<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                                    FORM 10-K

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934 (FEE REQUIRED)
     For the fiscal year ended December 31, 1998 OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
     EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
     For the transition period from ____________________ to ____________________

                         Commission File Number 1-12994

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

                   DELAWARE                               52-1802283
       (State or other jurisdiction of                 (I.R.S. Employer
         incorporate or organization)                 Identification No.)

       1300 WILSON BOULEVARD, SUITE 400
                ARLINGTON, VA                                22209
   (Address of principal executive office)                (Zip Code)

Registrant's telephone number, including area code:  (703) 526-5000
Securities registered pursuant to Section 12(b) of the Act:

       Title of each Class             Name of each exchange on which registered
       -------------------             -----------------------------------------
  COMMON STOCK,  $0.01 PAR VALUE               NEW YORK STOCK EXCHANGE

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 X  No   .
                                      ---   ---

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. [X]

As of March 26, 1999, the aggregate market value of the 22,627,138 shares of
common stock held by non-affiliates of the registrant was $391,732,327 based
upon the closing price ($17.3125) on the New York Stock Exchange composite tape
on such date. (For this computation, the registrant has excluded the market
value of all shares of its common stock reported as beneficially owned by
executive officers and directors of the registrant and certain other
shareholders; such exclusion shall not be deemed to constitute an admission that
any such person is an "affiliate" of the registrant.) As of March 26, 1999,
there were 24,139,317 shares of common stock outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's annual report to shareholders for the fiscal year
ended December 31, 1998 are incorporated by reference into Part II. Portions of
the registrant's proxy statement for the annual shareholders meeting to be held
in 1999 are incorporated by reference into Part III.


<PAGE>   2


                              THE MILLS CORPORATION

                           ANNUAL REPORT ON FORM 10-K
                                DECEMBER 31, 1998

                                TABLE OF CONTENTS

PART I  .......................................................................3

Item 1. Business...............................................................3

Item 2. Properties............................................................18

Item 3. Legal Proceedings.....................................................45

Item 4. Submission of Matters to a Vote of Security Holders...................45


PART II ......................................................................46

Item 5. Market for the Registrant's Common Equity and Related
        Shareholder Matters...................................................46

Item 6. Selected Financial Data...............................................47

Item 7 and 7A . Management's Discussion and Analysis of Financial Condition 
        and Results of Operations and Quantitative and Qualitative 
        Disclosures About Market Risk.........................................47

Item 8. Financial Statements and Supplementary Data...........................47

Item 9. Changes in and Disagreements with Accountants on Accounting
        and Financial Disclosure..............................................47

PART III .....................................................................48

Item 10. Directors and Executive Officers of the Registrant...................48

Item 11. Executive Compensation...............................................49

Item 12. Security Ownership of Certain Beneficial Owners and Management.......49

Item 13. Certain Relationships and  Related Transactions......................49

PART IV ......................................................................50

Item 14. Exhibits, Financial Statements, Schedules and Reports and
         Form 8-K.............................................................50

SIGNATURES ...................................................................53


                                       2
<PAGE>   3


                                     PART I

ITEM 1.  BUSINESS

CAUTIONARY STATEMENT

       Certain matters discussed in this Form 10-K and the information
incorporated by reference herein contain "forward-looking statements" for
purposes of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") relating to, without limitation, future economic
performance, plans and objectives of management for future operations and
projections of revenue and other financial items, demographic projections and
federal income tax considerations, which can be identified by the use of
forward-looking terminology such as "may," "will," "except," "anticipate,"
"estimate," or "continue" or the negative thereof or other variations thereon or
comparable terminology. Such forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those described in such forward-looking statements.

THE COMPANY

       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 direct and indirect subsidiaries, including The Mills
Limited Partnership, and references in this Form 10-K to the "Operating 
Partnership" refer to The Mills Limited Partnership, of which The Mills 
Corporation is the sole general partner.

       We own interests in, develop, redevelop, lease and manage a portfolio
currently consisting of seven super-regional, value and entertainment oriented
malls (the "Mills"), 11 community shopping centers (the "Community Centers") and
one urban entertainment/retail project (the "Block"). We are a fully-integrated,
self-managed real estate investment trust (a "REIT") with approximately 1,200
employees as of December 31, 1998 and provide all development, redevelopment,
leasing, financing, management and marketing services with respect to all
properties currently in operation. The Mills comprise the primary focus of our
operations, with approximately 10.7 million square feet of gross leasable area
in seven states, of which approximately 1.0 million square feet is owned by
certain anchor tenants.

       We were originally incorporated in the Commonwealth of Virginia on
January 2, 1991 and reincorporated in the State of Delaware in 1994. We became
publicly traded on April 21, 1994. We have authorized 150,000,000 shares of
common stock, $0.01 par value per share, comprised of 100,000,000 shares of
voting common stock and 50,000,000 shares of nonvoting common stock and 
20,000,000 shares of preferred stock, par value $0.01 per share. As of December
31, 1998, there were 24,139,317 shares of common stock (including 1,007,620
shares of common stock issued to the Operating Partnership and held in escrow
to secure specific obligations pursuant to a settlement agreement with Chelsea
GCA Realty and Simon Property; see  "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources--Development, Remerchandising and Expansion.") and no shares of
preferred stock outstanding. We are the sole general partner of the Operating
Partnership and currently own 59.35% of the Operating Partnership's outstanding
partnership units (before giving effect to the common stock held in escrow and
the corresponding partnership units associated with those shares). The 
Operating Partnership's partnership units (other than those owned by us) are
exchangeable under certain circumstances for the cash equivalent of a share of
our common stock or, at our option, a share of our common stock. As the sole
general partner of the Operating Partnership, we have the exclusive power to
manage and conduct the business of the Operating Partnership, subject to
certain limited exceptions. The Operating Partnership either holds title to our
properties or directly or indirectly holds 100% of the general and limited
partnership interests in the partnerships that own the operating properties,
except for the joint ventures that own Ontario Mills, Grapevine Mills, Arizona
Mills and The Block at Orange in which the Operating Partnership holds 50.0%,
37.5%, 36.8% and 50.0% interest, respectively. The Operating Partnership has
also formed joint ventures to develop additional properties.



                                       3
<PAGE>   4


       We conduct all of our business through the Operating Partnership and the
Operating Partnership's various subsidiaries, which include: (i) Management
Associates Limited Partnership, which provides leasing and management services
for our properties, and (ii) MillsServices Corp., which provides management
services to properties in which we do not own an interest and provides
development services for our properties and new properties acquired by us. The
Operating Partnership owns 100% of the interests in the Management Associates
Limited Partnership, and 99% of the non-voting preferred stock (representing a
99% economic interest) and 5% of the voting common stock of MillsServices Corp.
In addition, a former director of ours and an affiliate of Kan Am U.S., Inc.
("Kan Am", which owns approximately 34.8% of the outstanding partnership units
in the Operating Partnership) each own 5% of the non-voting preferred stock
(representing, in the aggregate, a 1% economic interest) and 47.5% of the voting
common stock of MillsServices Corp.

       We maintain our executive offices at 1300 Wilson Boulevard, Suite 400,
Arlington, Virginia 22209. Our telephone number is (703) 526-5000. We also
maintain a web site at www.millscorp.com.

OUR PORTFOLIO

       The following table sets forth a summary of our operating properties as
of December 31, 1998:

<TABLE>
<CAPTION>
                                                             APPROX.                      NO. OF       1998
                                                              GROSS           PERCENT     ANCHOR      SPECIALTY
                          METROPOLITAN          YEAR      LEASABLE AREA       LEASED      STORES     STORE SALES       COMPANY
NAME/LOCATION             AREA SERVICED        OPENED     (SQ. FT.) (1)         (2)         (3)      PER SQ. FT.      OWNERSHIP
-------------             -------------        ------     -------------         ---         ---      -----------      ---------
<S>                     <C>                   <C>         <C>                 <C>         <C>        <C>              <C>
MILLS
                           Washington,
Potomac Mills            D.C./Baltimore         1985        1,636,870           96%          17         $ 320            100%

                          Philadelphia/
Franklin Mills              Wilmington          1989        1,739,849           97           19           294            100%

                        Fort Lauderdale/
Sawgrass Mills          Miami/Palm Beach        1990        1,878,522           99           20           448            100%

Gurnee Mills            Chicago/Milwaukee       1991        1,653,978           98           16           282            100%

Ontario Mills              Los Angeles          1996        1,345,096 (4)       99           18           345             50% (5)

Grapevine Mills         Dallas/Ft. Worth        1997        1,240,781 (6)       98           16           300           37.5% (7)

Arizona Mills                Phoenix            1997        1,208,899           98           15           301           36.8% (8)
                                                            ---------                        --
     MILLS TOTALS/WEIGHTED AVERAGES                        10,703,995           97%         121         $ 332 (9)
                                                           ==========                       ===
BLOCKS

                          Los Angeles/
The Block at Orange       Orange County         1998          642,554(10)       90%           9            --             50% (11)
                                                              =======                         =
COMMUNITY CENTERS (11 SHOPPING CENTERS)       Various       2,220,502           95%          28         $ 245            100%
                                                            =========                        ==
</TABLE>

(1)    Includes 963,173 square feet of gross leasable area owned by tenants as
       follows: Potomac Mills-80,000 square feet; Franklin Mills-209,612 square
       feet; Sawgrass Mills-281,774 square feet; Gurnee Mills-250,806 square
       feet; Ontario Mills-125,000 square feet; and



                                       4
<PAGE>   5


       Community Centers-15,981 square feet. A ground lease at Franklin Mills of
       152,370 square feet and a ground lease at Ontario Mills of 16,595 square
       feet are also included.

(2)    Percent leased is defined as all space leased and for which rent is being
       paid as of December 31, 1998, excluding tenants with leases having a term
       of less than one year, plus gross leasable area owned by store tenants.

(3)    Anchor stores include all stores occupying more than 20,000 square feet.

(4)    Ontario Mills will contain approximately 1.7 million square feet of gross
       leasable area, including gross leasable area owned by tenants, upon
       full build out.

(5)    Our other joint venture partners are Kan Am, with a 25% interest, and
       Simon Property, with a 25% interest. We and our other partners each are
       entitled to a priority return during operations equal to 9% per annum on
       unreturned capital contributions.

(6)    Grapevine Mills will contain approximately 1.5 million square feet of
       gross leasable area, including gross leasable area owned by tenants, upon
       full build out.

(7)    Our other joint venture partners are Kan Am, with a 25% interest, and
       Simon Property, with a 37.5% interest. We and our other partners each are
       entitled to a priority return during operations equal to 9% per annum on
       unreturned capital contributions. 

(8)    Our other joint venture partners are Taubman Realty, with a 36.8%
       interest, and Simon Property, with a 26.4% interest. 

(9)    Includes Grapevine Mills and Arizona Mills, which opened in October 1997
       and November 1997, respectively. Excluding projects in their first full
       year of operations (Grapevine Mills and Arizona Mills), the average sales
       per square foot would be $342.

(10)   The Block at Orange will contain approximately 0.8 million square feet of
       gross leasable area, including gross leasable area owned by tenants, 
       upon full build out.

(11)   Our other joint venture partner is Kan Am, with a 50% interest. Each
       partner is entitled to a cumulative construction period preference and a
       priority return during operations equal to 9% per annum on its unreturned
       capital contributions.

       A brief description of the three types of real estate projects in our
portfolio is set forth below:

       Mills. The Mills are the primary focus of our operations. A typical Mills
contains 175 to 200 specialty tenants and 15 to 20 anchor tenants, and averages
approximately 1.5 million square feet of gross leasable area. Mills are
essentially a hybrid of various retail formats with a diverse tenant base 
consisting of department stores, specialty stores, manufacturers outlets, 
off-price retailers, catalog retailers, "category killers," which offer a 
selection of products in one defined merchandise category, and entertainment
venues. A list of representative tenants is set forth below:

<TABLE>
<CAPTION>
  DEPARTMENT STORES                SPECIALTY STORES      MANUFACTURERS OUTLETS
  -----------------                ----------------      ---------------------
  <S>                              <C>                   <C>
  Off 5th by Saks Fifth Avenue     Ann Taylor            Ralph Lauren/Polo
  Last Call from Neiman Marcus     Benetton              Nautica
  Nordstrom Rack                   Joan and David        Tommy Hilfiger
</TABLE>

<TABLE>
<CAPTION>
         OFF-PRICE RETAILERS                              CATALOG RETAILERS
         -------------------                              -----------------
         <S>                                              <C>
         Dress Barn                                       Land's End
         Famous Footwear                                  Harry and David
         Rack Room Shoes                                  J.C. Penney Outlet

         CATEGORY KILLERS                                 ENTERTAINMENT VENUES
         ----------------                                 --------------------
         Bed, Bath & Beyond                               AMC Theatres
         Waccamaw Pottery                                 Rainforest Cafe
         The Sports Authority                             Dave & Busters
</TABLE>

       Mills are located in large, metropolitan areas with a minimum of one
million people within a 20 mile radius, a projected annual population growth of
at least 6%, a minimum median annual household income of $50,000 and a market
with steady tourist appeal. Prototypical physical layout is a "race track"
format of stores on one level with ample non-decked parking. We believe shoppers
of the Mills can generally be characterized as follows:

       -      shoppers within a 10-15 mile radius of the property that use the
              Mills as their local regional mall equivalent;

       -      shoppers within a 15-40 mile radius that travel beyond other
              retail offerings to access the breadth and uniqueness of the Mills
              tenant mix; and



                                       5
<PAGE>   6


       -      shoppers and tourists traveling from various distances as part of
              a planned shopping experience.

       Blocks. With the opening of The Block at Orange in November 1998, located
in Orange, California, we have begun the rollout of a new retail format
consisting of an open-air urban mainstreet atmosphere located in high traffic
areas. The Blocks will have a high component of entertainment including
restaurants, theatres and distinctive retail concepts such as Vans, a
clothing/shoe store and skateboarding park. The Block projects will have an
urban/suburban mainstreet scene with a size between 0.3 million square feet and
1.0 million square feet of gross leasable area and will be custom tailored for
each market and geographic location. We believe that this concept meets market
demand for an innovative retail format within target markets such as major
university towns, dense suburban areas and large city centers. We believe that
our success with the Mills concept will carry over to this new concept, as
evidenced by the 89% occupancy rate at the opening of The Block at Orange and
the favorable market reaction to this distinctive development.

       Community Centers. The eleven Community Centers contain a total of
approximately 2.2 million square feet of gross leasable area and are located in
Florida, Georgia, Illinois, Maryland, New Jersey, Ohio, Pennsylvania, South
Carolina and Virginia. The Community Centers are open-air shopping centers
containing traditional shopping center tenants such as grocery, drug, video and
greeting card stores, as well as a strong concentration of national value
retailers. Anchor tenants of the Community Centers include Giant Food, Krogers,
Marshall's, Safeway, T.J. Maxx, Wal-Mart, Bed, Bath & Beyond and Walgreens.

       While serving as a stable source of property operating income for the 
Company, the Community Centers are not a strategic part of our business. We may
consider divesting these assets and redeploying the capital into the core
business of developing large scale value/entertainment-oriented assets. The
timing of any divestiture is dependent on market conditions.

COMPETITIVE ADVANTAGES

       We believe that the Mills have a number of inherent competitive
advantages over other retail formats in operation today, and that these
advantages are responsible for the strong operating performance of our portfolio
of properties, as more fully described below.

       Consumer Draw. We believe that the critical mass achieved by aggregating
an average of approximately 190 stores and 1.5 million square feet of gross
leasable area under one roof, coupled with the distinctive physical 
characteristics of our Mills, are the primary reasons that our properties
attract so many people and create extended shopping trips. We believe people
are attracted to our distinctive mix of tenants, including department stores,
specialty 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. We believe we have
created a shopping environment that is festive and social, with interior
designs resembling a "Mainstreet" atmosphere which incorporates staggered store
fronts and roof lines, natural lighting and colorful graphic accents. Shopping
avenues in our Mills are interspersed with a variety of food establishments and
video and entertainment courts, further enhancing the entertainment nature of
the shopping trip.

       We believe our Mills have a primary trade area of an estimated 40 miles.
The Mills are the top tourist destinations in their respective states (excluding
Sawgrass Mills in Florida, which is second only to Disney World). The Mills
average 18 million visitors each per year, and are visited by an excess of
2,000 tour buses annually.

       Brand Awareness. The Mills brand is synonymous with a one of a kind 
value, entertainment and variety retail offering. We believe that the Mills is
the only retail shopping experience that is differentiated by its product type.
The Mills brand has intrinsic value due to its differentiation with the market,
consumers and tourist shoppers and their identification with the Mills brand.

       Attractiveness to Tenants. We believe tenants are attracted to our Mills
as a result of the heavy foot traffic generated at the Mills and the length and
productivity of consumer visits, which translate into high sales levels. In
addition, we believe tenant occupancy costs are low as a result of lower common
area maintenance costs at a Mills versus many other retail formats. The lower
common maintanence costs are a result of several factors, including:

       -      Anchor contributions: due to 15 to 20 anchor stores contributing
              significantly to common area maintenance pools;



                                       6
<PAGE>   7


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

       -      Larger tenant base: due to each Mills' significant specialty
              store shop tenant square footage, resulting in a lower per square 
              foot common area maintenance costs.

       Flexibility of Product. The single-story, simple construction of our
Mills 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 any desired remodeling projects
than is afforded by traditional regional mall anchor leases. This makes it 
easier for us to make room for new, exciting retailers, which keep the product 
fresh and enhance consumer draw, and to replace underperforming stores.

       Barriers to Entry. We believe that our status as the innovator of the
Mills and Block product types and our success with our existing portfolio have
made us the leading developer of large-scale value/entertainment oriented retail
projects. The strong relationships we have developed with our tenants 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 financial
commitment associated with developing a project the size and nature of a Mills
precludes many potential competitors from entering our business. Furthermore,
through our contractual alliances with Simon Property Realty Group, L.P. ("Simon
Property") and Taubman Realty Group, L.P. ("Taubman Realty"), we believe we are
already aligned with two of the strongest developers of retail projects in the
country. See "-- Strategic Relationships." Finally, we believe we are the only
company currently building Mills-type projects that has fully integrated
development capabilities reflecting lessons learned from successful past
development projects.

DEVELOPMENT PIPELINE

       Projects Under Construction. As of December 31, 1998, we had four Mills
under construction, comprising approximately 4.2 million square feet of new
gross leasable area. Estimated total development cost for these projects is
approximately $726 million. After construction financing proceeds and joint
venture partner equity contributions, our equity requirement associated with
these projects is approximately $88.75 million, $45.4 million of which had been
funded as of December 31, 1998. The following table sets forth certain
information with regard to these projects.

                            MILLS UNDER CONSTRUCTION

<TABLE>
<CAPTION>
                                                     APPROXIMATE                       ESTIMATED                           ANCHOR
                                     ANTICIPATED        GROSS                            TOTAL           REQUIRED           STORE
                   METROPOLITAN        OPENING        LEASABLE         COMPANY          PROJECT        EQUITY FROM         TENANT
NAME/LOCATION      AREA SERVED        DATE (1)      AREA (1), (2)     OWNERSHIP        COST (3)        COMPANY (4)       COMMITMENTS
-------------      -------------      --------      -------------     ---------      -------------    -------------      -----------
                                                                                     (IN MILLIONS)    (IN MILLIONS)
<S>                <C>               <C>            <C>               <C>            <C>              <C>                <C>
Sawgrass Mills -   Ft. Lauderdale/
  Phase III        Miami/Palm          Spring
    Expansion      Beach                1999             300,000        50% (5)       $     68            $ 0.00              4

                                        Fall
Katy Mills         Houston              1999           1,300,000      62.5% (6)            225             26.25             13

                                        Fall
Concord Mills      Charlotte            1999           1,400,000      37.5% (7)            211             12.50             11

                                       Spring
Opry Mills         Nashville            2000           1,200,000      66.7% (8)            222             50.00              5
                                                       ---------                      --------          --------

                                                       4,200,000                      $    726             88.75
                                                       =========                      ========          ========
</TABLE>



                                       7
<PAGE>   8


(1)    Anticipated opening dates and approximate gross leasable area may be
       subject to adjustment as a result of factors inherent in the development
       process, some of which may not be under our direct control.

(2)    Approximate gross leasable area includes space that will be owned by
       anchor tenants.

(3)    Our best estimate of aggregate project cost as of December 31, 1998 net
       of reimbursements for tax increment financings, sales of land to anchor
       tenants and other construction-related recoveries. Many of the underlying
       components of development cost may not be under our direct control.

(4)    Consists of equity requirement of the Company after construction loans
       and joint venture equity partner contributions. Of the $88.75 million
       required for all four projects, $45.4 million, or 51.2%, had been funded
       by the Company as of December 31, 1998.

(5)    Our other joint venture partner is Kan Am, with a 50% interest. Each
       partner is entitled to a cumulative construction period preference and a
       priority return during operations equal to 9% per annum on its unreturned
       capital contributions.

(6)    Our other joint venture partner is Kan Am, with a 37.5% interest. Each
       partner is entitled to a cumulative construction period preference and a
       priority return during operations equal to 9% per annum on its unreturned
       capital contributions.

(7)    Our other joint venture partners are Kan Am, with a 25% interest, and
       Simon Property, with a 37.5% interest. Each partner is entitled to a
       cumulative construction period preference and a priority return during
       operations equal to 9% per annum on its unreturned capital contributions.

(8)    Our other joint venture partner is a corporate affiliate of Gaylord
       Entertainment Company, with a 33.3% interest. We are entitled to
       a cumulative construction period preference and each partner is entitled
       to a priority return during operations equal to 9% per annum on its 
       unreturned capital contributions.

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

               Sawgrass Mills - Phase III Expansion - Sunrise, Florida.
The Phase III expansion of Sawgrass Mills will consist of an approximately
300,000 square foot entertainment zone, will be anchored by a 24-screen Regal
Theater, Gameworks, Wolfgang Puck Cafe and Ron Jon Surf Shop and will be
located across the ring road from the Florida Panthers Sports Arena. We expect
to open Phase III of Sawgrass Mills in the spring of 1999. Development costs
incurred through December 31, 1998 were approximately $32.5 million.

               The Phase III expansion is being developed and is owned by a
limited partnership between us, with a 50% interest, and Kan Am, with a 50%
interest. Kan Am has agreed to fund 100% of the project's initial required
equity. We have no equity contribution requirement. Kan Am will receive a 9%
preferred return on its equity until permanent financing is secured for the
project. We have guaranteed Kan Am's receipt of this preferred return. After
permanent financing is secured, we and Kan Am will each receive a 9% preferred
return on our equity, and the remaining cash flow will be distributed pro rata
in accordance with the percentage ownership interests. We have the right to
provide all development, management and leasing services for the expansion,
subject to the approval of Kan Am of specified major decisions, including a sale
or refinancing of the project and the approval of the development and annual
budgets. We have guaranteed completion of the expansion within the parameters of
the approved development budget.

               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 the Operating Partnership 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 the Operating Partnership at our election, Kan Am's entire
interest in the partnership.

               Katy Mills - Houston, Texas. In the first quarter of 1998, we
acquired a 500-acre site located at the intersection of Katy-Fort Bend Road and
I-10 in Fort Bend and Harris Counties. The approximately 1.3 million square foot
project planned for this site will consist of a combination of specialty
retailers, cinemas and themed restaurants. We have obtained anchor lease
commitments from Bed, Bath & Beyond, Books-A-Million, Jillian's, FYE (For Your
Entertainment), Starflight Cafe, Benetton Sportsystems, Sun & Ski, Boot Town,
Inc., AMC Theaters, Burlington Coat Factory, Marshalls, Bass Pro Shops and
Rainforest Cafe. Construction began on this project during the first quarter of
1998. The residual acreage that remains after the build out of the Katy Mills
project will be developed for mixed-use office and retail projects either by us
or by third parties. We expect to open this project in the fall of 1999.
Development costs through December 31, 1998 were approximately $106.2 million.

               The project is being developed and is owned by a limited
partnership between us, with a 62.5% interest, and Kan Am, with a 37.5%
interest. Kan Am and we have committed to contribute up to $78.75 million and
$26.25 million, respectively, which represents 100% of the estimated equity
required for this project, and it is anticipated that construction and tax
increment financing will be obtained to complete the project. As of December
31, 1998, we had fully funded our commitment. We and Kan Am each will receive a
9% preferred return on our equity until permanent financing is secured for the
project. We have guaranteed Kan Am's receipt of this preferred return. After
permanent financing is secured, we and Kan Am each will receive a 9% preferred
return on our equity, and the remaining cash flow will be distributed pro rata
in accordance with the percentage ownership interests. We have the right to
provide all development, management and leasing services for the project,
subject to the approval of Kan Am for specified major decisions, including a
sale or refinancing of the project and approval of annual budgets. We have
guaranteed completion of the project within the parameters of an approved
development budget.

               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 the Operating Partnership 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 the Operating Partnership at our election, Kan Am's entire
interest in the partnership.


                                       8
<PAGE>   9
               Concord Mills - Charlotte, North Carolina. The Concord Mills
project will be situated on an approximately 165-acre site located at the
intersection of Interstate 85 and Kings Grant/Speedway Boulevard in the city of
Concord, North Carolina. The approximately 1.4 million square foot project
planned for this site will consist of a combination of specialty retailers,
cinemas and themed restaurants. We have obtained anchor lease commitments from
Burlington Coat Factory, Group USA, Jillian's, Bass Pro Shops, FYE (For Your
Entertainment), Alabama Grill, Sun & Ski, T.J. Maxx, Books-A-Million, Bed, Bath
& Beyond and AMC Theatres. We expect to open Concord Mills in the fall of 1999.
Acquisition and development costs incurred through December 31, 1998 were
approximately $72.2 million.

