<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission file number 1-12994
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THE MILLS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 52-1802283
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
3000 K Street, N.W., Suite 400, Washington, D.C. 20007
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(Address of principal executive offices - zip code)
(202) 965-3600
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
-------------------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
16,905,953 shares of Common Stock
$.01 par value as of May 14, 1996
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THE MILLS CORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
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<S> <C>
ITEM 1. FINANCIAL STATEMENTS (unaudited)
Consolidated balance sheets as of March 31,
1996 and December 31, 1995. 1
Consolidated statements of operations for
the three months ended March 31, 1996 and March 31, 1995. 2
Consolidated statements of cash flows for
the three months ended March 31, 1996 and March 31, 1995. 3
Notes to the consolidated financial statements 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 6
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE MILLS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
(Unaudited) (Note)
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<S> <C> <C>
ASSETS
Income producing property:
Land and land improvements . . . . . . . . . $ 165,994 $ 165,994
Building and improvements . . . . . . . . . 653,490 652,706
Furniture, fixtures and equipment . . . . . 22,262 21,943
Less: accumulated depreciation
and amortization . . . . . . . . . . . . (159,808) (152,713)
--------- ---------
Total income producing property . . . . . . . . . 681,938 687,930
Land held for investment and/or sale . . . . . . 974 3,225
Real estate development in progress . . . . . . . 45,997 36,282
Investment in partnerships . . . . . . . . . . . 28,302 14,115
--------- ---------
Total real estate and development assets . . . . 757,211 741,552
Cash and cash equivalents . . . . . . . . . . . . 2,632 14,550
Restricted cash . . . . . . . . . . . . . . . . . 17,385 19,354
Accounts receivable . . . . . . . . . . . . . . . 17,761 17,274
Notes receivable . . . . . . . . . . . . . . . . 7,277 7,357
Deferred costs, net . . . . . . . . . . . . . . . 46,778 49,596
Other assets . . . . . . . . . . . . . . . . . . 6,863 3,374
--------- ---------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . $ 855,907 $ 853,057
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages, notes, and loans payable . . . . . . . $ 689,577 $ 676,435
Accounts payable and other liabilities . . . . . 41,463 39,375
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Total liabilities . . . . . . . . . . . . . . . . 731,040 715,810
Minority interest . . . . . . . . . . . . . . . . 61,356 66,839
STOCKHOLDERS' EQUITY
Common stock $.01 par value, authorized
100,000,000 shares, issued and outstanding
16,905,953 shares . . . . . . . . . . . . . 169 169
Additional paid-in capital . . . . . . . . . 309,813 309,813
Accumulated deficit . . . . . . . . . . . . (246,471) (239,574)
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Total stockholders' equity . . . . . . . . 63,511 70,408
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . $ 855,907 $ 853,057
========= =========
</TABLE>
Note: The balance sheet at December 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes to financial statements
1
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THE MILLS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Three
months ended months ended
March 31, 1996 March 31, 1995
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<S> <C> <C>
RENTAL REVENUES:
Minimum rent $22,898 $ 22,204
Percentage rents 1,221 1,055
Recoveries from tenants 11,541 10,832
Other revenue 1,261 872
------------ -----------
Total rental revenues 36,921 34,963
PROPERTY OPERATING COSTS:
Recoverable from tenants 10,329 9,397
Other operating 1,708 934
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Total property operating costs 12,037 10,331
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PROPERTY OPERATING INCOME 24,884 24,632
OTHER INCOME (EXPENSE):
Fee income 831 323
Interest income 454 582
Interest expense (11,589) (10,781)
General and administrative (2,104) (2,339)
Depreciation and amortization (10,049) (9,661)
Other 1,738 (55)
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(20,719) (21,931)
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Income before extraordinary item and minority interest 4,165 2,701
Extraordinary loss on debt extinguishment (830) (419)
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Income before minority interest 3,335 2,282
Minority interest (1,640) (1,111)
