Monday, November 18, 2019

WNYC Series on Ghermezians' American Dream


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AMERICAN DREAM: IS THERE A FUTURE FOR STALLED MALL ON THE NJ MEADOWLANDS?
JOHN REITMEYER, ILYA MARRITZ, SUSAN BERFIELD | DECEMBER 12, 2016
Canadian developers say they're building more than a mall, it’s also an international tourist destination — one that would be partially funded by $1 billion in tax incentives

This is the first 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 WNYC, NJ Spotlight, and Bloomberg Businessweek. The second story, third story, the fourth story, and fifth are also availale online.
“It makes me angry every time I drive by it,” said Matt Reagan, expressing a sentiment likely shared by many New Jerseyans about the multicolored behemoth of a building in the Meadowlands now known as American Dream.
Reagan, a Rutgers Law student who was flipping hamburgers while tailgating at nearby MetLife Stadium before a Bruce Springsteen concert this summer, sees the huge, empty structure as a symbol of New Jersey’s waste and failure — and the inability of the government to get anything done.
“They’ve already had more than enough money to build what they wanted to build, and they haven’t done it,” he said.
Construction on the project that drew his strong criticism began in 2003, and two separate developers have tried and failed to finish a mixed retail and entertainment center once called Xanadu. They hoped it would revitalize a Meadowlands sports complex that had suffered through the decline of horseracing and its once-popular sports arena. Now, a third developer, Canada-based Triple Five, has taken over the project. The company is trying to emulate what’s made its Mall of America a big success in Minnesota, intending to transform the sprawling complex into more than just a mall, but a destination that will attract international tourists as well as millions of visitors from New York and New Jersey.
But even as Triple Five says it’s moving ahead with an ambitious $2.65 billion finance plan to pay for the major construction that’s still needed to bring the developer’s vision to life, questions remain about whether a megamall that was first dreamed up more than a 13 years ago remains relevant in a new era in which online shopping is becoming a dominant force. To bring Triple Five onto the project, Gov. Chris Christie also had to pledge government tax incentives to the private developer, and the size of the incentive package has now grown to over $1 billion, although none of those tax breaks can be redeemed unless the project eventually opens its doors and turns a profit.
Even if all does go right and the project becomes a success, public records indicate the annual net benefit for New Jersey will be an estimated $36 million. Most of the permanent jobs that will be created by American Dream will also pay less than $20,000 a year, according to the public records, a small sum for East Rutherford, the town in which the project is located, where median household income runs close to $80,000.
Meanwhile, public records also indicate that as the project has moved forward over the past several years, there is one group that has made money on it — those with political ties to Christie. Campaign contributions have also flowed back to the governor over the same period.

Putting together the financing
Christie unveiled Canada-based Triple Five as the project’s new developer in 2011, saying it had the wherewithal to finally complete a project that had already left two prior developers, Mills Corp. and Colony Capital, in shambles. The difference, Christie said, was that for Triple Five, which is run by Canada’s Ghermezian family, the project would represent more than just a place to make some cash.

“That’s what we needed all along,” Christie said at the time. “Someone who didn’t want to use this as a way to make money, but as a showpiece, a centerpiece for their development. And that’s what the Triple Five group will do.”

But right now, American Dream is facing what will almost certainly prove to be a make-or-break moment as Triple Five is trying to close on its $2.65 billion construction-finance plan. After holding back from making public comments for weeks, company officials are now saying the deal will close soon, possibly before the Christmas holiday.

In all, Triple Five is trying to generate $2.65 billion from investors, some through a complicated $1.15 billion bond sale, but public confidence has not been running high after the company missed its own early November deadline to complete the financing deal. And that delay comes after another planned bond sale was postponed last year. So it remains unclear whether the financial market has any interest in a three-million-square-foot retail and entertainment center that’s located less than nine miles from Times Square.
Christopher Leinberger, an experienced developer who chairs George Washington University’s Center for Real Estate and Urban Analysis, said typically the financing for successful commercial-development projects comes together like “a magnet gathering up little pieces of metal.”

“My experience with financing real-estate projects is that either it comes together quickly or it doesn't come together,” he said.

But company president Don Ghermezian said Triple Five’s financing plan remains very much alive. In fact, he is now predicting the entire financing package will close later this month.

