The Mills Corporation, owner and operator of super-regional retail and entertainment oriented malls, announced today that the Company has entered into agreements to purchase a 100% interest in six mall properties in two separate transactions.
The total acquisition price is expected to be approximately $621 million before transaction costs. The agreements are subject to customary closing conditions and both transactions are expected to close on or before January 31, 2003. Based on the purchase price, the in-place unlevered return to Mills from these transactions is approximately 9%, prior to any significant remerchandising or expansion efforts currently contemplated for the properties.
Mills expects to fund the cash portion of this purchase via a combination of debt and equity sources, including the assumption of existing debt of $62 million on Broward Mall and placing new mortgage financings aggregating approximately $385 million on the five unencumbered assets. For the remaining equity, the Company has numerous options, including a fully underwritten and committed bridge loan from Deutsche Bank Securities Inc. and RBC Capital Markets for the entire equity balance, a commitment from Kan Am, the Company´s long-time private equity source, for up to 50% of the equity balance, utilization of the Company´s $175 million revolving credit facility which has approximately $125 million available as of December 9, 2002, and/or a combination of common and/or preferred stock.
In addition to the six mall properties, the Company has also entered into a conditional contract to purchase general partnership interests in Town Center at Cobb and Gwinnett Place in Atlanta, Georgia. If conditions are satisfied, these purchases would likely be completed in the first half of 2003.
Siegel added, 'All six of the soon-to-be acquired malls provide the Company with the opportunity to employ this Mills vision. All are high quality, well located, productive assets that we can improve utilizing our special brand of merchandising. And they are synergistic, both in terms of location, tenant mix, and redevelopment opportunities, to our current domestic and European programs.'
Ken Parent, Chief Operating Officer, said, 'The acquisition builds shareholder value by buying very attractive and productive assets at very favorable prices. It also establishes the opportunity for Mills to create additional upside value through key expansions and remerchandisings, enhancing FFO and net operating income while maintaining conservative balance sheet targets. Using first-year projections, which are largely void of our expected expansion and assume a modest increase in leverage levels, we anticipate that incremental income from the acquisitions will increase 2003 FFO by $0.15 to $0.25 per share. As a result of this transaction, we are revising our 2003 FFO per share guidance to $3.55 to $3.65 per share. This range is largely dependent on the ultimate equity source.'
Jim Napoli, President, Operating Division, commented, 'We have a program in place to evaluate each property´s retail and entertainment mix and unlock its value for our retailers, entertainment partners, consumers and shareholders. Within the last 18 months, significant capital has been spent on these malls to add sparkle and luster. Current tenant interest in these centers is strong and will grow with our program. These acquisitions leverage Mills´ ability to transform mall properties, and build on the development, leasing and marketing strengths of our management team.'
Siegel concluded, 'As we demonstrated with our acquisition of Forest Fair mall in Cincinnati earlier this year, where we are converting a failed regional mall into a full-scale 'Mills' project, our company has a unique vision that allows us to recognize and create value where others cannot. We are uniquely positioned to reap the benefits of the ownership of these six mall properties.'
Mills Corporation is a self-managed real estate investment trust (REIT) based in Arlington, Va.,