American Dream, the most expensive U.S. shopping center ever built, is behind on its bills.
Its owner, Canadian mall operator Triple Five Group, failed to make a quarterly $125,000 payment that was due on Aug. 1 to East Rutherford, N.J., according to the town’s mayor. It is the second time the developer has been late on the payment-in-lieu-of-taxes.
Triple Five didn’t respond to requests for comment.
The owner of the sprawling shopping center and entertainment complex, located across the Hudson River from Manhattan in East Rutherford, hoped to redefine the mall experience when it opened in 2019 after a cost of $6 billion.
It was the first mall in the U.S. to devote more space to entertainment, restaurants and theme-park rides than to traditional retail, part of an ambitious effort to lure younger shoppers away from their screens and to the complex. Its nearly 90-acre site includes a 16-story indoor ski hill, a roller coaster, as well as a water park with a steep slide that rises 14 stories high.
Triple Five Group has found it challenging to make the project financially viable. The mall was closed for six months as a result of the Covid-19 pandemic, and it continues to struggle even as foot traffic to the complex picks up.
Visits to the American Dream mall in July were 46% higher than in January 2021, according to data-analytics firm Placer.ai. Nationwide, visits to indoor malls were down slightly in July compared with both the same month last year and July 2019, according to Placer.ai.
The developer last week made a late payment of nearly $14 million to U.S. Bank NA, which serves as the trustee for an $800 million municipal bond connected with the mall’s construction, according to financial filings.
American Dream continues to struggle even as foot traffic to the complex picks up.
Triple Five hasn’t, however, paid interest on the overdue amount and is therefore in default on its financial agreement, the filings said.
It is unclear what will happen next, but East Rutherford Mayor Jeffrey Lahullier said that he considers the American Dream to be “too big to fail” since the state of New Jersey has invested so much in the property, and that he doubts the mall’s lenders would want to take over operations.
The developer said it hoped to draw 40 million annual visitors when American Dream opened nearly three years ago. The pandemic resulted in delayed store openings, loss of rent payments from retailers and an eventual default on its mortgage.
Triple Five, which also owns Mall of America in Bloomington, Minn., took over the project in 2011 after two other developers abandoned it as a result of delays caused by the recession, as well as since-resolved litigation over parking and permitting requirements.
Mr. Lahullier said that in addition to the missed August payment and unpaid interest, American Dream’s owners owe the town about $5.4 million in sewer fees and payments-in-lieu-of-taxes under three other agreements that give the developer rights to build a baseball stadium, hotel and office space at the site.
“We have retained counsel and we’re following it very closely, but I don’t know what our options are,” Mr. Lahullier said. “We can’t get blood from a stone.”
The mayor said he refuses to attend ribbon cuttings at American Dream until the owner pays its bills. But he said the roughly four-square-mile town’s $40 million annual budget isn’t dependent on revenue from the mall.
Still, Mr. Lahullier said, “I hate to see the project go under or go bankrupt, it does employ a lot of people down there.”
Source: WSJ.com August 16, 2022 | By Kate King