Will Triple Five Be the Charm for Xanadu?
- Dec 28, 2010
December 27, 2010
By Paul Rosta, Senior Editor
If Triple Five can transform New Jersey’s stalled $2 billion Xanadu project from a costly white elephant into a thriving retail and destination center, the Canadian firm will pull off a feat that eluded two previous developers.
On Dec. 23, state officials revealed that Triple Five signed a letter of intent to complete the 2.2 million-square-foot project in East Rutherford, located a few miles from New York City in the New Jersey Meadowlands complex. The state wants the makeover to be completed in time for the 2014 Super Bowl, which will take place at the nearby football stadium that opened last September.
In picking Triple Five, the state cited the company’s success as the developer and operator of giant-size retail projects. The firm’s 4.2 million-square-foot Mall of America in Minneapolis, opened in 1992 and draws 40 million visitors annually. Triple Five also built West Edmonton Mall, a 5.3 million-square foot retail and entertainment complex in Canada that includes 800 stores and a hotel as well as nine attractions. That venue attracts 22 million visitors per year.
By any reckoning, however, Triple Five will have its work out for it in attempting to reposition Xanadu. For years, the project has been by financing problems, starting with its original developer, Mills Corp. A team including Colony Capital, Dune Capital and Kan Am took over the project in 2006. But in August, the developers were forced to turn over the keys to its lender syndicate Credit Suisse Group AG, Capmark Financial Group Inc. and Fortress Investment Group L.L.C. Shortly after losing control of the project, the former developers issued a statement criticizing its lenders for refusing to consider its revised business plan or allow restructuring of the financing package.
Triple Five will also have to address Xanadu’s image problem. In particular, its exterior design has drawn ridicule from public officials and residents. Xanadu’s new owner promises to re-do the controversial design and come up with a new name.
Nevertheless, state officials insist that Triple Five has the expertise and resources that the troubled project needs to succeed. As Gov. Chris Christie put it in a statement last week, “I am confident that the developers who created the most visited mall in the world, due to their vision and innovation, will transform the Meadowlands into New Jersey’s very own Mall of America.”
Some local executives have also expressed confidence in the project’s potential. “There are a lot of reasons to expect that a project like Xanadu could experience success,” said Gil Medina, New Jersey executive managing director for Cushman & Wakefield Inc., told CPE last August. Xanadu’s current outward appearance may not be to everyone’s liking, but as Medina pointed out, “When you go into the interior, it is absolutely fabulous.” Signature attractions will include an indoor ski slope and the tallest Ferris wheel in the United States.
Medina, who served as New Jersey’s secretary of commerce in the administration of former Gov. Christie Todd Whitman, also gave economic arguments for the project’s potential. A revamped Xanadu will benefit from its location in the New York City metropolitan region and from New Jersey’s number-10 ranking among the nation’s tourism destinations, he said.