MILLS CORP, SC TO-I, EX-99.A1, 2000-11-17

MILLS CORP
SC TO-I, EX-99.A1, 2000-11-17
REAL ESTATE INVESTMENT TRUSTS

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<PAGE> 1

THE MILLS CORPORATION

OFFER TO PURCHASE OUTSTANDING OPTIONS WITH AN EXERCISE PRICE OF $23.50
OR MORE IN EXCHANGE FOR SHARES OF ITS COMMON STOCK

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THE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 5:00 P.M., NEW YORK CITY TIME, ON MONDAY, DECEMBER 18, 2000,
UNLESS THE OFFER IS EXTENDED.
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The Mills Corporation, a Delaware corporation, hereby offers to
purchase all outstanding options to purchase shares of our common stock, $.01
par value per share, that were issued to our employees under the 1994 Amended
and Restated Executive Equity Incentive Plan or the 1999 Stock Option Plan
(the "plans") and that have an exercise price of $23.50 per share or more (the
"options"). The purchase price of each option tendered will be paid in common
stock, which will be issued as "restricted stock" under the terms of the
plans. As restricted stock, these shares will be subject to forfeiture and
other restrictions until they vest under the terms of a new restricted stock
award agreement between each tendering optionholder and us. The number of
shares of restricted stock that each optionholder will receive has been
calculated as described below, and the shares of restricted stock will be
issued pursuant to the terms and subject to the conditions set forth herein
and in the related letter of transmittal. We refer to this amount payable to
optionholders as the "purchase price." See Section 5. We refer to this offer
to purchase and the related letter of transmittal, together with any
amendments or supplements, as the "offer."

WE WILL NOT BE OBLIGATED TO PURCHASE ANY OPTIONS IF OPTIONHOLDERS AS
A GROUP TENDER LESS THAN 700,000 OPTIONS. HOWEVER, WE MAY CHOOSE TO PURCHASE
LESS THAN 700,000 OPTIONS IF LESS THAN 700,000 OPTIONS ARE TENDERED. SEE
SECTION 1. THE OFFER ALSO IS SUBJECT TO OTHER CONDITIONS. SEE SECTION 6.

All options properly tendered and not thereafter validly withdrawn will
be purchased at the applicable purchase price, subject to the terms and the
conditions of the offer. You may tender all or any portion of your options.
However, you are not required to tender any of your options.

The restricted stock issued in exchange for tendered options will be
issued under the plans. Regardless of the current vesting schedule of your
options, the restricted stock you receive for tendered options will vest in
three equal annual installments beginning one year after April 1, 2000,
assuming you meet the requirements for vesting specified in the restricted
stock award agreement. As a result, you may receive restricted stock with a
new vesting schedule in exchange for options that have already vested. See
Section 8.

NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO
WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR OPTIONS FOR PURCHASE.
YOU MUST MAKE YOUR OWN DECISION WHETHER TO TENDER OPTIONS. WE HAVE BEEN
ADVISED THAT MOST OF OUR EXECUTIVE OFFICERS, INCLUDING A MAJORITY OF THOSE
THAT ARE DIRECTORS, INTEND TO TENDER OPTIONS PURSUANT TO THIS OFFER.
NON-EMPLOYEE DIRECTORS ARE NOT ELIGIBLE TO PARTICIPATE IN THE OFFER.

Shares of our common stock are listed and traded on The New York
Stock Exchange under the symbol "MLS." As of November 15, 2000, the closing
price of our common stock, as reported on the NYSE, was $16.94 per share. We
urge you to obtain current market quotations for our common stock. See Section
7.

You should direct questions or requests for assistance or for
additional copies of this offer to purchase or the letter of transmittal to
Michael Rodis, Vice President of Human Resources, The Mills Corporation, 1300
Wilson Blvd., Suite 400, Arlington, Virginia 22209 (telephone: (703)
526-5000).

November 17, 2000

<PAGE> 2

IMPORTANT INFORMATION

Any optionholder desiring to tender his or her options for purchase
should complete and sign the letter of transmittal, or a facsimile thereof, in
accordance with the instructions in the letter of transmittal, and mail or
otherwise deliver it and any other required documents, including the option
agreement(s) evidencing your options, to us at our address set forth on the
back cover of this offer to purchase.

This offer is not being made to, nor will any tender of options be
accepted from or on behalf of, optionholders in any jurisdiction in which the
making of this offer or the acceptance of any tender of options would not be
in compliance with the laws of such jurisdiction. However, we may, at our
discretion, take such action as we may deem necessary for us to make this
offer to optionholders in such jurisdiction.

WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS
TO WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR OPTIONS PURSUANT
TO THE OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS
DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO
GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THE
OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE RELATED LETTER OF
TRANSMITTAL. IF ANYONE MAKES ANY RECOMMENDATION OR GIVES ANY INFORMATION OR
REPRESENTATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, INFORMATION OR
AUTHORIZATION AS HAVING BEEN AUTHORIZED BY US.

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<PAGE> 3

SUMMARY TERM SHEET

This summary highlights the most material information from this offer
to purchase. To understand the offer fully and for a more complete description
of the terms of the offer, you should read carefully this entire offer to
purchase and related letter of transmittal. We have included page references
parenthetically to direct you to a more complete description of the topics in
this summary.

- WHAT SECURITIES ARE WE OFFERING TO PURCHASE?

We are offering to purchase all outstanding employee stock options issued at
an exercise price of $23.50 per share or more pursuant to the 1994 Amended and
Restated Executive Equity Incentive Plan or the 1999 Stock Option Plan, the
"plans." (Page 9)

- WHAT ARE THE CONDITIONS TO THE OFFER?

We will not be obligated to purchase any options if optionholders as a group
tender less than 700,000 options. However, we may choose to purchase less than
700,000 options if less than 700,000 options are tendered. (Page 9)

The offer also is subject to a number of other conditions. (Page 14)

- HOW MUCH WILL WE PAY YOU FOR YOUR OPTIONS?

We will pay for the options with shares of our common stock. All shares of our
common stock issued to optionholders in this offer will be "restricted stock"
awarded pursuant to the terms of the plans. Accordingly, these shares will be
subject to forfeiture and restrictions on transfer until the restrictions
lapse (at which time the shares "vest") under the terms of a new restricted
stock award agreement between you and us. If you tender all of your options,
you will receive the total number of shares of restricted stock set forth in
Schedule A. If you tender less than all of your options, you will receive a
portion of the total number of shares set forth on Schedule A equal to the
value of the portion of your options that you tender. (Page 12)

The amount of restricted stock you will receive was determined based on 50% of
the value of your options, as set forth in Schedule A. We retained Towers
Perrin Inc., an executive compensation consultant, to help us calculate the
value of the options. (Page 13)

You are urged to obtain current market quotations for the common stock. (Page
16)

- DO YOU HAVE TO TENDER ALL OF YOUR OPTIONS?

No, you may tender any portion of your options or none at all. If you tender
less than all of your options (a "partial tender"), you must indicate in the
letter of transmittal the number

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<PAGE> 4
of shares of common stock subject to each option listed on Schedule A ("option
shares") that are included in your tender. If we accept for purchase a partial
tender of an option, we will first accept the option shares as to which the
option has vested, if any. If the number of option shares that you tender
exceeds the number of option shares that have vested under that option, or if no
option shares have vested, we will first accept the option shares that have
vested, if any, and then will accept unvested option shares available under that
option sequentially, starting with those option shares scheduled to vest
earliest. (Page 12)

- WHEN WILL YOU RECEIVE PAYMENT FOR YOUR PURCHASED OPTIONS?

