<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
Commission File Number 1-12994
THE MILLS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 52-1802283
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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.
24,005,054 shares of Common Stock
$.01 par value, as of May 11, 2000
<PAGE> 2
THE MILLS CORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
--------------------- ----
<S> <C> <C>
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Consolidated Balance Sheets as of March 31, 2000 1
and December 31, 1999.
Consolidated Statements of Income for the 2
Three Months Ended March 31, 2000 and March 31, 1999.
Consolidated Statements of Cash Flows for the 3
Three Months Ended March 31, 2000 and March 31, 1999.
Notes to Consolidated Financial Statements 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 18
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signature 20
</TABLE>
Certain matters discussed in this Form 10-Q and the information incorporated by
reference herein contain "forward-looking statements" for purposes of Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
relating to, without limitation, future economic performance, plans and
objectives of management for future operations, projections of revenue and other
financial items, demographic projections and federal income tax consequences,
which can be identified by the use of forward-looking terminology such as "may,"
"will," "except," "anticipate," "estimate," or "continue" or the negative
thereof or other variations thereon or comparable terminology. Such
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those described in such
forward-looking statements. These risks and uncertainties include those set
forth in the Company's annual report on Form 10-K and other SEC filings.
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
THE MILLS CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, 2000 December 31,1999
(Unaudited) (Note)
-------------- -----------------
ASSETS
<S> <C> <C>
Income producing property:
Land and land improvement $ 171,127 $ 171,024
Building and improvements 730,106 725,530
Furniture, fixtures and equipment 39,887 36,958
Less: accumulated depreciation and amortization (246,031) (239,484)
----------- -----------
Total income producing property 695,089 694,028
Land held for investment and/or sale 9,789 9,924
Real estate development in progress 40,005 33,138
Investment in unconsolidated joint ventures 211,355 201,152
----------- -----------
Total real estate and development assets 956,238 938,242
Cash and cash equivalents 1,591 3,035
Restricted cash 12,192 13,771
Accounts receivable, net 26,472 25,389
Notes receivable 8,300 8,351
Deferred costs, net 51,615 47,942
Other assets 6,903 2,737
----------- -----------
TOTAL ASSETS $ 1,063,311 $ 1,039,467
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages, notes and loans payable $ 908,194 $ 877,273
Accounts payable and other liabilities 64,740 61,189
----------- -----------
Total liabilities 972,934 938,462
Minority interests 36,648 40,978
STOCKHOLDERS' EQUITY
Common stock $.01 par value, authorized 100,000,000
shares, issued and outstanding 23,208,216 and 23,192,041
shares in 2000 and 1999, respectively 232 232
Additional paid-in capital 441,250 440,924
Accumulated deficit (385,902) (379,306)
Unamortized restricted stock award (1,851) (1,823)
----------- -----------
Total stockholders' equity 53,729 60,027
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,063,311 $ 1,039,467
=========== ===========
</TABLE>
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by accounting principles generally accepted in the
United States for complete financial statements.
See Accompanying Notes to Consolidated Financial Statements.
1
<PAGE> 4
THE MILLS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
REVENUES:
<S> <C> <C>
Minimum rent $ 25,706 $ 26,017
Percentage rent 346 196
Recoveries from tenants 13,386 13,332
Other property revenue 2,287 1,665
Management fee income 1,793 951
Other fee income 2,410 2,377
Interest income 787 1,054
------------------ -----------------
46,715 45,592
EXPENSES:
Recoverable from tenants 11,455 11,722
Other operating 975 1,202
General and administrative 3,335 2,924
Interest expense 12,801 11,123
Depreciation and amortization 9,243 8,617
----------------- -----------------
37,809 35,588
Other income/(expense) (371) (179)
Equity in earnings of unconsolidated joint ventures 1,668 1,017
----------------- -----------------
Income before extraordinary item and minority interests 10,203 10,842
Extraordinary losses on debt extinguishments (1,513) (2,762)
---------------- ----------------
Income before minority interests 8,690 8,080
Minority interests (3,524) (3,285)
---------------- ----------------
Net income $ 5,166 $ 4,795
================ ================
Per Share Information:
Net income per common share - basic:
Income before extraordinary item $ 0.26 $ 0.28
Extraordinary loss on debt extinguishment (0.04) (0.07)
---------------- ----------------
Net income $ 0.22 $ 0.21
================ ================
Net income per common share - diluted:
Income before extraordinary item $ 0.26 $ 0 28
Extraordinary loss on debt extinguishment (0.04) (0.07)
----------------- ---------------
Net income $ 0.22 $ 0.21
================ ================
Dividends declared $ .5175 $ .5025
================ ================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
2
<PAGE> 5
THE MILLS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
OPERATING ACTIVITIES:
<S> <C> <C>
Income before minority interests $ 8,690 $ 8,080
Adjustments to reconcile income before minority interests
to net cash provided by operating activities:
Net accretion of note receivable (175) (175)
Depreciation and amortization 9,243 8,617
Provision for losses on accounts receivable (244) (13)
Gain on sale of property (131) (728)
Equity in earnings of unconsolidated joint ventures (1,668) (1,017)
Amortization of incentive stock programs 297 134
Extraordinary loss on debt extinguishment 1,513 2,762
Other changes in assets and liabilities:
Increase in accounts receivable (981) (408)
Decrease in notes receivable 226 70
Increase in other assets (4,025) (2,403)
Increase in accounts payable and other liabilities 4,831 401
--------- ---------
Net cash provided by operating activities 17,606 15,320
INVESTING ACTIVITIES:
Investment in real estate and development assets (30,666) (48,119)
Distributions received from unconsolidated joint ventures 5,943 10,149
Proceeds from sale of property 500 800
Deferred costs (3,798) (1,518)
--------- ---------
Net cash used in investing activities (28,021) (38,688)
FINANCING ACTIVITIES:
Proceeds from mortgages, notes and loans payable 277,784 130,576
Repayments of mortgages, notes and loans payable (246,863) (93,180)
Refinancing costs (3,913) (3,487)
Restricted cash 1,579 2,049
Dividends (11,662) (11,276)
Distributions (7,954) (7,724)
--------- ---------
Net cash provided by financing activities 8,971 16,958
Net decrease in cash and cash equivalents (1,444) (6,410)
Cash and cash equivalents at beginning of period 3,035 10,510
--------- ---------
Cash and cash equivalents at end of period $ 1,591 $ 4,100
========= =========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 15,853 $ 14,105
========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 6
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 Mills Limited
Partnership (the "Operating Partnership"), in which it owns, as of March 31,
2000, a 1% interest as the sole general partner and a 58.45% 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, retail and entertainment-oriented
centers (the "Mills" and "Block" projects) and community shopping centers (the
"Community Centers"). As of March 31, 2000 the Operating Partnership owns or
holds an interest in the following operating properties:
<TABLE>
<CAPTION>
Mills Location (Metropolitan Market Served)
----- -------------------------------------
<S> <C> <C>
Franklin Mills Philadelphia, PA (Philadelphia)
Gurnee Mills Gurnee, IL (Chicago)
Potomac Mills Woodbridge, VA (Washington, DC)
Sawgrass Mills Sunrise, FL (Ft. Lauderdale)
Ontario Mills Ontario, CA (Los Angeles)
Grapevine Mills Dallas, TX (Dallas/Fort Worth)
Arizona Mills Tempe, AZ (Phoenix)
The Oasis at Sawgrass Sunrise, FL (Ft. Lauderdale)
Concord Mills Concord, NC (Charlotte)
Katy Mills Katy, TX (Houston)
Block
-----
The Block at Orange Orange, CA (Los Angeles)
Community Centers
-----------------
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 new Mills-type and other retail
oriented projects.
4
<PAGE> 7
THE MILLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by the
Company's management in accordance with accounting principles generally
accepted in the United States 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 accounting
principles generally accepted in the United States for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The results of operations for the three month period ended March 31,
2000 are 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
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
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 Corp.
("MSC"), an entity formed in connection with the Company's initial public
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 ownership in certain
Mills and Block operating properties, as well as certain properties under
development, are through investment in joint ventures that own Ontario
Mills, Ontario Mills Residual, Grapevine Mills, Grapevine Mills Residual,
Arizona Mills, The Oasis at Sawgrass, The Block of Orange, Concord Mills, Katy
Mills, Katy Mills Residual Opry Mills, Arundel Mills, Discover Mills, Vaughan
Mills and Meadowlands Mills. MSC also owns 100% of Mills Enterprises, Inc.
("MEI"), an entity that owns Foodbrand (the Company's food and beverage entity
that was created in 1999 to master lease and operate food courts at the
Company's malls with existing operations at Katy Mills, Franklin Mills and
future projects under development) and which holds investments in other retail
joint ventures. Such investments are accounted for using the equity method of
accounting. (see note 6)
All significant intercompany transactions and balances have been
eliminated in consolidation. Minority interests represent the ownership
interests in the Operating Partnership not held by the Company.
2. SEGMENT REPORTING
Effective January 1, 1998 the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosure about Segments of an Enterprise and
Related Information" (SFAS 131). SFAS 131 defines an operating segment as a
component of an enterprise that engages in business activities that generate
revenues and incur expenses, whose operating results are reviewed by the chief
operating decision maker in the determination of resource allocation and
performance, and for which discrete financial information is available. The
Company operates in one reportable segment, the development, ownership and
operation of retail properties. These properties consist of "Mills"
superregional value and entertainment oriented malls, "Block" retail and
entertainment properties, community center retail shopping centers, food court
operations and other retail operations. Substantially all the Company's assets,
revenues and income are derived from this segment. The Company currently has no
operations in foreign countries.
3. RECLASSIFICATIONS
Certain reclassifications of prior period amounts have been made in the
financial statements to conform to the 2000 presentation.
5
<PAGE> 8
THE MILLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
4. EARNINGS PER SHARE
The Company accounts for earnings per share pursuant to SFAS 128. Basic
EPS is calculated by dividing income available to common shareholders by the
weighted number of common shares outstanding during the period. Diluted EPS is
calculated by adjusting net income for the period for the effects on minority
interests resulting from issuance of stock pursuant to restricted stock or
option grants and dividing the resulting adjusted net income by the weighted
average shares outstanding during the period, adjusted for the dilutive effect
of options and stock grants.
The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Numerator for basic earnings per share $ 5,163 $ 4,794
======== ========
Numerator for diluted earnings per share $ 5,165 $ 4,803
======== ========
Denominators:
Denominator for basic earnings
per share -- weighted average shares 23,208 23,132
Outstanding unvested restricted stock awards --
weighted average shares (35) (20)
-------- --------
Denominator for basic earnings per share --
adjusted weighted average shares 23,173 23,112
Effect of dilutive securities:
Employee stock options and restricted
stock awards 19 93
-------- --------
Denominator for diluted earnings per
share-adjusted weighted average shares 23,192 23,225
======== ========
Basic earnings per share $ 0.22 $ 0.21
======== ========
Diluted earnings per share $ 0.22 $ 0.21
======== ========
</TABLE>
Limited partnership units in the Operating Partnership (15,827,909 and
15,831,636 outstanding at March 31, 2000 and December 31, 1999) may be exchanged
for shares of common stock of the Company on a one-for-one basis in specified
circumstances. This exchange right has not been considered in the computation of
per share data as it does not have a dilutive effect.
