Update Published 1/29/09:
Great Neck, NY-based regional mall owner/manager, Feldman Mall Properties (Pink Sheets: FMLP), announced Jan. 27, 2009 that Inland American Real Estate Trust ("Inland") terminated its agreement to assume the titles of Feldman's Stratford Square, Northgate, and Golden Triangle malls in exchange for 2 million shares of Inland stock and $9.125 million in cash.

As a result of this termination, Feldman needs to raise capital from other sources in order to retire the $28.5 million principal amount of unsecured note and preferred securities. Additionally, Feldman said that in order to fund its ongoing operations, it needs to raise additional capital or renegotiate existing debt arrangements.

For more information on this terminated deal, as well as the string of events behind Feldman's predicament, review the story below.

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First Published 11/14/08:
Great Neck, NY-based regional mall owner/manager, Feldman Mall Properties, today announced an agreement with Inland American Real Estate Trust ("Inland") for Feldman to repurchase 2 million shares of convertible preferred stock from Inland. In exchange, Feldman will turn over to Inland titles to three of its six remaining malls; subject to the mortgage indebtedness secured by the Malls. In addition, Inland will pay Feldman $9.125 million in cash; which represents the amount by which the value of the malls, subject to outstanding indebtedness, exceeds the value of the preferred stock.

This transaction is subject to approvals of the board of directors of both companies; but if the transaction is completed Feldman said it would have the cash it needs to redeem from Kodiak 28,500 preferred securities of FMP Statutory Trust (a subsidiary of Feldman), which carry a $28.5 million liquidation value. In addition, Feldman said it would be able to redeem and retire $29.38 million of unsecured junior subordinated notes also held by FMP Statutory Trust.

In the event Feldman is unsuccessful in completing the Inland transaction, the mall owner said it would need to raise sufficient additional capital or successfully renegotiate existing debt in order to continue to fund its on-going operations. However, the likelihood of Feldman achieving these alternatives is low, as the company said, "The current economic and business environment makes the achievement of any such alternative transactions especially difficult." Feldman has been working to secure additional capital for more than a year now with little success.

In the release, Feldman addressed its 965,860-square-foot Tallahassee, Florida mall, which recently went into receivership, releasing the company from any further obligations or benefits relating to the property. In June, the company recorded a $45.7 million impairment charge for the Tallahassee Mall when the outstanding principal balance of the mortgage on the mall was $44.2 million. In August, the loan was transferred to special servicing due to imminent default -- Feldman cited cash flow issues after losing anchor tenants Dillard's and Goody's, which left the mall only 65% occupied earlier this year.

In addition, the Company has concluded its negotiations with the first mortgage lender for the Tallahassee Mall and a receiver was appointed to operate the property on behalf of the lender and to release the Company from further obligations and benefits arising out of the Company's ownership of this property. As previously announced in the Company's Form 10-Q for the quarter ended June 30, 2008, it recorded a $45.7 million impairment charge for the Tallahassee Mall, and based on this write-down, its cost basis in the Tallahassee Mall was written down to a level which is below the current principal balance that is outstanding on the Tallahassee non-recourse first mortgage of $44.2 million. The appointment of the receiver is subject to judicial approval.

Lastly, Feldman said it will no longer file reports with SEC in a cost-saving effort; as a result, its stock will no longer be quotes on the Over-the-Counter Bulletin Board and will instead transfer to the Pink OTC Markets, known as the "Pink Sheets." On Jun. 30, 2008, Feldman was de-listed from the New York Stock Exchange (its former ticker symbol was “FMP”) because it could not meet the NYSE’s requirement of a $25 million average market capitalization for more than 30 consecutive trading days.

Details on the Malls Inland is Expected to Take Title On
PROPERTY NAME	LOCATION	RBA (Sq. Ft.)	ANCHOR TENANTS
Stratford Square Mall	Bloomingdale, IL	1,300,000	Burlington Coat Factory, JC Penney, Kohl's, Macy's, Sears, Stratford Square Theaters
Northgate Mall	Cincinnati, OH	1,100,000	Dillard's, JC Penney, Macy's, Sears
Golden Triangle Mall	Denton, TX	764,719	Dillard's, DSW, JC Penney, Macy's, Sears
SOURCE: CoStar Property Professional

Feldman acquired the Northgate Mall in 2005 for $110 million; as of June 30, 2008, it had a $76.55 million loan on the property, due 2032. In 2004, Feldman acquired the Stratford Square Mall from General Growth for $93.1 million; as of June 30, 2008, Feldman had a $104.5 million loan on the mall due May 2010. Feldman holds a $30 million line of credit, maturing April 2009, against its Golden Triangle Mall, which the company acquired for $40 million in 2006.

If the transaction with Inland closes, Feldman will only be left with the minority ownership interests in three borderline malls. In 2006, Feldman contributed the Colonie Center Mall in Albany, NY into a joint venture with Heitman; which acquired a 75% interest in the mall for $76.13 million. Feldman retained a 25% interest and was to lease and manage the mall; however, in July 2008, Jones Lang LaSalle was assigned to take over leasing of the center. With new anchor stores including L.L. Bean and a movie theatre, Colonie Center may be the mall owner's best asset.

In June 2006, Feldman contributed the Foothills Mall in Tucson, AZ into a joint venture with Kimco, under which Feldman retained a 30.8% interest in the mall, valued at $104 million. The agreement includes a buy-sell provision, under which Feldman may elect to sell its interest in the mall to Kimco. The mall recently lost a Linens 'n Things anchor store.

In September 2003, Feldman acquired a 25% interest in the Harrisburg Mall in Harrisburg, PA in a joint venture with Lubert-Adler. As of June 30, 2008, the two were in dispute over the funding of a $37.3 million renovation of the center, and the mall was in danger of have liens placed on it if its lender did not agree to extend a $50 million loan through December 2009. Anchor tenant Boscov's closed its store in October, a Barnes & Noble has delayed opening nearly a year, and Sega, which was supposed to open an entertainment complex at the mall, has sued the joint venture and suspended the store opening.

Feldman has been exploring strategic alternatives since June 2007 and admitted to the possibility of a bankruptcy filing in September 2008.

This story appears in CoStar's Retail News Roundup: Nov. 16 to 22, 2008, a weekly column by CoStar senior news editor Sasha Pardy on Retailer Expansion Plans, New Developments, Acquisitions/Mergers/Sales, Closings, Cutbacks and Bankruptcies, Personnel Anouncements, Sustainability and more…

This week in the Retail Roundup, CoStar reports on expansions or new concepts at Columbia, Office Max, Disney Store, and Fresh & Easy; new retail developments in NJ, MO, CA, MI and OK; acquisition, merger, loan or sale activity at Weingarten and Hines, Inland and Feldman, and Charlotte Russe; closings, cutbacks or bankruptcies at National Wholesale Liquidators and Sears; personnel announcements at Kimco, Gotham and ICSC; green building news at Fred Meyer; and more.