Prepared and filed by St Ives Burrups

S-11/A 1 b400059_s11a.htm FORM S-11/A Prepared and filed by St Ives Burrups

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As filed with the Securities and Exchange Commission on December 15, 2004

Registration No. 333-118246

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 8 to

Form S-11

FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES

Feldman Mall Properties, Inc.
(Exact Name of Registrant as Specified in its Governing Instruments)

3225 North Central Avenue, Suite 1205
Phoenix, Arizona 85012

(Address, Including Zip Code, and Telephone Number, including
Area Code, of Registrant’s Principal Executive Offices)

Larry Feldman
Chairman and Chief Executive Officer
Feldman Mall Properties, Inc.
3225 North Central Avenue, Suite 1205
Phoenix, Arizona 85012
(602) 277-5559
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for Service)

Copies to:

Jay L. Bernstein, Esq.
Beth A. De Santo, Esq.
Clifford Chance US LLP
31 West 52nd Street
New York, New York 10019
(212) 878-8000

Randolph C. Coley, Esq.
Alexander G. Simpson, Esq.
King & Spalding LLP
1185 Avenue of the Americas
New York, New York 10036-4003
(212) 556-2100

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If delivery of this prospectus is expected to be made pursuant to Rule 434, check the following box.

This registration statement shall hereafter become effective in accordance with the provisions of Section 8(a) of the Securities Act of 1933.

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SUBJECT TO COMPLETION, DATED DECEMBER 15, 2004

PROSPECTUS

10,666,667 Shares of Common Stock

Feldman Mall Properties, Inc.

This is our initial public offering of shares of our common stock. We are offering 10,666,667 shares of our common stock. All of the shares being offered by this prospectus are being sold by us. No public market currently exists for our common stock. Following the completion of this offering, we intend to elect to qualify as a real estate investment trust, or REIT, for U.S. federal income tax purposes commencing with our taxable year ending December 31, 2004.

The initial public offering price of our common stock is expected to be between $14.00 and $16.00 per share. Our shares of common stock have been approved for listing, subject to official notice of issuance, on the New York Stock Exchange, or NYSE, under the symbol “FMP.”

The shares of our common stock are subject to ownership limitations contained in our charter that are intended to preserve our qualification as a REIT.

Before buying any shares, you should read the discussion of the risks of investing in our common stock in “Risk Factors” beginning on page 22, including, among others:

•

We may not be successful in identifying and consummating suitable acquisitions that meet our investment criteria, which may impede our growth and negatively affect our results of operations.


	•	Our investments in underperforming or distressed malls could be subject to higher than anticipated costs and unexpected delays which would adversely affect our investment returns, harm our operating results and reduce funds available for distributions to our stockholders.


	•	Our management team will receive material benefits upon completion of this offering, including a 14.8% equity stake in our company on a fully diluted basis (having a value of approximately $27.8 million based on the mid-point of the price range listed above), which could allow them to exercise significant influence over matters submitted to our stockholders.


	•	We did not obtain any third party appraisals for the initial properties in our portfolio in connection with the formation transactions and the consideration to be given by us in exchange for them may exceed fair market value or the value that may have been determined by third party appraisals.


	•	If we fail to qualify as a REIT, our distributions will not be deductible by us and we will be subject to corporate level tax on our taxable income. This would reduce the cash available to make distributions to our stockholders and may have significant adverse consequences on the value of our stock.


	•	Our organizational documents contain no limitations on the amount of indebtedness we may incur, and our cash flow and ability to make distributions could be adversely affected if we become highly leveraged.


	•	We have not committed approximately 12.1% of the net proceeds of this offering to any specific investment and, as a result, may be considered to be a blind pool investment opportunity. Investors will not be able to evaluate the economic merits of any investments we make with our remaining net proceeds. We may be unable to invest the remaining net proceeds on acceptable terms, or at all.

	Per Share	Total


Public offering price	$	$
Underwriting discounts and commissions⁽¹⁾	$	$
Proceeds, before expenses, to us	$	$

(1)

Certain members of our senior management team intend to make an aggregate investment of $1 million in this offering, including a $600,000 investment by Larry Feldman, our Chairman and Chief Executive Officer, a $125,000 investment by each of Jim Bourg, our Executive Vice President and Chief Operating Officer, Scott Jensen, our Executive Vice President of Leasing, and Thomas Wirth, our Executive Vice President and Chief Financial Officer, and a $25,000 investment by Jeffrey Erhart, our Executive Vice President and General Counsel. The underwriters will not receive a discount on any shares purchased by Messrs. Feldman, Bourg, Jensen, Wirth and Erhart in this offering.

The underwriters may also purchase up to 1,600,000 additional shares of our common stock at the public offering price, less underwriting discounts and commissions, within 30 days from the date of this prospectus. The underwriters may exercise this option only to cover over-allotments, if any.

The underwriters expect to deliver the shares of our common stock on or about , 2004.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

FRIEDMAN BILLINGS RAMSEY

RBC CAPITAL MARKETS

BB&T CAPITAL MARKETS

The date of this prospectus is , 2004.

The information in this prospectus is not complete and may be changed or supplemented. We cannot sell any of the securities described in this prospectus until the registration statement that we have filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell the securities and we are not soliciting an offer to buy the securities in any state where the offer or sale is not permitted.

TABLE OF CONTENTS

PROSPECTUS SUMMARY			1

Overview			1
Summary Risk Factors			2
Our Industry			3
The Market Opportunity			3
Our History			4
Our Properties			4
Investment Highlights			8
Our Business and Growth Strategies			9
Our Financing Strategies			9
Proposed Line of Credit			10
The Formation Transactions			10
Our Structure			13
Benefits to Related Parties			14
Conflicts of Interest			16
This Offering			17
Our Ownership Limit			18
Our Tax Status			18
Distribution Policy			18

SUMMARY FINANCIAL DATA			20

RISK FACTORS			22

Risks Related to Our Properties and Operations			22
Risks Related to This Offering			27
Risks Related to the Real Estate Industry			29
Risks Related to Our Organization and Structure			30
Risks Related to Our Organization and Operation as a REIT			35
Risks Related to Our Debt Financings			37

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION			39

USE OF PROCEEDS			40

DISTRIBUTION POLICY			42

CAPITALIZATION			43

DILUTION			44

Dilution After This Offering			44
Differences Between New Stockholders and Contributors in the Formation Transactions in Number of Shares and Amount Paid			45

SELECTED FINANCIAL DATA			47

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			49

Overview			49
Critical Accounting Policies			50
Depreciation and Insurance			52
Results of Operations of Our Predecessor			53
Cash Flows			55
Liquidity and Capital Resources			56
Quantitative and Qualitative Disclosures About Market Risk			59
Capital Expenditures			59

STRUCTURE AND FORMATION OF OUR COMPANY			60

Overview			60
Formation Transactions			60

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TABLE OF CONTENTS
(continued)

BUSINESS AND PROPERTIES			64

Overview			64
Our Industry			66
Investment Highlights			67
Our Business and Growth Strategies			70
Mall Acquisitions			71
The Renovation and Repositioning Process			72
Property Management, Leasing and Marketing			73
Our Properties			74
Tenant Diversification			87
Lease Expiration			87
Our Financing Strategy			88
Competition			89
Offices			89
Legal Proceedings			90
Employees			90
Regulation			90
Environmental Matters			90
Insurance			91

MANAGEMENT			92

Directors, Director Nominees and Executive Officers			92
Corporate Governance Profile			93
Board Committees			94
Compensation Committee Interlocks and Insider Participation			95
Board Compensation			95
Executive Compensation			95
Employment Agreements			96
2004 Equity Incentive Plan			97
2004 Incentive Bonus Plan			99
Indemnification Agreements			100

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS			102

Contribution Agreements and Tax Protection Agreement			102
Employment Agreements			103
Repayment of Affiliated Indebtedness and Release of Guarantees			103
Registration Rights Agreements			103

BENEFITS TO RELATED PARTIES			104

Benefits to Related Parties			104

PRIOR PERFORMANCE INFORMATION			107

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES			109

Investment Policies			109
Dispositions			110
Financing Policies			110
Equity Capital Policies			110
Conflicts of Interest Policies			111
Interested Director and Officer Transactions			112
Policies with Respect to Other Activities			113
Reporting Policies			113
Lending Policies			113

PRINCIPAL STOCKHOLDERS			114

DESCRIPTION OF STOCK			115

General			115
Common Stock			115
Power to Reclassify Unissued Shares of Our Stock			115
Power to Increase or Decrease Authorized Stock and Issue Additional Shares of Our Common Stock and Preferred Stock			116
Restrictions on Transfer			116
Transfer Agent and Registrar			119

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TABLE OF CONTENTS
(continued)

CERTAIN PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS			120

Our Board of Directors			120
Removal of Directors			120
Business Combinations			120
Control Share Acquisitions			121
Subtitle 8			121
Amendment to Our Charter and Bylaws			122
Dissolution of Our Company			122
Advance Notice of Director Nominations and New Business			122
Anti-takeover Effect of Certain Provisions of Maryland Law and of Our Charter and Bylaws			122
Indemnification and Limitation of Directors’ and Officers’ Liability			123
REIT Status			124

FELDMAN EQUITIES OPERATING PARTNERSHIP, LP			125

General; Management			125
Management Liability and Indemnification			125
Fiduciary Responsibilities			125
Distributions			126
Allocations of Net Income and Net Loss			126
Redemption Rights			126
Transferability of OP Units			126
Issuance of Our Stock			126
Tax Matters			127
Term			127
Resale Registration Statement for the Limited Partners of Our Operating Partnership			127

SHARES ELIGIBLE FOR FUTURE SALE			128

General			128
Rule 144			128
Registration Rights			128
2004 Equity Incentive Plan			128
Lock-Up Agreements			129

U.S. FEDERAL INCOME TAX CONSIDERATIONS			130

Taxation of the Company			131
Tax Aspects of Investments in Partnerships			141
Taxation of Stockholders			142

ERISA CONSIDERATIONS			149

UNDERWRITING			150

LEGAL MATTERS			153

EXPERTS			153

WHERE YOU CAN FIND MORE INFORMATION			153

INDEX TO FINANCIAL STATEMENTS			F-1

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of common stock.

iii

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PROSPECTUS SUMMARY

You should read the following summary together with the more detailed information regarding our company, including under the caption “Risk Factors,” and the financial statements, including the related notes, appearing elsewhere in this prospectus. Unless the context otherwise requires or indicates, references in this prospectus to “we,” “our company,” “our” and “us” refer to Feldman Mall Properties, Inc., a Maryland corporation, together with our consolidated subsidiaries, including Feldman Equities Operating Partnership, LP, a Delaware limited partnership, which we refer to in this prospectus as our “operating partnership,” and our predecessor, Feldman Equities of Arizona, LLC, an Arizona limited liability company, together with its subsidiaries and affiliates, which we refer to collectively herein as “Feldman Equities of Arizona,” the “predecessor” or “our predecessor.” In addition, references to “common stock” refer to the common stock, $0.01 par value per share, of our company, references to “OP units” refer to the units of limited partnership interest of our operating partnership and references to “equity securities” refer to the common stock and the OP units, collectively. Unless the context otherwise indicates, the information about our company assumes that the formation transactions described herein have been completed. In addition, unless otherwise indicated, the information contained in this prospectus assumes that the underwriters’ over-allotment option is not exercised and that the common stock to be sold in this offering is sold at $15.00 per share, which is the mid-point of the price range indicated on the front cover of this prospectus.

Overview

We are a fully-integrated, self-administered and self-managed real estate company formed in July 2004 to continue the business of Feldman Equities of Arizona, to acquire, renovate and reposition retail shopping malls. Our investment strategy is to opportunistically acquire underperforming malls and transform them into physically attractive and profitable Class A malls (meaning those in which average annual shop tenant sales per square foot are above $350) or near Class A malls (meaning those in which average annual shop tenant sales per square foot range from $325 to $350) through comprehensive renovation and repositioning efforts aimed at increasing shopper traffic and tenant sales. Through these renovation and repositioning efforts, we expect to raise occupancy levels, rental income and property cash flow. We intend to qualify as a real estate investment trust, or REIT, for federal income tax purposes beginning with our initial taxable year ending December 31, 2004.

Our predecessor is currently near completion of two comprehensive mall renovation and repositioning projects for the Harrisburg Mall in the Harrisburg, Pennsylvania area and the Foothills Mall in the Tucson, Arizona area. Since our predecessor acquired a joint venture interest in the Harrisburg Mall in 2003 and in the Foothills Mall in 2002, these malls have undergone dramatic improvements in architectural design and appearance, layout, square footage and tenant composition. Upon completion of this offering, we will acquire our predecessor’s 25% capital interest in the joint venture that owns the Harrisburg Mall and will have an option to acquire the remaining 75% capital interest in this joint venture. We will also acquire a 100% ownership interest in the joint venture that owns the Foothills Mall.

In September 2004, we entered into a binding agreement to acquire Colonie Center, a super-regional mall in the Albany, New York area, for a base purchase price of $84.2 million, subject to increase by up to an additional $9 million if, prior to June 30, 2005, certain pending leases in negotiation are executed and tenants under such leases take occupancy and commence rental payments. We expect to fund this acquisition out of the net proceeds of this offering. Our renovation and repositioning plan for Colonie Center is designed to convert the mall from a Class B mall to a Class A mall. We estimate that the cost of this plan will be approximately $9.6 million.

We believe our acquisition and redevelopment pipeline creates opportunities to increase our company’s cash flow and create long-term stockholder value. We expect to continue to source attractive opportunities that meet our investment criteria. We believe that our predecessor’s recent transactions demonstrate our ability to locate and acquire properties with the potential to substantially increase their operating cash flow and value through our comprehensive renovation and repositioning strategies.

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Our investment strategy includes acquiring, renovating and repositioning properties both directly and indirectly through joint ventures with institutional investors. Through joint ventures, we will seek to enhance our return on equity by supplementing the cash flow we receive from our properties with additional management, leasing, development and incentive fees from the joint ventures. We also intend to enhance our return on equity by selectively selling properties once they are stabilized and fully valued. We intend to re-deploy the capital derived from such sales into new, higher yielding acquisition and redevelopment opportunities.

Upon completion of this offering and the formation transactions, we will conduct substantially all of our business through our operating partnership, Feldman Equities Operating Partnership, LP, in which we will hold approximately an 87% ownership interest. Our operating partnership will enable us to complete tax deferred acquisitions of additional malls utilizing our OP units as an alternative acquisition currency.

Our corporate headquarters is located at 3225 North Central Avenue, Suite 1205, Phoenix, Arizona 85012. Our website is located at www.FeldmanMall.com. Information on our website is not incorporated into this prospectus.

Summary Risk Factors

You should carefully consider the matters discussed in the section “Risk Factors” beginning on page 22 prior to deciding whether to invest in our common stock. Some of the risks include:

•

We may not be successful in identifying and consummating suitable acquisitions that meet our investment criteria, which may impede our growth and negatively affect our results of operations.


	•	Our investments in underperforming or distressed malls could be subject to higher than anticipated costs and unexpected delays which would adversely affect our investment returns, harm our operating results and reduce funds available for distributions to our stockholders.


	•	Our management team will receive material benefits upon completion of this offering, including a 14.8% equity stake in our company on a fully diluted basis (having a value of approximately $27.8 million based on the mid-point of the price range indicated on the front cover of this prospectus), which could allow them to exercise significant influence over matters submitted to our stockholders. Upon completion of this offering and the formation transactions, management’s equity stake will include 163,228 shares of common stock and 966,456 OP units to be held by Larry Feldman, our Chairman and Chief Executive Officer, and his affiliates, 8,333 shares of common stock and 233,504 OP units to be held by Jim Bourg, our Executive Vice President and Chief Operating Officer, 8,333 shares of common stock and 233,504 OP units to be held by Scott Jensen, our Executive Vice President of Leasing, 1,667 shares of common stock and 160,000 OP units to be held by Jeffrey Erhart, our Executive Vice President and General Counsel and 8,333 shares of common stock and 66,667 shares of restricted stock (or other equity-based compensation of equivalent value) issued under our 2004 equity incentive plan to be held by Thomas Wirth, our Executive Vice President and Chief Financial Officer.