Assuming the conditions to the offer are satisfied, we will exchange the
shares of restricted stock for the tendered options promptly following the
expiration date of the offer. After the expiration date of the offer, we will
forward a restricted stock award agreement to you. You must properly execute
this restricted stock award agreement and return it to us. Upon our receipt of
the executed restricted stock award agreement, we will issue the restricted
stock to your account. (Page 12)

- WHAT IS THE VESTING SCHEDULE FOR THE RESTRICTED STOCK?

The restricted stock you receive will vest in three equal annual installments
beginning one year after April 1, 2000 (we refer to April 1, 2000 as the
"vesting record date"). Even if your options currently are vested, the
restricted stock you receive will be subject to vesting over three years from
the vesting record date. (Page 17)

- UNDER WHAT CIRCUMSTANCES WILL YOU FORFEIT THE RESTRICTED STOCK YOU
RECEIVE IN THIS TENDER OFFER?

In general, you will forfeit the restricted stock received in this tender offer
if you cease to be employed by us before the date the restricted stock vests.
You will not forfeit your restricted stock, and all of your restricted stock
will vest, if you leave our employment because of "retirement" or "permanent
disability" (both as defined in the plans), or upon your death, or because we
terminate your employment with us, provided that your termination was not a
"termination for cause" (as defined in the restricted stock award agreement).
(Page 17)

The shares of restricted stock you will receive vest in three annual
installments beginning one year after the vesting record date. For example,
subject to the above referenced exceptions, you would lose all of your shares of
restricted stock if you cease to be employed by us before April 1, 2001, the
first anniversary of the vesting record date. If, however, you remain in our
employment for two and one-half years after the vesting record date, you would
forfeit one-third of the shares of restricted stock and would own unrestricted
shares of common stock equal to two-thirds of the original grant of restricted
stock. (Page 17)

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<PAGE> 5

- WHAT ARE THE OTHER RESTRICTIONS ON THE RESTRICTED STOCK?

The restrictions on the restricted stock you will receive in this tender offer
are contained in the restricted stock award agreement. Restricted stock
generally may not be sold, transferred, assigned, pledged, or otherwise
encumbered or disposed until the stock vests. (Page 17)

You will not receive a stock certificate for the restricted stock until after
the restricted stock has vested. Until then, the restricted stock will be held
in our custody. Once the restricted stock has vested, the stock will no longer
be subject to forfeiture and will be free of the terms, conditions and
restrictions contained in the restricted stock award agreement. You will then
receive a certificate for the corresponding number of shares of common stock.
(Page 18)

- ARE YOU ENTITLED TO EXERCISE ANY RIGHTS OF OWNERSHIP OF RESTRICTED
STOCK WHILE THE STOCK IS SUBJECT TO A RESTRICTION OR SIMILAR
CONDITION?

Yes, you will have dividend, voting and other stockholder rights with respect to
any restricted stock you receive in the offer as of the date we issue the
restricted stock to your account. In addition, we will deliver to you, by mail
or otherwise, all notices of meetings, proxy statements, proxies and other
materials distributed to our stockholders. (Page 18)

- WHAT IS THE SOURCE OF THE COMMON STOCK THAT WILL BE USED TO PAY YOU
FOR YOUR OPTIONS?

The restricted stock to be offered to optionholders will be issued under our
two existing plans, and will be drawn from the pool of common stock currently
authorized for issuance under the plans. All options purchased by us in the
tender offer will be cancelled, thereby permitting the issuance of the
restricted stock and providing additional stock for future awards under the
plans. (Pages 17, 21)

- UNDER WHICH OF THE PLANS WILL YOUR SHARES OF RESTRICTED STOCK BE
ISSUED?

We will issue your award of restricted stock pursuant to the same plan under
which we initially issued the options that you tender for purchase. The
material terms of the awards of restricted stock issued in exchange for
tendered options will be the same under both plans. (Page 17)

- WHEN DOES THE OFFER EXPIRE? CAN WE EXTEND THE OFFER, AND IF SO, HOW
WILL YOU BE NOTIFIED?

The offer expires Monday, December 18, 2000, at 5:00 p.m., New York City
time, unless it is extended by us.

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<PAGE> 6

We may extend the offer at any time but we cannot assure you that the offer
will be extended or, if extended, for how long. (Page 9)

If the offer is extended, we will make a public announcement of the extension
no later than 9:00 a.m. on the next business day following the previously
scheduled expiration of the offer period. (Page 23)

- HOW DO YOU TENDER YOUR OPTIONS?

If you decide to tender your options, you must deliver to us a properly
completed and duly executed letter of transmittal, the option agreement(s)
evidencing your options and any other documents required by the letter of
transmittal, at the address set forth on the back cover of this offer before
5:00 p.m. on Monday, December 18, 2000. (Pages 9, 11)

- DURING WHAT PERIOD OF TIME CAN YOU WITHDRAW PREVIOUSLY TENDERED
OPTIONS?

You may withdraw your tendered options at any time before 5:00 p.m. on
December 18, 2000. If the offer is extended by us beyond that time, you may
withdraw your tendered options at any time until the expiration of the offer.
In addition, unless we accept your tendered options for purchase before 12:00
midnight, New York City time, on January 17, 2001, you may withdraw your
tendered options at any time after January 17, 2001. To withdraw tendered
options you must deliver a written notice of withdrawal, or facsimile thereof,
with the required information to us while you still have the right to withdraw
the tendered options. Once withdrawn, you may retender options only by again
following the delivery procedures described above. (Page 12)

- WHAT DO WE AND OUR BOARD OF DIRECTORS THINK OF THE OFFER?

Neither we nor our board of directors makes any recommendation as to whether
you should tender or refrain from tendering your options. You must make your
own decision whether to tender options.

We have been advised that most of our executive officers, including a majority
of those that are directors, intend to tender options pursuant to the offer.
Non-employee directors are not eligible to participate in the offer. (Pages
10, 21)

- WILL YOU HAVE TO PAY TAXES IF WE PURCHASE YOUR OPTIONS IN THE OFFER?

There are no immediate tax consequences of receiving restricted stock in
exchange for your options, unless you make an election under Section 83(b) of
the Internal Revenue Code. Upon vesting in the restricted stock and lapse of
the terms, conditions and restrictions that apply to the restricted stock, you
will be required to recognize additional income in an amount equal to the fair
market value of such restricted stock, determined on the date the shares are
no longer restricted. The Company will generally be allowed a business
expense deduction

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<PAGE> 7

for the amount of any taxable income recognized by you at the time such income
is recognized. (Page 22)

Certain consequences to holders of "incentive stock options" who do not tender
these options in the offer are discussed in the offer to purchase. (Page 22)

You are urged to consult with your own tax adviser to determine the tax
consequences of participating in the offer. (Page 22)

- WHO SHOULD YOU CONTACT IF YOU HAVE QUESTIONS ABOUT THE OFFER?

For additional information or assistance, you may contact:

Michael Rodis
Vice President of Human Resources
The Mills Corporation
1300 Wilson Blvd., Suite 400
Arlington, Virginia 22209
(telephone: (703) 526-5000)

- WHY ARE WE MAKING THE OFFER?

