American Dream Mall’s Long Nightmare Appears Over

At the start of Citizen Kane, Orson Welles’s 1941 cinematic masterpiece, the opening shot pans up through a mix of fog and shadow to highlight Xanadu, an immense private estate that we’re told during a newsreel voiceover “is the costliest monument a man has built to himself … since the pyramids.” 

Boasting “the loot of the world,” “the biggest private zoo since Noah,” and “a collection of everything so big it can never be cataloged or appraised,” Xanadu is undoubtedly a fictional creation. That is until you visit East Rutherford, N.J. 

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Just off Interstate 95 within the Meadowlands Sports Complex, a 3.5 million-square-foot retail and entertainment galleria once called “Meadowlands Xanadu” — now American Dream mall — may finally be turning a corner. That’s after its own ambition and more than 20 years of false starts, lawsuits, ownership changes, construction delays, temporary closures and several bond payment defaults almost killed it. 

In September, the $5 billion complex that broke ground in 2004 — and includes an indoor waterpark, a hockey rink, an indoor amusement park, hundreds of shops and restaurants, and an honest-to-God ski slope — began paying back $287 million owed to municipal bondholders with a payment of $25.7 million. 

Retail experts credit increased foot traffic, strong leasing and modest, if not consistent, retail sales as the source for the long-delayed debt payments. 

“The mall is finally finding its footing, where it appears to be starting to resonate with the broader trade area as a unique and interesting destination to visit,” said Thomas Dobrowski, a vice chairman at Newmark (NMRK) and an expert on regional malls. “It’s now on the radar throughout the New York and New Jersey area, and it’s becoming a true destination for the consumer, mainly driven by its unique features.” 

In the first quarter of the year, gross sales for the mall’s retail, entertainment, dining and parking rose 27 percent, to just under $148 million. That remained consistent in the second quarter, when the mall reported $149 million in sales, a 30 percent year-over-year increase, according to Bloomberg. In 2023, sales at American Dream reached $553 million, an increase of 31 percent compared to 2022, per Bloomberg. 

Leasing is strong and improving gradually since American Dream opened in September 2019, and almost immediately needed to shut down due to COVID-19 pandemic restrictions for much of 2020.  

As of July 1, the mall was 87 percent leased, according to a public filing released this summer. That occupancy is more impressive when given the context of the mall’s early troubles — leasing stood at 77 percent at the end of 2021, 83 percent at the end of 2022 and 85 percent at the end of 2023. 

“What’s great about American Dream is they did a good job of making it everything to everyone. There’s luxury shopping, there’s the moderate pricing [shopping], and it’s done a great job of having marquee, unique things that get people to travel to a shopping center,” said Charles Cristella, an executive vice president of retail leasing at JLL (JLL). 

Cristella listed the Sesame Street play center, the DreamWorks Waterpark, the LegoLand Discovery Center, the Nickelodeon Universe theme park, and the 16-story indoor ski slope as among the mall’s best assets. 

“Let’s face it: You opened a mall center in the middle of a global economic shutdown, and it’s built around meeting places and socializing, so we had to get comfortable going out again,” Cristella said. “But it’s on the right trajectory, it’s positive. … It’s a large draw.”  

Not only is American Dream drawing visitors, but it’s seeing visitors stay longer, and potentially shop for more goods, at least according to the all-important “dwell time” metric. 

American Dream received 4.8 million visitors between Nov. 1, 2023, and Oct. 31, 2024, where visitors notched an average dwell time — the time spent in the mall shopping or using its entertainment options — of 125 minutes, according to foot traffic tracker Placer.ai. Visits to the mall have increased 40 percent year-over-year since 2022, and 79 percent year-over-year since 2021. 

“The synergy between retail, entertainment and restaurants is stronger than ever now,” said Cristella. “Everyone talks about Amazon and online shopping killing mall sales, but one thing you can’t get online is experience. You can’t get a haircut, a massage or go down a ski slope online. And, if I’m getting you out to go to those things, chances are that dwell time will be extended.” 

