The Mills, Kan Am and Colony Capital Enter into Letter of Intent to Build and Finance Meadowlands Xanadu

The Mills Corporation (NYSE:MLS) announced today that it hassigned a non-binding letter of intent with Colony CapitalAcquisitions, LLC and Kan Am USA Management XXII Limited Partnershipunder which Colony would arrange for construction financing for theMeadowlands Xanadu development project (the "Project") and make asignificant equity infusion into the joint venture for the Projectthat currently includes The Mills and Kan Am. Meadowlands Xanadu,located in Northern New Jersey, is planned to be a unique sports,leisure, shopping and family entertainment destination.

While the recapitalized partnership will continue to have the sameobligations to the New Jersey Sports and Exposition Authority, TheMills will not have any financial obligations post closing. Kan Am hasbeen The Mills' partner on the Project since its inception in 1997.The transaction is expected to close on or prior to September 21,2006.

"Our transaction with Kan Am and Colony would allow The Mills toachieve its goals of reducing the Company's financial obligations andfacilitating our exploration of strategic alternatives. Colony is anexperienced and well respected real estate investor and itsparticipation attests to the potential long-term economic benefits ofthe Meadowlands Xanadu development. This transaction, when completed,will enable the realization of Meadowlands Xanadu for the people ofNew Jersey and the metropolitan area. The Mills will continue toexplore strategic alternatives and to take aggressive actions in theinterests of enhancing value for its shareholders," said Larry Siegel,Chairman and Chief Executive Officer of The Mills.

"We are happy to be working with Colony. We believe they share ourcommitment to this unique entertainment and retail destination. Wecontinue to believe that, upon completion, Meadowlands Xanadu will bea world class project," said Kan Am President James Braithwaite.

"This is the culmination of our long-standing relationship withsenior management of The Mills Corporation and Kan Am. We are thrilledto be joining the Meadowlands Xanadu partnership and look forward tothe completion and success of this landmark entertainment and retaildevelopment project," said Richard Saltzman, President of ColonyCapital.

As consideration for the transaction, The Mills would issue atclosing, at its election, either 4,500,000 shares of The Mills commonstock or 4,500,000 units of The Mills Limited Partnership, redeemablefor the same number of shares of The Mills common stock. The Millswould also provide resale registration rights with respect to suchshares of common stock. The shares or units would be allocated betweenColony and Kan Am as they determine (but Kan Am would not receive morethan 1% of the outstanding shares of TMC common stock).

In addition, upon consummation of the transaction, The Mills wouldbecome a limited partner in the Project with a total partner capitalaccount of approximately $485 million, which includes incrementalproject funding of $90 million from July 31, 2006, to be funded underThe Mills' existing term loan. Colony is anticipated to provide up to$500 million of equity financing and arrange for construction loanfinancing that will fund the remaining balance of the expected $2billion of total project costs. In addition to Colony's and The Mills'investments, Kan Am's current partner capital account is $342 million.Furthermore, Mack-Cali Realty Corporation has invested an additional$32.5 million in the Project through a separate partnership. Thearrangement contemplates that Colony and Kan Am would be entitled tocertain specified preferred returns on their capital that will resultin substantial accruals senior to The Mills' capital investment. As aresult, it is unlikely that The Mills will be able to recoup any ofits invested capital unless and until the Project has been completedand stabilized and one or more significant capital events hasoccurred.

Certain obligations under the letter of intent are legallybinding, including that The Mills, Colony and Kan Am are obligated tonegotiate in good faith the terms of the transactions in a mannerconsistent with the terms set forth in the letter of intent and usecommercially reasonable efforts to consummate the transactions bySeptember 21, 2006, and that, until then, Colony will have theexclusive right to negotiate and endeavor to close the transactionwith The Mills and Kan Am (without prejudice to The Mills continuingits exploration of strategic alternatives with respect to all orsubstantially all of The Mills and its subsidiaries). The Mills willalso be required in certain circumstances to reimburse Colony forlegal and due diligence costs up to a cap of $4 million. In addition,in certain circumstances where Colony stands ready to proceed underthe letter of intent but the transaction does not proceed, The Millswill be required to pay Colony a termination fee of up to $25 million.

