Mills Corp. To Divest Its Foreign Mall Stakes

Chevy Chase-based mall developer Mills Corp. yesterday announced plans to sell its stakes in three foreign malls to a Canadian firm, as the struggling company tries to stay afloat.

The deal is expected to net $500 million for Mills and would go toward paying off about $2 billion in debt. After a series of inquiries about its accounting practices, the company is under a year-end deadline to find a buyer or face a possible loan default.

The three malls, which were sold to Montreal developer Ivanhoe Cambridge Inc., are Vaughan Mills in Ontario; St. Enoch Centre in Glasgow, Scotland; and Madrid Xanadu. Ivanhoe Cambridge already has a 50 percent interest in Vaughan Mills and St. Enoch Centre.

Mills has been plagued by financial troubles in the past year: a series of layoffs, ballooning construction costs at its massive Xanadu project at the Meadowlands in New Jersey, and a more than 50 percent reduction in the profits recorded from 2003 to 2005.

Last week, Mills reported that its auditors have concluded there is "substantial doubt" that the company can survive its problems.

The Securities and Exchange Commission is investigating accounting irregularities dating to 2000 at Mills.

Mills owns 42 shopping malls in the United States and Europe, including Potomac Mills in Prince William County and Arundel Mills in Maryland. The three malls being sold are the only international sites in Mills' portfolio. Another Mills mall is under construction in Rome and is set for completion in 2008.

Nancy Defoy, a spokeswoman for Ivanhoe Cambridge, said the deal would be "quite a sizable addition" to its international portfolio, which includes malls in Germany, Poland and Spain.

Shares of Mills rose yesterday by $1.53, or 9.6 percent, to close at $17.44. As bad news has mounted, the stock has fallen from a high of just above $60 last August.

The malls in Scotland and Ontario are expected to change hands at the end of the month, and Madrid Xanadu will be transferred at the end of September, according to a news release. A Mills spokesman declined to comment on whether the sale was related to the company's financial troubles or why it was selling off its international ventures.