Will economy rain on Xanadu’s parade? Sluggish leasing has some questioning whether August debut is realistic

One of the attractions developers haven’t planned for the $2.3 billion Xanadu Meadowlands retail/recreation complex on Route 3 is a roller coaster. But maybe they should. The long-delayed project has had more ups and downs than a ride at Coney Island.
A year ago, several companies signed lease agreements to open in Xanadu and made public announcements, including the Cheesecake Factory, Benihana, Legoland, and Cabela’s.
The massive complex, in East Rutherford just northwest of Secaucus, will be divided into five theme-oriented shopping and entertainment districts. It’s envisioned to be a cross between an indoor theme park and a mall. It will have a total of 4.8 million square feet, with 2.3 million square feet available for lease. It will feature a 287-foot Ferris wheel, an aquarium, an indoor snow dome for skiing, two skydiving tunnels, movie theaters, and up to 200 stores.

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The New Jersey Sports and Exposition Center announced recently that Xanadu is 70 percent leased.
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Developers pushed back Xanadu’s debut from November 2008 to August 2009. In interviews last spring, they said they expected to have about 90 percent of Xanadu’s rentable space leased up by the end of 2008.
Yet, two weeks ago the New Jersey Sports and Exposition Center announced that Xanadu is 70 percent leased, and no major lease deals have been announced in several months.
At a tourism industry conference held last November, representatives said the project is still on track for a summer 2009 opening. But the economy has some questioning whether an August debut is realistic.
Last month, State Senate President Richard Codey, a longtime critic of the project, told an audience at the New Jersey Meadowlands Commission that Xanadu could go down in flames, labeling the project “the mistake of the Meadowlands.” Earlier this month, Carl Goldberg, chairman of the New Jersey Sports and Exposition Authority, which owns the land Xanadu is being built on, acknowledged to NBC News that Xanadu may not have the enough of a commitment from retailers and other tenants to open in six months.
At least one retailer, Virgin Megastore, has backed out of plans to open what would have been the music and video chain’s largest store in New Jersey. The retailer cited project delays and cost overruns.
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“I think Xanadu can and will still be successful. But they’re going to have to weather it out.” – Jim Kirkos
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“It wouldn’t surprise me if there were another delay,” said Jim Kirkos, President and CEO of the Meadowlands Regional Chamber of Commerce, last week. “The economy is definitely having an affect on their ability to sign tenants. Every day you hear how this economy is wreaking havoc on retailers from every sector. So, will they spend money on leases and renovations now? Many won’t, and the credit markets aren’t providing them with the resources to do that. I think Xanadu can and will still be successful. But they’re going to have to weather it out.”
Originally expected to be financed by the Maryland-based Mills Corp., Xanadu ended up being backed by Colony Capital, a private equity firm. After it became apparent that Mills would be unable to finance the project as planned, Colony Capital took over in August 2006, committing up to $500 million of equity. Colony also arranged for construction loan financing to help fund construction costs.
Reach E. Assata Wright at awright@hudsonreporter.com.