October 19, 2004
Mail Stop 0409
Larry Feldman
Chairman and Chief Executive Officer
Feldman Mall Properties, Inc.
3225 North Central Avenue, Suite 1205
Phoenix, Arizona 85012
Re: Feldman Mall Properties, Inc.
Amendment No. 1 to Registration Statement on Form S-11
Filed September 30, 2004
Registration No. 333-118246
Dear Mr. Feldman:
We have reviewed your filing and have the following comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
General
1. We note your response to comment 2 that the number of
securities
to be issued in the formation transactions has not been fixed and
that you have added a discussion in the summary of how the number
of
securities to be issued in the formation transactions will be
determined. Please reconcile this response with your disclosure
on
page 11 that the contributors will exchange their ownership
interests
for 100,000 shares of common stock and 1,500,249 OP units.
Further,
we note that you have added a discussion regarding how you valued
the
ownership interests of your predecessor but you have not disclosed
the value of the ownership interests in your predecessor.
Finally,
if you have not yet established the value or the number of common
shares and units, please supplementally tell us why you believe
that
the material terms of the contribution agreements which were
executed
prior to the filing of the registration statement were
sufficiently
fixed at the time of execution so as to constitute a completed
binding investment agreement.
2. We note from your response to comment 3 that you will use
approximately 87.3% of the proceeds of this offering to purchase
identified properties. Under these circumstances, prior
performance
disclosure of the type required by Guide 5 for limited
partnerships
and applicable to IPO`s of REITs pursuant to Release 33-6900, may
not
be required. However, should the amount of your offering or your
intended use of proceeds change prior to effectiveness, please
advise.
3. We note your response to our comment no. 10. Please revise
your
disclosure to indicate, if true, that Larry Feldman, Jim Bourg and
Scott Jensen are promoters rather than "may be" considered
promoters.
4. Please revise to provide all information required by Item 15 of
Form S-11. In this connection, we note for example only, the
requirements of sections (d), (f), (g) and (h) of Item 15.
Cover page
5. We note your response to our comment no. 11. Please revise
your
disclosure to include the associated dollar value of the stock
that
will be issued to affiliates in return for the contributed
properties.
6. Please move the information that is not key to an investment
decision off the cover page. For example, please revise to delete
the first sentence regarding a description of your business. In
this
connection, we note that you describe yourself as a REIT rather
than
that you intend to qualify as a REIT beginning with your taxable
year
ending December 31, 2004. Further, your description includes a
reference to Class A or near Class A malls which has not been
defined
and which is not appropriate to define on the cover page.
Finally,
your description includes terms that need further explanation and
are
therefore not appropriate for the cover page such as your
reference
to "opportunistically" acquiring "underperforming" properties to
transform them into "profitable" ones. Similarly, please revise
to
delete the last paragraph prior to the legend on the cover page.
7. Please revise your cross-reference to the "Description of
Stock-
Restrictions on Transfer" to delete the cross-reference from the
cover page and to instead very briefly describe those
restrictions.
Prospectus Summary, page 1
8. We note your response to our comment no. 15 and 16; however,
the
amount of detail in your summary continues to overwhelm the most
significant aspects of the offering. For example, you indicate in
your response to our comment no. 15 that under the caption
"Prospectus Summary--Investment Highlights--Experienced Management
Team" on page 9 is a summary discussion of the information that
appears on page 65 under the caption" Business and Properties--
Investment Highlights--Experienced Management Team." You also
indicate that you have further summarized the disclosure regarding
our three properties that appears under the caption "Prospectus
Summary--Our Properties" in comparison to the more detailed
disclosure that appears on page 71 under the caption "Business and
Properties--Our Properties." However, it appears that the
disclosure
under these heading is repeated verbatim in your prospectus. For
another example, please revise your description of each of the
properties to limit your discussion of the renovation plans to the
amount you expect to expend to implement the plan. Finally,
revise
your disclosure relating to your business and growth strategies on
page 9 to limit your discussion. Please revise or advise.
9. We note your response to our comment no. 21 and your disclosure
in
the section regarding formation transactions; however, we are
unable
to locate disclosure of the total amount of consideration you will
pay to the predecessors for their interest in the Harrisburg Mall
and
the Foothills Mall or the total amount of indebtedness you will
assume. Please revise or advise.
