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

ARLINGTON, VA-What, if anything, might happen with the Mills Corp.'s portfolio at this point is anyone's guess, Matthew Ostrower, a retail-REIT analyst at Morgan Stanley, says. The locally based shopping-center owner has supposedly hired JP Morgan Co. and Goldman Sachs Group Inc. to investigate a deal, according to recently published reports. A Mills spokesperson would not "comment on rumors."

If the company, which owns 42 properties across the country and abroad, is indeed up for grabs, any number of entities could be potential buyers, from institutional investors and private-equity firms to traditional mall owners, Ostrower says. "This is a market where there are enormous amounts of capital floating around," he states. "Anyone is desperate to put capital out."

And pressure from well-publicized rumors won't necessarily spur Mills officials to comment publicly on any potential deal. "So far this company has been quiet until they want to say something," Ostrower says. "It doesn't mean anything necessarily."

News of Mills looking at strategic alternatives follows a January announcement by its Germany-based investment partners KanAm that it is freezing its $580-million KanAm US Grundinvestment fund (See related story) that has ownership in two Mills centers, Opry Mills in Nashville, TN 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.

The move by KanAm follows a hectic yearend for Mills, in which 17 executives were let go after the company restated its third-quarter earnings. The locally 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.

For its part, Banc of America Securities REIT analysts aren't sure that any sale of Mills is going to happen in the near future. "We continue to believe that a sale of the company is not imminent for the following reasons: 2005 audited financials are not yet available; there remains uncertainty surrounding the potential liability resulting from the SEC inquiry and shareholder lawsuits; and the uncertain outlook for Meadowlands Xanadu."

Meadowlands Xanadu is a proposed 4.7-million-sf retail entertainment destination in Bergen County, NJ that would be the firm's most ambitious project to date. Mills officials have said that they plan to abandon some development projects they had in the pipeline but never indicated that Xanadu would be one of those.

Instant Insights /

UPDATE: Mills Asset Sale Debated

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