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Net income $ 1,695 $ 1,171
============ ===========
Income per common share before extraordinary item $ 0.13 $ 0.08
============ ===========
Net income per common share $ 0.10 $ 0.07
============ ===========
Dividend declared per common share $ 0.4725 $ 0.4725
============ ===========
Weighted average common shares outstanding 16,905,953 16,905,953
============ ===========
</TABLE>
See accompanying notes to financial statements
2
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THE MILLS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Three
months ended months ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Income before minority interest $3,335 $2,282
Adjustments to reconcile income before minority interest to net
cash provided by operating activities:
Net accretion of note receivable (175) (177)
Depreciation and amortization 10,999 10,610
Provision for losses on accounts receivable 176 99
Gain on land sales (1,709) -
Extraordinary loss on debt extinguishment 830 419
Other changes in assets and liabilities:
(Increase) decrease in accounts receivable (524) 1,397
(Increase) decrease in notes receivable 255 131
(Increase) decrease in other assets (3,489) (3,303)
(Decrease) increase in accounts payable and other
liabilities 3,056 3,901
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Net cash provided by operating activities 12,754 15,359
INVESTING ACTIVITIES:
Investment in real estate and development assets (26,666) (10,528)
Proceeds from sale of land 4,195 -
Deferred costs (1,448) (2,574)
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Net cash used in investing activities (23,919) (13,102)
FINANCING ACTIVITIES
Proceeds from mortgages, notes and loans payable 16,000 45,554
Repayments of mortgages, notes and loans payable (2,858) (23,882)
Funding (to) from affiliates (289) 1,031
Restricted cash 1,969 (3,561)
Dividends (7,988) (7,988)
Distributions (7,587) (7,587)
-------- ---------
Net cash used in financing activities (753) (3,567)
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Net increase (decrease) in cash and cash equivalents (11,918) 5,824
Cash and cash equivalents at beginning of period 14,550 20,057
-------- ---------
Cash and cash equivalents at end of period $2,632 $25,881
======== =========
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized $11,758 $ 10,578
======== =========
</TABLE>
See accompanying notes to financial statements
3
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The Mills Corporation
Notes to the Consolidated Financial Statements
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
The Mills Corporation (the "Company") was incorporated in Virginia on January
2, 1991 and was reincorporated in Delaware in 1994. The Company elected to be
taxed as a real estate investment trust ("REIT") under the Internal Revenue
Code of 1986, as amended, for the year ended December 31, 1994 and thereafter.
In connection with its re-incorporation, the Company completed its initial
public offering of 14,380,000 shares of its common stock on April 21, 1994 (the
"Offering"). The net proceeds of the Offering of approximately $310.0 million
and other assets of the Company were contributed to The Mills Limited
Partnership (the "Operating Partnership") in exchange for a 51.3% interest
therein, including a 1% interest as the sole general partner. The Operating
Partnership was formed prior to consummation of the Offering and is the
successor to the operations of the Mills Entities (the "Predecessor").
Simultaneous with the Offering, the individual property partnerships comprising
the Predecessor transferred their assets to the Operating Partnership in
exchange for limited partnership units ("Units") in the Operating Partnership
and/or the assumption of their debt. Such Units are exchangeable into common
stock of the Company, or cash (at the option of the Company, as the general
partner of the Operating Partnership) equal to the fair market value of the
number of shares of common stock into which such Units are exchangeable. The
Company has reserved 16,057,740 shares of common stock relating to this
exchangeability. The Operating Partnership also acquired certain investors'
interests in the Mills Entities for cash and Units. Purchase accounting was
applied to the acquisition of all investor interests for which cash
consideration was paid. Contributed assets and liabilities related to
interests of all Mills Entities which received only Units and/or the assumption
of debt by the Operating Partnership have been accounted for as a
reorganization of entities under common control, and, accordingly, have been
recorded at Predecessor cost.
On January 25, 1996, the Operating Partnership acquired additional partnership
interests of Franklin Mills of approximately 6% in exchange for 274,777 Units.
