Click Here for Contents

|  |
|--|
|  |
|  |

**UNITED STATES****SECURITIES AND EXCHANGE COMMISSION****Washington, DC 20549**

----

**FORM** **10-K**

|  | **ANNUAL REPORT PURSUANT TO SECTION** **13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|--|---------------------------------------------------------------------------------------------------|

**For the fiscal year ended December** **31, 2004**

|  | **TRANSITION REPORT PURSUANT TO SECTION** **13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|--|-------------------------------------------------------------------------------------------------------|

**Commission File No.** **001-32365**

**FELDMAN MALL PROPERTIES, INC.**(Exact name of registrant as specified in its charter)

| **Maryland**                                               |   | **13-4284187**                         |
|------------------------------------------------------------|--------|----------------------------------------|
| (State or other jurisdictionincorporation or organization) |   | (I.R.S. Employer ofIdentification No.) |

**3225 N. Central Avenue, Suite 1205, Phoenix, AZ 85012**(Address of principal executive offices - zip code)

**(602) 277-5559**(Registrant’s telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

| **Title of Each Class**      |   | **Name of Each Exchange on Which Registered** |
|------------------------------|--------|-----------------------------------------------|
| Common Stock, $.01 par value |   | New York Stock Exchange                       |

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: **None**

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports),and (2) has been subject to such filing requirements for the past 90 days. Yes  No .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in PartIII of this Form 10-K or any amendment to this Form 10-K. Yes  No 

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes  No 

The Registrant’s common stock was not publicly traded as of the last business day of its most recently completed second quarter. The Registrant completed its initial public offering on December 15, 2004. As of March 24, 2005 there were 12,392,895 shares of the Registrant’s common stock outstanding.

**DOCUMENTS INCORPORATED BY REFERENCE**

Portions of the Registrant’s Proxy Statement for the Annual Stockholders’ Meeting to be held May 26, 2005 and to be filed within 120 days after the close of the Registrant’s fiscal year are incorporated by reference into Part III of this Annual Report on Form 10-K.

|  |
|--|
|  |
|  |

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC.**

**FORM** **10-K**

**TABLE OF CONTENTS**

| **10-K and Item No.** |   |                                                                                           |   | **Page** |
|-----------------------|--------|------------------------------------------------------------------------------------------------|--------|----------|
|                       |   |                                                                                           |   |          |
|                  |   |                                                                                           |   |     |
| **PART I**            |   |                                                                                           |   |     |
| 1.                    |   | Business                                                                                       |   | 4        |
| 2.                    |   | Properties                                                                                     |   | 11       |
| 3.                    |   | Legal Proceedings                                                                              |   | 28       |
| 4.                    |   | Submission of Matters to a Vote of Security Holders                                            |   | 28       |
|                  |   |                                                                                           |   |     |
| **PART II**           |   |                                                                                           |   |     |
| 5.                    |   | Market for Registrant’s    Common Equity and Related Stockholders Matters                 |   | 29       |
| 6.                    |   | Selected Financial Data                                                                        |   | 30       |
| 7.                    |   | Management’s Discussion    and Analysis of Financial Condition and Results of Operations  |   | 31       |
| 7A                    |   | Quantitative and Qualitative Disclosures about Market Risk                                     |   | 43       |
| 8.                    |   | Financial Statements and Supplementary Data                                                    |   | 44       |
| 9.                    |   | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           |   | 82       |
| 9A.                   |   | Controls and Procedures                                                                        |   | 82       |
| 9B.                   |   | Other Information                                                                              |   | 82       |
|                  |   |                                                                                           |   |     |
| **PART III**          |   |                                                                                           |   |     |
| 10.                   |   | Directors and Executive Officers of the Registrant                                             |   | 83       |
| 11.                   |   | Executive Compensation                                                                         |   | 83       |
| 12.                   |   | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |   | 83       |
| 13.                   |   | Certain Relationships and Related Transactions                                                 |   | 83       |
| 14.                   |   | Principal Accountant Fees and Services                                                         |   | 83       |
|                  |   |                                                                                           |   |     |
| **PART IV**           |   |                                                                                           |   |     |
| 15.                   |   | Exhibits and Financial Statement Schedules                                                     |   | 83       |
| 16.                   |   | Signatures                                                                                     |   | 87       |
| 17.                   |   | Certifications                                                                                 |   | 89       |

2

----

Back to Contents

**STATEMENTS REGARDING FORWARD-LOOKING INFORMATION**

When used within this document, the words “believes,” “anticipates,” “projects,” “should,” “estimates,” “expects,” and similar expressions are intended to identify “forward-looking statements” within the meaning of Section 27-A of the Securities Act of 1933, asamended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results, performanceor achievements of our company to be materially different from those expressed or implied in the forward-looking statements. Such factors include, but are not limited to, the following changes in general economic conditions and in the markets in which our company operates;

|   | • | our business strategy, including our acquisition, renovation and repositioning plans; |
|--------|--------|---------------------------------------------------------------------------------------|

|   |   |                                       |
|--------|--------|--------------------------------------------|
|   | • | our ability to close pending acquisitions; |

|   |   |                                                 |
|--------|--------|------------------------------------------------------|
|   | • | our ability to obtain future financial arrangements; |

|   |   |                                           |
|--------|--------|------------------------------------------------|
|   | • | estimates relating to our future distribution; |

|   |   |                                  |
|--------|--------|---------------------------------------|
|   | • | 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; and |

|   |   |                   |
|--------|--------|------------------------|
|   | • | lease rates and terms. |

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 canchange 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 carefullyconsider these risks before you make an investment decision with respect to our common stock.

We do not intend and disclaim any duty or obligation to update or revise any forward-looking statements set forth in this Annual Report Form 10-K to reflect new information, future events or otherwise.

3

----

Back to Contents

**PART I**

| **ITEM 1.**     **Business** |
|-------------------------------------------------------|

|                                        |
|---------------------------------------------|
|      ***General*** |

Feldman Mall Properties, Inc. is 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. We closed our initialpublic offering on December 15, 2004 (the “Offering Date”).

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 expectto 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 ended December 31, 2004.

At December 31, 2004, our portfolio consisted of two enclosed regional malls, the Foothills Mall located in Tucson, Arizona and the Stratford Square Mall located in Bloomingdale, Illinois, totaling 2.0 million square feet, and a 25% capital interest in a joint venturethat owns the 0.9 million square foot Harrisburg Mall located in Harrisburg, Pennsylvania. In February 2005, we acquired the 1.2 million square foot Colonie Center Mall located in the Albany, New York area.

Our corporate headquarters is located at 3225 North Central Avenue, Suite 1205, Phoenix, Arizona 85012. Our website is located at www.FeldmanMall.com. On our website, you can obtain, free of charge, a copy of our Annual Report on Form 10-K, quarterly reportson Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as practicable after we file such material electronically with, or furnish it to theSecurities and Exchange Commission. We have also made available on our website our audit committee charter, compensation committee charter, corporate governance and nominating committee charter, code of business conduct and ethics and corporate governance principles.

Unless the context otherwise requires or indicates, “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 Delawarelimited partnership, which we refer to in this Annual Report on Form 10-K 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 tocollectively herein as “Feldman Equities of Arizona,” the “predecessor” or “our predecessor.” We conduct substantially all of our business through our operating partnership in which we hold approximately an 87% ownership interest as of December 31, 2004. We control allmajor decisions regarding the activities and management of the operating partnership. Our operating partnership enables us to complete tax deferred acquisition of additional malls utilizing its units of limited partnership interests or, OP units, as an alternative acquisitioncurrency.

|      ***Corporate Structure*** |
|---------------------------------------------------------|

|                                                           |
|----------------------------------------------------------------|
|      *IPO and Formation Transactions* |

On the Offering Date, we sold 10,666,667 shares of our common stock and contributed the net proceeds to our operating partnership. Subsequently, on January 15, 2005, we sold an additional 1,600,000 shares of our common stock to the underwriters upon their fullexercise of their over-allotment option.

Prior to the completion of our initial public offering, we conducted our business through (i) our predecessor, which owned a 25% capital interest in the joint venture that owns the Harrisburg Mall and a 67% capital interest in the joint venture that owned the FoothillsMall, and (ii) two corporations that owned

4

----

Back to Contents

interests in these joint ventures. Subsequent to the formation transactions outlined below, we now effectively own 100% of the economic and legal interests in the Foothills Mall. We refer to theownership interest 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 andtheir respective affiliates as the contributors.

At or prior to the closing of our initial public offering we engaged in various transactions, which include the following:

|   | • | Pursuant to separate contribution, merger and related agreements, the contributors contributed their direct and indirect ownership interests in the contributed entities to us in exchange for an aggregate of 123,228 shares of our common stock and 1,593,464 OP units. Inaddition, unaffiliated third party investors exchanged their ownership interests in two of our joint ventures for $5.0 million in cash. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | The contribution, merger and related agreements provide that Larry Feldman, our Chairman and Chief Executive Officer, Jim Bourg, our Chief Operating Officer and one of our directors, and Scott Jensen, our Executive Vice President of Leasing, will retain all right, titleand interest held by the contributed entities to amounts held in certain impound accounts established pursuant to the $54.8 million mortgage loan due in 2008 that is secured by the Foothills Mall. Funds held in this account accrue interest and will be released orreimbursed to Larry Feldman, Jim Bourg and Scott Jensen promptly upon their release from the impound accounts. As of the Offering Date, the balance in these accounts totaled $7.6 million. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | The contribution, merger and related agreements further 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 additional OP units relating to the performance of the jointventure that owns the Harrisburg Mall. The aggregate value of the additional OP units that may be issued with respect to the Harrisburg Mall is equal to 50% of the amount, if any, that the internal rate of return achieved by us from the joint venture exceeds 15% on ourinvestment on or prior to December 31, 2009. The fair value of the right to receive these additional OP Units was approximately $5.0 million at the Offering Date. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | We became 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 $5.5 million mezzanine loan relating to          the Foothills Mall, (iii) a $5.9 millionintercompany 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, (iv) $4.0 million outstanding under a line          of credit owed by our predecessor which was incurred to  return funds          advanced by the contributors in connection with the purchase and renovation          of the Harrisburg Mall and the Foothills Mall, and (v) a $4.0 milliondistribution owed by our predecessor to Messrs. Larry Feldman, Jim Bourg and Scott          Jensen. In addition, the joint venture that owns the Harrisburg Mall          remains subject          to          a construction          loan          that is due byDecember 2005 and has a maximum funding commitment of approximately $46.9 million,of which the joint venture had borrowed approximately $44.3 million as ofDecember 31, 2004. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | We applied approximately $13.4 million of the net proceeds from our initial public offering to repay certain of our predecessor’s outstanding indebtedness, including (i) the $5.5 million mezzanine loan relating to the Foothills Mall, (ii) $4.0 million of the $5.9 millionintercompany loan owed to Feldman Partners, LLC ($1.9 million of this loan was converted into equity securities), (iii) a $4.0 milliondistribution owed by our predecessor to Messrs. Larry Feldman, Jim Bourg and Scott          Jensen, and (iv) the $4.0 million outstanding under our predecessor’s line ofcredit. |

5

----

Back to Contents

|      ***Our Industry*** |
|--------------------------------------------------|

Our property acquisitions and redevelopment activities are focused on underperforming regional and super-regional malls. The following tables describe these property types and contains certain comparable information relating to other retail properties:

**Types of Retail Properties**

| **Type of Center**        |   | **Concept/Market**                                                                                            |   | **Square Feet****(including****Anchors)**        |   | **Anchor Type**                                                                                                                        |
|---------------------------|--------|---------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------|
|                           |   |                                                                                                               |   |                                                  |   |                                                                                                                                        |
| Neighborhood Center       |   | Convenience                                                                                                   |   | 30,000 – 150,000                            |   | One or more supermarkets                                                                                                               |
|                      |   |                                                                                                          |   |                                             |   |                                                                                                                                   |
| Community Center          |   | General merchandise, convenience                                                                              |   | 100,000 – 350,000                           |   | Two or more discount department        stores, supermarkets,  drug stores, home improvement or large specialty/discount        apparel |
|                      |   |                                                                                                          |   |                                             |   |                                                                                                                                   |
| **Regional Malls***       |   | **General merchandise, fashion (typically enclosed andreferred to as malls)**                                 |   | **400,000 – 800,000**                       |   | **Two or more full-line department stores, jr.department store, mass merchant, discountdepartment store or fashion apparel**           |
|                      |   |                                                                                                          |   |                                             |   |                                                                                                                                   |
| **Super-Regional Malls*** |   | **Similar to regional mall but has more variety andassortment (typically enclosed and referred to as malls)** |   | **800,000+**                                     |   | **Three or more full-line department stores, jr.department stores, mass merchant or fashionapparel**                                   |
|                      |   |                                                                                                          |   |                                             |   |                                                                                                                                   |
| Fashion/Specialty Center  |   | Higher-end, fashion-oriented                                                                                  |   | 80,000 – 250,000                            |   | Fashion                                                                                                                                |
|                      |   |                                                                                                          |   |                                             |   |                                                                                                                                   |
| Lifestyle Center          |   | Upscale specialty stores; dining and entertainment inoutdoor setting                                          |   | 150,000 – 500,000(can be smaller or larger) |   | Not usually anchored but may include large-format bookstore, multiplex, cinema, small department(s) and otherbig boxes                 |
|                      |   |                                                                                                          |   |                                             |   |                                                                                                                                   |
| Power Center              |   | Category-dominant anchors, few small tenants                                                                  |   | 250,000 – 600,000                           |   | Three or more category killer, home improvement,discount department store, warehouse club or off-pricestore                            |
|                      |   |                                                                                                          |   |                                             |   |                                                                                                                                   |
| Theme/Festival Center     |   | Leisure, tourist-oriented, retail and service                                                                 |   | 80,000 – 250,000                            |   | Restaurants, entertainment                                                                                                             |
|                      |   |                                                                                                          |   |                                             |   |                                                                                                                                   |
| Outlet Center             |   | Manufacturers’ outlet stores                                                                             |   | 50,000 – 400,000                            |   | Manufacturers’ outlet stores                                                                                                      |
|                      |   |                                                                                                          |   |                                             |   |                                                                                                                                   |

|  |   |
|--|--------|

| *                                                   | Target properties |
|-----------------------------------------------------|-------------------|
| *Source: International Council of Shopping Centers* |

|                                      |
|-------------------------------------------|
|      ***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 twoor more department stores or large big box retail stores, which are called anchor tenants. These anchor 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 samecharacteristics as 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.

6

----

Back to Contents

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 typicallyaccount for a substantial majority of the revenues of a mall.

Malls have different strategies with regard to price, merchandise offered and tenant mix, and are generally tailored to meet the needs of their trade areas. Malls draw from their trade areas by providing an array of shops, restaurants and entertainment facilities and oftenserve as the town center and a preferred gathering place for community, charity, and promotional events. In many communities, the mall is an important engine of economic activity, providing a range of employment opportunities to local residents and sales and property taxrevenues to local governments.

|      ***Investment Classes*** |
|--------------------------------------------------------|

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. Wegenerally 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 above 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 throughour renovation and repositioning strategies, we can substantially increase shopper traffic and tenant sales which will result in higher occupancy, rents and, ultimately, cash flow. We believe that the successful implementation of our strategy can result in the transformation of aClass B or Class C mall into a Class A or near Class A mall. Currently, Stratford Square, 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 ourrenovation and repositioning efforts, each of these malls 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 salestrends and often have excellent access to transportation but, due to mismanagement or changing retail trends, 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-optimallayouts and 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 ormanagement resources necessary to successfully renovate and reposition their facilities. 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.

Notwithstanding the increase in national retail sales and the favorable characteristics of malls, the rate of new U.S. mall construction continues to decrease. We believe that the low rate of new mall construction is caused by high barriers to entry, such as:

|   | • | the large number of existing malls which adequately serve or, in many cases, over-serve the available mall trade areas in the United States; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|

7

----

Back to Contents

|   | • | the presence of large stand-alone discount retailers such as Wal-Mart and Target; |
|--------|--------|-----------------------------------------------------------------------------------|

|   |   |                                                                                                                                                             |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | the costs and difficulties associated with acquiring land for sites with sufficient acreage, requisite regional access and suitable development characteristics; |

|   |   |                                                                                                                                                                                                                       |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | the time and expense associated with obtaining zoning entitlements and environmental approvals due to growing environmental concerns and objections to new mall development from local governments and citizen groups; and |

|   |   |                                                                                                                            |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------|
|   | • | the high costs of new construction and a five to 10-year lead-time required from project conception to completion of new malls. |

Unlike new mall development that may encounter strong opposition from local community and/or local government, our renovation efforts are usually strongly supported by local communities and therefore can be completed in a much shorter time frame. In manycommunities, the mall is a highly important economic driver and a significant source of employment and local government revenue. Therefore, underperforming malls threaten a community with a significant loss of economic activity, jobs and tax revenues. As a result, strongsupport can generally be found in local communities and from local governments for renovation and repositioning plans, including tax incentives and/or government grants. For example, in the case of the Harrisburg Mall, the joint venture expects to receive approximately$8.0 million (of which $1.0 million was received in 2004) in government incentives and grants upon completion of the renovation and repositioning project.

|      ***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 andgrowth strategies, which are aimed at achieving these objectives, include the following elements:

|   | • | ***Pursue Additional Targeted Property Acquisitions.***     Our strategy is to opportunistically acquire underperforming or distressed malls and to transform them into Class A or near Class A malls through a comprehensive renovation and repositioning process. We intend tocarefully select and acquire existing malls that fit our acquisition investment criteria, which extends generally to well-located properties that are underperforming due to vacant anchors, outdated designs and appearance, poor tenant mixes, mismanagement, or changingretail trends. We will tap our network of contacts within the finance, retail and real estate industry to locate underperforming malls at attractive prices. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                                                                                             |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***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 populationand income trends and manageable competition in relation to local population densities. |

|   |   |                                                                                                                                                                                                                                                                                                    |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Implement Renovation and Repositioning Strategies.***     We will implement the 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 preferable tenant mixes bymoving 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 byimplementing targeted tenant marketing campaigns at the local and national levels. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

|   | • | ***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 andmaximizing percentage rents. We will also seek to replace underperforming shop tenants with stronger tenants whose sales will enhance |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

8

----

Back to Contents

|   |   | overall mall traffic and tenant sales. Following the completion of the renovation and repositioning of our malls, we expect our tenants’ sales per square foot to increase. We expect thatsuch increases in sales per square foot will enable our tenants to pay higher rents. We also believe that higher tenant sales per square foot will generate increased leasing demand fromhigher 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 propertiesowned by other mall REITs. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Manage Property Intensively.***     The core of our management strategy is to increase shopper traffic through our malls, which improves tenant sales volume and, ultimately, rental rates. In addition, we utilize a decentralized approach to property and operationalmanagement to increase and maintain occupancy, improve tenant satisfaction, improve customer satisfaction and control operating costs. In certain cases, we may evaluate the replacement of heating, ventilation and air conditioning systems in order to reduce the cost ofenergy. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Pursue Joint Ventures.***     We intend to acquire, renovate and reposition some of our properties in 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 propertieswith 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 flexible financing position by maintaining a prudent level of leverage consistent with the level of debt typical of publicly-traded mall REITs. We will consider a number of factorsin 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 short term financing with medium to long-term fixed rate financing. We may also finance our activitiesthrough 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 propertieswith additional management, leasing, development and incentive fees from the joint ventures. We may also acquire properties in exchange for our OP units.

|      ***Competition*** |
|-------------------------------------------------|

Excluding our company, there are eight other publicly-traded mall REITs and several large private mall companies, any of which under certain circumstances could compete against us for an acquisition, an anchor tenant or a shop tenant. In most cases, we do not expectto compete with publicly-traded REITs during our acquisition process. This was the case regarding our purchase of each of our malls to date. However, in some cases we may compete with other REITs for shop tenants or anchor tenants to occupy space.

We may also compete with other owners and operators of malls in all of our markets. The number of competing malls in a particular market could have a material adverse effect on the success of our renovation and repositioning strategies and on the occupancy levels,and rental rates of certain of our properties. We believe that the primary competition for potential tenants at any of our malls comes from other malls within a three to 25 mile radius of that mall.

We also may compete with numerous other potential private buyers when pursuing a possible property for acquisition or redevelopment and this can cause an increase in the potential cost of an acquisition. Some of these entities may seek financing through similarsources. Therefore, we will continue to compete with other investors in a market where funds available for real estate investment could decrease in the future.

9

----

Back to Contents

We believe that because we are the only publicly-traded REIT solely focused on the renovation and repositioning of distressed malls, we have less competition in acquiring these properties. According to the International Council of Shopping Centers, in 2003 REITsowned or had an interest in 538 malls. The typical REIT strategy is to purchase assets with predictable cash flow and to consolidate such assets into a portfolio of similar quality assets. Accordingly, we believe that the existing REITs are not primarily focused on theacquisition, renovation and repositioning of underperforming or distressed malls.

In contrast, we believe that some mall REITs may sell their distressed malls in order to re-deploy capital in alternative investments. This tendency for a REIT to increase the percentage of stable, fully valued Class A malls in its portfolio creates opportunities for us andreduces our competition from established REITs for future acquisitions. Since other REITs are usually not competing against us for the purchase of underperforming malls, we believe that we are one of very few buyers that can offer a tax deferred sale to private sellers throughuse of our OP units as an acquisition currency. This may be a way for private owners to sell us their older, fully depreciated malls with a low tax basis.

We believe that our senior management team’s experience and reputation in the industry, coupled with our unique turnaround strategies, will enable us to effectively compete against other mall companies.

|      ***Employees*** |
|-----------------------------------------------|

Currently, all of our employees are employed by us, as well as Feldman Equities Management, Inc., our wholly owned taxable REIT subsidiary, which performs various property management, maintenance, acquisition, renovation and management functions. As ofDecember 31, 2004, we had approximately 115 employees in total. None of our employees are represented by a union. We consider our relations with our employees to be good.

|      ***Segment Information*** |
|---------------------------------------------------------|

The Company is a REIT engaged in owning, managing, leasing and repositioning Class B regional malls and has one reportable segment, retail mall real estate.

|      ***Recent Developments*** |
|---------------------------------------------------------|

|                                                      |
|-----------------------------------------------------------|
|      **A. Real Estate Activity** |

|                                                                                       |
|--------------------------------------------------------------------------------------------|
|      **Acquisition of the Colonie Center Mall, Albany, New York** |

On February 2, 2005, we announced the purchase of the Colonie Center Mall, located in Albany, New York, for $82.2 million dollars. The 1.2 million square foot, two-level shopping mall is situated in the heart of New York’s Capital region and minutes from theAlbany International Airport and major hotel chains. The mall has shop occupancy of 66% (excluding temporary and anchor tenants). Including temporary tenants, the shop occupancy as of December 31, 2004 was 85%. Including anchor and temporary tenants, the mall’soverall occupancy was 96% at December 31, 2004. Anchor tenants include Macy’s and Sears (non-owned anchor spaces), Boscov’s and Christmas Tree Shops (a subsidiary of Bed, Bath and Beyond). In addition, junior anchor tenants include F.Y.E and Steve & Barry’s.

|      **B. Financing Activity** |
|---------------------------------------------------------|

|                                                 |
|------------------------------------------------------|
|      **Mortgage Financing** |

In January 2005, we completed a $75 million, 3-year first mortgage financing collateralized by the Stratford Square Mall. This mortgage bears interest at a rate of LIBOR plus 125 basis points and has two one-year extensions. The initial loan to cost is approximately80%; however, once the intended capital improvements of approximately $20 million are completed, we estimate that the leverage to asset ratio for this property will decrease to approximately 65%.

10

----

Back to Contents

|      **Forward Swap Contract** |
|---------------------------------------------------------|

In connection with the Stratford Square Mall mortgage financing, during January 2005, we entered into a $75 million swap which commences in February 2005 and has a final maturity date in January 2008. The effect of the swap is to fix the all-in interest rate on theStratford Square Mall mortgage loan at 5.0% per annum.

|      **C. Dividend** |
|-----------------------------------------------|

On March 23, 2005, we announced that our Board of Directors declared a dividend of $0.2671 per common share. This distribution reflects the regular dividend for the period December 16, 2004 to March 31, 2005. The dividend is payable April 15, 2005 toshareholders of record at the close of business on April 4, 2005.

| **ITEM 2.**     **Properties** |
|---------------------------------------------------------|

As of December 31, 2004, we owned wholly-owned interests in two malls encompassing approximately 2.0 million rentable square feet. Our portfolio also included a 25% ownership interest in one unconsolidated joint venture located in Harrisburg Pennsylvania,encompassing approximately 0.9 million rentable square feet. The table below sets forth information with respect to these properties.

| **Property****(Ownership** **Interest)** |   | **Year Built/****Most Recent****Renovation** |      | **Total****Square****Feet** |   | **Rentable****Square Feet** |   | **Percentage****Leased** |      |   | **Shop****Tenant****Square Feet** |   | **Shop****Tenants****Percentage****Leased** |   |   | **Annualized****Base Rent** |   | **Shop****Tenant****Base Rent****Per Leased****Sq. Ft.** |   | **Owned****Anchors** |   | **Non-owned****Anchors** |       |
|-----------------------------------------------|--------|----------------------------------------------|-----------|-----------------------------|--------|-----------------------------|--------|--------------------------|-----------|--------|-----------------------------------|--------|---------------------------------------------|--------|--------|-----------------------------|--------|----------------------------------------------------------|--------|----------------------|--------|--------------------------|------------|
|                                               |   |                                              |           |                        |        |                             |   |                          |           |   |                                   |        |                                        |   |        |                             |   |                                                          |        |                 |   |                          |            |   |  |  |   |  |  |   |  |  |   |
| Foothills Mall                                |   |                                         | 1983/2004 |                        |   | 711,000                     |   |                     | 500,000   |   |                              | 91.0   | %                                           |   |   | 230,000                     |   |                                                     | 84.0   | %                    |   | $                        | 6,827,000  |   | $ | 18.03 |   | Barnes & Noble; |   | Wal-Mart |   |
| (100%)                                        |   |                                         |      |                        |   |                        |   |                     |      |   |                              |   |                                        |   |   |                        |   |                                                     |   |                 |   |                     |       |   |   |   |   | Linens‘ N Things;Loews Cineplex;Ross Dress forLess; Saks Off5th |   |   |   |   |
| Stratford Square                              |   |                                         | 1966/1999 |                        |   | 1,300,000                   |   |                     | 485,000   |   |                              | 68.3   |                                        |   |   | 485,000                     |   |                                                     | 68.3   |                 |   |                     | 6,692,000  |   |   | 20.20 |   |  — |   |  Burlington Coat |   |
| (100%)                                        |   |                                         |      |                        |   |                        |   |                     |      |   |                              |   |                                        |   |   |                        |   |                                                     |   |                 |   |                     |       |   |   |   |   |   |   |   |  Factory; JCPenney;Marshall Fields;Sears; Carson PirieScott; Kohls |   |
| Harrisburg Mall                               |   |                                         | 1969/2004 |                        |   | 893,000                     |   |                     | 893,000   |   |                              | 89.4   |                                        |   |   | 266,000                     |   |                                                     | 70.2   |                 |   |                     | 4,467,000  |   |   | 16.11 |   |  Bass Pro Shops; |   |  — |   |
| (25%)                                         |   |                                         |      |                        |   |                        |   |                     |      |   |                              |   |                                        |   |   |                        |   |                                                     |   |                 |   |                     |       |   |   |   |   |  Boscov’s;Hecht’s |   |   |   |   |
|                                          |   |                                         |      |                        |   |                        |   |                     |      |   |                              |   |                                        |   |   |                        |   |                                                     |   |                 |   |                     |       |   |   |   |   |   |   |   |   |   |   |
| **Total/Weighted**                            |   |                                         |      |                        |   |                        |   |                     |      |   |                              |   |                                        |   |   |                        |   |                                                     |   |                 |   |                     |       |   |   |   |   |   |   |   |   |   |   |
| **Average**                                   |   |                                         |      |                        |   | 2,904,000                   |   |                     | 1,878,000 |   |                              | 84.4   | %                                           |   |   | 981,000                     |   |                                                     | 73.4   | %                    |   | $                        | 17,986,000 |   | $ | 18.58 |   |   |   |   |   |   |   |
|                                          |   |                                         |      |                        |        |                        |        |                     |           |   |                              |        |                                        |        |   |                        |        |                                                     |        |                 |   |                     |       |   |   |   |

In the table above:

|   | • | Our 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 cashflow. 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 December 31, 2004) plus a 12% preferred return on their capital contributions, we will have the right toreceive 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 suchexcess, 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 amountof the 12% preferred return, which operating cash flow must exceed in order for the partners to receive the additional 20% of excess cash flow, will increase. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

11

----

Back to Contents

|   | • | Percentage Leased is calculated          based on leases executed as of December 31, 2004 and includes          owned anchor tenant space. Percentage Leased for the Foothills Mall          and Stratford Square Mall excludes approximately 210,000 square feet          and 815,000 square feet,  respectively, of non-owned anchor tenant          space. Harrisburg has no non-owned anchor tenant space. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                    |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Shop Tenants Percentage Leased is calculated based on leases executed as of December 31, 2004, by shop tenants and non-anchor tenants. These figures exclude leases to tenants under temporary leases, which are leases for an initial 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 December 31, 2004 and annualized for a 12-month period, except as set forth below. The Annualized Base Rent figures appearing in thetable 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 expireprior to December 31, 2005, which constitute less than 5.38% 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 afterDecember 31, 2004 or (d) pass through of operating expenses to tenants. Annualized Base Rent at the Foothills Mall, Stratford Square Mall and Harrisburg Mall does not include approximately $773,000 for annualized rental income receivable under percentage rent leaseprovisions and $2.5 million annualized income receivable from temporary and month-to-month tenants as of December 31, 2004. |

|   |   |                                                                                                                                                                                                                                                                                                           |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Shop Tenant Base Rent Per Leased Square Foot is calculated based on monthly base rent derived from shop tenant leases executed and in occupancy as of December 31, 2004 and annualized for a 12-month period, with the product divided by the rentable square feetleased to shop tenants as of such date. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Non-owned Anchor Tenants are anchor tenants of the mall, but we do 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 anchortenants 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 tenantof 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. |

12

----

Back to Contents

|      ***Tenant Diversification*** |
|------------------------------------------------------------|

We have approximately 250 leases, many of which are with nationally recognized retailers. The following table sets forth information regarding the 10 largest tenants in our portfolio based on annualized base rent as of December 31, 2004.

**Top 10 Tenants by Annualized Base Rent**

| **Tenant**                       |   | **Mall****Location** |   | **Principal****Nature of****Business** |   | **Lease****Expiration** |   | **Rentable****Sq. Feet** |    | **% of****Total****Rentable****Sq. Feet(1)** |   |   | **Annualized****Base Rent** |   | **% of Total****Annualized****Base****Rent** |      |   | **Base Rent****Per Sq. Ft.** |   |
|----------------------------------|--------|----------------------|--------|----------------------------------------|--------|-------------------------|--------|--------------------------|---------|----------------------------------------------|--------|--------|-----------------------------|--------|----------------------------------------------|-----------|--------|------------------------------|--------|
|                                  |   |                      |   |                                        |   |                         |   |                          |    |                                              |   |   |                             |   |                                              |      |   |                              |   |
| Loews Cineplex                   |   | Foothills            |   | Multi Screen MovieTheatre              |   | Oct.-2017               |   |                     | 77,283  |                                         |   | 4.11   | %                           |   | $                                            | 1,178,556 |   |                         | 6.55   | % |   | $ | 15.25 |   |
|                             |   |                 |   |                                   |   |                    |   |                     |    |                                         |   |   |                        |   |                                         |      |   |                         |   |   |   |   |   |   |
| Bass Pro Shops                   |   | Harrisburg           |   | Sportsman’sSuperstore             |   | Dec.-2019               |   |                     | 200,000 |                                         |   | 10.65  |                        |   |                                         | 822,868   |   |                         | 4.57   |   |   |   | 4.11 |   |
|                             |   |                 |   |                                   |   |                    |   |                     |    |                                         |   |   |                        |   |                                         |      |   |                         |   |   |   |   |   |   |
| Linens ‘N Things            |   | Foothills            |   | Soft Home GoodsSupplier                |   | Jan.-2013               |   |                     | 41,480  |                                         |   | 2.21   |                        |   |                                         | 414,804   |   |                         | 2.31   |   |   |   | 10.00 |   |
|                             |   |                 |   |                                   |   |                    |   |                     |    |                                         |   |   |                        |   |                                         |      |   |                         |   |   |   |   |   |   |
| Toys R Us                        |   | Harrisburg           |   | Toy Store                              |   | Jan.-2013               |   |                     | 45,950  |                                         |   | 2.45   |                        |   |                                         | 410,328   |   |                         | 2.28   |   |   |   | 8.93 |   |
|                             |   |                 |   |                                   |   |                    |   |                     |    |                                         |   |   |                        |   |                                         |      |   |                         |   |   |   |   |   |   |
| Barnes & Noble               |   | Foothills            |   | Book Store                             |   | Feb.-2012               |   |                     | 40,472  |                                         |   | 2.15   |                        |   |                                         | 407,136   |   |                         | 1.96   |   |   |   | 8.73 |   |
|                             |   |                 |   |                                   |   |                    |   |                     |    |                                         |   |   |                        |   |                                         |      |   |                         |   |   |   |   |   |   |
| South Dakota Assoc. for the Deaf |   | Foothills            |   | TelecommunicationService               |   | Dec.-2008               |   |                     | 20,357  |                                         |   | 1.08   |                        |   |                                         | 353,328   |   |                         | 2.26   |   |   |   | 20.00 |   |
|                             |   |                 |   |                                   |   |                    |   |                     |    |                                         |   |   |                        |   |                                         |      |   |                         |   |   |   |   |   |   |
| Ross Dress for Less              |   | Foothills            |   | Discount ClothesRetailer               |   | Jan.-2008               |   |                     | 30,056  |                                         |   | 1.60   |                        |   |                                         | 330,612   |   |                         | 1.84   |   |   |   | 11.00 |   |
|                             |   |                 |   |                                   |   |                    |   |                     |    |                                         |   |   |                        |   |                                         |      |   |                         |   |   |   |   |   |   |
| FYE                              |   | Stratford            |   | Electronics                            |   | Jan.-2010               |   |                     | 17,062  |                                         |   | .91    |                        |   |                                         | 272,992   |   |                         | 1.52   |   |   |   | 16.00 |   |
|                             |   |                 |   |                                   |   |                    |   |                     |    |                                         |   |   |                        |   |                                         |      |   |                         |   |   |   |   |   |   |
| Saks off 5th                     |   | Foothills            |   | Discount Retail                        |   | Oct.-2011               |   |                     | 28,000  |                                         |   | 1.49   |                        |   |                                         | 252,000   |   |                         | 1.40   |   |   |   | 9.00 |   |
|                             |   |                 |   |                                   |   |                    |   |                     |    |                                         |   |   |                        |   |                                         |      |   |                         |   |   |   |   |   |   |
| Limited                          |   | Harrisburg           |   | Women’s Apparel                   |   | Nov.-2006               |   |                     | 11,955  |                                         |   | .64    |                        |   |                                         | 215,184   |   |                         | 1.20   |   |   |   | 18.00 |   |
|                             |   |                 |   |                                   |   |                    |   |                          |    |                                              |   |   |                             |   |                                              |      |   |                              |   |
|                             |   |                 |   |                                   |   |                    |   |                     |    |                                         |   |   |                        |   |                                         |      |   |                         |   |   |   |   |   |   |
| Total/Weighted                   |   |                 |   |                                   |   |                    |   |                     |    |                                         |   |   |                        |   |                                         |      |   |                         |   |   |   |   |   |   |
| Average                          |   |                 |   |                                   |   |                    |   |                     | 512,615 |                                         |   | 27.29  | %                           |   | $                                            | 4,657,808 |   |                         | 25.90  | % |   | $ | 9.09 |   |
|                             |   |                 |   |                                   |   |                    |   |                          |    |                                              |   |   |                             |   |                                              |      |   |                              |   |

|  |   |
|--|--------|

| (1) | The percentage of Total          Rentable Square Feet excludes approximately 1,082,000 square feet with          respect to non-owned anchor tenants. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

13

----

Back to Contents

|      ***Lease Expiration*** |
|------------------------------------------------------|

The following table sets forth information regarding lease expirations at our properties based on executed and occupied leases as of December 31, 2004.

