Gazit-Globe property in NJ
Israeli investor to rebuild struggling Mills corp.
Large Israeli real estate firm Gazit-Globe Ltd invests USD 1.2 billion in struggling Mills shopping mall developer saying it would rather rebuild company than sell it off in pieces. Chairman Chaim Katzman: 'We believe Mills should be rebuilt, not sold'
An Israeli real estate investment firm said Wednesday it wants to invest up to USD 1.2 billion to rebuild struggling mall developer The Mills Corp., saying the company should not go ahead with plans to offer itself up for sale.
Gazit-Globe Ltd. Said in a Securities and Exchange Commission filing that it has acquired 9 percent of Mills' shares. The firm, Israel's largest real estate investment company, said it wants Mills' board of directors to agree to recapitalize and not go ahead with plans to sell all or part of the company.
Following the announcement, shares of Mills rose more than 15 percent in early trading Wednesday on the New York Stock Exchange, rising USD 2.56 to USD 19.57.
The company's longtime chief executive, Laurence Siegel, retired abruptly last month, and incoming CEO Mark Ordan said he would pursue a sale of Mills. The real estate investment trust, based in Chevy Chase, Maryland, also made a deal in August that ends its stake in a troubled New Jersey mall project. Analysts said the developments signaled a sale of Mills could come as early as this year.
But Gazit-Globe Chairman Chaim Katzman said in a statement Wednesday that he feared Mills would sell itself at a "distressed price." He urged Mills to consider the recapitalization proposal. "We believe Mills should be rebuilt, not sold," Katzman said.
The SEC has been investigating Mills over its accounting practices. The company has yet to file an annual report or quarterly results this year as required by SEC rules. Mills obtained a USD 2 billion loan from the investment firm Goldman Sachs to help it stay afloat. The loan is due at the end of the year.
Gazit-Globe owned 4.9 percent of Mills shares until this month, when it boosted its holdings, including USD 37.6 million that a Gazit-Globe subsidiary bought between Oct. 16 and Oct. 20.
Katzman first approached Siegel with the proposal in September, and then reiterated the offer when Ordan took over in October.
As part of the recapitalization plan, the Israeli firm proposes paying USD 24.50 for new Series B common stock. Gazit-Globe would also assume the majority of seats on Mills' board of directors, according to the SEC filing.
On Oct. 20, Katzman met with Ordan to explain why he thought the new investment would be a better option than a sale. Katzman said the funds would give Mills time to prop up its portfolio of real estate holdings and invest in new projects. It would also simplify the company's capital structure to "Lead to increased transparency in financial reporting," The filing states.
"It is not a question of whether or not the board must take action to ensure the continuity of Mills in order to restore profitability and leadership to the industry, but rather what kind of action is necessary and appropriate," Katzman said in a statement Wednesday.
Ordan called Gazit-Globe Tuesday and "expressed an interest in continuing a dialog" about the proposal, and said he would arrange a meeting for Katzman with a Mills special committee, according to the filing.
