Xanadu, the $2 billion entertainment/retail development being built next to the Meadowlands Sports Complex off Route 3, is scheduled to open in November – but the soft economy may prove to be a drag on their search for tenants.
The complex will have a total of 4.8 million square feet, with 2.3 million square feet available for lease.
According to a report released last month by the New Jersey Sports & Exposition Authority, which owns the land where Xanadu is being built, developer Colony Capital has lease commitments for one-third of its rentable space.
With just 10 months to go before opening day, some retail and real estate observers thought Xanadu would have announced a few anchor stores by now.
But Xanadu spokesman Richard Edmond said last week that the complex is in negotiations with a number of retailers, many of whom he expects will eventually sign leases before the grand opening.
“If you count our serious negotiations with retailers and entertainment operators, we are close to 90 percent leased up,” Edmond said. “In terms of actual signed leases, it is less.”
He said he believes Xanadu will hit that 90 percent threshold by November.
Regarding the Sports Authority, Edmond said, “The report is not a leasing report, and I would caution against characterizing it that way … Far from being behind schedule with lease commitments, we believe we’re ahead of where we should be.”
First-of-its-kind attractions
An ambitious concept, Xanadu will be a cross between a traditional high-end shopping mall, an entertainment Mecca, and an indoor sports wonderland.
Retailers will be carefully distributed throughout Xanadu’s five theme-oriented “shopping districts” dedicated to fashion, home furnishings entertainment, sports, and family entertainment/youth.
The sports district will feature a few first-of-its-kind attractions, including the first indoor ski slope in the U.S. – 780 feet high – and two wind tunnels for “skydiving.”
The massive project will create approximately 20,000 part-time and full-time jobs and another 20,000 jobs during Xanadu’s construction phase, according to the New Jersey Sports & Exposition Authority web site.
Economy’s impact
The weak economy and unease about a possible recession may be a factor in Xanadu’s ability to attract retailers. According to the International Council of Shopping Centers, store-closing announcements in 2008 are already higher than they were at this time last year. And although a council report stated that retail store closing dropped slightly in 2007 over 2006, the report states, “[2007] may be the calm before the storm.”
James Kirkos, chief executive officer of the Meadowlands Regional Chamber of Commerce, a big supporter of the development, said last week he believes the retail leasing data must be considered in the context of the current economy.
“Would they love to be fully occupied, fully leased? Absolutely,” Kirkos said. “But throw in a very weak, shaky economy, and throw in the financial markets and not knowing how much money is available for businesses to borrow. I think that may have delayed some retailers from making the decision to lease space.”
Kirkos said he thinks recent actions by the Federal Reserve may ease some of these concerns.
He also stated that Xanadu has told him that the facility should be 75 to 80 percent leased by it fall debut, slightly less than the 90 percent projection made by Edmond.
Early problems created negative buzz
Kirkos also said problems with the development’s initial financial backer could be forcing prospective tenants to look more closely at the project before signing on the dotted line.
Xanadu was originally going to be financed by the Maryland-based Mills Corp. After it was apparent that Mills would be unable to finance the facility as it was planned, Colony Capital took over in August 2006, committing up to $500 million of equity. Colony also arranged for construction loan financing to fund the rest of Xanadu’s construction costs.
“The early controversies of the Mills Corp., and the financial issues that it had before the project was taken over by Colony Capital, certainly had a negative impact,” Kirkos said. “I think Colony Capital is proving that it not only has the financial wherewithal, but the management prowess, to run a fabulous facility. Colony Capital is now beginning to convince a lot of people that Xanadu is a place to build and run their businesses.”