What will save malls like American Dream New Jersey, Palisades Center, in the post-pandemic world?
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American Dream owner Triple Five Group tries to restructure $ 1.67 billion construction loan
By Tina Traster
Before the pandemic rocked the world, a slew of entertainment entities were planning to expand their brands at The Palisades Center in West Nyack. Each concept seemed to aim for ever more ambitious ways to engage young people in learning, adventure and physical activity. Specifically, Boda Borg, a Swedish research company, and Arena STEM, a science-based concept, had planned to rent space. The same goes for Get Air !, a trampoline park with locations all over the country.
All have backed down, according to a source close to the Palisades Center.
The US retail industry is weathering unprecedented financial strains, closures and bankruptcies as the pandemic accelerates consumers’ pivot to e-commerce. Closures and fear of congregating during COVID-19 prevented people from frequenting entertainment venues that had drawn traffic to retail centers.
While companies like Get Air! have slowly reopened locations across the country, their New York centers are still closed. The northeast has been particularly affected by the pandemic, with government officials taking an aggressive and cautious stance by allowing people to congregate in interior spaces.
The Palisades Center is not alone in having to respond to the dizzying changes that have occurred during the year, but it reveals the conundrum that many shopping center owners now find themselves in nationwide.
According to Co-Star, a Canadian retail owner said it seems increasingly likely that his lenders are set to take a 49% stake in North America’s two largest malls in the aim to pay off unpaid debts related to another massive shopping spree. entertainment and entertainment center he owns, American Dream in New Jersey.
An executive from Triple Five Group, which owns the Mall of America in Bloomington, Minnesota, the largest shopping mall in the United States, and the largest West Edmonton mall in Canada, said the company was trying to restructure sub-loans. underlying the $ 5 billion American Dream, which was unlucky to open around the same time the pandemic hit.
“From a financial standpoint, it would have been much better if American Dream had burned down or had a hurricane hit it,” Kurt Hagen, senior vice president of development at the Mall of America, told Bloomington City Council. last month during a pitch to redirect tax funding to support the hospitality industry, according to Co-Star.
The 3 million square foot American Dream has closed for most of 2020 and has generated no cash flow for six straight months. Hagen said Triple Five saw encouraging activity at American Dream attractions, which include a water park and a ski slope, but the commercial portion of the mall was never fully functional.
Financial exposure gives lenders Goldman Sachs and JPMorgan Chase the leverage to take back the collateral offered by Triple Five to secure a $ 1.67 billion construction loan for American Dream: a minority stake in Mall of America and West Edmonton Mall.
In July, the owners of The Palisades Center reached a deal with its lenders to avoid foreclosure. After temporarily shutting down due to the coronavirus shutdown, Palisades Center Mall owner Pyramid Companies risked defaulting on its $ 388.5 million CMBS loan. The loan fell on special duty in April.
The Palisades Center had struggled before it closed – losing both JC Penney and Lord & Taylor, along with several other retailers, including Bed, Bath & Beyond. However, all tenants stopped paying their rent during the foreclosure. The occupancy rate before the pandemic was 82%.
Under the standstill agreement, Pyramid received on June 19 a moratorium on debt service payments or reserve deposits until September 9. loan extension and changes in cash flow and use of reserve funds.
The loan maturity date has been extended until October 2021 or whenever Palisades Center repays the last of 12 monthly payments, whichever comes first.
In recent years, malls had banked on entertainment to increase their prospects as they could see the writing on the wall of failing retailers filing for bankruptcy or downsizing. Large restaurant chains had also started to suffer before the pandemic. But destinations for kids and families – fun – were the holy grail, the element that would reinvent or boost activity in malls.
Now the conversation is shifting towards repurposing shopping malls with residential, medical and warehouse development, as attracting people to playrooms and trampoline parks in the New York City area remains a challenge.
Boda Borg, with its first and only location in Massachusetts, had considered the Palisades Center for its second. The company opened its first US location in Malden, Massachusetts in 2015. Since then, people from all over the world have flocked to Boda Borg to participate in its unique challenges, or “Quests,” which test teams of 3 to 5 on their mental and physical strength.
Boda Borg helped transform Malden, MA, into a gaming center – an ambitious model for shopping malls looking for a new lease of life. The company had planned to move into the Barnes & Noble space.
Arena STEM, an innovative new concept of retail entertainment that was due to open at the Palisades Center last June, focuses on activities in the fields of technical sciences, sports and creative hobbies. They had taken on a 10-year lease on 12,240 square feet on the third floor near the food court.
Its owners said, “We put entertainment, education and retail under one roof, but the bottom line is the experience. Arena STEM is designed for families to come and participate in activities, learn, take master classes, participate in 3D modeling. It’s about having an experience with friends and families.
The year-long pandemic has suppressed the ability of entertainment businesses to thrive. Even with the decline in vaccine and virus cases, it’s too early to predict when life will truly return to pre-COVID-19 normal.
A solid return will be essential for the Palisades Center and other shopping centers to avoid defaults. Since reopening, the mall has signed a handful of new tenants, filed lawsuits with a few over past due rents, and lost key tenants who would have widened its entertainment footprint.
“The years of renting big brands in shopping malls are over,” a source said. “The question is, can we convert the dated structures quickly enough to transport them into the new age? “