               The project is being developed and is owned by a limited
partnership among us, with a 37.5% interest, Simon Property, with a 37.5%
interest, and Kan Am, with a 25% interest. We and Simon Property have committed
to contribute up to $12.5 million each and Kan Am has committed to contribute
up to $25.0 million to fund the project's equity capital requirements. As of
December 31, 1998, we had fully funded our commitment. The remainder of the
estimated project costs will be financed with a construction loan. We, Simon 
Property and Kan Am each will receive a 9% preferred return on our equity until
permanent financing is secured for the project. We and Simon Property have
guaranteed Kan Am's receipt of this preferred return. After permanent financing
is secured, we, Simon Property and Kan Am each will receive a 9% preferred
return on our equity, and the remaining cash flow will be distributed pro rata
in accordance with the percentage ownership interests. We and Simon Property
have the right to provide development, management and leasing services for the
project. Development fees are allocated to us and Simon Property on a 60% and
40% basis, respectively. Leasing fees will be allocated to us and Simon
Property on a 75% and 25% basis, respectively. We will be entitled to a
management fee equal to 4% of revenues collected and Simon Property will be
entitled to an asset management fee equal to 2% of revenues collected.
Specified major decisions are subject to Simon Property's and Kan Am's
approval, which include the sale or refinancing of the project and approval of
annual budgets.

               At specified times following the tenth anniversary of the
project's opening, either we and Simon Property together or Kan Am can exercise
a buy-sell provision. Pursuant to the buy-sell provision, we and Simon Property
can require Kan Am to sell to us, for cash or limited partnership units of the
Operating Partnership and limited partnership units of Simon Property 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 and Simon Property to acquire, for
cash or limited partnership units of the Operating Partnership and limited
partnership units of Simon Property at our and Simon Property's election, Kan
Am's entire interest in the partnership.

               Opry Mills - Nashville, Tennessee. Opry Mills will be constructed
on a 67-acre site located adjacent to the Grand Ole Opry and the Opryland Hotel
Convention Center. Opry Mills will have approximately 1.2 million square feet of
retail and entertainment space and will feature an entertainment corridor
connecting the enhanced Opry Plaza and Cumberland Landing areas. We have
obtained anchor lease commitments from Regal Cinemas, Bass Pro Shops, Virgin
Megastore, Alabama Grill and Rainforest Cafe. Construction began in October
1998. We expect to open this project in the spring of 2000. Development costs
through December 31, 1998 were approximately $40.0 million.

               The project is being developed and is owned by a limited
partnership between us, with a 66.7% interest, and a corporate affiliate of
Gaylord Entertainment Company, with a 33.3% interest. We have committed to
contribute up to $50 million to fund the project's equity capital requirements,
while the affiliate of Gaylord Entertainment Company has contributed the land
for the project, valued at $25 million. The remainder of the project costs will
be financed with a construction loan. We will receive a 9% preferred return on
our equity until such time as permanent financing is secured. After permanent
financing is secured, we will receive a new 9% preferred return on our equity.
After this preference, the affiliate of Gaylord Entertainment Company will
receive a 9% preferred return on its $25 million land contribution. After this
preference is paid to the affiliate of Gaylord Entertainment Company, the
remaining cash flow will be distributed pro rata in accordance with the
percentage ownership interests. We have the right to provide development,
leasing and management services for the project, subject to the approval of
such affiliate of Gaylord Entertainment




                                       9
<PAGE>   10
Company for specified major decisions, including a sale or refinancing of the
project and approval of annual budgets.

               At specified times, following the tenth anniversary of the
project's opening or at any time after the opening if the partners are unable to
agree on specified major decisions, either we or the affiliate of Gaylord
Entertainment Company can exercise a buy-sell provision. Pursuant to the
buy-sell provision, either party, as the offeror, may require the other party,
as the offeree, to elect to either sell to the offeror the offeree's interest in
the partnership or purchase from the offeror the offeror's interest in the
partnership.

              Projects Under Development. In addition to the projects currently
under construction, we are also actively pursuing other prospective projects.
These projects are in various levels of the due diligence stage where we are in
the process of determining site/demographic viability, negotiating tenant
commitments or working through third-party approval processes. Consistent with
past practice, we will not begin construction on these projects until we have
completed our investment due diligence process and 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 these prospective
projects. As of December 31, 1998, we had invested $49.3 million in the pursuit
of these prospective projects.

              Vaughan Mills - Toronto, Ontario. We and Cambridge Shopping
Centers Ltd. have secured a site for the proposed development of a
Mills project. The 180-acre site is located in the City of Vaughan at the
southeast corner of Highway 400 and Rutherford Road, approximately 20 miles
north of downtown Toronto, Ontario. Upon completion, this project would be the
first Mills outside of the United States. Subject to the receipt of necessary
government approvals, construction is anticipated to begin by the spring of
2000. As of December 31, 1998, we had invested approximately $8.8 million in
this project.

              We anticipate that the project will be developed and owned by a
limited partnership between us and Cambridge Shopping Centers Ltd. The limited 
partnership agreement is still under negotiation. However, we anticipate that 
our ownership interest will be 50%.

              Meadowlands Mills - Carlstadt, New Jersey. We have acquired a
mortgage interest in a 595-acre site located on the New Jersey Turnpike (I-95)
adjacent to the Meadowlands Sports Complex and approximately five miles from New
York City and have signed certain preliminary agreements with Empire Ltd., the
current owner of the site, concerning the development of Meadowlands Mills.
Current plans also call for the construction of up to 1.0 million square feet of
office space and a 300 room hotel on the site. Timing of construction is
uncertain due to ongoing environmental impact studies and the federal and state
permitting process. In December 1997, the White House Council on Environmental
Quality joined the Army Corps of Engineers, the Environmental Protection Agency
and other federal agencies in proposing a Special Area Management Plan for the
Hackensack Meadowlands area. This plan provides a context and streamlined
process for evaluating and approving development proposals, including the
federal fill permit application now pending for this project. The guidelines
proposed in the plan would, upon their anticipated adoption by September 1999,
allow Meadowlands Mills to be developed on a site containing approximately 90
net developable acres. Approval of the plan is not required before completion of
the permitting process. We anticipate that site preparation could commence
during the second quarter of 2000. As of December 31, 1998, costs to date
invested in this project were $38.3 million, of which we had funded $21.3
million.

              After we have received all necessary permits, we anticipate that
the project will be developed and owned by a limited partnership among us, Kan
Am, Empire Ltd. and Bennett S. Lazare, an individual affiliated with Empire Ltd.
Kan Am has committed to contribute approximately $70 million to the project if
it proceeds as planned. Final adjustments to the ownership interests of the
partners are under negotiation. We anticipate that Kan Am will receive a 9%
preferred return on its equity, which we will guarantee until permanent
financing is



                                       10
<PAGE>   11


secured for the project. After the Kan Am preference, we anticipate that each 
of the remaining partners will receive a 9% preferred return on their equity,
and the remaining cash flow will be split in accordance with the percentage
ownership interests.

              Arundel Mills - Dorchester, Maryland. Jointly with Simon
Property, we have entered into a purchase agreement to acquire an approximately
400-acre site located near the intersection of the Baltimore-Washington Parkway
and State Route 100 in Anne Arundel County, Maryland. The project will contain
approximately 1.3 million square feet of gross leasable area on a site
containing approximately 107 acres. We intend to develop the remainder of the
site for commercial, office or other uses compatible with the Mills project. We
are in the process of seeking certain governmental approvals for the project and
tax increment financing. Subject to obtaining these approvals and closing on the
acquisition of the site, we anticipate that construction could commence during
1999 and that the project could open as early as 2000.

              We anticipate that the project will be developed and owned by a
limited partnership among us, with a 37.5% interest, Simon Property, with a
37.5% interest, and Kan Am, with a 25% interest. We anticipate that we, Simon
Property and Kan Am will receive a 9% preferred return on our equity, and the
remaining cash flow will be distributed pro rata in accordance with the
percentage ownership interests. Prior to securing permanent financing for the
project, Kan Am's 9% preferred return will be guaranteed by us and Simon 
Property.

              Projects Under Review. In addition to the projects discussed
above, we are also conducting due diligence on several other proposed
developments, including sites in San Francisco, California; North Aurora,
Illinois; Atlanta, Georgia; Cleveland, Ohio; Denver, Colorado; Philadelphia,
Pennsylvania; South Weymouth, Massachusetts; and Tampa, Florida. We are also 
continuing to evaluate various prospective international sites, with a
concentrated focus on Western Europe, as well as other domestic sites for Mills
and Block projects.

NEW BUSINESS OPPORTUNITIES

       The following is a brief description of new revenue generating
opportunities that are related to, or are extensions of, our core business of
developing, redeveloping, leasing, financing and managing retail projects. We
generated $2 million in revenues though these initiatives in 1998, their first
full year of operation. We expect to grow this aspect of our business
significantly during the next few years, subject to tax law limitations 
applicable to REITs.

       Advertising/Non-Traditional Programs. In 1998, we began selling corporate
advertising space in Mills malls to both tenants and non-tenants through a
sponsorship program. We believe that the consumer traffic generated at our
properties make them valuable environments for corporate advertisers seeking to
market their products in non-traditional ways. At The Block at Orange, for
example, we erected over 19 billboards to enhance the urban mainstreet
experience while adding architectural features to the mall. We contracted with a
third-party billboard company to sell advertising on these billboards to both
tenants in the mall and non-tenants. In 1998, the initial year of our
sponsorship program, we generated approximately $0.7 million in sponsorship
revenue portfolio wide.

       Other non-traditional programs conducted in 1998 include participating in
revenues from ATM machines and payphone operations located at our properties, as
well as leasing telephone lines to phone providers. These other activities
grossed approximately $1.3 million in revenue in 1998.

       Investing in Retail and Entertainment Concepts. Historically, many new
retail and entertainment concepts have been developed and expanded at the Mills.
Examples include:



                                       11
<PAGE>   12


       -      retail companies that have used Mills projects to launch
              extensions of their brands, including Neiman Marcus and Saks Fifth
              Avenue, which opened its first Off 5th by Saks Fifth Avenue 
              store at Franklin Mills in February 1990;

       -      urban retailers, including Virgin Megastore, Wolfgang Puck and
              Planet Hollywood, which have used Mills projects to expand into
              non-urban markets; and

       -      participatory retailers like Van's Skate Park and Bass Pro Shops
              Outdoor World that are using Mills and Block projects to launch
              new retail entertainment concepts and for additional promotion of
              their products.

       New concepts frequently require significant capital, which is provided by
both the tenant and landlord in the form of tenant allowances and
buildout. In a typical landlord/tenant relationship, the landlord receives
rental income for its investment and, if the concept performs well, can increase
its returns through percentage rents as well.  Mills Enterprises, Inc., a
separate corporation wholly owned by MillsServices Corp., is able to acquire,
without significant investment, interests of up to 50% in retail, food and
beverage and entertainment enterprises in the early stage of their growth
cycles. Initial investments by Mills Enterprises, Inc. include partnership
interests in two Wolfgang Puck restaurants, two Ron Jon Surf Shops and 100%
interest in various  kiosks and food courts. We have initially limited our
investment in Mills Enterprises, Inc. to $25 million. While we believe that this
initiative presents significant opportunities, the tax laws applicable to REITs 
limit our ability to expand these types of investments.

CAPITAL STRATEGIES

       To fund our capital needs, we have generally utilized project specific
secured financing, joint venture equity contributions, cash flow from operations
and our line of credit. New development is financed with construction loans, tax
increment municipal financing and joint venture partner equity contributions.
After project openings, the properties are refinanced with permanent debt
in the form of non-recourse, fixed rate mortgage debt. A description of our
capital cycle and the various funding sources utilized follows.

       Development Financing. A typical Mills project will cost approximately
$200 to 250 million to build. Approximately 65 to 75% of this cost is funded
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 levels
of pre-leasing. We have relationships with multiple lenders in the construction
loan market, evidenced by the fact that each of our last four development
projects were lead by different banks. Our construction loans generally have
terms of four years, some with extension options for an additional three years.
Interest rates range from 110 to 225 basis points over LIBOR. The construction
loans are guaranteed by us and our joint venture partners other than Kan Am,
and are generally obtained on a several and not joint basis. When Kan Am is a
partner in a project, we and our other joint venture partners, on a pro rata
basis, guarantee Kan Am's portion of the construction debt in addition to our
own portions. See "-- Strategic Relationships." All guarantees are 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 have historically been able to
obtain 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 our project
is located, and the capital is advanced as the infrastructure improvements are
constructed. This financing is advantageous to us because debt service is
typically paid from special tax assessments levied against the project which 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.



                                       12
<PAGE>   13


       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 $100
million line of credit and proceeds from any corporate debt or equity
offerings.

       Permanent Financing. After a new project opens and stabilizes (generally
within 24 months of opening), we generally refinance the construction loan with
permanent, fixed rate, non-recourse mortgage debt. This debt usually has a
ten-year term and is amortized over 30 years. We have found that the credit of
our tenants and the stable nature of the 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
generally have not increased the leverage on a property and have historically
achieved investment grade ratings on the entire refinanced balance. As of
December 31, 1998, all of our operating Mills other than Arizona Mills, which
opened November 1997, are encumbered by permanent investment grade securitized
mortgage loans. As of December 31, 1998, our indebtedness had a weighted average
maturity of 5.2 years and a weighted average interest rate of 6.81%. None of our
project specific debt is cross-collateralized. We intend to permanently finance
our future projects in a similar manner.

STRATEGIC RELATIONSHIPS

       We have formed strategic relationships with certain developers and equity
partners. These relationships serve as a source of equity for new development
projects, mitigate development risk and competition and provide assistance in
the identification of new development opportunities and the development and
expansion of tenant and lender relationships. The following is a brief
description of our contractual strategic partnerships.

       Simon Property. In November 1995, we entered into an agreement with Simon
Property pursuant to which we agreed to examine with Simon Property the
feasibility of developing Mills projects in eight specified markets. Out of the
eight markets originally contemplated by the agreement, we have jointly, with
Simon Property, developed Grapevine Mills in Grapevine, Texas, and Arizona Mills
in Phoenix, Arizona; in addition, we have jointly developed Ontario Mills in
Ontario, California. We are in the process of developing Concord Mills in
Charlotte, North Carolina and we expect to begin joint development of Arundel
Mills in Anne Arundel County, Maryland during 1999. The agreement generally
provides that when Simon Property jointly develops a Mills project with us, each
party will hold equal interests and will be required to contribute needed equity
on a pro rata basis. The agreement restricts Simon Property from developing any
Mills project unless it first offers to us the right to participate equally in
such development. In exchange, the agreement also restricts us from developing a
Mills project in 25 specified metropolitan areas in which Simon Property has
major mall investments without first offering to Simon Property the right to
participate equally in such development. These restrictions extend through
December 2003. The agreement also prohibits Simon Property from acquiring more
than 800,000 shares of our common stock or from hiring specified members of our
senior management without our prior written approval. 

       Taubman Realty. In May 1998, we entered into an agreement with Taubman
Realty (a member of our joint venture that developed Arizona Mills) to jointly
develop four Mills projects during a five-year period and a total of seven Mills
projects in a ten-year period. 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.
Pursuant to this agreement, we currently are exploring with Taubman Realty the
feasibility of developing a Mills project on a site in the Denver, Colorado
metropolitan area.

       Kan Am. We have a long-standing relationship with Kan Am, a German
syndicator of closed U.S. real estate funds which currently manages about $650
million in equity for approximately 3,000 German investors. Over the last two
years, Kan Am has invested $150 million in equity in various projects with us.
To date, Kan Am has never disapproved an offer to participate in any individual
Mills project or failed to raise the agreed upon level of capital.



                                       13
<PAGE>   14


       In addition to its existing investments at the property level, Kan Am
owns approximately 33.6% of the partnership units of the Operating Partnership,
which are freely exchangeable on a one-to-one basis for our common stock.
Directors and executive officers of Kan Am hold three seats on our Board of
Directors.

       On February 4, 1999, we received from Kan Am an agreement that provides
that (i) Kan Am will contribute an additional $26.25 million to the Katy Mills
joint venture, as described above, (ii) Kan Am will contribute approximately
$25 million to the Concord Mills joint venture in 1999 and will participate in
developing an additional parcel at Concord Mills, as described above, (iii)
Kan Am will contribute approximately $70 million to the Meadowlands Mills joint
venture if the project proceeds as planned, as described above, and (iv) Kan Am
will contribute approximately $35 million to a joint venture to develop Arundel
Mills in exchange for a 25% interest in the joint venture, as described above.
In addition, Kan Am agreed in principle to provide approximately $120 to 160
million of additional financing for certain proposed projects under review by
us. Finally, Kan Am agreed to work with us to identify joint projects over the
next few years and, if projects are agreed upon between us, to use its best
efforts to provide approximately $150 million of additional financing in each
of 2001, 2002 and 2003 for such projects.

       We expect that the terms of our future arrangements with Kan Am will be
similar to Kan Am's historical capital contributions in our projects. Kan Am
will agree to use its best efforts to provide up to one-half the required
equity for a project in return for an ownership interest equal to half of the
percentage of total project equity it has funded. Each of us, other partners
and Kan Am will be entitled to receive a 9% preferred return on our equity. We
and other partners will guarantee Kan Am's preference until such time as
permanent financing is secured for the project. After permanent financing is
secured, each partner will get a 9% preference on their equity, and the
remaining cash flow is split pro rata per the respective ownership interests.
We, along with any other joint venture partners on a specific project,
guarantee Kan Am's portion of construction debt.

       As of December 31, 1998, Kan Am has property level investments in three
existing projects, Ontario Mills, Grapevine Mills and The Block at Orange, and
is currently a partner in two of our projects under construction, Katy Mills and
Concord Mills, as well as in our Phase III expansion of Sawgrass Mills. In
addition, Kan Am is participating with us in our efforts to develop the
Meadowlands Mills site near Carlstadt, New Jersey.

ASSET MANAGEMENT STRATEGIES

       We believe that the property operating income provided by our existing
assets is a stable, predictable source of cash flow from which to fund our
corporate endeavors, including the development of new projects and the payment
of distributions to shareholders. All of our Mills 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 of our physical assets while maintaining low tenant
occupancy costs.

       Optimization of Tenant Mix. Our management actively manages and leases
the properties with the goal of maintaining a fresh and exciting tenant mix that
continues to appeal to consumers over time. Below are examples of our
management's recent efforts in this regard.

       At Potomac Mills, we remerchandised approximately 60,000 square feet of
specialty space over the last two years, adding tenants such as Brooks Brothers,
Hush Puppies, Jones New York, Oshkosh B'Gosh, Pacific Sunwear, Polo Ralph Lauren
Factory Store, Samsonite and Tommy Hilfiger. Average specialty store sales at
Potomac Mills rose approximately 11% from 1996 to 1998, to $320 per square foot.

       At Franklin Mills, we upgraded our tenant mix by adding approximately
135,000 square feet of fashionable new tenants including Aeropostale, BCBG,
DKNY, Kenneth Cole, L'eggs Hanes Bali, Old Navy, Perry Ellis, Polo Ralph Lauren
Factory Store, Reebok-Rockport and Greg Norman, The Gap Outlet and
Track-n-Trail. Additionally, we updated the food court and created an
entertainment zone with a large-scale general cinema and themed restaurants like
Elephant & Castle Pub and Rainforest Cafe. Average specialty store sales at
Franklin Mills rose approximately 16% from 1996 to 1998, to $294 per square
foot.



                                       14
<PAGE>   15


       At Gurnee Mills, we have re-tenanted 30,000 square feet with upscale
fashion tenants such as The Gap Outlet, Abercrombie & Fitch and Nautica and
added a 125,000 square foot Bass Pro Shops Outdoor World. Average specialty
store sales at Gurnee Mills rose approximately 12% from 1996 to 1998, to $282
per square foot.

       Active Management and Promotion of Properties to Tenants and Consumers.
As a result of the performance of our properties and our strong relationships
with retailers, the Mills have had high degree of tenant retention. During 1998,
for example, 69% of the expiring specialty store gross leasable area was renewed
by the existing tenants. 

       We generally obtain favorable lease terms as evidenced by the long
duration of our leases, their fixed rent steps and their percentage rent
provisions.

       Anchor leases, which generally represent approximately 62% of
the gross leasable area of any individual project, generally have a ten-year
term with a series of five-year options exercisable at the tenant's discretion.
Specialty store leases generally range from three to seven years in term. As of
December 31, 1998, the weighted average lease maturity for our existing
portfolio of leases was 6.2 years.

       Our leases generally provide for the payment of a fixed base rent as well
as an additional rent based upon sales levels achieved by the tenant. The lease
agreements also typically provide for base rental increases either in the form
of fixed rate step ups or consumer price index increases. As of December 31,
1998, these embedded rental increases totaled $45.4 million of additional 
rent to be received over the remaining lives of the leases, assuming no early
terminations.

       We promote our Mills to consumers by spending $1.0 million to $2.5 
million annually per Mills on advertising aimed at consumers. Our success in
this program is evidenced by the following:

       -      18 million visitors per Mills, ranking each Mills as the top
              tourist attraction in its respective state (excluding Sawgrass
              Mills in Florida, which is second only to Disney World);

       -      Average length of visit is significantly higher than the peer 
              group average; and

       -      Primary trade area is extended to 40 miles with tourist draw from
              50 states and 49 countries.

       Maintenance of High Standards of Physical Assets and Low Tenant
Occupancy Costs. We believe our properties are well maintained physically. To
ensure a high quality shopping experience for our customers, in addition to our
regular recurring maintenance program, we invested an additional $89.2 million
in renovation and expansion projects at our assets during that same period. 

       While continuing the high appearance standard and maintenance level of
our properties, we have maintained an affordable cost of occupancy for our
tenants. During 1998, specialty store cost of occupancy for the seven Mills
opened for a full year or more totaled 11.5%. (The industry average for
specialty store cost of occupancy for 1997 was 12.9%, according to Urban Land
Institute Dollars & Cents Shopping Centers: 1998).

DEVELOPMENT STRATEGY

       Proven Track Record. Since our initial public offering in April 1994, we
have developed and opened three new Mills projects and one new Block project,
adding a total of approximately 4.4 million square feet of new gross leasable
area to our portfolio at a total cost of approximately $700 million. Each of
these projects was completed on time and under budget, with strong occupancy
levels as outlined below:



                                       15
<PAGE>   16


<TABLE>
<CAPTION>
                                                                 OCCUPANCY AT                     OCCUPANCY AT
PROJECT                        DATE OPENED                        OPENING (1)                DECEMBER 31, 1998 (1)
-------                        -----------                        -----------                ---------------------
<S>                            <C>                               <C>                         <C>
Ontario Mills                  November 1996                        91.3%                            98.9%
Grapevine Mills                October 1997                         91.8                             98.0
Arizona Mills                  November 1997                        92.6                             97.6 
The Block at Orange            November 1998                        88.5                             89.7
</TABLE>

(1)    Occupancy is percentage of gross leasable area subject to fully executed
leases. 

       Disciplined Approach. We intend to complete two to three new development
projects per year, depending on market conditions and capital availability. We
employ what we consider to be a highly disciplined approach to the development
process. Our in-house development team consists of several senior officers who
are responsible for all aspects of development, including market research, site
selection, predevelopment, construction and tenant coordination. We maintain
strict 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:

       -      Site Selection: Mills projects are developed in the top standard
              metropolitan statistical areas that are populous, growing and
              reasonably affluent. We 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.

       -      Pre-leasing: We obtain tenant validation prior to land acquisition
              and 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 tenants
              indicating their desire to join us in the project. Typically, a
              project will be 40-50% pre-leased before construction financing is
              funded.

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

ADDITIONAL FACTORS

       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 the percentage rents are 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 the 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. However, minimum rent, which is
the largest source of income, is not affected by seasonality.

       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 which 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 (i) future laws, ordinances or regulations will not
impose any material environmental liability or (ii) the current environmental
condition of our properties have 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.



                                       16
<PAGE>   17


       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.



                                       17
<PAGE>   18


ITEM 2.  PROPERTIES

       The following tables set forth certain information relating to the
properties as of December 31, 1998. We either hold title to the properties or
directly or indirectly hold 100% of the general and limited partnership 
interests in the partnerships that own the properties, except for  joint
ventures that own Ontario Mills, Grapevine Mills, Arizona Mills and The Block
at Orange in which the Operating Partnership holds 50%, 37.5%, 36.8% and 50.0%
interests, respectively. The Operating Partnership has also formed joint
ventures to develop additional properties.



