Arlington, Va.-based The Mills Corp. announced late Wednesday that it will buy all of Simon Property Group’s interests in five jointly owned retail properties.

The $430 million agreement marks the end of a seven-year relationship between the two companies. In a statement, Mills CEO Larry Siegel said Mills no longer needs to rely on Simon’s clout to get the best financing terms. "Today, our successful track record speaks for itself and our capital access is very strong," Siegel said.

The move also makes sense for Simon, which recognized strong annual operating returns from the properties and now says it will triple its initial investment by selling those interests to Mills. Indianapolis-based Simon, the nation's largest owner of regional malls, said it expects to record a gain of more than $100 million on the deal.

"The sale of our interests in the Mills projects allows us to further our strategy of owning highly productive, market-dominant regional malls, consistent with our strategy of aggressively recycling capital," CEO David Simon said in a statement.

Lehman Bros. research analyst Stuart Axelrod agrees with that assessment. "From Simon’s perspective we do think it is a good deal. It highlights capital recycling and we now think that Simon can fund the Rodamco acquisition with a smaller equity rate. That’s a key part of the deal."

Simon, along with Westfield America and the Rouse Co., in January announced plans to acquire the North American mall portfolio of Dutch real estate giant Rodamco.

Axelrod noted that last month Simon sold its Orlando outlets for $73.6 million back to the Chelsea outlet company. "You see a pattern of monetizing these minority interests," he says. "Simon is allocating capital back to its core malls."

The purchase price includes $175 million in cash and the assumption of about $255 million of debt. The deal, which is expected to close within two months, includes all of the joint ventures that Simon owns in Mills properties.

Mills said it expects to enjoy a 9.1% return on the deal after a year. The buy-out includes Simon’s 25% interest in Ontario Mills in Los Angeles; 37.5% interest in Grapevine Mills in Dallas; 13.2% interest in Arizona Mills in Phoenix; 37.5% interest in Concord Mills in Charlotte, N.C.; and 37.5% interest in Arundel Mills in Baltimore.

Mills expects to pay for the cash portion of the deal with either debt or equity sources, or some combination of both. The company noted that Kan Am, a private equity source that has a partnership interest in four of the five properties, is interested in buying a portion of the Simon interests from Mills.

And Taubman Centers, which holds a 36.8% interest in Arizona Mills, plans to acquire 50% of the Simon interest in that property (13.2%), consistent with Taubman’s rights under the equity joint venture agreement, Mills noted.

-- Staff and wire reports