“The financing is 100 percent committed,” Ghermezian said during a recent interview held at company’s American Dream leasing office and showroom across overlooking the site in East Rutherford. “The financing will be announced very, very shortly.”

A major expansion of the Xanadu project’s original design concept is already underway in an effort to bring American Dream more in line with Triple Five’s other malls, which feature massive entertainment attractions like indoor theme parks and full-size ice-skating rinks in addition to a retail component.

Ghermezian said he’s just hoping that New Jersey residents can give the company “a little bit more patience,” promising they will definitely be impressed by the final product.


“People that live in New Jersey that want that feel like we are a world-class state with a world-class project on par with any project in the world, I think that this project will be a tremendous (source) of pride for New Jersey,” Ghermezian said. “There’s no doubt in my mind.”

“We’re putting everything we have into it” he said.

A key component of Triple Five’s finance plan is the sale of tax-exempt bonds backed by the pledged government tax incentives, which total $1.15 billion. A New Jersey Transit rail line also already serves the sports complex, which helps the project by providing it with a crucial rail link to Penn Station in New York — at no cost to the developer. Last year officials at the New Jersey Sports & Exposition Authority also unexpectedly shut down the Izod Arena, which is also located in the sports complex, ensuring its operations would not interfere with any of the construction work at the adjacent American Dream site.

Jobs, wages, and taxes
Christie and Triple Five officials have defended the government’s involvement in the project by saying the state will benefit in the long run from the jobs and tax revenue that the project will create. And the tax incentives are structured in a way that forces Triple Five to first open its doors to the public and turn a profit before any of the incentives are paid out.

But the net benefit for New Jersey, as calculated by the New Jersey Economic Development Authority, an agency that has approved a $390 million portion of the tax-incentive package, is $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 $34.5 billion spending plan for the current fiscal year.

The EDA’s long-term projections also indicate that most of the roughly 10,000 permanent jobs that will be generated by American Dream – if it proves to be a success – will pay less than $20,000 a year.

That’s not enough income to afford even a one-bedroom apartment in most of the communities that surround the sports complex in Bergen and Hudson counties, according to rent totals tracked annually by affordable-housing activists. Such compensation would also likely mean many of the American Dream employees could qualify for state public-assistance programs and the Earned Income Tax Credit.
Senate Majority Leader Loretta Weinberg, a Democrat from Bergen County who has been raising questions about the development effort for years, said she remains unconvinced that the state’s investment will be worth the financial commitment.
“I don't know what kind of economic engine that is,” Weinberg said.

“You need to pay people enough that they in turn can go shopping and pay for a roof over their head, buy food and take care of their kids,” Weinberg said. “If you don't do that, then you're undermining the whole underpinning of our economy here.”

But officials from Triple Five say their economic estimates are much higher than those the EDA used to calculate the size of the tax incentive. The company has roughly 500 people working at the site now, and is spending $28 million to $30 million each month. They eventually expect there to be 23,000 construction jobs and another 23,000 jobs created or supported once American Dream opens, with $50 million in annual tax revenues from construction and another $133 million from the permanent jobs.

“We’re creating tens of thousands of jobs, we’re creating an incredible tax base and revenue for the state of New Jersey,” Ghermezian said. “These are taxes that we’re creating that otherwise would not exist in the state of New Jersey.”

Ghermezian also suggested that New Jersey residents, who have long complained about the existing buildings’ multicolored exterior, will be happy with the exterior of the project once its completed. “We’re getting rid of all these colored Lego blocks, whatever it is,” he said.

John Reitmeyer is the budget and public finance writer for NJ Spotlight. Ilya Marritz is a reporter/producer for WNYC. Susan Berfield is a reporter for Bloomberg Businessweek.

