American Dream mall sued by construction creditors

The American Dream Mall is being sued by a group of junior lenders of private loans that helped finance the construction of the $5 billion shopping complex in New Jersey, according to documents filed on Feb. 7 with the New York State Supreme Court.

The lawsuit, Bloomberg Law reported, was brought by SOL-MM III LLC, an administrative agent working on behalf of firms linked to lenders Western Asset and Nonghyup Bank of South Korea, and seeks to recoup $389 million for a mezzanine loan that came as part of a larger $1.7 billion package of private construction financing.

In November, senior lenders on that debt granted the American Dream a four-year extension for repayment after the mall defaulted in a renegotiation that effectively cut those junior creditors out.

Bloomberg News

The legal action targets a subsidiary of American Dream and alleges a breach of contract for a non-payment of debt due to those lenders on the mezzanine loan.

A representative for the mall's owners, Triple Five, declined to comment on the lawsuit at this time.

The mall has had to contend with a rocky brick-and-mortar retail market, especially difficult for big-box retailers in recent years, since opening its door just months before COVID-19 lockdown measures would shutter them again.

Along with those private loans, the mall's developer, Triple Five, also took on $1.1 billion in municipal debt to build the 3-million-square-foot retail and entertainment complex and has struggled to make ends meet on those obligations at times as well.

On Feb. 1, the trustee on $287 million of limited obligation grant revenue bonds issued through the Public Finance Authority in 2017 reported it hadn't received funds to make a debt service payment and did not have enough in a reserve account to cover it. It was the second consecutive payment default on those bonds.

A spokesperson for the American Dream said the NJEDA had yet to release funds due as part of the economic development agreement backing the bonds. The NJEDA is currently reviewing costs related to the development of the mall with those bond funds "which needs to be completed before initiating the payment process," the mall's spokesperson said.

"American Dream and its tenants, like all other businesses in the state, have been making sales tax payments, which are the source of revenue to make the grant payments to the bond trustee," the spokesperson said." Once this review is completed we anticipate that the funding release process will proceed as specified."