Colony's obligations under the transaction are subject to, amongother things, its completion of due diligence and its obtaining ofconstruction financing for the Project on terms satisfactory to thepartners. The transactions contemplated by the letter of intent aresubject to the approval of lenders under The Mills' term loan withGoldman Sachs as administrative agent. Under certain conditions afterclosing, Colony would have the right to appoint a director to TheMills Corporation's Board of Directors.

The Mills has not yet completed its review of the impact of thistransaction on its financial statements. However, The Mills willrecord a charge relating to the issuance of the 4,500,000 units orshares during the quarter in which the closing occurs in an amountequal to the value of such units or shares. In addition, The Millscurrently expects to record an impairment charge during the quarter inwhich the closing occurs on its $485 million partner capital account.The amount of the expected impairment charge will be determined afterThe Mills has completed its analysis of the transaction. Otherfinancial statement impacts include the possible de-consolidation ofThe Mills' investment in the Project.

There can be no assurance that the conditions to the transactionscontemplated by the letter of intent will be satisfied or that thosetransactions will be completed or, if completed, that The Mills willrecover its invested capital.

About The Mills Corporation

The Mills Corporation, based in Chevy Chase, MD, is a developer,owner and manager of a diversified global portfolio of retaildestinations including regional shopping malls, market dominant retailand entertainment centers, and international retail and leisuredestinations. It currently owns 42 properties in the U.S., Canada andEurope, totaling 51 million square feet. In addition, The Mills hasvarious projects in development, redevelopment or under construction.The Mills is traded on the New York Stock Exchange under the ticker:MLS. For more information, visit the Company's website atwww.themills.com.

About Colony Capital

Founded in 1991 by Chairman and Chief Executive Officer Thomas J.Barrack Jr., Colony is a private, international investment firmfocusing primarily on real estate-related assets, securities andoperating companies. The firm has invested approximately $20 billionin over 8,000 assets through various corporate, portfolio and complexproperty transactions. Colony has a staff of more than 160 and isheadquartered in Los Angeles, with offices in Beirut, Boston, Hawaii,Hong Kong, London, Madrid, New York, Paris, Rome, Seoul, Shanghai,Taipei, and Tokyo. For more information visit www.colonyinc.com.

About Kan Am

Kan Am is one of Germany's leading private syndicators and assetmanagers of international real estate investments. Since its inceptionin 1978 the group has invested and managed a portfolio valued atapproximately $10 billion in the US and Europe on behalf of privateand institutional investors through publicly offered real estate fundsand private placements. Since 1994, Kan Am has invested approximately$1 billion in equity in various projects with The Mills. Kan Amcurrently has three representatives on The Mills' Board of Directors:James Braithwaite, Dietrich von Boetticher and Franz von Perfall.

Statements in this press release that are not historical -including, among other things, as to The Mills' completion of thetransaction with Colony and Kan Am relating to The Mills' Meadowlandsdevelopment project subject to the parties' letter of intent, on theexpected terms or in the expected time frames or at all, the consentof The Mills' lenders to the transaction, the financial implicationsof the transaction, the ability of The Mills' to recover its investedcapital and the exploration of strategic alternatives - may be deemedforward-looking statements within the meaning of the federalsecurities laws. Although The Mills believes the expectationsreflected in any forward-looking statements are based on reasonableassumptions, The Mills can give no assurance that its expectationswill be attained and it is possible that our actual circumstances andresults may differ materially from those indicated by theseforward-looking statements due to a variety of risks anduncertainties, including The Mills' ability to obtain the necessaryconsents from The Mills' lenders and The Mills' and the other parties'ability to satisfy the other conditions to closing the transactionsubject to the letter of intent. The Mills undertakes no obligation topublicly update or revise any forward-looking statements, whether as aresult of new information, future events or otherwise. The reader isdirected to The Mills' various filings with the SEC, includingquarterly reports on Form 10-Q, reports on Form 8-K and its annualreports on Form 10-K, for a discussion of such risks anduncertainties.