Mills' NJ Project Faces Hurdle

Now, neighboring Carlstadt has entered the mix. Attorneys representing the city have filed a request asking the Army Corps of Engineers to issue a stop-work order. The city is also asking the Corps to deny Mills and Mack-Cali final environmental permits needed to start actual construction. Site work is already under way for the project.

According to documents filed with the Corps, Carlstadt city attorneys assert that the environmental impact information provided to the New Jersey DEP by Mills and Mack-Cali is insufficient. Specifically at issue is a tract of wetlands that would have to be filled in to complete Xanadu, which if completed as planned would encompass some five million sf of retail, entertainment, office and hotel space surrounding the existing Continental Airlines Arena.

"After 10 years of delays, the latest opposition isn't a surprise," says Ross Nussbaum, an analyst with Banc of America Securities. "While we can't opine on the eventual outcome of these legal disputes, based on our discussions with Mills management these latest attempts to derail the project seem to be last-ditch efforts.

"Mills remains confident the Army Corps will grant the remaining approval, but we can't rule out further delays," Nussbaum says. "With roughly $2 per share invested in predevelopment costs, Mills has a lot riding on this project."

Spokespersons for Xanadu and the government agencies were not available for comment.

Earlier this month, Mills and Mack-Cali signed a formal contract with the New Jersey Sports & Exposition Authority, a state agency, to develop Meadowlands Xanadu. The state owns the land, the arena, and the rest of the Meadowlands Sports Complex, including Giants Stadium and the Meadowlands Racetrack. The latter two venues are not part of the Xanadu site.