**Lease Expiration Table—Total Portfolio**

| **Lease****Expiration Year** |   | **Number of****Expiring Leases** |   | **Expiring****Rentable Area (1)** |   | **% of Total Sq. Ft.****Expiring** |   | **Expiring Base****Rent (2)** |   | **% of Total Base****Rent** |   | **Expiring****Base Rent****Per Sq. Ft.** |   |
|------------------------------|--------|----------------------------------|--------|-----------------------------------|--------|------------------------------------|--------|-------------------------------|--------|-----------------------------|--------|------------------------------------------|--------|
|                              |   |                                  |   |                                   |   |                                    |   |                               |   |                             |   |                                          |   |
| 2005                         |   |                             | 41     |                              |   | 168,073                            |   |                          | 8.95   | %                           | $      | 967,974                                  |   |   | 5.38 | % | $ | 5.76 |   |
| 2006                         |   |                             | 38     |                              |   | 130,424                            |   |                          | 6.94   |                        |   | 2,210,142                                |   |   | 12.29 |   |   | 16.95 |   |
| 2007                         |   |                             | 40     |                              |   | 92,104                             |   |                          | 4.90   |                        |   | 2,009,880                                |   |   | 11.17 |   |   | 21.82 |   |
| 2008                         |   |                             | 29     |                              |   | 108,719                            |   |                          | 5.79   |                        |   | 2,264,016                                |   |   | 12.59 |   |   | 20.82 |   |
| 2009                         |   |                             | 29     |                              |   | 62,623                             |   |                          | 3.33   |                        |   | 1,456,621                                |   |   | 8.10 |   |   | 23.26 |   |
| 2010                         |   |                             | 15     |                              |   | 44,519                             |   |                          | 2.37   |                        |   | 1,133,193                                |   |   | 6.30 |   |   | 25.45 |   |
| 2011                         |   |                             | 17     |                              |   | 85,511                             |   |                          | 4.55   |                        |   | 1,707,432                                |   |   | 9.49 |   |   | 19.97 |   |
| 2012                         |   |                             | 8      |                              |   | 55,599                             |   |                          | 2.96   |                        |   | 831,474                                  |   |   | 4.62 |   |   | 14.95 |   |
| 2013                         |   |                             | 20     |                              |   | 145,033                            |   |                          | 7.72   |                        |   | 2,122,488                                |   |   | 11.80 |   |   | 14.63 |   |
| 2014 and thereafter          |   |                             | 12     |                              |   | 692,771                            |   |                          | 36.89  |                        |   | 3,283,436                                |   |   | 18.25 |   |   | 4.74 |   |
|                         |   |                             |   |                              |        |                               |        |                          |        |                        |        |                                     |        |   |
| Total/Weighted Average       |   |                             |   |                              |   | 1,585,376                          |   |                          | 84.41  | %                           | $      | 17,986,656                               |   |   | 100.00 | % | $ | 11.35 |   |
|                         |   |                             |   |                              |        |                               |        |                          |        |                        |        |                                     |        |   |

|  |   |
|--|--------|

| (1) | Expiring rentable area excludes approximately 293,000 square feet of unleased space as of December 31, 2004. |
|-----|-------------------------------------------------------------------------------------------------------------------|

| (2) | Annualized base rent as of December 31, 2004 (leases executed as of that date). Excludes revenues from leases to tenants under temporary leases. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                |
|-----------------------------------------------------|
|      ***Harrisburg Mall*** |

|                                     |
|------------------------------------------|
|      *Overview* |

The Harrisburg Mall is located in Swatara Township, three miles from downtown Harrisburg, Pennsylvania. The property was originally built in 1969 and is a two-story, enclosed, regional mall containing approximately 900,000 square feet. It is the largest mall in theHarrisburg market and has approximately 83 shop spaces. It is anchored by three large anchor tenants, Bass Pro Shops (a national retailer of hunting, fishing and boating products), Boscov’s (a regional department store chain that just completed a brand new store that opened inMay 2004) and Hecht’s (a division of the May Company). The Harrisburg Mall’s specialty shop tenants include CVS, Disney Store, Foot Locker, The Limited and Victoria’s Secret. In addition, the Harrisburg Mall has a food court that includes such national tenants as Arby’s,Cosimos Pizza and McDonald’s. The renovation plans for this property include the addition of upscale restaurants on the exterior of the mall in order to create a streetscape look and feel for the property, as well as a food court renovation and additional food court tenants.Given the expected increase in shopper traffic from the recent opening of the Bass Pro Shops, we believe demand for casual dining and food court type dining will increase.

The Harrisburg Mall was at one time considered a dominant mall in its marketplace. However, due to anchor tenant vacancies and the bankruptcy of its former owner, the mall’s sales began to decline in the late 1990’s. Prior to our predecessor’s acquisition of a jointventure interest in the property 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 ourpredecessor’s leasing efforts, the Harrisburg Mall is now over 90% leased. Our intention is to focus our leasing efforts on national and regional shop tenants as mall traffic increases.

14

----

Back to Contents

|      *Renovation* |
|--------------------------------------------|

We are currently nearing completion of the renovation and repositioning project for the Harrisburg Mall. 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:

|   | • | ***New Anchors and Key Renewals.***     Our predecessor signed two new long-term leases and renewed a third lease with proven high traffic anchor tenants. Bass Pro Shops occupies a 200,000 square foot super store consisting of fishing, hunting and boating products. Ourpredecessor also signed a long-term lease with Boscov’s, a regional discount department store chain with 41 stores and annual sales in excess of $1 billion. In addition, the May Company, a national department store chain with annual sales in excess of $13 billion,renewed its long-term lease. All three anchor tenants have agreed to operate their stores continuously for an extended period following completion of the renovation. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Entertainment.***     We are focusing a significant portion of our leasing efforts towards leasing to tenants that are entertainment and tourist destinations, such as Bass Pro Shops. The Bass Pro Shops store opened on November 18, 2004 and is our most important anchortenant in the Harrisburg Mall, serving both as a retailer and as an entertainment destination. At approximately 200,000 square feet, the Bass Pro Shops Harrisburg store is the second largest Bass Pro Shops store in the nation and features a 60,000-gallon aquarium, rockclimbing walls, a live trout stream, waterfalls and an indoor archery range. According to the Springfield, Missouri Visitors and Convention Bureau, the Bass Pro Shops store in Springfield, Missouri, the chain’s flagship store, is the number one tourist destination in theState of Missouri. Including the Harrisburg Mall store, Bass Pro Shops currently has 26 stores across the United States and Canada and attracts over 66 million visitors annually. Based upon these figures, we believe that the Harrisburg Bass Pro Shops store is likely to beranked as one of the most visited tourist destinations in the Commonwealth of Pennsylvania. |

|   |   |                                                                                                                                                                                                                  |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Accessibility.***     We improved the mall’s access by arranging for the Pennsylvania Department of Transportation to provide a direct exit ramp to the property from Interstate 83. |

|   |   |                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Government Support.***     We negotiated and arranged for government grants and other economic incentives which in the aggregate are expected to produce approximately $8 million in economic benefits to the joint venture. As of December 31, 2004, we had received$1.0 million of such grants. |

|   |   |                                                                                                                                                                                                                                |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Appearance.***     We are improving the appearance of the mall by undertaking major renovations of the interior of the two new anchor stores, the interior and exterior of the mall and mall entrances. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Signage.***     We have improved visibility of the mall by adding significantly upgraded signage, including a 150-foot pylon sign which is visible from Interstate 83 and nearby local roads. In addition, we have installed a digital color video screen at the entrance to the mall.The digital color video screen is programmable from a computer inside our mall management office and will be available to notify the public about special events and other mall promotions. Working in collaboration with local officials, our predecessor succeeded inadding “Bass Pro Drive” to the name of a nearby local street, which will allow us to identify the retailer on multiple sign locations along Interstate 83. |

|   |   |                                                                                                                                                                                                            |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Lighting and Security.***     We have improved lighting and security by installing brighter energy-efficient lighting and increasing security in parking lots with regular patrols. |

|   |   |                                                                                                                                                                                                                                                                                        |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Heating, Ventilation and Air Conditioning.***     We are reducing operating expenses by replacing the main air conditioning central plant with new modern energy efficient units that we estimate will result in a significant reduction in the cost of energy. |

As a result of these renovation and repositioning efforts at the Harrisburg Mall, leased square footage has grown from 429,000 at acquisition to 798,000 as of December 31, 2004, after giving effect to executed leases as of such date. Given the attractiveness of the newanchor tenants at the Harrisburg Mall, additional revenue growth from the property is expected as occupancy levels and rental rates rise above current levels.

15

----

Back to Contents

|      *Joint Venture and Financing* |
|-------------------------------------------------------------|

In September 2003, our predecessor acquired an ownership interest in the Harrisburg Mall through Feldman Lubert Adler Harrisburg LP, a joint venture with affiliates of the Lubert Adler Funds based in Philadelphia. The Lubert Adler Funds control over $2 billion inequity which is primarily focused on opportunistic real estate investments. 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 providedapproximately $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 December 31, 2004, the joint venture had spent approximately $34.5 million (net of $1.0 million in received government grant funding) on the renovation and repositioning of this property and we estimate that the total additional investment required to renovateand reposition the property is approximately $11.0 million. The joint venture intends to fund the additional $11.0 million investment from the remaining proceeds of the construction loan with Commerce Bank (approximately $1.7 million available) and approved state andlocal government grants and other economic incentives (approximately $7.0 million) and cash flow from operations. Net of cash flow from property operations applied to project costs of approximately $8.7 million, and government grants and incentives, the total net projectcost is estimated to be approximately $56.3 million or $63.05 per square foot, which we believe is significantly below the replacement cost of building a new mall.

The construction loan with Commerce Bank contains a maximum funding commitment of $46.9 million, of which the joint venture has borrowed $44.3 million as of December 31, 2004. Through November 17, 2004, the loan bore interest at a rate of LIBOR plus 325basis points. The loan currently bears interest at a rate of LIBOR plus 250 basis points. Interest on the outstanding principal balance of this loan is payable on the first day of each month. No payments of principal are required on this loan until December 31, 2005, at whichtime the entire principal balance together with any accrued interest thereon will be due. This loan can be repaid in whole or in part at any time without penalty and may be extended for up to three additional one-year periods. 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%. During March 2005, we assumed Larry Feldman’s recourse liabilities under this loan. In addition, pursuant to the terms of thisloan, at any time the joint venture is entitled to receive a loan advance, the lender shall reduce the amount of such advance by the amount of the joint venture’s net cash flow after operating expenses and debt service.

Under the terms of the limited partnership agreement of Feldman Lubert Adler Harrisburg LP, the general partner (one of our wholly owned subsidiaries) manages the day-to-day operations of the property. The general partner and limited partners share equally indecision-making authority over major decisions affecting the property, including property sales and financings, leasing, and budget approval and amendments.

We and our joint venture partner each have the right to receive a preferred return from the operating cash flow of the property equal to 12%, computed on an annual compounded basis, on invested capital. Once operating cash flow exceeds 12%, we will be entitled toreceive 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 to the joint venture (an aggregate of approximately $16.8 million as of December 31, 2004) plus a 12% preferred returnthereon, 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 beentitled to a 30% share of such excess, if any, plus our 25% share of the remaining 70% interest. 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 mustexceed in order for the partners to receive the additional 20% of excess cash flow, will increase.

The contribution, merger and related agreements further 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 additional OP units relating to the performance of the jointventure that owns the Harrisburg Mall. The aggregate value of the additional OP units that may be issued with respect to the Harrisburg Mall is equal to

16

----

Back to Contents

50% of the amount, if any, that the internal rate of return achieved by us from the joint venture exceeds 15% on our investment on or prior to December 31, 2009. The fair value of the right toreceive these additional OP Units was approximately $5.0 million at the Offering Date.

The fees we are entitled to earn    as manager of the Harrisburg Mall include a management fee of 3.5% of annual    gross revenues paid monthly, a construction management fee of 3% of the amount    of capital improvements, and customary leasing fees for a mall leasing  agent.    For the year ended December 31, 2004, these fees totaled approximately    $.07 million.

The joint venture agreement includes a “buy-sell” provision allowing either joint venture partner to acquire the interests of the other beginning on September 30, 2005. Either partner to the joint venture may initiate a “buy-sell” proceeding, which may enable it toacquire the interests of the other partner. However, the partner receiving an offer to be bought out will have the right to buy out such offering partner at the same price offered. The joint venture agreement does not limit our ability to enter into real estate ventures or co-investments with other third parties. However, the agreement restricts our ability to enter into transactions relating to the joint venture with our affiliates without the prior approval of our joint venture partner.

Our predecessor acquired an ownership interest in the Harrisburg Mall through a joint venture with affiliates of the Lubert Adler Funds in 2003. Our company has been granted an option, exercisable at any time prior to July 19, 2005, to purchase the remaining interestheld by our joint venture partner for an aggregate of $27.6 million in cash.

|      ***Location and demographics*** |
|---------------------------------------------------------------|

The property is located east of the Harrisburg capital region in Pennsylvania adjacent to major thoroughfares, including Interstate 83. The following are key demographic and other information that we expect will benefit the Harrisburg Mall:

|   | • | ***Population.***The Harrisburg metropolitan statistical area population was 629,401 according to the US Census Bureau Census 2000. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Population Growth.***The population within a 10 mile radius of the Harrisburg Mall is estimated to have grown by approximately 7.9% from 1990 to 2000 and is projected to grow by 2.2% from 2003 to 2008, according to Claritas. |

|   |   |                                                                                                                                                                                                                                                                   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Household Income.***For the year ended December 31, 2003, the average household income within a 10-mile radius of the Harrisburg Mall was estimated to be approximately $63,000 and is expected to increase by 13.2% from 2003 to 2008, according to Claritas. |

|   |   |                                                                                                                                                                                                         |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Traffic Count.***The average annual daily traffic count in 2002 for Interstate 83 near the Harrisburg Mall was approximately 103,000 vehicles according to the Pennsylvania Department of Transportation. |

|   |   |                                                                                                                                                                                                                                                                                                                                                       |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Local Market Characteristics.***The Harrisburg region’s economy is dominated by State and Federal Government, which tends to insulate the region from major economic downturns in the national economy. The Harrisburg Mall is located within a 10 minute drive fromthe city of Hershey and Hershey Park, which is a national tourist destination. |

|                                        |
|---------------------------------------------|
|      *Competition* |

The primary competitors of the Harrisburg Mall include two regional malls that jointly comprise approximately 1.4 million square feet of shop space. Four power centers that comprise approximately 1.7 million square feet are located within seven miles of the property.In addition we expect to compete with a new lifestyle center within four miles of the property. We believe there are no major regional mall projects under construction or planned for the near future. No competitor has a unique anchor tenant similar to Bass Pro Shops. Thesignificant competitors within a 10 mile radius include:

|   | • | *Colonial Park Mall.*     The Colonial Park Mall opened in 1960 and is located approximately five miles north of the Harrisburg Mall. It contains approximately 745,000 square feet of leasable area, 95 shops, |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

17

----

Back to Contents

|   |   | and is anchored by Bon Ton, Sears and Boscov’s. This center was renovated and expanded with a food court and some specialty shops during 1990. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | *Capital City Mall.*     The Capital City Mall is located 10 miles to the west of the Harrisburg Mall. It contains approximately 600,000 square feet of leasable area and 94 shops. This center opened in 1974 and is anchored by Hecht’s, JCPenney and Sears. The center was firstrenovated in 1986 and a second renovation was completed in 1998, which included new flooring, plantings, seating, skylights and a food court area. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | *Camp Hill.*     The Camp Hill shopping center is a former community center originally constructed in 1958 and was completely enclosed and renovated in 1986. It contains approximately 523,000 square feet of leasable area and is anchored by Boscov’s. This center islocated 10 miles west of the Harrisburg Mall. This property is being converted back into its original use as a community center and will no longer be an enclosed mall. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | *The Shoppes at Susquehanna.*     The Shoppes at Susquehanna is a 108,000 square foot, open-air lifestyle center that opened in October 2004. It is approximately four miles from the Harrisburg Mall and is approximately 63% leased to such tenants as Ann Taylor Loft,Children’s Place, Coldwater Creek, J. Jill, Jos. A Banks and Williams Sonoma. This center has dining establishments including Damon’s and Macaroni Grill. |

**Average Occupancy Rate and Base Rent—Harrisburg Mall(1)**

| **Fiscal Year** |   | **Average****Occupancy Rate(2)(3)** |   | **Average Annual****Rent per Sq. Ft.(3)** |   |
|-----------------|--------|-------------------------------------|--------|-------------------------------------------|--------|
|                 |   |                                     |        |                                      |        |  |   |
| 2004            |   |                                | 65     | %                                         | $      | 17.70 |   |
| 2003            |   |                                | 70     | %                                         | $      | 15.40 |   |
| 2002            |   |                                | 81     | %                                         | $      | 13.42 |   |
| 2001            |   |                                | 80     | %                                         | $      | 14.72 |   |
| 2000            |   |                                | 82     | %                                         | $      | 17.29 |   |

|  |   |
|--|--------|

| (1) | The information in this chart for the periods prior to our predecessor’s investment in the Harrisburg Mall in September 2003 was supplied by or derived from information provided by the previous owner of the property. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Excludes temporary leases, which are leases for a term of less than one year. |
|-----|-------------------------------------------------------------------------------|

| (3) | Calculated based on rentable shop tenant space. |
|-----|-------------------------------------------------|

|                                               |
|----------------------------------------------------|
|      ***Foothills Mall*** |

|                                     |
|------------------------------------------|
|      *Overview* |

The Foothills Mall is located in the Tucson, Arizona area and is a single level, enclosed regional mall containing approximately 500,000 square feet originally built in 1983. In addition, Wal-Mart occupies and owns a new 210,000 square foot super center which shares acommon parking lot and road entrance with the Foothills Mall. The Foothills Mall is anchored by a series of big box anchor tenants, including Barnes & Noble, Linens ’N Things, a Loews Cineplex 15 screen stadium theatre, Ross Dress For Less, and Saks Off 5th. TheFoothills Mall’s specialty stores include a large Nike factory outlet store, Bath & Body Works, Claire’s, Haggar, Levi’s, Old Navy, PacSun, Quicksilver, Samsonite and Sunglass Hut. In addition, the Foothills Mall includes numerous restaurants such as Applebee’s, Fox andHound, Gavi Italian Restaurant, Keatons Restaurant, Melting Pot, J. Nippon, Outback Steakhouse and Thunder Canyon Brewery.

In April of 2004, our predecessor acquired an interest in the joint venture that acquired the Foothills Mall in April of 2002 for approximately $54 million. At that time, the Foothills Mall was experiencing low tenant sales per square foot, and as a result, the previousowners had difficulty attracting new tenants despite the mall’s solid location in the Tucson suburban area, one of the fastest growing markets in the United States.

18

----

Back to Contents

|      *Renovation* |
|--------------------------------------------|

We are currently near completion of the renovation and repositioning project for the Foothills Mall. We estimate that the cost of the renovation and repositioning will total approximately $11 million, which will result in a total project cost of approximately $65 millionor $130 per square foot. As of December 31, 2004, we had spent approximately $10.4 million on this project. The renovation and repositioning is being financed through a combination of debt and equity financing. The renovation and repositioning plan, which is designed toconvert the mall from a Class B mall to a Class A mall, includes the following:

|   | • | ***Redirecting Loews              Cineplex Traffic.***     Our predecessor              sharply increased shopper traffic by sealing off an exterior entrance              to the Loews Cineplex theatre and thereby redirected theatre patrons              through the interior of the mall. The 15 screen Loews Cineplex              is one of theFoothills Mall’s major anchor tenants and is the largest tenant in the FoothillsMall by rental revenue. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | We estimate that during peak weeks, the Loews        Cineplex is attended by up to 40,000 patrons, most of whom previously        entered and exited directly through the theatre’s parkinglot entrance without entering the mall. With the objective of driving up tenantsales, we provided $3.7 million to Loews to facilitate the conversion ofthe remaining unconverted theatres to stadium seating. In exchange, Loews closedits existing parking lot entrance and is now redirecting all patrons throughan entrance inside the mall at the end of the main mall corridor. The conversionto stadium seating, which was completed in October 2004, has already boostedbox office attendance, and the redirection of all of Loews patrons into the interiorof the mall has had a positive effect on overall mall shopper traffic. As a result,shop sales throughout the mall are expected to increase. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | • | ***Mall Expansion.***     Our predecessor increased the size of the mall by constructing approximately 27,000 square feet of additional space, including new space for Famous Footwear, and developing five out-parcels which have collectively added over 40,000 square feet ofnew area and have attracted such tenants as Baskin Robbins, Chipotle Grill, Compass Bank, Starbucks, Subway and Thomasville Furniture. Over 98% of the newly constructed expansion area of approximately 67,000 square feet has been leased or sold to tenants.                                                                                                                                                                                                                                                                                                                                            |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Leasing Initiatives.***     We are conducting an intensive leasing initiative which includes the following: (i) filling missing product categories and attracting strong brand name tenants such as Old Navy, who recently executed a new lease for approximately 15,000 squarefeet, (ii) renewing existing high volume tenants at the best possible market rental rates, (iii) eliminating unhealthy, low volume or unprofitable stores, (iv) filling certain difficult-to-lease vacant spaces with temporary tenants until leases with long-term tenants are in placeand (v) focusing on obtaining at least one additional major anchor tenant on the southwest corner of the mall. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Exterior Entrance Signage.***     Our predecessor significantly improved all of the mall entrance signs facing the public roadways with new, highly visible signs at all mall entrances. In addition, our predecessor installed a brightly lit, 25 foot pylon sign at the main mallentrance. This sign is used to promote mall events and is programmable from our management office. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                          |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Improved Visibility of Interior Mall Corridors.***     Previously, two of our anchor tenants, Barnes & Noble and Saks Off 5th, had only limited visibility to the main mall corridor. In order to increase the visibility of these key anchor tenants, our predecessor raised the mall’sceiling and reconfigured the main mall corridor. |

|   |   |                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***New Mall Entrances.***     Our predecessor constructed a new large rotunda entrance at the south end of the mall to increase shopper traffic and improve pedestrian circulation at that end of the mall, and we are currently renovating two other mall entrances and are installingnew entrance signage to our food court. |

|   |   |                                                                                                                                                                                                  |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***New “Lifestyle” Component.***     Our predecessor installed numerous outdoor and indoor seating areas, including an outdoor Starbucks café seating area. |
|   |   |                                                                                                                                                                                                  |

|   | • | ***Food Court and Amenities.***     We are improving shopper comfort and amenities, including high quality restrooms, a new floor, new tables and new soft seating areas in the food court, and new soft seating |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

19

----

Back to Contents

|   |   | areas in other parts of the mall. Some of these seating areas will feature large flat screen televisions and are designed to induce patrons to stay in the mall while their friends or familycontinue to shop. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                          |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Public Marketing Campaigns.***     We are conducting special public marketing campaigns with the objective of having community and other group events in the mall on a regular basis, such as car sales, rock groups, sports promotions, radio station events, and civic andcharitable functions. |

|   |   |                                                                                                                                                                                                                                                              |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Potential Expansion.***     The Foothills Mall property has the potential to be expanded by approximately 80,000 rentable square feet. We are in discussions with several potential anchor tenants for the pre-leasing of this space. |

These renovation and repositioning efforts have already impacted the operating performance of the Foothills Mall. Leased square footage as a percentage of total rentable area was maintained at approximately 90% throughout the renovation process, which addedapproximately 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.

|      *Financing* |
|-------------------------------------------|

In connection with the formation transactions, we acquired the remaining interests in the joint venture for approximately $4.5 million. There is an outstanding mortgage loan on the Foothills Mall in the amount of $54.8 million, as of December 31, 2004, at a fixed rateof 5.09%. There is no principal amortization requirement on this loan. The mortgage loan was originated by Archon Group, LP and in May 2004 was sold to a bondholder trust and is currently serviced by General Motors Acceptance Corp. on behalf of the bondholder trust.The term of the loan commenced on October 30, 2003 and matures on November 1, 2008. The loan is closed to prepayment during a lockout period until the first to occur of (i) three years following commencement of the loan or (ii) two years following the sale of the loanto 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. Therefore, we may not defease the loan until May 2006. Assuming no payments are made on theprincipal amount of this loan prior to November 1, 2008, the balance to be due at such date will be approximately $54.8 million.

We had a mezzanine loan which bore interest at a rate of 10.5% per annum and was due to mature in December 2008 in the amount of approximately $5.4 million owed by our predecessor to Massachusetts Mutual Life Insurance Company in connection with theredevelopment of the Foothills Mall. We repaid the loan with proceeds from our initial public offering.

|      *Location and Demographics* |
|-----------------------------------------------------------|

The Foothills Mall is located in the Northwest sector of Pima County in the greater Tucson, Arizona market and is near a busy thoroughfare which makes it accessible to significant local and tourist traffic. The following are key demographic and other information thatwe expect will benefit the Foothills Mall:

|   | • | ***Population.***     Tucson is Arizona’s second largest city with a metropolitan statistical area population of 843,746, according to the US Census Bureau Census 2000. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                                |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Population Growth.***     Tucson is estimated to be one of the fastest-growing cities in the United States. The population within a 10-mile radius of the Foothills Mall is estimated to have grown by 27% from 1990 to 2000 and is projected to grow by 10.1% from 2003 to2008, according to Claritas. |

|   |   |                                                                                                                                                                                                                                                                                 |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Household Income.***     For the year ended December 31, 2003, the average household income within a 10 mile radius of the Foothills Mall was estimated to be $59,000 and is projected to increase by 17% from 2003 to 2008, according to Claritas. |

|   |   |                                                                                                                                                                                                             |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Traffic Count.***     The daily traffic count in March 2004 on Ina Road near the Foothills Mall was approximately 37,000 vehicles according to Arizona Department of Transportation. |

|   |   |                                                                                                                                                                                          |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Local Market Characteristics.***     A new community college has recently opened within walking distance of the Foothills Mall with approximately 4,000 students. |

20

----

Back to Contents

|      *Competition* |
|---------------------------------------------|

The primary competitors of the Foothills Mall include three regional malls described below that jointly comprise approximately 3.5 million square feet of shop space. Seven power centers that comprise approximately 2.5 million square feet are located within ten milesof the property. Tucson’s expanding economy, tourism and strong population growth have created a strong retail market, including the regional mall sector. Accordingly, there is a strong demand for retail property in the Tucson area as evidenced by a 90% occupancy level forshop space. We expect the construction of new retail properties to increase modestly and in proportion to demand so that vacancy levels remain low. We believe the Foothills Mall is the only value and entertainment oriented mall in its trade area. Competitors of the FoothillsMall include:

|   | • | *El Con Mall.*     The El Con Mall is a 1.2 million square foot mall and is located approximately 12 miles southeast of the Foothills Mall. The mall was originally built in 1962 and partially renovated in 1996. It has a 20-screen Century Theatre, Home Depot and is seekingto add an additional discount retailer. Existing anchor tenants include JCPenney and Robinsons-May. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | *Park Place Mall.*     The Park Place Mall is a single level enclosed mall, which contains approximately 1.0 million square feet and is located 12 miles from the Foothills Mall. It is approximately 97% occupied and is anchored by Dillard’s, Macy’s and Sears. Other tenantsin the mall include Borders Books, Century Theatre and Old Navy. This mall recently completed a renovation process, which included the addition of “street” retailers, a food court, mall shops, restaurants, theatres and a new Dillard’s. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | *Tucson Mall.*     The Tucson Mall is a 1.3 million square foot mall that has been considered the dominant mall in Tucson for nearly 20 years. The property is located approximately five miles southeast of the Foothills Mall. This mall was constructed in 1982 and renovatedin 1991. Dillard’s, JCPenney, Macy’s, Mervyns, Robinsons-May and Sears are the anchor tenants. |

**Average Occupancy Rate and Base Rent—Foothills Mall(1)**

| **Fiscal Year** |   | **Average****Occupancy Rate(2)(3)** |   | **Average Annual****Rent per Sq. Ft.(3)** |   |
|-----------------|--------|-------------------------------------|--------|-------------------------------------------|--------|
|                 |   |                                     |        |                                      |        |  |   |
| 2004            |   |                                | 81     | %                                         | $      | 16.47 |   |
| 2003            |   |                                | 82     | %                                         | $      | 16.89 |   |
| 2002            |   |                                | 82     | %                                         | $      | 16.80 |   |
| 2001            |   |                                | 82     | %                                         | $      | 17.65 |   |
| 2000            |   |                                | 84     | %                                         | $      | 16.13 |   |
|            |   |                                |   |                                      |   |   |   |

|  |   |
|--|--------|

| (1) | The information in this chart for the periods prior to our predecessor’s acquisition of the Foothills Mall in April 2002 was supplied by or derived from information provided by the previous owner of the property. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Excludes temporary leases, which are leases for a term of less than one year. |
|-----|-------------------------------------------------------------------------------|

| (3) | Calculated based on rentable shop tenant space. |
|-----|-------------------------------------------------|

|                                                      |
|-----------------------------------------------------------|
|      ***Stratford Square Mall*** |

|                                     |
|------------------------------------------|
|      *Overview* |

On December 30, 2004, we acquired Stratford Square Mall for a base purchase price of $93.1 million. We also plan to invest an additional $20 million in the renovation and repositioning plan for Stratford Square Mall for an estimated total project cost ofapproximately $113 million.

Stratford Square Mall is a 1.3 million square foot, super-regional mall located in Bloomingdale, Illinois. Located in the rapidly growing and affluent DuPage County, a northwestern suburb of Chicago, the mall had an overall occupancy of 90.4% as of December 31,2004 with shop tenant occupancy of 68.7% (excluding temporary and anchor tenants). The mall has six non-owned anchor tenants: Kohl’s, Sears, Carson Pirie Scott (a unit of the Saks Department Store Group), Marshall Fields, JCPenney and Burlington Coat Factory.

21

----

Back to Contents

Average mall shop sales for 2004 were approximately $275 per square foot, an amount that we intend to increase through capital expenditures focused on improving shopper traffic and tenant sales. Plans to boost shopper traffic and tenant sales include building a new,multi-screen, cineplex with stadium seating, adding one or more junior anchor tenants, multiple sit-down restaurants, outdoor cafes and streetscape retail, new property signage and other general capital improvements.

The mall’s anchor tenants are complemented by numerous nationally recognized retailers such as Panera Bread, Forever 21, Abercrombie & Fitch, Pacific Sun, American Eagle, Claires, Bath & Body Works, Bombay Company, The Children’s Place, The Gap, f.y.e.,Limited Too and Victoria’s Secret. The shops are comprised of approximately 450,000 square feet and are accessed on two levels, with a central food court.

|      *Anchor Tenant Sales Versus Shop Tenant Sales* |
|------------------------------------------------------------------------------|

Shop sales at Stratford Square in calendar 2004 were $275 per square foot, which categorizes this mall as a Class B mall.

We believe that in 2004 the Stratford Square Marshall Field’s had approximately $25 million in sales, Sears had approximately $26 million in sales, JCPenney had sales of $25 million, Carson Pirie Scott has sales of $26 million, Kohls had sales of $23 million andBurlington Coat Factory had sales of $16 million. These six anchors will continue to operate as strong shopper draws. We estimate that collectively, the Stratford Square anchor tenants had approximately $141 million in combined sales in 2004. We believe that there is anopportunity to sharply increase shop tenant sales per square foot and thereby grow the property’s rental revenue.

