NEW YORK (BLOOMBERG) —
The value of the American Dream mega mall and entertainment complex in New Jersey’s Meadowlands plummeted by $800 million — a blow to municipal bondholders whose debt is backed by payments in lieu of property taxes.
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. The mall’s previous value was estimated at $3.3 billion.
To help finance the $5 billion mall, New Jersey approved a package of $1.1 billion of tax-exempt municipal bonds. State officials pitched the project as a boost to New Jersey’s economy, arguing it would generate tax revenue and jobs.
About $800 million of the debt issued to finance the complex is backed by so-called PILOT payments, which are equal to 90% of the estimated property tax due on the mall.
Last year, American Dream’s annual payment to the bond trustee was roughly $48.4 million, short of the annual $54.1 million debt service on the bonds. The trustee has dipped into reserves to make full payments to bondholders.
At an assessed value of $2.5 billion, American Dream’s annual PILOT payment would be roughly $36.5 million, meaning the trustee will have to draw more from reserves to make the full debt service payment. American Dream has a $27 million semi-annual interest payment due June 1. The trustee had about $38 million in reserves as of Dec. 1, 2024, according to a bond filing.
“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.”
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, according to data compiled by Bloomberg. Nuveen LLC holds almost $700 million of the debt.
Sally Lyden, a Nuveen spokesperson, didn’t respond to a request for comment.
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The massive entertainment complex, located across the Hudson River from New York City, opened its doors in October 2019, almost two decades after a mall on the site was first proposed. Five month’s 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.
