##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934
 For the quarterly period ended from June 30, 2008
 Or
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to.
 Commission File No. 001-32365
 FELDMAN MALL PROPERTIES, INC.
  Maryland
    
    13-4284187(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)
 1010 Northern Boulevard  Suite 314, Great Neck, New York 11021
 (516) 684-1239
  o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
  o þ




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##### 



FELDMAN MALL PROPERTIES, INC.
  
 INDEX
 PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSFeldman Mall Properties, Inc. and SubsidiariesConsolidated Balance Sheets as of June 30, 2008 (unaudited) and December 31, 2007
    
    
    3Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007 (unaudited)
    
    
    4Consolidated Statement of Stockholders Equity and Comprehensive Loss for the six months ended June 30,
2008 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007 (unaudited)
    
    
    6Notes to Consolidated Financial Statements (unaudited)
    
    
    7ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    30ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    47ITEM 4. CONTROLS AND PROCEDURES
    
    
    49PART II. OTHER INFORMATION
    
    
    51ITEM 1. LEGAL PROCEEDINGS
    
    
    51ITEM 1A. RISK FACTORS
    
    
    51ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    51ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    51ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    51ITEM 5. OTHER INFORMATION
    
    
    52ITEM 6. EXHIBITS
    
    
    52Signatures
    
    
    53EX-31.1EX-32.1
  2




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##### Table of Contents



PART 1. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
 June 30, 2008
    
    
    December 31, 2007(Unaudited)ASSETS:Investments in real estate, net
    
    $
    300,773
    
    
    $
    342,897Investment in unconsolidated real estate partnerships
    
    
    21,855
    
    
    
    43,683Cash and cash equivalents
    
    
    7,455
    
    
    
    27,976Restricted cash
    
    
    18,646
    
    
    
    20,395Rents, deferred rents and other receivables, net
    
    
    4,533
    
    
    
    5,545Acquired below-market ground lease, net
    
    
    2,483
    
    
    
    7,538Acquired lease rights, net
    
    
    6,169
    
    
    
    7,281Acquired in-place lease values, net
    
    
    4,756
    
    
    
    6,437Deferred charges, net
    
    
    2,956
    
    
    
    3,394Other assets, net
    
    
    3,926
    
    
    
    4,048Total Assets
    
    $
    373,552
    
    
    $
    469,194LIABILITIES AND STOCKHOLDERS EQUITY:LiabilitiesMortgage loans payable
    
    $
    230,447
    
    
    $
    232,878Junior subordinated debt obligations
    
    
    29,380
    
    
    
    29,380Secured line of credit
    
    
    22,627
    
    
    
    17,500Accounts payable, accrued expenses and other liabilities
    
    
    24,316
    
    
    
    27,211Dividends and distributions payable
    
    
    854
    
    
    
    568Acquired lease obligations, net
    
    
    2,389
    
    
    
    5,136Deferred gain on partial sale of real estate
    
    
    3,515
    
    
    
    3,515Negative carrying value of investment in unconsolidated partnership
    
    
    4,450
    
    
    
    4,450Total liabilities
    
    
    317,978
    
    
    
    320,638Minority interest
    
    
    239
    
    
    
    9,677Commitments and contingenciesStockholders EquitySeries A 6.85% cumulative convertible preferred stock; 50,000,000
shares authorized; 2,000,000 shares issued and outstanding at June
30, 2008 and December 31, 2007; $25.00 liquidation preference
    
    
    49,580
    
    
    
    49,580Common stock ($0.01 par value, 200,000,000 shares authorized,
12,992,537 and 13,018,831 issued and outstanding at June 30, 2008
and December 31, 2007, respectively)
    
    
    130
    
    
    
    130Additional paid-in capital
    
    
    120,834
    
    
    
    120,542Accumulated deficit
    
    
    (112,451
    )
    
    
    (27,712
    )Accumulated other comprehensive loss
    
    
    (2,758
    )
    
    
    (3,661
    )Total stockholders equity
    
    
    55,335
    
    
    
    138,879Total Liabilities and Stockholders Equity
    
    $
    373,552
    
    
    $
    469,194
  3




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##### Table of Contents



FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue:Rental
    
    $
    7,302
    
    
    $
    7,687
    
    
    $
    15,293
    
    
    $
    15,396Tenant reimbursements
    
    
    3,421
    
    
    
    3,417
    
    
    
    7,050
    
    
    
    6,997Management, leasing and development services
    
    
    428
    
    
    
    875
    
    
    
    1,392
    
    
    
    1,698Interest and other income
    
    
    124
    
    
    
    457
    
    
    
    373
    
    
    
    3,105Total revenue
    
    
    11,275
    
    
    
    12,436
    
    
    
    24,108
    
    
    
    27,196Expenses:Rental property operating and maintenance
    
    
    5,344
    
    
    
