West Edmonton Mall is undergoing a $335-million debt refinancing, and the process has given the public its first glimpse of the profitability of the famed shopping and amusement complex and the control exerted by the secretive Ghermezian family.
Financial details show up in a 222-page prospectus filed this week by Column Canada Issuer Corp., a little-known Toronto company engaged in promoting structured financings for Crédit Suisse Group of Switzerland.
The deal is a refinancing of the 4.2-million-square-foot complex, which is listed in Guinness World Records as the "largest shopping centre in the world" and as having the "largest indoor amusement park in the world."
Among the assets are a 12-storey, themed hotel known as the Fantasyland Hotel, World Waterpark, Deep Sea Adventure and Dolphin Lagoon.
The mall had total revenue of $129.2-million and a profit of $8.2-million for the year ended July 31, 2002. For the six months ended Jan. 31, it had revenue of $68.4-million and a profit of $5-million. Total assets were $383.8-million at Jan. 31.
Column Canada has raised $359.5-million by selling what are known as multiclass pass-through certificates, series 2003-WEM, to institutional investors and the public. The eight classes of certificates represent an undivided co-ownership in a $335-million first mortgage bond acquired by Column Canada Financial Corp. from West Edmonton Mall Property Inc. The cash from the sale of the certificates will be used to pay Column Canada's cost of acquiring the mortgage.
The properties had an appraised value at April 4 of $603-million.
The sale of the certificates was co-managed by Credit Suisse First Boston Canada Inc. and RBC Dominion Securities Inc.
The deal in essence ends a controversial chapter in the mall's financing. The four Ghermezian brothers, who own it, struck a borrowing arrangement in 1994 with Toronto-Dominion Bank.
Government-owned ATB Financial, then known as Alberta Treasury Branches, guaranteed $353-million in loans to the mall issued by TD. After more than four years of legal fights, ATB settled its dispute with the mall last December, but neither side has been willing to reveal details.
ATB started a $450-million lawsuit in mid-1998 against 20 defendants, including the mall and its owners. The mall filed a countersuit within months, seeking $495-million in damages.
ATB spokeswoman Darlene Dickinson said yesterday that the Edmonton-based Crown corporation has a policy of not commenting on individual files.
Mall spokesman Jonathan Meakin declined to comment.
The new mortgage, which represents a refinancing of West Edmonton Mall, is secured by, among other things, all of the mall's assets. The mortgage was issued on May 16 and bears interest of 6.656 per cent a year. It matures on Oct. 11, 2008.
Individual members of the Ghermezian family and four family trusts control Alfam Properties Corp., which in turn controls master company Triple Five Properties Inc. Triple Five operates and owns West Edmonton Mall through WEM Management Inc. and WEM Holdings Inc.
As part of the deal, the Ghermezian family must retain control of 51 per cent of WEM, and Triple Five National Developments Corp. is required to maintain a net market value of assets exceeding liabilities of $35-million (U.S.) and cash of at least $6-million.
The indemnity agreement was executed by David Ghermezian, the son of one of the mall's co-owners, Eskandar Ghermezian.
All rent from the mall and all revenue from the "amusement centre" and the hotel at the mall are to be deposited in "lockbox" accounts at a bank.
Brent Jang