<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 June 30, 1997
Commission File Number 1-12994
---------
THE MILLS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 52-1802283
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
1300 Wilson Boulevard, Arlington, Virginia 22209
------------------------------------------------
(Address of principal executive offices - zip code)
(703) 526-5000
--------------
(Registrant's telephone number, including area code)
(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
------- -------
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.
22,881,455 shares of Common Stock
$.01 par value as of August 11, 1997
<PAGE> 2
THE MILLS CORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
--------------------- ----
<S> <C>
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Consolidated Balance Sheets as of June 30, 1997
and December 31, 1996. 1
Consolidated Statements of Income for the
Three Months Ended June 30, 1997 and June 30, 1996. 2
Consolidated Statements of Operations for the
Six Months Ended June 30, 1997 and June 30, 1996 3
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1997 and June 30, 1996. 4
Notes to Consolidated Financial Statements 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
THE MILLS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
(Unaudited) (Note)
----------------------- ------------------
<S> <C> <C>
ASSETS
Income producing property:
Land and land improvements . . . . . . . . . $ 164,794 $ 164,420
Building and improvements . . . . . . . . . 664,249 662,469
Furniture, fixtures and equipment . . . . . 23,173 22,221
Less: accumulated depreciation
and amortization . . . . . . . . . . . . (192,661) (179,658)
----------- -----------
Total income producing property . . . . . . . . . 659,555 669,452
Land held for investment and or sale . . . . . . 3,274 3,564
Real estate development in progress . . . . . . . 39,537 28,259
Investment in unconsolidated entities . . . . . . 72,473 66,688
----------- -----------
Total real estate and development assets . . . . 774,839 767,963
Cash and cash equivalents . . . . . . . . . . . . 1,403 6,327
Restricted cash . . . . . . . . . . . . . . . . . 14,817 13,215
Accounts receivable . . . . . . . . . . . . . . . 20,590 19,165
Notes receivable . . . . . . . . . . . . . . . . 6,977 7,167
Deferred costs, net . . . . . . . . . . . . . . . 40,954 45,655
Other assets . . . . . . . . . . . . . . . . . . 5,870 3,132
----------- -----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . $ 865,450 $ 862,624
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages, notes, and loans payable . . . . . . . $ 638,913 $ 730,113
Accounts payable and other liabilities . . . . . 41,837 43,011
----------- -----------
Total liabilities . . . . . . . . . . . . . . . . 680,750 773,124
Minority interest . . . . . . . . . . . . . . . . 75,885 43,975
STOCKHOLDERS' EQUITY
Common stock $.01 par value, authorized
100,000,000 shares, issued and outstanding
22,881,445 and 16,907,164 shares in 1997 and 1996,
respectively . . . . . . . . . . . . . . . . 229 169
Additional paid-in capital . . . . . . . . . 436,013 309,813
Accumulated deficit . . . . . . . . . . . . (326,444) (264,457)
Unamortized Restricted Stock Award . . . . . ( 983) -
----------- -----------
Total stockholders' equity . . . . . . . . 108,815 45,525
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . $ 865,450 $ 862,624
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1996 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 Consolidated Financial Statements.
1
<PAGE> 4
THE MILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
REVENUES:
Minimum rent $ 23,818 $ 23,434
Percentage rents 1,003 1,084
Recoveries from tenants 11,422 11,378
Other revenues 1,355 1,176
Fee income 1,846 956
Interest income 1,072 739
------------- -------------
40,516 38,767
EXPENSES:
Recoverable from tenants 10,290 10,335
Other operating 1,878 1,820
General and administrative 1,991 2,081
Interest expense 9,995 11,130
Depreciation and amortization 8,361 9,547
------------- -------------
32,515 34,913
Other income (expense) (40) 478
Equity in earnings of unconsolidated entities 888 -
------------- -------------
Income before extraordinary item and minority interest 8,849 4,332
Extraordinary loss on debt extinguishment (8,060) (153)
------------- -------------
Income before minority interest 789 4,179
Minority interest (328) (2,053)
------------- -------------
Net income $ 461 $ 2,126
============= =============
Income per common share
before extraordinary item $ 0.23 $ 0.13
============= =============
Net income per common share $ 0.02 $ 0.13
============= =============
Dividends declared per common share $ 0.4725 $ 0.4725
============= =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
2
<PAGE> 5
THE MILLS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Six Six
Months Ended Months Ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
REVENUES:
Minimum rent $ 47,018 $ 46,332
Percentage rents 2,122 2,305
Recoveries from tenants 22,972 22,919
Other revenues 2,632 2,437
Fee income 4,361 1,787
Interest income 1,635 1,193
------------ ------------
80,740 76,973
EXPENSES:
Recoverable from tenants 20,689 20,664
Other operating 3,201 3,528
General and administrative 4,237 4,189
Interest expense 22,044 22,719
Depreciation and amortization 16,847 19,596
------------ ------------
67,018 70,696
Other income 203 2,216
Equity in earnings of unconsolidated joint ventures 1,001 -
------------ ------------
Income before extraordinary item and minority interest 14,926 8,493
Extraordinary loss on debt extinguishment (8,060) (983)
------------- ------------
Income before minority interest 6,866 7,510
Minority interest (3,039) (3,690)
------------- ------------
Net income $ 3,827 $ 3,820
============= ============
Income per common share
before extraordinary item $ 0.41 $ 0.26
============= ============
Net income per common share $ 0.19 $ 0.23
============= ============
Dividends declared per common share $ 0.945 $ 0.945
============= ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 6
THE MILLS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Six
Months Ended Months Ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Income before minority interest $ 6,866 $ 7,510
Adjustments to reconcile income before minority interest
to net cash provided by operating activities:
Net accretion of note receivable (350) (350)
Depreciation and amortization 18,169 21,494
Provision for losses on accounts receivable 61 822
Equity in earnings of unconsolidated entities (1,001) -
Net gain on sales of land and equipment (281) (2,238)
Extraordinary loss on debt extinguishment 8,060 983
Other changes in assets and liabilities:
(Increase) decrease in accounts receivable (1,443) (2,555)
(Increase) decrease in notes receivable 540 516
(Increase) decrease in other assets (2,652) (2,208)
(Decrease) increase in accounts payable and other liabilities (826) 2,002
------- ------------
Net cash provided by operating activities 27,143 25,976
INVESTING ACTIVITIES:
Investment in real estate and development assets (22,041) (25,912)
Distributions received from unconsolidated entities 2,766 -
Proceeds from sale of land and equipment 650 4,222
Deferred costs (6,443) (8,693)
--------- -----------
Net cash used in investing activities (25,068) (30,383)
FINANCING ACTIVITIES:
Proceeds from mortgages, notes and loans payable 114,082 84,601
Repayments of mortgages, notes and loans payable (205,282) (63,974)
Refinancing costs (2,054) -
Funding to affiliates - (158)
Restricted cash (1,602) 2,615
Dividends paid ( 18,520) ( 15,976)
Distributions paid ( 15,434) ( 15,435)
Proceeds from sale of common stock 121,811 -
---------- ------------
Net cash used in financing activities (6,999) (8,327)
---------- ------------
Net (decrease) in cash and cash equivalents (4,924) (12,734)
Cash and cash equivalents at beginning of period 6,327 14,550
---------- ------------
Cash and cash equivalents at end of period $ 1,403 $ 1,816
========== ============
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized $ 24,830 $ 23,750
========== ============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 7
THE MILLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
The Mills Corporation (the "Company") is a fully-integrated,
self-managed real estate investment trust ("REIT").