We believe that many of our outstanding options are not achieving the purpose
for which they were intended. The options that we are offering to purchase have
exercise prices ranging from $23.50 to $26.31 per share, while the closing
price of our common stock on November 15, 2000, as reported on the NYSE, was
$16.94 per share. By making this offer to purchase and instituting other forms
of incentive and option plans for which our current employees will be able to
realize the intended benefits, we expect to be able to provide better
performance incentives to these employees and thereby maximize stockholder
value. (Page 10)

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<PAGE> 8

<TABLE>
<CAPTION>
TABLE OF CONTENTS

SECTION PAGE
------- ----
<S> <C>
SUMMARY TERM SHEET..................................................................................1
TABLE OF CONTENTS...................................................................................6
FORWARD-LOOKING STATEMENTS..........................................................................6
INTRODUCTION........................................................................................7
THE OFFER...........................................................................................9
1. NUMBER OF OPTIONS; EXPIRATION DATE.............................................................9
2. PURPOSE OF THE OFFER..........................................................................10
3. PROCEDURES FOR TENDERING OPTIONS..............................................................11
4. WITHDRAWAL RIGHTS.............................................................................12
5. ACCEPTANCE FOR PURCHASE OF OPTIONS AND PAYMENT OF PURCHASE PRICE..............................12
6. CERTAIN CONDITIONS OF THE OFFER...............................................................14
7. PRICE RANGE OF THE COMMON STOCK...............................................................16
8. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF RESTRICTED STOCK AWARD..........................17
9. CERTAIN INFORMATION ABOUT US..................................................................18
10. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OPTIONS.....20
11. STATUS OF OPTIONS ACQUIRED BY US IN THE OFFER.................................................21
12. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS...................................................21
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......................................................22
14. EXTENSION OF OFFER; TERMINATION; AMENDMENT....................................................23
15. FEES AND EXPENSES.............................................................................24
16. ADDITIONAL INFORMATION........................................................................24
17. MISCELLANEOUS.................................................................................25

SCHEDULE A........................................................................................A-1
SCHEDULE B........................................................................................B-1
</TABLE>

FORWARD-LOOKING STATEMENTS

This offer to purchase and information that is incorporated by
reference in it contain forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those
in the forward-looking statements. When used in this offer to purchase, the
words "anticipate," "believe," "estimate," "intend" and "expect" and similar
expressions are intended to identify such forward-looking statements. The
forward-looking statements are based on our current views and assumptions and
involve risks and uncertainties that include, among other things, general
economic, business, and regulatory conditions, competition, federal and state
regulations, availability, terms and use of capital, environmental issues and
weather. Some or all of the factors are beyond our control.

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<PAGE> 9

INTRODUCTION

The Mills Corporation, a Delaware corporation, hereby offers to
purchase outstanding options to purchase shares of our common stock, $.01 par
value per share, that were issued to our employees under the 1994 Amended and
Restated Executive Equity Incentive Plan or the 1999 Stock Option Plan (the
"plans") and that have an exercise price of $23.50 per share or more (the
"options"). The purchase price of each option tendered will be paid in common
stock, which will be issued as "Restricted Stock" under the terms of the
plans. As Restricted Stock, these shares will be subject to forfeiture and
other restrictions until they vest under the terms of a new restricted stock
award agreement between each tendering optionholder and us. See Section 8. Our
offer is made upon the terms and subject to the conditions set forth herein
and in the related letter of transmittal. We refer to this offer to purchase
and the related letter of transmittal, together with any amendments or
supplements, as the "offer."

We are offering to purchase all of the outstanding options with an
exercise price of $23.50 per share or more. All options properly tendered and
not validly withdrawn will be purchased at the purchase price, subject to the
terms and the conditions of the offer. You may tender all, any portion of your
options, or none at all. Schedule A to this offer to purchase sets forth the
number of shares of Restricted Stock you will receive for each option you choose
to tender. To tender less than all of your options, you must indicate the number
of shares of common stock subject to each option ("option shares") that you wish
to tender. If you tender all of your options, you will receive the total number
of shares of Restricted Stock set forth in Schedule A. If you tender less than
all of your options, you will receive a portion of the total number of shares of
Restricted Stock set forth on Schedule A equal to the value of the number of
option shares you tender. See Section 5.

The Restricted Stock issued in exchange for tendered options will be
issued under the plans. Regardless of the current vesting schedule of your
options, the Restricted Stock you receive for tendered options will vest in
three equal annual installments beginning one year after April 1, 2000 (we
refer to April 1, 2000 as the "vesting record date"), assuming you meet the
requirements for vesting specified in the restricted stock award agreement. As
a result, you may receive Restricted Stock with a new vesting schedule in
exchange for options that have already vested. See Section 8.

As of the date of this offer, we had issued and outstanding options
to purchase 4,541,485 shares of common stock issued under the plans, of which
options to purchase 2,429,954 shares of common stock issued to our employees
have an exercise price of $23.50

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<PAGE> 10
or more. The options we are offering to purchase represent approximately 52% of
the stock options issued and outstanding as of such date.

Our common stock is listed and principally traded on The New York Stock
Exchange under the symbol "MLS." On November 15, 2000, the last reported sale
price of our common stock was $16.94 per share. YOU ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR OUR COMMON STOCK. SEE SECTION 7.

All options accepted by us pursuant to this offer will be cancelled.

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<PAGE> 11

THE OFFER

1. NUMBER OF OPTIONS; EXPIRATION DATE.

Upon the terms and subject to the conditions of the offer, we will
purchase from our employees all options to purchase shares of our common stock
that have an exercise price of $23.50 per share or more and that are properly
tendered (and not validly withdrawn in accordance with Section 4) prior to the
Expiration Date (as defined below). We will not be obligated to purchase any
options if optionholders as a group tender less than 700,000 options. However,
we may choose to purchase less than 700,000 options if less than 700,000 options
are tendered. This offer also is subject to other conditions. See Section 6. We
will accept partial tenders of any amount of options. See Section 5. The term
"Expiration Date" means 5:00 p.m., New York City time, on Monday, December 18,
2000, unless and until we, in our sole discretion, shall have extended the
period of time during which the offer will remain open, in which event the term
"Expiration Date" shall refer to the latest time and date at which the offer, as
so extended by us, shall expire. See Section 14 for a description of our right
to extend, delay, terminate or amend the offer.

If your options are properly tendered and accepted for purchase, you
will be entitled to receive an amount payable in shares of common stock. All
shares of our common stock paid to optionholders pursuant to this offer will be
Restricted Stock subject to the vesting schedule set forth in a new restricted
stock award agreement between you and us. See Section 8. If you tender all of
your options, you will receive the total number of shares of Restricted Stock
set forth in Schedule A. If you tender less than all of your options, you will
receive a portion of the total number of shares set forth on Schedule A equal to
the value of the number of option shares you tender. See Section 5.

The offer will be extended until the expiration of ten business days
from the date of publication of notice if:

(a) we increase or decrease the amount of consideration to be
paid for the options or we increase or decrease the number
of subject options being sought in the offer and, in the
event of an increase in the number of subject options being
sought, such increase exceeds 2% of the outstanding subject
options, and

(b) the offer is scheduled to expire at any time earlier than
the expiration of a period ending on the tenth business day
from, and including, the date that notice of such increase
or decrease is first published, sent or given in the manner
specified in Section 14.

For purposes of the offer, a "business day" means any day other than
a Saturday, Sunday or federal holiday and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.

