NJ didn’t approve American Dream mall grant as debt payment looms

New Jersey’s $50.6 billion budget for the fiscal year that began July 1 allocated about $87 million to the Economic Redevelopment and Growth Grant Program. Pellerin did not say why American Dream’s cost statement had not been approved, or whether part of the grant allocated in the budget was for the mall.

American Dream spokeswoman Melissa Howard declined to comment. Nuveen LLC, the largest holder of the bonds, with about $108 million as of April 30, did not respond to a request for comment.

American Dream, which includes an indoor ski slope, amusement park and water park, qualified for the grants because its location is designated as an economic redevelopment area. The grants, which represent up to 75% of the additional sales tax revenue collected each year, are capped at $390 million over a 20-year period.

Failure to make payment on so-called grant revenue bonds does not constitute default and does not obligate the borrower to repay the loan immediately, according to the bond documents. Bonds maturing in 2027 were trading at around 91 cents to the dollar on June 30, while debt maturing in 2031 was trading at around 82.4 cents.

The mall, whose opening was delayed by the pandemic, had about $90 million in gross sales for the first quarter and $305 million for 2021. Most clothing and footwear is not taxable in the New Jersey. American Dream did not disclose the amount of sales tax collected at the mall, which includes luxury stores including Saks Fifth Avenue and Hermes.

Bondholders criticized American Dream for not filing project cost documents with the state sooner. American Dream hired an auditor to complete the cost statement in March 2021, but as of January had not submitted it to the state, according to a letter from the bond department Trimont Real Estate Advisors.

“While everyone appreciates the difficulties posed by the pandemic and the likelihood that the grant revenue received now will not be sufficient to pay the obligations in full, this does not relieve the promoter of the responsibility to comply with its obligations under of the various agreements,” Trimont said. in the letter.

Remedies for breach “ranged from specific performance to special repayment of all obligations”, the letter said.

American Dream also has $800 million in fee-backed municipal bonds that the mall owner pays to bondholders instead of paying property taxes, called payments in lieu of taxes. Last month, the bond trustee had to dip into reserves to make a June 1 payment on the debt because American Dream had not deposited the money needed to pay creditors. Triple Five made the filing two weeks later.

The mall also has a construction debt of $1.7 billion. Triple Five is asking for a four-year extension to repay the bond.

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