|  |
|--|
|  |
|  |

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****Washington, D.C.  20549**

**FORM 10-Q**

**QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period ended March 31, 2005**

**or**

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

**For the transition period from             to            .**

**Commission File No. 001-32365**

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

| **Maryland**                                                  |   | **13-4284187**                      |   |
|---------------------------------------------------------------|--------|-------------------------------------|--------|
| (State or other jurisdictionof incorporation or organization) |   | (I.R.S. EmployerIdentification No.) |   |

**1010 Northern Boulevard – Suite 314, Great Neck, New York 11021**(Address of principal executive offices – zip code)

**(516) 684-1239**(Registrant’s telephone number, including area code)

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 whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  Yes    No     

The number of shares outstanding of the registrant’s common stock, $0.01 par value was 12,555,226 at May 5, 2005.

|  |
|--|
|  |
|  |

Back to Contents

**FELDMAN MALL PROPERTIES, INC.**

**INDEX**

| **PART I.**                                                                                                                  | **FINANCIAL INFORMATION**                                                                     | 3      |
|------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------|--------|
|                                                                                                                         |                                                                                          |   |
| **ITEM 1.**                                                                                                                  | **FINANCIAL STATEMENTS**                                                                      | 3      |
|                                                                                                                         |                                                                                          |   |
| Feldman Mall Properties, Inc. andSubsidiaries and Feldman Equities of Arizona,LLC and Subsidiaries (“Predecessor”) | 3                                                                                             |
|                                                                                                                         |                                                                                          |   |
| Condensed Consolidated BalanceSheets as of March 31, 2005 (unaudited) and December 31, 2004                                  | 3                                                                                             |
|                                                                                                                         |                                                                                          |   |
| Condensed Consolidated Statements of Operationsfor the three months ended March 31, 2005 and 2004 (unaudited)                | 4                                                                                             |
|                                                                                                                         |                                                                                          |   |
| Condensed Consolidated Statementof Stockholders’ Equity for the three months ended March 31, 2005 (unaudited)           | 5                                                                                             |
|                                                                                                                         |                                                                                          |   |
| Condensed Consolidated Statements ofCash Flows for the three months ended March 31, 2005 and 2004 (unaudited)                | 6                                                                                             |
|                                                                                                                         |                                                                                          |   |
| Notes to Condensed Consolidated FinancialStatements (unaudited)                                                              | 7-19                                                                                          |
|                                                                                                                         |                                                                                          |   |
| **ITEM 2.**                                                                                                                  | **MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS** | 20     |
|                                                                                                                         |                                                                                          |   |
| **ITEM 3.**                                                                                                                  | **QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK**                                 | 27     |
|                                                                                                                         |                                                                                          |   |
| **ITEM 4.**                                                                                                                  | **CONTROLS AND PROCEDURES**                                                                   | 28     |
|                                                                                                                         |                                                                                          |   |
| **PART II.**                                                                                                                 | **OTHER INFORMATION**                                                                         | 28     |
|                                                                                                                         |                                                                                          |   |
| **ITEM 1.**                                                                                                                  | **LEGAL PROCEEDINGS**                                                                         | 28     |
|                                                                                                                         |                                                                                          |   |
| **ITEM 2.**                                                                                                                  | **UNREGISTERED SALES        OF EQUITY SECURITIESAND USE OF PROCEEDS**                         | 28     |
|                                                                                                                         |                                                                                          |   |
| **ITEM 3.**                                                                                                                  | **DEFAULTS UPON SENIOR SECURITIES**                                                           | 28     |
|                                                                                                                         |                                                                                          |   |
| **ITEM 4.**                                                                                                                  | **SUBMISSION OF MATTERSTO A VOTE OF SECURITY HOLDERS**                                        | 28     |
|                                                                                                                         |                                                                                          |   |
| **ITEM 5.**                                                                                                                  | **OTHER INFORMATION**                                                                         | 28     |
|                                                                                                                         |                                                                                          |   |
| **ITEM 6.**                                                                                                                  | **EXHIBITS**                                                                                  | 28     |
|                                                                                                                         |                                                                                          |   |
| **Signatures**                                                                                                               | 30                                                                                            |

2

----

Back to Contents

**PART 1.  FINANCIAL INFORMATION****ITEM 1.  FINANCIAL STATEMENTS**

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS****(Amounts in Thousands, Except Share Data)**

|                                                     |   | **March 31, 2005** |                                  | **December 31, 2004** |   |
|----------------------------------------------------------|--------|--------------------|---------------------------------------|-----------------------|--------|
|                                                          |        |                    |                                       |                       |        |  |  |
|                                                     |   | (Unaudited)        |                                  |                  |   |   |
| **Assets:**                                              |   |               |                                  |                  |   |   |   |
| Investments in real estate, net                          |   | $                  | 224,683                               |                  | $      | 143,653 |   |
| Investment in unconsolidated real estate partnership     |   |               |      5,106   |                  |   |      5,150 |   |
| Cash and cash equivalents                                |   |               |      19,015  |                  |   |      15,607 |   |
| Restricted cash                                          |   |               |      5,788   |                  |   |      4,555 |   |
| Rents, deferred rents and other receivables, net         |   |               |      3,604   |                  |   |      1,921 |   |
| Acquired lease rights, net                               |   |               |      7,509   |                  |   |      4,167 |   |
| Acquired in-place lease values,    net                   |   |               | 12,364                                |                  |   | 11,504 |   |
| Deferred charges, net                                    |   |               |      1,665   |                  |   |      675 |   |
| Other assets                                             |   |               | 3,234                                 |                  |   | 1,551 |   |
|                                                          |        |                    |                                       |                       |        |  |  |
| **Total Assets**                                         |   | $                  | 282,968                               |                  | $      | 188,783 |   |
|                                                          |        |                    |                                       |                       |        |  |  |
|                                                     |   |               |                                  |                  |   |   |   |
| **Liabilities and Stockholders’ Equity:**           |   |               |                                  |                  |   |   |   |
| Mortgages and other loans payable                        |   | $                  | 129,750                               |                  | $      | 54,750 |   |
| Due to affiliates                                        |   |               |      8,996   |                  |   |      12,941 |   |
| Accounts payable, accrued expenses and other liabilities |   |               |      7,679   |                  |   |      7,862 |   |
| Acquired lease obligations, net                          |   |               |      7,467   |                  |   |      4,737 |   |
| Dividends and distributions payable                      |   |               | 3,778                                 |                  |   | — |   |
|                                                          |        |                    |                                       |                       |        |  |  |
| Total liabilities                                        |   |               |      157,670 |                  |   |      80,290 |   |
|                                                     |   |               |                                  |                  |   |   |   |
| Minority interest                                        |   |               |      13,585  |                  |   |      13,962 |   |
|                                                     |   |               |                                  |                  |   |   |   |
| **Stockholders’ Equity**                            |   |               |                                  |                  |   |   |   |
| Common stock                                             |   |               |      124     |                  |   |      108 |   |
| Additional paid-in capital                               |   |               | 114,952                               |                  |   |      95,672 |   |
| Distributions in excess of earnings                      |   |               |      (4,232  | )                     |   |      (1,249 | ) |
| Accumulated other comprehensive income                   |   |               | 869                                   |                  |   | — |   |
|                                                          |        |                    |                                       |                       |        |  |  |
| Total stockholders’ equity                          |   |               | 111,713                               |                  |   | 94,531 |   |
|                                                          |        |                    |                                       |                       |        |  |  |
| **Total Liabilities and Stockholders’ Equity**      |   | $                  | 282,968                               |                  | $      | 188,783 |   |
|                                                          |        |                    |                                       |                       |        |  |  |