    4,462
    
    
    
    9,910
    
    
    
    8,793Real estate taxes
    
    
    1,671
    
    
    
    1,463
    
    
    
    3,158
    
    
    
    3,041Interest (including amortization of deferred
financing costs)
    
    
    4,044
    
    
    
    3,529
    
    
    
    8,251
    
    
    
    6,640Loss from early extinguishment of debt
    
    
    
    
    
    
    379
    
    
    
    
    
    
    
    379Impairment loss on long-lived assets (note 2)
    
    
    45,655
    
    
    
    
    
    
    
    45,655
    
    
    
    Depreciation and amortization
    
    
    3,447
    
    
    
    3,451
    
    
    
    6,932
    
    
    
    6,856General and administrative
    
    
    5,288
    
    
    
    4,302
    
    
    
    8,450
    
    
    
    7,239Total expenses
    
    
    65,449
    
    
    
    17,586
    
    
    
    82,356
    
    
    
    32,948Loss from operations
    
    
    (54,174
    )
    
    
    (5,150
    )
    
    
    (58,248
    )
    
    
    (5,752
    )Equity in loss of unconsolidated real estate
partnerships (note 12)
    
    
    (7,589
    )
    
    
    (300
    )
    
    
    (8,168
    )
    
    
    (655
    )Impairment loss on investment in
unconsolidated real estate partnerships 
Harrisburg Mall and Colonie Center (note 12)
    
    
    (26,066
    )
    
    
    
    
    
    
    (26,066
    )
    
    
    Loss before minority interest
    
    
    (87,829
    )
    
    
    (5,450
    )
    
    
    (92,482
    )
    
    
    (6,407
    )Minority interest
    
    
    8,898
    
    
    
    515
    
    
    
    9,438
    
    
    
    608Net loss
    
    $
    (78,931
    )
    
    $
    (4,935
    )
    
    $
    (83,044
    )
    
    $
    (5,799
    )Basic and diluted loss per share
    
    $
    (6.18
    )
    
    $
    (0.40
    )
    
    $
    (6.57
    )
    
    $
    (0.46
    )Weighted average common shares outstanding:Basic and diluted
    
    
    12,904
    
    
    
    12,862
    
    
    
    12,898
    
    
    
    12,862
  4




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FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
AND COMPREHENSIVE LOSS
(Amounts in thousands, except share data)
(Unaudited)
 Six months ended June 30, 2008
 AccumulatedNumber of
    
    
    Number of
    
    
    Series A
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    OtherPreferred
    
    
    Common
    
    
    Preferred
    
    
    Common
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    
    
    
    
    ComprehensiveShares
    
    
    Shares
    
    
    Stock
    
    
    Stock
    
    
    Capital
    
    
    Deficit
    
    
    Loss
    
    
    Total
    
    
    LossBalance at December 31, 2007
    
    
    2,000,000
    
    
    
    13,018,831
    
    
    $
    49,580
    
    
    $
    130
    
    
    $
    120,542
    
    
    $
    (27,712
    )
    
    $
    (3,661
    )
    
    $
    138,879
    
    
    $
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (83,044
    )
    
    
    
    
    
    
    (83,044
    )
    
    
    (83,044
    )Unrealized gain on
derivative instruments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    903
    
    
    
    903
    
    
    
    903Restricted stock forfeited
    
    
    
    
    
    
    (26,294
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    292
    
    
    
    
    
    
    
    
    
    
    
    292
    
    
    
    Dividends on forfeited
nonvested stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    13
    
    
    
    Preferred dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,708
    )
    
    
    
    
    
    
    (1,708
    )
    
    
    Balance at June 30, 2008
    
    
    2,000,000
    
    
    
    12,992,537
    
    
    $
    49,580
    
    
    $
    130
    
    
    $
    120,834
    
    
    $
    (112,451
    )
    
    $
    (2,758
    )
    
    $
    55,335
    
    
    $
    (82,141
    )
  5




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##### Table of Contents



FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
 Six Months Ended June 30,2008
    
    
    2007Cash Flows From Operating Activities:Net loss
    
    $
    (83,044
    )
    
    $
    (5,799
    )Adjustments to reconcile net loss to net cash used in operating activities:Impairment loss on long-lived assets
    
    
    45,655
    
    
    
    Impairment loss on investment of unconsolidated real estate
partnerships  Colonie Center and Harrisburg Mall
    
    
    26,066
    
    
    
    Depreciation and amortization
    
    
    6,932
    
    
    
    6,856Loss from early extinguishment of debt
    
    
    
    
    
    
    179Amortization of deferred financing costs
    
    
    515
    
    
    
    497Provision for doubtful accounts receivable
    
    
    1,186
    
    
    
    622Noncash stock compensation
    
    
    292
    
    
    
