The long-delayed American Dream project in East Rutherford, N.J., barely started opening when the coronavirus pandemic hit.
Photo: eduardo munoz/ReutersWith Covid-19 keeping millions of consumers out of malls and shopping centers, much of the news about Triple Five Group, one of the largest private retail real-estate owners in North America, has been grim.
As of June, Mall of America is 60 days delinquent on its $1.4 billion mortgage and is negotiating with a special servicer for new terms, according to real-estate data firm Trepp LLC. The long-delayed American Dream project, which barely started opening when the pandemic hit, has at least $2.8 billion in debt, much of it borrowed in 2017.
But some retail experts say it is too early to count out the Canada-based company, which faces problems with Mall of America in Bloomington, Minn., and American Dream in East Rutherford, N.J., the country’s most expensive mall development.
Triple Five has in its favor the reluctance of creditors to foreclose on challenged properties, especially those being managed by leading operators with decades of experience. The controlling Ghermezian family is known for its charm and success at blending shopping with theme parks, aquariums and other forms of entertainment.
Some creditors say they have confidence with the Ghermezians at the helm. “We do not anticipate writing down the investment and believe the bond structure supports investor value,” said a spokeswoman for Nuveen LLC, a Chicago-based investment manager and major investor in the municipal bonds backing American Dream.
Still, a Triple Five spokesperson declined last week to comment on the Mall of America debt but acknowledged that the company is facing “financial challenges due to Covid-19.”
Mall of America, one of the country’s largest with 3 million square feet, was temporarily closed in mid-March, and some tenants have withheld rents because of the mandated closures. It was to reopen on June 1, but the Memorial Day killing of George Floyd while in Minneapolis police custody and the ensuing protests pushed the date to June 10.
As for the American Dream, the enclosed 3-million square foot mall development was already a challenge for Triple Five in the years leading up to the pandemic. Originally named Xanadu, American Dream was taken over by Triple Five in 2011. By October 2019, some $5.7 billion had been spent on the property, which included an artificial ski run and theme park.
After multiple delays, The Nickelodeon Universe theme park and ice-skating rink at American Dream opened in October last year, and the indoor ski slope opened in December. Just days before the scheduled March 19 opening of some stores and the DreamWorks Water Park, American Dream announced that it would close on March 16 because of the pandemic.
Since then there has been more pain. Vitamin seller GNC Holdings Inc. filed for bankruptcy last month, announcing up to 1,200 store closures including one in American Dream. Last month, American Dream sued a Korean restaurant owner for breach of contract, alleging that the tenant had refused to construct and open its premises according to the lease.
Malls in New Jersey are allowed to reopen starting June 29, but American Dream has yet to announce a date.
Its construction loans are more risky for Triple Five than the municipal bonds because the collateral includes stakes in Mall of America and another mall. Starwood Property Trust, one of the construction loan creditors, declined to comment.
Nuveen’s spokeswoman pointed out that even though it has been closed, American Dream has been current on payments that took the place of typical property taxes in the development’s municipal bond structure. There are also debt service reserves which gives the project “cushion to ramp up and increase utilization and ultimately support the debt,” said the spokeswoman.
As older shopping venues slide away, American Dream could be a survivor in a post-Covid world if it keeps a relevant mix of tenants, according to analysts. Its focus on entertainment also could be a big draw.
“Humanity desperately needs to be entertained,” said Nina Kampler, a retail consultant and New Jersey resident.
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Write to Esther Fung at esther.fung@wsj.com
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