See accompanying notes to condensed consolidated financial statements

3

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES AND FELDMAN EQUITIES OF ARIZONA, LLC AND SUBSIDIARIES (“PREDECESSOR”)****CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS****(Amounts in Thousands, Except Per Share Data)****(Unaudited)**

|                                                                                              |   |   | **March    31,**                     |   |
|---------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------|--------|
|                                                                                              |   |        |                                 |
|                                                                                              |   |   | **2005**                             |   |   | **2004** |   |
|                                                                                                   |        |        |                                      |        |  |  |  |
|                                                                                              |   |   | (The Company)                        |   |   | (The Predecessor) |   |
| **Revenue:**                                                                                      |   |   |                                 |   |   |   |   |
|      Rental                                                              |   | $      | 5,950                                |   | $ | 1,784 |   |
|      Tenant reimbursements                                               |   |   |      3,188  |   |   |      1,226 |   |
|      Management, leasing and development services                        |   |   |      151    |   |   |      233 |   |
|      Interest and other income                                           |   |   | 283                                  |   |   | 182 |   |
|                                                                                                   |        |        |                                      |        |  |  |  |
|           Total Revenue                         |   |   | 9,572                                |   |   | 3,425 |   |
|                                                                                                   |        |        |                                      |        |  |  |  |
| **Expenses:**                                                                                     |   |   |                                      |   |   |   |   |
|      Rental property operating and maintenance                           |   |   |      3,049  |   |   |      913 |   |
|      Real estate taxes                                                   |   |   |      1,165  |   |   |      340 |   |
|      Interest                                                            |   |   |      1,649  |   |   |      1,083 |   |
|      Depreciation and amortization                                       |   |   |      1,878  |   |   |      399 |   |
|      General and administrative                                          |   |   |      1,369  |   |   | 419 |   |
|                                                                                                   |        |        |                                      |        |  |  |  |
|           Total Expenses                        |   |   |      9,110  |   |   | 3,154 |   |
|      Equity in (loss) earnings of unconsolidated real estate partnership |   |   | (44                                  | )      |   | 82 |   |
|                                                                                                   |        |        |                                      |        |  |  |  |
| Income before minority interest                                                                   |   |   |      418    |   |   |      353 |   |
| Minority interest                                                                                 |   |   | 48                                   |   |   | 184 |   |
|                                                                                                   |        |        |                                      |        |  |  |  |
| **Net Income**                                                                                    |   | $      | 370                                  |   | $ | 169 |   |
|                                                                                                   |        |        |                                      |        |  |  |  |
|                                                                                              |   |   |                                 |   |   |   |   |
| Basic and diluted income per share                                                                |   | $      | 0.03                                 |   |   |   |   |
|                                                                                                   |        |        |                                      |        |  |  |  |
|                                                                                              |   |   |                                 |   |   |   |   |
| Basic weighted average common shares outstanding                                                  |   |   |      12,216 |   |   |   |   |
| Weighted average common stock equivalents outstanding                                             |   |   | 1,593                                |   |   |   |   |
|                                                                                                   |        |        |                                      |        |  |  |  |
| Diluted weighted average common shares outstanding                                                |   |   | 13,809                               |   |   |   |   |
|                                                                                                   |        |        |                                      |        |  |  |  |

See accompanying notes to condensed consolidated financial statements

4

----

Back to Contents

**FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY****AND COMPREHENSIVE INCOME**

**(Amounts in Thousands, Except Share Data)****(Unaudited)**

|                                        |   |   | **Number ofCommon Shares** |   |   | **CommonStock** |   |   | **AdditionalPaid-In Capital** |   |   | **Distributionsin  Excess ofEarnings** |   |   | **AccumulatedOtherComprehensiveIncome** |   |   | **Total** |   |   | **ComprehensiveIncome** |   |
|---------------------------------------------|--------|--------|----------------------------|--------|--------|-----------------|--------|--------|-------------------------------|--------|--------|----------------------------------------|--------|--------|-----------------------------------------|--------|--------|-----------|--------|--------|-------------------------|--------|
|                                             |        |        |                            |        |        |                 |        |        |                               |        |        |                                        |        |        |                                         |        |        |           |        |        |                         |        |
|                                        |   |   |                       |   |   |            |   |   |                          |   |   |                                   |   |   |                                    |   |   |      |   |   |                    |   |
| Balance at December 31, 2004                |   |   | 10,789,895                 |   | $      | 108             |   | $      | 95,672                        |   | $      | (1,249                                 | )      | $      | —                                  |   | $      | 94,531    |   | $      | —                  |   |
| Net proceeds from offering of common stock  |   |   | 1,600,000                  |   |   | 16              |   |   | 20,784                        |   |   | —                                 |   |   | —                                  |   |   | 20,800    |   |   | —                  |   |
| Common stock issued toindependent directors |   |   | 3,000                      |   |   | —          |   |   | 39                            |   |   | —                                 |   |   | —                                  |   |   | 39        |   |   | —                  |   |
| Costs associated with offering              |   |   | —                     |   |   | —          |   |   | (1,543                        | )      |   | —                                 |   |   | —                                  |   |   | (1,543    | )      |   | —                  |   |
| Net income                                  |   |   | —                     |   |   | —          |   |   | **—**                    |   |   | 370                                    |   |   | —                                  |   |   | 370       |   |   | 370                     |   |
| Net unrealized gain onderivative instrument |   |   | —                     |   |   | —          |   |   | **—**                    |   |   | —                                 |   |   | 869                                     |   |   | 869       |   |   | 869                     |   |
| Dividends                                   |   |   | —                     |   |   | —          |   |   | —                        |   |   | (3,353                                 | )      |   | —                                  |   |   | (3,353    | )      |   | —                  |   |
|                                             |        |        |                            |        |        |                 |        |        |                               |        |        |                                        |        |        |                                         |        |        |           |        |        |                         |        |
| Balance at March 31, 2005                   |   |   | 12,392,895                 |   | $      | 124             |   | $      | 114,952                       |   | $      | (4,232                                 | )      | $      | 869                                     |   | $      | 111,713   |   | $      | 1,239                   |   |
|                                             |        |        |                            |        |        |                 |        |        |                               |        |        |                                        |        |        |                                         |        |        |           |        |        |                         |        |

See accompanying notes to condensed consolidated financial statements

5

----

Back to Contents

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

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Amounts in Thousands)****(Unaudited)**

