The odds may seem against it, but Triple Five Group, the developer that has reached a definitive agreement to take over what was formerly known as the Xanadu Meadowlands project in Northern New Jersey, is taking its best shot to rehabilitate the troubled development with a new name, a new look and a new financing package.
On Tuesday, Triple Five and the New Jersey Governor’s Office announced Triple Five’s agreement with the lenders of the stalled 2.4-million-square-foot retail/entertainment venue. News of the deal originally broke late last week.
Triple Five will rebrand the project as American Dream Meadowlands and redesign its exterior skin, which many people in the state consider an eyesore, according to Joseph French, national director of retail with Sperry Van Ness, a commercial real estate brokerage.
Triple Five also plans to expand the center’s entertainment component, with a glass-domed amusement park, an indoor water park and aquarium and a skating rink. The expansion will take the project to 3 million square feet. The center already cost its previous developers and the state approximately $1.9 billion.
Triple Five wants to expand the entertainment portion of the development because “it really helps to drive traffic,” says Dan Jasper, director of public relations with the firm. “It’s the same thinking that Triple Five used at both the Mall of America and West Edmonton Mall, which is really to make it an entertainment attraction/retail destination.”
To help Triple Five achieve its vision, New Jersey Governor Chris Christie has reportedly committed approximately $400 million in state funds for the American Dream Meadowlands, including up to $200 million in low-interest financing and another $200 million that will come from forfeited sales tax revenue from the project. Triple Five will reportedly have until the end of 2011 to come up with the remaining $600 million it will need for the project’s completion.
The first phase of the development is scheduled to open in the fall of 2013.
A spokesperson with the New Jersey Economic Development Authority, however, told Retail Traffic that while incentives have been discussed, no deal has been finalized. A spokesperson for Triple Five adds that details about any financing package with the state will be revealed in the near future.
Troubled history
The project was first proposed by the Mills Corp., which was absorbed by Simon Property Group in 2007. As part of that deal, the development was spun off and came under the control of Colony Capital.
But when the credit crunch hit before the project opened, Colony ran into financing problems. Related Co. briefly showed interest about a year ago, but it never signed a deal, leaving the project in limbo. In September, the lenders brought in Jones Lang LaSalle to manage the development. Seven months later, Triple Five has now entered the fray.
Commercial real estate professionals who live and work in New Jersey, including Chuck Lanyard, president and founder of The Goldstein Group, a Paramus, N.J.-based retail real estate brokerage firm, hope the rebranding efforts, along with Triple Five’s reputation for operating successful retail/entertainment projects, will help lure retailers to the center.
Because of the project’s constantly moving completion date, some of the tenants that had initially agreed to open stores at the facility terminated their lease agreements in the wake of the downturn.
Among these was Cabela’s, a seller of camping, hunting and fishing supplies. Cabela’s was scheduled to serve as one of the anchors for the retail portion of the development with approximately 165,000-square-foot store. Early last year, executives with Cabela’s said it was highly unlikely it would ever open in the Meadowlands. As a result, one of the main issues Triple Five will now have to tackle will be creating a new anchor line-up for the center, says Lanyard.
In the past, “there was some skepticism if the developers could even deliver the project,” adds Robert Martie, a Parsippany, N.J.-based executive vice president with Colliers International, a commercial real estate services firm. “With Triple Five, I think the credibility issues of the project have disappeared. It enhances everybody’s image of the project. Bringing in Triple Five, creating the financing package and redesigning the mix [creates] a very strong success formula.”
Point of no return
Over the years, some commercial real estate specialists have questioned the wisdom of the very concept of building a mega retail/entertainment complex in New Jersey, a state already dense with regional malls. There was also the question of building a 600-foot indoor ski slope in an area that doesn’t lack for real snow, notes French.
Previous developers involved in the project, “didn’t really have a clear plan” as to what they wanted to achieve. The Mills Corp.’s approach “was kind of like ‘if you build it, they will come,’” French says. He feels the burden of Xanadu Meadowlands might have helped sink the firm when it began to run into troubles in 2005.
Given the project’s history and the already immense construction costs associated with it, people like Barry LePatner, founding partner of LePatner & Associates LLC, a New York City-based law firm construction law firm, feel Governor Christie would be making a mistake in committing additional funds to its completion. In his view, the new developers should only be allowed to proceed with construction if they are willing and able to finance it themselves.
Nevertheless, 80 percent of the construction for the original plan has already been completed and the facility currently sits empty. As a result, it makes sense to try to finish it and hopefully create some economic benefit for the state, according to Ira Bergstein, principal and CFO of Palisades Financial LLC, a Fort Lee, N.J.-based commercial real estate lending firm.
“I think the concept was flawed from the beginning, but it’s what we have,” Bergstein says. “There was a group that stepped up and was willing to do something, so I think you need to give it a shot to make it work.”
Completing the Meadowlands project will create approximately 8,900 construction jobs and up to 35,000 permanent jobs, according to New Jersey Governor’s Office. Altogether, the project’s economic impact on the region will total $3.8 billion a year, according to the Triple Five Group.
“We have to make some short-term investments in the state to keep the jobs going,” Bergstein says. “If we do nothing and allow jobs to leave the state, we’ll never become an economic success.”
The right fit
Today, the project has two things going for it. The first is its location. The American Dream Meadowlands is located in Bergen County, one of the wealthiest and most densely populated areas in the country. As of 2009, there were approximately 3,778 people living per square mile, with a median household income of $82,136 a year, almost $30,000 above the median figure for the U.S. It also sits adjacent to Meadowlands Stadium, the home of the NFL’s New York Jets and New York Giants.
According to Triple Five’s estimates, more than 100 million vehicles pass by the site on an annual basis. The firm projects the center will attract approximately 55 million visitors a year. Because of the site’s extensive transportation network and close proximity to New York City, “if it’s finished properly, it will have good potential for success,” says Lanyard.
What’s more, the Triple Five Group specializes in the development and operation of shopping centers, notes Martie. It operates two signature projects—the Mall of America in Bloomington, Minn. and West Edmonton Mall in Alberta, Canada—that it can model American Dream Meadowlands on.
The 2.5-million-square-foot Mall of America combines 500 shops and restaurants with an amusement park, an aquarium and a wedding chapel. West Edmonton Mall combines 3.8 million square feet of retail with up to 2 million square feet of entertainment venues, including a water park, an ice rink and a miniature golf course.
Triple Five Group is a privately held company and doesn’t release financial information about its properties, but both venues seemed to have come through the recent recession in fairly good shape.
“I would imagine their game plan would be to imitate the Mall of America and create something more than just a mall,” says French. “You’ve got to make this special—New Jersey doesn’t lack for retail and there are plenty of malls that are easier to get to.”