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Triple Five Group Says American Dream Occupancy Has Hit 'Critical Mass' After Delays And Losses

Depending on who you speak to, the 3.5M SF American Dream mall in New Jersey is either a growing toddler starting to find its feet or a problem child — a bold and pioneering model, billed as a one-of-a-kind retail and leisure extravaganza, or a project where the only luck to be had is bad luck.

With the crucial holiday season trading in full swing, the second-largest shopping mall in the U.S. has hit 89% of stores, entertainment, and food and beverage space leased, according to Paul Ghermezian, vice president at owner Triple Five Group and chief operating officer of American Dream, who said that the destination has hit “critical mass.”

But the the third and newest of a triumvirate for the Canadian development and finance corporation that includes two more megamalls, the Mall of America in Minneapolis and West Edmonton Mall in Canada, has also been beset by construction delays, significant losses and debt dilemmas. 

Ghermezian is resolutely upbeat about the project’s future. Speaking to Bisnow at the MAPIC conference in Cannes, southern France, where he was showcasing the latest raft of tenants to sign up to the retail and entertainment center, he said American Dream has seen growing momentum in the years after a pandemic-interrupted debut.

More stores and F&B outlets are opening, with new entertainment to come.

A number of new stores opened in November, including Zadig & Voltaire, Canada Goose, Rolex, Watches of Switzerland, Cartier and the Marcus Live Bar & Grille from celebrity chef Marcus Samuelsson, a flagship outlet for his small restaurant chain. The dining addition joins recent F&B openings by Michelin-starred restaurant Szechuan Opera, Jarana by celebrity chef Gaston Acurio, Isola Bella Champagne and wine bar, plus Asian grocer H Mart. 

Triple Five said that the year overall has seen more than 170K SF leased to new tenants, and according to statistics from intelligence provider, American Dream has also seen the largest year-on-year increase in footfall of any retail destination in the U.S.

“We have over 200 retailers open now and around 30 F&B outlets, plus 17 entertainment venues,” Ghermezian said. “We’ve really hit critical mass, and we believe we are unique in being able to offer from Hermès to Primark and everything in between. On top of that, while you can go to other centers for specific entertainment offers, at American Dream you can do everything.”

Soon to join the center’s wide array of leisure and entertainment offerings will be the first The Game Room powered by Hasbro and the debut of a Sesame Street-based offer that will include a Cookie Monster café.

Ghermezian said that away from New Jersey, the developer is also refreshing its entertainment parks. The Mall of America is set to open an even larger water park than the one at American Dream and West Edmonton Mall, plus add a 1,000-room hotel to its complex.

These three projects attract over 112 million visitors annually, and West Edmonton Mall in Alberta, established in 1981, and Mall of America in Minnesota, which opened in 1992, are landmark North American malls. 

“They are both very mature malls, and we like to think of them as our trained athletes, while American Dream is our toddler learning how to walk,” he said of the ongoing evolution of Triple Five’s newest mall.

For a toddler, American Dream has lived quite the life already. The project was dogged with problems from conception more than two decades ago. Construction began in 2003 when the Brooklyn Nets basketball team, then the New Jersey Nets, still played at New Jersey’s Meadowlands Arena. The development was originally known as Meadowlands Xanadu and was supposed to be a sister scheme to the giant Madrid Xanadú in Spain.

Its developer, Mills Corp., ultimately dropped out in 2007 and was subsequently acquired by Simon Property GroupColony Capital took over the scheme but also dropped it in May 2009, following the bankruptcy of Lehman Brothers. Triple Five announced its intention to acquire the project in 2011 and officially gained control in July 2013 with a plan that embodied a vision mixing retail, leisure, entertainment and dining in one destination.

However, stop-start construction slowed development and pushed back a series of proposed opening dates before it was finally delivered in late 2019, only for the pandemic to force it to shut its doors in March 2020, just five months after it had partially opened and just three days before it planned to debut its DreamWorks Water Park. It reopened in October 2020 with eight of its attractions and around 130 stores. 

Triple Five hopes to establish a successful track record before the next refinancing.

During development and since reopening, Triple Five has pivoted the mix even further from retail toward leisure. The owner bills American Dream as a tourist destination given its proximity to Manhattan and has included more movie theaters, dining, hotels and a range of theme parks, which collectively occupy more than half the space.

With finances hit by the pandemic, in November 2020 American Dream earned itself a four-year reprieve from a key lending group led by JPMorgan Chase, extending the term for $1.7B owed in construction financing. That debt has been extended again and will mature in October 2026. The lenders also took a stake in Triple Five’s Mall of America and West Edmonton Mall, 49% of which were offered up as collateral on American Dream’s debt.

Overall, bondholders and banks lent Triple Five roughly $2.7B, and in addition to the funds from private lenders, the project has municipal bonds supported by sales tax receipts, plus municipal debt backed by payments in lieu of taxes, which is senior to the construction loans.

JPMorgan was the largest lender, alongside Goldman Sachs, Starwood, real estate investor CIM Group, Soros Fund Management, asset manager Wafra and property investment group iStar.

The terms of the deal also mean that the banks will receive 49% of profits from Mall of America and West Edmonton Mall until the collateral is released, which Triple Five dubbed at the time of the agreement as an “indirect ownership interest” that doesn't include any assets.

According to recent reports by The Real Deal, Starwood Property Trust is weighing a sale of its $230M loan at a discounted rate, hoping to get at least 70 cents on the dollar. 

Filings show that the mall lost $61M in 2021, its first full year of operation, then a further $245M in 2022, according to a draft securities filing reported by Bloomberg. Expenses at the property almost doubled, reaching $428M in 2022, while financial expenses reached $189M, though liabilities fell 11% to $2.3B.

The refinance has provided the business with a “four-year runway” to continue the development of the tenant mix. Ghermezian said he believes that will allow the company to continue to demonstrate the operational performance of the complex, achieve full occupation, then finance again at bond rates more akin to those it achieved for its other two malls after successfully placing a 1.2B-Canadian-dollar ($885M) bond in September 2023 for West Edmonton Mall. Those four-year bonds yield close to 8%, Bloomberg reported. 

“We're fortunate that we have a group of investors who I think get what we're trying to do and who can see our success in the past [in Minneapolis and Edmonton], and we can also demonstrate that we are constantly opening new retail and F&B outlets,” Ghermezian said. “That means we and they can anticipate our trajectory towards full occupancy and by the time of the next refinancing we'll have a longer established and more mature mall.”

In the meantime, American Dream has thrown itself into driving foot traffic with Lunar New Year activaties, the Fiesta in America event, Dream Food Fest, the Royal Canadian International Circus, K-pop week and more. Some events attract upward of 30,000 visitors. Data shows 92% of visitors returning at least four times since their first visit, according to Triple Five.

“We’re achieving tremendous footfall at American Dream, and the scheme is performing really well and being able to demonstrate a strong track record that will help with our next round of refinancing,” Ghermezian said. “At its core, American Dream is the culmination of over 40 years of mixing leisure and retail, which started for us in West Edmonton.”