JPMorgan Chase, Goldman Sachs and a group of real estate investors to take a stake in Mall of America, America’s largest mall, after its owner defaults on another multi-billion dollar development in New Jersey.
The banks were in the final stages of securing a minority stake in the Minnesota Mall and have been in negotiations with its owner Triple Five Group, his attorneys and a consortium of other lenders, according to people involved in the ‘agreement.
Triple Five invested 49% in the Mall of America and West Edmonton Mall in Canada as collateral to secure $ 1.2 billion construction loan for his American Dream project in New Jersey in 2017.
The $ 5 billion project was a massive undertaking, billed as a tourist destination given its proximity to Midtown Manhattan, and had tenants from luxury department stores, a Nickelodeon theme park, and an indoor ski resort. But the first part of the mall opened just weeks before the coronavirus hit the United States. Several large tenants have pulled out of the project, including Barney’s and Lord & Taylor, two department store chains that have since closed their doors completely.
JPMorgan was the largest lender of the American Dream construction loan, alongside Goldman, Starwood Capital of Barry Sternlicht, real estate investor CIM Group, Soros Fund Management, asset manager Wafra and iStar, the real estate investment group led by Jay Sugarman.
The restructuring had been complicated by the number of lenders involved, but the deal could be reached as early as this week, two of the people added, although they warned it could be further delayed.
Even after the equity of the two shopping centers has been transferred to the lenders, thorny questions will remain. It was not clear whether the lenders were keen to maintain their long-term holdings and could continue their efforts to sell their positions, one person added.
The American Dream Project has struggled since its conception over 20 years ago. Construction began in 2003 when the Brooklyn Nets basketball team – then known as the New Jersey Nets – was still playing in New Jersey’s Meadowlands Arena. The development was known as Xanadu at the time. Its original developer, Mills Corp, eventually dropped out, as did its successor Colony Capital.
“It would have been a lot better if American Dream had burned down or had a hurricane hit it, financially, because we would have been covered by insurance,” Kurt Hagen, a Triple Five executive, said in a meeting. of the city council at the beginning of the month. “This pandemic that we didn’t see coming has not been covered and is the worst-case scenario imaginable.”
Triple Five, the family-owned Ghermezian investment group, will continue to own a controlling stake in the Mall of America after it ceded 49% to lenders.
He also only recently negotiated his way out of trouble on his mortgage on the mall, which was past due until December. The lenders have agreed to accept interest payments only until the maturity of the loan.
Regulatory filings for the Mall of America mortgage-backed securities show that Triple Five is still trying to collect late rent payments from tenants.
All parties declined to comment or did not respond to requests for comment.