American Dream Wakes Up: Financing in Place, Megamall Gets Busy Building
With almost $3 billion in place, backers and critics alike hope the long-stalled entertainment complex will start to deliver on some of the 23,000 expected construction jobs
- Credit: Adrian Gaut/Bloomberg Businessweek
With nearly $3 billion in new financing now in place, the developer of the long-stalled American Dream Meadowlands megamall is resuming work on the project, with construction expected to be finished in early 2019.
The project’s revival, boosted by a recent tax-exempt bond sale, is expected to bring thousands of construction jobs to the Meadowlands region as workers finish converting the former Xanadu development into the sprawling entertainment and retail complex that’s envisioned by Triple Five, the developer of American Dream.
Revenue from the $1.1 billion bond sale is being combined with another $1.67 billion in private financing that wasin recent weeks to finance the construction work at the state-owned site in East Rutherford.
Triple Five announced the completion of the bond sale in a statement issued late last month. The long-awaited financing deal is being praised by officials at the New Jersey Sports & Exposition Authority, the state agency that administers the Meadowlands sports complex, and longtime East Rutherford Mayor Jim Cassella, whose borough has also received a payment of more than $20 million from Triple Five as the project’s host community.
“I’m pleased, obviously,” Cassella said in an interview yesterday. “It goes back 14 years for me.”
In the beginning
First launched under the name Xanadu in 2003 by a prior developer, the megamall is aimed at generating new economic development for a Meadowlands region in north Jersey that for decades has suffered through the decline of horseracing and, more recently, the closure of the Izod Center, its once popular indoor sports arena.
Under Triple Five, the owner and operator of Minnesota’s Mall of America, the original Xanadu design plan has been ambitiously expanded to emphasize more entertainment elements, like a full-size ice-skating rink and indoor theme park. That will help to make the envisioned three-million square-foot American Dream complexin the face of mounting competition from online retailers, Triple Five president Don Ghermezian said during an interview last year.
To help finance its vision for the site — which also includes a makeover of the notorious, multicolored façade leftover from the failed Xanadu effort — Triple Five officials worked for months to secure a private loan. That effort culminated with an announcement from the developer in late May that it had successfully arranged for $1.67 billion in private financing led by J.P. Morgan.
But Triple Five’salso included the issuance of $1.1 billion in tax-exempt bonds to be paid back using $350 million in state tax incentives provided through the New Jersey Economic Development Authority and another $800 million in local redevelopment tax incentives. The NJSEA gave final approval for the bond sale to go forward last summer, but the issue was delayed for months by a number of factors, including market conditions and an that sought to block the sale.
A statement released by Triple Five after the bond sale closed late last month called the response from the investment community “exceptional.” Construction is now projected to be completed in March 2019, the statement said.
"The now completed financing allows Triple Five to proceed with full construction of this unprecedented project which will create tens of thousands of jobs, bring millions of tourists and billions of dollars in economic growth annually to Bergen County and the State of New Jersey,” Ghermezian said in the statement.
A job giant
Economic projections released by Triple Five last year indicate the project is expected to generate 23,000 construction jobs and $50 million in tax revenue during construction.
Wayne Hasenbalg, the NJSEA’s president and chief executive officer, said workers have already returned to the site to resume the construction of American Dream.
“We are finally at the point where we don't have to say 'when will it happen,’” Hasenbalg said. “We can say, 'American Dream is happening.’”
“There were many naysayers who said this great day would never come,” he went on to say.
Cassella said the developer has already provided a $21.5 million payment to East Rutherford under the terms of the project’s financing, which involves the borough and bondholders receiving annual revenue from payments in lieu of taxes (PILOTs) that will be provided by Triple Five when the complex opens.
East Rutherford is using the money to pay off debt on a $16.2 million police station and court complex built in anticipation of the megamall’s opening, Cassella said. Another $2.56 million is also being provided to the borough to cover sewer costs, and the developer is also maintaining a $200,000 escrow account to help the borough cover any future costs associated with the complex.
Stop and go
Cassella has watched the project’s numerous starts and stops since it was first proposed in the early 2000s, but he said he’s now rooting for Triple Five as the megamall is being counted on to provide an economic jolt to the Meadowlands region and his community.
“I believe it’s going to happen and I believe it’s going to be successful,” Cassella said. “They have too much invested in this for it not too happen.”
If American Dream is eventually able to open its doors to the public, the EDA has calculated that it would provide a net-economic benefit for New Jersey of $730 million spread out over two decades. That breaks down to roughly $36 million a year, which is about one-tenth of 1 percent of the state’s overall $34.7 billion spending plan for the current fiscal year.
The EDA’s long-term projections also indicate that most of American Dream’s roughly 10,000 permanent jobs — counting both full- and part-time positions — would pay less than $20,000 a year. But Triple Five has far loftier economic projections for the project, promising 23,000 jobs created or supported once the megamall opens and $133 million in tax revenue from the permanent jobs.