false 0000910612 0000915140 0000910612 2020-02-06 2020-02-06 0000910612 cbl:CBLAssociatesLimitedPartnershipMember 2020-02-06 2020-02-06 0000910612 us-gaap:CommonClassAMember 2020-02-06 2020-02-06 0000910612 cbl:ASevenPointThreeSevenFiveSeriesDCumulativeRedeemablePreferredStockZeroPointZeroOneParValueMember 2020-02-06 2020-02-06 0000910612 cbl:ASixPointSixTwoFiveSeriesECumulativeRedeemablePreferredStockZeroPointZeroOneParValueMember 2020-02-06 2020-02-06

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C.  20549

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported):  February 6, 2020

 

CBL & ASSOCIATES PROPERTIES INC

 

CBL & Associates Limited Partnership

 

(Exact Name of Registrant as Specified in its Charter)

 

 

 

 

 

 

 

Delaware

 

1-12494

 

62-1545718

Delaware

 

333-182515-01

 

62-1542285

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Commission File Number)

 

(I.R.S. Employer Identification No.)

 

2030 Hamilton Place Blvd., Suite 500, Chattanooga, TN 37421-6000

(Address of principal executive office, including zip code)

423-855-0001

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered under Section 12(b) of the Act:

 

 

 

 

 

 

 

Title of each Class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value

 

CBL

 

New York Stock Exchange

7.375% Series D Cumulative Redeemable Preferred Stock, $0.01 par value

 

CBLprD

 

New York Stock Exchange

6.625% Series E Cumulative Redeemable Preferred Stock, $0.01 par value

 

CBLprE

 

New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2).

Emerging growth company     

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 


ITEM 2.02 Results of Operations and Financial Condition

On February 6, 2020, CBL & Associates Properties, Inc. (the "Company") reported its results for the fourth quarter and year ended December 31, 2019. The Company's earnings release and supplemental financial and operating information for the fourth quarter and year ended December 31, 2019 is attached as Exhibit 99.1. On February 7, 2020, the Company held a conference call to discuss the results for the fourth quarter and year ended December 31, 2019. The conference call script is attached as Exhibit 99.2.

The information in this Form 8-K and the Exhibits attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

ITEM 9.01 Financial Statements and Exhibits

 

 

(a)

Financial Statements of Businesses Acquired

Not applicable

 

 

(b)

Pro Forma Financial Information

Not applicable

 

 

(c)

Shell Company Transactions

Not applicable

 

 

(d)

Exhibits

 

 

 

 

 

Exhibit

Number

 

Description

99.1

 

Earnings Release dated February 6, 2020 and Supplemental Financial and Operating Information - For the Three Months and Year Ended December 31, 2019

99.2

 

Investor Conference Call Script - Fourth Quarter and Year Ended December 31, 2019

104

 

Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*). (Filed herewith)

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

CBL & ASSOCIATES PROPERTIES, INC.

 

 

 

 

 

/s/ Farzana Khaleel

 

 

 

Farzana Khaleel

 

Executive Vice President -

 

Chief Financial Officer and Treasurer

 

 

 

CBL & ASSOCIATES LIMITED PARTNERSHIP

 

 

 

By: CBL HOLDINGS I, INC., its general partner

 

 

 

 

 

/s/ Farzana Khaleel

 

 

 

Farzana Khaleel

 

Executive Vice President -

 

Chief Financial Officer and Treasurer

 

 

Date: February 7, 2020

 

 

 

 

Exhibit 99.1

 

 

 

 

Earnings Release and

Supplemental Financial and Operating Information

 

For the Three Months and Year Ended

December 31, 2019


 

 

Earnings Release and Supplemental Financial and Operating Information

Table of Contents

 

 

 

Page

 

 

 

Earnings Release

 

1

 

 

 

Consolidated Statements of Operations

 

8

 

 

 

Reconciliations of Supplementary Non-GAAP Financial Measures:

 

 

 

 

 

     Funds from Operations (FFO)

 

9

 

 

 

     Same-center Net Operating Income (NOI)

 

12

 

 

 

Selected Financial and Equity Information

 

14

 

 

 

Consolidated Balance Sheets

 

15

 

 

 

Condensed Combined Financial Statements - Unconsolidated Affiliates

 

16

 

