**New Jersey Mega Mall’s Value Slashed by $850 Million**
A New Jersey tax court judge has significantly reduced the assessed value of the American Dream mega mall by $850 million, marking a nearly 50% decrease in valuation this year. This ruling benefits the mall’s owners, who aimed to lower their tax payments, but it poses challenges for bondholders holding approximately $800 million in debt linked to these payments, known as payments in lieu of taxes (PILOTs).
Judge Michael Gilmore determined that the 3.5 million square-foot complex, which features an amusement park, water park, and ski slope, should be valued at around $1.65 billion for the current tax year. In contrast, the Borough of East Rutherford had previously assessed the property at $2.5 billion for the quarter ending June 30, down from a prior appraisal of $3.3 billion. The American Dream has ongoing appeals regarding its tax assessments from 2019 through 2025, although Gilmore did not address assessments from previous years.
With the new valuation, the American Dream will owe approximately $24 million annually in PILOTs to municipal bondholders, significantly less than the $54.1 million in annual interest owed. Nuveen LLC holds about 90% of the municipal bonds backed by these PILOTs. The $800 million in PILOT debt is part of a larger $1.1 billion package of tax-exempt municipal bonds that financed the mall’s construction, which state officials promoted as a catalyst for economic growth in New Jersey.
Attorneys for the mall’s owners, Triple Five Group Ltd, argued that East Rutherford’s appraisal was flawed, citing an unrealistically low capitalization rate used to assess profitability. They noted that the American Dream’s assessed value exceeded the combined assessments of several other major retail and entertainment venues in the area. In a court filing, American Dream’s lawyers stated, “Considering the comparisons, it does not require a scintilla of tax assessment expertise to recognize the ridiculousness of American Dream’s assessments.”
If the American Dream successfully appeals its tax assessments for 2019 through 2024 and if the property’s value continues to decline, the risk of delayed payments to investors could increase. According to bond documents, failure to pay interest or principal on time does not constitute an event of default. The principal on the $800 million in bonds is set to mature in balloon payments scheduled for 2027, 2037, 2042, and 2050. The bond trustee currently holds approximately $38 million in reserve to cover debt service.
**FAQ**
*What impact does the tax court ruling have on American Dream’s financial obligations?*
The tax court ruling reduces American Dream’s assessed value, lowering its annual PILOT payments to bondholders, which could affect the timely repayment of the $800 million in municipal bonds.
