New Jersey's Xanadu Project Gets Cash Infusion

A Los Angeles equity firm steps in with a $500 million investment to buoy the sluggish project. Also, an industry fundraiser gives a bonus to the Democratic gubernatorial candidate in New York.

Xanadu to Add Partner

A $500 million light is shining at the end of the tunnel for the Mills Corp. of Chevy Chase, Md., and the Xanadu retail and entertainment complex in East Rutherford, N.J.

The company endured months of scrutiny from state leaders and industry observers about its ability to follow through with construction of the complex that will wrap around the Continental Airlines Arena at the Meadowlands sports complex.

Mills announced that it and Kan Am USA Management, its Germany-based partner in the project, were set to close a deal with Colony Capital Acquisitions of Los Angeles for a $500 million equity infusion. The deal would make Mills a limited partner, with Colony's funds expected to finance new construction loans. Kam Am and Mills already invested more than $800 million into the project, which is pegged to cost another $2 billion to finish. The original project budget was $1.3 billion.

The recapitalized partnership will honor the existing contract with the New Jersey Sports and Exposition Authority, which owns the sports complex. Mills reported that it is unlikely to recoup its investment because Colony and Kan Am have priority on returns.

A project team that includes New York's Turner Construction, Joseph Jingoli & Son of Lawrenceville, N.J., and Baltimore's Whiting-Turner Construction has completed excavation, site preparation, a 2,168-space garage, and topping off of three of five structures.

Xanadu would feature retailers providing interactive entertainment around their products. A future phase on the 104-acre tract calls for Mack-Cali Realty of Cranford, N.J., to add offices and a hotel.

Industry Fundraiser for Spitzer

A coalition of nine industry groups raised more than $600,000 this year at a fundraising event for Eliot Spitzer's bid to become New York's next governor. Voters head to the polls this month in the general election pitting Spitzer, a Democrat, against Republican John Faso, a former state assemblyman.

Spitzer told the crowd that he considers infrastructure projects "good debt" for the state to incur.

"I have an aversion to incurring more debt, but there is a difference between good debt and bad debt," he said.

Spitzer threw his support behind a number of controversial projects planned around New York, such as the $880 million plan to create Moynihan Station out of the James A. Farley Post Office building in West Midtown; a $1 billion redevelopment of the United Nations; Columbia University's Manhattanville expansion plans; and the $4.2 billion Atlantic Yards development in Brooklyn.

Spitzer also criticized the slow progress at the World Trade Center site, stressing that with construction costs rising 30 percent a year, waiting doesn't make financial sense.

"Five years is too long for that site to linger," he said.

Union contractors raised 60 percent of the money for the event, said Louis Coletti, president and CEO of the Building Trades Employers' Association, a member of the coalition.

"We want to be part of Spitzer's success as governor on construction-related policies," he said. "We want to be part of his policy-making team when he is ready to move forward."

The coalition includes the American Council of Engineering Companies, American Institute of Architects, Building & Construction Trades Council, General Contractors Association, New York Building Congress, and Subcontractors Trade Association.

For his part, Faso has taken stands on longstanding regulatory debates. In a separate interview, he called for repeal of the strict liability clause in sections 240 and 241 of the state's labor law, under which contractors are held liable for job-related injuries regardless of an accident's cause.

He also is calling for a 500-week cap on permanent partial disability payments in the state's workers' compensation program and for complete repeal of the Wicks law, which requires at least four independent prime contractors on a public works project.

Faso said he wants the state to adopt pay-as-you-go financing for road, bridge, and transit capital projects by redirecting gas tax revenues that currently go into the general fund.

"The state has used too much indebtedness to fund [transportation] capital programs," he said.

Faso said he supports large New York projects that may involve state funding such as Moynihan Station, the Jacob K. Javits Convention Center expansion, and the World Trade Center redevelopment.