Is the era of mega-malls coming to an end? At the American Dream mall in New Jersey, that may be the case.
The 3.5 million square foot retail and entertainment complex in East Rutherford is nearly $290 million in debt and has used some of its last reserves to make a $9.3 million payment due Tuesday.
According to a deposit of titles reported for the first time According to Bloomberg, what was supposed to be a bustling new mega-mall has just $820 left in its reserve fund, with the next payment due August 1.
How did it happen?
The missed sales tax payment is just the latest chapter in the mall’s difficult financial story.
A project of 6 billion dollars, the mall closed just three days before its scheduled grand opening in the spring of 2020 when the Covid-19 epidemic began to hit the United States
The developers expected year one to bring in around $2 billion in sales, but it only brought in $54 million in 2020 and just $220 million in the first three quarters of 2021.
American Dream also faces $1.7 billion in senior and mezzanine construction debt. As of January 1, the mall was 77% leased, while 5% of potential leases were currently under discussion.
Bond manager Trimont Real Estate Advisors said in a Jan. 18 letter reported by Bloomberg that the company continues to be opaque about its outlook.
“The developer provided Trimont with minimal information despite specific requests for additional items reasonably necessary to accurately track and understand certain aspects of project performance,” he wrote.
What happens next?
American Dream said in a statement that its challenges will smooth out over time as the pandemic finally comes to an end and audiences begin to seek out more interactive shopping experiences.
Along with miles of regular and luxury shopping, the resort also features a Nickelodeon Universe theme park, indoor ski slope, and water park.
But the whole concept of large shopping malls has come under severe pressure amid the rise of online shopping.
A 2020 report predicted that a quarter of all malls currently operating in the country close in the next five years. The nation’s largest mall, the Mall of America, has defaulted on the payments for his $1.4 billion mortgage twice in 2020.
He has since bounced back and is now relevant. This is also the path American Dream hopes to follow.
“We recently announced several exciting new offerings and concepts, including a two-story Gucci flagship, the opening of a 300-foot observation wheel overlooking the New York skyline, an entertainment and restaurant concept first-of-its-kind experiential from Hasbro, and much more,” American Dream spokeswoman Melissa Howard said in a statement to Bloomberg.