Simon Property Group will add to an already substantial Washington real estate portfolio if it’s counter bid with Farallon Capital Management for the financially troubled Mills Corp. is successful.
The potential merger would give real estate trust Simon purview over at least 10 Washington-area malls. Chevy Chase-based Mills owns five shopping malls in the Washington region, including Potomac Mills in Prince William County, while Simon owns the Fashion Centre at Pentagon City, the Leesburg Premium Outlets and other retail locations.
Farallon, Mills’ largest shareholder, offered Monday to buy Mills Corp. for more than $1.5 billion, or $24 per share in cash. The offer came a few weeks after Mills agreed to a $1.35 billion offer from Canadian investor Brookfield Asset Management. Simon’s offer would give Mills’ shareholders payment at least six months faster than the Brookfield deal, according to a letter that Simon and Farallon submitted to Mills.
Accounting problems and debt have plagued Mills, which owns a total of 38 U.S. malls. The Securities and Exchange Commission investigates accounting mistakes, and the company has said it will restate its earnings going back to 2001. Should the retail properties change hands, it is unlikely shoppers will see a difference right away, said Baker Hostetler lawyer William Conti who specializes in mergers and acquisitions.
“Change always follows an acquisition like this. It just becomes a question of how much change, and that’s hard to say,” Conti said.
While it is likely that Simon would assess the new properties, complete renovation seemsunlikely, he said. Good news for Potomac Mills, which remains one of Virginia’s biggest tourist attractions.
“[Simon] obviously thinks the underlying value of the assets is good,” Conti said. “The portfolio is prestigious. Potomac Mills isn’t going anywhere.”
The Associated Press contributed to this story.
