Mills Corp. ( MLS) shareholders may be looking for a quick sale of the beleaguered company, but the market shouldn't expect a merger announcement anytime soon. Sources say that complications surrounding the mall owner's joint venture agreements and general confusion over the value of the company's giant Xanadu development project in New Jersey's Meadowlands are stalling matters. The real estate investment trust put itself up for sale in February amid numerous financial woes. First-round bids were completed in early June, and second-round bids are now in the process of being submitted. "I don't think third-round bids will be for a while," says one source involved in the bidding process. The stickiest issue remains the complicated nature of the joint venture agreements the real estate investment trust has with its primary equity partner, the German fund KanAm, the source says. Add in the Securities and Exchange Commission investigation surrounding Mills' ongoing financial restatements, and the bidding process remains knotty.
At this point, it's not entirely clear who is bidding on Mills, which owns 42 retail properties around the U.S., Canada and Europe. Recent Australian press reports suggested that Westfield, which was expected to be a likely bidder, did not submit a bid in the first round. Likely candidates of interest in Mills are Vornado ( VNO), Simon Property ( SPG), General Growth ( GGP) and the privately held Lightstone Group, industry sources say. These parties, and Mills management, have remained mum during the bidding process. One analyst also raised the issue that Mills may not be providing adequate information during the bidding process. In a recent research note, Bank of America analyst Ross Nussbaum said conversations with several REIT management teams in recent months left him with the impression that Mills' Internet-based data portal for potential buyers "does not contain enough information with which to make a fully-informed offer for the company, especially given the associated risks related to the development pipeline, lack of audited financials, the SEC investigation and shareholder lawsuits."