This is the third installment of Mall Madness, a five-part series on the American Dream retail and entertainment complex under construction in the Meadowlands. The series was produced through a reporting collaboration between NJ Spotlight, WNYC Public Radio, and Bloomberg Businessweek. The first story, second story, fourth story, and the fifth are also available online.
When Gov. Chris Christie decided he was going to try to salvage the long-planned and half-built megamall in the Meadowlands that for years was called Xanadu, he turned to a family from Canada with Iranian roots to get the job done.
Best known for its sprawling Mall of America in Minnesota, the Canadian Ghermezian family and its company Triple Five are also the owners of the successful West Edmonton Mall in Canada.
[img-wide:/assets/16/1213/2035] Christie announced New Jersey’s partnership with the Ghermezians — which included a pledge to provide a significant government sales-tax incentive — with much fanfare back in 2011, touting their accomplishments in retail and real estate. He predicted the New Jersey mall, renamed American Dream Meadowlands, would open by early 2014.
“You just look at their track record at Mall of America, at the West Edmonton Mall,” Christie said at the time.
“These gentlemen are very good negotiators and they will get deals done to get people in here and to get this place operational,” Christie said of the Ghermezians.
But the megamall in the Meadowlands has still not opened, and missing from Christie’s public introduction of Triple Five and the Ghermezian family was a more complete description of the developer’s background and business history, including some of Triple Five’s thwarted mall-development efforts in places like Las Vegas, New York, and Maryland. An official who worked on one of these projects says that he was never contacted by New Jersey to discuss what went wrong, raising questions about whether New Jersey truly did its due diligence.
And while some now suggest the Christie administration should have been focused more on Triple Five’s losses than its wins, others staunchly defend the Ghermezian family, Triple Five, and its megamall vision. Triple Five president Don Ghermezian also says he has “no fear” that American Dream will ultimately prove to be a success — even as many in New Jersey remain skeptical.
The Ghermezian family’s roots go back to Iran, but Jacob Ghermezian, who is Don Ghermezian’s grandfather, brought his wife and four sons to North America in the 1950s. Triple Five, a private corporation, was founded in 1972.
Nearly 10 years later, the company opened the West Edmonton Mall in Alberta. Spanning more than 5 million square feet, the mall, according to Triple Five, draws more than 30 million annual visitors, attracted not only by its stores, but also an indoor wave pool and amusement park, some of the same features the developer is hoping to eventually open at the American Dream site in New Jersey.
Triple Five’s other flagship site is the Mall of America, which opened in 1992 in Bloomington, MN, just outside Minneapolis. With anchor tenants like Macy’s and Nordstrom, the 4.2-million-square-foot complex, which also has an indoor amusement park, restaurants, and other entertainment features, draws 40 million visitors each year, according to Triple Five.
Although those two malls have continued to operate successfully for decades, Triple Five itself hasn’t been able to replicate its winning formula by opening a new megamall anywhere else in North America — though not for a lack of trying.
Not long before Christie unveiled the Ghermezians as the new developers for the American Dream project in New Jersey, a property the company had picked for a project it called the Great Mall of Las Vegas was lost to foreclosure.
In the 1980s, Triple Five also unsuccessfully pursued a mall project called Fantasyland in Niagara Falls, NY. And about 20 years ago, the company pitched a mall development in Silver Spring, MD, that was also never built. It, too, was also called American Dream by the Ghermezians.
At the time, there were a lot of vacant buildings in Silver Spring, said Doug Duncan, the former county executive for Montgomery County, MD, which is a suburb of Washington, D.C. Triple Five was offering to fix the economic-development problem with one major project.
“We needed something dramatic to save Silver Spring,” Duncan said. “It had been the economic center for Montgomery County for decades and had fallen on really hard times as people moved further out from Washington, D.C.”
The cost of that project totaled about $600 million, making it more modest than the current American Dream Meadowlands effort, which will end up costing nearly $5 billion. But Triple Five was also expecting local taxpayers to pitch in by providing things like street improvements and upgraded parking garages, Duncan said.
