Mills Sued by Former Madrid Partner

Mills Corp.'s(MLS Quote - Cramer on MLS - Stock Picks) planned sale of its Madrid Xanadu site could be held up by a court challenge filed by its old joint-venture partner.

Spain-based real estate developer Parcelatoria de Gonzalo Chacon (PGC), which helped Mills develop the mammoth Madrid retail project, told TheStreet.com in a statement that it has sued Mills for back money it claims it is owed from the sale of its interest to the company.

Earlier this month, Mills announced it had sold its interest in three international properties, including Madrid Xanadu, for $981 million.

Investors at the time greeted the news with welcome arms, since Mills would receive about $500 million in net proceeds. The money would help the struggling mall developer pay down a portion of its senior term loan with Goldman Sachs Mortgage, which must approve the sale.

In August 2004, Mills purchased PGC's interest in Madrid Xanadu and the Snow Dome venture located at the property for an initial price of $45 million, according to Mills' Securities and Exchange Commission filings. This price is subject to adjustment using a formula based on 2003 operating results; the amount, if any, of the adjustment has not been determined, the SEC filings say.

PCG says it filed the claim at the High Court of Justice, Chancery Division, in London on June 19, 2005, claiming it had yet to be paid the additional amount.

According to PGC, the case is set to go to trial in October. It's not clear if a trial will hinder the sale of Madrid Xanadu.

PGC declined to comment beyond the press release it sent to TheStreet.com. Mills officials were not immediately available for comment.

Mills currently is restating its financials, battling numerous shareholder lawsuits and exploring a sale of the company.