    289Interest expense (accretion) amortization, net
    
    
    (1,576
    )
    
    
    (1,604
    )Amortization of ground rent
    
    
    173
    
    
    
    176Minority interest
    
    
    (9,438
    )
    
    
    (608
    )Equity in losses of unconsolidated real estate partnerships
    
    
    8,168
    
    
    
    655Amortization of revenue related to acquired lease rights/obligations
    
    
    157
    
    
    
    131Deferred tax expense
    
    
    34
    
    
    
    31Other noncash expense (income)
    
    
    13
    
    
    
    (2,091
    )Changes in operating assets and liabilities:Rents, deferred rents and other receivables
    
    
    (174
    )
    
    
    (1,337
    )Restricted cash relating to operating activities
    
    
    423
    
    
    
    913Other deferred costs
    
    
    (192
    )
    
    
    (450
    )Other assets, net
    
    
    (125
    )
    
    
    (605
    )Accounts payable, accrued expenses and other liabilities
    
    
    (2,696
    )
    
    
    1,127Net cash used in operating activities
    
    
    (7,631
    )
    
    
    (1,018
    )Cash Flows From Investing Activities:Expenditures for real estate improvements
    
    
    (6,509
    )
    
    
    (25,563
    )Change in restricted cash relating to investing activities
    
    
    1,326
    
    
    
    250Investment in unconsolidated real estate partnerships
    
    
    (10,556
    )
    
    
    (4,283
    )Net cash used in investing activities
    
    
    (15,739
    )
    
    
    (29,596
    )Cash Flows From Financing Activities:Proceeds from lines of credit
    
    
    5,127
    
    
    
    13,000Proceeds from mortgages payable
    
    
    
    
    
    
    104,500Repayment of mortgages payable
    
    
    (856
    )
    
    
    (79,021
    )Payment of deferred financing costs
    
    
    
    
    
    
    (961
    )Proceeds from sale of Series A preferred stock, net of issue costs
    
    
    
    
    
    
    14,764Change in restricted cash related to financing activities
    
    
    
    
    
    
    (24,119
    )Distributions and dividends
    
    
    (1,422
    )
    
    
    (6,623
    )Net cash provided by financing activities
    
    
    2,849
    
    
    
    21,540Net change in cash and cash equivalents
    
    
    (20,521
    )
    
    
    (9,074
    )Cash and cash equivalents, beginning of period
    
    
    27,976
    
    
    
    13,036Cash and cash equivalents, end of period
    
    $
    7,455
    
    
    $
    3,962Supplemental disclosures of cash flow information:Cash paid during the period for interest, net of amounts capitalized
    
    $
    9,494
    
    
    $
    8,215Supplemental disclosures of noncash investing and financing activities:Accrued renovation costs
    
    
    2,696
    
    
    
    9,030Unrealized gain on derivative instruments
    
    
    903
    
    
    
    251Dividends and distributions payable
    
    
    854
    
    
    
    175Accrued financing costs
    
    
    
    
    
    
    312Accrued preferred stock issuance costs
    
    
    
    
    
    
    165Accrued mortgage guarantee obligation  investment in
unconsolidated real estate partnerships  Harrisburg Mall (note 12)
    
    
    1,850
    
    
    
    
  6




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##### Table of Contents



FELDMAN MALL PROPERTIES, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  UNAUDITED
 June 30, 2008
 (Dollar amounts in thousands, except share and per share data)
 1. Overview
 Description of Business
  Going
Concern Considerations
   Impairment
Charges
  Tallahassee Mall impairment
    
    
    
    
    
    $
    45,655Equity in loss of Harrisburg Mall
impairment
    
    
    
    
    
    
    6,979Impairment loss on investment in unconsolidated real
estate partnerships:Colonie Center
    
    $
    15,284Harrisburg Mall
    
    
    10,782
    
    
    
    26,066Total impairment charge
    
    
    
    
    
    $
    78,700
 Organization
  7




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2. Summary of Significant Accounting Policies
 Basis of Quarterly Presentation
   Principles of Accounting and Consolidation and Equity Method of Accounting
  Consolidation of
Variable Interest Entities
  8




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Accounting for Investments in Real Estate
Ventures
     Gains on Disposition of Real Estate
   Managements Estimates
  9




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##### Table of Contents



Cash and Cash Equivalents
  Restricted Cash
  Revenue Recognition and Tenant Receivables
   10




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##### Table of Contents



Deferred Charges
  Investments in Real Estate and Depreciation
   11




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Interest
    
    $
    93
    
    
    $
    387
    
    
    $
    140
    
    
    $
    659Real estate taxes
    
    
    
    
    
    
    88
    
    
    
    
    
    
    
