Research: Rating Action: Moody’s upgrades Kapkowski Road Landfill Reclamation Improvement District (NJ) bond ratings to Ba1 and places bonds under review for possible upgrade

New York, June 29, 2022 — Moody’s Investors Service (“Moody’s”) has upgraded Kapkowski Road Landfill Reclamation Improvement District, NJ (“Kapkowski Project”) bonds from Ba1 to Ba2, and placed the ratings under review for possible upgrade. The bonds were issued by the New Jersey Economic Development Authority.

The upgrade in the Kapkowski Project bond ratings reflects the significant reduction in debt, following the decision by parent Simon Property Group, LP (Senior Unsecured, A3, Stable) to repay a $355 million loan on Jersey Gardens Mills in December 2021. The upgrade also reflects the increased level of financial support demonstrated by parent company Simon.


Notwithstanding the rating review, the Ba1 rating reflects the relative value of The Mills at Jersey Garden Mall (“the Mall”) as a shopping mall, whose payment in lieu of taxes (PILOT) secures the project’s obligations Kapkowski. The mall is a value-driven property adjacent to Newark International Airport that has a proven track record of resilience in the face of major shifts in consumer behavior from traditional brick-and-mortar to retail platforms. online retail. Supported by its competitive position, the mall has seen a continued financial recovery since the reopening of indoor malls in New Jersey in June 2020. The mall has historically demonstrated high relative profitability for its tenants. This profitability will support the Kapkowski project and tenant base, bolstered by strong property management by JG Elizabeth II, LLC (JGE II) as a wholly owned subsidiary of Simon Property Group, LP

Credit is challenged by the absence of a debt service reserve fund. However, the Kapkowski project is receiving liquidity support through an advance agreement by Midland Loan Services (NR) to ensure timely payment of debt service. We view these arrangements favourably, particularly for assets with high loan-to-value ratios and high levels of expected recoverability. Although credit has sometimes been negatively affected by the lack of timely financial information, recent levels of disclosure have improved. Consistent with our publicly stated policies, a lack of timely financial information would ultimately result in a rating withdrawal.

PILOT payments began in August 2004 and will end on the final bond payment date in February 2031. The PILOT payment for fiscal year 2022 is approximately $3.27 million per quarter, totaling $13.06 million. dollars per year. PILOT payments increase by 10% every 5 years, with the next increase scheduled for May 1, 2025.


The rating review will focus on the continued recovery of the Mills at Jersey Gardens and allow for a more detailed assessment of asset performance, including expected financial performance after repayment of $350 million mortgage debt, and on the dynamics of the tenants of the property. , as well as competitive dynamics.


– Evidence of improved financial performance which should remain stable

– Long-term improvement in project-level liquidity position and/or creation of a debt service reserve fund with adequate funding – Change in industry conditions favoring brick-and-mortar retail or tenants less exposed to competition


– A change in the competitive position in the market or in the tax environment resulting in lower occupancy rates or sales

– A decline in financial performance such that PILOT coverage falls below 2.0x on a sustained basis – Visitor levels decline noticeably with no sign of a rebound, causing projected financial metrics to remain weak for an extended period – Economic conditions point to a prolonged recessionary environment


Bonds are payable only from PILOTs made by JGE II to the City of Elizabeth, which has assigned payment to the Bondholder Trustee. If there is a shortfall in the PILOT payments, which are remitted quarterly to a trustee, the total value of the PILOT will not be accelerated. The NJ Landfill Improvement Act provides for the imposition of a special levy as a relief taxation mechanism for the PILOTS lien. The city’s assessment ordinance sets the special assessment lien at $180 million and requires it to be paid while the bonds are outstanding, or 30 years, whichever is lower. There is no explicit rate agreement, but the agreement is structured so that fixed PILOT payments provide sufficient debt service coverage.


JG Elizabeth II, LLC was formed for the purpose of operating and owning the factories in Jersey Gardens for long term investment and is a wholly owned subsidiary of Simon Property Group, LP JG Elizabeth II, LLC is responsible for pilots quarterly for a subsidiary, New Jersey Metromall Urban Renewal LLC, which is legally obligated to pay the PILOTS to the trustee. Simon replaced Glimcher Realty as owner and operator of the mall in January 2015.

The Mills at Jersey Gardens is a value-driven, two-level enclosed fashion and entertainment mega-mall in Elizabeth, New Jersey with approximately 1.3 million square feet of gross leasable area . It is located approximately three miles from Newark International Airport and 15 miles from Manhattan off Exit I3A of the New Jersey Turnpike in an urban enterprise area with a reduced sales tax rate. Billed as “New Jersey’s largest mall”, Jersey Gardens has approximately 200 stores and is located in northern New Jersey and the New York metropolitan area.


The main methodology used in these ratings is the Generic Project Finance Methodology published in January 2022 and available at Otherwise, please see the Scoring Methodologies page on for a copy of this methodology.


For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at

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David Kamran
Senior Analyst
Project funding
Moody’s Investors Service, Inc.
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Angelo Sabatelle
Additional contact person
Project funding
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

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