Adjacent to the Stratford Square Mall are six third-party owned anchor tenant spaces. We have entered into an operating agreement with these six anchor tenants to share certain operating expenses based on allocated amounts per square foot. The agreement terminates inMarch 2031.

|      *Financing* |
|-------------------------------------------|

We funded the Stratford Square Mall acquisition from proceeds of our initial public offering. In January 2005, we obtained a $75 million, 3-year floating rate first mortgage financing secured by the property. The mortgage loan bears interest at a rate of LIBOR plus 125basis points and has two, one-year extension options. The loan is interest-only and is prepayable in whole, but in part, on or after August 2009. We used a swap arrangement to convert this loan to one with a fixed interest rate of 5% per annum.

|      *Renovation and Repositioning Plan* |
|-------------------------------------------------------------------|

Our opportunity, with respect to Stratford Square, is to take advantage of the mall’s unusually strong number of six anchor tenants to leverage the draw from such anchor tenants into higher shop sales. In addition, with approximately 151,000 square feet of shop spaceavailable, there is an opportunity to create value for our stockholders through an ongoing leasing program. The following is a preliminary outline of our strategic plan to accomplish this goal:

|   | • | ***New Movie Theatre Tenant.***     Negotiations are in an advanced stage with a movie theatre tenant. We plan to boost shopper traffic and tenant sales by sharply upgrading and expanding the existing four-screen movie theatre into a state of the art, multi-screen Cineplex.Similar to our Foothills Mall property, the objective is to strengthen the shop tenants with a movie theatre and a series of restaurant tenants. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Redirecting Anchor Tenant Traffic.***     We will improve the appearance and ambience of the mall by undertaking major renovations of the interior common areas and the mall entrances. The objective with respect to this renovation will be to create a unique series ofindoor mall features that will compliment the mall’s attractive architecture. Present design concepts call for television viewing areas with comfortable leather sofa seating and modern full size flat screen televisions, and the addition of another large high-end children’splay area. In addition, indoor and outdoor restaurant seating will be encouraged throughout the mall, with café style seating overlooking the mall corridors. |

22

----

Back to Contents

|   | • | ***Appearance.***     We intend to improve the appearance of the mall by undertaking major renovations of the interior common areas and the mall entrances. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                        |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Signage.***     We will improve the visibility of the mall by adding significantly upgraded signage, including a new pylon sign (subject to municipal approvals) which will be visible from nearby local roads. |

|   |   |                                                                                                                                                                                                                                            |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Restaurants.***     We will focus a significant portion of our leasing efforts towards tenants that are entertainment and tourist destinations, such as upscale and trendy restaurants, arcades and movie theatres. |

We expect these renovation and repositioning efforts will impact the financial performance of Stratford Square by drawing the anchor tenant shoppers into the main mall and attracting more shoppers. We expect our revenues to grow as more shoppers spend more time inthe main mall, which we expect will increase shop tenant sales per square foot. The overall objective will be to convert this mall from a Class B mall to a Class A mall.

|      *Mall Location and Demographics* |
|----------------------------------------------------------------|

Stratford Square is located in Bloomingdale, Illinois, an affluent suburb of Chicago. The following are the key demographic and other information that we expect will benefit Stratford Square:

|   | • | ***Population.***     The suburban Chicago population within a 15-mile radius of Stratford Square is approximately 723,000 people according to Claritas. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Population Growth.***      The population within a 15-mile radius of Stratford Square is estimated to have grown by approximately 13% from 1990 to 2000 and is projected to grow by an additional 3.2% from 2004 to 2009 according to Claritas. |

|   |   |                                                                                                                                                                                                                                  |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Household Income.***      For the year ended December 31, 2003, the average household income within a 15-mile radius of the Stratford Square Mall was estimated to be $87,304 according to Claritas. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Local Market Characteristics.***     Chicago is recognized as one of the most important industrial and financial centers in the United States. It is the nation’s largest producer of steel and machinery, has the world’s largest commodities market and is the nation’s largestwholesaling center. Chicago’s mid-continent location and accessibility via both land and water have made it the central hub of the United States. |

The Chicago area thrives on its strong, diverse, and growing economy in manufacturing, wholesale and retail trade, communications, publishing, banking, finance, insurance, law, advertising, accounting, medicine, and high technology. The Chicago area also enjoys oneof the finest transportation systems of any urban area, a highly skilled labor pool, and an appreciation of and devotion to cultural and recreational activities that attract corporations and tourists from around the world.

|      *Competition* |
|---------------------------------------------|

The primary competitors of Stratford Square include two super-regional shopping centers situated within Stratford Square Mall’s trade region. In addition, there are two smaller malls that compete to a lesser degree with the subject property. A summary of StratfordSquare’s competitors are as follows:

|   | • | ***Woodfield Mall:***     The 2,270,000 square foot Woodfield Shopping Center is anchored by Nordstrom’s, Marshall Field’s, Lord & Taylor, Sears and JCPenney, and is located approximately 8 miles to the northeast of Stratford Square Mall. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Oakbrook Center:***     The 2,013,000 square foot Oakbrook Center is an outdoor mall anchored by Nordstrom’s, Marshall Field’s, Neiman-Marcus, Bloomingdale’s, Lord & Taylor and Sears, and is located about 11 miles to the property’s southeast. |

|   |   |                                                                                                                                                                                                                                       |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Charlestown Mall:***     The recently upgraded 832,000 square foot Charlestown Mall is anchored by Carson’s, Von Maur, Sears and Kohl’s and is located 8 miles to the west of Stratford Square Mall; |

23

----

Back to Contents

|   | • | ***Yorktown Shopping Center:***     The 1,600,000 square foot Yorktown Shopping Center is anchored by Carson’s, Von Maur, JCPenney and Target and is located about 10 miles to the property’s southeast. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Average Occupancy Rate and Base Rent—Stratford Square(1)**

| **Fiscal Year** |   | **Average****Occupancy Rate(2)(3)** |   | **Average Annual****Rent per Sq. Ft.(3)** |   |
|-----------------|--------|-------------------------------------|--------|-------------------------------------------|--------|
|                 |   |                                     |        |                                      |        |  |   |
| 2004            |   |                                | 69     | %                                         | $      | 23.96 |   |
| 2003            |   |                                | 75     | %                                         | $      | 23.71 |   |
| 2002            |   |                                | 79     | %                                         | $      | 22.38 |   |
| 2001            |   |                                | 70     | %                                         | $      | 27.60 |   |
| 2000            |   |                                | 82     | %                                         | $      | 24.18 |   |
|            |   |                                |   |                                      |   |   |   |

|  |   |
|--|--------|

| (1) | The information in this chart was supplied by or derived from information provided by the seller of the property. |
|-----|-------------------------------------------------------------------------------------------------------------------|

| (2) | Excludes temporary leases, which are leases for a term of less than one year. |
|-----|-------------------------------------------------------------------------------|

| (3) | Calculated based on rentable shop tenant space. |
|-----|-------------------------------------------------|

|                                               |
|----------------------------------------------------|
|      ***Colonie Center*** |

|                                     |
|------------------------------------------|
|      *Overview* |

In September 2004, we entered into an agreement to acquire Colonie Center for a base purchase price of $82.2 million. We completed this acquisition in February 2005. The purchase and sale agreement for this property provides for an increase to the purchase price if,prior to June 30, 2005, certain pending lease transactions are executed and tenants under such leases take occupancy and commence rental payments. The maximum amount of the purchase price increase is approximately $9 million so that the maximum potential purchaseprice 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. We also plan to invest an additional $22.0 million in therenovation and repositioning plan for Colonie Center for a maximum total project cost of $115.2 million.

Colonie Center is a 1.2 million square foot, super-regional mall serving Albany, New York and its surrounding areas. Colonie Center is anchored by four major stores: Macy’s, Sears, Boscov’s, and Christmas Tree Shops (a wholly owned subsidiary of Bed Bath &Beyond). In addition, the mall has two important “junior anchors;” Steve & Barry’s and an f.y.e. super store. The mall’s anchor tenants are complemented by numerous nationally recognized retailers such as Abercrombie & Fitch, American Eagle, Bath & Body Works,Bombay Company, The Children’s Place, The Gap, Limited Too and Victoria’s Secret. The 110 shops are comprised of approximately 381,000 square feet and are accessed on two levels, with a central food court, restaurants and cafés.

Colonie Center features Albany’s only Christmas Tree Shops store and Steve & Barry’s store, each of which distinguishes it from its competitors and attracts a large number of visitors. The mall features attractive, well-maintained improvements, a successful anchortenant line-up and a highly convenient location with immediate access to Interstate 87.

Colonie Center’s user-friendly design enables it to successfully target the more affluent, more mature, professional, and family-oriented shopper. The communities bordering the property in all directions provide a growing and loyal shopper base, and as Albany is the seatof New York state government, Colonie Center benefits from a stable and growing employment pool.

|      *Anchor Tenant Sales Versus Shop Tenant Sales* |
|------------------------------------------------------------------------------|

Shop tenant sales for Colonie Center in 2004 were $283 per square foot, which categorizes this mall as a Class B mall. However, the mediocre shop sales are in sharp contrast to the mall’s strong anchor tenant sales.

We believe that in 2004, the Colonie Center Macy’s had approximately $60 million in sales and Sears had approximately $49 million in sales. We also believe that each will continue to operate as anchor tenant

24

----

Back to Contents

strongholds for Colonie Center. We believe Boscov’s at Colonie Center had annual sales of $28 million in 2004. In addition, Christmas Tree Shops (a wholly owned subsidiary of Bed Bath &Beyond), reported sales in 2004 of $23 million, which equates to sales of over $400 per square foot. Collectively, the Colonie Center anchor tenants reported approximately $160 million incombined sales in 2003. We believe that there is an opportunity to increase shop tenant sales per square foot and thereby grow the property’s rental revenue.

|      *Financing* |
|-------------------------------------------|

We financed the acquisition of Colonie Center from the net proceeds from our recent initial public offering and proceeds from the Stratford Square Mall mortgage. We may elect to place mortgage financing on the property and use the proceeds from such financing toacquire additional properties.

|      *Renovation and Repositioning Plan* |
|-------------------------------------------------------------------|

Our opportunity, with respect to Colonie Center, is to take advantage of the mall’s unusually strong anchor tenant sales and leverage such sales into higher shop tenant sales. In addition, with approximately 123,000 square feet of shop space available, there is anopportunity to create value for our stockholders through an ongoing leasing program. The following is a preliminary outline of our strategic plan to accomplish this goal:

|   | • | ***New Upscale Junior Anchor Tenants.***     Negotiations are in an advanced stage with a junior anchor tenant, which will be the first of its kind in the Albany region. In addition, we are also negotiating with another potential junior anchor tenant whose use and shopperappeal is ideally suited to the repositioning plan. If successful, these additional junior anchor tenants will bring the total number of mall anchor tenants to eight (four major anchors and four junior anchor tenants). Similar to our Foothills Mall property, the concept we areutilizing in connection with Colonie Center is to strengthen the in-line shop area with a series of powerful, drawing junior anchor tenants that will help draw shoppers from the larger anchor tenants into the main mall. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Redirecting Anchor Tenant Traffic.***     We will improve the appearance and ambiance of the mall by undertaking major renovations of the interior common areas and the mall entrances. The objective with respect to this renovation will be to create a unique series ofindoor mall features that will attract the already very high volume of anchor tenant shoppers to come into the main mall. Present design concepts call for possible attractions such as a large indoor aquarium or series of aquariums, television viewing areas with comfortableleather sofa seating and modern full size flat screen televisions, and a large scale, high-end children’s play area featuring an innovative climbing apparatus. In addition, indoor and outdoor restaurant seating will be encouraged throughout the mall, with café style seatingoverlooking the mall corridors. A full-time piano player, to be located in a prominent location inside the mall, is also being considered to help add to the lifestyle theme. |

|   |   |                                                                                                                                                                                 |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Appearance.***     We intend to improve the appearance of the mall by undertaking major renovations of the interior common areas and the mall entrances. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Signage.***     We will improve the visibility of the mall by adding significantly upgraded signage, including a new pylon sign (subject to municipal approvals) which will be visible from nearby local roads and possibly from Interstate 87. In addition, we intend to install adigital color video screen at the entrance to the mall. The digital color video screen will be programmable from a computer inside our mall management office and will be available to notify the public about special events and other mall promotions. |

|   |   |                                                                                                                                                                                                                           |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Entertainment.***     We will focus a significant portion of our leasing efforts towards tenants that are entertainment and tourist destinations, such as restaurants, arcades and movie theatres. |

We expect these renovation and repositioning efforts will impact the financial performance of Colonie Center by drawing the already high volume of anchor tenant shoppers into the main mall and attracting more affluent shoppers. We expect our revenues to grow asmore shoppers spend more time in the main mall, which we expect will increase shop tenant sales per square foot. The overall objective will be to convert this mall from a Class B mall to a Class A mall.

25

----

Back to Contents

|      *Location and Demographics* |
|-----------------------------------------------------------|

Colonie Center is located in the greater Albany, New York area adjacent to major thoroughfares including Interstate 87. The following are key demographic and other information that we expect will benefit Colonie Center:

|   | • | ***Population.***     The Albany metropolitan statistical area population within a 30-mile radius of Colonie Center is approximately 875,000 according to the US Census Bureau 2000. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                          |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Population Growth.***     The population within a 30-mile radius of Colonie Center is estimated to have grown by approximately 1.77% from 1990 to 2000 and is projected to grow by 1.86% from 2004 to 2009 according to Claritas. |

|   |   |                                                                                                                                                                                                                          |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Household Income.***     For the year ended December 31, 2003, the average household income within a 30-mile radius of the Colonie Center was estimated to be $62,564 according to Claritas. |

|   |   |                                                                                                                                                                                                                      |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Traffic Count.***     The average annual daily traffic count on Wolf Road near Colonie Center was approximately 30,000 vehicles according to the New York State Department of Transportation. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Local Market Characteristics.***     The Albany region is home to a growing state government workforce, which tends to insulate the region from major economic downturns. In the next decade, the number of government employees is expected to increase, due to fiscalstimulus packages, which will have a positive impact on the Albany area. In addition, the region is home to 21 colleges with over 65,000 students. This student population and stable government workforce provides a steady pool of consumers for area retailers. |

|                                        |
|---------------------------------------------|
|      *Competition* |

The primary competitors of Colonie Center include three regional malls described below that comprise approximately 3.2 million square feet of shop space. Four power centers that comprise approximately 2.2 million square feet are located within five miles of theproperty. With four established anchor tenants, two unique junior anchor tenants and a well-balanced mix of shop tenants, Colonie Center is one of the dominant, super-regional malls in its trade area. Competitors of Colonie Center include:

|   | • | ***Crossgates Mall.***     The Crossgates Mall, located three miles south on Interstate 87, is Colonie Center’s closest and strongest competitor. The property was originally built in 1984 and underwent a renovation in 1994. It is the largest mall in the Albany region with over1.6 million square feet and is anchored by Cohoes, Filene’s, H&M, JCPenney, Lord & Taylor and Macy’s. Other tenants in the mall include Best Buy, DSW Shoe Warehouse, a 30 screen Hoyt’s Cinemas, The Gap, Hollister, Pottery Barn and Williams-Sonoma. This mallhas a large food court and much of its tenant mix is targeted toward teenagers. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                                                                           |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Latham Circle Mall.***     The Latham Circle Mall is located four miles northeast of Colonie Center. The property was built in 1957 and renovated in 1994 and contains 677,000 square feet. It is anchored by Burlington Coat Factory, JCPenney, Klein’s and includes othermajor retailers such as Baby Depot and Malt River Brewing Company. |

|   |   |                                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | ***Clifton Park Center.***     Clifton Park Center is an 875,000-square-foot regional mall located 15 miles northwest of Colonie Center. The property was constructed in 1976 and was renovated in 2001. It is anchored by Boscov’s, JCPenney and Mega Marshall’s and includes afood court, day spa and a six screen Hoyt’s Cinemas. |

26

----

Back to Contents

**Average Occupancy Rate and Base Rent—Colonie Center(1)**

| **Fiscal Year** |   | **Average****Occupancy Rate(2)(3)** |   | **Average Annual****Rent per Sq. Ft.(3)** |   |
|-----------------|--------|-------------------------------------|--------|-------------------------------------------|--------|
|                 |   |                                     |        |                                      |        |  |   |
| 2004            |   |                                | 72     | %                                         | $      | 16.53 |   |
| 2003            |   |                                | 73     | %                                         | $      | 20.36 |   |
| 2002            |   |                                | 76     | %                                         | $      | 21.84 |   |
| 2001            |   |                                | 77     | %                                         | $      | 20.65 |   |
| 2000            |   |                                | 78     | %                                         | $      | 22.67 |   |
|            |   |                                |   |                                      |   |   |   |

|  |   |
|--|--------|

| (1) | The information in this chart was supplied by or derived from information provided by the seller of the property. |
|-----|-------------------------------------------------------------------------------------------------------------------|

| (2) | Excludes temporary leases, which are leases for a term of less than one year. |
|-----|-------------------------------------------------------------------------------|

| (3) | Calculated based on rentable shop tenant space. |
|-----|-------------------------------------------------|

|           |
|----------------|
| **Regulation** |

Generally, the ownership and operation of real properties are subject to various laws, ordinances and regulations, including regulations relating to lien sale rights and procedures. Changes in any of these laws or regulations, such as the Comprehensive EnvironmentalResponse and Compensation Liability Act (“CERCLA”), increasing the potential liability for environmental conditions or circumstances existing or created by tenants or others on properties or laws affecting development, construction, operation, upkeep, safety and taxationrequirements may result in significant unanticipated expenditures, loss of regional mall sites or other impairments to operations, which would adversely affect our cash flows from operating activities.

Under the Americans with Disabilities Act of 1990 (the “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 additionalU.S. federal, state and local laws also exist that may require modifications to the properties, or restrict certain further renovations thereof, with respect to access thereto by disabled persons. Noncompliance with the ADA could result in the imposition of fines or an award ofdamages to private litigants and could also result in an order to correct any non-complying feature and in substantial capital expenditures. To the extent our properties are not in compliance, we are likely to incur additional costs to comply with the ADA.

Insurance activities are subject to state insurance laws and regulations as determined by the particular insurance commissioner for each state in accordance with the McCarran-Ferguson Act, as well as subject to the Gramm-Leach-Bliley Act and the privacy regulationspromulgated by the Federal Trade Commission pursuant thereto.

Property management activities are often subject to state real estate brokerage laws and regulations as determined by the particular real estate commission for each state.

Changes in any of the laws governing our conduct could have an adverse impact on our ability to conduct our business or could materially affect our financial position, operating income, expense or cash flow.

| **Environmental Matters** |
|---------------------------|

Pursuant to U.S. federal, state and local environmental laws and regulations, a current or previous owner or operator of real property may be required to investigate, remove and/or remediate a release of hazardous substances or other regulated materials at or emanatingfrom such property. Further, under certain circumstances, such owners or operators of real property may be held liable for property damage, personal injury and/or natural resource damage resulting from or arising in connection with such releases. Certain of these laws havebeen interpreted to impose joint and several liability unless the harm is divisible and there is a reasonable basis for allocation of responsibility. The failure to properly remediate the property may also adversely affect the owner’s ability to lease, sell or rent the property or toborrow using the property as collateral.

27

----

Back to Contents

In connection with the ownership, operation and management of our current or past properties and any properties that we may acquire and/or manage in the future, we could be legally responsible for environmental liabilities or costs relating to a release of hazardoussubstances or other regulated materials at or emanating from such property. In order to assess the potential for such liability, we conduct an environmental assessment of each property prior to acquisition and manage our properties in accordance with environmental laws whilewe own or operate them. Our predecessor engaged qualified, reputable and adequately insured environmental consulting firms to perform environmental site assessments of all of our properties and we are not aware of any environmental issues that are expected to materiallyimpact the operations of any property.

 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. The Harrisburg Mallhas an active 30,000-gallon underground heating oil storage tank that 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 willneed 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,Stratford Square and Colonie Center did not reveal any existing material environmental conditions.

| **Insurance** |
|---------------|

We believe that our properties are covered by adequate fire, flood, earthquake, wind (as deemed necessary or as required by our lenders) and property insurance as well as commercial liability insurance provided by reputable companies and with commercially reasonabledeductibles and limits. Furthermore, we believe our businesses and business assets are likewise adequately insured against casualty loss and third party liabilities. Changes in the insurance market since September 11, 2001 have caused increases in insurance costs anddeductibles, and have led to more active management of our insurance component.

| **ITEM 3.**     **Legal Proceedings** |
|----------------------------------------------------------------|

As of December 31, 2004, we were not involved in any material litigation nor, to management’s knowledge, is any material litigation threatened against us or our portfolio other than routine litigation arising in the ordinary course of business or litigation that isadequately covered by insurance.

| **ITEM 4.**     **Submission of Matters to a Vote of Security Holders** |
|--------------------------------------------------------------------------------------------------|

No matters were submitted to a vote of our stockholders for the period commencing with the closing of our initial public offering through December 31, 2004.

28

----

Back to Contents

**PART II**

| **ITEM 5.**     **Market for Registrant’s Common Equity and Related Stockholder Matters** |
|-------------------------------------------------------------------------------------------------------------------------|

Our common stock began trading on the New York Stock Exchange (“NYSE”) on December 16, 2004 under the symbol “FMP.” On March 22, 2005, the reported closing sale price per share of common stock on the NYSE was $12.20 and there were approximately110 holders of record of our common stock. Our fourth quarter’s high and low closing sales prices of common stock on the NYSE was $13.15 and $13.00, respectively.

At December 31, 2004, in connection with the formation transaction, there were 1,593,464 operating partnership units of limited partnership interest of our operating partnership outstanding. These units receive distributions per unit in the same manner as dividends pershare were distributed to common stockholders.

On March 23, 2005, we declared a dividend of $0.2671 per common share for the period December 16, 2004 to March 15, 2005 to shareholders of record on April 4, 2005. This dividend is payable April 15, 2005.

| **Unregistered Sales of Equity Securities and Use of Proceeds** |
|-----------------------------------------------------------------|

(a) In connection with our formation transactions and pursuant to separate contribution, merger, and related agreements, the contributors contributed their direct and indirect ownership interests in the contributed entities to us in exchange for an aggregate of 123,228shares of our common stock and 1,593,464 OP units. The contribution, merger and related agreements further 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 additional OPunits that may be issued with respect to the Harrisburg Mall is 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. The issuance of such shares of common stock and unitswas effected in reliance upon an exemption from registration provided by Section 4(2) under the Securities Act.

(b) Our initial public offering consisted    of the sale of 10,666,667 shares of common stock to the public at $13 per    share, resulting in gross proceeds to us of approximately $138.7 million    and proceeds of approximately $129.0 million pursuant to a registration    statement(SEC File No. 333-118246) that was declared effective on December 14,2004. On January 15, 2005, the underwriters exercised their over-allotmentoption to purchase an additional 1,600,000 shares of common stock at $13 pershare, resulting in additional gross proceeds ofapproximately $20.8 million and net proceeds of approximately $19.3 million.Friedman, Billings, Ramsey & Co., Inc., RBC Capital Markets Corporation andBB&T Capital Markets, a division of Scott & Stringfellow, Inc., actedas the underwriters. Total underwriting  discounts for the initial public offering,including the exercise of the over-allotment option, were approximately $11.1 million.Other expenses of the initial public offering totaled approximately $4.5 million.The net proceeds were contributed in exchange for an 87%  controlling interestin our operating partnership. A total of 123,228 shares of our common stock and1,593,464 OP units were issued to the contributors in exchange for their directand indirect ownership interests in the contributed entities. We have used, orintend to use, thenet proceeds from the offering to:

|   | • | Acquire the Stratford Square Mall for approximately $93.1 million; |
|--------|--------|-------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                       |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Repay a mezzanine loan in the amount of approximately $5.5 million owed by our predecessor to Massachusetts Mutual Life Insurance Company in connection with the redevelopment of the Foothills Mall; |

|   |   |                                                                                                                                                                                |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Repay approximately $4.0 million of the $5.9 million intercompany loan owed to Feldman Partners, LLC ($1.9 million of this loan was converted to equity securities); |

|   |   |                                                                                                            |
|--------|--------|-----------------------------------------------------------------------------------------------------------------|
|   | • | Repay the $4.0 million outstanding under our predecessor’s line of credit to Marshal and Ilsley Bank; |

|   |   |                                                                                                                                                                           |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Reimburse cash impound accounts in the amount of approximately $7.6 million at the Foothills Mall established in connection with tenant improvements, including interest; |

29

----

Back to Contents

|   | • | Acquire unaffiliated, third-party investor interests in the Foothills Mall for approximately $4.5 million; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                      |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|
|   | • | Acquire unaffiliated, minority, third-party investor interest in the Harrisburg Mall for approximately $0.5 million. |

(c) none

| **ITEM 6.**     **Selected Financial Data** |
|----------------------------------------------------------------------|

The following table shows selected consolidated financial data for our company and historical financial data for our predecessor for the periods indicated. We have not presented historical information for our company prior to December 16, 2004, the date on which wecompleted our initial public offering, because we did not have any significant activity prior to that time. You should read the following selected historical financial data together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”and historical consolidated financial statements and related notes thereto.

The following selected consolidated    historical financial data have been derived from financial statements audited    by KPMG LLP, an independent registered public accounting firm. Consolidated    balance sheets as of December 31, 2004, and 2003 and the relatedconsolidated statements of operations and cash flows for the period December 16,2004 to December 31, 2004, the period January 1, 2004 to December 15,2004, the year ended December 31, 2003 and for the period from April 1,2002 (date of inception) toDecember 31, 2002, and the related notes thereto appear in Item 8 on page44(1).

|                                                                |   | **The Company**                                             |       | **Our Predecessor**                                     |   |
|---------------------------------------------------------------------|--------|-------------------------------------------------------------|------------|---------------------------------------------------------|--------|
|                                                                |   |                                                             |       |                                                         |   |
|                                                                |   | **December          16 to****December** **31, 2004**   |       | **January          1 to****December** **15, 2004** |   | **Year Ended****December** **31, 2003** |   | **April** **1, 2002****(Inception) to****December** **31, 2002** |   |
|                                                                |   |                                                             |            |                                                    |        |  |   |  |  |   |  |  |   |
|                                                                |   |                                                        |       |                                                    |   |   |   |   |   |   |   |   |   |
|                                                                |   | **(amounts in thousands, except share and per share data)** |       |
| **Statement of Operations Data:**                                   |   |                                                        |       |                                                    |   |   |   |   |   |   |   |   |   |
| Revenue:                                                            |   |                                                        |       |                                                    |   |   |   |   |   |   |   |   |   |
| Rental                                                              |   | $                                                           | 327        |                                                    | $      | 6,340 |   | $ | 6,720 |   | $ | 4,881 |   |
| Tenant reimbursements                                               |   |                                                        | 193        |                                                    |   | 4,124 |   |   | 4,446 |   |   | 3,385 |   |
| Management, leasing and development services                        |   |                                                        | 58         |                                                    |   | 917 |   |   | 461 |   |   | 248 |   |
| Interest and other income                                           |   |                                                        | 52         |                                                    |   | 250 |   |   | 67 |   |   | 51 |   |
|                                                                |   |                                                             |            |                                                    |        |  |   |  |  |   |  |  |   |
| Total Revenue                                                       |   |                                                        | 630        |                                                    |   | 11,631 |   |   | 11,694 |   |   | 8,565 |   |
|                                                                |   |                                                             |            |                                                    |        |  |   |  |  |   |  |  |   |
| Expenses:                                                           |   |                                                        |       |                                                    |   |   |   |   |   |   |   |   |   |
| Rental property operating andmaintenance                            |   |                                                        | 329        |                                                    |   | 3,886 |   |   | 4,193 |   |   | 2,950 |   |
| Real estate taxes                                                   |   |                                                        | 45         |                                                    |   | 1,218 |   |   | 1,225 |   |   | 1,017 |   |
| Interest (including the amortization of deferred financing costs)   |   |                                                        | 443        |                                                    |   | 4,007 |   |   | 4,904 |   |   | 3,264 |   |
| Depreciation and amortization                                       |   |                                                        | 211        |                                                    |   | 1,462 |   |   | 1,442 |   |   | 964 |   |
| General and administrative                                          |   |                                                        | 1,047      |                                                    |   | 3,485 |   |   | 672 |   |   | 1,218 |   |
| Other                                                               |   |                                                        | —     |                                                    |   | 13 |   |   | 161 |   |   | 249 |   |
|                                                                |   |                                                             |            |                                                    |        |  |   |  |  |   |  |  |   |
| Total Expenses                                                      |   |                                                        | 2,075      |                                                    |   | 14,071 |   |   | 12,597 |   |   | 9,662 |   |
|                                                                |   |                                                             |            |                                                    |        |  |   |  |  |   |  |  |   |
| Equity in earnings of unconsolidated real estate partnership        |   |                                                        | 12         |                                                    |   | 425 |   |   | 197 |   |   | — |   |
|                                                                |   |                                                             |            |                                                    |        |  |   |  |  |   |  |  |   |
| Loss before minority interest                                       |   |                                                        | (1,433     | )                                                       |   | (2,015 | ) |   | (706 | ) |   | (1,097 | ) |
| Minority interest                                                   |   |                                                        | (184       | )                                                       |   | 233 |   |   | 30 |   |   | 107 |   |
|                                                                |   |                                                             |            |                                                    |        |  |   |  |  |   |  |  |   |
| Net loss                                                            |   | $                                                           | ($1,249    | )                                                       | $      | (2,248 | ) | $ | (736 | ) | $ | (1,204 | ) |
|                                                                |   |                                                             |            |                                                    |        |  |   |  |  |   |  |  |   |
|                                                                |   |                                                        |       |                                                    |   |   |   |   |   |   |   |   |   |
| Basic and diluted loss per share                                    |   | $                                                           | (0.12      | )                                                       |   | N/A |   |   | N/A |   |   | N/A |   |
| Weighted average common shares outstanding — basic and diluted |   |                                                        | 10,789,895 |                                                    |   | N/A |   |   | N/A |   |   | N/A |   |
|                                                                |   |                                                        |       |                                                    |   |   |   |   |   |   |   |   |   |

|  |   |
|--|--------|

| (1) | The selected financial data includes the consolidated financial statements of our predecessor for the periods up to and including December 15, 2004, and the financial statements of the Company for the period after December 15, 2004. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

30

----

Back to Contents

| **ITEM 6.**     **Selected Financial Data –  *(Continued)*** |
|--------------------------------------------------------------------------------------------|
|                                                                                       |

|                                                        |   | **The Company**           |     | **The Predecessor** |   |
|-------------------------------------------------------------|--------|---------------------------|----------|---------------------|--------|
|                                                        |   |                           |     |                     |   |
| **Balance Sheet Data (at and as of period)**                |   | **December** **31,** |     |
|                                                        |   |                           |     |
|                                                        |   | **2004**                  |     | **2003**            |   | **2002** |   |
|                                                        |   |                           |          |                |        |  |   |  |  |   |
| Investments in real estate, net                             |   | $                         | 143,653  |                | $      | 50,473 |   | $ | 48,729 |   |
| Total assets                                                |   |                      | 188,783  |                |   | 70,776 |   |   | 58,271 |   |
| Mortgages and other loans payable                           |   |                      | 54,750   |                |   | 61,278 |   |   | 46,528 |   |
| Total liabilities                                           |   |                      | 80,290   |                |   | 69,923 |   |   | 54,680 |   |
| Minority interest                                           |   |                      | 13,962   |                |   | 762 |   |   | 2,764 |   |
| Stockholders’/owners’ equity                      |   |                      | 94,531   |                |   | 91 |   |   | 827 |   |
| Total liabilities andstockholders’/owners’ equity |   |                      | 188,783  |                |   | 70,776 |   |   | 58,271 |   |
|                                                        |   |                      |     |                |   |   |   |   |   |   |
| **Other Data (for the year ended):**                        |   |                      |     |                |   |   |   |   |   |   |
| Cash flows provided by (used in):                           |   |                      |     |                |   |   |   |   |   |   |
| Operating activities                                        |   |                      | 945      |                |   | 758 |   |   | 514 |   |
| Investing activities                                        |   |                      | (102,530 | )                   |   | (6,644 | ) |   | (54,531 | ) |
| Financing activities                                        |   |                      | 113,215  |                |   | 9,517 |   |   | 54,363 |   |

The company did not declare any dividends for the period December 16, 2004 to December 31, 2004.

| **ITEM 7.**     **Management’s Discussion and Analysis of Financial Condition and Results of Operations** |
|-----------------------------------------------------------------------------------------------------------------------------------------|

|         |
|--------------|
| **Overview** |

We are a fully-integrated, self-administered and self-managed real estate company formed in July 2004 to continue the business of our predecessor to acquire, renovate and reposition shopping malls. Our investment strategy is to opportunistically acquire underperformingor distressed malls and transform them into physically attractive and profitable Class A or near Class A malls 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 derive revenues primarily from rent and reimbursement payments received by our operating partnership from tenants under existing leases at each of our properties. Our operating results, therefore, will depend materially on the ability of our tenants to make requiredpayments and overall real estate market conditions.

On the Offering Date, we sold 10,666,667 shares of our common stock and contributed the net proceeds to our operating partnership. Subsequently, on January 15, 2005, we sold an additional 1,600,000 shares of our common stock to underwriters upon their fullexercise of their over-allotment option.

Prior to the completion of the offering and formation transactions, our business was conducted by our predecessor, Feldman Equities of Arizona LLC, and its subsidiaries and affiliates. The consolidated financial statements of our company and the predecessor for theyears ended December 31, 2004, 2003 and the period April 1, 2002 (inception) to December 31, 2002 include the operating results of our company (for the period December 16, 2004 to December 31, 2004) and our predecessor which, for the other periods, was engaged incomprehensive mall renovation and repositioning projects. These projects included the Foothills Mall, which was acquired through a joint venture by our predecessor in April 2002, and the Harrisburg Mall, which was acquired through a joint venture by our predecessor inSeptember 2003. Through December 15, 2004, our predecessor consolidated the financial results of the Foothills Mall and accounted for its investment in the Harrisburg Mall using the equity method of accounting.

A discussion of the results of operations of our predecessor and our company is set forth below. For the following reasons, the results of operations of our predecessor and our company may not be indicative of the results of our future operations:

|   | • | Upon completion of our initial public offering, we acquired 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 toJuly 19, 2005, to acquire the remaining 75% capital interest in this joint venture, and (ii) a 100% ownership interest in Foothills |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

31

----

Back to Contents

|   |   | Mall LLC, the joint venture that owns the Foothills Mall. As part of the formation transactions, we acquired the interests owned by unaffiliated third parties in the joint venture that ownsthe Foothills Mall. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Since our predecessor acquired its interests in the Foothills Mall in 2002 and in the Harrisburg Mall in 2003, these malls have undergone dramatic changes in architectural design and appearance, layout, square footage and tenant composition. We estimate that theredevelopment costs (excluding the costs of acquisition) for the renovation and repositioning of the Harrisburg Mall and Foothills Mall will total approximately $56.3 million and $11.0 million, respectively. These changes have already improved the performance ofthese properties. In the case of the Harrisburg Mall, leased square footage has grown from approximately 429,000 at acquisition to 798,000 as of December 31, 2004. In the case of the Foothills Mall, leased square footage as a percentage of total rentable area wasmaintained at approximately 90% throughout the renovation process which added approximately 27,000 square feet of rentable area. Additional revenue growth from both properties is expected as occupancy levels and rental rates rise above current levels. |

|   |   |                                                             |
|--------|--------|------------------------------------------------------------------|
|   | • | We acquired the Stratford Square Mall on December 31, 2004. |

|   |   |                                                                                                           |
|--------|--------|----------------------------------------------------------------------------------------------------------------|
|   | • | During 2004, we incurred organizational costs totaling $0.6 million that negatively impacted our results. |

|   |   |                                                            |
|--------|--------|-----------------------------------------------------------------|
|   | • | We intend to qualify as a REIT for federal income tax purposes. |

Upon completion of the Offering and the formation transactions, we have substantially enhanced our financial flexibility and access to capital compared to our predecessor, which should play an important role in allowing our company to implement our growth andbusiness plan over time.

