Dream on hold

COVID-19 is only latest problem delaying complex's retail opening that has dragged on

By: Jean Rimbach
NorthJersey.com
USA Today Network - New Jersey

..... Plagued by financial problems. construction stop and other delays for nearly two decades, the latest developer to tackle the Meadowlands project known as American dream was poised to unveil an indoor water park and a first wave of stores when a fresh crisis emerged: the coronavirus pandemic.
..... But coronavirus was only the latest problem, state permit and other records show.
..... Few of the 250 stores, 199 dining options and other attraction publicized for the $5 billion mega-mall were ready to launch, even before the pandemic began to change the landscape of American life, and construction by tenants was expected to plod along into 2021.
..... Little more than a dozen stores had been cleared for occupancy by the state Department of Community Affairs when the developer announced - just ahead of Governor Murphy's order to shut all malls - that it would close the giant entertainment and retail complex and postpone its March 19 [2020] opening celebration.
..... Some rides at the water park lacked approvals. Bergen County's health department, meanwhile, had issued only about 15 licenses to eateries for the year [2020] - most for Kiosks and items eaten on the go rather than for the many full-scale restaurant options that were planned.
..... And the area earmarked for luxury retailed called The Collections was still under construction and had not bee issued a temporary certificate of occupancy when the virus forced all work on the project to halt March 20, [2020] a state spokeswoman said.
..... Now the fallout form the pandemic could mean an assortment of new headaches for Canadian developer Triple Five Group, financial documents show.
..... Investors who purchased more than $1 billion in bonds issued in 2017 to complete the project were told in an April [2020] report that "disruptions associated with the outbreak may include material delivery delays, labor shortages, and administrative delays," and that "the delays will likely result in unanticipated costs."
..... Delays are nothing new for the beleaguered project - once known as Xanadu - that has long tried to gain a foothold in the North Jersey wetlands. Triple Five - owned and operated by the Ghermezian family - opening on the site an indoor amusement park, ice rink, sku slope, and blacklight mini-golf feature.
.... But the developer blew past anticipated spring and summer launches in 2019, later announcing a four-chaptered opening plan. It was to culminate in March 2020 with the debut of hundreds of shopping and dining choices -from fast-fashion to internationally known luxury houses - and an assortment of new entertainment venues, including an upscale movie theater and a 300 foot observation wheel.
..... That was scaled back as the March [2020] opening date approached. Triple Five emphasized the long-delayed water park over retial in its promotions and remained vague about what stores would open. It officially postponed the start of The Collections to September 2020.
..... The only stores that had opened at the site before the pandemic hit were a multi-level candy store called IT'SIGAR and a temporary, seasonal pop-up shop by whoopi Goldberg that was open a few months.
..... Triple Ice declined a requested for an interview for this story and did not answer questions posed in writing. The developer recently told CNBC it expects to shift even more of American Dream to entertainment and away form retail.
..... In the meantime, the shuttered complex has been host to a drive-thru coronavirus testing site.
.... Retail and real estate experts said any challenges the developer faced getting the project completed before COVID-19 will likely be magnified in its aftermath. Struggling retailers that planed stores may be unwilling to carry through with them - or could go out of business entirely. And some predict the developer will need to offer steep incentives to lure replacement tenants and agree to lease provisions that protect form future shutdowns.
... Yet there are those who remain bullish about American Dream and Triple Five, which owns the two largest malls in North America: Mall of America in Bloomington, Minnesota and West Edmonton Mall in Canada. Given more time and the right reopening strategy, these experts predict it will become a major destination.
..... Chuck Lanyard, president of retail brokerage firm The Goldstein Group in Paramus, said he doesn't "know of any other group in the country that would be capable of doing it."
..... He said the project - which he called the "wave of the future of malls" - already had "really good buzz' and he thinks Triple Five can eventually overcome any disruptions due to the pandemic.
..... "I really do think that they will succeed because they'll find the right way to give the comfort level to the public," he said.
.... But long before coronavirus, American dream had skeptics. Some think the developer doesn't understand the New York-New Jersey market and its fierce competition for consumer entertainment and shopping dollars. And they question mixing under one roof family entertainment with luxury retailers.
..... Mark A. Cohen, director of retail studies at Columbia University's Business School, spoke at length with the developer about the project a little over a year ago. He said he heard fanciful ideas to address big issues - such as an aerial tramline across the Hudson River to coax visitors to the site form Manhattan.
..... "This is not the American dream," said Cohen. "It's a pipe dream.