6
<PAGE> 9
THE MILLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
5. MINORITY INTERESTS
Minority interests represent the interests of the unitholders in the
Operating Partnership. The minority interest is adjusted at each period
end to reflect the ownership percentage at that particular time. The
minority interest was 40.55% and 40.57% at March 31, 2000 and December 31,
1999, respectively.
6. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
Certain operating properties and properties under development are
partially owned through joint ventures ("Joint Ventures") in which the Company
is also a co-general and co-managing partner. The Company's interest in each
Joint Venture is as follows:
<TABLE>
<CAPTION>
Ownership %
Joint Venture as of March 31, 2000
------------- ------------------------
<S> <C> <C>
Ontario Mills 50.0%
Grapevine Mills 37.5%
Arizona Mills 36.8%
The Oasis at Sawgrass 50.0%
The Block at Orange 50.0%
Concord Mills 37.5%
Katy Mills 62.5%
Opry Mills 66.7%
Arundel Mills 37.5%
Meadowlands Mills (1) 66.7%
Discover Mills 50.0%
Vaughn Mills 50.0%
</TABLE>
(1) The Company's ownership percentage for Meadowlands Mills will be
53.3%, when the conditions to the delivery of the executed joint venture
documents from escrow have been satisfied.
In addition to the above joint ventures, MEI holds investments in
cetain retail joint ventures.
As major business decisions require the approval of at least one other
general partner, the Company does not control these Joint Ventures pursuant to
Statement of Position 78-9. As a result, its investments are accounted for under
the equity method, where the investments are recorded at cost and subsequently
adjusted for net equity in income (loss) and cash contributions and
distributions. The Company reduces its investments 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 $188.0 million of Joint Venture debt,
which includes $33.6 million of our joint venture partners' share of 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 District.
The remaining aggregate amount of the special tax assessment is approximately
$17.9 million and will be collected over the remaining 21 year period through
2020 to fund debt service on bonds issued by the City to fund the infrastructure
improvements.
The Company's real estate joint venture agreements contain buy-sell
provisions whereby certain partners can require the purchase or sale of
ownership interests among certain partners.
7
<PAGE> 10
THE MILLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
Condensed combined balance sheets at March 31, 2000 and December 31, 1999 and
results of operations for the three months ended March 31, 2000 and 1999 are
presented below for all Joint Ventures.
<TABLE>
<CAPTION>
MARCH 31, 2000
Operating Development Total
--------- ----------- -----
ASSETS:
<S> <C> <C> <C>
Income producing property $ 895,634 $ - $ 895,634
Construction in progress 12,941 359,015 371,956
Deferred costs, net 291,841 - 291,841
Other 143,983 18,378 162,361
-------------------------------------------------------------------------
$ 1,344,399 $ 377,393 $ 1,721,792
=========================================================================
LIABILITIES AND PARTNERS' EQUITY:
Debt $ 945,266 $ 95,140 $ 1,040,406
Other liabilities 86,172 60,466 146,638
Operating Partnership's accumulated equity 65,540 105,728 171,268
Joint Venture partners' accumulated equity 247,421 116,059 363,480
-------------------------------------------------------------------------
$ 1,344,399 $ 377,393 $ 1,721,792
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
Operating Development Total
--------- ----------- -----
ASSETS:
<S> <C> <C> <C>
Income producing property $ 871,608 $ - $ 871,608
Construction in progress 27,949 276,219 304,168
Deferred costs, net 288,995 - 288,995
Other 146,759 12,961 159,720
-------------------------------------------------------------------------
$ 1,335,311 $ 289,180 $ 1,624,491
=========================================================================
LIABILITIES AND PARTNERS' EQUITY:
Debt $ 909,989 $ 37,986 $ 947,975
Other liabilities 105,938 56,344 162,282
Operating Partnership's accumulated equity 65,571 100,230 165,801
Joint Venture partners' accumulated equity 253,813 94,620 348,433
-------------------------------------------------------------------------
$ 1,335,311 $ 289,180 $ 1,624,491
=========================================================================
</TABLE>
8
<PAGE> 11
THE MILLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000
Operating Development Total
--------- ----------- -----
REVENUES:
<S> <C> <C> <C>
Minimum rent $ 31,585 $ - $ 31,585
Percentage rent 825 - 825
Recoveries from tenants 12,476 - 12,476
Other property revenue 2,771 - 2,771
Interest income 2,374 213 2,587
------------------------------------------------------------------------
Total revenues 50,031 213 50,244
EXPENSES:
Recoverable from tenants 11,578 - 11,578
Other operating 2,468 - 2,468
Interest expense 15,158 - 15,158
Depreciation and amortization 16,946 - 16,946
------------------------------------------------------------------------
Total expenses 46,150 - 46,150
Other income/(expense) 100 - 100
------------------------------------------------------------------------
Net income $ 3,981 $ 213 $ 4,194
========================================================================
Operating Partnership's equity in earnings
of unconsolidated joint ventures $ 1,585 $ 83 $ 1,668
========================================================================
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
Operating Development Total
--------- ----------- -----
REVENUES:
<S> <C> <C> <C>
Minimum rent $ 19,202 $ 210 $ 19,412
Percentage rent 110 - 110
Recoveries from tenants 7,962 - 7,962
Other property revenue 1,467 - 1,467
Interest income 1,161 88 1,249
------------------------------------------------------------------------
Total revenues 29,902 298 30,200
EXPENSES:
Recoverable from tenants 7,940 40 7,980
Other operating 1,808 3 1,811
Interest expense 8,948 - 8,948
Depreciation and amortization 8,198 - 8,198
------------------------------------------------------------------------
Total expenses 26,894 43 26,937
Other income/(expense) (21) - (21)
------------------------------------------------------------------------
Net income $ 2,987 $ 255 $ 3,242
========================================================================
Operating Partnership's equity in earnings
of unconsolidated joint ventures $ 1,017 $ - $ 1,017
========================================================================
</TABLE>
9
<PAGE> 12
THE MILLS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(Unaudited)
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 and 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.
