Pyramid Companies

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Pyramid Companies

4 Clinton Square
Syracuse, New York 13202
U.S.A.
Telephone: (315) 422-7000
Fax: (315) 422-2717

Private Company
Incorporated: 1968
Employees: 400
Sales: $30 million (2002 est.)
NAIC: 233320 Commercial and Institutional Building Construction

Pyramid Companies is the leading developer of shopping malls in the northeastern United States, concentrating on secondary markets. The company operates out of Syracuse, New York, birthplace of its charismatic and often controversial managing partner, Robert J. Congel. His personal worth is estimated by Forbes magazine to be $700 million, making him the 364th wealthiest person in the country. Pyramid is known as an aggressive company that operates within the letter but not necessarily the spirit of the law, according to some critics. It also has become a breeding ground for aspiring entrepreneurs and developers, a business boot camp of sorts that requires young associates to attend daily 6:30 a.m. meetings and to work long hours six days a week. Congel enjoys fierce loyalty from his lieutenants by lending them money to buy ownership stakes in the projects on which they work. As a result Pyramid is a nest of partnerships between Congel, his associates, and local ownership groups, with Congel reportedly owning from 50 percent to 90 percent of each project. In recent years he and Pyramid have become preoccupied with a project dubbed DestiNY USA, a megamall tourist attraction to grow out of an existing Pyramid mall in Syracuse. DestiNY USA, unless scaled back, would be larger than Minnesota’s Mall of America and feature 400 stores, 30 restaurants and cafés, 20 movie screens, two Broadway-style theaters, and a concert hall. If as successful as Pyramid studies indicate, DestiNY USA will draw more visitors than San Francisco, New Orleans, or Disneyland.

Forming Pyramid Companies in 1968

Congel worked as a laborer for his father’s small Syracuse construction company before striking out on his own. In 1968 he teamed up with two like-minded young men in the area, Michael J. Falcone and Joseph T. Scuderi, and formed Pyramid. The company grew slowly in the beginning, its first major break coming when it was awarded a $13,000 contract to lay sewer pipe. Looking to become involved in more lucrative ventures, Congel contacted Simon Property Group, an Indianapolis mall developer, which, ironically, would one day become involved in the building of the Mall of America. The Simons essentially gave Congel a two-day seminar on the principles of the shopping center/mall business, teaching him about the design and building of a structure as well as the financial aspects. Pyramid then began to develop shopping centers in upstate New York, the first property opening in 1973. By 1976 the company developed 22 shopping centers, as well as a few office buildings and a project for Syracuse University. At this point the partners split, with Congel looking to focus on the development of shopping malls and his partners more interested in the office market. All three men became leading developers in the upstate New York area.

Over the next dozen years Congel and Pyramid built a dozen malls in New York and Massachusetts. According to a 1988 Boston Globe profile of the company, “Along the way, the Pyramid Companies established a reputation not only as the biggest and fastest-growing builder of shopping malls around, but also as a corporate operator—aggressive, prolific and proud of it. One company executive referred to Pyramid’s squadrons of young executives as ’the Green Berets of mall-building.’ “Drawn from top colleges and recruited by headhunters, Pyramid employed young lawyers and M.B.A.s willing to work whatever hours were necessary to complete a project. While associates operating out of the Syracuse headquarters were required to attend a daily work meeting at 6:30 a.m., those in the field had to be on the construction site at 5:30 a.m. in order to make their reports to the main office. It was an intense, fast-paced work environment that left little time for a social life, but generally it was only people who already possessed the necessary devotion and drive who were hired by Pyramid. Legions of Pyramid-trained lawyers and developers went on to establish their own companies around the country, most of whom professed gratitude to Congel for his crash course in business.

Less enthusiastic about Congel, however, were many individuals in the communities where Pyramid developed its malls, primarily environmentalists and small business owners. Part of the Pyramid method was not only to target secondary markets where a new mall could thrive but also to identify parcels of inexpensive land on which to locate the structure. All too often that meant selecting environmentally sensitive land or brownfields. According to a 1998 Business West article describing the company’s operations, “Pyramid brings to the table a sophisticated knowledge of land-use and zoning laws and a mastery of local political processes to achieve its ends. A common tactic is to employ litigation as a means of forcing cities and towns, where tax assessment offices are often undermanned and poorly equipped to lower tax obligations on Pyramid properties.” Business West also noted that “the town supervisor from Watertown, N.Y., Ralph Dickinson, once referred to Pyramid’s actions as a ’con job.’ He was rewarded with a libel suit. ’Where they might fail,’ he wrote, ’they threaten legal action to attempt to intimidate ... they file lawsuits based on distortions, half-truths and falsehoods. They try to portray themselves as good corporate citizens by throwing a few nickels and dimes around for PR purposes. Greed is their motivation, and only greed. I would never trust anything they say. They are the worst kind of corporate citizen.’”