10. We note your response to comment 18. Please revise to move
your
explanation of Class A from the italicized introduction to the
first
paragraph where the term first appears.
11. Please revise the description in the first sentence to clarify
that you intend to qualify to become a REIT beginning with your
taxable year ending December 31, 2004.
12. Please revise the third paragraph on page 1 to briefly
describe
the "certain" leasing initiatives that will result in an increase
in
the base acquisition price by $9 million.
13. We have reviewed your revisions in response to comment no. 81.
Please refrain from characterizing the operations of Feldman Mall
Properties, Inc. and your predecessor prior to their acquisition
as
being part of your corporate structure. Revise your disclosure
throughout accordingly. In this connection, we note your
disclosure
on page 1 that your "recent acquisition transactions demonstrate
our
ability to locate and acquire properties with the potential to
substantially increase their operating cash flow and value through
our comprehensive renovation and repositioning strategies."
Please
revise in light of the fact that you have not yet acquired any
properties and that you were only formed in July 2004.
14. We note your statement that you "have identified and are
actively
pursuing a number of additional malls as potential acquisition and
redevelopment candidates." This disclosure appears too
preliminary
to highlight in the summary and may be more appropriate for the
business section. If you choose to move it to the business
section
please revise there to disclose with more specificity what you
mean
by actively pursuing. Have you entered into any lock-up
agreements
on properties? Have you entered into any agreements on any
properties?
15. We note your response to our comment number 23. We also note
that you intend continue to source attractive opportunities
through,
among others, your current network of other contacts. We re-issue
our comment that if you choose to retain this disclosure, please
revise to discuss the nature of these relationships. What is the
basis of each relationship? Are they formal relationships?
Discuss
the benefits that both parties receive from such relationships.
16. We note your statement that you intend to conduct
substantially
all of your business through your operating partnership. Please
revise to disclose the percentage ownership you will have in the
operating partnership after the offering.
Our Properties, page 4
17. We note that a key element of your business plan is to
transform
underperforming malls through comprehensive renovation and
repositioning efforts. Please revise the table on pages 4 and 71
to
include a column to disclose the amount of development costs you
expect will be required for each property, excluding amounts
already
spent on renovations.
18. Please revise the table on page 4 and 71 to exclude the non-
owned
anchor tenant space from the column for "rentable square feet"
since
this space is not rentable. In this connection, we note that the
percentage leased column excludes non-owned anchor tenants. If
you
wish to keep these figures to show the total square footage of the
mall, consider revising the bullet to show the total square feet
including the non-owned anchor space.
19. We note from your second bullet point regarding the
calculation
of annualized base rent that the table includes leases that expire
prior to August 31, 2005. If the leases that will expire prior to
August 31, 2005 constitute a significant portion of annualized
base
rent please revise to so state and disclose the percentage of rent
that such leases constitute.
20. We note your disclosure in the 5th bullet point that "once
operating cash flow exceeds 12%" you will be entitled to receive
an
additional 20% of the excess cash flow. Please revise to explain
the
measure which cash flow must exceed by 12%.
21. We note that you have disclosed the additional investment that
will be required to renovate and reposition the Harrisburg Mall.
We
note that you have disclosed the total estimated costs of
renovation
and repositioning for the Foothills Mall. Please revise to
disclose
for each of the Foothills Mall and the Colonie Center the amount
of
additional investment that you estimate will be required to
renovate
and reposition each of these properties.
Investment Highlights, page 8
22. We note your statement on page 9 that upon completion of the
offering you expect to have the financial capacity to acquire an
estimated $250 million in additional mall assets. If you retain
this
statement, please revise to clarify that from the proceeds of this
offering you will have approximately $20 million for acquisitions
and
explain the source for the balance. If the source is borrowings,
please revise to disclose whether you have commitments in place
for
such borrowings.
23. We note your statement on page 9 that you believe that "over
time" you "can achieve a stabilized unleveraged yield on cost of
approximately 10% to 11% on our mall portfolio." If you choose to
retain this projection, please revise to provide a detailed
discussion of the basis for such projection and the limitations of
such projections, including the assumptions that in management`s
opinion are most significant to the projections or are key factors
upon which the financial results depend. In this regard
investors
should be cautioned against attributing undue certainty to
management`s assessment and include a statement indicating
management`s intention regarding the furnishing of updated
projections. Further, please revise to disclose the time frame
you
are referring to when you say "over time" and consider whether
such
time frame is an appropriate period over which management may make
reasonable projections. Similarly, provide a detailed discussion
of
the basis for your projection on page 9 that you believe your
malls,
"once renovated and repositioned, will produce stable levels of
cash
flow, which we anticipate will support distributions to our
stockholders in the future." Please refer to Rule 10 of
Regulation
S-K.