	•	We did not obtain any third party appraisals for the initial properties in our portfolio in connection with the formation transactions and the consideration to be given by us in exchange for them may exceed fair market value or the value that may have been determined by third party appraisals.


	•	If we fail to qualify as a REIT, our distributions will not be deductible by us and we will be subject to corporate level tax on our taxable income. This would reduce the cash available to make distributions to our stockholders and may have significant adverse consequences on the value of our stock.


	•	Our organizational documents contain no limitations on the amount of indebtedness we may incur, and our cash flow and ability to make distributions could be adversely affected if we become highly leveraged.


	•	We have not committed approximately 12.1% of the net proceeds of this offering to any specific investment and, as a result, may be considered to be a blind pool investment opportunity. Investors will not be able to evaluate the economic merits of any investments we make with our remaining net proceeds. We may be unable to invest the remaining net proceeds on acceptable terms, or at all.

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Our Industry

Our property acquisition and redevelopment activities are focused on underperforming regional and super-regional malls. Regional malls generally contain in excess of 400,000 square feet of enclosed and climate controlled space and offer a variety of fashion merchandise, hard goods, services, restaurants, entertainment and convenient parking. Regional malls are typically anchored by two or more department stores or large big box retail stores, which we refer to as anchor tenants. These tenants act as the main draw to a typical mall and are normally located within the mall at the ends of the common corridors. Super-regional malls have the same characteristics of regional malls but are generally larger than 800,000 square feet and have three or more anchor tenants. We refer to regional and super-regional malls as malls.

Malls typically contain numerous diversified smaller retail stores, which we refer to as shops or shop tenants. Shop tenants are mostly national or regional retailers typically located along common corridors which connect to the anchor tenants. Shop tenants typically account for a substantial majority of the rental revenues of a mall.

According to the International Council of Shopping Centers, the United States had approximately 1,130 malls in 2003. The median sales per square foot of shop tenants in a sample of malls studied by the International Council of Shopping Centers in 2002 was $318. We generally classify malls into one of the following three rating categories based upon the average annual sales per square foot of shop tenants:

Classes of Malls

Class		Shop Tenant Sales Per Square Foot

Class A		Above $350
Class B		$250 — $350
Class C		Below $250

We believe that more than half of the 1,130 malls in the United States fall into the Class B and Class C categories. Our strategy is to acquire Class B malls or Class C malls, which we refer to as underperforming or distressed malls. We believe that through our renovation and repositioning strategies, we can substantially increase shopper traffic and tenant sales which will result in higher occupancy, rents and, ultimately, cash flow to us. We believe that the successful implementation of our strategy can result in the transformation of a Class B or Class C mall into a Class A or near Class A mall. Currently, Colonie Center and the Foothills Mall fall into the Class B category and the Harrisburg Mall falls into the Class C category. We expect, however, that upon completion of our renovation and repositioning efforts, each mall will fall into the Class A or near Class A mall category.

The Market Opportunity

We believe there are a significant number of malls in the United States that are potential candidates for acquisition, renovation and repositioning by our company. These malls are typically located in favorable markets that are experiencing positive overall retail sales trends and often have excellent access to transportation, but due to mismanagement, changing retail trends or the passage of time, may lack one or more of the key characteristics of successful malls. These malls tend to have weak or closed anchor tenants, poor shop tenant mixes, non-optimal layouts, dark mall corridors or outdated designs and appearances.

We also believe that many owners of underperforming malls may prefer to sell such properties because they may be unable to respond to the forces that have eroded the competitive positions of their properties. These owners may lack the experience, expertise, capital or management resources necessary to successfully renovate and reposition their properties. We believe that these factors may allow us to acquire and redevelop malls at total project costs that are significantly below the cost of new mall construction. In addition, unlike new mall development, which may encounter strong local opposition due to traffic, environmental and other concerns, redevelopment efforts are generally strongly supported by local communities and can often be completed in a much shorter time frame in comparison to new construction.

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Our History

We trace our construction and redevelopment roots to the founding of a small plumbing company in 1920 by H.J. Feldman, the grandfather of Larry Feldman, our Chairman and Chief Executive Officer. That company eventually grew to become a major general contracting company. From 1950 through 1985, the firm, which was co-led by Larry Feldman’s father, Edward Feldman, was responsible for many high profile heavy construction projects, including the two main terminal buildings of Chicago’s O’Hare International Airport, as well as hospitals, sewage treatment plants, nuclear facilities and military installations throughout the United States. In 1985, Edward and Larry Feldman established a commercial real estate company under the name Feldman Equities. Larry Feldman served as President and Chief Executive Officer of Feldman Equities from 1990 until 1997. From 1997 until 1998 Larry Feldman was Chairman of the Board, Chief Executive Officer and President of Tower Realty Trust, Inc., a publicly-traded REIT, which completed its initial public offering in 1997 and focused on the redevelopment of underperforming or distressed office properties and also managed approximately 800,000 square feet of shopping centers. From 1999 until 2004, Larry Feldman served as Chairman and Chief Executive Officer of Feldman Equities and, since April 2002, of Feldman Equities of Arizona.

Our Properties

Upon completion of this offering, we will acquire interests as follows: (i) our predecessor’s 25% capital interest in Feldman Lubert Adler Harrisburg LP, the joint venture that owns the Harrisburg Mall, and will have an option, exercisable at any time prior to July 19, 2005, to acquire the remaining 75% capital interest in this joint venture and (ii) a 100% ownership interest in Foothills Mall LLC, the joint venture that owns the Foothills Mall. In addition, we have entered into a binding agreement to acquire Colonie Center, which we anticipate will close within 30 days following the closing of this offering. The table below sets forth information with respect to these properties.

Property	Year Built/ Most Recent Renovation		Ownership Interest			Total Square Feet		Rentable Square Feet		Percentage Leased			Shop Tenants Percentage Leased			Annualized Base Rent		Shop Tenant Base Rent Per Leased Sq. Ft.		Anticipated Remaining Renovation Costs		Anchor Tenants	Non-owned Anchor Tenants

Harrisburg Mall		1969/2004		25	%		892,802		892,802		90.91	%		74.54	%	$	4,301,906	$	14.05	$	18,800,000	Bass Pro Shops;	—
																						Boscov’s; Hecht’s

Foothills Mall		1983/2004		100			710,541		500,011		91.42			85.06			6,508,516		16.56		4,300,000	Barnes & Noble;	Wal-Mart
																						Linens ‘N Things;
																						Loews Cineplex;
																						Ross Dress for
																						Less; Saks Off
																						5th

Colonie Center		1966/1998		100			1,244,148		664,148		82.68			69.89			6,351,011		17.47		9,600,000	Boscov’s;	Macy’s; Sears
																						Christmas Tree
																						Shops; Steve &
																						Barry’s; f.y.e.

Total/Weighted Average		—		—			2,847,491		2,056,961		88.14	%		75.18	%	$	17,161,433	$	16.14	$	32,700,000	—	—

In the table above:

•

Our predecessor’s interest in the joint venture that owns the Harrisburg Mall consists of a 25% capital interest. In addition, once operating cash flow exceeds a 12% preferred return on the partners’ capital contributions, we will be entitled to receive an additional 20% of the excess cash flow. Upon a sale of the property, and after both partners receive a return of their capital contributions from the joint venture (which aggregated $16.8 million as of September 30, 2004) plus a 12% preferred return on their capital contributions, we will have the right to receive an additional 20% of the available cash, if any, plus our 25% share of the remaining 80% interest. In addition, in the event that a sale of the property produces an overall return in excess of 20% to our joint venture partner, we will be entitled to a 30% share of such excess, if any, plus our 25% share of the remaining 70% interest. The remaining interest in this joint venture is held by affiliates of the Lubert Adler Funds. To the extent that the partners are required to make additional capital contributions to the joint venture, the amount of the 12% preferred return, which operating cash flow must exceed in order for the partners to receive

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the additional 20% of excess cash flow, will increase. Therefore, if partners are required to make additional capital contributions, receipt of the additional 20% will become more difficult.


	•	Our predecessor’s interest in the joint venture that owns the Foothills Mall consists of a 67% capital interest and the right to additional percentages of cash flow from the joint venture upon the achievement of certain internal rates of return. The remaining interests in this joint venture are held by unaffiliated third party investors, whose interests will be acquired as part of the formation transactions with the net proceeds of this offering. Upon completion of the formation transactions, we will acquire a 100% ownership interest in the joint venture that owns the Foothills Mall.


	•	Total Square Feet includes Rentable Square Feet and the square feet occupied by non-owned anchor tenants.


	•	Rentable Square Feet for the Harrisburg Mall includes 266,367 square feet of rentable shop tenant space. Rentable Square Feet for the Foothills Mall includes 193,602 square feet of rentable shop tenant space. Rentable Square Feet for Colonie Center includes 381,941 square feet of rentable shop tenant space. Rentable Square Feet for Foothills Mall and Colonie Center excludes approximately 210,000 square feet and 580,000 square feet, respectively, of non-owned anchor tenant space.


	•	Percentage Leased is calculated based on leases executed as of September 30, 2004 and includes owned anchor tenant space. Percentage Leased for the Foothills Mall and Colonie Center excludes approximately 210,000 square feet and 580,000 square feet, respectively, of non-owned anchor tenant space.


	•	Shop Tenants Percentage Leased is calculated based on leases executed as of September 30, 2004 by shop tenants and non-anchor tenants. These figures exclude leases to tenants under temporary leases, which are leases for a term of less than one year.


	•	Annualized Base Rent is calculated based on monthly base rent derived from 100% of our existing lease agreements executed as of September 30, 2004 and annualized for a 12-month period, except as set forth below. The Annualized Base Rent figures appearing in the table above are based on net rent (which means that the rent shown above does not include certain additional charges that are passed on to the tenants, including common area maintenance charges and real estate taxes). Annualized Base Rent includes leases that expire prior to September 30, 2005, which constitute less than 4% of our Annualized Base Rent. Annualized Base Rent does not include (a) any additional revenues from temporary or month-to-month tenants, (b) lease-up of vacant space, (c) rental increases occurring after September 30, 2004 or (d) pass through of operating expenses to tenants. Annualized Base Rent at the Foothills Mall does not include approximately $150,000 of annualized rental income receivable under percentage rent lease provisions as of September 30, 2004 or approximately $320,000 of annualized income receivable from temporary and month-to-month tenants as of September 30, 2004.


	•	Shop Tenant Base Rent Per Leased Square Foot is calculated based on monthly base rent derived from shop tenant leases executed as of September 30, 2004 and annualized for a 12-month period, with the product divided by the rentable square feet leased to shop tenants as of such date.


	•	Anticipated Remaining Renovation Costs represents our estimate of the remaining costs of the project renovation from October 1, 2004 through project completion.


	•	Non-owned Anchor Tenants are anchor tenants of the mall, but we will not own their improvements or their underlying land and therefore we will not collect rent from these retailers. We refer to these retailers as non-owned anchor tenants. We believe non-owned anchor tenants are important to a property because the attractiveness of the anchor retailers at the property (whether or not we collect rent from them) may significantly affect the leasing of owned space and shop tenant sales at the property. Wal-Mart is a non-owned anchor tenant of the Foothills Mall and occupies and owns a super center consisting of approximately 210,000 square feet, which shares a common parking lot and entrance road with the Foothills Mall.


	•	The Macy’s building consists of approximately 305,000 square feet and the Sears building consists of approximately 275,000 square feet. Both buildings are contiguous to Colonie Center and share common entrances with Colonie Center.

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Harrisburg Mall

Our predecessor is currently nearing completion of the renovation and repositioning of the Harrisburg Mall, which is located in the Harrisburg, Pennsylvania area. Under the terms of the limited partnership agreement of Feldman Lubert Adler Harrisburg LP, the general partner (a wholly owned subsidiary of our predecessor) manages the day-to-day operations of the property. Upon completion of the formation transactions, the general partner will become our wholly owned subsidiary. The general partner and limited partners share equally in decision-making authority over major decisions affecting the property, including property sales and financings, leasing, and budget approval and amendments. The limited partners are certain entities affiliated with the Lubert Adler Funds that are ultimately controlled by Ira Lubert and Dean Adler. Prior to our predecessor’s acquisition of a 25% capital interest in Feldman Lubert Adler Harrisburg LP the joint venture that owns the Harrisburg Mall in September 2003, the Harrisburg Mall had an effective occupancy rate of 50% because two key anchor tenants, Lord & Taylor and JCPenney, had either completely ceased operations or had indicated an intention to do so. As a result of our predecessor’s leasing efforts, the Harrisburg Mall is now over 90% leased. The renovation and repositioning plan for this mall, which is designed to convert the mall from a Class C mall to a Class A mall, includes the following:

•

adding new anchors such as Bass Pro Shops and Boscov’s and securing a key lease renewal with Hecht’s;


	•	enhancing entertainment features;


	•	improving accessibility;


	•	gaining local government support;


	•	dramatically changing appearance;


	•	improving signage;


	•	enhancing lighting and security;


	•	repaving the parking lot; and


	•	upgrading the heating, ventilation and air conditioning systems.

As a result of these renovation and repositioning efforts at the Harrisburg Mall, leased square footage has grown from 428,703 at acquisition to 811,661 as of September 30, 2004, after giving effect to executed leases as of such date. Given the attractiveness of the new anchor tenants at the Harrisburg Mall, additional revenue growth from the property is expected as occupancy levels and rental rates rise above current levels.

In September 2003, our predecessor acquired an ownership interest in the Harrisburg Mall through a joint venture with affiliates of the Lubert Adler Funds. The joint venture paid $17.5 million or approximately $20.00 per square foot for the property, which was financed through both equity capital and a loan. Our joint venture partner provided approximately $10.8 million, or 75%, of the equity capital and our predecessor provided approximately $3.6 million, or 25%, of the equity capital. The remaining $3.1 million of the purchase price was financed through a construction loan with Commerce Bank. As of September 30, 2004, the joint venture had spent approximately $36 million on the renovation and repositioning of this property, and we estimate that the total additional investment required to renovate and reposition the property is approximately $18.8 million. Net of cash flow from property operations applied to project costs of approximately $8.6 million, and government grants and incentives totaling approximately $8 million, the total net project cost is estimated to be approximately $55.7 million, or $62.40 per square foot.

Foothills Mall

Our predecessor is currently nearing completion of the renovation and repositioning project for the Foothills Mall, which is located in the Tucson, Arizona area. At the time our predecessor contracted to purchase this property in November 2001, the Foothills Mall was experiencing low tenant sales and had difficulty attracting new tenants despite a favorable location and a strong retail market. The renovation and

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repositioning plan for this mall, which is designed to convert the mall from a Class B mall to a Class A mall, includes the following:

•

stepping up leasing initiatives, such as new leases that have recently been secured with Old Navy and Famous Footwear;


	•	redirecting theatre traffic for the Loews Cineplex from outside to inside the mall and the conversion of the remaining theatres to stadium seating;


	•	increasing rentable square footage;


	•	improved exterior entrance signage;


	•	improving visibility of interior mall corridors;


	•	creating new rotunda mall entrances;


	•	adding new “lifestyle” component;


	•	improving food court and amenities;


	•	conducting public marketing campaigns; and


	•	expanding the mall.

These renovation and repositioning efforts have already impacted the operating performance of the Foothills Mall. Leased square footage, as a percentage of total rentable square feet, was maintained at approximately 90% throughout the renovation process which added approximately 27,000 square feet of rentable area. Additional revenue growth from the property is expected as rentable area is added and occupancy levels rise above current levels. Since September 30, 2004, our predecessor has leased 29,572 square feet of shop space totaling approximately $403,000 of annualized based rent to retailers including Old Navy.

Our predecessor acquired an interest in the joint venture that acquired the Foothills Mall in April 2002 for $54 million. As of September 30, 2004, the joint venture had spent approximately $6.7 million on the renovation and repositioning of this property, and we estimate that the total additional investment required to renovate and reposition the property is approximately $4.3 million. We estimate the total project cost for this property to be approximately $65 million, or $130 per square foot.