    167Insurance
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    15Total
    
    $
    93
    
    
    $
    482
    
    
    $
    140
    
    
    $
    841
     June 30, 2008
    
    
    December 31, 2007Buildings and improvements
    
    $
    230,192
    
    
    $
    267,333Tenant improvements
    
    
    52,410
    
    
    
    55,934Construction in progress
    
    
    10,032
    
    
    
    6,436Land
    
    
    38,062
    
    
    
    38,062Total investments in real estate
    
    
    330,696
    
    
    
    367,765Accumulated depreciation
    
    
    (29,923
    )
    
    
    (24,868
    )Investments in real estate, net
    
    $
    300,773
    
    
    $
    342,897
 Impairment of Long-Lived Assets
 Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
   12




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##### Table of Contents



TallahasseeInvestment in real estate, net
    
    $
    41,665Long-term assets and liabilities subject to SFAS No. 141
    
    
    3,990Total impairment charge
    
    $
    45,655
 Restructuring Costs
 Accounting for Costs Associated with Exit or Disposal Activities
 Derivative Instruments
    13




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##### Table of Contents

\

Purchase Accounting for Acquisition of Interests in Real Estate Entities
 Business
Combinations
 14




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##### Table of Contents



Income Taxes
   15




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Income tax expense:Current  state
    
    $
    (7
    )
    
    $
    (6
    )
    
    $
    (13
    )
    
    $
    (13
    )Deferred  federal
    
    
    
    
    
    
    5
    
    
    
    (30
    )
    
    
    (28
    )Deferred  state
    
    
    
    
    
    
    1
    
    
    
    (4
    )
    
    
    (3
    )Income tax benefit (expense), net
    
    $
    (7
    )
    
    $
    
    
    
    $
    (47
    )
    
    $
    (44
    )
   Loss Per Share
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss:
    
    $
    (78,931
    )
    
    $
    (4,935
    )
    
    $
    (83,044
    )
    
    $
    (5,799
    )Add preferred stock dividends
    
    
    (854
    )
    
    
    (158
    )
    
    
    (1,708
    )
    
    
    (158
    )Net loss available to common stockholdersbasic
    
    
    (79,785
    )
    
    
    (5,093
    )
    
    
    (84,752
    )
    
    
    (5,957
    )Net loss attributable to common
stockholdersdiluted
    
    $
    (79,785
    )
    
    $
    (5,093
    )
    
    $
    (84,752
    )
    
    $
    (5,957
    )Basic and diluted weighted average common
shares outstanding
    
    
    12,903,907
    
    
    
    12,861,661
    
    
    
    12,898,229
    
    
    
    12,861,633Basic and diluted loss per share
    
    $
    (6.18
    )
    
    $
    (0.40
    )
    
    $
    (6.57
    )
    
    $
    (0.46
    )
 Segment Information
  16




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Recent Accounting Pronouncements
 The Fair Value Option for Financial
Assets and Financial Liabilities
     Share-Based Deferred Compensation
   17




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##### Table of Contents



Number of Unvested Shares
    
    Weighted Average Share Price2008
    
    2007
    
    2008
    
    2007Beginning balance
    
    
    158,743
    
    
    
    326,074
    
    
    $
    11.91
    
    
    $
    11.28Shares granted
    
    
    
    
    
    
    5,000
    
    
    
    
    
    
    
    11.31Shares vested
    
    
    (43,821
    )
    
    
    (32,675
    )
    
    
    12.28
    
    
    
    12.27Shares forfeited
    
    
    (26,294
    )
    
    
    (112,692
    )
    
    
    11.31
    
    
    
    9.90Ending balance
    
    
    88,629
    
    
    
    185,707
    
    
    
    11.90
    
    
    
    11.93
   3. Mortgage Loans Payable
  June 30, 2008
    
    
    December 31, 2007Mortgage loan payable  interest only at
115 basis points over LIBOR (3.63% and
6.18% at June 30, 2008 and December 31,
2007, respectively) payable monthly, due
May 2010, secured by the Stratford Square
Mall
    
    $
    104,500
    
    
    $
    104,500Mortgage loan payable  interest at 8.60%
payable monthly, due July 11, 2029,
anticipated repayment on July 11, 2009,
secured by the Tallahassee Mall
    
    
    44,248
    
    
    
    44,540Mortgage loan payable  interest at 6.60%
payable monthly, due October 11, 2032,
anticipated prepayment date of November
11, 2012, secured by the Northgate Mall
    
    
    76,554
    
    
    
    77,117Total mortgages outstanding
    
    
    225,302
    
    
    
    226,157Assumed above-market mortgage premiums, net
    
    
    5,145
    
    
    
    6,721Total mortgage loans payable
    
    $
    230,447
    
    
    $
    232,878
    18




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##### Table of Contents



2008 (six months)
    