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BRICKS OR CLICKS? THE AMERICAN DREAM MEGAMALL VERSUS ONLINE SHOPPING
American Dream's developers argue that they’re not just building a mall, they’re creating a global destination
This is the second 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 WNYC, NJ Spotlight, and Bloomberg Businessweek. The first story and the third storyfourth story, and fifth are also available online.
As the retail industry undergoes a massive transformation thanks to new technology and online shopping, is there any mall out there that can be considered “Internet-proof?” Maybe not, but that’s exactly what Triple Five, the developer of the American Dream megamall in the Meadowlands, is betting on.
American Dream, the garish, multicolored complex that sits alongside the New Jersey Turnpike in East Rutherford, is designed to be not just a mall, but a giant entertainment destination, featuring an amusement park, full-size ice-skating rink, indoor ski slope, waterpark, towering observation wheel, and, oh yes, some stores, too.
Whether that vision will turn into a reality is very much in question right now, but the success of the project hinges on it. And as retail experts say physical stores are becoming less and less popular with shoppers, it begs the question of whether New Jersey could be doing something else to spur economic development with 90 acres of state-owned property in the Meadowlands, especially as the state’s warehouse industry has taken off.
But back in 2003, when the mall was first launched and construction started under the name “Xanadu,” the primary focus was in-person shopping, with some entertainment features also sprinkled in. Now, consider how much has changed: Black Friday, which has traditionally kicked off the holiday shopping season, just passed with more sales completed online through the long weekend than in person at stores and malls, according to national retail figures.
Those sales figures bode well for New Jersey’s budding e-commerce industry, thanks to warehouses used by Internet retailers like Amazon and Peapod, the online division of grocery giant Stop & Shop, that have popped up across the state. But not necessarily for retailers that have built or leased giant facilities in New Jersey.
Still, Triple Five, which also owns Minnesota’s Mall of America and Canada’s West Edmonton Mall, maintains it is ready and able to face the retail industry’s increasing shift away from in-person purchases. The company has spent the past few years trying to expand its construction plans to emphasize the nonretail attractions of American Dream that they hope will make it a destination, not just for the New York/New Jersey region. The firm points to the success it has had with Mall of America, where international shoppers fly directly to Minneapolis just to visit its world-famous mall.
In fact, during an interview last week Triple Five President Don Ghermezian called his company’s business model “Internet proof.”
But when Gov. Chris Christie, a Republican, first ran for office in 2009, he was critical of the project formerly known as Xanadu, and a report prepared by the then-Gov.-elect’s transition team also called the earlier version of the planned megamall “a failed business model.”
By 2011, Christie, ambitious and looking for ways to jumpstart a state economy struggling to recover from the Great Recession, had changed his tune and decided to get behind the project and offer more direct support than any of his Democratic predecessors. His administration put up tax incentives for the project, and the government incentives have now grown to over $1 billion. Christie’s own explanation for that reversal centered on the dilemma of deciding what to do about an already vacant, $2 billion complex, one that he called “the ugliest damn building in New Jersey” thanks to its notorious multi-colored exterior.
“To me, it’s not an option to let it fail at this moment, because that’s not without costs either,” Christie said during a 2011 interview with WNYC Public Radio. “That would cost at least $100 million to take the place down.”
But after five years, Triple Five is still trying to generate the money needed to finish construction at the American Dream site. In all, the company wants to raise $2.65 billion from investors, but a planned $1.15 billion bond sale that’s a major part of Triple Five’s finance plan is now more than a month late. So it’s still uncertain whether investors will ever be interested in buying enough stakes in the planned three-million-square-foot entertainment and retail center to get it to the planned opening date of fall 2018.
Last week, Ghermezian said the company would close on its financing deal before Christmas, but yesterday a statement issued by Triple Five said the target for the bond sale is now January.
