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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-K

|ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2001

or

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number 1-12994

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

DELAWARE(State or other jurisdiction of
incorporate or organization)

52-1802283(I.R.S. Employer Identification No.)1300 WILSON BOULEVARD, SUITE 400
ARLINGTON, VA(Address of principal executive office)

22209(Zip Code)


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

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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 ý    No o

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

As
of March 25, 2002 the aggregate market value of the 30,490,933 shares of common stock held by non-affiliates of the registrant was $845,818,481 based upon the
closing price ($27.74) 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; such exclusion shall not be deemed to constitute an admission that any such person is an "affiliate" of the registrant.) As of
March 25, 2002, there were 30,490,933 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's proxy statement for the annual shareholders meeting to be held in 2002 are incorporated by reference into Part III.

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THE MILLS CORPORATION    Annual Report on Form 10-K  December 31, 2001    TABLE OF CONTENTS

|PART I     |  | 3                                                                                    
|---------- |  | -------------------------------------------------------------------------------------
|Item 1.    |  | Business                                                                             
|           |  | Risk Factors                                                                         
|Item 2.    |  | Properties                                                                           
|Item 3.    |  | Legal Proceedings                                                                    
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                  
|PART II    |  | 58                                                                                   
|Item 5.    |  | Market for the Registrant's Common Equity and Related Stockholder Matters            
|Item 6.    |  | Selected Financial Data                                                              
|Item 7.    |  | Management's Discussion and Analysis of Financial Condition and
Results of Operations
|Item 7A.   |  | Quantitative and Qualitative Disclosures About Market Risk                           
|Item 8.    |  | Financial Statements and Supplementary Data                                          
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 
|PART III   |  | 84                                                                                   
|Item 10.   |  | Directors and Executive Officers of the Registrant                                   
|Item 11.   |  | Executive Compensation                                                               
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management                       
|Item 13.   |  | Certain Relationships and Related Transactions                                       
|PART IV    |  | 85                                                                                   
|Item 14.   |  | Exhibits, Financial Statements, Schedules and Reports on Form 8-K                    
|SIGNATURES |  | 89                                                                                   

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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 and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on
current expectations and are not guarantees of future performance.

Forward-looking
statements, which can be identified by the use of forward-looking terminology such as "may," "will," "expect," "anticipate," "estimate," "would be," or "continue" or the
negative thereof or other variations thereon or comparable terminology are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected.
Among those risks, trends and uncertainties are the general economic climate; the supply and demand for retail properties; interest rate levels; the availability to the Company of financing for its
development projects; and other risks associated with the development, acquisition, and operation of retail properties, including risks that the development of the project may not be completed on
schedule, that the Company may not be able to lease available space to tenants at favorable rental rates, that tenants will not take occupancy or pay rent in accordance with their leases, or that
development or operating costs may be greater than anticipated, as well as those risks described in the section entitled "Risk Factors" beginning on page 19 of this Form 10-K.

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

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, acquire, expand and manage a portfolio currently consisting of 12 super-regional, retail and entertainment-oriented centers (the "Mills"),
two community shopping centers (the "Community Centers"), one urban entertainment/retail project (the "Block"), a portfolio of 46 single tenant net lease properties subject to net leases that operate
as CVS pharmacies ("Net Lease Properties") and other related commercial development. We are a fully-integrated, self-managed real estate investment trust (a "REIT") with approximately
1,357 employees as of December 31, 2001 and provide all development, redevelopment, leasing, financing, management and marketing services with respect to all properties currently in operation.
The Mills, Block and Community Centers comprise the primary focus of our operations, with approximately 18.3 million square feet of gross leaseable area ("GLA") in eleven 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 a publicly traded company on
April 21, 1994. We have authorized 150,000,000 shares of common stock, par value $0.01 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, 2001, there were 28,782,255 shares of common stock outstanding including 319,329 shares of
common stock issued to the Operating Partnership and held in escrow to secure specific obligations pursuant to a settlement agreement entered into with Chelsea GCA Realty Partnership, L.P. and Simon
Property Group, L.P. in October 1998. (The escrowed shares have been released in conjunction with the final payment made in

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January 2002.) Additionally, there were 750,000 shares of series A cumulative convertible preferred stock outstanding. We are the sole general partner of the Operating Partnership and
currently own 62.89% 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). Each partnership unit of the Operating Partnership (other than those owned by us) is exchangeable under specified circumstances, at our option, for the cash equivalent of a share of our
common stock or for 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 holds, directly or indirectly, 100% of the equity interests in the entities that own Potomac Mills, Franklin Mills, Sawgrass Mills (Phases I and II and as of
October, 2001, The Oasis at Sawgrass), Gurnee Mills, Liberty Plaza, Concord Mills Marketplace and the 46 Net Lease Properties. The Operating Partnership also owns, directly or indirectly, an equity
interest in the joint venture entity that
owns Arizona Mills and varying partnership interests in the joint venture entities that own Ontario Mills, Grapevine Mills, The Block at Orange, Concord Mills, Katy Mills, Opry Mills, Arundel Mills
and Discover Mills. Our partnership interests in the joint venture entities give us the right, among others, to receive, after preferential payments on unreturned capital contributions generally, a
percentage of net operating cash flow generated by a particular property and a percentage of net proceeds following the occurrence of a major capital event, such as the sale of the real property or
the project or the receipt of proceeds arising from condemnation of the project. For a description of our partnership interests for existing properties generally, see "Item 2.
PropertiesDescription of Existing Properties." The Operating Partnership has formed other joint ventures to develop additional properties. We have similar partnership interests under
these joint venture agreements and we anticipate that we will have similar partnership interests under future joint venture agreements. For a description of our partnership interests for properties
under development, see "Mills Under ConstructionDevelopment Pipeline."

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 wholly-owned projects, and (ii) MillsServices Corp. ("MSC"), which provides leasing and management services to our joint
venture projects and provides development services for our properties and new properties acquired by us. The Operating Partnership owns 100% of the interests in Management Associates Limited
Partnership and 100% of the voting common stock of MSC. Prior to August 2001, the Operating Partnership owned 5% of the voting common stock and 99% of the non-voting preferred stock
of MSC. Through its ownership of 99% of MSC's non-voting preferred stock, the Operating Partnership had the perpetual right to receive 99% of the economic benefits (i.e. cash flows)
generated by MSC's operations. The Company provides all of the operating capital of MSC. The two individuals who had contributed nominal amounts of equity of MSC for 95% of MSC's voting common shares
and 1% of MSC's preferred stock, were officers and directors of both MSC and the Company. These two individuals' interests were aligned with the interests of the Company's management. Also, all of
MSC's Board members were also Board members of the Company. All of these factors resulted in the Company having a controlling financial interest in MSC, and accordingly, the operations of MSC were
consolidated by the Company prior to August 2001. In August 2001, the Operating Partnership acquired 95% of MSC's voting common stock and 1% of MSC's non-voting preferred
stock that it did not then own for fair market value, totaling $170,000.

MSC
also owns 100% of Mills Enterprises, Inc. ("MEI"), an entity that holds investments in retail joint ventures, such as its investment in 60% of FoodBrand L.L.C., the Company's
food and beverage entity that was created in 1999 to master lease, manage and operate food courts and restaurants at the Company's malls. FoodBrand has existing operations at Katy Mills, Opry Mills,
Arundel Mills and Discover Mills and will have operations at our future projects under development.

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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. The information on our web site is not, and should not be considered to be a part of this Form 10-K.

Our Portfolio

The following table sets forth a summary of our operating properties as of December 31, 2001:

|NAME                     |                           | LOCATION AND
METROPOLITAN AREA SERVICED |                                       | YEAR
OPENED/
ACQUIRED |      | APPROX.
GLA
(SQ. FT.)(1) |            | NO. OF ANCHOR
STORES (2)
|------------------------ | ------------------------- | --------------------------------------- | ------------------------------------- | --------------------- | ---- | ------------------------ | ---------- | ------------------------
|MILLS                    |                           |                                         |                                       |                       |      |                          |            |                         
|                         | Arizona Mills             |                                         | Phoenix, AZ                           |                       | 1997 |                          | 1,227,442  |                         
|                         | Arundel Mills             |                                         | Baltimore, MD/ Washington, DC         |                       | 2000 |                          | 1,162,718  |                         
|                         | Concord Mills             |                                         | Charlotte, NC                         |                       | 1999 |                          | 1,247,394  |                         
|                         | Discover Mills            |                                         | Atlanta, GA                           |                       | 2001 |                          | 1,088,277  |                         
|                         | Franklin Mills            |                                         | Philadelphia, PA/Wilmington, DE       |                       | 1989 |                          | 1,738,627  |                         
|                         | Grapevine Mills           |                                         | Dallas/Ft. Worth, TX                  |                       | 1997 |                          | 1,545,739  |                         
|                         | Gurnee Mills              |                                         | Chicago, IL/Milwaukee, WI             |                       | 1991 |                          | 1,577,196  |                         
|                         | Katy Mills                |                                         | Houston, TX                           |                       | 1999 |                          | 1,189,772  |                         
|                         | Ontario Mills             |                                         | Los Angeles, CA                       |                       | 1996 |                          | 1,455,398  |                         
|                         | Opry Mills                |                                         | Nashville, TN                         |                       | 2000 |                          | 1,112,587  |                         
|                         | Potomac Mills             |                                         | Washington, DC/Baltimore, MD          |                       | 1985 |                          | 1,635,061  |                         
|                         | Sawgrass Mills            |                                         | Fort Lauderdale/Miami/Palm Beach, FL  |                       | 1990 |                          | 1,844,508  |                         
|                         | The Oasis at Sawgrass     |                                         | Fort Lauderdale/ Miami/Palm Beach, FL |                       | 1999 |                          | 287,372    |                         
|
|MILLS TOTALS             |                           |                                         |                                       |                       |      | 17,112,091               |            | 202                     
|
|THE BLOCK                |                           |                                         |                                       |                       |      |                          |            |                         
|                         | The Block at Orange       |                                         | Los Angeles/Orange County, CA         |                       | 1998 |                          | 655,368    |                         
|
|COMMUNITY CENTERS        |                           |                                         |                                       |                       |      |                          |            |                         
|                         | Liberty Plaza             |                                         | Philadelphia, PA                      |                       | 1994 |                          | 373,754    |                         
|                         | Concord Mills Marketplace |                                         | Charlotte, NC                         |                       | 2001 |                          | 119,848    |                         
|
|COMMUNITY CENTERS TOTALS |                           |                                         |                                       |                       |      | 493,602                  |            | 5                       
|
|                         | TOTALS                    |                                         |                                       |                       |      |                          | 18,261,061 |                         
|

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The following is a brief description of the two types of real estate projects in our portfolio:

Mills.Mills are the primary focus of our operations. A typical Mills contains 175 to 200 specialty tenants and 12 to 22
anchor tenants, and averages approximately 1.4 million square feet of gross leaseable 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. The following list is representative of our tenants:

DEPARTMENT STORES

SPECIALTY STORES

MANUFACTURERS OUTLETSOff 5th-Saks Fifth Avenue
Last Call-Neiman Marcus
Nordstrom Rack

Build a Bear
Bath & Body Works
The Limited Too

Ralph Lauren/Polo
Liz Claiborne
Tommy Hilfiger


OFF-PRICE RETAILERS

CATALOG RETAILERSBenetton Outlet
Banana Republic Factory Store
Bebe Outlet

J. Crew
L.L. Bean
J.C. Penney Catalog Outlet


CATEGORY KILLERS

ENTERTAINMENT VENUESBed, Bath & Beyond
Books-A-Million
Bass Pro Shops Outdoor World

AMC Theatres
Jillian's
ESPN Skate Park


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 or greater and a market with steady tourist appeal. The prototypical physical layout is a "race track" format of stores on one level with ample non-decked
parking. We believe shoppers of Mills can generally be characterized as follows:



Other Retail Formats.We are continuing to explore the feasibility of alternative retail formats that will serve the unique
needs of target markets such as major university towns, dense suburban areas and large city centers. With the opening of The Block at Orange in 1998, we created a new retail format consisting of an
open-air urban mainstreet atmosphere combining both entertainment (with themed restaurants, theatres and other interactive attractions) with distinctive retail concepts such as Van's Skate
Park, and a clothing/shoe store. The Company's continues to strengthen its position in the retail development industry leveraging the Mills concept with a powerful blend of shopping, entertainment,
dining and recreation. We are creating synergies with the optimum retail concepts including office, hotel and convention facilities into our Meadowlands Mills project.

In
2001, Mills began construction on its first European venture Madrid Xanadu. This new full-price retail format will contain the largest retailer in Spain, El Corte Ingles, (an anchor
tenant, with

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350,000 square feet of department store space), and will have as its centerpiece the Snow Dome which will consist of a 17-story indoor ski and snowboarding slope, the first of its kind in Spain.

In
addition to opening the Discover Mills in November of 2001 the Company negotiated its first naming rights deal with Discover Financial Services. Under the ten-year,
multi-million dollar agreement, the Discover Card is the preferred method of payment at Discover Mills with special incentives and benefits for cardholders. This deal creates business synergies that
will generate incremental revenue and leverage the Company's branding and marketing positioning for the next ten years.

Competitive Advantages

All Mills are located in areas which have other shopping centers and retail facilities. The amount of rentable retail space in the vicinity of a Mills could have
an effect on the amount of rent we charge and on our ability to rent vacant space and/or renew leases of the Mills. In addition, Mills compete with numerous shopping alternatives as retailers
themselves face increasing competition from discount shopping centers, outlet malls, discount shopping clubs, direct mail, internet sales and telemarketing. However, we believe that the Mills have a
number of inherent competitive advantages over other retail formats in operation today, and that these advantages have resulted in 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 over 175 stores and 1.4 million
square feet of gross leaseable 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 that people are attracted to our distinctive mix of tenants, which mix includes 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 in operation during 2001 are among the top tourist destinations in their respective states. On average,
each of our Mills projects attract 18 million visitors per year and each of our Mills projects are visited by more than 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 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
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 maintenance costs are a result of several factors, including:



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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 flexibility makes it easier for us to make room for new and 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.

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MILLS UNDER CONSTRUCTION

Development Pipeline

Projects Under Construction.We currently have two projects under construction, comprising approximately 2.4 million
square feet of new gross leaseable area. Estimated total development cost for these projects is approximately $391 million. The estimated development costs will be funded through construction
financing proceeds and joint venture partner and our equity contributions. The following table sets forth certain information with regard to these projects:

|Name/Location               |  | Metropolitan
Area Serviced |  | Anticipated
Opening
Date (1) |  | Approximate GLA
(Sq. Ft.)
(1)(2) |  | Estimated
Aggregate Project
Cost (1)
(millions) |     | Required Equity
from Company
(millions) |   | Company's Equity
at 12/31/01
(millions) |     | Anchor Store
Tenant
Commitments
|--------------------------- |  | -------------------------- |  | ---------------------------- |  | -------------------------------- |  | ----------------------------------------------- | --- | --------------------------------------- | - | --------------------------------------- | --- | -------------------------------
|Colorado Mills
Lakewood, CO |  | Denver                     |  | Fall 2002                    |  | 1,200,000                        |  | $                                               | 201 |                                         | $ | 26                                      |     | $                              
|Madrid Xanadu
Madrid, Spain |  | Madrid                     |  | Spring 2003                  |  | 1,200,000                        |  | $                                               | 190 |                                         |   | 54€                                     | (3) | $                              

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

Colorado
MillsLakewood, Colorado. The Colorado Mills project is being constructed on a 130-acre site located in Lakewood, Colorado,
ten miles west of downtown Denver. The project is expected to be 1.2 million square feet. We have commitments from anchor tenants such as Off 5th  Saks Fifth
Avenue, Neiman MarcusLast Call, Target, United Artists, Eddie Bauer, Garts Sports, and Off Broadway Shoes. The Operating Partnership, through Mills-Kan Am Colorado Limited
Partnership, has formed a joint venture with Stevinson Partnership, Ltd. and Greg C. Stevinson (together, "Stevinson"), to be known as Colorado Mills Limited Partnership, to develop the
Colorado Mills project. On April 11, 2001, Stevinson contributed its interest in the Colorado site to Colorado Mills Limited Partnership. Mills-Kan Am Colorado Limited Partnership,
which holds a 75% equity interest in Colorado Mills Limited Partnership, is fully obligated to fund all cash equity requirements for the development of Colorado Mills and will receive a 9% cumulative
preferred return on the first $42.7 million of its equity contributions and a 12% cumulative preferred return on any additional equity contributions. Stevinson, which holds a 25% equity
interest in Colorado Mills Limited Partnership, will receive capital account credit for the negotiated value of the land contributed, and will receive a 9% cumulative preferred return on its capital
account credit. Any remaining cash flow will be distributed pro rata in accordance with ownership interest.

Mills-Kan
Am Colorado Limited Partnership, through which the Operating Partnership will develop and operate its interest in the Colorado Mills project, is a joint venture formed with Kan
Am pursuant to which Kan Am and the Operating Partnership each is required to fund 50% of the total equity
required to develop the Colorado Mills project. The project's equity requirement is $51 million, of which we had funded approximately $16.8 million of our required equity as of
December 31, 2001. Kan Am's invested capital in this project as of December 31, 2001 was $25.5 million.

Under
the terms of the joint venture agreement with Kan Am, Kan Am and the Operating Partnership each will receive on a pro rata basis a cumulative construction period preference and a
priority return during operations equal to 11% per annum on its qualifying equity. Any residual cash flow after preference payments will be distributed 75% to the Operating Partnership and 25% to Kan
Am. The Operating Partnership will guarantee Kan Am's and Stevinson's portion of construction debt

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and Kan Am's preference until qualified permanent financing is secured for the project, except that the amount of preference guaranteed by the Operating Partnership will be reduced to 9% following
the substantial completion and opening of the project. Proceeds from a major capital event, such as the sale of the real property or the project or the receipt of proceeds arising from condemnation of
the project, will be distributed to the partners on a pro rata basis after the return of all capital contributions and the payment of any accrued but unpaid preferences. Commencing with the grand
opening of the project, an affiliate of the Operating Partnership will receive an asset management fee equal to 0.5% of the capital contributions made by Mills-Kan Am Colorado Limited
Partnership to Colorado Mills Limited Partnership, but not to exceed $0.3 million per year.

At
specified times following the fifth anniversary of the project's opening or, if earlier, upon a change in control of the Company, either the Operating Partnership or Kan Am can
exercise a buy-sell right. Pursuant to the buy-sell provision, the Operating Partnership can require Kan Am to sell to the Operating Partnership for cash or limited partnership
units of the Operating Partnership, at Kan Am's election, Kan Am's entire interest in the joint venture entity. Also, pursuant to the buy-sell provision, Kan Am can require the Operating
Partnership to acquire for cash or limited partnership units of the Operating Partnership, at the Operating Partnership's election, Kan Am's entire interest in the joint venture entity. Only Kan Am
may invoke the buy-sell right in the event of a change in control of the Company. Colorado Mills is targeted to open in the fall of 2002.

Madrid
XanaduMadrid, Spain. In August 2001, Mills Global II, LLC (our affiliate) entered into a joint venture agreement with
Parecelatoria De Gonzalo Chacon, S.A. ("PGC"), pursuant to which the parties agreed to establish a joint ventures for the purpose of developing a retail and entertainment center and a joint venture to
develop a snow dome indoor skiing facility on the site. The Madrid Xanadu project is being constructed on an 85-acre site located in the Municipality of Arroyomolinos, within the
Communidad of Madrid and it will be in excess of one million square feet of gross leaseable area. This project will be anchored by a 350,000 square foot combination department store and
hypermarket owned and operated by El Corte Ingles, the largest retailer in Spain. The project will also feature over 200 specialty retailers, including Sweden's Hennes and Mauritz, Italy's Benetton,
and Spain's Zara which have already committed to the project. PGC as the landowner contributed the land to the joint venture, and Mills will contribute the capital in the form of equity to the retail
joint venture. The retail joint venture will then contribute the U.S. dollar equivalent of 14 million British pounds in the form of a repayable tenant allowance loan and equity to the snow dome
joint venture. Mills would own two-thirds of the retail joint venture and one-third of the snow dome joint venture. Mills would receive a 9% preference for its equity
contributed to the retail joint venture, and the retail joint venture will receive 9% interest on the snow dome loan. The repayment of the snow dome loan
would be secured by 75% of cash flow distributable to PGC from the retail joint venture and PGC will receive no distributions from sale or refinancing of the retail center until the snow dome loan is
repaid. All public approvals necessary to commence construction were received and construction has commenced. Madrid Xanadu is targeted to open spring 2003. As of December 31, 2001, we had
invested $28.1 million, including capitalized interest and overhead. Until certain conditions specified in the joint venture agreement have been satisfied (which includes the execution of
certain additional agreements with El Corte Ingles), PGC has the right to purchase the company's interest in the joint venture at a price equal to its third party cost, plus any additional capital
paid into the venture. The Company believes that these conditions will be satisfied by May 31, 2002, but can give no assurance that the conditions will be satisfied by that date.

Projects Under Development.In addition to the two projects currently under construction, we are also actively pursuing other
prospective projects. These projects are in various levels of the due diligence stage during which we determine site/demographic viability, negotiate tenant commitments and work through third-party
approval processes. Consistent with past practice, we will not begin construction on these projects until we have completed our investment due diligence process and have

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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:

St.
Louis MillsSt. Louis, Missouri. In July 2001, we acquired a 200-acre site in Hazelwood, Missouri, for development of St.
Louis Mills. We are in the process of forming a joint venture with Kan Am to contribute one-half of the project's estimated equity to develop the site. The site is located at the northwest
quadrant of State Highway 370 and Missouri Bottom Road, approximately 16 miles from St. Louis and has all required entitlements. Some site work has already been completed. As of December 31,
2001, we had invested $39.8 million including capitalized interest and overhead. We anticipate commencement of construction in spring 2002 and an opening between fall 2003 and spring 2004.

Vaughan
MillsToronto, Ontario. In February 1998, we secured a site for the development of Vaughan Mills, the first Mills project to be
developed in Canada. 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. The project will be developed jointly by an affiliate of the Operating Partnership and by Cambridge Shopping Centres II Limited, as tenants in common. We anticipate that our final equity
requirement for Vaughan Mills may exceed $30 million. As of Deember 31, 2001 we have funded approximately $40.1 million, including capitalized interest and overhead. We anticipate
opening Vaughan Mills between fall 2003 and spring 2004.

Meadowlands
MillsCarlstadt, New Jersey. We have acquired a mortgage interest in a 592-acre site located on the New Jersey turnpike
(I-95) adjacent to Meadowlands Sports Complex and approximately five miles from New York City. Commencement of construction is contingent upon the completion of an ongoing Environmental
Impact Statement and the federal/state permitting process. A Special Area
Management Plan ("SAMP") for the Meadowlands area was published in the Federal Register on April 22, 1999. On July 20, 2000, the U.S. Army Corp of Engineers announced that it had
completed the Draft Environmental Impact Statement on our Section 404 Fill Permit and the period for public comment closed in October 2000. In December 2001, the U.S. Army Corp of
Engineers circulated its Draft Final Environmental Impact Statement to cooperating federal agencies and closed the comment period at the end of January 2002. Completion of the Final
Environmental Impact Statement is the last step before the U.S. Army Corp of Engineers issues its decision on whether to issue a wetlands fill permit.

The
Acting Governor of New Jersey requested in March 2001 that we withdraw our permit applications for the existing site and consider an alternate site in Bergen County. While we
refused this request, we engaged in conversations with State officials considering a redevelopment of the Meadowlands Sports Complex, to consider whether an acceptable alternate site might be defined
for our project. Significant support for this conceptual move has emerged in business, labor and environmental circles, and we have engaged in further discussions with the State of New Jersey to
consider the future of the Meadowlands Sports Complex including recent conversations with the new administration of Governor McGreevey.

The
mixed-use development will consist of 2.0 million square feet of gross leaseable area for Meadowlands Mills, plus office and hotel space. The project would be
developed on an entitled site of 90.5 acres, plus roads and retention facilities. Upon procurement of all necessary entitlements, it is anticipated that the project will be developed by Meadowlands
Mills Limited Partnership, a joint venture entity in which each of the Operating Partnership, Kan Am, Empire Ltd. and Bennett S. Lazare will hold an interest. Currently, the Operating
Partnership and Kan Am are the sole partners in Meadowlands Mills Limited Partnership. Our equity requirement has not yet been determined. As of December 31, 2001, we had invested
$72.7 million, which includes capitalized interest and overhead. Of

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the amount we have invested, $32.2 million is our equity contribution and the balance is an advance to Meadowlands Mills Limited Partnership. Kan Am's invested capital in the project was
$24.0 million as of December 31, 2001.

The
joint venture agreement provides for Kan Am's right to require Meadowlands Mills Limited Partnership to redeem its interest in the joint venture if a construction loan is not
obtained by June 30, 2003. The Operating Partnership and Kan Am each will receive a cumulative construction period preference and a priority return during operations equal to 9% per annum.
Prior to securing qualified permanent financing, the Operating Partnership's construction period preference will be subordinated to Kan Am's construction period preference. Additionally, payment of
the Operating Partnership's construction period preference will be made only from proceeds of the construction loan and only if the terms of the construction loan documentation so permit.

The
Operating Partnership currently guarantees Kan Am's preference. Beginning on the "Project Commencement Date," which is the date on which certain material contingencies have been
satisfied, the Company will guarantee the return of Kan Am's capital contribution upon exercise of its redemption right, and which may occur prior to securing the construction loan. The Operating
Partnership will guaranty Kan Am's portion of construction debt when a construction loan is obtained. The Operating Partnership's guaranty of Kan Am's preference and Kan Am's portion of construction
debt will continue until qualified permanent financing is secured for the project. As of December 31, 2001, Kan Am's unpaid preference was $0.5 million.

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

San
Francisco Piers 27-31San Francisco, California. In April 2001, the San Francisco Port Commission awarded us the exclusive
right to negotiate for a long-term lease on Piers 27-31 on the San Francisco waterfront, in order to develop a full-price mixed-use office, retail,
entertainment and recreation project. These negotiations have begun and are ongoing.

Projects Under Review.In addition to the projects discussed above, we are also conducting due diligence on several other
proposed sites for future projects, including sites in Cleveland, Ohio; Boston, Massachusetts; San Francisco, CA and Tampa, Florida. We continue to evaluate various prospective international sites, in
addition to other domestic sites for Mills-type and other retail oriented 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 expect to grow this aspect of our business significantly during the next few years, subject to tax law limitations applicable to
REITs.

Investing
in Retail and Entertainment Concepts. Historically, many new retail and entertainment concepts have been developed at the Mills. A recent example
is FoodBrand, an entity which was created in 1999 to master lease, manage and operate food courts and restaurants at our malls and that until October 2001 was owned 100% by MEI. In
October 2001, we added a new partner, the Panda Restaurant Group, one of the nation's largest restaurant companies. Initial operations in 1999 existed at Katy Mills and in 2000 the operations
were expanded into Opry Mills and Arundel Mills and Discover Mills operations were added when the mall opened in November 2001. Other opportunities

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for expansion and growth exist at future projects under development. We believe we have additional opportunities for investment in our own development pipeline where we view the risk of food court
operations as similar to our real estate developments but where we expect to earn superior returns.

Capital Strategies

To fund our capital needs, we have generally utilized project specific secured financing, joint venture equity contributions, cash flow from operations, our
$75 million revolving loan and the issuance of preferred and/or common equity. New development is financed with construction loans, tax increment municipal financing and joint venture partner
equity contributions. After project openings, the projects are refinanced with permanent debt generally in the form of non-recourse, fixed rate mortgage debt. The following is a
description of our capital cycle and the various funding sources utilized:

Development
Financing. A typical Mills project costs 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. Our construction loans generally have terms of three years, some
with extension options for an additional two years. Interest rates typically range from 120 to 275 basis points over LIBOR. The construction loans are typically 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." Guarantees are generally reduced incrementally after completion of a project based upon the
achievement of interest coverage ratios (ranging from 1.0 to 1.5).

In
addition to construction debt, we 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 type of 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.

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 revolving loan
and proceeds from any corporate debt or equity offerings.

Permanent
Financing. After a new project opens and stabilizes, which generally occurs within 36 months of opening, we generally refinance the
construction loan with permanent, fixed rate, non-recourse mortgage debt. This debt is usually amortized over 30 years, with anticipated balloon payments due within a five to
ten-year period. 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 have generally achieved
investment grade ratings on the entire refinanced balance. The refinancings of

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Ontario Mills, Grapevine Mills and Arizona Mills are examples of projects that are encumbered by permanent investment grade securitized mortgage loans. As of December 31, 2001, our
indebtedness had a weighted average maturity of 5.83 years and a weighted average interest rate of 6.81%, including our share of funded construction and operating debt of the unconsolidated
joint ventures. 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. Historically these relationships have served as a source of equity for
development projects, mitigated development risk and competition and provided assistance in the identification of new development opportunities and the development and expansion of tenant and lender
relationships. The following is a brief description of our contractual strategic partnerships.

Kan
Am. We have a long-standing relationship with Kan Am, a German syndicator of closed U.S. real estate funds which currently manages about
$700 million in equity for approximately 5,500 German investors. Over the last five years, Kan Am has invested approximately $330 million in equity in various projects with us. To date,
Kan Am has never failed to raise the agreed upon level of capital.

In
addition to its existing investments at the property level, as of December 31, 2001, Kan Am owns approximately 30.7% of the partnership units of the Operating Partnership. Each
unit is exchangeable under specified circumstances, at our option, for the cash equivalent of a share of our common stock or for a share of our common stock. Directors and executive officers of Kan Am
hold three seats on our Board of Directors.

We
are in the process of finalizing documentation with Kan Am pursuant to which Kan Am will commit during 2002 to contribute up to $50 million for investment in qualifying
development projects. Kan Am's contribution commitment will be satisfied by entering into joint venture agreements with us relating to individual projects. It is contemplated that the terms of these
joint venture agreements with Kan Am will be substantially similar to the terms of the joint venture agreement for the Colorado Mills project, which terms are described under "Development
Pipeline- Projects Under Construction,"
although the terms of individual projects may differ from the terms for the Colorado Mills project. We will not be obligated to offer Kan Am the opportunity to participate in development projects on
these terms.

We
also are in the process of finalizing a waiver of the "Ownership Limit" established in our Amended and Restated Certificate of Incorporation as to Kan Am and its affiliates, subject
to limitations established in our Amended and Restated Certificate of Incorporation to preserve our REIT status. This waiver, which is contingent on Kan Am and us entering into a definitive agreement
relating to Kan Am's commitment to contribute additional funds for development projects as described above, also will apply to the initial transferees of Kan Am and its affiliates, subject to
continued compliance by Kan Am with its contribution obligations, to Kan Am's compliance with certain first refusal rights in our favor, and to compliance by Kan Am and its affiliates and such
transferees with the applicable restrictions relating to preservation of our REIT status.

There
can be no assurance that we will enter into a definitive agreement on the terms outlined above or at all. Additionally, Kan Am's contribution commitment obligation would be
contingent on our ability to offer to Kan Am qualifying development projects that satisfy the criteria described in the contribution documentation. Many of the criteria are dependent upon factors that
are not within our control, and therefore we cannot assure you that we will be able to make offers to Kan Am of projects that would require Kan Am to make contributions.

As
of December 31, 2001, Kan Am has property level investments in seven existing projects, Ontario Mills, Grapevine Mills, The Block at Orange, Concord Mills, Katy Mills, Arundel
Mills and

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Discover Mills. In addition, Kan Am is participating with us in our efforts to develop the Meadowlands Mills site near Carlstadt, New Jersey and to construct Colorado Mills to be located near Denver,
Colorado. Currently, we are in the process of forming a joint venture with Kan Am for the development of St. Louis Mills.

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

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. Since entering into this agreement, we have jointly, with Simon Property, developed Ontario Mills in Ontario, California; Grapevine
Mills in Grapevine, Texas; Arizona Mills in Phoenix, Arizona; Concord Mills in Charlotte, North Carolina; and Arundel Mills in Anne Arundel County, Maryland. The agreement generally provides that if
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 a Mills-type project unless it first offers to us the right to participate equally in the 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, acquiring representation on our Board
of Directors 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 (partner in our joint venture that developed Arizona Mills) to jointly
develop four Mills projects during the initial five-year period of the term and a total of seven Mills projects in the ten-year term. The agreement establishes ownership
percentages for each project, and contemplates that the partners will contribute their pro rata share of the equity required for such projects. The agreement requires that each partner approve major
decisions on the venture, and requires the partners to share responsibility for developing, leasing and managing the projects.

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

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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.



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 a high degree of tenant retention. During 2001, for example, 80% of the expiring specialty store gross leaseable 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 step increases and their percentage rent provisions.

Anchor
leases, which generally represent approximately 60% of the gross leaseable 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, 2001, the weighted average
lease maturity for our existing portfolio of leases was 7.5 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.

We
promote our Mills to consumers by spending $1.0 million to $1.5 million annually per Mills on advertising aimed at consumers. Our success in this program is evidenced by
the following:



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Maintenance
of High Standards of Physical Assets. 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 $144.6 million in renovation and expansion projects in our assets from 1996 to 2001.

Development Strategy

Proven Track Record. Since our initial public offering in April 1994, we have developed and opened eight new Mills projects
and one new Block project, adding a total of approximately 11 million square feet of new gross leaseable area to our portfolio at a total cost of approximately $1.9 billion. Each of
these projects was completed in a timely fashion and on budget, with strong occupancy levels as outlined below:

Project

Date Opened

Occupancy at
Opening (1)Ontario Mills

November 1996

91.3%Grapevine Mills

October 1997

91.8%Arizona Mills

November 1997

92.6%The Block at Orange

November 1998

88.5%Concord Mills

September 1999

88.4%Katy Mills

October 1999

91.2%Opry Mills

May 2000

92.4%Arundel Mills

November 2000

87.5%Discover Mills

November 2001

87.7%


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Disciplined
Approach. We intend to complete one to two 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 work, 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:



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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 rent is not paid until the fourth quarter. Furthermore, most new lease-up occurs towards the later part of the year
in anticipation of the holiday season and most vacancies occur toward the beginning of the year. In addition, the majority of 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, although this impact is largely mitigated by recognizing minimum rent on a straight-line basis over the term of related leases in accordance
with GAAP.

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.

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

Insurance.
The tragic events of September 11th have resulted in an increase in insurance and security costs which are anticipated to be
absorbed by the Company's tenants with only a modest impact on common area maintenance costs at each property. Insurance providers have reduced coverage for terrorist attacks from full coverage to a
$100 million per incident maximum, which reduction could impact the loan underwriting process for the Company's future construction loans and the refinancing of the Company's existing debt.
There is a possibility that the Federal government may provide assistance to companies that can no longer can obtain full coverage insurance for terrorist attacks. The Company has not yet assessed
what the impact of a reduction of such coverage will be on the Company as a whole. Except in connection with terrorist attacks, management believes that all of our properties are adequately covered by
insurance.

Tax Status

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

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RISK FACTORS

Described below are risks that we believe are material to our shareholders and to potential investors. You should consider carefully the following material risks
together with the other information contained in and incorporated by reference in this Form 10-K, and the descriptions included in the Company's Consolidated Financial Statements
and accompanying notes, before making a decision to invest in our capital stock.

RISKS ASSOCIATED WITH OUR CAPITAL STOCK

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

For
us to qualify as a REIT, ownership of our capital stock, directly or by virtue of the applicable attribution provisions of the Internal Revenue Code, by any person or persons acting
as a group is limited to 9.225% of our outstanding capital stock. Any transfer that would cause you to violate this 9.225% ownership limit will result in the immediate conversion of the excess shares
into shares of "excess stock" that are non-voting and that may not participate in distributions (except for distributions in a liquidation of our company). The shares of excess stock would
be immediately transferred to us as trustee of a trust for the exclusive benefit of beneficiaries that you may designate, subject to our right to purchase the shares for fair consideration.

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

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

The price of our common stock is subject to many factors, some of which are not in our control.