On December 30, 2004, we acquired the Stratford Square Mall located in Bloomingdale, Illinois for a base purchase price of $93.1 million. Located in rapidly growing and affluent DuPage County, a northwestern suburb of Chicago, the 1.3 million square foot mallhas an overall occupancy of 90.4% with shop tenant occupancy of 69% (excluding temporary and anchor tenants). Including temporary tenants, the shop occupancy as of December 31, 2004 was 88%. Including anchor and temporary tenants, the mall’s overall occupancy was96% at December 31, 2004. The mall boasts 6 non-owned anchor tenants including Kohl’s, Sears, Carson Pirie Scott (a unit of the Saks Department Store Group), Marshall Fields, JCPenney and Burlington Coat Factory.

In January 2005, we completed a $75 million, 3-year first mortgage financing collateralized by the Stratford Square Mall. The mortgage bears interest at a rate of LIBOR plus 125 basis points and has two one-year extensions. The initial loan to cost is approximately80%; however, once the intended capital improvements of approximately $20 million are complete, the total leverage is expected to decrease to approximately 65% of total anticipated cost. In connection with the Stratford Square Mall financing, during January 2005, theCompany entered into a $75 million swap commencing February 2005 with an all-in-rate of 5% with a final maturity date in January 2008. The effect of the swap is to fix the interest rate on the Stratford Square Mall mortgage loan.

In September 2004, we entered into a binding agreement to acquire Colonie Center for an initial purchase price of $82.2 million, subject to increase by up to an additional $9 million if certain pending leases in negotiation are executed prior to June 30, 2005, andtenants under such leases, subsequently, take occupancy and commence rental payments. We acquired Colonie Center on February 2, 2005 and funded the purchase price of this acquisition using the net proceeds from a property-level financing of the Stratford Square Mall. Weintend to commence the renovation and repositioning project for Colonie Center shortly. We estimate that the total additional investment required to renovate and reposition this property, including tenant improvements and leasing commissions, will be approximately$22.0 million.

| **Critical Accounting Policies** |
|----------------------------------|

A summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements, included elsewhere in this Annual Report on Form 10-K, are set forth

32

----

Back to Contents

below. Certain of the accounting policies used in the preparation of these consolidated financial statements are particularly important for an understanding of the financial position and results ofoperations presented in the consolidated financial statements included in this Annual Report on Form 10-K . These policies require the application of judgment and assumptions by managementand, as a result, are subject to a degree of uncertainty. Actual results could differ from these estimates.

|      ***Revenue Recognition*** |
|---------------------------------------------------------|

Rental revenues from rental retail property are recognized on a straight-line basis over the non-cancelable terms of the related leases. Deferred rent represents the aggregate excess of rental revenue recognized on a straight-line basis over cash received under applicablelease provisions. Rental revenue, which is based upon a percentage of the sales recorded by tenants, is recognized in the period such sales are earned by the respective tenants.

Reimbursements from tenants, computed as a formula related to real estate taxes, insurance and other shopping center operating expenses, are recognized as revenues in the period the applicable costs are incurred. Lease termination fees, which are included in interestand other income in the accompanying consolidated statements of operations, are recognized when the related leases are cancelled, the tenant surrenders the space, and we have no continuing obligation to provide services to such former tenants.

Additional revenue is derived from the provision of management services to third parties, including property management, brokerage, leasing and development. Management fees generally are a percentage of managed property cash receipts. Leasing and brokerage feesare earned upon the consummation of new leases. Development fees are earned over the time period of the development activity.

In the case of land parcels that are sold outright for development by third parties, revenue is recognized in the period the sale is consummated in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 66.

We must also make estimates related to the collectibility of our accounts receivable related to minimum rent, deferred rent, tenant reimbursements, lease termination fees, management and development fees and other income. We analyze accounts receivable andhistorical bad debts, tenant concentrations, tenant credit worthiness, and current economic trends when evaluating the adequacy of the allowance for doubtful accounts receivable. These estimates have a direct impact on net income, because a higher bad debt allowance wouldresult in lower net income.

|      ***Principles of Consolidation and Equity Method of Accounting*** |
|-------------------------------------------------------------------------------------------------|

The accompanying consolidated financial statements of the company andthe predecessor include the accounts of their wholly-owned subsidiaries and all partnerships in which they have acontrolling interest. All intercompany balances and transactions have beeneliminated in consolidation.

The contribution of the predecessor    to the operating partnership in the formation transactions in exchange for    units in the operating partnership has been accounted for as a reorganization    of entities under common control. Accordingly, the contributed assets and    assumed    liabilities    were    recorded    at the predecessor’s historical cost basis. Prior to the formation transactions,    the company and the operating partnership had no significant operations;    therefore, the consolidated operating results for the period prior to December 16,    2004, represent the operations of  our predecessor. The minority interest    in one of the predecessor’s subsidiaries was acquired for cash, and    has been accounted for as a purchase, with the excess of the purchase price    over    the related historical cost basis of the minority interest being allocated    to the assets acquiredand the liabilities assumed.

Our company evaluates its investments in partially owned entities in accordance with FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, or FIN 46R. If the partially owned entity is a “variable interest entity,” or a “VIE,”and our company is the “primary beneficiary,” as defined in FIN 46R, we account for such investment as if it were a consolidated subsidiary.

For a joint venture investment, which is not a VIE or in which our company is not the primary beneficiary, we follow the accounting set forth in AICPA Statement of Position No. 78-9 — Accounting for Investments in Real Estate Ventures (“SOP 78-9”). Inaccordance with this pronouncement, investments in

33

----

Back to Contents

joint ventures are accounted for under the equity method when our ownership interest is less than 50% and we do not exercise direct or indirect control. Factors that we will consider indetermining whether or not we exercise control include important rights of partners in significant business decisions, including dispositions and acquisitions of assets, financing and operating andcapital budgets, board and management representation and authority and other contractual rights of our partners. To the extent that we are deemed to control these entities, these entities areconsolidated.

We have determined that the Foothills Mall and the Harrisburg Mall joint ventures are not VIEs. Our predecessor consolidated the joint venture owning the Foothills Mall as it is the majority owner that exercises control over all significant decisions. Our predecessoraccounted and we account for our investments in the joint venture that owns the Harrisburg Mall under the equity method of accounting in view of the important rights (as defined in SOP 78-9) held by the other joint venture partners. This investment is recorded initially atcost and subsequently adjusted for equity in earnings or losses and cash contributions and distributions. We would expect the operations of the Harrisburg Mall to become consolidated with our company if we exercise the option we hold to acquire the remaining interests in thejoint venture that owns this property.

On a periodic basis, we assess whether there are any indicators that the value of an investment in unconsolidated joint ventures may be impaired. An investment’s value is impaired if management’s estimate of the fair value of the investment is less than the carryingvalue of the investment. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the estimated fair value of the investment.

|      ***Investments in Real Estate and Real Estate Entities*** |
|-----------------------------------------------------------------------------------------|

Real estate is stated at historical cost, less accumulated depreciation. Improvements and replacements are capitalized when they extend the useful life or improve the efficiency of the asset. Repairs and maintenance are charged to expense as incurred.

The building and improvements thereon are depreciated on the straight-line basis over an estimated useful life of 39 years. Tenant improvements are depreciated on the straight-line basis over the shorter of the lease term or their estimated useful life. Equipment is beingdepreciated on an accelerated basis over the estimated useful lives of five to seven years.

It is our policy to capitalize interest and real estate taxes related to properties under redevelopment and to depreciate these costs over the life of the related assets.

In accordance with SFAS No. 144, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, investment properties are reviewed for impairment on a property-by-property basis at least annually or whenever events or changesin circumstances indicate that the carrying value of investment properties may not be recoverable. Impairment losses for investment properties are recorded when the undiscounted cash flows estimated to be generated by the investment properties during the expected holdperiod are less than the carrying amounts of those assets. Impairment losses are measured as the difference between the carrying value and the fair value of the asset. We are required to assess whether there are impairments in the values of our investments in real estate,including indirect investments in real estate through entities which we do not control and are accounted for using the equity method of accounting.

In connection with the formation transactions, we acquired our predecessor in exchange for the issuance of units in our operating partnership and shares of our common stock. This exchange has been accounted for as a reorganization of entities under common control;accordingly, we recorded the contributed assets and liabilities at our predecessor’s historical cost.

|      ***Purchase Price Allocation*** |
|---------------------------------------------------------------|

We allocate the purchase price of properties to tangible and identified intangible assets acquired based on their fair values in accordance with the provisions of SFAS No. 141, Business Combinations. In making estimates of fair values for the purpose of allocatingpurchase price, management utilized a number of sources. We also consider information about each property obtained as a result of our pre-acquisition due

34

----

Back to Contents

diligence, marketing and leasing activities in estimating the fair value of tangible and intangible assets acquired.

We allocate a portion of the purchase price to tangible assets including the fair value of the building on an as-if vacant basis, and to land determined either by real estate tax assessments, third party appraisals or other relevant data.

A portion of the purchase price is allocated to above-market and below-market in-place lease values for acquired properties based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) thecontractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market andbelow-market lease values are amortized as a reduction of or an addition to rental income over the remaining non-cancelable terms of the respective leases. Should a tenant terminate its lease, the unamortized portion of the lease intangibles would be charged or credited toincome.

A portion of the purchase price is also allocated to the value of leases acquired, and management utilizes independent sources or management’s determination of the relative fair values of the respective in-place lease values. Our estimates of value are made usingmethods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods, considering current market conditions and costs to execute similar leases. Inestimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. We also estimate costs to execute similar leases includingleasing commissions, legal expenses and other related costs.

| **Depreciation** |
|------------------|

The U.S. federal tax basis for the Foothills and Harrisburg malls, used to determine depreciation for U.S. federal income tax purposes, is the carryover basis for such malls. The tax basis for the Stratford Square Mall and Colonie Center Mall is our acquisition cost. ForU.S. federal income tax purposes, depreciation with respect to the real property components of our malls (other than land) generally will be computed using the straight-line method over a useful life of 39 years.

| **Results of Operations** |
|---------------------------|

|                                         |
|----------------------------------------------|
|      ***Overview*** |

The discussion below relates to the results of operations of our company and the predecessor which, throughout the periods discussed below, was engaged in comprehensive mall renovation and repositioning projects, one for the Foothills Mall, which was acquiredthrough a joint venture by our predecessor in 2002 and the other for the Harrisburg Mall, which was acquired through a joint venture by our predecessor in 2003.

The results for the year ended December 31, 2004 include the results of our predecessor for the period January 1, 2004 to December 15, 2004 and the results of our company for the period December 16, 2004 to December 31, 2004.

| ***Comparison of the Year Ended December*** ***31, 2004 to the Year Ended December*** ***31, 2003*** |
|----------------------------------------------------------------------------------------------------------------|

|                                     |
|------------------------------------------|
|      *Revenues* |

Rental revenues decreased approximately $53,000, or 0.1%, to $6.7 million for the year ended December 31, 2004 compared to $6.7 million for the year ended December 31, 2003. The decrease was primarily due to lower occupancy caused by renovations at theFoothills Mall that were primarily completed with the re-opening of an expanded movie theatre in October 2004.

Revenues from tenant reimbursements decreased $129,000, or 2.9%, to $4.3 million for the year ended December 31, 2004 compared to $4.4 million for the year ended December 31, 2003. The decrease was

35

----

Back to Contents

primarily due to lease restructuring at the Foothills Mall and an increase in temporary tenancy during the renovation period. Revenues from tenant reimbursements are expected to increase in thefuture based upon property operating expense increases and improving rental revenue and occupancy results.

Revenues from management, leasing and development services increased $514,000, or 111.5%, to $975,000 for the year ended December 31, 2004 compared to $461,000 for the year ended December 31, 2003. The increase was primarily due to the inclusion ofmanagement fee revenues related to the Harrisburg Mall, which our predecessor began managing in September 2003. We expect to continue to receive fee revenue in connection with the continued renovation and related leasing activity at the Harrisburg Mall.

Interest and other income increased $235,000, or 350.7%, to $302,000 for the year ended December 31, 2004 compared to $67,000 for the year ended December 31, 2003. The increase was primarily due to a lease termination payment of $125,000 received in 2004 and$50,000 of interest income received on net proceeds from our Offering.

|      *Expenses* |
|------------------------------------------|

Rental property operating and maintenance expenses increased $22,000, or 0.5%, to $4.2 million for the year ended December 31, 2004 compared to $4.2 million for the year ended December 31, 2003. The increase was due to higher insurance costs in line with theincrease in replacement value of the Foothills Mall, and maintenance and preventative maintenance required under the current loan agreement.

Interest expense decreased $454,000,    or 9.3%, to $4.5 million for the year ended December 31, 2004 compared    to $4.9 million for the year ended December 31, 2003. The decrease    was primarily due to (i) a $402,000 reduction in debt amortization costs    as refinancing activities included the write-off of unamortized deferred    debt    cost totaling    $300,000 in 2004 and $722,000 in 2003, (ii) $132,000 of interest capitalization    in 2004 compared to none in 2003. These decreases were partially off-set    by $65,000 of increased interest expense on loans due toLarry Feldman and $67,000 of increased interest expense from our unsecured line    of credit. These increased interest expense was due to higher outstanding    balances in 2004 as compared to 2003.

Depreciation and amortization expense increased $231,000 or 16.0%, to $1.7 million for the year ended December 31, 2004 compared to $1.4 million for the year ended December 31, 2003, as a result of capital additions to the Foothills Mall.

General and administrative expenses increased $3.9 million, or 574%, to $4.5 million for the year ended December 31, 2004 compared to $672,000 for the year ended December 31, 2003. The increase was primarily due to (i) a $2.0 million charge for thepredecessor in connection with the issuance of OP ownership interest to a current member of our company’s executive management team (ii) a $0.6 million charge for organizational costs associated with our formation of our company, (iii) additional costs associated with apublicly-traded REIT of $0.4 million and (iv) costs associated with increased overhead for both our company and predecessor related to a new office in Great Neck, New York and office expansion in Phoenix, Arizona.

Equity in earnings of unconsolidatedreal estate partnership represents our share of the equity in the earnings ofthe joint venture owning the Harrisburg Mall. The equity in earnings ofunconsolidated real estate partnership increased $240,000, or 121.8%, to$437,000 for the year ended December 31, 2004 as compared to $197,000 forthe year ended December 31, 2003. The increase is due to owning theunconsolidated investment for the full 2004 calendar year as compared to apartial 2003 calendar year. On an annualized basis, equity in earnings ofunconsolidated real estate partnership decreased as significant constructionduring 2004 resulted in (i) reduced the overall occupancy of the mall, (ii)higher borrowing costs and (iii) increased depreciation due to the increasedcost basis in the mall.

Minority interest for the period December 16, 2004 to December 31, 2004 represents the OP unit holders in our operating partnership which represents 12.87% of the Company’s losses for that period. The minority interest of our predecessor represents a 33.3%ownership interest in the Foothills Mall property.

36

----

Back to Contents

| ***Comparison of the Year Ended December*** ***31, 2003 to the Nine-month Period from April*** ***1, 2002 (Inception) to December*** ***31, 2002*** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

The activities of our predecessor commenced with its investment in the Foothills Mall in April 2002. Accordingly, most items of revenues and expenses increased in 2003 due to the inclusion of 12 months of activity compared to nine months of activity in 2002.

|      *Revenues* |
|------------------------------------------|

Rental revenue increased approximately $1.8 million to $6.7 million for the year ended December 31, 2003 compared to $4.9 million for the nine months ended December 31, 2002. On an annualized basis, the rental revenue would have been comparable for the twoperiods.

Revenues from tenant reimbursements increased $1.1 million to $4.4 million for the year ended December 31, 2003 compared to $3.3 million for the nine months ended December 31, 2002. However, on an annualized basis, tenant reimbursements decreased byapproximately $67,000, or 1.5%, due to the loss of several shop tenants.

Revenues from management, leasing and development services increased $213,000 to $461,000 for the year ended December 31, 2003 compared to $248,000 for the nine months ended December 31, 2002. On an annualized basis, the increase was approximately$130,000, or 39.4%. This increase was primarily due to the management fees earned from the unconsolidated joint venture that owns the Harrisburg Mall in the amount of approximately $64,000, which we started managing in the fourth quarter of 2003.

|      *Expenses* |
|------------------------------------------|

Rental property operating and maintenance expenses increased approximately $1.2 million to $4.2 million for the year ended December 31, 2003 compared to $3.0 million for the nine months ended December 31, 2002. On an annualized basis, the increase wasapproximately $260,000, or 6.6%, and was due to an increase in insurance and mall security expense.

Real estate taxes increased $208,000 to $1.2 million for the year ended December 31, 2003 compared to $1.0 million for the nine months ended December 31, 2002. However, on an annualized basis real estate taxes decreased approximately $131,000 due to the saleof several parcels of land, or “pads,” in the second half of 2002 and in 2003.

Interest expense includes (i) the borrowings on our first mortgage and mezzanine loans for the Foothills Mall, (ii) amortization of related deferred financing costs, and (iii) interest on loan balances due to Feldman Partners, LLC, the majority owner of our predecessor.Overall, interest expense increased $1.6 million to $4.9 million for the year ended December 31, 2003 compared to $3.3 million for the nine months ended December 31, 2002. On an annualized basis, interest expense increased approximately $552,000, or 13%. Thisincrease was due to an increase in the average borrowings outstanding, partially offset by the refinancing of the mortgage and mezzanine loans on the Foothills Mall during 2003, which decreased the interest rates on both loans. As a result of the refinancing, the balance of ourpredecessor’s unamortized, deferred, financing costs, relating to the original loans, in the amount of $722,000, was written off. In addition, interest expense on amounts due to an affiliate increased from $356,000 in 2002 to $711,000 in 2003, due to both an increase in principaland the additional three months in 2003.

Depreciation and amortization expense increased $478,000 to $1.4 million for the year ended December 31, 2003 compared to $964,000 for the nine months ended December 31, 2002. On an annualized basis, the increase was approximately $157,000, or 12.2%, as aresult of capital additions.

General and administrative expenses decreased $546,000 to $672,000 for the year ended December 31, 2003 compared to $1.2 million for the nine months ended December 31, 2002. The 2002 operating results include approximately $887,000 of general,administrative and abandoned project costs incurred by Feldman Partners, LLC or by Larry Feldman prior to April 2002 in connection with the formation of our predecessor, which the owners of our predecessor agreed would be reimbursed to him and included in hiscontribution to capital. Excluding these costs, general and administrative expenses in 2002, on an annualized basis, would

37

----

Back to Contents

have been approximately $417,000. The increase in 2003 is due to an increase in operating costs as a result of the growth of our predecessor.

The minority interest expense in our Foothills Mall joint venture decreased in 2003 as a result of the accelerated amortization of the deferred financing costs related to the mortgage refinancing.

As indicated above, in September 2003, our predecessor made an investment in a joint venture owning the Harrisburg Mall, and the share of the earnings of that joint venture was $197,000 in 2003.

| **Cash Flows** |
|----------------|

|                                                                                                           |
|----------------------------------------------------------------------------------------------------------------|
| ***Comparison of the year ended December*** ***31, 2004 to the year ended December*** ***31, 2003*** |

Cash and cash equivalents were $15.6 million and $4.0 million, respectively, at December 31, 2004 and December 31, 2003. The increase to cash is due to the following:

Cash from operating activities totaled    $945,000 for the year ended December 31, 2004, an increase of $187,000    as compared to $758,000 for the year ended December 31, 2003. The increase    was due to changes in operating assets and liabilities, primarily increased    accrued liabilities, partially offset by an increased net loss.

Net cash used in investing activities for the year ended December 31, 2004 increased to $102.5 million and was primarily the result of (i) cash required for the acquisition of the Stratford Square Mall totaling $91.2 million, (ii) $8.6 million paid for the renovation ofthe Foothills Mall, (iii) an additional $905,000 capital contribution in the Harrisburg Mall joint venture (iv) $1.0 cash deposit for the acquisition of the Colonie Center Mall and (v) $4.5 million purchase of a third party minority interest position in the Foothills Mall. Theseincreases were partially offset by the receipt of cash from restricted escrow cash account at Foothills totaling $3.7 million. This compares to $3.0 million of renovation cost during the year ended December 31, 2003, the initial investment of $3.6 million in the HarrisburgMall joint venture, and $1.6 million contributed to certain escrow accounts, offset by the proceeds from the sales of parcels of land for $1.6 million.

Net cash provided by financing activities    increased to $113.2 million and reflect (i) net proceeds from our initial    public offering totalling $129.0 million (before offering costs), (ii)    $5.9 million proceeds from our predecessors’ line of credit. These    sources were used to paycosts related to our initial public offering totalling $2.3 million andapproximately$19.1 millionto repay certain of the outstandingindebtedness, consisting of:

|   | • | a mezzanine loan in the amount of approximately $5.4 million owed by our predecessor to Massachusetts Mutual Life Insurance Company in connection with the redevelopment of the Foothills Mall; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                        |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | $4.0 million of the $5.9 million intercompany loan owed to Feldman Partners, LLC ($1.9 million of this loan was converted into equity securities); and a $3.7 million disbursement to the previous owners for impound account releases; |

|   |   |                                                                                                                                                                                                                                                    |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Repayment of a $6.0 million line of credit owed by our predecessor to Marshall and Ilsley Bank which was used by our predecessor to return funds advanced by existing owners in our two properties for acquisition costs and capital improvements. |

|                                                                                                                                                           |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ***Comparison of year ended December*** ***31, 2003 to the nine-month period from April*** ***1, 2002 (Inception) to December*** ***31, 2002*** |

Cash and cash equivalents were $4.0 million and $346,000, respectively, at December 31, 2003 and 2002.

Net cash provided by operating activities was $758,000 for the year ended December 31, 2003 compared to $514,000 for the nine months ended December 31, 2002. The increase was due to a reduction in net loss for the period, offset by the funding of our restrictedreal estate tax and insurance balances in accordance with the mortgage loan agreements.

38

----

Back to Contents

Net cash used in investing activities in 2003 primarily represents (i) our predecessor’s investment of $3.6 million in the joint venture that owns the Harrisburg Mall, (ii) additions in the amount of $3.0 million to the Foothills Mall, and (iii) additional escrow depositspursuant to the new mortgage loan agreement to be used for certain capital and tenant improvements, offset by $1.6 million of proceeds from the sale of undeveloped pads at Foothills. In 2002, the net cash used in investing activities related to the acquisition of the FoothillsMall and funding of related capital escrow accounts, partially offset by $2.8 million in proceeds from the sale of pads at the property.

Net cash provided by financing activities    in 2003 relates to the refinancing of the Foothills Mall original mortgage    and mezzanine loans, and payment of corresponding financing costs. From the    proceeds of the refinancing, (i) our predecessor made a distribution to theminority partner in the Foothills Mall joint venture in the amount of $2 million,and (ii) the lender required the funding of a cash impound account in the amountof $3.5 million,which funds would be released upon achieving specific financial milestones. Inaddition to the Foothills Mall borrowings, during 2002, our predecessor borrowedapproximately $4.3 million in principal from Feldman Partners, LLC, to helpfund the purchase of the Foothills Mall and working capital needs. The principalbalance of the loan increased slightly in 2003. The  balance due to affiliatesalso includes accrued interest payable in the amounts of $356,000 and $1.1 millionas of December 31, 2002 and 2003, respectively.

| **Liquidity and Capital Resources** |
|-------------------------------------|

|                                         |
|----------------------------------------------|
|      ***Overview*** |

As a result of our initial public offering, we had approximately $15.6 million in cash on hand at December 31, 2004 and also expect to be able to access additional funds through secured borrowings on the Colonie Center Mall, which we acquired in an all-cashtransaction in February, 2005. We also expect to substantially enhance our financial flexibility and access to capital compared to our predecessor, which should play an important role in allowing our company to implement its growth and business plan over time. This additionalcapital will allow us to acquire additional assets and complete significant redevelopment projects on our recently acquired assets. At December 31, 2004, our total consolidated indebtedness outstanding is approximately $54.8 million, or 29.7% of our total assets.

We intend to maintain a flexible financing position by maintaining a prudent level of leverage consistent with the level of debt typical in the mall industry. We intend to finance our acquisition, renovation and repositioning projects with the most advantageous source ofcapital 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-termfixed rate financing.

|      ***Short Term Liquidity Requirements*** |
|-----------------------------------------------------------------------|

Our short term liquidity needs include funds to pay dividends to our stockholders required to maintain our REIT status, distributions to our OP unit holders, funds for capital expenditures and potentially, acquisitions. We expect to meet our short-term liquidityrequirements generally through net cash provided by operations and our existing cash. Our properties require periodic investments of capital for tenant-related capital expenditures and for general capital improvements. For the period April 1, 2002 through December 31, 2004,our weighted average annual tenant improvement and leasing commission costs were $25.55 per square foot of vacant space, leased space and renewals. As of December 31, 2004, we have commitments to make tenant improvements and other capital expenditures at theStratford Square and Foothills Mall in the amount of approximately $267,000 to be incurred during 2005, which we intend to fund from existing cash and cash from operating activities. We expect the annual cost of additional future tenant improvements and leasingcommissions and renovation costs for the Foothills Mall to be approximately $602,000, based upon existing vacancy and approximately 29,000 square feet that will become available in our properties as a result of leases scheduled to expire during the twelve months endingDecember 31, 2005. We expect the cost of recurring capital improvements for the Foothills Mall to be approximately $100,000 annually, based upon a historic $0.20 per square foot annual reserve. We believe that our net cash provided by operations and our

39

----

Back to Contents

available cash and restricted cash will be adequate to fund operating requirements, pay interest on our borrowings and fund distributions in accordance with the REIT requirements of the federalincome tax laws.

In addition, as of December 31, 2004, the joint venture owning the Harrisburg Mall has commitments to make tenant improvements and other capital expenditures in the amount of $787,000 million to be incurred in 2005. The joint venture intends to fund thesecommitments from operating cash flow and available proceeds of the construction loan with Commerce Bank (approximately $2.6 million, as described under “—Harrisburg Mall Loan”) and approved state and local government grants and other economic incentives(approximately $8 million of which $1.0 million was received in 2004). Loan advances under the construction loan with Commerce Bank, however, are reduced by the amount of the Harrisburg Mall joint venture’s net cash flow after operating expenses and debt service.Accordingly, the Harrisburg Mall 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 withCommerce Bank matures on December 31, 2005, and we expect that the construction project at the Harrisburg Mall will be completed by the fourth quarter of 2005. This loan can be repaid in whole or in part at any time without penalty and may be extended for up to threeadditional one-year periods. 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 do not expect that this limitation will have a materialimpact on our ability to meet our short term liquidity requirements 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.

In April 2003, the Predecessor entered    into a revolving line of credit agreement with Marshall & Ilsley    Bank in the maximum amount of $2.5 million. This line of credit is secured    by, among other things, a pledge of the members’ interests in the Predecessor    and by a joint  and several guaranty of Larry Feldman, and matures in April    2005. In June 2004, the agreement was amended to increase the amount available    under the line of credit to $4.0 million. In November 2004, the agreement    was further amended to increase such amount to $6.0 million. Therewas no balance outstanding under this revolving line of credit at December 31,2004.

|      ***Long Term Liquidity Requirements*** |
|----------------------------------------------------------------------|

Our long-term liquidity requirements consist primarily of funds necessary for acquisition, renovation and repositioning of new properties, non-recurring capital expenditures and payment of indebtedness at maturity. We funded the acquisition of Colonie Center andrelated renovation costs out of existing cash and the first mortgage loan placed on the Stratford Square Mall in January 2005. We expect to meet our other long-term liquidity requirements through net cash from operations, existing cash, additional long-term secured andunsecured borrowings and the issuance of additional equity or debt securities.

We expect that the equity value on Colonie Center could be used to support a first mortgage. In the future, we may seek to increase the amount of our mortgages, negotiate credit facilities or issue corporate debt instruments. Any debt incurred or issued by us may besecured or unsecured, long-term or short-term, fixed or variable interest rate and may be subject to such other terms as we deem prudent.

While our charter does not limit the amount of debt we can incur, we intend to maintain a flexible financing position by maintaining a prudent level of leverage consistent with the level of debt typical in the mall industry. We will consider a number of factors inevaluating 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. In addition, we may also finance ouractivities 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

40

----

Back to Contents

supplementing the cash flow we receive    from our propertieswith additional management, leasing, development and incentive fees from thejoint ventures. We may also acquire properties in exchange for our OP units.

We are currently in preliminary discussions with a number of potential sellers of mall properties. We currently have no agreement to invest in any property other than the properties we currently own. There can be no assurance that we will make any investments in anyother properties that meet our investment criteria.

|      ***Contractual Obligations*** |
|-------------------------------------------------------------|

The following table summarizes our contractual obligations to third parties as of December 31, 2004:

| **Year**   |   | **Consolidated Capital****Expenditure****Commitments** |   | **Our Share of Capital Expenditure****Commitments in Unconsolidated****Joint Venture Entities** |   | **Consolidated****Long Term Debt** |   | **Our Share of Long Term****Debt in Unconsolidated****Joint Venture Entities** |   | **Total** |   |
|------------|--------|--------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|--------------------------------------------------------------------------------|--------|-----------|--------|
|            |   |                                                        |        |                                                                                            |        |                                    |   |                                                                                |        |      |        |  |   |  |  |   |
|       |   |                                                   |   |                                                                                            |   |                               |   |                                                                           |   |      |   |   |   |   |   |   |
|       |   | **(dollars in thousands)**                             |   |
| 2005       |   | $                                                      | 267    |                                                                                            | $      | 197                                |   | $                                                                              | 2,787  |      | $      | 11,702 |   | $ | 14,953 |   |
| 2006       |   |                                                   | — |                                                                                            |   | —                             |   |                                                                           | 2,787  |      |   | — |   |   | 2,787 |   |
| 2007       |   |                                                   | — |                                                                                            |   | —                             |   |                                                                           | 2,787  |      |   | — |   |   | 2,787 |   |
| 2008       |   |                                                   | — |                                                                                            |   | —                             |   |                                                                           | 57,072 |      |   | — |   |   | 57,072 |   |
| 2009       |   |                                                   | — |                                                                                            |   | —                             |   |                                                                           | — |      |   | — |   |   | — |   |
| Thereafter |   |                                                   | — |                                                                                            |   | —                             |   |                                                                           | — |      |   | — |   |   | — |   |
|       |   |                                                        |        |                                                                                            |        |                                    |   |                                                                                |        |      |        |  |   |  |  |   |
| **Total**  |   | $                                                      | 267    |                                                                                            | $      | 197                                |   | $                                                                              | 65,433 |      | $      | 11,702 |   | $ | 77,599 |   |
|       |   |                                                        |        |                                                                                            |        |                                    |   |                                                                                |        |      |        |  |   |  |  |   |

|                                                     |
|----------------------------------------------------------|
|      ***Harrisburg Mall Loan*** |

The joint venture that owns the Harrisburg Mall has entered into a construction loan with Commerce Bank with a maximum funding commitment of $46.9 million, as amended in October 2004, of which the joint venture has borrowed $44.3 million as ofDecember 31, 2004. Through November 17, 2004, the loan bore interest at a rate of LIBOR plus 325 basis points. The loan currently bears interest at a rate of LIBOR plus 250 basis points. Interest on the outstanding principal balance of this loan is payable on the first day ofeach month. No payments of principal are required on this loan until December 31, 2005, at which time the entire principal balance together with any accrued interest thereon will be due. This loan can be repaid in whole or in part at any time without penalty and may beextended for up to three additional one year periods. 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%. In March 2005, weassumed Larry Feldman’s recourse liabilities under this loan. In addition, pursuant to the terms of this loan, at any time the joint venture is entitled to receive a loan advance, the lender shall reduce the amount of such advance by the amount of the joint venture’s net cash flowafter operating expenses and debt service.

|      ***Stratford Square Mall Loan*** |
|----------------------------------------------------------------|

In January 2005, we completed a $75 million, 3-year first mortgage financing collateralized by the Stratford Square Mall. The mortgage bears interest at a rate of LIBOR plus 125 basis points and has two one-year extensions. The initial loan to cost is approximately80%; however, once the intended capital improvements of approximately $20 million are complete, the total leverage is expected to decrease to approximately 65% of total anticipated cost.

|      ***Capital Expenditures*** |
|----------------------------------------------------------|

We are required to maintain each retail property in good repair and condition and in conformity with applicable laws and regulations and in accordance with the tenant’s standards and the agreed upon requirements in our lease agreements. The cost of all such routinemaintenance, repairs and alterations may be paid out of a capital expenditures reserve, which will be funded by cash flow. Routine repairs and maintenance will be administered by our subsidiary management company.

41

----

Back to Contents

| **Off-Balance Sheet Arrangements** |
|------------------------------------|

|                                                |
|-----------------------------------------------------|
|      ***Loan Guarantees*** |

See loan guarantees described on Harrisburg loan above.

|      ***Forward Swap Contract*** |
|-----------------------------------------------------------|

In connection with the Stratford Square Mall mortgage financing, during January 2005, the company entered into a $75 million swap commencing February 2005 with a final maturity date in January 2008. The effect of the swap is to fix the all-in interest rate of theStratford Square mortgage loan at 5.0% per annum.

|      ***Tax Indemnifications*** |
|----------------------------------------------------------|

In connection with the Formation Transactions, the Company entered into agreements with Messrs. Feldman, Bourg and Jensen that indemnify them with respect to certain tax liabilities intended to be deferred in the Formation Transactions, if those liabilities aretriggered either as a result of a taxable disposition of a property by the Company, or if the Company fails to offer the opportunity for the contributors to guarantee or otherwise bear the risk of loss, with respect to certain amounts of the Company’s debt for tax purposes (the“contributor-guaranteed debt”). 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 five following year ends thereafter.

