CHEVY CHASE, MD-Simon Property Group and investment firm Farallon Capital Management are offering $24 per share to acquire shopping-center owner the Mills Corp. The deal tops the $21 per share, or $7.5 billion that Brookfield Asset Management had offered last month.
Mills shares closed Friday at $22.15. Farallon already owns about 10.9% of Mills' outstanding shares, making it the largest single reported shareholder of the company, according to a statement released by the San Francisco-based firm and Simon.
"This is a unique opportunity to acquire a portfolio of quality retail assets," says David Simon, Simon's chief executive officer. "We look forward to working with the Mills joint venture partners to improve the performance of these properties." He says the Mills portfolio is a good fit for his firm because of its diversified portfolio of traditional malls and value-oriented centers. Simon, the Indianapolis-based owners of 286 US retail assets, is both the largest mall- and outlet-center owner in the country.
Mills has been impacted by cost overruns at many of its developments, while its centers' performance has declined. 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.
As part of their proposal Simon and Farallon are offering $650 million in equity and plan to replace a $1.55-billion loan with financing that will include a working capital facility. Merrill Lynch is the financial advisor to the two parties. Simon's legal representative is Fried, Frank, Harris, Shriver & Jacobson, while Paul, Weiss, Rifkind, Wharton & Garrison LLP and Richards Kibbe & Orbe LLP are legal counsel to Farallon.
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