 

 

Ratio of Adjusted EBITDAre to Interest Expense and Reconciliation of Adjusted EBITDAre to Operating Cash Flows

 

17

 

 

 

Components of Rental Revenues

 

18

 

 

 

Schedule of Mortgage and Other Indebtedness

 

19

 

 

 

Schedule of Maturities and Debt Covenant Compliance Ratios

 

23

 

 

 

Unencumbered Consolidated Portfolio Statistics

 

24

 

 

 

Mall Portfolio Statistics

 

25

 

 

 

Leasing Activity and Average Annual Base Rents

 

28

 

 

 

Top 25 Tenants Based on Percentage of Total Annualized Revenues

 

30

 

 

 

Capital Expenditures

 

31

 

 

 

Development Activity

 

32

 

 

 

CBL Core Portfolio Exposure to Sears and Closed Bon-Ton Locations and Redevelopment Plans

 

34

 

 


 

 

Contact: Katie Reinsmidt, Executive Vice President - Chief Investment Officer, 423.490.8301, katie.reinsmidt@cblproperties.com

CBL PROPERTIES REPORTS RESULTS FOR FOURTH QUARTER AND FULL-YEAR 2019

CHATTANOOGA, Tenn. (February 6, 2020) – CBL Properties (NYSE:CBL) announced results for the fourth quarter and year ended December 31, 2019.  A description of each supplemental non-GAAP financial measure and the related reconciliation to the comparable GAAP financial measure is located at the end of this news release.

 

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2019

 

 

2018

 

 

%

 

 

2019

 

 

2018

 

 

%

 

Net income (loss) attributable to common shareholders per diluted share

 

$

0.27

 

 

$

(0.38

)

 

 

170.6

%

 

$

(0.74

)

 

$

(0.72

)

 

 

(4.1

)%

Funds from Operations (“FFO”) per diluted share

 

$

0.39

 

 

$

0.44

 

 

 

(12.4

)%

 

$

1.40

 

 

$

1.70

 

 

 

(17.7

)%

FFO, as adjusted, per diluted share (1)

 

$

0.37

 

 

$

0.45

 

 

 

(17.1

)%

 

$

1.36

 

 

$

1.73

 

 

 

(21.6

)%

 

(1)

For a reconciliation of FFO to FFO, as adjusted, for the periods presented, please refer to the footnotes to the Company’s reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders on page 9 of this news release.

KEY TAKEAWAYS:

 

Same-center sales per square foot for the stabilized mall portfolio for the fourth quarter 2019 improved 3%.   For the twelve-months ended December 31, 2019, same-center sales increased 2% to $386 per square foot compared with the prior-year period.

 

During 2019, CBL made significant progress on its anchor redevelopment program, completing a dozen redevelopment projects.  CBL currently has 27 former anchor spaces committed, under construction or with replacements already open featuring dining, entertainment, fitness and other mixed-use components.

 

FFO per diluted share, as adjusted, was $0.37 for the fourth quarter 2019, compared with $0.45 per share for the fourth quarter 2018.  Fourth quarter 2019 FFO per share was impacted by $0.02 per share of dilution from asset sales completed since the prior-year period and $0.06 per share of lower property NOI.

 

FFO per diluted share, as adjusted, was $1.36 for 2019, compared with $1.73 for 2018.  2019 FFO per share was impacted by $0.06 per share of dilution from asset sales completed since the prior-year period, $0.04 lower gains on the sale of outparcels and $0.20 per share of lower property NOI.

 

Total Portfolio Same-center NOI declined 6.5% for 2019, as compared with 2018.

 

Portfolio occupancy as of December 31, 2019, was 91.2%, representing a 70-basis point improvement sequentially and a 190-basis point decline compared with 93.1% as of December 31, 2018.  Same-center mall occupancy was 89.8% as of December 31, 2019, a 110-basis point improvement sequentially and a 210-basis point decline compared with 91.9% as of December 31, 2018.

 

During 2019, CBL completed gross asset sales totaling $185.7 million (details herein).

