JPMorgan, Goldman on verge of owning portion of Mall of America

Two of the nation's largest banks are about to become stakeholders in the Mall of America as its principal owner, Triple Five Group, is close to a deal to restructure its debt after defaulting on a loan for another megamall project.

JPMorgan Chase, Goldman Sachs and other real estate investors will wind up with nearly half of the ownership in the Bloomington mall, according to a report in the Financial Times that cited anonymous sources who said the deal could close as soon as this week.

That group of lenders backed Triple Five's $1.67 billion construction loan on its massive American Dream development in New Jersey. That $5 billion project, which includes an indoor ski slope, a water park and an amusement park, has been beleaguered by years of delays.

After first opening some of its attractions, American Dream was scheduled to finally open its retail portion in March 2020. But then the pandemic hit, delaying its opening for more than six months. At the same time, some of its tenants that were to be anchors such as Lord & Taylor and Saks Off Fifth dropped out.

A few years ago, Bloomington city officials raised concerns when they discovered that Triple Five had offered the Mall of America and its West Edmonton Mall as collateral in order to secure the loan for American Dream in 2017.

Earlier this month, Triple Five executives told the Bloomington City Council and the Bloomington Port Authority that the significant cash flow problems caused by the pandemic would likely mean that the lenders will indeed secure a minority stake in the Mall of America. The deal was structured so Triple Five will retain 51% stake, while the lenders will get 49%.

Kurt Hagen, a Triple Five executive, said there will be no impact on Mall of America or its operations. He said the change would chiefly be that just under half of the profits from Mall of America would go to the minority stakeholders.

"Lenders would have a noncontrolling interest," he said. "And quite frankly, they have no interest in running a shopping mall. They're very confident in Triple Five's ability to do so."

He added that it would have been better for Triple Five financially if a hurricane hit the mall, or if it had burned down, because then it would have been covered by insurance.

"This pandemic we didn't see coming has not been covered and is the worst scenario imaginable," he said.

He added that the Mall of America and the American Dream, which have both been affected by state restrictions, did not qualify for any federal, state or local financial assistance programs. Instead, Triple Five has had to shoulder the costs of the pandemic on its own, which he said will likely be in the "hundreds of millions of dollars by the time this is all done."

The report in the Financial Times noted that it was unclear if the lenders would likely continue as minority stakeholders long-term or if they might try to sell their positions.

The pandemic has dealt a blow to shopping malls nationwide. Like many others, the Mall of America has struggled. Many tenants stopped paying rent, and the mall fell behind in its mortgage payments. After months of being delinquent, the mall managed to become current on its $1.4 billion loan by the end of last year after restructuring it.

While the recovery will likely take a couple of years, Triple Five executives said they believe their giant malls, which have a strong entertainment focus, will recover faster than other shopping centers.

"Over the past year we have worked closely with our partners to chart a path through these difficult times," the mall said in a statement. "This path has positioned Mall of America for long-term success and growth."

Jill Renslow, a Mall of America executive, told Bloomington officials that while traffic was down about 50% over the holidays, it has improved a bit so far this year. Revenue, she said, has been down more than 30%.

The mall used to boast having more than 500 stores and restaurants. But it has lost about 45 tenants during the pandemic, Renslow said.

But it has attracted some new ones, with stores such as a Warby Parker slated to open this summer.

Kavita Kumar • 612-673-4113 Twitter: @kavitakumar