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<PAGE> 12

2. PURPOSE OF THE OFFER.

We believe that many of our outstanding options are not achieving the
purpose for which they were intended. The options that we are offering to
purchase have exercise prices ranging from $23.50 to $26.31 per share while the
closing price of our common stock on November 15, 2000, as reported on the NYSE,
was $16.94 per share. By making this offer to purchase and instituting other
forms of incentive and option plans for which our current employees will be able
to realize the intended benefits, we expect to be able to provide better
performance incentives to these employees and thereby maximize stockholder
value.

We consistently evaluate strategic opportunities that may arise,
including additional capital infusions, joint ventures and the purchase or
sale of assets. Subject to the foregoing, and except as otherwise disclosed in
this offer to purchase, we presently have no plans or proposals that relate to
or would result in:

(a) the acquisition by any person of any of our securities or
the disposition of any of our securities;

(b) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving us or any of our
subsidiaries;

(d) any change in our present board of directors or management;

(e) any material change in our present dividend rate or policy,
or our indebtedness or capitalization;

(f) any other material change in our corporate structure or
business;

(g) any change in our Amended and Restated Certificate of
Incorporation or Amended and Restated Bylaws (except for our
possible reincorporation from the State of Delaware to the
State of Maryland), or any actions which may impede the
acquisition of control of us by any person;

(h) a class of equity securities being delisted from a national
securities exchange;

(i) a class of our equity securities becoming eligible for
termination of registration pursuant to Section 12(g)(4) of
the Securities Exchange Act of 1934 ("Securities Exchange
Act"); or

(j) the suspension of our obligation to file reports pursuant to
Section 15(d) of the Securities Exchange Act.

Neither we nor our board of directors makes any recommendation as to
whether you should tender your options, nor have we authorized any person to
make any such recommendation. You are urged to evaluate carefully all
information in the offer to purchase and to consult your own investment and
tax advisers. You must make your own decision whether to tender your options
for purchase.

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<PAGE> 13

3. PROCEDURES FOR TENDERING OPTIONS.

Proper Tender of Options. To validly tender your options pursuant to
the offer, a properly completed and duly executed letter of transmittal, or
facsimile thereof, in accordance with the letter of transmittal, and any other
required documentation, including the option agreement(s) evidencing your
options, must be received by us at our address set forth on the back cover of
this offer to purchase prior to the Expiration Date.

THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING LETTERS OF
TRANSMITTAL, OPTION AGREEMENT(s), AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE
ELECTION AND RISK OF THE TENDERING OPTIONHOLDER. IF DELIVERY IS BY MAIL, WE
RECOMMEND THAT YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED AND
PROPERLY INSURE YOUR PACKAGE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME
TO ENSURE TIMELY DELIVERY.

Determination of Validity; Rejection of Options; Waiver of Defects;
No Obligation to Give Notice of Defects. All questions as to form of documents
and the validity, form, eligibility (including time of receipt) and acceptance
of any tender of options will be determined by us, in our sole discretion, and
our determination will be final and binding on all parties. We reserve the
right to reject any or all tenders of options that we determine are not in
appropriate form or the acceptance for payment of or payment for which may be
unlawful. We also reserve the right to waive any of the conditions of the
offer or any defect or irregularity in any tender with respect to any
particular options or any particular optionholder. No tender of options will
be deemed to have been properly made until all defects or irregularities have
been cured by the tendering optionholder or waived by us. Neither we nor any
other person will be obligated to give notice of any defects or irregularities
in tenders, nor will anyone incur any liability for failure to give any such
notice.

Our Acceptance Constitutes an Agreement. Your tender of options
pursuant to the procedures described above will constitute your acceptance of
the terms and conditions of the offer. OUR ACCEPTANCE FOR PURCHASE OF YOUR
OPTIONS TENDERED BY YOU PURSUANT TO THE OFFER WILL CONSTITUTE A BINDING
AGREEMENT BETWEEN YOU AND US UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF
THE OFFER.

Lost, Stolen, Destroyed or Mutilated Option Agreements Evidencing the
Tendered Options. If your option agreement(s) evidencing the options to be
tendered has been lost, stolen, destroyed or mutilated, you must complete the
box captioned "Lost, Stolen, Destroyed or Mutilated Agreements" on the letter
of transmittal, indicating the number of options subject to the lost, stolen,
destroyed or mutilated option agreement(s). You must then contact us to
ascertain the steps that must be taken to replace the option agreement(s)
evidencing the options to be tendered. To avoid delay, you should contact
immediately Michael Rodis, our Vice President of Human Resources, at (703)
526-5000.

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<PAGE> 14

4. WITHDRAWAL RIGHTS.

You may only withdraw your tendered options in accordance with the
provisions of this Section 4.

You may withdraw your tendered options at any time before 5:00 p.m. New
York City time on Monday, December 18, 2000. If the offer is extended by us
beyond that time, you may withdraw your tendered options at any time until the
expiration of the offer. In addition, unless we accept your tendered options for
purchase before 12:00 midnight, New York City time, on Wednesday, January 17,
2001, you may withdraw your tendered options at any time after January 17, 2001.
To withdraw tender options you must deliver a written notice of withdrawal, or
facsimile thereof, with the required information to us while you still have the
right to withdraw the tendered options. Withdrawals may not be rescinded and any
options withdrawn will thereafter be deemed not properly tendered for purposes
of the offer unless such withdrawn options are properly retendered prior to the
Expiration Date by following the procedures described Section 3.

Neither we nor any other person will be obligated to give notice of
any defects or irregularities in any notice of withdrawal nor will anyone
incur any liability for failure to give any such notice. All questions as to
the form and validity (including time of receipt) of notices of withdrawal
will be determined by us, in our sole discretion, which determination will be
final and binding.

5. ACCEPTANCE FOR PURCHASE OF OPTIONS AND PAYMENT OF PURCHASE PRICE.

Upon the terms and subject to the conditions of this offer to
purchase and as promptly as practicable following the Expiration Date, we will
accept for payment and pay for (and thereby purchase) options properly
tendered and not validly withdrawn prior to the Expiration Date. If your
options are properly tendered and are accepted for payment, you will receive a
restricted stock award agreement promptly after the Expiration Date. You must
properly execute and return this restricted stock award agreement to us. Upon
our receipt of the executed restricted stock award agreement, we will issue
the Restricted Stock to your account.

If you tender all of your options, this agreement will be for the
total number of shares of Restricted Stock set forth in Schedule A. If you
tender less than your total number of options (a "partial tender"), your
restricted stock award agreement will be for a portion of the total number of
shares set forth in Schedule A equal to the value of the number of option
shares you tender.

If you wish to make a partial tender of your options, you must
indicate in the letter of transmittal the number of shares of common stock
subject to each option listed on Schedule A ("option shares") that will be
included in your tender. If we accept for purchase a partial tender of an
option, we will first accept the option shares as to which the option has
vested, if any. If the number of option shares that you tender exceeds the
number of option shares that have vested under that option, or if no option
shares have vested, we will first accept the

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<PAGE> 15
option shares that have vested, if any, and then will accept unvested option
shares available under that option sequentially, starting with those option
shares scheduled to vest earliest. If we accept for purchase your partial
tender, a new option agreement evidencing your remaining options will be
forwarded to you.