7. INCOME RECOGNITION
The Company, as lessor, has retained substantially all the risks and
benefits of ownership and accounts for its leases as operating leases. Minimum
rent from income producing property is recognized on a straight-line basis over
the terms of the respective leases. Commencing in the second quarter of 1998,
percentage rent is recognized when tenants' sales have reached breakpoints
stipulated in the respective leases. For periods prior to the second quarter of
1998, such rents were recognized on an accrual basis. Recoveries from tenant
for real estate taxes and other operating expenses are recognized as revenue in
the period the applicable costs are incurred.
8. DECLARATION OF DIVIDEND
On February 22, 2000, the Company declared a dividend of $.5175 per share
which was paid on April 25, 2000 to stockholders of record as of April 10, 2000.
9. BORROWINGS
On January 31, 2000, the Company entered into a non-recourse mortgage
loan agreement in the amount of $285 million secured by its equity interest in
Sawgrass Mills. The proceeds were used to repay prior loans totaling $235
million, and the remaining proceeds were used to pay down the line of credit and
to fund the Company's development equity requirements. The new loan is a
non-amortizing loan with a repayment date of June 18, 2001. The interest rate is
payable at a variable rate, which is LIBOR plus 2.75%. As of March 31, 2000
approximately $7 million remained to be funded on this loan.
10
<PAGE> 13
THE MILLS CORPORATION
(Unaudited)
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Comparison of three months ended March 31, 2000 to three months ended March
31, 1999.
Income before extraordinary item and minority interest for the three months
ended March 31, 2000 decreased by approximately $0.6 million (5.9%) to $10.2
million as compared to the three months ended March 31, 1999. The decrease was
the result of an increase in expenses of approximately $2.2 million (6.2%),
decrease in other income/(expense) of approximately $0.2 million (107.3%),
offset by an increase in revenues of approximately $1.1 million (2.5%) and by
an increase in equity in earnings on unconsolidated joint ventures of
approximately $0.7 million (64.0%).
Revenues:
Minimum rent for the three months ended March 31, 2000, decreased approximately
$0.3 million (1.2%) compared with the three months ended March 31, 1999. The
decrease was primarily due to two anchor tenants in bankruptcy that vacated the
Company's community centers.
Other property revenue for the three months ended March 31, 2000, increased
$0.6 million (37.4%) compared with the three months ended March 31, 1999. The
increase was due to the current year recovery of accounts receivable for the
community centers that were reserved in prior years and an increase in income
related to the Company's pushcart program.
Management fee income for the three months ended March 31, 2000, increased $0.8
million (88.5%) compared with the three months ended March 31, 1999. The
increase was primarily due to the opening of The Oasis at Sawgrass in the second
quarter of 1999, the opening of Concord Mills in the third quarter of 1999 and
the opening of Katy Mills in the fourth quarter of 1999.
Expenses:
Recoverable from tenant expenses for the three months ended March 31, 2000,
decreased $0.3 million (2.3%) compared with the three months ended March 31,
1999. The decrease was primarily due to a $0.1 million reduction in real estate
taxes at Sawgrass Mills and $0.1 million related to floor repairs made during
the first quarter of 1999.
General and administrative expenses for the three months ended March 31, 2000,
increased $0.4 million (14.1%) compared with the three months ended March 31,
1999. The increase was primarily due to the increase in costs associated with
the Company's retail operations and expanded operations (i.e., the opening of
The Oasis at Sawgrass, Concord Mills and Katy Mills).
Interest expense for the three months ended March 31, 2000, increased $1.7
million (15.1%) compared with the three months ended March 31, 1999. The
increase was due to the increased debt burden related to the Sawgrass Mills
refinancing that was completed in January 2000 (see Liquidity and Capital
Resources discussion).
Depreciation and amortization expense for the three months ended March 31, 2000,
increased $0.6 million (7.3%) compared with the three months ended March 31,
1999. The increase was primarily due to an increase in loan cost amortization
related to the refinancing of Sawgrass Mills in January 2000 (see Liquidity and
Capital Resources discussion).
Equity in earnings of unconsolidated joint ventures for the three months ended
March 31, 2000, increased $0.7 million (64.0%) compared with the three months
ended March 31, 1999. The increase is primarily due to increases in operating
income at across all the operating joint venture projects.
