Mills Corp., developer of Potomac and Arundel Mills, scored big at New Jersey's Meadowlands sports complex last week, winning the right to negotiate a deal to develop a $1.3 billion entertainment and shopping center on a 104-acre site.
In partnership with Mack-Cali Realty Corp. and the New York Giants, Arlington-based Mills beat out two other competitors, helped by the backing of local political leaders and a proposal to pay the New Jersey Sports and Exposition Authority $160 million upfront to lease the land for the first 15 years.
The project, named Meadowlands Xanadu, is a blend of theme park, shopping mall, hotel and office space. Mills projects increasingly include entertainment attractions mixed with retail, and Xanadu will include a "snow dome" with indoor skiing, indoor water surfing, a spa, a minor league ballpark and a farmers' market .
"It's almost going to be laid out like Disneyland," said Laurence C. Siegel, Mills chairman and chief executive. Siegel said entertainment attractions would anchor the complex, rather than the usual department stores. For instance, sports retailers such as Bass Pro Shop will be clustered around the sports-related entertainment sites.
Mills and PBS are partners for an attraction that will feature PBS characters. The area will also include a child-scaled city, an attraction designed by a Mexican company where children can play at jobs or, of course, play at shopping.
George R. Zoffinger, president and chief executive of the sports authority, said Meadowlands Xanadu would be an attractive blend of economic development for surrounding communities and the state, money for the sports authority, infrastructure improvements and environmental benefits.
Mills had already invested in the Meadowlands area. It acquired a 587-acre tract adjacent to the Meadowlands in 1994 and planned to build a shopping center on it. As part of the Meadowlands deal, however, the company will donate the land to the state of New Jersey and help clean it up so that it can be preserved as a wetland and open space.
The experience of working on a high-profile project, the adjacent tract and working with local politicians during the regulatory process for so many years was an asset for Mills in the competition, company officials said. "We've been doing this a long time in that area," said Edward B. Vinson, executive vice president for international development.
"This is our third administration," he said of local officials. "We've had lots of opportunities to work with different officials over time." What the company learned about the site itself also helped. "We know more about subsoil conditions than the subsoil does," Vinson said.
While delivery dates and other details must still be negotiated, those involved in the project say it is, for all intents and purposes, a done deal. "Approval to negotiate a development agreement at the meadows is the most significant positive news Mills has generated in many years," said David M. Fick of Legg Mason Wood Walker. Legg Mason has an investment banking relationship with Mills, but neither Fick nor Legg Mason owns stock in the company.
Fick noted that Mills had already invested nearly $120 million in the project. "If it had been awarded to one of the competitors there was a potential cloud over the company for having to write that investment off, and that cloud is now lifted." The competitors were Hartz Mountain Industries Inc. of Secaucus, N.J. in partnership with Forest City Ratner Cos. of New York, and Westfield Holdings, an Australian shopping center developer whose holdings include Montgomery Mall.
Siegel wouldn't talk about the details of the partnership with the Giants, citing confidentiality. Zoffinger said that one of the issues was that the Giants have the rights to surface parking at the site and that parking during the construction phase of the project was involved. The sports authority is hoping that the new complex may help the Giants in its bid to bring the Super Bowl to the Meadowlands.
While Mills completes the entertainment and shopping parts of the complex, Cranford, N.J.-based Mack-Cali will develop four 14-story office buildings and a 520-room hotel with a total of 2.2 million square feet. Mills will own 80 percent of the entertainment and shopping complex and Mack-Cali 20 percent, with the percentages reversed on the office and hotel development. Kan Am, part of the Kan Am Group, a Munich-based investment syndicate, which has often provided equity for Mills projects, is putting up two-thirds of the money and will own a third of Mills's share of the project.
In addition to including concepts that Mills has incorporated elsewhere -- a project in Madrid that is expected to open in May also includes indoor skiing -- Siegel said the company hopes to develop new attractions that can be installed elsewhere.
"Every time we do one of these, we say it is our best work," Siegel said. "We keep honing our performance. This is a whole new platform of opportunities for Mills. It should move the company to a whole different standard."