The Company conducts all of its business through the The Mills Limited
Partnership (the "Operating Partnership"), in which it owns, as of June 30,
1997, a 1% interest as the sole general partner and a 57.9% interest as a
limited partner. The Company, through the Operating Partnership, is engaged
primarily in the ownership, development, redevelopment, leasing, acquisition,
expansion, and management of super-regional, value and entertainment-oriented
outlet malls (the "Mills") and community shopping centers (the "Community
Centers"). As of June 30, 1997, the Operating Partnership owns or holds an
interest in the following operating properties:
<TABLE>
<CAPTION>
Mills Location
----- --------
<S> <C>
Franklin Mills Philadelphia, PA
Gurnee Mills Gurnee, IL (Chicago)
Potomac Mills Woodbridge, VA (Washington, DC)
Sawgrass Mills Sunrise, FL (Ft. Lauderdale)
Ontario Mills Ontario, CA (Los Angeles)
</TABLE>
5
<PAGE> 8
THE MILLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
ORGANIZATION (CONTINUED):
<TABLE>
<CAPTION>
Community Centers Location
----------------- --------
<S> <C>
Butterfield Plaza Downers Grove, IL
Coopers Plaza Voorhees, NJ
Crosswinds Center St. Petersburg, FL
Fashion Place Columbia, SC
Germantown Commons Shopping Center Germantown, MD
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, including Grapevine Mills
(Dallas, TX), Arizona Mills (Tempe, AZ), City Mills at Orange (Orange,
California), Katy Mills (Houston, TX), Meadowland Mills (Carlstadt, NJ),
Concord Mills (Charlotte, NC), and Columbus Mills (Columbus, OH).
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
six month period ended June 30, 1997, 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, 1996.
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 Mills Services 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. The Company's
investments in the partnerships that own Ontario Mills, Ontario Mills Residual,
Grapevine Mills, Grapevine Mills Residual, Arizona Mills, Columbus Mills and
City Mills, which represent non-controlling ownership interests, are accounted
for using the equity method of accounting. 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.
6
<PAGE> 9
THE MILLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
2. RECLASSIFICATIONS
Certain reclassifications of prior period amounts have been made in
the financial statements to conform to the 1997 presentation.
3. PER SHARE DATA
Net income per share for the six months ended June 30, 1997 and June
30, 1996 is based on the weighted average number of common shares and common
equivalent shares outstanding during such period (20,540,896 and 16,905,953 at
June 30, 1997 and June 30, 1996, respectively).
Limited partnership units in the Operating Partnership (15,954,220 and
16,331,306 outstanding at June 30, 1997 and December 31, 1996, respectively)
may be exchanged for shares of common stock of the Company on a one-for-one
basis in certain circumstances. This exchange right has not been considered in
the computation of per share data as it does not have a dilutive effect.
In February 1997, the Financial Acocunting Standards Board issued
Statement No. 128, Earnings Per Share (FASB No. 128), which is required to be
adopted on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements for calculating primary earnings
per share, the dilutive effect of stock options will be excluded. Adoption of
FASB No. 128 is not expected to have a significant impact on primary or fully
diluted earnings per share for the six months ended June 30, 1997 and June 30,
1996.
4. INVESTMENT IN UNCONSOLIDATED ENTITIES
Certain Mills under development are partially owned through joint
ventures ("Joint Ventures"). The Company is also the managing general partner
of these Joint Ventures. The Company's interest in each Joint Venture is as
follows:
<TABLE>
<CAPTION>
Ownership %
Joint Venture as of June 30, 1997
------------- -------------------
<S> <C>
Ontario Mills 50.0%
Grapevine Mills 37.5%
Arizona Mills 36.8%
Columbus Mills and
Sawgrass Expansion 50.0%
City Mills 50.0%
</TABLE>
The Company does not consolidate these Joint Ventures as major
business decisions require the approval of at least one other general partner.
As a result, its investments are accounted for under the equity method, where
the investments are recorded at cost and subsequently adjusted for equity in
the net income (loss) and cash contributions and distributions. The Company
reduces its investment in Joint Ventures to eliminate intercompany profits on
sales of services that are capitalized by the Joint Ventures.
In connection with the Joint Venture agreements, the Company is committed
to providing certain levels of equity in addition to amounts invested to date.
The Company has guaranteed repayment of $22.9 million of Joint Venture debt
until certain debt service coverage tests are met. In addition, the Company is
contingently liable for property taxes and assessments levied against Ontario
Mills Limited Partnership by the City of Ontario Special Assessment
7
<PAGE> 10
THE MILLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
District. The aggregate amount of the special tax assessment is approximately
$26,000 and will be collected over a 25 year period to fund debt service on
bonds issued by the City to fund the infrastructure improvements.
