American Dream down to its last reserves

The American Dream mall is nearly down to its last dollar, a startling reality for the $5 billion retail attraction.

The beleaguered mall needed to pull $9.3 million from a reserve account on Tuesday to make a payment on about $290 million in debt, Bloomberg reported. A securities filing says only $820 is left in the account, leaving the mall in danger of missing its next payment due Aug. 1.

Failing to make a payment doesn’t necessarily doom the mall, but failing to keep bond servicer Trimont Real Estate Advisors apprised of the mall’s costs and performance might. The securities filing included a letter from the servicer, saying remediations for violations “range from specific performance to a special redemption of all the bonds.”

“The developer has provided Trimont with minimal information despite specific requests for additional items reasonably necessary to accurately track and understand certain aspects of the project’s performance,” Trimont wrote in a Jan. 18 letter, according to Bloomberg.

Developer Triple Five Group has also sold $800 million in debt, backed by payments it would make to bondholders in lieu of property taxes.

The mall in New Jersey’s Meadowlands has had a nightmare track record since opening. In August, the mall used a $9.3 million draw from its reserves to make a bond payment. The municipal bonds were issued in 2017, backed by 75 percent of sales tax receipts from mall purchases.

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Retail stores in the mall didn’t open until October 2020. In the second quarter of 2021, the mall was 76 percent leased and reported $78.1 million in gross sales. As of Jan. 1, the mall was only 77 percent leased, according to Bloomberg, while leases for another 5 percent of the mall were being negotiated.

For the first three quarters of 2021, sales were at approximately $220 million. In 2017, a forecast projected the mall would bring in $2 billion in its first year, which would’ve required an absurd $1.8 billion in sales in the fourth quarter.

In a statement to Bloomberg, American Dream spokesperson Melissa Howard forecast an optimistic year for the mall, which is set to “open over 100 new retail, entertainment and restaurant concepts,” including a restaurant from Hasbro and a Gucci flagship.

Cash flow problems have plagued the mall even before its opening, when it borrowed more than $1 billion in construction loans. The difficulty in paying off those loans resulted in senior construction loan holders taking minority stakes in other Triple Five properties, such as the Mall of America and the West Edmonton Mall.

[Bloomberg] — Holden Walter-Warner