The Company, through the Operating Partnership, is engaged primarily in the
ownership, operation, management, leasing, acquisition, expansion, and
development of super regional "value-oriented" mega malls (the "Mills") and
community shopping centers (the "Community Centers") . As of March 31, 1996,
the Operating Partnership owns or holds an interest in the following operating
properties:
<TABLE>
<S> <C>
Mills Location
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Franklin Mills Philadelphia, PA
Gurnee Mills Gurnee, IL
Potomac Mills Woodbridge, VA
Sawgrass Mills Sunrise, FL
Community Centers Location
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Butterfield Plaza Downers Grove, IL
Coopers Plaza Voorhees, NJ
Crosswinds Center St. Petersburg, FL
Fashion Place Columbia, SC
Germantown Commons Shopping Center Germantown, MD
</TABLE>
4
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<TABLE>
<S> <C>
Community Centers Location
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Gwinnett Marketfair Duluth, GA
Liberty Plaza Philadelphia, PA
Montgomery Village Off-Price Center Gaithersburg, MD
Mount Prospect Plaza Mount Prospect, IL
West Falls Church Outlet Center Falls Church, VA
Western Hills Plaza Cincinnati, OH
</TABLE>
In addition to the operating properties, the Company is actively involved in
the development of a number of new Mills.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by the
Company's management in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. The results of operations for the
three month period ended March 31, 1996, is not necessarily indicative of the
results that may be expected for the full year. These financial statements
should be read in conjunction with the Company's audited financial statements
and footnotes thereto, included in the Mills Corporation Annual Report on Form
10-K for the year ended December 31, 1995.
The accompanying consolidated financial statements of the Company include the
accounts of the Company and its subsidiaries, including its majority owned
subsidiary, the Operating Partnership. The accounts of the Operating
Partnership include the accounts of all Properties which are wholly owned or
controlled by the Operating Partnership as well as its wholly-owned
subsidiaries Mills Management L.L.C. ("Mills Management"), and Management
Associates Limited Partnership ("MALP"). In addition, the Operating
Partnership owns 5% of the voting common stock and 99% of the preferred stock
of the MillsServices Corporation ("MSC"), an entity formed in connection with
the Offering to provide development, management, leasing and finance services
to the Company and other entities owned by affiliates of the Company. As a
result of the Operating Partnership's ownership of 99% of the economic
interests, MSC is consolidated with the Operating Partnership. All significant
intercompany transactions and balances have been eliminated in consolidation.
Minority interests represent the ownership interests in the Operating
Partnership not held by the Company.
2. BORROWINGS
On January 31, 1996 the Company borrowed $76.0 million pursuant to a mortgage
loan agreement secured by nine of the Community Centers. This loan bears
interest at a fixed rate of 7.16%, matures February 1, 2001, and amortizes
over 18 years. $60.0 million of the loan proceeds were used to repay the
Company's Community Center interim mortgage loan. In connection with this
repayment, $0.8 million of deferred loan costs were written off and have been
included as an extraordinary item in the accompanying statement of operations
for the three months ended March 31, 1996.
5
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3. DECLARATION OF DIVIDEND
On February 22, 1996, the Company declared a dividend of $.4725 per share which
was paid on April 16, 1996 to stockholders of record as of April 1, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Comparison of quarter ended March 31, 1996 to quarter ended March 31, 1995
Income before minority interest for the quarter ended March 31, 1996, increased
by approximately $1.0 million to $3.3 million (46.1%) as compared with the
quarter ended March 31, 1995. This increase was the result of an increase in
property operating income of approximately $0.2 million (1.0%) compared with
the first quarter of 1995 and a decrease in other expense (net of other income)
of approximately $1.2 million (5.5%). These increases were offset by a $0.4
million increase in the loss on debt extinguishment.
Property Operating Income:
Minimum rents for the quarter ended March 31, 1996, increased by approximately
$0.7 million (3.1%) compared with the quarter ended March 31, 1995. The
increase was primarily due to the expansion of Sawgrass Mills, which accounted
for $0.6 million of the increase.
Recoveries from tenants for the quarter ended March 31, 1996, increased
approximately $0.7 million (6.5%) compared with the quarter ended March 31,
1995. This increase was attributable to the expansion of Sawgrass Mills and to
increases in recoverable expenses at the other centers.