Combined balance sheet and results of operations information is
presented below for all Joint Ventures at June 30, 1997, and for the six months
then ended:
<TABLE>
<CAPTION>
June 30, 1997
-------------
<S> <C>
Assets:
Income producing assets $ 136,268
Construction in progress 217,094
Other 77,701
-------------
$ 431,063
=============
Liabilities and partners' equity
Debt $ 195,702
Other liabilities 35,259
Operating Partnership's accumulated equity 52,614
Joint Venture partners' accumulated equity 147,488
-------------
$ 431,063
=============
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1997
-------------
<S> <C>
Revenues $ 13,259
Recoverable and other property expenses (4,589)
Interest expense (3,681)
Depreciation and amortization (3,754)
Other income 3,145
Extraordinary loss on debt extinguishment (961)
------
$ 3,419
=============
Equity in earnings of unconsolidated joint ventures $ 1,001
=============
</TABLE>
The primary difference between the carrying value of the Company's
investment in unconsolidated joint ventures and the Operating Partnership's
accumulated equity noted above is due to capitalized interest on the investment
balance, capitalized development and leasing costs which are recovered by the
Operating Partnership through fees earned during construction and loans to the
Joint Ventures included in other liabilities above.
5. DECLARATION OF DIVIDEND
On June 10, 1997, the Company declared a dividend of $.4725 per share
which was paid on July 22, 1997 to stockholders of record as of July 1, 1997.
8
<PAGE> 11
THE MILLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
6. BORROWINGS
On May 5, 1997, the Company refinanced loans secured by Franklin Mills
totaling $165,800, with the proceeds of a new $110,000 mortgage loan and funds
from the March 1997 stock issuance. The new loan bears interest at a fixed
rate of 7.88% and amortizes over 30 years with a balloon payment in March 2008.
In connection with this refinancing, the Company expensed $8,100 of deferred
loan costs as an extraordinary loss, including a prepayment penalty of $2,054.
The new loan can be increased to $165,000 through May 4, 1998, subject to
certain financial requirements relating to increases above $130,000. The
Company increased the borrowings under this loan to $130,000 on August 8, 1997.
9
<PAGE> 12
THE MILLS CORPORATION
(Unaudited)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Comparison of three months ended June 30, 1997 to three months ended June 30,
1996.
Income before minority interest for the three months ended June 30,
1997 decreased by approximately $3.4 million (81.1%) to $0.8 million as
compared with the three months ended June 30, 1996. The decrease was the
result of an increase in revenues of approximately $1.7 million (4.5%), a
decrease in expenses of approximately $2.4 million (6.9%) and an increase in
equity in earnings of unconsolidated entities of $0.9 million offset by a
decrease in other income of $0.5 million and an increase in extraordinary loss
on debt extinguishment of $7.9 million.
Revenues:
Minimum rents for the three months ended June 30, 1997
increased approximately $0.4 million (1.6%) compared with the three months
ended June 30, 1996. This was primarily due to higher lease renewal rates
accross the properties.
Fee income for the three months ended June 30, 1997, increased
$0.9 million (93.1%) compared with the three months ended June 30, 1996. During
the three months ended June 30, 1996 the Company earned development-related
fees from one project under development (Ontario Mills), compared to three
projects (Grapevine Mills, Arizona Mills and City Mills) for the three months
ended June 30, 1997.
Interest income for the three months ended June 30, 1997, increased
approximately $0.3 million (45.1%) compared with the three months ended June
30, 1996. The increase was primarily due to higher average daily balances in
interest-bearing accounts resulting from the investment of the proceeds from
the sale of common stock in March 1997.
Expenses:
Interest expense decreased by approximately $1.1 million (10.2%) for
the three months ended June 30, 1997, compared with the three months ended June
30, 1996. The decrease was primarily due to the refinancing of debt secured by
Franklin Mills.
Depreciation and amortization decreased $1.2 million (12.4%) for the
three months ended June 30, 1997, compared with the three months ended June 30,
1996. The decrease was due to a decrease in amortization of loan costs as a
result of refinancing the debt secured by Potomac Mills and Gurnee Mills in
December 1996 and a decrease in depreciation relating to assets reaching their
depreciable lives.
Other income for the three months ended June 30, 1997, decreased $0.5
million compared with the three months ended June 30, 1996. The decrease was
due to a decrease in gain on land sales.
Equity in earnings of unconsolidated entities in 1997 relates
primarily to the commencement of operations of Ontario Mills which opened
November 1996.
The extraordinary loss on debt extinguishment in 1997 was due to the
refinancing of the debt secured by Franklin Mills in May 1997. The
extraordinary loss on debt extingishment in 1996 was due to refinancing the
debt secured by the community centers in January, 1996.
10
<PAGE> 13
THE MILLS CORPORATION
(Unaudited)
Comparison of six months ended June 30, 1997 to six months ended June 30, 1996.
Income before minority interest for the six months ended June 30, 1997
decreased by approximately $0.6 million (8.6%) to $6.9 million as compared with
the six months ended June 30, 1996. The decrease was the result of an increase
in revenues of approximately $3.8 million (4.9%), a decrease in expenses of
approximately $3.7 million (5.3%), and an increase in equity in earnings of
unconsolidated joint ventures of $1.0 million offset by an increase in the
loss on debt extinguishment of $7.1 million and a decrease in other income of
$2.0 million.
Revenues:
Minimum rents for the six months ended June 30, 1997, increased
approximately $0.7 million (1.5%) compared with the six months ended June 30,
1996. The increase was primarily due to the higher lease renewal rates across
the properties.
Fee income for the six months ended June 30, 1997, increased $2.6
million (144.0%) compared to the six months ended June 30, 1996. During the
six months period ended June 30, 1996 the Company earned development-related
fees from one project under development (Ontario Mills), compared to three
projects (Grapevine Mills, Arizona Mills and City Mills) for the six months
ended June 30, 1997.
Interest income for the six months ended June 30, 1997, increased $0.4
million (37.0%) compared with the six months ended June 30, 1996. The increase
was primarily due to higher average daily balances in interest-bearing accounts
resulting from the investment of the proceeds from the sale of common stock in
March 1997.
Expenses:
Other operating expenses for the six months ended June 30, 1997,
decreased approximately $0.3 million (9.3%) compared with the six months ended
June 30, 1996. This decrease is primarily due to a decrease in contributions
to promotional programs of $0.2 million and a decrease in bad debt expense of
$0.1 million at certain projects.