|                                                                                                                                 |   | **Three    Months Ended March 31,** |                                 |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|--------------------------------------|
|                                                                                                                                 |   |                                     |                                 |
|                                                                                                                                 |   | **2005**                            |                                 | **2004** |   |
|                                                                                                                                      |        |                                     |                                      |  |  |  |  |
|                                                                                                                                 |   | (The Company)                       |                                 | (The Predecessor) |   |
| **Cash Flows From Operating Activities:**                                                                                            |   |                                |                                 |   |   |   |   |
| Net Income                                                                                                                           |   | $                                   | 370                                  |   | $ | 169 |   |
|      Adjustments to reconcile net income to net cash provided by (used in) operating activities:            |   |                                |                                 |   |   |   |   |
|           Depreciation and amortization                                            |   |                                |      1,878  |   |   |      399 |   |
|           Amortization of deferred financing costs                                 |   |                                |      94     |   |   |      39 |   |
|           Provision for doubtful accounts                                          |   |                                |      83     |   |   |      57 |   |
|           Non cash compensation expense                                            |   |                                |      112    |   |   |      — |   |
|           Non cash interest expense                                                |   |                                | 75                                   |   |   |      — |   |
|           Minority interest                                                        |   |                                |      48     |   |   |      184 |   |
|           Equity in loss (earnings) of unconsolidated real estate partnership      |   |                                |      44     |   |   |      (82 | ) |
|           Net change in revenue related to acquired lease rights/obligations       |   |                                |      (181   | ) |   |      14 |   |
|      Changes in operating assets and liabilities:                                                           |   |                                |                                 |   |   |   |   |
|           Rents, deferred rents and other receivables                              |   |                                |      (1,766 | ) |   |      (535 | ) |
|           Restricted cash relating to operating activities                         |   |                                |      (1,030 | ) |   |      (361 | ) |
|           Other deferred costs                                                     |   |                                |      (284   | ) |   |      (53 | ) |
|           Other assets                                                             |   |                                |      542    |   |   |      (177 | ) |
|           Accounts payable, accrued expenses and other liabilities                 |   |                                | 1,530                                |   |   | 240 |   |
|                                                                                                                                      |        |                                     |                                      |  |  |  |  |
|      Net cash provided by (used in) operating activities                                                    |   |                                | 1,515                                |   |   | (106 | ) |
|                                                                                                                                      |        |                                     |                                      |  |  |  |  |
| **Cash Flows From Investing Activities:**                                                                                            |   |                                |                                 |   |   |   |   |
|           Investment in unconsolidated real estate partnership                     |   |                                |      — |   |   |      209 |   |
|           Expenditures for real estate improvements                                |   |                                |      (596   | ) |   |      (1,106 | ) |
|           Real estate acquisitions, net of acquired assets and assumed liabilities |   |                                | (84,380                              | ) |   |      — |   |
|           Change in restricted cash relating to investing activities               |   |                                | (203                                 | ) |   | (150 | ) |
|                                                                                                                                      |        |                                     |                                      |  |  |  |  |
|      Net cash used in investing activities                                                                  |   |                                | (85,179                              | ) |   | (1,047 | ) |
|                                                                                                                                      |        |                                     |                                      |  |  |  |  |
| **Cash Flows From Financing Activities:**                                                                                            |   |                                |                                 |   |   |   |   |
|           Proceeds from equity offering                                            |   |                                | 20,800                               |   |   |      — |   |
|           Payment of offering costs                                                |   |                                | (3,754                               | ) |   |      — |   |
|           Proceeds from mortgage loans payable                                     |   |                                |      75,000 |   |   | — |   |
|           Repayment of loans payable                                               |   |                                | —                               |   |   |      (249 | ) |
|           Increase in revolving line of credit borrowings                          |   |                                | —                               |   |   |      (48 | ) |
|           Increase in due to affiliates                                            |   |                                | —                               |   |   | 167 |   |
|           Distributions to members of the predecessor                              |   |                                | (4,020                               | ) |   |      — |   |
|           Change in restricted cash relating to financing activities               |   |                                | —                               |   |   |      (4 | ) |
|           Payment of deferred financing costs                                      |   |                                | (954                                 | ) |   | — |   |
|                                                                                                                                      |        |                                     |                                      |  |  |  |  |
|        Net cash provided by (used in)  financing activities                                                 |   |                                | 87,072                               |   |   | (134 | ) |
|                                                                                                                                      |        |                                     |                                      |  |  |  |  |
|        Net change in cash and cash equivalents                                                              |   |                                |      3,408  |   |   |      (1,287 | ) |
|        Cash and cash equivalents, beginning of period                                                       |   |                                | 15,607                               |   |   | 3,977 |   |
|                                                                                                                                      |        |                                     |                                      |  |  |  |  |
|        Cash and cash equivalents, end of period                                                             |   | $                                   | 19,015                               |   | $ | 2,690 |   |
|                                                                                                                                      |        |                                     |                                      |  |  |  |  |
|                                                                                                                                 |   |                                |                                 |   |   |   |   |
| Supplemental disclosures of cash flow information:Cash paid during the period for interest, net of amounts capitalized               |   | $                                   | 1,403                                |   | $ | 898 |   |
|                                                                                                                                      |        |                                     |                                      |  |  |  |  |
|                                                                                                                                 |   |                                |                                 |   |   |   |   |
| Supplemental disclosures of non cash investing and financing activities:                                                             |   |                                |                                 |   |   |   |   |
|      Assets acquired in connection with real estate acquisition                                             |   | $                                   | 1,147                                |   |   | — |   |
|                                                                                                                                      |        |                                     |                                      |  |  |  |  |
|      Liabilities assumed in connection with real estate acquisition                                         |   | $                                   | 412                                  |   |   | — |   |
|                                                                                                                                      |        |                                     |                                      |  |  |  |  |
|      Unrealized    gain on derivative instrument                                                            |   | $                                   | 928                                  |   |   | — |   |
|                                                                                                                                      |        |                                     |                                      |  |  |  |  |
|      Dividends and distributions payable                                                                    |   | $                                   | 3,778                                |   |   | — |   |
|                                                                                                                                 |   |                                     |                                      |  |  |  |   |

See accompanying notes to condensed consolidated financial statements

6

----

Back to Contents

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITEDMarch 31, 2005**

**(Dollar Amounts in Thousands, Except Share and 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.  Feldman Mall Properties, Inc. (the “Company”), its affiliates and subsidiaries are principally engaged in the acquisition and management of retail malls.  Tenants include national and regional retail chains as well as local retailers.

     Feldman    Mall Properties, Inc. 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 Holdings Business 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 completion of the Offering,    the Company, the Operating Partnership and the Service 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 the Company (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 Operating Officer, 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 Service Company, together with    the partners and members of the affiliated partnerships and limited liability    companies affiliated with the Predecessor 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 operations of    the Predecessor, (ii) enable the Company to raise the necessary capital to    acquire interests in certain of the properties, repay mortgage debt relatingthereto and pay other indebtedness, (iii) fund costs, capital expenditures and    working capital, (iv) provide a vehicle for future acquisitions, (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 property management, 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, owned 12.9% of the Operating Partnership, as limited partners.  The exchange of contributed 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 cost basis.

     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 Operating Partnership 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 formation transactions, the Operating Partnership assumed debt and other obligations.  This exchange of interests has been accounted for as a reorganization of entities under common control.

7

----

Back to Contents

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (CONTINUED)March 31, 2005**

**(Dollar Amounts in Thousands, Except Share and Per Share Data)**

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

     As of March 31, 2005, the Company was invested in four real estate properties: The Foothills Mall in Tucson, Arizona, acquired in April 2002, the Stratford Square Mall in Bloomingdale, Illinois, acquired in December 2004, the Colonie Center Mall in Albany, New York, acquired in February 2005 and a minority interest in a partnership owning the Harrisburg Mall in Harrisburg, Pennsylvania, acquired in September 2003.

**2.  Summary of Significant Accounting Policies**

***     Basis of Quarterly Presentation***

     The    accompanying unaudited condensed consolidated financial statements have been    prepared in accordance with the accounting principles generally accepted    in the United States for interim financial information and with the instructions    to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these interim    financial statements do not include all of the information and notes required    by accounting principles generally accepted in the United States for complete    financial statements. In management’s opinion, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included.  The 2005 operating results for the period presented are not necessarilyindicative of the results that may be expected for the year ending December 31, 2005.  These financial statements should be read in conjunction with the financial statements and accompanying notes included in our annual report on Form 10-K for the year ended December 31, 2004.

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

     The    accompanying condensed consolidated financial statements of the Company and    the Predecessor include the accounts of their wholly-owned subsidiaries and    all    partnerships    in which they have a controlling interest. All intercompany balances and    transactions have been eliminated in consolidation.  

     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.

     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”).  In accordance 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 or not it exercises control include important rights of partners in significant business decisions, including dispositions and acquisitions of assets, financing andoperating and capital budgets, board and management representation and authority and other contractual rights of our partners.  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 all significant 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 for equity in earnings or losses and cash contributions and distributions.

8

----

Back to Contents

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (CONTINUED)March 31, 2005**

**(Dollar Amounts in Thousands, Except Share and Per Share Data)**

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

     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 the investment 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 condensed    consolidated financial statements. On an ongoing basis, the Company evaluates    estimates    related to critical accounting policies, 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 the Company and on various other assumptionsthat management believes 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 net income.

     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 on our 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 its investments in real estate, including real estate held by any uncombined real estate entities 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 negative adjustment 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 the acquisitions 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 condensed 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 liabilities and disclosure of contingent assets and liabilities at the date of the condensed 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 carrying amount of investments in real estate, allowance for doubtful accounts and the allocation of the purchase price of real estate to in-place leases and acquiredlease rights and obligations.  Actual results could differ from those amounts.

