The American Dream Mall outside of New York City has turned into a financial nightmare for its owners and the contractor and subcontractors that helped build the massive $5-billion northern NJ retail complex and entertainment destination.
Canadian conglomerate Triple Five Worldwide, which opened the 3-million-sq-ft mall last year, fell behind on debt payments on the $1 billion-plus loan to help fund the project,. triggering the loan’s collateral provisions, and is poised to turn over to its lenders half the profits from its two other flagship properties, the Mall of America in Minnesota and the West Edmonton Mall in Alberta.
The developer agreed to put up 49% of the other malls’ profits as collateral for the 2017 loan for American Dream, a massive renovation and expansion of Xanadu, a prevoiusly built retail project.
The developer also faces construction liens worth tens of millions of dollars from American Dream general contractor PCL Construction Enterprises and more than 40 subcontractors, which claim they have not been fully paid.
A top company executive stated publicly in March that the move was “likely” to happen, with the Financial Times recently reporting that the agreement is now being finalized.
Lenders on the project include JPMorgan and Goldman Sachs.
American Dream was forced to abort a long-planned grand opening in spring 2020 just as the coronavirus pandemic erupted. After a lengthy shutdown, the Rutherford, N.J., mall, which had a soft opening in October 2019 and features a mix of retail, restaurant and entertainment attractions, reopened last fall.
The center’s vast scope includes an 800-ft-long indoor ski slope previously built; an indoor, 22-ride amusement park with two roller coasters, one with the world’s steepest vertical drop at 121.5 deg, a glass-domed themed water park with a 1.5-acre wave pool and 25 slides; a massive assembly of shops including Saks Fifth Avenue and a 35,000-sq-ft Lego interactive store; a 300-ft-tall observation wheel offering views of New York City; and a 35,000-sq-ft aquarium.
Plans for Triple Five's similar project, a mall in Miami also called American Dream, remain under way according to local media, with construction planned to begin this year.
The N.J. mall was supposed to be a remedy for what Xanadu had become—a multicolored warehouse-like structure that stayed unfinished for 16 years amid owner financial woes, prompting its distinction as the state’s leading eyesore visible from the N.J. Turnpike.
Triple Five has struggled to fully pay the project's many contractors, with construction liens placed on the mall property by PCL and subs, according to Bergen County and court records.
PCL filed a construction lien in February in a bid to recover the last $24 million it is owed.
“The timing could not have been worse in terms of the pandemic,” Kurt Hagen, Triple Five senior vice president of development, told local officials in Minnesota last month when speaking of the nixed grand opening, according to a recording of the meeting. “This created a very significant cash flow crisis at the American Dream Mall.”
Overall, PCL says it has been paid $1.9 billion in the $2 billion-plus construction contract, which included more than $474 million in change orders.
Dozens of subs, from those delivering electrical services and fireproofing to tiles and steel erection, have filed their own construction liens. In several cases, Triple Five has managed to pay off most or all liens.
Still, substantial claims remain unpaid.
New Jersey Boom and Erectors filed a lawsuit in New Jersey Superior Court in a bid to recover $1.6 million it says it is owed from work on the 1,400-seat dine-in Cinemex theater, another of the mall’s big attractions.
The firm, which had previously filed a construction lien on the property, has named contractor Phoenix Diversified, Triple Five and one of its units, Ameream, and six others as defendants. The firm, which did structural steel work on the cinema complex as well as fireproofing and other work, noted in the complaint that it had been paid $2.4 million of the more than $4 million contract.
In a counterclaim filed April 15 in state court in New Jersey, Triple Five blamed Phoenix for the payment problems experienced by its subs. Triple Five contends that the contractor overbilled the developer for the work it had done, among other issues.
“Ameream has demanded that Phoenix provide an accounting and explanation as to each payment made by Ameream for work performed by Phoenix’s subcontractors and to discharge the liens,” the company said in its cross claim.
Still, when it comes to the overall financial struggles experienced by the new mall, Triple Five has placed blame squarely on the pandemic.
In a meeting last month with city officials in Bloomington, Minn., Triple Five’s Hagen detailed the collateral agreement involving the developer’s other mega malls, and predicted the collateral provision was “likely” to go into effect.
Hagen added that American Dream and its various entertainment attractions, after finally being able to open in October, remained under severe capacity restrictions. While capacity has since been raised from an initial 25%, the constraints are still putting a damper on business, he said.
“It would have been better [if] the American Dream Mall would have burned down, or a hurricane had hit it, financially, because we would have been covered by insurance,” Hagen said.
However, Hagen said there have been encouraging signs of a rebound at American Dream, with various attractions leading the way.
“The attractions are really the bright spot. Every single one has seen month over month [revenue] gains,” Hagen told the Minnesota officials.
But Jeff Tittel, director of the New Jersey Sierra Club and a long-time critic of the project, sees rough times ahead for the mall amid the shift to online shopping that was accelerated by the pandemic.
“I have always said retail is changing and a mall made no sense then, and it makes no sense now,” he said. “There are seven or eight malls within a 10-mile radius, plus shopping in New York.”