(Bloomberg) – American Dream, the $5 billion super mall in New Jersey’s Meadowlands, has drained a reserve fund to make a bond payment as it scrambles to attract buyers and renters alike that the pandemic is set to enter its third year.

The 3.5 million square foot shopping and entertainment complex, which includes an indoor ski slope, amusement park and water park, nearly emptied a reserve account to make a $9.3 million payment. owed Tuesday on about $290 million in debt backed by sales tax receipts, according to a securities filing. There’s about $820 left in the reserve fund, according to the record. It is unclear whether American Dream will make its next payment on the securities, due August 1.

Failure to make payment on the sales tax debt does not constitute default and does not obligate the borrower to repay the loan immediately, according to the bond documents.

However, the filing disclosing the drawdown of the reservation included a letter from the bond department Trimont Real Estate Advisors stating that American Dream was failing to meet obligations under the bond documents to provide project cost and performance updates. . Remedies for breach “ranged from specific performance to special repayment of all obligations,” the letter said.

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

Missed screenings

Developer Triple Five Group also sold $800 million of municipal debt secured by payments they agreed to make to bondholders in lieu of paying property taxes. The project still has $1.7 billion in senior and mezzanine construction debt.

“Given the delays in space completion and tenant occupancy (18-24 months behind the developer’s original projections), sales tax revenue is expected to miss short-term projections,” a wrote Nuveen LLC in a note last year.

American Dream, located across the Hudson River from New York, opened its entertainment complex in October 2019, nearly two decades after the site was first proposed for a mall. Five months later, Covid-19 has spread to New York and New Jersey, causing lockdowns to contain the public health emergency and postponing the opening of mall retail stores until October 2020.

Successive waves of the coronavirus have discouraged shoppers and tourists. American Dream’s sales were about $220 million for the first three quarters of 2021, according to public disclosures, about a tenth of the $2 billion a 2017 forecast predicted it would make during of its first year of operation. The mall was only 77% leased as of Jan. 1, and leases for an additional 5% of the mall are being negotiated, according to filings.

Melissa Howard, a spokeswoman for American Dream, said the mall was “extremely pleased” with the early success of its retail and entertainment tenants.

“This year, American Dream will open more than 100 new retail, entertainment and dining concepts,” Howard said in an emailed statement. “We recently announced several exciting new offerings and concepts, including a two-story Gucci flagship, the opening of a 300-foot observation wheel overlooking the New York skyline, an entertainment and restaurant concept one-of-a-kind experiential from Hasbro, and much more.”

American Dream is eligible for New Jersey grants if the project meets sales tax revenue goals. The grants, equal to 75% of sales tax revenue from mall purchases, cover expenses and debt service on a $290 million tranche of bonds.

However, American Dream has not submitted the project cost statement and other documents to state officials that are required to receive grant revenue, Trimont said in its letter.

“While everyone appreciates the hardship caused by the pandemic and the likelihood that grant revenue received now may not be sufficient to pay obligations in full, this does not relieve the sponsor of the responsibility to comply with its obligations under of various agreements,” the letter reads. .

Reserve draw

The Ghermezian family, owners of American Dream, have hired legal and financial advisers to help them deal with the New Jersey mall’s $3 billion debt. Last year, the family lost 49% of its stake in Minnesota’s Mall of America and Canada’s West Edmonton Mall to construction lenders American Dream.

American Dream first dipped into its reserves in August to pay off debt on sales tax subsidy bonds. Since then, the risk premium on bonds subject to federal income tax has increased by 0.5 percentage points. The tax-exempt bonds have not been traded since last March.

On October 5, $8.6 million of taxable bonds maturing in 2024 traded at a yield of 4.52%, about four percentage points more than US Treasuries maturing in three years, according to data compiled by Bloomberg. On June 9, the same bonds were trading at a premium of 3.5%.

Nuveen, the largest holder, held about $106 million in sales tax bonds from American Dream, with about $106 million as of Dec. 31, according to data compiled by Bloomberg.

In December, the new owner of the relaunch of Toys “R” Us, the toy store that failed and failed, opened a flagship store in American Dream.

However, the mall’s indoor ski and snowboard trail remains closed following a fire in September and the operator has not set a reopening date.

© 2022 Bloomberg L.P.