***Cash and Cash Equivalents***

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

9

----

Back to Contents

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (CONTINUED)March 31, 2005**

**(Dollar Amounts in Thousands, Except Share and Per Share Data)**

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

***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 properties 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 March 31, 2005 and December 31, 2004, approximately $1,240 and $1,110, 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 accompanying condensed consolidated financial statements.  “Percentage rent” or rental revenue, which is based upon a percentage of the sales recorded by theCompany’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 in interest 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.  The Predecessor and the Company recorded $125 of lease termination fees during the three months ended March 31, 2004 and none for the corresponding 2005 period.

     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 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    of new 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” in the condensed consolidated statements    of operations.

     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 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. Tenant receivables in the accompanying condensed consolidated    balance sheets are shown net of an allowance for doubtful accounts of $498and $414 as of March 31, 2005 and December 31, 2004, respectively.

***     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

***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.

10

----

Back to Contents

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (CONTINUED)March 31, 2005**

**(Dollar Amounts in Thousands, Except Share and Per Share Data)**

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

***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 the shorter of the lease term or their 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 $11 and $39 was capitalized for the three months ended March 31, 2005 and 2004, respectively.

     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 a comparison 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 of the 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 noimpairment in the net carrying values of the investments in real estate and investment in unconsolidated 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 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 independentappraisers.  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.  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 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 leases acquired) 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 the lease.  The capitalized above-market lease values (included in acquired lease rights in the accompanying consolidated balance sheets) are amortized as a reduction ofrental 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 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 include fixed-rate renewal periods.

11

----

Back to Contents

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (CONTINUED)March 31, 2005**

**(Dollar Amounts in Thousands, Except Share and 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 fair value 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 the additional interests in real estate entities acquired by the Company because such valueand its consequence to amortization expense is immaterial for these particular acquisitions.  Should future acquisitions of properties 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.

     The Company acquired Stratford Square Mall, located in Bloomingdale, Illinois, on December 30, 2004 and acquired Colonie Center Mall, located in Albany, New York, on February 1, 2005.  The fair value of the real estate acquired was allocated to the acquired tangible assets, consisting of land, building and improvements, and identified intangible assets and liabilities, consisting of above-market and below-market leases, in-place leases 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:

|                       |   | **Colonie** |                                 | **Stratford** |   |
|----------------------------|--------|-------------|--------------------------------------|---------------|--------|
|                            |        |             |                                      |               |        |  |  |
| Land                       |   | $           | 9,045                                |          | $      | 11,528 |   |
| Building and improvements  |   |        |      71,507 |          |   | 74,547 |   |
| Acquired lease rights      |   |        |      3,687  |          |   | 3,380 |   |
| Acquired lease obligations |   |        |      (3,256 | )             |   | (3,352 | ) |
| In-place lease value       |   |        | 2,662                                |          |   | 7,262 |   |
|                            |        |             |                                      |               |        |  |  |
| Total Purchase Price       |   | $           | 83,645                               |          | $      | 93,365 |   |
|                            |        |             |                                      |               |        |  |  |

     ***Pro Forma Financial Information***

     The    following table summarizes, on an unaudited pro forma basis, the results    of operations for the three months ended March 31, 2005 and 2004 as though    the Formation Transactions and the acquisitions of Stratford Square Malland Colonie Center Mall had occurred on January 1, 2004:

|                                                                     |   | **2005** |       | **2004** |   |
|--------------------------------------------------------------------------|--------|----------|------------|----------|--------|
|                                                                          |        |          |            |          |        |  |  |
| Pro forma revenues                                                       |   | $        | 10,589     |     | $      | 11,091 |   |
| Pro forma net income                                                     |   | $        | 538        |     | $      | 1,355 |   |
| Pro forma earnings per common share-basic                                |   | $        | 0.04       |     | $      | 0.11 |   |
| Pro forma earnings per common share and common share equivalents-diluted |   | $        | 0.04       |     | $      | 0.11 |   |
| Pro forma common shares-basic                                            |   |     | 12,392,895 |     |   | 12,392,895 |   |
| Pro forma common share and common share equivalents-diluted              |   |     | 13,986,359 |     |   | 13,986,359 |   |

***     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    and franchise taxes. Under certain circumstances, Federal income and excise    taxes may be due on the Company’s undistributed taxable income.

12

----

Back to Contents

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (CONTINUED)March 31, 2005**

**(Dollar Amounts in Thousands, Except Share and Per Share Data)**

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

     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 is 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.

     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.

     ***Mortgage Recording Tax–Hypothecated Loan***

     The Company has a mortgage tax credit loan of approximately $50,800 at March 31, 2005.  The loan is collateralized by the mortgage encumbering the Company’s ownership interest in the Colonie Center Mall.  The loan is also collateralized by an equivalent amount of the Company’s cash which was held by the lender and invested in overnight money market funds and US Treasury securities.  Interest earned on the cash collateral was applied by the lender to service the loan with the lender.  The Operating Partnership and lender each have the right of offset and therefore the loans and the cash collateral were presented on a net basis in the consolidated balance sheet at March 31, 2005.

     The purpose of the loan is to temporarily preserve mortgage recording tax credits for the future mortgage financing of the Colonie Center Mall which the company intends to finance during 2005 for which these credits would be applicable.  At the same time, the underlying mortgage remains a bona-fide debt to the lender.

     ***Earnings Per Share***

     The Company presents 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 1,593,464 units of limited partnership interest that were included in the 2005 diluted share calculation for the three months ended March 31, 2005.  The 2004 results represent the Predecessor andaccordingly, no EPS computations have been presented.

     ***Segment Information***

     The    Company is a REIT engaged in owning, managing, leasing and repositioningClass B regional malls and operates in 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. 123R will have a material effect    on the condensed consolidated financial statements.

13

----

Back to Contents

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (CONTINUED)March 31, 2005**

**(Dollar Amounts in Thousands, Except Share and Per Share Data)**

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

     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 thelimited 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” or participating rights–the    right to effectively participate in significant decisions made in the ordinary    course of the partnership’s business.  The kick-out rights and the participating    rights must be substantive in order to overcome the presumption of general    partner control. The Company does not believe that the adoption of EITF 04-05    will have a material effect on the condensed consolidated financial statements.

     ***Derivatives and Hedges***

     FASB No. 133, or SFAS 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended,  requires the Company to recognize all derivatives on the balance sheet at fair value.  Derivatives that are not hedges must be adjusted to fair value through income.  If a derivative is a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will either be offset against the change in fair value of the hedged asset, liability, or firm commitment through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings.  The ineffective portion of a derivative’s change in fair value will be immediately recognized in earnings.SFAS 133 may increase or decrease reported net income and stockholders’ equity prospectively, depending on future levels of LIBOR interest rates and other variables affecting the fair values of derivative instruments and hedged items, but will have no effect on cash flows.

     ***Reclassification***

     Certain prior period balances have been reclassified to conform with the current period financial statement presentation.

**3.  Mortgage and Other Loans Payable**

     At March 31, 2005 and December 31, 2004, mortgages and other loans payable consisted of the following:          

|                                                                                                                                                                             |   | **2005** |    | **2004** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|
|                                                                                                                                                                                  |        |          |         |          |        |  |  |
| Mortgage Loan Payable – interest only at5.09% payable monthly, due November 1, 2008, secured by the Foothills Mall property                                            |   | $        | 54,750  |     | $      | 54,750 |   |
|                                                                                                                                                                             |   |     |    |     |   |   |   |
| Mortgage loan payable – interestonly at 125 basis points over LIBOR (4.125% at March 31, 2005) payable monthly, due January 2008,secured by Stratford Square Mall  property |   |     | 75,000  |     |   | — |   |
|                                                                                                                                                                                  |        |          |         |          |        |  |  |
| Total                                                                                                                                                                            |   | $        | 129,750 |     | $      | 54,750 |   |
|                                                                                                                                                                                  |        |          |         |          |        |  |  |

     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.    The terms of the mortgage do not permit the Company to prepay the loan during    the first 18 months.