    $
    8892009
    
    
    45,1792010
    
    
    105,8242011
    
    
    1,4152012
    
    
    71,995Total principal payments
    
    
    225,302Assumed above-market mortgage premiums, net
    
    
    5,145Total
    
    $
    230,447
  4. Junior Subordinated Debt Obligation
    Subsequent Events
 19




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##### Table of Contents



5. Lines of Credit
 $30,000 Secured Line of Credit
     $25,000 Credit Facility
  6. Related Party Transactions
    20




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##### Table of Contents



7. Rentals Under Operating Leases
   Year Ending
December 31, 20082008 (six months)
    
    $
    12,2402009
    
    
    21,9972010
    
    
    19,6642011
    
    
    16,3822012
    
    
    14,7352013 and thereafter
    
    
    49,969Total future minimum base rentals
    
    $
    134,987
   21




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##### Table of Contents



8. Due to Affiliates
   9. Stockholders Equity
    Subsequent Events
 Stock Repurchase
  22




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##### Table of Contents



10. Minority Interest
 ,
 11. Commitment and Contingencies
        23




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##### Table of Contents




    
    Mr. Feldman will no longer continue as an employee of the Company, but will remain
Chairman of the Board.
    
    The severance payment due Mr. Feldman under his employment agreement will be reduced
from $3,000 to $1,900 and will be payable on the following schedule: $600 on December 1,
2008 and $100 on the first of each month thereafter until the $1,900 is paid in full.
Late payments will carry interest at the rate of 12% per annum.
    
    Mutual releases will be exchanged between the Company and Mr. Feldman.
    
    The payment due to Mr. Feldman and certain of his affiliates under his tax protection
agreement relating to the sale of Foothills Mall will be reduced from an estimated $3,300
to $2,100. The tax protection agreement will be amended to provide that the reduced tax
protection payment due Mr. Feldman and certain of his affiliates on the sale of Foothills
and the tax protection payment due to Mr. Feldman and certain affiliates on the sale of
the Harrisburg Mall (estimated to be approximately $100) will be payable by the Company
not only on any taxable disposition of the Foothills Mall or Harrisburg Mall (which is
required under the existing tax protection agreement), but also in any taxable or tax
deferred merger or sale of the Company. The payments due Mr. Feldman and certain of his
affiliates under his tax protection agreement will be secured by a pledge of the proceeds
received by the Company from the sale of the Foothills Malls.
    
    As required under his employment agreement, the Company will reimburse Mr. Feldman for
his costs and expenses arising out of the above matters.
    
    The time period for the Company to register the resale of shares of common stock
received in exchange for OP units held by Mr. Feldman and certain of his affiliates under
his existing registration rights agreement will be extended to November of 2009. Such
registration will only be required if such registration is requested by Mr. Feldman and
if the Company remains required to file periodic reports under the Securities Exchange
Act of 1934, as amended.
    
    The arbitration proceeding will be terminated.
   12. Investments in Unconsolidated Partnerships
 Foothills Mall
  24




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Harrisburg Mall
      25




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26




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Colonie Center Mall
       27




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June 30, 2008
    
    
    December 31, 2007Investment in real estate, net
    
    $
    315,857
    
    
    $
    333,463Receivables including deferred rents
    
    
    4,982
    
    
    
    4,308Other assets
    
    
    28,905
    
    
    
    31,853Total assets
    
    $
    349,744
    
    
    $
    369,624Mortgage loans payable
    
    $
    244,353
    
    
    $
    233,225Other liabilities
    
    
    42,670
    
    
    
    52,608Owners equity
    
    
    62,721
    
    
    
    83,791Total liabilities and owners equity
    
    $
    349,744
    
    
    $
    369,624The Companys share of owners equity
    
    $
    16,148
    
    
    $
    21,283
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenue
    
    $
    9,916
    
    
    $
    9,102
    
    
    $
    20,224
    
    
    $
    18,212Operating and other expenses
    
    
    (5,674
    )
    
    
    (4,829
    )
    
    
    (11,393
    )
    
    
    (9,973
    )Interest expense (including the amortization of deferred financing costs)
    
    
    (3,284
    )
    
    
    (3,132
    )
    
    
    (6,872
    )
    
    
    (6,191
    )Impairment loss on long-lived assets
    
    
    (27,916
    )
    
    
    
    
    
    
    (27,916
    )
    
    
    Depreciation and amortization
    
    
    (3,577
    )
    
    
    (2,644
    )
    
    
    (6,913
    )
    
    
    (5,748
    )Net loss
    
    $
    (30,535
    )
    
    $
    (1,503
    )
    
    $
    (32,870
    )
    
    $
    (3,700
    )The Companys share of net loss
    
    $
    (7,589
    )
    
    $
    (300
    )
    
    $
    (8,168
    )
    