We retained Towers Perrin, Inc., an executive compensation consultant, to
help us calculate the value of the options and the Restricted Stock to be issued
in exchange for the options. For purposes of determining the value of the
options, we have valued options based on differences in exercise price, vesting
schedule and expiration date. All options with the same exercise price, vesting
schedule and expiration date are treated the same. For each option tendered and
accepted for payment, you will receive shares of Restricted Stock equal in value
to 50% of the value of that option. The value of each option has been
determined using the "Binomial Ratio" option pricing model adapted for use in
valuing executive stock options. The estimated values under the model are based
on seven factors. The first three of these factors are the same for all options.
The fourth factor is the same for all options, but is applied only to the
unvested portion of each option, if any. The fifth and sixth factors vary among
options based on the number of years left before a particular option expires.
The final factor will vary among options based on the exercise price set at the
grant date. The seven factors are:

- an assumed volatility rate of our common stock (24.5%, based
on 36 months of stock price data ending September 29, 2000);

- the market price of our common stock, assumed to be $17.00,
the closing price on November 6, 2000;

- the dividend yield on our common stock (9.48%, based on 36
months of dividend and stock price data ending September 29,
2000);

- an assumed discount applied to each unvested installment of
an option that estimates the risk that an employee will not
remain employed by us for the duration of the vesting period
for the option (3% for each year until the installment
vests);

- a risk-free rate of return (6.5%, based on a U.S. Treasury
rate for the same term as the option);

- the length of time to expiration of the particular option;
and

- the exercise price of the particular option.

In consultation with Towers Perrin, we have valued the shares of
Restricted Stock to be issued in exchange for the options using a two-step
calculation. As a base price, we have valued all shares of Restricted Stock at
$17.00 per share, equal to the closing price of our common stock on November 6,
2000. For each of the three installments of the awards of Restricted Stock, we
reduced this base price using an assumed discount to estimate the risk that an
employee will not remain employed by us for the duration of the vesting period
for the Restricted Stock. This assumed discount was 3% for each year until the
installment of Restricted

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<PAGE> 16

Stock vests. Based on these calculations, the value of each share of
Restricted Stock is $15.997.

For purposes of the offer, we will be deemed to have accepted for
payment options that are validly tendered and not properly withdrawn as, if
and when we give oral or written notice to the optionholders of our acceptance
for payment of such options, which may be by press release.

6. CERTAIN CONDITIONS OF THE OFFER.

Notwithstanding any other provision of the offer, we will not be
required to accept for payment of, or make any payment for, any options
tendered and may terminate or amend the offer or may postpone the acceptance
for payment of, or the payment for, any options tendered, subject to Rule
13e-4(f)(5) under the Securities Exchange Act, if at any time on or after
November 15, 2000 and prior to the time of payment for any such options
(whether any options have previously been accepted for payment pursuant to the
offer) any of the following events shall have occurred (or shall have been
determined by us to have occurred) and, in our reasonable judgment in any such
case and regardless of the circumstances giving rise thereto (including any
action or omission to act by us), the occurrence of such event or events makes
it inadvisable to proceed with the offer or with such acceptance for payment
or payment:

(a) there shall have been threatened or instituted or be pending any
action or proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or any other person, domestic or
foreign, before any court, authority, agency or tribunal that directly or
indirectly (i) challenges the making of the offer, the acquisition of some of
all of the options pursuant to the offer, the payment for such options, or
otherwise relates in any manner to the offer; or (ii) in our reasonable
judgment, could materially and adversely affect the business, condition
(financial or other), income, operations or prospects of us and our
subsidiaries, or otherwise materially impair in any way the contemplated
future conduct of the business of us or any of our subsidiaries or materially
impair the contemplated benefits of the offer to us;

(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the offer or us or any of our
subsidiaries, by any court or any authority, agency or tribunal that, in our
reasonable judgment, would or might directly or indirectly (i) make the
acceptance for payment of, or payment for, some or all of the options illegal
or otherwise restrict or prohibit consummation of the offer or otherwise
relates in any manner to the offer; (ii) delay or restrict the ability of us,
or render us unable, to accept for payment or pay for some or all of the
options; (iii) materially impair the contemplated benefits of the offer to us;
or (iv) materially and adversely affect the business, condition (financial or
other), income, operations or prospects of us and our subsidiaries, taken as
whole, or otherwise materially impair in any way the contemplated future
conduct of the business of us or any of our subsidiaries;

- 14 -
<PAGE> 17

(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market; (ii) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory); (iii) the commencement of a war, armed
hostilities or other international or national crisis directly or indirectly
involving the United States; (iv) any limitation (whether or not mandatory) by
any governmental, regulatory or administrative agency or authority on, or any
event that, in our reasonable judgment, might affect the extension of credit
by banks or other lending institutions in the United States; (v) any
significant decrease in the market price of the shares of our common stock or
any change in the general political, market, economic or financial conditions
in the United States or abroad that could, in our reasonable judgment, have a
material adverse effect on our business, condition (financial or other),
operations or prospects or on the trading in the common stock; (vi) any change
in the general political, market, economic or financial conditions in the
United States or abroad that could have a material adverse effect on our
business, condition (financial or other), operations or prospects or that, in
our reasonable judgment, makes it inadvisable to proceed with the offer; (vii)
in the case of any of the foregoing existing at the time of the commencement
of the offer, a material acceleration or worsening thereof; or (viii) any
decline in either the Dow Jones Industrial Average or the Standard and Poor's
Index of 500 Companies by an amount in excess of 10% measured from the close
of business on November 15, 2000;

(d) a tender or exchange offer with respect to some or all of our
common stock, or a merger or acquisition proposal for us, shall have been
proposed, announced or made by another person or entity or shall have been
publicly disclosed, or we shall have learned that (i) any person, entity or
"group" (within the meaning of Section 13(d)(3) of the Securities Exchange
Act) shall have acquired or proposed to acquire beneficial ownership of more
than 5% of the outstanding shares of common stock, or any new group shall have
been formed that beneficially owns more than 5% of the outstanding shares of
common stock (other than any such person, entity or group who has filed a
Schedule 13D or Schedule 13G with the SEC on or before November 15, 2000);
(ii) any such person, entity or group who has filed a Schedule 13D or Schedule
13G with the SEC on or before November 15, 2000, shall have acquired or
proposed to acquire beneficial ownership of an additional 2% or more of the
outstanding shares of common stock; or (iii) any person, entity or group shall
have filed a Notification and Report Form under the Hart-Scott- Rodino
Antitrust Improvements Act of 1976 or made a public announcement reflecting an
intent to acquire us or any of our subsidiaries or any of their respective
assets or securities; or

(e) any change or changes shall have occurred in our business,
condition (financial or other), assets, income, operations, prospects or stock
ownership or our subsidiaries that, in our reasonable judgment, is or may be
material to us or our subsidiaries.

The conditions to the offer are for our benefit. We may assert them
in our discretion regardless of the circumstances giving rise to them prior to
the time we accept options for payment. We may waive them, in whole or in
part, at any time and from time to time prior to the time we accept options
for payment, in our discretion, whether or not we waive any other condition to
the offer. Our failure at any time to exercise any of these rights will not be
deemed a waiver of any such rights. The waiver of any of these rights with
respect to particular facts and circumstances will not be deemed a waiver with
respect to any other

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<PAGE> 18

facts and circumstances. Any determination we make concerning the events
described in this Section 6 will be final and binding upon all persons.

