American Dream Mall
Junior Mezz Agent Amends Complaint Against JPM Entities, Loan Guarantors; Alleges Ghermezian Family ‘Secretly’ Retained American Dream Interests After Senior Mezz Lender Foreclosure
Fri 12/01/2023 13:39 PM
Relevant Document:
First Amended Complaint
SOL-MM III LLC, administrative agent for junior mezzanine lenders to American Dream Mall junior mezzanine borrower Ameream Mezz I LLC, on Wednesday, Nov. 29, filed a first amended complaint in the agent’s federal litigation against JPMorgan Chase Bank, certain JPM-related entities and several entities known as the WEM-MOA guarantors relating to actions taken in the wake of a 2020 default on the $1.195 billion senior construction loan for the mall provided by lenders led by JPM. The filing adds mall developer Ameream as a defendant.
The defendants moved earlier this month to dismiss the initial complaint, calling SOL-MM III a “disgruntled” junior lender seeking to “upend” the priority of payments to which it agreed in an intercreditor agreement.
The amended complaint includes additional details about the defendants’ alleged actions to transfer 49% equity interests in the Mall of America, or MOA, and the West Edmonton Mall, or WEM, from guarantors of the junior mezzanine loan to the JPM-related entities, which SOL-MM says prevented the junior mezzanine lenders from being repaid on “hundreds of millions of dollars of loans” for the American Dream project.
The filing indicates that the new information emerged in part through post-judgment discovery conducted by SOL-MM after it obtained a $404.4 million judgment against Ameream Mezz I in May.
The new details include additional allegations about the interplay among the original financing documents for the senior construction loan, the senior mezzanine loan and the junior mezzanine loan - including the intercreditor agreement - and the documents effectuating the defendants’ post-default transactions.
SOL-MM alleges that these documents required JPM to sell its collateral - including the MOA and WEM interests pledged by the junior mezzanine guarantors - in a public sale and credit the sale proceeds against the senior construction loan, with any excess to be paid to SOL-MM. Instead, the defendants transferred the mall interests to the JPM-related entities “at a false valuation of just $50 million, even though JPMorgan had received more than $1 billion in value,” according to the amended complaint.
The amended complaint includes new allegations that the Ghermezian family, who through its affiliated entities including the WEM-MOA guarantors guaranteed the junior mezzanine loan and hold ownership interests in the American Dream Mall, the MOA and the WEM, “secretly” retained an interest in the American Dream Mall notwithstanding a 2022 foreclosure by the senior mezzanine lender on senior mezzanine borrower Ameream Mezz LLC’s ownership interest in American Dream Mall developer Ameream LLC.
Charts detailing the alleged pre- and post-transaction corporate ownership structure of the three malls are set forth below:
SOL-MM alleges that the collective transactions provided a windfall to JPM, kept the full amount of the senior construction loan outstanding and “permitted the Ghermezians to avoid repaying the [junior mezzanine loan] by hiding behind JPMorgan, since Plaintiff’s enforcement rights are limited as long as the [senior construction loan] is outstanding.”
The transactions also “permitted the Ghermezians to retain their ownership of the American Dream Mall, and thereby skip ahead of the [junior mezzanine lenders] by receiving income on an asset that was meant to serve as collateral available to repay the [junior mezzanine loan],” and “took out of play two other key assets - substantial ownership in the Mall of America and the West Edmonton Mall and corresponding reimbursement rights against Ameream - that also would have otherwise been available to repay the defaulted Plaintiff Loan,” according to the amended complaint.
Inverting the defendants’ motions to dismiss, SOL-MM says that it is “now evident that JPMorgan has permitted the Ghermezian family, which was supposed to be deeply subordinate to the [junior mezzanine lenders], to improperly leap-frog ahead of the [junior mezzanine loan] and benefit from owning three malls that should have been used to repay that loan. In return, JPMorgan received a windfall that it has continued to reap.”
The amended complaint sets forth the same causes of action as the original complaint: fraudulent transfer, tortious interference, marshaling, breach of the implied covenant of good faith and fair dealing, and declaratory relief. However, the counts incorporate and rely on SOL-MM III’s new, more detailed allegations.
The amended complaint’s prayer for relief remains substantially the same, with the addition of a request to declare void the transactions that resulted in the transfer of direct or indirect 49% equity interests in the MOA and the WEM to JPM-related entities.
Echoing the previous complaint, the amended complaint also notes that the plaintiff “has also brought an action in Canada against individual Ghermezian family members and the WEM Guarantors, asserting an oppression claim under Canadian law.”
