American Dream muni bonds drop sharply due to COVID-19

When Triple Five reported in July that it had lost some tenants, the price of about $1 billion worth of municipal bonds funding the company’s American Dream mall in New Jersey fell to about 87 cents on the dollar. Prior to the coronavirus pandemic, they were selling at around 120 cents.

As a result, according to a report in The Wall Street Journal, banks and investors that lent the company $2.7 billion to build the nation’s second largest mall, have taken paper losses in the hundreds of millions of dollars. Triple Five is owned by the Ghermezian family of Canada, whose Mall of America recently entered into a forbearance agreement after missing three mortgage payments.

More than $50 billion U.S. commercial mortgage-backed securities have been transferred to loan workout specialists since the onset of the pandemic, and retail and hotel properties account for nearly 90% of that balance. Triple Five’s $1.39 billion debt on the Mall of America is the single biggest loan in special service.

The company’s original plan for American Dream was that it would be 45% retail to 55% entertainment and provide a wide range of choices from fashion-value to luxury brands. But the mall’s retail component was stalled in April and May. Signed tenants Barney’s and Lord & Taylor filed for bankruptcy and American Dream CEO Don Ghermezian announced that, henceforth, entertainment-related tenants would account for 70% of its business.

In the spring, American Dream did manage to open the Nickelodeon theme park, an ice-skating rink, and its Big Snow indoor ski slope. The entire property is now closed due to the pandemic.