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EAST RUTHERFORD, NJ-A former developer of the former Xanadu project (now called American Dream Meadowlands) has won the right to sue a former lender that defaulted on its construction loan three years ago.
A New York appeals court overturned a lower court ruling to give Colony Capital the right to seek damages against Xanadu Mezz Holdings, which was a subsidiary of now-bankrupt Lehman Brothers.
Colony will now file suit against the lender in the New York Supreme Court, according to attorneys from Kasowitz, Benson, Torres and Friedman, who represented the developer in the successful appeal. Colony was forced to shut down construction abruptly in mid-2009 at the massive retail and entertainment venue site after the Lehman subsidiary defaulted on a $1 billion construction loan that had been promised two years before by a group of lenders.
The loan agreement was “unambiguous,” according to the new ruling – and attorneys for Colony said the company will proceed to sue Xanadu Mezz for as much as the full $600 million it had invested in Xanadu. In addition, attorney Sheron Korpus said in a statement, the company will attempt to recover $25 million it had advanced to cover monthly loans it was supposed to receive from Xanadu Mezz in early 2009. If the former Lehman Brothers subsidiary does not have the money to cover whatever amount in damages may eventually be recovered, Korpus said, the ruling means that Lehman Brothers Real Estate Mezzanine Partners is liable.
The 2.9 million-square-foot project is now officially supposed to open next year as American Dream Meadowlands, but in actuality it remains in limbo. The current developer Triple Five, which operates Mall of America in Minnesota, still has not secured state and federal environmental permits through the New Jersey Sports & Exposition Authority, which is the landlord for the Meadowlands property.
The permits are necessary before the state will move forward with authorization of a $1.7 billion public funding package that Gov. Christopher J. Christie announced with fanfare a year ago.
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