11
<PAGE> 14
Extraordinary losses on debt extinguishments for the three months ended March
31, 2000, decreased $1.2 million (45.2%) compared with the three months ended
March 31, 1999. The Company wrote off unamortized loan costs of $1.5 million as
a result of the refinancing of Sawgrass Mills in January 2000 (see Liquidity and
Capital Resources discussion). In the first quarter of 1999, the Company
incurred a prepayment penalty of $2.4 million in connection with the refinancing
of the community centers plus the write-off of the related unamortized loan
costs.
12
<PAGE> 15
THE MILLS CORPORATION
(Unaudited)
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000 the Company's balance of cash and cash equivalents was $1.6
million, not including its proportionate share of cash held in unconsolidated
entities. In addition to its cash reserves, the Company had $10 million
available under its line of credit. The terms of this facility are as follows:
<TABLE>
<CAPTION>
AMOUNT
TOTAL OUTSTANDING
FACILITY AT 3/31/00
MATURITY INTEREST RATE TERMS (000'S) (000'S)
--------- ------------- ----- ------- -------
<S> <C> <C> <C> <C> <C>
Line of Credit................. 5/31/00 LIBOR + 1.50% Interest Only $ 100,000 $ 90,000
</TABLE>
Pursuant to the line of credit, the Company is subject to certain
performance measurements and restrictive covenants. The Company was compliance
with the applicable covenants at March 31, 2000. The Company is currently in
negotiations to increase the line of credit to $125 million. Furthermore, in
January 2000, the Company refinanced Sawgrass Mills with a new non-recourse
mortgage loan of $285 million. The proceeds were used to repay loans totaling
$235 million with the remaining proceeds to be used to pay down the line of
credit and fund the Company's development equity. As of March 31, 2000,
approximately $7 million remained to be funded on this loan.
FINANCING ACTIVITIES. The weighted average life of the Company's
indebtedness was 3.7 years at March 31, 2000 (including funded construction and
operating debt of the unconsolidated joint ventures), with maintaining
investment-grade interest rates (7.54% weighted average interest rate for the
Company's indebtedness and funded construction and operating debt of the
unconsolidated joint ventures at March 31, 2000).
On January 31, 2000, the Company entered into a non-recourse mortgage
loan agreement in the amount of $ 285 million secured by its equity interest
in Sawgrass Mils. The proceeds were used to repay prior loans totaling $235
million with the remaining proceeds to be used to pay down the line of credit
and to fund the Company's development equity requirements. The new loan is a
non-amortizing loan with a repayment date of June 18, 2001. The interest rate
is payable at a variable rate, which is LIBOR plus 2.75%. As of March 31, 2000,
approximately $7 million remained to be funded on this loan.
On February 4, 1999, the Company received a five year, $750 million
capital commitment from Kan Am, a significant unit holder of the Operating
Partnership and joint venture partner, to fund future development projects.
Subject to terms and conditions, Kan Am will continue to fund certain project
level capital as they have on several of the Company's prior projects.
Definitive joint venture agreements have been executed for Arundel Mills and
Discover Mills wherein Kan Am's required contribution is $35 million and $70
million, respectively. In addition, Kan Am has agreed to work with the Company
to identify such other projects, and to use best efforts to provide funding for
such projects, in the approximate amount of $150 million in each of 2001, 2002
and 2003. Consistent with prior partnerships, Kan Am will fund 50% to 100% of a
specific project's equity requirement and receive a percentage of ownership
interest equal to half of the percentage of equity that they have funded,
subject to further adjustment for the interest of other partners in such
partnerships.
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 5,325,000 shares of common stock in
1997 generating net proceeds of $121.8 million. A balance approximately of $128
million of common stock, preferred stock and common stock warrants remain
available to the Company for issuance pursuant to this shelf registration.
13
<PAGE> 16
At March 31, 2000 the Company had consolidated debt of approximately
$908.2 million and gross unconsolidated joint venture debt of approximately $1.0
billion. The Company's pro rata share of gross unconsolidated joint venture debt
was $390.0 million (net of tax increment financing) at March 31, 2000. Of this
amount, the Company guaranteed $154.4 million, additionally, the Company has
guaranteed $33.6 million of its joint venture partners' share of debt. The
Company's consolidated debt plus its pro rata share of gross unconsolidated
joint venture debt totalled approximately $1.3 billion. Of this amount, $642.4
million was fixed rate debt and $655.8 million was variable rate debt. Scheduled
principal repayments of the Company's consolidated indebtedness and its pro rata
share of gross unconsolidated joint venture debt through 2004 are $952.0 million
with $346.2 million due thereafter. The Company and its partners expect to
refinance or repay these obligations with cash generated from operations,
external borrowings (including refinancing of existing loans) or equity
issuances.
The Company's EBITDA (earnings before interest, taxes, depreciation,
amortization and extraordinary items) to interest expense coverage ratio
(including the Company's proportionate share of EBITDA and interest expense of
unconsolidated joint ventures) for the trailing 12 months ended March 31, 2000
and March 31, 1999, was 2.64 and 2.65, respectively.
14
<PAGE> 17
THE MILLS CORPORATION
(Unaudited)
Development, Remerchandising and Expansion. The Company is involved in
the following development, remerchandising and expansion efforts:
The Company's most significant development efforts currently are focused
on the development of five projects: Opry Mills, Arundel Mills, Discover Mills,
Vaughan Mills and Meadowlands Mills.
