The financially struggling owner of the Colorado Mills mall in Lakewood is being sold to Brookfield Asset Management, the owner of New York’s World Financial Center.
Brookfield agreed to buy Mills Corp., the owner of 38 U.S. shopping malls that has lost more than half its market value in the past year, for $1.35 billion.
Mills will merge into a newly formed subsidiary of Brookfield. Its shareholders will receive $21 in cash for each of their Mills shares, the companies said in a statement distributed by Business Wire. Including assumed debt and preferred stock, the value of the purchase is $7.5 billion, the companies said.
The acquisition gives Brookfield 38 regional shopping malls as revenue at U.S. retailers of clothing, home furnishings, books, electronics and other general merchandise grew by 6.3 percent in 2006, the National Retail Federation said yesterday.
Colorado Mills has met its financial projections, according to Lakewood city officials. But the mall has disappointed some city leaders because it has not produced the mix of tenants Mills Corp. initially promised.
Additionally, city manager Mike Rock has complained that the company has been so consumed by its internal struggles that it has been unresponsive to the city’s concerns.
Mills’s portfolio also includes the Galleria at White Plains, New York; The Shops at Riverside in Hackensack, New Jersey; Arundel Mills in Baltimore; Westland Mall in Miami; and Sawgrass Mills in Fort Lauderdale, Florida.
“There undoubtedly is unrealized value in the Mills portfolio,” David Fick, an analyst with Stifel, Nicolaus & Co. in Baltimore, wrote in a letter to investors Jan. 10. Replacing employees who have left the company as it struggled through an accounting investigation and cost overruns at its Meadowlands Xanadu project in New Jersey, however, may take years, he said.
Mills said Jan. 9 that it may be forced into bankruptcy after executive misconduct and accounting errors resulted in almost four years of earnings restatements. The Chevy Chase, Maryland-based company sold malls last year in Canada, Scotland and Spain for $981 million to reduce debt.
It sold its stake in Meadowlands Xanadu, a 104-acre shopping and entertainment complex, to Colony Capital Acquisitions LLC, a closely held, Los Angeles-based real estate developer. Mills took an impairment of up to $655 million for Xanadu, its biggest project ever.
The offer follows separate bids made yesterday by Mills’s two largest shareholders, Farallon Capital Partners LLC, a San Francisco hedge fund, which offered to buy an additional $499 million stake in Mills, and Tel Aviv-based Gazit-Globe Ltd., which bid $1.1 billion.
Farallon, Mills’s biggest shareholder with almost 11 percent of the company’s stock offered $20 a share. Hours later, Gazit disclosed it had made a bid that included a $500 million immediate payment and another $600 million in a rights offer. Gazit would pay the $500 million in two parts that would average $21 a share.