Other revenues for the quarter ended March 31, 1996, increased by approximately
$0.4 million (44.6%) compared with the quarter ended March 31, 1995. The
increase was primarily due to a $0.3 million increase in income from tenants
who occupy space on a temporary basis.
Recoverable operating expenses for the quarter ended March 31, 1996, increased
approximately $0.9 million (9.9%) compared with the quarter ended March 31,
1995. The increase was primarily due to a $0.5 million increase in real estate
tax expense across all of the properties, and to an increase in expenses due to
the expansion of Sawgrass Mills. General increases in expenses and unusually
high snow removal costs at Franklin Mills and Potomac Mills accounted for the
remainder of the increase.
Other operating expenses for the quarter ended March 31, 1996, increased
approximately $0.8 million (82.9%) compared with the quarter ended March 31,
1995. This increase was primarily due to an increase in bad debt expense of
$0.2 million at certain projects, an increase in contributions to promotional
programs of $0.2 million at Franklin Mills, an increase in legal fees of $0.2
million for landlord/tenant litigation and the Sawgrass Mills HVAC litigation
and an increase of $0.1 million for expansion of the Company's push cart
program.
6
<PAGE> 9
Other Income and Expense:
Fee income increased by approximately $0.5 million for the quarter ended March
31, 1996, compared with the quarter ended March 31, 1995. The increase was due
primarily to development and leasing fees earned from the Ontario Mills Limited
Partnership.
Interest expense increased by approximately $0.8 million (7.5%) for the quarter
ended March 31, 1996, compared with the quarter ended March 31, 1995. The
increase in interest expense was due to additional debt associated with the
expansion of Sawgrass Mills which opened November 16, 1995, and the refinancing
of the Community Centers as discussed below.
Depreciation and amortization increased approximately $0.4 million (4.0%) for
the quarter ended March 31, 1996, compared with the quarter ended March 31,
1995. The increase was primarily due to a $0.2 million increase in
depreciation due to the expansion of Sawgrass Mills and to increases in income
- - producing property and deferred costs at the other centers.
Net other income increased $1.8 million for the quarter ended March 31, 1996,
compared with the quarter ended March 31, 1995. The increase was primarily due
to a gain of $1.7 million on the sale of land at two of the properties.
The extraordinary items relating to debt extinguishment increased $0.4 million
for the quarter ended March 31, 1996, compared with the quarter ended March 31,
1995. The increase was due to the write-off of $0.8 million of deferred loan
costs due to the refinancing of the debt on the community centers in January
1996.
LIQUIDITY AND CAPITAL RESOURCES
Historically, rental revenue from tenants has been the principal source of
funds to meet the Operating Partnership's operating expense requirements, debt
service and capital expenditures. During the past three years and prior to the
IPO, the Operating Partnership's primary portfolio growth has come from the
expansion of existing centers. During this period, the expansion has been
funded by long-term mortgages and the IPO proceeds combined with cash flows
provided by operations.
In order for the Operating Partnership to continue its planned development
activities, it will have to obtain significant sources of equity and debt
financing. A typical development project may require a capital investment
ranging from $5.0 million to as much as $50.0 million prior to obtaining
construction financing. Such financing is also generally contingent upon
pre-leasing activity in the range of 40% to 60% of GLA. As of March 31, 1996,
management had procured certain of the required equity and debt financing for
its planned near-term development projects. On January 31, 1996, the Operating
Partnership secured $76.0 million of permanent financing to repay its $60.0
million interim Community Center loan and to fund further development. This new
debt has a fixed interest rate of 7.16%, matures February 1, 2001, and
amortizes on an 18 year basis. On January 11, 1996, the Company entered into a
Master Repurchase Agreement by which it has effectively established a revolving
credit facility in the amount of $8.4 million. Borrowings under this facility
bear interest at LIBOR plus 1.25%. No amounts were outstanding at March 31,
1996.
