2007
Dial in: (800) 218-4007 or go to http://www.feldmanmall.com
GREAT NECK, N.Y., Dec. 21 /-/ --
RELEASE HIGHLIGHT
-- 3rd quarter FFO was $0.04 per diluted share as compared to $0.21 per
diluted share in the 3rd quarter of 2006.
Financial Results
Feldman Mall Properties, Inc. (NYSE: FMP) today reported Funds From Operations ("FFO") totaling $0.6 million, or $0.04 per diluted share, for the third quarter ended September 30, 2007 as compared to $3.0 million, or $0.21 per diluted share for the three months ended September 30, 2006. The Company's net loss for the three months ended September 30, 2007 was $3.1 million, or $0.26 per share, as compared to a net loss of $1.8 million, or $0.14 per diluted share for the third quarter of 2006. The Company had 14.5 and 14.7 million weighted average common shares and operating partnership units outstanding during the third quarters ended September 30, 2007 and 2006, respectively.
Third quarter results were negatively impacted by a number of non-recurring expenses, including professional fees, incurred in connection with the strategic alternatives process. Management believes that these non-recurring expenses will also impact the fourth quarter. The sale of joint venture interests in the Foothills Mall and Colonie Center during the second and third quarters of 2006, respectively, while having a negative impact on year-over-year comparisons from an operating income standpoint (as per the chart below), generated $80.3 million in cash proceeds. The Company has redeployed those proceeds into capital expenditures for the redevelopment of its existing mall properties and believes that continued redevelopment of its malls will lead to increased shop lease-up, increased shopper traffic and consequently stronger revenues. Third quarter results were positively impacted by a non-cash reduction in an obligation to affiliates totaling $1.6 million.
The following items represent variances in income and expense that impacted the Company's FFO results for the periods indicated compared to the prior year periods (in millions):
September 30, 2007
Three Nine
Months Months
Property Level Net Operating Income ("NOI"):
Higher rental revenue $ 1.1 $ 0.7
Higher operating expenses (0.8) (2.2)
Same store NOI variance (1) 0.3 (1.5)
G&A Expense:
Executive severance (non-recurring) - (0.6)
Strategic alternative costs (non-recurring) (0.3) (0.7)
Other G&A expense (2) (1.5) (4.0)
Total G&A variance (1.8) (5.3)
Effect of Sale to JVs: Colonie & Foothills:
Net operating income (1.6) (7.8)
Decrease in interest expense 0.6 3.5
Increase in management, leasing and
development fee income 0.9 2.4
Total effect of sale to joint ventures (0.1) (1.9)
Other:
Three months Golden Triangle Mall NOI
(acquired 4/06) - 0.7
Decrease in Harrisburg earnout liability 0.4 2.8
Increase in interest expense (0.8) (1.1)
Other income and expense, net (0.2) (0.5)
Preferred stock dividends (0.2) (0.4)
Decrease in FFO allocated to common
stockholders $ (2.4) $ (7.2)
(1) The increase in NOI for properties that were wholly-owned during both
the three months ended September 30, 2007 and 2006 periods was due to
(i) higher revenue ($1.1 million) primarily due to the opening of a
theater at the Stratford Square Mall, offset by (ii) higher operating
expenses ($0.8 million) primarily due to higher salary, wages,
provision for bad debt and professional fees.
(2) Other expenses for the three months ended September 30, 2007 increased
$1.5 million due to (i) higher professional fees, SOX-related fees,
and construction management expense ($1.1 million), (ii) costs
associated with special construction audits and lease audits ($0.2
million) and (iii) higher personnel costs ($0.2 million).
For the nine months ended September 30, 2007, FFO totaled $1.9 million, or $0.13 per diluted share as compared to $9.1 million, or $0.62 per diluted share for the nine months ended September 30, 2006. The Company's net loss for the nine months ended September 30, 2007 was $8.9 million, or $0.73 per share, as compared to net income of $21.2 million, or $1.62 per diluted share for the nine months ended September 30, 2006. The 2007 periods include non-cash reductions in the Company's earnout obligation due to affiliates, included in miscellaneous income in the first quarter in the amount of $2.3 million and in the third quarter in the amount of $1.6 million. The Company had 14.5 and 14.7 million weighted average common shares and operating partnership units outstanding during the nine months ended September 30, 2007 and 2006, respectively.
OTHER
Management Changes
The Company is concentrating on expense reduction both at the property and corporate levels and has initiated programs including outsourcing to achieve certain economies of scale. In conjunction with the Company's continuing efforts to restructure, the Phoenix office will be closed except for a minimal leasing staff. In addition, Executive Vice President and Chief Operating Officer and Director, James Bourg, announced that he will be leaving the Company. The Company anticipates that Mr. Bourg's departure and the closure of the Phoenix office will take place during the second quarter of 2008. In connection with Mr. Bourg's departure, the Company will incur a one-time severance charge of approximately $1.3 million that will be incurred in the fourth quarter of 2007.
