Bond-financed New Jersey megamall’s property assessment is cut

The value of the municipal bond-financed American Dream mega mall and entertainment complex in New Jersey’s Meadowlands plummeted by nearly 25% — a warning sign to bondholders whose debt payments are tied to how much the property is worth.

The 3.5 million square-foot venue, which includes an amusement park, water park and ski slope, was assessed at $2.5 billion by the Borough of East Rutherford for the quarter ending June 30, according to a revised tax bill posted late Tuesday on the Municipal Securities Rulemaking Board’s EMMA website. That’s $800 million less than the mall’s previous appraisal.

At the current assessed value, American Dream will be on the hook for roughly $36.5 million in what’s known as payments in lieu of taxes, or PILOTs, to holders of $800 million of the debt — less than the $54.1 million in annual interest that they’re owed. Half of that amount is due on June 1.

For the time being, the bond trustee can draw on its reserves to cover the shortfall. It held roughly $38 million as of December last year, according to an event filing on EMMA. The risk, though, for bondholders is that if assessed property values continue to decline, they may not end up being paid in full after reserves are exhausted. Last year, the trustee dipped into reserves to cover a $5.7 million shortfall. 

“The total annual PILOT payment is now falling significantly below the original projections and various scenarios presented in the bond offering document,” said Lisa Washburn, a managing director at Municipal Market Analytics. “It seems increasingly likely that full principal will not be repaid on the bonds.”

The $800 million in PILOT debt was part of a package of $1.1 billion of tax-exempt municipal bonds that helped finance the construction of the mall. State officials pitched the project as a boost to New Jersey’s economy, arguing it would generate tax revenue and jobs. 

Despite the lower valuation, American Dream PILOT bonds maturing in 2050 with a 7% coupon traded Wednesday at about 100.8 cents on the dollar, a slight decline from about 101 cents on the dollar on April 14, data compiled by Bloomberg show. Nuveen LLC holds almost $700 million of the debt.

Sally Lyden, a Nuveen spokesperson, declined to comment.

The massive entertainment complex, across the Hudson River from New York City, opened its doors in October 2019 after years of delay. Five months later, the Covid-19 virus spurred lockdowns, postponing the opening of the venue’s retail stores until October 2020.

While gross sales at American Dream are picking up, they’re still well off the pace of the almost $2 billion that a 2017 study projected for the first year of operation. The complex reported almost $650 million in sales in 2024, an 18% increase from the prior year.  

American Dream has appealed its tax assessments from East Rutherford from 2019 through 2025, arguing the property’s value was dealt a blow by the pandemic.

If American Dream wins the appeals, the likelihood that investors will be paid back on time will be at greater risk. Under the bond documents, failure to pay interest or principal when due isn’t an event of default. 

Principal on the $800 million of bonds matures in balloon payments scheduled in 2027, 2037, 2042 and 2050.

If the trustee doesn’t have enough money to make the principal payments, the maturity of the bonds is extended until they’re paid in full or Dec. 1, 2056. If the bonds aren’t paid by that date, PILOT bondholders aren’t entitled to more payments.