Interest expense decreased by approximately $0.7 million (3.0%) for
the six months ended June 30, 1997, compared with the six months ended June 30,
1996. This decrease was primarily due to the refinancing of debt secured by
Franklin Mills in May 1997.
Depreciation and amortization decreased $2.8 million (14.0%) for the
six months ended June 30, 1997, compared with the six months ended June 30,
1996. The decrease was due to a decrease in amortization of loan costs as a
result of refinancing the debt secured by Potomac Mills and Gurnee Mills in
1996 and a decrease in depreciation relating to assets reaching the end of
their depreciable lives.
Other income for the six months ended June 30, 1997, decreased $2.0
million compared with the six months ended June 30, 1996. The decrease was due
to a decrease in gain on land sales.
Equity in earnings of unconsolidated entities earned in 1997 relates
primarily to the commencement of operations of Ontario Mills which opened
November 1996.
The extraordinary loss on debt extinguishment in 1997 and 1996 was due
to refinancing the debt secured by Franklin Mills and the community centers,
respectively.
11
<PAGE> 14
THE MILLS CORPORATION
(Unaudited)
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company's balance of cash and cash
equivalents was $1.4 million, not including its proportionate share of cash
held in unconcolidated entities. In addition to its cash reserves, the Company
had a $40.0 million Line of Credit available, $10.6 million available under its
Revolving Master Repurchase Agreements and $20.0 million available under the
Franklin Mills loan (see below).
Financing Activities. During 1996 and 1997, the Company completed
various financing and refinancing activities which extended the weighted
average remaining term of the Company's total indebtedness from 3.5 years at
December 31, 1995 to 5.7 years at June 30, 1997, while maintaining
investment-grade interest rates (7.1% weighted average interest rate at June
30, 1997).
As of June 30, 1997, the Company had two short term credit facilities,
summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
TOTAL AMOUNT
------ OUTSTANDING
NATURE OF FACILITY MATURITY INTEREST RATE TERMS FACILITY AT 6/30/97
------------------ -------- ------------- ----- -------- ----------
<S> <C> <C> <C> <C> <C>
Line of Credit.......................... 10/31/98 LIBOR + 3.00% Interest Only $ 40,000 $ -
Revolving Master Repurchase Agreement... Varies LIBOR + 1.25% Interest Only 10,600 -
------------- ---------------
$50,600 $ -
------------- --------------
</TABLE>
The amounts available under the Line of Credit are subject to certain
performance measurements and restrictive covenants. The Company was in
compliance with the applicable covenants at June 30, 1997. In the third
quarter of 1997 the Company increased the funds available under the facility to
$60.0 million.
On May 5, 1997, loans totaling $165.8 million were refinanced with
proceeds of new borrowings of a new $110.0 million mortgage loan and funds from
a recent stock issuance (see below). The mortgage loan bears interest at 7.88%
and amortizes over thirty years with a balloon payment in May 2007. The new
loan can be increased to $165.0 million through May 4, 1998, subject to certain
financial requirements relating to increases above $130.0 million. On August
8, 1997, the Company borrowed $20.0 million under this loan to bring the total
proceeds to $130.0 million. This $20.0 million tranche bears interest at 7.44%
and amortizes over thirty years with a balloon payment in May 2007.
12
<PAGE> 15
THE MILLS CORPORATION
(Unaudited)
Effective October 28, 1996, the Company filed a universal shelf
registration statement on Form S-3 to offer a maximum of $250.0 million of
common stock, preferred stock, and common stock warrants. Pursuant to this
shelf registration, the Company sold a total of 5,175,000 shares of common
stock on March 19, 1997. On March 21, 1997, the Company sold an additional
150,000 shares of its common stock to its underwriters to cover a portion of
their short position resulting from their over-allotments in connection with
the March 19, 1997 offering. The net proceeds of these issuances ($121.8
million) were contributed to the Operating Partnership and were used to pay
down debt including $17.8 million outstanding under the line of credit, $10.6
million outstanding under the Revolving Master Repurchase Agreement and $55.0
million of prior loans secured by the Franklin Mills project in connection with
the refinancing discussed above. The balance of the proceeds were used to fund
development costs or are available to fund future development and
remerchandising activities.
The Company had consolidated debt of approximately $638.9 million at
June 30, 1997 of which $596.9 million was fixed-rate debt and $42.0 million was
variable-rate debt. Scheduled principal repayments of consolidated indebtedness
through 2000 are $58.7 million, with $580.2 million due thereafter. The
Company expects to refinance or repay these obligations with cash generated
from operations, external borrowings or equity issuances. The Company's pro
rata share of unconsolidated joint venture debt at June 30, 1997 was $77.9
million (net of tax increment financing), of which it had guaranteed $22.9
million.
The Company's ratio of debt-to-total market capitalization was 37.3%
and 54.5% at June 30, 1997 and June 30, 1996, respectively. If the Company's
pro-rata share of indebtedness of all unconsolidated joint venture properties
were included, the ratio of debt-to-total market capitalization would be 39.9%
and 54.9%, respectively.
Development, Remerchandising and Expansion. The Company is involved
in the following development, remerchandising and expansion efforts:
At least six Mills projects are planned to be completed in the next
four years, including Grapevine Mills, Arizona Mills, City Mills, Katy Mills,
Concord Mills, and Meadowland Mills.
Grapevine Mills and Arizona Mills are expected to open in the fourth
quarter of 1997. Construction loans and loan commitments, aggregating
approximately $240.0 million, are considered adequate to fund the remaining
development efforts for these projects. Equity commitments from the Company's
joint venture partners and the Company have been fully funded.
City Mills, Concord Mills, and Katy Mills are scheduled to open in the
fourth quarter of 1998, second quarter of 1999, and third quarter of 1999,
respectively. All three projects will be financed principally with external
borrowings, potential preferred and other equity contributions from joint
venture partners and the Operating Partnership. The Company anticipates that
the Operating Partnership's required future equity requirements for City Mills,
Concord Mills, and Katy Mills in the aggregate may total as much as $60 million.