    $
    (655
    )
   June 30, 2008
    
    
    December 31, 2007Harrisburg Mall
    
    $
    220
    
    
    $
    12,415Colonie Center
    
    
    21,450
    
    
    
    31,206Foothills Mall
    
    
    185
    
    
    
    62Total
    
    $
    21,855
    
    
    $
    43,683
 13. Fair Value of Financial Instruments
  28




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14. Financial Instruments  Derivatives and Hedging
  Notional
    
    
    Strike
    
    
    Effective
    
    
    Expiration
    
    
    FairValue
    
    
    Rate
    
    
    Date
    
    
    Date
    
    
    Value (1)Interest Rate Swap
    
    $
    75,000
    
    
    
    4.91%
    
    
    
    1/2008
    
    
    
    1/2011
    
    
    $
    (1,915
    )Interest Rate Swap
    
    
    29,500
    
    
    
    5.50%
    
    
    
    6/2007
    
    
    
    5/2010
    
    
    
    (971
    )
 
 (1)
    -
    Derivative valuations as of June 30, 2008 in their entirety are classified in Level 2 of
the fair value hierarchy. The Company does not have any significant fair value measurements
using significant unobservable inputs (Level 3) as of June 30, 2008.   15. Subsequent Events
   29




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
   Going
Concern Consideration
  Impairment Charges
  Tallahassee
Mall impairment
    
    
    
    
    
    $
    45.7Equity in loss of Harrisburg Mall
impairment
    
    
    
    
    
    
    6.9Impairment loss on investment in unconsolidated real estate partnerships:Colonie Center
    
    $
    15.3Harrisburg Mall
    
    
    10.8
    
    
    
    26.1Total impairment charge
    
    
    
    
    
    $
    78.7
 Trends that May Impact Future Operating Results
  30




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
    
    Many commercial real estate lenders have substantially tightened underwriting
standards or have withdrawn from the lending marketplace. These circumstances have
materially impacted liquidity in the real estate debt markets, making financing terms
for owners of retail properties less attractive, and in certain cases have resulted in the
unavailability of certain types of debt financing. As a result, until conditions change, we
expect debt financing and refinancing will be more difficult to obtain and our borrowing
costs on new and refinanced debt will be more expensive compared to prior periods.
    
    At the same time, constraints on capital are expected to reduce new development
competition in certain of our marketplaces, which may delay the opening of some
competitive projects near our existing properties.
    
    Tighter lending standards and higher borrower costs have exerted downward pressure on
the value and liquidity of real estate assets which will impact the values we could obtain
for our properties in the case of their sale. These factors may make it more difficult
for us to sell properties or may adversely affect the price we receive for properties that
we do sell, as prospective buyers may experience increased costs of debt financing or
difficulties in obtaining debt financing.
    
    Credit market conditions have also had an adverse effect on other financial markets
in the U.S., which may make it more difficult or costly for us to raise capital through
the issuance of common stock, preferred stock or other equity securities.
    
    Adverse economic conditions and declining home prices in many regions have also
impacted consumer spending, which in turn has caused a slow start to the 2008 retailing
season. A number of large retailers, including three of our tenants, Boscovs, Steve &
Barrys and Linens N Things as described below, have sought bankruptcy law protection
during the second and third quarter and other filings may follow later in the year. In
addition, a substantial number of retailers have reduced their growth plans for 2009 while
others have announced store closures or delays in new store openings. These factors are
expected to impact the pace of our leasing activity and the operating performance of our
properties for the balance of 2008.
    
    The increase in many global commodity prices purchased in U.S. dollars has led to
higher than anticipated construction costs in our redevelopment projects.
   Colonie Center
    
    
    Foothills Mall
    
    
    Harrisburg Mall
    
    
    Stratford Square MallMinimum
    
    
    
    
    
    
    Minimum
    
    
    
    
    
    
    Minimum
    
    
    
    
    
    
    MinimumSq.
    
    
    Base
    
    
    Sq.
    
    
    Base
    
    
    Sq.
    
    
    Base
    
    
    Sq.
    
    
    BaseFeet
    
    
    Rent
    
    
    Feet
    
    
    Rent
    
    
    Feet
    
    
    Rent
    
    
    Feet
    
    
    RentBoscovs
    
    
    225,000
    
    
    $
    77,083
    
    
    
    
    
    
    
    
    
    
    
    188,244
    
    
    $
    15,000
    
    
    
    
    
    
    
    Steve & Barrys
    
    
    25,095
    
    
    $
    27,186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,840
    
    
    $
    21,227Linens N Things
    
    
    
    
    
    
    
    
    
    
    41,480
    
    
    $
    38,023
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    250,095
    
    
    $
    104,269
    
    
    
    41,480
    
    
    $
    38,023
    
    
    
    188,244
    
    
    $
    15,000
    
    
    