     In connection with the Stratford Square Mall mortgage financing, during January 2005, the Company entered into a $75,000 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 the Stratford Square mortgage loan at 5.0% per annum.  

14

----

Back to Contents

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (CONTINUED)March 31, 2005**

**(Dollar Amounts in Thousands, Except Share and Per Share Data)**

**3.  Mortgage and Other Loans Payable –*****(Continued)***

     In    accordance with the mortgage loan agreement in effect as of March 31, 2005    and December 31, 2004, 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 in accordance 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 to a bondholder trust. After the end of the lockout period,    the loan is open to prepayment by defeasance (providing treasury bonds as    substitute collateral for the property) only. Therefore, the Company may    not defease the loan until May 2006. Assuming no payments are made on the    principal    amount    of this loan prior to November 1, 2008, the balance to be due at such date    will be approximately $54,800.

**4.  Related Party Transactions**

     As    of December 31, 2003, $5,533 was included in due to affiliates in the    accompanying condensed 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 $131 for the three months ended March 31,    2004. The operating agreement of the Predecessor provided that such 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 $197 for the three months    ended March 31, 2004. In December 2004, $4,000 of these advances were repaid    and    the balance was included in the total consideration received in the Formation    Transactions.

     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 of capital 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 partnership    aggregated $147 and $67 for the three months ended March 31, 2005 and 2004,    respectively. These fees are recorded in management, leasing and development    services on the accompanyingcondensed consolidated statements of operations.

     Prior to being employed by the Company, an officer provided professional services to the Company and Predecessor.  Fees charged by the officer to the Company for the three months ended March 31, 2004 were $4.

**5.  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 a given 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 three months ended March 31, 2005 and 2004 were $128, and $120, respectively.

     The minimum future base rentals under non-cancelable operating leases as of March 31, 2005 are as follows:

| Year ending December  31,    |   |   |                                 |   |
|-----------------------------------|--------|--------|--------------------------------------|--------|
| 2005                              |   | $      | 19,811                               |   |
| 2006                              |   |   |      18,687 |   |
| 2007                              |   |   |      17,482 |   |
| 2008                              |   |   |      14,868 |   |
| 2009                              |   |   |      12,429 |   |
| Thereafter                        |   |   | 50,068                               |   |
|                                   |        |        |                                      |        |
| Total future minimum base rentals |   | $      | 133,345                              |   |
|                                   |        |        |                                      |        |

15

----

Back to Contents

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (CONTINUED)March 31, 2005**

**(Dollar Amounts in Thousands, Except Share and Per Share Data)**

**5.  Rentals Under Operating Leases –*****(Continued)***

     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 Company’s credit risk is concentrated in the retail industry.  One tenant (movie theatre), whose lease expires in 2017, accounted for more than 10% of the Company’s rental revenues during the three months ended March 31, 2004.  Rental income collected from this tenant aggregated $208 for the three months ended March 31, 2004.  For the three months ended March 31, 2005, no tenant exceeded 10% of rental revenues.

**6.  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 prior to December 31, 2004 and are due $3,894 at March 31, 2005.

     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 to December 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 have been    issued. Based on the expected operating performance of the Harrisburg Mall,    the fair value is estimated to be $5,122 and $5,047 and is included in due    to affiliates at March 31, 2005 and December 31, 2004, respectively. The    fair value of this obligation will be assessed by the Company’s management    on a quarterly basis. The change in the fair value is included in interest    expense in the accompanying condensed consolidated statements of operations.

     In December 2004, the Predecessor agreed to make a distribution to its members in the amount of $4,000, which was unpaid and in due to affiliates at December 31, 2004.  Such amount was paid in January 2005.

**7.  Stockholders’ Equity**

     The Company’s authorized capital stock consists of 250,000,000 shares, $.01 par value, including 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 per share.  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 its common stock to each of its three independent 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, after underwriting fees, were approximately $19,300.

     As of March 31, 2005, 12,392,895 shares of common stock were issued and outstanding.

**8.  Minority Interest**

     As    of March 31, 2005 minority interest relates to the interests in the Operating    Partnership that are not owned by the Company, of approximately 11.4%. In    conjunction with the formation of the Company, certain persons and entities    contributing ownership interests in the 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 an    equivalent 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).

16

----

Back to Contents

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (CONTINUED)March 31, 2005**

**(Dollar Amounts in Thousands, Except Share and Per Share Data)**

**8.  Minority Interest**

     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.  

**9. 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 to have a material adverse effect    on the Company’scondensed consolidated financial position or results of operations.

     In    connection with the Company’s acquisition of the Colonie Center Mall,    the purchase price is subject to increase up to an additional $9,000 if,    prior    to June 30, 2005, certain pending leases in negotiation at the time    of acquisition are executed. The Company will disburse the additional purchase    price once the tenants under such leases take occupancy and commence rental    payments.

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

     The    Company has a 24% limited partnership interest and a 1% general partnership    interest in Feldman Lubert Adler Harrisburg, LP (the “Partnership”).    The Partnership purchased a 900,000 square foot regional mall in Harrisburg,    Pennsylvania on September 30, 2003. Summarized financial information for    thisinvestment, which is accounted for by the equity method, is as follows:

|                                            |   | **March 31,  2005** |                                | **December 31,  2004** |   |
|-------------------------------------------------|--------|--------------------------|-------------------------------------|-----------------------------|--------|
|                                                 |        |                          |                                     |                             |        |  |  |
| Investment in real estate                       |   | $                        | 50,720                              |                        | $      | 51,457 |   |
| Receivables including deferred rents            |   |                     |      1,020 |                        |   | 756 |   |
| Other assets                                    |   |                     | 12,480                              |                        |   | 15,790 |   |
|                                                 |        |                          |                                     |                             |        |  |  |
| Total assets                                    |   | $                        | 64,220                              |                        | $      | 68,003 |   |
|                                                 |        |                          |                                     |                             |        |  |  |
| Loan payable                                    |   | $                        | 43,060                              |                        | $      | 44,298 |   |
| Other liabilities                               |   |                     |      1,984 |                        |   | 4,352 |   |
| Owners’ equity                             |   |                     | 19,176                              |                        |   | 19,353 |   |
|                                                 |        |                          |                                     |                             |        |  |  |
| Total liabilities and owners’ equity       |   | $                        | 64,220                              |                        | $      | 68,003 |   |
|                                                 |        |                          |                                     |                             |        |  |  |
| The Company’s share of owners’ equity |   | $                        | 5,106                               |                        | $      | 5,150 |   |
|                                                 |        |                          |                                     |                             |        |  |  |

|                                                                      |   | **Three Months    Ended March 31,** |                                 |
|---------------------------------------------------------------------------|--------|-------------------------------------|--------------------------------------|
|                                                                      |   |                                     |                                 |
|                                                                      |   | **2005**                            |                                 | **2004** |   |
|                                                                           |        |                                     |                                      |  |  |  |  |
| Revenue                                                                   |   | $                                   | 2,700                                |   | $ | 2,167 |   |
| Operating and other expenses                                              |   |                                |      (1,455 | ) |   |      (1,036 | ) |
| Interest expense (including the amortization of deferred financing costs) |   |                                |      (546   | ) |   |      (266 | ) |
| Depreciation and amortization                                             |   |                                |      (876   | ) |   |      (339 | ) |
| Other                                                                     |   |                                | —                               |   |   | (200 | ) |
|                                                                           |        |                                     |                                      |  |  |  |  |
| Net (loss) income                                                         |   | $                                   | (177                                 | ) | $ | 326 |   |
|                                                                           |        |                                     |                                      |  |  |  |  |
| The Company’s and the Predecessor’s share of net (loss) income  |   | $                                   | (44                                  | ) | $ | 82 |   |
|                                                                           |        |                                     |                                      |  |  |  |  |

     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 March 31, 2005 and December 31, 2004 were 5.27% and 5.67%,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 presently has a limited recourse of $10,000 of which our joint venture partner is liable for $6,300 or 63%, and the Company is liable for $3,700 or 37%.

