Feldman Mall Properties (NYSE:FMP)
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In the news release, Feldman Mall Properties, Inc. (NYSE: FMP) Reports First Quarter 2008 Financial Results, issued earlier today by Feldman Mall Properties, Inc. over PR Newswire, we are advised by a representative of the company that the percentage in the fourth column, first row, under the heading "% of Total Sq. Ft. Expiring" in the table "OPERATING STATISTICS" should read "3.4%" rather than "93.4%" as originally issued inadvertently. Complete, corrected release follows:
GREAT NECK, N.Y., May 22 /PRNewswire-FirstCall/ --
RELEASE HIGHLIGHTS
-- 1st quarter FFO was $(0.09) per diluted share as compared to $0.20 per
diluted share in the 1st quarter of 2007
-- Three new directors were appointed recently to the Board and a fourth
is nominated for election
FINANCIAL RESULTS
Feldman Mall Properties, Inc. (NYSE:FMP) today reported Funds From Operations ("FFO") totaling $(1.33) million, or $(0.09) per diluted share, for the first quarter ended March 31, 2008 as compared to $2.97 million, or $0.20 per diluted share for the three months ended March 31, 2007. The Company's net loss for the three months ended March 31, 2008 was $5.0 million, or $(0.39) per share, as compared to a net loss of $0.9 million, or $(0.07) per diluted share for the first quarter ended March 31, 2007. As summarized in the table below, the Company's first quarter 2007 period results include a non-cash reduction in the Company's earnout obligation due to affiliates included in miscellaneous income in the amount of $2.3 million. The Company had 14.4 and 14.5 million weighted average common shares and operating partnership units outstanding during the quarters ended March 31, 2008 and 2007, respectively.
The following items represent variances in income and expense that impacted the Company's FFO results for the first quarter 2008 compared to the prior year period (in millions):
Three Months Ended
March 31, 2008
(unaudited)
Property Level Net Operating Income ("NOI"):
Rental revenue $0.3
Higher operating expenses (0.2)
Same store NOI variance (1) 0.1
G&A Expense:
Restructuring expense (0.4)
Other G&A expense (2) 0.2
Total G&A variance (0.2)
Other:
Change in fair value of Harrisburg
earnout liability(3) (2.3)
Other income and expense, net 0.1
Preferred stock dividends (0.8)
Decrease in FFO allocated to common stockholders $(4.3)
(1) The increase in NOI for properties that were wholly-owned during both
the three months ended March 31, 2008 and 2007 periods was due to (i)
higher rental revenues ($0.3 million) primarily due to rental revenue
associated with the theater at the Stratford Square Mall and (ii)
higher operating expenses ($0.2 million) primarily due to higher
provision for bad debts ($0.3 million) and snow removal ($0.1
million) which were offset by a decrease in utilities ($0.1 million)
and various other rental property operating and maintenance expenses
($0.1 million).
(2) Other expenses for the three months ended March 31, 2008 increased
$0.2 million primarily due to (i) third-party construction management
expenses ($0.3 million), and (ii) restructuring costs related to the
closing of the Phoenix office ($0.4 million); offset by a decrease in
consulting, Sarbanes-Oxley related and other professional fees ($0.5
million).
(3) The first quarter 2007 period results include a $2.3 million non-cash
reduction in the Company's earnout obligation due to affiliates
included in miscellaneous income.
OTHER
New Board Members and Board Nominees
The Company recently welcomed three additional board members who will provide additional insight and business counsel.
FMP announced that Inland American Real Estate Trust, Inc., a public non- listed real estate investment trust sponsored by an affiliated of the Inland Real Estate Group of Companies and the holder of 2,000,000 shares of 6.85% Contingently Convertible Series A Preferred Stock (the "Series A Preferred Stock") of the Company ("Inland American"), elected Thomas H. McAuley and Thomas McGuinness to serve as directors of the Company, pursuant to the terms of the Articles Supplementary relating to the Series A Preferred Stock. Messrs. McAuley and McGuinness are not expected to join any committees of the board of directors of the Company and are not required to stand for election as directors of the Company at its 2008 annual meeting of stockholders.