                                       18
<PAGE>   19

                              SUMMARY OF PROPERTIES

       The following table sets forth certain information with respect to the
Mills, the Block and the Community Centers as of December 31, 1998:

<TABLE>
<CAPTION>

                                                                    APPROX.
                                                                     GROSS                            ANNUALIZED         NO. OF
                                 METROPOLITAN           YEAR     LEASABLE AREA         PERCENT           BASE            ANCHOR
      NAME/LOCATION              AREA SERVICED         OPENED     (SQ. FT.)(1)       LEASED (2)        RENT (3)        STORES (4)
      -------------              -------------         ------     ------------       ----------        --------        ----------
<S>                                                    <C>       <C>                 <C>            <C>                <C>
MILLS
   Potomac Mills.......    Washington D.C./Baltimore    1985         1,636,870             96%      $   21,067,598         17




   Franklin Mills.......    Philadelphia/Wilmington     1989         1,739,849             97%          18,454,122         19




                              Fort Lauderdale, FL/
   Sawgrass Mills..             Miami/Palm Beach        1990         1,878,522             99%          25,087,996         20





   Gurnee Mills.......         Chicago/Milwaukee        1991         1,653,978             98%          17,277,272         16




   Ontario Mills......            Los Angeles           1996         1,345,096  (5)        99%          18,426,668         18





   Grapevine Mills..           Dallas/Fort Worth        1997         1,240,781  (6)        98%          20,816,085         16





   Arizona Mills......              Phoenix             1997         1,208,899             98%          19,221,802         15





                                                                  ------------                       -------------      -----
       MILLS TOTALS/WEIGHTED AVERAGES                               10,703,995             97%       $ 140,351,543        121
                                                                  ============                       =============      =====

   The Block at Orange     Los Angeles/Orange County    1998           642,554  (8)        90%          13,529,046          9
                                                                  ============                       =============      =====


COMMUNITY CENTERS (11 CENTERS)                                       2,220,502             95%       $  18,830,602         28
                                                                  ============                       =============      =====
</TABLE>

<TABLE>
<CAPTION>
                                                                                                        1998          1998
                                                                                                      SPECIALTY      ANCHOR

                                                                                                     STORE SALES   STORE SALES
      NAME/LOCATION                                 ANCHOR STORE TENANTS                             PER SQ. FT.   PER SQ. FT.
      -------------                                 --------------------                             -----------   -----------
<S>                                                                                                  <C>           <C>
MILLS
   Potomac Mills.......    American Multi-Cinema, Books-A-Million, Burlington Coat Factory,            $   320        $   202
                           Daffy's, Everything Rubbermaid, IKEA, J.C. Penney, Linens 'N Things,
                           Marshalls, Nordstrom Rack, Saks Clearinghouse, Spiegel, Sports
                           Authority, Syms, T.J. Maxx, Waccamaw Pottery, Group USA

   Franklin Mills.......   Bed, Bath & Beyond, Boscov's, Burlington Coat Factory, Filene's                 294            160
                           Basement, General Cinema, Group USA, J.C. Penney, Last Call-Neiman
                           Marcus, Marshalls, Modells, Nordstrom Factory, Off 5th Clearinghouse,
                           OfficeMax, Pharmor, Off 5th by Saks Fifth Avenue, Sam's Wholesale, 
                           Syms, Rainforest Cafe, Jillian's

   Sawgrass Mills..        Beall's Outlet, Bed, Bath & Beyond, Books-A-Million, Brandsmart,                448            301
                           Burlington Coat Factory, Cobb Theatre, J.C. Penney, Last Call-Neiman
                           Marcus, Filene's Basement, Marshalls, Outlet Marketplace, Rainforest
                           Cafe, Saks, Service Merchandise, Spec's Outlet, Spiegel, Sports
                           Authority, T.J. Maxx, Target, Waccamaw Pottery

   Gurnee Mills.......     Bass Pro Shops, Bed, Bath & Beyond, Burlington Coat Factory, Computer           282            170
                           City, J.C. Penney, Lord & Taylor, Marcus Cinema, Marshalls, Off 5th -
                           Saks Fifth Avenue, Rainforest Cafe, Spiegel, Sports Authority, Syms,
                           T.J. Maxx, Value City, Waccamaw Pottery

   Ontario Mills......     AMC Theatres, American Wilderness, Bed, Bath & Beyond, Burlington Coat          345            165
                           Factory, Dave & Busters, Foozles, Group USA, J.C. Penney, Marshalls,
                           Mikasa, Off Rodeo Drive, Saks Fifth Avenue, Sega Gameworks, Sports
                           Authority, T.J. Maxx, Totally for Kids, Virgin Megastores, Rainforest
                           Cafe

   Grapevine Mills..       Bed, Bath & Beyond, Books-A-Million, Burlington Coat Factory, Group             300            179
                           USA, J.C. Penney, Marshalls, Off Rodeo Drive, Old Navy, Rainforest
                           Cafe, Saks Fifth Avenue, Sega Gameworks, Sports Authority, Virgin
                           Megastores,  Western Warehouse, American Multi-Cinema, American
                           Wilderness

   Arizona Mills......     Burlington Coat Factory, Gameworks, Group USA, Harkin's Great Mall              301            170
                           Cinemas, Hi-Health World of Nutrition, J.C. Penney, Linens' N Things,
                           Marshalls, Off 5th Saks Fifth Avenue, Off Rodeo Drive, Oshman's
                           Supersports, Rainforest Cafe, Ross Dress for Less, Virgin Megastores,
                           American Wilderness


       MILLS TOTALS/WEIGHTED AVERAGES                                                                  $   332(7)     $   199


   The Block at Orange     Borders Books and Music, Vans, Virgin Megastores, Off-5th Saks Fifth            N/A(9)         N/A(9)
                           Avenue, Ron Jon Surf Shop, Stage 35 by Gameworks, American
                           Multi-Cinema, Dave & Busters, Hilo Hattie
</TABLE>

--------------

(1)    Includes 963,173 square feet of gross leasable area owned by tenants as
       follows: Potomac Mills-80,000 square feet; Franklin Mills-209,612
       square feet; Sawgrass Mills-281,774 square feet; Gurnee Mills-250,806
       square feet; Ontario Mills-125,000 square feet; and Community Centers-
       15,981 square feet. Ground leases at Franklin Mills of 152,370 square 
       feet and at Ontario Mills of 16,595 square feet are also included.

(2)    Percent leased is defined as all space leased and for which rent is being
       paid as of December 31, 1998, excluding tenants with leases having a term
       of less than one year plus gross leasable area owned by store tenants
       described in footnote (1).

(3)    Annualized base rent is defined as the contractual minimum rent of
       tenants comprising gross leasable area at December 31, 1998 multiplied by
       12.

(4)    Anchor stores include all stores occupying more than 20,000 square feet.

(5)    Ontario Mills will contain approximately 1.7 million square feet of gross
       leasable area, including gross leasable area owned by certain store
       tenants, upon full build out.

(6)    Grapevine Mills will contain approximately 1.5 million square feet of
       gross leasable area, including gross leasable area owned by certain store
       tenants, upon full build out.

(7)    Excluding first year projects (Grapevine Mills and Arizona Mills), the
       1998 specialty store sales per square foot would have been $342.

(8)    The Block at Orange will contain approximately 0.8 million square feet of
       gross leasable area, including gross leasable area owned by certain store
       tenants, upon full build out.

(9)    1998 sales per square foot information is not available for The Block at
       Orange, which opened in November 1998.



                                       19
<PAGE>   20


                            PROPERTY OPERATING INCOME
                            (IN THOUSANDS, UNAUDITED)

The following table sets forth the property operating income for each of the
Mills, the Block, Mainstreet (our push cart program) and the Community Centers.
The purpose of this table is to provide details about selected line items within
our consolidated financial statements for the year ended December 31, 1998.

                          YEAR ENDED DECEMBER 31, 1998

WHOLLY OWNED PROPERTIES

<TABLE>
<CAPTION>

                                                  POTOMAC                FRANKLIN             SAWGRASS                 GURNEE
                                                ------------           -------------         ------------            ------------
<S>                                             <C>                    <C>                   <C>                     <C>
RENTAL REVENUES:
   Minimum rent                                 $     21,127           $      17,182         $     25,918            $     17,004
   Percentage rents                                      317                     507                1,852                     521
   Recoveries from tenants                             9,217                  11,744               14,911                   9,524
   Other revenue                                       1,085                   1,055                3,482                   1,367
                                                ------------           -------------         ------------            ------------
   Total rental revenues                              31,746                  30,488               46,163                  28,416

PROPERTY OPERATING COSTS:
   Recoverable from tenants                            7,644                   8,977               13,528                   8,486
   Other operating                                       739                   1,018                  616                   1,221
                                                ------------           -------------         ------------            ------------
     Total property operating costs (1)                8,383                   9,995               14,144                   9,707
                                                ------------           -------------         ------------            ------------

PROPERTY OPERATING INCOME                       $     23,363           $      20,493         $     32,019            $     18,709
                                                ============           =============         ============            ============
</TABLE>

<TABLE>
<CAPTION>
                                                                         COMMUNITY
                                                  MAINSTREET              CENTERS                  TOTAL
                                                ------------            ------------            ------------
<S>                                             <C>                     <C>                     <C>
RENTAL REVENUES:
   Minimum rent                                 $      2,205            $     18,067            $    101,503
   Percentage rents                                      306                     329                   3,832
   Recoveries from tenants                                48                   5,499                  50,943
   Other revenue                                         521                     143                   7,653
                                                ------------            ------------            ------------
   Total rental revenues                               3,080                  24,038                 163,931

PROPERTY OPERATING COSTS:
   Recoverable from tenants                                -                   5,726                  44,361
   Other operating                                     1,535                     743                   5,872
                                                ------------            ------------            ------------
     Total property operating costs (1)                1,535                   6,469                  50,233
                                                ------------            ------------            ------------

PROPERTY OPERATING INCOME                       $      1,545            $     17,569            $    113,698
                                                ============            ============            ============
</TABLE>

UNCONSOLIDATED JOINT VENTURES

<TABLE>
<CAPTION>
                                                  ONTARIO               GRAPEVINE                 ARIZONA             THE BLOCK
                                                ------------           -------------            ------------         ------------
<S>                                             <C>                    <C>                      <C>                  <C>
RENTAL REVENUES:
   Minimum rent                                 $     19,003           $      20,584            $     18,776         $      2,415
   Percentage rents                                      514                     524                     389                    0
   Recoveries from tenants                             8,860                   8,763                   7,646                  476
   Other revenue                                       2,230                   2,349                   1,945                  169
                                                ------------           -------------            ------------         ------------
     Total rental revenues                            30,607                  32,220                  28,756                3,060

PROPERTY OPERATING COSTS:
   Recoverable from tenants                            8,110                   8,142                   6,987                  701
   Other operating                                       717                   1,100                     584                   32
                                                ------------           -------------            ------------         ------------
     Total property operating costs (1)                8,827                   9,242                   7,571                  733
                                                ------------           -------------            ------------         ------------

PROPERTY OPERATING INCOME                       $     21,780           $      22,978            $     21,185         $      2,327
                                                ============           =============            ============         ============


   Our Share (2)                                $      9,088           $       7,503            $      7,805         $        577
                                                ============           =============            ============         ============
</TABLE>

<TABLE>
<CAPTION>
                                                   OTHER                   TOTAL
                                                ------------            ------------
<S>                                             <C>                     <C>
RENTAL REVENUES:
   Minimum rent                                 $         77            $     60,855
   Percentage rents                                        0                   1,427
   Recoveries from tenants                                 2                  25,747
   Other revenue                                           0                   6,693
                                                ------------            ------------
     Total rental revenues                                79                  94,722

PROPERTY OPERATING COSTS:
   Recoverable from tenants                                0                  23,940
   Other operating                                       486                   2,919
                                                ------------            ------------
     Total property operating costs (1)                  486                  26,859
                                                ------------            ------------

PROPERTY OPERATING INCOME                       $      (407)            $     67,863
                                                ============            ============


   Our Share (2)                                $      (203)            $     24,770
                                                ============            ============
</TABLE>

--------------

(1)    Total property operating costs excludes management fees as follows:
       Potomac Mills - $914, Franklin Mills - $738, Sawgrass Mills - $1,269,
       Gurnee Mills - $765, Community Centers - $784, Ontario Mills - $878,
       Grapevine Mills - $941, Arizona Mills - $1,292 and The Block at Orange -
       $40.

(2)    Based on our share of distributable cash flow for the year ended December
       31, 1998, excluding management fees.



                                       20
<PAGE>   21


                               OCCUPANCY ANALYSIS

The following table sets forth occupancy analysis for our Mills, Community
Centers and the Block as of December 31, 1998.

<TABLE>
<CAPTION>
                                      GROSS LEASED & OCCUPIED AREA
                                              (SQ. FT.) (1)

                                               GROSS LEASABLE
                                             AREA OCCUPIED (3)
                               TOTAL          AT DECEMBER 31,
PROJECT                 GROSS LEASABLE AREA        1998                 %
-------                 -------------------        ----                 --
<S>                     <C>                     <C>                   <C>
MILLS:
Potomac Mills                1,636,870           1,574,571            96.19%
Franklin Mills               1,739,849           1,687,338            96.98%
Sawgrass Mills               1,878,522           1,850,723            98.52%
Gurnee Mills                 1,653,978           1,613,431            97.55%
                        -----------------------------------------------------
Total Mills                  6,909,219           6,726,063            97.35%

COMMUNITY CENTERS:
Butterfield                   114,610             104,610             91.27%
Coopers Crossing              173,509             173,509             100.00%
Crosswinds                    144,273             144,273             100.00%
Fashion Place                 147,950             130,518             88.22%
Germantown                    177,097             168,109             94.92%
Gwinnett                      194,719             186,079             95.56%
Liberty Plaza                 315,033             292,807             92.94%
Montgomery Village            117,391             109,359             93.16%
Mt. Prospect                  298,600             294,557             98.65%
West Falls Church             87,824              85,433              97.28%
Western Hills                 449,496             412,521             91.77%
                        -----------------------------------------------------
                             2,220,502           2,101,775            94.65%

                        -----------------------------------------------------
Total Wholly Owned           9,129,721           8,827,838            96.69%
                        ====================================================

JOINT VENTURES:

Ontario Mills                1,345,096           1,330,545            98.92%
Grapevine Mills              1,240,781           1,216,269            98.02%
Arizona Mills                1,208,899           1,179,469            97.57%
The Block at Orange            642,554             576,035            89.65%
                        -----------------------------------------------------

Total Joint Ventures         4,437,330           4,302,318            96.96%
                        ====================================================

Total Wholly Owned
  and Joint Ventures        13,567,051          13,130,156            96.78%
                        ====================================================
</TABLE>

<TABLE>
<CAPTION>
                            GROSS LEASED & OCCUPIED AREA, NET OF ANCHORS
                                            (SQ. FT.) (2)


                                                  GROSS LEASABLE
                               TOTAL            AREA OCCUPIED (3)
PROJECT                 GROSS LEASABLE AREA    AT DECEMBER 31, 1998         %
-------                 -------------------   -----------------------       --
<S>                     <C>                   <C>                        <C>
MILLS:
Potomac Mills                    627,860             598,091              95.26%
Franklin Mills                   601,488             548,977              91.27%
Sawgrass Mills                   676,617             668,818              98.85%
Gurnee Mills                     633,302             592,755              93.60%
                        ---------------------------------------------------------
Total Mills                     2,539,267           2,408,641             94.86%

COMMUNITY CENTERS:
Butterfield                      72,677               62,677              86.24%
Coopers Crossing                 14,953               14,953              100.00%
Crosswinds                       23,298               23,298              100.00%
Fashion Place                    74,692               57,260              76.66%
Germantown                       130,341             121,353              93.10%
Gwinnett                         97,172               88,532              91.11%
Liberty Plaza                    52,286               30,060              57.49%
Montgomery Village               80,986               72,954              90.08%
Mt. Prospect                     126,005             121,962              96.79%
West Falls Church                47,743               45,352              94.99%
Western Hills                    134,980             127,610              94.54%
                        ---------------------------------------------------------
                                 855,133             766,011              89.58%

                        ---------------------------------------------------------
Total Wholly Owned              3,394,400           3,174,652             93.53%
                        =========================================================

JOINT VENTURES:

Ontario Mills                    519,276             504,725              97.20%
Grapevine Mills                  542,771             518,259              95.48%
Arizona Mills                    533,162             503,732              94.48%
The Block at Orange              282,853             216,334              76.48%
                        ---------------------------------------------------------

Total Joint Ventures            1,878,062           1,743,050             92.81%
                        =========================================================

Total Wholly Owned
  and Joint Ventures            5,272,462           4,917,702             93.27%
                        =========================================================
</TABLE>

<TABLE>
<CAPTION>
                                          TOTAL VACANT
                                                    (SQ. FT.)




PROJECT                 ANCHOR           SPECIALTY STORE         TOTAL
-------                 ------         -------------------       -----
<S>                     <C>            <C>                       <C>
MILLS:
Potomac Mills              32,530             29,769              62,299
Franklin Mills               0                52,511              52,511
Sawgrass Mills             20,000              7,799              27,799
Gurnee Mills                 0                40,547              40,547
                        -------------------------------------------------
Total Mills                52,530             130,626             183,156

COMMUNITY CENTERS:
Butterfield                  0                10,000              10,000
Coopers Crossing             0                   0                   0
Crosswinds                   0                   0                   0
Fashion Place                0                17,432              17,432
Germantown                   0                 8,988               8,988
Gwinnett                     0                 8,640               8,640
Liberty Plaza                 0                22,226              22,226
Montgomery Village           0                 8,032               8,032
Mt. Prospect                 0                 4,043               4,043
West Falls Church            0                 2,391               2,391
Western Hills              29,605              7,370              36,975
                        -------------------------------------------------
                           29,605             89,122              118,727

                        -------------------------------------------------
Total Wholly Owned         82,135             219,748             301,883
                        =================================================

JOINT VENTURES:

Ontario Mills                0                14,551              14,551
Grapevine Mills              0                24,512              24,512
Arizona Mills                0                29,430              29,430
The Block at Orange          0                66,519              66,519
                        -------------------------------------------------

Total Joint Ventures         0                135,012             135,012
                        =================================================

Total Wholly Owned
  and Joint Ventures       82,135             354,760             436,895
                        =================================================
</TABLE>

---------------

(1)    Includes 963,173 square feet of gross leasable area owned by tenants as
       follows: Potomac Mills-80,000 square feet; Franklin Mills-209,612 square
       feet; Sawgrass Mills-281,774 square feet; Gurnee Mills-250,806 square 
       feet; Ontario Mills-125,000 square feet; Liberty Plaza-13,741 square 
       feet; and West Falls Church-2,240 square feet. Ground leases at Franklin
       Mills of 152,370 square feet and at Ontario Mills of 16,595 square feet
       are also included.

(2)    Anchor stores include all stores occupying more than 20,000 square feet.

(3)    Gross leasable area occupied is defined as follows: (i) all space leased
       and for which rent is being paid as of December 31, 1998, excluding
       tenants with leases that have a term of less than one year, and (ii)
       gross leasable area owned by certain store tenants.



                                       21
<PAGE>   22


                            LEASE EXPIRATION SCHEDULE(1)

The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1998 multiplied by 12.

<TABLE>
<CAPTION>
                          NO. OF                  1999                     NO. OF                  2000
                          LEASES               ANNUALIZED     PER SQ.      LEASES               ANNUALIZED     PER SQ.
                         EXPIRING    SQ. FT     MIN. RENT      FT.        EXPIRING   SQ. FT     MIN. RENT       FT.
                         --------    ------     ---------      ----       --------   ------     ---------       ----
<S>                      <C>         <C>       <C>            <C>         <C>        <C>        <C>            <C>
Potomac Mills:
    Anchors (2)              -              -  $          -   $      -       -              -   $          -   $      -
    Majors (2)               1         42,212       316,590       7.50       1         41,321        309,908       7.50
    Specialty               27         93,828     2,151,251      22.93       29        78,616      2,011,043      25.58
    Food Court               2          1,567        85,208      54.38       3          2,331        154,992      66.49
                         ----------------------------------------------  -----------------------------------------------
                            30        137,607  $  2,553,049   $  18.55       33       122,268   $  2,475,943   $  20.25

Franklin Mills:
    Anchors (2)              1        100,200  $    547,725   $   5.47       -              -   $          -   $      -
    Majors (2)               1         40,232       370,134       9.20       1         32,637        297,256       9.11
    Specialty               28         96,792     2,080,314      21.49       23        88,201      1,871,360      21.22
    Food Court               7          5,602       306,600      54.73       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                            37        242,826  $  3,304,773   $  13.61       24       120,838   $  2,168,616   $  17.95

Sawgrass Mills:
    Anchors (2)              -              -  $          -   $      -       1         78,619   $    255,512   $   3.25
    Majors (2)               -              -             -          -       2         67,851        776,198      11.44
    Specialty                9         16,412       497,996      30.34       61       208,506      4,991,171      23.94
    Food Court               2          1,206        80,500      66.75       21        17,595        994,014      56.49
                         ----------------------------------------------  -----------------------------------------------
                            11         17,618  $    578,496   $  32.84       85       372,571   $  7,016,895   $  18.83

Gurnee Mills:
    Anchors (2)              -              -  $          -   $      -       -              -   $          -   $      -
    Majors (2)               -              -             -          -       -              -              -          -
    Specialty               16         64,657     1,150,192      17.79       19        57,696      1,078,451      18.69
    Food Court               -              -             -          -       1            657         22,995      35.00
                         ----------------------------------------------  -----------------------------------------------
                            16         64,657  $  1,150,192   $  17.79       20        58,353   $  1,101,446   $  18.88

Total without Joint Ventures:
    Anchors (2)              1        100,200  $    547,725   $   5.47       1         78,619   $    255,512   $   3.25
    Majors (2)               2         82,444       686,724       8.33       4        141,809      1,383,362       9.76
    Specialty               80        271,689     5,879,753      21.64      132       433,019      9,952,025      22.98
    Food Court              11          8,375       472,308      56.39       25        20,583      1,172,001      56.94
                         ----------------------------------------------  -----------------------------------------------
                            94        462,708  $  7,586,510   $  16.40      162       674,030   $ 12,762,900   $  18.94
                         ==============================================  ===============================================
</TABLE>

<TABLE>
<CAPTION>
                          NO. OF                   2001                      NO. OF                   2002
                          LEASES                ANNUALIZED       PER SQ.     LEASES                ANNUALIZED       PER SQ.
                         EXPIRING    SQ. FT      MIN. RENT       FT.        EXPIRING    SQ. FT      MIN. RENT         FT.
                         --------    ------      ---------       ----       --------    ------      ---------        ---
<S>                      <C>         <C>         <C>             <C>        <C>         <C>         <C>           <C>
Potomac Mills:
    Anchors (2)              -              -    $          -    $      -       -              -    $          -  $      -
    Majors (2)               2         67,052         602,846        8.99       -              -               -         -
    Specialty               25         66,852       1,698,989       25.41      33        118,670       2,540,434     21.41
    Food Court               3          2,484         149,959       60.37       3          1,859         127,485     68.58
                         -------------------------------------------------  -----------------------------------------------
                            30        136,388    $  2,451,794    $  17.98      36        120,529    $  2,667,919  $  22.14

Franklin Mills:
    Anchors (2)              1         70,701    $    484,302    $   6.85       -              -    $          -  $      -
    Majors (2)               1         25,127         178,402        7.10       2         65,155         448,715      6.89
    Specialty               35        103,486       2,151,125       20.79      25         79,272       1,721,794     21.72
    Food Court               1            510          25,990       50.96       3          2,512          74,660     29.72
                         -------------------------------------------------  -----------------------------------------------
                            38        199,824    $  2,839,819    $  14.21      30        146,939    $  2,245,169  $  15.28

Sawgrass Mills:
    Anchors (2)              2        147,915    $  1,101,435    $   7.45       -              -    $          -  $      -
    Majors (2)               -              -               -           -       2         42,657         365,491      8.57
    Specialty               47        165,654       3,903,900       23.57      27         74,368       2,132,559     28.68
    Food Court               4          3,124         174,901       55.99       1            663          45,000     67.87
                         -------------------------------------------------  -----------------------------------------------
                            53        316,693    $  5,180,236    $  16.36      30        117,688    $  2,543,050  $  21.61

Gurnee Mills:
    Anchors (2)              3        231,271    $  1,381,540    $   5.97       1         61,265    $    495,000  $   8.08
    Majors (2)               1         40,752         289,339        7.10       1         33,627         252,202      7.50
    Specialty               61        213,440       3,946,489       18.49      22         67,738       1,472,469     21.74
    Food Court              14         10,061         569,153       56.57       5          3,611         226,154     62.63
                         -------------------------------------------------  -----------------------------------------------
                            79        495,524    $  6,186,521    $  12.48      29        166,241    $  2,445,825  $  14.71

Total without Joint Ventures:
    Anchors (2)              6        449,887    $  2,967,277    $   6.60       1         61,265    $    495,000  $   8.08
    Majors (2)               4        132,931       1,070,587        8.05       5        141,439       1,066,408      7.54
    Specialty               168       549,432      11,700,503       21.30      107       340,048       7,867,256     23.14
    Food Court              22         16,179         920,003       56.86      12          8,645         473,299     54.75
                         -------------------------------------------------  -----------------------------------------------
                            200     1,148,429    $ 16,658,370    $  14.51      125       551,397    $  9,901,963  $  17.96
                         =================================================  ===============================================
</TABLE>

-------------------------------
(1)    Excludes 963,173 square feet of gross leasable area owned by tenants as
       follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
       square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
       square feet; Ontario Mills - 125,000 square feet; and Community Centers
       - 15,981 square feet. Ground leases at Franklin Mills of 152,370 square
       feet and at Ontario Mills of 16,595 square feet are also excluded.

(2)    For purposes of this schedule, anchor tenants are defined as any tenant
       whose gross leasable area equals or exceeds 50,000 sq. ft. and major
       tenants are defined as any tenant whose gross leasable area equals or
       exceeds 20,000 sq. ft. but is less than 50,000 sq. ft.


                                       22
<PAGE>   23

                            LEASE EXPIRATION SCHEDULE(1)

The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1998 multiplied by 12.

