It turns out you can put a price on the American Dream, much to the chagrin of New Jersey megamall municipal bondholders.
The Borough of East Rutherford assessed the value of the American Dream mall and entertainment complex at $2.5 billion for the quarter ending at the conclusion of next month, Bloomberg reported. That’s an $800 million drop from the previous estimated value for the property.
That could prove to be a problem for those holding the mall’s debt.
New Jersey approved $1.1 billion of tax-exempt municipal bonds to finance the mall’s development. Roughly $800 million of the mall’s debt is backed by payments in lieu of property taxes, equivalent to 90 percent of the estimated property tax due on the mall.
The lower estimated valuation drops the annual so-called PILOT payment to approximately $36.5 million. Last year, that payment was roughly $48.4 million, which was not enough to cover the $54.1 million debt service on the bonds; the trustee needed to tap into reserves to make full bond payments.
That’s a trickier problem this year. The first semiannual interest payment of $27 million is due at the start of next month. As of December, however, the trustee only had $38 million in reserves, meaning a critical juncture could be just six months away.
Owner Triple Five Group appealed its East Rutherford tax assessments from 2019 to 2025, citing the value hit incurred due to the pandemic. Should the developer win those appeals, investors will be even less likely to be paid back on time; failure to make interest or principal payments on time doesn’t constitute default in this case.
The Ghermezians who run Triple Five opened the mall in October 2019, before pandemic closures, financial problems and lawsuits hit the shopping and entertainment center. They lost a lot of money in 2021 and 2022 and a $1.7 billion construction loan comes due next year.
— Holden Walter-Warner
Read more
American Dream owners trying to claw back $183M
How the Ghermezian family, owners of biggest malls in the US, made good on the American Dream
American Dream lost $60M in 2021
