The $5 billion ‘American Dream’ mall faces the end or the end of the holiday season
Malls are going through one of the worst retail crises of all time, as a public health emergency and changing consumer tastes conspire to ravage the industry.
So it’s not exactly the right time to launch the second-largest mall in the United States.
American Dream, a $5 billion, 3.3 million square foot behemoth in East Rutherford, New Jersey, finally opened its retail stores last month, about two decades after development began. The mall will face its first big test from the start, with Black Friday kicking off the crucial holiday shopping period amid record Covid-19 cases.
“How the holiday season unfolds could make or break if retailers on the verge of bankruptcy are forced to liquidate,” said Vince Tibone, retail analyst at commercial real estate data firm Green Street. “Black Friday will not be the giant in-person shopping event that it has been in years past.”
How the holiday season unfolds could make or break if retailers on the verge of bankruptcy are forced to liquidate.
Stores aren’t the only ones facing challenges. Like many new malls, American Dream was designed around experiences, including an indoor ski slope and water park. These benefits, which are open under limited capacity and health protocol restrictions, do not have the same appeal in the era of Covid-19.
The stakes are high. The Ghermezian family, which owns the mall through their property company Triple Five Group, borrowed billions to complete the project, using valuable assets from the retail portfolio as collateral. Nearly $1.7 billion in construction loans were secured by equity interests in West Edmonton Mall and Mall of America, and the two properties have more than $2 billion in debt. Triple Five already missed monthly payments on Mall of America’s $1.4 billion mortgage earlier this year, and the family’s net worth has taken a hit.
The mall’s bad timing is just the latest in a series of missteps and missteps since it was first considered in 1996. After kicking off in 2004, the project originally known as Meadowlands Xanadu saw its first developer, Mills Corp., go bankrupt just a few years later. Colony Capital then stepped in, but development stalled again after the collapse of Lehman Brothers, which had been a lender. Triple Five took over about ten years ago.
After more delays, the mall was finally due to open its retail stores in March this year, only to push that back by seven months when the coronavirus pandemic caused widespread closures.
Now, more than 100 stores and six attractions are open at American Dream, including an indoor ski resort, skating rink and Nickelodeon theme park, spokeswoman Patti Costantino said. The attractions — with limited capacity — draw sold-out crowds every weekend, she said.
“With so many families unable to travel this holiday,” the mall serves as an entertainment destination, she said via email.
Still, in this environment, it’s an uphill battle for any indoor mall. In a survey of potential buyers in the United States released last month by the International Council of Shopping Centers, less than half of respondents said they planned to go to a mall this holiday season.
This kind of reluctance has led to financial difficulties throughout the industry. Retailers have missed about $52 billion in rent since April. Major chains from Neiman Marcus to JC Penney have filed for bankruptcy, along with mall owners like CBL & Associates Properties Inc. and Pennsylvania Real Estate Investment Trust.
Many businesses are now turning to online channels and curbside pickup to fill the in-person shopping void. Brookfield Properties, one of the largest shopping center owners in the United States, offers more than 3,300 curbside parking spaces at its shopping centers and will offer a virtual store reservation platform for people who do not don’t want to queue.
If we have a continuation of the crisis at this level without government support, I worry about the health of the industry.
Fashion retailer Abercrombie & Fitch is one store that will rely on curbside pickup this holiday season. “With all the challenges carriers are going to face in delivering increasing numbers of packages to customers, it will be a good thing to have stores,” chief executive Fran Horowitz said. The company has two stores – Abercrombie Kids and Hollister – at American Dream.
At Old Navy, the company has added convenience stores, which are stations inside its stores where consumers can make returns and pick up orders online and skip the checkout line.
As Black Friday approaches, the pressure is mounting for traders.
“If we have a continuation of the crisis at this level without government support, I worry about the health of the industry,” said Tom McGee, CEO of the International Council of Shopping Centres. His concern, he said, is that “we will have malls and vacant tenants all over the country.”
By Jordyn Holman and Natalie Wong.