-MORE-


 

 

“As our results indicate, our properties are facing ongoing challenges as retailers struggle to adapt to today’s consumer preferences.  For the year 2019, our financial results were at the high end of our guidance range with same-center NOI of (6.5%) and adjusted FFO of $1.36 per share,” said Stephen D. Lebovitz, Chief Executive Officer.  “2019 results, as well as 2020 guidance, reflect the significant impact of retailer bankruptcies and store closings on revenues and occupancy. Our guidance range for 2020 incorporates the carryover from 2019 plus anticipated challenges by retailers in 2020 and a reserve for unbudgeted impacts. 

“At the same time, we are working to diversify and stabilize revenues. In recent months, we have opened 15 new tenants in former anchor locations, adding more productive, higher traffic-driving uses.  And, we have another dozen committed replacements either under construction or with planning underway. We are proactively reducing our exposure to apparel retailers with more than 76% of 2019 mall leasing completed with non-apparel tenants.  As we approach our redevelopments, we are evaluating our capital investments closely and successfully stretching our dollars through ground leases, joint ventures and other creative structures.  The steps we took in December 2019 to suspend our common and preferred dividends in 2020 are key elements of our strategy to preserve our significant level of internally generated cash flow, providing us with the capital to execute on our redevelopment and leasing strategies that will lead to stabilized future revenues and growth.”

Net income attributable to common shareholders for the fourth quarter 2019 was $46.5 million, or $0.27 per diluted share, compared with a net loss of $65.5 million, or a loss of $0.38 per diluted share, for the fourth quarter of 2018.  Net income for the fourth quarter 2019 was impacted by a $37.4 million loss on impairment of real estate to write down the carrying value of Park Plaza to the property’s estimated fair value.  

Net loss attributable to common shareholders for 2019 was $129.2 million, or a loss of $0.74 per diluted share, compared with a net loss of $123.5 million, or a loss of $0.72 per diluted share, for 2018.  Net loss for the full-year 2019 included a $26.4 million reduction to the class-action litigation expense recorded in the first quarter 2019.  The majority of the reduction relates to past tenants that did not submit a claim pursuant to the terms of the settlement agreement with the remainder relating to tenants that opted out of the lawsuit.

FFO allocable to common shareholders, as adjusted, for the fourth quarter 2019 was $64.7 million, or $0.37 per diluted share, compared with $77.0 million, or $0.45 per diluted share, for the fourth quarter 2018.  FFO allocable to the Operating Partnership common unitholders, as adjusted, for the fourth quarter 2019 was $74.6 million compared with $89.0 million for the fourth quarter 2018.

FFO allocable to common shareholders, as adjusted, for 2019 was $235.2 million, or $1.36 per diluted share, compared with $298.2 million, or $1.73 per diluted share, for 2018.  FFO allocable to the Operating Partnership common unitholders, as adjusted, for 2019 was $271.5 million compared with $345.1 million for 2018.

Percentage change in same-center Net Operating Income (“NOI”) (1):

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2019

 

 

2019

 

Portfolio same-center NOI

 

 

(9.1

)%

 

 

(6.5

)%

Mall same-center NOI

 

 

(9.8

)%

 

 

(7.3

)%

 

(1)

CBL’s definition of same-center NOI excludes the impact of lease termination fees and certain non-cash items such as straight-line rents and reimbursements, write‑offs of landlord inducements and net amortization of acquired above and below market leases.

Major variances impacting same-center NOI for the year ended December 31, 2019, include:

 

Same-center NOI declined $38.9 million, due to a $48.8 million decrease in revenues offset by a $9.9 million decline in operating expenses.  

 

Rental revenues declined $57.9 million, including a $26.5 million decline in tenant reimbursements and a $32.8 million decline in minimum and other rents. Percentage rents improved $1.4 million.

 

Property operating expenses declined $5.8 million compared with the prior year. Maintenance and repair expenses were flat.  Real estate tax expenses declined $4.1 million.

2


 

PORTFOLIO OPERATIONAL RESULTS

Occupancy(1):

 

 

As of December 31,

 

 

 

2019

 

 

2018

 

Total portfolio

 

 

91.2

%

 

 

93.1

%

Malls:

 

 

 

 

 

 

 

 

Total Mall portfolio

 

 

89.8

%

 

 

91.8

%

Same-center Malls

 

 

89.8

%

 

 

91.9

%

Stabilized Malls

 

 

90.0

%

 

 

92.1

%

Non-stabilized Malls (2)

 

 

83.8

%

 

 

76.7

%

Associated centers

 

 

95.6

%

 

 

97.4

%

Community centers

 

 

96.0

%

 

 

97.2

%

 

(1)

Occupancy for malls represents percentage of mall store gross leasable area under 20,000 square feet occupied.  Occupancy for associated and community centers represents percentage of gross leasable area occupied.