The Company also has agreed to maintain    approximately $10 million of indebtedness, and to offer the contributors    the option to guarantee $10 million of the Operating Partnership’s indebtedness,    in order to enable them to continue to defer certain tax liabilities. The    obligation  to maintain such indebtedness extends to 2013, but will be extended    by an additional five years for any contributor that holds (together with    his affiliates) at that time at least 25% of the initial ownership interest    in the Operating Partnership issued to them in the FormationTransactions.

|      ***Joint Venture Option*** |
|----------------------------------------------------------|

Our predecessor acquired an ownership interest in the Harrisburg Mall through a joint venture with affiliates of the Lubert Adler Funds in 2003. Our company has been granted an option, exercisable at any time prior to July 19, 2005, to purchase the remaining interestheld by our joint venture partner for an aggregate of $27.6 million in cash. The terms of this joint venture are described under the caption “Item 2 — Properties — Harrisburg Mall.”

| **Funds From Operations** |
|---------------------------|

The revised White Paper on Funds From Operations, or FFO, approved by the Board of Governors of NAREIT in October 1999 defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from debt restructuring and sales ofproperties, plus real-estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. We believe that FFO is helpful to investors as a measure of the performance of an equity REIT because, along with cash flow fromoperating activities, financing activities and investing activities, it provides investors with an indication of our ability to incur and service debt, to make capital expenditures and to fund other cash needs. We compute FFO in accordance with the current standards established byNAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than us. FFO does not represent cash generated from operatingactivities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance or to cash flow from operating activities (determined in accordance with GAAP) as ameasure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.

42

----

Back to Contents

Funds From Operations for the period December 16, 2004 to December 31, 2004 is as follows (in thousands):

| **Net Loss**                                                                                                    |   | $      | (1,249 | )      |
|-----------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|
|                                                                                                            |   |   |   |   |
| **Add:**                                                                                                        |   |   |   |   |
| Depreciation          and amortization (excluding $10 depreciation of non-real furniture          and fixtures) |   |   | 201    |   |
| FFO contribution from unconsolidated joint venture                                                              |   |   | 76     |   |
| **Less:**                                                                                                       |   |   |   |   |
| Minority interest                                                                                               |   |   | (184   | )      |
|                                                                                                            |   |        |        |   |
| Funds From Operations available to common stockholders and OP Unit holders                                      |   | $      | (1,156 | )      |
|                                                                                                            |   |        |        |   |

|                                                                                                     |
|----------------------------------------------------------------------------------------------------------|
| **ITEM 7A.**     **Quantitative and Qualitative Disclosures About Market Risk** |

Our future income, cash flows and fair values relevant to financial instruments depend upon interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates.

|      ***Market Risk Related to Fixed Rate Debt*** |
|----------------------------------------------------------------------------|

We had approximately $54.8 million of outstanding indebtedness as of December 31, 2004, all of which matures on November 1, 2008 and bears interest at a fixed rate of 5.09%. Upon the maturity of our debt, there is a market rate risk as to the prevailing rates at thetime of refinancing. Changes in market rates on our fixed-rate debt affects the fair market value of our debt but it has no impact on interest expense incurred or cash flow. A 100 basis point increase or decrease in interest rates on our fixed rate debt would increase or decreaseour annual interest expense by approximately $548,000, as the case may be.

|      ***Inflation*** |
|-----------------------------------------------|

Most of our leases contain provisions designed to mitigate the adverse impact of inflation by requiring the tenant to pay its share of operating expenses, including common area maintenance, real estate taxes and insurance. The leases also include clauses enabling us toreceive percentage rents based on gross sales of tenants, which generally increase as prices rise. This reduces our exposure to increases in costs and operating expenses resulting from inflation.

43

----

Back to Contents

| **ITEM 8.**     **Financial Statements and Supplemental Data** |
|-----------------------------------------------------------------------------------------|

**FELDMAN MALL PROPERTIES, INC.**

**INDEX TO FINANCIAL STATEMENTS**

**Feldman Mall Properties, Inc. and Subsidiaries and Feldman Equities of Arizona, LLC and Subsidiaries (“Predecessor”)**

|                                                                                                                                                                                                                                                                                                                                                        |   | **Page** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|
|                                                                                                                                                                                                                                                                                                                                                        |   |          |   |
| Report of Independent Registered Public Accounting Firm                                                                                                                                                                                                                                                                                                     |   | 45       |   |
| Consolidated Balance Sheets as of December 31, 2004 and 2003                                                                                                                                                                                                                                                                                           |   | 46       |   |
| Consolidated Statements of Operations for the period December 16, 2004 to December 31, 2004, and for the period January 1, 2004 to December 15, 2004, the year ended December 31, 2003 and the period from April 1, 2002 (date of inception) to December 31,2002                                                         |   | 47       |   |
| Consolidated Statements of Stockholders’/Owners’ Equity (Deficit) for the period December 16,          2004 to December 31, 2004, and for the period January 1, 2004 to December 15,          2004, the year ended December 31, 2003 and the period from April 1, 2002(date of inception) to December 31, 2002 |   | 48       |   |
| Consolidated Statements of Cash Flows for the years ended December 31, 2004 and 2003, and the period from April 1, 2002 (date of inception) to December 31, 2002                                                                                                                                                                             |   | 49       |   |
| Notes to Consolidated Financial Statements                                                                                                                                                                                                                                                                                                                  |   | 51       |   |
|                                                                                                                                                                                                                                                                                                                                                        |   |     |   |
| **Feldman Lubert Adler Harrisburg LP:**                                                                                                                                                                                                                                                                                                                     |   |     |   |
|                                                                                                                                                                                                                                                                                                                                                        |   |     |   |
| Independent Auditors’ Report                                                                                                                                                                                                                                                                                                                           |   | 69       |   |
| Balance Sheets as of December 31, 2004 and 2003                                                                                                                                                                                                                                                                                                        |   | 70       |   |
| Statements          of Operations for the year ended December 31, 2004 and the period          September 24, 2003 (date of inception) to December 31, 2003                                                                                                                                                                                   |   | 71       |   |
| Statements          of Partners’ Capital for the year ended December 31, 2004          and the period September 24, 2003 (date of inception) to December 31,          2003                                                                                                                                                              |   | 72       |   |
| Statements of Cash Flows for the year ended December 31, 2004 and the period September 24, 2003 (date of inception) to December 31, 2003                                                                                                                                                                                                     |   | 73       |   |
| Notes to Financial Statements                                                                                                                                                                                                                                                                                                                               |   | 74       |   |

44

----

Back to Contents

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

The Board of Directors and StockholdersFeldman Mall Properties, Inc.:

We have audited the accompanying    consolidated balance sheet of Feldman Mall Properties, Inc. and subsidiaries    (the Company) and the consolidated balance sheet of Feldman Equities of Arizona,    LLC and subsidiaries (the Predecessor, as defined in Note 1 to theconsolidated financial statements) as of December 31, 2004 and 2003, respectively,the related consolidated statements of operations and stockholders’ equityof the Company for the period from December 16, 2004 (commencement of operations)to December 31, 2004, therelated consolidated statements of operations and owners’ equity (deficit)of the Predecessor for the period from January 1, 2004 to December 15,2004, the year ended December 31, 2003 and the period from April 1,2002 (date of inception) to December 31, 2002, therelated consolidated statement of cash flows of the Company and the Predecessorfor the year ended December 31, 2004, and the related consolidated statementsof cash flows of the Predecessor for the year ended December 31, 2003 andthe period from April 1, 2002 (dateof inception) to December 31, 2002. These consolidated financial statementsare the responsibility of the Company’s management. Our responsibility isto express an opinion on these consolidated financial statements based on ouraudits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated    financial statements referred to above present fairly, in all material respects,    the financial position of Feldman Mall Properties, Inc. and subsidiaries    and the financial position of Feldman Equities of Arizona, LLC and subsidiaries    as ofDecember 31, 2004 and 2003, respectively, and the results of operationsofthe Company for the period from December 16, 2004 to December 31,2004, the results of operations of the Predecessor for the period from January 1,2004 to December 15, 2004, theyear ended December 31, 2003 and the period from April 1, 2002 to December 31,2002, the cash flows of the Company and the Predecessor for the year ended December 31,2004, and the cash flows of the Predecessor for the year ended December 31,2003, and theperiod from April 1, 2002 to December 31, 2002 in conformity with U.S.generally accepted accounting principles.

/s/ KPMG LLP

New York, New YorkApril 8, 2005

45

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**CONSOLIDATED BALANCE SHEETS****(Amounts in thousands, except per share data)**

|                                                                                                                                        |   | **December** **31,** |    |
|---------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------|---------|
|                                                                                                                                        |   |                           |    |
|                                                                                                                                        |   | **2004**                  |    | **2003** |   |
|                                                                                                                                        |   |                           |         |   |  |  |   |
|                                                                                                                                        |   | **(The Company)**         |    | **(The Predecessor)** |   |
| **Assets:**                                                                                                                                 |   |                      |    |   |   |   |   |
| Investments in real estate, net                                                                                                             |   | $                         | 143,653 |   | $ | 50,473 |   |
| Investment in unconsolidated real estate partnership                                                                                        |   |                      | 5,150   |   |   | 3,808 |   |
| Cash and cash equivalents                                                                                                                   |   |                      | 15,607  |   |   | 3,977 |   |
| Restricted cash                                                                                                                             |   |                      | 4,555   |   |   | 8,095 |   |
| Rents, deferred rents and other receivables, net                                                                                            |   |                      | 1,921   |   |   | 1,240 |   |
| Acquired lease rights, net                                                                                                                  |   |                      | 4,167   |   |   | 1,145 |   |
| Deferred charges, net                                                                                                                       |   |                      | 12,179  |   |   | 1,799 |   |
| Other assets                                                                                                                                |   |                      | 1,551   |   |   | 239 |   |
|                                                                                                                                        |   |                           |         |   |  |  |   |
| **Total Assets**                                                                                                                            |   | $                         | 188,783 |   | $ | 70,776 |   |
|                                                                                                                                        |   |                           |         |   |  |  |   |
|                                                                                                                                        |   |                      |    |   |   |   |   |
| **Liabilities and Stockholders’/Owners’ Equity:**                                                                                 |   |                      |    |   |   |   |   |
| Mortgages and other loans payable                                                                                                           |   | $                         | 54,750  |   | $ | 61,278 |   |
| Due to affiliates                                                                                                                           |   |                      | 12,941  |   |   | 5,533 |   |
| Accounts payable, accrued expenses and other liabilities                                                                                    |   |                      | 7,862   |   |   | 1,511 |   |
| Acquired lease obligation, net                                                                                                              |   |                      | 4,737   |   |   | 1,601 |   |
|                                                                                                                                        |   |                           |         |   |  |  |   |
| Total liabilities                                                                                                                           |   |                      | 80,290  |   |   | 69,923 |   |
|                                                                                                                                        |   |                      |    |   |   |   |   |
|                                                                                                                                        |   |                      |    |   |   |   |   |
| Minority interest                                                                                                                           |   |                      | 13,962  |   |   | 762 |   |
|                                                                                                                                        |   |                      |    |   |   |   |   |
|                                                                                                                                        |   |                      |    |   |   |   |   |
| **Stockholders’/Owners’ Equity**                                                                                                  |   |                      |    |   |   |   |   |
| Owners’ equity (Predecessor)                                                                                                           |   |                      | —  |   |   | 91 |   |
| Common          stock, $0.01 par value, 200,000,000 shares authorized, 10,789,895 issued          and outstanding at December 31, 2004 |   |                      | 108     |   |   | — |   |
| Additional paid-in capital                                                                                                                  |   |                      | 95,672  |   |   | — |   |
| Accumulated deficit                                                                                                                         |   |                      | (1,249  | ) |   | — |   |
|                                                                                                                                        |   |                           |         |   |  |  |   |
| Total Stockholders’/Owners’ Equity                                                                                                |   |                      | 94,531  |   |   | 91 |   |
|                                                                                                                                        |   |                           |         |   |  |  |   |
| **Total Liabilities and Stockholders’/Owners’ Equity**                                                                            |   | $                         | 188,783 |   | $ | 70,776 |   |
|                                                                                                                                        |   |                           |         |   |  |  |   |

See accompanying notes to consolidated financial statements.

46

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**CONSOLIDATED STATEMENTS OF OPERATIONS****(Amounts in thousands, except per share data)**

|                                                          |   | **The Company**                                                                |   | **The Predecessor**                                                          |   |
|---------------------------------------------------------------|--------|--------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|--------|
|                                                          |   |                                                                                |   |                                                                              |   |
|                                                          |   | **Period from****December** **16, 2004 to****December** **31, 2004** |   | **Period from****January** **1, 2004 to****December** **15, 2004** |   | **Year Ended****December** **31, 2003** |   | **Period from****April** **1, 2002****(date of inception) to****December** **31, 2002** |   |
|                                                          |   |                                                                                |        |                                                                         |        |  |   |  |  |   |  |  |   |
| **Revenue:**                                                  |   |                                                                           |   |                                                                         |   |   |   |   |   |   |   |   |   |
| Rental                                                        |   | $                                                                              | 327    |                                                                         | $      | 6,340 |   | $ | 6,720 |   | $ | 4,881 |   |
| Tenant reimbursements                                         |   |                                                                           | 193    |                                                                         |   | 4,124 |   |   | 4,446 |   |   | 3,385 |   |
| Management, leasing and development services                  |   |                                                                           | 58     |                                                                         |   | 917 |   |   | 461 |   |   | 248 |   |
| Interest and other income                                     |   |                                                                           | 52     |                                                                         |   | 250 |   |   | 67 |   |   | 51 |   |
|                                                          |   |                                                                                |        |                                                                         |        |  |   |  |  |   |  |  |   |
| Total Revenue                                                 |   |                                                                           | 630    |                                                                         |   | 11,631 |   |   | 11,694 |   |   | 8,565 |   |
|                                                          |   |                                                                                |        |                                                                         |        |  |   |  |  |   |  |  |   |
| **Expenses:**                                                 |   |                                                                           |   |                                                                         |   |   |   |   |   |   |   |   |   |
| Rental property operating and maintenance                     |   |                                                                           | 329    |                                                                         |   | 3,886 |   |   | 4,193 |   |   | 2,950 |   |
| Real estate taxes                                             |   |                                                                           | 45     |                                                                         |   | 1,218 |   |   | 1,225 |   |   | 1,017 |   |
| Interest (including amortization of deferred financing costs) |   |                                                                           | 443    |                                                                         |   | 4,007 |   |   | 4,904 |   |   | 3,264 |   |
| Depreciation and amortization                                 |   |                                                                           | 211    |                                                                         |   | 1,462 |   |   | 1,442 |   |   | 964 |   |
| General and administrative                                    |   |                                                                           | 1,047  |                                                                         |   | 3,485 |   |   | 672 |   |   | 1,218 |   |
| Other                                                         |   |                                                                           | — |                                                                         |   | 13 |   |   | 161 |   |   | 249 |   |
|                                                          |   |                                                                                |        |                                                                         |        |  |   |  |  |   |  |  |   |
| Total Expenses                                                |   |                                                                           | 2,075  |                                                                         |   | 14,071 |   |   | 12,597 |   |   | 9,662 |   |
|                                                          |   |                                                                                |        |                                                                         |        |  |   |  |  |   |  |  |   |
| Equity in earnings of unconsolidated real estate partnership  |   |                                                                           | 12     |                                                                         |   | 425 |   |   | 197 |   |   | — |   |
|                                                          |   |                                                                                |        |                                                                         |        |  |   |  |  |   |  |  |   |
| Loss before minority interest                                 |   |                                                                           | (1,433 | )                                                                            |   | (2,015 | ) |   | (706 | ) |   | (1,097 | ) |
| Minority interest                                             |   |                                                                           | (184   | )                                                                            |   | 233 |   |   | 30 |   |   | 107 |   |
|                                                          |   |                                                                                |        |                                                                         |        |  |   |  |  |   |  |  |   |
| **Net Loss**                                                  |   | $                                                                              | (1,249 | )                                                                            | $      | (2,248 | ) | $ | (736 | ) | $ | (1,204 | ) |
|                                                          |   |                                                                                |        |                                                                         |        |  |   |  |  |   |  |  |   |
| Basic and Diluted loss per share                              |   | $                                                                              | (0.12  | )                                                                            |   |   |   |   |   |   |   |   |   |
|                                                          |   |                                                                                |   |                                                                         |   |   |   |   |   |   |   |   |
| Basic and Diluted weighted average common shares outstanding  |   |                                                                           | 10,790 |                                                                         |   |   |   |   |   |   |   |   |   |
|                                                          |   |                                                                                |   |                                                                         |   |   |   |   |   |   |   |   |

See accompanying notes to consolidated financial statements.

47

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS’/OWNERS’ EQUITY (DEFICIT)****(Amounts in thousands, except per share data)**

|                                                                                        |   | **Number of****Common****Shares** |       | **Common****Stock** |   | **Additional****Paid-In Capital** |   | **Accumulated****Deficit** |    | **Owners’****Equity****(Deficit)** |   | **Total** |   |
|---------------------------------------------------------------------------------------------|--------|-----------------------------------|------------|---------------------|--------|-----------------------------------|--------|----------------------------|---------|-----------------------------------------|--------|-----------|--------|
|                                                                                        |   |                                   |            |                |        |                                   |   |                            |         |                                    |        |           |   |  |  |   |  |  |   |
| **The Predecessor**                                                                         |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |   |   |   |   |   |   |
| Balance at April 1, 2002 (date of inception)                                           |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   | $ | — |   | $ | — |   |
| Capital contributed                                                                         |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |   | 2,031 |   |   | 2,031 |   |
| Net loss                                                                                    |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |   | (1,204 | ) |   | (1,204 | ) |
|                                                                                        |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |  |   |  |   |
| Balance at December 31, 2002                                                           |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |   | 827 |   |   | 827 |   |
| Net loss                                                                                    |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |   | (736 | ) |   | (736 | ) |
|                                                                                        |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |  |   |  |   |
| Balance at December 31, 2003                                                           |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |   | 91 |   |   | 91 |   |
| Distribution — paid                                                                    |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |   | (451 | ) |   | (451 | ) |
| Distribution — accrued                                                                 |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |   | (4,000 | ) |   | (4,000 | ) |
| Contribution                                                                                |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |   | 100 |   |   | 100 |   |
| Adjustment for the fair value of ownership interests issued                                 |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |   | 1,980 |   |   | 1,980 |   |
| Net loss                                                                                    |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |   | (2,248 | ) |   | (2,248 | ) |
|                                                                                        |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |  |   |  |   |
| Balance at December 15, 2004                                                           |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |   | (4,528 | ) |   | (4,528 | ) |
| **The Company**                                                                             |   |                              |       |                |   |                              |   |                       |    |                                    |   |      |   |   |   |   |   |   |   |
| Reclassify predecessor owners’ deficit                                                 |   |                              | —     |                |   | —                            |   | $                          | (4,528  | )                                       |   | —    |   |   | 4,528 |   |   | — |   |
| Net proceeds from sale of initial public offering common stock                              |   |                              | 10,666,667 |                | $      | 107                               |   |                       | 128,923 |                                    |   | —    |   |   | — |   |   | 129,030 |   |
| Costs associated with initial public offering                                               |   |                              | —     |                |   | —                            |   |                       | (4,488  | )                                       |   | —    |   |   | — |   |   | (4,488 | ) |
| Contribution of the net assets of the Predecessor in exchange for fully vested common stock |   |                              | 123,228    |                |   | 1                                 |   |                       | 1,601   |                                    |   | —    |   |   | — |   |   | 1,602 |   |
| Record net obligations due to predecessor                                                   |   |                              | —     |                |   | —                            |   |                       | (11,690 | )                                       |   | —    |   |   | — |   |   | (11,690 | ) |
| Record minority interest for former owners’ continuing interest                        |   |                              | —     |                |   | —                            |   |                       | (14,146 | )                                       |   | —    |   |   | — |   |   | (14,146 | ) |
| Net loss                                                                                    |   |                              | —     |                |   | —                            |   |                       | —  |                                    | $      | (1,249    | )      |   |   |   |   | (1,249 | ) |
|                                                                                        |   |                                   |            |                |        |                                   |   |                            |         |                                    |        |           |   |  |  |   |  |  |   |
| Balance at December 31, 2004                                                           |   |                              | 10,789,895 |                | $      | 108                               |   | $                          | 95,672  |                                    | $      | (1,249    | )      | $ | — |   | $ | 94,531 |   |
|                                                                                        |   |                                   |            |                |        |                                   |   |                            |         |                                    |        |           |   |  |  |   |  |  |   |

See accompanying notes to consolidated financial statements.

48

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**CONSOLIDATED STATEMENTS OF CASH FLOWS****(Amounts in thousands)**

|                                                                           |   | **The Company****and Predecessor**           |     | **The Predecessor**                          |   |
|--------------------------------------------------------------------------------|--------|----------------------------------------------|----------|----------------------------------------------|--------|
|                                                                           |   | **Year Ended****December** **31, 2004** |     | **Year Ended****December** **31, 2003** |   | **Period from****April** **1, 2002****(date of****inception) to****December** **31, 2002** |   |
|                                                                           |   |                                              |          |                                         |        |  |   |  |  |   |
| **Cash Flows From Operating Activities:**                                      |   |                                         |     |                                         |   |   |   |   |   |   |
| Net loss                                                                       |   | $                                            | (3,497   | )                                            | $      | (736 | ) | $ | (1,204 | ) |
| Adjustments to reconcile net loss to netcash provided by operating activities: |   |                                         |     |                                         |   |   |   |   |   |   |
| Depreciation and amortization                                                  |   |                                         | 1,673    |                                         |   | 1,442 |   |   | 964 |   |
| Amortization of deferred financing costs                                       |   |                                         | 458      |                                         |   | 860 |   |   | 460 |   |
| Provision for doubtful accounts                                                |   |                                         | 128      |                                         |   | 258 |   |   | 28 |   |
| Non cash compensation                                                          |   |                                         | 1,980    |                                         |   | — |   |   | — |   |
| Minority interest                                                              |   |                                         | 49       |                                         |   | 30 |   |   | 107 |   |
| Equity in earnings of unconsolidated real estate partnership                   |   |                                         | (437     | )                                            |   | (197 | ) |   | — |   |
| Net change in revenue related to acquired lease rights/obligations             |   |                                         | 142      |                                         |   | 111 |   |   | 34 |   |
| Changes in operating assets and liabilities:                                   |   |                                         |     |                                         |   |   |   |   |   |   |
| Rents, deferred rents and other receivables                                    |   |                                         | (809     | )                                            |   | (925 | ) |   | (607 | ) |
| Restricted cash relating to operating activities                               |   |                                         | (142     | )                                            |   | 43 |   |   | (492 | ) |
| Other deferred costs                                                           |   |                                         | (257     | )                                            |   | (100 | ) |   | (107 | ) |
| Other assets                                                                   |   |                                         | (324     | )                                            |   | 8 |   |   | (216 | ) |
| Accounts payable, accrued expenses and other liabilities                       |   |                                         | 1,981    |                                         |   | (36 | ) |   | 1,547 |   |
|                                                                           |   |                                              |          |                                         |        |  |   |  |  |   |
| Net cash provided by operating activities                                      |   |                                         | 945      |                                         |   | 758 |   |   | 514 |   |
|                                                                           |   |                                              |          |                                         |        |  |   |  |  |   |
| **Cash Flows From Investing Activities:**                                      |   |                                         |     |                                         |   |   |   |   |   |   |
| Investment in unconsolidated real estate partnership                           |   |                                         | (905     | )                                            |   | (3,611 | ) |   | — |   |
| Real estate acquisition deposit                                                |   |                                         | (1,000   | )                                            |   | — |   |   | — |   |
| Expenditures for real estate improvements                                      |   |                                         | (8,625   | )                                            |   | (3,027 | ) |   | (367 | ) |
| Real estate acquisitions, net of assumed liabilities                           |   |                                         | (91,183  | )                                            |   | — |   |   | (54,383 | ) |
| Acquisition of minority interest                                               |   |                                         | (4,500   | )                                            |   | — |   |   | — |   |
| Proceeds from sales of pads                                                    |   |                                         | —   |                                         |   | 1,600 |   |   | 2,755 |   |
| Change in restricted cash relating to investing activities                     |   |                                         | 3,683    |                                         |   | (1,606 | ) |   | (2,536 | ) |
|                                                                           |   |                                              |          |                                         |        |  |   |  |  |   |
| Net cash used          in investing activities                                 |   |                                         | (102,530 | )                                            |   | (6,644 | ) |   | (54,531 | ) |
|                                                                           |   |                                              |          |                                         |        |  |   |  |  |   |
| **Cash Flows From Financing Activities:**                                      |   |                                         |     |                                         |   |   |   |   |   |   |
| Proceeds from equity offering (net of underwriters’ fees)                 |   |                                         | 129,030  |                                         |   | — |   |   | — |   |
| Payment of offering costs                                                      |   |                                         | (2,277   | )                                            |   | — |   |   | — |   |
| Proceeds from mortgage payable                                                 |   |                                         | —   |                                         |   | 54,750 |   |   | 43,500 |   |
| Repayment of mortgage payable                                                  |   |                                         | —   |                                         |   | (43,500 | ) |   | — |   |
| Proceeds from loans payable                                                    |   |                                         | —   |                                         |   | 6,450 |   |   | 3,028 |   |
| Repayment of loans payable                                                     |   |                                         | (6,450   | )                                            |   | (3,028 | ) |   | — |   |
| Repayment of line of credit                                                    |   |                                         | (6,000   | )                                            |   | — |   |   | — |   |
| Increase in revolving line of credit borrowings                                |   |                                         | 5,922    |                                         |   | 78 |   |   | — |   |
| Increase in due to affiliates                                                  |   |                                         | 603      |                                         |   | 761 |   |   | 4,772 |   |
| Payments to affiliates                                                         |   |                                         | (7,700   | )                                            |   | — |   |   | — |   |
| Change in restricted cash relating to financing activities                     |   |                                         | (13      | )                                            |   | (3,108 | ) |   | (396 | ) |
| Payment of deferred financing costs                                            |   |                                         | —   |                                         |   | (854 | ) |   | (1,229 | ) |
| Capital contributions                                                          |   |                                         | 551      |                                         |   | — |   |   | 2,031 |   |
| Contributions from minority interest                                           |   |                                         | —   |                                         |   | — |   |   | 2,657 |   |
| Distributions    to members of Predecessor                                     |   |                                         | (451     | )                                            |   | — |   |   | — |   |
| Distributions to minority interest                                             |   |                                         | —   |                                         |   | (2,032 | ) |   | — |   |
|                                                                           |   |                                              |          |                                         |        |  |   |  |  |   |

See accompanying notes to consolidated financial statements.

49

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES AND FELDMAN EQUITIES OF****ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**CONSOLIDATED STATEMENTS OF CASH FLOWS – *(Continued)*****(Amounts in thousands)**

|                                                                                                                                 |   | **The Company****and Predecessor**           |                | **The Predecessor**                          |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|---------------------|----------------------------------------------|--------|
|                                                                                                                                 |   | **Year Ended****December** **31, 2004** |                | **Year Ended****December** **31, 2003** |   | **Period from****April** **1, 2002****(date of****inception) to****December** **31, 2002** |   |
|                                                                                                                                 |   |                                              |                     |                                         |        |  |   |  |  |   |
| Net cash provided by financing activities                                                                                            |   |                                         |   113,215 |                                         |   |     9,517 |   |   |   54,363 |   |
|                                                                                                                                 |   |                                              |                     |                                         |        |  |   |  |  |   |
| Net change in cash and cash equivalents                                                                                              |   |                                         | 11,630              |                                         |   | 3,631 |   |   | 346 |   |
| Cash and cash equivalents, beginning of period                                                                                       |   |                                         | 3,977               |                                         |   | 346 |   |   | — |   |
|                                                                                                                                 |   |                                              |                     |                                         |        |  |   |  |  |   |
| Cash and cash equivalents, end of period                                                                                             |   | $                                            | 15,607              |                                         | $      | 3,977 |   | $ | 346 |   |
|                                                                                                                                 |   |                                              |                     |                                         |        |  |   |  |  |   |
| Supplemental disclosures of cash flow information:                                                                                   |   |                                         |                |                                         |   |   |   |   |   |   |
| Cash paid during the period for interest, net of amounts capitalized                                                                 |   | $                                            | 3,602               |                                         | $      | 3,375 |   | $ | 2,264 |   |
|                                                                                                                                 |   |                                              |                     |                                         |        |  |   |  |  |   |
| Supplemental disclosures of non cash investing and financing activities:                                                             |   |                                         |                |                                         |   |   |   |   |   |   |
| Unpaid initial public offering costs                                                                                                 |   | $                                            | 2,211               |                                         |   | — |   |   | — |   |
|                                                                                                                                 |   |                                              |                |                                         |   |   |   |   |   |
| Issuance of common stock to predecessor                                                                                              |   | $                                            | 1,602               |                                         |   | — |   |   | — |   |
|                                                                                                                                 |   |                                              |                |                                         |   |   |   |   |   |
| Record obligations due predecessor owners                                                                                            |   | $                                            | 15,690              |                                         |   | — |   |   | — |   |
|                                                                                                                                 |   |                                              |                |                                         |   |   |   |   |   |
| Record minority interest for limited partnership units in the operating partnership by reclassifying from additional paid in capital |   | $                                            | 14,170              |                                         |   | — |   |   | — |   |
|                                                                                                                                 |   |                                              |                |                                         |   |   |   |   |   |
| Reclassification of owners’ deficit to additional paid in capital                                                               |   | $                                            | 4,528               |                                         |   | — |   |   | — |   |
|                                                                                                                                 |   |                                              |                |                                         |   |   |   |   |   |
| Liabilities assumed in connection with real estate acquisition                                                                       |   | $                                            | 2,182               |                                         |   | — |   |   | — |   |
|                                                                                                                                 |   |                                              |                |                                         |   |   |   |   |   |

See accompanying notes to consolidated financial statements.

50

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTSDecember** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**1. Organization and Description of Business**

Feldman Equities of Arizona, LLC (the “Predecessor”) was organized under the laws of the State of Arizona and commenced operations on April 1, 2002. The Company, its affiliates and subsidiaries are principally engaged in the acquisition and management of retailmalls. Tenants include national and regional retail chains as well as local retailers.

As of December 31, 2003 and    2002, members of the Predecessor and their respective percentage interests    are Feldman Partners, LLC 70%, Mr. Jim Bourg 15%, and Mr. Scott    Jensen 15%. Each member’s liability for the debts and obligation of    the Predecessor is limited  as set forth under Arizona and other applicable    law.

Feldman Mall Properties, Inc. (the “Company”)    was incorporated in Maryland on July 14, 2004. The Company closed its    initial offering of its common stock on December 16, 2004 (the “Offering”).    The Company’s wholly owned subsidiaries, Feldman HoldingsBusiness Trust I and Feldman Holdings Business Trust II, are the sole general    partner and a limited partner, respectively, in, and collectively own 87.1%    of, Feldman Equities Operating Partnership, LP (the “Operating Partnership”).    The Company, through such subsidiaries,  has control over major decisions    of the Operating Partnership, including decisions related to sale or refinancing    of the properties. The Company, the Operating Partnership and Feldman Equities    Management Services Company (the “Service Company”) were formed    to continue  to operate and expand the business of the Predecessor. The Company    consolidates the assets and liabilities of the Operating Partnership in accordance    with AICPA Statement of Position 78-9, Accounting for Investments in Real    Estate Ventures (SOP 78-9). Until the completionof the Offering, the Company, the Operating Partnership and the Services Company    had no operations.

As of August 13, 2004, Mr. Larry Feldman, Chairman and Chief Executive Officer of the Company, was the ultimate owner of 100% of the Company. As of such date, Mr. Feldman (including members of his family), one other member of management of theCompany (Mr. Erhart) and the Operating Partnership owned directly or indirectly 100% of the Predecessor. Feldman Holdings Business Trust I owned 0.01% of the Operating Partnership, as general partner, and Jim Bourg, our Executive Vice President and Chief OperatingOfficer, and Scott Jensen, our Executive Vice President of Leasing, owned 99.99% as limited partners.

In a series of transactions culminating with the closing of the Offering, the Company, the Operating Partnership and the Services Company, together with the partners and members of the affiliated partnerships and limited liability companies affiliated with thePredecessor and other parties which hold direct or indirect ownership interests in the properties (collectively, the “Participants”), engaged in certain formation transactions (the “Formation Transactions”). The Formation Transactions were designed to (i) continue the operationsof the Predecessor, (ii) enable the Company to raise the necessary capital to acquire interests in certain of the properties, repay mortgage debt relating thereto and pay other indebtedness, (iii) fund costs, capital expenditures and working capital, (iv) provide a vehicle for futureacquisitions, (v) enable the Company to qualify as a real estate investment trust and (vi) preserve tax advantages for certain Participants.

Pursuant to contribution agreements among the owners of the Predecessor and the Operating Partnership, which were executed on August 13, 2004, the Operating Partnership received a contribution of interests in the Predecessor, which included the propertymanagement, leasing, and real estate development operations in exchange for limited partnership interests in the Operating Partnership.

As part of the Formation Transactions, the owners of the Predecessor contributed their ownership interests in the Predecessor to the Operating Partnership. Collectively, these contributors, including Messrs. Bourg and Jensen, own 12.9% of the Operating Partnership, as limitedpartners. The exchange of contributed

51

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**1. Organization and Description of Business*— (Continued)***

interests was accounted for as a reorganization of entities under common control; accordingly the contributed assets and assumed liabilities were recorded at the Predecessor’s historical costbasis.

The Harrisburg Mall joint venture entered into a construction loan with Commerce Bank that, as of December 31, 2004 has a maximum funding commitment of $46.9 million, of which the joint venture has borrowed $44.3 million. This loan presently has a limitedrecourse of $10 million, of which our joint venture partner is liable for $6.3 million, or 63%, and Larry Feldman is liable for $3.7 million, or 37%. In March 2005, the Company assumed Larry Feldman’s recourse liabilities under this loan.

The Company will elect the status of and qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. Pursuant to contribution agreements among the owners of the Predecessor and the Operating Partnership, the OperatingPartnership received a contribution of 100% of the interests in the Predecessor, in exchange for units. The Operating Partnership may acquire additional interests in certain properties from unaffiliated third parties, to be paid in cash. In connection with the formationtransactions, the Operating Partnership assumed debt and other obligations. This exchange of interests has been accounted for as a reorganization of entities under common control.