Benefits to Related Parties, page 14
24. We note that on page 14 and on pages 99-101 you disclose the
number of securities being issued in exchange for ownership
interests. We note that on pages 99-101 you disclose that the
securities are being exchanged for ownership interests in "certain
contributed entities." Please revise in all locations to specify
each of the ownership interests being contributed for each of the
disclosed number of securities.
25. We note that in response to comment 53 you have disclosed in
the
risk factor on page 30 the number of additional OP units that will
be
issued to Larry Feldman, Jim Bourg and Scott Jensen if certain
performance thresholds relating to the Harrisburg Mall are met and
that you have quantified the thresholds with respect to the
Harrisburg Mall. Please revise to quantify the number of
additional
OP units that will be issued with respect to the Foothills Mall
and
the thresholds relating to the Foothills Mall. Similarly, revise
here, in MD&A and on pages 99-101 to disclose the thresholds and
the
number of additional OP units that may be issued for each of the
Harrisburg and Foothills Malls. Further, we note from page 30 that
the number of additional OP units that may be issued with respect
to
the Foothills Mall will be determined by receipt of income or
other
cash flow from "a pad adjacent to the property and from two
expansion
parcels at the Foothills Mall." Please revise throughout to
explain
the relationship of the pad and expansion parcels to the Foothills
Mall and explain the measure of income or cash flow that must be
reached in order to issue additional units.
26. Please revise here and each bullet on pages 99-101 that
describes
the tax indemnification benefit to quantify the maximum extent of
the
indemnification or guaranty for tax liabilities.
Conflicts of Interest, page 16
27. Please revise to briefly describe the nature of the conflicts
that may arise between your duties as the general partner of the
operating partnership and your duties as directors and officers of
the REIT.
Risk Factors, page 21
Risks Related to this Offering, page 27
Future sales of shares of our common stock may depress the price
of
our shares, page 27.
28. Please revise to quantify the number of shares of common stock
that will be eligible for future sale. Please include the amount
of
(i) common stock that is subject to outstanding options or
warrants,
(ii) OP units that will be convertible into REIT shares, and (ii)
common stock that could be sold pursuant to Rule 144 or that you
have
agreed to register for sale. Refer to Item 201 of Regulation S-K.
Risks Related to Our Organization and Structure, page 29
Our management`s right to receive OP units upon the achievement of
certain performance thresholds...page 30
29. Refer to comment no. 53. Please revise your disclosure to
clarify the performance incentives relating to Foothills Mall.
For
example, quantify the specific thresholds that management must
achieve in order to receive OP units. Further, indicate whether
there is a limit to the amount of OP units that management may
receive.
None of the contribution agreements was the result of arm`s length
negotiations, page 30
30. We note your response to comment 54. Please revise to provide
a
separately captioned risk factor, as you have on the cover page
and
in the summary risk factors, to discuss the risk that you did not
obtain any third party appraisals for the initial properties in
your
portfolio and that the consideration to be given by you in
exchange
for them may exceed the value that may have been determined by
third
party appraisals.
Our board of directors has the power to issue additional
shares
of our stock...page 31
31. We reissue the portion of comment no. 55 that requests that
you
quantify the number of issued common and preferred stock. In this
regard, we note your disclosure that quantifies the number of
authorized but unissued shares of common and preferred stock.
Our Organizational documents contain no limitations on the amount
of
indebtedness we may incur..., page 31
32. We note your response to our comment number 58. We reissue
our
comment requesting that you revise to quantify the total
outstanding
indebtedness and the value of your portfolio after the completion
of
the formation transactions. In this regard, we note your
discussion
of the consolidated debt to total market capitalization ratio.
Distribution Policy, page 40
33. We note your response to our comment no. 65. Please revise
your
disclosure to clearly indicate that distributions in excess of
available cash will constitute a return of capital rather than a
dividend to stockholders. In this regard, we note your disclosure
in
the penultimate paragraph on page 40. Also, provide similar
disclosure in the summary.
