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TABLE OF CONTENTS
PART III

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

Commission File Number 1-12994

THE MILLS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Registrant's telephone number, including area code: (703) 526-5000

Securities registered pursuant to Section 12(b) of the Act:

               Securities registered pursuant to Section 12(g) of the Act: None

               Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such report(s)) and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

               Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

               Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý    No o

               As of June 30, 2003, the aggregate market value of the 37,178,838 shares of common stock held by non-affiliates of the registrant was $1,247,182,265 based upon the closing price of $33.55 per share on the New York Stock Exchange composite tape on such date. As of March 1, 2004, there were 50,373,343 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

               Portions of the registrant's proxy statement for the annual shareholders meeting to be held in 2004 are incorporated by reference into Part III. We expect to file our proxy statement by April 30, 2004.

THE MILLS CORPORATION

Annual Report on Form 10-K
December 31, 2003
TABLE OF CONTENTS

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PART I

Cautionary Statement

              Statements contained in this Form 10-K and the information incorporated by reference herein (the "Exchange Act") may be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.

              Forward-looking statements can be identified by the use of forward-looking terminology such as, but not limited to, "may," "will," "expect," "anticipate," "estimate," "would be," "believe," or "continue" or the negative or other variations of comparable terminology. We intend such forward-looking statements to be covered by the safe harbor provisions applicable to forward-looking statements contained in Section 21E of the Exchange Act. Such statements (none of which is intended as a guarantee of performance) are subject to certain assumptions, risks and uncertainties, which could cause our actual future results, achievements or transactions to differ materially from those projected or anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this Form 10-K is filed with the SEC. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements, including, but not limited to, the risks described in this Form 10-K. Such factors include, among others:

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international, national and local economic, business and real estate conditions that will, among other things, affect:



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supply and demand for retail space and retail properties,



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the extent, strength and duration of any economic recovery, including the effect on demand for retail space and the creation of new retail real estate developments,



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availability and creditworthiness of tenants,



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interest rate levels, and



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exchange rates between the US dollar and foreign currencies in countries where we have investments;



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adverse changes in the real estate market, including, among other things:



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the extent of tenant bankruptcies, financial difficulties and defaults,



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the extent of future demand for retail space and barriers to entry into markets that we may seek to enter in the future, and



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our ability to identify and consummate attractive acquisitions on favorable terms;



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risks associated with the development, acquisition and operation of retail properties, including risks that the development of the project may not be completed on schedule, that we may not be able to lease available space to tenants at favorable rental rates, that tenants will not take occupancy or pay rent in accordance with their leases, or that development costs may be greater than anticipated;



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availability of financing for our development and redevelopment projects or acquisition activities;



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our ability to maintain our status as a real estate investment trust ("REIT") for federal and state income tax purposes;



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our ability to raise capital;



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our ability to obtain insurance at a reasonable cost;



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the effect of any terrorist activity or other heightened geopolitical risks;



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governmental actions and initiatives;



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environmental/safety requirements; and



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those risks described in the section entitled "Risk Factors" in this Form 10-K.

              We undertake no duty or obligation to publicly announce any revisions to, or updates of, these forward-looking statements that may result from future events or circumstances.

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Introductory Note

              Except as otherwise required by the context, references in this Form 10-K to "we," "us," "our" and the "Company" refer to The Mills Corporation and its subsidiaries, including The Mills Limited Partnership, and references in this Form 10-K to "Mills LP" refer to The Mills Limited Partnership, of which The Mills Corporation is the sole general partner. We conduct all of our business and own all of our properties through Mills LP and Mills LP's various subsidiaries. As the general partner of Mills LP, we have the exclusive power to manage the business of Mills LP, subject to some limited exceptions.

Item 1. Business

The Company

              We are a fully integrated, self-managed REIT that develops, redevelops, acquires, operates and manages three types of retail and entertainment real estate properties. These three types of retail and entertainment real estate properties are:

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Mills Landmark Centers, which are retail and entertainment super-regional shopping centers branded as "Mills;"



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21^st Century Retail and Entertainment Centers, which include conventional regional shopping centers anchored by traditional department stores and open-air retail and entertainment centers; and



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International Retail and Entertainment Centers, which are internationally located super-regional full-priced retail and entertainment centers.

              As of December 31, 2003, we had an aggregate of 26 retail and entertainment-oriented centers consisting of 15 Mills Landmark Centers, ten 21^st Century Retail and Entertainment Centers and one International Retail and Entertainment Center. Of these (a) we wholly owned five Mills Landmark Centers and seven 21^st Century Retail and Entertainment Centers and (b) we held equity interests in various joint ventures that owned ten Mills Landmark Centers, three 21^st Century Retail and Entertainment Centers and the one International Retail and Entertainment Center. In January 2004, we acquired 100% of one additional 21^st Century Retail and Entertainment Center located near Miami, Florida. For a description of our existing properties, projects under construction and projects under development as of December 31, 2003, please refer to "Item 2. Properties" of this annual report on Form 10-K.

              We also own 100% of the entities that provide leasing, management, development and financing services for both joint venture and wholly owned properties. Through MillsServices Corp. ("MSC"), we own 100% of Mills Enterprises, Inc. ("MEI"), an entity that holds investments in certain retail joint ventures. In addition, as of December 31, 2003, we had three wholly-owned community shopping centers ("Community Centers"), a portfolio of 19 single tenant properties ("Net Lease Properties") and other related commercial developments.

              We utilize our experience with developing retail and entertainment centers that combine shopping, entertainment, dining and recreation into a consumer experience to develop shopping centers branded as Mills. We are leveraging this expertise to provide a superior shopping experience at the conventional regional shopping centers that we acquired recently, as well as at our Madrid Xanadú project, which opened in May 2003. We plan to continue to use our expertise in the development and operation of retail and entertainment projects to execute our three-pronged, integrated strategy consisting of Mills Landmark Centers, 21^st Century Retail and Entertainment Centers and International Retail and Entertainment Centers.

              The following is a brief description of our Mills Landmark Centers, 21^st Century Retail and Entertainment Centers, and International Retail and Entertainment Center.

Mills Landmark Centers

              Mills Landmark Centers typically contain an average of approximately 1.4 million square feet of gross leasable area ("GLA"), approximately 175 to 200 in-line tenants and an average of 17 anchor tenants. Mills Landmark Centers are essentially a hybrid of various retail formats with a diverse tenant base consisting of anchor stores, in-line stores, manufacturer's outlets, off-price retailers, catalog retailers, "category killers" (which offer a selection of products in one defined merchandise category) and entertainment venues.

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              The following list is representative of anchors and other tenants at our Mills Landmark Centers:

               Mills Landmark Centers are generally located in large, metropolitan areas with a population of at least one million within a 20 mile radius, median annual household income of $50,000 or greater and steady tourist appeal. The prototypical physical layout is a "race track" format of stores and ample parking on one level. Mills Landmark Center shoppers typically fit into one of the following categories:

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they reside within a 10-15 mile radius of a Mills Landmark Center and use the center as their local regional mall equivalent;



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they reside within a 15-40 mile radius of a Mills Landmark Center and travel beyond other retail offerings to access the breadth and uniqueness of the tenant mix at a Mills Landmark Center; or



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they travel from greater distances as part of a planned shopping experience.

              During 2003, we added two Mills Landmark Centers to our portfolio—Great Mall of the Bay Area, located in Milpitas, California, and St. Louis Mills, located in St. Louis, Missouri, both of which we currently own through joint ventures.

              We believe our Mills Landmark Center properties have a number of inherent competitive advantages over other retail formats in operation today. These advantages, which are more fully described below, have resulted in the strong operating performance of these properties.

              Consumer Draw.    We believe that the critical mass achieved by aggregating approximately 175 to 200 stores and 1.4 million square feet of GLA under one roof, coupled with the distinctive physical characteristics of our Mills Landmark Centers, are the primary reasons that our properties attract many shoppers and create extended shopping trips. We believe that shoppers are attracted to our unique mix of tenants, which includes department stores, in-line stores, manufacturer's outlets, off-price retailers, catalog retailers, "category killers" and entertainment venues. We believe we have created a shopping environment that is festive and social, with interior designs resembling a "Mainstreet" atmosphere that incorporates staggered store fronts and roof lines, natural lighting and colorful graphic accents. Shopping avenues in our Mills Landmark Centers are interspersed with a variety of food establishments and entertainment courts, further enhancing the entertainment nature of the shopping trip.

              Brand Awareness.    The Mills brand is synonymous with one-of-a-kind value, entertainment and variety retail offerings. We believe that a Mills Landmark Center is differentiated by the market, consumers and tourist shoppers.

              Attractiveness to Tenants.    We believe tenants are attracted to our Mills Landmark Centers for two main reasons: (a) heavy consumer traffic and the extended length and high productivity of consumer visits, which translate into higher sales levels than at traditional shopping malls; and (b) lower occupancy costs for each of our in-line tenants as a result of lower common area maintenance costs compared to many other retail formats. Lower common area maintenance costs for in-line tenants are a result of several factors, including:

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Anchor contributions: an average of 17 anchor stores make significant contributions in aggregate to common area maintenance pools;

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Low maintenance costs: one-story construction, smaller concourses and lack of deck parking require less maintenance; and



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Larger tenant base: a Mills Landmark Center's significant in-line tenant square footage results in lower common area maintenance costs per square foot.

              Flexibility of Product.    The single-story, simple construction of our typical Mills Landmark Center allows us to easily reconfigure them in response to changing retail formats. Furthermore, our anchor leases give us more flexibility to establish our preferred merchandise mix and to undertake desired remodeling projects than is afforded by traditional regional mall anchor leases. This flexibility makes it easier for us to replace underperforming tenants or make room for new and exciting retailers, which keeps the product fresh and enhances consumer draw.

              Barriers to Entry.    We believe that we are the innovator of a retail concept, represented by our Mills Landmark Centers, and that our success has made us one of the leading developers of large-scale value and entertainment-oriented retail projects. We have developed strong relationships with our tenants, which give us a number of competitive advantages in the development process, including the ability to validate project feasibility in the predevelopment stage with tenant commitments and the ability to fulfill significant pre-leasing requirements imposed by construction lenders. In addition, the complexity and significant financial commitment associated with developing a project the size and nature of a Mills Landmark Center precludes many potential competitors from developing and operating similar properties.

21st Century Retail and Entertainment Centers

              During 2003, we executed our recently adopted strategy of acquiring and reinvigorating conventional regional malls based on our belief that (a) many traditional regional malls can be improved through the addition of (i) anchor tenants similar to the ones found at our Mills Landmark properties, (ii) enhanced entertainment and dining options and (iii) select in-line retailers who are currently tenants at Mills Landmark Centers, and (b) our experience with developing, redeveloping and managing large retail and entertainment formats such as our Landmark Mills Centers has uniquely positioned us to effectively implement these types of changes at open-air retail and entertainment centers and traditional regional malls. As part of this strategy, from late 2002 through early 2004, we acquired 100% of, or partial interests in, the following conventional regional malls and are actively engaged in or planning the redevelopment of some of these malls:

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Broward Mall, located in Ft. Lauderdale, Florida;



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Del Amo Fashion Center, located in Los Angeles, California;



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Dover Mall, located in Wilmington, Delaware;



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The Esplanade, located in New Orleans, Louisiana;



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Galleria at White Plains, located in White Plains, New York;



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Gwinnett Place, located in Atlanta, Georgia;



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Northpark Mall, located in Jackson, Mississippi;



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Riverside Square, located in Hackensack, New Jersey;



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Town Center at Cobb, located in Atlanta, Georgia; and



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Westland Mall, located in Hialeah, Florida.