Despite the improving sales, leasing and foot traffic numbers at American Dream, all is not yet well at the property once envisioned as the East Coast’s answer to Minnesota’s Mall of America. 

Triple Five Group, the international supermall developer that took control of the project in 2011, had once estimated American Dream would create 23,000 construction jobs, 16,000 permanent jobs and bring in $183 million in annual taxes on the heels of an anticipated $2 billion in annual revenue. But, for much of the last year, the owner of American Dream has been mired in lawsuits and missed debt payments. 

Last year, the City of East Rutherford — whose municipal bonds helped finance American Dream — sued Triple Five for failing to pay $7.5 million in payments in lieu of taxes, or PILOTs. 

The New Jersey Sports and Exposition Authority, an independent authority that also helped finance the project through municipal bonds, told NorthJersey.com in August that Triple Five was supposed to pay between $1.15 million and $1.65 million each year to 13 Meadowlands area towns in the initial years after opening the mall, but those towns have yet to see any money. 

Moreover, in April 2023, a New York State Supreme Court judge ruled that Triple Five must pay two lenders, Western Asset Management and NongHyup Bank of South Korea, $390 million, after it failed to repay the loan in 2021. 

Triple Five Group did not respond to requests for comment. 

Even amid the rosier performance metrics, money might be hard to come by for Triple Five, mainly due to expenses at the mall. Last September, a securities filing released by the sponsor showed American Dream’s losses rose from $60 million in 2022 to $245 million in 2023. 

“It’s been underwater literally since Day One,” said David Auerbach, chief investment officer at Hoya Capital, a real estate advisory firm. “It’s gone through multiple cycles, multiple owners, and the story goes back to Xanadu, with all those issues, and, even if it finally got done, it will still be many years until it’s above water.”

“It’s a story that will be a Harvard Business School case study down the road,” he added. 

Made in America  

To fully grasp the scope of American Dream mall, and why its grandiose vision has proved so  costly, it helps to look at why private and public leaders felt compelled to build a $5 billion supermall outside of New York City in the first place. 

The story of malls in America begins with the spread of full-line department stores, which emerged in the late 19th century as enormous, regal, first-of-its-kind retail establishments in seemingly every major American city: Chicago had Marshall Field’s, New York had Macy’s, Philadelphia had Wanamaker’s, and Boston had Filene’s. The stores had one mission: Cater everything to everyone, from toys and cosmetics to clothing and household goods. 

Eventually, two phenomena emerged in the 20th century that changed the way people shop. Single-use retail stores and “category killer” retail tenants emerged — think Old Navy, GAP and Toys R Us — and people began moving from cities into the suburbs, where highways opened up travel, giving retailers the motivation to shun the downtown department store model in favor of a more democratized form of retail: the suburban shopping mall. 

“So developers said, ‘I have a big site out in suburbia at the intersection of highways, so I’ll build a mall,’ but they told three or four department stores, ‘I need you to come out there as my anchor, and you’ll subsidize the construction,’ ” explained Richard Latella, an executive managing director and group retail leader at Cushman & Wakefield (CWK). “And so, back then, they gave department stores sweetheart deals, where they paid low rents to relocate and they began leasing space inside the malls to other retailers who would subsidize the whole development.” 

The anchor-tenant arrangement put individual stores within steps of famous brands such as Macy’s, Marshall Field’s and Sears. The mix was a hit with shoppers, and expansive shopping malls featuring dozens of smaller retailers, movie theaters and restaurants began to appear across America. Among the most famous are Westfield Old Orchard in suburban Chicago, King of Prussia Mall outside Philadelphia, Tysons Corner Center in Northern Virginia, and The Galleria in Houston. 

“The problem is a lot of those designs were kind of ugly. They were big, monolithic boxes, and they were not architecturally appealing,” said Latella. “But, nonetheless, malls thrived for many years and they began to get built everywhere.”  

