The American Dream recreation and entertainment complex on Route 3 in the Meadowlands, formerly known as the Xanadu project, is in motion. The New Jersey Sports and Exposition Authority approved plans two weeks ago for indoor water and amusement parks and a new concept for the racetrack.
The approval allows Triple Five, the owner and developer of Minnesota’s Mall of America, to move forward and obtain permits to build.
While the new 125,000-foot grandstand for the racetrack isn’t scheduled to open until spring 2013, small changes to revitalize the site will begin at the end of this year. Jeff Gural, chairman of Newmark Knight Frank, who will soon take over operations of the 35-year-old track, has brought on General Manager Mike Newlin, former manager of the Nebraska State Fair, to help revive the site.
Triple Five committed another $1.7 billion to finish the amusement and water parks.
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Triple Five estimates the project will create more than 8,900 construction jobs over the next two years and up to 35,000 jobs once fully completed.
History of hurdles
The American Dream project has faced serious financial hurdles that threatened to shut it down until new developers came forward to take over its completion, and until Gov. Christopher Christie said the state would take a more active role.
Gural stepped in last December to build the grandstand. Triple Five committed another $1.7 billion in the spring to finish the amusement and water parks.
Located at the Meadowlands Sports complex, the former Xanadu was supposed to further solidify the Meadowlands as a tourist and entertainment destination and generate residual business and millions of dollars in revenue for the region, which includes Secaucus and North Bergen. Such residual business could have helped the Secaucus hotel industry, which includes the Crowne Plaza and Embassy Suites.
Originally expected to be financed by the Maryland-based Mills Corp., Xanadu ended up being backed by Colony Capital, a private equity firm, after it became apparent that Mills would be unable to finance the project as planned. Colony Capital took over in August 2006, committing up to $500 million of equity. Colony also arranged for construction loan financing to help fund building costs.
But in March 2009 a subsidiary of Lehman Brothers – which had been one of Xanadu’s financial backers – went bankrupt. The collapse sent the project into a tailspin as the recession also affected other financial supporters of the project. Making matters worse, the recession also hurt Xanadu’s ability to draw struggling retailers and other businesses to the complex.
Colony Capital found itself in need of $500 million to finish the project. The project floundered. In 2010, a consortium of lenders that had financed Xanadu wrested control of the project from Colony Capital.
The complex was supposed to open its doors in 2008. The 2008 debut was then pushed to August 2009, then again to 2010. The project is now scheduled to be completed in 2013.
Tax breaks boost
The state of New Jersey stepped in to salvage the stalled project earlier this year. The American Dream Meadowlands project became eligible to receive a $350 million tax break after the state legislature passed a bill in June under the state’s Economic and Redevelopment Growth program. The tax incentives have not received final approval.
The bill to change the tax incentives came after the state awarded a controversial $102.4 million tax break to help Secaucus-based Panasonic Corp. of North America move its headquarters just a few miles to a new building in Newark, a move which Secaucus and Hartz Mountain Industries fought. Hartz and Secaucus both claimed the tax incentives offered to Panasonic were a misuse of the Urban Transit Hub Program, because it caused Secaucus to lose jobs.
The Urban Transit Hub Tax Credit program was modified in the bill, which outlines what a company can receive if moving within the state. In particular, a company can get a larger tax break if 500 or more jobs are at risk of leaving the state unless the state grants an incentive. A company can also get a larger tax break with an interstate move if it consolidates two facilities.
The Christie administration has stated the complex will generate tens of millions of dollars in sales and payroll taxes for New Jersey and will generate significant revenue for municipalities in Bergen County. It’s unclear what the economic impact will be for nearby municipalities in Hudson County, like Secaucus and North Bergen.