Mills Corp. Files Data on Centers

CHEVY CHASE, MD-The Mills Corp. has finally released data that potential suitors of the troubled REIT have requested for months. The company filed an 8K document with the SEC that details the sales per sf at its malls, as well as occupancy rates at the centers, two leading indicators of its portfolio's financial health.

Mills' occupancy rates dropped to 87.9% at its centers as of Sept. 1, from 90.4% as of Dec. 1 last year. However, for the 12 months ended Sept. 30, sales per sf were $391, up from $372 during the same year-ago period. According to the International Council of Shopping Centers, sales per sf at the average US mall are $392.

By comparison, Simon Property Group's sales per sf at its regional malls came in at $474 for the quarter ended Sept. 30. Occupancy rates were 92.5%. For its most recent quarter, also ended on Sept. 30, General Growth Properties' malls had sales per sf of $450, and occupancy rates averaged 92.4%.

Matthew Ostrower, a retail-REIT analyst at Morgan Stanley, says reports of Mills' lagging occupancy rates would normally have a "dramatic effect" on a company's stock. But impact on Mills could be less pronounced, he says, since the company is trading in the $20 range, significantly down from its 52-week high of $44.50. Mills' stock plummeted after executives in the last year have revealed accounting irregularities, an SEC investigation, higher-than-projected development costs, and other issues.

Mills has also put itself up for sale. Gazit-Globe, an Israeli real estate firm that has acquired a 9% stake in the Mills Corp., filed a complaint earlier this month against the locally based REIT in a Delaware court, urging it to hold its annual meeting in a timely manner. Gazit's management had also insisted that Mills release financial data, some of which was revealed in the most recent 8-K, so that potential suitors can assess the company's portfolio.

Ostrower says it's too early to tell what impact the release of 8-K will have on bids made for Mills. But he says the drop in occupancy rates is not a good sign. "It's not surprising given how challenged the company has been," Ostrower says. "Obviously some of the operating problems the company is having are coming home to roost."

Mills has shed some of its assets over the last few months. Earlier in the month Joseph Freed & Associates has signed a letter of intent to investigate the purchase of the retail portion of a development at 108 N. State St. in Chicago. Last month it sold all of its foreign centers, Vaughan Mills in Ontario, Canada; St. Enoch Centre in Glasgow, Scotland; and Madrid Xanadu in Spain; to Ivanhoe Cambridge Inc. for about $988 million.