The Company expects to commence construction of Meadowlands Mills in
1998, with a targeted opening date in 2000. Kan Am has committed to
contribute two-thirds of the equity for a one-third ownership interest in this
project.
The Company has announced plans to develop a Mills project adjacent to
the new 49ers stadium at Candlestick Point near San Francisco with Simon
DeBartolo Group and DeBartolo Entertainment. The Company is also conducting
due diligence on several other proposed Mills, including evaluating sites in
Columbus, Ohio, N.
13
<PAGE> 16
THE MILLS CORPORATION
(Unaudited)
Aurora, Illinois, and Toronto, Canada. In June 1997, the Company formed an
alliance with Tishman-Speyer to study potential international sites.
In addition to these new Mills, the Company is planning to spend
approximately $125 million on its existing portfolio during the next three
years to complete its expansion and remerchandising programs in each of the
Company's first four Mills. It is anticipated that these projects will be
financed with external borrowings, equity contributions from Kan Am and other
potential equity issuances.
Capital Resources. The Company anticipates that its operating
expenses, interest expense on outstanding indebtedness, recurring capital
expenditures and distributions to stockholders in accordance with REIT
requirements will be provided by cash generated from operations, potential
ancillary land sales and borrowings under its Line of Credit.
The Company believes that it will have the capital and access to
additional capital resources sufficient to expand and develop its business in
accordance with its operating, development and financing strategies.
Distributions. The Company has paid and intends to continue to pay
regular quarterly distributions to its stockholders. Distributions are payable
at the discretion of the Board of Directors and depend on a number of factors,
including net cash provided by operating activities, its financial condition,
capital commitments, debt repayment schedules and such other factors as the
Board of Directors deems relevant.
CASH FLOWS
Comparison of Six Months Ended June 30, 1997 to Six Months Ended June 30,
1996. Net cash provided by operating activities increased $1.2 million, or
4.5%, to $27.1 million for the six months ended June 30, 1997 as compared to
$26 million for the six months ended June 30, 1996. Net cash used in investing
activities decreased $5.3 million or 17.5%, to $25.1 million for the six months
ended June 30, 1997, as compared to $30.4 million for the six months ended June
30, 1996, primarily as a result of decreased expenditures for real estate and
development assets and the return of advances from certain joint ventures. Net
cash used in financing activities decreased $1.3 million, to $7.0 million for
the six months ended June 30, 1997, as compared to $8.3 million for the six
months ended June 30, 1996, primarily as a result of the additional capital
provided by the sale of common stock in 1997, offset by the repayment of
outstanding indebtedness.
FUNDS FROM OPERATIONS
The Company generally considers Funds From Operations ("FFO") a widely
used and appropriate measure of performance for an equity REIT which provides a
relevant basis for comparison among REITs. FFO as defined by NAREIT means
income (loss) before minority interest (determined in accordance with GAAP),
excluding gains (losses) from debt restructuring and sales of property, plus
real estate related depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures. FFO is presented to assist
investors in analyzing the performance of the Company. The Company's method of
calculating FFO may be different from methods used by other REITs and,
accordingly, may not be comparable to such other REITs. FFO does not represent
cash flows from operations as defined by GAAP, (ii) is not indicative of cash
available to fund all cash flow needs and liquidity, including its ability to
make distributions and (iii) should not be considered as an alternative to net
income (determined in accordance with GAAP) for purposes of evaluating the
Company's operating performance.
14
<PAGE> 17
THE MILLS CORPORATION
(Unaudited)
For the six months ended June 30, 1997 FFO increased to $32.4 million
from to $26.1 million for the six months ended June 30, 1996. For the quarter
ended June 30, 1997, FFO increased to $17.5 million from $13.3 million for the
comparable period in 1996. FFO amounts were calculated in accordance with
NAREIT's definition of FFO as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30,
- ---------------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars in thousands) (Dollars in thousands)
<S> <C> <C> <C> <C>
Funds From Operations Calculation:
Income before extraordinary item and $ 8,849 $ 4,332 14,926 $ 8,493
minority interest.....................................
Adjustments:
Add: Depreciation and amortization 7,742 8,156 15,447 16,862
of real estate assets..............................
Add: Loss on Sale of furniture, -- 776 776
fixtures, and equipment..........................
Add: Real estate depreciation
and amortization of unconsolidated 924 -- 1,646
entities
Add: Extraordinary loss on debt -- -- 397 --
extinguishment of unconsolidated
entities
Funds From Operations.................................... $17,515 $13,264 $ 32,416 $ 26,131
======= ======= ========== ===========
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEASONALITY
The regional shopping center industry is seasonal in nature, with mall
tenant sales peaking in the fourth quarter due to the Christmas season. As a
result, a substantial portion of the percentage rents are not paid until the
fourth quarter. Furthermore, most new lease-up occurs towards the later part of
the year in anticipation of the holiday season and most vacancies occur toward
the beginning of the year. In addition, the majority of the temporary tenants
take occupancy in the fourth quarter. Accordingly, cash flow and occupancy
levels are generally lowest in the first quarter and highest in the fourth
quarter. This seasonality also impacts the quarter-by-quarter results of net
operating income and FFO, although this impact is largely mitigated by accruing
minimum and percentage rents on a straight line basis during the year in
accordance with GAAP.
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 that 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 and percentage rent clauses that provide additional rent after a certain
minimum sales level is achieved. These provisions provide some protection to
the Company during highly inflationary periods.
15
<PAGE> 18
THE MILLS CORPORATION
(Unaudited)
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
The Annual Meeting of Shareholders of The Mills Corporation was
held on May 30, 1997 and, by the affirmative vote of a majority of
shareholders participating in person or by proxy, was adjourned until
and concluded on June 25, 1997. The following is a tabulation of the
voting on each proposal presented at the Annual Meeting and a listing
of Directors whose term of office as Directors continued after the
meeting:
Proposal 1 (a proposal to amend the Company's bylaws to require
the approval of a two-thirds majority of the disinterested outside
directors for all joint venture or similar arrangemenets between the
Company and Kan Am U.S., Inc. or its affiliates and would eliminate
the requirement that a majority of the Company's shareholders approve
such transactions):
Votes for: 12,744,971
Votes against: 1,989,220
Abstensions: 169,334
Non-Vote 5,964,121
Under the Company's Certificate of Incorporation, a proposal to
amend the by-laws by the vote of the shareholders requires the
approval of two-thirds of the issued and outstanding shares of the
Company's stock as of the applicable record date; thus, Proposal 1
required at least 14,874,324 shares to vote in favor of the Proposal
and, accordingly, did not receive sufficient votes for approval.