The
price of our common stock in the public markets may be adversely affected by a number of factors, many of which are beyond our control. These factors include:



Any
adverse effect on the market price of our common stock would materially adversely affect the value of your investment in our common stock. Additionally, a significant decrease in the
market price of our common stock would make it more difficult for us to raise funds through future offerings of our common stock.

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We may issue a large number of shares of our common stock. Future sales of these shares could adversely affect the value of your investment in our common
stock.

We
may issue shares of common stock upon redemption of outstanding units of Mills LP issued at various times, including in connection with our formation and our initial public offering
in 1994, and our subsequent acquisition of assets at various times. We have issued, and may be obligated to issue in the future, a substantial number of units of Mills LP to our joint venture partners
in connection with their capital contributions to our joint venture projects, and to other persons or entities that contribute to our joint venture projects. These units of Mills LP are, and upon
issuance, will be exchangeable for shares of our common stock. In addition, as of February 25, 2002, we have granted or authorized to be granted options to purchase 3,249,502 shares of common
stock, taking into account options exercised and options forfeited upon employment termination, and we have authorized to be granted but have
not issued 413,565 shares of restricted stock to a number of our directors, officers and employees. The issuance or sale of a substantial number of shares of common stock, or the perception that those
sales could occur, could adversely affect prevailing market prices for shares. We cannot predict what effect future issuances and sales of common stock will have on the market prices of shares.

Distributions to holders of our common stock are junior in right of payment to dividends on our preferred stock and our other liabilities.

Mills
LP's ability to make distributions to us depends on its subsidiaries' and joint ventures' ability first to satisfy their obligations to their creditors and then to make
distributions to Mills LP. Similarly, our ability to make distributions to our stockholders depends on Mills LP's ability first to satisfy its obligations to its creditors and then to make
distributions to us. In the event of a bankruptcy, liquidation or reorganization or similar proceeding relating to any of our subsidiaries or joint ventures, holders of their indebtedness and their
creditors will generally be entitled to payment of their claims from the assets of those subsidiaries and joint ventures before any assets are made available for distribution to us. In every case, the
holders of our common stock, and all other equity securities junior in right as to dividends and liquidating distributions to our series A cumulative convertible preferred stock, par value $.01
per share, will have the right to participate in any distribution of our assets only after the claims of our creditors and holders of our series A preferred stock are satisfied. The certificate
of designations governing our series A preferred stock prohibits us from making dividend payments, distributions and all other payments to holders of our common stock and all other equity
securities junior in right to our series A preferred stock, unless we have paid all accrued dividends on our series A preferred stock or set apart funds for payment of the dividends due
to holders of our series A preferred stock.

RISKS ASSOCIATED WITH OUR COMPANY

New accounting pronouncements and regulations could have an impact on our future earnings and funds from
operations.

We
are required to implement new accounting pronouncements and regulations applicable to our business when issued by the Financial Accounting Standards Board, the Commission and other
regulatory organizations within the accounting profession. Currently there are three pronouncements being considered that impact the real estate industry. The first proposal, "Accounting for
Investments in Real Estate Ventures," contemplates a change in the method of calculating equity in earnings of unconsolidated joint ventures. The second proposal, "Accounting for Certain Costs and
Activities Related to Property, Plant and Equipment," would eliminate the capitalization of various development costs and would require depreciation of different asset components based upon each of
their lives.

The
third proposal is to eliminate the extraordinary classification requirement for debt extinguishments through a rescission of FASB Statement No. 4, "Reporting Gains and Losses
From Extinguishment of Debt," which would require the Company to classify costs incurred to refinance debt

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obligations as ordinary operations rather than as an extraordinary item beginning January 1, 2003. Additionally, this proposal will require a similar reclassification of prior period amounts
when comparative amounts are disclosed subsequent to adoption by the Company. Adoption of this proposal would not affect our reported earnings, but would reduce our reported funds from operations. For
the year ended December 31, 2001, we reported as $16.6 million in extraordinary losses from extinguishment of debt.

All
proposals are still in the adoption process and have not been finalized. Accordingly, we cannot assure you that these proposals will be adopted in their current form or at all. If
adopted, the final form of these proposals could have an impact on our earnings and funds from operations.

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

As
of December 31, 2001, we had total debt of approximately $1.6 billion, including our pro rata share of unconsolidated joint venture debt. In addition, as of the date of
this report, we have issued and outstanding 750,000 shares of series A preferred stock. We must make regular dividend payments to the holders of our series A preferred stock. The
dividends payable are calculated based on the number of shares outstanding and the dividend rate, which regularly increases from year to year. We have also guaranteed selected outstanding
unconsolidated joint venture debt, representing an affiliate's portion of outstanding unconsolidated joint venture debt, which guaranties expire upon the achievement of specified financial performance
tests. We expect to make similar guarantees in connection with our future developments.

We
are subject to the risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest. If a
property were mortgaged to secure payment of indebtedness and we were unable to meet mortgage payments, the mortgagee could foreclose upon that property, appoint a receiver and receive an assignment
of rents and leases or pursue other remedies. We are subject to the additional risk that our cash flow may be insufficient for us to make the required dividend payments to the holders of our
series A preferred stock. If we fail to make the required dividend payments to the holders of our series A preferred stock, we will be subject to serious penalties under the terms of the
documents that govern our series A preferred stock. Our substantial debt and our dividend obligations on the series A preferred stock could cause us to be unable to make dividend
payments, distributions and other payments on our common stock and all other equity securities junior in right to our series A preferred stock.



As of December 31, 2001, our consolidated borrowings and pro rata share of unconsolidated borrowings totaled approximately $1.6 billion, which
represented approximately 55.0% of our total market capitalization as of that date. As used in this report, total market capitalization means the sum of the outstanding indebtedness (including our
share of joint venture indebtedness), the total liquidation preference of all our preferred shares and the total market value of our common shares and units of partnership interest of Mills LP, based
on the closing price of our common stock as of December 31, 2001. Increases in our leverage could adversely affect our ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions, development or other general corporate purposes, and may make us more vulnerable to a downturn in business or the economy generally.

We will need additional capital to either refinance or repay existing indebtedness at maturity. There is no guaranty that we can refinance or obtain other
financing to repay matured debt.

The
terms of most of our indebtedness do not require significant principal payments prior to maturity. Currently, we do not anticipate making any additional principal payments prior to
maturity. Consequently, in order to pay the full principal amount at maturity, we may need to refinance or repay

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our indebtedness by (1) obtaining additional secured or unsecured debt financing; (2) issuing private or public debt instruments; (3) offering for sale additional equity
securities; or (4) selling our assets. We have no refinancing commitments covering the principal payments at maturity. We cannot assure you that refinancing will be available on reasonable
terms or at all. If prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, the interest expense relating to refinanced indebtedness
would increase, which would adversely affect our funds from operations and reduce the amount of distributions we can make to our stockholders. If we are unable to secure refinancing of the mortgage
indebtedness encumbering a property on acceptable terms, we may be forced to dispose of that property upon disadvantageous terms, or the mortgagee could foreclose upon the property. In addition to the
loss of a source of income and an income flow, a disadvantageous sale or foreclosure may result in a partial or complete loss on our investment.

A significant increase in the dividend rate on our series A preferred stock takes effect if we have not repurchased our outstanding series A
preferred stock by October 30, 2004. In order to complete the repurchase of this series A preferred stock and prevent the dividend rate increase from taking effect, we may need to raise
additional capital. There is no guaranty that we can raise additional capital for this repurchase.

Dividend
payments to holders of our series A preferred stock will increase significantly if shares of series A preferred stock remain issued and outstanding on
October 30, 2004. Under the terms of our series A preferred stock, we are not permitted to repurchase our series A preferred stock prior to November 11, 2003 without
incurring substantial extra costs. Accordingly, we anticipate that we will
attempt to repurchase our series A preferred stock between November 11, 2003 and October 30, 2004. In order to finance the repurchase, we may need to use one or more of the
methods listed in the previous risk factor. We cannot assure you that we will obtain financing on reasonable terms or at all. If we are unable to secure financing on reasonable terms, we may not be
able to repurchase our outstanding series A preferred stock prior to the increase in required dividend payments, if at all.

Holders of series A preferred stock have the right, under specific circumstances, to require us to repurchase the series A preferred stock. There is
no guaranty that we can obtain financing for the repurchase. If we do not timely repurchase the series A preferred stock, the repurchase price will increase
significantly.

Holders
of series A preferred stock may exercise their right under the series A preferred stock purchase agreement to require us to repurchase all or a portion of our
series A preferred stock if:



Generally,
the repurchase price varies based on the event giving rise to the put right of the holders of series A preferred stock and the time of its occurrence. However, if the
event is our failure to continue to qualify as a REIT or a material event of noncompliance, in each case caused by our willful and intentional actions, then the repurchase price will increase
significantly. The increased repurchase price is based on a higher internal rate of return on the purchase price of the series A preferred stock and will be calculated from the date of
purchase.

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We
do not have any financing arrangement in place for the repurchase of the series A preferred stock when required. In order to finance the repurchase, we may need to use one or
more of the methods
listed above. We cannot assure you that we will obtain financing on reasonable terms or at all. If we are unable to secure appropriate financing, we may be unable to repurchase on a timely basis, or
at all, the shares of series A preferred stock that are put to us by the holders of series A preferred stock. In that case, we will become obligated to pay the increased repurchase
price.

We have entered into agreements that impose a number of restrictive covenants that may hinder our operational flexibility. Violation of these restrictive
covenants carries serious consequences that may materially adversely affect our operations.

Our
revolving loan and term loan and the series A preferred stock purchase agreement impose numerous restrictive financial and operating covenants on us, including covenants that
limit our ability to (1) incur additional debt, (2) sell assets, (3) repurchase our securities and (4) engage in mergers and consolidations. For example, if we sell any
portion of our four wholly owned properties, holders of our series A preferred stock may require us to repurchase shares of our series A preferred stock at substantial release prices.

Under
our revolving loan and term loan, the lenders may accelerate payment and may pursue standard remedies upon a violation of any covenant. In addition, our failure to observe a number
of the listed covenants constitutes a material event of noncompliance under the series A preferred stock purchase agreement and gives the holders of our series A preferred stock the
right to require us to repurchase all or a portion of the then outstanding shares of series A preferred stock. If the material event of noncompliance triggering the put right of the holders of
series A preferred stock is caused by our willful and intentional actions, then we must pay the increased repurchase price described above. Even if the material event of noncompliance is due to
an inadvertent act, we still must pay the increased repurchase price if we do not make the repurchase in a timely manner. We may avoid the consequences under the series A preferred stock
purchase agreement by exercising our call right to repurchase the shares of series A preferred stock then outstanding before taking the action that constitutes a violation. Our ability to
exercise our call option, however, is subject to:



These
restrictions reduce our flexibility in fulfilling our obligations following the exercise of our call option, and otherwise reduce our ability in conducting our operations.

The occurrence of an event of noncompliance under the series A preferred stock purchase agreement may give holders of our series A preferred stock
rights that materially adversely affect the rights of holders of our common stock.

Upon
the occurrence of an event of noncompliance under the series A preferred stock purchase agreement, subject to a cure period for curable events, or our failure to make a
required dividend payment:



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

We
are developing and plan to continue to develop new retail properties, including new Mills. The funds necessary to construct and develop new properties must be obtained through
issuance of additional equity or debt securities offerings, conventional third-party debt financing, loan arrangements or joint venture arrangements. We cannot assure you that we will obtain the
financing necessary to fund new development and expansion projects. In addition, the additional debt service payments required in respect of any additional debt incurred, and the dilutive effect of
any additional equity securities issued to finance future development, could adversely affect our ability to make distributions to our stockholders. Financing by third parties may carry a floating
interest rate. We anticipate financing new projects, some of which could be developed through joint venture arrangements, through lines of credit or other forms of secured or unsecured construction
financing which generally carry a floating interest rate. We cannot assure you that we would be able to obtain permanent debt or equity financing on acceptable terms or at all to refinance the
construction loans once the project is close to completion. As a result, the floating interest rate on the construction loans could be outstanding for a longer period of time than anticipated at the
time of borrowing, leading to a decrease in our development activities or in the amount of cash available for distribution to our stockholders. If we had floating rate construction loans outstanding
and interests rates were to increase, our debt service would increase up to the applicable cap rate.

We rely on joint venture partners and Kan Am in particular for financing for our development and expansion activities.

The
majority of our current and planned projects are being developed through joint ventures. Our planned level of development activity depends on our success in finding joint venture
partners, and their ability to finance their obligations to the joint venture, both of which factors are not entirely in our control. We rely heavily on Kan Am US, Inc. and its affiliates,
which are partners with us in nine joint ventures. Kan Am raises investor capital to fund its equity commitments for projects on a project-by-project basis. We cannot guarantee
that Kan Am will be able to raise capital for any particular project in accordance with its commitment for that project. If Kan Am or any other joint venture partner were to terminate its relationship
with us, to file for bankruptcy or be placed into involuntary bankruptcy, or to fail to perform as expected, we may not be able to find other viable partners, in which case we may not be able to
finance our development activity and may be forced to decrease development activity and cut back on our planning for new projects. If a partner were to fail to contribute capital that is required for
a development project and we were not successful in finding another partner for a particular development project, we may have to find alternative sources of capital for the project. We cannot
guarantee that we will be able to obtain other sources of equity. If we are
unable to do so, we could suffer a partial or complete loss on our investment and be required to repay any recourse indebtedness incurred on the project.

Our joint venture agreements include buy-sell and redemption obligations. There is no guaranty that we will have the necessary financing to meet these
obligations.

Our
joint venture agreements with Kan Am and other investors typically include buy-sell provisions, under which our joint venture partner may be entitled, under certain
circumstances, such as a change in control of us or a deadlock over certain major decisions, to require either that we buy their interest in the joint venture or sell our interest to them. If we are
unwilling or unable to purchase their interest, we would be required to sell our interest to them at a time when we otherwise may not have wished to sell our interest.

We
are partners with Kan Am in a joint venture agreement for the development of Meadowlands Mills, under which Kan Am has the right to require the Meadowlands Mills joint venture to
redeem Kan Am's interest in the joint venture (together with any accrued priority return) if a construction loan is not obtained by June 30, 2003. Mills LP currently guarantees Kan Am's receipt
of its accrued priority

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return. Beginning on the "project commencement date," which is the date on which certain material contingencies have been satisfied the Company will guarantee the return of Kan Am's capital
contribution upon exercise of its redemption right, which may occur prior to securing the construction loan. Mills LP's guaranty of Kan Am's priority return will continue until qualified permanent
financing has been secured for the project. As of December 31, 2001, Kan Am's invested capital in this project was $24 million and the amount of accrued priority return was
$0.5 million.

In
order to finance a purchase or redemption of a joint venture partner's interest, we may need to use one or more of the financing sources described above. We cannot assure you that we
will be able to obtain financing on reasonable terms, or at all, to permit us to meet our obligations to purchase or redeem a joint venture partner's interest on a timely basis.

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

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

RISKS ASSOCIATED WITH THE OPERATION OF OUR PROPERTIES



We intend from time to time to develop new Mills or expand existing Mills, and may engage in the development of other retail or related mixed use projects, as
opportunities arise. These projects generally require significant expenditures of capital and frequently depend on obtaining various forms of government and other approvals. We cannot assure you that
we can obtain the necessary approvals in a timely manner or at all. We have policies in place designed to regulate development activities in an effort to limit the risks associated with development.
However, these policies do not remove us from all development risks associated with a project and we continue to face the risk of expending funds for, and devotion of management's time to, a project
that may not be developed on a timely basis or at all. We cannot assure you whether or when any development of new Mills, other retail or related mixed use projects or expansions of existing
properties will be completed, or if completed, that the costs of development or expansion will not exceed, by a material amount, projected costs. Upon the completion of a project, we face the
additional risk that occupancy rates and rents will not be sufficient to make the project profitable.



Our income and cash available for distribution would be adversely affected if we were unable either to rent unleased space in any of our properties or to relet
space after the expiration of a tenant's lease on economically favorable lease terms. Our ability to rent or to relet space in our properties is affected by many factors. Our tenants generally enter
into leases with an initial term ranging from three to 15 years. We cannot assure you that any tenant whose lease expires in the future will renew its lease at that time, or on terms
economically favorable to us, or that we will be able to find a replacement

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tenant. In addition, our leases with a number of tenants contain covenants restricting the use of other space in our properties or requiring the presence of other specified co-tenants.
Our failure to rent unleased space on a timely basis or at all would likely adversely affect our financial condition and
results of operations. We may also incur costs in making improvements or repairs to property required by a new tenant.



There are other companies that are engaged in the development or ownership of retail properties that compete with us in seeking tenants. We compete with these
other companies for prime locations and for tenants who lease space in the retail properties that we and our competitors own or operate. The development by our competitors of new super-regional malls
or other retail shopping centers with more convenient locations or better rents may attract our tenants to our competitors or may cause them to seek lease terms that are less favorable to us at or
prior to renewal, and accordingly may adversely affect our business and the revenues that we derive from, and the value of, our properties. Furthermore, retailers at our properties may face increasing
competition from e-commerce, outlet malls, discount shopping clubs, catalog companies, direct mail, telemarketing and home shopping networks.

Bankruptcy of our tenants or downturns in our tenants' businesses may reduce our cash flow.

Since
we derive a significant amount of our income from rental payments, our cash available for distribution would be adversely affected if a significant number of our tenants were
unable to meet their obligations to us, or if we were unable to lease vacant space in our properties on economically favorable terms. At any time, a tenant may seek the protection of the bankruptcy
laws. Under the bankruptcy laws, the tenant may have the right to reject and terminate its lease and thereby cause a reduction in the cash available for distribution to our stockholders. If a tenant
files for bankruptcy, we cannot be sure that it will affirm its leases and continue to make rental payments in a timely manner. Any change in a tenant, especially an anchor tenant, could materially
adversely affect customer traffic in a center and thereby reduce the income generated by that center. Some of our rents are based on a percentage of our tenants' sales. A slowing economy generally
could lead to a downturn in the retail sector and weaken the financial condition of a tenant and result in a reduction in the percentage rent paid by that tenant or in the failure to make rent
payments when due. Furthermore, some of our tenants, including anchor tenants, hold the right under their leases to terminate their leases or reduce their rental rates if specified occupancy
conditions are not met, if specified anchor tenants are closed, if specified sales levels or profit margins are not achieved or if an exclusive use provision is violated. If a significant number of
these tenants were to terminate their leases, the terminations could adversely affect our cash available for distribution and the value of our common stock.

The performance of our properties is subject to many factors that are not in our control.

Real
property investments are subject to varying degrees of risk that may affect the ability of our centers to generate sufficient revenues to meet operating and other expenses. The
economic performance and value of a property are affected by a number of factors, including:



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In
addition, other factors may adversely affect a property's value, including changes in government regulations and other laws, rules and regulations governing real estate, zoning or
taxes, changes in interest rate levels, the availability of financing and potential liability under environmental and other laws and other unforeseen events.

RISKS ASSOCIATED WITH REAL ESTATE INVESTMENT

Due to the illiquid nature of investments in equity real estate, we may not be able to act quickly to diversity our portfolio in response
to economic changes.

Equity
real estate investments generally are relatively illiquid. Additionally, all of our properties are in the same line of business. As a result, our ability to diversify our
portfolio promptly in response to changes in economic or other conditions may be restricted. Moreover, significant expenditures associated with each equity investment, such as debt service, real
estate taxes and operating and maintenance costs, generally are not reduced when circumstances cause a reduction in income from the investment. Consequently, if any of our properties fail, we may not
be able to convert that property to an attractive alternative use or to sell that property to recoup our investment.

We could incur significant costs related to environmental issues.

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



We carry comprehensive liability, fire, flood, extended coverage and rental loss insurance with respect to our properties with policy specifications and insured
limits that we believe are customary for similar properties. We also carry comprehensive earthquake and pollution cleanup coverage on all our properties. We carry off-premises power
coverage for each of our Mills. For Sawgrass Mills only, we carry sinkhole coverage. There are some types of losses, generally of a catastrophic nature, such as wars or acts of God, which may be
either uninsurable or not economically insurable. As a result of the tragic events of September 11th, insurance for terrorist attacks for each of our properties was reduced to a
$100 million per incident maximum coverage. Should a property suffer an uninsured loss, we could lose

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both our invested capital in and anticipated profits from that property, as well as the anticipated future revenue from that property. Additionally, in the case of recourse construction loans, we may
remain
obligated under those loans and any other financial obligations on that property. An uninsured loss or a loss in excess of insured limits may negatively impact our financial condition.

RISKS ASSOCIATED WITH OUR ORGANIZATION

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

The
executive officers of Kan Am US, Inc. and its affiliates directly and indirectly own a substantial percentage of the total outstanding number of shares of our common stock and
the units of Mills LP. Three of our eleven directors substantially own and control the Kan Am entities. These three directors have significant influence over us as members of our board and, by virtue
of their ownership of our common stock through the Kan Am entities, over the outcome of any matters submitted to our stockholders for approval. The interests of these directors may conflict with the
interests of our other stockholders in connection with Kan Am's joint ventures with Mills LP to develop, own, and operate additional properties, and they may use their voting influence contrary to our
other stockholders' interests. If these directors and the Kan Am entities, as stockholders, were to act together, they may have the ability to exercise significant influence over our affairs. The Kan
Am entities may exchange all or a substantial portion of the units that they hold for shares of our common stock. If they do so, they and the three directors affiliated with them, as substantial
owners of the Kan Am entities, will increase their influence over us and over the outcome of any matters submitted to our stockholders for approval. The influence and voting power of our other
stockholders may diminish accordingly.

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

We,
as the sole general partner of Mills LP, may have fiduciary responsibilities to the other partners in Mills LP that may conflict with the interests of our stockholders, including
decisions regarding the sale or refinancing of our properties and the timing and amount of distributions from Mills LP. In addition, individuals and entities, including our executive officers, our
directors (including those who substantially own and control Kan Am US, Inc. and their respective affiliates that hold units of Mills LP) may have limited rights in decisions affecting Mills LP
that may conflict with the interests of our common stockholders. In particular, a holder of units may suffer different and/or more adverse tax consequences than The Mills Corporation upon the sale or
refinancing of some of our properties as a result of unrealized gain attributable to properties or the tax status of the unit holder. These unit holders, therefore, may have objectives different from
ours regarding the appropriate pricing and timing of any sale or refinancing. We have the exclusive authority to determine whether and on what terms to sell or refinance an individual property as the
sole general partner of Mills LP. However, these unit holders may try to influence us into not selling or refinancing the properties, even though a sale might otherwise be financially advantageous to
us and our stockholders, or to influence us into refinancing a property with a higher level of debt than would be in our best interests or in the best interests of our stockholders.

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

In
some instances, a change in control of our company could give the holders of our common stock the opportunity to realize a premium over the then prevailing market price of those
securities. Provisions in our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws may have the effect of discouraging a third party from trying to acquire our company
even if a change in control were in the best interests of our stockholders. Our board of directors has the authority, without a vote of stockholders, to issue up to an additional 19,250,000 shares of
preferred

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stock and to establish the rights and preferences of any class or series of preferred stock to be issued, which rights and preferences could delay or prevent a change in control. The limitation on
beneficial ownership of our company also may have the effect of precluding acquisition of control of our company by a third party even if a change in control were in the best interests of our
stockholders. In addition, our board of directors is a classified board composed of three classes of directors with staggered terms. Directors for each class are chosen for a three-year
term upon the expiration of the term of the current class. A classified board of directors makes it more difficult to effect a change in control and may discourage an attempt by a third party even if
a change in control were in our stockholders' best interests. The holders of our series A preferred stock have the contractual right to require us to repurchase all or a portion of our
series A preferred stock upon a change in control, which also may discourage third party acquisitions.

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

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



RISKS ASSOCIATED WITH INCOME TAX LAW

Our failure to qualify as a REIT would result in adverse tax consequences with regard to our results of
operations.

We
believe that we have been organized and have conducted our operations in a manner so as to qualify as a REIT under the Code, and we intend to continue to operate as a REIT in the
future. We cannot assure you, however, that we currently qualify as a REIT or will continue to qualify as a REIT. Many of the REIT requirements are highly technical and complex and depend on various
factual matters and circumstances that may not be completely within our control, such as actions taken by our joint venture partners. Any determination that we do not qualify as a REIT would have a
material adverse effect on our results of operations and could reduce materially the value of our common stock. If we fail to qualify as a REIT,



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In
addition, unless entitled to relief under specific statutory provisions, we will also be disqualified from treatment as a REIT for the four taxable years following the year during
which our qualification was lost. A disqualification would reduce our net earnings available for investment or distribution to our stockholders because of the additional tax liability to us for the
year or years involved. Furthermore, we would no longer be required by the Internal Revenue Code to make any distributions to our stockholders as a condition to REIT qualification. Our failure to
qualify as a REIT could reduce materially the value of our common stock and would cause any distributions to stockholders that otherwise would have been subject to tax as capital gain dividends to be
taxable as ordinary income to the extent of our current and accumulated earnings and profits. Corporate distributees, however, may be eligible for the dividends received deduction on the
distributions, subject to limitations under the Internal Revenue Code. If we make distributions to our stockholders in reliance on our continued qualification as a REIT, we might be required to borrow
funds or to liquidate some of our investments to pay the taxes that would result from the actual failure to qualify as a REIT. In addition to these tax
consequences, if we fail to qualify as a REIT, the holders of our series A preferred stock may require us to repurchase all or a portion of our series A preferred stock. Even if we
currently qualify as a REIT, new tax rules or legislation may affect whether we continue to qualify as a REIT or the federal income tax consequences of our REIT qualification.



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

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

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

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

Subject
to certain exceptions, including the one discussed in this paragraph, a REIT is generally prohibited from owning securities in any one issuer if the value of those securities
exceeds 5% of the

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

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Item 2. Properties

The following tables set forth certain information relating to our properties as of December 31, 2001. The Operating Partnership holds, directly or
indirectly, 100% of the equity interests in the entities that own Potomac Mills, Franklin Mills, Sawgrass Mills (Phases I and II and as of October 2001, The Oasis at Sawgrass), Gurnee Mills, Liberty
Plaza, Concord Mills Marketplace and the 46 Net Lease Properties. The Operating Partnership also owns, directly or indirectly, an equity interest in the joint venture entity that owns Arizona Mills
and varying partnership interests in the joint venture entities that own Ontario Mills, Grapevine Mills, The Block at Orange, Concord Mills, Katy Mills, Opry Mills, Arundel Mills and Discover Mills.
Our partnership interests in the joint venture entities give us the right, among others, to receive after preferential payments on unreturned capital contributions generally, a percentage of net
operating cash flow generated by a particular property and a percentage of net proceeds following the occurrence of a major capital event, such as the sale of the real property or the project or the
receipt of proceeds arising from condemnation of the project. For a description of our partnership interests for existing properties generally, see "Description of Existing Properties."
The Operating Partnership has formed other joint ventures to develop additional properties. We have similar partnership interests under these joint venture agreements and we anticipate that we will
have similar partnership interests under future joint venture agreements. For a description of our partnership interests for properties under development, see "Item 1.
BusinessMills Under ConstructionDevelopment Pipeline."

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, 2001:

|Name          |  | Location and
Metropolitan Area Served |  | Year
Opened/
Acquired |  | Approx. GLA
(Sq.Ft.) (1) |  | Annualized
Base Rent (2) |            | No. of
Anchor
Stores (3) |    | Anchor Store Tenants
|------------- |  | ------------------------------------- |  | --------------------- |  | ------------------------ |  | ------------------------ | ---------- | ------------------------ | -- | --------------------
|Arizona Mills |  | Phoenix, AZ                           |  | 1997                  |  | 1,227,442                |  | $                        | 19,716,376 |                          | 17 |                     
|Arundel Mills |  | Baltimore, MD/Washington, DC          |  | 2000                  |  | 1,162,718                |  |                          | 21,682,700 |                          | 13 |                     
|Concord Mills |  | Charlotte, NC                         |  | 1999                  |  | 1,247,394                |  |                          | 19,559,668 |                          | 16 |                     

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SUMMARY OF PROPERTIES, Continued

|Name            |  | Location and
Metropolitan Area Served |  | Year
Opened/
Acquired |  | Approx. GLA
(Sq.Ft.) (1) |  | Annualized
Base Rent (2) |            | No. of
Anchor
Stores (3) |    | Anchor Store Tenants
|--------------- |  | ------------------------------------- |  | --------------------- |  | ------------------------ |  | ------------------------ | ---------- | ------------------------ | -- | --------------------
|Discover Mills  |  | Atlanta, GA                           |  | 2001                  |  | 1,088,277                |  | $                        | 17,043,707 |                          | 12 |                     
|Franklin Mills  |  | Philadelphia, PA/ Wilmington          |  | 1989                  |  | 1,738,627                |  |                          | 17,982,863 |                          | 19 |                     
|Grapevine Mills |  | Dallas, TX/ Fort Worth                |  | 1997                  |  | 1,545,739                |  |                          | 20,533,306 |                          | 19 |                     
|Gurnee Mills    |  | Chicago, IL/ Milwaukee, WI            |  | 1991                  |  | 1,577,196                |  |                          | 16,946,044 |                          | 15 |                     
|Katy Mills      |  | Houston, TX                           |  | 1999                  |  | 1,189,772                |  |                          | 17,569,171 |                          | 13 |                     
|Ontario Mills   |  | Los Angeles, CA                       |  | 1996                  |  | 1,455,398                |  |                          | 20,597,586 |                          | 22 |                     

33

---

SUMMARY OF PROPERTIES, Continued

|Name                      |  | Location and
Metropolitan Area Served |  | Year
Opened/
Acquired |  | Approx. GLA
(Sq.Ft.) (1) |  | Annualized Base
Rent (2) |             | No. of
Anchor
Stores (3) |     | Anchor Store Tenants
|------------------------- |  | ------------------------------------- |  | --------------------- |  | ------------------------ |  | ------------------------ | ----------- | ------------------------ | --- | --------------------
|Opry Mills                |  | Nashville, TN                         |  | 2000                  |  | 1,112,587                |  | $                        | 21,453,081  |                          | 16  |                     
|Potomac Mills             |  | Washington DC/ Baltimore, MD          |  | 1985                  |  | 1,635,061                |  |                          | 22,275,521  |                          | 18  |                     
|Sawgrass Mills            |  | Ft. Lauderdale/ Miami/Palm Beach, FL  |  | 1990                  |  | 1,844,508                |  |                          | 27,362,243  |                          | 19  |                     
|The Oasis at Sawgrass     |  | Ft. Lauderdale/ Miami/ Palm Beach, FL |  | 1999                  |  | 287,372                  |  |                          | 5,369,978   |                          | 3   |                     
|The Block at Orange       |  | Los Angeles, CA/ Orange County        |  | 1998                  |  | 655,368                  |  |                          | 14,782,907  |                          | 10  |                     
|
|MILLS TOTALS              |  |                                       |  |                       |  | 17,767,459               |  | $                        | 262,875,151 |                          | 212 |                     
|
|COMMUNITY CENTERS         |  |                                       |  |                       |  |                          |  |                          |             |                          |     |                     
|Liberty Plaza             |  | Philadelphia, PA                      |  | 1994                  |  | 373,754                  |  | $                        | 3,102,197   |                          | 4   |                     
|Concord Mills Marketplace |  | Charlotte, NC                         |  | 2001                  |  | 119,848                  |  |                          | 976,788     |                          | 1   |                     
|
|COMMUNITY CENTERS TOTALS  |  |                                       |  |                       |  | 493,602                  |  | $                        | 4,078,985   |                          | 5   |                     
|

---

34

---

PROPERTY OPERATING INCOME  (UNAUDITED, IN THOUSANDS)

The following table presents the property operating income for our wholly-owned properties and unconsolidated joint venture properties and provides details about
certain line items within our consolidated financial statements for the year ended December 31, 2001. The information in the table is
not intended to represent net income according to accounting principles generally accepted in the United States.