UNFINISHED TENANT SPACE:

..... Records give a glimpse of the progress that had been made at American Dream before the health crisis hit.
..... A small group of popular retailers were ready for business or on the verge of being so.
..... Fast-fashion brands Primark and UNOQLO, cosmetics giants Sephora, Mac, and Morphe, and mall staples such as Hollister, DSW, and Victoria Secret PINK were issued certificates of occupancy before the mall closed. Asic, Tumi and Columbia were also approved.
...... Build-a-Bear was OK'd for occupancy at a temporary location. And since the mall shut, Samsonite and Sunglass Hut have been cleared. Both were inspected before work stopped.
..... Five other retailers had undergone final inspection but did not yet meet all criteria for a certificate of occupancy: Century 21, Old Navy, Banana Republic, Bath& Body Works and Fabletics.
..... Much of the tenant space in the Multi-level complex is incomplete, with a recent status report saying work was observed ongoing or finished in roughly half of more than 300 spaces.
..... In addition to those already cleared for occupancy, about 115 permits have been issued to businesses so they can start building out their space.
..... About 45 others were listed last week [05/14/2020] as having submitted projects to the state for review but had not yet been issued permits.
..... among them are stores once touted by American dream that are no longer expected at the site, including Lord and Taylor, Saks off 5th and Barneys. The latter was slated to anchor one end of The Collections but has gone bankrupt. Triple Five has yet to announce a replacement. Ghermezian told Women's Wear Daily in January [2020] they had "moved on form Barneys."
..... Just 15 of the permits issued are for high-end retailers to build out space in two-level luxury wing. Bond documents show the area is expected to house approximately 75 stores spread over 450,000 square feet.
..... There of them - Gucci, Louis Vuitton and Fendi - are preparing space within a Saks Fifth Avenue flagship, another anchor of The Collections. A recent report showed the Saks "interior finishes appeared generally complete."
..... Hermes. Dolce & Gabbana, Tifany & Company, Saint Laurent, Mulberry, Anne Fontaine, Arc'Teryx, and Johnny Was also have permits to build for locations in the high-end atrium. Zadig & Voltaire and SJP by Sara Jessica Parker had permits issued most recently, in mid-March. [2020]
..... Food options fall short of the "100 carefully curated dining destinations" promoted. records indicate few choices are ready for the public and sit-down restaurants appear lacking.
..... Kiosks at the amusement park, ice rink, and water park make up the bulk of the food licenses granted so far this year [2020] by Bergen County health officials. Cinnabon is licensed, as well as the candy store and a hot cocoa purveyor at the ski slope.
..... Much more is pending County officials have reviewed and approved initial plans for more than 50 locations in American Dream that expect to sell prepared or packaged food items - form Wendy's to Walgreens. Before a license is issued, the county does an inspection to see if what was built matches plans.
..... Among those that passed an initial plan review are fast food choices such as Popeyes, Five Guys, and Taco Bell, and eateries featuring Latin, Caribbean, Japanese, Chinese and Thai Fare. There are specialty shops such as coocolatier Laerach and Butter Lane gourmet cupcakes. Two sports bars, a luxury din-in movie theater and Dons Bogam, which has a trio of Korean restaurants in Manhattan, are also among this group.
.... American dream was on track to add Dreamworks Animation Water Park to its growing roster of entertainment venues. But some rides have not received state approval and its private party rooms and luxury cabanas designed by Jonathan Adler weren't expected until later in the year. [2020]
..... The water park has been expected to debut no later than October 2019, after the rest of the mall opened in the sprig of that year. Its launch was later set for the day after Thanksgiving.
... Currently 22 of 27 rides at the water park have been inspected and approved to operate. Three are still in engineering review and two others - the hydromagnetic rocket and one waterslide - are out of review but have not been inspected due to the COVID-19 crisis, a state spokeswoman said.
.... Other entertainment venues have been taking shape or are among projects still under state review.
..... Sea Life Aquarium had advertised an April [2020] debut prior to the pandemic. It had begun to sell tickets and fill its tanks with water. LEGOLAND expects to open sometime in 2020. KidZania is also advertising a 2020 opening although a report for bondholders earlier in the year [2020] said work on it, as with a movie theater, "is expected to lag well behind other tenant work."
.... Components for the observation wheel are still being manufactured, according to a report last month. [04/2020]
..... And a Performing Arts Theater is listed in project review, but the report said a tenant has not yet been selected.
..... Angry Birds miniature golf and a mirror maze also have work permits. And the Escape Game and Lucky Strike Social, which features bowling, games, music and food, are in review.

