Malls and entertainment--a winning combination.

Despite overblown media reports citing declining ticket sales in American movie theatres, Feldman Mall Properties still believes that movies and malls are a winning combination. Interestingly, ever since the invention of the television, the pundits have been predicting the end of the movie theater industry. This dire prediction was repeated nearly 20 years ago when the sales of VCRs gained momentum, and once again, it is being predicted now due to the proliferation of DVDs.

As the only REIT focused exclusively on the renovation and repositioning of enclosed regional shopping malls nationwide, we have made attracting quality entertainment-oriented anchors a central piece of our overall turnaround strategy for underperforming properties.

While ticket sales are off approximately 7 percent in 2005 versus 2004 through July, summer blockbusters such as the Star Wars Episode 3, The Fantastic Four, Batman Returns, War of the Worlds and surprise hits such as Mr. and Mrs. Smith and Charlie and The Chocolate Factory are already helping to reverse this trend. Furthermore, the unexpected success of 2004's "The Passion of the Christ" may explain this numbers anomaly when comparing 2005 versus 2004.

Despite the age of DVDs and home entertainment systems, America's love affair with the movies, as well as other retail entertainment venues, remains alive and well.

Since the late 1990's, a "survival of the fittest" trend has divided most major cinema markets between those theaters that offer stadium seating versus theatres without such seating. Research shows that movie patrons will often travel twice the distance to a theater with stadium seating, and in some cases are willing to pay a little more for the benefit of sitting in those high back rocker seats.

At Feldman Mall Properties, our view of the future is to help move our tenant cinemas to the next generation of theaters. At all of our malls, we intend to build the best product in the marketplace. For example, at our Foothills Mall in Tucson, our company was able to assist the existing 15-theatre Loews Cineplex increase ticket sales, which already ranked in the top 10 percent for the national theatre chain, through a unique win-win arrangement.

Our company provided Loews with approximately $4 million in new funding, which permitted them to convert their existing seating to modern stadium seating. In exchange for this funding by the landlord, Loews agreed to seal off its existing parking lot entrance and to redirect their patrons to enter only through the interior of the mall.

At Feldman Mall Properties' Harrisburg Mall in Pennsylvania, it has been another entertainment oriented anchor that has greatly enhanced overall mall performance. The addition of a massive Bass Pro Shops to the Harrisburg Mall in December of 2004 proved once again the value of entertainment venues in attracting greater numbers of mall patrons.

Bass Pro Shops expanded the former Lord and Taylor site at the mall and extensively renovated the massive 225,000-square-foot space, which sports an Adirondack hunting lodge theme, complete with knotted pine pillars and hundreds of wildlife mounts, a 60,000-gallon aquarium with 200 native fish, a rock climbing wall, murals by Pennsylvania artists, full sized NASCAR race car simulators, shooting and archery ranges and antique guns and fishing tackle.

In order to insure that Bass Pro customers visit the mall, Feldman Mall Properties was the first developer in the country to place a live trout stream that runs through the middle of the main mall corridor. This stream is a major tourist attraction that originates at the "mouth" of the Bass Pro store and runs into the mall.

With Feldman Mall Properties' recent addition of the Colonie Center mall in Albany, NY, the Stratford Square Mall in suburban Chicago, the Northgate Mall in suburban Cincinnati, and the Tallahassee Mall in Tallahassee, Florida, our company continues to implement its proven turnaround strategy for retail enclosed malls with movie and/or other entertainment-oriented anchors in major markets nationwide.

Feldman Mall Properties believes in a strategy of offering the consumer a reason to shop at its malls in lieu of shopping at the local Wal-mart, and we continue to attract quality entertainment, restaurant and junior anchor tenants that will enhance the mall experience for years to come.

LARRY FELDMAN CEO, FELDMAN MALL PROPERTIES INC