(2)

Represents occupancy for The Outlet Shoppes at Laredo.

New and Renewal Leasing Activity of Same Small Shop Space Less Than 10,000 Square Feet:

 

% Change in Average Gross Rent Per Square Foot:

 

 

 

 

 

 

 

 

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2019

 

 

2019

 

Stabilized Malls

 

 

(12.1

)%

 

 

(8.6

)%

New leases

 

 

8.8

%

 

 

9.1

%

Renewal leases

 

 

(15.7

)%

 

 

(11.5

)%

 

Same-Center Sales Per Square Foot for Mall Tenants 10,000 Square Feet or Less:

 

 

 

Year Ended December 31,

 

 

 

 

 

 

 

2019

 

 

2018

 

 

% Change

 

Stabilized mall same-center sales per square foot

 

$

386

 

 

$

379

 

 

 

2

%

Stabilized mall sales per square foot

 

$

386

 

 

$

377

 

 

 

2

%

 

DISPOSITIONS

Year-to-date, CBL has closed on $185.7 million in asset sales, as detailed below.

In December, CBL closed on the sale of a 15% interest in The Outlet Shoppes at Atlanta to its existing joint venture partner, Horizon Group Properties (“Horizon”), for $20.8 million, including cash of $9.4 million and the assumption of 15% interest in the existing loan (representing $11.4 million at closing).  Following the completion of the sale, CBL and Horizon each own a 50% interest, with Horizon continuing to lease and manage the asset.

3


 

Property

 

Location

 

Date Closed

 

Gross Sales Price (M)

 

Cary Towne Center(1)

 

Cary, NC

 

January

 

$

31.5

 

Honey Creek Mall (1)

 

Terre Haute, IN

 

April

 

 

14.6

 

The Shoppes at Hickory Point

 

Forsyth, IL

 

April

 

 

2.5

 

Courtyard by Marriott at Pearland Town Center

 

Pearland, TX

 

June

 

 

15.1

 

The Forum at Grandview

 

Madison, MS

 

July

 

 

31.8

 

850 Greenbrier Circle

 

Chesapeake, VA

 

July

 

 

10.5

 

Various parcels

 

Various

 

Various

 

 

31.1

 

25% interest in The Outlet Shoppes at El Paso (2)

 

El Paso, TX

 

August

 

 

27.8

 

15% interest in The Outlet Shoppes at Atlanta (3)

 

Woodstock, GA

 

December

 

 

20.8

 

Total

 

 

 

 

 

$

185.7

 

(1)

100% of sale proceeds utilized to retire existing secured loans.

(2)

Gross amount shown above is comprised of $9.3 million in equity and 25% interest in loan balance at closing of $18.5 million.

(3)

Gross amount shown above is comprised of $9.4 million in equity and 15% interest in loan balance at closing of $11.4 million.

 

ANCHOR REPLACEMENT PROGRESS AND REDEVELOPMENT

During 2019, CBL completed a dozen redevelopment projects and had five additional projects under construction at year-end.  Anchor replacements recently opened or pending include (complete list and additional information can be found in the financial supplement):

 

Property

 

Prior Tenant

 

New Tenant(s)

 

Construction/Opening Status

Eastland Mall

 

JCPenney

 

H&M, Planet Fitness

 

Open

Jefferson Mall

 

Macy’s

 

Round1

 

Open

Northwoods Mall

 

Sears

 

Burlington

 

Open

Kentucky Oaks Mall

 

Sears

 

Burlington, Ross Dress for Less

 

Open

West Towne

 

Sears

 

Dave & Busters, Total Wine

 

Open

Hanes Mall

 

Shops

 

Dave & Busters

 

Open

Parkdale Mall

 

Macy’s

 

Dick’s, Five Below, HomeGoods

 

Open

Brookfield Square

 

Sears

 

Marcus Theatres, Whirlyball

 

Open

Laurel Park Place

 

Carson’s

 

Dunham’s Sports

 