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Analysts across the country have been pointing to a decline in retail, and a recent New Jersey Business & Industry Association survey predicted the industry would be one of only a few expected to go backward in New Jersey in 2017.
According to Suzanne Mulvee, the director of U.S. retail research for CoStar Portfolio Strategy, up to one billion square feet of retail across the country could eventually just “go away.”
“To put that in perspective, it’s a huge amount,” Mulvee said. “If you think about a retailer like Target for example … that would be about 10,000 of those Targets.”
The problem, Mulvee explained, is retail companies before the onset of e-commerce were trying to impress Wall Street by adding more and more locations. Retail itself was also booming as a cultural phenomenon, with movies like Mallrats and the popular Milton Bradley board game called “Mall Madness.”
Driven by big-box chains like Wal-Mart and Target, Mulvee said the overexpansion carried right through the boom years in the housing market.
“We built too much space and it became this game of market share,” she said.
In contrast, New Jersey right now seems to be in the midst of an e-commerce boom. Anne Strauss-Wieder, director of freight planning for the North Jersey Transportation Planning Authority, discussed companies like Amazon, which has opened facilities in recent years in place like Carteret in Middlesex County and Robbinsville in Mercer County, as an example of this trend.
“Nowadays we look at a screen,” Strauss-Wieder said. “We buy something and it shows up at our doorstep. We may not be going to stores, but that inventory has to be somewhere and has to be readily available to us, the consumers,” she said.
Exit 8A off the New Jersey Turnpike now has 70 million square feet of distribution property in its immediate surroundings. The location itself has become known as a key e-commerce hub throughout the world, even in places as far away as South Korea, Strauss-Wieder said.
One of the new warehouses that she pointed to is located under the Pulaski Skyway in Jersey City, just miles from the American Dream complex in the Meadowlands. The 475,000-square-foot facility is being used by Peapod.
Peapod is aiming to become the go-to grocery-delivery service for all of New York City and the surrounding region. The facility already employs 500 people in the warehouse, and another 250 drivers.
Inside the warehouse, a shopping basket that Peapod calls a “tote” travels automatically on a conveyor belt before stopping in front of a stack of products that an online customer had already requested. In all, there are more than seven miles of conveyor belts in the facility. And in another section of the warehouse, lines of trucks were backed up against open bays waiting to be filled with each customers’ selections.
“It’s all about automation now, being able to get the product to the customer faster,” said Lynn Blasio, senior director of the Peapod warehouse.
Yet up the road in East Rutherford, Triple Five is still sticking with its vision of a retail-entertainment destination that is the hallmark of its other malls, which opened in 1992 and 1981.
The reason, according to Ghermezian, lies in the plan to create something more “experiential” than a traditional shopping mall — one that would allow a customer to buy ski equipment and then immediately try it out on American Dream’s planned indoor ski slope. The megamall would also feature a huge indoor garden, restaurants staffed by famous chefs, and movie theaters that will have private viewing suites, all to make it more of a destination than a mall.
The retail component will also feature flagship stores with brands that right now aren’t available in New Jersey. More than 70 percent of the retail space is already filled, Ghermezian said. Still, retail will only make up about 50 percent of the total American Dream project, a smaller percentage than Triple Five’s other successful locations, he said.
“For us, we’re not shopping-center developers,” Ghermezian said.
He also didn’t shy away at all from talk of a declining retail market. “We are Internet-proof because you can’t go to a theme park on the Internet. You can’t go to a hundred different restaurants or eating establishments, you can’t go to the largest indoor waterpark in North America or ski hill or ice rink on the Internet,” he said.
Capt. Bill Sheehan, the Hackensack Riverkeeper, said he also believes that American Dream will be a success. The clean-water activist and lifetime resident of the Meadowlands region is predicting a boost for the local economy as well.
“It’s going to be a real uptick in the local economy once it gets moving, once it’s finished and all the entertainment and all the restaurants and everything are in there,” Sheehan said.
“I have faith in the people in New Jersey that they will at least come here once to see what it’s all about, and there are eight million of us,” he said.
http://www.njspotlight.com/stories/16/12/12/bricks-or-clicks-the-american-dream-megamall-versus-online-shopping/