First Amended Complaint
SOL-MM III LLC, administrative agent for junior mezzanine lenders to American Dream Mall junior mezzanine borrower Ameream Mezz I LLC, on Wednesday, Nov. 29, filed a first amended complaint in the agent’s federal litigation against JPMorgan Chase Bank, certain JPM-related entities and several entities known as the WEM-MOA guarantors relating to actions taken in the wake of a 2020 default on the $1.195 billion senior construction loan for the mall provided by lenders led by JPM. The filing adds mall developer Ameream as a defendant.
The defendants moved earlier this month to dismiss the initial complaint, calling SOL-MM III a “disgruntled” junior lender seeking to “upend” the priority of payments to which it agreed in an intercreditor agreement.
The amended complaint includes additional details about the defendants’ alleged actions to transfer 49% equity interests in the Mall of America, or MOA, and the West Edmonton Mall, or WEM, from guarantors of the junior mezzanine loan to the JPM-related entities, which SOL-MM says prevented the junior mezzanine lenders from being repaid on “hundreds of millions of dollars of loans” for the American Dream project.
The filing indicates that the new information emerged in part through post-judgment discovery conducted by SOL-MM after it obtained a $404.4 million judgment against Ameream Mezz I in May.
The new details include additional allegations about the interplay among the original financing documents for the senior construction loan, the senior mezzanine loan and the junior mezzanine loan - including the intercreditor agreement - and the documents effectuating the defendants’ post-default transactions.
SOL-MM alleges that these documents required JPM to sell its collateral - including the MOA and WEM interests pledged by the junior mezzanine guarantors - in a public sale and credit the sale proceeds against the senior construction loan, with any excess to be paid to SOL-MM. Instead, the defendants transferred the mall interests to the JPM-related entities “at a false valuation of just $50 million, even though JPMorgan had received more than $1 billion in value,” according to the amended complaint.
The amended complaint includes new allegations that the Ghermezian family, who through its affiliated entities including the WEM-MOA guarantors guaranteed the junior mezzanine loan and hold ownership interests in the American Dream Mall, the MOA and the WEM, “secretly” retained an interest in the American Dream Mall notwithstanding a 2022 foreclosure by the senior mezzanine lender on senior mezzanine borrower Ameream Mezz LLC’s ownership interest in American Dream Mall developer Ameream LLC.
Charts detailing the alleged pre- and post-transaction corporate ownership structure of the three malls are set forth below:
(Click HERE to enlarge.)
(Click HERE to enlarge.)
SOL-MM alleges that the collective transactions provided a windfall to JPM, kept the full amount of the senior construction loan outstanding and “permitted the Ghermezians to avoid repaying the [junior mezzanine loan] by hiding behind JPMorgan, since Plaintiff’s enforcement rights are limited as long as the [senior construction loan] is outstanding.”
The transactions also “permitted the Ghermezians to retain their ownership of the American Dream Mall, and thereby skip ahead of the [junior mezzanine lenders] by receiving income on an asset that was meant to serve as collateral available to repay the [junior mezzanine loan],” and “took out of play two other key assets - substantial ownership in the Mall of America and the West Edmonton Mall and corresponding reimbursement rights against Ameream - that also would have otherwise been available to repay the defaulted Plaintiff Loan,” according to the amended complaint.
Inverting the defendants’ motions to dismiss, SOL-MM says that it is “now evident that JPMorgan has permitted the Ghermezian family, which was supposed to be deeply subordinate to the [junior mezzanine lenders], to improperly leap-frog ahead of the [junior mezzanine loan] and benefit from owning three malls that should have been used to repay that loan. In return, JPMorgan received a windfall that it has continued to reap.”
The amended complaint sets forth the same causes of action as the original complaint: fraudulent transfer, tortious interference, marshaling, breach of the implied covenant of good faith and fair dealing, and declaratory relief. However, the counts incorporate and rely on SOL-MM III’s new, more detailed allegations.
The amended complaint’s prayer for relief remains substantially the same, with the addition of a request to declare void the transactions that resulted in the transfer of direct or indirect 49% equity interests in the MOA and the WEM to JPM-related entities.
Echoing the previous complaint, the amended complaint also notes that the plaintiff “has also brought an action in Canada against individual Ghermezian family members and the WEM Guarantors, asserting an oppression claim under Canadian law.”
This article is an example of the content you may receive if you subscribe to a product of Reorg Research, Inc. or one of its affiliates (collectively, “Reorg”). The information contained herein should not be construed as legal, investment, accounting or other professional services advice on any subject. Reorg, its affiliates, officers, directors, partners and employees expressly disclaim all liability in respect to actions taken or not taken based on any or all the contents of this publication. Copyright © 2024 Reorg Research, Inc. All rights reserved.