Conference Call to Discuss Results Will Be Held at 10:00AM EDT, October 29, 2007 Dial in: (800) 257-1836 or go to http://www.feldmanmall.com/ GREAT NECK, N.Y., Oct. 26 /PRNewswire-FirstCall/ RELEASE HIGHLIGHTS -- 2nd quarter FFO was $(0.12) per (diluted) share as compared to $0.20 per share (diluted) in 2nd quarter 2006 -- Executive management restructuring Financial Results
Feldman Mall Properties, Inc. today reported Funds From Operations ("FFO") totaling $(1.7) million, or $(0.12) per diluted share, for the second quarter ended June 30, 2007 as compared to $3.0 million, or $0.20 per diluted share for the three months ended June 30, 2006. The Company's net loss for the three months ended June 30, 2007 was $4.9 million, or $0.40 per share, as compared to net income of $24.4 million, or $1.86 per diluted share for the second quarter of 2006. Net income for the three months ended June 30, 2006 included a $30.0 million gain, or $2.04 per diluted share, on the partial sale of the Foothills Mall. The Company had 14.5 and 14.7 million weighted average common shares and operating partnership units outstanding during the second quarters ended June 30, 2007 and 2006, respectively.
Second 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 third quarter but to a lesser extent. 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.
The following items represent changes in income and expense that impacted the Company's FFO results for the periods indicated (in millions):
June 30, 2007 Three Six Months Months Property Level Net Operating Income ("NOI"): Lower renewal revenue $(0.3) $(0.1) Higher operating expenses (0.6) (1.1) Same store NOI variance(1) (0.9) (1.2) G&A Expense: Executive severance (non-recurring) (0.6) (0.6) Strategic alternative costs (non-recurring) (0.4) (0.4) Other recurring G&A expense(2) (1.5) (2.6) Total G&A variance (2.5) (3.6) Effect of Sale to JVs: Colonie & Foothills: Net operating Income (3.3) (6.1) Decrease in interest expense 1.4 2.9 Increase in management, leasing and development fees 0.8 1.4 Total effect of sale of JV interests (1.1) (1.8) Other: Golden Triangle Mall NOI (acquired 4/06) - 0.4 Change in Harrisburg earnout liability - 2.3 Other income and expense, net - (0.7) Preferred stock dividends (0.2) (0.2) Decrease in FFO $(4.7) $(4.8) (1) The decrease in NOI for properties that were owned during both the three months ended June 30, 2007 and 2006 periods was due to (i) lower revenue ($0.3 million) primarily due to lower reimbursement revenue as the Company's average expense recovery ratio decreased from 60% to 56% due to more percentage rent leases that exclude recovery provisions, and (ii) higher operating expenses ($0.6 million) primarily due to higher provision for bad debts, salary and wages, and professional fees. (2) Other expenses for the three months ended June 30, 2007 increased $1.5 million due to (i) higher professional fees, SOX-related fees, and construction management fees ($0.9 million), (ii) costs associated with special construction audits and lease audits ($0.3 million) and (iii) higher personnel costs ($0.3 million).
For the six months ended June 30, 2007, FFO totaled $1.3 million, or $0.09 per diluted share as compared to $6.0 million, or $0.41 per diluted share for the six months ended June 30, 2006. The Company's net loss for the six months ended June 30, 2007 was $5.8 million, or $0.46 per share, as compared to net income of $23.0 million, or $1.75 per diluted share for the six months ended June 30, 2006. The 2007 period includes a non-cash reduction in the Company's earnout obligation due to affiliates, increasing miscellaneous income in the first quarter by $2.3 million. The Company had 14.5 and 14.7 million weighted average common shares and operating partnership units outstanding during the six months ended June 30, 2007 and 2006, respectively.
OTHER Strategic Alternatives
On June 5, 2007, the Company announced that it has 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 a sale, merger or other strategic alternative is imminent under the current market conditions. During the Company's second quarter conference call management will update investors on the strategic alternative process.
Deferred Dividend
In light of current market conditions and to enhance the redevelopment of the Company's malls, the Company has suspended the common dividend and does not expect to declare any additional common dividends in the foreseeable future except as may be required to maintain REIT status.
