Holidays a test for $5B mall in N.J.
Shopping centers are struggling through one of the worst retail crises ever, as a public health emergency and changing consumer tastes ravage the industry.
So it’s not exactly the ideal time to be launching the nation’s second-biggest mall.
American Dream, a $5 billion, 3.3-million-square-foot behemoth in East Rutherford, N.J., finally opened its retail stores last month, about two decades after development began. The mall will face its first big test right off the bat, with Black Friday kicking off the crucial holiday shopping period amid record COVID-19 cases.
“How the holiday season goes could make or break whether retailers on the brink of bankruptcy are forced to liquidate,” said Vince Tibone, a retail analyst at Green Street, a commercial property data company. “Black Friday is not going to be the giant in-person shopping event that it has been in prior years.”
It’s not just the stores that face challenges. Like many new shopping centers, American Dream was designed around experiences, including an indoor ski slope and a water park. Those perks, which are open under limited capacity and health protocol restrictions, don’t hold the same appeal in the age of COVID-19.
The stakes are high. The Ghermezian family, which owns the mall through its Triple Five Group real estate company, borrowed billions to complete the project, using prized assets in the retail portfolio as collateral. Almost $1.7 billion of construction loans were backed by equity interests in West Edmonton Mall and Mall of America, and the two properties carry more than $2 billion in debt. Triple
Five already missed monthly payments on Mall of America’s $1.4 billion mortgage this year, and the family’s net worth has taken a hit.
The mall’s poor timing is only the latest in a series of missteps and stumbles since it was first envisioned in 1996. After breaking ground in 2004, the project originally known as Meadowlands Xanadu saw its first developer, Mills Corp., go nearly bankrupt just a few years later. Colony Capital then stepped in, but the development stalled again after the collapse of Lehman Brothers, which had been a lender. Triple Five took over about a decade ago.
After more delays, the mall was finally set to open its retail stores in March, only to push that back by seven months when the coronavirus pandemic prompted widespread lockdowns.
Now, more than 100 stores and six attractions are open at American Dream, including an indoor snow resort, a skating rink and a Nickelodeon theme park, spokeswoman Patti Costantino said. The
attractions — with limited capacity — are drawing sellout crowds every weekend, she said.
“With so many families unable to travel this holiday,” the mall serves as an entertainment destination, she said by email.
Still, in this environment, it’s an uphill battle for any indoor mall. In a survey of likely shoppers in the U.S. 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.
That kind of reluctance has led to financial distress across the industry. Retailers have missed roughly $52 billion in rent since April. Major chains and mall landlords have filed for bankruptcy.
Many companies are now turning toward online channels and curbside pickup to fill the in-person shopping void. Brookfield Properties, one of the largest U.S. mall owners, is providing over 3,300 curbside parking spots across its malls and will offer a virtual store reservation platform for
people who don’t want to cram in a line.
Fashion retailer Abercrombie & Fitch is one store that will rely on curbside pickup this holiday season. “With all of the challenges that the carriers are going to have in delivering an escalated number of packages to customers, it’s going to be a good thing to have stores,” CEO Fran Horowitz said.
At Old Navy, the company added convenience spots, which are stations inside its stores where consumers can make returns and pick up online orders and avoid the checkout line.
Pressure was mounting for retailers as Black Friday approached.
“If we have a continuation of the crisis at this level without government support, I do worry about the health of the industry,” said Tom McGee, CEO of the International Council of Shopping Centers. He said his concern, is that “we will have vacant shopping centers and tenants around the country.”