Back To Press Release and News


Financial problems delay Block projects

Owner Mills Corp. postpones expansion, sells some assets amid SEC investigation.


The Orange County Register

 
CONDO PLAN: The Mills Corp., owner of The Block at Orange, has sold some land to a luxury homebuilder.

YGNACIO NANETTI, THE ORANGE COUNTY REGISTER
Graphic
Plans for The Block
Plans for The Block
Mills Corp.

Based: Arlington, Va.

Founded: 1985

Properties: 42 properties in U.S., Canada and Europe

Total reported tenant sales: $8.7 billion in 2004

Largest property: Sawgrass Mills in Ft. Lauderdale, Fla., 2.2 million square feet

The Block at Orange: opened in 1998

ORANGE  The Mills Corp., owner of The Block at Orange, has delayed ambitious expansion plans and sold off assets.

Last week, the Securities and Exchange Commission changed an inquiry about Mills accounting practices into a formal investigation, according to a company filing to the SEC.

Construction of a 1,722-space parking structure at The Block will be delayed at least a year. The structure was designated by the city of Orange as a top priority, with future condominium developments and hotel construction hinging on increased parking.

Work on the structure was to begin in January and be completed by November. The delay affects plans to build a 403-unit condominium complex on the western edge of The Block property.

Meanwhile, tenants are eagerly awaiting the condos and improved parking.

"It's better for us because we'll get a live-in demographic," said Allen King, assistant general manager at the Dave & Buster's entertainment center. "We'll get a constant flow of people."

The delay comes at a time when the Arlington, Va.-based owner of 42 malls is facing financial problems.

Mills declined to comment this week.

The SEC first looked at the company after Mills announced in January that it would restate its financial results from the nearly past six years because of accounting errors, according to a company SEC filing.

Projects abandoned

The mall owner also announced plans in December to abandon 10 "pre-development" projects around the world.

The projects at The Block were not included on that list. However, Mills has sold a portion of its land to luxury home developer Toll Brothers, said Jim Reichert, Orange's economic development director.

Toll Brothers, with condo and single-family home projects in Yorba Linda, is in the process of submitting preliminary plans to develop condos on the land, Reichert said.

Pennsylvania-based Toll Brothers declined to comment this week.

Mills said in a recent news release that it is looking at possibly selling all or part of its company.

Vornado Realty Trust, which owns retail properties in Orange, Anaheim and Costa Mesa, said in March that it has been talking with the company. Vornado declined to comment further.

Orange city officials said they are not worried about Mills' financial problems but are concerned about the parking crunch.

"The city is taking steps to protect the taxpayers' interests," said Denis Bilodeau, an Orange planning commissioner. "I don't think the Mills' financial problems are of great concern to the city."

However, Bilodeau said he has "grave concerns about the parking situation" at the mall, which lacks as many as 875 spaces during peak hours, leaving customers circling the lot on Friday and Saturday nights.

Hot property

Councilwoman Carolyn Cavecche said the city always looks for growth opportunities and will do so whether Mills moves forward with its projects.

"I look at the total economic viability of that area," she said. "I'm a big believer that the market drives what happens and I sit back. With everything that's going on at the Anaheim side of the freeway and the 22 Freeway expansion, it's a prime piece of property for everybody."

Reichert said mall revenue has increased in the past few years.

The mall generated about $1.5 million in sales-tax revenue last year. Since its opening in late 1998, the mall contributed a steady $1.2 million until 2004, when it drew $1.3 million.

Orange's other mall, The Village at Orange, generated $1.5 million in sales tax in 2004.

Mills' plans to ease the crunch with a 1,722-spot parking structure that won City Council approval in December. The proposal also included building a condo complex with spas and a swimming pool after more parking spaces were in place.

Alice Angus, the city's community development director, said she expects Mills to move forward with plans after it reaches a consensus with its tenants and Equity Office Properties, the owner of several nearby office buildings.

"We have a hope, as do the local folks at The Block, that it'll move ahead," she said. "The have not withdrawn or pulled back in terms of the parking structure."



Register staff writer Hang T. Nguyen contributed to this report. CONTACT US: (714) 704-3788 or epak@ocregister.com