Executive Management Restructuring
The Company announces the following management restructuring which is effective immediately:
-- Larry Feldman will give up his position as CEO and the accompanying management responsibilities so that he may focus significantly all of his energy on the critical real estate imperatives facing the Company including leasing, anchor tenant retention and replacement, redevelopment and construction, and strategic direction and planning for the Company. He remains Chairman of the Board. -- Tom Wirth has been named President and remains CFO. Tom will assume management responsibilities for the Company with a focus on public company obligations including timely financial reporting. -- Jim Bourg retains his position as Chief Operating Officer. -- To provide support to, and more direct oversight of management, the independent board members have formed an executive committee led by Bruce Moore. The executive committee will remain in place until such time as the Company has retained additional executive talent, or the committee deems its assistance is no longer required. CONFERENCE CALL
The Company's executive management team will host a conference call and audio web cast on October 29, 2007 at 10:00 AM 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/.
A replay of the call will be available through November 5, 2007 by dialing (800) 405-2236 using pass code 11101247, 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 October 29, 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) June 30, December 31, 2007 2006 (Unaudited) ASSETS: Investments in real estate, net $339,265 $318,440 Investment in unconsolidated real estate partnerships 36,461 32,833 Cash and cash equivalents 3,962 13,036 Restricted cash 31,115 8,159 Rents, deferred rents and other receivables, net 6,433 5,718 Acquired below-market ground lease, net 7,606 7,674 Acquired lease rights, net 8,211 9,262 Acquired in-place lease values, net 7,706 10,049 Deferred charges, net 4,289 3,284 Other assets, net 6,397 5,396 Total Assets $451,445 $413,851 LIABILITIES AND STOCKHOLDERS' EQUITY: Mortgage loans payable $235,291 $211,451 Junior subordinated debt obligation 29,380 29,380 Secured line of credit 13,000 - Due to affiliates 1,654 3,891 Accounts payable, accrued expenses and other liabilities 27,500 25,832 Dividends and distributions payable 175 3,315 Acquired lease obligations, net 5,903 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 320,868 288,657 Minority interest 10,719 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 14,599 - Common stock ($0.01 par value, 200,000,000 shares authorized, 13,047,370 and 13,155,062 issued and outstanding at June 30, 2007 and December 31, 2006, respectively) 131 132 Additional paid-in capital 120,453 120,163 Distributions in excess of earnings (16,463) (7,637) Accumulated other comprehensive income 1,138 887 Total stockholders' equity 119,858 113,545 Total Liabilities and Stockholders' Equity $451,445 $413,851 FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 Revenue: Rental $7,687 $11,787 $15,396 $22,477 Tenant reimbursements 3,417 6,326 6,997 11,665 Management, leasing and development services 875 112 1,698 257 Interest and other income 457 265 3,105 769 Total revenue 12,436 18,490 27,196 35,168 Expenses: Rental property operating and maintenance 4,462 5,701 8,793 11,225 Real estate taxes 1,463 2,518 3,041 4,570 Interest (including amortization of deferred financing costs) 3,529 5,129 6,640 9,303 Loss from early extinguishment of debt 379 357 379 357 Depreciation and amortization 3,451 5,500 6,856 9,947 General and administrative 4,302 1,800 7,239 3,681 Total expenses 17,586 21,005 32,948 39,083 Loss from operations (5,150) (2,515) (5,752) (3,915) Equity