Minneapolis, Minn. — The Ghermezians hit Minnesota in the mid-'80s with a splash. They proposed a mall with the world's largest indoor lake, waves six-feet high, and big enough for water skiing. That original vision was similar to their existing mall, the world's biggest, in Edmonton, Alberta. But in Minnesota the grandiose plans prompted enduring skepticism.
The Ghermezians largely faded from the scene as mall developers Melvin and Herbert Simon became involved and eventually took the reins as managing general partner. But a federal judge has ruled the Ghermezians and their company, Triple Five, are in control as managing general partner.
"This is a seismic result," declared the Ghermezians' jubilant attorney Roger Magnuson, who said the brothers sued because they were frozen out.
Teachers Insurance and Annuity Association wanted to sell half of its 55-percent stake in the mall. Magnuson says the Simons did not fulfill their obligations to their partners, the Ghermezians.
"The Simon's promised us that we would be at the table, they'd do nothing behind our backs, and that we would have a role in taking down this opportunity for the benefit of all of us. Instead they secretly negotiated with Teachers, took the opportunity for an affiliate, Simon Property Group," he said.
U.S. District Judge Paul Magnuson, who is no relation to the Ghermezians' attorney), agreed that the Simons had breached their fiduciary duty. He ordered that the Ghermezians replace the Simons as managing general partner of the mall, that the Ghermezians may buy the Teachers stake for $81 million, and that the Simons have to give up profits. The exact amount is still to be determined, but the Ghermezians' attorney, Roger Magnuson, says the amount is in the range of $45 to $50 million. He says the Ghermezians are likely to apply to the Megamall the creativity and strong management they display in Edmonton.
Planning for a second phase of the mall is underway, but Magnuson says the Simons kept the Ghermezians in the dark about phase two.
"All the plans for phase two obviously will be re-evaluated to seek to maximize the value for all the partners, including Teachers and Simons," he said.
Simon Property Group issued a statement saying the company believes that the court's order is legally and factually wrong, and the company plans to vigorously contest the ruling.
As for the existing Mall of America, the change produces more questions than answers. Minneapolis retail consultant Jim McComb points out that many leases at the mall are coming due for renegotiation.He says a new managing partner throws into question the mall's current planning.
"Will Triple Five agree with that plan, or will they want to do their own? Will they agree with the lease terms that are in negotiation, or will they want to change them? And all of these things create questions, particularly in the minds of the potential tenant," he said.
At the mall, none of the tenants MPR contacted were willing to be recorded for broadcast. Some said they didn't think it would have much effect, others didn't know the effect. One said he was glad because he thought the Ghermezians would inject more of a focus on entertainment into a marketing plan that currently overemphasizes shopping.
Jake Ladd, 19, of Roseville said he's skeptical the mall will change much. "I think stores that I like are pretty popular stores, and I don't think they're going to take those out. Like, I don't mind if they take out old people stores. That's cool. They should put a skate park in here."
Jake's pal, Brett Baker, says the Mall has a lot to offer. "It's got everything that you need. Like, some malls have, all they have is one store that you like, they don't have another store. This has got everything."
A skate park and any other big changes may have to wait. With an appeal likely it may be some time before it's clear who has final control of Minnesota's most widely known attraction.