- The Washington Times - Tuesday, February 13, 2007

Mills Corp., the local mall developer at the center of a bidding war, said yesterday it plans to pursue a bid from Simon Property Group Inc., the largest mall owner in the country, and Farallon Capital Management LLC, Mills’ largest shareholder.

The Chevy Chase company deemed Simon’s $1.56 billion bid, which comes to $24 cash per share, better than a $1.35 billion offer from Toronto’s Brookfield Asset Management Inc. Mills had agreed Jan. 17 to accept Brookfield’s deal.

Mills “considered a number of factors, including the higher per-share consideration that Simon and Farallon have offered and the likelihood that the Simon/Farallon transaction could be completed more quickly than the Brookfield merger,” the company said.

What makes Mills so valuable, despite recent revelations that executives may have mismanaged funds and that it was running out of money, is its 38 shopping centers across the country.

Locally, it owns Lakeforest Mall in Gaithersburg, Potomac Mills and Potomac Town Center in Prince William County, Marley Station in Glen Burnie, Md., and Arundel Mills in Hanover, Md.

Brookfield has three days to submit a new bid before Mills breaks its agreement to be bought by the company.

Brookfield Chief Executive Officer J. Bruce Flatt said in a quarterly conference call Friday that “if Mills doesn’t deem [our] bid to be superior, we will consider our options.”

A Brookfield spokeswoman declined to comment yesterday.

RBC Capital Markets analyst Richard C. Moore said yesterday he doesn’t expect Brookfield to rebid and said Simon is a more natural buyer.

Simon, an Indianapolis real estate investment trust, owns the Fashion Centre at Pentagon City, Bowie Town Center, Leesburg (Va.) Corner Premium Outlets and St. Charles (Md.) Towne Center.

“They’re a huge mall owner and, in the mall business, scale is very important and relationship with tenants is important. Brookfield doesn’t have that,” he said.

If Mills terminates its agreement with Brookfield, Mills — presumably, its new owner — will owe Brookfield $40 million in fees. Mr. Moore said that is a “very small amount for Simon.”

Mills said in a Securities and Exchange Commission filing last month that it already has about $1.1 billion in debt.

But the company also stands to owe about $1.5 million to Maryland and Montgomery County.

The state offered Mills a $1.1 million grant, and Montgomery offered a $470,000 grant, when it moved its headquarters from Arlington to Chevy Chase last year. But they came with stipulations that Mills keep 325 jobs in the state and county by the end of 2006.

Mills had “a little over 200 employees” as of late 2006, according to the Montgomery County Department of Economic Development.

Montgomery County never issued Mills the grant, according to Tina Benjamin, chief of staff of the Montgomery County Department of Economic Development, and is waiting for Mills to settle its acquisition until figuring out whether the grant will go through.

“We’re waiting for the dust to settle to figure this out,” she said. “They’re in so much flux.”

Mills is in discussions with the state about what percentage of the funds, if any, Maryland will order returned, according to a spokeswoman with the state’s Department of Business and Economic Development.

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