Payment on American Dream bonds may be missed for third time
Creditors could see a third straight missed interest payment on municipal bonds issued to finance the American Dream mall in the Meadowlands, according to a report Monday by Bloomberg News.
The bonds, worth $290 million, are backed by grants issued by the state Economic Development Authority, but a state delay in certifying financial information from the mall may lead to another missed payment, according to Bloomberg, which cited a person familiar with the matter.
Jessica Griffin, a spokesperson for American Dream, didn’t immediately respond to a request for comment Tuesday. In February, responding to another report that the bond payments were in jeopardy, she told NorthJersey.com that the authority still hadn’t completed the required review and certification process. It’s the state’s responsibility to ensure the payment is made, not American Dream’s, Griffin said.
“American Dream and its tenants, like all other businesses in the state, have been making sales tax payments, which are the source of revenue to make the grant payments,” she said in a February email.
Representatives for the Economic Development Authority could not immediately be reached for comment on Tuesday.
Why payments may be missed
The potential missed payments mark the latest sign of financial strife associated with the project, which opened to the public in October 2019 but saw its full opening delayed by the COVID-19 pandemic. The sprawling property features such attractions as an amusement park, Ferris wheel, water park and ski slope.
According to a July 13 report by Nuveen
LLC, the largest holder of municipal debt issued for the $5 billion megamall, the missed payment was to be expected.
“Regarding the grant revenue bonds, the project cost statement is still going through its approval process, which is expected to finally occur in the third quarter of 2023 after a nearly three-year delay,” the note read.
“Once approved, revenues pledged to the debt (essentially sales taxes collected on gross sales at the project) can be appropriated and deposited annually into the trust estate,” it said.
Sales fall short of projections
The 3.5 million-square-foot complex is 84% leased and generated nearly $422 million in gross sales in 2022. In 2017, mall owner Triple Five projected bringing in roughly $2 billion in its first year of operations.
The mall’s sales have not been enough to pay off the annual debt service on the grant-backed bonds, Nuveen said.
“However, continued progress in opening new tenants is expected to produce increased cash flows in future years,” read Nuveen’s commentary.
Fight over tax assessment
In addition to the $290 million in state-backed bonds, the mall is backed by $800 million in municipal debtbacked bonds.
Triple Five has gone to court to get a lower tax assessment stretching back to 2019, reported The Bond Buyer, a financial news publication. Those lower assessments would affect the mall’s payments in lieu of taxes, or PILOTs. The payments back the $800 million in taxexempt bonds used to finance the mall’s construction, Bond Buyer added.
A win for the mall over its hometown, the borough of East Rutherford, would mean a judge reduces the value of the land and the company’s payments.