks later, the company said the mall may end up being smaller than two million sq. feet.) "For the next 15 years, with the demographic growth that's happening, there is no overwhelming this market," Joveidi says. "Our history speaks for itself. Whatever we do, it becomes the talk of the town."
Maclean's October 4, 2004