Mills focus of latest bid war.

Simon Property Group and Farallon Capital Management have teamed up to unravel a seemingly done deal in what has become another indication of the level of competition that has increasingly become a part of the rampant merger and acquisition activity sweeping the REIT industry. The pair made a bid for The Mills Corporation that trumped a previous $7.5 billion offer put forward last month by Brookfield Asset Management that The Mills had stated it would accept. But on Tuesday last week, The Mills issued an announcement that it would instead select the Simon and Farallon bid, which, at $24 per share, was higher than the $21 per share purchase price that Brookfield had offered.

"The Mills' Board of Directors, after consultation with its outside counsel and independent financial advisors, has determined, in accordance with the merger agreement between The Mills and Brookfield Asset Management, Inc., that the transaction contemplated by the Simon/Farallon offer is more favorable to The Mills' stockholders than the Brookfield merger and constitutes a "Superior Competing Transaction," as defined in the Brookfield merger agreement," a statement issued by The Mills read.

The transaction is just one among a growing number of major REIT buyouts in which a competitor has entered into the bidding, often after an initial deal has seemingly been consummated. In recent months, SL Green almost saw its bid to purchase Reckson Associates crumble when a higher bid was submitted by a group that included billionaire investor, Carl Icahn, Macklowe Properties and Mack-Cali. SL Green eventually won the bid, but not before it was forced to up its initial offer.

More recently, the Blackstone Group had to increase its offer to acquire Equity Office Properties by $3 billion to $39 billion in order to beat out a competing bid by Vornado, who made an offer for the REIT after Blackstone seemed to have reached a deal with EOP weeks ago.

If Farallon in fact is able to purchase The Mills--which is anything but certain given the uncertainty that has become part of such transactions--it would come after Farallon had urged the troubled mall operator and developer to delay a sale.

One of The Mills' two largest shareholders, Farallon Partners had offered the REIT $19.20 per share to issue 25 million shares of new stock, money that it wanted The Mills to use to service or refinance a costly bridge loan with Goldman Sachs in order to buy itself more time to pursue a sale.

The Mill's other major shareholder, Gazit-Globe, meanwhile made a richer offer in which it would pay $21 per share for $500 million of new stock, commit to arranging another $600 million in capital through a subsequent stock offering, and see that The Mills' Goldman Sachs debt was refinanced with a $675 million loan it would arrange with the Royal Bank of Canada. Prior to news of the sale agreement between The Mills and Brookfield, Gazit-Globe had upped its offer to $22 per share, which would lessen the diluting effect that the firm's $500 million stock purchase would have had on existing shares in the company.

The Mills declined both offers, as many observers expected, given that both amounted to complex recapitalizations when The Mills had stated on numerous occasions that it was focusing on a sale of the company.

It isn't clear whether Brookfield Asset Management, whose real estate arm is the REIT Brookfield Properties, has plans to match or try to exceed Simon and Farallon's offer.