34. We note your response and revision to our comment no. 66;
however, your disclosure does not indicate whether there are any
restrictions that would prevent your receipt of distributions from
your operating partnership. Please revise or advise.
35. Disclose the source enabling you to pay a dividend of
$330,051.
36. If you choose to equate the distribution to be paid to an
amount
based upon the anticipated shares of common stock and operating
partnership units after the offering, please include a table
supporting the distribution amount inferred will be paid in the
future. Alternatively, clarify that the distribution is being
paid
to members before the offering and delete reference to what the
distribution amount would be to stockholders after the offering.
Please make similar revisions to your disclosure on page 18.
Business and Properties, page 61
Harrisburg Mall, page 72
37. Joint Venture and Financing. Regarding the Commerce Bank and
General Motors Acceptance Corp. loans, we are unable to locate
disclosure relating to the balance to be due at maturity assuming
no
payments have been made on principal in advance of the due date.
Please advise or revise.
Benefits to Related Parties, page 99
38. We note your disclosure in the third paragraph on page 91 that
indicates Thomas Wirth will be granted restricted stock valued at
$1,000,000 upon the effective date of this offering. Please
revise
your table on page 101 and summary on page 14 to disclose the
grant
of restricted securities to Mr. Wirth.
Pro Forma Condensed Consolidated Financial Statements, page F-2
39. We have read your response to comment 94, however, we continue
to
believe that the pro forma financial position of the registrant
before the offering should be transparent to investors. In that
regard, please revise to distinguish the adjustments related to
the
formation transactions in order to illustrate Feldman Mall`s
historical financial position before and after the formation
transactions as well as the offering.
40. Refer to pro forma footnote adjustment 1(D). We note that in
connection with the acquisition of Colonie Center Mall, there is
no
guaranty that this transaction will close. If management believes
it
is probable that the Company will, in fact, acquire the Colonie
Center Mall such that the pro forma financial statements give
effect
to the transaction, this statement and the similar statements made
on
pages 12, 39, 60, 79 and F-48 may be confusing to investors.
Please
revise to clarify, if so, that you believe it is probable the
transaction will close.
41. Reference is made to adjustment 1(J). Please disclose the
nature
of the assets Larry Feldman is receiving for the stock as part of
the
formation transactions in addition to the units received for the
contribution of his interest in Feldman Equities of Arizona.
42. Reference is made to adjustment 1(M) and II. Disclose the
assets
contributed for the units issued. In this regard, please also
disclose the nature and amount of the equity securities issued to
repay $2.3 million of the intercompany loan owed to Feldman
Partners
LLC.
Financial Statements - Feldman Equities of Arizona LLC
Consolidated Balance Sheets, page F-17
43. Please revise your pro formas and financial statements to give
effect to the distribution of $330,051 declared on September 30,
2004
including pro forma earnings per share. See SAB 1.B.3.
Financial Statements - Feldman Lubert Adler Harrisburg, LP
Independent Auditors Report, page F-33
44. Please revise your audit report in accordance with Auditing
Standard No. 1 of the PCAOB, References in Audit Reports to the
Standards of the Public Company Accounting Oversight Board.
Statements of Revenues and Certain Operating Expenses - Colonie
Center Mall
Independent Auditors Report, page F-46
45. Please revise your audit report in accordance with Auditing
Standard No. 1 of the PCAOB, References in Audit Reports to the
Standards of the Public Company Accounting Oversight Board.
Note 2 - Basis of Presentation and Summary of Significant
Accounting
Policies, page F-48
46. Pursuant to Item 3-14 of Regulation S-X, please state whether,
after reasonable inquiry, management is aware of any material
factors
that would cause the reported financial information not to be
necessarily indicative of future operating results.
* * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Rachel Zablow, Accountant, at (202) 824-5336
or
Donna DiSilvio, Branch Chief, at (202) 942-1852 if you have
questions
regarding comments on the financial statements and related
matters.
Please contact Jeffrey Shady, Attorney-Advisor, at (202) 942-1901
or
me at (202) 942-1960 with any other questions.
Sincerely,
Elaine Wolff
Special Counsel
cc: Jay Bernstein, Esq (via facsimile)
Clifford Chance
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Feldman Mall Properties, Inc.
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