Colonie Center

In September 2004, we entered into a binding agreement to acquire Colonie Center, a 1.2 million square foot super-regional mall located in the Albany, New York area for a base purchase price of $84.2 million. The agreement, which is subject to customary closing conditions, provides for an increase to the purchase price if certain pending lease transactions are executed and tenants under such leases take occupancy and commence their rental payments. The maximum amount of such purchase price increase is approximately $9 million so that the maximum purchase price is $93.2 million. In addition, the agreement provides for the seller to bear all expenses incurred in connection with such leases, including tenant improvements, leasing commissions and other tenant inducements. Our renovation and repositioning plan is designed to convert the mall from a Class B mall to a Class A mall. We estimate that the cost of this plan will be approximately $9.6 million. Our renovation and repositioning plan currently includes the following:

•

adding new upscale junior anchor tenants;


	•	redirecting anchor tenant traffic;


	•	major change in appearance;


	•	improved signage; and


	•	adding entertainment features.

We expect these renovation and repositioning efforts to impact the financial performance of Colonie Center by drawing the already high volume of anchor tenant shoppers into the main mall and by attracting

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more affluent shoppers. We expect our revenues to grow as more shoppers spend more time in the main mall, which we expect will increase shop tenant sales per square foot and therefore the rental rates that existing and prospective tenants may be willing to pay.

Investment Highlights

The following factors may benefit our company as we implement our business plan:

Favorable Industry Conditions. We have identified a significant number of malls that are potential candidates for renovation and repositioning by our company. We believe that the difficulties faced by many mall owners due to changing retail trends, competition and mismanagement have created an opportunity for us to acquire properties and to complete the mall renovations at well below the cost of new mall construction. According to the U.S. Department of Commerce, despite periods of varying macroeconomic growth and decline in the U.S. economy, total retail and food services sales increased from approximately $2.1 trillion in 1992 to $3.8 trillion in 2003, or 82.5%. We believe that these favorable trends of increasing retail and food service sales, combined with the opportunity to acquire and renovate properties at well below the cost of new construction, present us with the opportunity to create substantial value for our stockholders through our acquisition, renovation and repositioning strategies.

Lack of Competition for the Acquisition of Underperforming Malls. Upon completion of this offering, we believe that we will be the only publicly-traded REIT exclusively focused on the acquisition, renovation and repositioning of underperforming or distressed malls. Most of the existing mall REITs are primarily focused on acquiring and owning stabilized malls with predictable in-place cash flow and are generally disinclined to purchase or own underperforming assets. In addition, investments in underperforming or distressed malls are highly complex, management intensive and require significant experience by the owner, which discourages many real estate investors from seeking these properties.

Experienced Management Team. Our senior management team has significant experience in all aspects of property development, acquisition, management, leasing and redevelopment. Four of the top five members of our senior management team have an average of over 20 years experience in the real estate business and have led the development, redevelopment, leasing and acquisition of more than 50 retail and office properties totaling over six million square feet of space with an aggregate market value of more than $1.3 billion. Our senior management team will devote substantially all of their business attention and time to our company.

Growth-Oriented Capital Structure. Upon completion of this offering and the formation transactions, we expect to have the financial capacity to acquire additional mall assets by accessing additional funds through secured and unsecured borrowings and public offerings of equity and debt securities. We do not currently have commitments in place for these borrowings and have no current intention to conduct offerings of equity or debt securities in the near future.

Management’s Significant Equity Stake. Upon completion of this offering, our management team will own a 14.8% equity interest in our company on a fully-diluted basis. Therefore, management’s and stockholders’ economic interests will be closely aligned.

Appreciation Potential. We will attempt to redevelop our mall portfolio in a manner that will create significant appreciation in value as a result of our renovation and repositioning strategies, which affords us the opportunity to create capital gains for our stockholders as we selectively sell stabilized properties. We intend to re-deploy the capital derived from such sales into new, higher yielding investment opportunities in the mall sector.

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Our Business and Growth Strategies

Our primary business objectives are to increase the occupancy, tenant sales, rental income, and cash flow from each of our properties resulting in increased cash available for distribution to our stockholders and growth in net asset value per share. Our business and growth strategies to achieve these objectives include the following elements:

•

Aggressively Pursue Additional Targeted Property Acquisitions. Our strategy is to opportunistically acquire underperforming or distressed malls and transform them into physically attractive and profitable Class A or near Class A malls. We recently executed a non- binding letter of intent to acquire a super-regional mall in a major Midwestern market and are conducting due diligence investigations on this property. There can be no assurance that we will complete this transaction.


	•	*Focus on Markets with Strong Demographics.* We will seek to acquire underperforming or distressed malls that exhibit strong market characteristics and demographics, including proximity to major highways, dense population centers and retail hubs, rising population and income trends and manageable competition in relation to local population densities.


	•	*Implement Renovation and Repositioning Strategies.* We will implement comprehensive renovation and repositioning strategies aimed at improving the physical appearance, visibility and design of our malls in order to increase shopper traffic and tenant sales.


	•	*Maximize Occupancy.* We will seek to remedy weak occupancy at our target properties by adding anchor tenants with powerful consumer draws as well as attractive and diverse national and specialty shop tenants. We expect to achieve optimal tenant mixes by moving tenants into tenant neighborhoods. Tenant neighborhoods are clusters of tenants located within a concentrated area of a mall that sell to specific consumer segments, such as teenagers. A major component of our tenant leasing program will be accomplished by implementing targeted tenant marketing campaigns at the local and national level.


	•	*Drive Revenues Through Leasing.* We will seek to increase rental income from existing space by maintaining high levels of occupancy, increasing rental rates as current leases with below market rents expire, negotiating new leases to reflect increases in rental rates and maximizing percentage rents. We will also seek to replace underperforming shop tenants with stronger tenants whose sales will enhance overall mall shopper traffic and tenant sales. We believe that higher tenant sales per square foot will generate increased leasing demand from higher quality shop tenants. As a result, we believe that our malls will tend to have a greater potential for increases in rent upon lease renewal in comparison to more stable properties owned by other mall REITs.


	•	*Manage Property Intensively.* The core of our management strategy is to continuously increase shopper traffic through our malls, which improves tenant sales volume and, ultimately, rental rates. In addition, we utilize a comprehensive decentralized approach to property and operational management to increase and maintain occupancy, improve tenant satisfaction, improve customer satisfaction and control operating costs.


	•	*Mitigate Risk.* We will seek to control the risks associated with our acquisition, renovation and repositioning efforts through an extensive due diligence and project evaluation process prior to committing substantial risk capital to any project. In some cases, we will seek to negotiate new tenant leases with multiple anchor tenants (rather than relying on only one or two larger anchor tenants) and we will negotiate early lease terminations from underperforming tenants.


	•	*Pursue Joint Ventures.* We intend to acquire, renovate and reposition some of our properties in joint ventures with institutional investors through which we will seek to enhance our returns by supplementing the cash flow we receive from our properties with additional management, leasing, development and incentive fees from the joint ventures.

Our Financing Strategies

While our charter does not limit the amount of debt we can incur, we intend to maintain a strong and flexible financing position by maintaining a prudent level of leverage consistent with the level of debt typical

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of publicly-traded mall REITs. We will consider a number of factors in evaluating our actual level of indebtedness, both fixed and variable rate, and in making financial decisions. We intend to finance our acquisition, renovation and repositioning projects with the most advantageous source of capital available to us at the time of the transaction, including traditional floating rate construction financing. We expect that once we have completed our renovation and repositioning of a specific mall asset we will replace construction financing with medium- to long-term fixed rate financing. We may also finance our activities through any combination of sales of common or preferred shares or debt securities, additional secured or unsecured borrowings and our proposed line of credit.

In addition, we may also finance our acquisition, renovation and repositioning projects through joint ventures with institutional investors. Through these joint ventures, we will seek to enhance our returns by supplementing the cash flow we receive from our properties with additional management, leasing, development and incentive fees from the joint ventures. We may also acquire properties in exchange for our OP units.

Proposed Line of Credit

We are currently exploring the possibility of obtaining from certain banks a line of credit for approximately $75 million. We currently expect that the equity value of Colonie Center could be used to support a secured line of credit. We expect to enter into this proposed line of credit concurrently with or shortly after completion of this offering.

The Formation Transactions

We currently conduct our business through (i) our predecessor, Feldman Equities of Arizona, LLC, an Arizona limited liability company, which, together with its subsidiaries, owns a 25% capital interest in the joint venture that owns the Harrisburg Mall and a 67% capital interest in the joint venture that owns the Foothills Mall, and (ii) two corporations which also serve as the general partner of two of these subsidiaries. We refer collectively to Feldman Equities of Arizona and these two corporations as the contributed entities. Prior to the formation transactions, the ownership interests in Feldman Equities of Arizona were held, directly or indirectly, by Larry Feldman, our Chairman and Chief Executive Officer (who together with his affiliates holds an estimated 56% economic interest), Jim Bourg, our Executive Vice President and Chief Operating Officer (who holds an estimated 15.5% indirect economic interest), Scott Jensen, our Executive Vice President of Leasing (who holds an estimated 15.5% indirect economic interest), and Jeffrey Erhart, our Executive Vice President and General Counsel (who holds an estimated 13.1% economic interest), and their respective affiliates. The two corporations are owned 51% by Larry Feldman and his affiliates. We refer to the ownership interests in the contributed entities collectively as the ownership interests and we refer to the holders of these ownership interests who are members of our senior management team and their respective affiliates as the contributors. Larry Feldman, Jim Bourg and Scott Jensen are considered promoters with respect to our company.

Prior to or concurrently with the closing of this offering, we will engage in the following series of transactions, which we refer to as the formation transactions, pursuant to contribution, merger and related agreements. These agreements contain customary representations and warranties and are subject to customary closing conditions. As a result of the formation transactions, we will acquire the contributed entities, including their interests in the Harrisburg Mall and the Foothills Mall. The formation transactions include the following:

	•	We will sell 10,666,667 shares of our common stock in this offering and up to an additional 1,600,000 shares of our common stock if the underwriters exercise their over-allotment option and will contribute the net proceeds from this offering to our operating partnership in exchange for a number of OP units equal to the total number of shares of common stock sold.

•

Pursuant to separate contribution, merger and related agreements, the contributors will contribute their direct and indirect ownership interests to us in exchange for an aggregate of approximately 123,228 shares of our common stock and 1,593,464 OP units (having an aggregate value of approximately $25.8 million based on the mid-point of the price range indicated on the front cover of this

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prospectus). The aggregate historical combined net book value of the ownership interests to be contributed to us was approximately $34,000 as of September 30, 2004. The aggregate number of equity securities to be received by each such person and his or her affiliates and the aggregate net book value attributable to such interests as of September 30, 2004 are set forth in “Benefits to Related Parties.” In addition, unaffiliated third party investors will exchange their ownership interests in our joint ventures for $5 million in cash.


	•	The contribution, merger and related agreements also provide that Larry Feldman, Jim Bourg and Scott Jensen will retain all right, title and interest held by the contributed entities to amounts held in certain cash impound accounts established pursuant to the $54.8 million mortgage loan due 2008 originated by Archon Group, LP, which is secured by the Foothills Mall. Funds held in these accounts accrue interest and will be released or reimbursed to Larry Feldman, Jim Bourg and Scott Jensen promptly upon their release from the impound accounts. As of September 30, 2004, the balances in these accounts totaled approximately $7.6 million.


	•	In addition, Feldman Partners, LLC (an entity controlled by Larry Feldman and owned by him and his family), Jim Bourg and Scott Jensen will receive 70%, 15% and 15%, respectively, of additional OP units that may be issued for their ownership interests upon the achievement of the internal rate of return relating to the Harrisburg Mall. The aggregate value of the additional OP units that may be issued with respect to the Harrisburg Mall will be equal to 50% of the amount, if any, that the internal rate of return achieved by us from the joint venture exceeds 15% on or prior to December 31, 2009.


	•	In connection with the formation transactions, we will become subject to approximately $70.1 million of consolidated mortgage and other indebtedness consisting of (i) a $54.8 million mortgage loan secured by the Foothills Mall, (ii) a $5.4 million mezzanine loan relating to the Foothills Mall, (iii) a $5.9 million intercompany loan owed to Feldman Partners, LLC that was used to invest in the Harrisburg Mall and the Foothills Mall and to pay our predecessor’s overhead expenses, and (iv) the $4 million outstanding under the $6 million line of credit owed by our predecessor which was incurred to return funds advanced by our existing owners in connection with the purchase and renovation of the Harrisburg Mall and the Foothills Mall. In addition, the joint venture that owns the Harrisburg Mall will remain subject to a construction loan that has a maximum funding commitment of approximately $46.9 million, of which the joint venture has borrowed $29.7 million as of September 30, 2004. The construction loan bears interest at a rate of LIBOR plus 250 basis points.


	•	We intend to use approximately $13.4 million of the net proceeds of this offering to repay certain of the outstanding indebtedness, consisting of (i) a $5.4 million mezzanine loan relating to the Foothills Mall, (ii) $4.0 million of the $5.9 million intercompany loan owed to Feldman Partners, LLC ($1.9 million of this loan will be converted into equity securities) and (iii) the $4 million outstanding under the $6 million line of credit owed by our predecessor.


	•	We intend to acquire Colonie Center for a base purchase price of $84.2 million, subject to increase by up to an additional $9 million if, prior to June 30, 2005, certain pending leases in negotiation are executed and tenants under such leases take occupancy and commence rental payments. In addition we plan to invest an additional $9.6 million in the renovation and repositioning plan for Colonie Center for an estimated total project cost of $102.8 million. We expect to fund these amounts out of the net proceeds of this offering. We anticipate that this acquisition will close within 30 days following the closing of this offering. We believe it is probable that this transaction will be consummated; however, there can be no assurance that this transaction will close.


	•	In connection with the formation transactions, we will enter into agreements with the contributors that indemnify them with respect to certain tax liabilities intended to be deferred through the formation transactions, if those tax liabilities are triggered either as a result of a taxable disposition of a property by us, or if we fail to offer the opportunity for the contributors to guarantee or otherwise bear the risk of loss with respect to certain amounts of our debt for tax purposes. With respect to tax liabilities arising out of property sales, the indemnity will cover 100% of any such liability until December 31, 2009 and will be reduced by 20% of the aggregate liability on each of the next five following year ends thereafter.

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In determining the number of equity securities that will be issued in exchange for the ownership interests in the formation transactions, the management of our predecessor valued the ownership interests in our predecessor by taking into account the value of the properties owned by the joint ventures in which our predecessor owns an interest and the amount of the related debt and other liabilities of our predecessor and such joint ventures that will be outstanding immediately prior to the closing of this offering. The factors considered by our predecessor’s management in valuing the properties included an analysis of the progress made in completing the redevelopment of these properties, market sales comparables, market capitalization rates for other mall properties and general market conditions for mall properties. Our predecessor’s management, however, did not receive any third party appraisals of our predecessor’s properties in determining their value.

Feldman Equities Management, Inc., a Delaware corporation and an indirect wholly owned subsidiary of our operating partnership, will, together with our company, make an election to be treated as our taxable REIT subsidiary. We expect that this taxable REIT subsidiary will earn income and engage in activities that might otherwise jeopardize our status as a REIT or that would cause us to be subject to a 100% tax on prohibited transactions. We will own all of the outstanding capital stock of two corporations, Feldman Pads Partner Inc. and Feldman Mall Partners Inc., that held a 1% interest in the joint venture that currently owns the Foothills Mall. We acquired these two taxable REIT subsidiaries and their combined 1% interest in the Foothills Mall in the formation transactions, and we do not expect them to earn significant income. A taxable REIT subsidiary is taxed as a corporation and its income therefore will be subject to U.S. federal, state and local corporate level tax. We may form additional taxable REIT subsidiaries in the future in order to engage in certain activities that might otherwise jeopardize our status as a REIT. Any income earned by our taxable REIT subsidiaries will not be included for purposes of the 90% distribution requirement discussed under “US Federal Income Tax Considerations—Annual Distribution Requirements.” For a further detailed discussion of the effect of taxable subsidiary entities, see “U.S. Federal Income Tax Considerations—Taxation of the Company.”

