Is the age of megamalls coming to an end? At New Jersey's American Dream mall, it may be.
The 3.5 million square foot retail and entertainment complex in East Rutherford has nearly $290 million in debt and used some of its last reserves to make a $9.3 million payment due Tuesday.
According to a securities filing first reported by Bloomberg, what was projected to be a bustling new megamall now has just $820 left in its reserve fund, with the next payment due on Aug. 1.
How Did This Happen?
The missed sales tax payment is just the latest chapter in the mall's fraught financial history.
A $6 billion dollar project, the mall shut down just three days before its planned grand opening in spring 2020 as the Covid-19 outbreak first started hitting the U.S.
Developers had expected the first year to bring in around $2 billion in sales, but it brought in just $54 million in 2020 and only $220 million during the first three quarters of 2021.
American Dream also faces $1.7 billion of senior and mezzanine construction debt. As of Jan. 1, the mall is 77% leased while another 5% of potential leases are currently in discussion.
Bond servicer Trimont Real Estate Advisors said in a Jan. 18 letter reported by Bloomberg that the company continues to be opaque about its prospects.
"The developer has provided Trimont with minimal information despite specific requests for additional items reasonably necessary to accurately track and understand certain aspects of the project’s performance," it wrote.
What Happens Next?
American Dream said in a statement that its challenges will even out with time, as the pandemic finally comes to an end and the public begins to look for more interactive shopping experiences.
Along with miles of both regular and luxury stores, the complex also has a Nickelodeon Universe theme park, an indoor ski slope and a water park.
But the entire concept of large malls has been under serious pressure amid the rise of online shopping.
A 2020 report predicted that a fourth of all malls currently operating in the country would close within the next five years. The biggest shopping mall in the country, the Mall of America, defaulted on the payments for its $1.4 billion mortgage twice in 2020.
It has since bounced back and is now current. That is the path American Dream is hoping to follow too.
"We've recently announced several new deals and exciting concepts, including a two-story Gucci flagship, the opening of a 300-foot observation wheel overlooking the NYC skyline, a first-of-its-kind experiential entertainment and restaurant concept from Hasbro, and much more," American Dream spokesperson Melissa Howard said in a statement to Bloomberg.
