American Dream misses payment, has 9 days to avoid default
The American Dream property rose above its alarm last week, missing an interest payment on nine-figure debt.
Don Ghermezian’s Triple Five group has failed to make its semi-annual payment on an $800 million municipal bond, The Wall Street Journal reported. Bond trustee US Bank NA notified bondholders two days after Wednesday’s missed payment.
Bondholders instead received a payment from a debt service reserve account of $11.35 million, according to the publication. But if Triple Five doesn’t pay what was owed by the end of the grace period on June 16, it could be declared in default.
Money troubles are nothing new for the beleaguered $6 billion mall in East Rutherford. A title filing last month revealed the property lost about $60 million last year, generating $173 million in revenue versus $232 million in expenses.
The extravagant shopping complex recorded $305 million in sales last year, well below the $2 billion forecast for its first year of operation.
Earlier this year, Triple Five began seeking a four-year extension to repay $1.7 billion in construction financing. The loans came from a group including JPMorganChase, including a $1.2 billion senior loan and a $475 million mezzanine loan due to be repaid last year.
In February, the mall had to withdraw $9.3 million from a reserve account to pay off its debt. A securities deposit revealed that only $820 remained in the account after payment.
After years of delays, the star-studded mall opened in 2019, around the same time the novel coronavirus began to replicate in Hubei province. Its first stores did not open until October 2020, six months after the pandemic began in America.
Cash flow problems soon emerged, leading senior construction loan holders to take minority stakes in other Triple Five properties, including the Mall of America and the West Edmonton Mall.
The New Jersey property’s near-term future has not been finalized, but East Rutherford Mayor Jeffrey Lahullier said Monday that the “mall is definitely in trouble,” according to NorthJersey.com .
Curiously, the mayor hinted that the mall might be “too big to fail,” noting taxpayer contributions to the complex. Lahullier said the mall is at least $5.5 million behind in payments in lieu of taxes.
But the mall clearly isn’t consistently important to New Jersey’s economy, and the vast majority of it has been privately funded, making the possibility of a government bailout remote.
[WSJ] — HoldenWalter Warner