Mills Corp., fighting for survival, sells three properties

Tuesday, Aug. 15, 2006

Mall developer The Mills Corp. is selling its interest in three malls, officials said Monday, as the company continues to struggle with financial difficulties that threaten its survival.

Mills recently moved its corporate headquarters to Chevy Chase from Arlington, Va., but the company has shed more than 200 employees in the past few months and did not lease as much space as officials originally thought they would.

Earlier this year, Mills officials said the board of directors was looking into a possible sale of all or part of the company and retained Goldman, Sachs and Co. and J.P. Morgan Securities as financial advisers.

Mills announced Monday it is selling its stake in Vaughan Mills in Canada, St. Enoch Centre in Scotland and Madrid Xanadu in Spain for $981 million to Ivanhoe Cambridge, a Montreal mall developer. Company officials did not return a phone call.

On Thursday, Mills filed a report with the U.S. Securities and Exchange Commission that said earnings restatements were likely to reduce net income by $210 million for 2003 through September 2005. Mills reported earning $342.8 million over that time.

The SEC is investigating the company’s accounting practices.

The report also said that auditors Ernst and Young LLP plan to issue a ‘‘going concern” warning when it reports on Mills’ overdue results for 2005, due primarily to deadlines for the repayment of $2 billion in debt. The letter warns investors and others that the company might not stay afloat.

In addition, Mills outlined increased costs for the Xanadu entertainment and retail complex being built at the Meadowlands in New Jersey. Officials expect costs for the project to hit about $2 billion — about $700 million more than previous estimates.

Mills owns 42 properties and 51 million square feet of retail space, including three Maryland malls: Lakeforest mall in Gaithersburg, Arundel Mills in Hanover and Marley Station in Glen Burnie.

Mills shares plunged about 30 percent on Friday to $15.91, then rose 10 percent to $17.51 by mid-afternoon Monday on the New York Stock Exchange. The stock has dropped from $59.98 in September.

In June, company officials said restructuring in the past several months resulted in 222 fewer full-time employees, expected to save more than $20 million annually.