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2001

|Wholly-Owned Properties   |                          | Stabilized
Properties (2)      |         | Net Lease
Properties (3) |         | New
Properties (4) |        | Disposed
Properties (5) |     | Total
|------------------------- | ------------------------ | ------------------------------ | ------- | ------------------------ | ------- | ------------------ | ------ | ----------------------- | --- | -----
|Rental Revenues           |                          |                                |         |                          |         |                    |        |                         |     |      
|                          | Minimum rent             |                                | $       | 95,375                   |         | $                  | 10,085 |                         | $   | 278  
|                          | Percentage rent          |                                |         | 1,518                    |         |                    |       |                         |     |     
|                          | Recoveries from tenants  |                                |         | 50,166                   |         |                    |       |                         |     | 31   
|                          | Other property revenues  |                                |         | 14,144                   |         |                    |       |                         |     |     
|                          |                          |                                |         |                          |         |                    |        |                         |     |      
|                          |                          | Total rental revenues          |         |                          | 161,203 |                    |        | 10,085                  |     |      
|                          |                          |                                |         |                          |         |                    |        |                         |     |      
|Property Operating Costs  |                          |                                |         |                          |         |                    |        |                         |     |      
|                          | Recoverable from tenants |                                |         | 43,062                   |         |                    |       |                         |     | 3    
|                          | Other operating (1)      |                                |         | 6,187                    |         |                    | 77     |                         |     |     
|                          |                          |                                |         |                          |         |                    |        |                         |     |      
|                          |                          | Total property operating costs |         |                          | 49,249  |                    |        | 77                      |     |      
|                          |                          |                                |         |                          |         |                    |        |                         |     |      
|Property Operating Income |                          | $                              | 111,954 |                          | $       | 10,008             |        | $                       | 306 |      
|                          |                          |                                |         |                          |         |                    |        |                         |     |      

|Unconsolidated Joint Venture Properties |                          | Stabilized
Properties (2)      |        | New
Properties (4) |         | Other   |        | Total  
|--------------------------------------- | ------------------------ | ------------------------------ | ------ | ------------------ | ------- | ------- | ------ | -------
|Rental Revenues                         |                          |                                |        |                    |         |         |        |        
|                                        | Minimum rent             |                                | $      | 82,864             |         | $       | 93,351 |        
|                                        | Percentage rent          |                                |        | 2,609              |         |         | 1,734  |        
|                                        | Recoveries from tenants  |                                |        | 34,755             |         |         | 36,604 |        
|                                        | Other property revenue   |                                |        | 10,920             |         |         | 9,332  |        
|                                        |                          |                                |        |                    |         |         |        |        
|                                        |                          | Total rental revenues          |        |                    | 131,148 |         |        | 141,021
|Property Operating Costs                |                          |                                |        |                    |         |         |        |        
|                                        | Recoverable from tenants |                                |        | 30,760             |         |         | 32,693 |        
|                                        | Other operating (1)      |                                |        | 4,280              |         |         | 4,935  |        
|                                        |                          |                                |        |                    |         |         |        |        
|                                        |                          | Total property operating costs |        |                    | 35,040  |         |        | 37,628 
|                                        |                          |                                |        |                    |         |         |        |        
|Property Operating Income (Loss)        |                          | $                              | 96,108 |                    | $       | 103,393 |        | $      
|                                        |                          |                                |        |                    |         |         |        |        

---

35

---



LEASE EXPIRATION SCHEDULES (1)    Wholly-Owned Properties

The following table summarizes the lease expirations assuming that none of the tenants exercise 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, 2001, multiplied by 12.

|Lease Expiration
Year        |  | Number of
Leases
Expiring |  | Leased Area in
Square Footage |  | Annualized Minimum
Rents Under
Expiring Leases |            | Annualized
Minimum
Rents per
Square Foot |   | Percent of Total
Leased Square
Footage Represented
by Expiring Leases |  | Percent of
Total Minimum
Rents Represented
by Expiring Leases |  
|---------------------------- |  | ------------------------- |  | ----------------------------- |  | ---------------------------------------------- | ---------- | ---------------------------------------- | - | --------------------------------------------------------------------- |  | ------------------------------------------------------------- | -
|
|2002                         |  | 8                         |  | 296,935                       |  | $                                              | 1,915,333  |                                          | $ | 6.45                                                                  |  | 8.12                                                          | %
|2003                         |  | 7                         |  | 411,050                       |  |                                                | 2,614,335  |                                          |   | 6.36                                                                  |  | 11.24                                                         | %
|2004                         |  | 9                         |  | 421,103                       |  |                                                | 3,714,524  |                                          |   | 8.82                                                                  |  | 11.51                                                         | %
|2005                         |  | 9                         |  | 270,654                       |  |                                                | 3,065,982  |                                          |   | 11.33                                                                 |  | 7.40                                                          | %
|2006                         |  | 8                         |  | 561,046                       |  |                                                | 4,642,783  |                                          |   | 8.28                                                                  |  | 15.34                                                         | %
|2007                         |  | 3                         |  | 92,072                        |  |                                                | 863,781    |                                          |   | 9.38                                                                  |  | 2.52                                                          | %
|2008                         |  | 5                         |  | 348,708                       |  |                                                | 2,999,529  |                                          |   | 8.60                                                                  |  | 9.54                                                          | %
|2009                         |  | 5                         |  | 398,793                       |  |                                                | 3,452,785  |                                          |   | 8.66                                                                  |  | 10.90                                                         | %
|2010                         |  | 5                         |  | 238,079                       |  |                                                | 2,065,139  |                                          |   | 8.67                                                                  |  | 6.51                                                          | %
|2011                         |  | 3                         |  | 127,298                       |  |                                                | 1,288,826  |                                          |   | 10.12                                                                 |  | 3.48                                                          | %
|After 2011                   |  | 7                         |  | 491,355                       |  |                                                | 4,463,085  |                                          |   | 9.08                                                                  |  | 13.44                                                         | %
|                             |  |                           |  |                               |  |                                                |            |                                          |   |                                                                       |  |                                                               |  
|                             |  | 69                        |  | 3,657,093                     |  | $                                              | 31,086,102 |                                          | $ | 8.50                                                                  |  | 100.00                                                        | %
|                             |  |                           |  |                               |  |                                                |            |                                          |   |                                                                       |  |                                                               |  
|Specialty Tenant Expirations |  |                           |  |                               |  |                                                |            |                                         
|2002                         |  | 149                       |  | 431,185                       |  | $                                              | 10,497,754 |                                          | $ | 24.35                                                                 |  | 17.98                                                         | %
|2003                         |  | 119                       |  | 368,502                       |  |                                                | 9,380,207  |                                          |   | 25.45                                                                 |  | 15.36                                                         | %
|2004                         |  | 80                        |  | 258,469                       |  |                                                | 6,536,408  |                                          |   | 25.29                                                                 |  | 10.78                                                         | %
|2005                         |  | 115                       |  | 455,000                       |  |                                                | 11,543,653 |                                          |   | 25.37                                                                 |  | 18.97                                                         | %
|2006                         |  | 102                       |  | 296,893                       |  |                                                | 8,010,648  |                                          |   | 26.98                                                                 |  | 12.38                                                         | %
|2007                         |  | 39                        |  | 107,725                       |  |                                                | 3,126,576  |                                          |   | 29.02                                                                 |  | 4.49                                                          | %
|2008                         |  | 23                        |  | 65,314                        |  |                                                | 1,847,860  |                                          |   | 28.29                                                                 |  | 2.73                                                          | %
|2009                         |  | 25                        |  | 100,618                       |  |                                                | 2,911,989  |                                          |   | 28.94                                                                 |  | 4.19                                                          | %
|2010                         |  | 33                        |  | 89,343                        |  |                                                | 2,833,324  |                                          |   | 31.71                                                                 |  | 3.72                                                          | %
|2011                         |  | 43                        |  | 141,316                       |  |                                                | 4,081,683  |                                          |   | 28.88                                                                 |  | 5.89                                                          | %
|After 2011                   |  | 20                        |  | 84,238                        |  |                                                | 2,159,430  |                                          |   | 25.63                                                                 |  | 3.51                                                          | %
|                             |  |                           |  |                               |  |                                                |            |                                          |   |                                                                       |  |                                                               |  
|                             |  | 748                       |  | 2,398,603                     |  | $                                              | 62,929,532 |                                          | $ | 26.24                                                                 |  | 100.00                                                        | %
|                             |  |                           |  |                               |  |                                                |            |                                          |   |                                                                       |  |                                                               |  
|Total Tenant Expirations     |  |                           |  |                               |  |                                                |            |                                         
|2002                         |  | 157                       |  | 728,120                       |  | $                                              | 12,413,087 |                                          | $ | 17.05                                                                 |  | 12.02                                                         | %
|2003                         |  | 126                       |  | 779,552                       |  |                                                | 11,994,542 |                                          |   | 15.39                                                                 |  | 12.87                                                         | %
|2004                         |  | 89                        |  | 679,572                       |  |                                                | 10,250,932 |                                          |   | 15.08                                                                 |  | 11.22                                                         | %
|2005                         |  | 124                       |  | 725,654                       |  |                                                | 14,609,635 |                                          |   | 20.13                                                                 |  | 11.98                                                         | %
|2006                         |  | 110                       |  | 857,939                       |  |                                                | 12,653,431 |                                          |   | 14.75                                                                 |  | 14.17                                                         | %
|2007                         |  | 42                        |  | 199,797                       |  |                                                | 3,990,357  |                                          |   | 19.97                                                                 |  | 3.30                                                          | %
|2008                         |  | 28                        |  | 414,022                       |  |                                                | 4,847,389  |                                          |   | 11.71                                                                 |  | 6.84                                                          | %
|2009                         |  | 30                        |  | 499,411                       |  |                                                | 6,364,774  |                                          |   | 12.74                                                                 |  | 8.25                                                          | %
|2010                         |  | 38                        |  | 327,422                       |  |                                                | 4,898,463  |                                          |   | 14.96                                                                 |  | 5.41                                                          | %
|2011                         |  | 46                        |  | 268,614                       |  |                                                | 5,370,509  |                                          |   | 19.99                                                                 |  | 4.44                                                          | %
|After 2011                   |  | 27                        |  | 575,593                       |  |                                                | 6,622,515  |                                          |   | 11.51                                                                 |  | 9.50                                                          | %
|                             |  |                           |  |                               |  |                                                |            |                                          |   |                                                                       |  |                                                               |  
|                             |  | 817                       |  | 6,055,696                     |  | $                                              | 94,015,634 |                                          | $ | 15.53                                                                 |  | 100.00                                                        | %
|                             |  |                           |  |                               |  |                                                |            |                                          |   |                                                                       |  |                                                               |  

---

36

---

LEASE EXPIRATION SCHEDULES (Continued) (1)    Unconsolidated Joint Ventures

The following table summarizes lease expirations assuming that none of the tenants exercise 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, 2001, multiplied by 12.

|Lease Expiration
Year |  | Number of
Leases
Expiring |  | Leased Area in
Square Footage |  | Annualized Minimum
Rents Under
Expiring Leases |             | Annualized
Minimum
Rents per
Square Foot |   | Percent of Total
Leased Square
Footage Represented
by Expiring Leases |  | Percent of
Total Minimum
Rents Represented
by Expiring Leases |  
|--------------------- |  | ------------------------- |  | ----------------------------- |  | ---------------------------------------------- | ----------- | ---------------------------------------- | - | --------------------------------------------------------------------- |  | ------------------------------------------------------------- | -
|
|2002                  |  | 2                         |  | 43,479                        |  | $                                              | 359,948     |                                          | $ | 8.28                                                                  |  | 0.74                                                          | %
|2003                  |  | 2                         |  | 44,258                        |  |                                                | 531,096     |                                          |   | 12.00                                                                 |  | 0.77                                                          | %
|2004                  |  | 3                         |  | 72,842                        |  |                                                | 896,068     |                                          |   | 12.30                                                                 |  | 1.26                                                          | %
|2005                  |  | 3                         |  | 62,472                        |  |                                                | 730,798     |                                          |   | 11.70                                                                 |  | 1.08                                                          | %
|2006                  |  | 7                         |  | 167,907                       |  |                                                | 2,427,742   |                                          |   | 14.46                                                                 |  | 2.91                                                          | %
|2007                  |  | 12                        |  | 321,252                       |  |                                                | 4,727,015   |                                          |   | 14.71                                                                 |  | 5.57                                                          | %
|2008                  |  | 6                         |  | 191,090                       |  |                                                | 2,514,870   |                                          |   | 13.16                                                                 |  | 3.31                                                          | %
|2009                  |  | 20                        |  | 649,161                       |  |                                                | 8,936,872   |                                          |   | 13.77                                                                 |  | 11.25                                                         | %
|2010                  |  | 27                        |  | 874,964                       |  |                                                | 12,001,154  |                                          |   | 13.72                                                                 |  | 15.16                                                         | %
|2011                  |  | 16                        |  | 642,574                       |  |                                                | 7,707,432   |                                          |   | 11.99                                                                 |  | 11.13                                                         | %
|After 2011            |  | 38                        |  | 2,702,469                     |  |                                                | 31,463,098  |                                          |   | 11.64                                                                 |  | 46.82                                                         | %
|                      |  |                           |  |                               |  |                                                |             |                                          |   |                                                                       |  |                                                               |  
|                      |  | 136                       |  | 5,772,468                     |  | $                                              | 72,296,093  |                                          | $ | 12.52                                                                 |  | 100.00                                                        | %
|                      |  |                           |  |                               |  |                                                |             |                                          |   |                                                                       |  |                                                               |  
|
|
|2002                  |  | 174                       |  | 547,719                       |  | $                                              | 12,268,646  |                                          | $ | 22.40                                                                 |  | 13.98                                                         | %
|2003                  |  | 92                        |  | 287,925                       |  |                                                | 7,163,807   |                                          |   | 24.88                                                                 |  | 7.34                                                          | %
|2004                  |  | 123                       |  | 456,748                       |  |                                                | 10,191,915  |                                          |   | 22.31                                                                 |  | 11.65                                                         | %
|2005                  |  | 118                       |  | 417,595                       |  |                                                | 10,275,537  |                                          |   | 24.61                                                                 |  | 10.65                                                         | %
|2006                  |  | 129                       |  | 411,639                       |  |                                                | 10,627,401  |                                          |   | 25.82                                                                 |  | 10.50                                                         | %
|2007                  |  | 88                        |  | 232,060                       |  |                                                | 6,745,701   |                                          |   | 29.07                                                                 |  | 5.92                                                          | %
|2008                  |  | 86                        |  | 265,537                       |  |                                                | 7,578,317   |                                          |   | 28.54                                                                 |  | 6.77                                                          | %
|2009                  |  | 82                        |  | 246,574                       |  |                                                | 6,952,623   |                                          |   | 28.20                                                                 |  | 6.29                                                          | %
|2010                  |  | 130                       |  | 469,917                       |  |                                                | 13,448,914  |                                          |   | 28.62                                                                 |  | 11.99                                                         | %
|2011                  |  | 93                        |  | 402,603                       |  |                                                | 10,625,532  |                                          |   | 26.39                                                                 |  | 10.27                                                         | %
|After 2011            |  | 34                        |  | 181,876                       |  |                                                | 4,764,016   |                                          |   | 26.19                                                                 |  | 4.64                                                          | %
|                      |  |                           |  |                               |  |                                                |             |                                          |   |                                                                       |  |                                                               |  
|                      |  | 1,149                     |  | 3,920,193                     |  | $                                              | 100,642,409 |                                          | $ | 25.67                                                                 |  | 100.00                                                        | %
|                      |  |                           |  |                               |  |                                                |             |                                          |   |                                                                       |  |                                                               |  
|
|
|2002                  |  | 176                       |  | 591,198                       |  | $                                              | 12,628,594  |                                          | $ | 21.36                                                                 |  | 6.10                                                          | %
|2003                  |  | 94                        |  | 332,183                       |  |                                                | 7,694,903   |                                          |   | 23.16                                                                 |  | 3.43                                                          | %
|2004                  |  | 126                       |  | 529,590                       |  |                                                | 11,087,983  |                                          |   | 20.94                                                                 |  | 5.46                                                          | %
|2005                  |  | 121                       |  | 480,067                       |  |                                                | 11,006,335  |                                          |   | 22.93                                                                 |  | 4.95                                                          | %
|2006                  |  | 136                       |  | 579,546                       |  |                                                | 13,055,143  |                                          |   | 22.53                                                                 |  | 5.98                                                          | %
|2007                  |  | 100                       |  | 553,312                       |  |                                                | 11,472,716  |                                          |   | 20.73                                                                 |  | 5.71                                                          | %
|2008                  |  | 92                        |  | 456,627                       |  |                                                | 10,093,187  |                                          |   | 22.10                                                                 |  | 4.71                                                          | %
|2009                  |  | 102                       |  | 895,735                       |  |                                                | 15,889,495  |                                          |   | 17.74                                                                 |  | 9.24                                                          | %
|2010                  |  | 157                       |  | 1,344,881                     |  |                                                | 25,450,068  |                                          |   | 18.92                                                                 |  | 13.88                                                         | %
|2011                  |  | 109                       |  | 1,045,177                     |  |                                                | 18,332,964  |                                          |   | 17.54                                                                 |  | 10.78                                                         | %
|After 2011            |  | 72                        |  | 2,884,345                     |  |                                                | 36,227,114  |                                          |   | 12.56                                                                 |  | 29.76                                                         | %
|                      |  |                           |  |                               |  |                                                |             |                                          |   |                                                                       |  |                                                               |  
|                      |  | 1,285                     |  | 9,692,661                     |  | $                                              | 172,938,502 |                                          | $ | 17.84                                                                 |  | 100.00                                                        | %
|                      |  |                           |  |                               |  |                                                |             |                                          |   |                                                                       |  |                                                               |  

---

37

---



RENTAL RATES (1)

The following tables present the average base rent per leased square foot of store openings and closings for the anchor and specialty tenant stores collectively
(except as noted in footnote (1)) for each property for the five years ended December 31, 2001, 2000, 1999, 1998, and 1997.

|Anchor Stores | 
|------------- | 
|
|
|2001          | 
|2000          | 
|1999          | 
|1998          | 
|1997          | 

|Specialty Stores | 
|---------------- | 
|
|
|2001             | 
|2000             | 
|1999             | 
|1998             | 
|1997             | 

---

38

---

AVERAGE RENTS

The following table presents certain information regarding operating rents with respect to the existing Mills and The Block at Orange for the five years ended
December 31, 2001, 2000, 1999, 1998, and 1997.

|Minimum Rent Plus Percentage Rent(1)
|------------------------------------
|
|
|2001                                
|2000                                
|1999                                
|1998                                
|1997                                

---

39

---

SPECIALTY STORE TENANT REPORTED SALES ANALYSIS

Gross Sales (PSF) (1)Twelve Months
Ended
December 31,

Current Year

Prior Year

Percentage
Change2001(2)

$
330

$
338

(2.4)%2000


352


337

4.51999


337


332

1.5


Comparable Sales (in thousands)(1)(3)Twelve Months
Ended
December 31,

Current Year

Prior Year

Percentage
Change2001(4)

$1,231,195

$1,272,193

(3.2)%2000

1,070,290

1,063,065

0.71999

991,116

986,197

0.5


---

Those
projects included in the respective years are as follows:

2001

Potomac Mills, Franklin Mills, Sawgrass Mills, Gurnee Mills, Ontario Mills, Grapevine Mills, Arizona Mills, The Block at Orange, The Oasis at Sawgrass, Concord Mills and Katy Mills.2000

Potomac Mills, Franklin Mills, Sawgrass Mills, Gurnee Mills, Ontario Mills, Grapevine Mills, Arizona Mills, and The Block at Orange.1999

Potomac Mills, Franklin Mills, Sawgrass Mills, Gurnee Mills, and Ontario Mills.


40

---

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 2.7% of 2001 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, The Block at Orange, Concord Mills, Katy Mills, Opry Mills, Arundel Mills,
and Discover Mills), sets forth certain information with respect to our ten largest tenants (measured by 2001 base rent) as of December 31, 2001:

Tenant

Percent of
2001 Base Rent

Percent of
Total Leased
GLA

Number
of
StoresAMC Theatres

2.7%

2.8%

5T.J. Maxx Group (1)

1.9

3.9

15GAP (2)

1.9

2.4

30Burlington Coat Factory Group (3)

1.5

6.3

12J.C. Penney

1.3

4.3

7Regal Theatres

1.2

1.1

3Muvico Entertainment

1.1

0.6

1Off 5th  Saks Fifth Avenue

1.0

2.5

13Designs Group (4)

1.0

0.9

15Sun & Ski Sports

0.9

1.3

8Totals

14.5%

26.1%

109


During
the third and fourth quarter of 2000, the Company acquired 46 single tenant net leased properties subject to net leases that operate as CVS pharmacies. The CVS properties are at
various locations throughout the United States. The Net Leased Properties base rent represent 3.5% of 2001 base rent and contribute annually approximately $2.0 million to net income before
minority interests.

---

Description of Existing Properties

The following are descriptions of each of our existing Mills and The Block properties.

Potomac MillsWoodbridge, Virginia.Potomac Mills contains approximately 1.6 million square feet of gross
leaseable 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 leaseable area. As a
result of customer demand, Potomac Mills was expanded to approximately 1.2 million square feet of gross leaseable area in 1986. The Phase III expansion of Potomac Mills opened on
September 30, 1993 and increased total gross leaseable area by approximately 355,000 square feet. We completed construction of a 63,000 square foot Van's Skate Park which opened in the spring
of 2000. Potomac Mills has 18 anchors, including: IKEA, J.C. Penney Outlet, Marshalls, Spiegel Outlet, AMC Theatres,

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The Sports Authority, Off 5th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.

Franklin MillsPhiladelphia, Pennsylvania.Franklin Mills opened in 1989 and contains approximately
1.7 million square feet of gross leaseable 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 in November 1998. Franklin
Mills has 19 anchors, including: Bed, Bath & Beyond, Last Call-Neiman Marcus, Marshalls, Nordstrom Rack, Office Max, Off 5th-Saks Fifth Avenue, Jillian's, Syms and Sam
Ash Music. 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 and The Oasis at SawgrassSunrise, Florida.Sawgrass Mills, which opened in 1990, contains
approximately 1.8 million square feet of gross leaseable 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 leaseable area in 1995. We further expanded Sawgrass Mills by opening The Oasis at Sawgrass in April 1999. The Oasis at Sawgrass contains
approximately 287,000 square feet of gross leaseable area comprised of approximately 132,000 square feet of anchor space and approximately 155,000 square feet of specialty store space. The Oasis at
Sawgrass currently has three anchor stores: Regal Theater, Sega Gameworks and Ron Jon Surf Shop. Other tenants include Cheesecake Factory and Legal Seafoods. Sawgrass Mills has 19 anchors, including:
Beall's Outlet Store, Burlington Coat Factory, Last Call-Neiman Marcus, Spiegel Outlet, The Sports Authority, GAP and Sun & Ski Sports. 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.

Effective
October 2001, 1,245,000 units of the Operating Partnership were issued to Kan Am in exchange for the contribution by Kan Am of its 50% partnership interest in
Mills-Kan Am Sawgrass Phase 3 Limited Partnership, the joint venture entity that owned The Oasis at Sawgrass. We now own 100% of The Oasis at Sawgrass in addition to 100% of Sawgrass Mills
that we already owned.

Gurnee MillsGurnee, Illinois.Gurnee Mills opened in 1991 and contains approximately 1.6 million square
feet of gross leaseable area, of which three anchor store tenants own approximately 251,000 square feet. We completed construction of an expansion of over 195,000 square feet of gross leaseable area
in 1999, which added an ice skating rink to the existing mall. Gurnee Mills has been remerchandised resulting in the upgrade of the project's tenant mix. Gurnee Mills has 15 anchors, including: Bass
Pro Shops Outdoor World, Circuit City, Rinkside Sports, J.C. Penney Catalog Outlet, Marshalls, Spiegel Outlet, Bed, Bath & Beyond, The Sports Authority, Off 5th-Saks Fifth Avenue,
and T.J. Maxx. 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.

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Ontario MillsOntario, California.Ontario Mills opened in 1996 and contains approximately 1.5 million
square feet of gross leaseable area comprised of approximately 1.0 million square feet of anchor space and approximately 500,000 square feet of specialty store space. In 1999, we completed a
136,000 square foot expansion which included tenants such as Van's Skate Park, Sam Ash Music, and Cost Plus. Ontario Mills currently has 22 anchors, including: Off 5th-Saks Fifth Avenue,
Cost Plus, Dave & Busters, J.C. Penney Catalog Outlet, Burlington Coat Factory, Nike Factory Store, The Sports Authority, Off Broadway Shoes, Marshalls, Bed, Bath & Beyond, Mikasa, Off
Rodeo Drive, T.J. Maxx, AMC Theatres, Virgin Megastore, Group USA, Foozles, Totally 4 Kids, Rainforest Cafe, Sam Ash Music, Sega Gameworks and Van's Skate Park. Ontario Mills has an additional anchor
tenant commitment from Nordstrom Rack which will open in 2002. 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.

The
Operating Partnership, Kan Am and Simon Property are the sole partners in the joint venture entities that own Ontario Mills. The initial required equity capital was contributed 50%
by Kan Am, 25% by Simon Property and 25% by the Operating Partnership. Pursuant to the terms of the joint venture agreements, each partner receives a priority return equal to 9% per annum on its
capital contribution. Any residual cash flow after preference payments are distributed 25% to Kan Am, 50% to the Operating Partnership and 25% to Simon Property. Following the occurrence of a major
capital event, such as the sale of the real property or the project or the receipt of proceeds arising from condemnation of the project, each partner will receive its unpaid priority return and its
unreturned capital contributions, and any residual cash flow will be distributed 25% to Kan Am, 50% to the Operating Partnership and 25% to Simon Property. We have the right to manage the development,
property management and leasing of Ontario Mills, subject to the other joint venture partners' approval of specified major decisions, including sale or refinancing of Ontario Mills and approval of an
annual budget.

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

At
any time during the operating period, if the Operating Partnership or Simon Property are unable to agree on specified major decisions, at any time following the fifth anniversary of
the project's completion date or at any time if certain named executive officers of the Company or Simon Property are no longer executive officers, either the Operating Partnership or Simon Property
can exercise a buy-sell right. Pursuant to the buy-sell provision, either party, as the offeror, may require the other party, as offeree, to elect to either sell to the offeror
the offeree's interest in the joint venture entity or purchase from the offeror the offeror's interest in the joint venture entity for cash, subject to compliance with certain procedural requirements.

Grapevine MillsGrapevine, Texas.Grapevine Mills opened in 1997 and contains approximately 1.5 million
square feet of gross leaseable area comprised of approximately 1.0 million square feet of anchor space and approximately 520,000 square feet of specialty store space. Grapevine Mills currently
has 19 anchors, including: AMC Theatres, Polar Ice, Old Navy, Bass Pro Shops Outdoor World, Off 5th-Saks Fifth Avenue, Burlington Coat Factory, Bed, Bath & Beyond, Group USA,
Books-A-Million, Sega Gameworks, Virgin Megastore, and Sun & Ski Sports. Grapevine Mills has an additional anchor tenant commitment from Neiman Marcus which will open in
2002. Grapevine Mills is located on a

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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.

The
Operating Partnership, Kan Am and Simon Property are the sole partners in the joint venture entities that own Grapevine Mills. The initial required equity capital was contributed 50%
by Kan Am, 25% by Simon Property and 25% by the Operating Partnership. Pursuant to the terms of the joint venture agreements, each partner receives a priority return equal to 9% per annum on its
capital contribution. Any residual cash flow after preference payments are distributed 25% to Kan Am, 37.5% to the Operating Partnership and 37.5% to Simon Property. Following the occurrence of a
major capital event, such as the sale of the real property or the project or the receipt of proceeds arising from condemnation of the project, each partner will receive its unpaid priority return and
its unreturned capital contributions, and any residual cash flow will be distributed 25% to Kan Am, 37.5% to the Operating Partnership and 37.5% to Simon Property. We have the right to manage the
development, property management and leasing of Grapevine Mills, subject to the other joint venture partners' approval of specified major decisions, including sale or refinancing of Grapevine Mills
and approval of an annual budget.

At
specified times following the tenth anniversary of the project's opening or, if earlier, upon a change in control of the Company, either the Operating Partnership and Simon Property
together or Kan Am can exercise a buy-sell right. Pursuant to the buy-sell provision, the Operating Partnership and Simon Property can require Kan Am to sell to the Operating
Partnership 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 joint venture
entity. Also, pursuant to the buy-sell provision, Kan Am can require the Operating Partnership and Simon Property to acquire for cash or limited partnership units of the Operating
Partnership and limited partnership units of Simon Property, at the election of the Operating Partnership and Simon Property, Kan Am's entire interest in the joint venture entity. Only Kan Am may
invoke the buy-sell provision in the event of a change in control of the Company.

At
any time during the operating period, if the Operating Partnership or Simon Property are unable to agree on specified major decisions, at any time following the tenth anniversary of
the project's completion date or at any time if certain named executive officers of the Company or Simon Property are no longer executive officers, either the Operating Partnership or Simon Property
can exercise a buy-sell right. Pursuant to the buy-sell provision, either party, as the offeror, may require the other party, as offeree, to elect to either sell to the offeror
the offeree's interest in the joint venture entity or purchase from the offeror the offeror's interest in the joint venture entity for cash, subject to compliance with certain procedural requirements.

Arizona MillsTempe, Arizona.Arizona Mills opened in 1997 and contains approximately 1.2 million square
feet of gross leaseable area comprised of approximately 700,000 square feet of anchor space and approximately 520,000 square feet of specialty store space. Arizona Mills currently has 17 anchors,
including: Burlington Coat Factory, Off 5th-Saks Fifth Avenue, Last Call-Neiman Marcus, Oshman's, Harkins Cinema, Hilo Hattie, J.C. Penney, 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 the Operating Partnership, with a 36.8% equity interest, Taubman Realty, with a 36.8% equity interest, and Simon Property,
with a 26.4% equity interest. Each joint venture partner has contributed its required equity capital. Cash flow is distributed, and other payments are made, to each partner in accordance with each
partner's respective equity interest. We have the right to manage the development, property management and leasing of

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Arizona Mills, subject to the other joint venture partners' approval of specified major decisions, including sale or refinancing of Arizona Mills and approval of an annual budget.

At
specified times following the later of the fifth anniversary of the project's opening or the date that 90% of the project has been leased, if the joint venture partners are unable to
agree upon specified major decisions (including, among others, sales, refinancings, expansions, and certain capital expenditures), 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 and contains
approximately 655,000 square feet of gross leaseable area comprised of approximately 385,000 square feet of anchor space and approximately 270,000 square feet of specialty store space. The Block at
Orange currently has 10 anchors, including: Borders Books and Music, Van's Skate Park, Virgin Megastore, Off 5th-Saks Fifth Avenue, Ron Jon Surf Shop, Power House, AMC Theatres,
Dave & Busters, Hilo Hattie, and Mars Music. 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
Operating Partnership and Kan Am are the sole partners in the joint venture entity that owns The Block at Orange. Kan Am contributed the entire estimated equity requirement of
$60 million. Pursuant to the terms of the joint venture agreement, Kan Am receives a priority return equal to 9% per annum on its capital contribution. Any residual cash flow after preference
payments are distributed 50% to Kan Am and 50% to the Operating Partnership. Following the occurrence of a major capital event, such as the sale of the real property or the project or the receipt of
proceeds arising from condemnation of the project, Kan Am will receive its unpaid priority return and its unreturned capital contributions, and any residual cash flow will be distributed 50% to Kan Am
and 50% to the Operating Partnership. We have the right to manage the development, property management and leasing of The Block at Orange, subject to the other joint venture partners' approval of
specified major decisions, including sale or refinancing of The Block at Orange and approval of an annual budget.

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

The
Operating Partnership has guaranteed to Kan Am the payment of its priority return, subject to an aggregate limit of $10,800,000. This aggregate limit is to be reduced annually by the
sum of $1,080,000 in each year in which the Operating Partnership was not required to make payments under the guaranty, but not below $5,400,000. This guarantee will terminate upon the earlier of May,
2006, or such time as the partnership's cash flow in any fiscal year exceeds $8,000,000.

Concord MillsConcord, North Carolina.Concord Mills opened in 1999 and contains approximately 1.2 million
square feet of gross leaseable area comprised of approximately 691,000 square feet of anchor space and approximately 556,000 square feet of specialty store space. Concord Mills currently has 16
anchors including: Bass Pro Shops Outdoor World, AMC Theatres, Jillian's, Sun & Ski Sports, Alabama Grill, Off 5th-Saks Fifth Avenue, Burlington Coat Factory, T.J. Maxx, F.Y.E. (For
Your Entertainment), and Old Navy. Concord Mills is located on an 165-acre site at the intersection of interstate 85 and Concord Mills Boulevard in the city of concord which is
approximately ten miles north of downtown Charlotte.

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The
Operating Partnership, Kan Am and Simon Property are the sole partners in the joint venture entities that own Concord Mills. The initial required equity capital was contributed 50%
by Kan Am, 25% by Simon Property and 25% by the Operating Partnership. Pursuant to the terms of the joint venture agreements, each partner receives a construction period preference until construction
is substantially completed and permanent financing is secured and will receive a priority thereafter, equal to 9% per annum on its capital contribution. Any residual cash flow after preference
payments are distributed 25% to Kan Am, 37.5% to the Operating Partnership and 37.5% to Simon Property. The Operating Partnership and Simon Property currently guarantee Kan Am's construction period
preference and Kan Am's portion of construction debt and will continue these guaranties until qualified permanent financing is secured for the project. As of December 31, 2001, Kan Am's unpaid
preference was $0.6 million. Following the occurrence of a major capital event, such as the sale of the real property or the project or the receipt of proceeds arising from condemnation of the
project, each partner will receive its unpaid construction period preference, its unpaid priority return and its unreturned capital contributions, and any residual cash flow will be distributed 25% to
Kan Am, 37.5% to the Operating Partnership and 37.5% to Simon Property. We have the right to manage the development, property management and leasing of Concord Mills, subject to the other joint
venture partners' approval of specified major decisions, including sale or refinancing of Concord Mills and approval of an annual budget.

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

At
any time during the operating period, if the Operating Partnership or Simon Property are unable to agree on specified major decisions, at any time following the fifth anniversary of
the project's completion date or at any time if certain named executive officers of the Company or Simon Property are no longer executive officers, either the Operating Partnership or Simon Property
can exercise a buy-sell right. Pursuant to the buy-sell provision, either party, as the offeror, may require the other party, as offeree, to elect to either sell to the offeror
the offeree's interest in the joint venture entity or purchase from the offeror the offeror's interest in the joint venture entity for cash, subject to compliance with certain procedural requirements.

Katy MillsKaty, Texas.Katy Mills opened in 1999 and contains approximately 1.2 million square feet of
gross leaseable area comprised of approximately 605,000 square feet of anchor space and approximately 585,000 square feet of specialty store space. Katy Mills currently has 13 anchors including: Bass
Pro Shops Outdoor World, Burlington Coat Factory, AMC Theatres, F.Y.E. (For Your Entertainment), Off 5th-Saks Fifth Avenue, Sun & Ski Sports, Old Navy, Jillian's, and Marshalls.
Katy Mills is located on a 500-acre site at the intersection of Interstate 10 and Katy-Fort Bend Road in Fort Bend and Harris Counties which is approximately 20 miles west of
Houston.

The
Operating Partnership and Kan Am are the sole partners in the joint venture entity that owns Katy Mills and an interest in an additional development site located approximately two
miles from the Katy Mills property. Kan Am contributed $78.8 million, representing 75% of the total estimated equity requirement, and the Operating Partnership contributed the balance of the
total estimated equity requirement. Pursuant to the terms of the joint venture agreement, the Operating Partnership and Kan Am each receives a construction period preference until construction is
substantially completed and permanent financing is secured, and will receive a priority return thereafter, equal to 9% per annum on

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its capital contribution. Any residual cash flow after preference payments are distributed 37.5% to Kan Am and 62.5% to the Operating Partnership. The Operating Partnership currently guarantees Kan
Am's construction period preference and Kan Am's portion of construction debt and will continue these guaranties until qualified permanent financing is secured for the project. As of
December 31, 2001, Kan Am's unpaid preference was $1.8 million. Under the joint venture agreement, following the occurrence of a major capital event, such as the sale of the real
property or the project or the receipt of proceeds arising from condemnation of the project, each partner will receive its unpaid construction loan preference, its unpaid priority return and, on a pro
rata basis, its unreturned capital contributions and any residual cash flow will be distributed 62.5% to the Operating Partnership and 37.5% to Kan Am. We have the right to manage the development,
property management and leasing of Katy Mills, subject to the other joint venture partners' approval of specified major decisions, including sale or refinancing of Katy Mills and approval of an annual
budget.

At
specified times following the tenth anniversary of the project's opening, either the Operating Partnership or Kan Am can exercise a buy-sell right. Pursuant to the
buy-sell provision, the Operating Partnership can require Kan Am to sell to the Operating Partnership for cash or limited partnership units of the Operating Partnership, at Kan Am's
election, Kan Am's entire interest in the joint venture entity. Also, pursuant to the buy-sell provision, Kan Am can require the Operating Partnership to acquire for cash or limited
partnership units of the Operating Partnership, at the Operating Partnership's election, Kan Am's entire interest in the joint venture entity.

Opry MillsNashville, Tennessee.Opry Mills opened in May 2000 and contains approximately
1.1 million square feet of gross leaseable area comprised of approximately 595,000 square feet of anchor space and approximately 517,000 square feet of specialty store space. Opry Mills
currently has 16 anchors including: Alabama Grill, Barnes & Noble, Bass Pro Shops Outdoor World, Gibson Guitar, Jillian's, Off Broadway Shoes, Off 5th-Saks Fifth Avenue, Old Navy,
Regal Theatre, Sun & Ski Sports and Tower Records. Opry Mills is located on a 67-acre site that is adjacent to the Opryland Hotel and Convention Center.

The
Operating Partnership and Gaylord Entertainment Company are the sole partners in the joint venture entity that owns Opry Mills. Gaylord contributed the land for the project, which
was valued at $25 million, as its portion of the initial required capital. The Operating Partnership contributed $50 million as its portion of the initial required capital. The Operating
Partnership and Gaylord each receive a 9% priority return. Cash flow is used first to pay the Operating Partnership's priority return, second to pay Gaylord's priority return, third to pay to the
Operating Partnership special distributions of up to $3.5 million of certain net sponsorship revenues until the project achieves an 11% yield and finally, to the extent there exists any
residual cash flow, for distributions to the partners66.67% to the Operating Partnership and 33.33% to Gaylord. Following the occurrence of a major capital event, such as the sale of the
joint venture's leasehold interest in the underlying land or receipt of proceeds arising from condemnation of the project, payments to the partners will be made in the following order of priority:
(1) the Operating Partnership will receive its unpaid priority return; (2) Gaylord will receive its unpaid priority return; (3) each partner will receive its unreturned capital
contributions on a pro rata basis; and (4) any residual cash flow will be distributed 66.67% to the Operating Partnership and 33.33% to Gaylord. We have the right to provide all the
development, property management and leasing services for Opry Mills, subject to Gaylord's approval for specified major decisions, including the sale or refinancing of Opry Mills and approval of an
annual budget.

At
any time after 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 the Operating
Partnership or Gaylord can exercise a buy-sell right. Pursuant to the buy-sell provision, either partner, as the offeror, may require the other partner, as the offeree, to
elect to either sell to the offeror the offeree's interest in the joint venture or purchase from the offeror the offeror's interest in the joint venture for cash.

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The
Operating Partnership has guaranteed to the joint venture and to Gaylord the performance of our obligations under the joint venture agreement until the sale or transfer of Gaylord's
interest in the joint venture to any entity that is not an affiliate or until the dissolution of the joint venture.