Opry Mills opened on May 11, 2000. The project is being financed
principally with external borrowings and equity contributions from joint
venture partners and the Operating Partnership. The Company anticipates that
the Operating Partnership's equity requirements for Opry Mills may total as
much as $52 million, all of which has been funded as of March 31, 2000. The
Company has entered into a letter of intent with Kan Am to fund 100% of the
Operating Partnership's equity requirement for Opry Mills. Upon formation of
the joint venture (which is subject to final documentation), Kan Am will
receive a 33.33% interest in Opry Mills Limited Partnership. Opryland
Attractions, Inc. contributed an interest in land to the Opry Mills joint
venture and received a capital account credit of $25 million. The remaining
costs are being financed through a $168 million construction loan.
Arundel Mills broke ground on July 15, 1999 and is scheduled to open in
the fourth quarter of 2000. The project is being financed principally with
external borrowings and equity contributions from joint venture partners and the
Operating Partnership. The Company anticipates that the Operating Partnership's
equity requirements for Arundel Mills may total as much as $18 million, of which
approximately $13 million has been funded as of March 31, 2000. The Company
expects to close on a $191 million construction loan in the second quarter of
2000.
The Company has formed a joint venture with Kan Am to develop Discover
Mills on a 225-acre site located near Atlanta, Georgia. As of March 31, 2000,
the Discover Mills joint venture has acquired the land assemblage for the
project, and plans to begin construction later in 2000. Discover Mills is
targeted to open in 2001. Kan Am will fund all the required equity for this
project and the remaining project costs are expected to be financed through a
construction loan.
In February 1998, the Company announced that it had secured a site in
Vaughan, Ontario for the development of Vaughan Mills, the first Mills project
to be developed outside of the United States. The project will be developed
through a joint venture with Cambridge Shopping Centres Limited of Toronto. The
Company anticipates that the Operating Partnership's equity requirement for
Vaughan Mills may total as much as $30 million, of which approximately $19
million has been funded as of March 31, 2000. The Company has completed the land
assemblage and is targeting a 2000 groundbreaking.
The Company has acquired a mortgage interest in a 592-acre site located
on the New Jersey Turnpike (I-95) adjacent to the Meadowlands Sports Complex and
approximately five miles from New York City. Commencement of construction is
contingent upon the completion of ongoing Environmental Impact Statement and the
federal/state permitting process. A Special Area Management Plan (SAMP) for the
Meadowlands area was published in the Federal Register on April 22, 1999. The
guidelines proposal in the SAMP would, upon their anticipated adoption in the
second quarter of 2000, permit development of 2.0 million square feet of gross
leasable area (GLA) for Meadowlands Mills, plus office and hotel space. The
project would be developed on an entitled site of 90.5 acres plus roads and
retention facilities. Upon procurement of all necessary entitlements, it is
anticipated that the project will be developed by a joint venture to be formed
among the Operating Partnership, Kan Am, Empire Ltd. and Bennett S. Lazare, an
individual. The Operating Partnership's equity requirements have not yet been
determined. As of March 31, 2000, the Company has funded approximately $20
million. The Company has targeted a 2000 groundbreaking for this project.
The Company has identified a site near Denver, Colorado and is in the
process of forming a joint venture to develop the site. The Company is targeting
a 2001 opening.
15
<PAGE> 18
In addition to the above, the Company is also conducting due diligence on
several other proposed sites for its Mills and Block projects, including sites
in Atlanta, Georgia; Cleveland, Ohio; North Aurora, Illinois (Chicago); San
Francisco, California; South Weymouth, Massachusetts (Boston); and Tampa,
Florida. The Company is also continuing to evaluate various prospective
international sites, including a site identified in Spain, with a concentrated
focus on Western Europe as well as other domestic sites for other Mills-type
projects and other retail-oriented projects.
The Company is in the process of expanding and/or remerchandising
Potomac Mills, Grapevine Mills and The Black at Orange. The costs of these
expansions and remerchandising programs could aggregate $22 million. Of the
estimated costs, approximately $12 million will be financed with external
sources and approximately $10 million will be funded by the Operating
Partnership.
16
<PAGE> 19
THE MILLS CORPORATION
(Unaudited)
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.
As a potential source of capital, the Company is negotiating the
possible sale or exchange of its community center portfolio. In addition to
providing the Company with a source of development capital, a disposition will
allow management to focus on its main retail products. Conclusion of these
negotiations and finalization of a sale is subject to a number of conditions
including satisfactory completion of further due diligence by the purchaser and
indentification of acceptable replacement properties.
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. In the
event such capital cannot be obtained, the Company's development plans could be
curtailed.
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 Three Months Ended March 31, 2000 to Three Months Ended
March 31, 1999. Net cash provided by operating activities increased
approximately $2.3 million (14.9%) to $17.6 million for the three months ended
March 31, 2000 as compared to $15.3 million for the three months ended March 31,
1999. The increase is primarily due to an increase in accounts payable and other
liabilities related to the Company's Foodbrand operations offset by an increase
in inventory related to the Company's retail operations. Net cash used in
investing activities decreased approximately $10.7 million (27.6%) to $28.0
million for the three months ended March 31, 2000, as compared to $38.7 million
for the three months ended March 31, 1999, primarily as a result of decreased
expenditures for real estate and development assets and advances to certain
joint ventures, offset by a decrease in distributions received from
unconsolidated entities and an increase in deferred costs expenditures. Net cash
provided by financing activities decreased approximately $8.0 million (47.1%) to
$9.0 million for the three months ended March 31, 2000 as compared to $17.0
million for the three months ended March 31, 1999. The decrease was due to an
increase in proceeds offset by an increase in repayments.
