By Linda O’Flanagan
New York appeals court today (Tuesday) ruled in favor of the former developer of the Meadowlands Xanadu shopping center, overturning a lower court ruling and giving Colony Capital the right to recover damages against a lender who refused to a $1 billion construction loan.
The law firm Kasowitz, Benson, Torres and Friedman represented the former developer, ERC 16W Limited Partnership, on the appeal before the New York Appellate Division, First Department.
Sheron Korpus, the partner at Kasowitz who led the representation, said, “We are gratified with the appellate division’s decision finding the arguments raised by the lenders ‘untenable,’ and we look forward to pursuing the case in New York Supreme Court and recovering the significant damages suffered by our client.”
Colony and its partners were forced to abandon the project when one of the lenders, an entity formerly associated with Lehman, refused to fund its share of the $1 billion loan.
The lower court held that the developer had no remedy under the loan agreement other than to find a substitute lender.
The appellate court in today’s decision disagreed and reversed, holding that both the lender and its guarantor are liable under the unambiguous agreement and that their arguments were “untenable.”
The developer now intends to seek damages arising from its lost investment on the project, said Korpus.
Colony Capital and its partners took over Xanadu in 2006 from the now-defunct Mills Corp., and ran into major financing problems when an affiliate of bankrupt Lehman Brothers stopped providing promised construction funds.
After a year in limbo, Triple Five acquired the uncompleted project from the lenders who owned the debt on the project in 2010.
Now named American Dream, the multicolored behemoth on the eastern edge of the Meadowlands Sports Complex and dubbed the “ugliest building in New Jersey” received final approval for a transformation last fall.
Triple Five received approval from the New Jersey Sports Authority for an exterior makeover that will introduce a white and silver color scheme, and replace garish green and orange windows with glass.
“It’ll give it a much more sophisticated feel, and lends itself to a much higher level of retailing,” Paul Ghermezian, senior vice president of Triple Five. “The thing only thing that stayed is the barreled ceiling.”
Triple Five, which owns the Mall of America and the West Edmonton Mall in Canada, is expected to complete the project next year, ahead of the 2014 Super Bowl to be played at the Meadowlands, assuming the company is able to secure state and federal environmental permits that will authorize a $1.7 bullion public funding package for the mall.
By the time the mall opens, Triple Five expects over 25 million foreign visitors to ski in an indoor snow dome, attend concerts in a brand-new performing arts center, and surf six-foot waves in a climate-controlled simulation of a Hawaiian beach.
Nader Ghermezian, the company’s chairman, has been in talks with airlines to provide shuttles to the Meadowlands from Newark, and even increase flights to the airport to accommodate tourists wishing to visit the mall.