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Our Structure

The following chart reflects the material aspects of our corporate organization following completion of this offering and the formation transactions:

(1)	An entity controlled by Larry Feldman and owned by him and his family.

(2)

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Benefits to Related Parties

Upon completion of this offering and the formation transactions, certain of our directors and members of our senior management will receive material financial and other benefits, as shown below. For a more detailed discussion of these benefits, see “Management,” “Certain Relationships and Related Transactions” and “Benefits to Related Parties.” Unless otherwise indicated, the information set forth below assumes a per share value of $15.00, which is the mid-point of the price range indicated on the front cover of this prospectus.

Formation Transactions

In connection with the formation transactions, the contributors will exchange their existing ownership interests in the contributed entities for equity securities in our company, as described below:

Name		Securities Received

Larry Feldman, or Feldman Partners, LLC, an entity controlled by Larry Feldman and owned by him and his family		Larry Feldman and Feldman Partners, LLC will contribute the following ownership interests in the contributed entities: (i) an estimated 56% economic interest in Feldman Equities of Arizona and (ii) a 51% interest in each of Feldman Mall Partners Inc. and Feldman Equities General Partner, Inc. As of September 30, 2004, these ownership interests had an aggregate net book value of approximately $23,000. These interests will be exchanged for 123,228 shares of common stock and 966,456 OP units (with a combined aggregate value of approximately $16.3 million).

Jim Bourg		Jim Bourg will contribute an estimated 15.5% indirect economic interest in Feldman Equities of Arizona. As of September 30, 2004, these ownership interests had an aggregate net book value of approximately $5,500. These ownership interests will be exchanged for 233,504 OP units (with an aggregate value of approximately $3.5 million).

Scott Jensen		Scott Jensen will contribute an estimated 15.5% indirect economic interest in Feldman Equities of Arizona. As of September 30, 2004, these ownership interests had an aggregate net book value of approximately $5,500. These ownership interests will be exchanged for 233,504 OP units (with an aggregate value of approximately $3.5 million).

Jeffrey Erhart		Jeffrey Erhart will contribute an estimated 13.1% economic interest in Feldman Equities of Arizona. As of September 30, 2004, these ownership interests had a nominal book value. These ownership interests will be exchanged for 160,000 OP units (with an aggregate value of approximately $2.4 million) and which exchange has reduced the shares of restricted stock reserved for issuance under the 2004 equity incentive plan.


	Predecessor Distribution

On September 30, 2004, our predecessor declared a distribution in respect of the calendar quarter ended September 30, 2004 in the aggregate amount of $450,652, which was paid to Larry Feldman by our predecessor on December 2, 2004.

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Repayment of Affiliated Indebtedness and Release of Guarantees

In connection with the formation transactions, we will extinguish an intercompany loan owed to Feldman Partners, LLC (an entity controlled by Larry Feldman and owned by him and his family), in the amount of $5.9 million as of September 30, 2004. Of the total amount of this loan, $1.9 million will be converted into equity securities and $4.0 million will be repaid in cash. This loan was used to invest in the Harrisburg Mall and the Foothills Mall and to pay overhead expenses.

The Harrisburg Mall joint venture has a construction loan with Commerce Bank relating to the Harrisburg Mall that has a maximum funding commitment of approximately $46.9 million, of which the joint venture has borrowed $29.7 million as of September 30, 2004. This loan presently has a limited recourse of $10 million, of which affiliates of the Lubert Adler Funds are liable for $6.3 million, or 63%, and Larry Feldman is liable for $3.7 million, or 37%. We will assume Larry Feldman’s recourse liabilities under this loan upon completion of this offering and the formation transactions. If we are unsuccessful in assuming any such recourse liabilities, we will indemnify Larry Feldman with respect to any loss incurred with respect thereto.

We expect to cause the release of (i) a contingent personal guaranty previously made by Larry Feldman with respect to the Foothills Mall and (ii) a personal guaranty previously made by Larry Feldman with respect to the $6 million line of credit with Marshall and Ilsley Bank upon application of a portion of the net proceeds of this offering to repay the $4 million outstanding thereunder.

Employment Agreements

Prior to the closing of this offering, Larry Feldman, Jim Bourg, Scott Jensen, Jeff Erhart and Thomas Wirth will enter into or have entered into employment agreements with our company, each of which will have a term of three years (four years in the case of Mr. Feldman) with automatic one year renewals and will provide for an annual base salary, eligibility for annual bonuses, eligibility for participation in our 2004 equity incentive plan and participation in all of the employee benefit plans and arrangements made available by us to our similarly situated executives. Additionally, Mr. Wirth will be granted 66,667 shares of restricted stock (or other equity-based compensation of equivalent value) valued at $1,000,000 under the 2004 equity incentive plan.

Registration Rights Agreement

As holders of OP units and/or common stock, Larry Feldman and our other officers and directors will receive registration rights with respect to shares of our common stock acquired by them in the formation transactions, including in connection with their exercise of redemption rights with regard to their OP units under the partnership agreement.

Additional OP Units

The contribution, merger and related agreements provide that Feldman Partners, LLC (an entity controlled by Larry Feldman and owned by him and his family), Jim Bourg and Scott Jensen will receive 70%, 15% and 15%, respectively, of additional OP units for their ownership interests that may be issued upon the achievement of the internal rate of return relating to the Harrisburg Mall prior to December 31, 2009. The aggregate value of the additional OP units that may be issued with respect to the Harrisburg Mall will be equal to 50% of the amount, if any, that the internal rate of return achieved by us from the joint venture exceeds 15% on or prior to December 31, 2009.

Cash Impound Accounts

The contribution, merger and related agreements also provide that Larry Feldman, Jim Bourg and Scott Jensen will retain all right, title and interest held by the contributed entities to amounts held in certain restricted and cash impound accounts established pursuant to the $54.8 million mortgage loan due in 2008 and originated by Archon Group, LP, which is secured by the Foothills Mall. Funds held in these accounts accrue interest and will be released or reimbursed to Larry Feldman, Jim Bourg and Scott Jensen promptly

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upon their release from the impound accounts. As of September 30, 2004, the balances in these accounts totaled approximately $7.6 million.

Tax Protection Agreements

In connection with the formation transactions, we will enter into agreements with the contributors that indemnify them with respect to certain tax liabilities intended to be deferred through the formation transactions, if those liabilities are triggered either as a result of a taxable disposition of a property by us, or if we fail to offer the opportunity for the contributors to guarantee or otherwise bear the risk of loss with respect to certain amounts of our debt for tax purposes. With respect to tax liabilities arising out of property sales, the indemnity will cover 100% of any such liability until December 31, 2009 and will be reduced by 20% of the aggregate liability on each of the next five following year ends thereafter.

Directors’ and Officers’ Indemnification Agreements

We have also entered into indemnification agreements with each of our executive officers and directors whereby we indemnify such executive officers and directors to the fullest extent permitted by applicable Maryland law against all expenses and liabilities, subject to limited exceptions. These indemnification agreements also provide that upon an application for indemnity by an executive officer or director to a court of appropriate jurisdiction, the court may order us to indemnify the executive officer or director. In addition, our charter and the partnership agreement provide for indemnification of our officers and directors against liabilities to the fullest extent permitted by applicable Maryland law.

Conflicts of Interest

Following completion of this offering and the formation transactions, conflicts of interest will exist between our directors and executive officers and our company as described below.

We have entered into tax protection agreements with the contributors which may limit our ability to sell certain of our properties because we are obligated, pursuant to the terms of these agreements, to idemnify the contributors for certain tax liabilities intended to be deferred through the formation transactions.

Larry Feldman, our Chairman and Chief Executive Officer, Jim Bourg, our Executive Vice President and Chief Operating Officer, Scott Jensen, our Executive Vice President of Leasing and Jeffrey Erhart, our Executive Vice President and General Counsel, have direct or indirect ownership interests in certain entities to be contributed to our operating partnership in the formation transactions. Accordingly, to the extent these individuals are parties to any of our contribution agreements, we may pursue less vigorous enforcement of the terms of these agreements.

We did not obtain third party appraisals of the initial properties in connection with our acquisition of these properties and the consideration being paid by us in exchange for the initial properties may exceed fair market value or the value that may be indicated by third party appraisals. The terms of the contribution agreements and the valuation methods used to determine the value of the properties were determined by our senior management team.

Conflicts of interest could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our operating partnership or any holder of OP units, on the other hand. For example, in connection with a proposed sale or refinancing of a property that has been contributed by a holder of OP units, that holder may have different and more adverse tax consequences with respect to that sale as compared to our stockholders. Our directors and officers have duties to our company and our stockholders under applicable Maryland law in connection with their management of our company. At the same time, we, as a general partner of our operating partnership through a wholly owned business trust subsidiary, have fiduciary duties to our operating partnership and to its limited partners under Delaware law. To the extent that conflicts exist between the interests of our company and our stockholders, on the one hand, and our operating partnership and holders of OP units, on the other hand, the duties of our directors and officers to our company and to our stockholders may conflict with our duties as general partner to our operating partnership and its partners. The partnership agreement of our operating partnership does not require us to resolve such conflicts in favor of either our stockholders or the limited partners of our operating partnership.

We have adopted policies that are designed to eliminate or minimize potential conflicts of interest.

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This Offering


Common stock offered by us	10,666,667 shares⁽¹⁾


Common stock to be outstanding prior to completion of this offering	123,228 shares⁽²⁾


Common stock to be outstanding after this offering	10,917,880 shares^{(1) (3)}


Common stock to be outstanding after this offering (assuming conversion of all OP units into common stock)	12,511,344 shares^{(1) (3)}


Use of proceeds (in thousands)	We intend to use the net proceeds of this offering to:


	•	acquire Colonie Center which is currently under contract		$93,200⁽⁴⁾


	•	invest in the renovation and repositioning plan for Colonie Center		$9,600


	•	repay a mezzanine loan owed by our predecessor to Massachusetts Mutual Life Insurance Company in connection with the redevelopment of the Foothills Mall		$5,400


	•	repay an intercompany loan owed by our predecessor to Feldman Partners, LLC that was used to invest in the Harrisburg Mall and the Foothills Mall and pay overhead expenses		$4,000


	•	repay amounts outstanding under the $6 million line of credit owed by our predecessor to Marshall and Ilsley Bank which was used by our predecessor to return funds advanced by the existing owners in our two properties for acquisition costs and capital improvements		$4,000


	•	reimburse cash impound accounts at the Foothills Mall established in connection with tenant improvements, including interest		$4,100


	•	acquire unaffiliated third party investor interests in the Foothills Mall		$4,500


	•	acquire unaffiliated minority third party investor interests in the Harrisburg Mall		$500


	Any net proceeds remaining after the uses set forth in the table above will be used for working capital purposes and for potential acquisitions of underperforming malls. If the underwriters exercise their over-allotment option for this offering in full, we expect to use the additional net proceeds, which will be approximately $22,300, for property acquisitions and working capital needs.


NYSE symbol	“FMP”

(1)	Excludes up to 1,600,000 shares of common stock that may be issued by us upon exercise of the underwriters’ over-allotment option with respect to this offering.

(2)	Represents the number of shares of common stock outstanding prior to the completion of this offering and following completion of the formation transactions.

(3)	Includes 127,985 restricted shares of common stock to be issued by us concurrently with this offering to employees and our independent directors under the 2004 equity incentive plan.

(4)	The base purchase price of Colonie Center is $84.2 million. The purchase agreement provides for an increase in the purchase price of up to $9 million if, prior to June 30, 2005 certain leases in negotiation are executed and tenants under such leases take occupancy and commence rental payments.

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Our Ownership Limit

Due to limitations on the concentration of ownership of REIT stock imposed by the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, our charter generally prohibits any person from actually or constructively owning more than 9.0% (by value or by number of shares, whichever is more restrictive) of our common stock or 9.0% (by value or by number of shares, whichever is more restrictive) of our outstanding capital stock. Our charter, however, will permit exceptions to be made for stockholders provided our board of directors determines such exceptions will not jeopardize our tax status as a REIT. In addition, a different ownership limit will apply to Larry Feldman, certain of his affiliates, family members and estates and trusts formed for the benefit of the foregoing. This ownership limit will allow Larry Feldman, certain of his affiliates, family members and estates and trusts formed for the benefit of the foregoing, to hold 13.5% (by value or by number of shares, whichever is more restrictive) of our common stock or 13.5% (by value or number of shares, whichever is more restrictive) of our outstanding capital stock. Furthermore, certain designated investment entities, as defined in our charter generally to include pension funds, mutual funds and certain investment management companies, will have an ownership limit of 9.8% (by value or by number of shares, whichever is more restrictive) of our common stock, or 9.8% (by value or by number of shares, whichever is more restrictive) of our outstanding capital stock, provided that the beneficial owners of the common stock or capital stock, as applicable, held by such entity would satisfy the 9.0% ownership limit after application of the relevant constructive ownership rules.

Our Tax Status

We intend to elect to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code, commencing with our taxable year ending December 31, 2004. We believe that we are organized in conformity with the requirements for qualification and taxation as a REIT, and our proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes. We expect to receive an opinion of Clifford Chance US LLP to the effect that, beginning with our taxable year ending December 31, 2004, we have been organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code, and that our proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT for the taxable year ended December 31, 2004 and subsequent taxable years.

To maintain our REIT status, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute at least 90% of our REIT taxable income to our stockholders. As a REIT, we generally will not be subject to U.S. federal income tax on REIT taxable income we currently distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax at regular corporate rates. Even if we qualify for taxation as a REIT, we may be subject to some U.S. federal, state and local taxes on our income or property, and the income of our taxable REIT subsidiaries will be subject to taxation at normal corporate rates.

Distribution Policy

On September 30, 2004, our predecessor declared a distribution in the aggregate amount of $450,652, which will be payable to Larry Feldman by our predecessor out of available cash balances of our predecessor in respect of the quarter ended September 30, 2004. There is no assurance that we will be able to maintain our distribution to our stockholders at this level, or at all, following the completion of this offering.

Following the completion of the formation transactions, the timing and frequency of our distributions will be determined and declared by our board of directors based upon a variety of factors, including:

•

actual results of operations;


	•	the timing of the investment of the proceeds of this offering;


	•	debt service requirements;


	•	capital expenditure requirements for our properties and the pace and timing of our acquisitions;


	•	the number of our malls which are producing stable cash flow after having undergone renovations and repositionings directed by our company;

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•

our taxable income;


	•	our operating expenses; and


	•	other factors that our board of directors may deem relevant.

In addition, because loan advances under the Harrisburg Mall joint venture’s construction loan with Commerce Bank are reduced by the amount of the joint venture’s net cash flow after operating expenses and debt service, the joint venture will not have cash from operations to distribute to the joint venture partners during the period that it is taking advances under this loan because any net cash flow will be used in lieu of the advances. The construction loan with Commerce Bank matures on December 31, 2005 and we expect that the construction project at the Harrisburg Mall will be completed by the third quarter of 2005. We do not expect this limitation to affect our ability to fund distributions because once the construction is completed, we expect the joint venture that owns the Harrisburg Mall to refinance this construction loan with alternative mortgage financing.

We anticipate that, at least initially, our distributions will exceed our current and accumulated earnings and profits as determined for U.S. federal income tax purposes. Therefore, a portion of these distributions may represent a return of capital rather than a dividend for U.S. federal income tax purposes. Distributions in excess of our current and accumulated earnings and profits will not be taxable to a taxable U.S. stockholder under current U.S. federal income tax law to the extent those distributions do not exceed the stockholder’s adjusted tax basis in his or her common stock, but rather will reduce such adjusted basis in our common stock. Therefore, the gain (or loss) recognized on the sale of that common stock or upon our liquidation will be increased (or decreased) accordingly. To the extent those distributions exceed a taxable U.S. stockholder’s adjusted tax basis in his or her common stock, they generally will be treated as a capital gain realized from the taxable disposition of those shares. The percentage of our stockholder distributions that exceeds our current and accumulated earnings and profits may vary substantially from year to year.

