Bondholders in Triple Five’s American Dream megamall in New Jersey have sued the developer and the Borough of East Rutherford, alleging they colluded to slash the assessed value of the complex, jeopardizing repayment of about $800 million in bonds.

The complaint, filed Friday by the U.S. Bank Trust Company on behalf of bondholders, claims the Borough of East Rutherford and the developer, Triple Five affiliate Ameream LLC, engaged in a “pattern of wrongful conduct” that undermined the process used to calculate payments in lieu of taxes, or PILOTs, pledged to bondholders.

The lawsuit is the latest in aseries of legal battles over tax assessmentsof the megamall property and PILOT payments based on those assessments, which are used to repay the bonded debt issued in 2017 to finance the mall’s construction. This is the first time the bondholders have brought a direct legal action against the developer or the borough.

Riverhead remains tangled up in its own gnarly legal dispute with a subsidiary of Triple Five Group, the Alberta, Canada-based conglomerate. That subsidiary, Calverton Aviation and Technology (CAT), sued the Town of Riverhead and the Riverhead Industrial Development Agency in January 2024, seeking to force the sale of 1,600-acres of vacant industrial land at the Calverton Enterprise Park, pursuant to a $40 million contract the Town Board canceled in October 2023, after the Riverhead IDAdenied CAT’s application for financial assistancefor a proposed industrial development at the enterprise park. The financial assistance sought from the Riverhead IDA included a long-term PILOt agreement.

The New Jersey lawsuit accuses the Borough of East Rutherford of colluding with the developer to illegally reduce the megamall’s tax assessment from stable levels exceeding $3.1 billion to an assessment of $2.5 billion, and ultimately a $1,653,960,000 valuation after a tax judgment. The complaint claims the tax judgment resulted from the borough knowingly relying on a “legally indefensible” assessment. That appraisal was prepared by a newly hired appraiser, after the borough was pressured by the developer into firing the previous longtime appraiser, the complaint says.

“Since at least 2024, the Defendants have disregarded their legal and contractual obligations to the PILOT Trustee in a concerted effort to improperly reduce payments owed by the Developer that would be used to repay the … Bonds. In the case of the Developer, its disregard is only the latest in an ongoing pattern of ignoring its legal and contractual obligations to gain unfair benefits from its counterparties,” the complaint states.

The borough is paid first from the PILOT revenues, so is guaranteed payment under the reduced assessment, the complaint states, leaving the bondholders’ payment in jeopardy.

Riverhead Town and the Riverhead IDA filed a motion to dismiss CAT’s lawsuit. The motion was argued in November 2024. The court has not yet issued a decision on the motion.

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Source: RiverheadLOCAL