Despite criticism of its methods, Pyramid was in many ways the envy in its field. Whereas the industry average sale level for mall tenants was $170 per square foot, Pyramid boasted an average of $250 per square foot, due in large part to hard-nosed bargaining of leases that allowed Pyramid to remove underper-forming tenants. The company also was able to build its projects in half the time as other developers, needing only six to nine months from groundbreaking to completion. To achieve this end, Pyramid again skirted the edge of acceptable business practices. According to a 1988 Forbes article, “In Pittsfield, Massachusetts, recently, Pyramid and a subcontractor paid over $240,000 in fines for filling in a swamp, relocating a stream, and even laying drinking water and sewage pipes in the same trench. Still, the 100-store mall opened recently to more than 120,000 shoppers over the first five days.” No matter how vehement the community protests leveled at Pyramid during the developmental stage of a project, the mall always proved to be highly trafficked. The Forbes profile conceded that “for all his roughshod tactics, Congel invariably leaves behind malls that enhance the local economy and are much appreciated by the townfolk. I declared war on Pyramid,’ admits Thacam N.Y.’s former mayor, Edward Conley, who also took to visiting city after city in the Northeast to warn others about Pyramid. He now says, ’In retrospect I have to admit that Pyramid helped us rejuvenate our community by offering us competition, making the whole county a vibrant retail market.’”

Involvement in 1985 Election Flap

One of the most notorious episodes in Pyramid’s history occurred in Poughkeepsie, New York, in 1985 when the company became involved in a local election to influence a change in zoning laws in order to build a mall in the area. An election ethics panel, the New York State Commission on Government Integrity, looked into the matter and some five years after the events concluded that Pyramid used a Republican Party official among others to circumvent state election laws. According to the panel’s findings, Republican Party election-law specialist Tom Spargo met with six Republican candidates for the Poughkeepsie Town Board in October 1985 to tell them that the Republican State Committee was going to provide strong support for their campaigns because of the strategic importance of Poughkeepsie, situated between New York City and the state capital of Albany. What he failed to tell them was that he was also in the employ of Pyramid, which proceeded to pour about $700,000 into the coffers of the pro-mall candidates. Pyramid affiliates donated $301,000 to three political committees, which then transferred virtually all of the funds to the Poughkeepsie slate of candidates. Although it was permissible by state law for such committees to donate as much as $150,000 a year to a candidate, using them to get around a $1,000 limit on individual contributors was a felony. In addition, two Pyramid affiliates spent another $475,967 on consulting firms, which among other services coached the candidates on how to best campaign door to door.

In the late 1980s Congel looked to build a mall in his own backyard, targeting the site of an old junkyard. Named the Carousel Center, it opened in 1990 and served not only as a flagship center for Pyramid but also a prototype for the future malls. Also in 1990 Pyramid attempted to become directly involved in retailing when it paid $20 million to acquire the venerable Bonwit Teller department store chain from its bankrupt corporate parent, after an earlier attempt at acquiring B. Altman had failed. For Pyramid, the acquisition assured that a Bonwit Teller store continued to serve as an anchor in its Walden Galleria mall in Cheektowaga, New York. Moreover, Pyramid hoped to use Bonwit Teller department stores as anchors at its new malls, as well as to open a new flagship operation on Fifth Avenue in Manhattan. Efforts to revitalize Bonwit Teller failed, however, and Pyramid returned its focus to leasing rather than retail.

Key Dates:

1968:: Pyramid Companies is established by Robert J. Congel and partners.
1973:: The first shopping center opens.
1985:: Pyramid is embroiled in Poughkeepsie elections.
1990:: Carousel Center opens in Syracuse.
1998:: Congel attempts to sell properties.
2000:: Congel is sued by eight minority partners.