Open

Meridian Mall

 

Younkers

 

High Caliber Karts

 

Open

Stroud Mall

 

Boston

 

Shoprite

 

Open

Kentucky Oaks Mall

 

Elder Beerman

 

HomeGoods and Five Below

 

Open

Frontier Mall

 

Sears

 

Jax Outdoor Gear

 

Open

Stroud Mall

 

Sears

 

EFO Furniture Outlet

 

Open

Dakota Square

 

Herberger’s

 

Ross Dress for Less

 

Open

Hamilton Place

 

Sears

 

Dick’s Sporting Goods, Dave & Busters, Aloft Hotel, Malones

 

Under construction -

Spring 2020/ 2021 (Aloft)

CherryVale Mall

 

Sears

 

Tilt

 

Under construction - Q1/Q2 ‘20

Richland Mall

 

Sears

 

Dillard’s

 

Under construction - 2020

Post Oak Mall

 

Sears

 

Conn’s HomePlus

 

Under construction - 2020

Kirkwood Mall

 

BonTon

 

Restaurants

 

2020

Imperial Valley

 

Sears

 

Hobby Lobby

 

2020

Westmoreland Mall

 

BonTon

 

Stadium Live! Casino

 

2020

York Galleria

 

Sears

 

Hollywood Casino

 

2020

Cross Creek Mall

 

Sears

 

Dave & Busters

 

Construction start in 2020

South County Center

 

Sears

 

Round1

 

Opening TBD

Hanes Mall

 

Sears

 

Novant Health

 

Opening TBD

West Towne Mall

 

Sears

 

Von Maur

 

2021

 

DIVIDENDS

In December 2019, CBL announced that it is suspending all future dividends on its common stock, 7.375% Series D Cumulative Redeemable Preferred Stock and 6.625% Series E Cumulative Redeemable Preferred Stock. The dividend suspension will be reviewed quarterly by the Board of Directors, but is expected to remain in place until year-end 2020. The Company made this determination following a review of taxable income

4


 

projections for 2019 and 2020. The Company will review taxable income on a regular basis and take measures, if necessary, to ensure that it meets the minimum distribution requirements to maintain its status as a Real Estate Investment Trust (REIT).  

OUTLOOK AND GUIDANCE

CBL is providing 2020 FFO, as adjusted, guidance in the range of $1.03 - $1.13 per diluted share.  Guidance incorporates a reserve in the range of $8.0 - $18.0 million (the “Reserve”) for potential future unbudgeted loss in rent from tenant bankruptcies, store closures or lease modifications that may occur in 2020.  

Key assumptions underlying guidance are as follows:

 

 

 

Low

 

 

High

 

2020 FFO, as adjusted, per share (includes the Reserve)

 

$

1.03

 

 

$

1.13

 

2020 Change in Same-Center NOI (“SC NOI”) (includes the Reserve)

 

 

(9.5

)%

 

 

(8.0

)%

Reserve for unbudgeted lost rents included in SC NOI and FFO

 

$18.0 million

 

 

$8.0 million

 

Updated expectation for gains on outparcel sales

 

$2.0 million

 

 

$5.0 million

 

Assumptions underlying the change in 2020 SC NOI are as follows:

 

 

Estimated Impact to 2020 SC NOI

 

 

Explanation

New Leasing/Contractual Rent Increases

 

2.30

%

 

 

Specialty Retail/Branding

 

(0.50

)%

 

2019 actual and 2020 budgeted closures

Store Closures/Non-renewals

 

(4.00

)%

 

2019 actual and 2020 budgeted store closures at natural lease maturity as well as mid-term store closures primarily due to tenants in bankruptcy

Lease Renewals

 

(1.50

)%

 

Impact of new renewals completed in 2019 and budgeted for 2020, including certain tenants in bankruptcy reorganization

Lease Modifications/Co-tenancy

 

(2.10

)%

 

Mid-term lease modifications and co-tenancy rents triggered in 2019 or budgeted in 2020

Expenses

 

(0.65

)%

 

Increases in operating expenses

Reserve for lost rents

 

(2.30

)%

 

Mid-point of reserve for unbudgeted lost rents

Total 2020 SC NOI Change at Midpoint

 

(8.75

)%

 

 

 