For most of the current projects under development, the Operating Partnership
has elected to complete development on a joint venture basis and thereby obtain
a portion of the required equity from its joint venture partners. For
instance, the Operating Partnership has formed a partnership with Kan Am, its
largest investor, to provide $20.0 million or half of the required equity
financing for the Ontario Mills project in exchange for a 25% general and
limited partnership interest. Kan Am funded its equity on September 30, 1995.
In December 1995, the Operating Partnership formed Ontario Mills L.L.C.
("OMLLC") with Simon Property Group, L.P. ("Simon") whereby Simon is required
to provide an additional $15.0 million of equity financing for the Ontario
Mills project
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in exchange for an effective 25% general and limited partnership interest in
the Ontario Mills Limited Partnership. On November 9, 1995, OMLLC executed a
$110 million construction loan agreement with several commercial lenders to
fund construction of the Ontario Mills project. Loan funding occurred in May,
1996 after all the lender equity requirements had been met. At March 31, 1996,
the Operating Partnership's investment in OMLLC totalled $28.3 million.
On January 31, 1996, the Operating Partnership elected not to exercise its
option to acquire a site proposed for its Columbus Mills project near Columbus,
Ohio. The Operating Partnership is pursuing an alternative site in Columbus
and is performing due diligence to ascertain its feasibility for the Columbus
Mills development project. The Operating Partnership expects to recover all of
its development costs incurred to date (approximately $7.9 million) in
connection with the development of the Columbus Mills project.
Additionally, on April 12, 1996, the Operating Partnership formed a partnership
with Kan Am to develop Columbus Mills.
On August 16, 1995, the Operating Partnership executed a letter of intent to
form an alliance with Simon to co-develop several "Mills" projects. In
December 1995, the parties formed a joint venture to develop Grapevine Mills in
Grapevine, Texas. Kan Am is expected to be an equity partner in this project.
In May 1996, a joint venture comprised of the Operating Partnership, Simon,
Taubman Realty Group and Grossman Company Properties was formed to develop
Arizona Mills in Tempe, Arizona. While management believes it can raise the
funds necessary to complete the projects that were under development at March
31, 1996, there can be no assurance that the Operating Partnership will obtain
such funds.
Subsequent to the IPO, cash flow from operations has increased due to lower
interest costs as a result of debt extinguishment. The Operating Partnership
has limited its exposure to interest rate increases by purchasing interest rate
caps on $293.0 million of its $317.2 million variable rate debt.
The Company has paid and intends to continue to pay regular quarterly dividends
to its shareholders. Dividends payable by the Company are at the discretion of
the Board of Directors and depend on the cash available to the Operating
Partnership, its financial condition, capital and other requirements, and such
other factors as the Board of Directors deems relevant. The Company
anticipates that its annual cash flow will provide adequate liquidity, in the
short and long term, to conduct its operations, fund administrative costs and
interest payments on debt and allow future distributions to the company's
stockholders in excess of the requirements under the Internal Revenue Code for
qualification as a REIT.
ECONOMIC TRENDS
Because inflation has remained relatively low during the last three years, it
has had little impact on the operation of the Mills Entities and the Company
during the period. Even in periods of higher inflation, however, tenant leases
provide, in part, a mechanism to help protect the Company. As operating costs
increase, leases permit a pass-through of the common area maintenance and other
operating costs, including real estate taxes and insurance, to the tenants.
Furthermore, most of the leases contain base rent steps that generally coincide
with inflationary increases and percentage rent clauses that provide additional
rent after a certain minimum sales level is achieved. Thus, during
inflationary periods, the Company should receive additional rental income.
FUNDS FROM OPERATIONS
Industry analysts generally consider Funds From Operations ("FFO") an
appropriate measure of performance for an equity REIT. As defined by the
National Association of Real Estate Investment Trusts, "Funds From Operations"
means net income (loss) (computed in accordance with generally accepted
accounting principles), excluding gains (or losses) from debt restructuring and
sales of property (other than undepreciated property incidental to the REIT's
main business), plus depreciation and amortization of real estate assets, and
after adjustments for unconsolidated partnerships and joint ventures. The
Company reports FFO on a consolidated basis before minority interest. FFO (i)
does not represent cash flow from operations as defined by generally accepted
accounting principles, (ii) is not indicative of cash available to fund all
cash flow needs or ability to make distributions, and (iii) should not be
considered as an alternative to net income for purposes of evaluating the
Company's operating performance.
