Xanadu: if we build it, they will come.

As if the Mills Corporation's string of problems in recent months wasn't enough, the revelation a few weeks ago that construction costs for the embattled company's largest and most ambitious project to date, Meadowlands Xanadu, had ballooned from $1.2 billion to $2 billion fueled mounting doubt whether the company has the financial wherewithal to complete the development.

The cost overruns for the mall and entertainment venue, which are likely compounded by the grandiosity of a project that includes such attractions as indoor skiing and wave surfing, seemingly couldn't have come at a more inopportune time. Amid a series of accounting errors and overstated earnings reports that spurred an SEC investigation in past months, layoffs and poor financial performance, the Mills has had to write off projects far smaller than Meadowlands Xanadu.

"We continue to believe that the project does not make economic sense at a $2 billion price tag and that Mills will ultimately need to write-off its equity investment," was the gloomy prediction a Bank of America Securities report written by Ross Nussbaum and Christy McElroy had for the project last week.

Even the company's lucrative sale last week of three assets, Vaughn Mills, St. Enoch Centre, and Madrid Xanadu, are less a success than an apparent confirmation of the company's plan to either sell its assets piecemeal or--in the type of transaction the Mills has said it is exploring--dispose of its entire portfolio in a single major deal that would be right at home amid the ongoing trend of mergers and acquisitions in the REIT industry.

Company officials wouldn't comment if the sale of Madrid Xanadu was evidence of any sense of hesitation towards owning and operating such elaborate sports and entertainment venues given the Mills' precarious financial status or if it hints at a potential sale of Meadowlands Xanadu, for which the Madrid development was the predecessor and prototype.

Despite the flurry of doubt, a leasing broker for the development insists that the project is on a strong footing, that it will get completed, and said that he has secured letters of commitment well ahead of schedule for almost all of the space he was hired to lease, the project's roughly 100,000 s/f of restaurant space. According to the broker Irv Siegel, a co-owner of Siegel/Lillo & Associates, which specializes in restaurant leasing for shopping and entertainment centers, in addition to the restaurant space, 500,000 s/f of the project's hundreds of thousands of square feet of retail space overall had secured similar letters of commitment.

"It's beyond my comprehension that this development won't happen," Siegel said, given what he felt was strong tenant interest.

While tenants have had both questions and concerns about the project, it hasn't prevented many, Siegel said, from advancing negotiations to close deals for space. Siegel downplayed the risk retailers faced by making leasing commitments saying that the complex would get completed even if the Mills was forced to sell and said that most have treated Meadowlands Xanadu as a project whose potential for being one of the country's top-grossing malls outweighs the risks of the project's collapse.

"Mall of America [in Minnesota] gets 45 million visitors a year and its location is not nearly as good as Meadowlands Xanadu," Siegel said. "We think that we can do better than that given that we're between two tremendous markets in Northern New Jersey and New York City. This could be the highest grossing mall in the country and tenants see that and are scrambling to be a part of it."

Siegel estimated that, within six months, he would have signed leases with between eight and ten restaurant tenants to occupy a collection of spaces within the complex ranging from 8,000 s/f to 15,000 s/f.

"This project isn't scheduled to open for another two years, so we're well ahead of the curve," Siegel said of the leasing progress.

Leasing however has slowed in recent months as the scandal surrounding the Mills worsened.

"How could it have no effect, of course it did," Siegel said of the controversy. "Prospective tenants had questions, but we answered them and now we're going forward."

While there has been lingering speculation that the Mills will have to sell Meadowlands Xanadu, perhaps to a fellow respondent to the RFP that New Jersey issued to develop the parcel of land on which it sits, Siegel said that a recently completed scale model of the complex that the Mills constructed indicated to him that the firm continues to show the same attention to detail as a developer planning to see a project through.

"I think that they will be the ones to finish and continue to own this project," Siegel said. "But even if they don't and the project is sold to another developer, it will still get done. That's how the shopping center industry is, there are constant acquisitions."

Siegel wouldn't reveal yet what restaurants he has lined up to take space, but said that they will be different from the standard fare served at most malls and not the kind of big-name eateries that have become as much a part of the shopping center landscape as Macy's and The Gap.

"These are going to be iconic restaurants, many of which are already in Manhattan," Siegel said. "But it's not going to be the kind of names we see all the time, like P.F. Chang's and the Cheesecake Factory, it's going to be a little different."