FMP's board of directors elected Wendy Luscombe to serve as a director of the Company effective May 12, 2008. Ms. Luscombe fills the vacancy created by James C. Bourg, who did not stand for re-election as a director at the Company's 2007 annual meeting of stockholders. Ms. Luscombe will become a member of the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee of the Company. Ms. Luscombe will be standing for election as a director of the Company at its 2008 annual meeting of stockholders.
In addition, the Company nominated Jim Sight as an additional board member. Jim currently serves as a director of LSB Industries, a company listed on the American Stock Exchange. From 1995 to 2006, Mr. Sight has been a consultant at Westmoreland Coal and was active in its reorganization efforts. From 2001 to 2005, Mr. Sight served as a director of Programmers Paradise, a NASDAQ listed computer and software merchant. Prior to serving on the Board of Programmers Paradise, Mr. Sight also served as a director at various public companies, including Nevada Chemicals and U.S. Home Corporation. Mr. Sight holds a B.S. in Finance from the University of Pennsylvania Wharton School Of Economics. Mr. Sight is standing for election as a director of the Company at its 2008 annual meeting of stockholders.
CONFERENCE CALL
The Company's executive management team will host a conference call and audio web cast on May 22, 2008 at 2:00 PM EDT to discuss the financial results. The conference call may be accessed by dialing (800) 257-1836. No pass code is required. The live conference will be simultaneously broadcast in a listen-only mode on the Company's website at http://www.feldmanmall.com/.
On the conference call, among other items, we will be discussing:
1. Current Liquidity Outlook
2. Property-level performance
3. A Harrisburg Mall update on the maturity of our mortgage loan,
partnership disputes and tenant negotiations
4. An update on negotiations related to our hard cost guarantee at
Colonie Center
5. The status of our debt covenants
A replay of the call will be available through May 29, 2008 by dialing (800) 405-2236 using passcode 11114866, or individuals may access the replay via the Company's web site.
NON-GAAP FINANCIAL MEASURES
Feldman Mall Properties, Inc., consistent with real estate industry and investment community preferences, uses FFO as a supplemental measure of operating performance. The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income (loss) (computed in accordance with Generally Accepted Accounting Principles (GAAP)), excluding gains (or losses) from cumulative effects of accounting changes, extraordinary items and sales of depreciable properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures.
The Company considers FFO a supplemental measure for equity REITs and a complement to GAAP measures because it facilitates an understanding of the operating performance of the Company's properties. FFO does not give effect to real estate depreciation and amortization since these amounts are computed to allocate the cost of a property over its useful life. Since values for well-maintained real estate assets have historically increased or decreased based upon prevailing market conditions, the Company believes that FFO provides investors with a clearer view of the Company's operating performance.
In order to provide a better understanding of the relationship with FFO and GAAP net income, a reconciliation of FFO to GAAP net income has been provided on page 10 of this release. FFO does not represent cash flow from operating activities in accordance with GAAP, should not be considered as an alternative to GAAP net income and is not necessarily indicative of cash available to fund cash needs.
During the May 22, 2008 conference call, the Company may discuss non-GAAP financial measures as defined by SEC Regulation G. In addition, the Company has used a non-GAAP financial measure and the comparable GAAP financial measure (net income/loss) can be found on pages 8 and 10 of this release.
*Financial Tables Attached
About Feldman Mall Properties
Feldman Mall Properties, Inc. acquires, renovates and repositions enclosed regional shopping malls. Feldman Mall Properties Inc.'s investment strategy is to opportunistically acquire underperforming malls and transform them into physically attractive and profitable Class A malls or near Class A through comprehensive renovation and re-tenanting efforts aimed at increasing shopper traffic and tenant sales.
The Company's portfolio, including non-owned anchor tenants, consists of seven regional malls aggregating approximately 7.0 million square feet of which the Company owns approximately 4.1 million square feet. For more information on Feldman Mall Properties Inc., visit the Company's website at http://www.feldmanmall.com/.
To receive the Company's latest news release and other corporate documents, please contact the Company at (516) 684-1239. All releases and supplemental data can also be downloaded directly from the Feldman Mall Properties website at: http://www.feldmanmall.com/.