              The following list is representative of anchors and other tenants at our 21^st Century Retail and Entertainment Centers:

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International Retail and Entertainment Centers

              The shopping habits of international shoppers, and especially European shoppers, have been traditionally focused almost entirely on "high street" retailers, or those retailers located on primary city streets. Suburban-type retail is beginning to appear in and around Western Europe. We believe that this trend is due to several factors, including:

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the increased cost of living in "downtown" locations, which has resulted in increases in suburban population and demand for shopping and entertainment alternatives to city centers;



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the lack of retail space per capita in Europe, especially when compared to the retail space per capita of the U.S.;



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the fragmented nature of retail property ownership;



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U.S. retailers' expansion into international markets;



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the desire of international shoppers for shopping and entertainment experiences similar to those experienced by American shoppers; and



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the importance of the entertainment aspect of a shopping experience for many international shoppers.

              For these reasons, and given our success in developing and operating retail malls in the United States that offer a variety of distinctive shopping experiences and entertainment destinations, we saw an opportunity to expand our operations internationally. In May 2003, we opened our first International Retail and Entertainment Center, Madrid Xanadú, located in Madrid, Spain. This new full-price retail property contains El Corte Inglés, the largest retailer in Spain, which occupies 350,000 square feet of department store space. Madrid Xanadú has, as its entertainment centerpiece the Snow Dome, an indoor ski and snowboarding slope, the first of its kind in Spain. The success of Madrid Xanadú has led to interest by other European cities for a similar destination and we are reviewing other potential development opportunities internationally. For example, we are exploring follow-on opportunities beyond Madrid Xanadú in and around Seville, Bilbao, Valencia and Barcelona, Spain. In addition, we are pursuing an opportunity in Glasgow, Scotland, and in Italy, we are reviewing several well-located sites in Milan, suburban Florence and Rome.

Asset Management Strategy

              We believe that the property operating income provided by our existing assets is a stable, predictable source of cash flow from which to fund a portion of our capital needs, including the development and acquisition of new projects, redevelopment of existing projects and the payment of dividends to our stockholders. Our assets generally have experienced stable, moderate growth in standard measures of real estate operating performance. We believe these results are attributable to our ability to optimize our tenant mix, actively manage and promote our assets to tenants and consumers and maintain the high standards and physical appearance of our assets while maintaining relatively low tenant occupancy costs.

Optimization of Tenant Mix

              Our management actively manages and leases our properties with the goal of maintaining a tenant mix that continues to appeal to consumers over time. For example, from 2001 through 2003, we implemented this approach at Ontario Mills where we:

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added approximately 102,000 square feet of anchor space, with tenants such as Nordstrom Rack, The Children's Place, Nike Factory Store and Off Broadway Shoes; and



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remerchandised approximately 75,000 square feet of in-line space, with tenants such as Forever 21, Kenneth Cole New York, American Eagle Outfitters, Pacific Sunwear, The Limited Too, Build-A-Bear, Ecko Unlimited, OshKosh B'Gosh and Tommy Hilfiger.

              As a result, since 2001, average in-line sales per square foot have risen approximately 10%.

Active Management and Promotion of Properties to Tenants and Consumers

              We actively market our properties and have implemented a centralized marketing program to, among other things, create efficiencies and more consistently communicate our brand message. Benefits of our new centralized marketing program include more effective management of our local marketing programs; more in-depth consumer research; more effective property advertising strategies; new websites with data capture and email capability; and portfolio-wide or product-type seasonal, gift card, tourism or other marketing programs.

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Development Strategy

              Over the next several years, we intend to complete one to three new development projects per year, depending on market conditions and capital availability. We employ what we consider to be a disciplined approach to the development process. Our in-house development team consists of several experienced officers who are responsible for all aspects of development, including market research, site selection, predevelopment work, construction and tenant coordination. We maintain asset management control through the entire development process, including frequent internal reviews of costs and leasing status.

              To mitigate development risk, we have adopted a number of procedures, including the following:

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Site Selection: Projects are developed in top standard metropolitan statistical areas that are populous, growing and reasonably affluent. We typically select sites within our target markets that have at least one million people within a 20-mile radius. The sites must be well situated and near major transportation arteries. We perform predevelopment work when land is under option to minimize capital exposure.



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Pre-leasing: We obtain tenant validation prior to land acquisition and seek to obtain significant pre-leasing commitments prior to construction commencement and financing. We traditionally obtain letters of intent and approvals from at least five to ten key anchor stores indicating their desire to join us in the project. Typically, a project will be 40-50% pre-leased before construction financing is obtained.



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Financing: We maintain a relationship with a network of banks to facilitate construction financing and utilize strategic and financial equity partners to share in the risks and costs, including loan guarantees.

Capital Strategy

              To fund our capital needs, which arise mostly from our development, redevelopment and acquisition activities, we use mortgage financing, bridge loans, joint venture equity contributions, cash flow from operations, our line of credit and proceeds from issuances of preferred and/or common equity.

Development and Redevelopment Financing

              New development projects are typically financed with construction loans, tax increment financing, our line of credit and joint venture partner equity contributions. For development projects, after project openings, the projects are typically refinanced with permanent non-recourse mortgage debt. The following is a description of our capital cycle and the various funding sources used:

              Construction Financing.    We fund approximately 65% to 75% of the cost of a new development with a construction loan provided by a bank group led by an agent bank. This financing is obtained after a substantial portion of the equity contributions to a project have been made and is based upon the achievement of certain pre-leasing levels. We have relationships with multiple lenders in the construction loan market. Our construction loans generally have terms of three years, some with extension options for an additional two years. Interest rates typically range from 120 to 275 basis points over LIBOR. Construction loans are typically guaranteed by us. When Kan Am is a partner in a project, we guarantee Kan Am's portion of the construction debt in addition to our own portion. See "Strategic Relationships." Guarantees and interest rates are generally reduced incrementally after completion of a project based upon the achievement of interest coverage ratios (ranging from 1.0 to 1.5).

              In addition to construction debt, we historically have obtained tax increment financing to fund infrastructure costs (including roads, traffic signals and interstate on and off ramps). This financing generally takes the form of bonds that are issued by the local municipality in which the project is located, with the capital advanced as the infrastructure improvements are constructed. This type of financing is advantageous to us because debt service is typically paid from special tax assessments levied against the project that are passed on to the tenants as part of their contractual leases, or from sales tax revenues generated by the project and paid by shoppers. We have been successful in obtaining this form of financial assistance because our projects typically create new jobs and generate large sales revenues, much of which comes from outside the municipality and is therefore beneficial to the municipality.

              The remainder of the cost of a development project is funded with equity contributed by us and our joint venture partners. See "Strategic Relationships." These equity contributions fund the initial development costs prior to the funding of the construction loan. Our share of required equity is funded with cash from operations, including proceeds from land sales, our line of credit and proceeds from issuances of preferred and/or common equity.

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              Similar to development projects, our redevelopment projects are funded with construction loans, refinancings, tax increment financing, our line of credit, joint venture partner equity contributions and proceeds from issuances of preferred and/or common equity.

              Permanent Financing.    After a new development project opens and stabilizes, which typically occurs within 36 months of opening, we generally refinance the construction loan with permanent non-recourse mortgage debt. This debt is usually amortized over 30 years, with scheduled balloon payments due within a five to ten-year period. We have found that the financial stability of our tenants and the stable nature of property cash flows make our projects attractive collateral for a number of real estate lenders, including commercial banks, life insurance companies and investment banks (in the form of commercial mortgage-backed securitizations). When refinancing a construction loan, we have generally achieved investment grade ratings on the entire refinanced balance. As of December 31, 2003, our indebtedness had a weighted average maturity of 4.5 years and a weighted average interest rate of 5.6%, including our share of funded construction and operating debt of our unconsolidated joint ventures. We intend to permanently finance our future projects, including our redevelopment projects, in a similar manner.

Acquisition Financing

              Our acquisitions to date have been financed using our line of credit, the proceeds from issuances of preferred and/or common equity, permanent non-recourse mortgage debt and joint venture partner equity contributions. In the event we consummate future acquisitions, we anticipate using similar financing sources, although there can be no assurance that these sources of financing will be available to us on reasonable terms or at all.

Strategic Relationships

              We have formed strategic relationships with certain developers and equity partners. Historically, these relationships have served as a source of equity for development projects, mitigated development risk and competition and provided assistance in the identification of new development opportunities and the development and expansion of anchor tenant and lender relationships. The following is a brief description of our contractual strategic partnerships.

Kan Am

              We have a long-standing relationship with Kan Am, a German syndicator of closed and open-end real estate funds, and its affiliates, which we refer to collectively as Kan Am. Kan Am currently manages over $6.3 billion for approximately 21,000 German investors. Since 1994, Kan Am has invested over $860 million in equity in various projects with us. To date, Kan Am has always successfully funded the agreed upon level of capital.

              As of December 31, 2003, Kan Am had direct investments in the following projects:

              In addition to these investments, as of December 31, 2003, Kan Am owned approximately 7.7% of the partnership units of Mills LP. Each unit is exchangeable under specified circumstances for, at our option, the cash equivalent of a share of our common stock or a share of our common stock. Currently, three of the members of our board of directors are principals of Kan Am.

Kan Am Grund

              In December 2003, we conveyed an approximately 50% partnership interest in the Great Mall of the Bay Area to Kan Am Grund Kapitalanlagegesellschaft mbH, or Kan Am Grund, for $136.5 million, including $89.3 million of allocable partnership debt. Kan Am Grund, a Kan Am affiliate, manages German syndicated open-end real estate funds, which typically invest in stabilized real estate properties as opposed to development projects. This transaction

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marked our first transaction with one of Kan Am Grund's open-end funds. All of the prior joint ventures between Mills and Kan Am have been ground up development projects, and were funded through Kan Am's closed-end funds. Pursuant to a written agreement, both Kan Am's closed-end funds and Kan Am Grund's open-end funds currently make their retail real estate investments in the United States exclusively through us.

Ivanhoe Cambridge

              In October 1999, we entered into a Master Agreement with Ivanhoe Cambridge pursuant to which we agreed to examine with Ivanhoe Cambridge the feasibility of jointly acquiring, developing, constructing, owning and operating one or more Mills Landmark Centers in the Provinces of Ontario, Quebec, Alberta and/or British Columbia or one or more Block projects in any Province in Canada. Pursuant to the agreement, we and Ivanhoe Cambridge jointly acquired the site in Vaughan, Ontario, on which we are currently constructing Vaughan Mills, and are examining the feasibility of another location. The agreement generally provides that when Ivanhoe Cambridge jointly develops a site with us, the parties will hold their interests as tenants-in-common having equal interests. The agreement restricts either party from developing a Mills Landmark Center in the four specified Provinces or from developing a Block project anywhere in Canada without first offering to the other party the right to participate equally in the development. The agreement also prohibits either party from developing a Mills Landmark Center within a fifty mile radius of any project developed by the parties, and from developing any project having a GLA in excess of 400,000 square feet within a ten mile radius of any project developed by the parties unless the individually developed project is approved by the other party. The term of this agreement extends through December 31, 2005, unless otherwise agreed by the parties.

