American Dream bonds priced after a week-long delay Wednesday morning, paving the way for completion of a New Jersey megamall 15 years after the project was conceived.
The $1.1 billion tax-exempt revenue bond transaction to finance the final construction phases of the retail/entertainment complex next to MetLife Stadium in East Rutherford, N.J. originally was scheduled to hit the market June 14. Goldman Sachs was lead underwriter on the negotiated unrated bond deals, which included $800 million of limited obligation revenue bonds backed by a payment-in-lieu-of-taxes agreement between developer Triple Five Group and East Rutherford, along with $287 million of grant revenue bonds supported by anticipated sales tax revenue.
A rendering of the planned American Dream retail/entertainment complex in East Rutherford, N.J. Triple Five Group
The $800 million Series 2017 deal priced at par to yield 5% in 2027 and was 314 basis points above the comparable maturity in Municipal Market Data’s triple-A scale. Goldman priced the $287 million Series 2017A and B transaction at 6.385% with a 6.25% coupon in 2027.
“The [American Dreams] deal looked cheaper than I anticipated given the recent demand for high yield,” said Alan Schankel, managing director at Janney Capital Markets. “But that’s understandable given lack of rating and likely narrow liquidity since its offered only to qualified institutional buyers in $100,000 minimums.”
Wisconsin’s Public Finance Authority borrowed as a conduit issuer for New Jersey Sports & Exposition Authority, which operates the Meadowlands District that houses the project. THe project first broke ground in 2004 under previous developer, Xanadu, before encountering a series of delays from the credit crisis. Triple Five secured $1.6 billion in private construction loans from JPMorgan in late May to jump-start the final construction phase and is planning a March 2019 opening.
“It is probably as risky as you can get on the risk spectrum,” said Lisa Washburn, managing director at Municipal Marketing Analytics. “In a different market this deal may have run into more challenges.”
Triple Five previously planned to issue taxable bonds through the borough of East Rutherford and NJSEA before opting for the tax-exempt route through the PFA due to market shifts. The developer, which also runs the Mall of America in Minneapolis, argued that utilizing the PFA as a conduit was the most efficient and cost effective strategy to promptly sell the bonds.
“It’s a very speculative transaction with a long history of problems getting done,” Washburn said. “And it’s going into gigantic headwinds in the retail industry.”
A spokeswoman for Triple Five Group declined to comment on the bond sale. The developer has aggressively promoted to investors entertainment aspects of the project, which are highlighted by an indoor water park, amusement park, ski facility and performing arts center. The complex will also feature an outdoor observation wheel that provides views of the nearby Manhattan skyline.
“It’s been a long road to get here, but hopefully it will have been worthwhile and the project will be successful,” said East Rutherford Mayor James Cassella. “This should be a boon to our economy, Bergen County and Northern New Jersey.”
Chip Barnett and Aaron Weitzman contributed to this story