in loss of unconsolidated real estate partnerships (300) (139) (655) (284) Gain on partial sale of real estate - 29,968 - 29,968 Income (loss) before minority interest (5,450) 27,314 (6,407) 25,769 Minority interest 515 (2,962) 608 (2,795) Net income (loss) $(4,935) $24,352 $(5,799) $22,974 Less preferred stock dividends, net of minority interest (158) - (158) - Net income (loss) available to common stockholders - basic (5,093) 24,352 (5,957) 22,974 Basic income (loss) per share $(0.40) $1.90 $(0.46) $1.79 Diluted income (loss) per share (0.40) 1.86 (0.46) 1.75 Funds From Operations (FFO) Calculation: Net income (loss) available to common shareholders $(5,093) $24,352 $(5,957) $22,974 Add: Depreciation and amortization 3,451 5,500 6,856 9,947 Joint venture FFO adjustment 622 209 1,247 388 Minority interest (515) 2,962 (608) 2,795 Less: Gain on partial sale of real estate - (29,968) - (29,968) Depreciation of non-real estate assets (134) (46) (242) (88) FFO, diluted $(1,669) $3,009 $1,296 $6,048 FFO per share $(0.12) $0.20 $0.09 $0.41 Ownership interests: Weighted average REIT common shares for basic net income per share 12,862 12,802 12,862 12,800 Weighted average common stock equivalents and partnership units 1,613 1,891 1,642 1,884 Weighted average shares and units outstanding 14,475 14,693 14,504 14,684 Feldman MALL PROPERTIES, INC. OPERATING STATISTICS June 30, 2007 Shop Tenant Base Shop Shop Rent 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 94.8% $8,083,572 384,000 68.34% $23.85 Tallahassee Mall (100%) 966,000 966,000 92.75 7,416,224 204,000 73.13 22.62 Northgate Mall (100%) 1,100,000 577,000 91.67 7,953,772 315,000 63.36 24.19 Golden Triangle Mall (100%) 765,000 288,000 98.06 3,065,867 171,000 69.85 19.40 Foothills Mall (30.8%) 711,000 502,000 96.72 8,209,269 230,000 91.80 19.24 Colonie Center Mall (25.0%) 1,200,000 668,000 91.95 6,916,906 336,000 80.34 26.34 Harrisburg Mall (25.0%) 922,000 922,000 83.10 5,292,389 270,000 55.64 21.34 Total/ Weighted Avg. 6,964,000 4,552,000 92.72% $46,937,999 1,910,000 71.78% $22.43 (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 50 127,347 3.61% $198,757 $2,385,059 5.1% $18.73 2008 86 368,141 10.43 372,900 4,474,766 9.5 12.16 2009 67 190,152 5.38 327,875 3,934,473 8.4 20.69 2010 64 221,114 6.26 365,301 4,383,585 9.3 19.82 2011 62 249,735 7.07 415,015 4,980,190 10.6 19.94 2012 42 290,219 8.22 302,900 3,634,757 7.7 12.52 2013 36 326,865 9.26 336,162 4,033,883 8.6 12.34 2014 34 308,591 8.74 363,065 4,356,782 9.3 14.12 2015 22 90,651 2.57 147,336 1,768,042 3.8 19.50 2016 and there- after 59 1,358,497 38.47 1,082,210 12,986,462 27.7 9.56 Total/ Weighted Average 522 3,531,312 100.0% $3,911,521 $46,937,999 100.0% $13.29 Sales Per Square Foot Trailing Twelve Months Ending 6/30/2007 3/31/2007 12/31/2006 9/30/2006 6/30/2006 Stratford $286.93 288.77 284.51 283.33 282.70 Square Mall Tallahassee 325.00 327.45 320.32 329.34 329.64 Mall Northgate 317.56 320.38 308.42 309.63 308.27 Mall Golden 293.02 295.70 283.95 278.54 Triangle Mall Foothills 308.47 310.35 305.77 306.03 302.35 Mall Colonie 303.43 303.33 308.02 299.71 299.95 Center Mall Harrisburg 270.44 269.92 266.61 260.31 255.03 Mall Total/Weigh $300.69 $302.27 $296.80 $295.27 $296.32 ted Average Shop Occupancy with Temporary Tenants Trailing Twelve Months Ending 6/30/2007 3/31/2007 12/31/2006 9/30/2006 6/30/2006 Stratford 82.74% 83.19% 82.28% 75.89% 73.76% Square Mall Tallahassee 85.98 86.61 88.00 88.00 88.19 Mall Northgate 78.65 84.26 90.18 90.91 84.75 Mall Golden 91.76 95.26 95.63 78.41 Triangle Mall Foothills 87.37 92.71 100.00 96.50 96.52 Mall Colonie 87.10 87.18 89.19 90.46 88.96 Center Mall Harrisburg 77.03 80.72 75.15 80.80 77.90 Mall Total/Weighted 84.38% 87.13% 88.63% 85.85% 85.01% Average
