- The Washington Times - Wednesday, January 17, 2007

Embattled local mall developer Mills Corp. agreed yesterday to be bought by a Toronto investment company, potentially ending a year of accounting problems and declining market value.

Brookfield Asset Management Inc. plans to buy the Chevy Chase developer for $1.35 billion, beating out at least two other firms.

Mills, which recently revealed that its executives may have mismanaged funds and that it was running out of money, owns 38 shopping centers nationwide. 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 did not return a phone call yesterday to learn whether the shopping centers would remain open.

Mills Chief Executive Officer and President Mark Ordan said the Brookfield offer was the “best possible result” out of a number of offers.

“We believe the transaction with Brookfield not only provides certain value to the Mills’ stockholders, but also affords them the opportunity to participate in the upside potential created by this transaction,” he said.

The deal, which comes to $7.5 billion including assumed debt and preferred stock, was approved unanimously by the company’s board of directors. But it still must be voted on by shareholders, leaving the window open for counterbids.

Brookfield plans to pay $21 per share, 15 percent more than Tuesday’s closing price of $17.77 on the New York Stock Exchange. By the close yesterday, Mills’ shares climbed 26 percent to $22.46.

The stock price climbed over $21 after Gazit-Globe Ltd., an Israeli real estate company, said in a Securities and Exchange Commission (SEC) filing that earlier in the day it submitted a new bid that came to $22 per share.

Gazit and fellow major shareholder Farallon Capital Management, a San Francisco hedge fund, submitted bids to pour money into the company, trying in part to rescue their own investments.

Farallon proposed $20 per share in a $499 million recapitalization plan.

But those bids merely infused Mills with cash; Brookfield’s offer is to buy the company. A purchase offer is more attractive, said RBC Capital Markets analyst Richard C. Moore.

“That’s what we’ve been calling for for months,” Mr. Moore said. “A purchase is the only outcome likely in our minds.”

Under the Brookfield offer, Mills would become a publicly traded entity of the company, which manages more than $50 billion worth of office space in the United States and Canada and shopping centers in Brazil.

One of its subsidiaries, Brookfield Properties, owns 25 buildings in the Washington area, including Silver Spring Metro Plaza, Sunrise Technology Park in Reston and 1200 K Street Northwest.

“We are pleased to be able to work with the Mills Corp. to move beyond the recent issues it had encountered,” said J. Bruce Flatt, managing partner and chief executive officer of Brookfield Asset Management.

During 2006, Mills’ value fell from $42.28 per share in January to $12.94 in August, before climbing back to $17.77 Tuesday.

The company said earlier this month in an SEC filing that its executives may have engaged in misconduct, creating four years worth of earnings restatements. The SEC is investigating. It also warned that unless it could negotiate a loan extension, it would run out of money on March 31. Its loan was $1.1 billion, slightly less than the Brookfield purchase offer.

The Brookfield deal, if approved by shareholders, is expected to be completed during the second half of this year.

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