Xanadu, the gargantuan New Jersey entertainment retail complex, may be going down for the third time. Less than a year ago, analysts were arguing that the project was "too big to fail," but the developer's struggle to find new financiers, which has led to negotiations with real estate powerhouse Related Companies, now carries more than a whiff of desperation, as the state of New Jersey may be considering a move to seize the land.If this occurred, the new Jersey Sports and Exposition Authority would likely fold the building in with its Meadowlands Sports Complex. Admittedly, this seems like a somewhat unlikely scenario, given that Xanadu's developer, Colony Capital, has paid the Authority $160 million to rent the space for 15 years, but Governor Chris Christie is clearly eager to deal with Xanadu, one way or another.
Last Partner Was Now Defunct Lehman Brothers
The mall's immediate problem is that its last partner, Lehman Brothers, went out of business in 2008, taking $500 million in financing with it. On a larger scale, however, the entire project seems locked in the past, offering the kind of amusements and designs that may have been groundbreaking 30 years ago, but are now increasingly going out of style. For real estate investors, this is a bad sign, and it bodes ill for the future of Xanadu.
The first hint that Xanadu might be living in a time capsule is the fact that it's an enclosed mall. Some 20 years ago, huge, enclosed retail spaces were all the rage -- in the 1980's, one developer, Mel Simon, was building three enclosed malls per year. (Simon, incidentally, later absorbed Xanadu creator the Mills Corporation, a few months after the gargantuan project was sold to Colony Capital of Los Angeles.)
Unfortunately for Xanadu and its developers, the retail world has moved on. Over the past few years, Internet sales, a resurgence in outdoor shopping centers and a devastating recession have all conspired to pull the rug out from underneath the mall industry. Currently, commercial real estate prices are down 41% from their 2007 peak. And, despite optimistic predictions from some analysts, they don't seem likely to rebound any time soon.
The Tallest Ferris Wheel In North America?
As its developers would undoubtedly note, Xanadu is not just a mall, it's the ultimate mall. With over 4.5 million square feet and room for 200 stores, it is designed to be the largest complex of its kind in the U.S. and the third largest in the world. It will have the tallest Ferris Wheel in North America, the U.S.'s first indoor ski resort, a skydiving simulator, a museum, a bowling center, a family entertainment center and dozens of other attractions.
Yet some of these amusements seem poorly thought out: While the indoor ski slope concept works in countries like Dubai, where natural skiing is impossible, Xanadu's patrons are within easy driving distance of several ski resorts. As for the Ferris wheel, it will offer panoramic views of Secaucus, the Teeterboro airport and the New Jersey Turnpike. For those familiar with this area, it seems likely that many patrons will pay to not have to ride the Ferris Wheel.
For that matter, the entire mall/adult playground concept itself seems to be a little shaky right now. After all, General Growth Properties -- which owned New York's South Street Seaport, among other amusements -- filed the biggest real estate bankruptcy in history last year.
Back To The Style Of The Seventies
And then there's the look: Xanadu's design also hearkens back to the style of the seventies. The sprawling complex offers at least three distinct color schemes: A blue-and-white checked area, a brown-and-yellow striped area and a slightly preppy hunter green-and-white area. Individually, these colors would be garish; taken as a whole, they look like a clown threw up on the Meadowlands.
Inside, things are hardly any better. While the curvy spaces, rainbow lights and blue mood lighting are relaxing, they are also strangely reminiscent of Logan's Run or even of a roller rink/disco. Of course, given that Xanadu references Olivia Newton John's 1980 roller rink/disco movie of the same name, this may not be entirely accidental. But, while this look might have been groundbreaking in 1980, it now seems painfully dated.
In fact, even among New Jersey's elected officials, there seems to be a consensus that the building is pretty horrendous. According to the New York Times, reactions have included "Honky Tonk," "hideous," and -- in the words of New Jersey State Senate President Richard J. Codey -- "yucky looking."
With investment and retail dollars at a premium, Xanadu's developers need to seriously reconsider if their white elephant is appropriate for today's audiences. At the very least, they may want to update their outdated cultural touchstones. "Macarena Village," anyone?
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