As of December 31, 2004, the Company was invested in three real estate properties: The Foothills Mall in Tucson, Arizona, acquired in April 2002, the Stratford Square Mall in Bloomingdale, Illinois, acquired in December 2004 and a minority interest in a partnershipowning the Harrisburg Mall in Harrisburg, Pennsylvania, acquired in September 2003.

**2. Summary of Significant Accounting Policies**

| ***Basis of Accounting*** |
|---------------------------|

The accompanying consolidated financial statements have been prepared on the accrual method of accounting in accordance with U.S. generally accepted accounting principles.

| ***Principles of Consolidation and Equity Method of Accounting*** |
|-------------------------------------------------------------------|

The accompanying consolidated financial statements of the Company andthe Predecessor include the accounts of their wholly-owned subsidiaries and all partnerships in which they have acontrolling interest. All intercompany balances and transactions have beeneliminated in consolidation.

The contribution of the Predecessor    to the Operating Partnership in the formation transactions in exchange for    units in the Operating Partnership has been accounted for as a reorganization    of entities under common control. Accordingly, the contributed assets and    assumed    liabilities    were    recorded    at the Predecessor’s historical cost basis. Prior to the formation transactions,    the Company and the Operating Partnership had no significant operations;    therefore, the consolidated operating results for the period prior to December 16,    2004, represent the operations of  our Predecessor. The minority interest    in one of the Predecessor’s subsidiaries was acquired for cash, and    has been accounted for as a purchase, with the excess of the purchase price    over    the related historical cost basis of the minority interest being allocated    to the assets acquiredand the liabilities assumed.

The Company evaluates its investments in partially-owned entities in accordance with FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, or FIN 46R. If the partially-owned entity is a “variable interest entity,” or a “VIE,”and the Company is the “primary beneficiary” as defined in FIN 46R, the Company accounts for such investment as if it were a consolidated subsidiary.

52

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**2. Summary of Significant Accounting Policies*— (Continued)***

For a joint venture investment which is not a VIE or in which the Company is not the primary beneficiary, the Company follows the accounting set forth in AICPA Statement of Position No. 78-9— Accounting for Investments in Real Estate Ventures (“SOP 78-9”). Inaccordance with this pronouncement, investments in joint ventures are accounted for under the equity method when the ownership interest is less than 50% and the Company does not exercise direct or indirect control. Factors the Company considers in determining whether ornot it exercises control include important rights of partners in significant business decisions, including dispositions and acquisitions of assets, financing and operating and capital budgets, board and management representation and authority and other contractual rights of ourpartners. To the extent that the Company is deemed to control these entities, these entities are consolidated.

The Company has determined that the Foothills Mall (for the period prior to being wholly-owned) and the Harrisburg Mall joint ventures are not VIEs. It consolidates the entity owning the Foothills Mall, as it is the majority owner and exercises control over allsignificant decisions. It accounts for its investments in the Harrisburg Mall partnership under the equity method of accounting, as the other limited partners have important rights as defined in SOP 78-9. This investment is recorded initially at cost, and subsequently adjusted forequity in earnings or losses and cash contributions and distributions.

On a periodic basis, management assesses whether there are any indicators that the value of the Company’s investment in unconsolidated joint ventures may be impaired. An investment’s value is impaired only if management’s estimate of the fair value of theinvestment is less than the carrying value of the investment. To the extent impairment has occurred, the loss shall be measured as the excess of the carrying amount of the investment over the estimated fair value of the investment.

|      ***Critical Accounting Policies and Management’s Estimates*** |
|--------------------------------------------------------------------------------------------------|

The Company has identified certain critical accounting policies that affect our more significant judgments and estimates used in the preparation of the consolidated financial statements. On an ongoing basis, the Company evaluates estimates related to critical accountingpolicies, including those related to revenue recognition and the allowance for doubtful accounts receivable and investments in real estate and asset impairment. The estimates are based on information that is currently available to us and on various other assumptions that webelieve are reasonable under the circumstances.

The Company makes estimates related    to the collectibility of accounts receivable related to minimum rent, deferred    rent, expense reimbursements, lease termination fees and other income. The    Company specifically analyzes accounts receivable and historical bad debts,    tenant concentrations, tenant creditworthiness, and current economic trends    when evaluating the adequacy of the allowance for doubtful accounts receivable.    These estimates have a direct impact on our net income, because a higher    bad debt allowance would result in lower netincome.

The Company is required to make subjective assessments as to the useful lives of the properties for purposes of determining the amount of depreciation to record on an annual basis with respect to our investments in real estate. These assessments have a direct impact onour net income (loss) because if the Company were to shorten the expected useful lives of its investments in real estate, the Company would depreciate such investments over fewer years, resulting in more depreciation expense and lower net income on an annual basis.

The Company is required to make subjective assessments as to whether there are impairments in the values of our investments in real estate, including real estate held by any uncombined real estate entities

53

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**2. Summary of Significant Accounting Policies*— (Continued)***

accounted for using the equity method. These assessments have a direct impact on the Company’s net income (loss) because recording an impairment loss results in an immediate negativeadjustment to income.

The Company is required to make subjective assessments as to the fair value of assets and liabilities in connection with purchase accounting related to real estate required. These assessments have a direct impact on the Company’s net income (loss) subsequent to theacquisitions as a result of depreciation and amortization being recorded on these assets and liabilities over the expected lives of the related assets and liabilities.

The preparation of the consolidated financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of certain assets and liabilitiesand disclosure of contingent assets and liabilities at the date of the consolidated financial statements. They also affect reported amounts of revenues and expenses during the reporting period. Significant items, subject to such estimates and assumptions, include the carryingamount of investments in real estate, allowance for doubtful accounts and the allocation of the purchase price of real estate to in-place leases and acquired lease rights and obligations. Actual results could differ from those amounts.

|      ***Cash and Cash Equivalents*** |
|---------------------------------------------------------------|

For purposes of the consolidated statements of cash flows, the Company considers short-term investments with maturities of 90 days or less when purchased to be cash equivalents.

|      ***Restricted Cash*** |
|-----------------------------------------------------|

Restricted cash includes escrowed funds and other restricted deposits in conjunction with the Company’s loan agreements.

|      ***Revenue Recognition and Tenant Receivables*** |
|--------------------------------------------------------------------------------|

Base rental revenues from rental retail property are recognized on a straight-line basis over the noncancelable terms of the related leases, which are all accounted for as operating leases. As of December 31, 2004 and 2003, approximately $1,110 and $579, respectively,has been recognized as straight-line rents receivable (representing the current net cumulative rents recognized prior to the date when billed and collectible as provided by the terms of the lease). These amounts are included in deferred rents receivable in the accompanyingconsolidated financial statements. “Percentage rent” or rental revenue, which is based upon a percentage of the sales recorded by the Company’s tenants, is recognized in the period such sales are earned by the respective tenants.

Reimbursements from tenants related to real estate taxes, insurance and other shopping center operating expenses, are recognized as revenue, based on a predetermined formula, in the period the applicable costs are incurred. Lease termination fees, which are included ininterest and other income in the accompanying consolidated statements of operations, are recognized when the related leases are cancelled, the tenant surrenders the space, and the Company has no continuing obligation to provide services to such former tenants. ThePredecessor and the Company recorded $125 of lease termination fees during the period January 1, 2004 to December 15, 2004 and none for all other periods presented.

The Company’s other source of revenues comes from the provision of management services to third parties, including property management, brokerage, leasing and development. Management fees generally are

54

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**2. Summary of Significant Accounting Policies*— (Continued)***

a percentage of cash receipts from managed property and are recorded when earned as services are provided. Leasing and brokerage fees are earned and recognized upon the consummation ofnew leases. Development fees are earned and recognized over the time period of the development activity. These activities are referred to as “management, leasing and development services” inthe consolidated statements of operations.

Additionally, shortly after the acquisition of the Foothills Mall, the Company sold parcels of land (pads) to third parties. Revenue is recognized in the period the sale is consummated in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 66.There was no profit or loss on such sales in any period.

The Company provides an allowance for doubtful accounts against the portion of tenant receivables which is estimated to be uncollectible. Management of the Company reviews its allowance for doubtful accounts monthly. Past due balances over 90 days and over aspecified amount are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Tenant receivables in the accompanying consolidatedbalance sheets are shown net of an allowance for doubtful accounts of $414 and $286 at December 31, 2004 and 2003, respectively.

Activity in the allowance for doubtful accounts follows:

| Balance at April 1, 2002 (date of inception) |   | $      | — |   |
|---------------------------------------------------|--------|--------|--------|--------|
| Provision                                         |   |   | 28     |   |
|                                              |   |        |        |   |
| Balance at December 31, 2002                 |   |   | 28     |   |
| Provision                                         |   |   | 258    |   |
|                                              |   |        |        |   |
| Balance at December 31, 2003                 |   |   | 286    |   |
| Provision                                         |   |   | 128    |   |
|                                              |   |        |        |   |
| Balance at December 31, 2004                 |   | $      | 414    |   |
|                                              |   |        |        |   |

|                   |
|------------------------|
| ***Deferred Charges*** |

Deferred leasing commissions, acquired    in-place lease value, and other direct costs associated with the acquisition    of tenants are capitalized and amortized on a straight-line basis over the    terms of the related leases. Loan costs are capitalized and amortized to    interest  expense over the terms of the related loans using a method that    approximates the effective-interest method. The Company’s early extinguishments    of debt (described in note 6) resulted in the write-off of unamortized deferred    financing costs totaling $300 for the periodDecember 16, 2004 to December 31, 2004 and $722 for the year endedDecember 31, 2003.

| ***Offering Costs*** |
|----------------------|

Offering costs, representing expenditures related to the Offering, including underwriting commissions and initial public offering costs, were charged to equity of the Company upon completion of the Offering, and are reflected as a reduction to additional paid-in capital.

| ***Real Estate and Depreciation*** |
|------------------------------------|

Real estate is stated at historical cost, less accumulated depreciation. The building and improvements thereon are depreciated on the straight-line basis over an estimated useful life of 39 years. Tenant improvements are being depreciated on the straight-line basis over theshorter of the lease term or their

55

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**2. Summary of Significant Accounting Policies*— (Continued)***

estimated useful life. Equipment is being depreciated on a straight-line basis over the estimated useful lives of 5 to 7 years.

It is the Company’s policy to capitalize interest and real estate taxes to properties under redevelopment and to depreciate these costs over the life of the related assets. Interest in the amount of $132 was capitalized during the year ended December 31, 2004. No interestwas capitalized in 2003 and 2002.

Improvements and replacements are capitalized when they extend the useful life or improve the efficiency of the asset. Repairs and maintenance are charged to expense as incurred.

| ***Impairment of Long-Lived Assets*** |
|---------------------------------------|

The Company assesses whether there has been impairment in the value of its long-lived assets whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by acomparison of the carrying amount to the future net cash flows, undiscounted and without interest, expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. Management believes no impairment in the net carrying values of the investments in real estate and investment inunconsolidated real estate partnership has occurred.

| ***Purchase Accounting for Acquisition of Interests in Real Estate Entities*** |
|--------------------------------------------------------------------------------|

The Company allocates the purchase price of properties to tangible and identified intangible assets acquired based on their fair value in accordance with the provisions of Statement of Financial Accounting Standards No. 141, Business Combinations. The fair value ofthe tangible assets of an acquired property (which includes land, building and improvements) is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land, building and improvements based on management’s determination ofthe relative fair values of these assets. Management determines the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs duringthe expected lease-up periods considering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-upperiods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, legal and other related costs.

In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leasesacquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of thelease. The capitalized above-market lease values (included in acquired lease rights in the accompanying consolidated balance sheets) are amortized as a reduction of rental income over the remaining, non-cancelable, terms of the respective leases. The capitalized below-marketlease values (presented as acquired lease obligation in the accompanying consolidated balance sheets) are amortized as an increase to rental income over the initial term and any fixed rate renewal periods in the respective leases. The Company’s leases do not currently includefixed-rate renewal periods.

56

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**2. Summary of Significant Accounting Policies*— (Continued)***

The aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationships, is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fairvalue of the property as if vacant, determined as set forth above. This aggregate value is allocated between in-place lease values and tenant relationships based on management’s evaluation of the specific characteristics of each tenant’s lease; however, the value of tenantrelationships has not been separated from in-place lease value for the additional interests in real estate entities acquired by the Company because such value and its consequence to amortization expense is immaterial for these particular acquisitions. Should future acquisitions ofproperties result in allocating material amounts to the value of tenant relationships, an amount would be separately allocated and amortized over the estimated life of the relationship. The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to expense over the remaining non-cancelable periods of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be written off.

Purchase accounting was applied to    the assets and liabilities related to the real estate properties, which the    Predecessor and Company acquired on April 10, 2002 and December 30,    2004, respectively. In April 2002, the Predecessor acquired a majority (66.7%)    interest  in the partnership which purchased the Foothills Mall in Tuscon,    Arizona. The results of operations of the Foothills Mall are included in    the accompanying consolidated statements of operations of the Predecessor    since April 10, 2002. The Company acquired Stratford SquareMall, located in Bloomingdale, Illinois, on December 30, 2004. The fairvalue of the real estate acquired was allocated to the acquired tangible assets,consisting of land, building and improvements, and identified intangible assetsand liabilities, consisting of above-market and below-market leases, in-placeleases and tenant relationships, if any, based in each case on their fair values.

The following are the amounts assigned to each major asset and liability caption at the acquisition date:

|                       |   | **Foothills (1)** |   | **Stratford (2)** |   |
|----------------------------|--------|-------------------|--------|-------------------|--------|
|                       |   |                   |        |              |        |  |   |
| Land                       |   | $                 | 11,447 |              | $      | 11,528 |   |
| Building and improvements  |   |              | 42,111 |              |   | 74,547 |   |
| Acquired lease rights      |   |              | 1,786  |              |   | 3,380 |   |
| Acquired lease obligations |   |              | (2,097 | )                 |   | (3,352 | ) |
| In-place lease value       |   |              | 1,136  |              |   | 7,262 |   |
|                       |   |                   |        |              |        |  |   |
| Total Purchase Price       |   | $                 | 54,383 |              | $      | 93,365 |   |
|                       |   |                   |        |              |        |  |   |
|                       |   |              |   |              |   |   |   |

|  |   |
|--|--------|

| (1) | The Foothills acquired lease rights, lease obligations and in-place lease value are being amortized over the remaining lease terms and the weighted average remaining lease terms are 7.6 years, 10 years and 10.4 years, respectively. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | The Stratford acquired lease rights, lease obligations and in-place lease value are being amortized over the remaining lease terms and the weighted average remaining lease terms are 3.9 years, 2.8 years and 3.6 years, respectively. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

57

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**2. Summary of Significant Accounting Policies*— (Continued)***

In connection with the formation transactions, the Company acquired the remaining 33.3% minority interest in the Foothills Mall owned by unaffiliated third party investors. This acquisition of the minority interest was accounted for as a purchase and is recorded at fairvalue. The following is a summary of the purchase price and allocation of excess purchase price on the acquisition date:

| Purchase price                                                            |   | $      | 4,500 |   |
|---------------------------------------------------------------------------|--------|--------|-------|--------|
| Reversal of minority interest recorded by Predecessor                     |   |   | (995  | )      |
|                                                                      |   |        |       |   |
| Acquisition of minority interest — allocated to in-place lease value |   | $      | 3,505 |   |
|                                                                      |   |        |       |   |

|                                              |
|---------------------------------------------------|
| ***Pro Forma Financial Information (Unaudited)*** |

The following table summarizes, on an unaudited pro forma basis, the results of operations for the years ended December 31, 2004 and 2003 as though the Formation Transactions and the acquisition of Stratford Square Mall had occurred on January 1, 2003:

|                                                                                   |   | **2004** |       | **2003** |   |
|----------------------------------------------------------------------------------------|--------|----------|------------|----------|--------|
|                                                                                   |   |          |            |     |        |  |   |
| Pro forma revenues                                                                     |   | $        | 28,476     |     | $      | 29,364 |   |
| Pro forma net income                                                                   |   | $        | 3,224      |     | $      | 3,178 |   |
| Pro forma earnings per common share—basic                                         |   | $        | 0.30       |     | $      | 0.29 |   |
| Pro          forma earnings per common share and common share equivalents—diluted |   | $        | 0.30       |     | $      | 0.29 |   |
| Pro forma common shares—basic                                                     |   |     | 10,789,895 |     |   | 10,789,895 |   |
| Pro forma common share and common share equivalents—diluted                       |   |     | 10,789,895 |     |   | 10,789,895 |   |

|               |
|--------------------|
| ***Income Taxes*** |

The Company will be taxed as a REIT    under Section 856(c)    of the Code. As a REIT, the Company is generally not subject to Federal and    state income tax. To maintain its qualification as a REIT, the Company must    distribute at least 90% of REIT taxable income to its stockholders and meet    certain other requirements. If the Company fails to qualify as a REIT in    any taxable year, it will be subject to Federal and state income tax on our    taxable income at regular corporate rates. The Company may also be subject    to certain state, local andfranchise taxes. Under certain circumstances, Federal income and excise taxes  may be due on the Company’s undistributed taxable income.

The Company has elected or may elect    to treat certain of our existing or newly created corporate subsidiaries    as taxable REIT subsidiaries, or TRS. In general, a TRS may perform non-customary    services for tenants, hold assets that we cannot hold directly and generally     may engage in any real estate or non-real estate related business. A TRS    is subject to corporate Federal and State income tax. Our TRS’s generate    no income or are marginally profitable, resulting in minimal or no Federal    and State income    tax    liability for these entities. With the exception of the  TRS, the Company    has paid no income taxes for the periods presented, nor incurred any tax    liability or expense.

As a REIT, the Company will be permitted    to deduct dividends paid to its stockholders, eliminating the federal taxation    of income represented by such dividends at the Company level. REITs are subject    to a number of organizational and operational requirements. If the  Company    fails to qualify as a REIT in any taxable year, the Company will be subject    to Federal and State income tax (including any applicable alternative minimum    tax) on its taxable income at regular corporate tax rates.

58

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**2. Summary of Significant Accounting Policies*— (Continued)***

The Predecessor and its subsidiaries are limited liability partnerships or limited liability companies. As such, no Federal or state income tax expense was recorded as items of income or expense by the Predecessor as these amounts are recorded on the members’/partners’individual tax returns.

| ***Earnings Per Share*** |
|--------------------------|

We present both basic and diluted earnings per share, or EPS. Basic EPS excludes potentially dilutive securities and is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period.Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower EPS amount. This also includes units of limitedpartnership interest. Due to the Company’s loss for the period December 16, 2004 to December 31, 2004, 1,593,464 Operating Partnership units are considered anti-dilutive for the period. As a result, the basic and diluted EPS are the same.

| ***Segment Information*** |
|---------------------------|

The Company is a REIT engaged in owning, managing, leasing and repositioning Class B regional malls and has one reportable segment, retail mall real estate.

| ***Recent Accounting Pronouncements*** |
|----------------------------------------|

On December 16, 2004, the FASB    issued SFAS No. 123 (Revised 2004), “Share-Based Payment” (“SFAS    No. 123R”). SFAS No. 123R replaces SFAS No. 123, which    the Company adopted in December 2004. SFAS No. 123R requires that the    compensation cost  relating to share-based payment transactions be recognized    in financial statements. SFAS No. 123R is effective as of the first    interim or annual reporting period that begins after June 15, 2005.    The Company does not believe that the adoption of SFAS No. 123Rwill have amaterial effect on the consolidated financial statements.

At its March 2005 meeting, the EITF    discussed Issue 04-05 with regards to consolidation of limited partnership    interests    by the general partner. The proposed requirements would replace counterpart    requirements in SOP 78-9, which provides guidance on accounting for  investments    in real-estate ventures, but has come to be used for all types of limited    partnerships. The tentative conclusions reached by the EITF are based on    the same presumption in SOP 78-9 that the general partner controls the limited    partnership and should consolidate it,regardless of the level of its ownership interest. However, EITF 04-05 would    establish a new framework for evaluating whether the presumption that the    general partner controls the limited partnership is overcome.

Based on the tentative conclusions,    the presumption of general-partner control would be overcome only if the    limited partners have either “kick-out rights”—the right to    dissolve or liquidate the partnership or otherwise remove the general partner “without    cause” orparticipating rights—the right to effectively participate in significantdecisions made in the ordinary course of the partnership’sbusiness. The kick-out rights and the participating rights must be substantivein order to overcome the presumption of general partner control. The Companydoes not believe that the adoption of EITF 04-05 will have a material effecton the consolidated financial statements.

59

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**3. Intangible Assets and Liabilities**

At December 31, 2004 and 2003, the Company’s intangible assets and liabilities were as follows:

|                                      |   | **Acquired****Lease Rights** |   | **In-place****Lease Value** |   | **Acquired****Lease****Obligations** |   |
|-------------------------------------------|--------|------------------------------|--------|-----------------------------|--------|--------------------------------------|--------|
|                                      |   |                              |        |                        |        |                                      |   |  |  |   |
| Balance at December 31, 2003         |   | $                            | 1,786  |                        | $      | 1,136                                |   | $ | (2,097 | ) |
| Acquisition of Stratford Mall             |   |                         | 3,380  |                        |   | 7,262                                |   |   | (3,352 | ) |
| Write-off of fully amortized balances     |   |                         | (454   | )                           |   | (83                                  | )      |   | 126 |   |
| Acquisition          of minority interest |   |                         | — |                        |   | 3,505                                |   |   | — |   |
|                                      |   |                              |        |                        |        |                                      |   |  |  |   |
| Balance at December 31, 2004         |   | $                            | 4,712  |                        | $      | 11,820                               |   | $ | (5,323 | ) |
|                                      |   |                              |        |                        |        |                                      |   |  |  |   |

Amortization expense of in-place lease value is expected to be $1,927, $1,476, $1,232, $976 and $783 over each of the next five years through December 31, 2009.

**4. Real Estate**

Following is certain information related to the Company’s investments in real estate as of December 31, 2004:

|                                                |   | **Foothills Mall** |      | **Stratford Square** |   |
|-----------------------------------------------------|--------|--------------------|-----------|----------------------|--------|
|                                                |   |                    |           |                 |        |  |   |
| Initial cost of the acquired or purchased property: |   |               |      |                 |   |   |   |
| Land                                                |   | $                  | 11,447    |                 | $      | 11,528 |   |
| Buildings and improvements                          |   |               | 42,111    |                 |   | 74,547 |   |
| Cost capitalized subsequent to acquisition:         |   |               |      |                 |   |   |   |
| Improvements                                        |   |               | 11,997    |                 |   | — |   |
| Land sold                                           |   |               | (4,355    | )                    |   | — |   |
| Total Costs:                                        |   |               |      |                 |   |   |   |
| Land                                                |   |               | 7,092     |                 |   | 11,528 |   |
| Buildings and improvements                          |   |               | 54,108    |                 |   | 74,547 |   |
| Accumulated depreciation                            |   |               | (3,622    | )                    |   | — |   |
| Date of acquisition                                 |   |               | 4/10/2002 |                 |   | 12/30/2004 |   |
|                                                |   |                    |           |                 |        |  |   |
| Federal tax basis at December 31, 2004         |   | $                  | 62,109    |                 | $      | 93,365 |   |
|                                                |   |                    |           |                 |        |  |   |

At December 31, 2004 and 2003, investments in real estate consisted of the following:

|                             |   | **2004** |    | **2003** |   |
|----------------------------------|--------|----------|---------|----------|--------|
|                             |   |          |         |     |        |  |   |
| Buildings and improvements       |   | $        | 128,655 |     | $      | 45,483 |   |
| Land                             |   |     | 18,620  |     |   | 7,092 |   |
|                             |   |          |         |     |        |  |   |
| Total investments in real estate |   |     | 147,275 |     |   | 52,575 |   |
| Accumulated depreciation         |   |     | (3,622  | )        |   | (2,102 | ) |
|                             |   |          |         |     |        |  |   |
| Investments in real estate, net  |   | $        | 143,653 |     | $      | 50,473 |   |
|                             |   |          |         |     |        |  |   |

60

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**4. Real Estate*— (Continued)***

The following tables reconcile the    historical cost of the Company’s investments in real estate and accumulated    depreciation for the years ended December 31, 2004 and 2003 and the    period April 1, 2002 to December 31, 2002:

|                              |   | **2004** |    | **2003** |   | **2002** |   |
|-----------------------------------|--------|----------|---------|----------|--------|----------|--------|
|                              |   |          |         |     |        |          |   |  |  |   |
| **Real Estate:**                  |   |     |    |     |   |     |   |   |   |   |
| Balance, beginning of the period  |   | $        | 52,575  |     | $      | 49,548   |   | $ | — |   |
| Acquisition of mall property      |   |     | 86,075  |     |   | —   |   |   | 53,536 |   |
| Additions during the period       |   |     | 8,625   |     |   | 3,027    |   |   | 367 |   |
| Sale of pads during period        |   |     | —  |     |   | —   |   |   | (2,755 | ) |
| Pads transferred to held for sale |   |     | —  |     |   | —   |   |   | (1,600 | ) |
|                              |   |          |         |     |        |          |   |  |  |   |
| Balance, end of period            |   | $        | 147,275 |     | $      | 52,575   |   | $ | 49,548 |   |
|                              |   |          |         |     |        |          |   |  |  |   |
|                              |   |     |    |     |   |     |   |   |   |   |
|                              |   | **2004** |    | **2003** |   | **2002** |   |
|                              |   |          |         |     |        |          |   |  |  |   |
| **Accumulated Depreciation:**     |   |     |    |     |   |     |   |   |   |   |
| Balance, beginning of the period  |   | $        | 2,102   |     | $      | 819      |   | $ | — |   |
| Depreciation during the period    |   |     | 1,520   |     |   | 1,283    |   |   | 819 |   |
|                              |   |          |         |     |        |          |   |  |  |   |
| Balance, end of period            |   | $        | 3,622   |     | $      | 2,102    |   | $ | 819 |   |
|                              |   |          |         |     |        |          |   |  |  |   |

**5. Deferred Charges**

At December 31, 2004 and 2003, deferred charges consisted of the following:

|                           |   | **2004** |   | **2003** |   |
|--------------------------------|--------|----------|--------|----------|--------|
|                           |   |          |        |     |        |  |   |
| Deferred financing costs       |   | $        | 397    |     | $      | 789 |   |
| Deferred leasing costs         |   |     | 455    |     |   | 198 |   |
| Acquired in-place leases       |   |     | 11,820 |     |   | 1,136 |   |
|                           |   |          |        |     |        |  |   |
| Total                          |   |     | 12,672 |     |   | 2,123 |   |
| Less: Accumulated amortization |   |     | (493   | )        |   | (324 | ) |
|                           |   |          |        |     |        |  |   |
| Net                            |   | $        | 12,179 |     | $      | 1,799 |   |
|                           |   |          |        |     |        |  |   |

61

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**6. Mortgage and Other Loans Payable**

At December 31, 2004 and 2003, mortgages and other loans payable consisted of the following:

|                                                                                                                                                              |   | **2004** |   | **2003** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                                                                                                                              |   |          |        |     |        |  |   |
| Mortgage Loan Payable — Archon Financial L.P. interest only at 5.09% payable monthly, due November 1, 2008, secured by the Foothills Mall property      |   | $        | 54,750 |     | $      | 54,750 |   |
|                                                                                                                                                              |   |     |   |     |   |   |   |
| Note Payable — Massachusetts Mutual Life Insurance Company with interest at 10.5% principal and interest payable monthly. Paid-in-full in December 2004 |   |     | — |     |   | 6,450 |   |
|                                                                                                                                                              |   |     |   |     |   |   |   |
| Line of Credit — Marshall & Ilsley Bank $6,000 line of credit interest only at prime plus 1.5% payable monthly                                           |   |     | — |     |   | 78 |   |
|                                                                                                                                                              |   |          |        |     |        |  |   |
| Total                                                                                                                                                             |   | $        | 54,750 |     | $      | 61,278 |   |
|                                                                                                                                                              |   |          |        |     |        |  |   |

The terms of the mortgage loan do not permit the Company to prepay the loan during the specified lockout periods.

In accordance with the mortgage loan agreement in effect as of December 31, 2004 and 2003, all cash receipts of the Foothills Mall are deposited directly into restricted lockbox accounts. These receipts are then allocated and held in restricted cash accounts inaccordance with the cash management agreements, which are part of the loan agreements. The loan is closed to prepayment during a lockout period until the first to occur of (i) three years following commencement of the loan or (ii) two years following the sale of the loan toa 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. Therefore, we may not defease the loan until May 2006. Assuming no payments are made on theprincipal amount of this loan prior to November 1, 2008, the balance to be due at such date will be approximately $54.8 million.

In October of 2003, the Predecessor repaid its original mortgage and mezzanine loans payable in the amounts of $43,500 and $3,028, respectively, secured by the Foothills Mall with the proceeds of borrowings from Archon Financial L.P.

In April 2003, the Predecessor entered    into a revolving line of credit agreement with Marshall & Ilsley    Bank in the maximum amount of $2,500. This line of credit was secured by,    among other things, a pledge of the members’ interests in the Predecessor    and by a joint  and several guaranty of Larry Feldman, and matures in April    2005. In June 2004, the agreement was amended to increase the amount available    under the line of credit to $4,000. In November 2004, the agreement was further    amended to increase such amount to $6,000. Therewas no balance outstanding under this revolving line of credit at December 31,2004.

**7. Related Party Transactions**

As of December 31, 2003, $5,533    was included in due to affiliates in the accompanying consolidated balance    sheet for advances and related accrued interest due to Feldman Partners,    LLC (an entity controlled by Larry Feldman and owned by him and his family),    the majority owner of the Predecessor. The advances were made to fund the    Predecessor’s investment in the Foothills Mall and to reimburse Feldman    Partners, LLC for certain salary and overhead costs. These costs amounted    to $428, $342 and $144 for the years endedDecember 31, 2004 and 2003 and for the period April 1, 2002 to December 31,2002, respectively. The operating agreement of the Predecessor provided thatsuch advances made by its members shall bear interest at a rate of 15% per annum,were unsecured and were to be  repaid before any other distribution to any member.The interest expense on such advances amounted to $777, $711 and $356 for theperiod January 1, 2004 to December 15,2004 the year ended December 31, 2003, and for the period from April 1,2002 to

62

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**7. Related Party Transactions*— (Continued)***

December 31, 2002, respectively. In December 2004, $4,000 of these advances were repaid and the balance was included in the total consideration received in the Formation Transactions.

Included in the 2002 general and administrative expense was approximately $906 of general, administrative and abandoned project costs incurred by Feldman Partners, LLC or by Larry Feldman prior to April 2002, in connection with the formation of the Predecessor,which the members agreed would be reimbursed to him, and included in his contribution to capital.

Since September 2003, the Company provides certain property management, leasing and development services to its unconsolidated real estate partnership for an annual management fee of 3.5% of gross receipts, a construction management fee of 3% on the amount ofcapital improvements and customary leasing fees for a mall leasing agent, as defined by their agreement. In addition, the Company earns brokerage commission fees as a percentage of contractual rents on new leases and lease renewals. Total fees earned from such partnershipaggregated $714 and $65 for the years ended December 31, 2004 and 2003, respectively. These fees are recorded in management, leasing and development services on the accompanying consolidated statements of operations.

In August 2004, an officer of the    Company committed to make a $100 cash investment in the Predecessor. He contributed    his interest to the Company as part of the formation transactions in exchange    for 160,000 OP units with a value of $2,080 based on the initial public    offering price of $13 per share. The excess of the value of the OP units    over his cash contribution is reflected as compensation expense and classified    as general and administrative expense of the Predecessor in the consolidated    statement of operations for the period January 1,2004 to December 15, 2004. Prior to being employed by the Company, thisofficer provided professional services to the Company and Predecessor. Fees chargedfor periods December 16, 2004 to December 31, 2004, January 1,2004 to December 15, 2004, the year endedDecember 31, 2003 and the period April 1, 2002 to December 31,2002 were $87, $73, $134 and $24, respectively.

**8. Rentals Under Operating Leases**

The Company receives rental income from the leasing of retail shopping center space under operating leases. The Company recognizes income from its tenant operating leases on a straight-line basis over the respective lease terms and, accordingly, rental income in agiven period will vary from actual contractual rental amounts due as reduced by amortization of capitalized above-market lease values. Amounts included in tenant receivables based on recording lease income on the straight-line basis for the years ended December 31, 2004and 2003, and the period from April 1, 2002 to December 31, 2002 were $594, $289 and $290, respectively.

The minimum future base rentals under non-cancelable operating leases as of December 31, 2004 are as follows:

| **Year Ending December** **31,** |   |   |   |   |
|---------------------------------------|--------|--------|--------|--------|
|                                       |   |   |   |   |
| 2005                                  |   | $      | 13,464 |   |
| 2006                                  |   |   | 12,183 |   |
| 2007                                  |   |   | 11,248 |   |
| 2008                                  |   |   | 9,413  |   |
| 2009                                  |   |   | 7,820  |   |
| Thereafter                            |   |   | 26,419 |   |
|                                  |   |        |        |   |
| Total future minimum base rentals     |   | $      | 80,547 |   |
|                                  |   |        |        |   |

63

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**8. Rentals Under Operating Leases*— (Continued)***

Minimum future rentals do not include amounts which are payable by certaintenants based upon certain reimbursable shopping center operating expenses. Thetenant base includes national and regional chains and local retailers, andconsequently, the Company’s credit risk is concentrated in the retailindustry. One tenant (movie theatre), whose lease expires in 2017, accounted formore than 10% of the Company’s rental revenues in each period. Rentalincome collected from this tenant aggregated $1,831, $1,536 and $1,068 for the yearsended December 31, 2004 and 2003 and for the period April 1, 2002 toDecember 31, 2002, respectively.

**9. Due to Affiliates**

At December 31, 2004 due to affiliates primarily reflects obligations to make payments to certain owners of the Predecessor in connection with the Formation Transactions. As part of the Formation Transactions, the owners of the Predecessor are entitled to the following:

Messrs. Feldman, Bourg and Jensen    have the right to the receipt of funds  totaling $7,594 at December 16,    2004 from certain restricted cash accounts,    once these accounts are released to the Company. The owners were paid $3,700    of the restricted cash accounts priorto December 31, 2004 and are due $3,894 at December 31, 2004.