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ALL IN THE FAMILY: THE CANADIAN CLAN BEHIND THE AMERICAN DREAM MALL
The Ghermezian family has two hugely popular megamall/entertainment complexes to its credit, and some troubling flops
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 storysecond storyfourth 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.
Ghermezian family
Credit: Jewish Archives and Historical Society of Edmonton and Northern Alberta
Ghermezian family (ca. 1999): Jacob Ghermezian (seated center) brought the family to Canada in the 1950s; Nader Ghermezian (standing left) is now the chairman of Triple Five.

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.
Bottom of Form
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.”


4
PUTTING A PRICE TAG ON THE AMERICAN DREAM
Getting to the requisite $5 billion will require a labyrinthine arrangement of private loans, bond sales, tax incentives — and a public finance agency in Wisconsin
This is the fourth 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 WNYC, NJ Spotlight, and Bloomberg Businessweek. The first storysecond storythird, and fifth are also available online.
Tim Lizura, president and chief operating officer of the New Jersey Economic Development Authority, has more than 20 years with the agency over two different tenures. He also worked on World Trade Center redevelopment for the Port Authority.
Yet he didn’t hesitate to answer, “Yes,” when asked if Triple Five’s American Dream was the most complex state project he’s worked on.
“What makes it complex is the financing that sits behind the analysis,” Lizura said.
Credit: Adrian Gaut/Bloomberg Business Week
That complex financing includes a state sales-tax incentive that could be worth up to $390 million, approved by Lizura’s agency last year. Then there’s a local-redevelopment tax incentive that could be worth up to $800 million. And rather than waiting to redeem those incentives over several decades, Triple Five intends to use them to back more than $1 billion in tax-free municipal bonds that could be sold as early as next month through a public-finance agency in Wisconsin, all to cover construction costs.
The developer is also planning to raise another $1.5 billion for construction through a private loan, which would run the total price tag of the project up to $5 billion, counting the $2 billion value of a vacant building inherited from prior developers. And a $185 million government-funded rail line that opened in 2009 will carry customers to and from the planned mall, which is located on state-owned property in the Meadowlands.
Triple Five’s attorneys, government-agency lawyers, and other officials say it’s the very complexity of the finance plan — the way the bond sale has been structured and the tax-incentive programs designed — that ensures taxpayers are 100 percent protected if Triple Five to falls flat — as did two of the project’s prior developers. Others take issue with government being involved at all, arguing that Triple Five, which is owned by a family worth an estimated $2.5 billion according to Bloomberg’s Billionaires Index, shouldn’t need tax incentives in a state where property taxes are at an all-time high and priorities like education and public-employees pensions routinely go underfunded.
The reason Triple Five wants to raise $2.65 billion in new financing is to resume construction on a 90-acre site near the New Jersey Turnpike in East Rutherford, which was left abandoned by two developers when the project was called Xanadu. Triple Five, which owns the Mall of America in Minnesota, renamed its project “American Dream,” and wants to turn it into a three-million-square-foot shopping/entertainment complex, one that will feature a waterpark, amusement park, full-size ice rink, and observation wheel.
But to do so, the developer needs the bond sale to go through. And to get this far that has meant getting approvals from three different agencies in recent months due to the involvement of the state and local-redevelopment incentive programs. The bond issue also survived a legal challenge this summer.
One component of the bond sale involves the financing of payments-in-lieu-of-taxes (PILOTs) that Triple Five has agreed to make to the borough of East Rutherford instead of paying conventional property taxes. Since New Jersey law allows such payments to be used to finance upfront construction costs for priority redevelopment projects, Triple Five plans to back as much as $800 million in bonds using the pledged payments, with a maturity date of 2049, according to a summary submitted to the state Local Finance Board in August.
Top of Form
Another $350 million in bonds will be backed by the up-to $390 million sales-tax break that was approved in 2015 by the Economic Development Authority. To qualify for that tax incentive, the developer had to demonstrate its project would create a net benefit for the state, and that the company couldn’t generate enough financing to finish construction without the state’s involvement. In this case, the incentive is 75 percent of the project’s future sales-tax revenue over two decades.
The combined $1.15 billion in unrated revenue bonds will be sold through a two-step process involving the New Jersey Sports & Exposition Authority and the Wisconsin Public Finance Authority. The Wisconsin agency — located nearly 1,000 miles from the Meadowlands — is legally authorized to issue tax-exempt bonds for projects that aren’t required to be within its borders. According to Bloomberg, the agency has become a popular partner for projects across the country that provide some kind of social or economic benefits and are willing to pay fees for the issuance of tax-exempt bonds.
Yet the bond sale has already been delayed several times this year, and there are several issues that could give investors pause. The American Dream site stands on slightly higher ground in the Meadowlands than other parts of a region commonly referred to as a swamp, but a climate-change report released just last week by the Regional Plan Association warns that critical infrastructure running through the Meadowlands could be threatened by three feet of sea-level rise — a scenario that scientists believe could happen as soon as the 2080s. A map released by the RPA also suggests American Dream could eventually become an island surrounded by a large saltwater bay.
Another possible concern for investors is an issue raised by the Federal Reserve Bank of New York in research published online in 2012 about municipal bonds, which are generally considered to be safe if unspectacular investments. The research noted defaults for municipal bonds are higher than is often reported by rating agencies because unrated bonds are usually not factored into their assessments. The report also labeled revenue bonds such as those being sold by Triple Five as being particularly risky compared with government general-obligation bonds, which are typically backed directly by tax revenues.
Christopher Leinberger, an experienced developer who chairs George Washington University’s Center for Real Estate and Urban Analysis, also raised questions about how much of its own cash equity Triple Five is putting on the table. According to documents submitted to the Economic Development Authority, that amount appears to be $200 million, but Tony Armlin, Triple Five’s vice president, said it’s actually north of $350 million.
Still, even the higher amount remains just a small fraction of the overall $2.65 billion that Triple Five is trying to raise from investors to complete the development project.
“I'll make the prediction that there will be a recession, and when it comes — I just can't tell you when — when it comes, this project is going to have some very lean years as far as the revenues that it generates,” Leinberger said. “To carry it through those lean years you need more than 10 percent equity in the deal. That's why banks are demanding 20 percent to 40 percent equity.”
But Armlin has stressed at government meetings in recent months that there is absolutely no risk being placed on the state or the taxpayers by Triple Five’s bond issue. Instead, he said the risk is entirely on the investors because the bonds are being sold as a “non-recourse,” issue. That means the lenders will have no grounds to go after taxpayers if the project doesn’t take off, but it also means they will expect a higher yield.