Then they got overbuilt. In their late 20th century heyday, the U.S. had close to 1,300 individual malls, an average of 26 per state, according to Latella, who added the country can, at best, reasonably accommodate 400 malls nationally today.

“There’s a misconception that e-commerce killed retail real estate in the United States. That’s wrong,” said Rich Hill, head of real estate strategy and research at investment manager Cohen & Steers. “Retail real estate killed retail real estate in the United States. E-commerce was just the tipping point.” 

Hill said that, beginning in the 1970s, retail real estate’s gross leasable area grew by more than 300 percent and the overall U.S. population grew by only 70 percent. The imbalance eventually led to plummeting sales due to the laws of supply and demand, as well as the competition from e-commerce. 

“We just built way too much retail real estate, because people wanted to shop at places like malls, and the 1970s to the 1990s was the heyday of going to the movies at malls,” Hill said. “We just had too much of it, and e-commerce arrived and it created a tipping point.”

Even amid the e-commerce revolution of the early 2000s,, some of the biggest names in retail real estate had a vision — some could call it overly ambitious, others foolhardy, but a vision nonetheless: Build the biggest mall on the East Coast. 

Here’s the plan  

What eventually became American Dream was initially the dream of Larry Siegel, the former CEO of Mills Corporation, a development firm that blended retail with entertainment in several super regional shopping malls beginning in the late 1960s. These included Sawgrass Mills in Sunrise, Fla., and Philadelphia Mills in the City of Brotherly Love. 

Siegel had been eying a chance to build a supermall in the Meadowlands since 1993, but it took him years to line up the financing for the project. 

“Back then, I went to Germany with Larry Siegel, who was running Mills and looking to raise money from investors,” recalled Latella. “It was his dream.”

First under the name Meadowlands Mills, and then Xanadu Mills, Siegel proposed a 2.4 million-square-foot complex that would include a Formula One-style racetrack, indoor surfing, a minor league baseball stadium, an indoor ski slope, a movie theater, a concert hall, office space, a 520-room hotel, restaurants, a small-scale city and 500,000 square feet of retail. 

He teamed up with Jersey City-based developer Mack-Cali Realty, agreed to pay the New Jersey Sports and Exposition Authority $160 million for the development rights, and broke ground on construction in 2004. Back then, the project was estimated to cost only $1.3 billion. 

By August 2006, with costs skyrocketing amid a stalled development, and his firm’s stock price in the tank (it had fallen from $65 to $16 in one year), Siegel ignominously stepped down. Mills Corporation sold its interest in Meadowlands Xanadu to Colony Capital and German’s KanAm Ground Fund for $500 million. Due to the cost of the project, Mills Corporation eventually filed for bankruptcy in 2007 and was bought by Simon Property Group. 

Just when the development appeared to be getting some direction, the Global Financial Crisis hit. Lehman Brothers, one of the principal finance partners for Xanadu Meadowlands, became the largest investment bank collapse in American history, nearly triggering a global economic depression when it went under in September 2008. At this point, the entire mall project became a boondoggle. 

“They had a number of problems getting it off the ground, a lot of cost overruns, bankruptcy, a bad economy, their financing fell apart with Lehman, and then the news media started giving it bad names like ‘XanaDon’t,’ ” said Latella. “When it was ultimately built [in the first phase], it was in shell condition, and [N.J. Gov.] Chris Christie called it ‘The ugliest mall in America.’ ”

But at this point, the State of New Jersey had spent too much money, and had built out enough of the retail space, to simply allow Xanadu Meadowlands to wallow away as an incomplete disgrace. 

Enter the Ghermezian family, an Iranian-Canadian real estate dynasty, whose patriarch, Jacob Ghermezian, hosted Franklin Delano Roosevelt, Winston Churchill and Joseph Stalin at his estate for the 1943 Tehran Conference during World War II.  