Pyramid became the subject of more adverse publicity in the late 1990s when the Cheektowaga mall’s policy of banning Buffalo’s public transit buses from stopping on its property was accused of being racially motivated. Buffalo riders, many of them inner-city blacks, faced a difficult task in using the nearest Metro Bus stop. According to the Buffalo News, ’ ’They step off the bus along a muddy, unsheltered patch of Waiden Avenue without sidewalks. The stop consists of a metal pole and Metro flag shoved in the mud along the curb of Walden Avenue. They then must scramble across seven lanes of fast-moving traffic on Waiden Avenue or walk 20 yards to the nearest traffic light at the intersection of Duke Road. But even the intersection—where drivers are more concerned about making right turns than watching for pedestrians—does not have a pedestrian crosswalk.” The situation came to a head in December 1995 when a 17-year-old black woman named Cynthia N. Wiggins, employed at the mall’s food court, attempted to cross the seven lanes of Waiden Avenue on her way to work. She safely negotiated six lanes, then was struck and killed by a dump truck. With a newborn child left motherless, cries of racism, and the involvement of Johnnie Cochran, famous for his involvement in the O.J. Simpson murder case, a trial was certain to receive a great deal of media coverage. While the civil suit made its way through the court system, the mall changed its bus policy in reaction to boycott threats from area civil rights groups as well as the Buffalo teachers’ union. Only days after the trial opened in November 1999, however, lawyers for both sides of the dispute reached an agreement. Pyramid admitted no wrongdoing and paid $2 million of the $2.55 million settlement.

Attempt to Sell Pyramid in 1998

In addition to the ill-fated purchase of Bonwit Teller, Pyramid also experienced financial pressure in the 1990s from major cost overruns in the construction of the Carousel Center and Palisades Centers in Rockland County, New York. Chase Manhattan loaned the company $200 million to complete Palisades as well as to help Congel prepare Pyramid properties for sale. In April 1998 Congel announced that he was interested in selling Pyramid’s 31 properties (including 29 malls), which he portrayed as a family decision. With five children, he preferred to avoid family conflict by selling the assets, then allowing his heirs “to do their own thing.” The fact that a number of competing Real Estate Investment Trusts had recently paid high prices for mall operations, according to Congel, “only made what was inevitable much better.” When the real estate market soon cooled, however, he elected to sell off the Pyramid malls individually. But this strategy also failed to produce the kind of return for which Congel had hoped, and the properties were pulled from the market. In the aftermath of this decision, Congel was sued in federal court in May 2000 by eight partners in individual New York and Massachusetts malls who claimed that he had drawn millions of dollars from their partnerships in order to acquire Bonwit Teller and complete Carousel Center. Pyramid attorneys maintained that such actions were proper and normal operating procedure for the company. Pyramid officials also called the suit “sour grapes,” caused by the company’s failure to sell the malls.

Despite facing racketeering charges, Congel carried on with plans to transform Carousel Center into a much grander edifice that would not only serve as a legacy to himself but also as a gift to Syracuse: the DestiNY USA complex. In November 1997 Pyramid announced that it planned to nearly double the size of Carousel Center, work it hoped to complete by 2000. That timetable was delayed initially by a necessary cleanup of the oil-soaked property on which much of the construction was to take place. The project was further delayed as the Carousel Center expansion fired Congel’s imagination, and the outlines of a giant mall-and-entertainment complex began to take shape. In April 2000 Pyramid announced plans for a $900 million expansion that would now triple the size of Carousel Center and include hotels, skating rinks, and an aquarium. In order for it to operate such an enterprise, however, Pyramid insisted that it required a 30-year tax break from local governments, which it ultimately received. Pyramid then announced in October 2001 that the expanded Carousel Center would become known as DestiNY USA and that its projected cost now stood at $1.3 billion. Further concessions were sought from local officials as the project continued to grow. By December 2001 the projected cost reached $1.7 billion as plans for the top floor of DestiNY USA now called for grassy fields and brooks, a nine-hole golf course and driving range, a 15,000-seat concert amphitheater, a botanical garden, and even an indoor mountain that offered water slides during the winter and toboggan runs during the summer. As Pyramid pressed for more government concessions it also revealed that it was shopping for alternative sites for the project in Pennsylvania and Massachusetts. In January 2002 Pyramid was successful in obtaining additional tax breaks from both the county and city.

Congel’s vision for Syracuse and DestiNY USA, now budgeted at $2.2 billion, was not yet complete, however. In July Congel announced that he wanted to transform central New York into the Silicon Valley of clean-energy sciences by building a $500 million, 300-acre technology park adjacent to the mall complex, a project that a local newspaper headline immediately dubbed “Destiny’s Child.” In the meantime, a U.S. District judge ruled that the federal lawsuit claiming that Congel and his companies defrauded eight minority partners could go to trial. The outcome of the litigation, as well as the fate of DestiNY USA, would go a long way in determining how the aging Robert Congel, one of the country’s wealthiest people, would be remembered.