    31,840
    
    
    $
    21,227
  Critical Accounting Policies
  31




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Revenue Recognition
     Principles of Consolidation and Equity Method of Accounting
  Consolidation of Variable Interest Entities
  Accounting for
Investments in Real
Estate Ventures
 32




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Investments in Real Estate and Real Estate Entities
    Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
  33




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Gains on Disposition of Real Estate
   Purchase Price Allocation
 Business
Combinations
   34




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Depreciation
  Derivative Instruments
     Results of Operations
 Overview
  35




---



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Comparison of the Three Months Ended June 30, 2008 to the Three Months Ended June 30, 2007
 Revenues
     Expenses
       Impairment Charges on Consolidated Assets
  36




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Other
    Comparison of the Six Months Ended June 30, 2008 to the Six Months Ended June 30, 2007
 Revenues
    37




---



##### Table of Contents



Expenses
 .
      Impairment Charges on Consolidated Assets
   38




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##### Table of Contents



Other
  Impairment Charges on Unconsolidated Assets
   Cash Flows
 Comparison of the Six Months ended June 30, 2008 to the Six Months ended June 30, 2007
     39




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##### Table of Contents



Liquidity and Capital Resources
 Overview
     Short-Term Liquidity Requirements
   Harrisburg Mall.
  40




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##### Table of Contents



Harrisburg Mall Joint Venture
    Colonie Center.
   Foothills Mall.
 41




---



##### Table of Contents



Long-Term Liquidity Requirements
   Stock Repurchase
   Contractual Obligations
  Our Share of
    
    
    
    
    
    
    Our Share ofCapital Expenditure
    
    
    
    
    
    
    Long-TermConsolidated
    
    
    Commitments in
    
    
    Consolidated
    
    
    Debt inCapital Expenditure
    
    
    Unconsolidated
    
    
    Long-Term
    
    
    Unconsolidated
    
    
    Operating andYear
    
    Commitments
    
    
    Joint Ventures
    
    
    Debt(1)
    
    
    Joint Ventures(1)
    
    
    Ground Leases
    
    
    Total2008 (six months)
    
    $
    8,373
    
    
    $
    4,165
    
    
    $
    9,230
    
    
    $
    42,278
    
    
    $
    302
    
    
    $
    64,3482009
    
    
    1,224
    
    
    
    1,792
    
    
    
    61,734
    
    
    
    1,517
    
    
    
    532
    
    
    
    66,7992010
    
    
    
    
    
    
    
    
    
    
    115,005
    
    
    
    1,517
    
    
    
    450
    
    
    
    116,9722011
    
    
    
    
    
    
    
    
    
    
    8,763
    
    
    
    1,640
    
    
    
    351
    
    
    
    10,7542012
    
    
    
    
    
    
    
    
    
    
    78,871
    
    
    
    1,826
    
    
    
    265
    
    
    
    80,9622013 and thereafter
    
    
    
    
    
    
    
    
    
    
    88,874
    
    
    
    31,341
    
    
    
    23,311
    
    
    
    143,526Total
    
    $
    9,597
    
    
    $
    5,957
    
    
    $
    362,477
    
    
    $
    80,119
    
    
    $
    25,211
    
    
    $
    483,361
 
 (1)
    
    Amounts include interest payments based on contractual terms and current interest rates for
variable rate debt. Mortgage Loans
 Northgate Mall
  Tallahassee Mall
  42




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$104.5 Million Stratford Square Refinancing
  $30 Million Secured Line of Credit
     Colonie Center Mall Joint Venture
  43




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Foothills Mall Joint Venture
  Harrisburg Mall Joint Venture
   Capital Expenditures
  Off-Balance Sheet Arrangements
 Loan Guarantees
  Forward Swap Contracts
   44




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Tax Indemnifications
    Funds From Operations
  45




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Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss
    
    $
    (78,931
    )
    
    $
    (5,093
    )
    
    $
    (83,044
    )
    
    $
    (5,957
    )Add:Depreciation and amortization (excluding non-real
estate furniture and fixtures)
    
    
    3,318
    
    
    
    3,317
    
    
    
    6,672
    
    
    
    6,614FFO contribution from unconsolidated joint ventures
    
    
    737
    
    
    
    622
    
    
    
    1,556
    
    
    
    1,247Less:Preferred stock dividends
    
    
    (854
    )
    
    
    
    
    
    
    (1,708
    )
    
    
    Minority interest
    
    
    (8,898
    )
    
    
    (515
    )
    
    
    (9,438
    )
    
    
    (608
    )FFO available to common stockholders and OP unit holders
    
    $
    (84,628
    )
    
    $
    (1,669
    )
    
    $
    (85,962
    )
    
    $
    1,296
 46




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##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
  Market Risk Related to Fixed Rate Debt
    Market Risk Related to Other Obligations
   Market Risk Related to Impairments
 Tallahassee Mall
   47