<TABLE>
<CAPTION>
                          NO. OF                  1999                     NO. OF                  2000
                          LEASES               ANNUALIZED     PER SQ.      LEASES               ANNUALIZED     PER SQ.
                         EXPIRING    SQ. FT     MIN. RENT       FT.       EXPIRING   SQ. FT     MIN. RENT        FT.
                         --------    ------     ---------      ----       --------   ------     ---------       ----
<S>                      <C>         <C>       <C>            <C>         <C>        <C>        <C>            <C>
Ontario Mills:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              -              -             -          -       -              -              -          -
    Specialty                5         10,414       304,140      29.20       6         13,267        332,266      25.04
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                             5         10,414  $    304,140   $  29.20       6         13,267   $    332,266   $  25.04

Arizona Mills:
    Anchors(2)               -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              -              -             -          -       -              -              -          -
    Specialty                -              -             -          -       9         26,473        698,472      26.38
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                             -              -  $          -   $      -       9         26,473   $    698,472   $  26.38

Grapevine  Mills:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              -              -             -          -       -              -              -          -
    Specialty                4          7,849       178,179      22.70       8         15,183        409,888      27.00
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                             4          7,849  $    178,179   $  22.70       8         15,183   $    409,888   $  27.00

Total with Joint
Ventures:
    Anchors  (2)             1        100,200  $    547,725   $   5.47       1         78,619   $    255,512   $   3.25
    Majors  (2)              2         82,444       686,724       8.33       4        141,809      1,383,362       9.76
    Specialty               89        289,952     6,362,072      21.94      155       487,942     11,392,651      23.35
    Food Court              11          8,375       472,308      56.39       25        20,583      1,172,001      56.94
                         ----------------------------------------------  -----------------------------------------------
                           103        480,971  $  8,068,829   $  16.78      185       728,953   $ 14,203,526   $  19.48
                         ==============================================  ===============================================

The Block at Orange:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              -              -             -          -       -              -              -          -
    Specialty                -              -             -          -       1            400         36,000      90.00
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                             -              -  $          -   $      -       1            400   $     36,000   $  90.00
                         ==============================================  ===============================================

Community Centers:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              -              -             -          -       1         21,007        278,343      13.25
    Specialty               34         93,758     1,328,119      14.17       25       105,323      1,146,687      10.89
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                            34         93,758  $  1,328,119   $  14.17       26       126,330   $  1,425,030   $  11.28
                         ==============================================  ===============================================
</TABLE>

<TABLE>
<CAPTION>
                          NO. OF                   2001                      NO. OF                    2002
                          LEASES                ANNUALIZED      PER SQ.      LEASES                 ANNUALIZED     PER SQ.
                         EXPIRING    SQ. FT      MIN. RENT        FT.       EXPIRING    SQ. FT       MIN. RENT      FT.
                         --------    ------      ---------       ----      --------     ------       ---------      ---
<S>                      <C>         <C>        <C>             <C>        <C>          <C>         <C>           <C>
Ontario Mills:
    Anchors  (2)             -              -    $          -   $      -       -               -    $          -  $      -
    Majors  (2)              -              -               -          -       -               -               -         -
    Specialty               50        209,623       4,093,677      19.53      21          72,507       1,605,795     22.15
    Food Court               -              -               -          -       -               -               -         -
                         ------------------------------------------------  ------------------------------------------------
                            50        209,623    $  4,093,677   $  19.53      21          72,507    $  1,605,795  $  22.15

Arizona Mills:
    Anchors(2)               -              -    $          -   $      -       -               -    $          -  $      -
    Majors  (2)              -              -               -          -       -               -               -         -
    Specialty               11         23,803         636,079      26.72      60         199,707       4,361,895     21.84
    Food Court               -              -               -          -       -               -               -         -
                         ------------------------------------------------  ------------------------------------------------
                            11         23,803    $    636,079   $  26.72      60         199,707    $  4,361,895  $  21.84

Grapevine  Mills:
    Anchors  (2)             -              -    $          -   $      -       -               -    $          -  $      -
    Majors  (2)              -              -               -          -       1          23,329         279,948     12.00
    Specialty               13         31,076         733,989      23.62      58         189,768       4,194,829     22.11
    Food Court               -              -               -          -       -               -               -         -
                         ------------------------------------------------  ------------------------------------------------
                            13         31,076    $    733,989   $  23.62      59         213,097    $  4,474,777  $  21.00

Total with Joint
Ventures:
    Anchors  (2)             6        449,887    $  2,967,277   $   6.60       1          61,265    $    495,000  $   8.08
    Majors  (2)              4        132,931       1,070,587       8.05       6         164,768       1,346,356      8.17
    Specialty               242       813,934      17,164,248      21.09      246        802,030      18,029,775     22.48
    Food Court              22         16,179         920,003      56.86      12           8,645         473,299     54.75
                         ------------------------------------------------  ------------------------------------------------
                            274     1,412,931    $ 22,122,115   $  15.66      265      1,036,708    $ 20,344,430  $  19.62
                         ================================================  ================================================

The Block at Orange:
    Anchors  (2)             -              -    $          -   $      -       -               -    $          -  $      -
    Majors  (2)              -              -               -          -       -               -               -         -
    Specialty                6          5,910         228,040      38.59       2           3,627         113,323     31.24
    Food Court               -              -               -          -       -               -               -         -
                         ------------------------------------------------  ------------------------------------------------
                             6          5,910    $    228,040   $  38.59       2           3,627    $    113,323  $  31.24
                         ================================================  ================================================

Community Centers:
    Anchors  (2)             -              -    $          -   $      -       -               -    $          -  $      -
    Majors  (2)              1         24,300         133,650       5.50       2          59,300         245,450      4.14
    Specialty               45        164,248       2,130,466      12.97      40         125,362       1,765,660     14.08
    Food Court               -              -               -          -       -               -               -         -
                         ------------------------------------------------  ------------------------------------------------
                            46        188,548    $  2,264,116   $  12.01      42         184,662    $  2,011,110  $  10.89
                         ================================================  ================================================
</TABLE>

-------------------------------
(1)    Excludes 963,173 square feet of gross leasable area owned by tenants as
       follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
       square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
       square feet; Ontario Mills - 125,000 square feet; and Community Centers
       - 15,981 square feet. Ground leases at Franklin Mills of 152,370 square
       feet and at Ontario Mills of 16,595 square feet are also excluded.

(2)    For purposes of this schedule, anchor tenants are defined as any tenant
       whose gross leasable area equals or exceeds 50,000 sq. ft. and major
       tenants are defined as any tenant whose gross leasable area equals or
       exceeds 20,000 sq. ft. but is less than 50,000 sq. ft.



                                       23
<PAGE>   24


                            LEASE EXPIRATION SCHEDULE(1)

The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1998 multiplied by 12.

<TABLE>
<CAPTION>
                          NO. OF                  2003                     NO. OF                  2004
                          LEASES               ANNUALIZED     PER SQ.      LEASES               ANNUALIZED     PER SQ.
                         EXPIRING    SQ. FT     MIN. RENT       FT.       EXPIRING   SQ. FT     MIN. RENT        FT.
                         --------    ------     ---------      ----       --------   ------     ---------       ----
<S>                      <C>         <C>       <C>            <C>         <C>        <C>        <C>            <C>
Potomac Mills:
    Anchors  (2)             -              -  $          -   $      -       1         61,763   $    509,546   $   8.25
    Majors  (2)              3         75,384       654,146       8.68       1         40,857        367,713       9.00
    Specialty               46         16,954     3,379,858      28.90       8         32,944        674,842      20.48
    Food Court               -              -             -          -       1            590         37,635      63.79
                         ----------------------------------------------  -----------------------------------------------
                            49        192,338  $  4,034,004   $  20.97       11       136,154   $  1,589,736   $  11.68

Franklin Mills:
    Anchors  (2)             1        128,950  $    567,000   $   4.40       -              -   $          -   $      -
    Majors  (2)              -              -             -          -       1         42,241        253,446       6.00
    Specialty               22         98,455     1,843,129      18.72       7         20,079        438,581      21.84
    Food Court               2          1,238        47,050      38.00       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                            25        228,643  $  2,457,179   $  10.75       8         62,320   $    692,027   $  11.10

Sawgrass Mills:
    Anchors  (2)             1         85,024  $    467,632   $   5.50       -              -   $          -   $      -
    Majors  (2)              -              -             -          -       2         83,581        821,500       9.83
    Specialty               20          3,842     2,062,568      27.93       7         14,784        489,014      33.08
    Food Court               1            836        51,832      62.00       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                            22        159,702  $  2,582,032   $  16.17       9         98,365   $  1,310,514   $  13.32

Gurnee Mills:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              3        115,506       964,142       8.35       -              -              -          -
    Specialty               24         85,015     1,759,482      20.70       4         18,770        346,789      18.48
    Food Court               -              -             -          -       2          1,357         50,135      36.95
                         ----------------------------------------------  -----------------------------------------------
                            27        200,521  $  2,723,624   $  13.58       6         20,127   $    396,924   $  19.72

Total without Joint
Ventures:
    Anchors  (2)             2        213,974  $  1,034,632   $   4.84       1         61,763   $    509,546   $   8.25
    Majors  (2)              6        190,890     1,618,288       8.48       4        166,679      1,442,659       8.66
    Specialty               112       374,266     9,045,037      24.17       26        86,577      1,949,226      22.51
    Food Court               3          2,074        98,882      47.68       3          1,947         87,770      45.08
                         ----------------------------------------------  -----------------------------------------------
                            123       781,204  $ 11,796,839   $  15.10       34       316,966   $  3,989,201   $  12.59
                         ==============================================  ===============================================
</TABLE>

<TABLE>
<CAPTION>
                          NO. OF                   2005                     NO. OF                    2006
                          LEASES                ANNUALIZED      PER SQ.     LEASES                 ANNUALIZED      PER SQ.
                         EXPIRING    SQ. FT      MIN. RENT        FT.      EXPIRING    SQ. FT       MIN. RENT        FT.
                         --------    ------      ---------       ----      --------    ------       ---------       ----
<S>                      <C>         <C>         <C>            <C>        <C>         <C>          <C>           <C>
Potomac Mills:
    Anchors  (2)             1        153,036    $    525,000   $   3.43       2         208,813    $  1,394,772  $   6.68
    Majors  (2)              1         33,743         326,779       9.68       -               -               -         -
    Specialty                7         37,672         877,345      23.29       2          22,347         473,012     21.17
    Food Court               -              -               -          -       2           1,354          80,750     59.64
                         ------------------------------------------------  ------------------------------------------------
                             9        224,451    $  1,729,124   $   7.70       6         232,514    $ 1,948, 534  $   8.38

Franklin Mills:
    Anchors  (2)             -              -    $          -   $      -       -               -    $          -  $      -
    Majors  (2)              -              -               -          -       1          46,406         483,087     10.41
    Specialty                3         25,686         451,419      17.57       2           2,561          71,198     27.80
    Food Court               -              -               -          -       1             476          24,276     51.00
                         ------------------------------------------------  ------------------------------------------------
                             3         25,686    $    451,419   $  17.57       4          49,443    $    578,561  $  11.70

Sawgrass Mills:
    Anchors  (2)             -              -    $          -   $      -       -               -    $          -  $      -
    Majors  (2)              1         25,110         321,408      12.80       1          20,300         527,800     26.00
    Specialty               12         48,911       1,176,240      24.05       4          17,593         483,552     27.49
    Food Court               1          2,960          37,148      12.55       -               -               -         -
                         ------------------------------------------------  ------------------------------------------------
                            14         76,981    $  1,534,796   $  19.94       5          37,893    $  1,011,352  $  26.69

Gurnee Mills:
    Anchors  (2)             -              -    $          -   $      -       -               -    $          -  $      -
    Majors  (2)              -              -               -          -       1          20,000         600,000     30.00
    Specialty                3         26,856         498,697      18.57       3          14,673         249,024     16.97
    Food Court               1            542          24,390      45.00       2           1,169          64,760     55.40
                         ------------------------------------------------  ------------------------------------------------
                             4         27,398    $    523,087   $  19.09       6          35,842    $    913,784  $  25.49

Total without Joint
Ventures:
    Anchors  (2)             1        153,036    $    525,000   $   3.43       2         208,813    $  1,394,772  $   6.68
    Majors  (2)              2         58,853         648,187      11.01       3          86,706       1,610,887     18.58
    Specialty               25        139,125       3,003,701      21.59      11          57,174       1,276,786     22.33
    Food Court               2          3,502          61,538      17.57       5           2,999         169,786     56.61
                         ------------------------------------------------  ------------------------------------------------
                            30        354,516    $  4,238,426   $  11.96      21         355,692    $  4,452,231  $  12.52
                         ================================================  ================================================
</TABLE>

-------------------------------
(1)    Excludes 963,173 square feet of gross leasable area owned by tenants as
       follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
       square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
       square feet; Ontario Mills - 125,000 square feet; and Community Centers
       - 15,981 square feet. Ground leases at Franklin Mills of 152,370 square
       feet and at Ontario Mills of 16,595 square feet are also excluded.

(2)    For purposes of this schedule, anchor tenants are defined as any tenant
       whose gross leasable area equals or exceeds 50,000 sq. ft. and major
       tenants are defined as any tenant whose gross leasable area equals or
       exceeds 20,000 sq. ft. but is less than 50,000 sq. ft.



                                       24
<PAGE>   25


                            LEASE EXPIRATION SCHEDULE(1)

The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1998 multiplied by 12.


<TABLE>
<CAPTION>
                          NO. OF                  2003                     NO. OF                  2004
                          LEASES               ANNUALIZED     PER SQ.      LEASES               ANNUALIZED     PER SQ.
                         EXPIRING    SQ. FT     MIN. RENT       FT.       EXPIRING   SQ. FT     MIN. RENT        FT.
                         --------    ------     ---------      ----       --------   ------     ---------       ----
<S>                      <C>         <C>       <C>            <C>         <C>        <C>        <C>            <C>
Ontario Mills:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              -              -             -          -       -              -              -          -
    Specialty               14         39,268     1,111,915      28.32       3         12,082        252,756      20.92
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                            14         39,268  $  1,111,915   $  28.32       3         12,082   $    252,756   $  20.92

Arizona Mills:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              -              -             -          -       -              -              -          -
    Specialty               23         90,908     1,943,256      21.38       8         23,061        601,571      26.09
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                            23         90,908  $  1,943,256   $  21.38       8         23,061   $    601,571   $  26.09

Grapevine  Mills:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              -              -             -          -       -              -              -          -
    Specialty               22         73,061     1,567,215      21.45       5         12,227        325,228      26.60
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                            22         73,061  $  1,567,215   $  21.45       5         12,227   $    325,228   $  26.60

Total with Joint
Ventures:
    Anchors  (2)             2        213,974  $  1,034,632   $   4.84       1         61,763   $    509,546   $   8.25
    Majors  (2)              6        190,890     1,618,288       8.48       4        166,679      1,442,659       8.66
    Specialty               171       577,503    13,667,423      23.67       42       133,947      3,128,781      23.36
    Food Court               3          2,074        98,882      47.68       3          1,947         87,770      45.08
                         ----------------------------------------------  -----------------------------------------------
                            182       984,441  $ 16,419,225   $  16.68       50       364,336   $  5,168,756   $  14.19
                         ==============================================  ===============================================

The Block at Orange:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              -              -             -          -       -              -              -          -
    Specialty               21         57,795     1,608,350      27.83       5         14,177        373,516      26.35
    Food Court               1            946        70,004      74.00       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                            22         58,741  $  1,678,354   $  28.57       5         14,177   $    373,516   $  26.35
                         ==============================================  ===============================================

Community Centers:
    Anchors  (2)             1         56,949  $    194,300   $   3.41       1        129,615   $     74,300   $    .57
    Majors  (2)              4        117,557       910,369       7.74       -              -              -          -
    Specialty               27         90,903     1,324,158      14.57       7         30,492        433,484      14.22
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                            32        265,409  $  2,428,827   $   9.15       8        160,107   $    507,784   $   3.17
                         ==============================================  ===============================================
</TABLE>

<TABLE>
<CAPTION>
                          NO. OF                   2005                     NO. OF                    2006
                          LEASES                ANNUALIZED      PER SQ.     LEASES                 ANNUALIZED     PER SQ.
                         EXPIRING    SQ. FT      MIN. RENT        FT.      EXPIRING    SQ. FT       MIN. RENT       FT.
                         --------    ------      ---------       ----      --------    ------       ---------      ----
<S>                      <C>         <C>         <C>            <C>        <C>         <C>          <C>           <C>
Ontario Mills:
    Anchors  (2)             -              -    $          -   $      -       -               -    $          -  $      -
    Majors  (2)              -              -               -          -       4         102,308       1,379,563     13.48
    Specialty                1          5,382         137,241      25.50      28          73,449       2,015,485     27.44
    Food Court               -              -               -          -       1             400          40,000    100.00
                         ------------------------------------------------  ------------------------------------------------
                             1          5,382    $    137,241   $  25.50      33         176,157    $  3,435,048  $  19.50

Arizona Mills:
    Anchors  (2)             -              -    $          -   $      -       -               -    $          -  $      -
    Majors  (2)              -              -               -          -       1          22,774         120,000      5.27
    Specialty                2          2,938         112,770      38.38       2           8,823         177,070     20.07
    Food Court               -              -               -          -       -               -               -         -
                         ------------------------------------------------  ------------------------------------------------
                             2          2,938    $    112,770   $  38.38       3          31,597    $    297,070  $   9.40

Grapevine  Mills:
    Anchors  (2)             -              -    $          -   $      -       -               -    $          -  $      -
    Majors  (2)              -              -               -          -       -               -               -         -
    Specialty                5         22,920         503,907      21.99       1           7,514         127,738     17.00
    Food Court               -              -               -          -       -               -               -         -
                         ------------------------------------------------  ------------------------------------------------
                             5         22,920    $    503,907   $  21.99       1           7,514    $    127,738  $  17.00

Total with Joint
Ventures:
    Anchors  (2)             1        153,036    $    525,000   $   3.43       2         208,813    $  1,394,772  $   6.68
    Majors  (2)              2         58,853         648,187      11.01       8         211,788       3,110.450     14.69
    Specialty               33        170,365       3,757,619      22.06      42         146,960       3,597,079     24.48
    Food Court               2          3,502          61,538      17.57       6           3,399         209,786     61.72
                         ------------------------------------------------  ------------------------------------------------
                            38        385,756    $  4,992,344   $  12.94      58         570,960    $  8,312,087  $  14.56
                         ================================================  ================================================

The Block at Orange:
    Anchors  (2)             -              -    $          -   $      -       -               -    $          -  $      -
    Majors  (2)              -              -               -          -       -               -               -         -
    Specialty                3         12,548         299,800      23.89       -               -               -         -
    Food Court               -              -               -          -       -               -               -         -
                         ------------------------------------------------  ------------------------------------------------
                             3         12,548    $    299,800   $  23.89       -               -    $          -  $      -
                         ================================================  ================================================

Community Centers:
    Anchors  (2)             3        184,640    $  1,523,430   $   8.25       -               -    $          -  $      -
    Majors  (2)              5        157,086         908,568       5.78       -               -               -         -
    Specialty                4         30,080         377,525      12.55       7          32,946         510,096     15.48
    Food Court               -              -               -          -       -               -               -         -
                         ------------------------------------------------  ------------------------------------------------
                            12        371,806    $  2,809,523   $   7.56       7          32,946    $    510,096  $  15.48
                         ================================================  ================================================
</TABLE>

-------------------------------
(1)    Excludes 963,173 square feet of gross leasable area owned by tenants as
       follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
       square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
       square feet; Ontario Mills - 125,000 square feet; and Community Centers
       - 15,981 square feet. Ground leases at Franklin Mills of 152,370 square
       feet and at Ontario Mills of 16,595 square feet are also excluded.

(2)    For purposes of this schedule, anchor tenants are defined as any tenant 
       whose gross leasable area equals or exceeds 50,000 sq. ft. and major 
       tenants are defined as any tenant whose gross leasable area equals or 
       exceeds 20,000 sq. ft. but is less than 50,000 sq. ft.



                                       25
<PAGE>   26


                            LEASE EXPIRATION SCHEDULE(1)

The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1998 multiplied by 12.

<TABLE>
<CAPTION>
                          NO. OF                  2007                     NO. OF                  2008
                          LEASES               ANNUALIZED     PER SQ.      LEASES               ANNUALIZED     PER SQ.
                         EXPIRING    SQ. FT     MIN. RENT       FT.       EXPIRING   SQ. FT     MIN. RENT        FT.
                         --------    ------     ---------      ----       --------   ------     ---------       ----
<S>                      <C>         <C>       <C>            <C>         <C>        <C>        <C>            <C>
Potomac Mills:
    Anchors  (2)             -              -  $          -   $      -       1        107,021   $    611,520   $   5.71
    Majors  (2)              1         38,210       337,394       8.83       1         27,068        216,000       7.98
    Specialty                -              -             -          -       4         16,089        364,538      22.66
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                             1         38,210  $    337,394   $   8.83       6        150,178   $  1,192,058   $   7.94

Franklin Mills:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              3         80,762       993,250      12.30       1         20,000        317,880      15.89
    Specialty                -              -             -          -       2         15,736        333,160      21.17
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                             3         80,762  $    993,250   $  12.30       3         35,736   $    651,040   $  18.22

Sawgrass Mills:
    Anchors  (2)             -              -  $          -   $      -       1         59,480   $    713,760   $  12.00
    Majors  (2)              -              -             -          -       1         28,152        422,280      15.00
    Specialty                5         11,202       422,251      37.69       1          1,605         59,385      37.00
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                             5         11,202  $    422,251   $  37.69       3         89,237   $  1,195,425   $  13.40

Gurnee Mills:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              -              -             -          -       -              -              -          -
    Specialty                3          3,290       107,117      32.56       4          8,755        210,029      23.99
    Food Court               2          1,426        58,835      41.26       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                             5          4,716  $    165,952   $  35.19       4          8,755   $    210,029   $  23.99

Total without Joint
Ventures:
    Anchors  (2)             -              -  $          -   $      -       2        166,501   $  1,325,280   $   7.96
    Majors  (2)              4        118,972     1,330,644      11.18       3         75,220        956,160      12.71
    Specialty                8         14,492       529,368      36.53       11        42,185        967,112      22.93
    Food Court               2          1,426        58,835      41.26       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                            14        134,890  $  1,918,847   $  14.23       16       283,906   $  3,248,552   $  11.44
                         ==============================================  ===============================================
</TABLE>

<TABLE>
<CAPTION>
                          NO. OF                AFTER 2008                  NO. OF                    TOTAL
                          LEASES                ANNUALIZED      PER SQ.     LEASES                 ANNUALIZED      PER SQ.
                         EXPIRING    SQ. FT      MIN. RENT        FT.      EXPIRING    SQ. FT       MIN. RENT       FT.
                         --------    ------      ---------       ----      --------    ------       ---------      ----
<S>                      <C>         <C>         <C>            <C>        <C>         <C>          <C>           <C>
Potomac Mills:
    Anchors  (2)             -              -    $          -   $      -       5         530,633    $  3,040,838  $   5.73
    Majors  (2)              -              -               -          -      11         365,847       3,131,376      8.56
    Specialty                1          3,934          88,043      22.38      182        587,906      14,259,355     24.25
    Food Court               -              -               -          -      14          10,185         636,029     62.45
                         ------------------------------------------------  ------------------------------------------------
                             1          3,934    $     88,043   $  22.38      212      1,494,571    $ 21,067,598  $  14.10

Franklin Mills:
    Anchors  (2)             2        123,968    $  1,856,028   $  14.97       5         423,819    $  3,455,055  $   8.15
    Majors  (2)              -              -               -          -      11         352,560       3,342,170      9.48
    Specialty                2          8,371         216,241      25.83      149        538,639      11,178,321     20.75
    Food Court               -              -               -          -      14          10,338         478,576     46.29
                         ------------------------------------------------  ------------------------------------------------
                             4        132,339    $  2,072,269   $  15.66      179      1,325,356    $ 18,454,122  $  13.92

Sawgrass Mills:
    Anchors  (2)             3        261,442    $  1,483,078   $   5.67       8         632,480    $  4,021,417  $   6.36
    Majors  (2)              -              -               -          -       9         267,651       3,234,677     12.09
    Specialty                2          9,557         229,871      24.05      195        642,434      16,448,507     25.60
    Food Court               -              -               -          -      30          26,384       1,383,395     52.43
                         ------------------------------------------------  ------------------------------------------------
                             5        270,999    $  1,712,949   $   6.32      242      1,568,949    $ 25,087,996  $  15.99

Gurnee Mills:
    Anchors  (2)             2        242,449    $    915,715   $   3.78       6         534,985    $  2,792,255  $   5.22
    Majors  (2)              1         25,000         250,000      10.00       7         234,885       2,355,683     10.03
    Specialty                1         13,042         294,173      22.56      160        573,932      11,112,912     19.36
    Food Court               -              -               -          -      27          18,823       1,016,422     54.00
                         ------------------------------------------------  ------------------------------------------------
                             4        280,491    $  1,459,888   $   5.20      200      1,362,625    $ 17,277,272  $  12.68

Total without Joint
Ventures:
    Anchors  (2)             7        627,859    $  4,254,821   $   6.78      24       2,121,917    $ 13,309,565  $   6.27
    Majors  (2)              1         25,000         250,000      10.00      38       1,220,943      12,063,906      9.88
    Specialty                6         34,904         828,328      23.73      686      2,342,911      52,999,095     22.62
    Food Court               -              -               -          -      85          65,730       3,514,422     53.47
                         ------------------------------------------------  ------------------------------------------------
                            14        687,763    $  5,333,149   $   7.75      833      5,751,501    $ 81,886,988  $  14.24
                         ================================================  ================================================
</TABLE>

-------------------------------
(1)    Excludes 963,173 square feet of gross leasable area owned by tenants as
       follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
       square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
       square feet; Ontario Mills - 125,000 square feet; and Community Centers
       - 15,981 square feet. Ground leases at Franklin Mills of 152,370 square
       feet and at Ontario Mills of 16,595 square feet are also excluded.

