American Dream Mall pays back Muni bonds by draining reserves

Bloomberg has reported that New Jersey’s 5 billion dollar American Dream mall has drained a reserve fund to make a bond payment. The mall, which was expected to be a large attraction for both New Jersey residents, neighboring New Yorkers, and tourists, has struggled to become the destination it had planned to be due to the ongoing COVID-19 pandemic.

The reserve emptied was for a 9.3 million dollar payment due Tuesday on 290 million dollars of debt supported by sales tax receipts. According to reserve filing, 820 dollars is left after this payment. The next payment is due on August 1, and it is unclear whether or not American Dream will make this payment.

Failing to make a payment on the sales tax debt doesn’t qualify as default or require the borrower to pay back the loan immediately. American Dream Mall’s developer, Triple Five Group, has sold 800 million dollars of muni-debt backed payments they agreed to make to bondholders rather than paying property taxes. American Dream Mall’s construction and mezzanine debt totals.

American Dream’s sales figures are also not as impressive as anyone would have hoped. For quarters one through three of the fiscal year 2021, American Dream did 220 million dollars in sales, 1/10 of the projected 2 billion dollars that was forecasted in 2017. Currently, only 77 percent of the mall is leased, and negotiations for another 5 percent of the leases are underway.

If American Dream reaches certain sales tax revenue targets, they are entitled to certain grants from New Jersey. Despite the potential for grants, American Dream hasn’t submitted the required paperwork and materials to state officials to review for grant awarding.

American Dream currently has a 3 billion dollar debt load. The Gharmezian family, the owners of American Dream, have tried to find ways to handle the debt load, and the reserves are just their latest attempt to manage the project’s debt.