Arundel MillsAnne Arundel County, Maryland.Arundel Mills opened in November 2000 and contains
approximately 1.2 million square feet of gross leaseable area comprised of approximately 624,000 square feet of anchor gross leaseable area and approximately 538,000 square feet of specialty
store space. Arundel Mills currently has 13 anchors, including: Bass Pro Shops Outdoor World, Bed, Bath & Beyond, Books-A-Million, Burlington Coat Factory, F.Y.E. (For
Your Entertainment), Jillian's, Muvico Theatres, Off 5th-Saks Fifth Avenue, Off Broadway Shoes, Old Navy, Sun & Ski Sports, The Children's Place, and T.J. Maxx. Arundel Mills has
two additional anchor commitments ESPN Skate Park and Medieval Times which will open in 2002. Arundel Mills is located on an approximately 107-acre site near the intersection of the
Baltimore/Washington Parkway and State Route 100 in Anne Arundel County, Maryland.

The
Operating Partnership, Kan Am and Simon Property are the sole partners in the joint venture entities that own Arundel Mills. The initial required equity capital was contributed 50%
by Kan Am, 25% by Simon Property and 25% by the Operating Partnership. Pursuant to the terms of the joint venture agreements, each partner receives a construction period preference until construction
is substantially completed and permanent financing is secured, and will receive a priority return thereafter, equal to 9% per annum on its capital contribution. Any residual cash flow, after
preference payments, are distributed 25% to Kan Am, 37.5% to the Operating Partnership and 37.5% to Simon Property. The Operating Partnership and Simon Property currently guarantee Kan Am's
construction period preference and Kan Am's portion of construction debt and will continue these guaranties until qualified permanent financing is secured for the project. As of December 31,
2001, Kan Am's unpaid preference was $0.5 million. Following the occurrence of a major capital event, such as the sale of the real property or the project or the receipt of proceeds arising
from condemnation of the project, each partner will receive it unpaid construction period preference, its unpaid priority return and its unreturned capital contributions, and any residual cash flow
will be distributed 25% to Kan Am, 37.5% to the Operating Partnership and 37.5% to Simon Property. We have the right to manage the development, property management and leasing of Concord Mills,
subject to the other joint venture partners' approval of specified major decisions, including sale or refinancing of Concord Mills and approval of an annual budget.

At
specified times following the tenth anniversary of the project's opening or, if earlier, upon a change in control of the Company, either the Operating Partnership and Simon Property
together or Kan Am can exercise a buy-sell right. Pursuant to the buy-sell provision, the Operating Partnership and Simon Property can require Kan Am to sell to the Operating
Partnership 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 joint venture
entity. Also, pursuant to the buy-sell provision, Kan Am can require the Operating Partnership and Simon Property to acquire for cash or limited partnership units of the Operating
Partnership and limited partnership units of Simon Property, at the election of the Operating Partnership and Simon Property, Kan Am's entire interest in the joint venture entity. Only Kan Am may
invoke the buy-sell provision in the event of a change in control of the Company.

At
any time during the operating period, if the Operating Partnership or Simon Property are unable to agree on specified major decisions, at any time following the fifth anniversary of
the project's completion date or at any time if certain named executive officers of the Company or Simon Property are no longer executive officers, either the Operating Partnership or Simon Property
can exercise a buy-sell right. Pursuant to the buy-sell provision, either party, as the offeror, may require the other party, as offeree, to elect to either sell to the offeror
the offeree's interest in the joint venture entity or

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purchase from the offeror the offeror's interest in the joint venture entity for cash, subject to compliance with certain procedural requirements.

Discover MillsSugarloaf, Georgia.Discover Mills opened in November 2001 and contains 1.1 million
square feet of gross leaseable area comprised of approximately 566,000 square feet of anchor gross leaseable area and approximately 522,000 square feet of specialty store space. Discover Mills
currently has 12 anchors, including: Bass Pro Shops Outdoor World, Books-A-Million, Burlington Coat Factory, ESPN Skatepark, Last Call-Neiman Marcus, Off
5th-Saks Fifth Avenue, and Sun & Ski Sports. Discover Mills is located on an approximately 225-acre site just off Interstate 85 and Sugarloaf Parkway in Gwinette
County, Georgia.

The
Operating Partnership and Kan Am are the sole partners in the joint venture entity that owns Discover Mills. Kan Am contributed the entire estimated equity requirement of
$75 million. Pursuant to the terms of the joint venture agreement, Kan Am will receive a construction period preference until construction is substantially completed and permanent financing is
secured and will receive a priority return thereafter, equal to 9% per annum on its capital contribution. Any residual cash flow, after preference payments, are distributed 50% to Kan Am and 50% to
the Operating Partnership. The Operating Partnership currently guarantees Kan Am's construction period preference and Kan Am's portion of construction debt and will continue these guaranties until
qualified permanent financing is secured for the project. As of December 31, 2001, Kan Am's unpaid preference was $1.0 million. Following the occurrence of a major capital event, such as
the sale of the real property or the project or the receipt of proceeds arising from condemnation of the project, Kan Am will receive its unpaid construction period preference, its unpaid priority
return and its unreturned capital contributions, and any residual cash flow will be distributed 50% to Kan Am and 50% to the Operating Partnership. We have the right to provide all the development,
property management and leasing services for Discover Mills, subject to Kan Am's approval for specified major decisions, including the sale or refinancing of Discover Mills and approval of an annual
budget.

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

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CAPITAL EXPENDITURESEXISTING MILLS, BLOCK AND COMMUNITY CENTERS  COMBINED (1) (2) (3)

The following tables present certain information regarding capital expenditures for the Mills, the Block and the Community Centers combined for each of the last
three years and a 3-year average. Data is only available for 2001 and 2000 for The Block at Orange.

|                                                     |  | Years Ended December 31, |            | 
|---------------------------------------------------- |  | ------------------------ | ---------- | 
|
|
|Recurring non-tenant capital
expenditures (4)        |  |                          |            | 
|Costs                                                |  | $                        | 1,188,795  | 
|Per Square Foot (5)                                  |  |                          | 0.11       | 
|Recurring tenant improvements/leasing
costs (6)      |  |                          |            | 
|Costs                                                |  | $                        | 1,821,232  | 
|Per Square Foot Improved (7)                         |  |                          | 8.82       | 
|Per Square Foot (5)                                  |  |                          | 0.20       | 
|Total recurring costs                                |  |                          |            | 
|Costs                                                |  | $                        | 3,010,027  | 
|Per Square Foot (5)                                  |  |                          | 0.31       | 
|Non-recurring tenant improvements/
leasing costs (6) |  |                          |            | 
|Costs (8)                                            |  | $                        | 11,561,703 | 
|Per Square Foot Improved (9)                         |  |                          | 14.06      | 
|Per Square Foot (5)                                  |  |                          | 1.08       | 
|Work in process (10)                                 |  |                          |            | 
|Costs                                                |  | $                        | 9,903,298  | 
|Per Square Foot Improved (11)                        |  |                          | 29.00      | 

---

50

---

CAPITAL EXPENDITURES (Continued)EXISTING MILLS AND BLOCK (1) (2)

The following table presents certain information regarding capital expenditures for the Mills and The Block for each of the last three years and a
3-year average. Data is only available for 2001 and 2000 for The Block at Orange.

|                                                     |  | Years Ended December 31, |            | 
|---------------------------------------------------- |  | ------------------------ | ---------- | 
|
|
|Recurring non-tenant capital expenditures (3)        |  |                          |            | 
|Costs                                                |  | $                        | 1,188,747  | 
|Per Square Foot (4)                                  |  |                          | 0.11       | 
|Recurring tenant improvements/leasing
costs (5)      |  |                          |            | 
|Costs                                                |  | $                        | 1,821,232  | 
|Per Square Foot Improved (6)                         |  |                          | 8.61       | 
|Per Square Foot (4)                                  |  |                          | 0.20       | 
|Total recurring costs                                |  |                          |            | 
|Costs                                                |  | $                        | 3,009,979  | 
|Per Square Foot (4)                                  |  |                          | 0.31       | 
|Non-recurring tenant improvements/
leasing costs (5) |  |                          |            | 
|Costs (7)                                            |  | $                        | 11,459,591 | 
|Per Square Foot Improved (8)                         |  |                          | 5.05       | 
|Per Square Foot (4)                                  |  |                          | 0.68       | 
|Work in process (9)                                  |  |                          |            | 
|Costs                                                |  | $                        | 9,900,722  | 
|Per Square Foot Improved (10)                        |  |                          | 29.37      | 

---

51

---

CAPITAL EXPENDITURES (Continued)COMMUNITY CENTERS (1)

The following table sets forth certain information regarding capital expenditures for the Community Centers for each of the last three years and a
3-year average.

|                                                    |  | Years Ended December 31, |         | 
|--------------------------------------------------- |  | ------------------------ | ------- | 
|
|
|Recurring non-tenant capital expenditures (2)       |  |                          |         | 
|Costs                                               |  | $                        | 48      | 
|Per Square Foot (3)                                 |  |                          |        | 
|Recurring tenant improvements/leasing costs (4)     |  |                          |         | 
|Costs                                               |  | $                        |        | 
|Per Square Foot Improved (5)                        |  |                          |        | 
|Per Square Foot (3)                                 |  |                          |        | 
|Total recurring costs                               |  |                          |         | 
|Costs                                               |  | $                        | 48      | 
|Per Square Foot (3)                                 |  |                          |        | 
|Non-recurring tenant improvements/leasing costs (4) |  |                          |         | 
|Costs (7)                                           |  | $                        | 102,112 | 
|Per Square Foot Improved (6)                        |  |                          | 0.80    | 
|Per Square Foot (3)                                 |  |                          | 0.28    | 
|Work in process (7)                                 |  |                          |         | 
|Costs                                               |  | $                        | 2,576   | 
|Per Square Foot Improved (8)                        |  |                          | 0.46    | 

---

52

---



SUMMARY OF OUTSTANDING CONSOLIDATED INDEBTEDNESS  (Dollars in thousands)

As of December 31, 2001, the Company had outstanding consolidated indebtedness in an aggregate amount of approximately $1,024 million (excluding its
pro rata share of unconsolidated joint venture debt) as set forth below:

|                               |                                 | Principal
Balance |         | Interest
Rate Type |          | Annual Interest
Rate |               | Annual Interest |   | Maturity Date (19) |        | Earliest
date at
which debt
can be
repaid |        | Recourse to
Company or
Operating
Partnership |    
|------------------------------ | ------------------------------- | ----------------- | ------- | ------------------ | -------- | -------------------- | ------------- | --------------- | - | ------------------ | ------ | ----------------------------------------- | ------ | -------------------------------------------- | ---
|Potomac Mills/Gurnee Mills     |                                 | $                 | 352,938 |                    | Fixed    |                      | 7.460%        |                 | $ | 26,329             |        | 3/10/11                                   | (1)    | (2)                                          |    
|Franklin Mills/Liberty Plaza   |                                 |                   |         |                    |          |                      |               |                 |   |                    |        |                                           |        |                                              |    
|                               | Tranche A                       |                   |         | 105,120            |          | Fixed                |               | 7.882%          |   |                    | 8,286  |                                           | 5/5/07 | (3)                                          | (4)
|                               | Mortgage Loan                   |                   |         | 19,102             |          | Fixed                |               | 7.440%          |   |                    | 1,421  |                                           | 5/5/07 | (3)                                          | (4)
|                               | Mortgage Loan                   |                   |         | 12,436             |          | Fixed                |               | 6.220%          |   |                    | 774    |                                           | 5/5/07 | (3)                                          | (4)
|Sawgrass Mills                 |                                 |                   |         |                    |          |                      |               |                 |   |                    |        |                                           |        |                                              |    
|                               | Mortgage Loan                   |                   |         | 252,848            |          | Fixed                |               | 7.180%          |   |                    | 18,155 |                                           | 7/7/06 | (5)                                          | (5)
|                               | Mezzanine Loan                  |                   |         | 31,170             |          | Fixed                |               | 7.34%(6)        |   |                    | 2,288  | (6)                                       | 7/7/06 | (8)                                          | (8)
|The Oasis at Sawgrass          |                                 |                   |         |                    |          |                      |               |                 |   |                    |        |                                           |        |                                              |    
|                               | Mortgage Loan                   |                   |         | 46,134             |          | Fixed                |               | 7.180%          |   |                    | 3,312  |                                           | 7/7/06 | (5)                                          | (5)
|                               | Mezzanine Loan                  |                   |         | 5,687              |          | Fixed                |               | 7.34%(6)        |   |                    | 428    | (6)                                       | 7/7/06 | (8)                                          | (8)
|CVS Portfolio (25 stores)      |                                 |                   | 35,967  |                    | Fixed    |                      | 7.960%        |                 |   | 2,863              |        | 10/10/10                                  |        | (9)                                          |    
|CVS Portfolio (25 stores)      |                                 |                   | 28,330  |                    | Fixed    |                      | 9.350%        |                 |   | 2,649              |        | 1/10/23                                   |        | (10)                                         |    
|CVS Portfolio (21 stores)      |                                 |                   | 39,703  |                    | Fixed    |                      | 6.498%        |                 |   | 2,580              |        | 8/6/18                                    |        | (11)                                         |    
|Concord Mills Residual III     |                                 |                   | 13,119  |                    | Variable |                      | Libor + 225bp |                 |   | 541                | (7)    | 12/31/02                                  |        | (12)                                         |    
|                               |                                 |                   |         |                    |          |                      |               |                 |   |                    |        |                                           |        |                                              |    
|                               | Total Property Mortgages        |                   | $       | 942,554            |          |                      |               |                 |   | $                  | 69,626 |                                           |        |                                              |    
|                               |                                 |                   |         |                    |          |                      |               |                 |   |                    |        |                                           |        |                                              |    
|Mainstreet Retail              |                                 |                   | 11,588  |                    | Variable |                      | Libor + 425bp |                 |   | 710                | (7)    | 7/21/10                                   |        | (14)                                         |    
|FoodBrand (Katy/Franklin/Opry) |                                 |                   | 9,791   |                    | Fixed    |                      | 11.102%       |                 |   | 1,087              |        | 7/15/05                                   |        | (15)                                         |    
|FoodBrand (Arundel)            |                                 |                   | 2,090   |                    | Fixed    |                      | 9.249%        |                 |   | 193                |        | 10/30/05                                  |        | (15)                                         |    
|Corporate Term Loan            |                                 |                   | 45,000  |                    | Variable |                      | Libor + 225bp |                 |   | 1,856              | (7)    | 6/1/03                                    |        | (16)                                         |    
|Corporate Revolving Loan       |                                 |                   | 10,000  |                    | Variable |                      | Libor + 275bp |                 |   | 462                | (7)    | 6/1/02                                    | (17)   | (12)                                         |    
|Sawgrass Residual              |                                 |                   | 2,871   |                    | Variable |                      | Libor + 165bp |                 |   | 101                | (7)    | 1/18/03                                   |        | (18)                                         |    
|                               |                                 |                   |         |                    |          |                      |               |                 |   |                    |        |                                           |        |                                              |    
|                               | Total Consolidated Indebtedness |                   | $       | 1,023,894          |          |                      |               |                 |   | $                  | 74,035 |                                           |        |                                              |    
|                               |                                 |                   |         |                    |          |                      |               |                 |   |                    |        |                                           |        |                                              |    

---

53

---

54

---

SUMMARY OF OUTSTANDING UNCONSOLIDATED INDEBTEDNESS  (Dollars in thousands)

|                        |                                   | Principal
Balance |         | Total
Commitment |   | Interest
Rate Type |         | Annual Interest
Rate |  | Annual
Interest       |  | Maturity
Date (26) |        | Earliest
date at
which debt
can be
repaid |         | Recourse to
Company or
Operating
Partnership |     
|----------------------- | --------------------------------- | ----------------- | ------- | ---------------- | - | ------------------ | ------- | -------------------- |  | --------------------- |  | ------------------ | ------ | ----------------------------------------- | ------- | -------------------------------------------- | ----
|Arizona Mills           |                                   | $                 | 144,737 |                  |   |                    |         | Fixed                |  | 7.895%                |  | $                  | 11,427 |                                           | 10/5/10 |                                              | (1) 
|Grapevine Mills         |                                   |                   | 155,000 |                  |   |                    |         | Fixed                |  | 6.470%                |  |                    | 10,029 |                                           | 10/1/08 | (2)                                          | (27)
|Grapevine Mills II      |                                   |                   | 14,396  |                  |   |                    |         | Fixed                |  | 8.390%                |  |                    | 1,208  |                                           | 11/5/08 | (4)                                          | (1) 
|Ontario Mills           |                                   |                   | 140,507 |                  |   |                    |         | Fixed                |  | 6.750%                |  |                    | 9,484  |                                           | 12/1/08 | (5)                                          | (1) 
|Ontario Mills II        |                                   |                   | 10,430  |                  |   |                    |         | Fixed                |  | 8.010%                |  |                    | 835    |                                           | 1/5/09  |                                              | (1) 
|The Block at Orange (6) |                                   |                   | 133,898 |                  |   |                    |         | Fixed (6)            |  | 8.000%                |  |                    | 10,800 |                                           | 5/1/06  |                                              | (7) 
|                        |                                   |                   |         |                  |   |                    |         |                      |  |                       |  |                    |        |                                           |         |                                              |     
|Total Mortgage Debt     |                                   | $                 | 598,968 |                  |   |                    |         |                      |  |                       |  | $                  | 43,783 |                                           |         |                                              |     
|                        |                                   |                   |         |                  |   |                    |         |                      |  |                       |  |                    |        |                                           |         |                                              |     
|Concord Mills           |                                   | $                 | 180,717 |                  | $ | 199,000            |         | Variable             |  | Libor + 120bp (9)(28) |  | $                  | 5,555  | (10)                                      | 12/2/02 |                                              | (3) 
|Katy Mills              |                                   |                   | 155,351 |                  |   | 158,000            |         | Variable             |  | Libor + 175bp         |  |                    | 5,630  | (10)                                      | 3/31/02 |                                              | (12)
|Opry Mills              |                                   |                   | 172,052 |                  |   | 176,500            |         | Fixed (14)           |  | Libor + 175bp         |  |                    | 13,807 | (15)                                      | 9/30/02 |                                              | (16)
|Arundel Mills           |                                   |                   | 170,085 |                  |   | 191,000            |         | Variable             |  | Libor + 140bp (28)    |  |                    | 5,568  | (10)                                      | 5/23/03 |                                              | (18)
|Arundel Mills Residual  |                                   |                   | 3,560   |                  |   | 10,000             |         | Variable             |  | Libor + 200bp         |  |                    | 138    | (10)                                      | 6/8/02  |                                              | (20)
|Discover Mills          |                                   |                   | 141,397 |                  |   | 182,243            |         | Variable             |  | Libor + 225bp (22)    |  |                    | 7,144  | (23)                                      | 4/16/04 |                                              | (24)
|                        |                                   |                   |         |                  |   |                    |         |                      |  |                       |  |                    |        |                                           |         |                                              |     
|                        |                                   | $                 | 823,162 |                  | $ | 916,743            |         |                      |  |                       |  | $                  | 37,842 |                                           |         |                                              |     
|                        |                                   |                   |         |                  |   |                    |         |                      |  |                       |  |                    |        |                                           |         |                                              |     
|                        | Total Unconsolidated Indebtedness |                   | $       | 1,422,130        |   | $                  | 916,743 |                      |  |                       |  |                    | $      | 81,625                                    |         |                                              |     
|                        |                                   |                   |         |                  |   |                    |         |                      |  |                       |  |                    |        |                                           |         |                                              |     

---

55

---

56

---

Income Producing PropertyFederal Income Tax Basis (unaudited) (in thousands)

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, Arizona Mills, Concord Mills, Katy Mills, Opry Mills, Arundel Mills, and Discover Mills, which are unconsolidated joint ventures) and The Block at Orange, which is an
unconsolidated joint venture, as of December 31, 2001:

|                          |  | Land |        | Land Improvements |   | Building |  | Furniture, Fixture and
Equipment
|------------------------- |  | ---- | ------ | ----------------- | - | -------- |  | --------------------------------
|
|Arizona Mills             |  | $    | 22,018 |                   | $ | 539      |  | MACRS 15                        
|Arundel Mills             |  |      | 16,466 |                   |   | 27,006   |  | MACRS 15                        
|Concord Mills             |  |      | 24,830 |                   |   | 21,095   |  | MACRS 15                        
|Concord Mills Marketplace |  |      | 2,817  |                   |   | 1,569    |  | MACRS 15                        
|Discover Mills            |  |      | 27,128 |                   |   | 20,005   |  | MACRS 15                        
|Franklin Mills            |  |      | 28,313 |                   |   | 6,840    |  | MACRS 15                        
|Grapevine Mills           |  |      | 23,143 |                   |   | 6,820    |  | MACRS 15                        
|Gurnee Mills              |  |      | 18,456 |                   |   | 16,931   |  | MACRS 15                        
|Katy Mills                |  |      | 8,989  |                   |   | 48,051   |  | MACRS 15                        
|Liberty Plaza             |  |      |       |                   |   | 346      |  | MACRS 15                        
|Ontario Mills             |  |      | 8,384  |                   |   | 10,532   |  | MACRS 15                        
|Opry Mills                |  |      | 34,669 |                   |   | 41,487   |  | MACRS 15                        
|Potomac Mills             |  |      | 15,913 |                   |   | 27,199   |  | ACRS 15,18                      
|Sawgrass Mills            |  |      | 12,992 |                   |   | 9,071    |  | MACRS 15                        
|The Block at Orange       |  |      | 23,211 |                   |   | 10,221   |  | MACRS 15                        
|The Oasis at Sawgrass     |  |      | 2,548  |                   |   | 3,120    |  | MACRS 15                        

Item 3. Legal Proceedings

None.

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

None.

57

---



PART II

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

Market Information

Our common stock trades on the New York Stock Exchange ("NYSE") under the symbol "MLS". The following table sets forth 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 for the periods noted.

HIGH

LOW

DISTRIBUTIONS2001First Quarter

$
20.98

$
16.37

$.5175Second Quarter


24.74


20.33

.5325Third Quarter


25.24


18.25

.5325Fourth Quarter


26.48


21.04

.53252000First Quarter

$
18.63

$
15.63

$.5025Second Quarter


19.06


17.44

.5175Third Quarter


18.94


17.06

.5175Fourth Quarter


18.75


16.06

.5175


The
last reported closing sale price on the NYSE on March 25, 2002 was $27.74 per share. As of March 25, 2002, there were 30,490,933, shares of our common stock outstanding, held
by 1,017 holders of record.

Distributions

We have made consecutive quarterly distributions since our initial public offering. The indicated annual distribution rate was $2.13 per share of common stock
based on the fourth quarter 2001 distribution. A portion of our distribution may represent a non-taxable return of capital and/or a capital gain dividend. Approximately 100% of 2001
distributions of $2.12 per share of common stock were a non-taxable return of capital. In 2002, we increased our annual distribution rate to $2.19 per share of common stock commencing with
our dividend for the first quarter of 2002 which is payable in May 2002. 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.

Item 6. Selected Financial Data

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

58

---

THE MILLS CORPORATION  SELECTED CONSOLIDATED FINANCIAL DATA  (In thousands, except per share data)

|                                                                                                                                   |                                                                                         | Years ended December 31, |                         
|---------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ------------------------ | ------------------------
|
|OPERATING DATA:                                                                                                                    |                                                                                         |                          |                         
|REVENUES:                                                                                                                          |                                                                                         |                          |                         
|                                                                                                                                   | Minimum rent                                                                            |                          | $                       
|                                                                                                                                   | Percentage rent                                                                         |                          |                         
|                                                                                                                                   | Recoveries from tenants                                                                 |                          |                         
|                                                                                                                                   | Other property revenue                                                                  |                          |                         
|                                                                                                                                   | Management fee income from unconsolidated joint ventures                                |                          |                         
|                                                                                                                                   | Other fee income from unconsolidated joint ventures                                     |                          |                         
|                                                                                                                                   |                                                                                         |                          |                         
|                                                                                                                                   |                                                                                         |                          | Total operating revenues
|                                                                                                                                   |                                                                                         |                          |                         
|EXPENSES:                                                                                                                          |                                                                                         |                          |                         
|                                                                                                                                   | Recoverable from tenants                                                                |                          |                         
|                                                                                                                                   | Other operating                                                                         |                          |                         
|                                                                                                                                   | General and administrative                                                              |                          |                         
|                                                                                                                                   | Depreciation and amortization                                                           |                          |                         
|                                                                                                                                   |                                                                                         |                          |                         
|                                                                                                                                   |                                                                                         |                          | Total operating expenses
|                                                                                                                                   |                                                                                         |                          |                         
|                                                                                                                                   |                                                                                         |                          | 88,512                  
|OTHER INCOME & EXPENSES:                                                                                                           |                                                                                         |                          |                         
|                                                                                                                                   | Equity in earnings of unconsolidated joint ventures before extraordinary items          |                          |                         
|                                                                                                                                   | Interest income                                                                         |                          |                         
|                                                                                                                                   | Interest expense, net                                                                   |                          |                         
|                                                                                                                                   | Other income (expense)                                                                  |                          |                         
|                                                                                                                                   |                                                                                         |                          |                         
|Income before gain on sale of interest in FoodBrand L.L.C., sale of community centers, extraordinary items, and minority interests |                                                                                         |                          | 45,041                  
|                                                                                                                                   | Gain on sale of interest in FoodBrand L.L.C.                                            |                          |                         
|                                                                                                                                   | Gain on sale of community centers                                                       |                          |                         
|                                                                                                                                   |                                                                                         |                          |                         
|Income before extraordinary items and minority interests                                                                           |                                                                                         |                          | 51,461                  
|                                                                                                                                   | Extraordinary losses on debt extinguishments                                            |                          |                         
|                                                                                                                                   | Equity in extraordinary losses on debt extinguishments of unconsolidated joint ventures |                          |                         
|                                                                                                                                   |                                                                                         |                          |                         
|Income before minority interests                                                                                                   |                                                                                         |                          | 34,710                  
|                                                                                                                                   | Minority interests                                                                      |                          |                         
|                                                                                                                                   |                                                                                         |                          |                         
|Net income                                                                                                                         |                                                                                         | $                        | 21,242                  
|                                                                                                                                   |                                                                                         |                          |                         
|EARNINGS PER COMMON SHAREBASIC:                                                                                                   |                                                                                         |                          |                         
|                                                                                                                                   | Income before extraordinary items                                                       |                          | $                       
|                                                                                                                                   | Extraordinary losses on debt extinguishments                                            |                          |                         
|                                                                                                                                   |                                                                                         |                          |                         
|                                                                                                                                   | Net income per share                                                                    |                          | $                       
|                                                                                                                                   |                                                                                         |                          |                         

59

---

THE MILLS CORPORATION  SELECTED CONSOLIDATED FINANCIAL DATA (Continued)  (In thousands, except per share data and number of properties)

|                                                          |                                              | Years ended December 31,                                           |        
|--------------------------------------------------------- | -------------------------------------------- | ------------------------------------------------------------------ | -------
|
|EARNINGS PER COMMON SHAREDILUTED:                        |                                              |                                                                    |        
|                                                          | Income before extraordinary items            |                                                                    | $      
|                                                          | Extraordinary losses on debt extinguishments |                                                                    |        
|                                                          |                                              |                                                                    |        
|                                                          | Net income per share                         |                                                                    | $      
|                                                          |                                              |                                                                    |        
|PER SHARE INFORMATION:                                    |                                              |                                                                    |        
|                                                          |                                              | Dividends paid per common share (unaudited):                       |        
|                                                          |                                              | Ordinary income                                                    |        
|                                                          |                                              | Capital gains                                                      |        
|                                                          |                                              | Return of capital                                                  |        
|                                                          |                                              |                                                                    |        
|                                                          |                                              | Dividends paid per common share                                    |        
|                                                          |                                              |                                                                    |        
|OTHER DATA:                                               |                                              |                                                                    |        
|Cash flows provided by (used in):                         |                                              |                                                                    |        
|                                                          |                                              | Operating activities                                               |        
|                                                          |                                              | Investing activities                                               |        
|                                                          |                                              | Financing activities                                               |        
|Funds from operations (1)                                 |                                              | $                                                                  | 121,472
|Diluted weighted average shares outstanding               |                                              |                                                                    | 25,491 
|Diluted weighted average shares and units outstanding     |                                              |                                                                    | 41,508 
|PORTFOLIO DATA (INCLUDING UNCONSOLIDATED JOINT VENTURES): |                                              |                                                                    |        
|                                                          |                                              | Total Portfolio GLA at end of period                               |        
|                                                          |                                              | Number of properties at end of period                              |        
|BALANCE SHEET DATA:                                       |                                              |                                                                    |        
|                                                          |                                              | Investment in real estate assets (before accumulated depreciation) |        
|                                                          |                                              | Total assets                                                       |        
|                                                          |                                              | Total mortgages, notes and loans payable                           |        
|                                                          |                                              | Minority interests                                                 |        
|                                                          |                                              | Total stockholders' equity                                         |        

---

60

---



THE MILLS CORPORATION

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

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. The following discussion and analysis of the consolidated financial condition and results of operations should be read in
conjunction with the "Selected Financial Data," and the Company's Consolidated Financial Statements and Notes thereto for the years ended December 31, 2001, 2000, and 1999. Historical results
set forth in the "Selected Financial Data" and the Company's Consolidated Financial Statements are not necessarily indicative of the future financial position and results of operations of the Company.

The
Mills Corporation is a fully integrated, self managed real estate investment trust that conducts all of its business through the Operating Partnership, in which we own a 1% interest
as the sole general partner and a 61.89% interest as a limited partner as of December 31, 2001. Through the Operating Partnership, we are engaged primarily in the ownership, development,
redevelopment, leasing, acquisition, expansion and management of a portfolio consisting of twelve super-regional, retail and entertainment-oriented centers, one urban entertainment/retail project, two
community centers, and a portfolio of 46 single tenant net lease properties ("Net Lease Properties"). Additionally, the Operating Partnership owns MillsServices Corp. ("MSC"), which was formed to
provide development, management, leasing and financial services to entities owned by affiliates of the Company. MSC owns 100% of Mills Enterprises, Inc., an entity that now owns 60% of
FoodBrand L.L.C., the food and beverage entity created by the Company in 1999 to master lease, manage and operate food courts and restaurants at the Company's malls.

Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated financial statements, which have been
prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On
an ongoing basis, management evaluates its estimates and judgments, including those related to real estate and development assets, revenue recognition in conjunction with providing development,
leasing and management services and equity in earnings of unconsolidated joint ventures. A summary of the Company's accounting policies and procedures are included in footnote 2 of the consolidated
financial statements and notes thereto. Management believes the following critical accounting policies among others affect its more significant judgment of estimates used in the preparation of its
consolidated financial statements.

Real Estate and Development Assets

Costs related to the acquisition, predevelopment, development, construction and improvement of properties are capitalized. Interest, real estate taxes, insurance
and other development related costs including certain direct and indirect costs incurred during the construction period are also capitalized. Upon completion of development all such costs are
depreciated over the life of the related assets.

Costs
incurred during predevelopment are capitalized after management has identified and secured a site, determined that a project is feasible, and concluded that it is probable that the
project will proceed. The Operating Partnership has invested significant amounts of capital in several

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predevelopment projects. While management believes it will recover this capital through the successful development of such projects, or through other alternative opportunities and courses of action
in the event that such development cannot proceed, it is possible that a significant write-off of unrecoverable amounts could occur. A material write-off could impact the financial condition of the
Operating Partnership, including its ability to comply with certain covenant tests under various debt agreements of the Company. A material write-off could also impact the Company's ability to obtain
funding for future development projects.

Income
producing properties are individually evaluated for impairment when various conditions exist which may indicate that it is probable that the sum of expected future cash flows (on
an undiscounted basis) from a property are less than its historical net cost basis. Upon determination that a permanent impairment has occurred, the Company records an impairment charge equal to the
excess of historical cost basis over fair value.

Revenue Recognition

The Company, as lessor, has retained substantially all the risks and benefits of property ownership and accounts for its leases as operating leases. Minimum rent
from income producing properties is recognized on a straight-line basis over the terms of the respective leases. Percentage rent is recognized when tenants' sales have reached certain
levels specified in the respective leases. Recoveries from tenants for real estate taxes and other operating expenses are recognized as revenue in the period the applicable costs are incurred.

MSC
has entered into agreements with the joint ventures to provide management, leasing, development and financial services for the joint venture properties. For management services, MSC
is entitled to a percentage of rental revenues received by the joint venture property. For leasing services, MSC is entitled to an agreed-upon rate monthly per square foot of space leased
that is recognized upon execution of a lease. For development services, MSC is entitled to an agreed-upon fee that is deferred during the predevelopment stage of the project and
subsequently recognized ratably during the development period once a development agreement is executed. For financial services, MSC receives an agreed upon percentage of the total loan commitment
which is recognized when a construction loan or permanent loan is executed by the lender. Costs incurred to provide leasing, development and financial services are capitalized when incurred and
subsequently expensed as the fee is earned. Other fee income from affiliated joint ventures reflects the fees earned from providing leasing, development and financing services, net of the estimated
costs incurred to provide these services.

Investment in Unconsolidated Joint Ventures

The Company does not consider itself to be in control of joint ventures when major business decisions require the approval of at least one other general partner.
Accordingly, the company accounts for its joint ventures under the equity method.

The
Company calculates the equity in income or loss earned from its unconsolidated joint ventures based on its estimate of each partner's economic ownership which is estimated based on
anticipated stabilized cashflows as they would be allocated to each partner based on how cash flow is distributed. Generally, under the terms of the respective partnership agreements, net ordinary
cashflow is distributed to each partner first to pay preferences on unreturned capital balances (including cumulative unpaid preferences) and thereafter in accordance with residual sharing percentages
as defined in the partnership agreement. Cashflow from capital events (including refinancing and asset sales) is allocated first to partners in an amount equal to their unreturned capital account and
thereafter in accordance with residual sharing percentages.

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Financial Overview

Fluctuations in the Company's results of operations from period to period are partially affected by acquisitions, dispositions, new assets placed in service, and
other business transactions generated from the Company's pursuit to develop new shopping centers, expand existing shopping centers, and build on other retail alternatives that leverage the Company's
existing portfolio. The following is a summary of new shopping center openings, acquisitions and dispositions for the years ended December 31, 2001, 2000 and 1999.

For
the year ended December 31, 2001, the Consolidated Financial Statements and accompanying Notes reflect the consolidated financial results of four wholly-owned shopping
centers, two community centers including Concord Mills Marketplace which opened in October 2001, the equity in earnings of nine unconsolidated joint ventures, including Discover Mills which
opened in November 2001, 46 Net Lease Properties and the operations of MSC.

In
November 2001, the Operating Partnership acquired Kan Am's interest in MillsKan Am Sawgrass Phase 3 Limited Partnership (the joint venture that owns The Oasis at
Sawgrass), in exchange for 1,245,000 limited partnership units of the Operating Partnership. As a result of this transaction the Company owns 100% of The Oasis at Sawgrass. Additionally, in
October 2001, the Company sold a 40% interest in FoodBrand L.L.C., one of the Company's wholly owned subsidiaries which master leases, manages and operates the food courts and several
restaurants at a number of Mills' properties, to privately-held Panda Restaurant Group. The transaction resulted in a $6.4 million gain for the year ended December 31, 2001.

For
the year ended December 31, 2000, the Consolidated Financial Statements and accompanying Notes reflect the consolidated financial results of four wholly-owned Mills shopping
centers, eleven community centers, ten of which were sold in August 2000 ("Disposed Properties"), the equity in earnings of nine unconsolidated joint ventures including Opry Mills and Arundel
Mills which opened in May and November 2000, respectively, 46 Net Leased Properties which were acquired in September and October 2000 and the operations of MSC.

For
the year ended December 31, 1999, the Consolidated Financial Statements and accompanying Notes reflect the consolidated financial results of four wholly-owned Mills shopping
centers, eleven community centers, the equity in earnings of seven unconsolidated joint ventures including The Oasis at Sawgrass, Concord Mills and Katy Mills which opened in April, September and
October 1999, respectively, and the operations of MSC.

