Explainer: 'American Dream' Project -- Is It Really Happening This Time?
Long and winding road filled with fiscal detours may finally lead to completion of sprawling entertainment and retail complex formerly known as ‘Xanadu’
Construction has resumed on the long-stalled “American Dream” shopping and entertainment complex at the Meadowlands.
Most notably, construction crews have begun replacing the garish exterior tiles that compelled the blunt Gov. Chris Christie to proclaim it “the ugliest damn building in New Jersey.” But a decade after groundbreaking and many, many, many delays, the public remains skeptical. What’s different this time?
‘American Dream’ Deferred: The project has cycled through two developers since its birth in 2003 as “Xanadu” before landing with Triple Five, the Canadian firm that owns and operates the two biggest malls in North America: the 5.3-million-square-foot West Edmonton Mall in Alberta, Canada, and the 4.2-million-square-foot Mall of America, near Minneapolis.
The original developer of the now-renamed American Dream, Mills Corporation, became the target of a Securities and Exchange Commission investigation and declared bankruptcy in 2007.
The Colony Capital group that took over foreclosed in 2009 after a subsidiary of the bankrupt Lehman Brothers began missing loan payments, causing other lenders to withdraw their support.
In 2011 (after heavy snow caused part of a wall to collapse), the New Jersey Sports and Exposition Authority, which owns the land, announced a deal with Triple Five. The company pledged to contribute $1 billion in privately raised money to construction and later resolved legal issues between itself and the New York Giants and New York Jets over concerns that operating part of the facility on game days would tie up traffic.
Triple Five points to its development and management of the 30-year-old West Edmonton Mall and the 20-year-old Mall of America as proof that it has the experience and know-how to bring American Dream to fruition.
The company claims that its two flagship destinations are the world’s first- and second-largest tourism retail and entertainment complexes of their kind. Together with the Meadowlands project, the company projects that the three venues will draw more annual visitors than Walt Disney World, Disneyland, Times Square, the Las Vegas Strip, the New Orleans French Quarter, the Grand Canyon and Yellowstone National Park combined.
With the recession over and strong support from the state, Triple Five appears poised to do what its predecessors couldn’t: Finish the mall at the Meadowlands.
Work Already Well Underway: Construction was reportedly 80 percent complete when Triple Five took over. Though company spokesperson Alan Marcus will say little about the project, he confirms that reconfiguration of the interior has been taking place for the past year and that crews have been replacing exterior tiles and vinyl for the past few months.
“Construction companies have been visible on the site,” he said. “It looks like a construction site whereas before it didn’t.”
The façade replacement will pause until spring, as the work can’t be done in cold weather.
In describing the exterior conversion, Triple Five executive Tony Armlin said, “We’re going to first create a neutral backdrop that takes away all the garish colors, and bring in white and light gray tones.” He added that “signage, graphics and accent pieces” will start to become visible next year and into the following year.
Marcus refuses to estimate a completion date for the 2.9-million square-foot site, presumably tired of backpedaling after the firm originally projected a 2013 opening then later promised to cut the ribbon before the Super Bowl this past February. Earlier this year, officials announced a fall 2016 opening.
Executives have confirmed that Triple Five has held discussions about taking over control of the Izod Center from the Sports and Expo Authority. They have also mentioned that Triple Five may consider eventually a “phase two,” constructing hotel and meeting space.
Attractions and Economic Impact: Promises of mega-attractions like a wind machine for skydiving have come and gone but what appears to remain in the plans are a 639,000-square-foot amusement park and waterpark, the world’s tallest “drop ride,” an observation wheel with views of Manhattan, an aquarium, an indoor ski slope and ice rinks, a miniature golf course, a performing arts center, and 400 stores and restaurants.
According to a filing with the state Economic Development Authority (EDA) one year ago, Triple Five already possessed signed letters of intent from 50 prospective tenants and was negotiating with 200 more. Cabela’s mega-outdoor store was touted as a tenant at the end of the last decade, though it’s unclear whether the chain retailer still plans to invest.
Triple Five claims the complex will attract upwards of 50 million visitors per year, more than both of its other mega-mall properties. Though questions linger over whether the mall will cannibalize others nearby or whether tourists will sacrifice sightseeing in New York to spend time on an artificial mountain, Richard Hughes, dean of the Bloustein School of Public Policy at Rutgers University, told a reporter that the project has potential to generate wealth for the region by drawing out-of-state spenders. Because of Bergen County’s blue laws, retail stores in the complex will have to close on Sundays but restaurants and entertainment attractions will remain open.
Who’s Footing the Bill? Last November, the EDA approved its largest tax break ever to help Triple Five finish construction. Under the terms, the developer is eligible for up to $390 million in tax breaks over the next 20 years.
At the same time, the state’s Local Finance Board approved a complicated deal between Triple Five and East Rutherford that has the borough monetizing anticipated developer Payment in Lieu of Taxes (PILOT) payments as bonds. These bonds, which have yet to be issued, are expected to be purchased by the Bergen County Improvement Authority (BCIA), which then plans to turn around and package them with additional bonds secured with the $390 million in expected tax breaks from the EDA. Together, these bond issues are expected to result in over $500 million in upfront cash to help finish construction.
The developer will avoid municipal tax payments by giving East Rutherford an immediate $20 million to pay off debt on its new justice center and more than $80 million over the next three decades.
Additionally, as part of the deal, East Rutherford will be exempt from paying any additional police, fire or security costs. State and local officials say the agencies won’t be held responsible if the developer defaults because they’re offering the bonds on a “non-recourse” basis, which, according to Investopedia, means the issuer can seize the collateral used to secure the loan but can’t “seek out the borrower for any further compensation.”
Investing in the Wrong Sector? New Jersey Policy Perspective President Gordon MacInnes criticized the incentives for subsidizing low-wage retail jobs instead of skilled research and education positions.
“Instead of placing their bets on a flailing retail destination in the swamps, New Jersey policymakers would be better off making investments that are proven to grow the economy and create good jobs for this and future generations,” he said.
In response, Triple Five issued a statement: “American Dream has received no public subsidy. There is no risk to taxpayers. The $400 million EDA Grant, funded by a portion of the (retail) sales and related taxes generated by the project after it is completed and open, poses no financial risk to taxpayers and is not a subsidy. In fact, it is a temporary revenue sharing mechanism using a portion of sales tax revenues which would otherwise not be available but for the existence of this project. Tax increment financing is widely utilized as a catalyst to complete financing of major projects such as American Dream.”
‘Bridgegate' Connection: Accusations of conflicts of interest have been hurled at many close Christie allies for their multi-faceted involvement in American Dream but none more so than at David Samson, founder of the influential New Jersey law firm Wolff & Samson and former chairman of the Port Authority of New York and New Jersey who stepped down as a result of the “Bridgegate” scandal. According to an investigation by The Nation magazine, Wolff & Samson enticed Triple Five to take on the project based on assurances that they would receive public financing from the EDA.
The firm represents Triple Five and has served as bond counsel to the EDA, Bergen County, and the BCIA. It has also acted as counsel in other matters to the BCIA and East Rutherford. Facing pressure from board members and elected officials after Bridgegate, Wolff & Samson stepped down as lawyer for the county and the authority.