Messrs. Feldman, Bourg and Jensen have the right to receive additional OP units for ownership interests contributed as part of the Formation Transactions upon the achievement of a 15% internal rate of return from the Harrisburg joint venture on or prior toDecember 31, 2009. The right to receive such additional OP units is a financial instrument which is recorded as an obligation of the Company as of the Offering and adjusted to fair value each reporting period until the thresholds have been achieved and the OP Units havebeen issued. Based on the expected operating performance of the Harrisburg Mall, the initial fair value is estimated to be $5,047 and is included in due to affiliates at December 31, 2004. The fair value of this obligation will be assessed by the Company’s management on aquarterly basis.

In connection with the Formation    Transactions, the Company extinguished the advances owed to Feldman Partners,    LLC in the amount of $5.9 million. Of this amount, $1.9 million    was converted into equity securities prior to December 31, 2004 and    $4.0 million    was repaid  from proceeds of the Offering. The advances were used to invest    in the Harrisburg Mall and the Foothills Mall and pay overhead expenses.

In December 2004, the Predecessor    paid a distribution to Mr. Feldman in the amount of $451 and agreed    to make a distribution to its members in the amount of $4,000, which was    unpaid and in due to affiliates as of December 15, 2004 and December 31,    2004, and  such amount was paid in January 2005. The $451 distribution was    contributed back to the Company by Mr. Feldman in December 2004.

**10. Stockholders’/Owners’ Equity**

The Company’s authorized capital stock consists of 250,000,000 shares, $.01 par value, of which we have authorized the issuance of up to 200,000,000 shares of common stock, $.01 par value per share and up to 50,000,000 shares of preferred stock, $.01 par value pershare. As of December 31, 2004, 10,789,895 shares of common stock was issued and outstanding. The Company has not issued any shares of preferred stock as of December 31, 2004. Subsequent to December 31, 2004, the Company issued 1,000 fully-vested shares of itscommon stock to each of its three outside directors.

In January 2005, the Company sold    1,600,000 shares of our common stock at a gross price of $13.00 per share.    The net  proceeds from this offering were approximately $19,300.

64

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**11. Minority Interest**

As of December 31, 2004 minority interest relates to the interests in the Operating Partnership that are not owned by the Company, of approximately 12.9%. In conjunction with formation of the Company, certain persons and entities contributing ownership interests inthe Predecessor to the Operating Partnership received Units. Limited partners who acquired Units in the Formation Transactions have the right, commencing on or after December 16, 2005, to require the Operating Partnership to redeem part or all of their Units for cash, or anequivalent number of shares of the Company’s common stock at the time of the redemption. Alternatively, the Company may elect to acquire those Units in exchange for shares of our common stock on a one-for-one basis subject to adjustment in the event of stock splits,stock dividends, issuance of stock rights, specified extraordinary distributions and similar events.

Until December 15, 2004, the minority interest represented an unaffiliated investors’ interest in the Foothills Mall, which was acquired (see Note 2).

In connection with the Formation Transactions, the Operating Partnership issued 1,593,464 OP units to Messrs. Feldman (including members of his family), Bourg, Jensen and Erhart in exchange for approximately 89.4% of their combined interests in the Predecessor.

**12. Commitment and Contingencies**

In the normal course of business, the Company becomes involved in legal actions relating to the ownership and operations of its properties and the properties it manages for third parties. In management’s opinion, the resolutions of these legal actions are not expected tohave a material adverse effect on the Company’s consolidated financial position or results of operations.

Adjacent to the Stratford Square    Mall are six third-party owned anchor tenant spaces. The Company has entered    into an operating    agreement    with these six anchor tenants to share certain operating expenses based on    allocated amounts per square foot. The agreement terminates inMarch 2031.

Pursuant to signed leases as of December 31, 2004, the Company also has commitments to make tenant improvements and other capital expenditures in the amount of approximately $267.

In connection with the Formation Transactions, the Company entered into agreements with Messrs. Feldman, Bourg and Jensen that indemnify them with respect to certain tax liabilities intended to be deferred in the Formation Transactions, if those liabilities aretriggered either as a result of a taxable disposition of a property by the Company, or if the Company fails to offer the opportunity for the contributors to guarantee or otherwise bear the risk of loss, with respect to certain amounts of the Company’s debt for tax purposes (the“contributor-guaranteed debt”). 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 five following year ends thereafter.

The Company also has agreed to maintain approximately $10,000 of indebtedness, and to offer the contributors the option to guarantee $10,000 of the Operating Partnership’s indebtedness, in order to enable them to continue to defer certain tax liabilities. The obligationto maintain such indebtedness extends to 2013, but will be extended by an additional five years for any contributor that holds (together with his affiliates) at that time at least 25% of the initial ownership interest in the Operating Partnership issued to them in the FormationTransactions.

The Company has operating lease obligations for office and equipment related to our corporate offices and property locations. The future minimum lease payments under these noncancelable lease payments as of December 31, 2004 are as follows:

65

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**12. Commitment and Contingencies*— (Continued)***

| **Year Ending December** **31,** |   |   |   |   |
|---------------------------------------|--------|--------|--------|--------|
|                                       |   |   |   |   |
| 2005                                  |   | $      | 143    |   |
| 2006                                  |   |   | 145    |   |
| 2007                                  |   |   | 148    |   |
| 2008                                  |   |   | 118    |   |
| 2009                                  |   |   | 84     |   |
| Thereafter                            |   |   | — |   |
|                                  |   |        |        |   |
| Total minimum lease payments          |   | $      | 638    |   |
|                                  |   |        |        |   |

The Company entered into employment    agreements with its executive officers. These agreements provide for salary,    bonuses and other benefits, including potentially, severance benefits upon    termination of employment, as well as for grants of restricted common stock,  option awards, cash bonuses and tax gross-ups, among other matters.

**13. Investment in Unconsolidated Real Estate Partnerships**

The Company has a 24% limited partnership interest and a 1% general partnership interest in Feldman Harrisburg Limited Partnership, LP (the Partnership). The Partnership purchased a 900,000 square foot regional mall in Harrisburg, Pennsylvania on September 30, 2003.Summarized financial information as of December 31, 2004 and 2003 for this investment, which is accounted for by the equity method, is as follows:

|                                                                       |   | **2004** |   | **2003** |   |
|----------------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                                       |   |          |        |     |        |  |   |
| Investment in real estate                                                  |   | $        | 51,457 |     | $      | 17,717 |   |
| Receivables including deferred rents                                       |   |     | 756    |     |   | 501 |   |
| Other assets                                                               |   |     | 15,790 |     |   | 13,526 |   |
|                                                                       |   |          |        |     |        |  |   |
| Total assets                                                               |   | $        | 68,003 |     | $      | 31,744 |   |
|                                                                       |   |          |        |     |        |  |   |
| Loan payable                                                               |   | $        | 44,298 |     | $      | 13,388 |   |
| Other liabilities                                                          |   |     | 4,352  |     |   | 3,125 |   |
| Owners’ equity                                                        |   |     | 19,353 |     |   | 15,231 |   |
|                                                                       |   |          |        |     |        |  |   |
| Total liabilities and owners’ equity                                  |   | $        | 68,003 |     | $      | 31,744 |   |
|                                                                       |   |          |        |     |        |  |   |
| The Company’s and the Predecessor’s share of owners’ equity |   | $        | 5,150  |     | $      | 3,808 |   |
|                                                                       |   |          |        |     |        |  |   |
|                                                                       |   |     |   |     |   |   |   |

|                                                                      |   | **Year Ended****December** **31, 2004** |   | **Period****September** **30, 2003****to December** **31, 2003** |   |
|---------------------------------------------------------------------------|--------|----------------------------------------------|--------|----------------------------------------------------------------------------|--------|
|                                                                      |   |                                              |        |                                                                       |        |  |   |
| Revenue                                                                   |   | $                                            | 9,665  |                                                                       | $      | 2,569 |   |
| Operating and other expenses                                              |   |                                         | (4,407 | )                                                                          |   | (1,165 | ) |
| Interest expense (including the amortization of deferred financing costs) |   |                                         | (938   | )                                                                          |   | (153 | ) |
| Depreciation and amortization                                             |   |                                         | (1,649 | )                                                                          |   | (245 | ) |
| Other                                                                     |   |                                         | (925   | )                                                                          |   | (215 | ) |
|                                                                      |   |                                              |        |                                                                       |        |  |   |
| Net income                                                                |   | $                                            | 1,747  |                                                                       | $      | 791 |   |
|                                                                      |   |                                              |        |                                                                       |        |  |   |
| The Company’s and the Predecessor’s share of net income         |   | $                                            | 437    |                                                                       | $      | 197 |   |
|                                                                      |   |                                              |        |                                                                       |        |  |   |

66

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**13. Investment in Unconsolidated Real Estate Partnerships*— (Continued)***

The Harrisburg Mall was purchased    with (i) the proceeds of a mortgage loan, secured by the mall property and    an assignment of rents and leases, and (ii) cash contributions from the Predecessor    and its joint venture partner. The construction loan, as amended in  December    2003, permitted the Partnership to draw up to $43,060, and was subsequently    amended in October 2004 to increase the lender’s commitment by $3,815    to $46,875. The construction loan initially bore interest at LIBOR plus 3.25%    per annum, until a certain anchor  tenant occupied its space and began paying    rent, at which time the spread became 2.5%. The effective rates on the loan    at December 31, 2004 and 2003 were 5.67% and 4.37%, respectively. The    loan is interest-only and matures on December 31, 2005. Under certain     circumstances, the Partnership may extend the maturity of the loan for three,    one-year periods. The Partnership may prepay the loan at any time without    incurring any prepayment penalty. The loan is recourse to the Company to    the extent of $3,700, and to the joint venturepartner to the extent of $6,300. The balance outstanding under the loan was $44,298,    and $13,388 as of December 31, 2004 and 2003, and the Partnership intends    to continue to draw down the loan and use cash flow from property operations    to fund its capital expenditurecommitments, which are $787 at December 31, 2004. The loan has certain restrictionsthat prohibit cash distributions to the joint venture partners until the property’soperating cash flow funds a minimum of $5,800 of capital expenditures. In August2004, the Predecessor and  its joint venture partner made additional contributionsof $594 and $1,781, respectively, to the Partnership to fund certain capitalexpenditures.

On July 19, 2004, the Predecessor entered into an agreement with its joint venture partner providing the Company with the option to purchase all of the partnership interests of its joint venture partner, at any time within one year, for an amount of $27,600 in cash.

The joint venture agreement includes    a “buy-sell” provision allowing either joint venture partner to    acquire the interests of the other beginning on September 30, 2005.    Either partner to the joint venture may initiate a “buy-sell” proceeding,    which may enable it to acquire the interests of the other partner. However,    the partner receiving an offer to be bought out will have the right to buy    out such offering partner at the same price offered. The joint venture agreement    does not limit the Company’s ability to enter into real estate ventures    or co-investments with other third parties. However, the agreement restricts    the Company’s ability    to enter into transactions relating to the joint venture with the Company’s affiliates  without the prior approval of this joint venture partner.

In connection with the Formation Transactions, the Company acquired a minority interest position in the Harrisburg Mall from an unaffiliated third-party for $500.

**14. Fair Value of Financial Instruments**

As of December 31, 2004 and 2003, the fair values of the Company’s mortgage and other loans payable, are approximately the carrying values as the terms are similar to those currently available to the Company for debt with similar risk and the same remainingmaturities. The carrying amounts for cash and cash equivalents, restricted cash, rents and other receivables, due to affiliates, and accounts payable and other liabilities, approximate fair value because of the short-term nature of these instruments.

In May 2003, the FASB issued Statement    of Accounting Standards No. 150, “Accounting for Certain Financial    Instruments with Characteristics of both Liabilities and Equity” (“Statement    150”). Statement 150 affects the accounting for certain financial instruments,     including requiring companies having consolidated entities with specified    termination dates to treat minority owners’ interests in such entities    as liabilities in an amount based on the fair value of the entities. Although    Statement 150 was originally effective July 1, 2003, theFASB has indefinitely deferred certain provisions related to classification and    measurement requirements

67

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES****AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS*— (Continued)*****December** **31, 2004**

**(Dollar amounts in thousands, except per share data)**

**14. Fair Value of Financial Instruments*— (Continued)***

for mandatorily redeemable financial    instruments that become subject to Statement 150 solely as a result of consolidation    including minority interest of entities with specified termination dates.    As a result, Statement 150 has no impact on the Company’s consolidated    financial statements as of and forthe years ended December 31, 2004 and 2003.

**15. Quarterly Financial Information (Unaudited)**

The tables below reflect the Company’s selected quarterly information for the Company and the Predecessor for the years ended December 31, 2004 and 2003.

|                                                                      |   | **Three Months Ended**            |       |
|---------------------------------------------------------------------------|--------|-----------------------------------|------------|
|                                                                      |   | **December** **31,****2004** |       | **September** **30,****2004** |   | **June** **30,****2004** |   | **March** **31,****2004** |   |
|                                                                      |   |                                   |            |   |  |  |   |  |  |   |  |  |   |
| Total revenue                                                             |   | $                                 | 3,151      |   | $ | 3,065 |   | $ | 2,620 |   | $ | 3,425 |   |
| Income (loss) before minority interests                                   |   |                              | (3,459     | ) |   | (37 | ) |   | (305 | ) |   | 353 |   |
| Net income (loss)                                                         |   |                              | (3,440     | ) |   | (9 | ) |   | (217 | ) |   | 169 |   |
|                                                                      |   |                              |       |   |   |   |   |   |   |   |   |   |   |
| Loss per share available to commonshareholders—basic and diluted (1) |   | $                                 | (0.12      | ) |   |   |   |   |   |   |   |   |   |
|                                                                      |   |                              |       |   |   |   |   |   |   |   |   |   |   |
| Weighted-average shares outstanding—basic and diluted (1)            |   |                              | 10,789,895 |   |   |   |   |   |   |   |   |   |   |
|                                                                      |   |                              |       |   |   |   |   |   |   |   |   |   |   |
|                                                                      |   | **Three          Months Ended**   |       |
|                                                                      |   | **December** **31,****2003** |       | **September** **30,****2003** |   | **June** **30,****2003** |   | **March** **31,****2003** |   |
|                                                                      |   |                                   |            |   |  |  |   |  |  |   |  |  |   |
| Total revenue                                                             |   | $                                 | 2,768      |   | $ | 2,764 |   | $ | 3,033 |   | $ | 3,129 |   |
| Income (loss) before minority interests                                   |   |                              | (1,116     | ) |   | (163 | ) |   | 274 |   |   | 299 |   |
| Net income (loss)                                                         |   |                              | (802       | ) |   | (165 | ) |   | 105 |   |   | 126 |   |
|                                                                      |   |                              |       |   |   |   |   |   |   |   |   |   |   |

|  |   |
|--|--------|

| (1) | The Company’s loss per common share and the shares outstanding are for the period December 16, 2004 through December 31, 2004. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------|

**16. Subsequent Events**

On February 2, 2005, the Company announced the purchase of the Colonie Center Mall, located in Albany, New York, for $82,200. The 1.2 million square foot, two-level shopping mall has shop occupancy of 66% (excluding temporary and anchor tenants). Includingtemporary tenants, the shop occupancy as of December 31, 2004 was 85%.

In January 2005, the Company completed a $75,000, 3-year, first mortgage financing collateralized by the Stratford Square Mall. The mortgage bears interest at a rate of LIBOR plus 125 basis points and has two, one-year extensions.

In connection with the Stratford Square Mall financing, during January 2005, the Company entered into a $75,000 interest rate swap commencing February 2005 with an all-in-rate of 5.0% with a final maturity date in January 2008. The effect of the swap is to fix theinterest rate on the Stratford Square Mall mortgage.

On March 24, 2005, the Company announced that the Board of Directors declared a dividend of $0.2671 per common share. The dividend is payable April 15, 2005 to shareholders of record at the close of business on April 4, 2005.

68

----

Back to Contents

**INDEPENDENT AUDITORS’ REPORT**

The PartnersFeldman Lubert Adler Harrisburg LP:

We have audited the accompanying balance sheets of Feldman Lubert Adler Harrisburg LP (the Partnership) as of December 31,    2004 and 2003, and the related statements of operations, partners’ capital, and cash flows for the year ended December 31,2004 and the period from September 24, 2003 (date of inception) to December 31, 2003. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal controlover financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above, present fairly, in all material respects, the financial position of Feldman Lubert Adler Harrisburg LP as of December 31, 2004, and 2003 and the results of its operations and its cash flows for the year endedDecember 31, 2004 and the period from September 24, 2003 to December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

/s/ KPMG LLP

New York, New YorkMarch 10, 2005

69

----

Back to Contents

**FELDMAN LUBERT ADLER HARRISBURG LP**

**BALANCE SHEETS****(Amounts in thousands)**

|                                                     |   | **December** **31,** |   |
|----------------------------------------------------------|--------|---------------------------|--------|
|                                                     |   | **2004**                  |   | **2003** |   |
|                                                     |   |                           |        |   |  |  |   |
| **Assets:**                                              |   |                      |   |   |   |   |   |
| Investments in real estate, net                          |   | $                         | 51,457 |   | $ | 17,717 |   |
| Cash and cash equivalents                                |   |                      | 756    |   |   | 353 |   |
| Restricted cash                                          |   |                      | — |   |   | 51 |   |
| Rents, deferred rents and other receivables, net         |   |                      | 4,027  |   |   | 501 |   |
| Acquired lease rights, net                               |   |                      | 1,012  |   |   | 1,388 |   |
| Deferred charges, net                                    |   |                      | 10,438 |   |   | 11,314 |   |
| Due from affiliates                                      |   |                      | — |   |   | 173 |   |
| Other assets                                             |   |                      | 313    |   |   | 247 |   |
|                                                     |   |                           |        |   |  |  |   |
| **Total Assets**                                         |   | $                         | 68,003 |   | $ | 31,744 |   |
|                                                     |   |                           |        |   |  |  |   |
| **Liabilities and Partners’ Capital:**              |   |                      |   |   |   |   |   |
| Mortgage loan payable                                    |   | $                         | 44,298 |   | $ | 13,388 |   |
| Deferred revenue                                         |   |                      | 111    |   |   | 83 |   |
| Due to affiliates                                        |   |                      | 45     |   |   | — |   |
| Accounts payable, accrued expenses and other liabilities |   |                      | 2,751  |   |   | 416 |   |
| Acquired lease obligation, net                           |   |                      | 1,445  |   |   | 2,626 |   |
|                                                     |   |                           |        |   |  |  |   |
| Total liabilities                                        |   |                      | 48,650 |   |   | 16,513 |   |
| Partners’ capital                                   |   |                      | 19,353 |   |   | 15,231 |   |
|                                                     |   |                           |        |   |  |  |   |
| **Total Liabilities and Partners’ Capital**         |   | $                         | 68,003 |   | $ | 31,744 |   |
|                                                     |   |                           |        |   |  |  |   |

See accompanying notes to financial statements.

70

----

Back to Contents

**FELDMAN LUBERT ADLER HARRISBURG LP**

**STATEMENTS OF OPERATIONS****(Amounts in thousands)**

|                                                          |   | **Year Ended****December** **31, 2004** |   | **Period from****September** **24, 2003****(Date of Inception) to****December** **31, 2003** |   |
|---------------------------------------------------------------|--------|----------------------------------------------|--------|--------------------------------------------------------------------------------------------------------|--------|
|                                                          |   |                                              |        |                                                                                                   |        |  |   |
| **Revenue:**                                                  |   |                                         |   |                                                                                                   |   |   |   |
| Rental                                                        |   | $                                            | 5,918  |                                                                                                   | $      | 1,650 |   |
| Tenant reimbursements                                         |   |                                         | 3,593  |                                                                                                   |   | 910 |   |
| Interest and other income                                     |   |                                         | 154    |                                                                                                   |   | 9 |   |
|                                                          |   |                                              |        |                                                                                                   |        |  |   |
| Total Revenue                                                 |   |                                         | 9,665  |                                                                                                   |   | 2,569 |   |
|                                                          |   |                                              |        |                                                                                                   |        |  |   |
| **Expenses:**                                                 |   |                                         |   |                                                                                                   |   |   |   |
| Rental property operating and maintenance                     |   |                                         | 3,901  |                                                                                                   |   | 1,004 |   |
| Real estate taxes                                             |   |                                         | 506    |                                                                                                   |   | 161 |   |
| Interest (including amortization of deferred financing costs) |   |                                         | 938    |                                                                                                   |   | 153 |   |
| Depreciation and amortization                                 |   |                                         | 1,649  |                                                                                                   |   | 245 |   |
| General and administrative                                    |   |                                         | 624    |                                                                                                   |   | 150 |   |
| Other                                                         |   |                                         | 300    |                                                                                                   |   | 65 |   |
|                                                          |   |                                              |        |                                                                                                   |        |  |   |
| Total Expenses                                                |   |                                         | 7,918  |                                                                                                   |   | 1,778 |   |
|                                                          |   |                                              |        |                                                                                                   |        |  |   |
| **Net income**                                                |   | $                                            | 1,747  |                                                                                                   | $      | 791 |   |
|                                                          |   |                                              |        |                                                                                                   |        |  |   |

See accompanying notes to financial statements.

71

----

Back to Contents

**FELDMAN LUBERT ADLER HARRISBURG LP**

**STATEMENTS OF PARTNERS’ CAPITAL****(Amounts in thousands)**

|                                                   |   | **General Partner**                   |   | **Limited Partners**                                    |   |                                           |   |      |
|--------------------------------------------------------|--------|---------------------------------------|--------|---------------------------------------------------------|--------|------------------------------------------------|--------|-----------|
|                                                   |   | **Feldman****Harrisburg****GP, Inc.** |   | **Feldman****Harrisburg****Limited****Partnership, LP** |   | **Lubert-Adler****Investment****Partnerships** |   | **Total** |   |
|                                                   |   |                                       |        |                                                    |        |                                                |   |           |  |   |  |  |   |
| Balance at September 24, 2003 (date of inception) |   | $                                     | — |                                                    | $      | —                                         |   | $         | — |   | $ | — |   |
| Capital contributed                                    |   |                                  | 144    |                                                    |   | 3,498                                          |   |      | 10,798 |   |   | 14,440 |   |
| Net income                                             |   |                                  | 8      |                                                    |   | 192                                            |   |      | 591 |   |   | 791 |   |
|                                                   |   |                                       |        |                                                    |        |                                                |   |           |  |   |  |  |   |
| Balance at December 31, 2003                      |   |                                  | 152    |                                                    |   | 3,690                                          |   |      | 11,389 |   |   | 15,231 |   |
| Capital contributed                                    |   |                                  | 24     |                                                    |   | 570                                            |   |      | 1,781 |   |   | 2,375 |   |
| Net income                                             |   |                                  | 17     |                                                    |   | 420                                            |   |      | 1,310 |   |   | 1,747 |   |
|                                                   |   |                                       |        |                                                    |        |                                                |   |           |  |   |  |  |   |
| Balance at December 31, 2004                      |   | $                                     | 193    |                                                    | $      | 4,680                                          |   | $         | 14,480 |   | $ | 19,353 |   |
|                                                   |   |                                       |        |                                                    |        |                                                |   |           |  |   |  |  |   |

See accompanying notes to financial statements.

72

----

Back to Contents

**FELDMAN LUBERT ADLER HARRISBURG LP**

**STATEMENTS OF CASH FLOWS****(Amounts in thousands)**

|                                                                              |   | **Year Ended****December** **31, 2004** |    | **Period from****September** **24, 2003****(Date of Inception) to****December** **31, 2003** |   |
|-----------------------------------------------------------------------------------|--------|----------------------------------------------|---------|--------------------------------------------------------------------------------------------------------|--------|
|                                                                              |   |                                              |         |                                                                                                   |        |  |   |
| **Cash Flows From Operating Activities:**                                         |   |                                         |    |                                                                                                   |   |   |   |
| Net income                                                                        |   | $                                            | 1,747   |                                                                                                   | $      | 791 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                                         |    |                                                                                                   |   |   |   |
| Depreciation and amortization                                                     |   |                                         | 1,649   |                                                                                                   |   | 245 |   |
| Amortization of deferred financing costs                                          |   |                                         | 343     |                                                                                                   |   | 57 |   |
| Net change in revenue related to acquired lease rights/obligations                |   |                                         | (805    | )                                                                                                      |   | (289 | ) |
| Changes in operating assets and liabilities:                                      |   |                                         |    |                                                                                                   |   |   |   |
| Rents, deferred rents and other receivables                                       |   |                                         | (401    | )                                                                                                      |   | (501 | ) |
| Restricted cash relating to operating activities                                  |   |                                         | 51      |                                                                                                   |   | (51 | ) |
| Other assets                                                                      |   |                                         | (66     | )                                                                                                      |   | (247 | ) |
| Due from/to affiliates                                                            |   |                                         | 218     |                                                                                                   |   | (173 | ) |
| Accounts payable, accrued expenses and other liabilities                          |   |                                         | 141     |                                                                                                   |   | 416 |   |
| Deferred revenue                                                                  |   |                                         | 28      |                                                                                                   |   | 83 |   |
|                                                                              |   |                                              |         |                                                                                                   |        |  |   |
| Net cash provided by operating activities                                         |   |                                         | 2,905   |                                                                                                   |   | 331 |   |
|                                                                              |   |                                              |         |                                                                                                   |        |  |   |
| **Cash Flows From Investing Activities:**                                         |   |                                         |    |                                                                                                   |   |   |   |
| Real estate acquisition                                                           |   |                                         | —  |                                                                                                   |   | (18,058 | ) |
| Expenditures for real estate improvements                                         |   |                                         | (36,416 | )                                                                                                      |   | (2,595 | ) |
| Expenditures for leasing costs                                                    |   |                                         | (345    | )                                                                                                      |   | (400 | ) |
| Tenant lease buyout payment                                                       |   |                                         | —  |                                                                                                   |   | (6,000 | ) |
|                                                                              |   |                                              |         |                                                                                                   |        |  |   |
| Net cash used in investing activities                                             |   |                                         | (36,761 | )                                                                                                      |   | (27,053 | ) |
|                                                                              |   |                                              |         |                                                                                                   |        |  |   |
| **Cash Flows From Financing Activities:**                                         |   |                                         |    |                                                                                                   |   |   |   |
| Proceeds from mortgage loan payable                                               |   |                                         | 30,910  |                                                                                                   |   | 13,388 |   |
| Proceeds from government grants                                                   |   |                                         | 1,000   |                                                                                                   |   | — |   |
| Payment of deferred financing costs                                               |   |                                         | (26     | )                                                                                                      |   | (753 | ) |
| Capital contributions                                                             |   |                                         | 2,375   |                                                                                                   |   | 14,440 |   |
|                                                                              |   |                                              |         |                                                                                                   |        |  |   |
| Net cash provided by financing activities                                         |   |                                         | 34,259  |                                                                                                   |   | 27,075 |   |
|                                                                              |   |                                              |         |                                                                                                   |        |  |   |
| Net increase in cash and cash equivalents                                         |   |                                         | 403     |                                                                                                   |   | 353 |   |
| Cash and cash equivalents, beginning of period                                    |   |                                         | 353     |                                                                                                   |   | — |   |
|                                                                              |   |                                              |         |                                                                                                   |        |  |   |
| Cash and cash equivalents, end of period                                          |   | $                                            | 756     |                                                                                                   | $      | 353 |   |
|                                                                              |   |                                              |         |                                                                                                   |        |  |   |
| Supplemental Disclosures of Cash Flow Information:                                |   |                                         |    |                                                                                                   |   |   |   |
| Cash paid during the period for interest, net of amounts capitalized              |   | $                                            | 594     |                                                                                                   | $      | 96 |   |
|                                                                              |   |                                              |         |                                                                                                   |        |  |   |
|                                                                              |   |                                         |    |                                                                                                   |   |   |   |
| Non-cash financing and investing activities:                                      |   |                                         |    |                                                                                                   |   |   |   |
| Receivable          relating to government grants for real estate improvements    |   | $                                            | 3,125   |                                                                                                   | $      | — |   |
|                                                                              |   |                                              |         |                                                                                                   |        |  |   |
| Accrued          expenses relating to real estate improvements                    |   | $                                            | 2,194   |                                                                                                   | $      | — |   |
|                                                                              |   |                                              |         |                                                                                                   |        |  |   |

See accompanying notes to financial statements.

73

----

Back to Contents

**FELDMAN LUBERT ADLER HARRISBURG LP**

**NOTES TO FINANCIAL STATEMENTS****December 31, 2004****(Dollar amounts in thousands)**

**1. Organization and Description of Business**

Feldman Lubert Adler Harrisburg LP (the Partnership) was organized under the laws of the Commonwealth of Pennsylvania on September 24, 2003 (date of inception) pursuant to a partnership agreement (the Partnership Agreement). The purpose of the Partnership is toacquire, own, redevelop, operate and manage the 838,000 square foot retail mall located in the Township of Swatara, Dauphin County, Pennsylvania (the Property). The Partnership acquired the Property on September 30, 2003. Tenants include national and regional retailchains, as well as local retailers. As of December 31, 2004, partners of the Partnership and their respective percentage interests (the Percentage Interests) are as follows:

|                                                            |   | **Ownership****Percentage** |   |
|-----------------------------------------------------------------|--------|-----------------------------|--------|
|                                                            |   |                             |        |   |
| Feldman Harrisburg General Partner, Inc. – general partner |   |                        | 1.0    | % |
| Limited Partners:                                               |   |                        |   |   |
| Lubert-Adler investment partnerships                            |   |                        | 75.0   | % |
| Feldman Harrisburg Limited Partnership, LP (FHLP)               |   |                        | 24.0   | % |

In November 2003, FHLP exercised its option to purchase an additional 15% ownership interest from other partners, and thereby increased its ownership interest from 9% to 24%. In August 2004, the partners made additional contributions of $2,375 to the Partnership tofund certain capital expenditures.

The Partnership commenced operations on September 24, 2003 and shall continue to operate for a term of 50 years unless dissolved sooner pursuant to the Partnership Agreement or by law. The liability of each of the partners to the Partnership is limited to the amountof capital contributions that such partner shall have made to the Partnership. The Partnership shall distribute net cash from capital transactions within 45 days of the Partnership’s receipt of such net cash from capital transactions.

To the extent the Partnership has more than a de minimis amount of Distributable Cash from Operations, as defined in the Partnership Agreement, it shall distribute Distributable Cash From Operations no less frequently than quarterly as follows:

|   | • | First, to the partners in an amount equal to the unpaid Additional Capital Contributions Preferred Return, as defined in the Partnership Agreement, owing to the partners ($146 at December 31, 2004), distributed to each partner pro rata in proportion to the amount of suchpartner’s unpaid Additional Capital Contributions Preferred Return; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |                                                                                                                                                                                                                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Second, to the partners in an amount, pro rata in proportion to each partner’s Unreturned Additional Capital Contributions Account, as defined in the Partnership Agreement ($2,375 at December 31, 2004), until each partner’s Unreturned Additional Capital ContributionsAccount has been reduced to zero; |

|   |   |                                                                                                                                                                                                                                                                                           |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Third, to the partners in an amount equal to the unpaid Priority Return, as defined in the Partnership Agreement, owing to the partners ($2,337 at December 31, 2004), distributed to each partner pro rata in proportion to the amount of such partner’s unpaid Priority Return;and |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | • | Thereafter, (A) 20% to FHLP and (B) 80% to the partners pro rata in accordance with their respective Percentage Interests. Upon the receipt by the partners of distributions resulting to the realization of a 20% annualized internal rate of return on their investment from theinception, distributions thereafter shall be adjusted so that 30% shall be distributed to FHLP and 70% to the partners pro rata in accordance with their respective Percentage Interests. |

Cash from capital transactions shall    be distributed in a manner substantially similar to the above, except that    the partners shall received all of their Unreturned Capital Contributions    prior to the promote distributions described above.

74

----

Back to Contents

**FELDMAN LUBERT ADLER HARRISBURG LP**

**NOTES TO FINANCIAL STATEMENTS*— (Continued)*****December 31, 2004****(Dollar amounts in thousands)**

**1. Organization and Description of Business*— (Continued)***

|      ***Allocations of profits and losses*** |
|-----------------------------------------------------------------------|

In general, profits and losses are    allocated in a manner such that upon a hypothetical liquidation of the Partnership    at its then net book value, each Partner’s capital account shall equal    to the amount of cash such partner would be entitled to receive, pursuant    to thePartnership Agreement.

FHLP has an option, exercisable at any time prior to July 19, 2005, to purchase the 75% ownership interest in the Partnership from the Lubert-Adler investment partnerships for a lump sum of $27,600. Upon exercising the option, FHLP will also have a continuingcontractual obligation to make one additional payment of $1,355 to the Lubert-Adler investment partnerships in the event FHLP elects to develop a land parcel located directly in front of the mall property.

The Partnership Agreement includes a “buy-sell” provision allowing either joint venture partner to acquire the interests of the other beginning on September 30, 2005. Either partner to the Partnership may initiate a “buy-sell” proceeding which may enable it to acquirethe interests of the other partner. However, the partner receiving an offer to be bought out will have the right to buy out such offering partner at the same price offered.

**2. Summary of Significant Accounting Policies**

|      ***Basis of Accounting*** |
|---------------------------------------------------------|

The accompanying financial statements have been prepared on the accrual method of accounting in accordance with accounting principles generally accepted in the United States of America.

|      ***Use of Estimates*** |
|------------------------------------------------------|

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of certainassets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. They also affect reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include thecarrying amount of investments in real estate, valuation of doubtful accounts and the allocation of purchase price to acquired lease rights and obligations. Actual results could differ from those amounts.

|      ***Cash and Cash Equivalents*** |
|---------------------------------------------------------------|

For purposes of the statements of    cash flows, the Partnership considers short-term investments with maturities    of 90 days or less when purchased to be cash equivalents.

| ***Revenue Recognition and Tenant Receivables*** |
|--------------------------------------------------|

Base rental revenues from rental    retail property are recognized on a straight-line basis over the noncancelable    terms of the related leases, which are all accounted for as operating leases.    Allowances, if any, given to tenants for general use will be accounted for    as lease  incentives and amortized on the straight-line basis over the lease    terms and will reduce rental revenue. As of December 31, 2004 and 2003,    approximately $349 and $16, respectively, have been recognized as straight-line    rents receivable (representing the current net cumulative rents recognized    prior to the date when billed and collectible as  provided by the terms of    the lease). These amounts are included in deferred rents receivable in the    accompanying financial statements. “Percentage rent” or rental    revenue based upon apercentage of the sales recorded by the Partnership’s tenants is recognizedin the period such sales were earned by the respective tenants. These amountswere

75

----

Back to Contents

**FELDMAN LUBERT ADLER HARRISBURG LP**

**NOTES TO FINANCIAL STATEMENTS*— (Continued)*****December 31, 2004****(Dollar amounts in thousands)**

**2. Summary of Significant Accounting Policies*— (Continued)***

approximately $645 in 2004 and$129 in 2003 and are included in rental revenue in the accompanying financial statements.