Forward-looking Information
This press release contains forward-looking statements that involve risks and uncertainties regarding various matters, including, without limitation, the success of our business strategy, including our acquisition, renovation and repositioning plans; our ability to close pending acquisitions and the timing of those acquisitions; our ability to obtain required financing; our understanding of our competition; market trends; our ability to implement our repositioning plans on time and within our budgets; projected capital and renovation expenditures; demand for shop space and the success of our lease-up plans; availability and creditworthiness of current and prospective tenants; and lease rates and terms. The forward-looking statements are based on our assumptions and current expectations of future performance. These assumptions and expectations may be inaccurate or may change as a result of many possible events or factors, not all of which are known to us. If there is any inaccuracy or change, actual results may vary materially from our forward- looking statements.
FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
March 31, December 31,
2008 2007
(Unaudited)
ASSETS:
Investments in real estate, net $343,682 $342,897
Investment in unconsolidated real estate
partnerships 47,449 43,683
Cash and cash equivalents 15,605 27,976
Restricted cash 19,217 20,395
Rents, deferred rents and other receivables, net 5,332 5,545
Acquired below-market ground lease, net 7,503 7,538
Acquired lease rights, net 6,856 7,281
Acquired in-place lease values, net 5,978 6,437
Deferred charges, net 3,140 3,394
Other assets, net 3,463 4,048
Total Assets $458,225 $469,194
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities
Mortgage loans payable $231,652 $232,878
Junior subordinated debt obligations 29,380 29,380
Secured line of credit 17,500 17,500
Accounts payable, accrued expenses and other
liabilities 25,696 27,211
Dividends and distributions payable 854 568
Acquired lease obligations, net 4,641 5,136
Deferred gain on partial sale of real estate 3,515 3,515
Negative carrying value of investment in
unconsolidated partnership 4,450 4,450
Total liabilities 317,688 320,638
Minority interest 9,137 9,677
Commitments and contingencies
Stockholders' Equity
Series A 6.85% Cumulative Convertible Preferred
Stock; 50,000,000 shares authorized;
2,000,000 shares issued and outstanding at
March 31, 2008 and December 31, 2007; $25.00
liquidation preference 49,580 49,580
Common stock ($0.01 par value, 200,000,000
shares authorized, 13,001,537 and 13,018,831
issued and outstanding at March 31, 2008 and
December 31, 2007, respectively) 130 130
Additional paid-in capital 120,732 120,542
Distributions in excess of earnings (32,670) (27,712)
Accumulated other comprehensive loss (6,372) (3,661)
Total stockholders' equity 131,400 138,879
Total Liabilities and Stockholders' Equity $458,225 $469,194
FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
Three Months Ended
March 31,
2008 2007
(Unaudited)
Revenue:
Rental $7,991 $7,709
Tenant reimbursements 3,629 3,580
Management, leasing and development services 964 823
Interest and other income 249 2,648
Total revenue 12,833 14,760
Expenses:
Rental property operating and maintenance 4,566 4,331
Real estate taxes 1,487 1,578
Interest (including amortization of deferred
financing costs) 4,207 3,111
Depreciation and amortization 3,485 3,405
General and administrative 3,162 2,937
Total expenses 16,907 15,362
Equity in loss of unconsolidated real estate
partnerships (579) (355)
Loss before minority interest (4,653) (957)
Minority interest 540 93
Net loss (4,113) (864)
Less preferred stock dividends, net of
minority interest (854) -
Net loss available to common shareholders'
basic $(4,967) $(864)
Basic and diluted loss per share $(0.39) $(0.07)
Funds From Operations (FFO) Calculation
- unaudited:
Net loss available to common shareholders $(4,967) $(864)
Add:
Depreciation and amortization 3,485 3,405
Joint venture FFO adjustment 819 625
Minority interest (540) (93)
Less:
Depreciation of non-real estate assets (131) (108)
FFO, diluted $(1,334) $2,965
FFO per share $(0.09) $0.20
Ownership interests:
Weighted average REIT common shares for basic
net loss per share 12,892 12,857
Weighted average common stock equivalents and
partnership units 1,527 1,671
Weighted average shares and units outstanding 14,419 14,528
Stages of Project Redevelopment
We believe that a typical mall redevelopment project cycles through a five stage process. Stage one involves acquisition and planning. In this stage, if a mall is underperforming, we would expect its net operating income generally to be declining as new leasing and development opportunities are identified. Stage two involves preliminary redevelopment, which encompasses final financial analysis, architectural and engineering input, and the estimate of project and capital needs. During this stage, we expect further declines in net operating income as some existing tenants are relocated/terminated or converted to percentage rent leases. Stage three is the commencement of construction activity, primary leasing activity, which may include junior anchors and national tenants, and the completion of required financing. During this stage, we anticipate that net operating income will usually begin to stabilize. Stage four is the completion of development and delivery of space to junior and national tenants and the commencement of the leasing of the remainder of shop tenant space. During this stage, we anticipate net operating income will begin to increase. In the final stage, the renovation is completed and the project reaches the objective of 92% overall occupancy.