Taubman Realty

              In May 1998, we entered into an agreement with Taubman Realty (our partner in Arizona Mills) to jointly develop four Mills Landmark Centers during the initial five-year period of the term and a total of seven Mills Landmark Center projects in the ten-year term. The agreement establishes ownership percentages for each project and contemplates that the partners will contribute their pro rata share of the equity required for such projects. The agreement requires that each partner approve major decisions on the venture and requires the partners to share responsibility for developing, leasing and managing the projects.

Future Capital Requirements

              We anticipate that operating expenses, interest expense and principal payments on outstanding indebtedness, recurring capital expenditures and distributions to stockholders in accordance with REIT requirements will be provided by cash generated from operations and potential ancillary land sales. We anticipate that future development and non-recurring capital expenditures will be funded from future borrowings, joint venture equity contributions and proceeds from issuances of preferred and/or common equity.

              We will need equity and debt capital to fund our development projects going forward. Access to capital is dependent on many factors outside of our control. We believe that we will have the capital and access to additional capital resources sufficient to expand and develop our business and to complete the projects currently under development. If the necessary capital cannot be obtained, our immediate and long-term development plans could be curtailed.

Competition

              We believe that our direct competitors are other publicly traded retail mall development and operating companies, various other private and public retail commercial property developers, retail real estate companies, and other owners of retail real estate that engage in similar businesses. We compete with these companies for development opportunities, potential acquisition of properties, retail tenants and shoppers. All of our properties are located in populous areas that have other shopping centers and retail facilities and, as a result, we often face intense competition in attracting shoppers and retailers alike. In addition, our properties compete with the same shopping alternatives that other retailers face, including full-price malls, e-commerce, outlet malls, discount shopping clubs or centers, catalog companies and home shopping networks. The intense competition for development and acquisition opportunities, retailers and shoppers may materially adversely affect our acquisition and development strategies, operating results and financial condition. We believe, however, that due to our size, management experience, operating experience, ability to attract key retailers and innovative mix of shopping and entertainment, we have a competitive advantage in the retail real estate industry.

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Seasonality

              The regional shopping center industry is seasonal in nature, with mall tenant sales peaking in the fourth quarter due to the holiday season. As a result, a substantial portion of percentage rent is not paid until the fourth quarter. Furthermore, most new lease-up occurs towards the later part of the year in anticipation of the holiday season and most vacancies occur toward the beginning of the year. In addition, the majority of temporary tenants take occupancy in the fourth quarter. Accordingly, cash flow and occupancy levels are generally lowest in the first quarter and highest in the fourth quarter. This seasonality also impacts the quarter-by-quarter results of net operating income and funds from operations, although this impact is largely mitigated by recognizing minimum rent on a straight-line basis over the term of related leases.

Environmental Matters

              We believe that our properties are in compliance in all material respects with all federal, state and local ordinances and regulations regarding hazardous or toxic substances. We are not aware of any environmental condition that we believe would have a material adverse effect on our financial condition or results of operations (before consideration of any potential insurance coverage). Nevertheless, it is possible that there are material environmental liabilities of which we are unaware. Moreover, no assurances can be given that (a) future laws, ordinances or regulations will not impose any material environmental liability or (b) the current environmental condition of our properties has not been or will not be affected by tenants and occupants of our properties, by the condition of properties in the vicinity of our properties or by third parties unrelated to us.

              Limited quantities of asbestos-containing materials are present in certain of our properties. The asbestos-containing materials found are generally non-friable (meaning that the asbestos-containing materials are not easily crumbled and thus are less likely to release asbestos fibers into the air), in good condition and are unlikely to be disturbed. With certain exceptions, these asbestos-containing materials will be removed by us in the ordinary course of renovation or reconstruction. Prior to removal, these asbestos-containing materials will be monitored and maintained by us in accordance with procedures established by the Environmental Protection Agency, the Occupational Safety and Health Administration and other applicable governmental authorities.

Insurance

              Although we believe our properties currently are adequately covered by insurance consistent with the level of coverage that is standard in our industry, we cannot predict at this time if we will be able to obtain adequate coverage at a reasonable cost in the future.

Tax Status

              We conduct our operations in a way intended to qualify us as a REIT under the Internal Revenue Code of 1986 (the "Code"). As a REIT, we generally will not be subject to federal and state income taxes on our net taxable income that we currently distribute to stockholders. Qualification and taxation as a REIT depend on our ability to meet certain share ownership requirements and various qualification tests (including dividend distribution, asset ownership and income tests) prescribed in the Code.

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Capital Stock and MLP Unit Ownership

              At December 31, 2003, we had the following number of common and preferred shares authorized and outstanding.

(1)

In March 2003, Mills LP issued 400,000 Series D preferred units which are convertible on a one-for-one basis into our Series D cumulative redeemable preferred stock, none of which were outstanding as of December 31, 2003.

              As of December 31, 2003, we owned 78.88% of Mills LP's outstanding partnership units. Each partnership unit of Mills LP (other than those owned by us) is exchangeable in accordance with Mills LP's partnership agreement for, at our option, the cash equivalent of a share of our common stock or for a share of our common stock.

State of Incorporation

              We were originally incorporated in the Commonwealth of Virginia on January 2, 1991 and reincorporated in the State of Delaware in 1994.

Corporate Headquarters

              We maintain our executive offices at 1300 Wilson Boulevard, Suite 400, Arlington, Virginia 22209. Our telephone number is (703) 526-5000. In February 2004, we entered into a lease for our new corporate headquarters that would commence in spring 2006.

Employees

              As of December 31, 2003, we had approximately 1,350 employees, of which approximately 450 were located at our headquarters.

Available Information

              We maintain an internet web site at www.themills.com. The information on our web site is not, and should not be, considered to be a part of this Form 10-K. You can obtain on our web site, free of charge, copies of our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after we electronically file such reports or amendments with the SEC. In addition, you may obtain from our website, or we will provide you free of charge at your request, copies of our Corporate Governance Guidelines, our Code of Business Conduct and Ethics, and the charters of our Audit Committee, Executive Compensation Committee and Governance and Nominating Committee.

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Risk Factors

              Described below are risks that we believe are material to our stockholders and to potential investors. You should consider carefully the following material risks, together with the other information contained in and incorporated by reference in this Form 10-K, and the descriptions included in our consolidated financial statements and accompanying notes.

Risks Associated with Real Estate

              We face risks associated with numerous international, national, regional and local economic and real estate conditions that are not in our control, any or all of which could adversely affect our properties and our business.

              We are subject to various economic conditions and trends that may adversely affect our business. These conditions include:

•

slowdown of the national economy or a recession;



•

slowdown of the regional and local economic climate due to plant closings, industry slowdowns, natural disasters and other factors; and



•

negative population trends.

              In addition, due to the May 2003 opening of Madrid Xanadú, our first international property, and other potential development opportunities internationally, we are subject to similar risks as they relate to Spain and other countries in which we may pursue development opportunities in the future.

              Furthermore, as a real estate company, we are subject to the following real estate conditions, any negative trends of which may adversely affect our properties and business:

•

the attractiveness of our property as compared to our competitors' properties based on considerations such as convenience of location, rental rates and safety record;



•

increased operating costs, including increased real property taxes and utilities costs;



•

slowdown of local real estate conditions, such as an oversupply of retail space or a reduction in demand for real estate in the area; and



•

changing trends in the demand by consumers for merchandise offered by retailers conducting business at our properties.

              Moreover, other factors may adversely affect us, including changes in government regulations and other laws, rules and regulations governing real estate, zoning or taxes, changes in interest rate levels, the availability of financing and potential liability under environmental and other laws and other unforeseen events, most of which are discussed elsewhere in these risk factors. Any or all of these factors could materially adversely affect our properties and our business.

              Because real estate investments are illiquid, we may not be able to sell our properties in response to economic changes.

              Real estate investments generally are relatively illiquid and as a result cannot be sold quickly in response to changes in the economy or other conditions when it may be prudent to do so. This inability to respond quickly to changes in the performance of our properties could adversely affect our business and ability to meet our debt obligations and distribute earnings to our stockholders.

              We may be unable to compete with our competitors and other alternatives to our portfolio of properties.

              The commercial retail real estate business is highly competitive. We compete for interests in properties with other real estate investors and purchasers, many of whom have significant financial resources, revenues and geographical diversity. Furthermore, we compete for tenants with other property owners. Our properties compete with a variety of shopping alternatives including full-price malls, e-commerce, outlet malls, discount shopping clubs or centers, catalog companies and home shopping networks.

              We are subject to significant regulation that inhibits our activities.

              Local zoning and use laws, environmental statutes and other governmental requirements restrict our development, expansion, rehabilitation and reconstruction activities. These regulations may prevent or delay us from

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taking advantage of economic opportunities. We cannot predict what requirements may be enacted and we cannot assure you that such enactment will not have a materially adverse impact on us.

Risks Associated with Our Properties

              We may be unable to develop new properties or expand existing properties successfully.

              We continue to develop new projects or expand existing properties, and may engage in the development of other retail or related mixed use projects, as opportunities arise. However, there are significant risks associated with our development activities in addition to those generally associated with the ownership and operation of established retail properties. While we have policies in place designed to regulate development activities in an effort to limit the risks associated with development, these policies do not remove us from all development risks associated with a project. These risks include the following:

•

significant expenditure of money and time on projects that may be delayed or never be completed;



•

higher than projected construction costs;



•

shortage of construction materials and supplies;



•

failure to obtain zoning, occupancy or other governmental approvals; and



•

late completion because of construction delays, delays in the receipt of zoning, occupancy and other approvals or other factors outside of our control.

              Any or all of these factors may impede our development strategy and adversely affect our overall business.

              We may be unable to lease new properties or renew leases or relet space at our existing properties as leases expire, which may adversely affect our operating results.

              Our tenants generally enter into leases with an initial term ranging from three to 15 years. As leases expire at our existing properties, tenants may elect not to renew them. We may not be able to relet the property on similar terms, if we are able to relet the property at all, due to a variety of reasons, including competition from other retailers. In addition, for new properties, we may be unable to attract enough tenants and the occupancy rates and rents may not be sufficient to make the property profitable. If we are unable to relet spaces at our existing properties on economically favorable lease terms or to lease spaces at our new properties, our operating results will be negatively affected.

              In addition, our leases with a number of tenants contain covenants restricting the use of other space in our properties or requiring the presence of other specified co-tenants. Our failure to rent unleased space on a timely basis or at all would likely adversely affect our financial condition and results of operations. Competition may cause the occupancy and rental rates of our properties to decrease. There are other companies that are engaged in the development or ownership of retail properties that compete with us in seeking tenants. We compete with these other companies for prime locations and for tenants who lease space in the retail properties that we and our competitors own or operate. The development by our competitors of new super-regional malls or other retail shopping centers with more convenient locations or better rents may attract our tenants to our competitors or may cause them to seek lease terms that are less favorable to us at or prior to renewal, and accordingly may adversely affect our business and the revenues that we derive from, and the value of, our properties. Furthermore, retailers at our properties may face increasing competition from traditional full-price malls, e-commerce, outlet malls, discount shopping clubs and centers, catalog companies and home shopping networks.

