ICSC Speaker Ponders Mills

To date, the troubles include a third-quarter 2005 earnings report in which NOI fell 5.2% and FFO plunged 53.6%; the layoff of 17 executives following an announcement that Mills needed to restate financial results back to 2000; a USB report that KanAm, Mills' Germany-based JV partner, may liquidate its investment in Mills properties, and the filing of class action law suits by three law firms. Linneman said, "people are worried over more bad news."

On Jan. 19, Mills stock dropped to a 52-week low of $36.38 a share on the NYSE, down from a 52-week high of $66.44 a share on Aug. 3, 2005. On Jan. 23, MLS shares closed at $37.63 a share.

"My gut tells me the market is overreacting," Linneman said, "but the whole thing about a public company is 'trust me.'" He predicted two outcomes. "Only Macerich and Simon" could acquire Mills, "the properties could be split up among many companies."

With equal candor in response to a question about Ford Motor Co.'s plan to lay off 30,000 workers, Linneman said, "it'll be great if it happens. Suddenly it discovers it has 30,000 people it can do away with? Wal-Mart is fighting an incredibly important battle. It's not unionizing," he said. "Thirty-five years ago big companies gave away the ranch. Companies cannot afford to have people destroying value every day."

Linneman heads Philadelphia-based Linneman Associates and is also a professor of real estate, finance and public policy at the University of Pennsylvania's Wharton School of Business. He is also an author and frequent speaker.

Regarding retail sales, he refuted the notion that "people are spending beyond their means. We're right on trend," he said. As for oil prices, he said, "they won't stay above the $20- to $30-a-barrel level and we're not running out. We haven't even begun to look for oil because it hasn't been economic to do so. Inflation will moderate as oil prices come down," he added.

ICSC projects "moderate sales growth in 2006," according to a report of ICSC statistics delivered by Nina Kilroy, president of Mount Laurel, NJ-based Metro Commercial Management Services. Employment growth, and what seems to be "the end of the Fed's rate-rise cycle," will be moderated by "weak pricing," which "will put pressure on the bottom line," the report concluded.