Our properties are in various stages of the redevelopment process. There has been no change since our last press release and those stages are as follow:
Stages of Development
Stage Property
1 Tallahassee Mall and Golden Triangle Mall
2 Northgate Mall
3 Stratford Square Mall
4 Colonie Center and Harrisburg Mall
5 Foothills Mall
FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL PROPERTY LEVEL NET OPERATING INCOME INFORMATION
UNAUDITED
(All dollar amounts in thousands)
Three Months Ended Vacant Shop Space
March 31, March 31, 2008
2008 2007 (Square feet)
Wholly-owned Cash NOI(1) (Unaudited)
Stratford Square Mall $2,081 $1,681 127,104
Northgate Mall 1,757 1,755 103,005
Tallahassee Mall 1,110 1,197 47,736
Golden Triangle Mall 629 642 48,222
Total Wholly-Owned Cash NOI $5,577 $5,275 326,067
Total Joint Venture Cash NOI(2) $1,194 $955 239,964
(1) Wholly-owned cash NOI excludes management fee expense and recurring
capital improvements.
(2) Represents our pro-rata share of the cash NOI generated by our
unconsolidated joint ventures.
(3) The Company measures the net operating income for its properties.
The Company believes that net operating income is commonly used in
the real estate industry to measure the operating performance of a
stabilized property. In addition, in a capitalization rate analysis,
which is one of the valuation methodologies that is commonly deployed
in the real estate industry to measure the value of a stabilized
property, value is estimated by multiplying the annual net operating
income of that property over a specific period by a selected
capitalization rate. Net operating income is a supplemental measure
of performance that does not give effect to real estate depreciation
and amortization nor to any general and administrative expenses of
the Company. In order to provide a better understanding of the
relationship with net operating income and GAAP net income,
reconciliation is provided below. Net operating income does not
represent cash flow from operating activities in accordance with
GAAP, and should not be considered as an alternative to GAAP net
income.
Three Months Ended
(All dollar amounts in thousands) March 31,
2008 2007
(Unaudited)
Loss before minority interest $(4,653) $(957)
Add:
Equity in loss of unconsolidated real estate
partnerships 579 355
Interest (including amortization of deferred
financing costs) 4,207 3,111
Depreciation and amortization 3,485 3,405
General and administrative 3,162 2,937
Less:
Management, leasing and development services 964 823
Interest and other income 249 2,648
GAAP Net Operating Income ("NOI") 5,567 5,380
GAAP NOI Adjustments (1) 10 (105)
Cash NOI $5,577 $5,275
(1) Primarily related to straight-line rents and capitalized costs.
FELDMAN MALL PROPERTIES, INC.