Reconciliation of GAAP net income (loss) to 2020 FFO, as adjusted, per share guidance:

 

 

 

Low

 

 

High

 

Expected diluted earnings per common share

 

$

(0.26

)

 

$

(0.16

)

Adjust to fully converted shares from common shares

 

 

0.02

 

 

 

0.02

 

Expected earnings per diluted, fully converted common share

 

 

(0.24

)

 

 

(0.14

)

Add: depreciation and amortization

 

 

1.28

 

 

 

1.28

 

Add: noncontrolling interest in loss of Operating Partnership

 

 

(0.01

)

 

 

(0.01

)

Expected FFO, as adjusted, per diluted, fully converted common share

 

$

1.03

 

 

$

1.13

 

 

INVESTOR CONFERENCE CALL AND WEBCAST

CBL Properties will host a conference call on Friday, February 7, 2020, at 11:00 a.m. ET. To access this interactive teleconference, dial (888) 317‑6003 or (412) 317-6061 and enter the confirmation number, 1982728. A replay of the conference call will be available through February 14, 2020, by dialing (877) 344-7529 or (412) 317‑0088 and entering the confirmation number, 10136909.

The Company will also provide an online webcast and rebroadcast of its fourth quarter 2019 earnings release conference call.  The live broadcast of the quarterly conference call will be available online at cblproperties.com on Friday, February 7, 2020, beginning at 11:00 a.m. ET.  The online replay will follow shortly after the call.

To receive the CBL Properties fourth quarter earnings release and supplemental information, please visit the Invest section of our website at cblproperties.com.

5


 

ABOUT CBL PROPERTIES

Headquartered in Chattanooga, TN, CBL Properties owns and manages a national portfolio of market-dominant properties located in dynamic and growing communities. CBL’s portfolio is comprised of 108 properties totaling 68.2 million square feet across 26 states, including 68 high-quality enclosed, outlet and open-air retail centers and 9 properties managed for third parties. CBL seeks to continuously strengthen its company and portfolio through active management, aggressive leasing and profitable reinvestment in its properties. For more information visit cblproperties.com.

ADOPTION OF NEW LEASE ACCOUNTING STANDARD

The Company adopted Accounting Standards Codification (“ASC”) 842, Leases, effective January 1, 2019, which resulted in the Company revising the presentation of rental revenues in its consolidated statements of operations.  In the past, certain components of rental revenues were shown separately in the consolidated statements of operations. Upon the adoption of ASC 842, these amounts have been combined into a single line item. Please see the Company’s Supplemental Financial and Operating Information located in the Invest section of the Company’s website for more information regarding the components of rental revenues.

NON-GAAP FINANCIAL MEASURES

Funds From Operations

FFO is a widely used non-GAAP measure of the operating performance of real estate companies that supplements net income (loss) determined in accordance with GAAP.  The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) (computed in accordance with GAAP) excluding gains or losses on sales of depreciable operating properties and impairment losses of depreciable properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests.  Adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests are calculated on the same basis.  We define FFO as defined above by NAREIT less dividends on preferred stock of the Company or distributions on preferred units of the Operating Partnership, as applicable.  The Company’s method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

The Company believes that FFO provides an additional indicator of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assumes the value of real estate assets declines predictably over time.  Since values of well-maintained real estate assets have historically risen with market conditions, the Company believes that FFO enhances investors’ understanding of its operating performance.  The use of FFO as an indicator of financial performance is influenced not only by the operations of the Company’s properties and interest rates, but also by its capital structure.

The Company presents both FFO allocable to Operating Partnership common unitholders and FFO allocable to common shareholders, as it believes that both are useful performance measures.  The Company believes FFO allocable to Operating Partnership common unitholders is a useful performance measure since it conducts substantially all of its business through its Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of the Company’s common shareholders and the noncontrolling interest in the Operating Partnership.  The Company believes FFO allocable to its common shareholders is a useful performance measure because it is the performance measure that is most directly comparable to net income (loss) attributable to its common shareholders.

