NOTES TO CONSOLIDATED FINANCIAL STATEMENTS New Accounting Pronouncements - In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“FAS 150”), effective at the begin- ning of the first interim period beginning after June 15, 2003. The FASB initiated its liabilities and equity proj- ect in response to concerns regarding the current balance sheet classifications of certain financial instru- ments. The standard specifies that instruments within its scope, which include mandatorily redeemable financial instruments, obligations to repurchase the issuer’s equity shares by transferring assets, and cer- tain obligations to issue a variable number of shares, represent obligations of the issuer and, therefore, the issuer must classify them as liabilities. We adopted this statement effective July 1, 2003, and it had no impact on our results of operations or financial position. 3. ACQUISITIONS AND DEVELOPMENT OF RENTAL PROPERTIES 4. INVESTMENTS IN CONSOLIDATED REAL ESTATE JOINT VENTURES COROC Holdings, LLC 46 2003 ANNUAL REPORT We will provide operating, management, leasing and marketing services to the properties and will earn an annual management and leasing fee equal to $1.00 per square foot of gross leasable area. We may also earn an additional annual incentive fee of up to approximately $800,000 if certain annual increases in the net operating income are met on an annual basis. These fees are payable prior to, and are not subordinate to, any member distributions that may be required. Blackstone shall have the right to termi- nate the management agreement for the joint venture if it does not receive its minimum cash return as described above. We will have joint control with Blackstone over major decisions. If Blackstone does not receive an annu- al minimum cash return of 6% on their invested capital during any of the first three years and 7% in any year thereafter, Blackstone shall gain the right to become the sole managing member of the joint venture with complete authority to act for the joint venture, including the ability to dispose of one or more of the joint venture properties to a third party. Based on current available cash flows from the properties, we do not believe there is a significant risk of default under this provision. In December 2003 we completed the acquisition of the Charter Oak Partners’ portfolio of nine factory out- let centers totaling approximately 3.3 million square feet which is consolidated for financial reporting pur- poses under the provisions of FIN 46. We and an affiliate of Blackstone Real Estate Advisors (“Blackstone”) acquired the portfolio through a joint venture in the form of a limited liability company, COROC, for $491.0 million, including the assumption of $186.4 million of cross-collateralized debt which has a stated, fixed interest rate of 6.59% and matures in July 2008. We recorded the debt at its fair value of $198.3 million with an effective interest rate of 4.97%. Accordingly, a debt premium of $11.9 million was recorded and is being amortized over the life of the debt. We financed the majority of our share of the equity required for the transaction through the issuance of 2,300,000 common shares on December 10, 2003, generating approximately $88.0 million in net proceeds. The results of the Charter Oak portfo- lio have been included in the consolidated financial statements since December 19, 2003.  In September 2002, we completed the acquisition of Kensington Valley Factory Shops, a factory outlet center in Howell, Michigan containing approximately 325,000 square feet, for an aggregate purchase price of $37.5 million. The acquisition was funded with $16.8 million of net proceeds from the sale of our non-core property in Fort Lauderdale, Florida in June 2002 and a portion of the proceeds from the com- mon share offering in September 2002 described in Note 10. In January 2003, we acquired a 29,000 square foot, 100% leased expansion located contiguous to our existing factory outlet center in Sevierville, Tennessee at a purchase price of $4.7 million. Construction of an additional 35,000 square foot expansion of the center was completed during the third quarter and opened 100% occupied. The cost of the expansion was approximately $4 million. The Sevierville center now totals approximately 419,000 square feet.