Proposal 2 (a proposal to amend the Company's Certificate of
Incorporation to prohibit persons from acquiring shares of the Company
if the acquisition would cause more than 50% of the Company's shares
to be held by "Non-U.S. Persons," triggering withholding tax
obligations on the sale of the Company's stock by Non-U.S. Persons):
Votes for: 13,872,609
Votes against: 869,587
Abstensions: 133,879
Non-Votes: 5,964,571
Under the Company's Certificate of Incorporation, a proposal to
amend the Certificate of Incorporation requires the approval of
one-half of the issued and outstanding shares of the Company's stock
as of the applicable record date; thus, Proposal 2 required at least
11,155,743 shares to vote in favor of the Proposal and, accordingly,
was approved.
Proposal 3 (a proposal to amend the Company's Certificate of
Incorporation to eliminate a technical requirement requiring the
Company to obtain either a ruling from the Internal Revenue Service or
an opinion of counsel before granting an exemption from Ownership
Limits contained in the Company's Certificate of Incorporation):
Votes for: 13,183,660
Votes against: 1,485,444
Abstentions: 234,420
Non-votes: 5,964,122
Under the Company's Certificate of Incorporation, a proposal to
amend the Certificate of Incorporation requires the approval of
one-half of the issued and outstanding shares of the Company's stock
as of the applicable record date; thus, Proposal 3 required at least
11,155,743 shares to vote in favor of the Proposal and, accordingly,
was approved.
Proposal 4 (to elect directors to a term expiring upon the date
of the Annual Shareholders Meeting in the year 2000):
<TABLE>
<CAPTION>
DIRECTORS STANDING TERM VOTES FOR VOTES
FOR ELECTION EXPIRES WITHHELD
<S> <C> <C> <C>
Charles R. Black, Jr. 2000 20,613,307 254,339
Dietrich von Boetticher 2000 20,614,875 252,771
John M. Ingram 2000 20,615,375 252,271
Peter B. McMillan 2000 20,615,293 252,353
CONTINUING DIRECTORS
James C. Braithwaite 1998
The Hon. Joseph B. Gildenhorn 1998
Harry H. Nick 1998
Robert P. Pincus 1998
Peter A. Gordon 1999
Franz von Perfall 1999
Laurence C. Siegel 1999
</TABLE>
Nominees required a favorable vote of a plurality of the shares
of Common Stock present and entitled to vote, in person or by proxy, at
the Meeting; accordingly, all members standing for re-election were
elected.
Proposal 5 (to ratify the appointment of Ernst & Young, LLP as
the Company's independent auditors for the fiscal year ending December
31, 1997):
Votes for: 20,745,121
Votes against: 35,780
Votes withheld: 86,745
Proposal 5 required the approval of a majority of the votes cast
at the Meeting and, accordingly, was approved.
Proposal 6 (to adjourn the Annual Meeting to June 25, 1997):
Votes for: 17,169,378
Votes Against: 3,447,056
Abstensions: 191,480
Non-Votes 59,732
Proposal 6 required the approval of a majority of the votes cast
at the Meeting and, accordingly, was approved.
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.
16
<PAGE> 19
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.
THE MILLS CORPORATION
August 14, 1997 By: /s/ Kenneth R. Parent
- ------------------------ -------------------------------------------------
(Date) Kenneth R. Parent
Senior Vice President, Chief Financial Officer
and Treasurer
(Principal Financial and Accounting Officer)
17
<PAGE> 20
THE MILLS CORPORATION
EXHIBIT INDEX
(Pursuant to item 601 of Regulation S-K)
<TABLE>
<CAPTION>
NUMBER EXHIBIT SEQUENTIALLY
- ------ ------- NUMBERED PAGE
-------------
<S> <C>
*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. Miller, 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
*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
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
NUMBER EXHIBIT SEQUENTIALLY
- ------ ------- NUMBERED PAGE
-------------
<S> <C>
*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
10.20-10.22 Intentionally Omitted
*10.23 Form of Indemnification Agreement between the Company and each of its Directors
and Executive Officers
10.24-10.25 Intentionally Omitted
*****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
*****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
10.29-10.47 Intentionally Omitted
******10.48 Note dated July 30, 1996 by Sawgrass Mills Phase II Limited Partnership in favor
of CS First Boston Mortgage Capital Corp.
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
NUMBER EXHIBIT SEQUENTIALLY
- ------ ------- NUMBERED PAGE
-------------
<S> <C>
******10.49 Mortgage Security Agreement, Assignment of Leases and Rents and Fixture Filing
dated as of July 30, 1996, between Sawgrass Mills Phase II Limited Partnership,
as Mortgagor and CS First Boston Mortgage Capital Corporation, as Mortgagee
****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
*******10.52 Second Amended and Restated Deed of Trust, Security Agreement, Assignment of
Rents and Fixture Filing by Potomac Mills-Phase III (MLP) Limited Partnership
and Washington Outlet Mall (MLP) Limited Partnership, collectively, as Grantor
to R. Eric Taylor, a resident of Fairfax County, Virginia as Deed Trustee for
the benefit of CS First Boston Mortgage Capital Corp., as Beneficiary dated as
of December 17, 1996
*******10.53 Assignment of Leases and Rents and Security Deposits dated as of December 17,
1996 by Potomac Mills-Phase III (MLP) Limited Partnership and Washington Outlet
Mall (MLP) Limited Partnership to CS First Boston mortgage Capital Corp.
*******10.54 Mortgage, Security Agreement, Assignment of Rents and Fixture Filing by Gurnee
Mills (MLP) Limited Partnership, as Mortgagor to CS First Boston Mortgage
Capital Corp., as Mortgagee dated as of December 17, 1996
*******10.55 Assignment of Leases and Rents and Security Deposits dated as of December 17,
1996 by Gurnee Mills (MLP) Limited Partnership to CS First Boston Mortgage
Capital Corp.
