Owners of the American Dream megamall may lose their shopping centers

Due to declining cash flow, they could lose their stake in other megamalls used as collateral.

The owner of the American Dream project in New Jersey, Triple Five Worldwide, could lose nearly half of its stake in two other megamalls. Those stakes were previously used as collateral to finance the American Dream Mall’s construction, which has an estimated total cost of $5 billion. 

Due to cash flow problems caused by the market crisis, the American Dream project is becoming an increasing burden on the owners. The mall was closed for several months in 2020 due to quarantine; it reopened in October but with occupancy restrictions.

Declining financial flows due to the problematic retail situation have led to growing problems for the project owner. In particular, according to a report by Kurt Hagen, executive director of Triple Five Worldwide, cited by Bloomberg, lenders will likely take a 49 percent stake in the company’s other two megamalls, the West Edmonton Mall in Canada and the Mall of America in Minnesota.

Shares in the two malls were used to obtain a loan to construct the American Dream project, which amounted to 1.2 billion dollars. The company has difficulty paying back debt amid falling revenues and is likely to have to part with the pledged assets. 

Discussing the situation at a meeting with local officials in Bloomington, Minnesota, Hagen described the pandemic as the worst-case scenario that could happen to the project. “It would have been much better if American Dream had burned down or been hit by a hurricane,” he said. In that case, the owners of the megamall, which was insured, could have been compensated. But the pandemic, which no one could have foreseen, was a severe blow to the project, causing a crisis with financial flows and jeopardizing its other assets.