Comparison of the year ended December 31, 2001 to the year ended December 31, 2000

Minimum rentfor the year ended December 31, 2001 increased by approximately $2.6 million (2.6%) as
compared with the year ended December 31, 2000. The increase was due to higher re-leasing rates for specialty tenants as well as the modification of leases for several Sawgrass tenants that
previously paid percentage rents and converted them to minimum rent paying tenants. Additionally, the increase reflects higher rental rates at Potomac Mills, a full year of rental revenues received
from a new anchor tenant at Liberty Plaza which opened in November 2000 and Net Lease Properties which were acquired in the third quarter of 2000, partially offset by loss of minimum rents from
the ten Disposed Properties and lower occupancy primarily due to a significant number of tenant bankruptcies in 2001.

Percentage rentfor the year ended December 31, 2001 decreased by $1.4 million (47.5%) as compared with the year ended
December 31, 2000 due to modifications of certain leases at Sawgrass Mills, whereby percentage rent paying tenants were converted to minimum rent paying tenants, a loss of percentage rents from
the ten Disposed Properties and due to a decrease in specialty tenant

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reported sales which were significantly impacted in the South Florida market after the tragic events of September 11, 2001.

Recoveries from tenantsfor the year ended December 31, 2001 decreased by $1.0 million (2.0%) as compared with the year
ended December 31, 2000. The decrease was due primarily to a decrease of recoveries from tenants associated with the Disposed Properties for which there is an offsetting reduction in recovery
expense (see below). In addition this decrease was partially offset by higher tax recoveries at Sawgrass Mills due to an increase in property tax expense as a result of a property tax reassessment.

Other property revenueswhich includes rent from temporary tenants, termination income, and income from the Company's Mainstreet pushcart
program, for the year ended December 31, 2001 increased by $4.9 million (47.5%) as compared with the year ended December 31, 2000. The increase was due primarily to a more
aggressive termination policy for underperforming tenants, the current year recovery of accounts receivable totaling $1.6 million that were previously written off, increased kiosk rentals, and
increased rental of in-line temporary space as a result of lower occupancy.

Management fee income from unconsolidated joint venturesfor the year ended December 31, 2001 increased by $2.0 million
(23.6%) as compared with the year ended December 31, 2000 due primarily to a full year of management fees received in 2001 from Opry Mills and Arundel Mills which opened to the public in May
and November 2000, respectively, and from the opening of Discover Mills in November 2001.

Other fee income from unconsolidated joint venturesfor the year ended December 31, 2001 decreased by $0.5 million (6.3%) as
compared with the year ended December 31, 2000. The decrease was due primarily to the timing of development and leasing activity at Arundel Mills, Discover Mills, Colorado Mills and Madrid
Xanadu.

Recoverable expensesfor the year ended December 31, 2001 decreased by approximately $1.3 million (2.9%) as compared with
the year ended December 31, 2000 due primarily to the reduction of expenses associated with the Disposed Properties, partially offset by higher real estate taxes at Sawgrass Mills as a result
of a property tax reassessment.

Other operating expensesfor the year ended December 31, 2001 increased $0.3 million (6.0%) as compared with the year ended
December 31, 2000, due primarily to an increase in allowance for bad debts as a result of increased tenant bankruptcies in 2001.

General and administrative expensesfor the year ended December 31, 2001 increased by $1.7 million (10.6%) as compared with
the year ended December 31, 2000. The increase was due to increased employee bonuses and increased costs associated with expanded operations as a result of the openings of Discover Mills,
Arundel Mills and Opry Mills which opened to the public in November 2001, November 2000 and May 2000, respectively, and costs incurred by the Company in conjunction with the
departure of the Company's Chief Operating Officer.

Depreciation and amortization expensefor the year ended December 31, 2001 decreased $0.3 million (0.6%) as compared with
the year ended December 31, 2000. The decrease was due to the lower overall depreciation and amortization expense of the Net Lease Properties in 2001 as compared with the depreciation and
amortization expense incurred for the Disposed Properties in 2000, partially offset by additional assets placed in service in 2001 and late 2000.

Equity in earnings of unconsolidated joint venturesfor the year ended December 31, 2001 decreased $4.0 million (24.4%) as
compared with the year ended December 31, 2000. The decrease reflects lower termination income received from a tenant in 2000 at four joint venture properties of which the Company's share
totaled $2.4 million, lower land sale gains, increased bad debts due to an increase in tenant bankruptcies, increased depreciation and amortization from placing assets into service, and

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higher interest expense at Grapevine Mills and Ontario Mills due to obtaining financing in late 2000 for expansion of these centers. The decrease was partially offset by lower interest expense at
Concord Mills and Katy Mills due to a decrease in the LIBOR rate in 2001 and an increase in net income from Discover Mills, Arundel Mills and Opry Mills as a result of a full year of operations for
Arundel Mills and Opry Mills and the November 2001 opening of Discover Mills. For further discussion, see our discussion and analysis of the joint venture operations without regard to the
Company's pro rata share in the joint venture on page 68 of this Form 10-K.

Interest incomefor the year ended December 31, 2001 decreased by $0.8 million (16.8%) as compared with the year ended
December 31, 2000. The decrease was due to the repayment of advances made by the Company in late 2000 to joint ventures that own the Discover Mills and Opry Mills partnerships. Additionally,
interest income earned from advances to the Meadowlands Mills joint venture was higher in 2000 due to recognizing previously deferred interest income as a result of certain events that made
collectibility of interest probable in 2000, including certain actions taken by the U.S. Army Corps of Engineers with respect to the required fill permit for the Meadowlands project. The decrease was
partially offset by increased interest income associated with tax incremental financing bonds acquired from the City of Hazelwood, Missouri in conjunction with the future development of St. Louis
Mills. The aggregate face amount of the bonds is approximately $7.8 million.

Interest expense, netfor the year ended December 31, 2001 increased $1.0 million (1.8%) as compared with the year ended
December 31, 2000. The increase was due to interest expense incurred on our Series A preferred stock, which was issued during the second quarter of 2001, higher interest expense from the
refinancing of the Potomac Mills and Gurnee Mills debt due to an increase in leverage and the interest rate, an increase in the interest rate on the Sawgrass Mills debt as a result of its refinancing
and an increase in interest expense for the Net Lease Properties as compared with the Disposed Properties due to the timing of these property acquisitions and dispositions. The increase was partially
offset by interest rate savings on our variable rate debt as a result of the decline in the LIBOR rate in 2001 and the reduction of our revolving loan balance as a result of the issuance of
series A preferred stock in April and May of 2001 and the issuance of 4,025,000 shares of common stock in August 2001.

Other income (expense)for the year ended December 31, 2001 increased by $1.9 million (45.2%) as compared with the year
ended December 31, 2000 due primarily to a $0.5 million increase in operating income from our FoodBrand operations and a decrease in abandoned project costs of $2.5 million,
compared with the prior year, partially offset by a reduction in land sale gains of $1.1 million.

Extraordinary losses on debt extinguishmentfor the year ended December 31, 2001 increased by $13.5 million as compared with
the year ended December 31, 2000. In 2001, we incurred extraordinary losses on debt extinguishments totaling $16.6 million related to the refinancing of mortgages on Potomac Mills,
Gurnee Mills and Sawgrass Mills. In 2000, the Company incurred an extraordinary loss on debt extinguishment totaling $3.1 million related to the refinancing of Sawgrass Mills.

Equity in extraordinary losses on debt extinguishment of unconsolidated joint ventures before extraordinary itemsfor the years ended
December 31, 2001 and December 31, 2000 was $0.1 million and $0.3 million, respectively, which represent the Company's share of the extraordinary losses on debt
extinguishments related to the refinancing of The Oasis at Sawgrass and The Block at Orange in 2001 and Arizona Mills and The Oasis at Sawgrass in 2000.

Income before minority interestsfor the year ended December 31, 2001 decreased by $23.1 million (39.9%) as compared to the
year ended December 31, 2000. The decrease was due primarily to gains recognized in 2001 when compared to the gain recognized upon the sale of the Disposed Properties in
2000, partially offset by the 2001 gain from a sale of interest in FoodBrand. Excluding extraordinary losses on debt extinguishment as well as the impact of the gains on the sale of an interest in

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FoodBrand and the sale of the Disposed Properties, income before minority interests increased by $2.2 million (5.0%) for the reasons discussed above.

Comparison of the year ended December 31, 2000 to the year ended December 31, 1999

Minimum rentfor the year ended December 31, 2000 decreased $0.9 million (0.8%) as compared with the
year ended December 31, 1999. The decrease was primarily due to the loss of $6.4 million of minimum rent associated with the Disposed Properties. This decrease was partially offset by
$2.5 million of rental income from the Net Lease Properties that were acquired in September and October 2000, an increase of $1.5 million in kiosk rents due to program expansion,
higher rents throughout the portfolio and the opening of four new anchor tenants at Franklin Mills, Sawgrass Mills and Liberty Plaza.

Recoveries from tenantsfor the year ended December 31, 2000 increased $0.3 million (0.6%) as compared with the year ended
December 31, 1999. The increase was primarily due to increased expenses at various properties partially offset by the loss of $2.1 million of recoveries from tenants associated with the
Disposed Properties.

Other property revenuewhich includes rent from temporary tenants, termination income and income from the Company's pushcart program, for
the year ended December 31, 2000 increased $1.5 million (17.5%) as compared with the year ended December 31, 1999. The increase was due to current year recovery of accounts
receivable that were reserved in prior years, more aggressive termination policies for underperforming tenants and an increase in income related to the Company's pushcart program.

Management fee income from unconsolidated joint venturesfor the year ended December 31, 2000 increased $3.6 million (72.7%)
as compared with the year ended December 31, 1999. The increase was primarily due to the opening of The Oasis at Sawgrass in the second quarter of 1999, the opening of Concord Mills in the
third quarter of 1999, the opening of Katy Mills in the fourth quarter of 1999, the opening of Opry Mills in the second quarter of 2000 and the opening of Arundel Mills in the fourth quarter of 2000.

Other operating expensesfor the year ended December 31, 2000 decreased $0.8 million (13.3%) as compared with the year ended
December 31, 1999. The decrease is primarily due to $0.4 million of expenses associated with the Disposed Properties as well as decreased legal and promotional expenses across the
portfolio.

General and administrative expensesfor the year ended December 31, 2000 increased $3.3 million (26.4%) as compared with the
year ended December 31, 1999. The increase was primarily due to the increase in costs associated with the our FoodBrand operations and expanded operations as a result of opening The Oasis at
Sawgrass, Concord Mills, Katy Mills, Opry Mills and Arundel Mills.

Depreciation and amortization expensefor the year ended December 31, 2000 increased by $3.9 million (11.4%) as compared
with the year ended December 31, 1999. The increase was due to a $1.2 million increase in depreciation associated with our FoodBrand operations, a $0.9 million increase in
equipment depreciation due to software conversions and upgrades, a $0.6 million increase in amortization of leasing costs associated with wholly-owned property expansion and remerchandising as
well as additional amortization of unconsolidated joint venture investment basis adjustments associated with the openings of Concord Mills, Katy Mills, Opry Mills and Arundel Mills.

Equity in earnings of unconsolidated joint ventures before extraordinary itemsfor the year ended December 31, 2000 increased
$4.3 million (34.9%) as compared with the year ended December 31, 1999. The increase is due to a $3.1 million increase in the Company's share of joint venture land sale gains, as
well as an increase in operating income across all joint venture properties and an increase in lease buyout fees at various joint venture centers. This increase is offset by a decrease of
$1.1 million in interest income received during 1999 related to the tax increment financing on the Katy Mills joint

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venture. The financing agreement provides for the joint venture to receive interest on costs incurred prior to receipt of the financing.

Interest incomefor the year ended December 31, 2000 increased $2.3 million (86.9%) as compared with the year ended
December 31, 1999. The increase was primarily due to the recognition of previously deferred interest income relating to advances that the Company made to the Meadowlands Mills joint venture.
This income was recognized in the third quarter of 2000 as a result of certain events that made the collectibility of interest probable, including certain actions taken by the U.S. Army Corps of
Engineers with respect to the required fill permit for the Meadowlands project.

Interest expense, netfor the year ended December 31, 2000 increased $7.2 million (14.6%) as compared with the year ended
December 31, 1999. The increase was primarily due to the additional debt related to Sawgrass Mills that was obtained in January 2000 and a higher average debt burden related to the line
of credit. The Company also had $2.0 million of interest expense related to Net Lease Properties, which was partially offset by a $3.3 million reduction in interest expense related to
the Disposed Properties.

Other income (expense)for the year ended December 31, 2000 decreased by $2.6 million (156.2%) as compared with the year
ended December 31, 1999. The decrease was primarily due to an increase of $4.6 million in costs of abandoned projects and $0.6 million decrease in gains from wholly-owned land
sales. This was partially offset by a $2.7 million increase in operating margins associated with our FoodBrand operations and other retail operating operations.

Extraordinary losses on debt extinguishmentsfor the year ended December 31, 2000 increased $0.4 million (13.9%) as compared
with the year ended December 31, 1999. In 1999, the Company incurred $2.7 million in extraordinary loss on the debt extinguishment related to the refinancing of the Community Centers
versus $3.1 million in extraordinary loss on the debt extinguishment related to the refinancing of Sawgrass Mills in 2000.

Equity in extraordinary losses on debt extinguishments of unconsolidated joint venturesfor the year ended December 31, 2000 was
$0.3 million which represents the Company's share of the $0.9 million extraordinary loss on debt extinguishments related to the refinancing of Arizona Mills.

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Unconsolidated Joint Ventures

The Company conducts its business through its Operating Partnership, wholly-owned subsidiaries and affiliates. The consolidated financial statements include
accounts of the Company and all subsidiaries that the Company controls. The Company does not consider itself to be in control of an entity when major business decisions require the approval of at
least one other general partner. Accordingly, the Company accounts for its investments in joint ventures under the equity method. Because a significant number of the Mills shopping centers are
operated in joint ventures, we have expanded management's discussion and analysis of financial condition and results of operations to discuss the results of operations of the unconsolidated joint
ventures without regard to the Company's pro rata share of these operations. The table below provides the income statement of the unconsolidated joint ventures for the years ended December 31,
2001, 2000 and 1999 and is followed by a discussion of the unconsolidated joint venture results of operations:

|                                                                                        |                                                | Years ended December 31, |       
|--------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------ | ------
|
|Revenues:                                                                               |                                                |                          |       
|                                                                                        | Minimum rent                                   |                          | $     
|                                                                                        | Percentage rent                                |                          |       
|                                                                                        | Recoveries from tenants                        |                          |       
|                                                                                        | Other property revenue                         |                          |       
|                                                                                        |                                                |                          |       
|                                                                                        |                                                | Total revenues           |       
|                                                                                        |                                                |                          |       
|Expenses:                                                                               |                                                |                          |       
|                                                                                        | Recoverable from tenants                       |                          |       
|                                                                                        | Other operating                                |                          |       
|                                                                                        | Depreciation and amortization                  |                          |       
|                                                                                        |                                                |                          |       
|                                                                                        |                                                | Total expenses           |       
|                                                                                        |                                                |                          |       
|                                                                                        |                                                |                          | 96,831
|Other Income (Expense):                                                                 |                                                |                          |       
|                                                                                        | Interest income                                |                          |       
|                                                                                        | Interest expense                               |                          |       
|                                                                                        | Other income (expense)                         |                          |       
|                                                                                        |                                                |                          |       
|Income before Gain on Land Sales and Extraordinary Items                                |                                                |                          | 17,988
|                                                                                        | Gain on land sales                             |                          |       
|                                                                                        |                                                |                          |       
|Income before Extraordinary Items                                                       |                                                |                          | 25,249
|                                                                                        | Extraordinary losses on extinguishment of debt |                          |       
|                                                                                        |                                                |                          |       
|Net Income                                                                              |                                                | $                        | 24,722
|                                                                                        |                                                |                          |       
|Operating Partnership's equity in earnings of unconsolidated joint ventures             |                                                | $                        | 12,525
|                                                                                        |                                                |                          |       
|Equity in extraordinary losses on debt extinguishments of unconsolidated joint ventures |                                                | $                        | (127  
|                                                                                        |                                                |                          |       

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Comparison of the year ended December 31, 2001 to the year ended December 31, 2000 for unconsolidated joint ventures without regard to the Company's pro rata
share of these operations

Minimum rentfor the year ended December 31, 2001 increased $30.7 million (21.1%) as compared with the year ended
December 31, 2000. The increase is due primarily to the opening of Discover Mills in November 2001, and the opening of Arundel Mills and Opry Mills in November and May 2000,
respectively.

Percentage rentfor the year ended December 31, 2001 increased $0.1 million (1.9%) as compared with the year ended
December 31, 2000. The increase results from a full year of operations of Arundel Mills and Opry Mills which opened in 2000, offset by lower percentage rents at some of the other joint venture
properties due to a decline in sales as a result of the tragic events of September 11, 2001.

Recoveries from tenantsfor the year ended December 31, 2001 increased $14.5 million (25.5%) as compared with the year ended
December 31, 2000. The increase was due primarily to the openings of Arundel Mills and Opry Mills in 2000 and Discover Mills in 2001 which openings contributed $11.7 million of the
increase in recovery revenue over 2000. Excluding the positive impact from new properties, the increase relates primarily to an increase in the Company's recovery rates and recoverable expenses at
several joint venture properties.

Other property revenuesfor the year ended December 31, 2001 decreased $3.1 million (13.3%) as compared with the year ended
December 31, 2000. The decrease relates to the recognition of lease termination income of $7.6 million from one tenant at four joint venture properties in 2000. Excluding the significant
amount of termination income received from that tenant, other property revenues increased $4.5 million due to a full year of operations for Arundel Mills and Opry Mills and the 2001 opening of
Discover Mills. The three new properties contributed $3.0 million of the increase. Additionally, termination income at existing centers due to a more aggressive policy for
underperforming tenants and an increase in rental income from temporary tenants due to lower occupancy contributed to the increase.

Recoverable expensesfor the year ended December 31, 2001 increased $10.7 million (20.4%) as compared with the year ended
December 31, 2000, due primarily to the opening of Discover Mills in 2001 and the opening of Arundel Mills and Opry Mills in November and May 2000, respectively, which contributed
$9.6 million of the increase.

Other operating expensesfor the year ended December 31, 2001 increased $3.5 million (21.9%) as compared with the year ended
December 31, 2000, due primarily to a full year of operations for Arundel Mills and Opry Mills and the 2001 opening of Discover Mills which contributed $2.9 million of the increase.
Additionally, bad debts and related legal costs increased due to an increase in tenant bankruptcies in 2001.

Interest incomefor the year ended December 31, 2001 decreased $1.1 million (11.4%) as compared with the year ended
December 31, 2000 due primarily to the collection of note receivable balances at several properties.

Interest expensefor the year ended December 31, 2001 increased $12.6 million (16.3%) as compared with the year ended
December 31, 2000. The increase in interest expense is due primarily to placing Arundel Mills and Opry Mills into service in late 2000, contributing $11.9 million of the increase.
Additionally, interest expense was higher at Ontario Mills and Grapevine Mills due to the fourth quarter 2000 financing of expansions at these centers. These increases were partially offset by lower
interest on variable rate debt as a result of a decline in the LIBOR rate in 2001.

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Comparison of the year ended December 31, 2000 to the year ended December 31, 1999 for the unconsolidated joint ventures without regard to the Company's
pro-rata share of these operations

Minimum rentfor the year ended December 31, 2000 increased $53.0 million (57.3%) as compared with the year ended
December 31, 1999. The significant increase was due primarily to the new joint venture properties that opened in 2000 and 1999. The Oasis at Sawgrass, Concord Mills and Katy Mills which opened
in April, September and October of 1999, respectively, were open for a full year in 2000 and contributed approximately $32.2 million to the increase. In addition, Opry Mills and Arundel Mills
opened in May and November of 2000, respectively, contributing an additional $16.9 million in minimum rent when compared to the prior year.

Percentage rentfor the year ended December 31, 2000 increased $2.9 million (203.1%) as compared with the year ended
December 31, 1999. The increase in percentage rent was due to higher sales throughout the portfolio which contributed $1.8 million of the increase. In addition, the opening of The Oasis
at Sawgrass, Concord Mills and Katy Mills in 1999 and Arundel Mills and Opry Mills in 2000, contributed a combined $1.1 million to the increase.

Recoveries from tenantsfor the year ended December 31, 2000 increased $21.7 million (61.7%) as compared with the year ended
December 31, 1999. The increase is due primarily to the opening of five new joint venture properties The Oasis at Sawgrass, Concord Mills and Katy Mills in 1999, and Opry Mills and Arundel
Mills in 2000, which contributed a combined total of $19.8 million (91.2%) of the total increase. Also contributing to the increase were increased recovery rates and increased recoverable
expenses at several of the joint venture properties.

Other property revenuesfor the year ended December 31, 2000 increased $13.4 million (135.1%) as compared to the year ended
December 31, 1999 due primarily to termination income totaling $7.6 million received from one tenant at four joint venture properties. Additionally, the new properties added in 1999 and
2000 contributed $4.8 million of the increase and the Company's pushcart program and increased leasing of temporary in-line space contributed to the remainder of the increase in
other property revenues.

Recoverable expensesfor the year ended December 31, 2000 increased $18.6 million (54.5%) as compared with the year ended
December 31, 1999. The increase was due to the opening of The Oasis at Sawgrass, Concord Mills and Katy Mills in 1999, and Opry Mills and Arundel Mills in 2000 which contributed
$17.7 million (95.2%) of the increase. Excluding the impact from the newly opened properties, the increase was $0.9 million (3.3%) due to increased expenses at Ontario Mills and
Grapevine Mills associated with the addition of anchor tenants at these properties.

Other operating expensesfor the year ended December 31, 2000 increased $6.7 million (72.2%) as compared with the year ended
December 31, 1999. The increase was due primarily to the addition of the five new properties that opened in 1999 and 2000 which contributed $4.4 million of the increase, a legal
settlement totaling $1.3 million at Ontario Mills in 2001 related to a tenant dispute of which $1.1 million was accrued in 2000, and higher bad debts at The Block at Orange.

Interest incomefor the year ended December 31, 2000 decreased $1.2 million (11.3%) as compared with the year ended
December 31, 1999. The decrease was due primarily to the reduction of note receivable balances at Grapevine Mills in 2000 as compared to 1999.

Interest expensefor the year ended December 31, 2000 increased $32.0 million (70.3%) as compared with the year ended
December 31, 1999. The increase was due to interest incurred on properties placed into service in 2000 and 1999 which contributed approximately $29.9 million of the increase and a higher
LIBOR rate in 2000 which contributed to higher interest expense on variable rate debt.

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Cash Flows

Net cash provided by operating activities increased $12.0 million (15.3%) to $90.4 million for the year ended December 31, 2001 as compared
with $78.4 million for the year ended December 31, 2000. This increase resulted from increased operational income and improved collection of accounts receivable, partially offset by the
timing of payments for other assets and accrued expenses. Net cash used in investing activities increased by $68.4 million (87.5%) to $146.4 million for the year ended
December 31, 2001 as compared with $78.0 million for the year ended December 31, 2000. The increase is due to increased development expenditures and contributions to the
unconsolidated joint ventures for the development of Colorado Mills, Madrid Xanadu, St. Louis Mills, Vaughan Mills, Meadowland Mills, San Francisco Piers and various other projects in the
predevelopment stage, the acquisition of tax increment financing bonds from the City of Hazelwood, Missouri, decreased distributions received from unconsolidated joint ventures as Ontario Mills and
Grapevine Mills retained operating cash flow for expansions at these centers, partially offset by increased distributions from Opry Mills and Arundel Mills as a result of their opening in the second
and fourth quarters of 2000, respectively. The increases in investing cash flows is partially offset by proceeds totaling $9.5 million received upon the sale of an interest in FoodBrand L.L.C.
Net cash provided by financing activities increased by $47.8 million to $54.9 million for the year ended December 31, 2001 as compared with $7.1 million for the year ended
December 31, 2000. The increase was due primarily to the sale of the series A preferred stock, the secondary public offering of 4,025,000 shares of common stock at a price of $24.00 per
share, excess proceeds received from the refinancing of Potomac Mills and Gurnee Mills, partially offset by repayments on our revolving loan, an increase in restricted cash primarily due to the
establishment of escrow accounts associated with the Sawgrass Mills refinancing, and prepayment penalties incurred in conjunction with the extinguishment of the Potomac/Gurnee debts when they were
refinanced.

Funds From Operations

We consider Funds From Operations ("FFO") a widely used and appropriate measure of performance for an equity REIT which provides a relevant basis for comparison
among REITs. FFO, as defined by the National Association of Real Estate Investment Trusts ("NAREIT"), means income (loss) before minority interest (determined in accordance with accounting principles
generally accepted in the United States ("GAAP")), excluding gains (losses) from debt restructuring and sales of depreciated property, plus real estate related depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures. We present FFO to assist investors in analyzing our performance. Our method of calculating FFO may be different from methods used by
other REITs and, accordingly, may not be comparable to such other REITs. FFO (i) does not represent cash flows from operations as defined by GAAP, (ii) is not indicative of cash
available to fund all cash flow needs and liquidity, including its ability to make distributions and (iii) should not be considered as an alternative to net income (determined in accordance
with GAAP) for purposes of evaluating our operating performance.

FFO
for the year ended December 31, 2001 increased by $16.2 million (15.4%) to $121.5 million as compared with $105.3 million for the year ended
December 31, 2000. FFO amounts (denoted in

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thousands) were calculated in accordance with NAREIT's definition of FFO and are summarized as follows:

Years ended December 31,2001

2000

1999Funds from operations calculation:Income before extraordinary items and minority interests

$
51,461

$
61,255

$
48,603Adjustments:Add:  Depreciation and amortization of real estate assets


34,532


35,028


32,333Add:  Real estate depreciation and amortization of unconsolidated joint ventures


35,479


27,366


14,140Less: Gain on disposition of community centers





(18,370
)

Funds from operations

$
121,472

$
105,279

$
95,076


EBITDA

Our EBITDA, defined as earnings of the Operating Partnership, before interest expense, taxes, depreciation, amortization and certain other non-cash
extraordinary items (including gains or losses on sales of real estate assets), to interest expense coverage ratio (including our proportionate share of EBITDA and interest expense of unconsolidated
joint ventures) was 2.53 and 2.47 for the years ended December 31, 2001 and 2000, respectively. EBITDA to interest expense coverage ratio is provided as a
supplemental measurement of our operating performance. EBITDA does not represent cash flows from operations as defined by GAAP and should not be considered as an alternative to net income as an
indicator of our operating performance or to cash flows as a measure of liquidity. In addition, EBITDA measures presented by us may not be comparable to other similarly titled measures of other
companies.

Liquidity and Capital Resources

During the year ended December 31, 2001 and subsequent thereto, the Company completed a number of capital transactions that significantly improved its
balance sheet and overall liquidity. These transactions included several debt refinancings in addition to preferred and common stock issuances. For the year ended December 31, 2001, the Company
raised $228.1 million in incremental capital, not including $47 million that was raised in February 2002 from additional stock issuances. Other balance sheet improvements are detailed
below:

Years ended December 31,2001

2000Interest coverage ratio (earnings before interest taxes and depreciation to interest expense)

2.53

2.47Total debt to market capitalization ratio

55.0%

69.5%Total debt plus convertible preferred stock to market capitalization ratio

57.6%

69.5%Weighted average maturity (in years)

5.8

4.0Weighted average interest rate

6.8%

8.1%Fixed rate debt percentage

83.4%

55.6%


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As
of December 31, 2001, our balance of cash and cash equivalents was $9.4 million, excluding our proportionate share of cash held in unconsolidated joint ventures. In
addition to our cash reserves as of December 31, 2001, we have $65 million available under our line of credit.

The
following provides greater detail of the debt and equity transactions discussed above.

Debt Transactions

In June 2000, the Company refinanced and increased its line of credit from $100 million to $125 million. The line of credit is comprised of
two components. The first component is a $50 million term loan which is secured by the Operating Partnership's equity interest in Franklin Mills. The term loan requires two mandatory principal
repayments, the first totaling $5 million which was paid in 2001 and permanently reduced the loan to $45 million. The second totaling $10 million, will be due on or before
June 1, 2002. The loan matures in June 2003. The interest rate is payable at a variable rate with a variable margin, which was LIBOR plus 2.25% at December 31, 2001. The second
component of the Company's line of credit is a $75 million unsecured revolving loan, of which $10 million was drawn upon at December 31, 2001. The unsecured revolving loan is used
to fund acquisitions, redevelopment activities and serves as revolving working capital facility. The interest rate is payable at a variable rate with a variable margin, which was LIBOR plus 2.75% at
December 31, 2001. The loan matures in June 2002. The Company is currently negotiating the refinancing of this unsecured revolving loan. We are currently trying to expand the line to
$125 million, however, no assurances can be given that the line will be refinanced in 2002.

Pursuant
to the line of credit, we are subject to certain performance measurements and restrictive covenants. We were in compliance with these covenants at December 31, 2001.

As
of December 31, 2001, the weighted average life of our indebtedness, including our share of funded construction and operating debt of the unconsolidated joint ventures, was
5.83 years with a 6.81% weighted average interest rate.

At
December 31, 2001, our consolidated debt was approximately $1.0 billion and our pro-rata share of unconsolidated joint venture debt was approximately
$0.6 billion. Of the approximate $1.6 billion of combined debt (our consolidated debt and our share of gross unconsolidated joint venture debt), approximately $1.3 billion was
fixed rate debt and $0.3 billion was variable rate debt. Scheduled principal repayments of our consolidated indebtedness and our pro-rata share of unconsolidated joint venture debt
through 2006 is approximately $478.5 million with approximately $1.1 billion due thereafter. Additionally, the Company has guaranteed $381.7 million of total gross debt of which
$344.8 million relates to joint venture debt. We and our joint venture partners expect to refinance or repay these obligations with cash generated from operations, external borrowings
(including refinancing of existing loans) or from equity issuances.

In
February 2001, we refinanced Potomac Mills and Gurnee Mills with a new non-recourse mortgage loan of $355 million. The loan bears interest at 7.46% over a
30-year amortization period with an anticipated balloon repayment in March 2011. We used the proceeds to repay a prior loan totaling approximately $271 million plus a
prepayment penalty of approximately $13.4 million. We used the remaining proceeds to pay down the revolving loan and to fund our development equity requirements.

In
April 2001, the Discover Mills joint venture entered into a construction loan commitment for approximately $182.2 million. The loan matures on April 16, 2004 and
has a one-year extension option. The loan bears interest at LIBOR plus 2.25%, and is guaranteed by the Company. In November 2001, the joint venture entered into an interest rate
swap agreement which effectively fixed the interest rate at 5.16% on a notional amount of $126.7 million through June 2003.

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In
May 2001, The Block at Orange joint venture refinanced its $135 million mortgage loan. The refinancing is evidenced by two promissory notes: a permanent loan in the
amount of $108 million and a mezzanine loan in the amount of $27 million. The proceeds from the loans were used to repay the prior loan of $131.5 million plus loan finance costs.
The permanent loan is secured by the land and improvements at The Block at Orange while the mezzanine loan is guaranteed by the Company. In conjunction with this transaction, The Block at Orange joint
venture entered into an interest rate swap which effectively fixed the interest rate at 8.0% through May 2006 (see Item 7AQuantitative and Qualitative Disclosures About Market
Risk). In addition The Block at Orange joint venture incurred a $0.4 million extraordinary loss on debt extinguishment.

In
July 2001, the Company and our joint venture partner Kan Am refinanced the debts on Sawgrass Mills and The Oasis at Sawgrass with loans in the amount of $337 million.
The mortgage loan in the amount of $300 million and the mezzanine loan in the amount of $37 million are secured by Sawgrass Mills and The Oasis at Sawgrass, the Operating Partnership's
ownership interests in the two properties and an assignment of leases and rents. The net proceeds were used to repay prior loans totaling approximately $332.5 million. The new loans are
30-year amortizing loans with the $300 million mortgage loan bearing interest at 7.18% and the $37 million mezzanine loan bearing interest at LIBOR plus 4.5% which has
effectively been fixed at 7.34% through June 2003 as a result of entering into an interest rate swap agreement. The loans have an anticipated balloon repayment in July 2006. (See Item
7AQuantitative and Qualitative Disclosures About Market Risk)

Equity Transactions

Effective October 28, 1996, we filed a universal shelf registration statement on Form S-3 to offer up to $250 million of common
stock, preferred stock and common stock warrants. In August 2001, pursuant to the shelf registration we sold 4,025,000 shares of common stock, in a public offering at an initial price of $24.00
per share. The net proceeds, totaling approximately $90.8 million after discounts and expenses,
were used to reduce the outstanding indebtedness under our revolving loan and to fund our development pipeline. As of December 31, 2001, a balance of approximately $40.0 million of
common stock, preferred stock and common stock warrants remain available to us for issuance pursuant to this shelf registration.

Effective
August 14, 2001, we filed a universal shelf registration statement on Form S-3 to offer an additional $300 million in common stock and common
stock warrants. In February 2002, we sold 1,818,179 shares of common stock in two concurrent offerings at an initial price of $27.50 per share. The net proceeds totaling approximately
$47.0 million after discounts and expenses, were used to reduce the outstanding indebtedness under our revolving loan, $250 million remains available to the Company for issuance pursuant
to this shelf registration.

During
April and May 2001, the Company sold shares of series A preferred stock totaling $75 million in a private placement. The series A preferred stock has
an initial coupon of 10.5% with annual 50 basis point increase in each of the next two years, with significant increases after the third year. The series A preferred stock is convertible into
the Company's common stock at a strike price of $25.00 per share. The series A preferred stock is callable by the Company after the first year at a specified premium and has no sinking fund
requirements. The series A preferred stock is also subject to redemption at the option of the holders of series A preferred stock upon the occurrence of specified events, at a specified
premium, determined in accordance with the timing of the event triggering such redemption right. The holders of the series A preferred stock have the right to require the Company to redeem all
or a portion of the series A preferred stock for cash if (1) the Company ceases to qualify as a REIT, (2) there is a change in control, as defined in the securities purchase
agreement, (3) a material event of noncompliance occurs, as defined in the securities purchase agreement, and (4) shares of the series A preferred stock remain issued and
outstanding after April 30, 2006. The repurchase price will vary based on the event giving rise to the put right of the holders of the series A preferred stock and

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the time of occurrence. The Company contributed the proceeds to the Operating Partnership in exchange for preferred units. The preferred units are subject to the same terms and conditions as the
series A preferred stock. The net proceeds, which totaled $69.3 million after discounts and expenses, were used to pay down the Company's revolving loan and to fund the Company's
development equity requirements. Due to the redemption features of the series A preferred stock, the Company has accounted for the dividends on the series A preferred stock as interest
expense.

In
connection with the issuance of the series A preferred stock, we granted the holder a warrant to purchase our common stock at $25.00 per share. The number of common shares that
become exercisable under the warrant is based on the number of shares of series A preferred stock that we repurchase upon exercise of our call right between May 1, 2002 and
November 10, 2003.

In
September 2001, we announced our intention to enter into a stock repurchase program in compliance with the Emergency Order released by the Securities and Exchange Commission on
September 14, 2001. On September 18, 2001, we paid approximately $1.1 million to repurchase 50,000 shares of common stock at $22.04 per share, which were retired. No other
repurchases were made, and the stock repurchase program has been discontinued.

We
are in the process of finalizing documentation with Kan Am, a joint venture partner which holds approximately 30.7% of the units of the Operating Partnership, pursuant to which Kan Am
will commit during 2002 to contribute up to $50 million for investment in qualifying development projects. Kan Am's contribution commitment will be satisfied by entering into joint venture
agreements with us relating to individual projects. It is contemplated that the terms of these joint venture agreements with Kan Am will be substantially similar to the terms of the joint venture
agreement for the Colorado Mills project, which terms are described below, under the heading "Development, Remerchandising and Expansion Efforts" although the terms of individual projects may differ
from the terms for the Colorado Mills project. We will not be obligated to offer Kan Am the opportunity to participate in development projects on these terms.