(2)    For purposes of this schedule, anchor tenants are defined as any tenant
       whose gross leasable area equals or exceeds 50,000 sq. ft. and major
       tenants are defined as any tenant whose gross leasable area equals or
       exceeds 20,000 sq. ft. but is less than 50,000 sq. ft.



                                       26
<PAGE>   27


                            LEASE EXPIRATION SCHEDULE(1)

The following schedule shows lease expirations assuming that none of the tenants
exercised renewal options. Except as described in footnote (1), the minimum rent
is the monthly contractual minimum rent of the expiring leases as of December
31, 1998 multiplied by 12.

<TABLE>
<CAPTION>
                          NO. OF                  2007                     NO. OF                  2008
                          LEASES               ANNUALIZED    PER SQ.       LEASES               ANNUALIZED    PER SQ.
                         EXPIRING    SQ. FT     MIN. RENT      FT.        EXPIRING   SQ. FT     MIN. RENT       FT.
                         --------    ------     ---------      ----       --------   ------     ---------       ----
<S>                      <C>         <C>       <C>            <C>         <C>        <C>        <C>            <C>
Ontario Mills:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              3         78,457     1,141,946      14.56       1         21,711        500,000      23.03
    Specialty               10         20,080       670,194      33.38       5         11,257        260,105      23.11
    Food Court               -              -             -          -       2         11,330        554,165      48.91
                         ----------------------------------------------  -----------------------------------------------
                            13         98,537  $  1,812,140   $  18.39       8         44,298   $  1,314,270   $  29.67

Arizona Mills:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              4        111,578     1,935,850      17.35       2         60,667        805,903      13.28
    Specialty               11         67,779     1,345,318      19.85       9         16,612        592,337      35.66
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                            15        179,357  $  3,281,168   $  18.29       11        77,279   $  1,398,240   $  18.09

Grapevine  Mills:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              6        151,812     2,343,211      15.43       2         72,730        881,588      12.12
    Specialty               26         86,670     2,141,266      24.71       10        45,279        999,802      22.08
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                            32        238,482  $  4,484,477   $  18.80       12       118,009   $  1,881,390   $  15.94

Total with Joint
Ventures:
    Anchors  (2)             -              -  $          -   $      -       2        166,501   $  1,325,280   $   7.96
    Majors  (2)             17        460,819     6,751,651      14.65       8        230,328      3,143,651      13.65
    Specialty               55        189,021     4,686,146      24.79       35       115,333      2,819,356      24.45
    Food Court               2          1,426        58,835      41.26       2         11,330        554,165      48.91
                         ----------------------------------------------  -----------------------------------------------
                            74        651,266  $ 11,496,632   $  17.65       47       523,492   $  7,842,452   $  14.98
                         ==============================================  ===============================================

The Block at Orange:
    Anchors  (2)             -              -  $          -   $      -       -              -   $          -   $      -
    Majors  (2)              -              -             -          -       3         88,264      1,330,420      15.07
    Specialty                -              -             -          -       17        63,913      2,178,022      34.08
    Food Court               -              -             -          -       8         10,931        813,847      74.45
                         ----------------------------------------------  -----------------------------------------------
                             -              -  $          -   $      -       28       163,108   $  4,322,289   $  26.50
                         ==============================================  ===============================================

Community Centers:
    Anchors  (2)             -              -  $          -   $      -       1        131,812   $    790,872   $   6.00
    Majors  (2)              -              -             -          -       1         46,193        397,260       8.60
    Specialty                7         54,558       603,199      11.06       2         16,536        250,040      15.12
    Food Court               -              -             -          -       -              -              -          -
                         ----------------------------------------------  -----------------------------------------------
                             7         54,558  $    603,199   $  11.06       4        194,541   $  1,438,172   $   7.39
                         ==============================================  ===============================================
</TABLE>

<TABLE>
<CAPTION>
                          NO. OF                AFTER 2008                  NO. OF                    TOTAL
                          LEASES                ANNUALIZED     PER SQ.      LEASES                 ANNUALIZED     PER SQ.
                         EXPIRING    SQ. FT      MIN. RENT       FT.       EXPIRING    SQ. FT       MIN. RENT      FT.
                         --------    ------      ---------       ----      --------    ------       ---------      ---
<S>                      <C>         <C>        <C>            <C>         <C>         <C>          <C>           <C>
Ontario Mills:
    Anchors  (2)             4        286,023    $  1,883,132   $   6.58       4         286,023    $  1,883,132  $   6.58
    Majors  (2)              5        212,321       1,978,600       9.32      13         414,797       5,000,109     12.05
    Specialty                2          9,071         165,688      18.27      145        476,400      10,949,262     22.98
    Food Court               -              -               -          -       3          11,730         594,165     50.65
                         ------------------------------------------------  ------------------------------------------------
                            11        507,415    $  4,027,420   $   7.94      165      1,188,950    $ 18,426,668  $  15.50

Arizona Mills:
    Anchors  (2)             5        382,513    $  3,165,197   $   8.27       5         382,513    $  3,165,197  $   8.27
    Majors  (2)              3         98,205       1,146,246      11.67      10         293,224       4,007,999     13.67
    Specialty                3         29,704         747,336      25.16      138        489,808      11,216,104     22.90
    Food Court               1         13,924         832,502      59.79       1          13,924         832,502     59.79
                         ------------------------------------------------  ------------------------------------------------
                            12        524,346    $  5,891,281   $  11.24      154      1,179,469    $ 19,221,802  $  16.30

Grapevine  Mills:
    Anchors  (2)             3        315,042    $  3,638,512   $  11.55       3         315,042    $  3,638,512  $  11.55
    Majors  (2)              4        135,097       1,533,549      11.35      13         382,968       5,038,296     13.16
    Specialty                5         15,180         265,316      17.48      157        506,727      11,447,357     22.59
    Food Court               1         11,532         691,920      60.00       1          11,532         691,920     60.00
                         ------------------------------------------------  ------------------------------------------------
                            13        476,851    $  6,129,297   $  12.85      174      1,216,269    $ 20,816,085  $  17.11

Total with Joint
Ventures:
    Anchors  (2)            19      1,611,437    $ 12,941,662   $   8.03      36       3,105,495    $ 21,996,406  $   7.08
    Majors  (2)             13        470,623       4,908,395      10.43      74       2,311,932      26,110,310     11.29
    Specialty               16         88,859       2,006,668      22.58     1,126     3,815,846      86,611,818     22.70
    Food Court               2         25,456       1,524,422      59.88      90         102,916       5,633,009     54.73
                         ------------------------------------------------  ------------------------------------------------
                            50      2,196,375    $ 21,381,147   $   9.03     1,326     9,336,189    $140,351,543  $  15.03
                         ================================================  ================================================

The Block at Orange:
    Anchors  (2)             2        172,785    $  3,473,326   $  20.10       2         172,785    $  3,473,326  $  20.10
    Majors  (2)              4         98,652       1,509,411      15.30       7         186,916       2,839,831     15.19
    Specialty               12         45,026       1,420,717      31.55      67         203,396       6,257,768     30.77
    Food Court               1          1,061          74,270      70.00      10          12,938         958,121     74.05
                         ------------------------------------------------  ------------------------------------------------
                            19        317,524    $  6,477,724   $  20.40      86         576,035    $ 13,529,046  $  23.49
                         ================================================  ================================================

Community Centers:
    Anchors  (2)             3        204,744    $  1,823,107   $   8.90       9         707,760    $  4,406,009  $   6.23
    Majors  (2)              5        177,685       1,478,044       8.32      19         603,128       4,351,684      7.22
    Specialty                3         30,700         203,475       6.63      201        774,906      10,072,909     13.00
    Food Court               -              -               -          -       -               -               -         -
                         ------------------------------------------------  ------------------------------------------------
                            11        413,129    $  3,504,626   $   8.48      229      2,085,794    $ 18,830,602  $   9.03
                         ================================================  ================================================
</TABLE>

-------------------------------
(1)    Excludes 963,173 square feet of gross leasable area owned by tenants as
       follows: Potomac Mills - 80,000 square feet; Franklin Mills - 209,612
       square feet; Sawgrass Mills - 281,774 square feet; Gurnee Mills - 250,806
       square feet; Ontario Mills - 125,000 square feet; and Community Centers
       - 15,981 square feet. Ground leases at Franklin Mills of 152,370 square
       feet and at Ontario Mills of 16,595 square feet are also excluded.

(2)    For purposes of this schedule, anchor tenants are defined as any tenant
       whose gross leasable area equals or exceeds 50,000 sq. ft. and major
       tenants are defined as any tenant whose gross leasable area equals or
       exceeds 20,000 sq. ft. but is less than 50,000 sq. ft.



                                       27
<PAGE>   28


                         EXISTING MILLS OPERATING TRENDS

The following table sets forth, for each of the last five years, certain
information regarding operating trends with respect to the existing Mills.

<TABLE>
<CAPTION>
                                                                    MINIMUM RENT PLUS PERCENTAGE RENTS
                               -----------------------------------------------------------------------------------------------------
                   AVERAGE                  TOTAL STORES                          ANCHOR STORES             SPECIALTY STORES
                   PERCENT     -------------------------------------   -----------------------------  ------------------------------
                  LEASED (1)         TOTAL            PER SQ. FT.           TOTAL       PER SQ. FT.        TOTAL        PER SQ. FT.
                  ----------   -----------------   -----------------   --------------  -------------  ---------------  -------------
<S>               <C>          <C>                 <C>                 <C>             <C>            <C>              <C>
POTOMAC MILLS
1998                    95%       $21,443,619           $14.43           $6,001,966       $6.75         $15,441,653       $25.91
1997                    96         20,980,272            14.04            6,284,111        6.86          14,696,161        25.44
1996                    96         20,865,975            14.00            6,142,999        6.76          14,722,976        25.32
1995                    96         19,905,334            13.30            5,839,132        6.57          14,066,202        23.14
1994                    98         19,840,738            13.00            5,766,085        6.47          14,074,653        22.17

FRANKLIN MILLS
1998                    94%        17,689,143            12.38            6,050,348        6.61          11,638,795        22.64
1997                    92         16,549,052            11.47            5,700,661        6.05          10,848,391        21.68
1996                    92         16,318,689            11.40            5,291,698        5.67          11,026,991        22.16
1995                    95         16,837,997            11.33            5,401,107        5.69          11,436,890        21.29
1994                    97         17,565,102            11.64            5,485,679        5.78          12,079,423        21.54

SAWGRASS MILLS
1998 (2)                98%        26,969,276            17.29            7,265,079        8.13          19,704,197        29.57
1997 (2)                97         26,448,955            17.08            7,384,896        8.28          19,064,059        29.04
1996                    98         25,787,924            16.55            7,150,346        8.03          18,637,578        27.90
1995                    95         22,738,214            15.66            6,670,486        7.68          16,067,728        27.58
1994                    95         20,889,138            14.54            6,467,454        7.56          14,421,684        24.83

GURNEE MILLS
1998                    96%        17,525,250            13.06            5,022,342        6.52          12,502,908        21.85
1997                    91         15,900,406            13.80            4,418,036        7.42          11,482,370        20.63
1996                    90         15,340,496            13.62            3,823,991        6.78          11,516,505        20.50
1995                    91         15,089,531            12.89            3,898,381        6.36          11,191,150        20.08
1994                    92         15,176,595            12.83            3,986,828        6.48          11,189,767        19.71

ONTARIO MILLS
1998                    98%        19,516,934            16.50            7,300,086       10.61          12,216,848        24.68
1997                    95         18,708,479            17.11            6,358,058       10.11          12,350,421        26.59
                                                                                                
GRAPEVINE MILLS                                                                                 
1998                    95%        21,108,019            18.03            8,797,950       12.74          12,310,069        25.63
                                                                                                
ARIZONA MILLS                                                                                   
1998                    95%        19,165,290            16.82            7,262,540       10.83          11,902,750        25.41
                                                                                                
TOTAL - MILLS                                                                                   
1998                    96%      $143,417,531           $15.41          $47,700,311       $8.65         $95,717,220       $25.24
1997                    94         98,587,164            14.65           30,145,762        7.58          68,441,402        24.84
1996                    94         78,313,084            13.97           22,409,034        6.80          55,904,050        24.21
1995                    95         74,571,076            13.31           21,809,106        6.57          52,761,970        23.09
1994                    96         73,471,573            12.99           21,706,046        6.56          51,765,527        22.08
</TABLE>

----------------

(1)    Average percent leased is defined as total average space leased and for
       which rent was being paid excluding tenants with leases having a term of
       less than one year.

(2)    Annual rent excludes $800,000 of ground lease rent.

Note: The above amounts do not include Mainstreet retail income of $2,205,661
      for 1998, $2,066,991 for 1997, $2,088,000 for 1996, $1,658,000 for 1995
      and $1,794,000 for 1994.



                                       28
<PAGE>   29


                                RENTAL RATES (1)

The following table sets forth the average base rent per leased square foot of
store openings and closings for each property for the twelve months ended
December 31, 1998, 1997, 1996 and 1995.

<TABLE>
<CAPTION>
                                                                           ANCHOR STORES
                                    ---------------------------------------------------------------------------------------------
                                            STORE OPENINGS                   STORE CLOSINGS                     RELEASING
                                             DURING YEAR                      DURING YEAR                      SPREAD (2)
                                    -------------------------------   -----------------------------    --------------------------
                                       AVERAGE                           AVERAGE
                                      BASE RENT          TOTAL          BASE RENT         TOTAL
                                     PER SQ. FT.        SQ. FT.        PER SQ. FT.       SQ. FT.
                                    ---------------  --------------   ---------------  ------------
<S>                         <C>     <C>              <C>              <C>              <C>             <C>             <C>
POTOMAC MILLS               1998    $     11.52         65,028        $     9.46         70,490        $   2.06         21.75%
                            1997           7.71         73,432              6.30         97,820            1.41         22.33%
                            1996          11.43         33,406             11.55         15,178          (0.12)        (1.04%)
                            1995           8.74         20,048              8.61         78,572            0.13          1.51%

FRANKLIN MILLS              1998    $     13.33        100,127             $6.49         85,242        $   6.85        105.60%
                            1997          11.27         85,072              7.53         85,072            3.74         49.74%
                            1996          10.41         18,247             10.25         20,000            0.16          1.56%
                            1995              -              -                 -              -               -              -

GURNEE MILLS                1998    $      7.10         40,752        $     6.45         40,752        $   0.65         10.08%
                            1997           4.92        184,259  (3)            -              -             N/A            N/A
                            1996          30.00         20,000                 -              -             N/A            N/A
                            1995              -              -              8.08         74,218          (8.08)            N/A

SAWGRASS MILLS              1998    $     15.00         28,152        $    15.00         28,152        $      -              -
                            1997           8.91         50,579              8.93         50,579          (0.02)        (0.21%)
                            1996          26.39         20,000             14.86         39,275           11.53         77.59%
                            1995          12.80         25,110                 -              -             N/A            N/A 

ONTARIO MILLS               1998    $         -              -        $        -              -        $      -              -


                                                                                                       $
TOTAL MILLS                 1998    $     11.94        234,059        $     8.48        224,636            3.46         40.86%
                            1997           7.33        393,342              7.32        233,471            0.01          0.15%
                            1996          18.54         91,653             12.95         74,453            5.59         43.17%
                            1995          11.00         45,158              8.36        152,790            2.64         31.58%

COMMUNITY CENTERS           1998    $      6.66        168,738        $        -              -        $    N/A            N/A
                            1997              -              -              3.76         66,377          (3.76)            N/A
                            1996           9.60        104,586              8.69        176,238            0.91         10.47%
                            1995           6.19         48,958                 -              -             N/A            N/A
</TABLE>

<TABLE>
<CAPTION>
                                                                         SPECIALTY STORES
                                    --------------------------------------------------------------------------------------------
                                           STORE OPENINGS                   STORE CLOSINGS                      RELEASING
                                            DURING YEAR                       DURING YEAR                       SPREAD (2)
                                    -----------------------------    ------------------------------     ------------------------
                                       AVERAGE                          AVERAGE
                                      BASE RENT          TOTAL         BASE RENT          TOTAL
                                     PER SQ. FT.        SQ. FT.       PER SQ. FT.        SQ. FT.
                                    ---------------   ------------   ---------------   ------------
<S>                         <C>     <C>               <C>            <C>               <C>             <C>            <C>
POTOMAC MILLS               1998    $     27.68         70,769       $    27.91          62,034        $   (0.23)      (0.79%)
                            1997          22.78        128,964            21.77         127,191              1.00        4.61%
                            1996          23.64         83,594            21.80          66,607              1.84        8.44%
                            1995          24.91         49,135            18.89          82,912              6.02       31.87%

FRANKLIN MILLS              1998    $     19.18        150,869       $    17.65         113,961        $     1.53        8.65%
                            1997          20.16        112,670            19.34         106,202              0.83        4.29%
                            1996          20.08         73,880            18.61         115,416              1.47        7.90%
                            1995          19.49         46,453            21.90          77,713            (2.41)     (11.00%)

GURNEE MILLS                1998    $     21.07         99,886       $    18.59          88,220        $     2.48       13.35%
                            1997          20.75        101,771            19.24         104,086              1.51        7.87%
                            1996          19.01         74,447            18.63          71,457              0.38        2.04%
                            1995          16.95         48,988            17.79          55,864            (0.84)      (4.72%)

SAWGRASS MILLS              1998    $     32.52         48,268       $    26.32          49,373        $     6.20       23.54%
                            1997          30.00         72,188            24.57          64,626              5.42       22.08%
                            1996          29.63         58,904            22.24          57,770              7.39       33.23%
                            1995          24.58        173,744            23.11          55,108              1.47        6.36%

ONTARIO MILLS               1998    $     27.34         35,616       $    27.64          26,400        $   (0.30)      (1.08%)



TOTAL MILLS                 1998    $     23.43        405,408       $    21.80         339,988        $     1.63        7.49%
                            1997          22.83        415,593            20.92         402,105              1.90        9.10%
                            1996          22.76        290,825            19.97         311,250              2.79       13.97%
                            1995          22.71        318,320            20.38         271,597              2.33       11.43%

COMMUNITY CENTERS           1998    $     14.07         80,184       $    14.49          40,309        $   (0.42)      (2.90%)
                            1997          13.14        113,304            14.08         114,631            (0.94)      (6.66%)
                            1996          14.63         58,130            13.03          86,072              1.60       12.28%
                            1995          13.77         45,077            13.07          42,954              0.70        5.36%
</TABLE>

----------------------------

(1)    The Block at Orange, Grapevine Mills and Arizona Mills are excluded from
       this analysis, due to still being in their initial lease-up phase.
       Additionally, Ontario Mills for 1997 is excluded.

(2)    The releasing spread is calculated as the difference between per square
       foot openings and per square foot closings for the twelve months ended
       December 31, 1998. Openings and closings include renewals but exclude
       exercised options.

(3)    Consists primarily of expansion space related to two anchor stores, Bass
       Pro and Computer City, comprising 125,000 sq. ft. and 25,000 sq. ft.,
       respectively. The Bass Pro lease is expected to provide substantial
       percentage rent in addition to the base rent detailed above.

Note:  Totals may not sum due to rounding.


                                       29
<PAGE>   30


                                   GROSS SALES(1)(2)

The following table sets forth certain gross sales information for the years
ended December 31, 1998 and December 31, 1997.

<TABLE>
<CAPTION>
                                             YEAR ENDED DECEMBER 31, 1998                    
                              ---------------------------------------------------------------
                                 SQ. FT.                   SALES                 PER SQ. FT. 
                              ------------         --------------------          ------------
<S>                           <C>                  <C>                           <C>         
Potomac Mills:
   Anchor/Majors                   951,043         $        191,678,102          $        202
   Specialty                       580,658                  185,618,081                   320
   Temporary/Kiosk                       -                    5,155,021                     -
                              ------------         --------------------          ------------
                                 1,531,701         $        382,451,204          $        250

Franklin Mills:
   Anchor/Majors                   971,940         $        155,395,973          $        160
   Specialty                       527,403                  155,109,858                   294
   Temporary/Kiosk                       -                    3,496,367                     -
                              ------------         --------------------          ------------
                                 1,499,343         $        314,002,198          $        209

Sawgrass Mills:
   Anchor/Majors                 1,174,642         $        353,258,477          $        301
   Specialty                       664,466                  297,963,690                   448
   Temporary/Kiosk                       -                   10,588,716                     -
                              ------------         --------------------          ------------
                                 1,839,108         $        661,810,883          $        360

Gurnee Mills:
   Anchor/Majors                   831,201         $        141,156,686          $        170
   Specialty                       565,887                  159,651,566                   282
   Temporary/Kiosk                       -                    6,515,341                     -
                              ------------         --------------------          ------------
                                 1,397,088         $        307,323,593          $        220

Ontario Mills:
   Anchor/Majors                   823,815         $        136,055,601          $        165
   Specialty                       482,653                  166,299,546                   345
   Temporary/Kiosk                       -                    8,188,974                     -
                              ------------         --------------------          ------------
                                 1,306,468         $        310,544,121          $        238

Total Mills:
   Anchor/Majors                 4,752,641         $        977,544,839          $        206
   Specialty                     2,821,067                  964,642,741                   342
   Temporary/Kiosk                       -                   33,944,419                     -
                              ------------         --------------------          ------------
                                 7,573,708         $      1,976,131,999          $        261
                              ============         ====================          ============
</TABLE>

<TABLE>
<CAPTION>
                                                  YEAR ENDED DECEMBER 31, 1997
                              -----------------------------------------------------------------
                                   SQ. FT.                   SALES                  PER SQ. FT.
                              --------------         ---------------------         ------------
<S>                           <C>                    <C>                           <C>
Potomac Mills:
   Anchor/Majors                     910,288         $         184,834,466         $        203
   Specialty                         566,004                   179,387,582                  317
   Temporary/Kiosk                         -                     4,490,966                    -
                              --------------         ---------------------         ------------
                                   1,476,292         $         368,713,014         $        250

Franklin Mills:
   Anchor/Majors                     904,677         $         163,692,900         $        181
   Specialty                         487,463                   142,341,207                  292
   Temporary/Kiosk                         -                     6,388,496                    -
                              --------------         ---------------------         ------------
                                   1,392,140         $         312,422,603         $        224

Sawgrass Mills:
   Anchor/Majors                   1,173,109         $         365,821,871         $        312
   Specialty                         655,233                   295,180,646                  450
   Temporary/Kiosk                         -                    13,962,865                    -
                              --------------         ---------------------         ------------
                                   1,828,342         $         674,965,382         $        369

Gurnee Mills:
   Anchor/Majors                     681,640         $         103,395,397         $        152
   Specialty                         561,633                   150,055,052                  267
   Temporary/Kiosk                         -                     8,860,293                    -
                              --------------         ---------------------         ------------
                                   1,243,273         $         262,310,742         $        211

Ontario Mills:
   Anchor/Majors                     768,629         $         133,724,268         $        174
   Specialty                         454,598                   159,284,318                  350
   Temporary/Kiosk                         -                     6,866,186                    -
                              --------------         ---------------------         ------------
                                   1,223,227         $         299,874,772         $        245

Total Mills:
   Anchor/Majors                   4,438,343         $         951,468,902         $        214
   Specialty                       2,724,931                   926,248,805                  340
   Temporary/Kiosk                         -                    40,568,806                    -
                              --------------         ---------------------         ------------
                                   7,163,274         $       1,918,286,513         $        268
                              ==============         =====================         ============
</TABLE>

--------------------

(1)    Grapevine Mills and Arizona Mills are excluded from this analysis since
       they did not open until October 1997 and November 1997, respectively, and
       do not have twenty-four months of sales data for comparison. Grapevine
       Mills sales for the year ended December 31, 1998, were $117,597,419 on
       657,994 sq. ft. of anchor/major space ($179 per sq. ft.), $144,338,088
       on 481,255 of specialty store space ($300 per sq. ft.), and $9,710,374
       of Temp/Kiosk sales. Arizona Mills sales for the year ended December 31,
       1998, were $113,812,451 on 669,035 sq. ft. of anchor/major space ($170
       per sq. ft.), $137,253,170 on 455,674 sq. ft. of specialty store space
       ($301 per sq. ft.) and $8,300,350 of Temp/Kiosk sales.

(2)    Anchor/major sales have been adjusted to include sales from tenants that
       own their parcels.



                                       30
<PAGE>   31


DIVERSIFIED TENANT BASE

       Because our projects represent a collection of various retail formats
under one roof, we believe that our tenant base represents one of the more
diversified mixes of retailers in the industry today. This is evidenced by the
fact that no tenant represents more than 3.6% of 1998 base rent. We further
believe that the overall credit of our tenant base is strong given the
diversity of our retailers and the large number of manufacturer outlet tenants.
Our universe of tenants continues to expand.

       The following table, which includes our joint venture projects (Ontario
Mills, Grapevine Mills, Arizona Mills and The Block at Orange), sets forth
certain information with respect to our ten largest tenants (as measured by 1998
base rent) as of December 31, 1998:

<TABLE>
<CAPTION>
                                                                         PERCENT OF             PERCENT OF              NUMBER
                                                                            1998               TOTAL LEASED               OF
TENANT                                                                    BASE RENT         GROSS LEASABLE AREA         STORES
------                                                                    ---------         -------------------         ------
<S>                                                                       <C>               <C>                         <C>
TJ Maxx Group (1)..............................................             3.6%                   5.4%                    18
AMC ...........................................................             2.6%                   2.9%                     4
J.C. Penney (2) ...............................................             2.4%                   5.5%                     8
Burlington Coat Factory Group (3)..............................             1.6%                   5.1%                     8
Rainforest Cafe ...............................................             1.5%                   0.9%                     6
Off 5th by Saks Fifth Avenue...................................             1.5%                   2.4%                     9
The Sports Authority...........................................             1.5%                   1.7%                     5
Bed, Bath & Beyond.............................................             1.5%                   2.2%                     6
Levi's.........................................................             1.4%                   0.8%                    13
Ogden..........................................................             1.3%                   0.6%                     4
                                                                     ----------------    --------------------------    --------
   Total                                                                    18.9%                  27.5%                   81
                                                                     ================    ==========================    ========
</TABLE>

(1)    Includes T.J. Maxx and Marshalls.

