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Mills Corp. hires advisers on possible Xanadu sale
State says it anticipates project to be completed
Friday, February 17, 2006
BY MATTHEW FUTTERMAN
Star-Ledger Staff
In a move that raises serious questions about redevelopment plans for the Meadowlands, the troubled Mills Corp. has hired two top investment banks to advise the mall developer on a potential sale, executives confirmed yesterday.
The same executives, who asked to remain anonymous because they were not authorized to comment on the company's long- term strategy, said last week that Virginia-based Mills had retained JPMorgan and Goldman Sachs to help finance construction of several ongoing projects.
However, those banks' efforts are now focused on a sale, prompting state officials to worry about the future of the $1.3 billion retail and entertainment center known as Xanadu, now under construction at the Meadowlands Sports Complex.
"Of course I am concerned, because it's my job to be concerned," said George Zoffinger, chief executive of the New Jersey Sports and Exposition Authority, the agency that operates the sports complex. "But the worst thing we can do here is panic before we know all the facts."
The news that Mills was considering a sale of the entire company or some of its prime assets was first reported yesterday by the Wall Street Journal. The developments surprised officials in New Jersey, who had been assured by Mills Chief Executive Larry Siegel in a meeting two weeks ago that an accounting scandal and a series of poor earnings reports would not jeopardize the future of Xanadu. Siegel said his company, which is now the focus of a federal inquiry, remained totally committed to Xanadu.
The project, now a steel shell and a parking deck, is supposed to include dozens of high-end stores, North America's first indoor ski mountain and a minor league ballpark. Mills' partner in the project is Cranford-based Mack-Cali Realty.
Yesterday, Mills spokesman David Douglas declined to answer several questions about the future of Xanadu or the company. However, the financial community began digesting the prospect of a sale of the once-high-flying real estate investment trust, or REIT.
Jonathan Litt, an analyst with Citigroup, said Mills was likely still discussing construction financing with the banks, but noted the company could fetch $53 a share in a sale -- roughly a 25 percent premium on its current price. Shares of Mills closed yesterday at $42.14, down 8 cents.
"CEO Larry Siegel, however, did say on Jan. 6 that Mills would take 'all necessary steps' to 'create shareholder value' in response to whether Mills is looking at selling the company," Litt wrote. "Potential bidders are likely doing homework."
Industry experts said potential buyers include Paramus-based Vornado Realty Trust, mall owner Simon Property Group of Indianapolis and Westfield Development of Denver.
State Senate President Richard Codey, who during his 14 months as governor signed a deal to keep the Giants and Jets in New Jersey so the Meadowlands would remain a sports and entertainment destination, said the likelihood that Mills would be sold raised questions about what will ultimately be built at the sports complex.
"Somebody has to take a hard look at what is going on," Codey said yesterday. "The most important thing is that the entertainment part is lived up to, because the criticism was that this was just a mall."
Gov. Jon Corzine's office said the governor is keeping a close watch on developments with Mills and the sports authority.
"We expect Mills to live up to its contractual obligations, and if there were to be a substitute, we would expect them to do the same," said Anthony Coley, Corzine's chief spokesman.
Carl Goldberg, chairman of the Sports and Exposition Authority and an ardent defender of Xanadu and Mills, spent a frustrating day yesterday trying to get answers from Mills executives about the company's future.
Goldberg said he wanted to make it clear to the company and any potential suitors that the sports authority had no interest in changing the scope of Xanadu to make it more focused on the lucrative retail business rather than on entertainment venues.
"We want the project we bargained for, and we are going to get the project we bargained for, either from Mills or someone else," Goldberg said. "The land uses are restricted, and any potential purchaser of Mills or this project should be warned they must have the ability to complete the project with full a complement of entertainment components."
Mitch Hersh, chief executive of Mack-Cali, predicted yesterday Xanadu would be completed, but would not speculate on whether his current partner, Mills, would be able to finish the job.
"The project is going to be built and be successful, but that is a question I'm not in the loop on," Hersh said.
Despite the uncertainty, Zoffinger and Goldberg said the state could rely on its contract with Mills and Mack-Cali to make sure the project would be built. However, both men are veteran real estate executives and well aware of the possibility that any developer that bought Mills could try to play hardball with the state and refuse to do any more work on Xanadu until officials allowed for changes in the scope of the project.
In that case, Zoffinger said the state could use a portion of the $130 million it has already collected from Mills and Mack-Cali to deconstruct the steel shell that has been erected so far and pursue other opportunities on the site.
"We know there is value in this project," said Zoffinger, who is monitoring developments while on vacation in Mexico. "It is safe to say this documentation protects the interest of the state better than anything else we have. I think it puts most of the cards on our side of the table."