17

----

Back to Contents

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (CONTINUED)March 31, 2005**

**(Dollar Amounts in Thousands, Except Share and Per Share Data)**

**10.  Investment in Unconsolidated Real Estate Partnerships – (Continued)**

     The balance outstanding under the loan was $43,060 and $44,298, as of March 31, 2005 and December 31, 2004, and the Partnership intends to continue to draw down the loan and use cash flow from property operations to fund its capital expenditure commitments, which were $1,058 at March 31, 2005.  The 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.  

     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.  Currently, the Company does not anticipate exercising such option.

     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 tothe joint venture with the Company’s affiliates without the prior approval of this joint venture partner.

**11.  Fair Value of Financial Instruments**

     As of March 31, 2005 and December 31, 2004, 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 remaining maturities.  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.

**12.  Financial Instruments: Derivatives and Hedging**

     The    following summarizes the notional and fair value of our derivative financial    instrument at March 31, 2005. The notional value is an indication of the    extent of our involvement in these instruments at that time, but does not    represent exposure to credit, interest rate or market risks:

|               |   | **Notional****Value** |   | **Strike****Rate** |   | **Effective****Date** |   | **Expiration****Date** |   | **Fair****Value** |   |
|--------------------|--------|-----------------------|--------|--------------------|--------|-----------------------|--------|------------------------|--------|-------------------|--------|
|                    |        |                       |        |                    |        |                       |        |                        |        |                   |        |  |  |  |  |  |
|               |   |                  |   |               |   |                  |   |                   |   |              |   |   |   |   |   |   |
| Interest Rate Swap |   | $                     | 75,000 |               |   | 3.75%                 |   |                   | 2/2005 |              |   | 1/2008 |   | $ | 928 |   |

     On March 31, 2005, the derivative instrument was reported as a net asset at a fair value of approximately $928.  Over time, the realized and unrealized gains and losses held in Accumulated Other Comprehensive income will be reclassified into earnings as interest expense in the same periods in which the hedged interest payments affect earnings.

     We are hedging exposure to variability in anticipated future interest payments on existing variable rate debt.

18

----

Back to Contents

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED (CONTINUED)March 31, 2005**

**(Dollar Amounts in Thousands, Except Share and Per Share Data)**

**13.  Subsequent Events**

|   | ***Tallahassee Mall*** |
|--------|------------------------|
|   | Tallahassee, Florida   |

     On    May 5, 2005 the Company announced the signing of a purchase contract to acquire    the Tallahassee Mall, a 963,000 square foot mall located in Tallahassee,    the state capital of Florida. The purchase contract is subject to the completion    of customary real estate contractual requirements. In addition, the purchase    contract is subject to the approval of the assumption of the existing mortgage    loan by the Company. The purchase price of $61,500 includes the assumption    of the existing mortgage loan of approximately $45,300 plus cash in the amount    of approximately $16,200. The property is subject to a long term ground lease    that expires in the year 2063 (assuming the exercise of an extension option).    The groundlease does not contain a purchase option. 

|   | ***Northgate Mall*** |
|--------|----------------------|

|   | Cincinnati, Ohio |
|--------|------------------|

     On    May 2, 2005, the Company announced the signing of a purchase contract to    acquire Northgate Mall, a 1.1 million square foot mall located in the northwest    suburbs of Cincinnati, Ohio. The purchase contract is subject to the completion    of customary real estate contractual requirements and is also subject to    the lender's consent of the Company’s assumption of an existing mortgage    loan. The purchase price of $110,000 includes the assumption of the existing    mortgage loan in the approximate amount of $79,600 plus cash in the amount    of approximately $30,400. The first mortgage being assumed by the    Company bears interest at a fixed rate of 6.60% and has a November 2012,    maturity date.

19

----

Back to Contents

**ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION 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 underperforming or 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 required payments and overall real estate market conditions.

     On December 16, 2004, we completed our formation transactions and initial public offering and sold 10,666,667 shares of our common stock and contributed the net proceeds to our operating partnership.  Subsequently, on January 11, 2005, we sold an additional 1,600,000 shares of our common stock to underwriters upon their full exercise 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 condensed consolidated financial statements for the three months ended March 31, 2005 represent the results of our company and the condensed consolidated financial statements for the three months ended March 31, 2004 represent the results of our predecessor.  Our predecessor was engaged in comprehensive 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 jointventure by our predecessor in September 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. Upon completion of our initial public 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 and business plan over time.  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:

|  | • | 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 the redevelopment 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 of these 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 oftotal rentable area was maintained at approximately 90% throughout the renovation process which added approximately 27,000 square feet of rentable area. |
|--|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | • | 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 mall has 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 was 96% 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 approximately 80%; 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, the Company 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 the Colonie Center Mall, located in Albany, New York, for an initial purchase price of $82.2 million.  The initial purchase price is subject to increase by up to an additional $9 million if certain pending leases in negotiation are executed as of June 30, 2005, and tenants under such leases, subsequently, take occupancy and commence rental payments.  We acquired Colonie Center on February 1, 2005 and funded the purchase price of this acquisition using the net proceeds from a property-level financing of the Stratford Square Mall.  We intend to commence the renovation and repositioning project for Colonie Center during 2005.  We estimate that the total additional investment required to renovateand reposition this property, including tenant improvements and leasing commissions, will be approximately $22.0 million. |

20

----

Back to Contents

**Critical Accounting Policies**

     A summary    of the accounting policies that management believes are critical to the preparation    of the condensed consolidated financial statements are set forth below. Certain    of the accounting policies used in the preparation of these condensed consolidated    financial statements are particularly important for an understanding of the    financial position and results of operations presented in the condensed consolidated    financial statements included in this quarterly report on Form 10-Q. These    policies require the application of judgment and assumptions by management    and, as a result, are subject to a degree of uncertainty. Actual resultscould 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 applicable lease 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 interest and 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 fees are earned upon the consummation of new leases.  Development fees are earned over the time period of the development activity.

     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 and historical 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 would result in lower net income.

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

     The    accompanying condensed consolidated financial statements include all of the    accounts of our company, our operating partnership and the wholly-owned subsidiaries    of our operating partnership by our predecessor. Property interests contributed    to our operating partnership in the formation transactions in exchange for    OP units have been accounted for as a reorganization of entities under common    control. Accordingly, the contributed assets and assumed liabilities were    recorded at our predecessor’s historical cost basis.  Prior to the formation transactions, our company and our operating partnership had no significant operations; therefore, the combined operations for the period prior to December 15, 2004, representprimarily the operations of our predecessor.  The combination did not require any material adjustments to conform the accounting principles of the separate entities.  The remaining interests, which were acquired for cash, have been accounted for as a purchase, and the excess of the purchase price over the related historical cost basis has been allocated to the assets acquired and 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”).  In accordance with this pronouncement, investments in 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 in determining whether or not we exercise 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 our partners.  To the extent that we are deemed to control these entities, these entities are consolidated.

21

----

Back to Contents

     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 predecessor accounted 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 at cost and subsequently adjusted for equity in earnings or losses and cash contributions and distributions.  We would expect the operations of the Harrisburg Mall to becomeconsolidated with our company if we exercise the option we hold to acquire the remaining interests in the joint 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 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.

|   | ***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 being depreciated 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 changes in 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 hold period 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 assesswhether 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 allocating purchase price, management utilized a number of sources.  We also consider information about each property obtained as a result of our pre-acquisition due 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) 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 the lease.  The capitalized above-market and below-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 tenantterminate its lease, the unamortized portion of the lease intangibles would be charged or credited to income.

     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 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 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-up periodsbased on current market demand.  We also estimate costs to execute similar leases including leasing commissions, legal expenses and other related costs.