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Harrisburg Mall
   Colonie Center
   Inflation
  48




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
    
    
    Adequacy of Accounting Personnel We lacked personnel possessing technical accounting
expertise adequate to ensure that our consolidated financial statements were prepared
accurately and on a timely basis. As a result, certain controls and reconciliations
associated with financial statement account balances were not performed on a timely basis,
journal entries were recorded without adequate support, and review and approval procedures
associated with critical financial reporting process controls were not documented. This
material weakness in internal control over financial reporting resulted in misstatements
that were corrected prior to the issuance of the 2007 annual and interim financial
statements and there is a reasonable possibility that a material misstatement in the
financial statements would not be prevented or detected on a timely basis.
 
    
    Segregation of Duties We did not maintain adequate segregation of duties related to job
responsibilities for initiating, authorizing, and recording transactions. Due to this
material weakness, there is a reasonable possibility that a material misstatement in the
financial statements would not be prevented or detected on a timely basis.
  Managements Remedial Actions
   49




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Changes in Internal Control Over Financial Reporting
  50




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##### Table of Contents



PART II OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  Going Concern Considerations
   
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     51




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Proposal 1:
    
    For
    
    AbstainLawrence Feldman
    
    
    6,338,832
    
    
    
    831,411Lawrence Kaplan
    
    
    5,048,298
    
    
    
    2,121,945Bruce Moore
    
    
    6,293,423
    
    
    
    876,820Paul McDowell
    
    
    5,556,646
    
    
    
    1,613,597Wendy Luscombe
    
    
    7,035,921
    
    
    
    134,322James Sight
    
    
    7,070,112
    
    
    
    100,131
 Proposal 2:
    
    For
    
    Against
    
    AbstainKPMG LLP
    
    
    6,964,536
    
    
    
    189,607
    
    
    
    16,100
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 3.1
    
    Amended and Restated Articles of Incorporation of Feldman Mall
Properties, Inc, incorporated by reference from the Companys
Registration Statement on Form S-11 (File No. 333-118246), filed on
December 15, 2004.3.2
    
    Second Amended and Restated Bylaws of Feldman Mall Properties, Inc.,
incorporated by reference from the Companys Current Report on Form
8-K filed on March 17, 2005.3.3
    
    Amended and Restated Agreement of Limited Partnership of Feldman
Equities Operating Partnership, LP, dated as of December 21, 2004,
incorporated by reference from the Companys Annual Report on Form
10-K filed on April 15, 2005.3.4
    
    First Amendment to Amended and Restated Agreement of Limited
Partnership of Feldman Equities Operating Partnership, LP, dated as
of December 21, 2004, incorporated by reference from the Companys
Current Report on Form 10-K filed on April 15, 2005.3.5
    
    Declaration of Trust of Feldman Holdings Business Trust I, dated as
of November 18, 2004, incorporated by reference from the Companys
Registration Statement on Form S-11 (File No. 333-118246), filed on
December 15, 2004.3.6
    
    Declaration of Trust of Feldman Holdings Business Trust II, dated as
of November 18, 2004, incorporated by reference from the Companys
Registration Statement on Form S-11 (File No. 333-118246), filed on
December 15, 2004.3.7
    
    Amended and Restated Operating Agreement of Feldman Equities of
Arizona, LLC, dated as of August 13, 2004, by and between Feldman
Partners, LLC, Feldman Equities Operating Partnership, LP, Lawrence
Feldman, Jeffrey Erhart and Edward Feldman, incorporated by reference
from the Companys Registration Statement on Form S-11 (File No.
333-118246), filed on December 15, 2004.3.8
    
    Second Amended and Restated Agreement of Limited Agreement of Limited
Partnership of Feldman Equities Operating Partnership, LP, dated as
of August 26, 2005, incorporated by reference from the Companys
Current Report on Form 8-K filed on August 30, 2005.3.9
    
    Articles Supplementary designating 6.85% Series A Cumulative
Convertible Preferred Stock, par value $0.01 per share, liquidation
preference $25.00 per share, dated as of April 10, 2007, incorporated
by reference to the Companys Current Report on Form 8-K, filed on
April 16, 2007.10.1
    
    Settlement Agreement, dated as of May 5, 2008, by and between the
Company and James W. Sight, incorporated by reference to the
Companys Current Report on Form 8-K, filed on May 6, 2008.31.1
    
    Certification by the President and Chief Financial Officer pursuant
to section 302 of the Sarbanes-Oxley Act of 2002, 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.
 52




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SIGNATURES
  Date: September 4, 2008
    FELDMAN MALL PROPERTIES, INC.By:
    /s/ Thomas WirthName:
    Thomas WirthTitle:
    President and Chief Financial Officer 53