              We have been and may continue to be affected negatively by tenant bankruptcies and downturns in tenants' businesses, which may adversely affect our operating results and reduce our cash flow.

              At any time, a tenant may experience a downturn in its business that may weaken its financial condition due to a slowing economy generally or a downturn in the retail sector. As a result, our tenants may delay lease commencement, cease or defer making rental payments or declare bankruptcy. In addition, the financial difficulty of a larger tenant, especially an anchor tenant, could materially adversely affect customer traffic in a property, thereby triggering, among other things, other tenants' rights to terminate their leases or reduce their rental rates.

              If a tenant files for bankruptcy, the tenant may have the right to reject and terminate its lease and we cannot be sure that it will affirm its leases and continue to make rental payments in a timely manner. We also cannot be sure that we will be able to lease vacant space in our properties on economically favorable terms. During 2003, we were not materially affected by any bankruptcies of our in-line or anchor tenants.

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              Any of these events may negatively affect our operating results and reduce our cash flows.

              We may be unable to successfully integrate and effectively manage the properties we acquire.

              We recently acquired a number of properties and, subject to the availability of financing and other considerations, we intend to continue to acquire properties or interests in properties that we believe will be profitable or will enhance the value of our portfolio. The success of these acquisitions will depend, in part, on our ability to efficiently integrate the acquired properties and employees into our organization, and apply our business, operating, administrative, financial and accounting strategies and controls to the acquired properties. In addition, we plan on expanding or redeveloping some of these recently acquired properties. Such expansion and redevelopment activities pose the same risks that are inherent in our development activities as discussed elsewhere in this 10-K and pose additional risks that are unique to expansion and redevelopment efforts, such as the uncertainty of obtaining tenant approvals. If we are unable to successfully integrate the acquired properties into our operations, our results of operations and financial condition may be adversely affected.

              We may not be able to achieve the anticipated financial and operating results from our acquisitions, which would adversely affect our operating results.

              We will continue to acquire properties that we believe will enhance our future financial performance. Our belief is based on and is subject to risks, uncertainties and other factors, many of which are forward-looking and are uncertain in nature or are beyond our control. In addition, some of these properties may have unknown characteristics or deficiencies or may not complement our portfolio of existing properties. As a result, some properties may be worth less or may generate less revenue than we believed at the time of the acquisition, negatively affecting our operating results.

We could incur significant costs related to environmental issues.

              Under some environmental laws, a current or previous owner or operator of real property, and parties that generate or transport hazardous substances that are disposed of on real property, may be liable for the costs of investigating and remediating hazardous substances on or under or released from the property and for damages to natural resources. The Federal Comprehensive Environmental Response, Compensation & Liability Act, and similar state laws, impose liability on a joint and several basis, regardless of whether the owner, operator or other responsible party knew of or was at fault for the release or presence of hazardous substances. In connection with the ownership or operation of our properties, we could be liable for costs associated with investigation and remediation in the future. The costs of any required remediation and related liability as to any property could be substantial under these laws and could exceed the value of the property and/or our aggregate assets. The presence of hazardous substances, or the failure to properly remediate those substances, also may adversely affect our ability to sell or rent a property or to borrow funds using the property as collateral. In addition, environmental laws may impose restrictions on the manner in which we use our properties or operate our business, and these restrictions may require expenditures for compliance. We cannot assure you that a material environmental claim or compliance obligation will not arise in the future. The costs of defending against any claims of liability, of remediating a contaminated property, or of complying with future environmental requirements could be substantial and affect our operating results. Such expansion and redevelopment activities pose the same risks that are inherent in development activities as discussed elsewhere in this 10-K and pose a pose additional risks, such as tenant approvals.

Uninsured losses could adversely affect our financial condition.

              We carry comprehensive liability, fire, flood, terrorism, extended coverage and rental loss insurance with respect to our properties with policy specifications and insured limits that we believe are customary for similar properties. We also carry comprehensive earthquake and pollution cleanup coverage on all our properties and we carry off-premises power coverage for each of our Mills projects. In addition, for Sawgrass Mills, we carry sinkhole coverage. There are some types of losses, generally of a catastrophic nature, such as wars or acts of God, which may be either uninsurable or not economically insurable. Should a property suffer an uninsured loss, we could lose our invested capital in and anticipated profits and future revenues from that property. Additionally, in the case of recourse construction loans, we may remain obligated under those loans and any other financial obligations on that property. An uninsured loss or a loss in excess of insured limits may negatively impact our financial condition.

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Risks Associated with Our Indebtedness and Financing

              We have substantial indebtedness and we require significant cash flow to make required payments on our indebtedness.

              We rely heavily on debt financing for our business. As of December 31, 2003, we had total debt of approximately $3.3 billion, including our pro rata share of unconsolidated joint venture debt. We have also guaranteed selected outstanding unconsolidated joint venture debt, which guarantees expire upon the achievement of specified financial performance tests. We expect to make similar guarantees in connection with our future developments and to continue to rely on debt to finance our future developments and acquisitions. Due to our high level of debt, our cash flow may be insufficient to meet required payments of principal and interest. If a property were mortgaged to secure payment of indebtedness and we were unable to meet mortgage payments, the mortgagee could foreclose upon that property, appoint a receiver and receive an assignment of rents and leases or pursue other remedies.

              We may be unable to repay our existing indebtedness as it matures, which could adversely affect our financial condition.

              Most of our indebtedness does not require significant principal payments prior to maturity. However, we will need to raise additional equity capital, obtain secured or unsecured debt financing, issue private or public debt, or sell some of our assets to either refinance or repay our indebtedness as it matures. We cannot assure you that these sources of financing or refinancing will be available to us on reasonable terms or at all. Our inability to obtain financing or refinancing to repay our maturing indebtedness, and our inability to refinance existing indebtedness on reasonable terms, may require us to make higher interest and principal payments, issue additional equity securities, or sell some of our assets on disadvantageous terms, all or any of which may result in the foreclosure of properties or a partial or complete loss on our investment and otherwise adversely affect our financial conditions and results of operation.

              Our degree of leverage could limit our ability to obtain additional financing, which would negatively impact our business.

              As of December 31, 2003, our consolidated borrowings and pro rata share of unconsolidated borrowings totaled approximately $3.3 billion, which represented approximately 50.3% of our total market capitalization. Total market capitalization represents the sum of the outstanding indebtedness (including our share of joint venture indebtedness), the total liquidation preference of all our preferred stock and the total market value of our common shares and units of partnership interest of Mills LP, based on the closing price of our common stock as of December 31, 2003. Our leverage and any future increases in our leverage could adversely affect our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, development or other general corporate purposes which would negatively impact our business overall.

              Due to the significant amount of our variable rate debt, rising interest rates would adversely affect our results of operation.

              As of December 31, 2003, we had $1.3 billion of variable rate debt outstanding, including our pro rata share of variable rate unconsolidated joint venture debt. While we have sought to refinance our variable rate debt with fixed rate debt or cap our exposure to interest rate fluctuations by using interest rate swap agreements where appropriate, a significant increase in interest rates would adversely affect our results of operations.

              We have entered into loan agreements that impose a number of restrictive covenants that may hinder our operational flexibility and violation of these restrictive covenants carries serious consequences.

              The agreements governing our line of credit and term loan impose numerous restrictive financial and operating covenants on us, including covenants that limit our ability to (a) incur additional debt, (b) sell assets, (c) repurchase our securities and (d) engage in mergers and consolidations. For example, under our line of credit and term loan, the lenders may accelerate payment and may pursue standard remedies upon a violation of any covenant. These restrictions may negatively impact our flexibility in conducting our operations and violations of these covenants may have adverse consequences to us.

              We depend on third party financing for our development, expansion and acquisition activities.

              As we continue to develop or acquire new retail properties or expand existing properties, we anticipate that we will finance these activities through lines of credit, other forms of secured or unsecured debt, including construction financing and permanent debt, and contributions from joint venture partners including Kan Am. There can be no assurance that we will be able to obtain the financing necessary to fund new development, project expansions or our acquisition activities on terms favorable to us or at all. In addition, we cannot assure you that our joint venture partners

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will make their required capital contributions. If we are unable to obtain sufficient levels of third party financing to fund our growth, our business will be negatively impacted.

Risks Associated with our Joint Ventures

              Our joint venture agreements contain various rights including buy-sell, redemption and guaranty provisions and obligations that could impose a significant financial burden on us.

              Our joint venture agreements with Kan Am and other investors typically include buy-sell provisions, under which our joint venture partner may be entitled, under certain circumstances, such as a change in control of us, to require that we buy their interest in the joint venture. In addition, in the case of our Great Mall project, Kan Am Grund has the ability to cause the sale of the property at any time. If we are unwilling or unable to purchase their interest, we may be required to sell the property at a time when we otherwise may not have wished to sell the project and we will lose the revenues and profits that we otherwise would have earned on these properties.

              In addition, a number of our joint venture agreements with Kan Am contain obligations for us to redeem our partner's interest in the venture if certain conditions have not been satisfied, such as securing construction or other loans by specified dates, or require us to guarantee the payment of specified priority returns.

              There is no assurance that we will be financially able to satisfy any of these obligations when required to do so.

              We do not have exclusive control over the management of joint venture projects and must share control with our joint venture partners.

              With respect to some of our properties, we have invested and expect in the future to invest as a co-venturer or partner in the development of some of our new properties, instead of developing projects on our own. These shared investments may involve risks not present in a wholly owned development project that stem from us not having exclusive control over the development, financing, leasing, management and other aspects of the project. We may not have the right to take some significant actions without the approval of our joint venture partners, which approvals they may not grant, even if we think such actions would be in the best interests of the joint ventures and the properties. For example, we may need the other joint venturer's approval before selling or refinancing a joint venture's property, setting an annual budget, entering into specified transactions with affiliates and settling litigation above specified thresholds. If they do not provide their consents to actions that we believe are necessary and in the best interests of the joint ventures, our joint venture properties and our overall business may suffer. Additionally, our co-venturer might have interests or goals that are inconsistent with ours and may take actions that are contrary to our instructions, requests or interests, or otherwise hinder us from accomplishing our goals. Our joint venture partners could take actions binding on the joint venture without our consent. Actions by a joint venture partner could subject the joint venture assets to additional risk.

Risks Associated with our Capital Stock

              The market value of our capital stock can be adversely affected by numerous factors.

              As with any publicly traded company, the market value of our capital stock may be negatively affected by a number of factors, many of which are beyond our control. These factors include the following:

•

general decline in the capital markets;



•

level of institutional interest in our equity securities;



•

perception of REITs generally and REITs with portfolios similar to ours;



•

attractiveness of equity securities of REITs generally compared to other publicly traded companies;



•

the market's perception of our business and dividend growth potential;



•

government action or regulation, including the recent application of capital gains tax rates to dividends paid by regular corporations, which rates, except in limited circumstances, do not apply to dividends paid by REITs;



•

our earnings and cash distributions;



•

increases in market interest rates, which may lead investors to demand a higher dividend payout rate in relation to the price of our equity securities;

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•

the relatively low daily trading volume of equity securities of REITs in general; and



•

our ability to invest the proceeds of offerings of securities in a manner that will increase earnings per share.