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For the quarter ended March 31, 1995, FFO increased 15.9% to $12.9 million,
compared with $11.1 million for the first quarter of the previous year. FFO
includes $1.7 million in gain from the sale of undepreciated properties
incidental to the Company's main business. FFO amounts were calculated in
accordance with the National Association of Real Estate Investment Trust's
revised definition of FFO. Under the previous method of reporting, FFO for the
first quarter of 1996 was $15.1 million compared to $13.2 million for the first
quarter of 1995. The difference between the two methods is primarily
attributable to non-cash items relating to amortization of interest rate
buydown fees and interest rate caps as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
FUNDS FROM OPERATIONS CALCULATIONS - NEW DEFINITION (1):
Income before extraordinary item and minority interest $4,165 $2,701
Adjustments:
Add: Depreciation and amortization of real estate assets 8,706 8,406
-------- --------
Funds from operations $12,871 $11,107
======== ========
FUNDS FROM OPERATIONS CALCULATION - OLD DEFINITION
Income before extraordinary item and minority interest $4,165 $2,701
Adjustments:
Add: Depreciation and amortization of real estate assets 8,706 8,406
Add: Amortization of interest rate buydown fee (1) 950 950
Add: Amortization of interest rate caps (1) 678 678
Add: Other depreciation and amortization 655 577
Add: Straight-line interest expense 60 71
Less: Straight-line rent adjustment (105) (148)
-------- --------
Total adjustments 10,924 10,534
-------- --------
Funds from operations $15,089 $13,235
======== ========
</TABLE>
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(1) The new definition of FFO does not permit the add-back of amortization of
loan costs, including amortization relating to buydown fees and interest
rate caps. The annual amortization related to these items is not a cash
expense to the Company, although it reduces FFO. The impact of these items
on the Company's effective interest rate and other relevant information is
detailed below (dollars in thousands):
<TABLE>
<CAPTION>
Franklin Mills Gurnee Mills Potomac Mills
-------------- ------------ -------------
<S> <C> <C> <C>
Loan Amount $165,000 $151,152 $136,000
Deferred Cost Type Rate buydown (a) Rate cap (b) Rate cap (c)
Deferred amount $17,500 $4,632 $5,834
Current Rate 7.13% 7.00% 6.19%
Effective rate with amortization of cap or buydown 9.43% 8.02% 7.04%
Amortization:
Period 4.6 yrs 3 yrs 5 yrs
End date Dec-98 Apr-97 Oct-99
Annual amortization $3,800 $1,544 $1,167
</TABLE>
30 day Libor at 3/31/96: 5.38%
(a) On April 21, 1994 (IPO date), the Company paid $17.5 million to reduce the
interest rate on this mortgage to 7.125% from 9.625% and to extend the
maturity date.
(b) On April 21, 1994 (IPO date), the Company paid $4.6 million for an interest
rate cap. Through April 1, 1997, Libor is capped at 5.25%, provided Libor
is below 7.25%. If Libor is 7.25% or above, the cap increases to 6.25%.
(c) On October 19, 1994, the Company paid $5.8 million for an interest rate
cap. Through October 19, 1997, Libor is capped at 6.00% provided Libor is
below 8.00%. If Libor is greater than 8.00%. From October 20, 1997 though
October 19, 1999, Libor is capped at 8.00%.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Exhibit Index attached hereto is hereby incorporated by reference
to this item.
No reports on Form 8-K were filed by the registrant during the
applicable quarter covered by this report.
11
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
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THE MILLS CORPORATION
May 14, 1996 By: /s/ Kenneth R. Parent
- ------------ --------------------------------------------------------
(Date) Kenneth R. Parent
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)
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12
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THE MILLS CORPORATION
EXHIBIT INDEX
(Pursuant to item 601 of Regulation S-K)
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*3.1 Amended and restated Certificate of incorporation of the Company.