In the reconciliation of net income (loss) attributable to the Company’s common shareholders to FFO allocable to Operating Partnership common unitholders, located in this earnings release, the Company makes an adjustment to add back noncontrolling interest in income (loss) of its Operating Partnership in order to arrive at FFO of the Operating Partnership common unitholders.  The Company then applies a percentage to FFO of the Operating Partnership common unitholders to arrive at FFO allocable to its common shareholders.  The percentage is computed by taking the weighted-average number of common shares outstanding for the period and dividing it by the sum of the weighted-average number of common shares and the weighted-average number of Operating Partnership units held by noncontrolling interests during the period.

FFO does not represent cash flows from operations as defined by GAAP, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income (loss) for purposes of evaluating the Company’s operating performance or to cash flow as a measure of liquidity.

The Company believes that it is important to identify the impact of certain significant items on its FFO measures for a reader to have a complete understanding of the Company’s results of operations.  Therefore, the Company has also presented adjusted FFO measures excluding these items from the applicable periods. Please refer to the reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders on page 9 of this news release for a description of these adjustments.

6


 

Same-center Net Operating Income

NOI is a supplemental non-GAAP measure of the operating performance of the Company’s shopping centers and other properties.  The Company defines NOI as property operating revenues (rental revenues, tenant reimbursements and other income) less property operating expenses (property operating, real estate taxes and maintenance and repairs).

The Company computes NOI based on the Operating Partnership’s pro rata share of both consolidated and unconsolidated properties.  The Company believes that presenting NOI and same-center NOI (described below) based on its Operating Partnership’s pro rata share of both consolidated and unconsolidated properties is useful since the Company conducts substantially all of its business through its Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of the Company’s common shareholders and the noncontrolling interest in the Operating Partnership.  The Company’s definition of NOI may be different than that used by other companies and, accordingly, the Company’s calculation of NOI may not be comparable to that of other companies.

Since NOI includes only those revenues and expenses related to the operations of the Company’s shopping center properties, the Company believes that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates, sales at the malls and operating costs and the impact of those trends on the Company’s results of operations.  The Company’s calculation of same-center NOI excludes lease termination income, straight-line rent adjustments, amortization of above and below market lease intangibles and write-off of landlord inducement assets in order to enhance the comparability of results from one period to another.  A reconciliation of same-center NOI to net income is located at the end of this earnings release.

Pro Rata Share of Debt

The Company presents debt based on its pro rata ownership share (including the Company’s pro rata share of unconsolidated affiliates and excluding noncontrolling interests’ share of consolidated properties) because it believes this provides investors a clearer understanding of the Company’s total debt obligations which affect the Company’s liquidity.  A reconciliation of the Company’s pro rata share of debt to the amount of debt on the Company’s condensed consolidated balance sheet is located at the end of this earnings release.

Information included herein contains “forward-looking statements” within the meaning of the federal securities laws.  Such statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated.  Future events and actual events, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements.  The reader is directed to the Company’s various filings with the Securities and Exchange Commission, including without limitation the Company’s Annual Report on Form 10-K, and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included therein, for a discussion of such risks and uncertainties.

 

 

7


 

CBL & Associates Properties, Inc.

Supplemental Financial and Operating Information

For the Three Months and Year Ended December 31, 2019

Consolidated Statements of Operations

(Unaudited; in thousands, except per share amounts)

 

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

REVENUES (1):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

180,464

 

 

$

201,907

 

 

$

737,453

 

 

$

829,113

 

Management, development and leasing fees

 

 

2,025

 

 

 

2,520

 

 

 

9,350

 

 

 

10,542

 

Other

 

 

7,016

 

 

 

12,454

 

 

 

21,360

 

 

 

18,902

 

Total revenues

 

 

189,505

 

 

 

216,881

 

 

 

768,163

 

 

 

858,557

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating

 

 

(26,049

)

 

 

(29,660

)

 

 

(108,905

)

 

 

(122,017

)

Depreciation and amortization

 

 

(59,308

)

 

 

(68,140

)

 

 

(257,746

)

 

 

(285,401

)

Real estate taxes

 

 

(17,699

)

 

 

(20,554

)

 

 

(75,465

)

 

 

(82,291

)

Maintenance and repairs

 

 

(11,955

)

 

 

(11,591

)

 

 

(46,282

)

 

 

(48,304

)

General and administrative

 

 

(15,280

)

 

 

(13,661

)

 

 

(64,181

)

 

 

(61,506

)

Loss on impairment

 

 

(37,400

)

 

 

