For Don Ghermezian, president of Triple Five, the American Dream, and building the third-largest mall in North America, is far less about creating a product for today than one that meets the needs of tomorrow's shopping experience.
Ghermezian and Triple Five’s vision for American Dream is a shopping center that is over 55 percent entertainment and 45 percent retail.
“There are a lot of things in this project that were delayed that were self-inflicted,” he said. “I wanted to add certain elements (and) those deals took time. We will have what will be the largest combination of indoor theme park and waterpark in the world. Open 365 days a year, and the only way to get to it is to go through retail, because all of these attractions are there to push retail. That was our whole mindset: What can we give that serves multiple purposes?”
With a second round of construction financing completed at the end of June, bringing the financing total to $2.77 billion, Ghermezian and his team are now moving full steam ahead on the project, which will deliver almost 3 million square feet and 14 unique attractions to the Meadowlands.
The president of Triple Five is so bullish on the project, he has even set a definite — definite — opening date of March 2019.
“March 2019 is it,” he said. “We’re north of 70 percent fully executed leases in the center. And we have another 10 percent of the center in full LOIs (letters of intent). Our conversion rates on LOIs has been north of 96 percent. So, we figured that 10 percent that is there, 9.5 percent or whatever it is, will turn into executed leases. Which basically means, we’re close to 80 percent leased today, in a center that is the third-largest center in North America. So, you’re talking about a hell of a lot of GLA (gross leasable area). And, in an extremely difficult retail environment.
“The reason we’re able to do deals is because the tenants believe 100 percent that our project is the future of retail. And if they plan on being in retail two years from now, one year from now, if you’re not in American Dream, you might as well be giving up.”
Gov. Chris Christie recently spoke at the site of American Dream in East Rutherford, and called the project a vital asset to the future of Bergen County, and northern New Jersey’s economy.
“Long-term, there’ll be nearly 23,000 jobs, permanent jobs, that are created here on this site,” he said. “Including over 16,000 here on the American Dream site. Development and construction of the American Dream will generate upwards of $80 million in tax revenues for the state, as much as $70 million in sales tax revenue on construction materials and nearly $10 million in corporate business taxes. Over the first 20 years of operation, an average of $3.5 billion in tax revenue will be payed to the state of New Jersey. That’s a nine-to-one return on our investment of our $390 million in ERG grants approved by the (Economic Development Authority). It's a good deal for Triple Five. It’s a good deal for the taxpayers of New Jersey.
“These revenues include over $2 billion in sales taxes and over a $1.5 billion in corporate business taxes, income tax, as well as hotel tax, and occupancy fees, as well. So, after this project languished during previous administrations and a few other bumps along the way on our own, this project is progressing vigorously and a new completion date is scheduled for March 2019 and I'm thrilled to come up here as a private citizen at that point and see the results of the hard work that this administration has put in with our partners.”
American Dream will be the culmination of Triple Five’s work at Mall of America and West Edmonton Mall, and an opportunity to venture into a whole new type of retail center, Ghermezian said. With over 14 flagship entertainment venues, or more than 1.5 million square feet of entertainment, American Dream will be the first time Triple Five has put together a complex that is mostly entertainment.
“We started it at 40 percent entertainment, 60 percent retail, but as the world has shifted over the last couple of years, that number has shifted as well,” Ghermezian said. “When we open the project, we’ll be north of 55 percent entertainment, 45 percent retail. Nobody can compete with that.
“We knew that Mall of America and West Edmonton Mall were a little lighter than we wanted. We know exactly how many people our entertainment brings to the center versus our traditional anchor department store. It’s a big difference from what Nickelodeon brings to my mall and what Sears brings to my mall.
“What has happened, however, is that, over the last couple of years, we’ve been steadily increasing the amount of entertainment at Mall of America. We recently added a 60,000-square-foot Crayola experience at the center. We’re very close to announcing another 60,000-square-foot major attraction outside of the theme park, which will be another draw to the center. We’re probably working in aggregate, 200,000 square feet of entertainment concepts at Mall of America and probably close to 200,000 square feet of entertainment concepts in West Edmonton Mall. So, that number of around 20 percent will now start to trend. We want to push it closer to 30 percent over the next one to three years. Ultimately, we’ll be at 50 percent five to seven years down the road.”
Ghermezian’s take on retail is different than most mall owners. At American Dream, occupants are vetted not only according to the type of retail product they offer, but according to how they plan to set their stores apart from the rest.
Triple Five’s project will also serve as the location for several retailers to consolidate their New Jersey stores. Saks, Ghermezian said, which is in a partnership with Louis Vutton and Gucci for space at the center, decided to close its other two locations in the state to become one of over 500 stores.