U.S. federal income tax law requires that a REIT distribute annually at least 90% of its net taxable income excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its REIT taxable income including capital gains. We anticipate that our estimated cash available for distribution will exceed the annual distribution requirements applicable to REITs. However, under some circumstances, we may be required to pay distributions in excess of cash available for distribution in order to meet these distribution requirements and we may have to borrow funds to make some distributions.

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SUMMARY FINANCIAL DATA

The following table shows summary consolidated pro forma financial data for our company and historical financial data for our predecessor for the periods indicated. You should read the following summary pro forma and historical financial data together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the pro forma and historical consolidated financial statements and related notes thereto included elsewhere in this prospectus.

The following summary consolidated historical financial data have been derived from financial statements audited by KPMG LLP, independent registered public accounting firm. Consolidated balance sheets as of December 31, 2003 and 2002 and the related consolidated statements of operations and of cash flows for the year ended December 31, 2003 and for the period from April 1, 2002 (date of inception) to December 31, 2002, and the related notes thereto appear elsewhere in this prospectus. The selected historical financial data as of and for the nine months ended September 30, 2004 and September 30, 2003 have been derived from the unaudited financial statements of our predecessor included elsewhere in this prospectus and include all adjustments, consisting only of normal, recurring accruals which management considers necessary for a fair presentation of the historical financial data for such periods.

Our unaudited summary consolidated pro forma results of operations data and balance sheet data as of and for the nine months ended September 30, 2004 and for the year ended December 31, 2003 give effect to the formation transactions, this offering, the use of proceeds from this offering and certain related transactions as described elsewhere in this prospectus. Our pro forma financial information is not necessarily indicative of what our actual financial position and results of operations would have been as of the dates and for the periods indicated, nor does it purport to represent our future financial position or results of operations.

	Nine months ended September 30,							Period ended December 31, ⁽¹⁾

	Company Pro Forma		Our Predecessor Historical					Company Pro Forma		Our Predecessor Historical
	Company Pro Forma							Company Pro Forma
	2004 (Unaudited)		2004 (Unaudited)			2003 (Unaudited)		2003 (Unaudited)		2003			2002

	(amounts in thousands, except share and per share data)
Statement of Operations Data:
Revenue:
Rental	$	12,378	$	4,913		$	5,175	$	17,386	$	6,720		$	4,881
Tenant reimbursements		6,541		3,192			3,319		9,125		4,446			3,385
Management, leasing and development services		799		799			339		461		461			248
Interest and other income		260		206			93		116		67			51

Total revenue		19,978		9,110			8,926		27,088		11,694			8,565
Expenses:
Rental property operating and maintenance		6,520		3,364			3,081		8,654		4,193			2,950
Real estate taxes		2,315		947			987		3,048		1,225			1,017
Interest (including amortization of deferred financing costs)		2,497		3,336			3,031		4,355		4,904			3,264
Depreciation and amortization		3,822		1,206			1,051		4,900		1,442			964
General and administrative		2,004		512			319		4,962		672			1,218
Other		34		34			47		161		161			249

Total expenses		17,192		9,399			8,516		26,080		12,597			9,662
Equity in earnings of unconsolidated real estate partnership		300		300			—		954		197			—

Income (loss) before minority interest		3,086		11			410		1,962		(706	)		(1,097	)
Minority interest		393		68			344		250		30			107

Net income (loss)	$	2,693	$	(57	)	$	66	$	1,712	$	(736	)	$	(1,204	)

Pro forma basic earnings per share ⁽²⁾	$	0.25		—			—	$	0.16		—			—
Pro forma diluted earnings per share ⁽³⁾	$	0.25		—			—	$	0.16		—			—

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	Nine months ended September 30,								Period ended December 31, ⁽¹⁾

	Company Pro Forma		Our Predecessor Historical						Company Pro Forma		Our Predecessor Historical
	Company Pro Forma								Company Pro Forma
	2004 (Unaudited)		2004 (Unaudited)			2003 (Unaudited)			2003 (Unaudited)		2003			2002

	(amounts in thousands, except share and per share data)
Pro forma weighted average common shares outstanding — basic⁽²⁾		10,834,689		—			—			10,815,492		—			—
Pro forma weighted average common shares outstanding — diluted⁽³⁾		10,917,880		—			—			10,917,880		—			—

Balance Sheet Data (at period end):
Investments in real estate, net of accumulated depreciation	$	131,797	$	52,157		$	49,227				$	50,473		$	48,729
Total assets		204,284		74,240			58,256					70,776			58,271
Mortgages and other loans payable		54,750		64,434			45,099					61,278			46,528
Total liabilities		77,917		73,376			54,255					69,923			54,680
Minority interest		16,094		830			3,108					762			2,764
Stockholders’/owners’ equity		110,273		34			893					91			827
Total liabilities and stockholders’/owners’ equity		204,284		74,240			58,256					70,776			58,271

Other Data:
Cash flows provided by (used in):
Operating activities		—		(196	)		1,240			—		758			514
Financing activities		—		1,585			(960	)		—		9,517			54,363
Investing activities		—		(4,152	)		101			—		(6,644	)		(54,531	)

(1)	Represents the year ended December 31, 2003 and the period from April 1, 2002 (date of inception) to December 31, 2002.

(2)

Pro forma basic earnings per share is computed assuming this offering was consummated as of January 1, 2003 and equals pro forma net income (loss) divided by the number of shares of our common stock to be outstanding after this offering, excluding the weighted average of the number of unvested shares of restricted stock. The pro forma shares outstanding for the nine months ended September 30, 2004 excludes 30,000 additional shares, equivalent to the amount of the distributions declared by our predecessor on September 30, 2004.

(3)

Pro forma diluted earnings per share is computed assuming this offering was consummated as of January 1, 2003 and equals pro forma net income (loss) divided by the number of shares of our common stock to be outstanding after this offering, excluding the weighted average of the number of unvested shares of restricted stock, plus an amount computed using the treasury stock method with respect to the unvested shares of our restricted stock. Unvested shares of restricted stock are excluded from the computation of pro forma diluted earnings per share in the event their inclusion is antidilutive. The pro forma shares outstanding for the nine months ended September 30, 2004 excludes 30,000 additional shares, equivalent to the amount of the distributions declared by our predecessor on September 30, 2004.

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RISK FACTORS

Investment in our common stock involves risks. You should carefully consider the following risk factors in addition to the other information contained in this prospectus before purchasing shares of the common stock we are offering. The occurrence of any of the following risks might cause you to lose all or part of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled “Statements Regarding Forward-Looking Information.”

Risks Related to Our Properties and Operations

We have not committed approximately 12.1% of the net proceeds of this offering to any specific investment and, as a result, may be considered to be a blind pool investment opportunity. Investors will not be able to evaluate the economic merits of any investments we make with our remaining net proceeds. We may be unable to invest the remaining net proceeds on acceptable terms, or at all.

Approximately 12.1% of the net proceeds of this offering have not yet been targeted for investment, and we have not identified any assets in which there is a reasonable probability that we will invest. As a result, we may have a significant amount of uncommitted net proceeds after this offering and may be considered to be a blind pool investment opportunity. Investors will not be able to evaluate the economic merits of any investments we make with our uncommitted net proceeds.

Until we identify an investment consistent with our investment criteria, we intend to invest the uncommitted net proceeds of this offering in interest bearing, short-term, investment grade securities or money-market accounts which are consistent with our intention to qualify as a REIT. We may not be able to identify mall investments that meet our investment criteria or be successful in completing any investment we identify. Any investment we complete using the net proceeds of this offering may not yield the anticipated returns on our investment. We may be unable to invest the uncommitted net proceeds from this offering on acceptable terms or at all, which could delay stockholders receiving a return on their investment. Moreover, because we will not have identified these future investments at the time of this offering, we will have broad authority to invest the excess net proceeds of this offering in any real estate investments that we may identify in the future.

Our investments in underperforming or distressed malls could be subject to higher than anticipated costs and unexpected delays, which would adversely affect our investment returns, harm our operating results and reduce funds available for distributions to our stockholders.

A key component of our growth strategy is pursuing renovation and repositioning opportunities in underperforming or distressed malls. These renovation and repositioning projects may (i) be abandoned after funds have been expended, (ii) not be completed on schedule or within budgeted amounts, or (iii) encounter delays or refusals in obtaining all necessary zoning, land use, building, occupancy and other required governmental permits and authorizations. Any of the foregoing circumstances could result in our failing to realize any return on our investment or a lower return than expected. Such an outcome could reduce our revenue, harm our operating results and reduce funds available for distributions to our stockholders.

The assumptions we make in evaluating a renovation or repositioning opportunity may not prove to be correct and, as a result, our investment returns may be adversely impacted.

In deciding whether to renovate and reposition a particular property, we make certain assumptions regarding the expected future performance of that property and the projected costs and expenses to be incurred. We may underestimate the costs or time necessary to bring the property up to the standards established for its intended market position or may be unable to increase occupancy at a newly acquired property as quickly as expected or at all. Any substantial unanticipated delays or expenses could adversely affect the investment returns from these projects and harm our operating results, liquidity and financial condition, which could result in a decline in the value of our common stock.

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Our initial properties are limited to three geographic areas leaving us exposed to economic downturns in those areas.

Our properties are located in the Harrisburg, Pennsylvania area and the Tucson, Arizona area. In addition, we have entered into a binding agreement to acquire a third mall located in the Albany, New York area. We are particularly exposed to downturns in these local economies or other changes in local real estate market conditions. As a result of economic changes in these markets, our business, financial condition, operating results, cash flow, the trading price of our common stock, our ability to satisfy our debt service obligations and our ability to pay distributions could be materially adversely affected.

We may seek to acquire, renovate and reposition a property in a new, less familiar geographic area, and such an expansion may not prove successful or achieve expected performance even if successfully completed.

We may in the future renovate and reposition malls in geographic regions where we do not currently have a presence and where we do not possess the same level of familiarity with redevelopment as we do in other geographic areas. Our ability to redevelop such properties successfully or at all or to achieve expected performance depends, in part, on our familiarity with local demographic trends and potential competition from new development. We are currently in preliminary discussions with a number of potential sellers of mall properties. Other than our proposed acquisition of Colonie Center, we currently have no agreement to invest in any property other than the initial properties. There can be no assurance that we will make any investments in any other properties that meet our investment criteria.

We have a limited operating history and might not be able to operate our business or implement our strategies successfully.

We were organized in July 2004 and have no operating history as a publicly-traded mall REIT dedicated to the acquisition, renovation and repositioning of retail shopping malls. Our lack of operating history provides you with a limited basis to evaluate the likelihood that we will be able to successfully implement our mall renovation and repositioning strategies. We cannot assure you that our past experience will be sufficient to successfully operate our company as a publicly-traded mall REIT.

Any tenant bankruptcies or leasing delays we encounter, particularly with respect to our anchor tenants, could adversely affect our operating results and financial condition.

We receive a substantial portion, approximately 56.4% of base rental income for the nine months ended September 30, 2004, from long-term leases, which we define as having an initial term of more than five years. At any time, any of our tenants may experience a downturn in its business that may weaken its financial condition. As a result, our tenants may delay lease commencement, fail to make rental payments when due or declare bankruptcy. Any leasing delays, tenant failures to make rental payments when due or tenant bankruptcies could result in the termination of the tenant’s lease and, particularly in the case of a key anchor tenant, material losses to us and harm to our results of operations. Some of our tenants may occupy stores at multiple locations in our portfolio, and the impact of any bankruptcy of those tenants may be more significant on us than on other mall operators. If tenants are unable to comply with the terms of our leases, we may modify lease terms in ways that are unfavorable to us. In addition, under many of our leases, our tenants may be required to pay rent based on a percentage of their sales or other operating results. We expect that during 2004 we will receive percentage rents from tenants occupying approximately 9.5% of our total leased square footage as of September 30, 2004. Accordingly, declines in these tenants’ operating performance would reduce the income produced by our properties.

Any bankruptcy filings by or relating to one of our tenants or a lease guarantor would bar all efforts by us to collect pre-bankruptcy debts from that tenant, the lease guarantor or their property, unless we receive an order permitting us to do so from the bankruptcy court. A tenant or lease guarantor bankruptcy could also delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these sums. If a tenant assumes the lease while in bankruptcy, all pre-bankruptcy balances due under the lease must be paid to us in full. However, if a tenant rejects the lease while in bankruptcy, we would have only a general unsecured claim for pre-petition damages. Any unsecured claim we hold may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders

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of unsecured claims. It is possible that we may recover substantially less than the full value of any unsecured claims we hold, which may harm our financial condition. As of the date hereof, we are aware that four of our tenants (including Colonie Center tenants), KB Toys, Crescent Jewelers, Weathervane and Gameworks Studio, are in bankruptcy proceedings. These four tenants represent, collectively, approximately 1.2% of our total leased square footage. We are not aware of any other tenants currently threatening to file for bankruptcy protection.

Certain provisions of our leases with some of our tenants may harm our operating performance.

We have entered into leases with some of our tenants that allow the tenant to terminate its lease, or to pay reduced rent if certain tenants fail to open or subsequently cease operating, certain percentages of the shop space in the applicable mall are not leased or if we violate exclusives and/or restrictions imposed under the leases on the types and sizes of certain tenants or uses. Such leases comprised approximately 35.6% of our predecessor’s total base rent based on leases in effect as of September 30, 2004. If any of these events occur, we may be unable to re-lease the vacated space which would reduce our rental revenue.

In addition, in many cases, our tenant leases contain provisions giving the tenant the exclusive right to sell particular types of merchandise or provide specific types of services within the particular mall, or limit the ability of other tenants within that mall to sell that merchandise or provide those services. When re-leasing space after a vacancy by one of these other tenants, these provisions may limit the number and types of prospective tenants for the vacant space. The failure to re-lease on satisfactory terms could harm our operating results.

Adverse economic or other conditions in the markets in which we do business could negatively affect our occupancy levels and rental rates and therefore our operating results.

Our operating results are dependent upon our ability to maximize occupancy levels and rental rates in our properties. Adverse economic or other conditions in the markets in which we operate may lower our occupancy levels and limit our ability to increase rents or require us to offer rental discounts. If our properties fail to generate revenues sufficient to meet our cash requirements, including operating and other expenses, debt service and capital expenditures, our net income, funds from operations, cash flow, financial condition, ability to make distributions to stockholders and common stock trading price could be adversely affected. The following factors, among others, may adversely affect the operating performance of our properties:

•

the national economic climate and the local or regional economic climate in the markets in which we operate, which may be adversely impacted by, among other factors, industry slowdowns, relocation of businesses and changing demographics;


	•	periods of economic slowdown or recession, rising interest rates or the public perception that any of these events may occur, which could result in a general decline in rent under our leases or an increase in tenant defaults;


	•	local or regional real estate market conditions such as the oversupply of shop space in a particular area;


	•	negative perceptions by retailers or shoppers of the safety, convenience and attractiveness of our properties and the areas in which they are located;


	•	increases in operating costs, including the need for capital improvements, insurance premiums, real estate taxes and utilities;


	•	changes in supply of or demand for similar or competing properties in an area;


	•	the impact of environmental protection laws;


	•	earthquakes and other natural disasters, terrorist acts, civil disturbances or acts of war which may result in uninsured or underinsured losses; and


	•	changes in tax, real estate and zoning laws.

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Competition may impede our ability to renew leases or re-let space as leases expire and require us to undertake unbudgeted capital improvements, which could harm our operating results.

We face competition from the following retail centers that are near our malls with respect to the renewal of leases and re-letting of space as leases expire;

•

The Harrisburg Mall faces competition from two regional malls and four power centers located within 10 miles of the property. In addition, we expect to compete with a new lifestyle center within four miles of the Harrisburg Mall.


	•	The Foothills Mall faces competition from three regional malls and seven power centers within 12 miles of this property. We expect the construction of new retail properties to increase modestly in proportion to demand so that vacancy levels remain low.


