EAST RUTHERFORD, NJ-As reported by GlobeSt.com, Los Angeles-based Colony Capital is set to become the dominant partner for Meadowlands Xanadu, the massive $2-billion retail and entertainment complex under construction here. The financially troubled Mills Corp. and financial partner Kan Am said yesterday they had signed a non-binding LOI for an agreement under which Colony Capital would invest up to $500 million in equity, and would arrange for the construction financing to complete the project. Until now the project had been a joint venture of Mills and the Cranford-based Mack-Cali Realty. The pending deal also relegates Mills to limited partner status.
"Obviously, the Sports Authority is very enthused about the prospect of having Colony Capital as a joint venture partner in Meadowlands Xanadu," Carl Goldberg, chairman of the New Jersey Sports & Exposition Authority, tells GlobeSt.com. The NJSEA, a state agency, owns the site and picked the Mills/Mack-Cali proposal over several others several years ago.
"In our view, this is a validation of the land plan, as Colony Capital has clearly represented their willingness to build the project as currently approved by the Sports Authority board," Goldberg says. "The combination of Colony's financial capacity and their track record as one of the premier real estate investment firms in the nation really gives us a sense that this will create a whole new momentum for leasing at Meadowlands Xanadu, because none of the tenants who are interested in the facility now need be concerned about the ambiguity as to whether the project can be completed.
"And so I think that in every meaningful way, this is positive for the Sports Complex and for the region because the promise of Meadowlands Xanadu should be realized now, both in terms of its combination of entertainment and retail, and its ability to produce jobs and tax ratables for the region," Goldberg says.
Recent published reports had several retail and entertainment operations set to sign on at the project. Sources with knowledge of the situation say they expect those announcements to be formally made in the "very near future" now that Colony Capital is apparently a dominant part of the development picture.
And Mack-Cali, which has limited participation in the retail/entertainment portion of Xanadu but an 80% interest in subsequent phases that will entail several office buildings and hotels, has weighed in on the pending deal. "We are very pleased about the latest developments announced by Mills," says Mitchell E. Hersh, Mack-Cali's president/CEO. "Colony Capital is an outstanding real estate organization.
"To be clear on one point--the Mills announcement incorrectly referenced an additional financial commitment by Mack-Cali," Hersh says. "In fact, our $32.5-million investment, fully funded as of April 2005, is Mack-Cali's maximum commitment to the entertainment and retail component of the project."
Meanwhile, Bank of America REIT analysts have upgraded Mills' stock from "sell" to "neutral" after the company's Meadowlands announcement, coupled with the last week's disclosure for $981 million.
A full sale of Mills is more likely as a result of these actions, according to the Bank of America note, which says that the next step toward a buyout of the company will happen after it discloses delayed financial results.
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