Mills Corp., best known for its sprawling shopping centers such as Ontario Mills mall in the Inland Empire, said federal regulators were formally investigating its accounting practices.
The Arlington, Va.-based real estate investment trust made the disclosure late Wednesday in a government filing. It said the Securities and Exchange Commission informed the company of the probe Monday, although the agency has been asking questions on an informal basis for several months.
"The company has fully cooperated, and intends to continue to fully cooperate, with the SEC," Mills said its latest SEC filing.
Mills shares fell $1.57 to $28.85 on Thursday.
They have plummeted in the last week amid a flurry of analyst downgrades and the revelation that the company was scrutinizing other areas of its accounting.
Mills announced in January that financial statements from 2000 to 2004 and the first three quarters of 2005 would be restated to fix accounting errors.
But on March 17, the company said in an SEC filing that lease accounting, cost capitalization and three other areas would also be reviewed. In the same document, the REIT announced another delay in the filing of its 2005 annual report and said it was unknown when it would file the document.
A spokesman for Mills declined to comment Thursday on the latest developments.
In another twist, Massachusetts' attorney general and treasurer filed a motion seeking to make the state the lead plaintiff in an investor class-action suit. They say the state's pension funds have suffered more than $5 million in losses because of Mills' actions.
The suit, filed Jan. 20 in U.S. District Court in Alexandria, Va., accuses Mills of defrauding investors by making false statements about its financial condition and the status of certain projects.
Mills said this year that its board had decided to explore "strategic alternatives," which might include a sale. But Bank of America analyst Ross Nussbaum said an offer seemed unlikely under the circumstances.
"As we have stated previously, we believe that in the absence of audited 2005 results, none of the potential suitors have enough information to arrive at a reasonable assessment of the value of Mills," he wrote in a research note Monday.
Last week, Citigroup analyst Jonathan Litt provided a dim view of Mills' prospects, pointing to the company's expanded accounting review and a potential liquidity crunch. "Investors should stay on the sidelines," he wrote in his note.
Mills owns 42 retail properties in the United States, Canada and Europe.