Attention Mall Rats

Developer Bob Congel wants to turn Syracuse into a tourist destination.

09.03.01

by Daniel Kruger

Syracuse, N.Y. A tourist hot spot? It takes a certain imagination, or perhaps desperation, to come up with that as an economic development plan. But Robert Congel has believers.

Congel, 66, is a contractor turned mall owner. He already has in his portfolio the 1.5-million-square-foot Carousel Center in Syracuse. Help me triple the size of the mall, he is telling New York politicians, and I will make this into a destination shopping site. I will pull in shoppers from 500 miles away and inspire them to head off to vacations in the Adirondacks, Niagara Falls and the Finger Lakes. The 18,000 construction jobs, followed by 11,000 retail jobs (plus all that tourism), could inject $10 billion a year into the New York economy.

It would be easy to dismiss the scheme as daydreaming if not for Congel's considerable success in the real estate business. Starting in the late 1950s as a contractor, he assembled Pyramid Management Group, a collection of 23 separate private mall partnerships that rang up a collective $4.5 billion in retail sales last year, primarily in upstate New York. The existing Carousel Center pulled in $650 million of that total, or $430 a square foot. Comparable malls average $300, says a mall trade group.

If Congel accomplishes his plan to add 3.2 million square feet to Carousel, it would become 500,000 square feet larger than the Mall of America in Minneapolis. A gargantuan Carousel, he hopes, will draw 50 million visitors a year by 2004, up from 17 million last year (43 million visitors passed through Mall of America in 2000).

But seriously, folks. How many people are going to give up their summer rentals in Cape Cod or the Berkshires... for Syracuse? Yes, there are lovely rolling hills, a nice university and very cheap housing. But there's also a long legacy of spending taxpayer money on economic development schemes that don't quite pan out (FORBES, May 29, 2000).

Congel himself has built plans around some unfulfilled promises. In clearing ground for Carousel back in 1990, Congel said he hoped that Syracuse would dredge nearby Lake Onondaga and build a marina, and that hotels and homes would sprout along with the improvements. Didn't happen. Carousel went up with substantial tax breaks--but former partners charged that the project ran 50% over its $200 million projected cost. Congel says the overrun is minor.

There have been other disappointments. Pyramid bought the venerable but moneylosing Bonwit Teller in bankruptcy court proceedings in 1990 for $20 million and moved its headquarters to Syracuse. Congel wanted Bonwit as a high-end mall tenant. But Pyramid was out of its element running a retailer and couldn't turn the company around. Plans for a new flagship store on Manhattan's Fifth Avenue fizzled, and Bonwit returned to the dust from which Congel had tried to save it. "We are a leasing company," Congel concedes.

Lenders have confidence in Congel's abilities. Pyramid is carrying a total $2 billion in debt on its properties, which are worth $3 billion in all, by the estimate of outsiders we spoke to (Pyramid says $3.8 billion).

To finance the $935 million Carousel expansion, Congel plans to borrow $325 million from banks and the like, get $250 million from a tax-exempt bond issue, get $260 million from new tenants' building contributions, and use $100 million of his own and his partners' money.

Congel likens his project to that of Governor DeWitt Clinton, whose Erie Canal transformed the economy of a young state back in the 1820s. It might end up like the canal. Or it might end up more like Syracuse's many dead ends on the path to economic revival.