(2)    Includes J.C. Penney and Rite Aid.

(3)    Includes Burlington Coat Factory and Totally 4 Kids.

DESCRIPTION OF EXISTING PROPERTIES

       Set forth below are descriptions of each of our existing Mills and Block
properties.

       Potomac Mills - Woodbridge, Virginia. Potomac Mills contains
approximately 1.6 million square feet of gross leasable area, of which one
anchor store tenant owns approximately 80,000 square feet. Potomac Mills opened
in 1985 with a total of approximately 630,000 square feet of gross leasable
area. As a result of customer demand, Potomac Mills was expanded to
approximately 1.2 million square feet of gross leasable area in 1986. The Phase
III expansion of Potomac Mills opened on September 30, 1993 and increased total
gross leasable area by approximately 355,000 square feet. We anticipate that
construction of a new entertainment zone will begin in late 1999 with an opening
in 2000. Potomac Mills has 17 anchors, including: IKEA, J.C. Penney Outlet,
Waccamaw Pottery, Marshalls, Spiegel Outlet, AMC Theatres, The Sports Authority,
Off 5th by Saks Fifth Avenue, T.J. Maxx, Syms, Group USA and Nordstrom Rack.
Potomac Mills is situated on approximately 161 acres located approximately 20
miles southwest of Washington, D.C. Potomac Mills is adjacent to Interstate 95,
which serves as one of the transportation backbones of the Washington
metropolitan area. This location strategically positions Potomac Mills between
the Washington/Baltimore metropolitan market to the north and Richmond,
approximately 90 miles to the south. We own 100% of Potomac Mills.


                                       31
<PAGE>   32


       Franklin Mills - Philadelphia, Pennsylvania. Franklin Mills opened in
1989 and contains approximately 1.7 million square feet of gross leasable area,
of which two anchor store tenants own approximately 209,000 square feet. We
began remerchandising Franklin Mills in 1996 by upgrading its tenant mix and
began construction on an entertainment zone, including themed restaurants and
interactive entertainment venues, in the first half of 1997, which was completed
by November 19, 1998 with the openings of Rainforest Cafe and Elephant Castle.
Franklin Mills has 19 anchors, including: Bed, Bath & Beyond, Filene's Basement,
Last Call from Neiman Marcus, Marshalls, Nordstrom Rack, Office Max, Off 5th by
Saks Fifth Avenue, Jillian's and Syms. Franklin Mills features what we believe
is the largest concentration of outlet retailing in the Delaware Valley. With
access from U.S. Highway 1 and the Pennsylvania Turnpike, Franklin Mills is
strategically positioned approximately 15 miles northeast of Philadelphia's
Center City and just west of Interstate 95, a major thoroughfare serving the
greater Philadelphia/Wilmington metropolitan market. We own 100% of Franklin
Mills. 

       Sawgrass Mills - Sunrise, Florida. Sawgrass Mills, which opened in 1990,
contains approximately 1.9 million square feet of gross leasable area, of which
three anchor store tenants own approximately 282,000 square feet. As a result of
customer demand, Sawgrass Mills was expanded by approximately 136,000 square
feet of gross leasable area in 1995. We expect to open a Phase III expansion of
Sawgrass Mills in the spring of 1999 consisting of an approximately 300,000 
square foot entertainment zone anchored by a 24-screen Regal Theater. Sawgrass 
Mills has 20 anchors, including: Beall's Outlet Store, Burlington Coat Factory, 
Last Call from Neiman Marcus, Loehmanns, Rainforest Cafe, Spiegel Outlet, The 
Sports Authority and Waccamaw Pottery. Sawgrass Mills is located in Florida's 
"Gold Coast" market approximately 11 miles west of Fort Lauderdale. The site 
lies adjacent to both the Sawgrass Expressway and Flamingo Road, between Sunrise
and Oakland Park Boulevards. The entire South Florida region is linked by the 
road network of the Sawgrass Expressway, Interstate 75 and Interstate 595, which
intersect at an interchange located less than two miles southwest of Sawgrass
Mills. We own 100% of Sawgrass Mills, excluding the Phase III expansion.

       Gurnee Mills - Gurnee, Illinois. Gurnee Mills opened in 1991 and contains
approximately 1.7 million square feet of gross leasable area, of which three
anchor store tenants own approximately 251,000 square feet. We have completed
construction of an expansion of over 150,000 square feet of gross leasable area,
which added entertainment venues to the existing mall. Gurnee Mills has been
remerchandised resulting in the upgrade of the project's tenant mix. Gurnee
Mills has 16 anchors, including: Bass Pro Shops, J.C. Penney Outlet, Waccamaw
Pottery, Marshalls, Spiegel Outlet, Bed, Bath & Beyond, The Sports Authority,
Off 5th by Saks Fifth Avenue, T.J. Maxx and Syms. The project is located
adjacent to Interstate 94, the major north/south thoroughfare linking Chicago
and Milwaukee. Gurnee Mills is clearly visible from Interstate 94 and is
situated directly across from Six Flags Great America, one of the largest
amusement parks in the Midwest. We own 100% of Gurnee Mills.

        

                                       32
<PAGE>   33
        Ontario Mills - Ontario, California. Ontario Mills opened in 1996 and
contains approximately 1.3 million square feet of gross leasable area comprised
of approximately 800,000 square feet of anchor space and approximately 500,000
square feet of specialty store space. We have plans to expand the project to a
total of 1.7 million square feet upon full build out. Ontario Mills currently
has 18 anchors, including: Off 5th by Saks Fifth Avenue, Dave & Busters, J.C.
Penney Outlet, Burlington Coat Factory, The Sports Authority, Marshalls, Bed,
Bath & Beyond, Mikasa, Off Rodeo Drive, T.J. Maxx, AMC Theatres, Virgin
Megastore, Group USA, Foozles, Totally 4 Kids, American Wilderness Experience,
Sega Gameworks and Rainforest Cafe. Ontario Mills is located at the
intersection of Interstate 10 and Interstate 15 in the heart of the
Riverside/San Bernardino area known as the "Inland Empire." Ontario Mills
serves the Los Angeles/Orange County metropolitan market. Net construction
costs at completion are estimated at $174 million.

        Ontario Mills is owned by a limited partnership among us, with a 50%
interest, Kan Am, with a 25% interest, and Simon Property, with a 25% interest.
Kan Am has agreed to contribute 50% of the initial required equity capital.  We
and Simon Property are responsible for the balance of the initial required
equity capital on a pro rata basis. We, Simon Property and Kan Am each will
receive a 9% preferred return on our equity, and the remaining cash flow will
be distributed pro rata in accordance with the percentage ownership interests.
We have the right to manage the development, property management and leasing of
the Ontario Mills project, subject to the other joint venture partners'
approval of specified major decisions, including sale or refinancing of the
project and approval of an annual budget.

        At specified times following the fifth anniversary of the project's
opening, either we and Simon Property together or Kan Am can exercise a buy-sell
provision. Pursuant to the buy-sell provision, we and Simon Property can require
Kan Am to sell to us Kan Am's entire interest in the partnership. Also pursuant
to the buy-sell provision, Kan Am can require us and Simon Property to acquire
Kan Am's entire interest in the partnership.

        Grapevine Mills - Grapevine, Texas. Grapevine Mills opened in 1997 and
contains approximately 1.3 million square feet of gross leasable area comprised
of approximately 700,000 square feet of anchor space and approximately 550,000
square feet of specialty store space. We have plans to expand the project to a
total of 1.6 million square feet upon full build out. Grapevine Mills currently
has 14 anchors, including: Off 5th by Saks Fifth Avenue, Burlington Coat
Factory, Bed, Bath & Beyond, Group USA, Rainforest Cafe, Books-A-Million, Sega
Gameworks and Virgin Megastore. Grapevine Mills is located on a 175-acre site
located at the interchange of Highway 121 and International Parkway, two miles
north of the Dallas/Fort Worth Airport in Grapevine, Texas. Grapevine Mills is
approximately 19 miles northeast of downtown Fort Worth and serves the
Dallas/Fort Worth metropolitan area.

        Grapevine Mills is owned by a limited partnership among us, with a 37.5%
interest, Simon Property, with a 37.5% interest, and Kan Am, with a 25%
interest. Kan Am has agreed to contribute 50% of the initial required equity
capital. We and Simon Property are responsible for the balance of the initial
required equity capital on a pro rata basis. We, Simon Property and Kan Am each
will receive a 9% preferred return on our equity, and the remaining cash flow
will be distributed pro rata in accordance with the percentage ownership
interests. We have the right to manage the development, property management and
leasing of the Grapevine Mills project, subject to the joint venture partners'
approval of specified major decisions, such as changes to the plan of
development, the annual operating budget for the project and any proposed sale
or refinancing.

        At specified times following the tenth anniversary of the project's
opening, either we and Simon Property together or Kan Am can exercise a
buy-sell provision. Pursuant to the buy-sell provision, we and Simon Property
can require Kan Am to sell to us, for cash or limited partnership units of the
Operating Partnership and limited partnership units of Simon Property 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 and Simon Property to acquire,
for cash or limited partnership units of the


                                    33
<PAGE>   34
Operating Partnership and limited partnership units of Simon Property at our and
Simon Property's election, Kan Am's entire interest in the partnership.

        Arizona Mills - Tempe, Arizona. Arizona Mills opened in November 1997
and contains approximately 1.2 million square feet of gross leasable area
comprised of approximately 680,000 square feet of anchor space and approximately
530,000 square feet of specialty store space. Arizona Mills currently has 14
anchors, including: Burlington Coat Factory, Off 5th by Saks Fifth Avenue,
Oshman's, Harkins Cinema, J.C. Penney, Rainforest Cafe, Group USA, Hi-Health,
Virgin Megastore and Sega Gameworks. The project is located on a 115-acre site
located 20 minutes from downtown Phoenix, at the intersection of Interstate 10
and Superstition Freeway (Highway 60).

        Arizona Mills is owned by a limited liability company owned by us, with
a 36.8% interest, Taubman Realty, with a 36.8% interest, and Simon Property,
with a 26.4% interest. All joint venture partners are obligated to contribute
required equity capital on a pro rata basis. We have the right to manage the
development, property management and leasing services of the Arizona Mills
project, subject to the other joint venture partners' approval of specified
major decisions, including sale or refinancing of the project and approval of
an annual budget.

        At specified times following the fifth anniversary of the project's
opening or, if later, the date that 90% of the project has been leased, if the
joint venture partners are unable to agree upon specified major decisions, any
joint venture partner can cause the project to be sold pursuant to specified
procedures.

        The Block at Orange - Orange, California. The Block at Orange opened in
November 1998, with approximately 0.6 million square feet of gross leasable area
comprised of approximately 360,000 square feet of anchor space and approximately
280,000 square feet of specialty store space. We have plans to expand the
project to a total of 0.8 million square feet upon full build out. The Block at
Orange currently has nine anchors, including: Borders Books and Music, Vans,
Virgin Megastore, Off 5th by Saks Fifth Avenue, Ron Jon Surf Shop, Gameworks,
AMC Theatres, Dave & Busters and Hilo Hattie, and has two additional anchor
store commitments. The Block at Orange is located on an 85-acre site located at
the intersection of the Santa Ana Freeway (I-10), the Garden Grove Freeway and
Orange Freeway (Highway 57) in the City of Orange, California, three miles from
Disneyland.

        The Block at Orange project is owned by a limited partnership between
us, with a 50% interest, and Kan Am, with a 50% interest. Kan Am has committed
to fund up to $60 million (which represents 100% of the estimated equity
requirements for this project). Kan Am will receive a 9% preferred return on
its equity until such time as permanent financing is secured for the project.
We have guaranteed Kan Am's receipt of this preferred return. After permanent
financing is secured, we and Kan Am each will receive a 9% preferred return on
our equity, and the remaining cash flow will be distributed pro rata in
accordance with the percentage ownership interests. We have the right to manage
the development, property management and leasing services for the project,
subject to the approval of Kan Am for specified major decisions, including the
sale or refinancing of the project and approval of an annual budget.

        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 the Operating Partnership 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 the
Operating Partnership at our election, Kan Am's entire interest in the
partnership.

                                      34
<PAGE>   35


THE COMMUNITY CENTERS

       The eleven Community Centers contain a total of approximately 2.2 million
square feet of gross leasable area and are located in Florida, Georgia,
Illinois, Maryland, New Jersey, Ohio, Pennsylvania, South Carolina and Virginia.
The Community Centers are open-air shopping centers containing traditional
shopping center tenants, such as grocery, drug, video and greeting card stores,
as well as a strong concentration of national value retailers. Anchor tenants of
the Community Centers include Giant Food, Krogers, Marshalls, Safeway, T.J.
Maxx, Walgreens, Wal-Mart and Bed, Bath & Beyond.






                                       35
<PAGE>   36

                                COMMUNITY CENTERS

The following table sets forth certain information with respect to the Community
Centers as of December 31, 1998:

<TABLE>
<CAPTION>


                                                     GROSS LEASABLE AREA
                                                         (SQ. FT.)                                   PERCENT LEASED (2)
                       YEAR            LAND      --------------------------         TOTAL          -----------------------
                    COMPLETED/         AREA        ANCHOR        SPECIALTY          GROSS           ANCHOR       SPECIALTY
   PROPERTY          EXPANDED        (ACRES)      STORES(1)        STORES       LEASABLE AREA       STORES         STORES
   --------          --------        -------      ---------        ------       -------------       -------        -------


<S>                    <C>              <C>          <C>             <C>             <C>                <C>          <C>
West Falls Church
Outlet Center          1982             7            40,081          47,743          87,824             100%         95%

Butterfield            1983             9            41,933          72,677         114,610             100%         86%
Plaza                  

Montgomery             1983             11           36,405          80,986         117,391             100%         90%
Village                

Western Hills          1983             36          314,516         134,980         449,496              91%         95%
Plaza                  

Crosswinds             1984             11          120,975          23,298         144,273             100%        100%
Center                 

Germantown             1986             20           46,756         130,341         177,097             100%         93%
Commons                

Fashion                1987             13           73,258          74,692         147,950             100%         77%
Place                  

Gwinnett               1987             18           97,547          97,172         194,719             100%         91%
Marketfair             

Mount                  1987             34          172,595         126,005         298,600             100%         97%
Prospect Plaza         

Cooper's               1994             20          158,556          14,953         173,509             100%        100%
Plaza                  

Liberty                1994             36          262,747          52,286         315,033             100%         57%
Plaza                                  -----      ---------         -------       ---------
                       

Totals/Weighted
    Averages                           215        1,365,369         855,133       2,220,502              98%         90%
                                       ====       =========         =======       =========
</TABLE>


<TABLE>
<CAPTION>


                                                                                                                   1998
                                                                                                             SALES PER SQ. FT.
                     TOTAL         ANNUALIZED        NUMBER                                               ------------------------
                    PERCENT           BASE             OF                                                 ANCHOR         SPECIALTY
   PROPERTY         LEASED           RENT(3)         STORES                ANCHOR STORE TENANTS           STORES          STORES
   --------         ------           -------         ------                --------------------           ------          ------


<S>                     <C>     <C>                    <C>                                             <C>            <C>
West Falls Church       97%     $        840,762       18         Safeway Marketplace                  $      435     $        144
Outlet Center           

Butterfield             91%            1,371,044       17         Arvey Paper & Office, Kids R Us             130              215
Plaza                   

Montgomery              93%            1,427,930       22         Safeway Marketplace                         427              154
Village                 

Western Hills           92%            2,724,227       38         Krogers, Staples, McAlpin's, and            270              218
Plaza                                                             Media Play                                  

Crosswinds             100%            1,064,841       14         Bed, Bath & Beyond, Marshalls and           206              227
Center                                                            Scotty's                                    

Germantown              95%            2,120,431       33         Giant Food                                  529              153
Commons                 

Fashion                 88%              992,246       16         Staples, Superpetz and TJ Maxx              168              123
Place                   

Gwinnett                96%            1,995,658       29         A&P, Marshalls and TJ Maxx                  174              206
Marketfair              

Mount                   99%            2,201,962       32         Dominicks, Marshalls, TJ Maxx and           219              163
Prospect Plaza                                                    Walgreens                                                       

Cooper's               100%            1,656,887        4         Marshalls, Pathmark and Service             116              126
Plaza                                                             Merchandise                                 

Liberty                 93%            2,434,614        9         Dick's Sporting Goods, Service              199              137
Plaza                                -----------       ---        Merchandise and Wal-Mart                    

Totals/Weighted
    Averages            95%          $18,830,602       232                                                   $245             $175
                                     ===========       ===
</TABLE>

------------------------------

(1)     Anchor stores includes all stores occupying more than 20,000 square
        feet.
(2)     Percent leased is defined as all space leased and for which rent was
        being paid as of December 31, 1998, excluding tenants with leases
        having a term of less than one year.
(3)     Annualized base rent is the base rent payable in December 1998
        multiplied by 12.

                                       36

<PAGE>   37





                                OPERATING TRENDS


The following table sets forth, for the last five years, certain information
regarding operating trends with respect to the Community Centers as of December
31, 1998:


<TABLE>
<CAPTION>


                                                               MINIMUM RENT PLUS PERCENTAGE RENTS
                                        -----------------------------------------------------------------------------------
                          AVERAGE                    TOTAL STORES                                ANCHOR STORES
                          PERCENT       ----------------------------------------     --------------------------------------
                         LEASED (1)            TOTAL             PER SQ. FT.                TOTAL            PER SQ. FT.
                        ----------      ------------------   -------------------     -----------------   ------------------
COMMUNITY CENTERS

<S>                     <C>              <C>                  <C>                     <C>                 <C>
1998                      91%            $     18,396,101     $         9.19          $     8,473,402     $         6.66

1997                      87                   17,853,568               9.33                8,223,866               6.76

1996                      93                   18,492,347               9.08                8,956,215               6.74

1995                      90                   17,933,643               9.03                8,692,927               6.78

1994                      91                   16,991,532               9.30                7,470,611               7.02
</TABLE>



<TABLE>
<CAPTION>


                           MINIMUM RENT PLUS PERCENTAGE RENTS
                        ---------------------------------------
                                   SPECIALTY STORES
                        ---------------------------------------
                                TOTAL            PER SQ. FT.
                        -------------------   -----------------
COMMUNITY CENTERS

<S>                      <C>                   <C>
1998                     $     9,922,699       $      13.60

1997                           9,629,702              13.84

1996                           9,536,132              13.49

1995                           9,240,716              13.13

1994                           9,520,921              12.49
</TABLE>
-----------------

(1)     Average percent leased is defined as total average space leased and for
        which rent was paid excluding tenants with leases having a term of
        less than one year.



                                       37

<PAGE>   38
CAPITAL EXPENDITURES

            The following tables set forth certain information regarding capital
expenditures for the Mills and the Community Centers combined for each of the
last three years and a 3-year average, the existing Mills (Potomac Mills,
Franklin Mills, Sawgrass Mills, Gurnee Mills, Ontario Mills, Grapevine Mills
and Arizona Mills) for each of the last three years and a 3-year average, and
the Community Centers for each of the last three years and a 3-year average.
Only 1998 data is available for Ontario Mills, Grapevine Mills and Arizona
Mills. 

 CAPITAL EXPENDITURES - EXISTING MILLS AND EXISTING COMMUNITY CENTERS COMBINED

The following table sets forth certain information regarding capital
expenditures for the existing Mills and the Community Centers combined:

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                       --------------------------------------------------
                                                               1998                          1997
                                                               ----                          ----

RECURRING NON-TENANT CAPITAL EXPENDITURES (1)

<S>                                                    <C>                           <C>
Costs                                                  $         1,453,123           $          435,742

Per Square Foot (2)                                                   0.12                         0.05

RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)

Costs                                                  $         5,467,329           $        5,143,206

Per Square Foot Improved (4)                                          7.85                        11.90
Per Square Foot (2)                                                   0.46                         0.62

TOTAL RECURRING COSTS

Costs                                                  $         6,920,452           $        5,578,948
Per Square Foot (2)                                                   0.58                         0.67

NON-RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)

Costs                                                  $        18,911,845    (7)    $       41,571,485    (7)

Per Square Foot Improved (5)                                         71.68                        73.69
Per Square Foot (2)                                                   1.58                         5.03

WORK IN PROCESS (6)

Costs                                                  $         8,447,326           $        4,703,992

Per Square Foot Improved (8)                                         25.99                        14.59
</TABLE>


<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                       ------------------------          3 - YEAR
                                                               1996                       AVERAGE
                                                               ----                       -------

RECURRING NON-TENANT CAPITAL EXPENDITURES (1)

<S>                                                    <C>                         <C>
Costs                                                  $         328,974           $           739,280

Per Square Foot (2)                                                 0.04                          0.07

RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)

Costs                                                  $       4,228,743           $         4,946,426

Per Square Foot Improved (4)                                       12.71                         10.82
Per Square Foot (2)                                                 0.52                          0.53

TOTAL RECURRING COSTS

Costs                                                  $       4,557,717           $         5,685,706
Per Square Foot (2)                                                 0.56                          0.60

NON-RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)

Costs                                                  $       8,079,220           $        22,854,183

Per Square Foot Improved (5)                                       44.93                         63.43
Per Square Foot (2)                                                 0.99                          2.53

WORK IN PROCESS (6)

Costs                                                                 --           $         4,383,772

Per Square Foot Improved (8)                                          --                         13.53
</TABLE>

------------------

(1)  Recurring non-tenant capital expenditures include expenditures that are not
     tenant related nor recoverable from tenants.

(2)  Includes annual costs divided by total gross leasable area (excluding space
     owned by certain store tenants) of our properties.

(3)  Tenant Improvements/Leasing costs include tenant specific costs including
     tenant improvements, tenant allowances and capitalized internal leasing
     costs.

(4)  Calculated as recurring tenant improvements/leasing costs divided by gross
     leasable area of all recurring store openings (including spaces requiring
     no expenditures).

(5)  Calculated as non-recurring tenant improvements/leasing costs divided by
     gross leasable area of all non-recurring store openings.

(6)  Work in process will be shown as recurring or non-recurring in the year
     that the work is completed.

(7)  Includes expansion costs at Franklin Mills and Gurnee Mills and
     non-recurring remerchandising costs. Excludes costs relating to the
     Sawgrass Phase III expansion.

(8)  Calculated as work in process divided by gross leasable area of all space
     with work in process.

                                       38

<PAGE>   39



                     CAPITAL EXPENDITURES - EXISTING MILLS

The following table sets forth certain information regarding capital
expenditures for the existing Mills (Potomac Mills, Franklin Mills, Sawgrass
Mills, Gurnee Mills, Ontario Mills, Grapevine Mills and Arizona Mills).  Only
1998 data is available for Ontario Mills, Grapevine Mills and Arizona Mills.

<TABLE>
<CAPTION>

                                                                     YEAR ENDED DECEMBER 31,
                                                       -------------------------------------------------
                                                               1998                          1997
                                                               ----                          ----

RECURRING NON-TENANT CAPITAL EXPENDITURES (1)

<S>                                                    <C>                           <C>
Costs                                                  $          949,095            $         388,003

Per Square Foot (2)                                                  0.10                         0.06


RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)

Costs                                                  $        4,274,398            $       4,518,073

Per Square Foot Improved (4)                                         8.53                        13.35
Per Square Foot (2)                                                  0.44                         0.75

TOTAL RECURRING COSTS

Costs                                                  $        5,223,493            $       4,906,076
Per Square Foot (2)                                                  0.54                         0.81


NON-RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)

Costs                                                  $       18,175,677     (7)    $      41,010,815    (7)

Per Square Foot Improved (5)                                        96.48                        78.37
Per Square Foot (2)                                                  1.86                         6.77


WORK IN PROCESS (6)

Costs                                                  $        6,779,660            $       3,989,739
Per Square Foot Improved (8)                                        38.45                        31.27


</TABLE>



<TABLE>
<CAPTION>

                                                            YEAR ENDED DECEMBER 31,
                                                          --------------------------         3 - YEAR
                                                                    1996                     AVERAGE
                                                                    ----                     -------

RECURRING NON-TENANT CAPITAL EXPENDITURES (1)

<S>                                                         <C>                        <C>
Costs                                                       $         246,522          $         527,873

Per Square Foot (2)                                                      0.04                       0.07


RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)

Costs                                                       $       3,549,312          $       4,113,928

Per Square Foot Improved (4)                                            12.94                      11.61
Per Square Foot (2)                                                      0.60                       0.60

TOTAL RECURRING COSTS

Costs                                                       $       3,795,834          $       4,641,801
Per Square Foot (2)                                                      0.64                       0.66


NON-RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)

Costs                                                       $       7,746,906          $      22,311,133

Per Square Foot Improved (5)                                            50.00                      74.95
Per Square Foot (2)                                                      1.30                       3.31


WORK IN PROCESS (6)

Costs                                                                                  $       3,589,800
Per Square Foot Improved (8)                                               --                      23.24


</TABLE>
-------------------------

(1)  Recurring non-tenant capital expenditures include expenditures that are not
     tenant related nor recoverable from tenants.

(2)  Includes annual costs divided by total gross leasable area (excluding space
     owned by certain store tenants) of our properties.

