Feldman Mall Properties, Inc. (NYSE:FMP) was contacted by Mercury Real Estate Advisors LLC again on Tuesday after it failed to respond to their initial demands made on January 30, 2007. The activist hedge fund demanded once more, in a Schedule 13D/A filing with the SEC, that the company immediately hire an investment banker to explore strategic alternatives given the company's steep discount to liquidation value and several interested third parties. Further, Mercury notes that the continued pattern of delays in SEC filings, downward adjustments in reported FFO by 16.6%, and a reduction of earnings guidance by approximately 40% is extremely troubling. The hedge fund also added several other factors to its growing list of reasons the company should be sold:

1. The corporation has failed to match returns reflected by certain industry benchmarks. Since going public on December 15, 2004, the corporation has posted a total return of negative 4.79%. The MSCI US REIT Index has achieved a total return of positive 55.77% over this same period. This reflects substantial underperformance of 60.53%.
2. The corporation lacks the sufficient size required to operate as a public company. In our view, shareholders’ equity is being wasted on general and administrative expenses that are not commensurate with the size of the company. General and administrative expenses at the corporation totaled 13.6% of revenues during fiscal 2005 while the ratio of G&A to revenues in the Corporation’s Peer Group average 4.3%.
3. The corporation has suffered a series of earnings misses and downward revisions to guidance. The first downward revision of guidance came in November 2005 with regards to third quarter 2005 results. The corporation lowered FFO/share guidance 17% from a range of $0.28-$0.30 to $0.23-$0.25. Fourth quarter 2005 FFO/share guidance was also lowered from a range of $0.25-$0.27 to $0.17-$0.18. This is a 32% decrease from the guidance that was offered just a few months prior. In our view, management has lost credibility with investors as a result of being overly optimistic and not realistic on a number of occasions.
4. The corporation is an attractive acquisition candidate for a national or regional mall owner/operator. While we believe that the corporation is too small to generate economies of scale with its widely dispersed portfolio, several of the national or regional owner/operators could achieve operating synergies through an acquisition of the corporation. Further, we believe the corporation is trading at a significant discount to its intrinsic or liquidation value.
5. The company failed to file in a timely manner periodic reports required by the SEC, including its current Form 10-K, 2004 10-K, and various quarterly reports throughout 2005. Moreover, the company was forced to reschedule conference calls as a result of their inability to file on time.
6. The company revised its earnings lower several times throughout 2005 and 2006 resulting in a total reduction over six months of over 40%! Moreover, in 2006, it revised its FFO from A4 2005 lower by over 16%! Since the company hasn't filed its current financials, who knows if this is a trend that will continue through 2006 and 2007.

Mercury said that it had received numerous inquiries from well known and established, national and regional mall owners and operations interested in exploring a purchase of the company and its assets. The hedge fund insists that the board should not continue to let the opinion of its seemingly conflicted chairman, Larry Feldman, determine the right course of action for achieving and maximizing shareholder value. Rather, the board should act immediately and hire an investment banker to explore strategic alternatives. Finally, Mercury said that it would call the company later this week to schedule a time to discuss this matter in person - a move that will hopefully spark some actual response from management. This makes FMP a stock worth watching!

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