EAST RUTHERFORD, N.J. — A consortium of five lenders that includes Capmark Financial Group has taken over the troubled Xanadu project from its ownership group. The lenders' goal is to restart construction of the approximately $2 billion retail and entertainment project, which has sat idle since early 2009.
The lender group, which, according to published reports, also includes Credit Suisse and an affiliate of Fortress Investment Group, is in talks with several entertainment and retail operators to complete the project and take over its management. Published reports indicate that Related Cos., which has a history of assisting with troubled construction projects, is one of the companies involved in talks. The lender group's stipulations include accelerating completion of the project and launching a rebranding campaign that will include refinishing the project's widely criticized blue-and-white checkerboard exterior.
Several months ago, the previous ownership group, which includes Colony Capital, Dune Capital Management and Kan Am, entered into a forbearance agreement with the lender group that would transfer control of the project if satisfactory construction progress was not made.
“The transfer of control of this complex to the lender group is consistent with Governor Christie and Commision Chair Jon Hanson's commitment to realizing the original promise of this project as a world-class facility and economic driver for Bergen County and the entire state,” said Michael Beckerman, spokesperson for the lender group, in a statement. “This action creates a strong foundation to affect the seamless transfer of ownership in order to complete this project as quickly as possible so that it is open and flourishing as an established visitor destination in advance of the 2014 Super Bowl.
First conceived in 2004 by Mills Corp., which was later acquired by Simon Property Group, Xanadu was to be a 2.2 million-square-foot complex located within the Meadowlands Sports & Entertainment complex. Xanadu would feature abundant retail space and attractions such as an indoor ski slope, skydiving wind tunnels and what would have been the largest ferris wheel in North America. The Colony-led investor group took over the project from Mills in 2006. The project was slated to open in 2007, four years after its original groundbreaking, but construction was delayed. The 2008 collapse of the project's primary lender, Lehman Brothers, cut off construction financing, and construction halted soon after.
In a statement, the Colony-led ownership group explained that after Lehman's collapse, the group realized that several members of its lending syndicate were in financial distress. The ownership group allowed the lenders to terminate their initial loan obligations in exchange for restructuring the project's financing. The group also obtained commitments from Related Cos. and the state of New Jersey to develop a long-term business plan.
“For reasons that are not clear to us, when it came time for our existing lenders to support the continuation of Xanadu, they refused to engage is, ignored our proposed business plan and were unsupportive of a restructuring that would keep the project going,” the stated reads.
— Coleman Wood