22

----

Back to Contents

**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.  For U.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 our predecessor which, throughout the periods discussed below, was engaged in comprehensive mall renovation and repositioning projects, including the Foothills Mall, which was acquired through a joint venture by our predecessor in 2002 and the Harrisburg Mall, which was acquired through a joint venture by our predecessor in 2003.  Subsequent to our initial public offering, our Company acquired the Stratford Square Mall (December 2004) and Colonie Center Mall (February 2005), collectively the “Acquisition Properties” which are included in our consolidated results for the three months ended March 31, 2005 and not included in ourresults for the three months ended March 31, 2004.

     The results of operations for the three months ended March 31, 2005 and 2004 are the results of our company and our predecessor, respectively.

|   | ***Comparison of the Three Months Ended March 31, 2005 to the Three Months Ended March 31, 2004*** |
|--------|----------------------------------------------------------------------------------------------------|

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

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

     Rental revenues increased approximately $4.2 million, or 233%, to $6.0 million for the three months ended March 31, 2005 compared to $1.8 million for the three months ended March 31, 2004.  The increase was primarily due to a $4.1 million increase from the Acquisition Properties and $0.1 million increase at the Foothills Mall primarily due to increased mall occupancy.

     Revenues from tenant reimbursements increased $2.0 million, or 160%, to $3.2 million for the three months ended March 31, 2005 compared to $1.2 million for the three months ended March 31, 2004.  The increase was primarily due to a $2.1 million increase from the Acquisition Properties and a $0.1 million decrease at the Foothills Mall due to lower real estate tax reimbursements.

     Revenues from management, leasing and development services decreased $82,000, or 35.2%, to $151,000 for the three months ended March 31, 2005 compared to $233,000 for the three months ended March 31, 2004.  The decrease was primarily due to the lower construction management fee revenues related to completion of construction at the Harrisburg Mall.

     Interest and other income increased $101,000, or 55.5%, to $283,000 for the three months ended March 31, 2005 compared to $182,000 for the three months ended March 31, 2004.  The increase was primarily due to $172,000 of interest income received in 2005 from cash on hand partially offset by a lease termination payment of $125,000 received in 2004.

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

     Rental property operating and maintenance expenses increased $2.1 million, or 234%, to $3.0 million for the three months ended March 31, 2005 compared to $913,000 for the three months ended March 31, 2004.  The increase was due to a $2.2 million increase from the Acquisition Properties partially offset by a $0.1 million decrease in expenses at the Foothills Mall. 

     Interest    expense increased $566,000, or 52.3%, to $1.6 million for the three months    ended March 31, 2005 compared to $1.1 million for the three months ended    March 31, 2004. The increase was primarily due to $800,000 of interest associated    with the mortgage on Stratford Square Mall and a $75,000 increase related    to the Harrisburg earn-out accretion partially offset by the decrease in    interest of $165,000 associated with the payoff    of the    mezzanine    loan    in December 2004 in connection with the Company’s initial public offering    and a $197,000 decrease related to the 2004 payoff of the loan due to Larry    Feldman.  

     Depreciation    and amortization expense increased $1.5 million, or 371%, to $1.7 million    for the three months ended March 31, 2005 compared to $399,000 for the three    months ended March 31, 2004. The increase is primarily due to a $1.2 million    increase in depreciation from the Acquisition Properties and a $0.3 million    increase at the Foothills Mall due to the depreciation expense associated    with the 2004 renovation improvements being placed into service.

     General and administrative expenses increased $950,000, or 227%, to $1.4 million for the three months ended March 31, 2005 compared to $419,000 for the three months ended March 31, 2004.  The increase was primarily due to (i) 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, (ii) increase in personnel costs, and (iii) additional costs associated with being a publicly-traded REIT.

23

----

Back to Contents

     Equity    in (loss)/earnings of unconsolidated real estate partnership represents our    share of the equity in the earnings of the joint venture owning the Harrisburg    Mall. The equity in loss of unconsolidated real estate partnership totaled    ($44,000) for the three months ended March 31, 2005 as compared to $82,000    of income for the three months ended March 31, 2004. The 2005 loss at the    Harrisburg Mall is primarily due to increased depreciation resulting from    the 2004 capital renovations and increased interest expenses due to increased    loan balance.

     Minority interest for the three months ended March 31, 2005 represents the unitholders in our operating partnership which represents 11.4% our company’s income.  The minority interest of our predecessor for the three months ended March 31, 2004 represents a 33.3% ownership interest in the Foothills Mall.

**Cash Flows**

|   | ***Comparison of the three months ended March 31, 2005 to the three months ended March 31, 2004*** |
|--------|----------------------------------------------------------------------------------------------------|

     Cash and cash equivalents were $19.0 million and $2.7 million, respectively, at March 31, 2005 and March 31, 2004.  The increase to cash is due to the following: 

     Cash from operating activities totaled $1.5 million for the three months ended March 31, 2005, as compared to $(106,000) for the three months ended March 31, 2004.  The increase was due to higher net income despite higher depreciation expense, and changes in operating assets and liabilities, primarily increased accrued liabilities.

     Net cash used in investing activities for the three months ended March 31, 2005 increased to $85.2 million and was primarily the result of (i) cash required for the acquisition of the Colonie Center Mall totaling $84.4 million, (ii) $596,000 paid for the renovation of the Foothills Mall, and (iii) an increase in restricted capital escrow accounts.  This compares to $1.1 million of renovation cost during the three months ended March 31, 2004.  

     Net cash provided by financing activities totaled $87.1 million and reflect (i) net proceeds from the issuance of 1.6 million shares of common stock totaling $20.8 million, (ii) $75.0 million proceeds from our mortgage on Stratford Square Mall.  The increases were partially off-set by a $4.0 million payment to affiliates and $895,000 paid for deferred financing costs.

**Liquidity and Capital Resources**

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

     As of March 31, 2005, we had approximately $19.0 million in cash on hand, and also expect to be able to access additional funds through secured borrowings on the Colonie Center Mall, which we acquired in an all-cash transaction 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 additional capital will allow us to acquire additional assets and complete significant redevelopment projects on our recently acquired assets.  At March 31, 2005, our total consolidated indebtedness outstanding approximately$129.8 million, or 45.9% 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 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.

|   | ***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 unitholders in our    operating partnership funds for capital expenditures and, potentially, acquisitions.    We expect to meet our short-term liquidity requirements 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. As of March 31, 2005, we had commitments    to make tenant improvements and other capital expenditures at our properties    in the amount of approximately $1.0 million to be incurred during 2005, which    we intend to fund from existing cash and cash from operating activities.    We expect the cost of recurring capital improvements and tenant improvements    for our properties to be approximately $2.1 million for the remainder of    2005.    We    believe that    our net cash provided by operations and our 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 March 31, 2005, the joint venture owning the Harrisburg Mall    had commitments to make tenant improvements and other capital expenditures    in the amount of $1.1 million to be incurred in 2005. The joint venture intends    to fund these commitments 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 jointventure’s net cash flow after operating expenses and debt service.  Accordingly,the Harrisburg Mall joint venture will not have cash from operations to distributeto the joint venture partners during the period that it is taking advances underthis loan because any net cash flow will be used in lieu of the advances. Theconstruction loan with Commerce Bank matures on December 31, 2005, and weexpect that the construction project at the Harrisburg Mall will be completedby the fourth quarter of 2005. This loan can be repaid in whole or in part atany time without penalty and may be extended for up to three additional one-yearperiods. 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 paydistributions to us and our operating partnership.  We do not expect that thislimitation will have a material impact on our ability to meet our short termliquidity requirements because, once the construction is completed, we expectthe joint venture that owns the Harrisburg Mall to refinance this constructionloan with alternative mortgage financing. 

24

----

Back to Contents

|   | ***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. The Company    expects to complete a financing of the Colonie Center Mall during 2005. We    funded the acquisition of the Colonie Center Mall and related 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    and unsecured borrowings and the issuance of additional equity or debt securities.

