Shoppers now can invest in the West Edmonton Mall, the world's largest.
Management has decided to carve up the 22-year-old mall's mortgage and sell certificates that are similar to bonds to generate additional consumer interest, while capitalizing on near record low interest rates.
Single asset mortgage securitizations such as this (the largest of its kind in Canada) usually get slightly better terms when marketed to individuals versus large institutions.
“The big guys are really going to sharpen their pencils,” says Howard Davidowitz, chairman of Davidowitz & Co. in New York, a leading retail consultant. “Joe Six Pack isn't going to be as diligent.”
The co-divided C$335 million (US $248.7 million) mortgage, a debt refinancing, carries an interest rate of 6.656 percent per year. The mortgage, issued on May 16, matures Oct. 11, 2008.
Gary Hanson, general manager of the giant West Edmonton Mall, in Edmonton, Alberta, declined comment during a telephone interview. The secretive Ghermezian family controls the famed shopping mall.
The 4.2 million square foot mall, whose 12-story, 355 room Fantasyland Hotel and five-acre water park help draw 21 million visitors each year, was appraised at C$603 million on April 4. It also features 800 stores, 26 movie theaters, a hockey rink and 110 restaurants.
Earlier, the Ghermezians announced an aggressive 10-year expansion for West Edmonton. The developer hopes to add 300,000 square feet of additional retail space, a third hotel, an 8,000-seat sports/exhibition facility and 500 apartments.
The West Edmonton complex earned C$8.2 million on revenue of C$129.2 million during the 12 months ended July 31, 2002.
Financial details emerged from a 222-page prospectus filed in late June by Canada Column Insurer Corp. This low-profile Toronto-based firm promotes structured finance deals for Credit Suisse Group, its parent, which is handling the mall refinancing.
Investors tend to be wary of investments backed by a single asset, especially following the World Trade Center attack in September 2001. However, Moody's Investors Service classified the West Edmonton certificates as investment grade, indicating that it believes that the risk is modest.
IN PROGRESS: VAUGHAN MILLS
Developer: The Mills Corp. and Ivanhoe Cambridge
Location: Vaughan, Ont., near Toronto
Architect: Bregman + Hamann Architects
Size: 1.2 million sq. ft.
Early Tenants: Bass Pro Shops Outdoor World, Tommy Hilfiger Outlet, H&M, Burlington Coat Factory, ESPN Games Skatepark
Opens: Fall 2004
Cost: $263 million (U.S.)
BUZZ: 7.5 million people — nearly one-fourth of Canada's population — live within 60 miles of the developer's first Canadian project, a 50/50 partnership with Ivanhoe Cambridge of Montreal.