Mills Corp. hires advisers on possible Xanadu sale
State says it anticipates project to be completed
Friday, February 17, 2006
BY MATTHEW FUTTERMAN
Star-Ledger Staff
In a move that raises serious questions about redevelopment plans for the Meadowlands, the troubled Mills Corp. has hired two top investment banks to advise the mall developer on a potential sale, executives confirmed yesterday.
The same executives, who asked to remain anonymous because they were not authorized to comment on the company's long- term strategy, said last week that Virginia-based Mills had retained JPMorgan and Goldman Sachs to help finance construction of several ongoing projects.
However, those banks' efforts are now focused on a sale, prompting state officials to worry about the future of the $1.3 billion retail and entertainment center known as Xanadu, now under construction at the Meadowlands Sports Complex.
"Of course I am concerned, because it's my job to be concerned," said George Zoffinger, chief executive of the New Jersey Sports and Exposition Authority, the agency that operates the sports complex. "But the worst thing we can do here is panic before we know all the facts."
The news that Mills was considering a sale of the entire company or some of its prime assets was first reported yesterday by the Wall Street Journal. The developments surprised officials in New Jersey, who had been assured by Mills Chief Executive Larry Siegel in a meeting two weeks ago that an accounting scandal and a series of poor earnings reports would not jeopardize the future of Xanadu. Siegel said his company, which is now the focus of a federal inquiry, remained totally committed to Xanadu.
The project, now a steel shell and a parking deck, is supposed to include dozens of high-end stores, North America's first indoor ski mountain and a minor league ballpark. Mills' partner in the project is Cranford-based Mack-Cali Realty.
Yesterday, Mills spokesman David Douglas declined to answer several questions about the future of Xanadu or the company. However, the financial community began digesting the prospect of a sale of the once-high-flying real estate investment trust, or REIT.
Jonathan Litt, an analyst with Citigroup, said Mills was likely still discussing construction financing with the banks, but noted the company could fetch $53 a share in a sale -- roughly a 25 percent premium on its current price. Shares of Mills closed yesterday at $42.14, down 8 cents.
"CEO Larry Siegel, however, did say on Jan. 6 that Mills would take 'all necessary steps' to 'create shareholder value' in response to whether Mills is looking at selling the company," Litt wrote. "Potential bidders are likely doing homework."
Industry experts said potential buyers include Paramus-based Vornado Realty Trust, mall owner Simon Property Group of Indianapolis and Westfield Development of Denver.
State Senate President Richard Codey, who during his 14 months as governor signed a deal to keep the Giants and Jets in New Jersey so the Meadowlands would remain a sports and entertainment destination, said the likelihood that Mills would be sold raised questions about what will ultimately be built at the sports complex.
"Somebody has to take a hard look at what is going on," Codey said yesterday. "The most important thing is that the entertainment part is lived up to, because the criticism was that this was just a mall."
Gov. Jon Corzine's office said the governor is keeping a close watch on developments with Mills and the sports authority.
"We expect Mills to live up to its contractual obligations, and if there were to be a substitute, we would expect them to do the same," said Anthony Coley, Corzine's chief spokesman.
Carl Goldberg, chairman of the Sports and Exposition Authority and an ardent defender of Xanadu and Mills, spent a frustrating day yesterday trying to get answers from Mills executives about the company's future.
Goldberg said he wanted to make it clear to the company and any potential suitors that the sports authority had no interest in changing the scope of Xanadu to make it more focused on the lucrative retail business rather than on entertainment venues.
"We want the project we bargained for, and we are going to get the project we bargained for, either from Mills or someone else," Goldberg said. "The land uses are restricted, and any potential purchaser of Mills or this project should be warned they must have the ability to complete the project with full a complement of entertainment components."
Mitch Hersh, chief executive of Mack-Cali, predicted yesterday Xanadu would be completed, but would not speculate on whether his current partner, Mills, would be able to finish the job.
"The project is going to be built and be successful, but that is a question I'm not in the loop on," Hersh said.
Despite the uncertainty, Zoffinger and Goldberg said the state could rely on its contract with Mills and Mack-Cali to make sure the project would be built. However, both men are veteran real estate executives and well aware of the possibility that any developer that bought Mills could try to play hardball with the state and refuse to do any more work on Xanadu until officials allowed for changes in the scope of the project.
In that case, Zoffinger said the state could use a portion of the $130 million it has already collected from Mills and Mack-Cali to deconstruct the steel shell that has been erected so far and pursue other opportunities on the site.
"We know there is value in this project," said Zoffinger, who is monitoring developments while on vacation in Mexico. "It is safe to say this documentation protects the interest of the state better than anything else we have. I think it puts most of the cards on our side of the table."
posted by Jones Lang LaSalle NJ News Blog at 10:07 AM
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