7. PRICE RANGE OF THE COMMON STOCK.

Our common stock is traded on the NYSE. The following table sets
forth, for the quarters indicated, the high and low trading prices per share
of our common stock.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
2000 QUARTER ENDED
December 31, 2000 (through November 15, 2000)...................... $19.00 $16.625
September 30, 2000................................................. 19.1875 17.00
June 30, 2000 ..................................................... 19.25 17.375
March 31, 2000..................................................... 18.9375 15.625
1999 QUARTER ENDED
------------------
December 31, 1999.................................................. 18.4375 15.3125
September 30, 1999................................................. 22.00 17.50
June 30, 1999...................................................... 22.625 16.125
March 31, 1999..................................................... 20.75 17.125
1998 QUARTER ENDED
------------------
December 31, 1998.................................................. 23.0625 17.75
September 30, 1998................................................. 27.3125 19.125
June 30, 1998...................................................... 26.75 23.0625
March 31, 1998..................................................... 27.50 23.375
</TABLE>

As of November 15, 2000, the closing price of our common stock, as
reported on the NYSE, was $16.94 per share.

YOU ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON STOCK.

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<PAGE> 19

8. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF RESTRICTED STOCK AWARD.

Consideration. Assuming we purchase all of our outstanding options
from employees that have an exercise price of $23.50 per share or more
pursuant to the offer, the aggregate amount of Restricted Stock we will issue
to optionholders will be 270,367 shares.

Terms of Restricted Stock. The Restricted Stock will be issued
pursuant to the same plan under which the options tendered and accepted for
payment were issued. The material terms of the awards of Restricted Stock will
be the same under both plans.

Our statements concerning the plans and the Restricted Stock are merely
summaries and do not purport to be complete. The statements are subject to, and
are qualified in their entirety by reference to, all provisions of the plans and
the restricted stock award agreement between you and us. The forms of restricted
stock award agreement have been filed as exhibits to our Schedule TO, filed with
the SEC. Please contact us at the address and telephone number on the back cover
of this offer to purchase to receive copies of the plans or forms of restricted
stock award agreement. Copies will be furnished promptly at our expense.

Awards of Restricted Stock under the 1994 Amended and Restated
Executive Equity Incentive Plan ("1994 plan") may be made to any of our
employees and employees of certain of our subsidiaries and affiliates. The
1994 plan also allows awards to non-employee directors, provided, however,
that such awards are limited to non-discretionary annual awards of Restricted
Stock having a fair market value of $6,000. As a result, non-employee
directors will not be able to participate in the offer.

Awards of restricted stock under the 1999 Stock Option Plan ("1999
plan") may be made to our employees and employees of certain of our
subsidiaries and affiliates, provided in each case that the employee does not
hold a position more senior than vice president. Certain consultants, advisers
and service providers are also eligible for awards under this plan. Without
regard to title or position, persons who are required to file reports with
respect to our company with the Securities and Exchange Commission pursuant to
Section 16(a) of the Securities Exchange Act are not eligible for awards under
the 1999 plan. These persons may receive awards only under the 1994 plan.

The shares of Restricted Stock you receive in exchange for tendered
options accepted for payment will be subject to forfeiture and other
restrictions until the shares vest. These restrictions include prohibitions
against sale, assignment, transfer, exchange, pledge, hypothecation or other
encumbrance, other than by will or the laws of descent and distribution.

The shares of Restricted Stock will vest in three equal annual
installments beginning April 1, 2001, the first anniversary of the vesting
record date, assuming you are still employed by us or one of our subsidiaries
on the vesting date. Prior to vesting, your Restricted Stock will be subject
to forfeiture if you cease to be employed by us for any reason other than (a)
"retirement" or "permanent disability" (both as defined in the plans) or death;
or (b) because we terminate your employment for reasons other than a
"termination for cause" (as defined in the restricted stock award agreement).
In the event of death,

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<PAGE> 20

retirement, permanent disability or termination other than for cause, all
unvested shares of Restricted Stock will vest.

All unvested Restricted Stock awards will vest upon a "change of
control." At our discretion, we may instead cancel all unvested Restricted
Stock upon a change of control and pay you for the Restricted Stock. These
advantages are not available in certain circumstances to holders of Restricted
Stock awards who are involved in a plan to acquire us. Under the plans, a
"change of control" occurs if: (a) a person or group of persons acquires 20%
or more of our outstanding common stock; (b) there is a change of a majority
of our board of directors within any period of 24 months, unless a majority of
the directors in office at the end of the period were nominated upon the
recommendation of a majority of the directors in office at the beginning of
the period; or (c) there is a merger, consolidation or other reorganization
having substantially the same effect, or the sale of all or substantially all
of the consolidated assets of our company.

You will not receive a stock certificate for the Restricted Stock
until after the Restricted Stock vests. Until then, the Restricted Stock will
be held in our custody. Your award of Restricted Stock will be evidenced by
the restricted stock award agreement between you and us. On each vesting date,
if you are still employed by us, you will receive a certificate for the number
of shares of common stock corresponding to one-third of your original award of
Restricted Stock.

You will have dividend, voting and other stockholder rights (subject to
the transfer and forfeiture restrictions discussed above) with respect to all
shares of Restricted Stock you receive in the offer as of the date we issue the
Restricted Stock to your account. We will deliver to you, by mail or otherwise,
all notices of meetings, proxy statements, proxies and other materials
distributed to our stockholders.

9. CERTAIN INFORMATION ABOUT US.

GENERAL

We are a fully integrated, self-managed real estate investment trust
("REIT"). We conduct all of our business through The Mills Limited Partnership
(the "Operating Partnership"), in which we own, as of September 30, 2000, a 1%
interest as the sole general partner and a 58.68% interest as a limited partner.
Through the Operating Partnership, we own interests in, develop, redevelop,
lease and manage a portfolio that, as of the date of this offer to purchase,
consists of ten super-regional, value and entertainment oriented malls, one
community shopping center, one urban entertainment/retail project, a portfolio
of 25 single-tenant net lease properties and other related commercial
development. The ten malls comprise the primary focus of our operations. We have
approximately 1,300 employees, as of September 30, 2000, and provide all
development, redevelopment, leasing, financing, management and marketing
services with respect to all properties currently in operation. In addition to
the operating properties, we are actively involved in the development of new
malls and other retail oriented projects.

We were originally incorporated in the Commonwealth of Virginia on
January 2, 1991 and reincorporated in the State of Delaware in 1994. We became
publicly traded on April 21, 1994.

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<PAGE> 21

We maintain our executive offices at 1300 Wilson Boulevard, Suite
400, Arlington, Virginia 22209. Our telephone number is (703) 526-5000. We
also maintain a web site at www.millscorp.com.

CERTAIN FINANCIAL INFORMATION

Set forth below is selected summary historical consolidated financial
information of us and our subsidiaries. The historical financial information
has been derived from our consolidated financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 1999 and our
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000. The
information presented below should be read in conjunction with our
consolidated financial statements and notes thereto.

