Bidding frenzy as turf wars escalate.

In the trend de rigueur, the opportunity to bulk buy some choice real estate in a red hot market has fuelled another bidding war between two industry heavyweights.

The day after Vornado made its third offer to snatch Equity Office Properties from under the nose of the Blackstone Group, Simon Property Group attempted to engage in a game of one-upmanship itself with Brookfield Properties in its purchase of beleaguered retail REIT, The Mills Corporation.

"There's a great desire to obtain good real estate and not a lot of product out there for sale, so the chance of acquiring it all through one sale is what's driving this," said Deborah Jackson, executive managing director of Weiser LLP, the New York-based valuation and accounting firm. Simon--the largest mall owner in the US--has partnered with Farallon Capital, Mills biggest shareholder, to submit a competing offer of $24 per share in cash, topping Brookfield's $21 bid.

The surprise move came just over a week after it was announced Brookfield would purchase The Mills with a $7.5 billion cash and stock offer that included giving shareholders the chance to convert up to 20% of their stock into shares in a new company formed after the transaction closed.

It was voted the best deal on the table following two other cash and share offers, one from a solo Farallon and another from Gazit-Globe, another Mills shareholder, that were both dismissed as amounting to nothing more than recapitalization efforts.

Analyst Ross Nussbaum, of Bank of America Securities, noted that, with Simon's offer in cash coming along with a plan to replace The Mills existing debt financing, shareholders would be hard-pressed to say no, unless, of course, Brookfield comes back to the table with a counter offer and that, given the current merger and acquisition frenzy in the office sector, is a very real possibility.

As a $55 billion retail powerhouse, the $4 billion Mills portfolio would barely register in Simon's wake. However, as Jackson pointed out, a company such as Simon, with the vision and expertise to maximize the value of any product, likely sees the purchase as a chance to acquire a good number of assets at one time. "Simon is a prudent and sophisticated owner and while all of the assets may not quite fit, you would assume they have a plan for the operation of these centers and believe they can maximize the values of the portfolio," she said.

In the past two years, Mills has struggled with accounting errors, overstated earnings and allegations of financial misconduct. It has written off its involvement in several projects, including the $2 billion Xanadu retail mecca at the Meadowlands in New Jersey.

As REW went to press, a spokesman for Mills said the company's board of directors would "promptly consider" the new offer, but added, "At this time, the current merger agreement with Brookfield remains in effect, and The Mills' board of directors has not yet reached any determination as to the Simon/Farallon proposal."

Meanwhile, the bidding war between Blackstone and Vornado continued to escalate as Vornado bested its previous cash and share offer for Equity Office Properties only for Blackstone to announce the following day it was now prepared to pay $55.50 cash, a number that translates in to a record $39 billion sale.

Vornado is now making a tender offer to buy up to 55% of Equity Office's common shares for $56 per share in cash, and then acquire the rest of EOP's common shares through a follow-on merger. The offer represents a 13.4% increase in price since the opening salvo of this turf war was fired with a $48.50 bid by Blackstone last November that initially appeared to be enough to seal the deal.

However, while EOP's board has said it will evaluate the latest Vornado offer, it insisted in a statement issued Tuesday that it had not changed its initial recommendation in favor of Blackstone and will recommend shareholders approve its $55.50 allcash offer that could be closed within days of a shareholder meeting scheduled for today (Wednesday).