- The Washington Times - Tuesday, January 16, 2007


Two major shareholders of Mills Corp. offered dueling plans yesterday to pump hundreds of millions of dollars into the troubled mega-mall developer to help it pay off heavy debt.

The hedge fund Farallon Capital Management proposed a $499 million recapitalization plan for Mills, while Israeli real estate firm Gazit-Globe Ltd. offered a new $1.8 billion version of an offer it made last year. Both companies said Mills solicited the proposals.

Shares of Mills jumped nearly 17 percent on the news.

Mills owns 38 shopping centers nationwide, including 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.

The Chevy Chase company, a real estate investment trust, is considering a sale of all or part of the company to help pay off the $1 billion balance on a loan it took out last year to stay in business. Last week, Mills said it faced possible bankruptcy if it couldn’t repay the loan from Goldman Sachs Mortgage Co. when it comes due at the end of March.

But many investors fear Mills will sell itself at a depressed price to cover its debts.

Gazit Chairman Chaim Katzman, whose firm controls 9.7 percent of Mills, has said the company should be rebuilt, not sold. Gazit made its $1.2 billion offer in October. Farallon, which holds 11 percent of Mills stock, said yesterday that an infusion of cash should help Mills “move from a triage mode into a recovery mode” and avoid an imminent sale.

“Any sale today would almost certainly be at a discount in order to compensate the buyer for abnormal conditions,” Farallon wrote in a letter accompanying its U.S. Securities and Exchange Commission filing.

Those abnormal conditions include widespread accounting problems that have forced Mills to delay several regulatory filings and restate earnings dating back to 2001. Mills said last week that an internal review uncovered extensive accounting errors — some the result of possible wrongdoing by company officials.

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