**3.2 Amended and Restated Bylaws of the Company
**3.3 Limited Partnership Agreement of the Operating Partnership (filed as
part of Exhibit 10.3)
*4.1 Specimen Common Stock Certificate of Company
*4.2 Agreement dated March 15, 1994, among Richard L. Kramer, the A.J. 1989
Trust, the Irrevocable Intervivos Trust for the Benefit of the Kramer
Children, the N Street Investment Trust, Equity Resources Associates,
Herbert S. Miler, The Mills Corporation and The Mills Limited
Partnership (filed as Exhibit 10.19)
**4.3 Non-Affiliate Registration Rights and Lock-Up Agreement
**4.4 Affiliate Registration Rights and Lock-Up Agreement
*10.1 Form of Employee Non-Compete/Employment Agreements
*10.2 1994 Executive Equity Incentive Plan
**10.3 Limited Partnership Agreement of Operating Partnership
*10.4 Option Agreement (Sunrise Residuals/Parcels 4 and 5)
*10.5 Form of Noncompetition Agreement between the Company, the Operating
Partnership and each of Kan Am and the Kan Am Partnerships
*10.6 Form of Noncompetition Agreement with Kan Am Directors
*10.7 Trust and Servicing Agreement, dated as of December 1, 1993, among
Sawgrass Finance L.L.C., as depositor, The First National Bank of
Chicago, as servicer, and State Street Bank and Trust Company, as
Trustee
*10.8 Amended and Restated Mortgage, Security Agreement, Assignment of Lessee
and Rents and Fixture filing, dated as of December 1, 1993, by Sunrise
Mills Limited Partnership, as mortgagor, in favor of Sawgrass Finance
L.L.C., as mortgagee
*10.9 Assignment of Leases and Rents, dated as of December 1, 1993, between
Sunrise Mills Limited Partnership and Sawgrass Finance L.L.C.
*10.10 Assignment of Note, Mortgage, and Assignment of Rents dated as of
December 21, 1993, by Sawgrass Finance L.L.C. in favor of State Street
Bank & Trust Co.
*10.11 Promissory Note, dated as of November 16, 1993, by Western Hills
Associates Limited Partnership in favor of Connecticut General Life
Insurance Company
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<PAGE> 16
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*10.12 Assignment of Rents and Leases, dated as of November 16, 1993, by
Western Hills Associates Limited Partnership in favor of Connecticut
General Life Insurance Company
*10.13 Open-End Mortgage, Security Agreement and Fixture Filing, dated as of
November 16, 1993, by Western Hills Associates Limited Partnership in
favor of Connecticut General Life Insurance Company
*10.19 Agreement dated March 15, 1994 among Richard L. Kramer, the A.J. 1989
Trust, the Irrevocable Intervivos Trust for the Benefit of the Kramer
Children, the N Street Investment Trust, Equity Resources Associates,
Herbert S. Miller, The Mills Corporation and The Mills Limited
Partnership
*10.20 Form of Promissory Note made payable by Franklin Mills Associates
Limited Partnership to and for the benefit of the Operating Partnership
*10.21 Form of Mortgage, Security Agreement and Assignment of Rents and Leases
by Franklin Mills Associates Limited Partnership to and for the benefit
of the Operating Partnership
*10.22 Form of Sale of Partnership Interests Agreement (Franklin Mills) by and
between the Operating Partnership and Herbert S. Miller, Laurence C.