REDUCING RETAIL FOOTPRINT:

..... Triple Five would not say what stores it expected to open first or disclose all businesses that have leases at American Dream.
..... The New Jersey Sports and Exposition Authority, meanwhile, had no records of leases space when requested earlier this year, [2020] even though a redevelopment agreement calls for it to get quarterly reports from the developer listing tenants that have signed on.
..... The authority also had no written monthly progress reports from the developer, which are part of the agreement.
..... "We believe that this practice ceased a decade ago while the project experienced financial difficulties," a spokesman for the authority said in an e-mail.
..... Bondholders were told that as of April1, [2020] the project was 90% leased, 95% if lease under negotiations are considered.
.... The project was previously set at 55% complete. But Triple Five told CNBC last month [04/2020] it is shifting its leasing strategy to be roughly 70% entertainment and 30% retail.
.....Don Ghermezian, co-chief executive of American Cream, told CNBC no retailers had backed out of American dream but acknowledged the volatile climate.
..... "There is not doubt that when this is over, there will be retailers that were just making it along ... trying to survive. Those retailers that were on the bubble - I fully expect a number of those retailers to be gone," he aid.
..... Financial troubles in the retail sector had already hit the project. In addition to Barneys, Forever 21, which field for bankruptcy last year, [2019] has a building permit but is the subject of legal action involving a contractor and the mall owner over its failure to pay $1.3 million in construction costs - money the retailer was to recoup form the owner after opening. Court papers note Forever 21 "has no intention of occupying the leased premises."
..... And Riley Rose, a Forever 21-owned beauty chain, is among the businesses listed as being in sate review but it has closed all its stores.
..... American Dream, taken over by triple Five in 2011, has been viewed as a test case for the struggling American mall industry, with its over-the-top entertainment venues intended to entice shoppers. Expects anticipated tenants will include experiential components in stores.
..... A shift to an even greater entertainment focus some said, may be more by necessity than design -- and no panacea.
.... "They might not be able to find enough stores that are traditional retailers that are going to open fast enough," said Jan Rogers Kniffen, a national retail consultant. "but do I think entertainment is going to be an easy thing to get people to come back to, relatively speaking? I don't. It's hard to maintain 6 feet from the nearest parson wearing your mask and have a good time."

NEW POST-COVID CHALLENGES:

.... American Dream will face many of the same issues as other malls - from public fears to troubled tenants - plus much of it has never even opened.
.... "Even though malls may eventually start opening their doors, it's going to be a while before customers feel completed to take a risk and go shop - let along in a new mall that's inconvenient for them to get to," said Cohen.
..... Retailers may be reluctant to move forward in the face of financial upheaval, and the pandemic could make it difficult for the landlord to meet obligations built into leases, which could trigger cancellation clauses.
..... "Every lease has got delivery dates to it. As a landlord, you don't really breathe easily until the guy has a certificate of occupancy and has started to pay rent," said developer George Jacobs, CEO of Jacobs Enterprises in Clifton, which has retail and residential projects.
..... Experts expect tenants will want language in leases to protect from another health crisis, including concessions if they can only operate at a 25% capacity, as some states are now requiring.
..... "We have a saying that every lease is always subject to renegotiation all the time depending on market changes," said Peter S. Reinhart, director of the Kislak Real Estate Institute at Monmouth University. "Sometimes market conditions favor the landlord, sometimes they favor the tenant."
..... And like other businesses, American Dream will face issues because the normal production of goods has been "thoroughly disrupted by the crisis," from construction materials to state inventory, Lanyard said.
..... Other questions linger: will the complex be unique enough to attract repeat visitors and tourists, will entertainment venues propel retail success, and can it support all its high-end offerings?
..... Even before coronavirus, Kniffen said he could envision a successful amusement park, but didn't see it getting "the drive that you need to support all that retail."
..... "And I don't think when you drag your kinds to the water park you go and shop at Louis Vuitton on the way out," he added. "It's just not my visions of the way people shop."
..... Cohen presumes the luxury names that signed on were "given extraordinarily attractive leases to get them there in the first place." He aid the developer should stick with entertainment and "a lot of value retail and a lot of outlet, low end retail, and call it a day."
..... Ultimately, Reinhart thinks American Dream will be OK post-pandemic - but that could mean two years from now. He said it's a desirable location and the focus on entertainment instead of struggling department stores as anchors will be an advantage. And he doesn't think retailers who wanted to be there in the first place will opt out -- unless they really have to.
..... Still, the fallout form COVId-19 will make a long-delayed project even tougher to complete.
..... "The problems are - I won't say they're insurmountable - but they're pretty significant," said Jacobs, who is on the executive committee for Rutgers Business School's Center for Real Estate Studies.
.... "Listen, they have one of the most successful, sophisticated and purportedly wealthy ownership groups in the country," he said. "So if anybody is going to succeed you would expect these guys to do it."

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