- The Washington Times - Tuesday, December 31, 2002

The Mills Corp. is finishing 2002 with a bang.
Despite a less-than-stellar holiday shopping season, Mills, the Arlington-based developer of regional malls and shopping centers, is a favorite among many analysts and investors. Two announcements in December, meanwhile, have helped solidify the company's reputation as a leader among retail real estate investment trusts.
Early in December, Mills paid $621 million for six regional malls with more than 5 million square feet of retail. Then last week, it announced that its efforts to build a $1.3 billion entertainment complex at the Meadowlands in New Jersey had been endorsed by the New York Giants football team.
Richard Moore, a real estate analyst with McDonald Investments in Cleveland, rates Mills a "buy," based on its large market presence in retail, a relatively strong sector of the real estate investment trust industry. The company owns 19 large malls in North American and Europe.
"Mills is one of the strongest in the group," Mr. Moore said.
Shares of Mills rose 22 cents to close at $29.80 on the New York Stock Exchange yesterday. They have been relatively steady during the past six months, falling 65 cents, or about 2.1 percent, since a 52-week high of $30.45 July 5.
The malls bought by Mills are located in New Jersey, Louisiana, Mississippi, New York, Florida and Delaware.
Analysts said the acquisitions were a unique move for Mills, which is known mostly for developing malls from scratch.
"The [acquisitions] are a breakthrough for Mills," said Merrill Lynch real estate analyst Steve Sakwa, in a recent research note. "This is a new avenue of growth for Mills and is different than their typical ground-up efforts in the past."
Mr. Sakwa, who rates Mills a "buy" cautioned that the company could be taking on too much with the acquisitions because it is already one of the most aggressive developers. He also noted that Mills would be taking on nearly $500 million in mortgages from the properties.
However, Mr. Sakwa raised his estimate on the company's funds from operations from $3.41 to $3.53 per share. He also said Mills should be able to extract more revenue from the malls than previous owners and said he expects the company to get a 9.2 percent return on the properties in 2003.
"In Mills' hands, these projects should be able to take the potential of very strong surrounding demographics and enhance the center's profitability," Mr. Sakwa wrote.
Mills and development partner Mack-Cali Realty Corp. are battling stiff competition in their bid to build on the Meadowlands complex. The company's proposal, called Meadowlands Xanadu, includes a minor league baseball stadium and indoor skiing and surfing. Hartz Mountain Industries Inc., New Jersey's largest developer, also made a proposal, which includes a Formula One racetrack. Westfield America Trust, a division of the leading mall developer based in Australia, has also made a bid.
Analysts said Mills probably has the edge in getting the bid, due to be awarded next month, because of the endorsement from the Giants. But name recognition will also play a part, Mr. Moore said.
"When you're doing this type of unique project, Mills goes to the top of the list," he said.
Mills reported net income of $12.8 million, or 33 cents per share, during the third quarter of this year, compared with $7.1 million, or 29 cents per share, in the comparable quarter last year.

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