NEW YORK — Despite the woes of its developer, Mills Corp., construction of Meadowlands Xanadu, a fanciful $1.2 billion, 4.8 million-square-foot retail-entertainment-sports colossus rising from New Jersey swampland, plows on, albeit at a slower pace.
Mills has restated earnings twice in the last year, and the Securities and Exchange Commission is investigating its accounting practices. The company’s stock price had fallen precipitously in the last six months, then rose 26 percent to $30.33 per share on Wednesday, the same day Mills announced it had obtained new financing from J.P. Morgan Chase & Co.
About one-fifth of its workforce has left through layoffs and resignations. The company has said it is exploring strategic alternatives. Industry analysts said it’s unlikely that Mills would be sold while it is under investigation.
Xanadu would be a difficult project even if it weren’t being built on a highly contested piece of real estate. It is a few miles across the Hudson River from Manhattan in one of the country’s most affluent areas, in a state with reams of red tape and a powerful government. Everyone from the local communities to environmental groups to the New Jersey Sports and Exposition Authority to competing developers believe they have a claim to the land.
It also is Mills’ most ambitious project, and it has been fraught with challenges. The developers have been sued by Hartz Mountain Industries, which competed for the site and lost, as well as by the Town of Carlstadt, N.J., the Sierra Club and other environmental groups. The New York Giants, who play football at the Meadowlands, also filed a lawsuit over Xanadu before reaching an agreement with the rival New York Jets, the team’s tenant at Giants Stadium. The Jets will build a new stadium next door.
Complicating the project are its many components. Xanadu has been conceived as a grab bag of venues that include the country’s first snow dome — an alpine indoor skiing resort with real snow and chair lifts — a cooking school, a fashion runway, a minor league ballpark, a children’s interactive play area, the largest movie theater in the U.S., plus retail and dining options.
Mack-Cali Realty of Cranford, Mills’ partner, said it will build a rooftop driving range, a wave machine for surfing, climbing walls, a miniature Formula One-style racetrack, a spa, a home for the local Y.M.C.A. and classrooms for Bergen County Community College.
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“We’re fully under construction,” said a spokesman for Mills/Mack-Cali. “Mills had some cuts in staff, but this project is very much under way. There has been some reshuffling of staff. The contractors and vendors are not changed.”
The spokesman acknowledged that some work is on hold as “we redesign some elements to accommodate prospective tenants. On balance, the majority of work has continued.”
The steel beams for the retail space for the fashion district — stores will be grouped by type in separate areas — are in place, the spokesman said. The steel construction for the food and home districts is under way. “Three or four weeks more and everything will be on schedule,” he said.
The footprints for the three buildings housing sports, children’s education and entertainment may change, the spokesman said. “There is some redesign going on now to satisfy potential tenants. The work continues, and steel is being fabricated in factories off-site.”
While there has been skepticism that the snow dome — a key selling point of the project — will ever be built, the spokesman said, “It is being built. The steel for the snow dome can’t be used for anything else. We’re under negotiations with an operator to operate the snow dome.”
Marios Sarreas, a Mills leasing agent, said two anchor leases have been signed: Cabela’s, a direct marketer of hunting, fishing, camping and outdoor merchandise, with about 15 stores, and Muvico Theaters.
“I know there’s tremendous interest from [prospective] tenants,” Sarreas said.
But the majority of space has yet to be leased. Real estate experts said that anchor leases, especially, are usually signed before construction on a project begins.
Robert K. Futterman, chief executive officer of Robert K. Futterman Associates, who is advising Meadowlands Xanadu on retail, said, “It’s leasing up quite rapidly. There’s an enormous amount of interest, and specialty retailers galore.”
He declined to name any tenants, but said Mills “is finalizing a major public relations strategy before it makes an announcement. Everything seems to be going forward. The project’s getting built. Leasing is quite brisk … It’s such a great location, and a viable project.”
While the location may bode well for shopping, the project has been difficult for local communities such as Carlstadt, East Rutherford and North Arlington to accept. In its lawsuit last year, Carlstadt said it is losing tax revenue as a result of the development. One of the conditions of the Mills/Mack-Cali permit was turning over a 600-acre Empire Tract in Carlstadt for permanent preservation. The land had a total assessed value of $70 million before it was transferred to Meadowlands Conservation Trust, providing more than $1.7 million in tax revenue to Carlstadt. As a result of the transfer to the state, the land was taken off the tax rolls. A judge in February dismissed Carlstadt’s lawsuit.
Among the many organizations that were promised facilities or improvements is the YMCA Without Walls in North Arlington. Mills/Mack-Cali agreed to build a center for the YMCA at Xanadu. Robin Mazer, the Y’s director of development, said, “Part of the deal in getting their contract is that they were going to do something for the community. In all reality, Xanadu is not for the community. It’s to bring people from all over the world to a megamall.”
The Mills/Mack-Cali spokesman said the developers’ commitment to the area is evident from its work with “the Y, Bergen Community College, our environmental impact in preserving the 600-acre Empire Tract and the $80 million we’re spending on transportation improvements.”
Mazer, who knows that the Y’s facility depends upon Mills’ ability to finish the project, is cautiously optimistic that Xanadu will be completed. “They’ve been trying to do this for 25 years now,” she said. “They’re too far into the whole thing. It will happen. It may not happen the same way. I have no reason to believe we’re going to be abandoned.”