- Bondholders are suing American Dream and East Rutherford over a disputed tax assessment.
- The lawsuit claims the assessment undervalues the property by omitting revenue sources.
- Lower valuation reduces PILOT payments funding $800M in municipal bonds.
- American Dream and the township deny collusion, pledging to defend the current assessment.
Bond Dispute at American Dream
Bondholders holding $800M in municipal debt for the American Dream megamall have sued the mall and East Rutherford, reports CoStar. They allege both parties worked together to reduce the property’s tax assessment, which puts bond repayments at risk.
This legal fight follows a sharp valuation drop for the mall—once one of the nation’s largest. The mall’s value was cut in half, reducing annual payments in lieu of taxes (PILOT). These PILOT payments fund the bonds, and bondholders claim the drop slashed returns by $24M per year.
Allegations Over Assessment Reductions
In the New Jersey Superior Court lawsuit, bondholders say a new tax assessor undervalued the 3.5 million-square-foot mall. They argue the assessor ignored income from the observation wheel and the site’s prominence.
The assessment dropped from $3.3B to $1.65B over two recent adjustments. That cut the PILOT payment base in half and directly reduced investor returns.
Bondholders accuse developer Triple Five Group and the town of acting together to secure the lower valuation. They now seek court intervention to block future reductions and protect repayment streams.
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Stakeholder Responses
American Dream labeled the bondholders’ lawsuit as an attempt to overturn a lawful judicial decision and denounced the allegations as baseless. The mall operator said it intends to contest the claims vigorously. East Rutherford’s mayor declined to comment on the litigation.
What’s Ahead
The American Dream capital stack includes $2.876B, with the $800M municipal bonds at stake in this dispute. Because the municipality’s share of the PILOT comes first, any shortfall disproportionately impacts investors. The lawsuit comes amid broader financial pressure, as the mall’s owners have also sought a $183M tax refund, further underscoring their push to ease ongoing obligations. Bondholders are now seeking a court order to block future assessment reductions and restore lost payment streams.