“Triple Five’s project has been completely transparent and fully satisfied every local, state, and federal approval required,” Armlin said during a New Jersey Sports & Exposition Authority meeting in September.
Lizura, the EDA executive, said there are also protections built into the state tax incentives themselves. He said the tax breaks approved by his agency will never make it to Triple Five unless the project opens and is profitable. As an example of how they work, he pointed to a $261 million tax-incentive package approved for the failed Revel casino in Atlantic City in 2011. Because the casino went belly up, it never redeemed its tax breaks.
“I think we would have been better off if it operated, for sure, because the state would have gotten a bunch more money and we would’ve given some of that back, but there’s really no public money at risk in the way the program is run,” Lizura said.
Triple Five representatives have also pushed back strongly against claims that the developer is getting a sweetheart property tax break through its deal with East Rutherford. The borough will still be receiving an upfront payment of $21.5 million, and then $2.7 million per year through the agreement even as the investors are also paid off, Triple Five’s representatives said. They also note that it was a previous developer that struck the deal to move the mall from a privately owned tract to the state-owned sports complex.
“No real estate taxes are being diverted from the State of New Jersey or the Borough of East Rutherford,” Triple Five’s statement said.
East Rutherford Mayor James Cassella also offered assurances that borough taxpayers are completely protected, even against a lawsuit if the developer ends up going under. And he said the borough won’t have to provide the complex with police or other emergency services in return for the PILOTs. The state police are in charge of patrolling the sports complex, and the Sports Authority has a Meadowlands Fire Department. 
“There isn’t much you could sue us on because we didn’t conceive this, give any money to it, or whatever,” Cassella said. “We’re just saying if you open up, you’re going to pay us,” he said.
But Jeff Tittel, director of New Jersey’s Sierra Club and a longtime critic of American Dream’s tax incentives, said the bigger issue is what else could be done with the tax revenue that has been pledged to Triple Five to help fund its construction costs. “All of this money could clearly be better spent on building new schools, taking lead out of our drinking water, and cleaning up our toxic sites,” Tittel said. “This is clearly one of the biggest sellouts and largest subsidies in state history.”