FUNDS FROM OPERATIONS
The Company 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 National Association of Real
Estate Investment Trusts (NAREIT) means income (loss) before minority interest
(determined in accordance with accounting principles generally accepted in the
United States (GAAP)), excluding gains (losses) from debt restructuring and
sales of depreciated 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 (i) 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.
17
<PAGE> 20
THE MILLS CORPORATION
(Unaudited)
FFO for the three months ended March 31, 2000 increased to $23.6 million
compared to $21.3 million for the comparable period in 1999. FFO amounts were
calculated in accordance with NAREIT's definition of FFO as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
2000 1999
---- ----
(Dollars in thousands)
Funds from operations calculation:
<S> <C> <C>
Income before extraordinary item and minority interest.... $ 10,203 $ 10,842
Adjustments:
Add: Depreciation and amortization of real estate
assets............................................. 7,728 7,714
Add: Real estate depreciation and amortization of
unconsolidated joint ventures...................... 5,687 2,748
--------- ---------
Funds from operations..................................... $ 23,618 $ 21,304
========= =========
- ---------------------------------------------------------------------------------------------------------------------------
</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 latter 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
recognizing minimum rent on a straight-line basis over the term of related
leases 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 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
18
<PAGE> 21
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
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Exhibit Index attached hereto is hereby incorporated by
reference to this item.
Report on Form 8-K was filed by the Company on February 29, 2000 to
report certain operational information concerning the Company and
the properties owned or managed by it as of December 31, 1999. No
other reports on Form 8-K were filed by registrant for the
applicable quarter covered by this report.
19
<PAGE> 22
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
May 15, 2000 By : /s/ Kenneth R. Parent
- ------------------------ ---------------------------
(Date) Kenneth R. Parent
Executive Vice President, Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)
20
<PAGE> 23
THE MILLS CORPORATION
EXHIBIT INDEX
NUMBER EXHIBIT
------ -------
+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, EquityResources 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 Form of Noncompetition Agreement between the Company, the
Operating Partnership and each of Kan Am and Kan Am
Partnerships
*10.5 Form of Noncompetition Agreement with Kan Am Directors
*10.6 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
*10.7 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
*10.8 Assignment of Leases and Rents, dated as of December 1,
1993, between Sunrise Mills Limited Partnership and
Sawgrass Finance L.L.C.
*10.9 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.
*10.10 Agreement dated March 15, 1994 among Richard L. Kramer,
the A.J. 1989 Trust, the Irrevocable Intervivos
Associates, Herbert S. Miller, The Mills Corporation and
The Mills Limited Partnership
<PAGE> 24
*10.11 Form of Indemnification Agreement between the Company and
each of its Directors and Executive Officers
***10.12 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
***10.13 Prepayment Premium Agreement dated as of June 1, 1995,
between The Mills Limited Partnership and State Street
Bank and Trust Company, as trustee
****10.14 Second Amendment 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
****10.15 Form of 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 (see Exhibit 10.53)
****10.16 Mortgage Security Agreement, Assignment of Rents and
Fixture Filing by Gurnee Mills (MLP) Limited Partnership
to CS First Boston Mortgage Capital Corp., as Mortgagee
dated as of December 17, 1996
****10.17 Form of 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.
****10.18 Trust and Servicing Agreement dated as of December 17,
1996 among Potomac Gurnee Finance Corp., as Depositor,
AMRESCO Management, Inc., as Servicer, ABN AMRO Bank NY,
as Fiscal Agent and LaSalle National Bank as Trustee
- --------------------------------------------------------------------------------
* 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.
** Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the first quarter ended June 30, 1994.
*** Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the second quarter ended June 30, 1995.
**** Incorporated by reference to the Registrant's Quarterly Annual Report on
Form 10-Q for the third quarter ended September 30, 1996.
+ Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the second quarter ended June 30, 1997.
++ Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the second quarter ended September 30, 1997.
+++ Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998.
<PAGE> 1
THE MILLS CORPORATION
ENTITY STRUCTURE (ALL DELAWARE ENTITIES UNLESS OTHERWISE NOTED)
(AS OF 3/31/00)
THE MILLS CORPORATION (REIT) SUBSIDIARIES
- -----------------------------------------
Coopers Crossing Corp.
Crosswinds Corp.
Fashion Center Corp.
Fashion Place Corp.
Franklin Mills GP, Inc.
Germantown Corp.
Gwinnett Corp.
Liberty Plaza GP, Inc.
Montgomery Village Corp.
Montgomery Village Ground Corp.
Mount Prospect Plaza Corp.
Ontario Mills Finance Corp.
Potomac Gurnee Finance Corp.
Sawgrass Finance L.L.C.
Sunrise Mills/MLP Corp.
Vaughan Mills Advisory Services, Inc.
Washington Potomac Partners Corp.
West Falls Church Corp.
Western Hills Plaza Corp.
OPERATING PARTNERSHIP
- ---------------------
THE MILLS LIMITED PARTNERSHIP
The Mills Corporation holds 1% as the sole general partner and an
additional 59.23% as a limited partner (Reflects units issued in
conjunction with 763,091 shares of stock that were issued and
currently are held in escrow pursuant to a Settlement Agreement
dated October 23, 1998 and which, upon satisfaction of the
obligations secured thereby, will be retired)
SUBSIDIARIES OF THE MILLS LIMITED PARTNERSHIP
- ---------------------------------------------
Arundel Mills, L.L.C.
Arundel Mills Residual, L.L.C.
Candlestick Mills, L.L.C.
Candlestick Mills Limited Partnership
Colorado Mills, L.L.C.