              In addition, issuances of a substantial number of shares of our capital stock, or the mere perception that such issuances may occur, could adversely affect the market value of our capital stock. This is particularly true with our common stock, a substantial number of shares of which we may issue in connection with the exercise of outstanding options, redemption of outstanding Mills LP partnership units and for future financing needs. During 2003, we issued a number of shares of our common stock in connection with the redemption of partnership units by Mills LP's unitholders of partnership units and expect, although cannot state with certainty, that the unitholders of Mills LP will continue to redeem their partnership units in the future.

              We cannot predict what effect future issuances and sales of our capital stock, or the mere perception that such issuance may occur, will have on the market prices of our capital stock. Any adverse effect on the market price of our capital stock, however, would materially adversely affect the value of an investment in our capital stock. Additionally, a significant decrease in the market price of our capital stock would make it more difficult for us to raise funds through future offerings of our capital stock.

              We may not have sufficient cash flow or assets to make distributions to holders of one or more classes of our capital stock.

              Our ability to make distributions to the holders of our capital stock depends on our ability first to cover our operating and related expenses and satisfy our obligations to our creditors. In addition, we have different classes of capital stock outstanding, some of which have a different priority as to the distribution of dividends relative to others. For example, holders of our outstanding preferred stock are entitled to receive their dividends prior to our common stockholders. Generally, the terms of each different class of our preferred stock prohibits us from making dividend payments, distributions and all other payments to holders of our common stock and all other equity securities junior in right to such class of preferred stock, unless we have paid all accrued dividends on such class of preferred stock or set apart funds for payment of the dividends due to holders of such class of preferred stock. As a result, if we do not have sufficient cash remaining for our dividend distributions, holders of one or more classes of our capital stock may not receive any dividends.

              Also, in the event of a bankruptcy, liquidation or reorganization or similar proceeding, our creditors will generally be entitled to payment of their claims from our assets before any assets are made available for distribution to our stockholders. In every case, the holders of capital stock will have the right to participate in any distribution of our assets only after the claims of our creditors and holders of our priority capital stock are satisfied.

Risks Associated with Our Organization

              A number of our directors and significant stockholders may exert substantial influence over us.

              As of December 31, 2003, Kan Am and its affiliates directly and indirectly owned approximately 7.7% of the outstanding partnership units of Mills LP and was our joint venture partner in nine operating properties and two projects under development. In addition, Kan Am Grund is our joint venture partner in one additional operating project. Three of our eleven directors are affiliated with Kan Am. These three directors may have significant influence over us as members of our board. The interests of these directors may conflict with the interests of our other stockholders in connection with Kan Am's joint ventures with Mills LP to develop, own, and operate additional properties, and they may use their voting influence contrary to our other stockholders' interests. The Kan Am entities may exchange all or a substantial portion of the units that they hold for shares of our common stock. If they do so, they will increase their influence over us and over the outcome of any matters submitted to our stockholders for approval. The influence and voting power of our other stockholders may diminish accordingly.

              We are the sole general partner of Mills LP and have fiduciary responsibilities to the other partners of Mills LP. As a result, we may be in a position where we have duties to others whose interests conflict with those of our stockholders.

              We, as the sole general partner of Mills LP, may have fiduciary responsibilities to the other partners in Mills LP that may conflict with the interests of our stockholders, including decisions regarding the sale or refinancing of our properties and the timing and amount of distributions from Mills LP. In addition, individuals and entities, including certain of our executive officers and our directors (including those who are affiliated with Kan Am and their respective affiliates that hold units of Mills LP) may have limited rights in decisions affecting Mills LP that may conflict with the interests of our common stockholders. In particular, a holder of units may suffer different and/or more adverse tax consequences than we do on the sale or refinancing of some of our properties as a result of unrealized gain attributable

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to such properties that is allocable to such holder or the tax status of the unit holder. These unit holders, therefore, may have objectives different from ours regarding the appropriate pricing and timing of any sale or refinancing.

              Our certificate of incorporation and by-laws contain provisions that could delay or prevent a change in control.

              In some instances, a change in control of our company could give the holders of our common stock the opportunity to realize a premium over the then prevailing market price of those securities. Provisions in our charter and our bylaws may have the effect of discouraging a third party from trying to acquire us even if a change in control were in the best interests of our stockholders. Under our certificate of incorporation as currently in effect, our board of directors has the authority, without a vote of stockholders, to issue up to an additional 2,505,000 shares of preferred stock and to establish the rights and preferences of any class or series of preferred stock to be issued, which rights and preferences could delay or prevent a change in control. The limitation on beneficial ownership of our securities also may have the effect of precluding acquisition of control of us by a third party even if a change in control were in the best interests of our stockholders. In addition, our board of directors is a classified board composed of three classes of directors with staggered terms. Directors for each class are chosen for a three-year term upon the expiration of the term of the current class. A classified board of directors makes it more difficult to effect a change in control and may discourage an attempt by a third party even if a change in control were in our stockholders' best interests.

              A number of our joint venture partnership agreements contain provisions that could delay or prevent a change in control.

              A number of our joint venture agreements contain buy-sell rights that may be exercised upon a "change in control." This buy-sell right allows our partner in a joint venture to require us to purchase such partner's entire interest in the joint venture. We are required to pay for any purchase of such partner's joint venture interests, at our option, in cash or with units of Mills LP. The required payments may have the effect of discouraging a third party from partaking in a change in control of our company, even if a change in control were in the best interests of our stockholders. For the purpose of determining when buy-sell rights may be exercised, each of the following events is a "change in control" when it occurs without the unanimous approval of the members of our board of directors who are affiliates of Kan Am:

•

we participate in any consolidation, merger or corporate reorganization in which more than 40% of our outstanding voting securities are transferred;



•

any person or group, other than Kan Am and its affiliates, becomes the beneficial owner, directly or indirectly, of more than 40% of our then outstanding combined voting securities; and



•

a person, whose nomination for election as director was not recommended by the Governance and Nominating Committee of our board of directors, is elected as a director to our board of directors.

Risks Associated with Income Tax Laws and Accounting Pronouncements

              Our failure to qualify as a REIT would have adverse tax consequences to us and our stockholders.

              We believe that we have been organized and have conducted our operations in a manner so as to qualify as a REIT under Sections 856 through 860 of the Code, and we intend to continue to operate as a REIT in the future. We cannot assure you, however, that we currently qualify as a REIT or will continue to qualify as a REIT. Many of the REIT requirements are highly technical and complex and depend on various factual matters and circumstances that may not be completely within our control, such as actions taken by our joint venture partners. If we fail to qualify as a REIT:

•

we will not be allowed to take a deduction for distributions to stockholders in computing our taxable income;



•

we will be subject to federal and state income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates; and



•

unless entitled to relief under specific statutory provisions, we will also be disqualified from treatment as a REIT for the four taxable years following the year during which our qualification was lost.

              Any determination that we do not qualify as a REIT would have a material adverse effect on our results of operations and could reduce materially the value of our common stock, as the additional tax liability to us for the year or years involved would reduce our net earnings available for investment, debt service or distribution to our stockholders. Furthermore, we would no longer be required by the Code to make any distributions to our stockholders as a condition to REIT qualification. Our failure to qualify as a REIT would cause all of our distributions to our stockholders, to the extent of our current and accumulated earnings and profits, to be taxable as regular corporate

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dividends. This means that stockholders taxed as individuals currently would be taxed on those dividends at capital gains rates and corporate stockholders generally would be entitled to the dividends received deduction with respect to such distributions, subject, in each case, to applicable limitations under the Code. If we make distributions to our stockholders in reliance on our continued qualification as a REIT, we might be required to borrow funds or to liquidate some of our investments to pay the taxes that would result from the actual failure to qualify as a REIT. Even if we currently qualify as a REIT, new tax rules or legislation may affect whether we continue to qualify as a REIT or the federal income tax consequences of our REIT qualification.

Despite our REIT status, we remain subject to various taxes.

              Notwithstanding our status as a REIT, we are subject, through our ownership interest in Mills LP, to various federal, state, local and foreign taxes on our income and property. We may have to pay some state or local income taxes because not all states and localities treat REITs the same as they are treated for federal income tax purposes. We may also have to pay some foreign taxes as a result of our ownership and operation of assets in foreign jurisdictions. Mills LP is obligated under its partnership agreement to pay all taxes, and any related interest and penalties, incurred by us. Our taxable REIT subsidiaries are taxable as corporations and pay federal, state and local income tax on their net income at the applicable corporate rates, and pay foreign taxes to the extent they own assets or conduct operations in foreign jurisdictions. In addition, our taxable REIT subsidiaries are subject to special rules that may result in increased taxes. For example, our taxable REIT subsidiaries are limited in their ability to deduct interest payments made to us. In addition, we will be required to pay a 100% penalty tax on some payments that we receive if the economic arrangements between us, our tenants and our taxable REIT subsidiaries are not comparable to similar arrangements between unrelated parties or if we receive payments for property held for sale in the ordinary course of business. To the extent that we or our taxable REIT subsidiaries are required to pay federal, state, local or foreign taxes, we will have less cash available for investment, debt service and distribution to our stockholders.

              If the Internal Revenue Service ("IRS") were to challenge successfully Mills LP's status as a partnership for federal income tax purposes, we would cease to qualify as a REIT and suffer other adverse consequences.

              We believe that Mills LP qualifies to be treated as a partnership for federal income tax purposes. As a partnership, it is not subject to federal income tax on its income. Instead, each of its partners, including us, is required to pay tax on its allocable share of Mills LP's income. We cannot assure you, however, that the IRS will not challenge Mills LP's status as a partnership for federal income tax purposes, or that a court would not sustain an IRS challenge. If the IRS were successful in treating Mills LP as a corporation for tax purposes, we would fail to meet the income tests and some of the asset tests applicable to REITs and, accordingly, cease to qualify as a REIT. Also, the failure of Mills LP to qualify as a partnership would cause Mills LP to become subject to federal and state corporate income tax, which would reduce significantly the amount of cash available for investment, debt service and distribution to Mills LP's partners, including us.

              As a REIT, we are subject to limitations on our ownership of debt and equity securities.

              Subject to certain exceptions, including the one discussed in this paragraph, a REIT is generally prohibited from owning securities in any one issuer if the value of those securities exceeds 5% of the value of the REIT's total assets or the securities owned by the REIT represent more than 10% of the issuer's outstanding voting securities or more than 10% of the value of the issuer's outstanding securities. A REIT is permitted to own securities of its taxable REIT subsidiaries in an amount that exceeds the 5% value test and the 10% vote or value test, but the aggregate value of such securities may not represent more than 20% of the value of the REIT's total assets. Certain of our subsidiaries, including MillsServices Corp. and each corporate subsidiary in which it owns at least 35% of the outstanding voting securities or 35% of the value of the outstanding securities, have elected to be treated as taxable REIT subsidiaries. While we believe that we have satisfied these limitations on the ownership of securities during each of the taxable years that each such limitation applied to us, given the highly complex nature of the rules governing REITs (which complexity is exacerbated when a REIT owns its properties through partnerships, as we do) and the ongoing importance of factual determinations, we cannot provide any assurance that the IRS would not disagree with our determinations.

