WASHINGTON -- Mills Corp., a Chevy Chase shopping-mall developer that has lost more than half its market value this year, has secured financing for its Meadowlands Xanadu project in New Jersey, clearing the way for a possible sale of the company.
Colony Capital, based in Los Angeles, will provide as much as $500 million of equity financing and arrange for construction loans to fund the balance of the expected $2 billion cost of the Xanadu project, Mills said yesterday.
Mills' shares jumped 15.3 percent on the announcement, which comes less than a week after New Jersey Gov. Jon Corzine said the state would try to help save Xanadu.
"It definitely gives the project that infusion of cash they desperately needed," said New Jersey state Sen. Paul Sarlo. "I think everyone realized something like this had to happen. Mills was not going to be able to do it alone."
The 4.8 million-square-foot Xanadu project, five miles from Manhattan, is part of New Jersey's effort to boost tourism and help end chronic tax shortfalls. Ending the problems at Xanadu also is critical to Mills, which is the subject of a Securities and Exchange Commission accounting investigation and has been forced to sell assets as it seeks a possible buyer.
Mills has invested $380 million in Xanadu Meadowlands, its biggest project. The complex is supposed to include a luxury hotel, office buildings, runway fashion shows, fine dining and the nation's first snow dome for indoor skiing. It will be 600,000 square feet bigger than Mall of America in Bloomington, Minn., the nation's largest, which is big enough to hold 32 Boeing 747 aircraft, according to the mall's Web site.
State officials who backed Xanadu have said it would create thousands of jobs and lure tourists and shoppers to New Jersey, generating tax revenue.
Corzine, a former chief executive officer of Goldman, Sachs & Co., has said economic growth is crucial to helping end chronic state budget deficits.
The agreement with Colony Capital allows Mills "to achieve its goals of reducing the company's financial obligations and facilitating our exploration of strategic alternatives," Chief Executive Officer Lawrence C. Siegel said in the company's statement.
After the agreement is completed, Mills will become a limited partner in Xanadu and will have no financial obligations to the project.
"This is a very, very positive development," said Rich Moore, an RBC Capital Markets analyst who has an "outperform" rating on Mills shares. "The overhang on this company, aside from the fact that they won't release financial statements, is what was going to happen at the Meadowlands. Now you've got a resolution to that. Now I think the company gets sold."
Mills said last week that it agreed to sell its 50 percent stakes in the Vaughan Mills center in Ontario and St. Enoch Centre mall in Glasgow, Scotland, along with its Xanadu mall in Madrid, Spain, to Montreal-based Ivanhoe Cambridge Inc. for $981 million. Mills will receive about $500 million from the sales.
Mills shares rose $2.56 to close $19.28 yesterday on New York Stock Exchange.