We
also are in the process of finalizing a waiver of the "Ownership Limit" established in our Certificate of incorporation as to Kan Am and its affiliates, subject to limitations
established in our Certificate of incorporation to preserve our REIT status. This waiver, which is contingent on Kan Am and us entering into a definitive agreement relating to Kan Am's commitment to
contribute additional funds for development projects as described above, also will apply to the initial transferees of Kan Am and its affiliates, subject to continued compliance by Kan Am with its
contribution obligations, to Kan Am's compliance with certain first refusal rights in our favor, and to compliance by Kan Am and its affiliates and such transferees with the applicable restrictions
relating to preservation of our REIT status.

There
can be no assurance that we will enter into a definitive agreement on the terms outlined above or at all. Additionally, Kan Am's contribution commitment obligation would be
contingent on our ability to offer to Kan Am qualifying development projects that satisfy the criteria described in the contribution documentation. Many of the criteria are dependent upon factors that
are not within our control, and therefore we cannot assure you that we will be able to make offers to Kan Am of projects that would require Kan Am to make contributions.

Kan
Am must raise capital from other investors to meet its funding commitments to us and there can be no assurance that Kan Am will be able to raise such additional capital necessary to
enable it to meet its best efforts contribution commitments.

We
anticipate that our operating expenses, interest expense on outstanding indebtedness, recurring capital expenditures and distributions to stockholders in accordance with REIT
requirements will be provided by cash generated from operations, and potential ancillary land sales. We anticipate that

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future development and non-recurring capital expenditures will be funded from future borrowings and possible sales of common and/or preferred equity.

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

Distributions

We have paid and intend to continue to pay regular quarterly distributions to our shareholders. Distributions are payable at the discretion of our board of
directors and depend on a number of factors, including net cash provided by operating activities, our financial condition, capital commitments, debt repayment schedules, and other factors that our
board of directors deems relevant.

Development, Remerchandising, and Expansion Efforts

We are involved in various development, remerchandising and expansion efforts. As of December 31, 2001 we focused our most significant development efforts
on the development of five projects: Colorado Mills, Madrid Xanadu (Spain), St. Louis Mills, Vaughan Mills, Meadowlands Mills and San Francisco Piers 27-31.

The
Colorado Mills project is being constructed on a 130-acre site located in Lakewood, Colorado, ten miles west of downtown Denver. The project is expected to be
1.2 million square feet. We have commitments from anchor tenants such as Off 5thSaks Fifth Avenue, Neiman MarcusLast Call, Target, United Artists, Eddie
Bauer, Gart Sports, and Off Broadway Shoes. The Operating Partnership, through Mills-Kan Am Colorado Limited Partnership, has formed a joint venture with Stevinson Partnership, Ltd.
and Greg C. Stevinson (together, "Stevinson"), to be known as Colorado Mills Limited Partnership, to develop the Colorado Mills project. On April 11, 2001, Stevinson contributed its interest in
the Colorado site to Colorado Mills Limited Partnership. Mills-Kan Am Colorado Limited Partnership, which holds a 75% equity interest in Colorado Mills Limited Partnership, is fully
obligated to fund all cash equity requirements for the development of Colorado Mills and will receive a 9% cumulative preferred return on the first $42.7 million of its equity contributions and
a 12% cumulative preferred return on any additional equity contributions. Stevinson, which holds a 25% equity interest in Colorado Mills Limited Partnership, will receive capital account credit for
the negotiated value of the land contributed, and will receive a 9% cumulative preferred return on its capital account credit. Any remaining cash flow will be distributed pro rata in accordance with
ownership interest.

Mills-Kan
Am Colorado Limited Partnership, through which the Operating Partnership will develop and operate its interest in the Colorado Mills project, is a joint venture
formed with Kan Am pursuant to which Kan Am and the Operating Partnership each is required to fund 50% of the total equity required to develop the Colorado Mills project. The project's equity
requirement is $51 million, of which we had funded approximately $16.8 million of our required equity as of December 31, 2001. Kan
Am's invested capital in this project as of December 31, 2001 was $25.5 million and the amount of accrued preference was $0.7 million.

Under
the terms of the joint venture agreement with Kan Am, Kan Am and the Operating Partnership each will receive on a pro rata basis a cumulative construction period preference and a
priority return during operations equal to 11% per annum on its qualifying equity. Any residual cash flow after preference payments will be distributed 75% to the Operating Partnership and 25% to Kan
Am. The Operating Partnership will guarantee Kan Am's and Stevinson's portion of construction debt and Kan Am's preference until qualified permanent financing is secured for the project, except that
the

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amount of preference guaranteed by the Operating Partnership will be reduced to 9% following the substantial completion and opening of the project. Proceeds from a major capital event, such as the
sale of the real property or the project or the receipt of proceeds arising from condemnation of the project, will be distributed to the partners on a pro rata basis after the return of all capital
contributions and the payment of any accrued but unpaid preferences. Commencing with the grand opening of the project, an affiliate of the Operating Partnership will receive an asset management fee
equal to 0.5% of the capital contributions made by Mills-Kan Am Colorado Limited Partnership to Colorado Mills Limited Partnership, but not to exceed $250,000 per year.

At
specified times following the fifth anniversary of the project's opening or, if earlier, upon a change in control of the Company, either the Operating Partnership or Kan Am can
exercise a buy-sell right. Pursuant to the buy-sell provision, the Operating Partnership can require Kan Am to sell to the Operating Partnership for cash or limited partnership
units of the Operating Partnership, at Kan Am's election, Kan Am's entire interest in the joint venture entity. Also, pursuant to the buy-sell provision, Kan Am can require the Operating
Partnership to acquire for cash or limited partnership units of the Operating Partnership, at the Operating Partnership's election, Kan Am's entire interest in the joint venture entity. Only Kan Am
may invoke the buy-sell right in the event of a change in control of the Company. Colorado Mills is targeted to open in the fall of 2002.

In
August, 2001, Mills Global II, LLC (our affiliate) entered into a joint venture agreement with Parecelatoria De Gonzalo Chacon, S.A. ("PGC"), pursuant to which the parties agreed to
establish a joint venture for the purpose of developing a retail and entertainment center and a joint venture to develop a snow dome indoor skiing facility on the site. The Madrid Xanadu project is
being constructed on an 85-acre site located in the Municipality of Arroyomolinos, within the Communidad of Madrid and it will be in excess of one million square feet of gross
leaseable area. This project will be anchored by a 350,000 square foot combination department store and hypermarket owned and operated by El Corte Ingles, the largest retailer in Spain. The project
will also feature over 200 specialty retailers, including Sweden's Hennes and Mauritz, Italy's Benetton, and Spain's Zara which have already committed to the project. PGC as the landowner contributed
the land to the joint venture, and Mills will contribute the capital in the form of equity to the retail joint venture. The retail joint venture will then contribute the U.S. dollar equivalent of
14 million British pounds in the form of a repayable tenant allowance loan and equity to the snow dome joint venture. Mills would own two-thirds of the retail joint venture and
one-third of the snow dome joint venture. Mills would receive a 9% preference for its equity contributed to the retail joint venture, and the retail joint venture will receive 9% interest
on the snow dome loan. The repayment of the snow dome loan would be secured by 75% of cash flow distributable to PGC from the retail joint venture and PGC will receive no distributions from sale or
refinancing of the retail center until the snow dome loan is repaid. All public approvals necessary to commence construction were received and construction has commenced. Madrid Xanadu is targeted to
open spring 2003. As of December 31, 2001, we had invested $28.1 million, including capitalized interest and overhead. Until certain conditions specified in the joint venture agreement
have been satisfied (which includes the execution of certain additional agreements with El Corte Ingles), PGC has the right to purchase the company's interest in the joint venture at a price equal to
its third party cost, plus any additional capital paid into the venture. The Company believes that these conditions will be satisfied by May 31, 2002, but can give no assurance that the
conditions will be satisfied by that date.

In
July 2001, we acquired a 200-acre site in Hazelwood, Missouri, for development of St. Louis Mills. We are in the process of negotiating the terms and conditions of
a joint venture with Kan Am to contribute one-half of the equity to develop the site. The site is located at the northwest quadrant of State Highway 370 and Missouri Bottom Road,
approximately sixteen miles from St. Louis and has all required entitlements. Some site work has already been completed. As of December 31, 2001 the

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Company had invested $39.8 million including capitalized interest and overhead. We anticipate the commencement of construction in spring 2002, and an opening in 2003.

In
February 1998, we secured a site in Vaughan, Ontario for the development of Vaughan Mills, the first Mills project to be developed in Canada. 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, Canada. The project will be developed jointly by an
affiliate of the Operating Partnership and by Cambridge Shopping Centres II Limited as tenants in common. We anticipate that our final equity requirement for Vaughan Mills may exceed
$30 million. As of December 31, 2001 we had funded approximately $40.1 million including capitalized interest and overhead. We anticipate to open the center between fall 2003 and
spring 2004.

We
have acquired a mortgage interest in a 592-acre site located on the New Jersey turnpike (I-95) adjacent to Meadowlands Sports Complex and approximately five
miles from New York City. Commencement of construction is contingent upon the completion of an ongoing Environmental Impact Statement and the federal/state permitting process. A Special Area
Management Plan (SAMP) for the Meadowlands area was published in the Federal Register on April 22, 1999. On July 20, 2000, the U.S. Army Corp of Engineers announced that it had completed
the Draft Environmental Impact Statement on our Section 404 Fill Permit and the period for public comment closed in October 2000. In December 2001, the U.S. Army Corp of Engineers
circulated its Draft Final Environmental Impact Statement to cooperating federal agencies and closed the comment period at the end of January 2002. Completion of the Final Environmental Impact
Statement is the last step before the U.S. Army Corp of Engineers issues its decision on whether to issue a wetlands fill permit.

The
Acting Governor of New Jersey requested in March 2001 that we withdraw our permit applications for the existing site and consider an alternate site in Bergen County. While we
refused this request, we engaged in conversations with State officials considering a redevelopment of the Meadowlands Sports Complex, to consider whether an acceptable alternate site might be defined
for our project. Significant support for this conceptual move has emerged in business, labor and environmental circles, and we
have engaged in further discussions with the State of New Jersey to consider the future of the Meadowlands Sports Complex, including recent conversations with the new administration of Governor
McGreevey.

The
mixed-use development will consist of 2.0 million square feet of gross leaseable area for Meadowlands Mills, plus office and hotel space. The project would be
developed on an entitled site of 90.5 acres, plus roads and retention facilities. Upon procurement of all necessary entitlements, it is anticipated that the project will be developed by Meadowlands
Mills Limited Partnership, a joint venture entity in which each of the Operating Partnership, Kan Am, Empire Ltd. and Bennett S. Lazare will hold an interest. Currently, the Operating
Partnership and Kan Am are the sole partners in Meadowlands Mills Limited Partnership. Our equity requirements have not yet been determined. As of December 31, 2001, we had invested
$72.7 million, which includes capitalized interest and overhead. Of the amount we have invested, $32.2 million is our equity contribution and the balance is an advance to Meadowlands
Mills Limited Partnership. Kan Am's invested capital in the project was $24.0 million as of December 31, 2001.

The
joint venture agreement provides for Kan Am's right to require Meadowlands Mills Limited Partnership to redeem for cash Kan Am's interest in the joint venture if a construction loan
is not obtained by June 30, 2003. The Operating Partnership and Kan Am each will receive a cumulative construction period preference and a priority return during operations equal to 9% per
annum. Prior to securing qualified permanent financing, the Operating Partnership's construction period preference will be subordinated to Kan Am's construction period preference. Additionally,
payment of the Operating Partnership's construction period preference will be made only from proceeds of the construction loan and only if the terms of the construction loan documentation so permit.

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The
Operating Partnership currently guarantees Kan Am's preference and has further agreed to guarantee the redemption obligation of Meadowlands Mills Limited Partnership beginning on the
"Project Commencement Date," which is the date on which certain material contingencies have been satisfied and which may occur prior to securing the construction loan. The Operating Partnership will
guaranty Kan Am's portion of construction debt when a construction loan is obtained. The Operating Partnership's guaranty of Kan Am's preference and Kan Am's portion of construction debt will continue
until qualified permanent financing is secured for the project. As of December 31, 2001, Kan Am's unpaid preference was $0.5 million.

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

In
April 2001, the San Francisco Port Commission awarded us the exclusive right to negotiate for a long-term lease on Piers 27-31 on the San Francisco
waterfront, in order to develop a full-price mixed-use retail, office, entertainment and recreation project. These negotiations have begun and are ongoing.

In
addition to the above, we are also conducting due diligence on several other proposed sites for future projects, including sites in Cleveland, Ohio; Boston, Massachusetts; Tampa,
Florida and San Francisco, California. We continue to evaluate various prospective international sites, in addition to other domestic sites for other Mills-type projects and other
retail-oriented projects.

Portfolio Data

Seasonality

The regional shopping center industry is seasonal in nature, with mall tenant sales peaking in the fourth quarter due to the Christmas season. As a result, a
substantial portion of the percentage rents is not paid until the fourth quarter. Furthermore, most new lease-up occurs towards the latter 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 FFO.

Economic Trends

Because inflation has remained relatively low during the last three years, it has had little impact on our operations during that period. Even in periods of
higher inflation, however, tenant leases provide, in part, a mechanism to help protect our operations. As operating costs increase, our leases permit a pass-through of the common area
maintenance and other operating costs, including real estate taxes and insurance, to our tenants. Furthermore, most of the leases contain base rent steps and percentage rent clauses that provide
additional rent after a certain minimum sales level is achieved. These provisions provide us with some protection during highly inflationary periods.

The
September 11th events have resulted in an increase in insurance and security costs which is anticipated to be absorbed by the Company's tenants with only a
modest impact on common area maintenance costs at each property. Insurance providers have reduced coverage for terrorist attacks from full coverage to a $100 million per incident maximum, which
reduction could impact the loan
underwriting process for the Company's future construction loans and the refinancing of the Company's existing debt. There is a possibility that the Federal government may provide assistance to
companies that can no longer obtain full coverage insurance for terrorist attacks. The Company has not yet assessed what the impact of a reduction of such coverage will be on the Company as a whole.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

FINANCIAL INSTRUMENTS: DERIVATIVES AND HEDGING

In the normal course of business, we and our joint ventures are exposed to the effect of interest rate changes. We and the joint ventures limit these risks by
following established risk management policies and procedures, including the use of a variety of derivative financial instruments to manage or hedge interest rate risk. We and the joint ventures do
not enter into derivative instruments for speculative purposes. We and the joint ventures require that the hedging derivative instruments are effective in reducing interest rate risk exposure. This
effectiveness is essential for qualifying for hedge accounting. Changes in the hedging instrument's fair value related to the effective portion of the risk being hedged are included in accumulated
other comprehensive income (loss). In those cases, hedge effectiveness criteria also require that it be probable that the underlying transaction occurs. Hedges that meet these hedging criteria are
formally designated as cash flow hedges at the inception of the derivative contract. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, the
change in the fair value of the derivative instrument is marked to market with the change included in net income in each period until the derivative instrument matures. Additionally, any derivative
instrument used for risk management that becomes ineffective is marked to market.

To
manage interest rate risk, we and the joint ventures may employ interest rate swaps, caps and floors, options, forwards or a combination thereof, depending on an underlying exposure.
Interest rate swaps and collars are contractual agreements between us or the joint ventures and third parties to exchange fixed and floating interest payments periodically without the exchange of the
underlying principal amounts (notional amounts). In the unlikely event that a counterparty fails to meet the terms of an interest rate swap contract or collar agreement, our exposure is limited to the
interest rate differential on the notional amount. We do not anticipate non-performance by any of its counterparties. Net interest differentials to be paid or received under a swap
contract and/or collar agreement are included in interest expense as incurred or earned.

Interest
rate hedges, that are designated as cash flow hedges, hedge the future cash outflows on debt. Interest rate swaps that convert variable payments to fixed payments, interest rate
caps, floors, collars and forwards are cash flow hedges. The unrealized gains/losses in the fair value of these hedges are reported on the balance sheet and included in accounts payable and other
liabilities or in investment in
unconsolidated joint ventures (for joint venture hedges) with a corresponding adjustment to either accumulated other comprehensive income (loss) or in earnings depending on the hedging relationship.
If the hedging transaction is a cash flow hedge, then the offsetting gains/losses are reported in accumulated other comprehensive income (loss). Over time, the unrealized gains/losses held in
accumulated other comprehensive loss will be recognized in earnings consistent with when the hedged items are recognized in earnings. Within the next twelve months, the Company expects to reclassify
$0.1 million to earnings as interest expense and the joint ventures expect to reclassify to earnings as interest expense approximately $7.1 million from the current balance held in
accumulated other comprehensive loss, of which the Company's pro rata share is $4.3 million.

In
conjunction with our policy to reduce interest rate risk, the Company and unconsolidated joint ventures have entered into the following interest rate swaps and collar agreements to
hedge the variability of monthly cash outflows attributable to changes in LIBOR. The collar effectively locks LIBOR within a range from 6.275% to 7.0% and the Company's swaps require the Company to
receive

80

---

LIBOR and pay a fixed rate. The terms of the derivative instruments, a reconciliation of their fair value and adjustment to accumulated other comprehensive loss (in thousands) are as follows:

|                                                          |  |   |           | Joint Ventures |  
|--------------------------------------------------------- |  | - | --------- | -------------- | -
|
|Hedge type                                                |  |   | Cash Flow |                |  
|Description                                               |  |   | Swap      |                |  
|Notional amount                                           |  | $ | 37,000    |                | $
|Interest rate                                             |  |   | 2.84%     |                |  
|Maturity date                                             |  |   | 6/7/03    |                |  
|Fair value loss from transition adjustment at 1/1/01      |  | $ |          |                | $
|Change in fair value for the year ended December 31, 2001 |  |   | (82       | )              |  
|                                                          |  |   |           |                |  
|Accumulated other comprehensive loss at December 31, 2001 |  | $ | (82       | )              | $
|                                                          |  |   |           |                |  

The
Company's pro rata share of accumulated other comprehensive loss after minority interest at December 31, 2001 was $5,107.

The
estimated fair value of the Company's financial instruments has been determined by the Company, using available market information and appropriate valuation methodologies. However,
considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the
amounts that the Company could realize in a current market exchange. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts.

For
purposes of the Securities and Exchange Commission's market risk disclosure requirements, the Company has estimated the fair value of its financial instruments at December 31,
2001. The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2001. Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, as of December 31, 2001, future estimates of fair value and the amounts which may be paid or realized in the future may differ
significantly from amounts presented below. The following table provides information about our financial instruments that are sensitive to changes in interest rates as of December 31, 2001. For
debt obligations, the table presents principal cash flows (in thousands) and related weighted average interest rates by expected maturity dates,

81

---

including the effect of an interest rate swap agreement which locked the interest rate on the Sawgrass Mezzanine debt at 7.34% on a notional amount of $37 million through June 2003.

|                                                 |  | 2002 |        | 2003 |   | 2004   |   | 2005 |        | 2006 |   | Thereafter |   | Total |        | Estimated
Fair Value
12/31/01
|------------------------------------------------ |  | ---- | ------ | ---- | - | ------ | - | ---- | ------ | ---- | - | ---------- | - | ----- | ------ | -----------------------------
|Fixed rate mortgages, notes and loans payable    |  | $    | 11,782 |      | $ | 12,852 |   | $    | 13,957 |      | $ | 13,713     |   | $     | 12,227 |                              
|Average interest rate                            |  |      | 8.09%  |      |   | 8.11%  |   |      | 8.13%  |      |   | 7.88%      |   |       | 7.25%  |                              
|Variable rate mortgages, notes and loans payable |  | $    | 34,469 |      | $ | 39,221 |   | $    | 1,350  |      | $ | 1,350      |   | $     | 1,350  |                              
|Average interest rate                            |  |      | L(1    | )    |   | L(1    | ) |      | L(1    | )    |   | L(1        | ) |       | L(1    | )                            
|                                                 |  |      | +2.47% |      |   | +2.27% |   |      | +4.25% |      |   | +4.25%     |   |       | +4.25% |                              

---

OFF-BALANCE SHEET COMMITMENTS

As of December 31, 2001, the Company's off-balance sheet commitments were as follows (dollars in thousands):



82

---



Item 8. Financial Statements and Supplementary Data

The Financial Statements and Schedule appearing on pages F-1 to F-34 are incorporated herein by reference to Item 14.

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

None.

83

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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 March 25, 2002 are set forth in the following table:

|Name                      |  | Age |  | Position and Offices Held                                      
|------------------------- |  | --- |  | ---------------------------------------------------------------
|Laurence C. Siegel        |  | 49  |  | Chairman of the Board of Directors, and Chief Executive Officer
|James F. Dausch           |  | 59  |  | Senior Executive Vice PresidentDevelopment and Director       
|Judith S. Berson          |  | 59  |  | Executive Vice PresidentLeasing                               
|Kent S. Digby             |  | 49  |  | Executive Vice PresidentManagement/Marketing                  
|Kenneth R. Parent         |  | 41  |  | Executive Vice President and Chief Financial Officer           
|Mark J. Rivers            |  | 36  |  | Executive Vice PresidentChief Strategic Officer               
|Dietrich von Boetticher   |  | 60  |  | Vice Chairman and Director                                     
|John M. Ingram            |  | 66  |  | Vice Chairman and Director                                     
|Charles R. Black, Jr      |  | 54  |  | Director                                                       
|James C. Braithwaite      |  | 61  |  | Director                                                       
|Hon. Joseph B. Gildenhorn |  | 72  |  | Director                                                       
|Harry H. Nick             |  | 60  |  | Director                                                       
|Franz von Perfall         |  | 60  |  | Director                                                       
|Robert P. Pincus          |  | 55  |  | Director                                                       
|Cristina L. Rose          |  | 55  |  | Director                                                       

Biographical
summaries of the remaining directors and executive officers of the Company are included under the captions "Election of Directors (Proposal 1)Board of
Directors" and "Executive Officers of the Company," respectively, in our proxy statement for the 2002 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 2002 Annual Meeting of
Shareholders and is incorporated herein by reference.

Item 11. Executive Compensation

Information with respect to executive compensation is incorporated herein by reference to the information under the captions "Election of Directors (Proposal
1)Compensation of Directors" and "Executive Compensation" in our proxy statement for the 2002 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 2002 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 Related Transactions" in our proxy statement for the 2002 Annual Meeting of Shareholders.

84

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PART IV

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

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

|    |  |                                                                    |  | Page
|--- |  | ------------------------------------------------------------------ |  | ----
|(1) |  | FINANCIAL STATEMENTS                                               |  |     
|    |  | Report of Independent Auditors                                     |  | F-1 
|    |  | Consolidated Balance Sheets                                        |  | F-2 
|    |  | Consolidated Statements of Income                                  |  | F-3 
|    |  | Consolidated Statement of Stockholders' Equity                     |  | F-4 
|    |  | Consolidated Statements of Cash Flows                              |  | F-5 
|    |  | Notes to Consolidated Financial Statements                         |  | F-6 
|(2) |  | FINANCIAL STATEMENTS SCHEDULES                                     |  |     
|    |  | Schedule IIIConsolidated Real Estate and Accumulated Depreciation |  | F-32
|    |  | Notes to Schedule III                                              |  | F-33

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.

85

---





|NUMBER |  | EXHIBIT                                                                                                                                                                                                                                                              
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|^3.1   |  | Amended and Restated Certificate of Incorporation of the Company, as amended by First Amendment to 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, as amended (filed as part of Exhibits 10.1, 10.1A and 10.1B)                                                                                                                                             
|^3.4   |  | Certificate of Designations, Preferences and Rights Relating to Series A Cumulative Convertible Preferred Stock of the Company                                                                                                                                       
|**4.1  |  | Specimen Common Stock Certificate of the Company                                                                                                                                                                                                                     
|^4.2   |  | Specimen Series A Cumulative Convertible Preferred Stock Certificate of the Company                                                                                                                                                                                  
|**4.3  |  | Agreement, dated March 15, 1999, among Richard L. Kramer, A.J. 1989 Trust, Irrevocable Intervivos Trust for the benefit of the Kramer Children, N Street Investment Trust, Equity Resources Associates, Herbert S.
Miller, the Company and the Operating Partnership.
|#4.4   |  | Non-affiliate Registration Rights and Lock-up Agreement                                                                                                                                                                                                              
|#4.5   |  | Affiliate Registration Rights and Lock-up Agreement                                                                                                                                                                                                                  
|^4.6   |  | Amended and Restated Contingent Securities Purchase Warrant issued May 11, 2001                                                                                                                                                                                      
|^4.7   |  | Registration Rights Agreement, dated as of April 27, 2001, between the Company and iStar Preferred Holdings LLC ("iStar")                                                                                                                                            
|^4.8   |  | Amendment No. 1 to the Registration Rights Agreement, dated as of May 11, 2001, between the Company and iStar                                                                                                                                                        
|^4.9   |  | Amended and Restated Ownership Limit Waiver Agreement, dated as of May 11, 2001, between the Company and iStar                                                                                                                                                       
|##4.10 |  | Securities Purchase Agreement, dated as of April 27, 2001, between the Company and iStar                                                                                                                                                                             
|##4.11 |  | Amendment No. 1 to Securities Purchase Agreement, dated as of May 11, 2001, between the Company and iStar                                                                                                                                                            
|*10.1  |  | Limited Partnership Agreement of Operating Partnership, as amended                                                                                                                                                                                                   
|^10.1A |  | First Amendment to Limited Partnership Agreement of Operating Partnership                                                                                                                                                                                            
|^10.1B |  | Second Amendment to Limited Partnership Agreement of Operating Partnership                                                                                                                                                                                           
|#10.2  |  | Form of Employee Non-Compete/Employment Agreements                                                                                                                                                                                                                   
|+10.3  |  | 1994 Executive Equity Incentive Plan                                                                                                                                                                                                                                 
|#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  |  | Agreement dated March 15, 1994 among Richard L. Kramer, A.J. 1989 Trust, Irrevocable Intervivos Trust for the Benefit of the Kramer Children, N Street Investment Trust, Equity Resources Associates, Herbert S. Miller,
the Company and the Operating Partnership   
|#10.7  |  | Form of Indemnification Agreement between the Company and each of its Directors                                                                                                                                                                                      
|++10.8 |  | Employment Contract effective as of April 1, 2000 by and between Laurence C. Siegel and the Company                                                                                                                                                                  
|^^10.9 |  | Consulting Agreement, effective as of August 1, 2001, by and between Harry H. Nick and the Company                                                                                                                                                                   
|^^21.1 |  | List of Subsidiaries of the Registrant                                                                                                                                                                                                                               

86

---

|^^23.1 |  | Consent of Ernst & Young LLP, Independent Auditors
|------ |  | --------------------------------------------------

---

|^  |  | Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the first quarter ended March 31, 2001.                                                                                                                                                                                                      
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|^^ |  | Filed herewith.                                                                                                                                                                                                                                                                                                              
|*  |  | Limited Partnership Agreement incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the first quarter ended March 31, 1994, and amendments to Limited Partnership Agreement incorporated by
reference to the Registrant's Quarterly Report on Form 10-Q for the first quarter ended March 31, 2001.
|** |  | Incorporated by reference to the Registrant's Registration Statement on Form 3-11, Registration No. 33-71524, which was declared effective by the Securities and Exchange Commission on April 14, 1994.                                                                                                                      
|+  |  | Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the third quarter ended September 30, 1997.                                                                                                                                                                                                  
|++ |  | Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q for the third quarter ended September 30, 2001.                                                                                                                                                                                                  
|#  |  | 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, 2001.                                                                                                                                                                                                      

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, 2001.

The
Company's Current Report on Form 8-K dated September 30, 2001, and filed on November 9, 2001, furnished pursuant to Item 9 supplemental financial
information concerning the Company, and the properties owned or managed by it as of September 30, 2001, 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.

87

---

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on March 27, 2002:

| |  | THE MILLS CORPORATION, a Delaware corporation
| |  | ---------------------------------------------
| |  | By:                                          

88

---

Pursuant to the requirements of the Securities Act, this report has been signed by the following persons in the capacities indicated below on March 27, 2002:

|Name                                          |  | Title                                                                                                                        
|--------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------
|                                              |  |                                                                                                                              
|/s/LAURENCE C. SIEGELLaurence C. Siegel       |  | Chairman of the Board of Directors, and Chief Executive Officer (principal executive officer)                                
|/s/JAMES F. DAUSCHJames F. Dausch             |  | Senior Executive Vice-President  Development and Director                                                                   
|/s/KENNETH R. PARENTKenneth R. Parent         |  | Executive Vice President  Finance and Chief Financial Officer (principal financial officer and principal accounting officer)
|Dietrich von Boetticher                       |  | Vice Chairman and Director                                                                                                   
|/s/JOHN M. INGRAMJohn M. Ingram               |  | Vice Chairman and Director                                                                                                   
|/s/CHARLES R. BLACK, JR.Charles R. Black, Jr. |  | Director                                                                                                                     
|/s/JAMES C. BRAITHWAITEJames C. Braithwaite   |  | Director                                                                                                                     
|/s/JOSEPH B. GILDENHORNJoseph B. Gildenhorn   |  | Director                                                                                                                     
|/s/HARRY H. NICKHarry H. Nick                 |  | Director                                                                                                                     
|/s/FRANZ VON PERFALLFranz von Perfall         |  | Director                                                                                                                     
|/s/ROBERT P. PINCUSRobert P. Pincus           |  | Director                                                                                                                     
|/s/CRISTINA L. ROSECristina L. Rose           |  | Director                                                                                                                     

89

---



REPORT OF INDEPENDENT AUDITORS

BOARD OF DIRECTORS
THE MILLS CORPORATION

We have audited the accompanying consolidated balance sheets of The Mills Corporation as of December 31, 2001 and 2000 and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2001. Our audits also included the financial statement schedule listed in
the Index at Item 14(a). These consolidated financial statements and schedule are the responsibility of the management of The Mills Corporation. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Mills Corporation as of
December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth therein.

As
discussed in Note 2 of the Notes to the Consolidated Financial Statements, in 2001 the Company adopted Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities."



McLean,
Virginia
February 19, 2002, except for Note 17,
as to which the date is February 28, 2002

F-1

---



THE MILLS CORPORATION  CONSOLIDATED BALANCE SHEETS  (In thousands)

|                                                                                                                                       |                                                 | December 31, |          
|-------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | ------------ | ---------
|
|ASSETS                                                                                                                                 |                                                
|Income producing property:                                                                                                             |                                                 |              |          
|                                                                                                                                       | Land and land improvements                      |              | $        
|                                                                                                                                       | Building and improvements                       |              |          
|                                                                                                                                       | Furniture, fixtures and equipment               |              |          
|                                                                                                                                       | Less: accumulated depreciation and amortization |              |          
|                                                                                                                                       |                                                 |              |          
|                                                                                                                                       | Net income producing property                   |              |          
|Land held for investment and/or sale                                                                                                   |                                                 |              | 8,818    
|Construction in progress                                                                                                               |                                                 |              | 70,702   
|Investment in unconsolidated joint ventures                                                                                            |                                                 |              | 341,819  
|                                                                                                                                       |                                                 |              |          
|                                                                                                                                       | Net real estate and development assets          |              |          
|Cash and cash equivalents                                                                                                              |                                                 |              | 9,376    
|Restricted cash                                                                                                                        |                                                 |              | 30,133   
|Accounts receivable, net                                                                                                               |                                                 |              | 34,791   
|Notes receivable                                                                                                                       |                                                 |              | 16,911   
|Deferred costs, net                                                                                                                    |                                                 |              | 66,622   
|Other assets                                                                                                                           |                                                 |              | 2,051    
|                                                                                                                                       |                                                 |              |          
|                                                                                                                                       | TOTAL ASSETS                                    |              | $        
|                                                                                                                                       |                                                 |              |          
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                   |                                                
|Mortgages, notes, and loans payable                                                                                                    |                                                 | $            | 1,023,894
|Accounts payable and other liabilities                                                                                                 |                                                 |              | 76,380   
|                                                                                                                                       |                                                 |              |          
|                                                                                                                                       |                                                 |              | 1,100,274
|                                                                                                                                       |                                                 |              |          
|Minority interests                                                                                                                     |                                                 |              | 57,090   
|Series A cumulative convertible preferred stock                                                                                        |                                                 |              | 75,000   
|Common stock $.01 par value, authorized 100,000 shares, 28,463 and 23,409 shares issued and outstanding in 2001 and 2000, respectively |                                                 |              | 285      
|Additional paid-in capital                                                                                                             |                                                 |              | 533,374  
|Accumulated deficit                                                                                                                    |                                                 |              | (424,639 
|Accumulated other comprehensive loss                                                                                                   |                                                 |              | (5,107   
|Deferred compensation                                                                                                                  |                                                 |              | (7,173   
|                                                                                                                                       |                                                 |              |          
|                                                                                                                                       | Total stockholders' equity                      |              |          
|                                                                                                                                       |                                                 |              |          
|                                                                                                                                       | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      |              | $        
|                                                                                                                                       |                                                 |              |          

See
Accompanying Notes to Consolidated Financial Statements.

F-2

---



THE MILLS CORPORATION  CONSOLIDATED STATEMENTS OF INCOME  (In thousands, except per share data)

|                                                                                                                                   |                                                                                         | Years Ended December 31, |       
|---------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ------------------------ | ------
|
|REVENUES:                                                                                                                          |                                                                                         |                          |       
|                                                                                                                                   | Minimum rent                                                                            |                          | $     
|                                                                                                                                   | Percentage rent                                                                         |                          |       
|                                                                                                                                   | Recoveries from tenants                                                                 |                          |       
|                                                                                                                                   | Other property revenue                                                                  |                          |       
|                                                                                                                                   | Management fee income from unconsolidated joint ventures                                |                          |       
|                                                                                                                                   | Other fee income from unconsolidated joint ventures                                     |                          |       
|                                                                                                                                   |                                                                                         |                          |       
|                                                                                                                                   |                                                                                         | Total operating revenues |       
|                                                                                                                                   |                                                                                         |                          |       
|EXPENSES:                                                                                                                          |                                                                                         |                          |       
|                                                                                                                                   | Recoverable from tenants                                                                |                          |       
|                                                                                                                                   | Other operating                                                                         |                          |       
|                                                                                                                                   | General and administrative                                                              |                          |       
|                                                                                                                                   | Depreciation and amortization                                                           |                          |       
|                                                                                                                                   |                                                                                         |                          |       
|                                                                                                                                   |                                                                                         | Total operating expenses |       
|                                                                                                                                   |                                                                                         |                          |       
|                                                                                                                                   |                                                                                         |                          | 88,512
|OTHER INCOME AND EXPENSES:                                                                                                         |                                                                                         |                          |       
|                                                                                                                                   | Equity in earnings of unconsolidated joint ventures before extraordinary items          |                          |       
|                                                                                                                                   | Interest income                                                                         |                          |       
|                                                                                                                                   | Interest expense, net                                                                   |                          |       
|                                                                                                                                   | Other income (expense)                                                                  |                          |       
|                                                                                                                                   |                                                                                         |                          |       
|INCOME BEFORE GAIN ON SALE OF INTEREST IN FOODBRAND L.L.C.,
SALE OF COMMUNITY CENTERS, EXTRAORDINARY ITEMS, AND
MINORITY INTERESTS |                                                                                         |                          | 45,041
|                                                                                                                                   | Gain on sale of interest in FoodBrand L.L.C.                                            |                          |       
|                                                                                                                                   | Gain on sale of community centers                                                       |                          |       
|                                                                                                                                   |                                                                                         |                          |       
|INCOME BEFORE EXTRAORDINARY ITEMS AND MINORITY INTERESTS                                                                           |                                                                                         |                          | 51,461
|                                                                                                                                   | Extraordinary losses on debt extinguishments                                            |                          |       
|                                                                                                                                   | Equity in extraordinary losses on debt extinguishments of unconsolidated joint ventures |                          |       
|                                                                                                                                   |                                                                                         |                          |       
|INCOME BEFORE MINORITY INTERESTS                                                                                                   |                                                                                         |                          | 34,710
|                                                                                                                                   | Minority interests                                                                      |                          |       
|                                                                                                                                   |                                                                                         |                          |       
|NET INCOME                                                                                                                         |                                                                                         | $                        | 21,242
|                                                                                                                                   |                                                                                         |                          |       
|EARNINGS PER COMMON SHARE  BASIC:                                                                                                 |                                                                                         |                          |       
|                                                                                                                                   | Income before extraordinary items, net of minority interests                            |                          | $     
|                                                                                                                                   | Extraordinary losses on debt extinguishments, net of minority interests                 |                          |       
|                                                                                                                                   |                                                                                         |                          |       
|                                                                                                                                   | Net income per share                                                                    |                          | $     
|                                                                                                                                   |                                                                                         |                          |       
|EARNINGS PER COMMON SHARE  DILUTED:                                                                                               |                                                                                         |                          |       
|                                                                                                                                   | Income before extraordinary items, net of minority interests                            |                          | $     
|                                                                                                                                   | Extraordinary losses on debt extinguishments, net of minority interests                 |                          |       
|                                                                                                                                   |                                                                                         |                          |       
|                                                                                                                                   | Net income per share                                                                    |                          | $     
|                                                                                                                                   |                                                                                         |                          |       
|WEIGHTED AVERAGE NUMBER OF SHARES:                                                                                                 |                                                                                         |                          |       
|                                                                                                                                   | Basic                                                                                   |                          |       
|                                                                                                                                   |                                                                                         |                          |       
|                                                                                                                                   | Diluted                                                                                 |                          |       
|                                                                                                                                   |                                                                                         |                          |       
|TAX TREATMENT OF DIVIDENDS (UNAUDITED):                                                                                            |                                                                                         |                          |       
|                                                                                                                                   | Ordinary income per common share                                                        |                          | $     
|                                                                                                                                   | Capital gains per common share                                                          |                          |       
|                                                                                                                                   | Return of capital per common share                                                      |                          |       
|                                                                                                                                   |                                                                                         |                          |       
|                                                                                                                                   | Dividends paid per common share                                                         |                          | $     
|                                                                                                                                   |                                                                                         |                          |       

See Accompanying Notes to Consolidated Financial Statements.