              You may be subject to adverse consequences if you attempt to acquire shares in excess of 9.225% of our capital stock.

              For us to qualify as a REIT, ownership of our capital stock, directly or by virtue of the applicable attribution provisions of the Code, by any person or persons acting as a group is limited to 9.225% of our outstanding capital stock. Any transfer that would cause a violation of this 9.225% ownership limit will result in the immediate conversion of the excess shares into shares of "excess stock" that are non-voting and that may not participate in distributions (except for distributions in the event of our liquidation). The shares of excess stock would be immediately transferred to

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us as trustee of a trust for the exclusive benefit of beneficiaries that the person acquiring such shares may designate, subject to our right to purchase the shares for fair consideration.

              You may be subject to adverse consequences if you are not a U.S. person and you attempt to acquire shares of our capital stock.

              Provisions in our certificate of incorporation are intended to ensure that we maintain our status as a REIT by rendering void transfers of our shares that will jeopardize our status as a REIT and by eliminating rights of the shares of transferred stock. Under these provisions, if you are not a U.S. person and you acquire shares of our capital stock the acquisition of which causes less than 50% of our capital stock to be owned by U.S. persons, the shares that you acquire will convert immediately into shares of excess stock that will be non-voting and that may not participate in distributions (except for distributions in the event of our liquidation). These shares of excess stock would be immediately transferred to us as trustee of a trust for the exclusive benefit of beneficiaries that you may designate, subject to our right to purchase the shares for fair consideration.

              Recent changes in taxation of corporate dividends may adversely affect the value of our stock.

              Tax legislation enacted in May 2003 generally reduces to 15% (through 2008) the maximum marginal rate of tax payable by individuals on dividends received from a regular C corporation. This reduced tax rate, however, does not apply to dividends paid to individuals by a REIT on its stock, except in certain circumstances where the dividends are attributable to income that has been subject to corporate-level tax. While the earnings of a REIT that are distributed to its stockholders generally will be subject to less federal income taxation than earnings of a non-REIT C corporation that are distributed to its stockholders net of corporate-level income tax, this legislative change could cause individual investors to view the stock of regular C corporations as more attractive relative to the stock of a REIT. Individual investors could hold this view because the dividends from regular C corporations will generally be taxed at a lower rate while dividends from REITs will generally be taxed at the same rate as the individual's other ordinary income. We cannot predict what effect, if any, this difference in the taxation of dividends may have on the value of the stock of REITs, either in terms of price or relative to other investments.

              New accounting pronouncements and regulations could have an impact on our results of operations.

New accounting pronouncements

              In May 2003, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." This statement establishes standards for the classification and measurement of financial instruments that possess characteristics similar to both liability and equity instruments. SFAS No. 150 also addresses the classification of certain financial instruments that include an obligation to issue equity shares. This statement is effective for financial instruments entered into or modified after May 31, 2003 and otherwise is effective at the beginning of the first interim period commencing after June 15, 2003. Our adoption of this pronouncement, effective July 1, 2003, had no impact on our financial condition or results of operations.

              In January 2003, FASB issued FIN No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). The primary objectives of this interpretation are to provide guidance on the identification of entities for which control is achieved through means other than through voting rights ("variable interest entities") and how to determine when and which business enterprise (the "primary beneficiary") should consolidate the variable interest entity. This new model for consolidation applies to an entity in which (i) the equity investors, (if any) do not have a controlling financial interest; or (ii) the equity investment at risk is insufficient to finance that entity's activities without receiving additional subordinated financial support from other parties. In addition, FIN 46 requires that the primary beneficiary, as well as all other enterprises with a significant variable interest in a variable interest entity, make additional disclosures. FIN 46 became effective immediately for all VIEs created after January 31, 2003 and required certain disclosures be made in financial statements issued after January 31, 2003. In December 2003, FAS issued FIN 46 (revised December 2003), "Consolidation of Variable Interest Entities" ("FIN 46-R") to address certain FIN 46 implementation issues. Because we did not become party to any VIEs created since January 31, 2003, we are not required to adopt FIN 46-R until March 31, 2004. Based on a preliminary review, we have identified certain joint venture entities created prior to February 1, 2003, that may meet the criteria of a VIE and may require consolidation under FIN 46 and FIN 46-R effective March 31, 2004. Total assets of the potential VIEs were $581.4 million at December 31, 2003.

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Proposed accounting pronouncements

              We are required to implement new accounting pronouncements and regulations applicable to our business when issued by the Financial Accounting Standards Board, SEC and other regulatory organizations within the accounting profession. Currently a pronouncement is being considered that may impact the real estate industry. The proposal, "Accounting for Certain Costs and Activities Related to Property, Plant and Equipment," would eliminate the capitalization of various development costs and would require depreciation of different asset components based upon each of their lives. The proposal is still in the adoption process and has not been finalized. Accordingly, there can be no assurance that it will be adopted in its current form or at all. If adopted, the final form of this proposal and others being considered could have an impact on our results of operations.

              We continue to pursue foreign development opportunities in international markets that are subject to foreign currency risks due to potential fluctuations in exchange rates.

              We have pursued and intend to continue to pursue foreign development opportunities in international markets where the U.S. dollar is not the national currency. As a result, we are subject to foreign currency risk due to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar. For example, a significant depreciation in the value of the foreign currencies of one or more countries where we have a significant investment may materially adversely affect our performance. We are evaluating hedging strategies to mitigate such effects, although there can be no assurance that we will be successful in mitigating all the risks.

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Item 2. Properties

Our Portfolio

              The following table sets forth certain information relating to the properties that we wholly and partially owned as of December 31, 2003. Please note the following items when reviewing the attached summary:

•

GLA is stated in square feet and includes GLA that is owned by our tenants;



•

Annualized base rent represents contractual minimum rent for tenants comprising the GLA at December 31, 2003; and



•

Anchor stores are those tenants that occupy 20,000 square feet or more of GLA.

              For information regarding encumbrances on our wholly owned properties, see "—Summary of Outstanding Consolidated Indebtedness," "Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K—Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2003," and Note 6 Mortgages, Notes and Loans Payable to our financial statements set forth under Item 8. For information regarding encumbrances on our partially owned properties, which we refer to as our joint venture properties in this Form 10-K, see "—Summary of Outstanding Unconsolidated Indebtedness."

              We have formed other joint ventures to develop additional properties. We have similar partnership interests under these joint venture agreements and we anticipate that we will have similar partnership interests under future joint venture agreements. For a description of our interests in properties under construction, see "Item 1. Business—Development Pipeline—Projects Under Construction."

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              At December 31, 2003, the occupancy rate for our portfolio of properties was 93.3%. Occupancy includes all spaces leased for which rent is being earned as of December 31, 2003, excluding leases with an original term of less than one year.

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Our Joint Venture Operating Properties

              We own a significant number of our properties through various joint ventures. Most of our joint venture properties are owned through joint ventures with Kan Am and its affiliates. Our Kan Am joint venture agreements typically provide for the following material economic terms and rights:

•

preferred returns of 9% or 11% on each partner's capital contribution;



•

distribution of remaining operating cash flow based on the partners' residual sharing percentages after payment of preferred returns;



•

distribution of proceeds upon a major capital event (such as a sale of the property or receipt of proceeds from a refinancing) to the partners so that the partners will receive, in the following order, (a) their respective accumulated but unpaid preferred returns, (b) their unreturned capital contributions and (c) the remaining residual cash, if any, based on their residual sharing percentages;



•

management by us of the property subject to Kan Am's approval on certain major decisions such as refinancing or sale of a property; and



•

buy-sell rights that become exercisable at specified times following a specified anniversary after the grand opening of the property that would enable (a) us to require Kan Am to sell its interest to us for cash or partnership units of Mills LP, at Kan Am's election, or (b) Kan Am to require us to acquire its interest for cash or partnership units of Mills LP, at our election, but in either case, the applicable joint venture agreement provides that the purchase price for Kan Am's interest in the property will be calculated based on the fair market value of such property.

              We own Arizona Mills through a joint venture with Taubman Realty and own Madrid Xanadú through a joint venture with Parecelatoria De Gonzalo Chacün S.A., or PGC. Our Arizona Mills joint venture agreement does not provide for any preferred return but it contains a forced sale mechanism that would permit us or Taubman to cause the property to be sold pursuant to an agreed-upon procedure if we and Taubman are unable to agree to a specified major decision. This right is currently exercisable by either party.

              The Madrid Xanadú project is comprised of two separate joint ventures with PGC—a joint venture that owns the retail and leisure component of the property and a joint venture that owns the Snow Dome, an indoor ski facility. The joint venture agreement for the Snow Dome joint venture provides for a preferred return to PGC and the joint venture agreement for each joint venture contains a put-call provision that gives PGC the right to require us to purchase its interests in both joint ventures.

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              The following table provides a summary of the key terms and rights of our real estate joint venture properties:

(1)

Currently exercisable at specified times.

(2)

We and our joint venture partners earn a 9% priority return on predetermined amounts of contributed capital. Any capital required in excess of the predetermined amounts earns an 11% priority return.

(3)

We and PGC own the retail project and the Snow Dome through two separate joint ventures. The table shows our residual sharing and capital contribution percentages for the retail joint venture. Our residual sharing and capital contribution percentages for the Snow Dome joint venture are 33.3%. We and PGC each receive a 9% priority return on predetermined amounts of contributed capital at the Snow Dome joint venture. Any capital contribution required in excess of the predetermined amounts earns an 11% priority return. We alone earn a 9% priority return in the retail project joint venture.

(4)

Following the grand opening but prior to the third anniversary of the grand opening, PGC has the right to require us to purchase PGC's interest in both the retail and the Snow Dome projects for a minimum purchase price of Euro 35.0 million (equivalent of US $44.0 million based on the exchange rate in effect as of December 31, 2003), which purchase price may be adjusted upward depending on the financial performance of the projects. After the third, but prior to the fifth, anniversary of the grand opening, PGC has the right to require us to purchase its interest in the retail project, and concurrently, we have the option to cause PGC to sell to us its interest in the Snow Dome project.

Diversified Tenant Base

              Because our properties contain various retail formats under one roof, we believe that our tenant base represents one of the more diversified mixes of retailers in the industry. We have an average of 148 tenants per property and no single tenant accounted for more than 2.4% of our base rent or 5.0% of our aggregate GLA as of December 31, 2003. We further believe that the overall financial stability of our tenant base is strong given the diversity of our retailers and the large number of manufacturer outlet tenants.

              The following table sets forth certain information with respect to our ten largest tenants (measured by 2003 base rent) at our properties as of December 31, 2003:

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(1)

Includes The GAP, GAP Kids, Banana Republic and Old Navy.

(2)

Jillian's occupies anchor spaces at seven of our projects. At two of these projects, Jillian's has not made certain lease payments. We do not believe that the aggregate amount of the delinquent lease payments has had or will have a material impact on our financial results.

(3)

Includes TJ Maxx and Marshalls.