(3)  Tenant improvements/leasing costs include tenant specific costs including
     tenant improvements, tenant allowances and capitalized internal leasing
     costs.

(4)  Calculated as recurring tenant improvements/leasing costs divided by gross
     leasable area of all recurring store openings (including spaces requiring
     no expenditures).

(5)  Calculated as non-recurring tenant improvements/leasing costs divided by
     gross leasable area of all non-recurring store openings.

(6)  Work in process will be shown as recurring or non-recurring in the year
     that the work is completed.

(7)  Includes expansion costs at Franklin Mills and Gurnee Mills. Excludes cost
     relating to Sawgrass Phase III expansion.

(8)  Calculated as work in process divided by gross leasable area of all space
     with work in process.


                                       39
<PAGE>   40



                    CAPITAL EXPENDITURES - COMMUNITY CENTERS

The following table sets forth certain information regarding capital
expenditures for the Community Centers:

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                          ------------------------------------------------------
                                                                 1998                        1997
                                                                 ----                        ----

RECURRING NON-TENANT CAPITAL EXPENDITURES (1)

<S>                                                       <C>                          <C>               
Costs                                                     $            504,028         $           47,739
                                                                               
Per Square Foot (2)                                                       0.23                       0.02
                                                                               
                                                                               
RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)                                
                                                                               
Costs                                                     $          1,192,931         $          625,133
                                                                               
Per Square Foot Improved (4)                                              6.10                       6.68
Per Square Foot (1)                                                       0.54                       0.28
                                                                               
TOTAL RECURRING COSTS                                                          
                                                                               
Costs                                                     $          1,696,959         $          672,872
Per Square Foot (2)                                                       0.77                       0.31


NON-RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)

Costs                                                     $            736,168         $          560,670

Per Square Foot Improved (5)                                              9.76                      13.73
Per Square Foot (2)                                                       0.33                       0.25

WORK IN PROCESS (6)

Costs                                                     $          1,667,666         $          714,253
Per Square Foot Improved (7)                                             11.22                       3.66
</TABLE>

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                            ------------------------          3 - YEAR
                                                                      1996                     AVERAGE
                                                                      ----                     -------

RECURRING NON-TENANT CAPITAL EXPENDITURES (1)

<S>                                                            <C>                     <C>              
Costs                                                          $         82,452        $         211,406

Per Square Foot (2)                                                        0.04                     0.10


RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)

Costs                                                          $        679,431        $         832,498

Per Square Foot Improved (4)                                              15.06                     9.28
Per Square Foot (1)                                                        0.31                     0.38

TOTAL RECURRING COSTS

Costs                                                          $        761,883              $ 1,043,905
Per Square Foot (2)                                                        0.35                     0.48


NON-RECURRING TENANT IMPROVEMENTS/LEASING COSTS (3)

Costs                                                          $        332,314              $   543,051

Per Square Foot Improved (5)                                              13.35                    12.28
Per Square Foot (2)                                                        0.15                     0.24

WORK IN PROCESS (6)

Costs                                                                        --        $         793,973
Per Square Foot Improved (7)                                                 --                     4.96
</TABLE>

-----------------

(1)  Recurring non-tenant capital expenditures include expenditures that are not
     tenant related nor recoverable from tenants.

(2)  Includes annual costs divided by total gross leasable area (excluding space
     owned by certain store tenants) of the Community Centers.

(3)  Tenant improvements/leasing costs include tenant specific costs including
     tenant improvements, tenant allowances and capitalized internal leasing
     costs.

(4)  Calculated as recurring tenant improvements/leasing costs divided by gross
     leasable area of all recurring store openings (including spaces requiring
     no expenditures).

(5)  Calculated as non-recurring tenant improvements/leasing costs divided by
     gross leasable area of all non-recurring store openings.

(6)  Work in process will be shown as recurring or non-recurring in the year
     that the work is completed.

(7)  Calculated as work in process divided by gross leasable area of all space
     with work in process.


                                       40
<PAGE>   41
                             THE MILLS CORPORATION
                SUMMARY OF OUTSTANDING CONSOLIDATED INDEBTEDNESS

                             (DOLLARS IN THOUSANDS)

                            AS OF DECEMBER 31, 1998

As of December 31, 1998, the Company had outstanding consolidated indebtedness
in an aggregate amount of approximately $782.2 million (excluding its pro rata
share of unconsolidated joint venture debt) as set forth below.

<TABLE>
<CAPTION>

                                    Principal           Interest           Annual                 Maturity
                  Mortgage/Loan      Balance            Rate Type       Interest Rate               Date
               -------------------   -------            ---------       -------------               ----
                                     (000's)                               (000's)
<S>                                 <C>             <C>                  <C>                      <C>
Potomac Mills/Gurnee Mills:

                 Tranche A              $206,022          Fixed                     6.905%         12/17/26 (1)
                 Tranche B                27,000          Fixed                     7.021%         12/17/26 (1)
                 Tranche C                15,000          Fixed                     7.235%         12/17/26 (1)
                 Tranche D                30,000          Fixed                     7.701%         12/17/26 (1)
Franklin Mills and Liberty Plaza

                 Tranche A               108,561          Fixed                     7.882%           6/1/27 (3)
                 Mortgage Loan            19,764          Fixed                     7.440%           6/1/27 (3)
                 Mortgage Loan            12,973          Fixed                     6.220%           6/1/27 (3)
Sawgrass Mills:

                 Tranche A               115,000          Fixed                     6.450%          1/18/01
                 Tranche B                10,000    Variable with cap     85 bp over LIBOR (6)      1/18/01
                 Tranche C                20,000    Variable with cap    230 bp over LIBOR (6)      1/18/01

Sawgrass Mills - Phase II:                18,000          Fixed                     6.970%          1/18/01
Western Hills:                            14,949          Fixed                     7.675%           1/1/99 (18)
Nine Community Centers:                   66,833          Fixed                     7.160%          1/31/01
Concord Mills Residual III:                6,229        Variable         200 bp over LIBOR         12/31/00
                                   --------------
Total Property Mortgages                 670,331
                                   --------------
Other Loans
Corporate Miscellaneous:                     751          Fixed                     8.250%         10/31/00
Corporate Miscellaneous:                   2,400          Fixed                     6.200%          7/15/99
Corporate Line of Credit:                 89,000        Variable         140 bp over LIBOR           4/1/00
Corporate Miscellaneous:                  15,000        Variable         125 bp over LIBOR          1/18/00
Sawgrass Residual:                         4,700        Variable         165 bp over LIBOR          1/18/01
                                   --------------
                      Total             $782,182
                                   ==============


<CAPTION>
                                                     Earliest day       Recourse to
                                       Annual        at which debt       Company or
                  Mortgage/Loan       Interest       can be repaid      Op. Ptnrshp
               -------------------    --------       -------------      -----------
                                      (000's)
<S>                                <C>                <C>              <C>
Potomac Mills/Gurnee Mills:

                 Tranche A             $14,225                (2)            0%
                 Tranche B               1,896                (2)            0%
                 Tranche C               1,085                (2)            0%
                 Tranche D               2,310                (2)            0%
Franklin Mills and Liberty Plaza

                 Tranche A               8,557                (4)            0%
                 Mortgage Loan           1,470                (4)            0%
                 Mortgage Loan             807                (4)
Sawgrass Mills:

                 Tranche A               7,418                (5)            0%
                 Tranche B                 649 (7)            (5)            0%
                 Tranche C               1,588 (7)            (5)            0%

Sawgrass Mills - Phase II:               1,255                (8)            0%  (15)
Western Hills:                           1,147            (9), (16)          0%
Nine Community Centers:                  4,785           (10), (16)          0%
Concord Mills Residual III:                476              (17)            100%
                                   ------------
Total Propety Mortgages                 47,668
                                   ------------
Other Loans
Corporate Miscellaneous:                    62                (12)           0%
Corporate Miscellaneous:                   149              (12)             0%
Corporate Line of Credit:                6,266            (8), (11)         100%
Corporate Miscellaneous:                 1,034              (14)            100%
Sawgrass Residual:                         343              (13)             0%
                                   ------------
                      Total            $55,522
                                   ============
</TABLE>

(1)   This indebtedness is a 30 year amortizing loan with an anticipated balloon
      repayment on December 18, 2003. In the event the mortgage loan is not
      repaid by the anticipated balloon repayment date, the annual interest rate
      for each tranche will be increased by 2% per annum in excess of the stated
      interest rate. In addition, excess cash flow available after payment of
      the increased interest rate and scheduled amortization will be used to
      reduce the principal balance of the loan. Principal repayments are based
      on the scheduled amortization, assuming a 7% mortgage interest rate, over
      a 30 year period, with the monthly amortization payments being applied
      sequentially, beginning with Tranche A to reduce the principal balance.

(2)   Optional payments of principal are not permitted prior to December 17,
      1999. After such date, prepayments, in whole or in part, are permitted
      upon at least 15 days notice. In addition, the Company is required to pay
      a prepayment penalty equal to the greater of (i) 1% of the remaining
      principal balance or (ii) a yield preservation payment. Generally, yield
      preservation payments are intended to compensate the lender for the total
      amount of interest it would have earned on the indebtedness but for the
      repayment, less the amount of interest that the lender could earn if it
      invested the repayment amount in United States Treasury obligations or
      other similar securities from the date of the repayment through the
      maturity date of the indebtedness.

(3)   This indebtedness is a 30 year amortizing loan with an anticipated balloon
      repayment on May 5, 2007. In the event the mortgage loan is not repaid by
      the anticipated balloon repayment date, the annual interest rate will be
      increased by 5% per annum in excess of the stated interest rate. In
      addition, excess cash flow available after payment of the increased
      interest rate and scheduled amortization will be used to reduce the
      principal balance of the loan.

(4)   This indebtedness may be prepaid, without a prepayment penalty, beginning
      180 days prior to May 5, 2007. Prior to that date, there is no right to
      prepay the indebtedness, except that $12.5 million of the principal
      balance, which has been allocated to the Liberty Plaza shopping center,
      may be defeased through the establishment of defeasance collateral (which
      may include government or agency securities that have the full faith and
      credit of the United States government).
<PAGE>   42
(5)   Optional payments of principal on Tranche A of this indebtedness are not
      permitted prior to June 20, 2000 other than in connection with certain
      casualty or condemnation events occurring with respect to Sawgrass Mills.
      On and after such date, Tranche A may be prepaid in full, but not in part,
      without any prepayment penalty. Optional prepayments of Tranches B and C
      of the indebtedness may be made, in whole or in part, at any time without
      any prepayment penalty, but only if payments of interest are current with
      respect to each outstanding Tranche and an event of default is not then
      continuing.

(6)   The loan agreement provides for a cap on LIBOR at 14% for the life of the
      loan. 

(7)   Calculated using 30-day LIBOR at 5.6406%, which was the rate at
      December 31, 1998. 

(8)   Prepayable, in whole or in part, at any time without prepayment penalty.

(9)   This indebtedness may be prepaid, in whole or in part, upon 30 days
      notice to the lender and the payment of a prepayment penalty.   The
      penalty percentage due on prepayment is 1.5% of the outstanding
      principal.  During the last three months of its term, the indebtedness
      may be prepaid without penalty.

(10)  Prepayable, in whole or in part, at any time, upon 60 days prior notice
      to the lender. The Company is required to pay a prepayment penalty, which
      would equal to the greater of (i) 1% of the principal balance, or (ii) a
      yield preservation payment.

(11)  The total commitment under the Line of Credit is $100,000.  Funds are
      available subject to certain performance measures and  restrictive
      covenants.  This loan bears interest at a variable rate ranging from 100
      bp to 165 bp over LIBOR subject to certain  leverage tests (LIBOR + 140
      bp at 12/31/98).  The line of credit matures April 1, 2000 with a
      one-year option to extend.

(12)  Primarily corporate debt with maturities under one year. Prepayable, in
      whole or in part, at any time without prepayment penalty. 

(13)  Prepayable, in whole or in part, at any time, upon 3 days prior notice to
      lender without prepayment penalty. 

(14) Prepayable, in whole or in part, at any time, upon 5 days prior notice to 
     lender without prepayment penalty.

(15)  Principal is guaranteed by the Company if the Phase II project fails to
      achieve a DSC ratio of 1.35 and a debt yield of 12.5%.  As of  December
      31, 1998, the guaranteed amount was 0%.

(16)  On January 27, 1999, the loans were repaid with the proceeds of a new
      $112,500 permanent loan. The new indebtedness is a 30 year amortizing loan
      with an anticipated balloon repayment date of February 1, 2009. Interest
      will accrue at a fixed rate of 7.30%.. In the event the mortgage is not
      repaid by the anticipated balloon repayment date, the interest rate will
      be the greater of (i) the loan interest rate plus 2% or (ii) the yield
      calculated by linear interpolation of the yields of noncallable United
      States Treasury obligations with terms (one longer and one shorter) most
      nearly approximating the period from such date of determination to the
      anticipated repayment date.

(17)  The total commitment under this loan is $9,000.  Funds are available
      subject to certain performance measures and restrictive covenants.
      Interest accrues at 200 bp over LIBOR.  The indebtedness matures on
      December 31, 2000.

(18)  In December 1998, the Company received a three month extension to 4/1/99.


<PAGE>   43



                             THE MILLS CORPORATION

        SUMMARY OF OUTSTANDING UNCONSOLIDATED JOINT VENTURE INDEBTEDNESS

                             (DOLLARS IN THOUSANDS)

                            AS OF DECEMBER 31, 1998

As of December 31, 1998, the unconsolidated joint ventures had outstanding
indebtedness in an aggregate amount of approximately $583.3 million as set
forth below.

<TABLE>
<CAPTION>

                        Principal       Total       Interest            Annual                 Maturity        Annual
 Mortgage/Loan           Balance     Commitment    Rate Type         Interest Rate               Date         Interest
----------------         -------     ----------    ---------         -------------               ----         --------
                         (000's)                                        (000's)                               (000's)
<S>                     <C>         <C>             <C>         <C>                         <C>            <C>
Arizona Mills            $140,984       $145,000    Variable    130 bp over LIBOR (4),(5)   2/1/02              $  9,785

Grapevine Mills           155,000        155,000     Fixed      6.465%                      9/1/32   (8)          10,021

Ontario Mills             144,902        145,000     Fixed      6.75%                       12/1/28  (9)           9,781

The Block at Orange       105,840        136,000    Variable    165 bp over LIBOR (6)       1/22/02                7,716 (4)

Sawgrass Phase III         12,319         44,000    Variable    165 bp over LIBOR (7)       1/18/01                  898 (4)

Concord Mills              24,250        199,000    Variable    135 bp over LIBOR           12/2/01                1,695
                       -----------  -------------                                                           -------------      
Total                    $583,295       $824,000                                                                 $39,896 
`                      ===========  =============                                                            ============
<CAPTION>
                         Earliest day     Recourse to
                         at which debt     Company or
 Mortgage/Loan           can be repaid    Op. Ptnrshp
----------------         -------------    -----------
<S>                       <C>             <C>
Arizona Mills                    (1)          9.2%    (10)

Grapevine Mills                  (2)          3.2%    (11)

Ontario Mills                    (3)          0.0%

The Block at Orange              (3)         100.0%   (12)

Sawgrass Phase III               (1)         100.0%   (13)

Concord Mills                    (2)         50.0%    (14)
                       
Total               
</TABLE>


(1)     This indebtedness may be prepaid, in whole or in part, upon 5 business
        days notice to the Administrative Agent, be in principal amount of not
        less than $1 million and an integral multiple of $100,000, and each
        prepayment under this shall include all interest accrued on the amount
        of principal prepaid (and all late charges and other sums that may be
        payable) through the date of prepayment.

(2)     This indebtedness may be prepaid, in whole or in part, upon 3 business
        days notice to the Administrative Agent.

(3)     The Company shall have the right to make prepayments of the loan,
        without penalty, and a late charge, as the case may be, folllwing the
        occurrence of an Event of Default under any of the Loan Documents, in
        whole or in part, upon not less than 5 business days prior written
        notice to lender. No prepayment of all or part of the loan, including
        any mandatory prepayment of the Loan made as a result of an acceleration
        of the loan or pursuant to the immediately preceding sentence, shall be
        permitted unless same is made together with the payment of all interest
        accrued on the loan though the date of prepayment and an amount equal to
        all Breakage Costs and reasonable, out-of-pocket attorneys' fees and
        disbursements incurred by Lender and any participants in good faith as a
        result of the prepayment.

(4)     Calculated using 30-day LIBOR at 5.6406%, which was the rate at
        December 31, 1998.

(5)     The Applicable Margin may be reduced to 115 basis points if the Company
        receives a private letter bank loan rating equal to or better than "A-".
<PAGE>   44
(6)     Interest Rate shall be LIBOR plus (a) 165 basis points until the
        following conditions have been satisfied: (i) the Construction Phase
        Completion Date has occurred, (ii) the Grand Opening Date has occurred,
        (iii) 33% of the Specialty Space has been and continues to be leased to
        Specialty Tenants and 55% of the Anchor Space has been and continues to
        be leased to Anchors, (iv) the DSC Ratio for any Calculation Period is
        equal to or greater than 1.00 and (v) no Event of Default is continuing.
        Once these conditions have been satisfied the Interest Rate shall be
        LIBOR plus 150 bp. A further reduction to LIBOR plus 135 bp shall occur
        once the DSC Ratio for any period is equal to or greater than 1.25.
        Interest Rate will reduce to LIBOR plus 125 bp when the DSC Ratio for
        any period is equal to or greater than 1.40.

        Interest Rate will reduce to LIBOR plus 115 bp when the DSC Ratio for
        any period is equal to or greater than 1.50.

(7)     Interest Rate shall be LIBOR plus (a) 165 basis points until the
        following conditions have been satisfied: (i) the Construction Phase
        Completion Date has occurred and the project has achieved a DSC ratio of
        1.00, the interest rate shall be LIBOR plus 150 bp; (ii) the project has
        achieved a DSC ratio of 1.30 and a debt yield of 12.0% for a minimum of
        three months, the interest rate shall be LIBOR plus 125 bp; (iii) the
        project has achieved a DSC ratio of 1.35 and a debt yield of 12.5% for a
        subsequent three months, the interest rate will be LIBOR plus 110 bp.

(8)     This indebtedness is a 30 year amortizing loan with an anticipated
        repayment date on October 1, 2008. The loan has an interest only period
        through September 1, 2002. In the event the mortgage loan is not repaid
        by the anticipated balloon repayment date, the annual interest rate will
        be the greater of (i) the loan interest rate plus 2% or (ii) the yield
        calculated by linear interpolation of the yields of noncallable United
        States Treasury obligations with terms (one longer and one shorter) most
        nearly approximating the period from such date of determination to the
        anticipated repayment date.

(9)     This indebtedness is a 30 year amortizing loan with an anticipated
        repayment date on December 1, 2008.  In the event the mortgage loan is
        not repaid by the anticipated balloon repayment date, the annual
        interest rate will be the greater of (i) the loan interest rate plus 5%
        or (ii) the Treasury Rate plus 5%.

(10)    Principal is guaranteed on a several basis by each partner (the
        Company's share is 36.8%) reduced as follows: (i) as of closing, the
        "Guaranteed Amount" was 100% of Loan Amount; (ii) upon completion of
        construction, opening and achieving $16,000 of "In-Place Minimum Rent,"
        the Guaranteed Amount will reduce to 50%; (iii) upon achieving a 13.5%
        "Debt Yield," ("Debt Yield" is defined as EBITDA to total loan
        commitment) the Guaranteed Amount will reduce to 25% of the Loan
        Amount; (iv) upon achieving a 15% "Debt Yield," the Guaranteed Amount
        will reduce to 15% of the Loan Amount; and (v) upon achieving a 17%
        Debt  Yield and an appraised value indicating a loan to value ratio of
        no greater than 55%, the Guaranteed  Amount will reduce to $0.  As of
        December 31, 1998, the Company's share of the Guaranteed Amount was
        reduced from 36.8% to 9.2% according to the above formula.

(11)    The Company and Simon Property (Texas) Group, L.P. have each guaranteed
        $5,000 on this loan (3.2%).  The guarantee terminates when the debt
        service coverage for any twelve consecutive months is equal to or
        exceeds 1.5 to 1.0.

(12)    Principal is guaranteed by the Company, reduced as follows: (i) as of
        closing, the "Guaranteed Amount" was 100% of Loan Amount; (ii) upon
        construction completion, grand opening and a Debt Service Coverage
        ratio of 1.00 the Guaranteed Amount will reduce to 50%; (iii) upon
        achieving a DSC Ratio of 1.25 the Guaranteed Amount will reduce to 25%;
        (iv) upon achieving a DSC Ratio of 1.40 the Guaranteed Amount will
        reduce to 10%; and (v) upon achieving a DSC Ratio of 1.50 the
        Guaranteed Amount will reduce to 0%.

(13)    Principal is guaranteed by the Company, reduced as follows: (i) as of
        closing, the "Guaranteed Amount" was 100% of Loan Amount; (ii) upon
        achieving  a DSC Ratio of 1.35 and a debt yield of 12.5% will reduce to
        0%.

(14)    The loan commitment has a term of three years with two one-year
        extension options.  The interest rate will be LIBOR plus 135 basis
        points until completion and  occupancy requirements are met.  Once
        achieved, the interest rate will be LIBOR plus 120 basis points.  The
        interest rate can be further reduced to LIBOR plus 110 basis points
        when the project achieves a debt service coverage for three months of
        1.35.  The new loan is guaranteed severally by the Company (50%) and
        Simon Property Group, L.P. (50%) and can be reduced as follows: (i) as
        of closing, the "Guaranteed Amount" was 100% of loan amount; (ii) 50%
        upon achieving completion and occupancy requirements; (iii) 35% upon
        achieving a DSC ratio of 1.20 for three consecutive months;  (iv) 20%
        upon achieving a  DSC ratio of 1.35 for three consecutive months
        subsequent to the prior condition.

<PAGE>   45


INCOME PRODUCING PROPERTY - FEDERAL INCOME TAX BASIS

            The following table sets forth certain information regarding federal
income tax basis and depreciation of income producing property for the Mills
(including Ontario Mills, Grapevine Mills and Arizona Mills, which are
unconsolidated joint ventures) and The Block at Orange, which is an
unconsolidated joint venture, as of December 31, 1998:

<TABLE>
<CAPTION>

                         LAND                    LAND IMPROVEMENTS                                   BUILDING
                         ----                    -----------------                                   --------
                     FEDERAL TAX      FEDERAL TAX           DEPRECIATION                  FEDERAL TAX        DEPRECIATION
                        BASIS            BASIS           METHOD LIFE (YRS)                   BASIS         METHOD LIFE (YRS)
                   --------------------------------------------------------------------------------------------------------------

<S>                        <C>              <C>        <C>            <C>                 <C>                <C>        <C>
   Franklin Mills          $ 28,465         $ 6,289          MACRS      15                  $150,400          MACRS       39

     Gurnee Mills            18,456          16,394          MACRS      15                   162,543          MACRS     31.5,39

                                                             MACRS      15                                    MACRS     31.5,39
    Potomac Mills            15,908          27,194           ACRS     15,18                 115,093           ACRS      15,18

   Sawgrass Mills            17,195           8,348          MACRS      15                   161,916          MACRS       39

    Ontario Mills             7,264          10,643          MACRS      15                   121,118          MACRS       39

  Grapevine Mills            18,249           5,774          MACRS      15                   108,504          MACRS       39

    Arizona Mills            23,877             615          MACRS      15                   132,974          MACRS       39

     The Block at
           Orange            23,264           8,935          MACRS      15                    71,853          MACRS       39
</TABLE>

<TABLE>
<CAPTION>

                            FURNITURE, FIXTURE AND EQUIPMENT
                            --------------------------------
                       FEDERAL TAX             DEPRECIATION
                          BASIS              METHOD LIFE (YRS)
                       ----------------------------------------      

<S>                          <C>               <C>        <C>
   Franklin Mills              $3,284            MACRS      5,7

     Gurnee Mills               4,029            MACRS     3,5,7


    Potomac Mills               2,473            MACRS      5,7

   Sawgrass Mills               4,736            MACRS     3,5,7

    Ontario Mills               3,805            MACRS      5,7

  Grapevine Mills               4,086            MACRS      5,7

    Arizona Mills               1,980            MACRS     3,5,7

     The Block at
           Orange               7,091            MACRS      5,7
</TABLE>


ITEM 3.  LEGAL PROCEEDINGS

            None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            None.


                                       45
<PAGE>   46



                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER 
         MATTERS

Market Information

            Our common stock trades on the New York Stock Exchange ("NYSE")
under the symbol "MLS". The following table sets forth the high and low closing
sale prices per share of common stock for the periods indicated as reported on
the NYSE and the distributions per share paid by us with respect to the periods
noted.

<TABLE>
<CAPTION>

                                                                                    HIGH        LOW           DISTRIBUTIONS
                                                                                    ----        ---           -------------
1998
<S>                                                                              <C>            <C>              <C>    
First Quarter..............................................................      $27  1/4       $23  11/16       $ .4825
Second Quarter.............................................................       26  9/16       23  3/16          .4875
Third Quarter..............................................................       27  3/16       19  3/8           .4875
Fourth Quarter.............................................................       22  1/2        18  5/8           .4875

1997:

First Quarter..............................................................      $26  1/4       $23  1/2         $ .4725
Second Quarter.............................................................       27  11/16      24  3/4           .4725
Third Quarter..............................................................       28  7/8        25  5/8           .4725
Fourth Quarter.............................................................       28             23  7/8           .4725
</TABLE>

            The last reported closing sale price on the NYSE on March 26, 1999
was $17.3125 per share. As of March 26, 1999, there were 24,139,317 shares of
our common stock outstanding, held by 895 holders of record (including
763,091 shares issued to the Operating Partnership and held in escrow to
secure specific obligations pursuant to a settlement agreement with Chelsea GCA
Realty and Simon Property; see "Management's Discussion and Analysis of 
Financial Condition and Results of Operations--Liquidity and Capital 
Resources--Development, Remerchandising and Expansion.").

