The American Dream megamall, one of the nation's largest retail centers, and the New Jersey town where it's located have been slapped with a lawsuit that alleges they plotted together to reduce the debt payments that the project's bondholders are owed.
The bondholders' trustee — U.S. Bank Trust Co., National Association — filed the 69-page breach-of-contract suit in Superior Court on Friday in Bergen County in New Jersey. Those bondholders issued $800 million in debt to help pay for the completion of the construction of American Dream — a 3.5-million-square-foot entertainment-and-shopping venue in East Rutherford in northern New Jersey's Meadowlands region.
“This case concerns a pattern of wrongful conduct that, unless stopped, jeopardizes the developer’s repayment of approximately $800 million in tax-exempt municipal [Public Finance Authority] bonds issued to finance the development of the second largest mall in the United States,” the lawsuit said.
The litigation accuses American Dream, owned by Canadian mall developer Triple Five Group, and the borough of East Rutherford of colluding to get the mall's municipal tax assessment dramatically reduced. Debt service on the bonds is funded from revenue from Payment-In-Lieu-Of-Taxes, or PILOT, payments that American Dream makes.
The property's assessment determines how much the bondholders are entitled to be paid. A lower assessment means lower payments, in this case $24 million less annually to the bondholders, according to the suit.
American Dream didn't respond to an email from CoStar News seeking comment, and East Rutherford Mayor Jeffrey Lahullier didn't respond to a phone call.
Assessment slashed twice
The suit, first reported by Bloomberg News, was filed on behalf of the bondholders by lawyer Gurbir Grewal, a former New Jersey Attorney General.
The lawsuit alleges that American Dream pressured East Rutherford to switch its municipal tax assessor to one less qualified that led to an underestimation of the retail complex's value. For example, the new assessor omitted revenue from American Dream's observation wheel from the appraisal, according to the suit.
And the "2025 appraisal applied one-sided and unsupported location adjustments that ignored the superior regional prominence and market position of the subject properties," the suit charges.
American Dream's assessment got a haircut twice last year. In March, the borough cut it by roughly $800 million from about $3.3 billion to $2.5 billion. That summer, a tax court judge slashed the assessment even more, to about $1.65 billion — a roughly 50% decrease in the shopping-and-entertainment hub's valuation from 2024.
The "artificially collapsed" assessment reflects East Rutherford's conduct and "constituted a knowing, coordinated effort with the developer to depress assessed value, reduce PILOT obligations and shift the resulting losses to bondholders," the suit charges.
Bid to scrap prior assessment
The lowered valuation was the end result of "the developer’s ongoing coordination with the borough to use the 2025 judgment as a baseline for future assessments," according to the suit. It also threatens continuing injury to the trustee and bondholder PILOT trustee.
The litigation seeks to bar American Dream from "coercing, colluding with or otherwise influencing the borough’s assessment function for tax year 2026 and all subsequent tax years, including any attempt to rely on the 2025 stipulations or judgment to anchor future assessments."
American Dream was financed through a capital structure totaling about $2.876 billion, including the $800 million of tax-exempt redevelopment area bonds issued by the New Jersey Sports & Exposition Authority. Because East Rutherford's share of the PILOT payments is senior in priority, any reduction or shortfall "falls dollar-for-dollar" on the bondholders, according to the lawsuit.