Shares of embattled mall developer Mills Corp. ( MLS) were hammered further Monday after two analysts cut the company to a sell rating. Mills, which is
currently on the selling block , said Friday that it missed its 10-K filing deadline because of delays related to its financial restatements. In a research note Monday, Banc of America Securities analyst Ross Nussbaum cut his risk-weighted net asset value estimate on the real estate investment trust to $30 from $40. Analysts typically estimate net asset value, or NAV, for REITs to gauge the value of their underlying real estate. On Friday, Citigroup analyst Jonathan Litt cut Mills from hold to sell and lowered his NAV estimate to $37 from $40. Mills stock hit a 52-week-low of $32.50 earlier Monday, and recently changed hands at $32.84, down $3.89, or 10.6%. Based on Mills' SEC filing Friday, in which it says it won't be able to file its 10-K on time, Nussbaum believes the company may have previously overbooked revenue and/or under-reported expenses. He said he believes it is reasonable to assume a 5% reduction in Mills' previously reported net operating income once it restates, thus driving down his NAV estimate. His best-case NAV estimate is $35 and his worst-case NAV is now $25. The worst-case scenario assumes all of the following occur: Mills completes a $300 million preferred equity issuance; the company writes off its Meadowlands Xanadu project for $150 million; and the firm pays $200 million to settle shareholder lawsuits. "We see the potential for additional negative catalysts, including a substantial dividend cut (of up to 50%) or suspension, or the commencement of a formal SEC investigation," Nussbaum wrote. "We continue to believe that a near-term sale of Mills is unlikely, given the absence of audited 2005 financials, the SEC inquiry, lawsuits, and uncertain outlook for Meadowlands Xanadu."