(4)

Includes Bath and Body Works, The Limited, Express and Victoria's Secret.

(5)

Includes Off Broadway Shoes and Rack Room Shoes.

Lease Expiration

              The following table summarizes the leases at our properties that will expire in each of the next ten years and thereafter assuming that none of the tenants exercise their renewal options. Annualized minimum rent is based on the monthly contractual minimum rent in effect on December 31, 2003. The following table does not include leases for anchor tenants that occupy more than 50,000 square feet of GLA at our 21^st Century Retail and Entertainment Centers and 6.8 million square feet of tenant owned GLA and 0.6 million square feet of ground leases.

Development Pipeline

              Our development pipeline consists of projects under construction and projects under development as more fully described below. A project is deemed to be under development if we have, at a minimum, performed substantive due diligence on the feasibility and desirability of constructing the project.

Projects Under Construction

              We currently have three projects under construction, which we expect will have an aggregate of approximately 3.7 million square feet of GLA upon completion. Estimated total development costs for these projects is approximately $534 million. The estimated development costs will be funded through construction loans and joint venture partners'

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and our equity contributions. The following table sets forth some information with regard to these projects as of December 31, 2003 (dollars in millions):

(1)

Cincinnati Mills is in redevelopment and has remained open during construction. As such, anchor store tenant commitments and the percentage pre-leased include tenants currently open. We have contributed the total equity required for this project.

(2)

The Company has contributed the total equity required for this project. The functional currency for Vaughan Mills is Canadian Dollars. The aggregate project cost is estimated at C$289 million.

(3)

Leasing efforts have begun and several letters of interest from possible anchor stores have been received

              The following is a brief description of the three projects currently under construction:

              Cincinnati Mills – Cincinnati, Ohio.    We purchased 100% of Cincinnati Mills (formerly known as Forest Fair Mall) located in Cincinnati, Ohio in September 2002 and are currently redeveloping the mall. The grand re-opening will occur in August 2004. All current anchor stores are open during the renovation. In February 2004, we refinanced the then-existing mortgage debt on Cincinnati Mills with a new $122.0 million construction loan that we fully guarantee. The new loan matures in February 2007 and bears interest at LIBOR plus 200 basis points. To reduce our exposure to a potential rise in interest rates, we obtained two interest rate swaps that effectively fix the interest rate on the loan at 4.42% on a notional amount of $57.0 million through November 2004 and 5.88% on the same notional amount from December 2004 through October 2006.

              Vaughan Mills – Toronto, Canada.    This Landmark Mills Center is being developed jointly by us and Ivanhoe Cambridge, a shopping center developer/manager based in Montreal, Canada. Site construction began in June 2003 and anchor leases have been signed with Burlington Coat Factory, NASCAR Speedpark, H&M, The Children's Place, Bass Pro Shops Outdoor World and Lucky Strike Lanes for the project. In addition, we have obtained commitments from Winners, LaSenza & Tommy Hilfiger for additional anchor spaces. We anticipate opening the project in Fall 2004. The 180-acre site is located in the City of Vaughan, which is approximately 20 miles north of downtown Toronto, Canada.

              We and Ivanhoe Cambridge each own an undivided 50% interest in Vaughan Mills as tenants in common. Pursuant to a co-ownership agreement with Ivanhoe Cambridge, each party will receive a proportionate share of all revenues received from the project and will be responsible for the payment of a proportionate share of all expenses associated with the project. At any time following the fourth anniversary of the opening of the project, we or Ivanhoe Cambridge may exercise a buy-sell provision pursuant to which the offering party can require that the other party either purchase for cash the entire interest of the offering party in the project, or sell to the offering party the interest of such other party. In March 2004, we obtained a $143.0 million (C$190.0 million) construction loan from an affiliate of Ivanhoe Cambridge. The loan bears interest at CDOR plus 2.25% and matures in 2006 with a one-year extension option.

              Major decisions with respect to the project will require our approval and that of our joint venture partner. Disputes over decisions generally are subject to arbitration, but certain specified major decisions, such as the financing, sale or redevelopment of the project, the budget for the construction of the project and the initial decision to proceed with construction of the project, are not subject to arbitration.

              Pittsburgh Mills – Pittsburgh Mills.    In December 2002, Mills-Kan Am Pittsburgh Limited Partnership ("Mills-Kan Am Pittsburgh") and A.V. Associates Limited Partnership ("AV Associates") entered into a partnership agreement for the development of Pittsburgh Mills, which will be located on approximately 313 acres of land in Frazer Township, Pennsylvania.

              AV Associates contributed a portion of the land on which the mall will be situated and the rights to acquire the remaining land that will be used for the mall, as its initial capital contribution. The currently agreed value of these contributions is approximately $9.7 million, which value may be reduced under certain circumstances. Mills-Kan Am

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Pittsburgh has the option to fund any additional capital necessary for the development of the project until the one year anniversary of opening. If Mills-Kan Am Pittsburgh does not elect to fund additional capital prior to the one year anniversary of opening or if additional capital is required after such one year anniversary date, each partner will have the option, but not the obligation, to fund any such additional capital with Mills-Kan Am Pittsburgh funding 75% and AV Associates funding 25%. AV Associates will receive a construction period preference equal to 5.5% and a priority return during operations equal to 11% per annum on its qualifying initial capital contribution and 14% per annum on its qualifying additional capital contributions. Mills-Kan Am Pittsburgh will receive a cumulative construction period preference equal to 11%, a priority return during operations equal to 11% per annum on its qualifying initial capital contributions and 14% per annum on its qualifying additional capital contributions. Any residual cash flow after preference payments and after repayment of all capital contributions will be distributed 75% to Mills-Kan Am Pittsburgh and 25% to AV Associates.

              Commencing one year after the opening and terminating three years after the opening, AV Associates may elect to convert a certain portion of its partnership interest in Pittsburgh Mills Limited Partnership to cash or limited partnership units of Mills LP, at our election. In addition, if, after the opening of Pittsburgh Mills and prior to the exercise of the AV Associates' conversion right described above, a dispute arises regarding a "Major Decision," as defined in the partnership agreement, either Mills-Kan Am Pittsburgh or AV Associates can exercise a buy-sell right. Pursuant to the buy-sell provision, the partner receiving a buy/sell notice can elect to either purchase the other partner's interest in the project or sell its interest in the project to the other party. In addition, commencing on the five year anniversary of opening, AV Associates may put, and Mills-Kan Am Pittsburgh may call, all of AV Associates' remaining partnership interest for a purchase price to be paid in cash or limited partnership units of Mills LP, at our option. The purchase price will be based on the fair market value of the property.

              Mills-Kan Am Pittsburgh, through which we will operate our interest in the Pittsburgh Mills project, is a limited partnership between us and Kan Am. Each partner is required to fund 50% of Mills-Kan Am Pittsburgh's initial capital contribution. We anticipate that the total capital to be contributed by Mills-Kan Am Pittsburgh to Pittsburgh Mills will be $63.4 million. As of December 31, 2003, we and Kan Am had contributed $22.3 million and $25.0 million, respectively, to Mills-Kan Am Pittsburgh, of which $46.6 million had been contributed to Pittsburgh Mills Limited Partnership.

              Under the terms of the Mills-Kan Am Pittsburgh limited partnership agreement, each partner will receive on a pro rata basis a cumulative construction period preference and a priority return during operations equal to 11% per annum on its unreturned capital contributions. Any residual cash flow after preference payments will be distributed 75% to us and 25% to Kan Am. Proceeds from a major capital event, such as the sale of the property, will be distributed 75% to us and 25% to Kan Am after the payment of any accrued but unpaid preferences and the return of all capital contributions. Commencing with the grand opening of the project, we will be entitled to receive an annual asset management fee that will be cumulative and will be payable solely out of Kan Am's share of cash flow or proceeds received for certain capital and other events after all priority returns are paid.

              We will guarantee Kan Am's portion of construction debt until qualified permanent financing is secured for the project. In addition, we will guarantee all of Kan Am's construction period preference until the grand opening of the project but Kan Am's construction period preference that we guarantee will decrease from 11% to 9% during the period between the grand opening and the time of the qualified permanent financing.

              Kan Am will have the right to require the joint venture to redeem Kan Am's interest in the joint venture if specified conditions have not been met by a "redemption date," in exchange for the sum of Kan Am's total equity investment plus any unpaid construction period preference payments. The "redemption date" is June 30, 2005 or twelve months following the date that Kan Am has fully contributed its required equity to the joint venture. This redemption obligation is guaranteed by us. The specified conditions include the closing and initial funding of the construction loan, and the receipt of proceeds from public financings. We expect these conditions to be satisfied in the spring of 2005, but no assurance can be given that such conditions will be satisfied by that date.

              At specified times following the fifth anniversary of the opening of Pittsburgh Mills, or, if earlier, upon our change in control, either we or Kan Am can exercise a buy-sell right. Pursuant to the buy-sell provision, we can require Kan Am to sell to us for cash or limited partnership units of Mills LP, at Kan Am's election, Kan Am's entire interest in the joint venture entity. Also, pursuant to the buy-sell provision, Kan Am can require us to acquire for cash or limited partnership units of Mills LP, at our election, Kan Am's entire interest in the joint venture entity. Only Kan Am may invoke the buy-sell right in the event of our change in control.

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Projects Under Development

              In addition to the three projects currently under construction, we are also actively pursuing the development of other projects. These projects are in various levels of the due diligence stage during which we determine site/demographic viability, negotiate tenant commitments and work through third-party approval processes. Generally, we will not begin construction on these projects until we have completed our due diligence and have obtained significant pre-leasing commitments. While we currently believe that these projects will ultimately be completed, we cannot assure you that they will actually be constructed or that they will have any particular level of operational success or ultimate value. The following is a brief description of our current development projects:

              Meadowlands Xanadu – East Rutherford, New Jersey.    In December 2003, we executed a redevelopment agreement with the New Jersey Sports & Exposition Authority (the "NJSEA") pursuant to which we will redevelop the Continental Arena site in East Rutherford, New Jersey. We have teamed with Mack-Cali Realty Corporation, a leading owner and manager of class A office properties located primarily in the Northeast United States ("Mack-Cali"), and the New York Giants football organization. We are currently working with the NJSEA and other government agencies to finalize a ground lease for the site and we plan to begin construction by the third quarter of 2004.

              Upon completion, Meadowlands Xanadu will include a family entertainment and recreation complex with five themed zones and an office and hotel component with four office buildings and a 520-room hotel with conference and exhibition facilities totaling 4.8 million square feet. The Meadowlands Xanadu proposal features the Snow Dome, America's first year-round indoor Alpine ski resort with real snow and chair lifts, and additional active and spectator activities. We have commenced leasing and licensing activities. We expect to announce additional tenant commitments later in 2004.