5

WHO BENEFITS FROM THE AMERICAN DREAM?
Since Triple Five took over the megamall project, it has made generous contributions to Gov. Chris Christie’s campaign coffers, as well as to his political allies
This is the final 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 WNYC, NJ Spotlight, and Bloomberg Businessweek. The first storysecond storythird story, and fourth story are also available online.
The jury is out on whether the American Dream megamall will ever become a financial success, but one group has already benefited tremendously from the project — Gov. Chris Christie and his political allies.
Political donations to Christie’s campaign coffers, legal work for firms aligned with Christie, and large contributions to the Republican Governors Association have all occurred since Canada-based developer Triple Five took over work on the massive American Dream project located on state-owned land in the Meadowlands in East Rutherford.
Credit: Adrian Gaut/Bloomberg Businessweek
Federal IRS records show the governors association, an organization that spent $1.7 million on TV ads supporting Christie or attacking his Democratic opponent during his successful 2013 campaign for reelection in New Jersey, received a $300,000 contribution from the NJ Laborers PAC, the political fund of the 20,000-member labor union whose members are in line for jobs at the American Dream site once construction resumes in earnest.
Credit: Tim Larsen/Governor's Office
Christie spoke about the American Dream project while picking up the union’s endorsement in person in late 2012, saying it would become a “job machine for the people of North Jersey.”
The RGA, according to the IRS records, also received $10,000 that year from McManimon, Scotland & Baumann, the law firm serving as a special counsel for Ameream, Triple Five’s subsidiary for the American Dream project.
The group that seems to have benefited most from work related to the American Dream effort is Gibbons PC, a major New Jersey law firm that employs William Palatucci, one of Christie’s closest friends and advisors. The New Jersey Sports & Exposition Authority, which is overseeing the American Dream project, said in response to an open-records request that it has paid Gibbons $7.42 million in legal fees since 2011. But the agency would not provide more detailed information despite repeated records requests.
“Gibbons PC, along with other firms, were approved by the NJSEA board to perform legal services in areas where firms have particular experience and expertise. Gibbons PC was assigned legal work on a wide array of issues including the American Dream project,” the NJSEA said in a statement. Palatucci and Gibbons attorney Peter Torcicollo were among the many firm employees to make contributions to Christie’s presidential campaign, the records show.
The Chiesa, Shahinian & Giantomasi law firm, previously called Wolff & Samson — whose founding member David Samson pleaded guilty in federal court earlier this year to charges that arose in the wake of the Bridgegate scandal — was also at one point representing Triple Five, records indicate.
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To be clear, the campaign contributions are not illegal, and New Jersey is a state that is already well known for its long history of pay-to-play politics, under both Democratic and Republican administrations. But it was Christie who set a high ethical bar as a candidate for governor in 2009, running on his record as a former federal prosecutor who aggressively and successfully targeted political corruption in New Jersey. His 2009 gubernatorial campaign also ran a television ad that year in the wake of a major summer bribery scandal that promised he would “change Trenton” if elected.
Christie declined through a spokesman to be interviewed about the American Dream project. His press secretary instead released a statement, but it did not directly address a question sent by email asking whether the campaign contributions have in any way influenced the public-approval process for the American Dream project.
Federal records also show $10,000 contributions were made to the New Jersey Republican Party’s federal account earlier this year by two members of the Ghermezian family, Syd Ghermezian and Aviva Ghermezian. Walrath and Calascibetta also made $10,000 contributions to the state GOP as well, federal records indicate.
A statement provided by Triple Five representatives said political contributions are made from time to time “like many other individuals exercising their (free-speech) rights.”
“They are not linked to any governmental action,” the statement said.
Senate Majority Leader Loretta Weinberg (D-Bergen) said she’s not surprised at all to hear about the campaign contributions.
“It would surprise me if you told me you didn’t come across any contributions,” she said during an interview in her legislative office.
But she quickly turned serious when discussing the NJSEA. Backing Triple Five’s planned bond sale are pledged state-tax incentives worth up to $390 million, and payments-in-lieu-of-taxes through a redevelopment agreement with East Rutherford that are worth up to $800 million. The complicated finance plan was approved during public meetings held over the summer by the NJSEA, but the agency held those meetings during the middle of the day at an off-the-beaten-path location in the middle of the Meadowlands. The agency also allows NJSEA board members to cast votes by phone.
Weinberg said she’s concerned that on the American Dream project there’s simply been “too much investment on the part of the public with very little public oversight.”
“I think that it just needs to be done with a lot of accountability and a lot of public oversight, and we don’t have that in a lot of these autonomous or semi-autonomous commissions,” Weinberg said.
East Rutherford Mayor James Cassella, a Republican, said he understands that taxpayers may be looking at the project skeptically because of the reputation that many New Jersey politicians have these days.
“Even though 95 percent of the politicians are probably as honest as the day is long, it’s people think all politicians are crooked, so there’s something in it for them,” Cassella said.
But no matter what ends up happening with the megamall project — Triple Five is now shooting for a fall 2018 opening — Cassella said for East Rutherford residents, life will continue.
“It’s here, if it opens, fine. If it doesn’t, so be it … our lives up on the hill here will go on,” the mayor said.
Although Christie once bragged that American Dream would open in time for the Super Bowl that New Jersey hosted back in 2014, the statement provided by his press secretary, Brian Murray, also expressed a sense of resignation about the status of the American Dream project. Christie’s second term ends in early 2018, well before Triple Five plans to open the doors of American Dream to the public.
“We have witnessed many different development proposals for this location, dating back through the administrations of at least four previous governors,” the statement said. “That experience has taught us that governors have very little control over these kinds of projects, no matter how beneficial they may be to New Jersey.”
John Reitmeyer is the budget and public finance writer for NJ Spotlight. Ilya Marritz is a reporter/producer for WNYC. Susan Berfield is a reporter for Bloomberg Businessweek.
The Mall Madness series was produced through a reporting collaboration between WNYC, NJ Spotlight, and Bloomberg Businessweek.
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American Dream Pushes Back Open Date, Secures $1.6B In Financing
Developer Triple Five worked with J.P. Morgan and Goldman Sachs to secure the construction funds. It is slated to be complete in March 2019.
By Daniel Hubbard, Patch Staff | May 19, 2017 11:31 pm ET