As owners of Triple Five Group, the Ghermezians have developed the 4.5 million-square-foot Mall of America in Minnesota and the 5.5 million-square-foot West Edmonton Mall in Alberta, the two largest shopping malls in North America. If anyone could save the foundering Meadowlands Xanadu project, it was expected to be the Ghermezians, who took over the development in April 2011. 

“They are the top of the food chain of what they do, which is to handle these outrageously large entertainment venues that have restaurants and retail,” said JLL’s Cristella. “They are the mixed-use version of Disney. They know what they’re doing and they have a success rate.”

Renaming the project American Dream, the Ghermazians immediately went to work, first and foremost, by shoring up financing to actually complete the ambitious vision drawn up by Siegel during Y2K. 

Triple Five Group secured a $1.1 billion tax-exempt revenue bond in June 2017 led by Goldman Sachs. The deal between Triple Five Group and the City of East Rutherford is split between $800 million in limited-obligation revenue bonds (municipal bonds backed by PILOTs and paid through property taxes) and $287 million of grant revenue bonds (bonds paid through a sales tax on 75 percent of American Dream revenues).  

Moreover, Gov. Christie had given Triple Five a $390 million tax break in 2013 to hasten construction, while the firm also secured $1.7 billion in construction financing in 2017 from J.P. Morgan Chase, Starwood Property Trust, CIM Group and iStar. Triple Five financed the rest of the construction costs from private investments and $200 million of its own capital. 

The plan was to open American Dream in time for Super Bowl XLVIII in February 2014, played that year a few steps away at MetLife Stadium at the Meadowlands Sports Complex. 

But the vast network of financing soon became tangled in its own complexity and bureaucracy, delaying the project’s opening by a whopping five years. Little did the Ghermezian family know, by the time American Dream opened in September 2019, its troubles were just beginning. 

And then …  

Six months after American Dream opened its doors, the world shut down. COVID-19 paralyzed the nation beginning in March 2020 as millions of Americans remained inside their homes during a nearly two-year period of lockdowns, social distancing and event cancelations; American Dream Mall closed from March to October 2020. 

Kurt Hagen, an executive at Triple Five, famously said at a public hearing, referencing the would-be insurance payouts, “It would have been much better if American Dream had burned down or a hurricane had hit it, financially.” 

“It was just all timing, and you base your loan on current market values and current market conditions, and then you have something that no one could foresee,” explained Cristella. “You could foresee velocity of leasing and sales not being there, but you can’t foresee what American Dream went through [with COVID].”  

After projecting $2 billion in annual sales, American Dream reported $54 million in sales by the end of 2020. The mall lost $60 million in 2021, according to securities filings. 

That year, Triple Five drew down $9.3 million in its reserves to cover an August 2021 payment of $290 million in bond debt. But the bond payment left the firm with a measly $862.12 in its account, according to CO reporting. One year later, Triple Five missed an $8.8 million bond payment. 

It was one thing after another. Hurricane Ida damaged several retail stores in August 2021, and an electrical fire delayed the opening of the indoor ski slope, which was already three years behind schedule. In February 2022, Triple Five sought and received a four-year extension to repay the $1.7 billion in construction financing it secured from the private consortium of lenders. 

All told, Triple Five missed five straight municipal bond payments, and, by August 2024, the firm had accumulated past-due interest totaling $46.4 million. 

“The issue here is the grant contract is limited at $390 million over 20 years, but they don’t have enough money to pay full interest, they’re not amortizing the principal, and they’ll need more money for interest than they thought they did,” explained Lisa Washburn, managing director at Municipal Market Analytics, a bond agency. “The longer this continues to underperform expectations, the closer it will get to 20 years and $390 million.”

Examining the bonds secured by the project, Washburn told CO that Triple Five was supposed to have only $96.7 million in outstanding bond payments by February 2024, but today all $287 million remains outstanding. 

“It’s a ticking clock,” she said. “The more outstanding debt they don’t pay down, the higher interest cost will be, which means there’s less money available for principal, and I’m not aware they paid any principal down yet.” 