Siegel, Harry H. Nick, Western Franklin Mills Corp., Kan Am USA IX
Limited Partnership and Kan Am USA X Limited Partnership
*10.23 Form of Indemnification Agreement between the Company and each of its
Directors and Executive Officers
+10.24 Construction Loan Agreement dated November 9, 1995, by and between
Ontario Mills Limited Partnership and Canadian Bank of Commerce,
Bayerische Hypotheken-Und Wechsel-Bank Aktiengesellschaft and The
Mitsubishi Bank of Commerce
+10.25 Construction Deed of Trust, Security Agreement, Assignment of Leases
and Rents, Fixture Filing and Financing Statement dated as of December
26, 1995 in favor of Canadian Imperial Bank of Commerce, Bayerische
Hypotheken-Und Wechsel-Bank Aktiengesellschaft and The Mitsubishi Bank
of Commerce
+10.26 Loan Agreement dated as of January 31, 1996 by and among Coopers
Crossing Associates (MLP) Limited Partnership, Crosswinds Center
Associates of St. Petersburg (MLP) Limited Partnership, Echo Hills
Center Associates (MLP) Limited Partnership, Fashion Center Associates
of Illinois No. 1 (MLP) Limited Partnership, Fashion Place Associates
(MLP) Limited Partnership, Germantown Development Associates (MLP)
Limited Partnership, Gwinnett Market Fair Associates (MLP) Limited
Partnership, Montgomery Village Associates (MLP) Limited Partnership,
Montgomery Village Ground (MLP) Limited Partnership, Mount Prospect
Plaza (MLP) Limited Partnership (collectively, "The Mills Corporation,
et. al."), and PFL Life Insurance Company
+10.27 First Amended and Restated Promissory Note dated as of January 31,
1996, made by and among The Mills Corporation, et al., and PFL Life
Insurance Company
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<PAGE> 17
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SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
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+10.28 Absolute Assignment of Mortgage and Loan Documents dated January 31,
1996 by and between CS First Boston Mortgage Capital Corporation as
assignor and PFL Life Insurance Company as assignee
10.29-10.33 Intentionally Omitted
***10.34 Promissory Note dated October 26, 1994 by Washington Outlet Mall
Limited Partnership and Potomac Mills - Phase III Limited Partnership
in favor of Potomac Mills Finance Corporation
***10.35 Amended and Restated Deed of Trust, Security Agreement, Assignment of
Leases and Rents and Fixture Filing dated as of October 1, 1994, by
Washington Outlet Mall Limited Partnership and Potomac Mills - Phase
III Limited Partnership in favor of Potomac Mills Finance Corp. and R.
Eric Taylor as trustee
***10.36 Limited Guaranty dated as of October 26, 1994, by The Mills Limited
Partnership in favor of Potomac Mills Finance Corp.
***10.37 Trust and Servicing Agreement dated as of October 1, 1994, among
Potomac Mills Finance Corp., as depositor; The First National Bank of
Chicago, as servicer; ABN Amro Bank, N.V., as fiscal agent; and LaSalle
National Bank, as trustee
10.38-10.49 Intentionally Omitted
****10.50 First Amendment to Trust and Servicing Agreement (Exhibit 10.7) dated
as of June 1, 1995, among Sawgrass Finance L.L.C., as depositor, The
First National Bank of Chicago, as servicer, and State Street Bank and
Trust Company, as trustee.
****10.51 Prepayment Premium Agreement dated as of June 1, 1995, between The
Mills Limited Partnership and State Street Bank and Trust Company, as
trustee.
*21.1 List of Subsidiaries of the Registrant
27.1 Financial Data Schedule
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* Incorporated by reference to the Registrant's Registration Statement on Form
S-11, Registration No. 33-71524, which was declared effective by Securities
and Exchange Commission on April 14, 1994 (Commission File No. 1-12994).
** Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q
for the first quarter ended March 31, 1994 (Commission File No. 1-12994).
<PAGE> 18
*** Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994.
**** Incorporated by reference to the Registrant's Quarterly by Report on Form
10-Q for the second quarter ended June 30, 1995.
+ Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995.
<TABLE> <S> <C>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,632
<SECURITIES> 0
<RECEIVABLES> 25,038
<ALLOWANCES> 0
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<PP&E> 841,746
<DEPRECIATION> 159,808
<TOTAL-ASSETS> 855,907
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0
0
<COMMON> 169
<OTHER-SE> 124,698
<TOTAL-LIABILITY-AND-EQUITY> 855,907
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</TABLE>