However, after roughly a year of different meetings, he said it became clear the Ghermezians wanted more from the local taxpayers. And, as Duncan held firm, the deal eventually soured and Triple Five never built its American Dream-Silver Spring.
“Every time we met with the Ghermezians, the terms sort of changed a little bit, and they were constantly looking to push things over onto the public side of the ledger, versus the private side,” Duncan said.
“I think they expected us out of desperation to just keep putting more public money into the project because we needed this project so badly we would basically give them everything they wanted,” he said. “They were very surprised when I ended a meeting with them and said, ‘You know, you don’t have the money in it. That’s it we’re done.’”
In New Jersey, since 2011, the size of the government-incentive package has increased from $200 million to more than $1 billion, a total that now includes local redevelopment-tax incentives that have been approved by state agencies.
Triple Five also inherited buildings already on the development site worth an estimated $2 billion, and the project will also benefit from a $185 million Meadowlands rail link that debuted in 2009, before Christie took office. Still, Triple Five is now trying to raise $2.65 billion in new financing to finish construction at the complex, with a $1.5 billion private loan expected to be completed later this month and a $1.1 billion bond sale planned for January.
Duncan, the former government official from Maryland, said he would have expected a call from officials in New Jersey doing due diligence before they struck the deal to bring on Triple Five. But there was no call.
“No one from New Jersey called to do any kind of background check or anything on them,” Duncan said.
Norman Krone, a former Triple Five consultant who said he worked on company projects in China, wrote a cautionary letter to Christie in 2011, the same year that Triple Five was announced as the new developer of the Meadowlands project. The letter urged the governor to look more skeptically at Triple Five and its projections, and it cast doubt on the developer’s ability to find success in the Meadowlands.
“Triple Five has not developed a significant project in the United States and has, in fact, failed to implement several large-scale projects in other locales,” Krone wrote to Christie.
Christie declined through a spokesman to be interviewed about the American Dream project, and a statement provided by his spokesman did not directly address issues raised in Krone’s letter. Jon Hanson, Christie’s top advisor on the Meadowlands redevelopment-issue, also declined to be interviewed until the construction-financing is in place.
Speaking generally about the company’s past failures, Triple Five president Don Ghermezian said in an interview that Triple Five has continued to successfully expand its malls in Minnesota and West Edmonton. He also said the company is firmly committed to finishing its project in New Jersey, even as it has already started a similar effort in Miami.
“We are very, very selective in the projects we do and where we go,” Ghermezian said. “The other markets that we didn’t end up ultimately exercising and moving forward there were market conditions that at the time warranted that we pull back or not move forward.”
“But there was no project that we’ve come as far as we’ve come with American Dream and decide to step back,” he said. “There’s no fear on my part that American Dream will not get built.”
The Ghermezians and their company also have their share of defenders, including Michael Glanzberg, a principal at New York-based Sinvin Real Estate who said he is an advisor to Don Ghermezian. Glanzberg calls Ghermezian an “extraordinary visionary,” and he said because of Triple Five’s something-for-everyone approach he’s expecting American Dream to be a hit with international visitors, as well as shoppers from New York and New Jersey.
“Most useful insight I could give is that I do think all the kids, including Don, they do live in tremendous awe and respect and fascination of what family before them has accomplished,” Glanzberg said. “They truly feel duty bound to continue accomplishing more.”
“It’s very old school. It’s really very nice,” he said.
Saul Katz, a former Triple Five official from Canada, said the family is interested in building “a legacy,” and he also used the word “visionary” as a description of its efforts.
“It’s unfortunate that people have not understood the Ghermezians, not understood or (trusted) them, but in my experience, I have tremendous respect for them,” Katz said. “I can’t say enough good about them.”
The Mall Madness series continues tomorrow with a closer look at the government tax incentives that are being provided to the American Dream Meadowlands project and whether any taxpayers dollars are at risk. The series was produced through a reporting collaboration between WNYC, NJ Spotlight, and Bloomberg Businessweek.