F-3

---

THE MILLS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)

|                                                               |  | Common Stock |   |   |     |  |   |         |   |   |          |   |   |        |  
|-------------------------------------------------------------- |  | ------------ | - | - | --- |  | - | ------- | - | - | -------- | - | - | ------ | -
|
|
|
|BALANCES, DECEMBER 31, 1998                                    |  | 23,132       |   | $ | 231 |  | $ | 439,448 |   | $ | (359,404 | ) | $ | (1,357 | )
|Restricted stock incentive program                             |  | 60           |   |   | 1   |  |   | 1,476   |   |   |         |   |   | (1,477 | )
|Amortization of restricted stock incentive program             |  |             |   |   |    |  |   |        |   |   |         |   |   | 1,011  |  
|Dividends declared                                             |  |             |   |   |    |  |   |        |   |   | (47,125  | ) |   |       |  
|Net income                                                     |  |             |   |   |    |  |   |        |   |   | 27,223   |   |   |       |  
|                                                               |  |              |   |   |     |  |   |         |   |   |          |   |   |        |  
|BALANCES, DECEMBER 31, 1999                                    |  | 23,192       |   |   | 232 |  |   | 440,924 |   |   | (379,306 | ) |   | (1,823 | )
|                                                               |  |              |   |   |     |  |   |         |   |   |          |   |   |        |  
|Restricted stock incentive program                             |  | 168          |   |   | 2   |  |   | 2,883   |   |   |         |   |   | (2,885 | )
|Amortization of restricted stock incentive program             |  |             |   |   |    |  |   |        |   |   |         |   |   | 1,728  |  
|Units exchanged for common stock                               |  | 3            |   |   |    |  |   | 53      |   |   | (53      | ) |   |       |  
|Exercise of stock options                                      |  | 46           |   |   |    |  |   | 829     |   |   |         |   |   |       |  
|Dividends declared                                             |  |             |   |   |    |  |   |        |   |   | (49,070  | ) |   |       |  
|Net income                                                     |  |             |   |   |    |  |   |        |   |   | 34,420   |   |   |       |  
|                                                               |  |              |   |   |     |  |   |         |   |   |          |   |   |        |  
|BALANCES, DECEMBER 31, 2000                                    |  | 23,409       |   |   | 234 |  |   | 444,689 |   |   | (394,009 | ) |   | (2,980 | )
|                                                               |  |              |   |   |     |  |   |         |   |   |          |   |   |        |  
|Cumulative effect of a change in accounting principle (Note 2) |  |             |   |   |    |  |   |        |   |   |         |   |   |       |  
|Restricted stock incentive program                             |  | 365          |   |   | 4   |  |   | 9,172   |   |   |         |   |   | (9,176 | )
|Amortization of restricted stock incentive program             |  |             |   |   |    |  |   |        |   |   |         |   |   | 4,983  |  
|Units exchanged for common stock                               |  | 276          |   |   | 3   |  |   | 7,071   |   |   |         |   |   |       |  
|Exercise of stock options                                      |  | 438          |   |   | 4   |  |   | 8,308   |   |   |         |   |   |       |  
|Sale of common stock, net of expenses                          |  | 4,025        |   |   | 40  |  |   | 90,744  |   |   |         |   |   |       |  
|Repurchase and retirement of common stock                      |  | (50          | ) |   |    |  |   | (1,102  | ) |   |         |   |   |       |  
|Change in intrinsic value of cash flow hedges                  |  |             |   |   |    |  |   |        |   |   |         |   |   |       |  
|Dividends declared                                             |  |             |   |   |    |  |   |        |   |   | (51,872  | ) |   |       |  
|Adjustment to minority interests                               |  |             |   |   |    |  |   | (25,508 | ) |   |         |   |   |       |  
|Net income                                                     |  |             |   |   |    |  |   |        |   |   | 21,242   |   |   |       |  
|                                                               |  |              |   |   |     |  |   |         |   |   |          |   |   |        |  
|BALANCES, DECEMBER 31, 2001                                    |  | 28,463       |   | $ | 285 |  | $ | 533,374 |   | $ | (424,639 | ) | $ | (7,173 | )
|                                                               |  |              |   |   |     |  |   |         |   |   |          |   |   |        |  

See Accompanying Notes to Consolidated Financial Statements.

F-4

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THE MILLS CORPORATION  CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands)

|                                                                                                        |                                                                                         | Years Ended December 31, |         
|------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ------------------------ | --------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                   |                                                                                         |                          |         
|Income before minority interests                                                                        |                                                                                         | $                        | 34,710  
|Adjustments to reconcile income before minority interests to net cash provided by operating activities: |                                                                                         |                          |         
|                                                                                                        | Net accretion of note receivable                                                        |                          |         
|                                                                                                        | Depreciation and amortization                                                           |                          |         
|                                                                                                        | Amortization of finance costs                                                           |                          |         
|                                                                                                        | Write-off of abandoned projects                                                         |                          |         
|                                                                                                        | Provision for losses on accounts receivable                                             |                          |         
|                                                                                                        | Equity in earnings of unconsolidated joint ventures before extraordinary items          |                          |         
|                                                                                                        | Gain on sales of property                                                               |                          |         
|                                                                                                        | Gain on sale of community centers                                                       |                          |         
|                                                                                                        | Gain on sale of interest in FoodBrand L.L.C.                                            |                          |         
|                                                                                                        | Extraordinary losses on debt extinguishments                                            |                          |         
|                                                                                                        | Equity in extraordinary losses on debt extinguishments of unconsolidated joint ventures |                          |         
|                                                                                                        | Amortization of restricted stock incentive program                                      |                          |         
|Other changes in assets and liabilities:                                                                |                                                                                         |                          |         
|                                                                                                        | Accounts receivable                                                                     |                          |         
|                                                                                                        | Notes receivable                                                                        |                          |         
|                                                                                                        | Other assets                                                                            |                          |         
|                                                                                                        | Accounts payable and other liabilities                                                  |                          |         
|                                                                                                        |                                                                                         |                          |         
|Net cash provided by operating activities                                                               |                                                                                         |                          | 90,388  
|                                                                                                        |                                                                                         |                          |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                   |                                                                                         |                          |         
|Investment in real estate and development assets                                                        |                                                                                         |                          | (168,053
|Distributions received from unconsolidated joint ventures                                               |                                                                                         |                          | 28,134  
|Proceeds from sale of community centers, net                                                            |                                                                                         |                          |        
|Proceeds from sale of property, net                                                                     |                                                                                         |                          | 350     
|Proceeds from sale of interest in FoodBrand L.L.C.                                                      |                                                                                         |                          | 9,549   
|Notes receivable                                                                                        |                                                                                         |                          | (8,687  
|Deferred costs                                                                                          |                                                                                         |                          | (7,655  
|                                                                                                        |                                                                                         |                          |         
|Net cash used in investing activities                                                                   |                                                                                         |                          | (146,362
|                                                                                                        |                                                                                         |                          |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                   |                                                                                         |                          |         
|Proceeds from mortgages, notes and loans payable                                                        |                                                                                         |                          | 711,863 
|Repayments of mortgages, notes and loans payable                                                        |                                                                                         |                          | (706,369
|Refinancing costs                                                                                       |                                                                                         |                          | (21,321 
|Increase in restricted cash                                                                             |                                                                                         |                          | (10,569 
|Proceeds from public offering of common stock, net                                                      |                                                                                         |                          | 90,784  
|Proceeds from sale of series A preferred stock, net                                                     |                                                                                         |                          | 69,343  
|Repurchase of common stock, net                                                                         |                                                                                         |                          | (1,102  
|Dividends paid                                                                                          |                                                                                         |                          | (51,872 
|Distributions to minority interests                                                                     |                                                                                         |                          | (34,166 
|Proceeds from exercise of stock options                                                                 |                                                                                         |                          | 8,312   
|                                                                                                        |                                                                                         |                          |         
|Net cash provided by financing activities                                                               |                                                                                         |                          | 54,903  
|                                                                                                        |                                                                                         |                          |         
|Net (decrease) increase in cash and cash equivalents                                                    |                                                                                         |                          | (1,071  
|Cash and cash equivalents, beginning of year                                                            |                                                                                         |                          | 10,447  
|                                                                                                        |                                                                                         |                          |         
|Cash and cash equivalents, end of year                                                                  |                                                                                         | $                        | 9,376   
|                                                                                                        |                                                                                         |                          |         
|SUPPLEMENTAL CASH FLOW INFORMATION:                                                                     |                                                                                         |                          |         
|                                                                                                        | Cash paid for interest, net of amount capitalized                                       |                          | $       
|                                                                                                        |                                                                                         |                          |         

See Accompanying Notes to Consolidated Financial Statements.

F-5

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THE MILLS CORPORATION            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS            (Dollars in thousands, except share data)

1. ORGANIZATION

The Mills Corporation (the "Company") is a fully integrated, self-managed real estate investment trust ("REIT").

The
Company conducts all of its business through The Mills Limited Partnership (the "Operating Partnership"), in which it owns a 1% interest as the sole general partner and a 61.89%
interest as a limited partner as of December 31, 2001. The Company, through the Operating Partnership, is engaged in the ownership, development, redevelopment, leasing, acquisition, expansion
and management of super-regional, retail and entertainment-oriented centers (the "Mills" and "Block" projects), two community shopping centers and a portfolio of 46 single tenant net lease properties
("Net Lease Properties") at various locations throughout the United States. As of December 31, 2001, the Operating Partnership owns or holds an interest in the following Mills and Block
projects and two community centers:

|Arizona Mills             |  | Tempe, AZ (Phoenix)                               
|------------------------- |  | --------------------------------------------------
|Arundel Mills             |  | Anne Arundel County, MD (Baltimore/Washington, DC)
|Concord Mills             |  | Concord, NC (Charlotte)                           
|Discover Mills            |  | Sugarloaf, GA (Atlanta)                           
|Franklin Mills            |  | Philadelphia, PA                                  
|Grapevine Mills           |  | Grapevine, TX (Dallas/Fort Worth)                 
|Gurnee Mills              |  | Gurnee, IL (Chicago)                              
|Katy Mills                |  | Katy, TX (Houston)                                
|Ontario Mills             |  | Ontario, CA (Los Angeles)                         
|Opry Mills                |  | Nashville, TN                                     
|Potomac Mills             |  | Woodbridge, VA (Washington, DC)                   
|Sawgrass Mills            |  | Sunrise, FL (Ft. Lauderdale)                      
|The Oasis at Sawgrass     |  | Sunrise, FL (Ft. Lauderdale)                      
|The Block at Orange       |  | Orange, CA (Los Angeles)                          
|COMMUNITY CENTERS         |  |                                                   
|Concord Mills Marketplace |  | Concord, NC (Charlotte)                           
|Liberty Plaza             |  | Philadelphia, PA                                  

The
Company is actively involved in the predevelopment of a number of projects, including Colorado Mills (Denver, CO), Madrid Xanadu (Madrid, Spain), St. Louis Mills (St. Louis, MO),
Vaughan Mills (Toronto, Canada), Meadowlands Mills (Carlstadt, NJ) and San Francisco Piers 27-31 (San Francisco, CA).

Additionally,
the Operating Partnership owns MillsServices Corp. ("MSC"), a taxable REIT subsidiary formed in connection with the Company's initial public offering to provide
development, management, leasing and financial services to entities owned by unconsolidated joint ventures of the Company. MSC does not perform any services to entities in which the Company is not a
significant investor. MSC also owns 100% of Mills Enterprises, Inc. ("MEI"), an entity that owns 60% of FoodBrand L.L.C.
("FoodBrand") (see Note 4) the Company's food and beverage entity that was created in 1999 to master lease, manage and operate food courts and restaurants at the Company's malls.

F-6

---

Prior
to August 2001, the Operating Partnership owned 5% of the voting common stock and 99% of the non-voting preferred stock of MSC. Through its ownership of 99% of
MSC's non-voting preferred stock, the Operating Partnership had the perpetual right to receive 99% of the economic benefits (i.e. cash flows) generated by MSC's operations. The Company
provided all of the operating capital of MSC. The two individuals who had contributed nominal amounts of equity to MSC for 95% of MSC's voting common shares and 1% of MSC's preferred stock, were
officers and directors of both MSC and the Company. These two individuals' interests were aligned with the interests of the Company's management. Also, all of MSC's Board members were also Board
members of the Company. All of these factors resulted in the Company having a controlling financial interest in MSC, and accordingly, the operations of MSC were consolidated by the Company. In
August 2001, the Operating Partnership acquired 95% of MSC's voting common stock and 1% of MSC's non-voting preferred stock that it did not already own for fair market value,
totaling $170.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The Company conducts its business through its Operating Partnership, wholly-owned subsidiaries and affiliates. The consolidated financial statements include the
accounts of the Company and all subsidiaries that the Company controls. The Company does not consider itself to be in control of an entity when major business decisions require the approval of at
least one other general partner. Accordingly, the Company accounts for its joint ventures under the equity method (see Note 7).

All
significant intercompany transactions and balances have been eliminated in consolidation. Minority interests represent the ownership interests in the Operating Partnership not held
by the Company.

REAL ESTATE AND DEVELOPMENT ASSETS

Income producing property is stated at cost and includes all costs related to acquisition, development, leasing and construction, including tenant improvements,
interest incurred during construction, costs of
pre-development and certain direct and indirect costs of development. Cost incurred during the predevelopment stage are capitalized once management has identified and secured a site,
determined that the project is feasible and it is probable that management is able to proceed. Land held for sale is carried at the lower of cost or fair value less costs to sell. Expenditures for
ordinary maintenance and repairs are expensed to operations as they are incurred. Significant renovations and improvements, which improve or extend the useful life of the assets are capitalized.

Income
producing properties are individually evaluated for impairment when various conditions exist that may indicate that it is probable that the sum of expected future cash flows (on
an undiscounted basis) from a property are less than its historical net cost basis. Upon determination that a permanent impairment has occurred, the Company records an impairment charge equal to the
excess of historical cost basis over fair value. In addition, the Company writes off costs related to predevelopment projects when it determines that it will no longer pursue the project.

F-7

---

Depreciation
expense is computed using the straight-line method over the estimated useful lives of the assets, as follows:

Buildings and improvements

40 yearsLand improvements

20 yearsFurniture, fixtures and equipment

7 years


Total
depreciation expense was $26,900, $26,598 and $25,130 for the years ended December 31, 2001, 2000 and 1999, respectively.

Total
interest expense capitalized to real estate and development assets, including investments in unconsolidated joint ventures under development, was $25,670, $21,058 and $13,065 for
the years ended December 31, 2001, 2000 and 1999, respectively.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.

RESTRICTED CASH

Restricted cash consists primarily of funds invested in cash collateral accounts. The purpose of the cash collateral accounts is to hold proceeds from certain
transactions and to fund maintenance reserves, interest, taxes and payments on debt. The cash collateral accounts are controlled by the lenders.

ACCOUNTS RECEIVABLE

Accounts receivable include amounts billed to tenants, deferred rent receivable arising from straight-lining of rents and accrued recoveries from tenants.
Management evaluates the collectibility of these receivables and adjusts the allowance for doubtful accounts to reflect the amounts estimated to be uncollectible. The allowance for doubtful accounts
was $1,478 and $3,148 at December 31, 2001 and 2000, respectively.

DEFERRED COSTS

Deferred costs consist of loan fees and related expenses which are amortized on a straight-line basis that approximates the interest method over the
terms of the related notes. In addition, deferred costs include leasing charges, comprised of tenant construction allowances and direct salaries and other costs incurred by the Company to originate a
lease, which are amortized on a straight-line basis over the terms of the related leases. Total amortization expense was $14,485, $14,366, and $11,539 for the years ended
December 31, 2001, 2000 and 1999, respectively. Total accumulated amortization of deferred costs was $73,384 and $64,706 at December 31, 2001 and 2000, respectively.

REVENUE RECOGNITION

The Company, as lessor, has retained substantially all the risks and benefits of property ownership and accounts for its leases as operating leases. Minimum rent
from income producing properties is recognized on a straight-line basis over the terms of the respective leases. Percentage rent is recognized

F-8

---

when tenants' sales have reached certain levels specified in the respective leases. Recoveries from tenants for real estate taxes and other operating expenses are recognized as revenue in the period
the applicable costs are incurred.

MSC,
a wholly owned subsidiary of the Company, has entered into agreements with the unconsolidated joint ventures (see Note 7) to provide management, leasing, development and
financing services for the joint venture properties. For management services, MSC is entitled to receive monthly a percentage of rental revenues received by the joint venture property. For leasing
services, MSC is entitled to an agreed-upon rate per square foot of space leased that is recognized upon execution of a lease. For development services, MSC is entitled to an
agreed-upon fee that is deferred during the pre development stage of the project and subsequently recognized ratably during the development period once a development agreement is executed.
For financial services, MSC receives an agreed upon percentage of the total loan commitment which is recognized when a construction loan or permanent loan is executed by the lender. Costs incurred to
provide leasing, development and financial services are capitalized when incurred and subsequently expensed as the fee is earned. Other fee income from affiliated joint ventures reflects the fees
earned from providing leasing, development and financing services, net of the costs incurred to provide these services and the elimination of intercompany profits.

OTHER PROPERTY REVENUE

Other property revenue generally consists of revenues from tenants with lease agreements of one year or less, revenues from rentals of temporary
in-line space, kiosks and ATM space rentals. It also includes revenues received from lease termination agreements or subsequent collection of receivables previously written off.

INCOME TAXES

Federal income taxes are not provided for because the Company believes it qualifies as a REIT under the provisions of the Internal Revenue Code ("IRC") and will
distribute in excess of its taxable income to its shareholders. As a REIT, the Company is required to distribute at least 90% of its taxable income to shareholders and to meet certain other
requirements. The differences between net income available to common shareholders for financial reporting purposes and taxable income before dividend deductions relate primarily to temporary
differences, principally real estate depreciation.

MSC,
the Company's consolidated IRC subchapter C corporate subsidiary, is subject to federal income taxes at the prevailing tax rates. MSC has a federal net operating loss carryforward
of $45,320 at December 31, 2000, and the Company estimates that the federal net operating loss carryforward will be approximately $50,000 at December 31, 2001. A valuation allowance has
been established for deferred
tax assets principally relating to the loss carryforward as there can be no assurance that MSC will generate taxable income in future years.

For
taxable years beginning on or after January 1, 2001, Federal income tax law generally allows a REIT to own stock in one or more subsidiaries ("taxable REIT subsidiaries")
engaged in businesses that generate income that would not constitute qualifying income under the REIT income test. Additionally, Federal income tax imposes certain limitations on the value of the
stock in these taxable REIT subsidiaries. Both the REIT and the taxable REIT subsidiaries are subject to strict Federal

F-9

---

income tax rules governing their ownership, operation and taxation. As of January 1, 2001, MSC and its subsidiaries filed an election to be treated as taxable REIT subsidiaries.

SEGMENT REPORTING

Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 131 defines an operating segment as a component of an enterprise that engages in business activities that generate revenues and incur expenses,
which operating results are reviewed by the chief operating decision maker in the determination of resource allocation and performance, and for which discrete financial information is available. The
Company's properties consist of "Mills" super-regional, retail and entertainment oriented malls, the "Block" an urban entertainment retail property, two community shopping centers, food courts and
several restaurant operations, a portfolio of 46 Net Lease Properties and other retail operations. Each of the Company's Mills and Blocks are separate operating segments which have been aggregated and
reported as one reportable segment because they have characteristics so similar that they are expected to have essentially the same future prospects. These economic characteristics include similar
returns, occupancy and tenants and each is located near a metropolitan area with similar economic demographics and site characteristics. This reportable segment consists of greater than 90% of the
Company's assets, revenues and income for each of the years presented. The Company currently has no operations in foreign countries that generate revenue and expenses.

ACCOUNTING CHANGES: STANDARDS IMPLEMENTED AND TRANSITION ADJUSTMENT

On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities." SFAS No. 133, as amended, establishes accounting and reporting standards for derivative
instruments. Specifically, SFAS No. 133 requires an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments
at fair value. Additionally, the fair value adjustments will affect either shareholders' equity or net income depending on whether the derivative instrument qualifies as a hedge for accounting
purposes and, if so, the nature of the hedging activity.

To
determine the fair values of derivative instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet
date. For the majority of financial instruments, including most derivatives, long-term investments and long-term debt, standard market conventions and techniques, such as
discounted cash flow analysis, option pricing models, replacement cost, and termination cost, are used to determine fair value. All methods of assessing fair value result in a general approximation of
value, which may never be realized.

On
the date SFAS No. 133 was adopted, the Company and its unconsolidated joint ventures were required to recognize all of their derivative instruments as either assets or
liabilities and to measure them at fair value. The difference between the derivative instruments' previous carrying amount and their fair value was recorded as a transition adjustment to accumulated
other comprehensive income (loss), which amounted to a fair value loss of $1,279 at January 1, 2001, including the Company's pro-rata share of the transition adjustment recorded by
its unconsolidated joint venture (see Note 9).

F-10

---

EARNINGS PER SHARE

Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of common shares outstanding during the
period. Diluted earnings per share reflects the assumed conversion of stock issued pursuant to the Company's restricted stock program and stock option incentive program using the treasury stock method
and the if-converted method for the Company's convertible preferred stock.

STOCK OPTION PLAN

The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock options because, the alternative fair value accounting provided for under FASB Statement No. 123, "Accounting for Stock-Based Compensation,"
("SFAS 123") requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, when the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

TAX INCREMENT FINANCING

The Company considers the requirements of EITF 91-10, "Accounting for Special Assessments and Tax Increment Financing Entities," (effective
May 1992) in assessing the need to record an obligation for these forms of project infrastructure financing. These requirements include consideration of whether the assessment is fixed or
variable and an evaluation under SFAS No. 5, "Accounting for Contingencies," of the probability of the Company becoming obligated for the project infrastructure financing.

NEW ACCOUNTING PRONOUNCEMENT

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"),
which addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121 but retains SFAS
No. 121's fundamental provisions for recognition/measurement of impairment of long-lived assets to be held and used, and measurement of long-lived assets to be disposed
of by sale. SFAS No. 144 also supersedes the accounting and reporting provisions of APB Opinion No. 30 for segments of a business to be disposed of but retains the requirement to report
discontinued operations separately from continuing operations and extends that reporting requirement to a component of an entity that either has been disposed of or is classified as held for sale.
SFAS No. 144 is effective for fiscal years beginning after December 15, 2001, and for interim periods within those fiscal years. The Company does not expect the impact of adopting SFAS
No. 144 to be material.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

F-11

---

RECLASSIFICATIONS

Certain amounts in the 2000 and 1999 consolidated financial statements have been reclassified to conform with the current year presentation.

3. ACQUISITIONS

ACQUISITION OF THE OASIS AT SAWGRASS

In October 2001, the Operating Partnership issued 1,245,000 Operating Partnership units to Kan Am USA XIII Limited Partnership in exchange for the
remaining 50% interest in The Oasis at Sawgrass that the Operating Partnership did not already own. The operating partnership units may be exchanged for cash or, at the discretion of the Company,
shares of the Company's common stock. The acquisition gives the Company a 100% interest in the property. The consolidation of the assets and liabilities acquired, comprised primarily of real estate
assets, have been treated as a non-cash investing activity.

ACQUISITION OF A PORTFOLIO OF NET LEASED PROPERTIES

During the third and fourth quarters of 2000, the Company acquired 46 Net Lease Properties for an aggregate purchase price of $114,000 through the assumption
$105,200 of mortgage notes and $8,800 cash payment. The Net Lease Properties were purchased from unrelated third parties and are subject to single tenant net leases operating as CVS stores. The leases
are triple net leases that contain indemnification for liabilities customarily associated with possession of the site (including, without limitation, certain specified environmental liabilities). The
tenants' obligations under the leases are guaranteed by CVS Corporation, a Delaware corporation. The assumption of debt has been treated as a non-cash investing activity for cash flow
purposes. A summary of operations for the Net Lease Properties for the years ended December 31, 2001 and 2000 is as follows:

Years Ended
December 31,2001

2000Revenues

$
10,085

$
2,518Other expenses


77


Interest expense


8,145


2,039Depreciation expense


2,063


653


F-12

---

4. DISPOSITIONS

SALE OF AN INTEREST IN FOODBRAND L.L.C.

In October 2001, the Company sold a 40% interest in FoodBrand to privately-held Panda Restaurant Group ("PRG") for $9,549 in cash which
resulted in a gain of $6,420. FoodBrand which was previously wholly owned by MEI, was created in 1999 to master lease, manage and operate food courts and several restaurants at the Company's malls.
Under the terms of the joint venture agreement, MEI will serve as a co-general and managing partner and all significant business decisions will be subject to approval by both MEI and PRG.
The Company has accounted for its interest in FoodBrand joint venture using the equity method beginning October 2001. The deconsolidation of the FoodBrand assets and liabilities subsequent to
the sale date has been treated as a non-cash investing activity.

SALE OF COMMUNITY CENTERS

In August 2000, the Company sold ten of its eleven community centers (the "Disposed Properties") to an unrelated third party for $142,000 and recorded a
gain of $18,370. Net proceeds to the Company after assumption of the mortgage notes of $111,600 and closing costs of $7,864 were $22,536. The assumption of debt has been treated as a
non-cash investing activity for cash flow purposes.

A
summary of operations for the community centers for the years ended December 31, 2000 and 1999, are as follows:

Years Ended
December 31,2000

1999Revenues

$
12,809

$
21,330Other expense


3,363


5,775Interest expense


4,935


8,211Depreciation expense


2,523


4,438


5. OTHER INCOME (EXPENSE)

Other income (expense) consists of gains from land sales, abandoned project costs and operating margins and start-up costs associated with FoodBrand
through September 30, 2001 (see Note 4) and the Company's other retail operations as follows:

Years Ended December 31,2001

2000

1999Revenues

$
27,214

$
25,759

$
5,737Expenses


(25,798
)

(23,781
)

(6,506
)Start-up costs





(1,126
)

(1,094
)Abandoned projects


(3,799
)

(6,279
)

(1,675
)Gains on land sales


153


1,255


1,895Other


(77
)

(38
)

$
(2,307
)
$
(4,210
)
$
(1,643
)


F-13

---



6. NOTES RECEIVABLE

Notes receivable held by MSC include $3,733 and $4,387 at December 31, 2001 and 2000, respectively, relating to a reimbursement and annexation agreement
with the Village of Gurnee ("Village") to reimburse the owner of Gurnee Mills for the cost of certain public improvements. The Village has executed a non-interest bearing note for $15,000
to be paid from taxes collected from tenants of Gurnee Mills during a ten-year period beginning one year after Gurnee Mills opened in August 1991. In 1996, the note was amended and
the note amount increased to $17,500 to be paid over a thirteen-year period. The note was recorded in 1991 at its net present value based on the estimated taxes to be collected by the
Village using a discount rate of 10%. Interest income accreted was $548, $470, and $532 for the years ended December 31, 2001, 2000 and 1999, respectively. For the years ended
December 31, 2001, 2000 and 1999, collections from the Village totaled $1,202, $1,386 and $1,210, respectively.

Notes
receivable also include $1,825 and $1,582 at December 31, 2001 and 2000, respectively, relating to loans made to certain members of management to fund purchases of the
Company's common stock on the open market. The notes are fully recourse, mature in April and September 2002 and accrue interest monthly at interest rates ranging from 6% to 8.0% per annum.

Included
in notes receivable at December 31, 2001 are notes receivable and accrued interest from the City of Hazelwood, Missouri totaling $8,687. The notes, which were acquired in
connection with the Company's development of St. Louis Mills, and earn interest at variable rates ranging from 9% to 10% through their maturity in October 2021.

7. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES

The Company owns certain operating properties and properties under development through joint ventures (each a "Joint Venture" property) in which the Company is a
co-general and co-managing partner. The Company does not consider itself to be in control of joint ventures when major business
decisions require the approval of at least one other general partner. Accordingly, the Company accounts for its joint ventures under the equity method.

The
Company calculates the equity in income or loss earned from its unconsolidated joint ventures based on its estimate of each partner's economic ownership which is estimated based on
anticipated stabilized cash flows as they would be allocated to each partner based on how cash flow is distributed. Generally, under the terms of the respective joint venture agreements, net ordinary
cash flow is distributed to each partner first to pay preferences on unreturned capital balances (including cumulative unpaid preferences) and thereafter in accordance with residual sharing
percentages specified in the joint venture agreement. Cash flow from capital events (including refinancing and asset sales) is allocated first to partners in an amount equal to their unreturned
capital account and thereafter in

F-14

---

accordance with residual sharing percentages. The Company's residual sharing and capital contribution percentages for each Joint Venture property at December 31, 2001, is as follows:

Joint Venture

Residual Sharing
Percentage

Capital
Contribution
PercentageArizona Mills

36.8%

36.8
%Arundel Mills

37.5%

25.0
%Colorado Mills

56.3%

37.5
%Concord Mills

37.5%

25.0
%Discover Mills

50.0%

Grapevine Mills

37.5%

25.0
%Katy Mills

62.5%

25.0
%Meadowlands Mills (1)

66.7%

33.0
%Ontario Mills

50.0%

25.0
%Opry Mills

66.7%

66.7
%The Block at Orange

50.0%

Vaughan Mills

50.0%

50.0
%


---

The
Company's residual sharing and capital contribution percentages of The Oasis at Sawgrass from January through October 31, 2001 were 50% and 0%, respectively. Effective
October 31, 2001 the Company owned 100% of The Oasis at Sawgrass (see Note 3). In addition to the above Joint Ventures, MEI holds investments in certain retail joint ventures and a 60%
interest in FoodBrand (see Note 4).

Pursuant
to the joint venture agreements, the Company is committed to providing certain levels of equity in addition to amounts invested to date. The Company has guaranteed repayment of
$344,790 of the Joint Venture debt, generally until certain debt service coverage tests are met. In addition, the Company is contingently liable for property taxes and assessments levied against
Ontario Mills Limited Partnership by the City of Ontario Special Assessment District ("City"). The remaining aggregate amount of the special tax assessment is approximately $12,405 and will be
collected over a 20 year period ending 2020 to fund debt service on bonds issued by the City to fund infrastructure improvements.

The
Company's real estate joint venture agreements contain buy-sell provisions whereby certain partners can require the purchase or sale of ownership interests among certain
partners. Additionally, there are provisions whereby the Company has guaranteed our partners preference and equity during the construction period. Specifically, the Company generally guarantees a 9%
preferred return on Kan Am's equity balance in an unconsolidated joint venture until permanent financing is obtained. Additionally the Company has guaranteed to return Kan Am's capital contribution to
Colorado Mills

F-15

---

totaling $25,500 if a construction loan is not obtained by November 6, 2002. The Company expects to close the construction loan for Colorado Mills in Spring 2002.

|                                       |                                            | December 31,
|-------------------------------------- | ------------------------------------------ | ------------
|
|
|ASSETS:                                |                                            |             
|                                       | Income producing assets                    |             
|                                       | Construction in progress                   |             
|                                       | Cash and cash equivalents                  |             
|                                       | Restricted cash                            |             
|                                       | Notes receivable                           |             
|                                       | Deferred costs, net                        |             
|                                       | Other                                      |             
|                                       |                                            |             
|Total assets                           |                                            | $           
|                                       |                                            |             
|LIABILITIES AND PARTNERS' EQUITY:      |                                            |             
|                                       | Debt                                       |             
|                                       | Other liabilities                          |             
|                                       | Operating Partnership's accumulated equity |             
|                                       | Joint venture partners' accumulated equity |             
|                                       |                                            |             
|Total liabilities and partners' equity |                                            | $           
|                                       |                                            |             

The
primary difference between the carrying value of the Company's investment in unconsolidated joint ventures and the Operating Partnership's accumulated equity noted above is due to
capitalized interest on the investment balance, capitalized development and leasing costs which are recovered by

F-16

---

the Operating Partnership through fees during construction, and loans and advances to the Joint Ventures included in other liabilities above.

|                                                                                        |                                                | Years Ended December 31, |       
|--------------------------------------------------------------------------------------- | ---------------------------------------------- | ------------------------ | ------
|
|Revenues:                                                                               |                                                |                          |       
|                                                                                        | Minimum rent                                   |                          | $     
|                                                                                        | Percentage rent                                |                          |       
|                                                                                        | Recoveries from tenants                        |                          |       
|                                                                                        | Other property revenue                         |                          |       
|                                                                                        |                                                |                          |       
|                                                                                        |                                                | Total revenues           |       
|                                                                                        |                                                |                          |       
|Expenses:                                                                               |                                                |                          |       
|                                                                                        | Recoverable from tenants                       |                          |       
|                                                                                        | Other operating                                |                          |       
|                                                                                        | Depreciation and amortization                  |                          |       
|                                                                                        |                                                |                          |       
|                                                                                        |                                                | Total expenses           |       
|                                                                                        |                                                |                          |       
|                                                                                        |                                                |                          | 96,831
|Other Income (Expense):                                                                 |                                                |                          |       
|                                                                                        | Interest income                                |                          |       
|                                                                                        | Interest expense                               |                          |       
|                                                                                        | Other income (expense)                         |                          |       
|                                                                                        |                                                |                          |       
|Income before Gain on Land Sales and Extraordinary Items                                |                                                |                          | 17,988
|                                                                                        | Gain on land sales                             |                          |       
|                                                                                        |                                                |                          |       
|Income before Extraordinary Items                                                       |                                                |                          | 25,249
|                                                                                        | Extraordinary losses on extinguishment of debt |                          |       
|                                                                                        |                                                |                          |       
|Net Income                                                                              |                                                | $                        | 24,722
|                                                                                        |                                                |                          |       
|Operating Partnership's equity in earnings of unconsolidated joint ventures             |                                                | $                        | 12,525
|                                                                                        |                                                |                          |       
|Equity in extraordinary losses on debt extinguishments of unconsolidated joint ventures |                                                | $                        | (127  
|                                                                                        |                                                |                          |       

Significant
accounting policies used by the unconsolidated joint ventures are similar to those used by the Company.

