Mills' CEO Steps Down
As Problems Mount for REIT

Larry Siegel stepped down as chief executive of Mills Corp. after a year of mounting problems at the real-estate investment trust. But some on Wall Street expressed concern about the size of the payment he will receive and the fact that he may participate in development of the $2 billion Meadowlands Xanadu shopping mall that contributed to the firm's woes.

According to a filing with the Securities and Exchange Commission, Mills agreed to pay Mr. Siegel $10.5 million if the company is purchased by the end of 2007, in addition to a $2.5 million severance payment. Mr. Siegel remains chairman until the Meadowlands Xanadu deal is closed.

Analysts generally applauded Mr. Siegel's departure -- as well as disclosure that the New York Stock Exchange would delay until next April a decision to delist Mills -- as clearing the way for sale of the company. While the company has been exploring "strategic alternatives," including sale of the company, questions about its financial condition have made would-be bidders reluctant.

Mark S. Ordan, who came to Mills in March as chief operating officer, was named president and chief executive. Mr. Ordan reiterated in an interview yesterday that Mills plans to "sell the whole company or part of the company."

Ross Nussbaum, a Banc of America Securities analyst, said in a note the change-of-control provision and Mr. Siegel's new role as nonexecutive chairman "creates a serious conflict of interest as it could incentivize (Mr. Siegel) to vote for a sale of the company at a lower price than if he were receiving a stock payment."

Mr. Siegel couldn't be reached for comment yesterday. Mr. Ordan said the $10.5 million payment was less than what was called for in Mr. Siegel's contract. Mr. Ordan said Mr. Siegel's resignation "was a decision made mutually by the board and Larry."

The SEC filing also showed that Mr. Siegel must repay Mills $362,156 for "personal use of the company-chartered aircraft and personal flights erroneously paid by the company."

Matthew Ostrower, an analyst with Morgan Stanley, said the change-of-control agreement and disclosure about personal air travel are likely to anger the average Mills investor.

Throughout his 11-year tenure, Mr. Siegel was seen as an aggressive innovator, pushing his malls in new directions that used entertainment attractions to draw shoppers into a unique mix of outlet shops not found in typical regional malls. But he also was criticized for over-promising, particularly at the Meadowlands Xanadu project, a massive shopping-and-entertainment complex under construction in the New Jersey Meadowlands near Manhattan.

Costs have soared to $2 billion from the $1.2 billion projected as recently as this spring. Under an agreement announced in August, Colony Capital Acquisitions LLC and Kan Am USA Management XXII Limited Partnership agreed to arrange construction financing and fund the remaining balance. In yesterday's SEC filing, Mills said if the Colony/Kan Am deal is completed, "Mr. Siegel may join the new venture" while remaining on the Mills board and resigning as executive chairman.

Mills shares have been battered by financial restatements, canceled development projects, a 60% dividend cut and an investigation into Mills's accounting. When Mr. Siegel took over as chief executive of Mills in March 1995, its shares traded at $16.63. They reached a peak of $66.44 in August 2005, but yesterday were down 1.4% to $16.48 in 4 p.m. NYSE composite trading.

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