- 19 -

<PAGE> 22

<TABLE>
<CAPTION>
AT OR FOR THE YEAR AT OR FOR THE NINE
ENDED MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1999 1998 2000 1999
---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data
----------------------------
Total revenue $ 184,685 $ 177,270 $ 141,522 $ 135,817
Income before extraordinary items and minority interests 48,603 43,192 47,949 34,836
Income before minority interests 45,841 39,252 44,802 32,074
Net income 27,223 23,252 26,686 19,046

Earnings per share - Basic:

Income per share before extraordinary items 1.25 1.11 1.23 0.89
Extraordinary loss on debt extinguishment (0.07) (0.10) (0.08) (0.07)

Net income per share 1.18 1.01 1.15 0.82

Earnings per share - Diluted:

Income per share before extraordinary items 1.24 1.10 1.23 0.89
Extraordinary loss on debt extinguishment (0.07) (0.10) (0.08) (0.07)

Net income per share 1.17 1.00 1.15 0.82

Basic shares 23,131 23,011 23,231 23,070
Diluted shares 23,293 23,361 23,287 23,460

Balance Sheet Data
------------------
Investment in real estate assets
(before accumulated depreciation) 1,177,726 1,198,058
Total assets 1,039,467 1,084,864
Total mortgages, notes and loans payable 877,273 926,267
Minority interests 40,978 35,359
Total stockholders' equity 60,027 52,336

Book value per common share 2.58 2.24
</TABLE>

10. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE OPTIONS.

A list of our directors and executive officers is attached to this
offer to purchase as Schedule B. As of the date of this offer, our directors and
executive officers as a group (19 persons) beneficially own an aggregate of
2,760,878 options to purchase shares of our common stock, representing
approximately 61% of the total number of options issued and outstanding as of
such date. For information with respect to beneficial ownership by our directors
and executive officers of our common stock, please refer to our definitive proxy
statement, filed with the SEC on March 30, 2000.

Based upon our records and upon information provided to us by our
directors, executive officers, associates and subsidiaries, neither we nor, to
the best of our knowledge,

- 20 -

<PAGE> 23

any of our directors or executive officers or any of our subsidiaries nor any
associates or subsidiaries of any of the foregoing, has effected any
transactions in the options or our common stock during the 60 days prior to
the date hereof.

We have been advised that most of our executive officers, including a
majority of those that are directors, intend to tender options pursuant to
this offer. Non-employee directors are not eligible to participate in the
offer.

Except for outstanding options to purchase common stock and
restricted stock awards granted from time to time to certain of our employees
(including executive officers) and non-employee directors pursuant to the
plans, and except as set forth in this offer to purchase, neither we nor any
person controlling us nor, to our knowledge, any of our directors or executive
officers, is a party to any contract, arrangement, understanding or
relationship with any other person relating, directly or indirectly, to the
offer with respect to any of our securities (including, but not limited to,
any contract, arrangement, understanding or relationship concerning the
transfer or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss or
the giving or withholding of proxies, consents or authorizations).

11. STATUS OF OPTIONS ACQUIRED BY US IN THE OFFER.

Options we acquire pursuant to the offer will be canceled and
returned to the pool of options available for issuance pursuant to the plans.
Such options will be available for future awards to eligible employees and
certain consultants and advisers to us without further stockholder action
(except as required by applicable law or the rules of the NYSE or any other
securities exchange on which our common stock is then listed).

12. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.

We are not aware of any license or regulatory permit that appears to
be material to our business that might be adversely affected by our
acquisition of options and payment of Restricted Stock as contemplated herein
or of any approval or other action by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, that
would be required for the acquisition or ownership of our options or
Restricted Stock as contemplated herein. Should any such approval or other
action be required, we presently contemplate that such approval or other
action will be sought. We are unable to predict whether we may determine that
we are required to delay the acceptance for payment of or payment for options
tendered pursuant to the offer pending the outcome of any such matter. There
can be no assurance that any such approval or other action, if needed, would
be obtained or would be obtained without substantial conditions or that the
failure to obtain any such approval or other action might not result in
adverse consequences to our business. Our obligation under the offer to accept
for payment and pay for options with Restricted Stock is subject to certain
conditions. See Section 6.

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<PAGE> 24

13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.

The following is a general summary of the material federal income tax
consequences of the sale of options pursuant to the offer. This discussion is
based on the Internal Revenue Code of 1986, as amended (the "Code"), its
legislative history, Treasury Regulations thereunder and administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change (possibly on a retroactive basis). This summary does not
discuss all the tax consequences that may be relevant to you in light of your
particular circumstances and it is not intended to be applicable in all
respects to all categories of stockholders.

YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISER WITH RESPECT TO THE
FEDERAL, STATE AND LOCAL CONSEQUENCES OF PARTICIPATING IN THE OFFER, AS WELL
AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING
JURISDICTION.

General. There are no immediate tax consequences of receiving
Restricted Stock in exchange for your options, unless you make an election
under Section 83(b) of the Internal Revenue Code. Upon vesting in the
Restricted Stock and lapse of the terms, conditions and restrictions that
apply to the Restricted Stock, you will be required to recognize additional
income in an amount equal to the fair market value of such Restricted Stock,
determined on the date the shares are no longer restricted.

The Section 83(b) election must be made and filed with the Internal
Revenue Service within 30 days of the exchange. If you make a Section 83(b)
election, you will be required to recognize taxable income at the time of the
exchange in an amount equal to the fair market value of the Restricted Stock
on such date. If the Restricted Stock is subsequently forfeited, you are not
entitled to a deduction for the loss. However, having made the filings, if you
hold the Restricted Stock until after the shares vest and subsequently sell
the shares of common stock issued upon vesting, the gain will be taxed as
capital gain as opposed to ordinary income.

We will generally be allowed a business expense deduction for the
amount of any taxable income is recognized by you at the time such income is
recognized. Section 162(m) of the Internal Revenue Code, however, may limit
the deduction that can be claimed by us in certain circumstances.

Incentive Stock Options. Certain of the options subject to this offer
to cancel are intended to qualify as "incentive stock options." In order for a
holder of incentive stock options to receive certain favorable tax treatment
with respect to shares of common stock obtained through the exercise of those
options, several statutory requirements must be satisfied. One of these
requirements is that the stock subject to the incentive stock option be held
by the optionholder following exercise of the option for two years after the
date the option was granted or, if later, one year after the option is
exercised (the "statutory holding period").

If the holder of an incentive stock option does not tender the
incentive stock option pursuant to this offer, the statutory holding period
for that option will begin on the date of the offer. This is because the offer
is treated as the grant of a new incentive stock option

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<PAGE> 25

for purposes of the statutory holding period requirements. Therefore, in order
to be eligible for favorable tax treatment, the holder of the incentive stock
option must hold any stock purchased on exercise of the option for two years
after the date of this offer or, if later, one year after the option is
exercised.

14. EXTENSION OF OFFER; TERMINATION; AMENDMENT.

We expressly reserve the right, in our sole discretion, at any time
and from time to time, and regardless of whether or not any of the events set
forth in Section 6 shall have occurred or shall be deemed by us to have
occurred, to extend the period of time during which the offer is open and
thereby delay acceptance for payment of and payment for any options by giving
oral or written notice of such extension to the optionholders and making a
public announcement thereof.

We also expressly reserve the right, in our reasonable judgment, to
terminate the offer and not accept for payment or pay for any options
previously accepted for payment or paid for or, subject to applicable law, to
postpone payment for options upon the occurrence of any of the conditions
specified in Section 6, by giving oral or written notice of such termination
or postponement to the optionholders and making a public announcement thereof.
Our reservation of the right to delay payment for options which we have
accepted for payment is limited by Rule 13e-4(f)(5) promulgated under the
Securities Exchange Act, which requires that we must pay the consideration
offered or return the options tendered promptly after termination or
withdrawal of the tender offer.