Strategic Alternatives
On June 5, 2007, the Company announced that it retained Friedman, Billings, Ramsey & Co., Inc. to assist the Company in exploring strategic alternatives in order to enhance shareholder value. These strategic alternatives included the raising of capital through the sale of assets of the Company, joint ventures or strategic partnerships, selective acquisitions or dispositions, and the combination, sale or merger of the Company with another entity. While the Company remains committed to exploring strategic alternatives, it does not believe that a sale, merger or other strategic alternative is imminent under the current market conditions. During the Company's third quarter conference call management will update investors on the strategic alternative process.
CONFERENCE CALL
The Company's executive management team will host a conference call and audio web cast on December 21, 2007 at 1:00 PM EST to discuss the financial results. The conference call may be accessed by dialing (800) 218-4007. 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.
A replay of the call will be available through December 28, 2007 by dialing (800) 405-2236 using pass code 11105154, 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 7 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 December 21, 2007 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 page 7 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 through comprehensive renovation and re-tenanting efforts aimed at increasing shopper traffic and tenant sales. For more information on Feldman Mall Properties Inc., visit the Company's website at http://www.feldmanmall.com.
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.
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)
September December
30, 2007 31, 2006
(Unaudited)
ASSETS:
Investments in real estate, net $ 342,288 $ 318,440
Investment in unconsolidated real estate
partnerships 37,931 32,833
Cash and cash equivalents 1,804 13,036
Restricted cash 21,136 8,159
Rents, deferred rents and other receivables,
net 7,090 5,718
Acquired below-market ground lease, net 7,572 7,674
Acquired lease rights, net 7,753 9,262
Acquired in-place lease values, net 7,030 10,049
Deferred charges, net 4,029 3,284
Other assets, net 4,507 5,396
Total Assets $ 441,140 $ 413,851
LIABILITIES AND STOCKHOLDERS' EQUITY:
Mortgage loans payable $ 234,099 $ 211,451
Junior subordinated debt obligation 29,380 29,380
Secured line of credit 17,000 -
Due to affiliates - 3,891
Accounts payable, accrued expenses and other
liabilities 22,366 25,832
Dividends and distributions payable 259 3,315
Acquired lease obligations, net 5,458 6,823
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 316,527 288,657
Minority interest 10,409 11,649
Commitments and contingencies
Stockholders' Equity
Series A 6.85% Cumulative Convertible
Preferred Stock; 2,000,000 shares
authorized; 600,000 shares issued and
outstanding; $25.00 liquidation
preference 14,580 -
Common stock ($0.01 par value, 200,000,000
shares authorized, 13,034,331 and 13,155,062
issued and outstanding at September 30, 2007
and December 31, 2006, respectively) 130 132
Additional paid-in capital 120,562 120,163
Distributions in excess of earnings (19,827) (7,637)
Accumulated other comprehensive income (loss) (1,241) 887
Total stockholders' equity 114,204 113,545
Total Liabilities and Stockholders' Equity $ 441,140 $ 413,851
FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Revenue:
Rental $ 7,898 $ 9,643 $ 23,294 $ 32,120
Tenant reimbursements 3,596 4,030 10,593 15,695
Management, leasing and
development services 1,094 183 2,792 440
Interest and other income 2,285 1,532 5,390 2,301
Total revenue 14,873 15,388 42,069 50,556
Expenses:
Rental property operating
and maintenance 4,595 5,023 13,388 16,248
Real estate taxes 1,516 1,661 4,557 6,231
Interest (including
amortization of deferred
financing costs) 4,114 3,880 10,754 13,183
Loss from early extinguishment
of debt - - 379 357
Depreciation and amortization 3,826 3,892 10,682 13,839
General and administrative 3,754 1,973 10,993 5,654
Total expenses 17,805 16,429 50,753 55,512
Equity in loss of
unconsolidated real estate
partnerships (508) (370) (1,163) (654)
(Loss) gain on partial sale of
real estate - (571) - 29,397
(Loss) income before minority
interest (3,440) (1,982) (9,847) 23,787
Minority interest 311 214 919 (2,580)
Net (loss) income (3,129) (1,768) (8,928) 21,207
Less preferred stock
dividends, net of minority
interest (233) - (391) -
Net income (loss) available
to common shareholders'
basic $ (3,362) $ (1,768) $ (9,319) $ 21,207
Basic (loss) earnings per
share $ (0.26) $ (0.14) $ (0.73) $ 1.66
Diluted (loss) earnings per
share $ (0.26) $ (0.14) $ (0.73) $ 1.62
Funds From Operations (FFO)
Calculation:
Net income (loss) available
to common shareholders $ (3,362) $ (1,768) $ (9,319) $ 21,207
Add:
Depreciation and amortization 3,826 3,892 10,682 13,839
Joint venture FFO adjustment 590 651 1,837 1,039
Minority interest (311) (214) (919) 2,580
Less:
Gain on partial sale of real
estate - 571 - (29,397)
Depreciation of non-real
estate assets (135) (113) (377) (201)
FFO, diluted $ 608 $ 3,019 $ 1,904 $ 9,067
FFO per share $ 0.04 $ 0.21 $ 0.13 $ 0.62
Ownership interests:
Weighted average REIT common
shares for basic net
income per share 12,868 12,811 12,864 12,804
Weighted average common stock
equivalents and
partnership units 1,587 1,900 1,624 1,889
Weighted average shares and
units outstanding 14,455 14,711 14,488 14,693
FELDMAN MALL PROPERTIES, INC.
