NEW YORK CITY-The KanAm Group, the Mill's Corp.'s Germany-based joint-venture partner on a number of its properties, may have to liquidate its ownership of some of those assets, surmises a UBS Investment Research report. This comment follows KanAm's freezing its $580-million KanAm US Grundinvestment fund that has ownership in two Mills centers, Opry Mills in Nashville and Great Mall in San Jose, CA among other US holdings other than Mills' properties.

The move by KanAm follows a hectic year's end for Mills, in which 17 executives were let go after the company restated its third-quarter earnings. The Arlington, VA-based REIT's 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. Mills, which has acknowledged that it has been contacted by the SEC, will restate earnings from its Q1 in 2000 to last year's Q3.

As for KanAm, UBS says the closing of the US Grundinvestment fund could just be the beginning. "This could be a catalyst for KanAm to reassess its overall Mills partnership strategy," the reports says. KanAm has ownership in an additional nine Mills centers in the REIT's overall portfolio of 42 properties in North America and Europe.

A Mills spokesman would not return a phone call by deadline. However, earlier this month during a conference call with analysts and investors company executives said that, among other actions, they were no longer pursuing 10 development projects, six of them in the US. "We are confident that our renewed focus on our core operations, along with the measures that are being taken to increase operating efficiencies and improve our cost structure, should result in a stronger company better able to deliver sustained future growth and value to our shareholders," says Mills chairman and CEO Larry C. Siegel.

Among the projects the company is still pursuing is Meadowlands Xanadu, a $1.3-billion mixed-use project in East Rutherford, NJ, with 2.2 million sf of retail-entertainment. The developer also broke ground last year on 108 N. State St., in Chicago, which will have about 400,000 sf of retail space as well as offices.