	•	Colonie Center faces competition from three regional malls and four power centers within 15 miles of the property.

Any additional competitive properties that are developed close to our existing properties also may impact our ability to lease space to creditworthy tenants. Increased competition for tenants may require us to make capital improvements to properties that we would not have otherwise planned to make. Any unbudgeted capital improvements may negatively impact our financial position. Also, to the extent we are unable to renew leases or re-let space as leases expire, it would result in decreased cash flow from tenants and reduce the income produced by our properties. Excessive vacancies (and related reduced shopper traffic) at one of our properties may hurt sales of other tenants at that property and may discourage them from renewing leases.

Our leases do not allow us to pass on all real estate related costs to our tenants and, if such costs increase, they could reduce our cash flow and funds available for distributions.

Our properties and any properties we acquire in the future are and will be subject to operating risks common to real estate in general, any or all of which may negatively affect us. If any property is not fully occupied or if rents are being paid in an amount that is insufficient to cover operating expenses, we could be required to expend funds for that property’s operating expenses, including real estate and other taxes, utility costs, operating expenses, insurance costs, repair and maintenance costs and administrative expenses. Excluding vacant space and excluding non-owned anchor tenants, approximately 4.6% of our predecessor’s leased square footage as of September 30, 2004 was occupied by tenants whose leases do not require them to pay a portion of the expenses associated with the property. To the extent we lease properties on a basis not requiring tenants to pay all or some of the expenses associated with the property, or if tenants fail to pay required expenses, we could be required to pay those costs, which could reduce our results of operations and cash flow.

We may not be successful in identifying and consummating suitable acquisitions that meet our investment criteria, which may impede our growth and negatively affect our results of operations.

Integral to our business strategy are continuing acquisitions of underperforming or distressed malls. Our ability to expand through acquisitions requires us to identify suitable acquisition candidates or investment opportunities that meet our investment criteria and are compatible with our growth strategy. We analyze potential acquisitions on a property-by-property and market-by-market basis. We may not be successful in identifying suitable acquisition candidates or investment opportunities or in consummating acquisitions or investments on satisfactory terms. Failures in identifying or consummating acquisitions could reduce the number of acquisitions we complete and slow our growth, which could adversely affect our results of operations.

Our ability to acquire properties on favorable terms may be adversely affected by the following significant risks:

•

competition from local investors and other real estate investors with significant capital, including other publicly-traded REITs and institutional investment funds, that may significantly increase the purchase price of the property, which could reduce our profitability;

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•

satisfactory completion of due diligence investigations and other customary closing conditions;


	•	failure to finance an acquisition on favorable terms or at all; or


	•	acquisitions of properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities such as liabilities for clean-up of undisclosed environmental contamination, claims by persons dealing with the former owners of the properties and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.

We may not be successful in integrating and operating acquired properties which could adversely affect our results of operations.

We expect to make future acquisitions of underperforming or distressed malls. We will be required to integrate them into our existing portfolio. The acquired properties may turn out to be less compatible with our growth strategy than originally anticipated, may require expenditures of excessive time and cash to make necessary improvements or renovations and may cause disruptions in our operations and divert management’s attention away from our other operations, which could impair our results of operations as a whole.

Uninsured losses or losses in excess of our insurance coverage could result in a loss of our investment, anticipated profits and cash flow from a property.

We maintain comprehensive liability, fire, flood, earthquake, wind (as deemed necessary or as required by our lenders), extended coverage and rental loss insurance with respect to our properties with policy specifications, limits and deductibles customarily carried for similar properties. Certain types of losses, however, may be either uninsurable or not economically insurable, such as losses due to riots, acts of war or terrorism. Should an uninsured loss occur, we could lose our investment in, as well as anticipated profits and cash flow from, a property. In addition, even if any such loss is insured, we may be required to pay a significant deductible on any claim for recovery of such a loss prior to our insurer being obligated to reimburse us for the loss, or the amount of the loss may exceed our coverage for the loss.

Increases in taxes and regulatory compliance costs may reduce our revenue.

Increases in income, service or other taxes generally are not passed through to tenants under leases and may reduce our net income, cash flow, financial condition, ability to pay or refinance our debt obligations, ability to make distributions to stockholders and the per share trading price of our common stock. Similarly, changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or other conditions may result in significant unanticipated expenditures, which could similarly adversely affect our business and results of operations.

We did not obtain any third party appraisals for the initial properties in our portfolio in connection with the formation transactions and the consideration to be given by us in exchange for them may exceed fair market value or the value that may have been determined by third party appraisals.

We did not obtain any third party appraisals for our initial properties in connection with our acquisition of these properties as part of the formation transactions and the consideration being paid by us in exchange for these properties may exceed fair market value or the value that may have been determined by third party appraisals. The terms of these agreements and the valuation methods used to determine the value of the properties were determined by our senior management team.

Joint venture investments could be subject to additional risks as a result of our lack of sole decision-making authority.

Immediately following completion of this offering and the formation transactions, we will hold a 25% capital interest in the Harrisburg Mall through a joint venture. We expect to selectively enter into additional joint ventures as part of our strategy. In the event that we enter into a joint venture, we would not be in a position to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity. Although major decisions affecting the Harrisburg Mall and the joint venture, including the declaration and payment of distributions by the joint venture, are shared equally by us and our joint venture partners,

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affiliates of the Lubert Adler Funds, the decision-making authority in other joint ventures may be vested exclusively with our joint venture partners or be subject to a majority vote of the joint venture partners. In addition, investments in partnerships, joint ventures or other entities may, under certain circumstances, involve risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions. Partners or co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the partner or co-venturer would have full control over the partnership or joint venture. Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and efforts on our business. Consequently, actions by or disputes with partners or co-venturers might result in subjecting properties owned by the partnership or joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our third party partners or co-venturers.

Risks Related to This Offering

If you purchase shares of our common stock in this offering, you will experience immediate and significant dilution in the book value of our common stock offered in this offering equal to $5.52 per share.

We expect the initial public offering price of our common stock to be substantially higher than the book value per share of our outstanding common stock immediately after this offering. On a pro forma basis at September 30, 2004, after giving effect to the issuance of shares of common stock and OP units in the formation transactions, but before giving effect to the other formation transactions and this offering, the net tangible book value of our predecessor was approximately ($14,917,000) or ($8.69) per share of common stock. If you purchase our common stock in this offering, you will incur immediate dilution of approximately $5.52 in the book value per share of common stock from the price you pay for our common stock in this offering. This means that the investors who purchase shares:

•

will pay a price per share that substantially exceeds the per share book value of our net assets after subtracting our liabilities; and


	•	will have contributed 118% of the total amount of our equity funding since inception but will only own 85.3% of the shares outstanding.

There is currently no public market for our common stock, an active trading market for our common stock may never develop following this offering and the trading and our common stock price may be volatile and could decline substantially following this offering.

Prior to this offering, there has been no public market for our common stock and an active trading market for our common stock may never develop or be sustained. You may not be able to resell our common stock at or above the initial public offering price. The initial public offering price of our common stock has been determined based on negotiations between us and the representatives of the underwriters and may not be indicative of the market price for our common stock after this offering. Performance, government regulatory action, tax laws, interest rates and market conditions in general could have a significant impact on the future market price of our common stock. Some of the factors that could negatively affect our share price or result in fluctuations in the price of our stock include:

•

actual or anticipated variations in our quarterly operating results;


	•	changes in our funds from operations, earnings estimates or publication of research reports about us or the real estate industry;

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•

increases in market interest rates may lead purchasers of our shares to demand a higher yield;


	•	changes in market valuations of similar companies;


	•	adverse market reaction to any increased indebtedness we incur in the future;


	•	additions or departures of key personnel;


	•	actions by institutional stockholders;


	•	speculation in the press or investment community; and


	•	general market, economic and political conditions.

Because our senior management team will have broad discretion to invest a portion of the net proceeds of this offering, they may make investments where the returns are substantially below expectations or which result in net operating losses.

Our senior management team will have broad discretion to invest a portion of the net proceeds of this offering and to determine the timing of such investments. Such discretion could result in investments that may not yield returns consistent with investors’ expectations.

Future sales of shares of our common stock may depress the price of our shares.

Upon completion of this offering and the formation transactions, we will have outstanding 10,917,880 shares of common stock, including 123,228 shares issued in the formation transactions. In addition, we will have reserved for issuance 1,593,464 shares of common stock for redemption of outstanding OP units and 287,985 shares of common stock issuable under our 2004 equity incentive plan. The 10,666,667 shares of common stock sold in this offering will be freely tradable without restriction (other than any restrictions set forth in our charter relating to our qualification as a REIT). The shares issued in the formation transactions or issuable upon redemption of outstanding OP units or under our 2004 equity incentive plan will be subject to the 180-day lock-up period described under the caption “Underwriting.” Such shares, as well as any shares owned by our “affiliates,” as that term is defined for purposes of Rule 144 under the Securities Act of 1933, as amended, or the 1933 Act, may only be resold pursuant to the requirements of Rule 144 under the 1933 Act or as described below, subject to the 180-day lock-up period described under the caption “Underwriting.”

Holders of shares issued in the formation transactions or upon redemption of outstanding OP units have registration rights requiring us to register their common stock with the Securities and Exchange Commission. In the aggregate, these shares of common stock and OP units represent approximately 13.7% of our outstanding shares of common stock on a fully-diluted basis after completion of this offering. In addition, after completion of this offering and the formation transactions, we intend to register all common stock that we may issue under our 2004 equity incentive plan, and once we register these shares they can be freely sold in the public market after issuance.

We cannot predict whether future issuances of shares of our common stock or the availability of shares for resale in the open market will decrease the market price per share of our common stock. Any sales of a substantial number of shares of our common stock in the public market, including upon the redemption of OP units, or the perception that such sales might occur, may cause the market price of our shares to decline.

In addition, the exercise of the underwriters’ over-allotment option, the redemption of OP units for common stock, the issuance of our common stock or OP units in connection with property, portfolio or business acquisitions and other issuances of our common stock could decrease the market price of the shares of our common stock, and the existence of OP units and shares of our common stock reserved for issuance as restricted shares of our common stock or upon redemption of OP units may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities. In addition, future sales of shares of our common stock may be dilutive to existing stockholders.

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Risks Related to the Real Estate Industry

Any negative perceptions of the mall industry generally by the investing public may result in a decline in our stock price.

We own and operate indoor malls and expect to continue to focus on acquiring, renovating and repositioning indoor malls in the future. Consequently, we are subject to risks inherent in investments in a single industry. To the extent that the investing public has a negative perception of indoor mall properties, the value of our common stock may be negatively impacted, which would result in our common stock trading at a discount below the inherent value of our assets as a whole.

Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our properties.

Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties in our portfolio in response to changing economic, financial and investment conditions is limited. Decreases in market rents, negative tax, real estate and zoning law changes and changes in environmental protection laws may also increase our costs, lower the value of our investments and decrease our income, which would adversely affect our business, financial condition and operating results. We cannot predict whether we will be able to sell any property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property.

We may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure you that we will have funds available to correct those defects or to make those improvements. In acquiring a property, we may agree to transfer restrictions that materially restrict us from selling that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property. These lockout provisions may restrict our ability to sell a property even if we deem it necessary or appropriate.

At the time of this offering, we have one loan for approximately $54.8 million secured by the Foothills Mall that contains a lockout provision. The loan is closed to prepayment during a lockout period until the first to occur of (i) three years following the commencement of the loan or (ii) two years following the sale of the loan to a bondholder trust. After the end of the lockout period, the loan is open to prepayment by defeasance (providing treasury bonds as substitute collateral for the property) only. The loan was sold to a bondholder trust in May 2004. Therefore, we may not defease the loan until May 2006.

We could incur significant costs related to environmental matters.

Under various U.S. federal, state and local laws, ordinances and regulations, owners and operators of real estate may be liable for the costs of removal or remediation of certain hazardous substances or other regulated materials on or in such property. Such laws often impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such substances or materials. The presence of such substances or materials, or the failure to properly remediate such substances, may adversely affect the owner’s or operator’s ability to lease, sell or rent such property or to borrow using such property as collateral. Persons who arrange for the disposal or treatment of hazardous substances or other regulated materials may be liable for the costs of removal or remediation of such substances at a disposal or treatment facility, whether or not such facility is owned or operated by such person. Certain environmental laws impose liability for release of asbestos-containing materials into the air, and third parties may seek recovery from owners or operators of real properties for personal injury associated with asbestos-containing materials.

Certain environmental laws also impose liability, without regard to knowledge or fault, for removal or remediation of hazardous substances or other regulated materials upon owners and operators of contaminated property even after they no longer own or operate the property. Moreover, the past or present owner or operator from which a release emanates could be liable for any personal injuries or property damages that may result from such releases, as well as any damages to natural resources that may arise from such releases. The cost of investigation, remediation or removal of these substances may be substantial.

Certain environmental laws impose compliance obligations on owners and operators of real property with respect to the management of hazardous materials and other regulated substances. For example,

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environmental laws govern the management of asbestos-containing materials and lead-based paint. Failure to comply with these laws can result in penalties or other sanctions.

Phase I Environmental Reports were completed more than two years ago in connection with our predecessor’s investments in the Harrisburg Mall and the Foothills Mall. A Phase I Environmental Report was recently completed for Colonie Center. According to the Harrisburg Mall report, the property has an active 30,000 gallon underground heating oil storage tank which will require ongoing monitoring and testing to ensure continued compliance with environmental laws. In addition, the Harrisburg Mall has a limited amount of asbestos- containing building materials that will need to be removed in accordance with applicable laws and regulations if encountered during any renovation or maintenance activities. We do not believe the costs associated with this compliance to be material. The Phase I Environmental Report for each of the Foothills Mall and Colonie Center did not reveal any existing material environmental conditions.

Existing environmental reports with respect to any of our properties may not reveal (i) all environmental liabilities, (ii) that any prior owner or operator of our properties did not create any material environmental condition not known to us, or (iii) that a material environmental condition does not otherwise exist as to any one or more of our properties. There also exists the risk that material environmental conditions, liabilities or compliance concerns may have arisen after the review was completed or may arise in the future. Finally, future laws, ordinances or regulations and future interpretations of existing laws, ordinances or regulations may impose additional material environmental liability.

Costs associated with complying with the Americans with Disabilities Act of 1990 may result in unanticipated expenses.

Under the Americans with Disabilities Act of 1990, or ADA, all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. These requirements became effective in 1992. A number of additional U.S. federal, state and local laws may also require modifications to our properties, or restrict certain further renovations of the properties, with respect to access thereto by disabled persons. Noncompliance with the ADA could result in the imposition of fines or an award of damages to private litigants and also could result in an order to correct any non-complying feature, which could result in substantial capital expenditures. We have not conducted an audit or investigation of all of our properties to determine our compliance and we cannot predict the ultimate cost of compliance with the ADA or other legislation. If one or more of our properties is not in compliance with the ADA or other legislation, then we would be required to incur additional costs to bring the facility into compliance. If we incur substantial costs to comply with the ADA or other legislation, our financial condition, our results of operations, our cash flow, the per share trading price of our common stock and our ability to satisfy our debt service obligations and to make distributions to our stockholders could be adversely affected.

Risks Related to Our Organization and Structure

Our management team will receive material benefits upon completion of this offering, including a 14.8% equity stake in our company which could allow them to exercise significant influence over matters submitted to our stockholders.

Our management team will receive material benefits upon completion of this offering, including a 14.8% equity stake in our company on a fully diluted basis (having a value of approximately $27.8 million based on the mid-point of the price range indicated on the front cover of this prospectus). Management’s equity stake will include 163,228 shares of common stock and 966,456 OP units to be held by Larry Feldman, our Chairman and Chief Executive Officer, and his affiliates, 8,333 shares of common stock and 233,504 OP units to be held by Jim Bourg, our Executive Vice President and Chief Operating Officer, 8,333 shares of common stock and 233,504 OP units to be held by Scott Jensen, our Executive Vice President of Leasing, 1,667 shares of common stock and 160,000 OP units to be held by Jeffrey Erhart, our Executive Vice President and General Counsel and 8,333 shares of common stock and 66,667 shares of restricted stock (or other equity-based compensation of equivalent value) issued under the 2004 equity incentive plan to be held by Thomas Wirth, our Executive Vice President and Chief Financial Officer. Consequently, those stockholders, individually or to the extent their interests are aligned, collectively, may be able to influence the outcome of matters submitted for stockholder consideration, including the election of our board of directors, the approval

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of significant corporate transactions, including business combinations, consolidations and mergers, and the determination of our day-to-day corporate and management policies. Therefore, those stockholders have substantial influence over us and could exercise their influence in a manner that is not in the best interests of our other stockholders.