*******10.56 Trust and Servicing Agreement dated as of December 1, 1996 among Potomac Gurnee
Finance Corp., as Depositor, AMRESCO Management, Inc., as Servicer, ABN AMRO
Bank N.V., as Fiscal Agent and LaSalle National Bank, as Trustee
*******10.57 Credit Agreement dated as of October 28, 1996,among the Mills Corporation, the
Mills Limited Partnership, Sunrise Mills (MLP) Limited Partnership and CS First
Boston Mortgage Capital Corp.
*******10.58 General Pledge and Security Agreement, dated as of October 28, 1996 made by The
Mills Limited Partnership in favor of CS First Boston Mortgage Capital Corp.
*******10.59 Intercompany Pledge and Security Agreement dated as of October 28, 1996, by The
Mills Limited Partnership, The Mills Corporation, Sunrise Mills (MLP) Limited
Partnership and Sawgrass Mills Phasae II Limited Partnership in favor of CS
First Boston Mortgage Capital Corp.
*******10.60 Assignment of Partnership Interest daated as of October 28, 1996 from The Mills
Limited Partnership to CS First Boston Mortgage Capital Corp.
*******10.61 Revolving Note dated as of October 28, 1996 from The Mills Limited Partnership
to CS First Boston Mortgage Capital Corp. in the maximum amount of $40,000,000
*******11 Statement Re: Computation of Per Share Earnings
21.1 List of Subsidiaries of the Registrant
</TABLE>
<PAGE> 23
* 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).
*** 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.
****** Incorporated by reference to the Registrant's Annual Report on Form 10-Q
for the third quarter ended September 3, 1996.
******* Incorporated by reference to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1996.
<PAGE> 1
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF REGISTRANT
A. SUBSIDIARIES OF THE MILLS CORPORATION
<TABLE>
<CAPTION>
==========================================================================================================
NAME STATE OF FICTITIOUS
FORMATION & QUALIFICATION BUSINESS NAMES
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Franklin Mills GP, Inc. Delaware N/A
District of Columbia
Pennsylvania
- ----------------------------------------------------------------------------------------------------------
Liberty Plaza GP, Inc. Delaware N/A
Pennsylvania
- ----------------------------------------------------------------------------------------------------------
Potomac Gurnee Finance Corp. Delaware N/A
Virginia
- ----------------------------------------------------------------------------------------------------------
Potomac Mills Finance Corp. Delaware N/A
Virginia
- ----------------------------------------------------------------------------------------------------------
The Mills GP, Inc. Delaware N/A
District of Columbia
Florida
South Carolina
Virginia
- ----------------------------------------------------------------------------------------------------------
Washington Potomac Partners Corp. Delaware N/A
Virginia
- ----------------------------------------------------------------------------------------------------------
The Mills Limited Partnership Delaware
Arizona Chandler Mills Limited
Partnership
California Delaware Mills Limited
Partnership
District of Columbia
Florida The Mills Limited
Partnership of
Delaware
Georgia
Illinois
Maryland
</TABLE>
1
<PAGE> 2
<TABLE>
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
New Jersey
North Carolina Delaware Mills
(Concord) Limited
Partnership
Ohio
Pennsylvania Delaware Mills Limited
Partnership
South Carolina
Texas The Delaware Mills
Limited Partnership
Virginia
- ----------------------------------------------------------------------------------------------------------
Sawgrass Finance L.L.C. Delaware N/A
==========================================================================================================
</TABLE>
B. SUBSIDIARIES OF THE MILLS LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
===========================================================================================================
NAME STATE OF FICTITIOUS
FORMATION & BUSINESS NAMES
QUALIFICATION
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Arizona Mills, L.L.C. Delaware N/A
Arizona
Michigan
- -----------------------------------------------------------------------------------------------------------
Concord Mills Limited Delaware N/A
Partnership North Carolina
- -----------------------------------------------------------------------------------------------------------
Concord Mills, L.L.C. Delaware N/A
- -----------------------------------------------------------------------------------------------------------
Coopers Crossing Associates New Jersey N/A
(MLP) Limited Partnership
- -----------------------------------------------------------------------------------------------------------
Coopers Crossing L.L.C. Delaware N/A
New Jersey
- -----------------------------------------------------------------------------------------------------------
Crosswinds Center Associates District of Columbia N/A
of St. Petersburg (MLP) Florida
Limited Partnership
- -----------------------------------------------------------------------------------------------------------
Crosswinds L.L.C. Delaware N/A
District of Columbia
Florida Crosswinds L.L.C. of
DE, L.C.
</TABLE>
2
<PAGE> 3
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Echo Hills Center Associates (MLP) Virginia N/A
Limited Partnership
- -----------------------------------------------------------------------------------------------------------
Fashion Center Associates of Illinois N/A
Illinois No. 1 (MLP) Limited
Partnership
- -----------------------------------------------------------------------------------------------------------
Fashion Center L.L.C. Delaware N/A
Illinois
- -----------------------------------------------------------------------------------------------------------
Fashion Place Associates, Delaware N/A
L.L.C. South Carolina
- -----------------------------------------------------------------------------------------------------------
Fashion Place Associates South Carolina N/A
Limited Partnership
- -----------------------------------------------------------------------------------------------------------
Four "J" Development Texas N/A
Company, Ltd.
- -----------------------------------------------------------------------------------------------------------
Franklin Mills Associates District of Columbia N/A
Limited Partnership Pennsylvania
- -----------------------------------------------------------------------------------------------------------
Franklin Mills, L.L.C. Delaware
District of Columbia
Pennsylvania
- -----------------------------------------------------------------------------------------------------------
Franklin Mills Residual District of Columbia N/A
Associates Limited Pennsylvania
Partnership
- -----------------------------------------------------------------------------------------------------------
Germantown Development Maryland N/A
Associates (MLP) Limited
Partnership
- -----------------------------------------------------------------------------------------------------------
Germantown Development Delaware N/A
Associates L.L.C. Maryland Maryland Germantown
Development
Associates, L.L.C.