OPERATING STATISTICS
September 30, 2007
Shop
Tenant
Base
Rent
Shop Shop Per
Property Total Rentable Annualized Tenant Tenants Leased
(Ownership Square Square Mall Base Square Percentage Sq.
Interest) Feet Feet Occupancy Rent Feet Leased (A) Ft.
Stratford
Square
(100%) 1,300,000 629,000 93.81% $8,058,324 383,614 66.49% $24.07
Tallahassee
Mall
(100%) 966,000 966,000 92.86% 7,418,237 204,000 74.19% 23.99
Northgate
Mall
(100%) 1,100,000 577,000 89.03% 8,038,751 315,000 74.15% 24.32
Golden
Triangle
Mall
(100%) 765,000 288,000 97.15% 3,023,115 171,000 68.71% 19.00
Foothills
Mall
(30.6%) 711,000 502,000 97.41% 8,215,865 230,000 91.80% 19.27
Colonie
Center
Mall
(25%) 1,200,000 668,000 91.07% 6,797,747 36,000 69.35% 28.03
Harrisburg
Mall
(25%) 922,000 922,000 83.41% 5,237,889 270,000 56.63% 21.47
Total/
Weighted
Avg. 6,964,000 4,552,000 92.11% $46,789,928 1,909,614 71.11% $22.88
(A) -- Excludes temporary tenants
Expiring
Lease % of Base
Expirat- Number of Expiring Total Expiring Annualized % of Rent
ion Expiring Rentable Sq. Ft. Base Base Total Per Sq.
Year Leases Area Expiring Rent Rent Base Rent Ft.
2007 46 124,180 3.48% $179,346 $2,152,120 4.6% $17.33
2008 89 370,286 10.36% 363,142 4,357,676 9.3% $11.77
2009 68 184,352 5.16% 317,872 3,814,443 8.2% $20.69
2010 66 226,780 6.35% 368,801 4,425,585 9.5% $19.51
2011 62 248,370 6.95% 414,223 4,970,690 10.6% $20.01
2012 40 285,993 8.00% 296,568 3,558,782 7.6% $12.44
2013 37 331,602 9.28% 346,426 4,157,045 8.9% $12.54
2014 34 308,510 8.63% 363,065 4,356,782 9.3% $14.12
2015 22 90,651 2.54% 147,336 1,768,042 3.8% $19.50
2016 and
there-
after 65 1,402,776 39.25% 1,102,403 13,228,763 28.3% $9.43
Port-folio
Total 529 3,573,500 100.00% $3,899,182 $46,789,928 100% $13.09
Sales Per Square Foot
Trailing Twelve Months Ending
9/30/2007 6/30/2007 3/31/2007 12/31/2006 9/30/2006
Stratford
Square Mall $284.71 $286.93 288.77 284.51 283.33
Tallahassee Mall 315.13 325.00 327.45 320.32 329.34
Northgate Mall 323.48 317.56 320.38 308.42 309.63
Golden
Triangle Mall 292.96 293.02 295.70 283.95 278.54
Foothills Mall 302.79 308.47 310.35 305.77 306.03
Colonie
Center Mall 305.31 303.43 303.33 308.02 299.71
Harrisburg Mall 269.73 270.44 269.92 266.61 260.31
Total/Weighted
Average $299.16 $300.69 $302.27 $296.80 $295.27
Shop Occupancy with Temporary Tenants
Trailing Twelve Months Ending
9/30/2007 6/30/2007 3/31/2007 12/31/2006 9/30/2006
Stratford
Square Mall 87.44% 82.74% 83.19% 82.28% 75.89%
Tallahassee Mall 85.45 85.98 86.61 88.00 88.00
Northgate Mall 85.50 78.65 84.26 90.18 90.91
Golden
Triangle Mall 87.90 91.76 95.26 95.63 78.41
Foothills Mall 93.89 91.80 92.71 100.00 96.50
Colonie
Center Mall 87.90 87.10 87.18 89.19 90.46
Harrisburg Mall 77.88 77.03 80.72 75.15 80.80
Total/Weighted
Average 85.12% 84.38% 87.13% 88.63% 85.85%