Subject to compliance with applicable law, we further reserve the
right, in our sole discretion, and regardless of whether any of the events set
forth in Section 6 shall have occurred or shall be deemed by us to have
occurred, to amend the offer in any respect (including, without limitation, by
decreasing or increasing the consideration offered in the offer to holders of
options or by decreasing or increasing the number of options being sought in
the offer).

Amendments to the offer may be made at any time and from time to time
by public announcement of the amendment. In the case of an extension, the
amendment must be issued no later than 9:00 a.m., New York City time, on the
next business day after the last previously scheduled or announced Expiration
Date. Any public announcement made pursuant to the offer will be disseminated
promptly to optionholders in a manner reasonably designated to inform
optionholders of such change. Without limiting the manner in which we may
choose to make a public announcement, except as required by applicable law, we
shall have no obligation to publish, advertise or otherwise communicate any
such public announcement other than by making a press release to the Dow Jones
News Service.

If we materially change the terms of the offer or the information
concerning the offer, or if we waive a material condition of the offer, we
will extend the offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(3) promulgated under the Securities Exchange Act. These rules require
that the minimum period during which an offer must remain open following
material changes in the terms of the offer or information concerning the offer

- 23 -

<PAGE> 26

(other than a change in price or a change in percentage of securities sought)
will depend on the facts and circumstances, including the relative materiality
of such terms or information. If:

(a) we increase or decrease the amount of consideration to be paid
for the options or we increase or decrease the number of subject
options being sought in the offer and, in the event of an increase in
the number of subject options being sought, such increase exceeds 2%
of the outstanding subject options, and

(b) the offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from and
including the date that such notice of an increase or decrease is
first published, sent or given in the manner specified in this
Section 14,

then the offer will be extended until the expiration of such period of ten
business days.

15. FEES AND EXPENSES.

We will not pay any fees or commissions to any broker, dealer, or
other person for soliciting tenders of options pursuant to this offer to
purchase.

16. ADDITIONAL INFORMATION

We are subject to the informational filing requirements of the
Securities Exchange Act and, in accordance therewith, are obligated to file
reports and other information with the SEC relating to our business, financial
condition and other matters. Information, as of particular dates, concerning
our directors and officers, their remuneration, options granted to them, the
principal holders of our securities and any material interest of such persons
in transactions with us is required to be disclosed in proxy statements
distributed to our stockholders and filed with the SEC.

These reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the SEC
at:

- 450 Fifth Street, N.W., Room 2120, Washington, D.C. 20549;

- 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; and

- 7 World Trade Center, New York, New York 10048.

Copies of such material may also be obtained by mail, upon payment of
the SEC's customary charges, from the Public Reference Section of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also
maintains a Web site on the World Wide Web at http://www.sec.gov that contains
reports, proxy statements and other information regarding registrants that
file electronically with the SEC. These reports, proxy statements and other
information concerning us also can be inspected at the offices of The New York
Stock Exchange, 20 Broad Street, New York, New York 10005.

- 24 -

<PAGE> 27
We urge you to review the following materials which we have filed with
the SEC prior to making a decision on whether to tender your options. The SEC
file number for our documents is 1-12994.

(a) Annual Report on Form 10-K for the year ended December 31,
1999;

(b) Quarterly Reports on Form 10-Q for the quarters ended
September 30, 2000, June 30, 2000 and March 31, 2000;

(c) Current Reports on Form 8-K filed with the SEC on November 14,
2000, October 18, 2000, August 18, 2000, August 16, 2000, May
17, 2000 and February 29, 2000.

17. MISCELLANEOUS.

We are not aware of any jurisdiction where the making of the offer is
not in compliance with applicable law. If we become aware of any jurisdiction
where the making of the offer is not in compliance with any valid applicable
law, we will make a good faith effort to comply with such law. If, after such
good faith effort, we cannot comply with such law, the offer will not be made
to (nor will tenders be accepted from or on behalf of) the holders of options
residing in such jurisdiction.

Pursuant to Rule 13e-4 of the General Rules and Regulations under the
Securities Exchange Act, we have filed with the SEC a Tender Offer Statement
on Schedule TO which contains additional information with respect to the
offer. Such Schedule TO, including the exhibits and any amendments thereto,
may be examined, and copies may be obtained, at the same places and in the
same manner as is set forth in Section 16 with respect to information
concerning us.

THE MILLS CORPORATION

November 17, 2000

- 25 -

<PAGE> 28
SCHEDULE A

THE MILLS CORPORATION
TENDER OFFER FOR STOCK OPTIONS WITH EXERCISE PRICE OF $23.50 OR MORE

NAME OF OPTIONHOLDER:
SOCIAL SECURITY NUMBER:

<TABLE>
<CAPTION>
Total Number of Number of Vested
Grant Date of Exercise Expiration Date Option Shares Option Shares
Option Price of Option Under Option Under Option
------ ------ --------- -------------- ---------------
<S> <C> <C> <C> <C>

</TABLE>

<TABLE>
<CAPTION>
Number of Shares of
Value Per Value of All Restricted Stock in
Option Share(1) Option Shares(2)(4) Exchange for All Option Shares(3)(4)
--------------- ------------------- ------------------------------------
<S> <C> <C>

</TABLE>

(1) The value of each option has been established at 50% of the calculated
value of the option using the Binomial Ratio Option pricing model adapted
for use in valuing executive options.
(2) Value applied to all option shares regardless of vesting status
(3) Number of shares is determined by dividing the value of all options shares
by $15.997, the established value of each share of Restricted Stock.
(4) Assumes entire option is tendered.

A-1

<PAGE> 29

SCHEDULE B

The directors and executive officers of the Company and their positions and
offices as of November 16, 2000 are set forth in the following table:

<TABLE>
<CAPTION>
NAME POSITION AND OFFICES HELD
<S> <C>
Laurence C. Siegel Chairman of the Board, Chief Executive Officer and Director
Peter B. McMillan President, Chief Operating Officer and Director
James F. Dausch Senior Executive Vice President - Development and Director
Judith S. Berson Executive Vice President - Leasing
Kent S. Digby Executive Vice President - Management/Marketing
Kenneth R. Parent Executive Vice President and Chief Financial Officer
Thomas E. Frost Executive Vice President, General Counsel and Secretary
Steven J. Jacobsen Executive Vice President - Development
Mark J. Rivers Executive Vice President - Chief Strategic Officer
James P. Whitcome Executive Vice President - Capital Services
Dietrich von Boetticher Vice Chairman and Director
John M. Ingram Vice Chairman and Director
Charles R. Black, Jr. Director
James C. Braithwaite Director
The Hon. Joseph B. Gildenhorn Director
Harry H. Nick Director
Franz von Perfall Director
Robert P. Pincus Director
Christina L. Rose Director
</TABLE>

The address of each director and executive officer is: The Mills Corporation,
1300 Wilson Boulevard, Suite 1400, Arlington, Virginia 22209.

B-1

<PAGE> 30

===============================================================================

OFFER TO PURCHASE

ALL OUTSTANDING OPTIONS

WITH AN EXERCISE PRICE OF $23.50 OR MORE

THE MILLS CORPORATION

---------------------

Any questions or requests for assistance or additional copies of any documents
incorporated by reference into the prospectus may be directed to Michael Rodis,
our Vice President of Human Resources at The Mills Corporation, 1300 Wilson
Boulevard, Suite 1400, Arlington, Virginia 22209, telephone (703) 526-5000.

---------------------

November 17, 2000