     We    believe that the equity value on the Colonie Center Mall 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 be secured or unsecured, long-term    or short-term, fixed or variable interest rate and may be subject to suchother 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 in evaluating our actual level of indebtedness, both fixed and variable rate, and in making financial decisions.  We intend to finance our acquisition, renovation and repositioning projects with the most advantageous source of capital available to us at the time of the transaction, including traditional floating rate construction financing.  We expect that once we have completed our renovation and repositioning of a specific mall asset we will replaceconstruction financing with medium to long-term fixed rate financing.  In addition, we may also finance our activities through any combination of sales of common or preferred shares or debt securities, additional secured or unsecured borrowings and our proposed line of credit.

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

     In    connection with our company’s aquisition of the Colonie Center Mall, the    purchase price is subject to increase up to an additional $9.0 million    if, prior to June 30, 2005, certain pending leases in negotiation at    the time of acquisition are executed. Our company will disburse the additional    purchase price once the tenants under such leases take occupancy and commence    rental payments.

     We  announced two separate agreements to acquire two malls for an aggregate purchase price of $171.5 million and are subject to customary real estate contractual closing requirements.  We have made $8.0 million in cash deposits.  Subject to approval, our company will assume $124.9 million in first mortgage loans and expect to fund the balance of the purchase prices totaling $38.6 million with cash on hand and net proceeds from the Colonie Center Mall loan financing.

     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 and have announced to acquire.    There can be no assurance that we will make any investments in any other    properties that meet our investment criteria.

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

     The    joint venture that owns the Harrisburg Mall 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 $43.1 million    as of March 31, 2005. The loan currently bears interest at a rate of LIBOR    plus 250 basis points (5.67% at March 31, 2005). 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 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 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%. In March 2005,    we assumed 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 flow after    operating expenses and debt service.

25

----

Back to Contents

     ***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 approximately 80%; 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.

     We anticipate refinancing the construction loan prior to the loan’sexpiration on December 31, 2005.

     ***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 routine maintenance, 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.

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

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

     See loan guarantees described on “Harrisburg Mall Loan” above.

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

     In connection with the Stratford Square Mall mortgage financing, during January 2005, we 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 the Stratford Square mortgage loan at 5.0% per annum.  

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

     In connection with the formation transactions, we 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 are triggered either as a result of a taxable disposition of a property by our company, or if our company fails to offer the opportunity for the contributors to guarantee or otherwise bear the risk of loss, with respect to certain amounts of our 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.  

     We also agreed to maintain approximately $10 million of indebtedness, and to offer the contributors the option to guarantee $10 million of our operating partnership’s indebtedness, in order to enable them to continue to defer certain tax liabilities.  Our 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 our operating partnership issued to them in the Formation Transactions.

|   | ***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 interest held by our joint venture partner for an aggregate of $27.6 million in cash.   Currently, our company does not anticipate exercising such option.

     ***Mortgage Recording Tax–Hypothecated Loan***

     The Company has a mortgage tax credit loan totaled approximately $50.8 million at March 31, 2005.  The loan is collateralized by the mortgage encumbering the Company’s ownership interest in the Colonie Center Mall.  The loan is also collateralized by an equivalent amount of the Company’s cash which was held by the lender and invested in overnight money market funds and US Treasury securities.  Interest earned on the cash collateral was applied by the lender to service the loan with the lender.  The Operating Partnership and lender each have the right of offset and therefore the loans and the cash collateral were presented on a net basis in the consolidated balance sheet at March 31, 2005.

26

----

Back to Contents

     The purpose of the loan is to temporarily preserve mortgage recording tax credits for the future mortgage financing of the Colonie Center Mall which the company intends to finance during 2005 for which these credits would be applicable.  At the same time, the underlying mortgage remains a bona-fide debt to the lender.

     **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 of properties, 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 from operating 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 othercash needs.  We compute FFO in accordance with the current standards established by NAREIT, 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 operating activities 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 a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions.

     FFO for the three months ended March 31, 2005 is as follows (in thousands):

| **Net Income**                                           |   | $      | 370    |   |
|----------------------------------------------------------|--------|--------|--------|--------|
| **Add:**                                                 |   |   |   |   |
| Depreciation and amortization                            |   |   | 1,878  |   |
| Minority interest                                        |   |   | 48     |   |
| FFO contribution from unconsolidated joint venture       |   |   | 164    |   |
| **Less:**                                                |   |   |   |   |
| Depreciation of non-real estate assets                   |   |   | (34    | )      |
|                                                          |        |        |        |        |
| FFO available to common stockholders and OP Unit holders |   | $      | 2,426  |   |
|                                                          |        |        |        |        |

**ITEM 3.  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 $129.8 million    of outstanding indebtedness as of March 31, 2005, all of which matures during    2008 and bears interest at fixed rates ranging from 5.00% to 5.09%. Upon    the maturity of our debt, there is a market rate risk as to the prevailing    rates at the time 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 decrease our annualinterest expense by approximately $1.3 million, as the case may be.

     We    currently have a $75 million swap contract and a 100 basis point increase    in interest rates would increase the fair value of our swap by approximately    $2.1 million and a 100 basis point decrease in interest rates would decrease    the fair value of our swap by approximately $1.4 million.

     ***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 to receive 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.

27

----

Back to Contents

**ITEM 4.  CONTROLS AND PROCEDURES**

     ***Evaluation of Disclosure Controls and Procedures***

     We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on thedefinition of “disclosure controls and procedures” (as defined in Rules 13a – 15(c) and 15d – 15(e) under the Exchange Act).In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, 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 certain unconsolidated 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 of our 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 were no changes in our company’s internal controls over financial reporting (as such term is defined in Rule 13a – 15(f) and 15d – 15(f) under the Exchange Act) identified in connection with the evaluation of such internal controls that occurred during the quarter ended March 31, 2005 that have materially affected, or are reasonably likely to materially affect, our company’s internal controls over financial reports.

| **PART II** | **OTHER INFORMATION** |
|-------------|-----------------------|
|        |                  |

| **ITEM 1.** | **LEGAL PROCEEDINGS** |
|-------------|-----------------------|
|        | None                  |

|        |                                                           |
|-------------|----------------------------------------------------------------|
| **ITEM 2.** | **UNREGISTERED SALESOF EQUITY SECURITIES AND USE OF PROCEEDS** |
|        |                                                           |

     On January 15, 2005,Friedman, Billings, Ramsey & Co., Inc., RBC Capital Markets Corporation and BB&T Capital Markets, a division of Scott & Stringfellow, Inc., the underwriters to our company’s initial public offering, exercised their over-allotment option in full to purchase an additional 1,600,000 shares of our common stock at $13.00 per share, resulting in additional gross proceeds to us of approximately $20.8 million and net proceeds of approximately $19.3 million.

| **ITEM 3.** | **DEFAULTS UPON SENIOR SECURITIES** |
|-------------|-------------------------------------|
|        | None                                |
|        |                                |

| **ITEM 4.** | **SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS** |
|-------------|---------------------------------------------------------|
|        | None                                                    |
|        |                                                    |

| **ITEM 5.** | **OTHER INFORMATION** |
|-------------|-----------------------|
|        | None                  |

28

----

Back to Contents

| **ITEM 6.** | **EXHIBITS** |
|-------------|--------------|

|   |   |                                                                                                                                 |   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | 31.1   | Certification by the Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 202 filed herewith                 |   |
|   |   |                                                                                                                                 |   |
|   | 31.2   | Certification by the Chief Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 202 filed herewith.                |   |
|   |   |                                                                                                                                 |   |
|   | 32.1   | Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 202 filed herewith |   |

29

----

Back to Contents

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|   | FELDMAN MALL PROPERTIES |
|--------|-------------------------|
|   |                    |   |
|   |                    |   |
|   | By:                     | /s/ Thomas Wirth |
|   |                    |  |
|   |                    | Executive Vice President and Chief Financial Officer |

Date: May 13, 2005

30

----