American Dream has 9 days to avoid default

The American Dream’s ownership overslept its alarm last week, missing an interest payment on a nine-figure debt.

Don Ghermezian’s Triple Five Group failed to make its semiannual payment on a $800 million municipal bond, the Wall Street Journal reported. Bondholder trustee U.S. Bank NA informed bondholders two days after Wednesday’s missed payment.

Bondholders instead received payment from an $11.35 million debt service reserve account, according to the publication. But if Triple Five does not fork over what was due by the end of the grace period on June 16, it could be declared in default.

The money troubles are nothing new for the beleaguered $6 billion mall in East Rutherford. Last month, a securities filing revealed the property lost roughly $60 million last year, generating $173 million in revenue against $232 million in expenses.

The extravagant retail complex recorded $305 million in sales last year, well below the $2 billion once forecasted for its first year of operation.

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American Dream lost $60M in 2021

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American Dream down to its last reserves

Earlier this year, Triple Five began hunting for a four-year extension to pay off $1.7 billion in construction financing. The loans came from a group including JPMorganChase, including a $1.2 billion senior loan and $475 million mezzanine loan due to be repaid last year.

In February, the mall needed to take $9.3 million from a reserve account to make a debt payment. A securities filing revealed there was only $820 left in the account after the payment was made.

After years of delays, the star-crossed mall opened in 2019, around the same time the novel coronavirus began replicating in Hubei Province. Its first stores didn’t open until October 2020, half a year into the pandemic’s onset in America.

Cash flow problems quickly arose, 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 come into focus, but East Rutherford Mayor Jeffrey Lahullier said Monday that the “mall’s definitely in trouble,” according to NorthJersey.com.

Curiously, the mayor floated that the mall could 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 is clearly not systemically important to New Jersey’s economy, and the vast majority of it was privately financed, making the possibility of a government bailout remote.

[WSJ] — Holden Walter-Warner