OPERATING STATISTICS
UNAUDITED
March 31, 2008
Property Total Rentable
(Ownership Square Square Mall
Interest) Feet Feet Occupancy
Stratford Square (100%) 1,300,000 629,000 94.8%
Tallahassee Mall (100%) 966,000 966,000 70.5
Northgate Mall (100%) 1,100,000 577,000 91.3
Golden Triangle Mall (100%) 765,000 288,000 97.6
Foothills Mall (30.6%) 711,000 502,000 97.4
Colonie Center Mall (25%) 1,200,000 668,000 88.5
Harrisburg Mall (25%) 922,000 922,000 88.7
Total/Weighted Avg. 6,964,000 4,552,000 89.6%
Shop
Shop Shop Tenant
Property Annualized Tenant Tenants Base Rent
(Ownership Base Square Percentage Per Leased
Interest) Rent(B) Feet Leased(A) Sq. Ft.
Stratford Square (100%) $8,779,718 384,000 66.90% $24.52
Tallahassee Mall (100%) 6,671,807 204,000 76.6 23.46
Northgate Mall (100%) 7,116,483 315,000 67.3 24.83
Golden Triangle Mall(100%) 2,934,665 171,000 71.8 20.50
Foothills Mall (30.6%) 7,989,076 230,000 86.2 21.33
Colonie Center Mall(25%) 7,472,916 336,000 76.6 26.45
Harrisburg Mall(25%) 6,089,423 270,000 52.0 24.61
Total/Weighted Avg. $47,054,088 1,910,000 70.3% $23.41
(A) - Excludes temporary tenants
(B) - Based on in-place rents as of March 31, 2008
Lease Number of Expiring % of Total
Expiration Expiring Rentable Sq. Ft.
Year Leases Area Expiring
2008 73 118,456 3.4%
2009 77 202,482 5.8
2010 70 186,360 5.3
2011 68 271,196 7.8
2012 49 309,298 8.8
2013 38 333,330 9.5
2014 34 305,197 8.7
2015 21 83,551 2.4
2016 and thereafter 81 1,688,444 48.3
Portfolio Total 511 3,498,314 100.0%
Lease Expiring Annualized Expiring
Expiration Base Base % of Total Base Rent
Year Rent Rent(B) Base Rent Per Sq. Ft.
2008 $269,925 $3,239,052 6.9% $27.34
2009 333,951 4,007,391 8.5 19.79
2010 350,118 4,201,371 8.9 22.54
2011 437,329 5,247,957 11.2 19.35
2012 332,033 3,984,367 8.5 12.88
2013 347,763 4,173,097 8.9 12.52
2014 367,126 4,405,513 9.4 14.43
2015 139,836 1,678,042 3.6 20.08
2016 and thereafter 1,343,114 16,117,298 34.3 9.55
Portfolio Total $3,921,195 $47,054,088 100.0% $13.45
Sales Per Square Foot
Trailing Twelve Months Ending
03/31/2008 12/31/2007 9/30/2007 6/30/2007 3/31/2007
Stratford
Square Mall $282.79 $285.38 $284.71 $286.93 $288.77
Tallahassee
Mall 319.13 304.69 315.13 325.00 327.45
Northgate
Mall 307.76 313.01 323.48 317.56 320.38
Golden
Triangle
Mall 288.20 290.35 292.96 293.02 295.70
Foothills
Mall 296.56 301.56 302.79 308.47 310.35
Colonie
Center Mall 320.70 322.77 305.31 303.43 303.33
Harrisburg
Mall 262.80 275.28 269.73 270.44 269.92
Total/
Weighted
Average $298.65 $299.01 $299.16 $300.69 $302.27
Shop Occupancy with Temporary Tenants
Trailing Twelve Months Ending
03/31/2008 12/31/2007 9/30/2007 6/30/2007 3/31/2007
Stratford Square
Mall 83.00% 85.42% 87.44% 82.74% 83.19%
Tallahassee
Mall 91.81 90.63 85.45 85.98 86.61
Northgate
Mall 82.00 87.84 85.50 84.26 84.26
Golden Triangle
Mall 92.49 94.61 87.90 91.76 95.26
Foothills Mall 91.38 99.28 93.89 91.80 92.71
Colonie Center
Mall 84.83 89.74 87.90 87.10 87.18
Harrisburg
Mall 66.82 77.43 77.88 77.03 80.72
Total/Weighted
Average 83.64% 89.28% 85.12% 84.38% 87.13%
DATASOURCE: Feldman Mall Properties, Inc.