In
April 2001, the Discover Mills Joint Venture entered into a construction loan agreement for approximately $182,200. The loan commitment matures in April 2004 and has a
one-year extension option. The interest rate is LIBOR plus 2.25%, and is guaranteed by the Company. In November 2001, the Joint Venture entered into an interest rate swap agreement
which effectively fixed the interest rate at 5.16% on a notional amount of $126,700 (see Note 9). The interest rate swap agreement matures in June 2003.

F-17

---

In
May 2001, The Block at Orange Joint Venture refinanced its mortgage loan in the amount of $135,000. The refinancing is evidenced by two promissory notes: a permanent loan in
the amount of $108,000 and a mezzanine loan in the amount of $27,000. The proceeds from the loans were used to repay the prior loan balance of $131,522 plus loan finance costs. The permanent loan is
secured by the land and improvements at The Block at Orange while the mezzanine loan is guaranteed by the Company. In conjunction with this transaction, the Joint Venture entered into an interest rate
swap which effectively fixes the interest rate at 8.0% (see Note 9). The interest rate swap agreement matures in May 2006 and amortizes over a 24 year period to coincide with the
loan's amortization period. In addition, the Joint Venture incurred a $442 extraordinary loss on debt extinguishment. The Company's share of the loss was $108.

In
connection with the refinancing of debt during the year ended December 31, 2000, the Arizona Mills Joint Venture recognized an extraordinary loss on debt extinguishment
totaling $943 due to the write-off of deferred loan costs. The Company's share of the loss was $347.

In
August 1998, Simon Property Group ("Simon"), Chelsea GCA Reality Inc. ("Chelsea"), formed a joint venture ("Houston I") which purchased a site for a future shopping
center development located approximately two miles from a site where Katy Mills Limited Partnership ("Katy"), an unconsolidated joint venture, was developing the Katy Mills shopping center. Katy is
owned 67.5% by the Company and 32.5% by Kan Am (a major unit holder of the Company's Operating Partnership). The Company believed that Simon's participation in Houston I constituted a breach of other
agreements between the Company and Simon. To ensure the economic potential of the Katy Mills development, Katy filed a suit against Simon and Chelsea. In October 1998, Katy executed a
settlement agreement with Chelsea and Simon whereby Katy purchased Chelsea's interest in Houston I for $11,600 and Katy would make additional payments aggregating $21,400 over a four year period as
consideration for not building a similar project nearby. The Company's future payments were initially secured by a pledge of 1,007,620 shares of the Company's common stock which were reduced pro rata
as payments were made. The obligation was fully paid in January 2002 and the remaining number of shares were released.

The
purchase of Chelsea's interest in Houston I totaling $11,600 has been recorded on Katy's books as an investment in a partnership. The $21,400 payments was capitalized on Katy's books
as a development cost as it was directly associated with the development of the Katy Mills. Based on Katy's ability to develop Katy Mills and execute long term leases with tenants, Katy is amortizing
the $21,400 Chelsea payment over the period in which Katy benefits, which had been estimated at twenty years.

In
December 1997, an affiliate of Kan Am and a wholly-owned affiliate of the Operating Partnership entered into a partnership agreement forming Meadowland Mills for the purpose of
acquiring a mortgage interest in a 592-acre site located on the New Jersey Turnpike (I-95) adjacent to the Meadowlands Sports Complex and approximately five miles from New York
City. Upon procurement of all entitlements, it is anticipated that a project consisting of 2.0 million square feet of gross leaseable area for, Meadowland Mills shopping center, plus office and
hotel space, would be developed by a joint venture consisting of, the Company, Kan Am, Empire Ltd. and Bennett S. Lazare. Currently, the Company and Kan Am are the sole partners of the
Meadowlands Mills Joint Venture.

As
of December 31, 2001, the Company has invested $32,239 in the Meadowlands Mills Joint Venture project and has advanced $40,478 to the project. Kan Am has the right to redeem
its interest in the Meadowlands Mills Joint Venture if a construction loan is not obtained by June 2003. The

F-18

---

Company has guaranteed the return of Kan Am's accrued preferential return, which was $540 at December 31, 2001. Beginning on the "project commencement date," which is a date on which certain
material contingencies have been satisfied, the Company will guarantee the return of Kan Am's capital contribution upon Kan Am's exercise of its redemption right, which was $24,000 as of
December 31, 2001. The Company's guaranty of Kan Am's preferential return will continue until permanent financing is secured for the project.

Commencement
of the Meadowlands project construction is contingent upon the completion of an ongoing Environmental Impact Statement and the federal/state permitting process. In
December 2001, the U.S. Army Corps of Engineers circulated its Final Environmental Impact Statement to cooperating federal agencies and closed the comment period at the end of
January 2002. Completion of the Final Environmental Impact Statement is the last step before the U.S. Army Corps of Engineers issues its decision on whether to issue a wetland fill permit.

In
March 2001, the Acting Governor of New Jersey requested us to withdraw our permit applications for the existing site and to consider an alternate site in Bergen County. While
the Company refused this request, it has engaged in conversations with State officials considering a redevelopment of the Meadowlands Sport Complex, adjacent to our site, to determine whether an
acceptable alternate site might be defined for our project. Significant support for this conceptual move has emerged in business, labor, and environmental circles, and we have had further discussions
with the State to consider the future of the Meadowlands Sports Complex.

F-19

---

8. MORTGAGES, NOTES AND LOANS PAYABLE

Mortgages, notes and loans payable, consist of the following:

|                                                                                                                                                                                                                                                                                                                 |  | December 31,
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------
|
|The Mills Limited Partnership $75,000 unsecured revolving loaninterest payable monthly at LIBOR plus 2.75%, subject to certain leverage tests, maturing in June 2002 (with a one year extension
option).                                                                                                        |  | $           
|The Mills Limited Partnership term loaninterest payable monthly at LIBOR plus 2.25% with principal reduction of $10,000 in June 2002, and maturing June 2003.                                                                                                                                                   |  |             
|Potomac Mills/Gurnee Mills securitized bondsprincipal and interest payments based on 30-year amortization with an anticipated balloon payment in December 2003 and required maturity in 2026; weighted average interest rate of 7.02% per
annum. This loan was refinanced in February 2001.                     |  |             
|Potomac Mills/Gurnee Mills mortgage loanprincipal and interest payments based on 30-year amortization with an anticipated balloon payment in March 2011, and maturity date of March 2031; interest rate at 7.46% per annum.                                                                                     |  |             
|Franklin Mills/Liberty Plaza mortgage loanprincipal and interest payments based on 30-year amortization with an anticipated balloon payment in May 2007 and required maturity in 2027; interest rate at 7.88% per annum on $105,120, 7.44% per
annum on $19,102, and 6.22% per annum on $12,436.                |  |             
|Sawgrass Mills $285,000 financing ($185,000 mortgage loan and $100,000 mezzanine loan)interest only payments; blended interest rate of LIBOR plus 2.75%. This loan was refinanced in June 2001.                                                                                                                 |  |             
|Sawgrass Mills/The Oasis at Sawgrass mortgage loanprincipal and interest payments due monthly with a maturity date in July 2006; original loan amount was $300,000; interest rate at 7.18% per annum.                                                                                                           |  |             
|Sawgrass Mills/The Oasis at Sawgrass mezzanine loaninterest payable monthly with a maturity date in July 2006; original loan amount was $37,000; interest rate at LIBOR plus 4.50%. Interest is considered to be fixed at 7.34% through
June 2003 due to an interest rate swap on a notional amount of $37,000. |  |             
|Net Leased Properties mortgage loansprincipal and interest payments based on a 30-year amortization with maturity dates ranging from October 2010 to January 2023; weighted average interest rate of 7.78% per annum.                                                                                           |  |             
|Mainstreet Retail loanprincipal and interest payments based on a 10-year amortization maturing in July 2010; interest rate at LIBOR plus 4.25%.                                                                                                                                                                 |  |             
|Concord Mills Residual III mortgage loaninterest only payable monthly at LIBOR plus 2.25% with a maturity date of December 2002.                                                                                                                                                                                |  |             
|Other notes and loans payable.                                                                                                                                                                                                                                                                                   |  |             
|                                                                                                                                                                                                                                                                                                                 |  |             
|                                                                                                                                                                                                                                                                                                                 |  | $           
|                                                                                                                                                                                                                                                                                                                 |  |             

F-20

---

The
Company's weighted average interest rate at December 31, 2001 and 2000, was 7.23% and 8.27%, respectively, of which $941,316 and $529,740 was fixed rate debt
at December 31, 2001 and 2000, respectively. Of the Company's total consolidated debt at December 31, 2001, $10,000 is unsecured.

In
connection with the refinancing of certain debt during 2001, the Company wrote off $3,274 of unamortized loan costs and paid a prepayment penalty of $13,350. In connection with the
refinancing of certain debt during 2000, the Company wrote off $1,513 of unamortized loan costs and paid a prepayment penalty of $1,634. Such amounts are reflected as extraordinary losses on debt
extinguishments.

Certain
mortgages, notes and loans payable agreements provide for restrictive covenants relating to the maintenance of specified financial performance ratios such as minimum net worth,
debt service coverage ratio, loan to value and restriction on future dividend and distribution payments. As of December 31, 2001, the Company was in compliance with these covenants.

The
aggregate maturities of the Company's borrowings (excluding the Joint Ventures' debts) at December 31, 2001 are as follows:

2002

$
46,2512003


52,0732004


15,3072005


15,0632006


13,577Thereafter


881,623$
1,023,894


In
February 2001, the Company entered into a nonrecourse mortgage loan agreement in the amount of $355,000 secured by its interests in Potomac Mills and Gurnee Mills. The proceeds
were used to repay a prior loan totaling approximately $271,148 plus a prepayment penalty of $13,350. The remaining proceeds were used to pay down the revolving loan and to fund the Company's
development equity requirements.

In
July 2001, the Company and The Oasis at Sawgrass Joint Venture refinanced the debts on Sawgrass Mills and The Oasis at Sawgrass in the amount of $337,000. The loans are
evidenced by a mortgage loan in the amount of $300,000 and a mezzanine loan in the amount of $37,000 and are secured by the properties, the Company's ownership interests in the two properties and an
assignment of leases and rents. The net proceeds were used to repay prior loans totaling approximately $332,495.

F-21

---



9. FINANCIAL INSTRUMENTSDERIVATIVES AND HEDGING

In the normal course of business, the Company and its unconsolidated joint ventures are exposed to the effect of interest rate changes. The Company and its
unconsolidated joint ventures limit these risks by following established risk management policies and procedures including the use of a variety of derivative financial instruments to manage or hedge
interest rate risk. The Company and its unconsolidated joint ventures do not enter into derivative instruments for speculative purposes. The Company and its unconsolidated joint ventures require that
hedging derivative instruments are effective in reducing interest rate risk exposure. This effectiveness is essential for qualifying for hedge accounting. Changes in the hedging instrument's fair
value related to the effective portion of the risk being hedged are included in accumulated other comprehensive income (loss). In those cases, hedge effectiveness criteria also require that it be
probable that the underlying transaction occurs. Hedges that meet these hedging criteria are formally designated as cash flow hedges at the inception of the derivative contract. When the terms of an
underlying transaction are modified, or when the underlying hedged item ceases to exist, the change in the fair value of the derivative instrument is marked to market with the change included in net
income in each period until the derivative instrument matures. Additionally, any derivative instrument used for risk management that becomes ineffective is marked to market.

To
manage interest rate risk, the Company and its unconsolidated joint ventures may employ interest rate swaps, caps and floors, options, forwards or a combination thereof, depending on
an underlying exposure. Interest rate swaps and collars are contractual agreements between the Company or its unconsolidated joint ventures and third parties to exchange fixed and floating interest
payments periodically without the exchange of the underlying principal amounts (notional amounts). In the unlikely event that a counterparty fails to meet the terms of an interest rate swap contract
or collar agreement, the Company's exposure is limited to the interest rate differential on the notional amount. The Company does not anticipate non-performance by any of its
counterparties. Net interest differentials to be paid or received under a swap contract and/or collar agreement are included in interest expense as incurred or earned.

Interest
rate hedges that are designated as cash flow hedges, hedge the future cash outflows on debt. Interest rate swaps that convert variable payments to fixed payments, interest rate
caps, floors, collars and forwards are cash flow hedges. The unrealized gains/losses in the fair value of these hedges are
reported on the balance sheet and included in accounts payable and other liabilities or in investment in unconsolidated joint ventures (for joint venture hedges) with a corresponding adjustment to
either accumulated other comprehensive income (loss) or in earnings depending on the hedging relationship. If the hedging transaction is a cash flow hedge, then the offsetting gains/losses are
reported in accumulated other comprehensive income (loss). Over time, the unrealized gains/losses held in accumulated other comprehensive loss will be recognized in earnings consistent with when the
hedged items are recognized in earnings. Within the next twelve months the Company expects to reclassify $59 to earnings as interest expense and its unconsolidated joint ventures expect to reclassify
$7,088 to earnings as interest expense from the current balance held in accumulated other comprehensive loss, of which the Company's pro rata share is $4,249.

In
conjunction with the Company's policy to reduce interest rate risk, the Company and unconsolidated joint ventures have entered into the following interest rate swaps and collar
agreements to hedge the variability of monthly cash outflows attributable to changes in LIBOR. The collar effectively locks LIBOR within a range from 6.275% to 7.0% and the Company's swaps require the

F-22

---

Company to receive LIBOR and pay a fixed rate. The terms of the derivative instruments, a reconciliation of their fair value and adjustment to accumulated other comprehensive loss, are as follows:

|                                                          |  |   |           | Joint Ventures |  
|--------------------------------------------------------- |  | - | --------- | -------------- | -
|
|Hedge type                                                |  |   | Cash Flow |                |  
|Description                                               |  |   | Swap      |                |  
|Notional amount                                           |  | $ | 37,000    |                | $
|Interest rate                                             |  |   | 2.84%     |                |  
|Maturity date                                             |  |   | 6/7/03    |                |  
|Fair value loss from transition adjustment at 1/1/01      |  | $ |          |                | $
|Change in fair value for the year ended December 31, 2001 |  |   | (82       | )              |  
|                                                          |  |   |           |                |  
|Accumulated other comprehensive loss at December 31, 2001 |  | $ | (82       | )              | $
|                                                          |  |   |           |                |  

The
Company's pro rata share of accumulated other comprehensive loss after minority interest at December 31, 2001 was $5,107. The Company's total comprehensive income for the year
ended December 31, 2001 was $16,135.

10. LEASING ACTIVITIES

The Company has noncancellable leases with tenants with remaining terms ranging from one to 23 years and requiring monthly payments of specified minimum
rent. A majority of the leases require reimbursement by the tenant of substantially all operating expenses of the properties. Future minimum rental commitments under the noncancellable operating
leases at December 31, 2001 are as follows:

2002

$
91,0202003


82,6172004


72,0902005


61,7022006


46,620Thereafter


272,009$
626,058


These
amounts do not include percentage rents which may become receivable under certain leases on the basis of tenant sales in excess of stipulated minimums.

F-23

---

The
Company has a noncancellable operating lease for its corporate headquarters in Arlington, Virginia. The lease commenced in April 1996 for a term of ten years. Minimum rental
payments under this lease subsequent to December 31, 2001, are as follows:

2002

$
2,6542003


2,7212004


2,7882005


2,8582006


1,319$
12,340


11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosures of estimated fair value were determined by management, using available market information and appropriate valuation methodologies.
Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company
could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amounts.

Cash
equivalents, accounts and notes receivable, accounts payable and other liabilities are carried at amounts which reasonably approximate their fair values.

Fixed
rate debt with an aggregate carrying value of $941,316 and $529,740 has an estimated aggregate fair value of $953,687 and $567,800 at December 31, 2001 and 2000,
respectively. Estimated fair value of fixed rate debt is based on interest rates currently available to the Company for issuance of debt with similar terms, credit risk and remaining maturities. The
estimated fair value of the Company's variable rate debt is estimated to be approximately equal to its carrying value of $82,578 and $436,765 at December 31, 2001 and 2000, respectively.

Disclosure
about fair value of financial instruments is based on pertinent information available to management at December 31, 2001 and 2000. Although management is not aware of
any factors that would significantly affect the reasonable fair value amounts, such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since
December 31, 2001, and current estimates of fair value may differ significantly from the amounts presented herein.

12. EMPLOYEE BENEFIT PLANS

The Company has a 401(K) defined contribution benefit plan that covers all employees who are age 21 or older and have completed at least 60 days of
service. Contributions made by employees electing to participate in the plan under salary reduction agreements are recorded when paid into the plan or, alternatively, accrued if unpaid. Employer
contributions are accrued and paid into the plan periodically. Employer contributions were $1,400, $1,346 and $1,165 for the years ended December 2001, 2000 and 1999, respectively.

F-24

---

13. SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK

During April and May 2001, the Company sold 750,000 shares of series A cumulative convertible preferred stock ("Series A Preferred Stock")
totaling $75,000 in a private placement. The Series A Preferred Stock has an initial coupon of 10.5% with annual 50 basis point increase in each of the next two years, with additional increases
after the third year. The Series A Preferred Stock is convertible into the Company's common stock at a strike price of $25.00 per share. The Series A Preferred Stock is callable by the
Company after the first year at a specified premium and has no sinking fund requirements. The Series A Preferred Stock is also subject to redemption at the option of the holders of
Series A Preferred Stock upon the occurrence of specified events, at a specified premium, determined in accordance with the timing of the event triggering such redemption right. The holders of
the Series A Preferred Stock have the right to require the Company to redeem all or a portion of the Series A Preferred Stock for cash if (1) the Company ceases to qualify as a
REIT, (2) there is a change in control, as defined in the securities purchase agreement, (3) a material event of noncompliance occurs, as defined in the securities purchase agreement,
and (4) shares of the Series A Preferred Stock remain issued and outstanding after April 30, 2006. The Company contributed the proceeds to the Operating Partnership in exchange
for preferred units. The preferred units would be subject to the same terms and conditions as the Series A Preferred Stock. The net proceeds, which totaled $69,343 after discounts and expenses,
were used to pay down the Company's unsecured revolving loan and to fund the Company's development equity requirements. Due to the redemption features of the Series A Preferred Stock, the
Company has accounted for the dividends on the Series A Preferred Stock as interest expense.

In
connection with the issuance of the Series A Preferred Stock, the Company granted the holder a warrant ("Series A Warrant") to purchase the Company's common stock at
$25.00 per share. The number of common shares that become exercisable under the Series A Warrant is based on the number of shares of Series A Preferred Stock the Company repurchases upon
exercise of its call right between May 1, 2002 and November 10, 2003.

14. CAPITAL STOCK

AUTHORIZED AND OUTSTANDING CAPITAL

At December 31, 2001 and 2000, the total number of shares authorized and outstanding were as follows:

|                                          |  | December 31, 2001 |  | December 31, 2000
|----------------------------------------- |  | ----------------- |  | -----------------
|
|Common stock, $0.01 par value             |  | 100,000,000       |  | 28,462,926       
|Non-voting common stock, $0.01 par value  |  | 50,000,000        |  |                 
|Series A Preferred Stock, $0.01 par value |  | 20,000,000        |  | 750,000          

SALE OF COMMON STOCK

In August 2001, the Company sold 4,025,000 shares of common stock, par value $0.01 per share, in a public offering at a purchase price of $24.00 per share.
The net proceeds, which totaled

F-25

---

approximately $90,784, after discounts and expenses, were used to repay the outstanding indebtedness under the Company's unsecured revolving loan and will be used to fund the Company's future
development.

STOCK REPURCHASES

In September 2001, the Company announced its intention to enter into a stock repurchase program in compliance with the Emergency Order released by the
Securities and Exchange Commission on September 14, 2001. The Emergency Order permitted companies to repurchase their own securities
during the period from September 17, 2001 through October 12, 2001, without meeting certain of the volume and timing restrictions that normally would apply under the Securities Exchange
Act of 1934. On September 18, 2001, the Company paid approximately $1,102 to repurchase 50,000 shares of common stock, at $22.04 per share, which were retired. No other repurchases were made,
and the stock repurchase program has been discontinued.

EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

|                                                                            |                                                                           | Years Ended December 31,                           |       
|--------------------------------------------------------------------------- | ------------------------------------------------------------------------- | -------------------------------------------------- | ------
|
|Net income                                                                  |                                                                           | $                                                  | 21,242
|Adjustment to minority interest                                             |                                                                           |                                                    | (72   
|                                                                            |                                                                           |                                                    |       
|Numerator for basic earnings per share                                      |                                                                           |                                                    | 21,170
|Adjustment to minority interest                                             |                                                                           |                                                    | 146   
|                                                                            |                                                                           |                                                    |       
|Numerator for diluted earnings per share                                    |                                                                           | $                                                  | 21,316
|                                                                            |                                                                           |                                                    |       
|Denominator:                                                                |                                                                           |                                                    |       
|                                                                            | Weighted average shares                                                   |                                                    |       
|                                                                            | Outstanding unvested restricted stock awardsweighted average shares      |                                                    |       
|                                                                            |                                                                           |                                                    |       
|                                                                            | Denominator for basic earnings per share-adjusted weighted average shares |                                                    |       
|                                                                            | Effect of dilutive securities:                                            |                                                    |       
|                                                                            |                                                                           | Employee stock options and restricted stock awards |       
|                                                                            |                                                                           |                                                    |       
|Denominator for diluted earnings per share-adjusted weighted average shares |                                                                           |                                                    | 25,491
|                                                                            |                                                                           |                                                    |       
|Basic earnings per share                                                    |                                                                           | $                                                  | 0.85  
|                                                                            |                                                                           |                                                    |       
|Diluted earnings per share                                                  |                                                                           | $                                                  | 0.84  
|                                                                            |                                                                           |                                                    |       

MINORITY INTEREST

Assets and liabilities allocated to the limited partners (the "Minority Interest") are based on their ownership percentage of the Operating Partnership at year
end. The ownership percentage is

F-26

---

determined by dividing the number of Operating Partnership Units held by the Minority Interest at year end by the total Operating Parntership Units outstanding at year end. The Minority Interest
ownership percentage in assets and liabilities of the Operating Partnership was 37.11%, and 40.32% at December 31, 2001 and 2000, respectively.

Income
before minority interest is allocated to the limited partners based on their weighted average ownership during the year. The ownership percentage is determined by dividing the
weighted average number of Operating Partnership units held by the Minority Interest by the total weighted average number of Operating Partnership units outstanding during the year. For purposes of
this calculation, shares granted, even if not issued, in conjunction with the Company's stock incentive plan are included. For basic earnings per share, the ownership percentage is adjusted to reflect
only shares vested and issued and for dilutive earnings per share the ownership percentage is further adjusted to reflect the dilutive impact of unvested restricted stock and options.

There
were 16,797,152 and 15,827,909 limited partnership units in the Operating Partnership, as of December 31, 2001 and 2000, respectively, not held by the Company which were
outstanding and could be exchanged for shares of common stock of the Company on a one-for-one basis in specified circumstances. This exchange right has not been considered in
the computation of per share data as it does not have a dilutive effect. The common shares that may become exercisable under the Series A Warrant have not been considered in the computation of
per share data, as they are anti-dilutive for all periods presented. Certain options outstanding were not included in the computation of diluted earnings per share because the exercise
price of the options was higher than the average market price of common stock for the applicable periods or, because the conditions which must be satisfied prior to issuance of any such shares were
not achieved during the applicable periods, therefore, the effect would be anti-dilutive.

STOCK OPTION PLANS

The Company has an Executive Equity Incentive Plan ("Plan") for the purpose of attracting and retaining directors, executive officers and other key personnel of
the Company, the Operating Partnership and their subsidiaries. Pursuant to the Plan, 4,500,000 shares of common stock have been reserved for issuance of stock options and restricted stock. The options
and restricted stock are issued at a price not less than 100% of fair market value at the date of grant. The options expire 10 years from the date of grant and will contain such other terms and
conditions (including, without limitation, conditions to vesting) as may be determined by the Company's Executive Compensation Committee. In 1999, the Company adopted a broad-based 1999 Stock Option
Plan for the purpose of advancing the interests of the Company, the Operating Partnership and their subsidiaries. Pursuant to the plan, 2,000,000 shares of common stock have been reserved for issuance
of stock options and restricted stock. The options are issued at a price not less than 100% of fair market value at the date of grant, expire 10 years from the date of grant and will contain
such other terms and conditions (including, without limitation, conditions to vesting) as may be determined by the Company's Executive Compensation Committee.

F-27

---

A
summary of the Company's stock option activity, and related information for the years ended December 31, 2001, 2000 and 1999, respectively, is as follows (in thousands, except
price data):

|                                                               |  | Years Ended December 31,
|-------------------------------------------------------------- |  | ------------------------
|
|
|Outstandingbeginning of year                                  |  | 4,756                   
|Granted                                                        |  | 93                      
|Exercised                                                      |  | (438                    
|Forfeited and Expired                                          |  | (247                    
|Restricted Stock GrantsTender Offer                           |  | (878                    
|                                                               |  |                         
|Outstandingend of year                                        |  | 3,286                   
|                                                               |  |                         
|Exercisable at end of year                                     |  | 2,032                   
|Weighted average fair value of options granted during the year |  |                         

The
range of exercise prices of options outstanding at December 31, 2001 was $17.44 to $26.19. The weighted average remaining contractual life of options outstanding at
December 31, 2001 was 5.8 years.

In
November 2000, the Company commenced a tender offer to acquire all of the outstanding options with an exercise price of $23.50 or more for shares of restricted stock. In
January 2001, the Company purchased approximately 878,331 options in exchange for approximately 98,932 shares of restricted stock, which have a three-year vesting period.

Pro
forma information regarding net income and earnings per share is required by SFAS 123 which also requires that the information be determined as if the Company has accounted
for its employee stock options granted subsequent to December 31, 1994 under the fair value method of SFAS 123. The fair value for these options was estimated at the date of grant using
a Black-Scholes option pricing model with the following weighted average assumptions for 2001, 2000 and 1999, respectively: risk-free interest of 4.6%, 6.5% and 6.5%; expected life of the
option of 3.1 years, 5.5 years and 5.0 years; a dividend yield of 9.7%, 10.0% and 10.0%; and volatility factors of the expected market price of the Company's common stock of .258,
..202, and .215.

The
Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition,
option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma

F-28

---

disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows:

2001

2000

1999Pro forma income before minority interest

$
34,554

$
56,617

$
44,430Pro forma net income per sharediluted

$
0.84

$
1.45

$
1.14


RESTRICTED STOCK GRANTS

Pursuant to both the Executive Equity Incentive Plan and the 1999 Stock Option Plan, the Company grants restricted stock to its directors, officers and other key
employees. Vesting periods for restricted stock are determined by the Company's Executive Compensation Committee. As of December 31, 2001, the Company had grants of 622,506 shares of
non-vested restricted stock outstanding pursuant to such plans, which shares vest as follows:

2002

2003

2004

2005

2006212,851

184,322

133,762

76,967

14,604


An
additional 49,026 shares of stock would be issued and would vest only upon a change in control of the Company.

15. COMMITMENTS AND CONTINGENCIES

The Company is subject to the risks inherent in the ownership and operation of commercial real estate. These include, among others, the risks normally associated
with changes in the general economic climate, trends in the retail industry, including creditworthiness of retailers, competition for retailers, changes in tax laws, interest rate levels, the
availability of financing, and potential liability under environmental and other laws.

The
Company currently is neither subject to any other material litigation nor, to management's knowledge, is any material litigation currently threatened against the Company other than
routine litigation and administrative proceedings arising in the ordinary course of business.

As
of December 31, 2001, the Company had outstanding letters of credit totaling $483 which were provided to certain utility companies and The Ministry of Finance of the Province
of Ontario Canada as security for certain performance criteria.

16. TRANSACTIONS WITH AFFILIATES

MSC provides management, leasing, commissioned land sales, and related services to entities owned by partners of the Operating Partnership. Fees earned for the
years ended December 31, 2001, 2000 and 1999, were $215, $258 and $285, respectively.

In
addition, MSC provides development and leasing, financing and management services to the unconsolidated joint ventures. Fees recorded during 2001, 2000 and 1999, were $18,318, $16,824
and $13,253, respectively.

F-29

---

Interest
income earned from advances to unconsolidated joint ventures totaled $1,678, $2,510 and $713 for the years ended December 31, 2001, 2000 and 1999, respectively.

17. SUBSEQUENT EVENT

SALE OF COMMON STOCK

On February 28, 2002, the Company sold 1,818,179 shares of common stock in two concurrent offerings at an initial price of $27.50 per share. The net
proceeds of both offerings, which totaled approximately $47,016 after discounts and expenses, were used to reduce the outstanding indebtedness under the Company's unsecured revolving loan.

18. UNAUDITED QUARTERLY RESULTS OF OPERATIONS

The following is a summary of results of operations for each of the fiscal quarters during 2001 and 2000:

|                                                         |                                           | Three Months Ended,
|-------------------------------------------------------- | ----------------------------------------- | -------------------
|
|Total revenues                                           |                                           | $                  
|Income before extraordinary items and minority interests |                                           |                    
|Income before minority interests                         |                                           |                    
|Net (loss) income                                        |                                           |                    
|EARNINGS PER COMMON SHAREBASIC:                         |                                           |                    
|                                                         | Income before extraordinary items         |                    
|                                                         | Extraordinary loss on debt extinguishment |                    
|                                                         |                                           |                    
|                                                         | Net (loss) income per share               |                    
|                                                         |                                           |                    
|EARNINGS PER COMMON SHAREDILUTED:                       |                                           |                    
|                                                         | Income before extraordinary items         |                    
|                                                         | Extraordinary loss on debt extinguishment |                    
|                                                         |                                           |                    
|                                                         | Net (loss) income per share               |                    
|                                                         |                                           |                    
|Basic Common Shares                                      |                                           |                    
|Diluted Common Shares                                    |                                           |                    

F-30

---

|                                                         |                                           | Three Months Ended, |           
|-------------------------------------------------------- | ----------------------------------------- | ------------------- | ----------
|
|Total revenues                                           |                                           | $                   | 46,715    
|Income before extraordinary items and minority interests |                                           |                     | 10,203    
|Income before minority interests                         |                                           |                     | 8,690     
|Net income                                               |                                           |                     | 5,166     
|EARNINGS PER COMMON SHAREBASIC:                         |                                           |                     |           
|                                                         | Income before extraordinary items         |                     | $         
|                                                         | Extraordinary loss on debt extinguishment |                     |           
|                                                         |                                           |                     |           
|                                                         | Net income per share                      |                     | $         
|                                                         |                                           |                     |           
|EARNINGS PER COMMON SHAREDILUTED:                       |                                           |                     |           
|                                                         | Income before extraordinary items         |                     | $         
|                                                         | Extraordinary loss on debt extinguishment |                     |           
|                                                         |                                           |                     |           
|                                                         | Net income per share                      |                     | $         
|                                                         |                                           |                     |           
|Basic Common Shares                                      |                                           |                     | 23,172,940
|Diluted Common Shares                                    |                                           |                     | 23,191,770

---

F-31

---



THE MILLS CORPORATION  SCHEDULE IIIREAL ESTATE AND ACCUMULATED DEPRECIATION  DECEMBER 31, 2001

|                                                                  |                           |   |           | Initial Cost to Partnership (3) |   |         |        | Gross Amount at Which Carried
at Close of Period |         |        |   |         |         |  
|----------------------------------------------------------------- | ------------------------- | - | --------- | ------------------------------- | - | ------- | ------ | ------------------------------------------------ | ------- | ------ | - | ------- | ------- | -
|
|
|Mills                                                             |                           |   |           |                                 |   |         |        |                                                  |         |        |   |         |         |  
|                                                                  | Franklin Mills            |   | $         | 127,102                         |   | $       | 15,333 |                                                  | $       |       |   | $       | 177,794 |  
|                                                                  | Franklin Mills Residual   |   |           |                                |   |         | 4,779  |                                                  |         |       |   |         | (4,275  | )
|                                                                  | Gurnee Mills              |   |           | 164,043                         |   |         | 23,770 |                                                  |         |       |   |         | 188,575 |  
|                                                                  | Potomac Mills             |   |           | 188,895                         |   |         | 8,486  |                                                  |         |       |   |         | 163,739 |  
|                                                                  | Sawgrass Mills            |   |           | 284,018                         |   |         | 13,750 |                                                  |         |       |   |         | 172,764 |  
|                                                                  | The Oasis at Sawgrass (9) |   |           | 51,821                          |   |         | 9,417  |                                                  |         | 52,816 |   |         |        |  
|Community Centers                                                 |                           |   |           |                                 |   |         |        |                                                  |         |        |   |         |         |  
|                                                                  | Liberty Plaza             |   |           | 9,556                           |   |         | 9,335  |                                                  |         | 14,456 |   |         | 9,686   |  
|                                                                  | Concord Mills Marketplace |   |           | 13,119                          |   |         | 4,387  |                                                  |         | 691    |   |         |        |  
|Net Lease Properties                                              |                           |   | 104,000   |                                 |   | 32,938  |        |                                                  | 81,054  |        |   | 1,564   |         |  
|Construction in progress, development, and pre-construction costs |                           |   |          |                                 |   |        |        |                                                  |        |        |   | 70,702  |         |  
|Corporate                                                         |                           |   | 69,752    |                                 |   | 6,276   |        |                                                  | 2,769   |        |   | 16,995  |         |  
|Mainstreet Retail                                                 |                           |   | 11,588    |                                 |   |        |        |                                                  | 484     |        |   | 402     |         |  
|                                                                  |                           |   |           |                                 |   |         |        |                                                  |         |        |   |         |         |  
|Totals                                                            |                           | $ | 1,023,894 |                                 | $ | 128,471 |        | $                                                | 152,270 |        | $ | 797,946 |         | $
|                                                                  |                           |   |           |                                 |   |         |        |                                                  |         |        |   |         |         |  

F-32

---

THE MILLS CORPORATION  NOTES TO SCHEDULE III  December 31, 2001

| | Property Name             |  | Location                              
| | ------------------------- |  | --------------------------------------
| | MILLS:                    |  |                                       
| | Franklin Mills            |  | Philadelphia, PA                      
| | Franklin MillsResidual   |  | Philadelphia, PA                      
| | Gurnee Mills              |  | Gurnee, IL (Chicago)                  
| | Potomac Mills             |  | Woodbridge, VA (Washington, DC)       
| | Sawgrass Mills            |  | Sunrise, FL (Ft. Lauderdale)          
| | Sawgrass MillsPhase II   |  | Sunrise, FL (Ft. Lauderdale)          
| | The Oasis at Sawgrass     |  | Sunrise, FL (Ft. Lauderdale)          
| | COMMUNITY CENTERS:        |  |                                       
| | Concord Mills Marketplace |  | Concord, NC (Charlotte)               
| | Liberty Plaza             |  | Philadelphia, PA                      
| | NET LEASE PROPERTIES      |  | Various (throughout the United States)

Building and improvements

40 yearsLand improvements

20 yearsEquipment

7 yearsTenant improvements

Lesser of life of asset or life of lease


F-33

---

2001

2000

1999Balance at January 1

$
1,008,508

$
976,574

$
940,842Acquisitions


126,156


175,816


50,226Retirements/Disposed Properties


(6,085
)

(136,359
)

(2,435
)Other


(49,893
)

(7,523
)

(12,059
)Balance at December 31

$
1,078,686

$
1,008,508

$
976,574


2001

2000

1999Balance at January 1

$
222,910

$
239,484

$
214,766Additions charged to costs and expenses


26,900


26,598


25,130Acquisition


3,605





Removal of accumulated depreciation


(2,130
)

(43,172
)

(412
)Balance at December 31

$
251,285

$
222,910

$
239,484


F-34

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