BERGEN COUNTY, NJ — The developer of the multi-billion dollar American Dream Meadowlands project has secured $1.67 billion in construction financing for the project.
The Triple Five Group of Companies announced Friday it worked with Goldman Sachs and J.P. Morgan to obtain the funds.
"The construction loan paves the way for the completion of American Dream and allows uss to aggressively move forward with the construction and opening of this project," said Don Ghermezian, American Dream president and CEO.
The 91-acre complex is now slated to open in March 2019.
Finishing the "most expensive retail project on Earth has seen setback after setback since the ill-fated Xandu project was slated to be built on the site 12 years ago. American Dream was slated to open this summer, but pushed the completion date back to the fall of next year because it had difficulty securing $1.1 billion in financing.
Local officials were pleased with the announcement.
"Projects like this come along once in a lifetime and while it is understandable for skepticism to take over with the many long delays we have experienced," said Jim Kirkos, president of the Meadowlands Regional Chamber of Commerce. "The time has come for us to seize this moment and leverage the economic impact a project like this can have on so many lives."
The project is expected to bring 20,000 jobs to North Jersey and compete with New York City as the go-to tourist destination in the area.
Triple Five is the project's third developer. The family-owned company took over the project in 2011 and has promised American Dream would be akin to two world-renowned properties to already owns: The Mall of America in Minnesota and the West Edmonton Mall in Canada. So far, American Dream seems to be meeting, if not exceeding, those expectations.
Attractions will include the largest indoor amusement park in the western hemisphere, Nickelodeon Universe. DreamWorks, owner of popular movie franchises such as "Shrek," "Kung Fu Panda," and "How To Train Your Dragon," is the official partner of American Dream's water park.
A huge adult-style arcade and bowling alley will give parents a place to hang out and have fun while kids ride a 300-foot-tall observation wheel and a 12-story indoor ski park with an 800-foot-long hill.
Several retailers, including Banana Republic, Gap, MAC, Microsoft, Zara, Pink and Victoria's Secret have committed to opening stores there. Luxury retailers Lord & Taylor, Saks Fifth Avenue, and Hermès will also open stores.
American Dream could have a positive effect on already-existing malls and shopping centers, including the Willowbrook Mall and Garden State Plaza, which have been North Jersey mainstays for decades.
Kirkos previously said that regional malls near the West Edmonton Mall have expanded three times in recent years.
"The Garden State Plaza, the Willowbrook Mall, American Dream is not expected to put those places out of business," Kirkos said.
There will be several transportation options for American Dream visitors.
A commuter shuttle will run between NJ Transit's Meadowlands station and the Secaucus train station. NJ Transit will also operate a direct bus line from the Port Authority Bus Terminal in New York City to American Dream.
New York Waterway is in talks to run a shuttle to take passengers to and from marinas along the Hudson River along the Gold Coast — Edgewater, Weehawken, and North Bergen — to the entertainment destination.


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