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EAST RUTHERFORD, NJ-The financially troubled Mills Corp. announced this morning that it had signed a non-binding letter of intent with the Los Angeles-based Colony Capital Acquisitions and Germany's Kan Am USA Management under which Colony would arrange for construction financing for Meadowlands Xanadu, the retail/entertainment project Mills is joint-venturing here with Mack-Cali Realty Corp. Under the terms of the letter, Colony will invest up to $500 million in equity capital and arrange for construction financing for the rest of the projected $2-billion cost.

As part of the agreement, Mills will have no obligations post-closing to finance Xanadu, although the recapitalized partnership will continue to have the same obligations to the New Jersey Sports & Exposition Authority, owner of the site. Mills' equity capital in the project will become subordinated, and the LOI is also being described as a further step in Mills' "strategic alternatives process." The transaction is expected to close by Sept. 21.

"Our transaction would allow Mills to achieve its goals of reducing the company's financial obligations and facilitating our exploration of strategic alternatives," says Larry Siegel, Mills' chairman and CEO, in a prepared statement. "This transaction will enable the realization of Meadowlands Xanadu. Mills will continue to explore strategic alternatives and take aggressive actions in the interests of enhancing value for its shareholders."

"This is the culmination of our long-standing relationship with senior management of Mills and Kan Am," says Colony Capital president Richard Saltzman. "We are thrilled to be joining the Meadowlands Xanadu partnership and look forward to the completion and success of this project."

When the transaction closes, Mills will issue, at its choosing, either 4.5 million shares of common stock or 4.5 million units of the Mills Limited Partnership, redeemable for the same number of shares of common stock. The shares or units would be allocated between Colony and Kan Am, which has been a financial partner with Mills in Xanadu for several years. The agreement also calls for Mills to become a limited partner in Xanadu, with a total partner capital account of about $485 million including incremental project funding of $90 million from July 31, 2006.

Besides Colony's and Mills' investments, Kan Am's current partner capital account in the project is $342 million, according to data released by the firms. And the Cranford-based Mack-Cali Realty has invested a total of $32.5 million to date in the project through a separate partnership with Mills.

Instant Insights /

New Agreement To Finance Meadowlands Xanadu

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