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American Dream Mall reserves funds to pay for Muni Bonds

(Bloomberg)—American Dream, a $5 billion super mall in Meadowlands, New Jersey, depleted a reserve fund to make bond payments as it begins its third year with the pandemic to attract shoppers and renters. fights for.

The 3.5 million-square-foot shopping and entertainment complex, which houses an indoor ski slope, amusement park and water park, emptied a reserve account backed by sales tax receipts on an approximately $290 million loan to pay off approximately $9.3 million . , according to a securities filing. The filing said there is about $820 left in the reserve fund. It is unclear whether American Dream will make its next payment on the securities due in August. 1.

According to the bond documents, failure to pay sales tax on the loan is not a default nor is the borrower required to return the loan immediately.

However, the filing disclosing the reserve draw included a letter from bond servicer Trimont Real Estate Advisors stating that American Dream was not complying with obligations under the bond documents to provide updates on project costs and performance. The letter said the infringement measures “ranged from specific performance to the exclusive redemption of all bonds”.

“The developer has provided Tremont with minimal information, despite specific requests for additional items that are reasonably necessary to accurately track and understand certain aspects of project performance,” Tremont said in January. 18 characters.

missed screening

Developer Triple Five Group also sold an $800 million muni-loan backed by agreed payments to pay bondholders instead of paying property taxes. The project has a further $1.7 billion in senior and mezzanine construction loans.

Nuveen LLC wrote in a note last year, “Given the space completion and tenant occupancy delays (18 to 24 months behind initial developer estimates), sales tax receipts are projected to miss near-term estimates.” “

American Dream, located across the Hudson River from New York City, opened the doors of its entertainment complex in October 2019, nearly two decades after a mall on the site was first proposed. Five months later, COVID-19 spread to New York and New Jersey, a lockdown to prevent a public health emergency and the postponement of the mall’s retail store openings until October 2020.

The relentless waves of coronavirus have discouraged shoppers and tourists alike. American Dream sales were about $220 million for the first three quarters of 2021, public disclosures reveal, about a tenth of the $2 billion that 2017 forecasters estimate it will bring in during its first year of operation. As of January the mall was only 77% leased. Leases are underway for 1 and another 5% of the mall, according to securities filings.

American Dream spokeswoman Melissa Howard said the mall is “extremely pleased” with the initial success of its retail and entertainment tenants.

“This year, the American Dream will open more than 100 new retail, entertainment and restaurant concepts,” Howard said in an emailed statement. “We recently announced a number of new deals and exciting concepts, including the inauguration of a two-story Gucci flagship, a 300-foot observation wheel overlooking the NYC skyline, the first of its kind experiential entertainment and restaurant concept from Hasbro. and many more.”

The American Dream is entitled to a grant from New Jersey if the project meets sales-tax revenue targets. The grant, equivalent to 75% of sales tax receipts on mall purchases, covers $290 million of bond expenses and debt service.

However, American Dream has not submitted project cost statements and other materials to state officials that are required to receive grant revenue, Tremont said in its letter.

“While everyone appreciates the hardships caused by the pandemic, and the revenue grant received now may not be enough to fully pay off the bonds, the developer will be required to comply with its obligations under various agreements. does not relieve the responsibility,” the letter said. ,

reserve draw

The Germazian family, which owns the American Dream, has legal and financial advisors to help tackle the New Jersey mall’s $3 billion debt load. Last year, the family lost 49% of its stake in the Mall of America in Minnesota and the West Edmonton Mall in Canada to American Dream’s construction lenders.

American Dream first dipped into reserves in August to pay off debt on sales tax grant bonds. Since then, the risk premium on bonds subject to federal income tax has increased by 0.5 percent. The tax-exempt bonds haven’t traded since last March.

According to data compiled by Bloomberg, on October 5, $8.6 million of taxable bonds maturing in 2024 trade at a yield of 4.52%, nearly four percent higher than US Treasuries maturing in three years. On June 9, the same bonds traded at a 3.5% premium.

According to data compiled by Bloomberg, Nuveen, the largest holder, had $106 million in sales tax bonds of American Dream worth approximately $106 million as of December 31.

In December, the new owners of the revived Toys “R” Us, the toy store that went bankrupt and went out of business, opened a flagship location in the American Dream.

The mall’s indoor ski and snowboard slopes, however, remain closed after the September fires and the operator has not set a date for reopening.

© 2022 Bloomberg LP

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