Conflicts of interest could arise as a result of our relationship with our operating partnership and the resolution of such conflicts may not be in our favor.

Conflicts of interest could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our operating partnership or any holder of OP units, on the other hand. For example, in connection with a proposed sale or refinancing of a property that has been contributed by a holder of OP units, that holder may have different and more adverse tax consequences with respect to that sale as compared to our stockholders. Our directors and officers have duties to our company and our stockholders under applicable Maryland law in connection with their management of our company. At the same time, we, through our wholly owned business trust subsidiary, as a general partner, have fiduciary duties to our operating partnership and to its limited partners under Delaware laws. To the extent that conflicts exist between the interests of our company and our stockholders, on the one hand, and our operating partnership and holders of OP units, on the other hand, the duties of our directors and officers to our company and to our stockholders may conflict with our duties as general partner to our operating partnership and its partners. The partnership agreement of our operating partnership does not require us to resolve such conflicts in favor of either our stockholders or the limited partners in our operating partnership.

Unless otherwise provided for in the relevant partnership agreement, Delaware law generally requires a general partner of a Delaware limited partnership to adhere to fiduciary duty standards under which it owes its limited partners the highest duties of good faith, fairness and loyalty and which generally prohibit such general partner from taking any action or engaging in any transaction as to which it has a conflict of interest.

Following completion of this offering and the formation transactions, conflicts of interest will exist between our directors and executive officers and our company as described below.

We have entered into tax protection agreements with the contributors which may limit our ability to sell certain of our properties.

Additionally, the partnership agreement of our operating partnership expressly limits our liability by providing that neither we, our direct wholly owned business trust subsidiary, as the general partner of the operating partnership, nor any of our or their trustees, directors or officers, will be liable or accountable in damages to our operating partnership, the limited partners or assignees for errors in judgment, mistakes of fact or law or for any act or omission if we, or such trustee, director or officer, acted in good faith. In addition, our operating partnership is required to indemnify us, our affiliates and each of our respective trustees, officers, directors, employees and agents to the fullest extent permitted by applicable law against any and all losses, claims, damages, liabilities (whether joint or several), expenses (including, without limitation, attorneys’ fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, that relate to the operations of the operating partnership, provided that our operating partnership will not indemnify a person for (1) willful misconduct or a knowing violation of the law, (2) any transaction for which such person received an improper personal benefit in violation or breach of any provision of the

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partnership agreement or (3) in the case of a criminal proceeding, the person had reasonable cause to believe the act or omission was unlawful.

The provisions of Delaware law that allow the common law fiduciary duties of a general partner to be modified by a partnership agreement have not been resolved in a court of law, and we have not obtained an opinion of counsel covering the provisions set forth in the partnership agreement that purport to waive or restrict our fiduciary duties that would be in effect under common law were it not for the partnership agreement.

Conflicts of interest between management and our stockholders may arise that could impact potential dispositions.

Members of our senior management team may suffer adverse tax consequences upon the sale or refinancing of our properties. Therefore, certain members of our senior management team may have different objectives than our stockholders regarding the pricing, timing and other material terms of any sale or refinancing of our properties.

Our management’s right to receive OP units upon the achievement of certain performance thresholds relating to the Harrisburg Mall may cause them to devote a disproportionate amount of time to such performance thresholds, which could cause our overall operating performance to suffer.

Upon completion of the offering and the formation transactions, Feldman Partners, LLC (an entity controlled by Larry Feldman and owned by him and his family), Jim Bourg, our Executive Vice President and Chief Operating Officer, and Scott Jensen, our Executive Vice President of Leasing, will have the right to receive additional OP units for ownership interests contributed by them as part of the formation transactions, only upon the achievement of the internal rate of return relating to the Harrisburg Mall. The aggregate value of the additional OP units that may be issued with respect to the Harrisburg Mall will be equal to 50% of the amount, if any, that the internal rate of return achieved by us from the joint venture exceeds 15% on or prior to December 31, 2009.

As a result, Larry Feldman, Jim Bourg and Scott Jensen may have an incentive to devote a disproportionately large amount of their time and a disproportionate amount of our resources to achieving these performance thresholds in comparison with our other objectives, which could harm our operating results.

We may pursue less vigorous enforcement of terms of contribution, merger and other related agreements because of conflicts of interest with certain of our officers.

Larry Feldman, Jim Bourg, Scott Jensen and Jeffrey Erhart, who serve as directors and/or officers have direct or indirect ownership interests in certain entities to be contributed to our operating partnership in the formation transactions. Following the completion of this offering and the formation transactions, we, under the agreements relating to the contributions of such interests, will be entitled to indemnification and damages in the event of breaches of representations or warranties made by the contributors. We may choose not to enforce, or to enforce less vigorously, our rights under these contribution, merger and related agreements because of our desire to maintain our ongoing relationships with the individuals party to these agreements.

None of the contribution agreements was the result of arm’s-length negotiations and may not reflect terms comparable to those that could have been obtained from unaffiliated third parties.

The contribution, merger and related agreements that were executed in connection with the formation transactions were not negotiated on an arm’s-length basis. As a consequence, these agreements may not reflect terms comparable to those that could have been obtained from unaffiliated third parties and, therefore, may not be as favorable to us as they may otherwise have been.

The exemption from the registration requirements of the 1933 Act may not be available in the formation transactions, which may give rise to rights of rescission.

The offering and issuance of the shares of common stock and OP units to our senior management team in the formation transactions has been structured as a private placement transaction that is exempt from the registration requirements under the 1933 Act pursuant to the exemption afforded by Section 4(2) thereof and/or Regulation D thereunder.

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Under federal securities laws as interpreted by the Securities and Exchange Commission, an exemption from the registration requirements of the 1933 Act may not be available for an otherwise valid private placement if that private placement is determined to be “integrated” with a registered public offering. Generally, a valid private placement will not be “integrated” with a registered public offering if the investor in the private placement has completed its investment decision with regard to the private placement before the initial filing of the registration statement for the registered offering and the definitive investment agreement executed prior to the initial filing of the registration statement is complete and encompasses all material terms.

Because the investment agreements executed by our senior management team prior to the initial filing of the registration statement, of which this prospectus is a part, provide for the issuance to the senior management team of equity securities based on a particular formula set forth in the investment agreements, a question may arise under federal securities laws as to whether the investment decisions of our senior management team made prior to the initial filing of such registration statement were sufficiently definitive, which could make the private placement exemption unavailable for the private placement made to our senior management team.

Federal securities laws provide for a one-year rescission right for investors who purchase securities in an unregistered transaction for which the private offering or another exemption was not available. An investor successfully asserting a rescission right during the one- year time period has the right to require the issuer to repurchase the securities issued to the investor at the price paid by the investor for the securities. We have approximated that the aggregate purchase price for all of the equity securities issued to our senior management team in the private placement is $25.8 million, based on the aggregate number of shares and OP units issued in the private placement multiplied by $15, which is the mid-point of the price range indicated on the front cover of this prospectus.

On these issues, we have obtained an opinion from our legal counsel that the offer and issuance of the shares of common stock and OP units to our senior management team are exempt from the registration requirements of the 1933 Act pursuant to Section 4(2) thereof and/or Regulation D promulgated thereunder. In addition, we expect to avoid any possible liability or repurchase obligation arising out of the private placement of the shares of common stock and OP units to the senior management team because each member of our senior management team has entered into an agreement/waiver with us and our operating partnership providing that (i) he will not, under any circumstances, exercise any rescission rights arising out of the formation transactions, (ii) he has irrevocably waived any right to rescission that may arise with respect to the formation transactions and (iii) irrevocably agreed to contribute to our operating partnership any proceeds received by him as a result of any rescission action arising out of the formation transactions if it is ultimately determined that such agreement/waiver is not enforceable.

Our organizational documents, including the stock ownership limit imposed by our charter, may inhibit market activity in our stock and could delay, defer or prevent a change in control transaction.

Our charter authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT and, subject to certain exceptions, limits any person to actual or constructive ownership of no more than 9.0% (by value or by number of shares, whichever is more restrictive) of our outstanding common stock or 9.0% (by value or by number of shares, whichever is more restrictive) of our outstanding capital stock. Our board of directors, in its sole discretion, may exempt a proposed transferee from the ownership limit. However, our board of directors may not grant an exemption from the ownership limit to any proposed transferee whose ownership, direct or indirect, in excess of 9.0% (by value or by number of shares, whichever is more restrictive) of our outstanding common stock or 9.0% (by value or by number of shares, whichever is more restrictive) of our outstanding capital stock could jeopardize our status as a REIT. These restrictions on ownership will not apply if our board of directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT. The ownership limit may delay, defer or prevent a change in control or other transaction that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.

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Certain provisions of Maryland law could inhibit changes in control.

Certain provisions of the Maryland General Corporation Law, or MGCL, may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change in control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares. We are subject to the “business combination” provisions of the MGCL that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of our then outstanding voting shares, or an affiliate thereof) for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes special appraisal rights and special stockholder voting requirements on these combinations. However, we have, by resolution, exempted business combinations (1) between us and Larry Feldman, his affiliates and associates and people acting in concert with any of the foregoing and (2) between us and any person who has not otherwise become an interested stockholder, provided that such business combination is first approved by our board of directors (including a majority of our directors who are not affiliates or associates of such person), from the provisions of the Maryland Business Combination Act. Consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between us and any person described above. We have determined to opt out of the so-called “control share” provisions of the MGCL that provide that “control shares” of a Maryland corporation (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares. We may in the future elect to become subject to the control share provisions of the MGCL. The “unsolicited takeover” provisions of the MGCL permit our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement takeover defenses, some of which (for example, a classified board) we do not yet have. These provisions may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of our company under the circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-current market price.

Our board of directors has the power to issue additional shares of our stock in a manner that may not be in your best interests.

Our charter authorizes our board of directors to issue additional authorized but unissued shares of common stock or preferred stock and to increase the aggregate number of authorized shares or the number of shares of any class or series without stockholder approval. In addition, our board of directors may classify or reclassify any unissued shares of common stock or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares. Our board of directors could issue additional shares of our common stock or establish a series of preferred stock that could have the effect of delaying, deferring or preventing a change in control or other transaction that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders. Upon completion of this offering, we expect to have authorized but unissued shares of common stock, 10,917,880 shares of common stock issued and outstanding, authorized but unissued shares of preferred stock and no shares of preferred stock issued and outstanding.

Our rights and the rights of our stockholders to take action against our directors and officers are limited.

Maryland law provides that a director or officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. In addition, our charter eliminates our directors’ and officers’ liability to us and our stockholders for money damages except for liability resulting from actual receipt of an improper benefit in money, property or services or active and deliberate dishonesty established by a final judgment and which is material to the cause of action.

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Our bylaws require us to indemnify our directors and officers for liability resulting from actions taken by them in those capacities to the maximum extent permitted by Maryland law. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by our directors and officers.

We may assume unknown liabilities in connection with the formation transactions thereby negatively impacting our results of operations and cash available for distributions.

As part of the formation transactions, we (through our operating partnership) will receive the contribution of certain assets or interests in certain assets subject to existing liabilities, some of which may be unknown at the time this offering is consummated. Unknown liabilities might include liabilities for cleanup or remediation of undisclosed environmental conditions, claims of tenants, vendors or other persons dealing with the entities prior to this offering (that had not been asserted or threatened prior to this offering), tax liabilities, and accrued but unpaid liabilities incurred in the ordinary course of business. Our recourse with respect to such liabilities will be limited. The liabilities we are knowingly assuming in the formation transactions include existing debt, construction loans, trade payables and other accounts payable.

Our business could be harmed if key personnel with long standing business relationships in the real estate business terminate their employment with us.

Our success depends, to a significant extent, on the continued services of Larry Feldman, our Chairman and Chief Executive Officer, and the other members of our senior management team. Although we will have an employment agreement with Larry Feldman and some other members of our senior management team, there is no guarantee that any of them will remain employed by us. We do not maintain key-person life insurance on any of our officers. The loss of services of one or more members of our senior management team, particularly Larry Feldman, could harm our business and our prospects.

Risks Related to Our Organization and Operation as a REIT

To maintain our REIT status, we may be forced to borrow funds on a short-term basis during unfavorable market conditions.

To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our net taxable income each year, excluding net capital gains, and we will be subject to regular corporate income taxes to the extent that we distribute less than 100% of our net taxable income each year. In addition, we will be subject to a 4% nondeductible excise tax under certain circumstances if we fail to make sufficient and timely distributions of our taxable income. In order to maintain our REIT status and avoid the payment of income and excise taxes, we may need to borrow funds on a short-term basis to meet the REIT distribution requirements even if the then-prevailing market conditions are not favorable for these borrowings. These short-term borrowing needs could result from a difference in timing between the actual receipt of cash and inclusion of income for U.S. federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt or amortization payments.

Distributions payable by REITs do not qualify for the reduced tax rates under recently enacted tax legislation.

Recently enacted tax legislation reduces the maximum tax rate for dividends payable by domestic corporations to individual U.S. stockholders (as such term is defined under “U.S. Federal Income Tax Considerations” below) to 15% (through 2008). Distributions payable by REITs, however, are generally not eligible for the reduced rates (though distributions paid by a taxable REIT subsidiary or other corporation are generally eligible for the reduced rates). Consequently, the more favorable rates applicable to regular corporate dividends could cause stockholders who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.

In addition, the relative attractiveness of real estate in general may be adversely affected by the newly favorable tax treatment given to corporate dividends, which could negatively affect the value of our properties.

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Possible legislative or other actions affecting REITs could reduce our total return to our stockholders or cause us to terminate our REIT status.

The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect our stockholders. It cannot be predicted whether, when, in what forms, or with what effective dates, the tax laws applicable to us or our stockholders will be changed.

The power of our board of directors to revoke our REIT status without stockholder approval may cause adverse consequences to our stockholders. Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interests to continue to qualify as a REIT. If we cease to be a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders.

If we fail to qualify as a REIT, our distributions will not be deductible by us and we will be subject to corporate level tax on our taxable income. This would reduce the cash available to make distributions to our stockholders and may have significant adverse consequences on the value of our stock.

We intend to operate in a manner that will allow us to elect to qualify as a REIT for U.S. federal income tax purposes under the Internal Revenue Code. We have not requested and do not plan to request a ruling from the Internal Revenue Service, or the IRS, that we qualify as a REIT, and the statements in this prospectus are not binding on the IRS or any court. If we fail to qualify as a REIT or lose our status as a REIT at any time, we will face serious tax consequences that would substantially reduce the funds available for distribution to you for each of the years involved because:

•

we would not be allowed a deduction for distributions to stockholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates;


	•	we also could be subject to the U.S. federal alternative minimum tax and possibly increased state and local taxes; and


	•	unless we are entitled to relief under applicable statutory provisions, we could not elect to be taxed as a REIT for four taxable years following a year during which we were disqualified.

In addition, if we fail to qualify as a REIT, we will not be required to make distributions to stockholders, and all distributions to stockholders will be subject to tax as regular corporate dividends to the extent of our current and accumulated earnings and profits. This means that our stockholders who are taxed as individuals would be taxed on our distributions at capital gains rates, and our corporate stockholders generally would be entitled to deductions with respect to such distributions, subject, in each case, to applicable limitations under the Internal Revenue Code. As a result of all these factors, our failure to qualify as a REIT also could impair our ability to expand our business and raise capital, and would adversely affect the value of our common stock.

Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial and administrative interpretations. The complexity of these provisions and of the applicable Treasury regulations that have been promulgated under the Internal Revenue Code is greater in the case of a REIT that, like us, holds its assets through a partnership. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify as a REIT. In order to qualify as a REIT, we must satisfy a number of requirements, including requirements regarding the composition of our assets and sources of our gross income. Also, we must make distributions to stockholders aggregating annually at least 90% of our net taxable income, excluding capital gains. In addition, legislation, new regulations, administrative interpretations or court decisions may adversely affect our investors, our ability to qualify as a REIT for U.S. federal income tax purposes, or the desirability of an investment in a REIT relative to other investments.

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We will pay some taxes which will reduce the amount of funds available to make distributions to our stockholders.

Even if we qualify as a REIT for U.S. federal income tax purposes, we will be required to pay some U.S. federal, state and local taxes on our income and property. We expect that we, Feldman Equities Management, Inc. and certain corporations that hold small interests in the Foothills Mall, will elect for each such corporation to be treated as a “taxable REIT subsidiary” of our company for U.S. federal income tax purposes. A taxable REIT subsidiary is a fully taxable corporation and may be limited in its ability to deduct interest payments made to us. In addition, we will be subject to a 100% penalty tax on certain amounts if the economic arrangements among our tenants, our taxable REIT subsidiaries and us are not comparable to similar arrangements among unrelated parties or if we receive payments for inventory or property held for sale to tenants in the ordinary course of business. To the extent that we or our taxable REIT subsidiaries (or additional taxable REIT subsidiaries we may form in the future) are required to pay U.S. federal, state or local taxes, we will have less cash available for distribution to stockholders.

Risks Related to Our Debt Financings

Required payments of principal and interest on borrowings may leave us with insufficient cash to operate our properties or to pay the distributions currently contemplated or necessary to maintain our qualification as a REIT and may expose us to the risk of default under our debt obligations.

Upon completion of this offering and the formation transactions, we expect to have approximately $54.8 million of outstanding indebtedness, 100% of which will be secured. We estimate that on a pro forma basis (after giving effect to the completion of this offering and the formation transactions) our consolidated debt to total market capitalization ratio will be approximately 22.6%. On a pro forma basis, for the year ended December 31, 2003, our annual debt service was approximately $2.8 million. We expect to incur additional debt in connection with future acquisitions. We may borrow under our proposed line of credit or borrow new funds to acquire these future properties. Further, we may need to borrow funds to make distributions required to maintain our REIT status or to meet our expected distributions.

If we are required to utilize our proposed line of credit for purposes other than acquisition activity, this will reduce the amount available for acquisitions and could slow our growth. Therefore, our level of debt and the limitations imposed on us by our debt agreements could have significant adverse consequences, including the following:

•

our cash flow may be insufficient to meet our required principal and interest payments;


	•	we may be unable to borrow additional funds as needed or on favorable terms, including to make acquisitions or distributions required to maintain our REIT status;


	•	we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness;


	•	an increase in interest rates could materially increase our interest expense;


	•	we may be forced to dispose of one or more of our properties, possibly on disadvantageous terms;


	•	after debt service, the amount available for distributions to our stockholders is reduced;


	•	our debt level could place us at a competitive disadvantage compared to our competitors with less debt;


	•	we may experience increased vulnerability to economic and industry downturns, reducing our ability to respond to changing business and economic conditions;


	•	we may default on our obligations and the lenders or mortgagees may foreclose on our properties that secure their loans and receive an assignment of rents and leases;


	•	we may violate restrictive covenants in our loan documents, which would entitle the lenders to accelerate our debt obligations; and


	•	our default under any one of our mortgage loans with cross-default or cross-collateralization provisions could result in default on other indebtedness or result in the foreclosures of other properties.

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Our organizational documents contain no limitations on the amount of indebtedness we may incur, and our cash flow and ability to make distributions could be adversely affected if we become highly leveraged.

Our organizational documents contain no limitations on the amount of indebtedness that we or our operating partnership may incur. Upon completion of this offering and the formation transactions, we expect to have approximately $54.8 million of outstanding indebtedness. On a pro forma basis (after giving effect to the completion of this offering and the formation transactions) our consolidated debt to total market capitalization ratio will be approximately 22.6%. We could alter the balance between our total outstanding indebtedness and the value of our portfolio at any time. If we become more highly leveraged, then the resulting increase in debt service could adversely affect our ability to make payments on our outstanding indebtedness and to pay our anticipated distributions and/or the distributions required to maintain our REIT status, and could harm our financial condition.

Increases in interest rates may increase our interest expense and reduce our cash flow and impair our ability to service our indebtedness and make distributions to our stockholders.

Upon completion of this offering and the formation transactions, we expect our pro rata share of unconsolidated debt held by the Harrisburg Mall joint venture to be approximately $10 million, which will be subject to variable interest rates. This variable rate debt had an effective interest rate of approximately 5.1% per annum as of September 30, 2004. Increases in interest rates on this variable rate debt would increase our interest expense, which could harm our cash flow and our ability to pay distributions. For example, if market rates of interest on this variable rate debt increased 100 basis points, the increase in interest expense would have decreased 2003 pro forma earnings and cash flows by approximately $100,000 annually.

Our cash flow is not assured. If our cash flow is reduced, we may not be able to make distributions to our stockholders.

We intend to distribute to our stockholders all or substantially all of our REIT taxable income each year in order to comply with the distribution requirements of the federal tax laws and to avoid federal income tax and the nondeductible excise tax. We have not established a minimum distribution payment level. Our ability to make distributions may be adversely affected by the risks described in this prospectus. All distributions will be made at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our REIT status and other factors that our board of directors may deem relevant from time to time. We cannot assure you that we will be able to make distributions in the future. Our ability to make distributions is based on many factors, including efficient management of our properties.

The Harrisburg Mall joint venture’s construction loan with Commerce Bank provides that loan advances are reduced by the amount of the joint venture’s net cash flow after operating expenses and debt service. As a result, the joint venture will not have cash from operations to distribute to the joint venture partners during the period that it is taking advances under this loan because any net cash flow will be used in lieu of the advances. The construction loan with Commerce Bank matures on December 31, 2005 and we expect that the construction project at the Harrisburg Mall will be completed by the third quarter of 2005. As a result, our net cash provided by operations may, during the term of this loan, be reduced by the limitation on our joint venture’s ability to pay distributions to us and our operating partnership.

We also cannot assure you that the level of our distributions will increase over time or the receipt of rental revenue in connection with future acquisitions of properties will increase our cash available for distribution to stockholders. In the event of defaults or lease terminations by our tenants, rental payments could decrease or cease, which would result in a reduction in cash available for distribution to our stockholders. If our cash available for distributions generated by our assets is less than our expected dividend distributions, or if such cash available for distribution decreases in future periods from expected levels, our ability to make the expected distributions would be adversely affected. We may be required either to fund future distributions from borrowings under our proposed line of credit or to reduce such distributions. If we need to borrow funds on a regular basis to meet our distribution requirements or if we reduce the amount of our distribution or fail to make expected distributions, our stock price may decline.

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STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This prospectus contains various “forward-looking statements.” You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “would,” “could,” “should,” “seeks,” “approximately,” “intends,” “plans,” “projects,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Statements regarding the following subjects may be impacted by a number of risks and uncertainties:

•

our business strategy, including our acquisition, renovation and repositioning plans;


	•	our ability to close pending acquisitions;


	•	our ability to obtain future financing arrangements;


	•	estimates relating to our future distributions;


	•	our understanding of our competition;


	•	market trends;


	•	projected capital expenditures;


	•	demand for shop space or retail goods;


	•	availability and creditworthiness of current and prospective tenants;


	•	lease rates and terms; and


	•	use of the proceeds of this offering.

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. You should carefully consider these risks before you make an investment decision with respect to our common stock.

For more information regarding risks that may cause our actual results to differ materially from any forward-looking statements, see “Risk Factors.” We do not intend and disclaim any duty or obligation to update or revise any industry information or forward-looking statements set forth in this prospectus to reflect new information, future events or otherwise.

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USE OF PROCEEDS

We will receive net proceeds from this offering of approximately $144.6 million (or approximately $166.9 million if the underwriters’ over-allotment option is exercised in full) after deducting the underwriting discounts and commissions and estimated expenses of this offering.

We will contribute the net proceeds from this offering to our operating partnership in exchange for OP units.

The following table sets forth the uses of funds that we expect in connection with this offering assuming that:

•

we issue 10,666,667 shares of common stock at $15.00 per share, which is the mid-point of the range of prices indicated on the front cover of this prospectus, for gross proceeds of $160 million; and


	•	we complete the formation transactions.

Sources (in thousands)		Uses (in thousands)

Gross proceeds from this offering	$160,000	•	Acquisition of Colonie Center which is currently under contract	$93,200
		•	Investment in the renovation and repositioning plan for Colonie Center	9,600
		•	Repayment of a mezzanine loan owed by our predecessor to Massachusetts Mutual Life Insurance Company in connection with the redevelopment of the Foothills Mall	5,400
		•	Repayment of an intercompany loan owed by our predecessor to Feldman Partners, LLC that was used to invest in the Harrisburg Mall and the Foothills Mall and to pay overhead expenses	4,000
		•	Repayment of amounts outstanding under the $6 million line of credit owed by our predecessor to Marshall and Ilsley Bank which was used by our predecessor to return funds advanced by the existing owners in our two properties for acquisition costs and capital improvements	4,000
		•	Reimbursement of cash impound accounts at the Foothills Mall established in connection with tenant improvements, including interest	4,100
		•	Acquisition of unaffiliated third party investor interests in the Foothills Mall	4,500
		•	Acquisition of unaffiliated minority third party investor interests in the Harrisburg Mall	500

			Subtotal	125,300


		•	Underwriting discounts and commissions	11,200
		•	Other offering fees and expenses (including repayment of loan balances used to pay such expenses)	4,200
		•	Cash for working capital and potential acquisitions of underperforming malls	19,300


			Subtotal	34,700

Total Sources	$160,000		Total Uses	$160,000

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Our repayment of existing indebtedness related to our initial assets consists of the following:

	Debt

	(in thousands)
A mezzanine loan due December 2008, which bears interest at a rate of 10.5% per annum	$	5,400
An intercompany loan with no stated maturity, which bears interest at a rate of 15% per annum		4,000
Amounts outstanding under the $6 million line of credit due April 2005, which bears interest at a rate of prime plus 1.5% per annum		4,000

	$	13,400

In September 2004, we entered into a binding agreement to acquire Colonie Center, a regional mall located in the Albany, New York area for a base purchase price of $84.2 million. The agreement, which is subject to customary closing conditions, provides for an increase to the purchase price, if, prior to June 30, 2005, certain pending leases in negotiation are executed and tenants under such leases take occupancy and commence rental payments. The maximum amount of such purchase price increase is approximately $9 million so that the maximum purchase price is $93.2 million. In addition, we plan to invest an additional $9.6 million in the renovation and repositioning plan for Colonie Center for a maximum total project cost of $102.8 million. We expect to fund these amounts out of the net proceeds of this offering. We anticipate that this acquisition will close within 30 days following the closing of this offering. We believe that it is probable that this transaction will be consummated; however, there can be no assurance that this transaction will close.

Pending the use of any cash proceeds, we intend to invest the net proceeds in interest-bearing, short-term investment grade securities or money-market accounts which are consistent with our intention to qualify as a REIT. Such investments may include, for example, government and government agency certificates, certificates of deposit, interest-bearing bank deposits and mortgage loan participations.

Any net proceeds remaining after the uses set forth in the table above will be used for working capital purposes and to acquire assets. If the underwriters exercise their over-allotment option for this offering in full, we expect to use the additional net proceeds, which will be approximately $22.3 million, for property acquisitions and working capital needs.

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DISTRIBUTION POLICY

On September 30, 2004, our predecessor declared a distribution in the aggregate amount of $450,652, which was paid to Larry Feldman on December 2, 2004 by our predecessor out of available cash balances of our predecessor in respect of the quarter ended September 30, 2004. There is no assurance that we will be able to maintain our distribution to our stockholders at this level, or at all, following the completion of this offering. See “Risk Factors.”

•

actual results of operations;


	•	the timing of the investment of the proceeds of this offering;


	•	debt service requirements;


	•	capital expenditure requirements for our properties and the pace and timing of our acquisitions;


	•	the number of our malls which are producing stable cash flow after having undergone renovations and repositionings directed by our company;


	•	our taxable income;


	•	our operating expenses;


	•	restrictions under applicable law; and


	•	other factors that our board of directors may deem relevant.

Our ability to make distributions to our stockholders will depend, in part, upon our receipt of distributions from our operating partnership, Feldman Equities Operating Partnership, LP. Under the agreement of limited partnership of our operating partnership, our wholly owned subsidiary controls the timing and amount of all distributions.

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CAPITALIZATION

The following table presents the capitalization on an historical basis for Feldman Equities of Arizona and on a pro forma basis for the company as of September 30, 2004 taking into account the formation transactions and this offering. The pro forma adjustments give effect to this offering and the formation transactions as if they had occurred on September 30, 2004 and the application of the net proceeds as described in “Use of Proceeds.” You should read this table in conjunction with “Use of Proceeds,” “Summary Financial Data,” “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the more detailed information contained in the consolidated financial statements and notes thereto included elsewhere in this prospectus.

	As of September 30, 2004

	Historical Predecessor		Company Pro Forma (as adjusted)

	(amounts in thousands, except share and per share data)
Mortgage and other loans payable	$	64,434	$	54,750
Minority interest in our operating partnership		—		16,094
Stockholders’ equity (deficit):
Preferred stock, $0.01 par value per share, no shares authorized, no shares issued and outstanding		—		—
Common stock, $0.01 par value per share, shares authorized, 10,917,880 shares issued and outstanding on a pro forma basis ⁽¹⁾		—		109
Additional paid-in capital		—		112,084
Unearned compensation		—		(1,920	)
Owners’ equity		34		—

Total stockholders’/owners’ equity		34		110,273

Total capitalization	$	64,468	$	181,117

(1)

The common stock outstanding as shown includes common stock to be issued in this offering and the formation transactions and restricted stock grants with an aggregate value of $163.4 million and excludes (i) up to 1,600,000 shares of common stock that may be issued by us upon exercise of the underwriters’ over-allotment option, (ii) 287,985 shares of common stock available for future issuance under our 2004 equity incentive plan and (iii) 1,593,464 shares of common stock that may be issued by us upon redemption of any OP units outstanding upon completion of this offering.

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DILUTION

Dilution After This Offering

Purchasers of our common stock will experience an immediate and significant dilution of the net tangible book value of our common stock from the assumed initial public offering price. On a pro forma basis at September 30, 2004, after giving effect to the issuance of shares of common stock and OP units in the formation transactions, but before giving effect to the other formation transactions and this offering, the net tangible book value of our predecessor was $1.1 million deficit or $(0.64) per share of common stock. On a pro forma basis as of September 30, 2004, after giving effect to the formation transactions, but before giving effect to the sale of shares of common stock to new investors in this offering, our predecessor’s pro forma net tangible book value would have been a $16.0 million deficit or $(9.33) per share, or a decrease in pro forma net tangible book value attributable to the formation transactions of $14.9 million or $(8.69) per share. After giving effect to the sale of shares of common stock in this offering, the receipt by us of the net proceeds from this offering, the deduction of underwriting discounts and commissions and estimated offering expenses payable by us, the pro forma net book value as of September 30, 2004 would have been $101.3 million or $9.48 per share, or an increase in pro forma net tangible book value attributable to the sale of shares of common stock to new investors of $32.3 million or $18.81 per share. This amount represents an immediate dilution in pro forma net tangible book value of $5.52 per share from the assumed initial public offering price of $15.00 per share. The following table illustrates this per share dilution:

Initial public offering price per share					$	15.00

Pro forma net tangible book value per share of our predecessor as of September 30, 2004, before the formation transactions and this offering⁽¹⁾	$	(0.64	)

Pro forma net tangible book value per share attributable to the formation transactions, but before this offering⁽²⁾		(8.69	)

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