Distributions

            We have made consecutive quarterly distributions since our
initial public offering. The indicated annual distribution rate was $1.95 per
share of common stock based on the fourth quarter 1998 distribution. A portion
of our distribution may represent a non-taxable return of capital and/or a
capital gain dividend. Approximately 40% of 1998 distributions of $1.95 per
share of common stock were a non-taxable return of capital. Approximately 1% of
1998 distributions were capital gain dividends. In 1999, we increased our annual
distribution rate to $2.01 per share of common stock commencing with our
dividend for the first quarter of 1999 which is payable in April 1999. Our
ability to make distributions depends on a number of factors, including net cash
provided by operating activities, financial condition, capital commitments, debt
repayment schedules and such other factors, as the Board of Directors deems
relevant.

            Holders of common stock are entitled to receive distributions when,
as and if declared by the Board of Directors out of any funds legally available
for that purpose. As a REIT, we are required to distribute annually to our
shareholders at least 95% of its "real estate investment trust taxable income,"
which, as defined by the relevant tax statutes and regulations, is generally
equivalent to net taxable ordinary income.


                                       46
<PAGE>   47


ITEM 6.  SELECTED FINANCIAL DATA

            Information with respect to Selected Financial Data is incorporated
herein by reference to the information appearing in our 1998 Annual Report to
Shareholders under the caption "Selected Consolidated Financial Data."

ITEM 7. AND 7A.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS AND QUANTITATIVE AND QUALITATIVE DISCLOSURES
        ABOUT MARKET RISK 

            Information with respect to Management's Discussion and Analysis of
Financial Condition and Results of Operations is incorporated herein by
reference to the information appearing in our 1998 Annual Report to Shareholders
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

            Information with respect to Financial Statements and Supplementary
Data are set forth in Item 14 of this report and are hereby incorporated by
reference to the information appearing in our 1998 Annual Report to Shareholders
under the caption "Consolidated Financial Statements."

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE

            None.



                                       47
<PAGE>   48


                                   PART III

         ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

            The directors and executive officers of the Company and their
positions and offices as of February 28, 1999 are set forth in the following
table: 

<TABLE>
<CAPTION>

NAME                                             AGE       POSITION AND OFFICES HELD
----                                             ---       -------------------------
<S>                                              <C>       <C>                                                        
Laurence C. Siegel...........................    46        Chairman of the Board, Chief Executive Officer and Director
Peter B. McMillan............................    51        President, Chief Operating Officer and Director
Judith S. Berson.............................    56        Executive Vice President - Specialty Leasing
James F. Dausch..............................    56        Executive Vice President - Development and Director
Kent S. Digby................................    46        Executive Vice President - Management/Marketing
Kenneth R. Parent............................    38        Executive Vice President - Finance and Chief Financial Officer
Thomas E. Frost..............................    46        Senior Vice President, General Counsel and Secretary
Thomas M. Hindert............................    45        Senior Vice President - Real Estate
Steven J. Jacobsen...........................    43        Senior Vice President - Development
Terrence W. LaPier...........................    45        Senior Vice President - International Development
Mark J. Rivers...............................    33        Senior Vice President - Anchor Leasing
James P. Whitcome............................    52        Senior Vice President - Capital Services
Dietrich von Boetticher......................    57        Vice Chairman and Director
John M. Ingram...............................    63        Vice Chairman and Director
Charles R. Black, Jr.........................    51        Director
James C. Braithwaite.........................    58        Director
The Hon. Joseph B. Gildenhorn................    69        Director
Peter A. Gordon..............................    57        Director
Harry H. Nick................................    57        Director
Franz von Perfall............................    57        Director
Robert P. Pincus.............................    52        Director
Cristina L. Rose.............................    52        Director
</TABLE>

            Peter A. Gordon, 57, has been a director of the Company since April
1994. Since 1992, Mr. Gordon has been the general partner of Ethos Capital
Management, Inc., an international investment company. From 1971 to 1992, Mr.
Gordon was employed by the investment bank of Salomon Brothers where he
eventually served as Managing Director of International Corporate Finance. Mr.
Gordon is a member of the Audit Committee of the Board of Directors.

            Biographical summaries of the remaining directors and executive
officers of the Company are included under the caption "Board of Directors" and
"Executive Officers," respectively, in our proxy statement for the 1999 Annual
Meeting of Shareholders and are incorporated herein by reference. Information
required by Item 405 of Regulation S-K is included under the caption "Section
16(a) Beneficial Ownership Reporting Compliance" in our proxy statement for the
1999 Annual Meeting of Shareholders and is incorporated herein by reference.


                                       48
<PAGE>   49


ITEM 11.  EXECUTIVE COMPENSATION

            Information with respect to executive compensation is incorporated
herein by reference to the information under the captions "Compensation of
Directors" and "Executive Compensation" in our proxy statement for the 1999
Annual Meeting of Shareholders.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

            Information with respect to security ownership of certain beneficial
owners and management of the Company is incorporated herein by reference to the
information under the caption "Voting Securities and Principal Holders Thereof"
in our proxy statement for the 1999 Annual Meeting of Shareholders.

ITEM 13.  CERTAIN TRANSACTIONS WITH RELATED PARTIES

            Information with respect to certain relationships and transactions
is incorporated herein by reference to the information under the caption
"Certain Relationships and Transactions" in our proxy statement for the 1999
Annual Meeting of Shareholders.


                                       49
<PAGE>   50
                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS AND FORM 8-K

14(a)        LIST OF DOCUMENTS FILED AS PART OF FORM 10-K

             (1)         FINANCIAL STATEMENTS

                         Report of Independent Auditors
                         Consolidated Balance Sheets
                         Consolidated Statements of Operations
                         Consolidated Statements of  Stockholders' Equity
                         Consolidated Statements of Cash Flows
                         Notes to Consolidated Financial Statements

             (2)         FINANCIAL STATEMENTS SCHEDULES                   Page
                                                                          ----
                         Schedule III - Consolidated Real Estate and       
                         Accumulated Depreciation                          F-1 
                         Notes to Schedule III                             F-2 

      All other schedules for which provision is made in the applicable
      accounting regulations of the Securities and Exchange Commission are not
      required under the related instructions, are included in the consolidated
      financial statements or are inapplicable and therefore have been omitted.

             (3)         EXHIBITS

<TABLE>
<CAPTION>
                  NUMBER  EXHIBIT
                  ------  -------
<S>               <C>     <C>
                    +3.1  Amended and Restated Certificate of Incorporation of the Company.

                    +3.2  Amended and Restated Bylaws of the Company

                   **3.3  Limited Partnership Agreement of the Operating Partnership (filed as part of Exhibit 10.3)

                    *4.1  Specimen Common Stock Certificate of Company 

                    *4.2  Agreement dated March 15, 1994, among Richard L. Kramer, the A.J. 1989 Trust, the Irrevocable 
                          Intervivos Trust for the Benefit of the Kramer Children, the N Street Investment Trust, Equity 
                          Resources Associates, Herbert S. Miller, The Mills Corporation and The Mills Limited Partnership 
                          (filed as Exhibit 10.19)

                   **4.3  Non-Affiliate Registration Rights and Lock-Up Agreement

                   **4.4  Affiliate Registration Rights and Lock-Up Agreement

                   *10.1  Form of Employee Non-Compete/Employment Agreements

                  ++10.2  1994 Executive Equity Incentive Plan

                  **10.3  Limited Partnership Agreement of Operating Partnership 
</TABLE>


                                       50
<PAGE>   51
<TABLE>
<CAPTION>
                  NUMBER  EXHIBIT
                  ------  -------
<S>               <C>     <C>                                                                                       
                   *10.4  Form of Noncompetition Agreement between the Company, the Operating Partnership and each 
                          of Kan Am and the Kan Am Partnerships

                   *10.5  Form of Noncompetition Agreement with Kan Am Directors 

                   *10.6  Trust and Servicing Agreement, dated as of December 1, 1993, among Sawgrass Finance L.L.C., 
                          as depositor, The First National Bank of Chicago, as servicer, and State Street Bank and Trust 
                          Company, as Trustee

                   *10.7  Amended and Restated Mortgage, Security Agreement, Assignment of Lessee and Rents and 
                          Fixture filing, dated as of December 1, 1993, by Sunrise Mills Limited Partnership, 
                          as mortgagor, in favor of Sawgrass Finance L.L.C., as mortgagee

                   *10.8  Assignment of Leases and Rents, dated as of December 1, 1993, between Sunrise Mills Limited 
                          Partnership and Sawgrass Finance L.L.C.

                   *10.9  Assignment of Note, Mortgage, and Assignment of Rents dated as of December 21, 1993, by Sawgrass Finance
                          L.L.C. in favor of State Street Bank & Trust Co.

                   *10.10 Agreement dated March 15, 1994 among Richard L. Kramer, the A.J. 1989 Trust, the Irrevocable Intervivos
                          Trust for the Benefit of the Kramer Children, the N Street Investment Trust, Equity Resources 
                          Associates, Herbert S. Miller, The Mills Corporation and The Mills Limited Partnership

                  *10.11  Form of Indemnification Agreement between the Company and each of its Directors and Executive Officers

                ***10.12  First Amendment to Trust and Servicing Agreement (Exhibit 10.7) dated as of June 1, 1995, among Sawgrass
                          Finance L.L.C., as depositor, The First National Bank of Chicago, as servicer, and State Street Bank and 
                          Trust Company, as trustee.  

                ***10.13  Prepayment Premium Agreement dated as of June 1, 1995, between The Mills Limited Partnership
                          and State Street Bank and Trust Company, as trustee.

               ****10.14  Second Amendment and Restated Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing
                          by Potomac Mills-Phase III (MLP) Limited Partnership and Washington Outlet Mall (MLP) Limited
                          Partnership, collectively, as Grantor to R. Eric Taylor, a resident of Fairfax County, Virginia as Deed
                          Trustee for the benefit of CS First Boston Mortgage Capital Corp., as Beneficiary dated as of 
                          December 17, 1996.

               ****10.15  Form of Assignment of Leases and Rents and Security Deposits dated as of December 17, 1996 by Potomac
                          Mills-Phase III (MLP) Limited Partnership and Washington Outlet Mall (MLP) Limited Partnership to CS
                          First Boston Mortgage Capital Corp (see Exhibit 10.53).

               ****10.16  Mortgage Security Agreement, Assignment of Rents and Fixture Filing by Gurnee Mills (MLP) Limited 
                          Partnership to CS First Boston Mortgage Capital Corp., as Mortgagee dated as of December 17, 1996

               ****10.17  Form of Assignment of Leases and Rents and Security Deposits dated as of December 17, 1996 by Gurnee 
                          Mills (MLP)Limited Partnership to CS First Boston Mortgage Capital Corp.

               ****10.18  Trust and Servicing Agreement dated as of December 17, 1996 among Potomac Gurnee Finance Corp., as 
                          Depositor, AMRESCO Management, Inc., as Servicer, ABN AMRO Bank NY, as Fiscal Agent and LaSalle National
                          Bank as Trustee.
</TABLE>


                                       51
<PAGE>   52
<TABLE>
<CAPTION>
                  NUMBER  EXHIBIT
                  ------  -------
<S>               <C>     <C>                                    
                  # 13.1  Selected Consolidated Financial Data

                  # 13.2  Management's Discussion and Analysis of Financial Condition and Results of Operations

                  # 13.3  Consolidated Financial Statements

                  # 21.1  List of Subsidiaries of the Registrant

                  #   23  Consent of Ernst & Young LLP, Independent Auditors

                  # 27.1  Financial Data Schedule

 </TABLE>

----------------------

*           Incorporated by reference to the Registrant's Registration Statement
            on Form S-11, Registration No. 33-71524, which was declared
            effective by Securities and Exchange Commission on April 14, 1994.

**          Incorporated by reference to the Registrant's Quarterly Report on
            Form 10-Q for the first quarter ended March 31, 1994.

***         Incorporated by reference to the Registrant's Quarterly Report on
            Form 10-Q for the second quarter ended June 30, 1995.

****        Incorporated by reference to the Registrant's Quarterly Annual
            Report on Form 10-Q for the third quarter ended September 30, 1996

+           Incorporated by reference to the Registrant's Quarterly Report on
            Form 10-Q for the second quarter ended June 30, 1997.

++          Incorporated by reference to the Registrant's Quarterly Report on
            Form 10-Q for the second quarter ended September 30, 1997.

#           Filed herewith.

14(b)                   REPORTS ON FORM 8-K

            The Company filed one report on Form 8-K during the last quarter of
the year ended December 31, 1998.

            The Company's Current Report on Form 8-K dated June 30, 1998 and
filed on November 4, 1998 made available supplemental financial information
concerning the Company, and the properties owned or managed by it as of June 30,
1998, in the form of a Supplemental Information Package.

14(c)                   EXHIBITS

            The list of exhibits filed with this report is set forth in response
to item 14(a)(3). The required exhibit index has been filed with the exhibits.

14(d)                   FINANCIAL STATEMENTS SCHEDULES

            Schedule III - Real Estate and Accumulated Depreciation

            Notes to Schedule III.


                                       52
<PAGE>   53



            Pursuant to the requirements of Section 13 or 15(d) of the
Securities Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 31, 1999.


                                          THE MILLS CORPORATION,

                                          a Delaware corporation

                                          By:      /s/ LAURENCE C. SIEGEL
                                                   -----------------------------
                                                   Laurence C. Siegel
                                                   Chairman of the Board of
                                                   Directors, Chief Executive
                                                   Officer and Director

            Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed by the following persons in the
capacities indicated below on March 31, 1999:

<TABLE>
<CAPTION>
              Name                                                                Title
              ----                                                                -----
<S>                                                                <C>
/s/ LAURENCE C. SIEGEL
-------------------------------                                    Chairman of the Board, Chief Executive
Laurence C. Siegel                                                 Officer and Director (principal executive
                                                                   officer)
/s/ PETER B. MCMILLAN
-------------------------------
Peter B. McMillan                                                  President, Chief Operating Officer and Director

/s/ JAMES F. DAUSCH
-------------------------------
James F. Dausch                                                    Executive Vice-President - Development and Director

/s/ KENNETH R. PARENT
-------------------------------                                    Executive Vice President - Finance and Chief Financial Officer
Kenneth R. Parent                                                  (principal financial officer and principal accounting officer)


-------------------------------
Dietrich von Boetticher                                            Vice Chairman and Director

/s/ JOHN M. INGRAM
-------------------------------
John M. Ingram                                                     Vice Chairman and Director

</TABLE>


<PAGE>   54



<TABLE>
<CAPTION>

<S>                                                               <C>
/s/ CHARLES R. BLACK, Jr.
-------------------------------
Charles R. Black, Jr.                                              Director

/s/ JAMES C. BRAITHWAITE                  
--------------------------------
James C. Braithwaite                                               Director

/s/ JOSEPH B. GILDENHORN     
-------------------------------
Joseph B. Gildenhorn                                               Director

/s/ PETER A. GORDON
--------------------------------
Peter A. Gordon                                                    Director

/s/ HARRY H. NICK
--------------------------------
Harry H. Nick                                                      Director

/s/ FRANZ VON PERFALL
-------------------------------
Franz von Perfall                                                  Director

/s/ ROBERT P. PINCUS
--------------------------------
Robert P. Pincus                                                   Director

/s/ CRISTINA L. ROSE
--------------------------------
Cristina L. Rose                                                   Director

</TABLE>


<PAGE>   55

                            THE MILLS CORPORATION
            SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                               DECEMBER 31, 1998



<TABLE>
<CAPTION>
                                                                        INITIAL COST TO PARTNERSHIP (3)
                                                                      ------------------------------------
                                                                                           BUILDING,
                                                                                           EQUIPMENT
                                                                                              AND
               DESCRIPTION(1)                     ENCUMBRANCES(2)         LAND           IMPROVEMENTS
               --------------                     ---------------         ----           ------------

Mills
<S>                                               <C>                  <C>              <C>                  
   Potomac Mills .........................          $ 158,590             $8,486        $         -
   Sawgrass Mills.........................            145,000             11,194                  -
   Sawgrass Mills Phase II................             18,000              2,556                  -
   Franklin Mills.........................            131,429             15,333                  -
   Franklin Mills Residual................                  -              4,779                  -
   Gurnee Mills...........................            119,432             20,449                  -
   Hunt Club..............................                  -              3,321                  -

Community Centers

   Montgomery Village.....................              8,040                  -                  -
   Germantown Commons.....................             11,747                451                  -
   Mount Prospect Plaza...................              9,408              4,560              3,740
   Butterfield Plaza......................              6,956              1,604                  -
   Western Hills..........................             14,949              2,299              3,785
   Crosswinds.............................              3,943              1,346              4,449
   Gwinnett Marketfair....................             10,259              6,827              2,789
   Fashion Place..........................              4,233              1,853                  -
   West Falls Church......................              3,891                839                  -
   Liberty Plaza..........................              9,869              9,335             14,456
   Cooper's Plaza.........................              8,356                769              7,888

Construction in progress and
  development pre-construction costs.

Corporate.................................            118,080              6,276              2,769
Mainstreet Retail.........................                  -                  -                484
                                                  -----------         ----------          ---------

Totals....................................        $   782,182         $  102,277          $  40,360
                                                  ===========         ==========          =========
</TABLE>

<TABLE>
<CAPTION>


                                                  COST
                                               CAPITALIZED                         GROSS AMOUNT AT WHICH
                                              SUBSEQUENT TO                      CARRIED AT CLOSE OF PERIOD
                                               ACQUISITION         --------------------------------------------------------
                                                BUILDING,                                 BUILDING,
                                                EQUIPMENT              LAND               EQUIPMENT
                                                AND LAND               AND                   AND
               DESCRIPTION(1)                 IMPROVEMENTS         IMPROVEMENTS        IMPROVEMENTS(7)        TOTAL(4) (5)
               --------------                 ------------         ------------        ---------------        ------------
Mills
<S>                                          <C>                  <C>                   <C>                  <C>
   Potomac Mills .........................     $ 157,975          $  41,576             $   124,885           $ 166,461
   Sawgrass Mills.........................       143,623             13,344                 141,473             154,817
   Sawgrass Mills Phase II................        25,632              4,765                  23,423              28,188
   Franklin Mills.........................       165,992             30,917                 150,408             181,325
   Franklin Mills Residual................       (4,079)                700                       -                 700
   Gurnee Mills...........................       181,182             36,982                 164,649             201,631
   Hunt Club..............................       (3,152)                169                       -                 169

Community Centers

   Montgomery Village.....................        13,748              5,620                   8,128              13,748
   Germantown Commons.....................        13,291              2,074                  11,668              13,742
   Mount Prospect Plaza...................        11,237              4,221                  15,316              19,537
   Butterfield Plaza......................         9,626              2,419                   8,811              11,230
   Western Hills..........................        15,088              3,668                  17,504              21,172
   Crosswinds.............................         1,378              1,633                   5,540               7,173
   Gwinnett Marketfair....................         7,548              8,030                   9,134              17,164
   Fashion Place..........................         8,818              2,088                   8,583              10,671
   West Falls Church......................         6,759              1,803                   5,795               7,598
   Liberty Plaza..........................         2,884              8,628                  18,047              26,675
   Cooper's Plaza.........................           800                769                   8,688               9,457

Construction in progress and
  development pre-construction costs.             28,987                  -                  28,987              28,987

Corporate.................................        10,557              8,807                  10,795              19,602
Mainstreet Retail.........................           311                  -                     795                 795
                                               ---------          ---------              ----------           ---------

Totals....................................     $ 798,205          $ 178,213              $  762,629           $ 940,842
                                               =========          =========              ==========           =========
</TABLE>



<TABLE>
<CAPTION>

                                               ACCUMULATED           DATE             USEFUL
               DESCRIPTION(1)                 EPRECIATION(6)       ACQUIRED          LIFE(8)
               --------------                 --------------       --------          -------

Mills                                                             
<S>                                          <C>                  <C>                 <C>
   Potomac Mills .........................        $42,403            1983
   Sawgrass Mills.........................         35,527            1986
   Sawgrass Mills Phase II................          2,018            1993
   Franklin Mills.........................         42,460            1986
   Franklin Mills Residual................              -            1986
   Gurnee Mills...........................         48,899            1988
   Hunt Club..............................              -            1988

Community Centers

   Montgomery Village.....................          3,190            1980
   Germantown Commons.....................          4,867            1980
   Mount Prospect Plaza...................          5,433            1985
   Butterfield Plaza......................          3,421            1982
   Western Hills..........................          6,501            1981
   Crosswinds.............................          2,672            1981
   Gwinnett Marketfair....................          3,537            1986
   Fashion Place..........................          4,300            1985
   West Falls Church......................          2,998            1982
   Liberty Plaza..........................          1,878            1994
   Cooper's Plaza.........................          1,098            1994

Construction in progress and
  development pre-construction costs.                             various

Corporate.................................          3,137         various
Mainstreet Retail.........................            427            1995

                                                ---------

Totals....................................      $ 214,766
                                                =========
</TABLE>


                                      F-1
<PAGE>   56
                            THE MILLS CORPORATION
                            NOTES TO SCHEDULE III
                              DECEMBER 31, 1998
                                      
(1)     The Company owns super-regional, value and entertainment oriented malls
        ("Mills") and community shopping centers ("Community Centers"). The
        geographic location of the Mills and Community Centers are as follows:

<TABLE>
<CAPTION>
              PROPERTY NAME                                                     LOCATION
              -------------                                                     --------

              MILLS:
<S>           <C>                                                          <C>    
              Franklin Mills.................................................Philadelphia, PA
              Franklin Mills - Residual......................................Philadelphia, PA
              Gurnee Mills.........................................................Gurnee, IL
              Hunt Club............................................................Gurnee, IL
              Potomac Mills....................................................Woodbridge, VA
              Sawgrass Mills......................................................Sunrise, FL
              Sawgrass Mills - Phase II...........................................Sunrise, FL

              COMMUNITY CENTERS:
              Butterfield Plaza.............................................Downers Grove, IL
              Cooper's Plaza.....................................................Voorhees, NJ
              Crosswinds Center............................................St. Petersburg, FL
              Fashion Place......................................................Columbia, SC
              Germantown Commons...............................................Germantown, MD
              Gwinnett Marketfair..................................................Duluth, GA
              Liberty Plaza..................................................Philadelphia, PA
              Montgomery Village.............................................Gaithersburg, MD
              Mount Prospect Plaza.........................................Mount Prospect, IL
              West Falls Church Outlet Center................................Falls Church, VA
              Western Hills Plaza..............................................Cincinnati, OH
</TABLE>

(2)     See description of mortgage, notes and loans payable in Note 5 of the
        Notes to the Consolidated Financial Statements.

(3)     Initial cost of properties is cost at the end of the calendar year for
        the year of acquisition.

(4)     The aggregate cost of land, land held for sale, buildings, improvements,
        equipment and tenant improvement for federal income tax basis is
        $943,849 at December 31, 1998.

(5)     Reconciliation of real estate and development assets, excluding
        investment in unconsolidated joint ventures

<TABLE>
<CAPTION>
                                                                   1998             1997             1996
                                                                   ----             ----             ----
<S>                                                             <C>              <C>              <C>      
                  Balance at January 1......................    $ 922,768        $ 880,933        $ 880,150
                  Acquisitions..............................       49,303           69,535           23,177
                  Retirements...............................      (18,121)            (760)          (1,618)
                  Other.....................................      (13,108)         (26,940)         (20,776)
                                                                ---------        ---------        ---------

                  Balance at December 31....................    $ 940,842        $ 922,768        $ 880,933
                                                                =========        =========        =========

(6)     Reconciliation of accumulated depreciation

                                                                   1998             1997             1996
                                                                ---------        ---------        ---------

                  Balance at January 1......................    $ 206,357        $ 179,658        $ 152,713
                  Additions charged to costs and expenses...       26,504           26,799           27,724
                  Removal of accumulated depreciation.......      (18,095)            (100)            (779)
                                                                ---------        ---------        ---------

</TABLE>



                                       F-2

<PAGE>   57

<TABLE>
<S>                                                             <C>              <C>              <C>
                  Balance at December 31....................    $ 214,766        $ 206,357        $ 179,658
                                                                =========        =========        =========
</TABLE>

(7)     In 1991, the city of Sunrise, Florida issued municipal bonds in the
        amount of $24,730 and reimbursed a partnership for costs of public works
        which amounted to approximately $21,000. Costs previously capitalized to
        income producing property were reduced upon reimbursement.

        In 1991, a note receivable of $5,925 was recorded pursuant to
        reimbursement and annexation agreements with the Village of Gurnee to
        reimburse the Company that owns Gurnee Mills for the cost of certain
        public improvements. The Village of Gurnee has executed a noninterest
        bearing note for $15,000, amended to $17,500 in 1996, to be paid from
        taxes collected from the tenants of the shopping mall during a ten-year
        period, amended to a thirteen year period in 1996, beginning one year
        after the mall opened. The note was recorded in 1991, based on the
        estimated taxes to be collected by the Village of Gurnee from the
        tenants using a discount rate of 10%.

(8)     Depreciation is computed based upon the following estimated lives:

<TABLE>
<S>                                                                      <C>      
                  Building and improvements..............................................................40 years
                  Land improvements......................................................................20 years
                  Equipment...............................................................................7 years
                  Tenant improvements....................................Lesser of life of asset or life of lease
</TABLE>

                                       F-3