Colorado Retail Development Company, L.L.C.
Concord Mills, L.L.C.
Concord Mills Residual, L.L.C.
Concord Mills Residual III, L.L.C.
Concord Mills Residual III Limited Partnership
Coopers Crossing L.L.C.
<PAGE> 2
<TABLE>
<C> <S>
Coopers Crossing Associates (MLP) Limited Partnership (NJ Partnership)
Crosswinds Center Associates of St. Petersburg (MLP) Limited
Partnership (DC Partnership)
Crosswinds L.L.C.
Echo Hills Center Associates (MLP) Limited Partnership (VA Partnership)
Fashion Center Associates of Illinois No. 1 (MLP) Limited
Partnership (IL Partnership)
Fashion Center L.L.C.
Fashion Place Associates Limited Partnership (SC Partnership)
Fashion Place Associates L.L.C.
Franklin Mills Associates Limited Partnership (DC Partnership)
Franklin Mills, L.L.C.
Franklin Mills Residual Limited Partnership (DC Partnership)
Germantown Development Associates (MLP) Limited Partnership (MD Partnership)
Germantown Development Associates L.L.C.
Grapevine Mills Operating Company II, L.L.C.
Grapevine Mills Operating Company, L.L.C.
Gurnee Mills L.L.C.
Gurnee Mills II L.L.C.
Gurnee Mills (MLP) Limited Partnership (IL Partnership)
Gwinnett L.L.C.
Gwinnett Marketfair Associates Limited Partnership (GA Partnership)
Houston Development I L.P.
Houston Development L.L.C.
Hunt Club Road Properties Associates Limited Partnership (IL Partnership)
Katy Mills, L.L.C.
Katy Mills Limited Partnership
Katy Mills Residual Limited Partnership
Katy Mills Residual, L.L.C.
Katy Mills Residual II Limited Partnership
Liberty Plaza, L.L.C.
Liberty Plaza Limited Partnership
Mainstreet Retail Limited Partnership
Management Associates Limited Partnership
Meadowlands Mills L.L.C.
Meadowlands Mills Limited Partnership
Mills Global, L.L.C.
Mills International Acquisitions (Luxembourg) S.a r.l. (Luxembourg 1990 Company)
Mills-Kan Am Sawgrass Phase 3 Limited Partnership
Mills Management L.L.C.
Mills Ontario Acquisitions, L.L.C.
MillsServices Corp.
MillsServices II Corp.
Mills Texas Acquisitions Limited Partnership
Mills Texas Acquisitions, L.L.C.
Montgomery Village Associates L.L.C.
Montgomery Village Associates (MLP) Limited Partnership (MD Partnership)
</TABLE>
<PAGE> 3
<TABLE>
<C> <S>
Montgomery Village Ground L.L.C.
Montgomery Village Ground (MLP) Limited Partnership (MD Partnership)
Mount Prospect Plaza L.L.C.
Mount Prospect Plaza (MLP) Limited Partnership (IL Partnership)
Ontario Mills Finance, L.L.C.
Ontario Mills L.L.C.
Ontario Mills Limited Partnership
Ontario Mills II, L.L.C.
Ontario Mills II Limited Partnership
Ontario Mills Residual, L.L.C.
Ontario Mills Residual Limited Partnership
Opry Mills, L.L.C.
Opry Mills Limited Partnership
Orange City Mills, L.L.C.
Orange City Mills Limited Partnership
Potomac Mills L.L.C.
Potomac Mills Limited Partnership (VA Partnership)
Sawgrass Mills Phase II, L.L.C.
Sawgrass Mills Phase II Limited Partnership
Sugarloaf Mills, L.L.C.
Sugarloaf Mills Limited Partnership
Sugarloaf Mills Residual, L.L.C.
Sugarloaf Mills Residual Limited Partnership
Sunrise Mills L.L.C.
Sunrise Mills/MLP, L.L.C.
Sunrise Mills (MLP) Limited Partnership
The Mills Corporation Spain B.V. (Netherlands Corporation)
West Falls Church L.L.C.
Western Hills Plaza L.L.C.
WSM South Florida Corp. (FL Corporation)
SUBSIDIARIES OF MILLSSERVICES CORP.
- -----------------------------------
Commonwealth Investors, Inc.
Franklin Mills Residual Corp.
Grapevine Mills Finance Corp.
Grapevine Mills Residual Limited Partnership
Grapevine Mills Residual Operating Company, L.L.C.
Mainstreet Retail, Inc.
Mainstreet Ventures, Inc.
Manufacturers @ The Mills Corp.
Mills Enterprises, Inc.
MillsServices Canada Corp. (Ontario Corporation)
MillsServices of Grapevine, Inc.
Mills TV Corp.
Premises Providers, Inc. (MD Corporation)
</TABLE>
<PAGE> 4
<TABLE>
<C> <S>
SUBSIDIARIES OF MILLSSERVICES II CORP.
- --------------------------------------
1199420 Ontario Inc. (Ontario Corporation)
Arundel Mills Residual Corp.
MillsServices Canada II Corp. (Ontario Corporation)
Sugarloaf Mills Residual Corp.
SUBSIDIARIES OF MILLS ENTERPRISES, INC.
- ---------------------------------------
FoodBrand, L.L.C.
FoodBrand Services, Inc.
MEI/Kan Am I, L.L.C.
MEI/Kan Am II, L.L.C.
Moe's Beverage, Inc. (TX Corporation)
WPFC/Mills Development Company, L.L.C.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
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