              Meadowlands Xanadu will be developed by a joint venture between affiliates of Mack-Cali and Meadowlands Mills Limited Partnership (the "Meadowlands Mills/Mack-Cali LP"). Upon formation, in exchange for certain contributions and pre-formation expenditures, Meadowlands Mills Limited Partnership received an initial capital account credit of approximately $134,000,000 and Mack-Cali received an initial capital account credit of approximately $290,000. Meadowlands Mills Limited Partnership, the entity through which we and Kan Am will hold our respective interests in the project, is obligated to contribute 80% of all additional capital to Meadowlands Mills/Mack-Cali LP up to a maximum of 40% of net project costs, and Mack-Cali is obligated to contribute 20% of all additional capital (with certain exceptions) to Meadowlands Mills/Mack-Cali LP up to a maximum of $32,500,000. Each of Meadowlands Mills Limited Partnership and Mack-Cali receives a cumulative preference equal to 9% on its capital contributions. Any residual cash flow after preference payments, repayment of all capital contributions and payment to the owner of the New York Giants football organization, as described above, will be distributed 80% to Meadowlands Mills Limited Partnership and 20% to Mack-Cali.

              Meadowlands Mills Limited Partnership is the managing general partner and Mack-Cali Meadowlands Special LLC is the special general partner of Meadowland Mills/Mack-Cali LP, with rights to approve certain "Major Decisions" of the partnership. All disputes arising under the partnership agreement are required to be submitted to mediation and, if necessary after such mediation, submitted to arbitration.

              Commencing three years after the opening, either Meadowlands Mills Limited Partnership or Mack-Cali may sell its partnership interest to a third party subject to the following provisions:

•

Meadowlands Mills Limited Partnership has certain "drag-along" rights and Mack-Cali has certain "tag-along rights" in connection with such sale of interest to a third party; and



•

Meadowlands Mills Limited Partnership has a right of first refusal with respect to a sale by Mack-Cali of its partnership interest.

              In addition, commencing on the sixth anniversary of opening, Mack-Cali may cause Meadowlands Mills Limited Partnership to purchase, and Meadowlands Mills Limited Partnership may cause Mack-Cali to sell to Meadowlands Mills Limited Partnership, all of Mack-Cali's partnership interests at a price based on the fair market value of the project.

              The partnership agreement for Meadowlands Mills/Mack-Cali LP contemplates that Meadowlands Mills Limited Partnership will develop the entertainment/retail portion of the project and that Mack-Cali may elect to develop the hotel and office portions of the project. If Mack-Cali so elects, then Mack-Cali is obligated to contribute 80% of all required equity and Meadowlands Mills Limited Partnership is obligated to contribute 20% of all required equity and Mack-Cali and Meadowlands Mills Limited Partnership will have residual sharing percentages of 80% and 20%, respectively, after payment of all preferred returns and return of capital. If Mack-Cali does not elect to develop

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the hotel and office portions, Meadowlands Mills Limited Partnership may develop the hotel and office portions with or without a third party partner or sell the leasehold rights in the hotel and office land parcels. If Meadowlands Mills Limited Partnership elects to develop the hotel and office portions, then Mack-Cali may elect to participate in such development with an obligation to fund 20% of all required equity and will receive a residual sharing percentage of 20% after payment of all preferred returns and return of capital.

              Meadowlands Mills Limited Partnership is a joint venture between us and Kan Am. Meadowlands Mills Limited Partnership has also entered into agreements with Empire, Ltd., the current owner of the "Empire Tract" and Bennett S. Lazare, Esq. pursuant to which Empire, Ltd. and Mr. Lazare have the right to become limited partners in the partnership with a combined twenty percent (20%) limited partnership interest. As of December 31, 2003, we had invested $144.0 million, including capitalized interest, in Meadowlands Mills Limited Partnership. Of the amount we had invested as of December 31, 2003, $72.0 million is an advance to Meadowlands Mills Limited Partnership. Kan Am's invested capital in Meadowlands Mills Limited Partnership was $24.0 million as of December 31, 2003. The Meadowlands Mills Limited Partnership agreement provides for Kan Am's right to require Meadowlands Mills Limited Partnership to redeem its interest in the joint venture if a construction loan is not obtained by June 30, 2005.

              In conjunction with the formation of Meadowlands Mills Limited Partnership, we acquired a mortgage interest in a 587-acre tract of land commonly known as the "Empire Tract" which is adjacent to the Continental Arena site. The executed redevelopment agreement with the NJSEA provides that the Meadowlands Mills/Mack-Cali LP will convey the Empire Tract to the State of New Jersey for establishment of a wetlands mitigation area. The rights of Meadowlands Mills Limited Partnership in the Empire Tract were contributed to the Meadowlands Mills/Mack-Cali LP and certain proceeds of the sale of the Empire Tract are to be paid to Meadowland Mills Limited Partnership to recover its investment in the Empire Tract prior to the payment of the preferences on unreturned capital contributions to Meadowlands Mills Limited Partnership and Mack-Cali.

              Pursuant to the Meadowlands Mills Limited Partnership agreement, we and Kan Am each are entitled to receive a cumulative construction period preference and a priority return during operations equal to 9% per year. Payment of the construction period preference to Kan Am is guaranteed by us until substantial physical completion of construction of the project and the closing of a permanent loan and the payment of the construction period preference is payable to us solely out of proceeds of the construction loan to the extent permitted by the loan documents. At specified times following the tenth anniversary of the project's opening, either we or Kan Am can exercise a buy-sell provision. Pursuant to the buy-sell provision, we can require Kan Am to sell to us for cash or limited partnership units of Mills LP, at Kan Am's election, Kan Am's entire interest in the partnership. Also, pursuant to the buy-sell provision, Kan Am can require us to acquire for cash or limited partnership units of Mills LP, at our election, Kan Am's entire interest in the partnership at a price based on the fair market value of the project.

              Del Amo – Los Angeles, California.    We are currently pursuing a plan to redevelop our Del Amo Fashion Center which will include the addition of new department store anchors, introduction of additional tenants with higher price points than the property's current tenants and the demolition of the vacant wing formerly anchored by Montgomery Ward. The vacant wing will be replaced by an open air retail and entertainment wing. In addition, we anticipate that we will sell a parcel of land at the property to a residential developer who intends to build a multifamily building on the site.

              Sawgrass – Ft. Lauderdale, Florida.    We are currently pursuing a redevelopment program at Sawgrass Mills to incorporate improved lighting, painting and directional signage. We are also contemplating the addition of an open-air promenade to the property.

              San Francisco Piers 27-31 – San Francisco, California.    In April 2001, the San Francisco Port Commission awarded us the exclusive right to negotiate for a long-term lease on Piers 27-31 on the San Francisco waterfront by which to develop a 21^st Century Retail and Entertainment Center full-price mixed-use retail, office, entertainment and recreation project. These negotiations have begun and are ongoing. Concurrently, entitlements at the state and local level are proceeding.

              108 North State Street – Chicago, Illinois.    In June 2002, we were selected by the City of Chicago to negotiate the development of Block 37 (108 N. State Street), a key city block opposite the Marshall Fields department store in downtown Chicago, as a 21^st Century Retail and Entertainment Center mixed-use project including retail, office, residential and hotel uses. Negotiations for this development are ongoing. We are in discussion with tenants for the retail portion of the project and are negotiating with an office developer to develop the office portion of the project.

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              In addition to the projects discussed above, we are also conducting due diligence on several other proposed sites for future projects, including sites in Cleveland, Ohio; Woodbridge, Virginia; Boston, Massachusetts; Tampa, Florida; and San Francisco, California. We are also reviewing other potential retail and entertainment development opportunities internationally. For example, we are exploring follow-on opportunities beyond Madrid Xanadú for sites in and around Seville, Bilbao, Valencia and Barcelona, Spain. In addition, we are pursuing an opportunity in Glasgow, Scotland, and in Italy, our efforts are concentrated on several well-located sites in Milan, suburban Florence and Rome.

Item 3. Legal Proceedings

        We do not believe that there are any material pending legal proceedings, other than ordinary routine litigation incidental to its business, to which we are a party or to which any of our properties is subject.

              On March 27, 2003, Hartz Mountain Industries, Inc. filed a lawsuit in the Superior Court of New Jersey, Law Division, for Bergen County, seeking to enjoin NJSEA from entering into a contract with Mack-Cali Realty Corporation and us for the redevelopment of the Continental Arena site. On May 1, 2003, the court ruled that no injunction should be issued and that Hartz Mountain would be required to exhaust its administrative remedies through a protest filed with the NJSEA before bringing the issue to court. Hartz Mountain has appealed the court's order. On September 10, 2003, the NJSEA ruled against Hartz Mountain and Westfield America, Inc., which had also protested the NJSEA's decision, in separate protest hearings filed by them. Hartz Mountain, Westfield and four taxpayers have each filed appeals from the action taken by the NJSEA. In January 2004, Hartz Mountain and Westfield also appealed the NJSEA's approval and execution of the Redevelopment Agreement with Mack-Cali and us. All of these cases are now pending unresolved in the Superior Court of New Jersey, Appellate Division. We believe that our proposal fully complied with applicable laws and the request for proposals and that the NJSEA acted properly in entering into the Redevelopment Agreement with us, and we plan to vigorously enforce our rights concerning this project. We do not believe that these lawsuits will have any material effect on our ability to develop the project.

Item 4. Submission of Matters to a Vote of Security Holders

        None.

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PART II

Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters

Market Information

              Our common stock trades on the New York Stock Exchange ("NYSE") under the symbol "MLS". The following table sets forth, for each quarterly period during the last two years, the high and low closing sale prices per share of our common stock as reported on the NYSE and the dividends per share that we paid. We have made consecutive quarterly distributions since our initial public offering in 1994. As of March 1, 2004, there were 1,081 stockholders of record.

              In February 2004, our board of directors approved an increase in our quarterly dividend rate to $0.595 per share of common stock commencing with our dividend for the first quarter of 2004 which is payable in May 2004. Our ability to make dividend distributions depends on a number of factors, including net cash provided by operating activities, financial condition, capital commitments, debt repayment schedules and other factors. Holders of our common stock are entitled to receive dividends when, as and if declared by our board of directors out of any funds legally available for that purpose.

              In order to qualify as a REIT, we are required to make dividend distributions to our stockholders. The amount of these distributions must equal at least:

•

the sum of (A) 90% of our "REIT taxable income" (computed without regard to the dividends paid deduction and our net capital gain) and (B) 90% of the net income (after tax), if any, from foreclosure property, minus



•

the sum of certain non-cash income items over 5 percent of our "REIT taxable income" (computed without regard to dividends paid, deductions and our net capital gain).

              For federal income tax purposes, dividend distributions may consist of ordinary income, capital gains, nontaxable return of capital or a combination of those items. Dividend distributions that exceed our current and accumulated earnings and profits (calculated for tax purposes) constitute a return of capital rather than a dividend, which reduces a stockholder's basis in the shares of common stock and will not be taxable to the extent that the dividend distribution equals or is less than the stockholder's basis in the stock. To the extent a dividend distribution exceeds both current and accumulated earnings and profits and the stockholder's basis in the stock, that dividend distribution will be treated as a gain from the sale or exchange of that stockholder's stock. Every year, we notify stockholders of the taxability of our dividend distributions paid during the preceding year.

              The following table sets forth the approximate taxability of common stock dividend distributions paid in 2003 and 2002 on a per share basis:

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Item 6. Selected Financial Data

        The following table sets forth selected consolidated financial data for us, including Mills LP and our subsidiaries. Our historical financial data should be read in conjunction with the consolidated financial statements and accompanying notes and the discussion set forth in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," each included elsewhere in this Form 10-K.

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