Rental income is also recognized in accordance with Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, whereby the amortization of acquired favorable leases and acquired unfavorable leases is recognized as a reduction of or anaddition to base rental income, respectively, over the terms of the respective leases. The net amounts included as an addition to base rental income for the year ended December 31, 2004 and the period ended December 31, 2003 were approximately $805 and $289,respectively.

Reimbursements from tenants related to real estate taxes, insurance and other shopping center operating expenses are recognized as revenue, based on a predetermined formula, in the period the applicable costs are incurred. Lease termination fees are recognized whenthe related leases are cancelled, the tenant surrenders the space, and the Partnership has no continuing obligation to provide services to such former tenants. The Partnership recognized lease termination fees of $16 for the year ended December 31, 2004. No lease terminationfee was recognized for the period from September 30, 2003 to December 31, 2003.

The Partnership provides an allowance for doubtful accounts against the portion of tenant receivables which is estimated to be uncollectible. Management of the Partnership reviews its allowance for doubtful accounts monthly. Balances that are past due over 90 days andover a specified amount are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Partnership recorded $9 in bad debt for theyear ended December 31, 2004 and none for the period ended December 31, 2003.

|      *********Deferred Charges*** |
|------------------------------------------------------------|

Deferred leasing commissions, acquired in-place lease value, and other direct costs associated with the acquisition of tenants are capitalized and amortized on a straight-line basis over the terms of the related leases. Loan costs are capitalized and amortized to interestexpense over the term of the related loan using a method that approximates the effective-interest method.

|      ***Real Estate and Depreciation*** |
|------------------------------------------------------------------|

Real estate is stated at historical cost less accumulated depreciation. The building and improvements thereon are depreciated on the straight-line basis over estimated useful lives of 15 to 39 years. Equipment is being depreciated on the straight-line basis over estimateduseful lives of 5 to 23 years. Tenant improvements are being depreciated on the straight-line basis over the shorter of the lease term or their estimated useful life.

In connection with certain tenant    improvement and capital improvement projects, the Partnership was approved    for three grants by the Commonwealth of Pennsylvania to be reimbursed for    certain qualified expenditures. The grants were provided on a reimbursement    basis to the Partnership and were restricted to be used for the aforementioned    capital improvement projects only. The Partnership offsets the amounts received    against the related capital expenditures on the accompanying balance sheets.    The Partnership received$1,000 on the first two grants in 2004 and had submitted for reimbursement of  an additional $3,125 on the third grant, which was received in February 2005.

It is the Partnership’s policy to capitalize interest expense and real estate taxes directly related to properties under redevelopment and to depreciate these costs over the life of the related assets. The Partnership capitalized $514 of interest and $189 of real estate taxesduring the year ended December 31, 2004 and no such costs were capitalized in the period ended December 31, 2003.

76

----

Back to Contents

**FELDMAN LUBERT ADLER HARRISBURG LP**

**NOTES TO FINANCIAL STATEMENTS*— (Continued)*****December 31, 2004****(Dollar amounts in thousands)**

**2. Summary of Significant Accounting Policies*— (Continued)***

Improvements and replacements are capitalized when they extend the useful life or improve the efficiency of the asset. Repairs and maintenance are charged to expense as incurred.

|      ***Impairment of Long-Lived Assets*** |
|---------------------------------------------------------------------|

The Partnership assesses whether there has been impairment in the value of its long-lived assets whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by acomparison of the carrying amount to the future net cash flows, undiscounted and without interest, expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount ofthe assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. Management believes no impairment in the net carrying values of the investments in real estate has occurred.

|      ***Purchase Accounting for Acquisition of Interests in Real Estate Entities*** |
|--------------------------------------------------------------------------------------------------------------|

The Partnership allocates the purchase price of property to tangible and identified intangible assets acquired based on its fair value in accordance with the provisions of SFAS No. 141, Business Combinations. The fair value of the tangible assets of an acquired property(which includes land, building and improvements) is determined by valuing the property as if it were vacant, and the “as-if-vacant” value is then allocated to land, building and improvements based on management’s determination of the relative fair values of these assets.Management determines the “as-if-vacant” fair value of a property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periodsconsidering current market conditions and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on currentmarket demand. Management also estimates costs to execute similar leases including leasing commissions, legal and other related costs.

In allocating the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leasesacquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of thelease. The capitalized above-market lease values (included in acquired lease rights in the accompanying balance sheets) are amortized as a reduction of rental income over the remaining non-cancelable terms of the respective leases. The capitalized below-market lease values(presented as acquired lease obligation in the accompanying balance sheets) are amortized as an increase to rental income over the initial term and any fixed rate renewal periods in the respective leases. The Partnership’s leases do not currently include fixed-rate renewalperiods.

The aggregate value of other acquired intangible assets, consisting of in-place leases and tenant relationships, is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fairvalue of the property as if vacant, determined as set forth above. This aggregate value is allocated between in-place lease values and tenant relationships based on management’s evaluation of the specific characteristics of each tenant’s lease; however, the value of tenant relationships has not been separated from in-place lease value for theadditional interests in real estate entities acquired by the Partnership because such value and its consequence to amortization expense is immaterial for these particular acquisitions. The value ofin-place leases exclusive of the value of above-

77

----

Back to Contents

**FELDMAN LUBERT ADLER HARRISBURG LP**

**NOTES TO FINANCIAL STATEMENTS*— (Continued)*****December 31, 2004****(Dollar amounts in thousands)**

**2. Summary of Significant Accounting Policies*— (Continued)***

market and below-market in-place leases is amortized to expense over the remaining non-cancelable periods of the respective leases. If a leasewere to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be written off.

Purchase accounting was applied, on a pro-rata basis, to the assets and liabilities related to the Property. The results of operations of the Property since September 30, 2003 are included in the accompanying statements of operations of the Partnership. The purchase priceof the Property, excluding closing costs, was $17,500. The fair value of the real estate acquired was allocated to the acquired tangible assets, consisting of land and building and improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, other value of in-place leases and value of tenant relationship, if any, based in each case on their fair values.

The following are the amounts assigned to each major asset and liability caption at the acquisition date:

| Land                          |   | $      | 6,106  |   |
|-------------------------------|--------|--------|--------|--------|
| Building and improvements     |   |   | 9,092  |   |
| Acquired lease rights(1)      |   |   | 1,486  |   |
| Acquired lease obligations(1) |   |   | (3,013 | )      |
| In-place lease value(1)       |   |   | 4,387  |   |
|                          |   |   |   |   |

|  |   |
|--|--------|

| (1) | These intangibles are being amortized over the remaining lease terms. The weighted average remaining lease terms at December 31, 2004 are 5.2 years, 6.5 years and 16.5 years, respectively. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Amortization expense of in-place lease value is expected to be $354, $280, $240, $227 and $206 over each of the next five years through December 31, 2009.

|      ***Income Taxes*** |
|--------------------------------------------------|

No provision for federal or state income tax expense was made on the accompanying financial statements as the items of income and expenses are reported on the respective partners’ individual tax returns.

**3. Restricted Cash**

Restricted cash at December 31, 2003 includes escrowed funds and other restricted deposits required in conjunction with the Partnership’s loan agreement.

**4. Real Estate**

Real estate consists of the following at December 31:

|                             |   | **2004** |   | **2003** |   |
|----------------------------------|--------|----------|--------|----------|--------|
|                             |   |          |        |     |        |  |   |
| Land                             |   | $        | 6,156  |     | $      | 6,106 |   |
| Building and improvements        |   |     | 15,412 |     |   | 9,136 |   |
| Tenant improvements              |   |     | 30,710 |     |   | 2,551 |   |
|                             |   |          |        |     |        |  |   |
| Total investments in real estate |   |     | 52,278 |     |   | 17,793 |   |
| Accumulated depreciation         |   |     | (821   | )        |   | (76 | ) |
|                             |   |          |        |     |        |  |   |
| Net investments in real estate   |   | $        | 51,457 |     | $      | 17,717 |   |
|                             |   |          |        |     |        |  |   |

78

----

Back to Contents

**FELDMAN LUBERT ADLER HARRISBURG LP**

**NOTES TO FINANCIAL STATEMENTS*— (Continued)*****December 31, 2004****(Dollar amounts in thousands)**

**4. Real Estate*— (Continued)***

The following tables reconcile the historical cost of the Partnership’s investments in real estate and accumulated depreciation for the year ended December 31, 2004 and period from September 24, 2003 to December 31, 2003.

|                             |   | **2004** |   | **2003** |   |
|----------------------------------|--------|----------|--------|----------|--------|
|                             |   |          |        |     |        |  |   |
| **Real Estate:**                 |   |     |   |     |   |   |   |
| Balance, beginning of the period |   | $        | 17,793 |     | $      | — |   |
| Acquisition of mall property     |   |     | — |     |   | 15,198 |   |
| Additions during the period      |   |     | 34,485 |     |   | 2,595 |   |
|                             |   |          |        |     |        |  |   |
| Balance, end of period           |   | $        | 52,278 |     | $      | 17,793 |   |
|                             |   |          |        |     |        |  |   |
|                             |   |     |   |     |   |   |   |
| **Accumulated Depreciation:**    |   |     |   |     |   |   |   |
| Balance, beginning of the period |   | $        | 76     |     | $      | — |   |
| Depreciation during the period   |   |     | 745    |     |   | 76 |   |
|                             |   |          |        |     |        |  |   |
| Balance, end of period           |   | $        | 821    |     | $      | 76 |   |
|                             |   |          |        |     |        |  |   |

Real estate additions for 2004 are net of $4,125 in reimbursements from government grants.

**5. Rents, deferred rents, and other receivables**

At December 31, this account consists of the following:

|                         |   | **2004** |   | **2003** |   |
|------------------------------|--------|----------|--------|----------|--------|
|                         |   |          |        |     |        |  |   |
| Tenant receivables           |   | $        | 65     |     | $      | 30 |   |
| Government grants receivable |   |     | 3,125  |     |   | — |   |
| Accrued rents                |   |     | 349    |     |   | 16 |   |
| Other receivable             |   |     | 488    |     |   | 455 |   |
|                         |   |          |        |     |        |  |   |
| Total                        |   | $        | 4,027  |     | $      | 501 |   |
|                         |   |          |        |     |        |  |   |

The government grants receivable of $3,125 represents amounts submitted to theCommonwealth of Pennsylvania for reimbursements, which was received on February 17, 2005.

**6. Deferred Charges**

At December 31, deferred charges consist of the following:

|                           |   | **2004** |   | **2003** |   |
|--------------------------------|--------|----------|--------|----------|--------|
|                           |   |          |        |     |        |  |   |
| Deferred financing costs       |   | $        | 779    |     | $      | 753 |   |
| Deferred leasing costs         |   |     | 6,745  |     |   | 6,400 |   |
| Acquired in-place leases       |   |     | 4,387  |     |   | 4,387 |   |
|                           |   |          |        |     |        |  |   |
| Total                          |   |     | 11,911 |     |   | 11,540 |   |
| Less: Accumulated amortization |   |     | (1,473 | )        |   | (226 | ) |
|                           |   |          |        |     |        |  |   |
| Deferred charges, net          |   | $        | 10,438 |     | $      | 11,314 |   |
|                           |   |          |        |     |        |  |   |

Authorization expense of in-place    lease value is expected to be $354, $280, $240, $227 and $206 over each of    the next five years through December 31, 2009.

79

----

Back to Contents

**FELDMAN LUBERT ADLER HARRISBURG LP**

**NOTES TO FINANCIAL STATEMENTS*— (Continued)*****December 31, 2004****(Dollar amounts in thousands)**

**7. Mortgage Loan Payable**

The mortgage loan payable consists of the following:

|                                                                                                                                                                                                                                           |   | **2004** |   | **2003** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|--------|----------|--------|
|                                                                                                                                                                                                                                           |   |          |        |     |        |  |   |
| Mortgage Loan Payable — interest only at LIBOR plus 2.5% at December 31, 2004 and LIBOR plus 3.25% at December 31, 2003 payable monthly, due December 31, 2005, secured by the real estate and an assignment of the leases |   | $        | 44,298 |     | $      | 3,388 |   |
|                                                                                                                                                                                                                                           |   |          |        |     |        |  |   |

The mortgage loan is a line of credit whereby the Partnership can borrow up to $46,875. The outstanding principal balance of the loan shall not exceed 65% of the fair value of the Property. Advances on the loan can be made for certain tenant improvements, capitalimprovements, leasing commissions and other “soft” costs. The entire mortgage loan payable balance is due on December 31, 2005. Interest rate on the mortgage loan payable was equal to LIBOR plus 3.25% per annum until November 2004 when a certain anchor tenantoccupied its space and began paying rent at which time the spread became 2.5%. The effective rates on the loan on December 31, 2004 and 2003 were 5.67% and 4.37%, respectively.

Under certain circumstances, the Partnership may extend the maturity of the loan for three one-year periods. The Partnership may prepay the loan at any time without incurring any prepayment penalty.

Larry Feldman, an affiliate of the    general partner, and certain Lubert-Adler investment partnerships have made    guarantees up to $3,700 and $6,300, respectively, with respect to the Partnership’s    mortgage loan. In March 2005, the guarantees made by Larry Feldman were assumed    by Feldman Equities Operating Partnership, L.P., an affiliated entity.

The mortgage loan has certain restrictions that prohibit cash distributions to the joint venture partners until the Property’s operating cash flow funds a minimum of $5,800 of capital expenditures.

**8. Related Party Transactions**

As of December 31, 2004, due to affiliates of $45 represents expenses paid by an affiliated entity on behalf of the Partnership.

As of December 31, 2003, $173    was included in amounts due from affiliates representing non-interest bearing    advances from the Partnership to an affiliate of the general partner. Such  amounts were collected from the affiliated entity in 2004.

The Partnership has entered into a management agreement with an affiliate of the general partner to provide various management and leasing services to the Partnership. The agreement commenced on September 30, 2003 and shall terminate in accordance with its termsor the terms of any financing document. The Partnership pays an annual management fee equal to 3.5% of the annual gross receipt, as defined in the management agreement. In addition, the Partnership pays brokerage commission fees as a percentage of contractual rents onnew leases and lease renewals. Furthermore, the Partnership is required to pay construction management fees equal to 3% of the total hard costs of all tenant improvement construction and capital renovation projects. Total fees paid by the Partnership aggregated $714 for theyear ended December 31, 2004 and $65 for the period from September 24, 2003 to December 31, 2003.

**9. Rentals Under Operating Leases**

The Partnership receives rental income from the leasing of retail shopping center space under operating leases. The Partnership recognizes income from its tenant operating leases on a straight-line basis over the respective lease terms and, accordingly, rental income in agiven period will vary from actual contractual rental amount due.

80

----

Back to Contents

**FELDMAN LUBERT ADLER HARRISBURG LP**

**NOTES TO FINANCIAL STATEMENTS*— (Continued)*****December 31, 2004****(Dollar amounts in thousands)**

**9. Rentals Under Operating Leases*— (Continued)***

The minimum future base rentals under non-cancelable operating leases as of December 31, 2004 are as follows:

| **Year ending December** **31,** |   |   |   |   |
|---------------------------------------|--------|--------|--------|--------|
|                                       |   |   |   |   |
| 2005                                  |   | $      | 4,899  |   |
| 2006                                  |   |   | 4,106  |   |
| 2007                                  |   |   | 3,497  |   |
| 2008                                  |   |   | 3,243  |   |
| 2009                                  |   |   | 2,676  |   |
| Thereafter                            |   |   | 23,546 |   |
|                                  |   |        |        |   |
| Total minimum future base rentals     |   | $      | 41,967 |   |
|                                  |   |        |        |   |

Minimum future rentals do not include amounts which are payable by certain tenants based upon certain reimbursable shopping center operating expenses. The tenant base includes national and regional chains and local retailers, and, consequently, the Partnership’s creditrisk is concentrated in the retail industry. No tenants account for more than 10% of the Partnership’s rental revenue in 2004 and 2003.

**10. Commitment and Contingencies**

In the normal course of business, the Partnership becomes involved in legal actions relating to the ownership and operations of its properties. In management’s opinion, the resolutions of these legal actions are not expected to have a material adverse effect on thePartnership’s financial position or results of operations.

Pursuant to signed leases and active construction projects as of December 31, 2004, the Partnership has commitments to make tenant improvements and other capital expenditures in the amount of $787.

81

----

Back to Contents

| **ITEM 9.**     **Changes in and Disagreements With Accountants On Accounting and Financial Disclosure** |
|-----------------------------------------------------------------------------------------------------------------------------------|

NONE

| **ITEM 9A.**     **Controls and Procedures** |
|-----------------------------------------------------------------------|

We maintain disclosure controlsand procedures that are designed to ensure that information required in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such is accumulated andcommunicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of “disclosure controls and procedures” in Rule 13a-15(3). In designingand evaluating the disclosure controls and procedures, management recognized that any controls and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, we have investments in certainunconsolidated entities. As we do not control these entities, our disclosure controls and procedures with respect to such entities are necessarily substantially more limited than those we maintain with respect to our consolidated subsidiaries.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation ofour disclosure controls and procedures. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

| **Changes in Internal Control over Financial Reporting** |
|----------------------------------------------------------|

There have been no significant changes in our internal control over financial reporting during the quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reports.

| **ITEM 9B.**     **Other Information** |
|-----------------------------------------------------------------|

NONE

82

----

Back to Contents

**PART III**

| **ITEM 10.**     **Directors and Executive Officers of the Registrant** |
|--------------------------------------------------------------------------------------------------|

The information required by this item, with respect to directors, is hereby incorporated by reference to the material appearing in our company’s definitive proxy statement filed in connection with the annual shareholders’ meeting (the “2005 Proxy Statement”).Information required by this item, with respect to executive officers, is provided in the 2005 Proxy Statement.

The information required to be filed regarding compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, is hereby incorporated by reference to the material appearing in the 2005 Proxy Statement. The information required by this item, withrespect to audit committee financial experts, is hereby incorporated by reference to the material appearing in the 2005 Proxy Statement.

The information required by this item, with respect to the adoption of a code of ethics, is hereby incorporated by reference to the material appearing in the 2005 Proxy Statement. Our company’s Code of Business Ethics, which applies to all employees, officers anddirectors, including principal executive officer, principal financial officer and principal accounting officer, is posted on our website at http://www.feldmanmall.com.

The Board of Directors has adopted Corporate Governance Guidelines and charters for its Audit Committee and Compensation, Nominating and Governance Committee, each of which is posted on our website. Investors may also obtain a free copy of the Code ofBusiness Ethics, the Corporate Governance Guidelines or the committee charters by contacting the Investor Relations Department at 1010 Northern Boulevard, Suite 314, Great Neck, NY 11021 or by telephoning (516) 684-1239.

| **ITEM 11.**     **Executive and Director Compensation** |
|-----------------------------------------------------------------------------------|

The information set forth under the Captions, “Election of Directors — Director Compensation” and “Executive Compensation,” in the 2005 Proxy Statement, is incorporated herein by reference.

| **ITEM 12.**     **Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters** |
|----------------------------------------------------------------------------------------------------------------------------------------------|

The information set forth under the Captions, “Principal and Management Stockholders” and “Equity Compensation Plan Information” in the 2005 Proxy Statement, is incorporated herein by reference.

| **ITEM 13.**     **Certain Relationships and Related Transactions** |
|----------------------------------------------------------------------------------------------|

The information set forth under the caption, “Certain Relationships and Related Transactions,” in the 2005 Proxy Statement, is incorporated herein by reference.

| **ITEM 14.**     **Principal Accountant Fees and Services** |
|--------------------------------------------------------------------------------------|

The information regarding principal accounting fees and services, and the audit committee’s pre-approval policies and procedures required by this Item 14, is incorporated herein by reference to the 2005 Proxy Statement.

| **ITEM 15.**     **Exhibits and Financial Statements Schedules** |
|-------------------------------------------------------------------------------------------|

|   |   |                                                                                                        |
|--------|--------|-------------------------------------------------------------------------------------------------------------|
|   | (a)    | “Financial Statements and Schedules” — see Index to Financial Statements included in Item 8. |

|   |   |                     |
|--------|--------|--------------------------|
|   | (b)    | Reports on Form 8-K |

|   |   |   |
|--------|--------|--------|
|   |   | NONE.  |

|   |   |     |
|--------|--------|----------|
|   | (c)    | Exhibits |

83

----

Back to Contents

| **Exhibit****Number** |   | **Description**                                                                                                                                                                                                                                              |
|-----------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |   |                                                                                                                                                                                                                                                              |
|                  |   |                                                                                                                                                                                                                                                         |
|   3.1       |   | Amended and Restated Articles of Incorporation of Feldman Mall Properties, Inc. (1)                                                                                                                                                                          |
|   3.2       |   | Second Amended and Restated Bylaws of Feldman Mall Properties, Inc. (2)                                                                                                                                                                                      |
|   3.3       |   | Amended and Restated Agreement of Limited Partnership of Feldman Equities Operating Partnership, LP. (5)                                                                                                                                                     |
|   3.4       |   | First Amendment to Amended and Restated Agreement of Limited Partnership of Feldman Equities Operating Partnership, LP. (5)                                                                                                                                  |
|   3.5       |   | Declaration of Trust of Feldman Holdings Business Trust I. (1)                                                                                                                                                                                               |
|   3.6       |   | Declaration of Trust of Feldman Holdings Business Trust II. (1)                                                                                                                                                                                              |
|   3.7       |   | Amended and Restated Operating Agreement of Feldman Equities of Arizona, LLC, dated as of August 13, 2004 by and between FeldmanPartners, LLC, Feldman Equities Operating Partnership, LP, Lawrence Feldman, Jeffrey Erhart and Edward Feldman. (1)     |
| 10.1                  |   | Registration Rights Agreement, dated as of November 15, 2004, by and among Feldman Mall Properties, Inc. and the parties listed on Schedule Ithereto. (1)                                                                                               |
| 10.2                  |   | Employment Agreement, dated December 13, 2004, by and between Feldman Mall Properties, Inc. and Lawrence Feldman. (5)                                                                                                                                   |
| 10.3                  |   | Employment Agreement, dated December 13, 2004, by and between Feldman Mall Properties, Inc. and James Bourg. (1)                                                                                                                                        |
| 10.4                  |   | Employment Agreement, dated December 13, 2004, by and between Feldman Mall Properties, Inc. and Scott Jensen. (1)                                                                                                                                       |
| 10.5                  |   | Employment Agreement, dated August 13, 2004, by and between Feldman Mall Properties, Inc. and Jeffrey Erhart. (1)                                                                                                                                       |
| 10.6                  |   | Employment Agreement, dated November 6, 2004, by and between Feldman Mall Properties, Inc. and Thomas E. Wirth. (1)                                                                                                                                     |
| 10.7                  |   | Subscription Agreement, dated August 13, 2004, by and between Feldman Equities Operating Partnership, LP, Feldman Equities of Arizona, LLCand Feldman Mall Properties, Inc. (1)                                                                         |
| 10.8                  |   | Contribution Agreement, dated as of August 13, 2004, by and between James Bourg, Feldman Equities Operating Partnership, LP and FeldmanEquities of Arizona, LLC. (1)                                                                                    |
| 10.9                  |   | Irrevocable Contribution Agreement, dated as of August 13, 2004, by and between Lawrence Feldman, Feldman Equities Operating Partnership,LP, Feldman Holdings Business Trust I, Feldman Mall Properties, Inc. and Feldman Equities of Arizona, LLC. (1) |
| 10.10                 |   | Contribution Agreement, dated as of August 13, 2004, by and between Scott Jensen, Feldman Equities Operating Partnership, LP and FeldmanEquities of Arizona, LLC. (1)                                                                                   |
| 10.11                 |   | Contribution and Subscription Agreement, dated as of August 13, 2004, by and between Jeffrey Erhart and Feldman Equities of Arizona, LLC.(1)                                                                                                            |
| 10.12                 |   | Dubin Ownership Interest Assignment Agreement, dated as of August 13, 2004, by and between Dennis Dubin, Mildred Dubin and FeldmanEquities of Arizona, LLC. (1)                                                                                         |
| 10.13                 |   | Ash Ownership Interests Assignment        Agreement, dated as of August 13,        2004, by and among Ash Foothills Investors, LLC, Bruce Ash, Paul Ash        and Feldman Equities of Arizona, LLC. (5)                                                |
| 10.14                 |   | Merger Agreement, dated as of August 13, 2004, by and between Feldman Equities General Partner Inc., Feldman Equities General PartnerMerger Inc., Feldman Equities Partners, LLC and Feldman Mall Properties, Inc. (1)                                  |
| 10.15                 |   | FHGP Merger Agreement, dated as of August 13, 2004, by and between Feldman Harrisburg General Partner Inc., Feldman Harrisburg GeneralPartner Merger Inc., Feldman Partners, LLC and Feldman Mall Properties, Inc. (1)                                  |
| 10.16                 |   | Recapitalization Agreement,        dated as of August 13,        2004, by and between James Bourg, Scott Jensen, Feldman Equities Operating        Partnership, LP and Feldman Mall Properties, Inc. (1)                                                |
| 10.17                 |   | Indemnification Agreement, dated as of December 21, 2004, by and between Feldman Mall Properties, Inc. and James Bourg. (5)                                                                                                                             |

84

----

Back to Contents

| **Exhibit****Number** |   | **Description**                                                                                                                                                                                                                                                                              |
|-----------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |   |                                                                                                                                                                                                                                                                                              |
|                  |   |                                                                                                                                                                                                                                                                                         |
| 10.18                 |   | Indemnification Agreement, dated as of December 21, 2004, by and between Feldman Mall Properties, Inc. and Lawrence Kaplan. (5)                                                                                                                                                         |
| 10.19                 |   | Indemnification Agreement, dated as of December 21, 2004, by and between Feldman Mall Properties, Inc. and Thomas Wirth. (5)                                                                                                                                                            |
| 10.20                 |   | Indemnification Agreement, dated as of December 21, 2004, by and between Feldman Mall Properties, Inc. and Jeffrey Erhart. (5)                                                                                                                                                          |
| 10.21                 |   | Indemnification Agreement, dated as of December 21, 2004, by and between Feldman Mall Properties, Inc. and Scott Jensen. (5)                                                                                                                                                            |
| 10.22                 |   | Indemnification Agreement, dated as of December 21, 2004, by and between Feldman Mall Properties, Inc. and Lawrence Feldman. (5)                                                                                                                                                        |
| 10.23                 |   | Indemnification Agreement, dated as of December 21, 2004, by and between Feldman Mall Properties, Inc. and Bruce Moore. (5)                                                                                                                                                             |
| 10.24                 |   | Indemnification Agreement, dated as of December 21, 2004, by and between Feldman Mall Properties, Inc. and Paul McDowell. (5)                                                                                                                                                           |
| 10.25                 |   | Erhart Redemption Agreement, dated as of August 13, 2004, by and between Jeffrey Erhart, Feldman Equities of Arizona, LLC, Feldman EquitiesOperating Partnership, LP, Feldman Holdings Business Trust I and Feldman Mall Properties, Inc. (1)                                           |
| 10.26                 |   | Feldman Partners, LLC Redemption Agreement, dated as of August 13, 2004, by and between Feldman Partners, LLC, Feldman Equities ofArizona, LLC, Feldman Equities Operating Partnership, LP, Feldman Holdings Business Trust I and Feldman Mall Properties, Inc. (1)                     |
| 10.27                 |   | Purchase and Sale Agreement, dated as of September 29, 2004, by and between BRE/Colonie Center LLC. and Feldman Equities OperatingPartnership, LP. (1)                                                                                                                                  |
| 10.28                 |   | First Amendment to Purchase and Sale Agreement, dated December 13, 2004, by and between BRE/Colonie Center LLC and Feldman EquitiesOperating Partnership, LP. (3)                                                                                                                       |
| 10.29                 |   | Second Amendment to Purchase and Sale Agreement, dated January 28, 2005, by and between BRE/Colonie Center LLC, FMP Colonie CenterLLP and Feldman Equities Operating Partnership, LP. (3)                                                                                               |
| 10.30                 |   | Waiver and Contribution Agreement, dated as of November 15, 2004, by and between Feldman Partners, LLC, Feldman Mall Properties, Inc. andFeldman Equities Operating Partnership, LP. (1)                                                                                                |
| 10.31                 |   | Waiver and Contribution Agreement, dated as of November 15, 2004, by and between Lawrence Feldman, Feldman Mall Properties, Inc. andFeldman Equities Operating Partnership, LP. (1)                                                                                                     |
| 10.32                 |   | Waiver and Contribution Agreement, dated as of November 15, 2004, by and between James Bourg, Feldman Mall Properties, Inc. and FeldmanEquities Operating Partnership, LP. (1)                                                                                                          |
| 10.33                 |   | Waiver and Contribution Agreement, dated as of November 15, 2004, by and between Scott Jensen, Feldman Mall Properties, Inc. and FeldmanEquities Operating Partnership, LP. (1)                                                                                                         |
| 10.34                 |   | Waiver and Contribution Agreement, dated as of November 15, 2004, by and between Jeffrey Erhart, Feldman Mall Properties, Inc. and FeldmanEquities Operating Partnership, LP. (1)                                                                                                       |
| 10.35                 |   | Limited Partnership Agreement of Feldman Lubert Adler Harrisburg LP, dated as of September 30, 2003. (1)                                                                                                                                                                                |
| 10.36                 |   | First Amendment to Limited Partnership Agreement of Feldman Lubert Adler Harrisburg LP, dated as October 1, 2003. (1)                                                                                                                                                                   |
| 10.37                 |   | Second Amendment to Limited Partnership Agreement of Feldman Lubert Adler Harrisburg LP, dated November 13, 2003. (1)                                                                                                                                                                   |
| 10.38                 |   | Agreement Regarding Feldman Lubert Adler Harrisburg LP, dated July 19, 2004. (1)                                                                                                                                                                                                        |
| 10.39                 |   | First Amendment to Feldman Partners, LLC Redemption Agreement, dated as of November 15, 2004, by and between Feldman Partners, LLC,Feldman Equities of Arizona, LLC, Feldman Equities Operating Partnership, LP, Feldman Holdings Business Trust I and Feldman Mall Properties,Inc. (1) |

85

----

Back to Contents

| **Exhibit****Number** |   | **Description**                                                                                                                                                                                                |
|-----------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |   |                                                                                                                                                                                                                |
|                  |   |                                                                                                                                                                                                           |
| 10.40                 |   | First Amendment to Recapitalization Agreement, dated as of November 15, 2004, by and between James Bourg, Scott Jensen, Feldman EquitiesOperating Partnership, LP and Feldman Mall Properties, Inc. (1)   |
| 10.41                 |   | 2004 Incentive Bonus Plan. (1)                                                                                                                                                                                 |
| 10.42                 |   | 2004 Equity Incentive Plan. (1)                                                                                                                                                                                |
| 10.43                 |   | Purchase and Sale Agreement, dated as of December 29, 2004, by and between LaSalle Bank National Association and FMP Stratford LLC.(4)                                                                    |
| 10.44                 |   | Form of Restricted Stock Agreement (5)                                                                                                                                                                    |
| 14.0                  |   | Code of Business Conduct and Ethics (5)                                                                                                                                                                        |
| 21.1                  |   | List of Subsidiaries of Feldman Mall Properties, Inc. (5)                                                                                                                                                      |
| 31.1                  |   | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (5)                                                                                               |
| 31.2                  |   | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (5)                                                                                               |
| 32                    |   | Certifications of the Chief        Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350,        as adopted pursuant to Section 906of the Sarbanes-Oxley Act of 2002. (5) |
|                  |   |                                                                                                                                                                                                           |

|  |   |
|--|--------|

| (1) | Incorporated by reference from the Company’s Registration Statement on Form S-11 (File No. 333-118246 dated December 15, 2004). |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Incorporated by reference from the Company’s Form 8-K filed on March 17, 2005. |
|-----|-----------------------------------------------------------------------------------------------|

| (3) | Incorporated by reference from the Company’s Form 8-K filed on February 7, 2005. |
|-----|-------------------------------------------------------------------------------------------------|

| (4) | Incorporated by reference from the Company’s Form 8-K filed on January 5, 2005. |
|-----|------------------------------------------------------------------------------------------------|

| (5) | Filed herewith. |
|-----|-----------------|

86

----

Back to Contents

**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|                      | FELDMAN MALL PROPERTIES, INC.Registrant              |
|---------------------------|------------------------------------------------------|
|                      |                                                 |
| Date: April 15, 2005 | By: /s/ Larry Feldman                                |
|                      | Larry Feldman                                        |
|                      | Chairman and Chief Executive Officer                 |
|                      |                                                 |
| Date: April 15, 2005 | By: /s/ Thomas Wirth                                 |
|                      | Thomas Wirth                                         |
|                      | Executive Vice President and Chief Financial Officer |

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the dates indicated.

| **Name**                           |   | **Title**                                                                                        |   | **Date**            |
|------------------------------------|--------|--------------------------------------------------------------------------------------------------|--------|---------------------|
|                                    |   |                                                                                                  |   |                     |
|                               |   |                                                                                             |   |                |
| /s/ Larry FeldmanLarry Feldman     |   | Chairman and Chief Executive Officer (principal executive officer)                               |   | April 15, 2005 |
|                               |   |                                                                                             |   |                |
| /s/ Thomas WirthThomas Wirth       |   | Executive Vice President and Chief Financial Officer (principalfinancial and accounting officer) |   | April 15, 2005 |
|                               |   |                                                                                             |   |                |
| /s/ James BourgJames Bourg         |   | Executive Vice President and Chief Operating Officer and Director                                |   | April 15, 2005 |
|                               |   |                                                                                             |   |                |
| /s/ Bruce MooreBruce Moore         |   | Director                                                                                         |   | April 15, 2005 |
|                               |   |                                                                                             |   |                |
| /s/ Paul McDowellPaul McDowell     |   | Director                                                                                         |   | April 15, 2005 |
|                               |   |                                                                                             |   |                |
| /s/ Lawrence KaplanLawrence Kaplan |   | Director                                                                                         |   | April 15, 2005 |

87

----