Other occupants, like Cirque du Soleil and KidZania, believe in the project so much that, instead of setting their sights on Manhattan, they chose American Dream, he said. This not only speaks to the hopes — and capital — being invested in the property, but will serve as an attractant for New Yorkers.
Like Mall of America and West Edmonton, American Dream will take advantage of the inability to shop outdoors in Manhattan during half of the year. Triple Five’s master plan includes a streetscape that resembles a Parisian road, with retailers lining the corridors between the entertainment venues.
“We knew the impact on retailers and Amazon, so we were five years ahead of the curve,” he said. ”We took as much time as we needed to put together these elements. So: Nickelodeon Universe theme park, DreamWorks Waterpark, the indoor ski hill, the indoor ice rink, Cirque du Soleil theater.
“And that goes into how you will get New Yorkers to come into the property. There is no Cirque on Broadway anymore. There’s no Nickelodeon theme park in New York, there’s no DreamWorks indoor waterpark in New York, there’s no skiing, there’s no indoor ice rink, there’s no aquarium … there’s no Lego Discovery Center; you can’t find that in Manhattan. There’s no Kid Zania … so, we signed KidZania, we signed Cinemax, we signed the observation wheel, all these elements … and then you mix them with retail, but not just your run-of-the-mill retail.
“We signed the largest H&M in any mall in the world. They’re one of the top fast-fashion retail tenants that are out there. … And, in addition to those guys, we saw the Aritzias, the Lululemons, all of the top-performing retailers that are out there, and then we did luxury.”
And, after becoming a part of American Dream, Ghermezian said, tenants are still required to show how they are planning to separate themselves even within the mall. In some cases, tenants have decided to add automated dressing rooms. In others, visitors will have the ability to personalize their experience using their own devices to play music and be able to change the lighting within the shop.
“We’ve gone crazy, because we want to build what really is the next generation of what retail and entertainment should be,” Ghermezian said. “But you as a tenant need to show me what you’re going to do. And if you can’t, well first of all, good luck being in business two years from now, but, second of all, we’re not going to do deals with you. Go do deals with the other centers in the area. We’re perfectly fine with passing on deals if they can’t compete or can’t show us they’re going to be different the way we’re going to be different.”
For any brick-and-mortar retailer or mall developer, being unable to sell on Sundays presents a difficult challenge and maybe even deters investment. And, if you’re building the third-largest mall in North America, choosing the last county in the state to enforce “blue laws” may seem difficult.
Triple Five President Don Ghermezian, however, is confident this will have no effect in his turnover rate or in the sales of his tenants.
“What we found is that, when you’re closed on Sunday for shopping, that customer base, or that amount, spreads over the next six days anyway,” he said. “We’re not concerned about it, and neither are any of the tenants we’ve signed.
“More than 60 percent of the shopping center will be open on Sundays because the blue laws apply primarily to apparel. At 55 to 60 percent of the project being entertainment-based, all the theme parks, all the restaurants, all the food courts, all the other attractions that we’ve got will be open. We think the center will be extremely packed on Sundays (even) with the 40 percent of the retail component being closed.”
With financing and construction taken care of, the developer’s next step will be to focus on transportation and how its mall fits into the bigger plan proposed by the New Jersey Sports and Exposition Authority.
As with its other centers in Alberta and Minnesota, Triple Five will staff a logistics specialist to drive traffic to and from the airports and Manhattan to American Dream.
“We’ll have tour buses that will go from Manhattan out to the property, we’ll have tour buses from all three airports out to the property,” Ghermezian said. “We have tourist departments at our other centers that are staffed 20 to 25 deep. That’s all they do, figure out how to drive traffic through the centers, especially when there aren’t 60,000 tourists coming to your store. For us, now, the conversation is how do we get them out of the island, and that’s four miles away. And it’s not that difficult. We’re going to be expanding transportation aspect over the next five years.”
Triple Five is aware of the mix of uses that have taken place in other malls around the country, but American Dream will seek to maintain its retail and entertainment focus in the main building, while looking for other opportunities in the region.
“There will always be brick-and-mortar retailers, and there will always be an opportunity for everyone to have an experiential retail experience, but that’s just a part of our structure and DNA,” Ghermezian said. “It’s about a sense of place, it’s about a community, it’s about an experience that is more than just retail and more than just entertainment. I’m not looking to backfill, I’m not worried about contraction … but, will we explore other opportunities for other components, additional retail and potentially office and potentially other components as we look to the master-planned development of the overall site beyond the initial phase (like) hotel, etc.? Absolutely.
“When (NJSEA) put together this complex almost 40 years ago, their focus was on entertainment, tourism, sports and any integration of those things. We’re a part of that. We’re helping them fill some of those components above and beyond what the stadium presented and what the racetrack presented over the past 34 years.”
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