Jones Lang LaSalle
MEDDLING WITH MILLS
VA 03 10 06
Peter Slatin
The unfolding saga of retail REIT Mills Corp. (nyse: MLS) got an interesting wrinkle yesterday when an investor group revealed that it has acquired 6.4% of the troubled company's plummeting stock. According to SNL Financial, a pair of Midwestern hedge funds, Milwaukee-based Stark Investments and Shepherd International Investments of Madison, Wis., had reported their holdings in a 13D filing with the SEC.The investors behind Stark and Shepherd are Brian Stark and Michael Roth, two friends born just three days apart.
But the real estate player behind the scenes is likely Louis Conforti, a seasoned REIT investor whose Greenwood Group, a hedge fund manager focused on small-cap REITs, was recently acquired by Stark.The group's acquisition of a piece of Mills worth roughly $144 million (MLS closed at $40/share Thursday) is likely just the opening salvo in what could become a fierce buyout battle for the Arlington, Va. REIT. Earlier this week, Vornado Realty Trust (nyse: VNO) confirmed that it is in "informal" talks with Mills.
Vornado has made opportunistic investments in retailers Sears and Toys 'R' Us and in McDonald's, and is deep in acquisition mode.Mills is the perfect target for a buyout because of its existing portfolio of some 42 large retail and entertainment properties in the U.S., Canada and Europe, and an extensive, if risky, development pipeline. Since late 2004, Mills has twice been forced to restate earnings and has dropped ten development projects.
It has also laid off 89 employees, and has hired investment banks J.P. Morgan Chase and Goldman Sachs to explore "strategic alternatives," including a possible sale; meanwhile, its stock has plunged from a high of 68 last year, even as REIT shares in general have soared. And Mills is the target of an SEC investigation; the company has also acknowledged that it will not meet a mid-March deadline for completing its annual report.
It has also said that its 2005 earnings will be "significantly below" expectations.The company's turmoil could seriously affect leasing and financing efforts at Mills' two highest-profile projects, the $1.7 billion Xanadu Meadowlands development in New Jersey and the Block 37 project in the heart of downtown Chicago, which Mills is calling 108 North State Street.
Block 37 has for more than 15 years resisted all attempts at development by numerous experienced and well-heeled entities. Mills is already in the ground there on its planned $224 million retail development; the project also includes an office building.Under Conforti, Greenwood was involved in the takeover and privatization last year of Prime Group Realty Trust (where Conforti was once CFO). That buyout of a REIT that had failed to perform was one of the early events in the still snowballing privatization boom of the past 18 months. The largest of these deals to date, the sale of CarrAmerica Realty Corp. to Blackstone Group for $5.6 billion, was announced earlier this week.
© 2005. The Slatin Report. All rights reserved.
MEDDLING WITH MILLS
VA 03 10 06
Peter Slatin
The unfolding saga of retail REIT Mills Corp. (nyse: MLS) got an interesting wrinkle yesterday when an investor group revealed that it has acquired 6.4% of the troubled company's plummeting stock. According to SNL Financial, a pair of Midwestern hedge funds, Milwaukee-based Stark Investments and Shepherd International Investments of Madison, Wis., had reported their holdings in a 13D filing with the SEC.The investors behind Stark and Shepherd are Brian Stark and Michael Roth, two friends born just three days apart.
But the real estate player behind the scenes is likely Louis Conforti, a seasoned REIT investor whose Greenwood Group, a hedge fund manager focused on small-cap REITs, was recently acquired by Stark.The group's acquisition of a piece of Mills worth roughly $144 million (MLS closed at $40/share Thursday) is likely just the opening salvo in what could become a fierce buyout battle for the Arlington, Va. REIT. Earlier this week, Vornado Realty Trust (nyse: VNO) confirmed that it is in "informal" talks with Mills.
Vornado has made opportunistic investments in retailers Sears and Toys 'R' Us and in McDonald's, and is deep in acquisition mode.Mills is the perfect target for a buyout because of its existing portfolio of some 42 large retail and entertainment properties in the U.S., Canada and Europe, and an extensive, if risky, development pipeline. Since late 2004, Mills has twice been forced to restate earnings and has dropped ten development projects.
It has also laid off 89 employees, and has hired investment banks J.P. Morgan Chase and Goldman Sachs to explore "strategic alternatives," including a possible sale; meanwhile, its stock has plunged from a high of 68 last year, even as REIT shares in general have soared. And Mills is the target of an SEC investigation; the company has also acknowledged that it will not meet a mid-March deadline for completing its annual report.
It has also said that its 2005 earnings will be "significantly below" expectations.The company's turmoil could seriously affect leasing and financing efforts at Mills' two highest-profile projects, the $1.7 billion Xanadu Meadowlands development in New Jersey and the Block 37 project in the heart of downtown Chicago, which Mills is calling 108 North State Street.
Block 37 has for more than 15 years resisted all attempts at development by numerous experienced and well-heeled entities. Mills is already in the ground there on its planned $224 million retail development; the project also includes an office building.Under Conforti, Greenwood was involved in the takeover and privatization last year of Prime Group Realty Trust (where Conforti was once CFO). That buyout of a REIT that had failed to perform was one of the early events in the still snowballing privatization boom of the past 18 months. The largest of these deals to date, the sale of CarrAmerica Realty Corp. to Blackstone Group for $5.6 billion, was announced earlier this week.
© 2005. The Slatin Report. All rights reserved.
posted by Jones Lang LaSalle NJ News Blog at 10:24 AM
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