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Who Will Bankroll the $4B American Dream Miami?

Analysts: Favorable Lending Climate, But a Recession is Likely
May 27, 2018
American Dream Miami will rise in northwestern Miami-Dade County, with the first phase expected to open in 2023.
Credit: Triple Five Worldwide

Now that American Dream Miami has the blessing of county commissioners, the question becomes: How will the developer pay for the $4 billion behemoth?

Triple Five Worldwide officials are revealing little about financing for the 5 million-square-foot planned mega mall and entertainment center, except to say that it likely will involve multiple lenders, similar to American Dream Meadowlands.

For that sister project in New Jersey, Triple Five announced last summer that Goldman Sachs and JP Morgan completed a sale of $1.1 billion in tax-exempt bonds to go with a $1.67 billion construction loan from the two Wall Street heavyweights. In addition, the New Jersey Sports and Exposition Authority authorized up to $350 million in bonds. The nearly 3 million-square-foot retail and entertainment complex is scheduled to open next year.

Triple Five insists that American Dream Miami won’t be just a mall, but rather the largest retail and entertainment destination in the country, attracting tens of millions of visitors a year.

The project, set on 174 acres at Interstate 75 and Florida’s Turnpike in northwest Miami-Dade County, will include shops and restaurants, as well as a Ferris wheel, ski park, water park, skating rink and submarine ride. The first phase is expected to open in late 2023.

Another developer, The Graham Cos., is building a separate project on 337 acres abutting American Dream to the south. The 3 million-square-foot business park will include 1 million square feet of retail and 2,000 residential units. It also received approval from the Miami-Dade County Commission last week.

Miguel Diaz de la Portilla, a Miami lawyer for Triple Five, told CoStar News that the developer’s experience building similar projects – including the Mall of America in Minnesota and West Edmonton Mall in Alberta, Canada – will carry great weight with prospective lenders.

“They have a track record of success,” he said of Triple Five. “Traditional malls aren’t doing this type of development. It’s an experience. This kind of entertainment and retail has worked very well.”

Ken Thomas, a Miami-based economist and banking analyst, expects a recession in the next few years that could affect construction of American Dream Miami. He noted that retail and entertainment are both a function of income.

Thomas added that lenders will want to know how much equity Triple Five will put into the development. Typically, they require at least 15 percent, he noted.

But, he said, a generally favorable lending environment now bodes well for Triple Five, along with still-low interest rates and the developer’s success in lining up Goldman Sachs and JP Morgan in New Jersey.

“I think that’s a very positive sign for this project,” Thomas said. “Other lenders will say, 'Wow. Maybe this is something we ought to do, too.'”

Jack McCabe, a real estate consultant in Deerfield Beach, FL, also doubts the developer will have trouble finding equity partners and lenders to bankroll construction, noting that there’s still plenty of capital chasing deals.

“Does that mean its smart money? Not necessarily,” McCabe said. “The project will get built. And then what?”

McCabe and other industry analysts point to the increasing volatility of retail, with more consumers forgoing malls for the ease and comfort of shopping online. McCabe added that residents of Broward and Palm Beach counties who do like brick-and-mortar stores will have to pass Sawgrass Mills, the largest outlet mall in the country in Sunrise, FL, on their way to American Dream Miami.

“It could either be a home run or it could be South Florida’s biggest flaw,” McCabe said.

Miami-Dade County commissioners debated all day and into the evening May 17 before approving American Dream Miami and The Graham Cos.’ project. The commissioners insisted that no county tax dollars go toward the developments.

Board Chairman Esteban L. Bovo Jr. signed off on American Dream Miami after commissioners agreed to adopt his proposal requiring the developer build transit infrastructure that helps reduce the reliance on cars. The day before the vote, Bovo explained why he supported Triple Five and its project.

“Fact: Malls seem to be a last century’s idea of the shopping experience, but it is a private investment, and they have been successful elsewhere,” Bovo tweeted. “I don’t like government telling the private sector where and how to invest their money.”

Fellow commissioner Daniella Levine Cava told representatives for Triple Five and The Graham Cos. that she was rooting for both projects to succeed. Still, she cast the only dissenting votes.

“I can’t support the approval of such a massive development that promises mostly low paid jobs, horrendous traffic and undermines the objectives we have for core transit development,” she tweeted.

Paul Owers, South Florida Market Reporter  CoStar Group   
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