The Mills Corporation To Acquire Portfolio of Two Regional Malls in Midwest
Acquisition of Highly Productive Mall Portfolio with Redevelopment Opportunities Fits Growth Strategy
Arlington, Va., (February 1, 2005) – The Mills Corporation (NYSE: MLS) announced today that it has entered into a merger agreement to purchase a portfolio of two regional shopping malls, Southdale Center in suburban Minneapolis, Minn., and Southridge Mall in suburban Milwaukee, Wis., and related development components from a joint venture comprised of Blackstone Real Estate Advisors affiliates and Polaris Capital. The total consideration is approximately $452 million before transaction costs.
The first year unlevered yield is expected to be approximately 6.4%. This yield includes both the anticipated net operating income and capital expenditures related to tenants with fully executed leases that have not yet taken occupancy of their space. The yield does not take into account the value of future development opportunities, including remerchandising a vacant Mervyn’s store at Southdale and 46,000 square feet of vacant space in the former Younker’s store at Southridge.
The merger agreement is subject to customary closing conditions and the transaction is expected to close in March 2005. The portfolio will be acquired unencumbered. The acquisition is expected to be financed with mortgage debt, with the balance to be paid in cash from a variety of potential sources including public and private equity and financing sources.
The centers are among the highest producing regional malls in their markets. Specialty tenant sales at the two centers averaged $418 per square foot in 2004. Excluding vacant anchors, the properties are 88% leased.
“We believe these strong performing, market-dominant properties present us with attractive redevelopment and remerchandising opportunities that will result in higher sales productivity for our tenants and enhanced investment returns.” said Laurence C. Siegel, Chairman and CEO of The Mills Corporation. “The former Mervyn’s store at Southdale provides a range of opportunities including the potential for a new fashion department store with additional small shop GLA. Department store approvals are in place to possibly add another new high fashion department store anchor at Southdale on a vacant pad. These potential new department stores could provide the catalyst for a significant redevelopment. At Southridge, the vacant Younker’s department store has 46,000 square feet that has not been leased and provides us with an attractive opportunity to increase the property’s operating income.”
Southdale Center
Southdale Center was the nation’s first enclosed regional shopping center and now features approximately 1.3 million square feet of aggregated GLA. The center is anchored by one of May Co.’s top producing Marshall Fields, as well as JCPenney and Marshall’s. Southdale Center also has more than 120 specialty stores, including Crate & Barrel, Guess, Coach and J. Crew, as well as a 16 screen AMC theatre and a top performing restaurant line-up including The Cheesecake Factory, Maggiano’s and P.F. Chang’s China Grill.
The center is located in the affluent southwestern Minneapolis suburb of Edina and benefits from high visibility and frontage access from four major roadways (France Avenue, West 66th Street, York Avenue and West 69th Street) and convenient access to Interstate 494 and Highway 62. Within 10 miles of Southdale Center is a population of 950,000 with an average household income of more than $75,000.
Southridge Mall
At 1.2 million square feet, Southridge Mall is Wisconsin’s largest shopping mall and one of the premier regional malls in metropolitan Milwaukee. The center has four department store anchors: JCPenney, Sears, Kohl’s and Boston Store. Southridge Mall also features a food court with 11 food and beverage retailers in addition to 109 specialty stores, including Victoria’s Secret, Bath & Body Works, Foot Locker and American Eagle. The property benefits from a recent $2.8 million renovation that updated the mall’s common areas and exterior presence and added a new children’s play area. The redevelopment potential is centered on an existing vacant 210,000 square foot former Younker’s department store building that is being renovated and re-leased. Steve & Barry, Linens ‘n Things and Cost Plus World Market have recently completed leases for over 150,000 square feet of the former Younker’s space.
Southridge Mall benefits from superior access from a wide range of major streets and is located near the crossroads of three substantial interchanges, including 76th Street, Interstate 43/894 and Interstate 94.
About The Mills
The Mills Corporation is a self-managed real estate investment trust (REIT) based in Arlington, Virginia that owns, develops, leases, manages and/or markets a portfolio of 39 retail and entertainment destinations totaling approximately 48 million square feet. Currently, the Company has six projects under construction or development around the world. The Company’s Internet address is www.themills.com.
Statements in this press release that are not historical may be deemed forward-looking statements within the meaning of the federal securities laws. Although The Mills Corporation believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, the Company can give no assurance that its expectations will be attained and it is possible that our actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. The Mills Corporation undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The reader is directed to the Company’s various filings with the Securities and Exchange Commission, including quarterly reports on Form 10-Q, reports on Form 8-K and its annual reports on Form 10-K for a discussion of such risks and uncertainties.
The Mills Corporation considers unlevered yield a key measure in analyzing prospective transactions that is a standard measure of operating performance for REITs. It is not specifically defined by accounting principles generally accepted in the United States (“GAAP”).