What’s in store 

Despite the troubling financial landscape, there is one critical trend working in American Dream Mall’s favor. 

Retail, especially brick-and-mortar retail, is kind of back.  

“It’s a remarkable asset class with really strong fundamentals,” said Cohen & Steers’ Hill. “People are thinking about the asset class from [the perspective of] 10 years ago and saying, ‘I can’t invest,’ but it’s one of the most superior returns we can find.”  

Cushman’s Latella echoed these sentiments, pointing to fundamentals.  

“Retail, right now, is having a pretty good moment in terms of leasing fundamentals and tenant demand, and it’s been driven by the economy that’s stronger than expected,” he said. “Vacancies are at or are at near all-time lows for retail in general.” 

JLL’s third-quarter 2024 national retail report found shopping malls carry vacancy rates of 5.3 percent, strip centers hold vacancy rates of 4.7 percent, and malls have vacancies of 8.7 percent, while national retail sales rose 1.7 percent year-over-year. Moreover, with annual construction starts in retail at their lowest level in 15 years, supply is short, and landlords have been marketing rents 32 percent higher than a typical expired lease’s starting rent, according to JLL. 

“Retail, as a whole sector, has proven its resiliency,” said Newmark’s Dobrowski, who pointed to the benefits of a lack of new construction combined with increases in population and consumer demand. “The sector is performing better than it has since the [Global Financial Crisis].” 

Investors are taking notice. The largest mall-focused real estate investment trusts have all seen their share prices soar in 2024: Tanger Outlets’ stock is up 40 percent since last November, Macerich is up 68 percent, CBL is up 19 percent, and Simon Property Group is up 49 percent. 

“It’s a huge tailwind for retail real estate owners, where they’re in a position where there’s not lots of vacancy in the open-air market, and you can say the enclosed-mall market is moving in that direction, as well,” said Dobrowski. “There’s also now a good marriage between both brick-and-mortar and e-commerce. They’ve really learned and found a great way to sell both.” 

American Dream is now counting on its experiential assets — the golfing, skiing, waterpark shebang — to combine with a revived retail renaissance at its hundreds of restaurants and brand-name shopping centers. 

“It’s catching on and it’s going to catch on more,” said Joseph Aquino, president of JAACRES, a New York City leasing firm. “You see families with kids there, and it’s packed. It’s like a mini Disneyland, a mini Universal Studios. And they shop at all the luxury stores.”  

Others are more pessimistic, and doubt that American Dream will ever generate the 2 million visitors per year it promised bondholders back when it secured public and private financing in the sunnier days of 2017. 

“I don’t think it’s living anywhere up to its expectations in terms of traffic,” said Municipal Market’s Washburn. “It’s certainly doing better than it was doing last year, and the year before that, but they were counting on a huge international tourism presence, lots of multiday visits, and I don’t see that that’s necessarily happening. Traffic is still lagging.”

Latella argued that American Dream is only a couple of years into its post-COVID foot traffic, and that it stands to benefit from nearby suburbs all along Interstate 95, its 10-minute distance from Newark International Airport, and the opportunity to draw visitors who go to the 80,000-seat MetLife Stadium for New York Giants and Jets games 17 times per year. 

“This mall has, by far, the best demographics and the best potential for visitations, just from the volume of traffic that passes the property on the New Jersey Turnpike, and the fact that you have an international airport down the road,” he said. “They do market to that.” 

Marc Pfeiffer, a senior fellow at Rutgers University’s Center for Urban Policy Research, said that “from the very beginning” he believed this particular supermall would benefit from its accessibility to and from Long Island, Westchester, northern New Jersey and eastern Pennsylvania, and that there’s no other entertainment venue in that area that has as many ongoing events 365 days per year. 

“The Ghermezian family are really smart retailers, and betting against them in the long term is probably a losing proposition,” said Pfeiffer. “They’ll figure out how to make it work, which they now seem to be doing.”

Brian Pascus can be reached at bpascus@commercialobserver.com