https://apple.news/Ak1yClNdfRKW-VW1RNSMV1Q
Lenders including Goldman Sachs (GS -1.1%), JPMorgan Chase (JPM -0.7%), Barry Sternlicht's Starwood Property Trust, and Soros Fund Management may face losses on $1.7B in construction loans used to finance the faltering American Dream Mall, a few miles outside of Manhattan, Bloomberg reports.
Triple Five Group, owned by the Ghermezian family, runs the 3M-square-foot entertainment and luxury retail complex and owns a majority stake in American Dream. But the complex is weighed down by $3B in debt and the complex is making a fraction of its projected revenue as the pandemic continues to make shoppers and tourists wary of indoor spaces.
Triple Five has hired financial adviser Houlihan Lokey (NYSE:HLI) and law firm Weil Gotshal & Manges to represent them in restructuring talks, Bloomberg reports, citing people familiar with the negotiations.
One potential resolution is that the Ghermezian give up ownership to the complex, which features an indoor water park and ski slope as well as luxury retail stores. Another is that lenders give Triple Five 18-24 additional months for sales to increase if the firm chips in hundreds of millions of its own cash or gets a new equity partner that can provide the cash.
Besides the construction loan debt, American Dream also must make payments on $800M of municipal bonds called PILOT notes, which require the developers to pay bondholders in lieu of paying property taxes. An additional $290M of muni bonds are backed by a pledge of 75% of the sales tax receipts on mall purchases. In any restructuring, muni bonds are senior to the construction loans.
The talks with creditors could result in forbearance or extended terms for Triple Five. "It’s in everybody’s best interest to keep those PILOTs current,” and solve the problem by improving the mall's operations, John Miller, the head of municipal investments, the biggest holder of American Dream municipal bonds, told Bloomberg.
Last year, the Mall of America, also majority-owned by the Ghermezian family, missed at least three payments on its $1.4B mortgage.
Liz Kiesche, SA News Editor