- -----------------------------------------------------------------------------------------------------------
Grapevine Mills Limited Delaware N/A
Partnership Texas
- -----------------------------------------------------------------------------------------------------------
Grapevine Mills Operating Delaware N/A
Company, L.L.C. Texas
</TABLE>
3
<PAGE> 4
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gurnee Mills (MLP) Limited Illinois N/A
Partnership
- -----------------------------------------------------------------------------------------------------------
Gurnee Mills L.L.C. Delaware N/A
Illinois
- -----------------------------------------------------------------------------------------------------------
Gurnee Mills II L.L.C. Delaware N/A
Illinois
- -----------------------------------------------------------------------------------------------------------
Gwinnett L.L.C. Delaware N/A
Georgia
- -----------------------------------------------------------------------------------------------------------
Gwinnett Marketfair Georgia N/A
Associates Limited
Partnership
- -----------------------------------------------------------------------------------------------------------
Hunt Club Road Properties Illinois N/A
Associates Limited
Partnership
- -----------------------------------------------------------------------------------------------------------
Liberty Plaza Limited Delaware
Partnership Pennsylvania Delaware Liberty Plaza
Limited Partnership
- -----------------------------------------------------------------------------------------------------------
Liberty Plaza, L.L.C. Delaware N/A
Pennsylvania
- -----------------------------------------------------------------------------------------------------------
Mainstreet Retail Limited Delaware
Partnership Arizona Delaware Mainstreet
Retail Limited
Partnership
California
Florida
Illinois
Maryland
Ohio
Pennsylvania
South Carolina
Texas
Virginia
</TABLE>
4
<PAGE> 5
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Management Associates Delaware
Limited Partnership Florida
Georgia
Illinois
Maryland
New jersey
Ohio
Pennsylvania
South Carolina
Virginia
- -----------------------------------------------------------------------------------------------------------
Meadowlands Mills L.L.C. Delaware N/A
New Jersey
- -----------------------------------------------------------------------------------------------------------
Mills-Kan Am Columbus/ Delaware N/A
Sawgrass Limited
Partnership
- -----------------------------------------------------------------------------------------------------------
Mills Management L.L.C. Delaware N/A
California
Florida
Illinois
Maryland
Ohio
South Carolina
- -----------------------------------------------------------------------------------------------------------
MillsServices Corp. Delaware
California
District of Columbia
Florida
New Jersey
North Carolina
Ohio MillsServices Corp. of
Ohio
Virginia MillsServices Corp. of
Virginia
- -----------------------------------------------------------------------------------------------------------
Montgomery Village Maryland N/A
Associates (MLP) Limited
Partnership
</TABLE>
5
<PAGE> 6
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Montgomery Village Delaware
Associates L.L.C. Maryland Maryland Montgomery
Village Associates
L.L.C.
- -----------------------------------------------------------------------------------------------------------
Montgomery Village Ground Maryland N/A
(MLP) Limited Partnership
- -----------------------------------------------------------------------------------------------------------
Montgomery Village Ground Delaware N/A
L.L.C. Maryland
- -----------------------------------------------------------------------------------------------------------
Mount Prospect Plaza (MLP) Illinois N/A
Limited Partnership
- -----------------------------------------------------------------------------------------------------------
Mount Prospect Plaza L.L.C. Delaware N/A
Illinois
- -----------------------------------------------------------------------------------------------------------
MTS Services of Tempe, Delaware N/A
L.L.C. Arizona
Michigan
- -----------------------------------------------------------------------------------------------------------
Ontario Mills L.L.C. Delaware N/A
California
- -----------------------------------------------------------------------------------------------------------
Orange City Mills Limited Delaware N/A
Partnership California
- -----------------------------------------------------------------------------------------------------------
Potomac Mills L.L.C. Delaware N/A
Virginia
- -----------------------------------------------------------------------------------------------------------
Potomac Mills Limited Virginia N/A
Partnership
- -----------------------------------------------------------------------------------------------------------
Sawgrass Mills Phase II Delaware N/A
Limited Partnership Florida
- -----------------------------------------------------------------------------------------------------------
Sawgrass Mills Phase II, Delaware N/A
L.L.C. Florida
- -----------------------------------------------------------------------------------------------------------
Sunrise Mills (MLP) Limited District of Columbia N/A
Partnership Florida
- -----------------------------------------------------------------------------------------------------------
Sunrise Mills L.L.C. Delaware N/A
District of Columbia
Florida Sunrise Mills of
Sunrise L.C.
</TABLE>
6
<PAGE> 7
<TABLE>
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
West Falls Church L.L.C. Delaware N/A
Virginia
===========================================================================================================
</TABLE>
C. SUBSIDIARIES OF MILLSSERVICES CORP.
<TABLE>
<CAPTION>
===========================================================================================================
NAME STATE OF FICTITIOUS
FORMATION & BUSINESS NAMES
QUALIFICATION
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Concord Mills Residual Delaware N/A
Limited Partnership North Carolina
- -----------------------------------------------------------------------------------------------------------
Concord Mills Residual, Delaware N/A
L.L.C.
- -----------------------------------------------------------------------------------------------------------
Franklin Mills Residual Corp. Delaware N/A
District of Columbia
Pennsylvania
- -----------------------------------------------------------------------------------------------------------
MillsServices of Grapevine, Delaware N/A
Inc. Texas
- -----------------------------------------------------------------------------------------------------------
Ontario Mills Residual, Delaware N/A
L.L.C. California
- -----------------------------------------------------------------------------------------------------------
Potomac Title Services, Inc. Florida N/A
- -----------------------------------------------------------------------------------------------------------
Premises Providers, Inc. Maryland N/A
Arizona
California
District of Columbia
Florida
Illinois
North Carolina
Ohio
Pennsylvania
Texas
Virginia
Wisconsin
- -----------------------------------------------------------------------------------------------------------
WSM South Florida Corp. Florida N/A
District of Columbia
===========================================================================================================
</TABLE>
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,403
<SECURITIES> 0
<RECEIVABLES> 27,567
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 852,216
<DEPRECIATION> 192,661
<TOTAL-ASSETS> 865,450
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 229
<OTHER-SE> 184,471
<TOTAL-LIABILITY-AND-EQUITY> 865,450
<SALES> 0
<TOTAL-REVENUES> 40,516
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 32,515
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,995
<INCOME-PRETAX> 461
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 8,060
<CHANGES> 0
<NET-INCOME> 461
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0
</TABLE>
