Bonds

American Dream mall misses another debt payment

The developers of the American Dream mall in East Rutherford, New Jersey, have missed another scheduled debt service payment on the bonds issued to bankroll its construction.

Triple Five, owner and developer of American Dream, missed a payment due on $287 million of limited obligation grant revenue bonds issued through the Public Finance Authority in 2017 as part of a mix of debt used to restart construction on the stalled Xanadu project and develop the massive mall and entertainment complex next to New Jersey’s Meadowlands sports complex seven miles west of Manhattan.

“Trustee has not received any revenues for payment of the Feb. 1 debt service and the reserve account does not have sufficient funds to make such payment,” bond trustee U.S. Banksaid in a notice posted on the Municipal Securities Rulemaking Board’s EMMA disclosure website.

The developers also missed the Aug. 1 debt service payment.

The mall has struggled since opening its doors to the public in late 2019 just as debt service payments were to come due on more than $1 billion of municipal bonds taken by the company.  In addition to the grant anticipation bonds, the PFA also sold $800 million in revenue bonds backed by payments in lieu of taxes.

The trustee had to take $2.6 million from the debt service reserve to make a Dec. 1 interest payment on those PILOT bonds.

“They’ve fallen so much behind on paying off their debt, especially with the hit they took from the pandemic,” said former Mayor Jim Cassella of East Rutherford who was in office when the development deal was negotiated. “They cannot generate enough income to catch up; there’s cash flow for sure but it’s just not busy enough.”

On top of a gradual but sustained decline in profits for big box retailers, the mall has also fought against strong national economic headwinds since opening.

Only $878.50 remains in the reserve account for the grant-backed bonds, US Bank said.

Government entities like East Rutherford that were involved with the project and due to receive scheduled PILOT payments are generally not seeing those funds, Cassella said, with “a very small portion of what they are owed” making its way to municipalities so far. 

Triple Five also reportedly defaulted on $1.7 billion in private construction loans in February of 2021, allowing creditors to take a 49% stake in another of the developer’s holdings, the Mall of America in Minnesota, the only U.S. mall bigger than American Dream, which was collateral in the original lending agreement.

In November, Triple Five was granted a four-year extension on that debt by a group of creditors led by JP Morgan in an agreement some experts hoped might ease overall pressure and allow the company to address its pending municipal obligations.

“It seems like every week we hear of another one of the lenders not receiving their payment and the question that has to be asked is, is this just the way they do business?” Cassella said.