Explainer: American Dream Starting to Come True in the Meadowlands?
With nearly $1 billion in public funding on the way -- making it the largest taxpayer-backed project in state history -- can the former Xanadu overcome its troubled past?
For more than a decade, drivers crossing the Meadowlands in north Jersey have witnessed the slow, erratic growth of a massive shopping and entertainment facility along the eastern edge of the sports complex. Financing problems and other delays caused construction on the $3.2 billion project, now known as American Dream, to proceed in fits and starts, but state officials hope the infusion of nearly $1 billion in public assistance -- the largest taxpayer backing for such a project in state history -- will finally push it over the finish line. Work has picked up recently, as state funds start to flow into the troubled project, and efforts are underway to transform what looks to some likes an empty stack of shipping containers into a mix of retail stores, restaurants, and lodging and entertainment, including an indoor ski slope, jumbo water park, and a London Eye-style Ferris wheel.
Inside the American Dream
Earlier this month the project’s developer, The Triple Five Group of Companies, invited members of the press to tour the American Dream buildings for the first time in years. After months of hinting at news to come, the company also announced it had secured a trio of big-name anchor tenants: Saks Fifth Avenue, Lord & Taylor and discount store Saks Fifth Avenue OFF 5th. On Monday they announced 10 more retail outlets, including Banana Republic, Microsoft, and Uniqlo. Plans for the 90-acre site also call for an 800-room hotel, scores of other shopping options, an Imax Theatre, and more. Triple Five expects the complex will attract 40 million visitors annually -- once it opens.
“American Dream is one of the most unique projects in the world -- it is elevating the shopping center format to combine retail, dining, lifestyle and entertainment to create a total experiential destination. We believe that shopping is an entertainment experience, and the American Dream concept exemplifies that philosophy fully,” said Richard Baker, Governor and Executive Chairman of Hudson’s Bay Company, which owns Lord & Taylor and the Saks brands.
The deal with anchor tenants is “not even the tip of the iceberg,” Don Ghermezian, Triple Five president, told reporters. For example, the amusements will include a water park with movie-themed characters and rides -- thanks to a partnership with DreamWorks Entertainment -- and the “tallest and longest” water slide in the world. The much-maligned Pepsi Globe, a massive Ferris wheel attraction, will still be built, but rechristened the “Dreamview Observation Wheel.” And the iconic indoor ski slope will get a Swiss chalet-style makeover, the addition of winter sports outfitters, and a new name: “Big Snow.”
Triple Five’s announcement follows a summer of recommitments from various public agencies to support the beleaguered project, which the developers said they could not afford to open without additional state help. In August, the New Jersey Economic Development Authority renewed an agreement first reached in 20013 to eventually reimburse the developer up to $390 million in sales tax proceeds generated after the facility finally opens to the public. Triple Five parlayed this pledge and payments it promised East Rutherford, which hosts the site, into separate bond sales by two other public agencies that could raise as much as $900 million for construction in the coming weeks.
Long and troubled history
The project’s history stretches back a dozen years and its plans have evolved with the comments and criticisms of multiple developers and several governors. The New Jersey Sports and Exposition Authority, which oversees the Sports Complex, issued a request for proposals in 2002 seeking a private developer to create new entertainment opportunities that would fit with the stadiums and racetrack already on site. The following winter the agency selected a plan from the Mills Corp. and Mack-Cali Realty Corp. to build a $1.3 billion high-fashion shopping and entertainment complex, then called Xanadu, complete with an indoor ski slope. The facility was slated to open in 2007.
Initial work at the site began in late 2003, but problems cropped up quickly. Some environmental advocates raised concerns about the project’s impact on nearby sensitive lands and waterways; local officials questioned increased traffic and the harm it could do to small businesses; losing bidders challenged the NJSEA’s contract with Mills Corp.; and the Giants and Jets, the National Football League teams that play in the stadium on site, filed a lawsuit contesting they had not been adequately advised of the developer’s plans.
By 2006 the developers had overcome initial opposition and construction was underway, but the project’s financial backer, the Mills Corp., was struggling. Mills eventually fired 14 top executives and wrote off more than $5 million in losses, but delays mounted at the Meadowlands project and some state officials questioned Mills ability to finish the job. Then-Governor Jon S. Corzine worked behind the scenes to lure Colony Capital, a global real estate and investment firm; by years’ end Colony had a deal with Mills to take over the project. Opening was pushed back to late 2008.
Construction at the site picked up again and, by July 2007, Colony announced it had secured leases for the first retail tenants. But as the financial markets started to falter, Colony suffered its own problems and eventually revealed that the fallout of the Lehman Brothers meltdown would slow progress at the Xanadu site. The public opening was delayed once more.
Christie steps up
By the summer of 2010, Gov. Christie was six months into his first term and had made his feelings clear about the project, calling it “by far the ugliest damn building in New Jersey and maybe in America.” Colony had since receded, turning the project over to a group of financial investors and real estate companies, and the future of the complex was in question.
Hope soon hope emerged in the form of Triple Five, an international real estate company owned by the Ghermezian family that operates the two largest malls in North America, including the famous Mall of America in Minnesota. By April 2011, NJSEA had agreed to transfer the project to Triple Five. The developer unveiled plans to transform the highly controversial look of the site and, by fall, outlined plans to add a water park and additional amusements.
But this revival hasn’t been without problems either. In June 2012 the Giants and Jets filed another lawsuit contesting the expanded proposal; Triple Five countersued and eventually both sides dropped the charges. A lack of capital also continued to bedevil the project, and Triple Five approached the state for assistance. EDA agreed in the fall of 2013 to step in with public funds and bridge the financing gap so work could finally be completed. (As the most costly project to receive EDA support, American Dream got the largest grant in the agency’s history.)
According to state officials, the complex public-funding package is based in part on the state’s promise -- in the form of an EDA grant -- to reimburse up to $390 million in sales-tax proceeds, once American Dream is completed, opened, and starts generating revenue. Triple Five essentially offered this grant as collateral to the NJSEA, which agreed in August to sell bonds worth up to $252 million, which it will turn over to the developer for construction costs.
The second bond sale is tied to an agreement reached in 2004 between a previous developer, the NJSEA and East Rutherford, the municipality that controls the site. Triple Five will use a portion of the PILOT payments outlined in this agreement as collateral in a deal with the Bergen County Improvement Authority, which will arrange a bond sale to raise up to $650 million. This money is also expected to go to the developer in the coming weeks, state officials said.
According to the EDA board memo from 2013, the project will boost the region’s economic activity in many ways, including creating more than 11,000 permanent jobs and half as many temporary construction positions. It will also convert parking spaces now used only a handful of days a month into a greater “revenue generating use” – a shopping and entertainment complex that can make money every day.
As the pace of construction picked up recently, Triple Five officials said they must remove some of the ornamental details added under previous developers in order to make room for their own vision. Reporters touring the site last week described the multibillion-dollar structure as a “gutted, empty warehouse;” the developer said final touches will go quickly and can be added as tenants wrap up their plans. One change already underway is the transformation of the unpopular red and yellow exterior, which is being repainted with a subtle gray and white motif. LED billboards will be added next spring. As of now, the facility is scheduled to open in late summer 2017.