Mills Execs Explore Company Sale
Friday, February 24, 2006
By Ian Ritter

<(Ian Ritter is national online editor for GlobeSt.com/RETAIL.)

ARLINGTON, VA-Mills Corp.’s directors are considering the sale of all or part of the company, keeping in line with the predictions of some industry observers that have followed the firm’s woes. Meanwhile, the locally based REIT will also lay off 77 employees in a move forecast to save it $1.2 million in this year’s first quarter.

Mill’s troubles were made public, for the most part, last year when third-quarter NOI fell 5.2%, to $104.7 million, from the same year-ago period, while FFO dropped 53.6%, to $0.45 per share. Those plunges were due, in part, to a variety of charges taken on in regard to projects in the company’s pipeline and failure to collect some rents.

The company, which owns 42 retail properties in the US and Europe, was contacted by the SEC in January and is now restating earnings from 2000 to the first three quarters of last year. Now, the company’s executives have announced that they do not plan to file an annual report by their March 16 deadline and gave no specific date when they expect to file any financial documents.

Mills’ lenders have set an April 6 deadline for the restatement of financial filings, but executives are seeking an extension. A company statement does say that last year’s earnings and FFO “will be significantly below the market's expectations” and that prior guidance should not be relied upon.

Mills officials say they believe they can obtain funds to complete the property developments and expansions under way in their pipeline, including the 4.7-million-sf Meadowlands Xanadu, a retail-entertainment destination in Bergen County, NJ. But “no assurance can be given as to these matters,” according to the statement.

Mills has hired Goldman, Sachs & Co. and J.P. Morgan Securities Inc as financial advisors and Wachtell, Lipton, Rosen & Katz; Hogan & Hartson LLP and Willkie Farr & Gallagher LLP as legal counsel. The firm also named Mark S. Ordan, non-executive chairman of the board at Rockville, MD-based retail REIT Federal Realty Investment Trust as chief operating officer, effective March 6.

News of Mills looking at strategic alternatives follows a January announcement by its Germany-based investment partner KanAm that it is freezing its $580-million US Grundinvestment fund that has ownership in two Mills centers, Opry Mills in Nashville and Great Mall in San Jose, CA among other non-Mills holdings. Analysts say that KanAm could look to sell its stakes in those assets and an additional nine Mills centers in which it has invested.

Though Mills is seeking a sale, some analysts have been skeptical that a deal could get done because of the lack of current financial information about the company. If it is sold, it could be as a whole, or in parts to buyers that range from private-equity firms and mall owners to institutional investors, they have surmised.