(89,885

)

 

 

(239,521

)

 

 

(174,529

)

Litigation settlement

 

 

3,708

 

 

 

 

 

 

(61,754

)

 

 

 

Other

 

 

(50

)

 

 

(410

)

 

 

(91

)

 

 

(787

)

Total operating expenses

 

 

(164,033

)

 

 

(233,901

)

 

 

(853,945

)

 

 

(774,835

)

OTHER INCOME (EXPENSES):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

552

 

 

 

1,144

 

 

 

2,764

 

 

 

1,858

 

Interest expense

 

 

(49,266

)

 

 

(56,874

)

 

 

(206,261

)

 

 

(220,038

)

Gain on extinguishment of debt

 

 

 

 

 

 

 

 

71,722

 

 

 

 

Gain on investments/deconsolidation

 

 

84,356

 

 

 

 

 

 

95,530

 

 

 

 

Gain on sales of real estate assets

 

 

2,463

 

 

 

2,616

 

 

 

16,274

 

 

 

19,001

 

Income tax benefit (provision)

 

 

(32

)

 

 

(295

)

 

 

(2,654

)

 

 

1,551

 

Equity in earnings of unconsolidated affiliates

 

 

1,519

 

 

 

4,808

 

 

 

4,940

 

 

 

14,677

 

Total other income (expenses)

 

 

39,592

 

 

 

(48,601

)

 

 

(17,685

)

 

 

(182,951

)

Net income (loss)

 

 

65,064

 

 

 

(65,621

)

 

 

(103,467

)

 

 

(99,229

)

Net (income) loss attributable to noncontrolling interests in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Partnership

 

 

(7,210

)

 

 

10,710

 

 

 

19,906

 

 

 

19,688

 

Other consolidated subsidiaries

 

 

(108

)

 

 

604

 

 

 

(739

)

 

 

973

 

Net income (loss) attributable to the Company

 

 

57,746

 

 

 

(54,307

)

 

 

(84,300

)

 

 

(78,568

)

Preferred dividends declared

 

 

 

 

 

(11,223

)

 

 

(33,669

)

 

 

(44,892

)

Preferred dividends undeclared

 

 

(11,223

)

 

 

 

 

 

(11,223

)

 

 

 

Net income (loss) attributable to common shareholders

 

$

46,523

 

 

$

(65,530

)

 

$

(129,192

)

 

$

(123,460

)

Basic and diluted per share data attributable to common

   shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders

 

$

0.27

 

 

$

(0.38

)

 

$

(0.74

)

 

$

(0.72

)

Weighted-average common and potential dilutive common shares

   outstanding

 

 

173,578

 

 

 

172,665

 

 

 

173,445

 

 

 

172,486

 

 

(1)

See "Adoption of Lease Accounting Standard" on page 6 for further information on the presentation of rental revenues in accordance with the new standard adopted effective January 1, 2019.

8


 

CBL & Associates Properties, Inc.

Supplemental Financial and Operating Information

For the Three Months and Year Ended December 31, 2019

The Company's reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders is as follows:

(in thousands, except per share data)

 

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income (loss) attributable to common shareholders

 

$

46,523

 

 

$

(65,530

)

 

$

(129,192

)

 

$

(123,460

)

Noncontrolling interest in income (loss) of Operating Partnership

 

 

7,210

 

 

 

(10,710

)

 

 

(19,906

)

 

 

(19,688

)

Depreciation and amortization expense of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated properties

 

 

59,308

 

 

 

68,140

 

 

 

257,746

 

 

 

285,401

 

Unconsolidated affiliates

 

 

12,835

 

 

 

10,681

 

 

 

49,434

 

 

 

41,858

 

Non-real estate assets

 

 

(931

)

 

 

(913

)

 

 

(3,650

)

 

 

(3,661

)

Noncontrolling interests' share of depreciation and amortization in other

   consolidated subsidiaries

 

 

(1,355

)

 

 

(2,177

)

 

 

(8,191

)

 

 

(8,601

)

Loss on impairment, net of taxes

 

 

37,400

 

 

 

89,773

 

 

 

239,521

 

 

 

174,416

 

Loss on impairment of unconsolidated affiliates

 

 

 

 

 

 

 

 

 

 

 

1,022

 

Gain on depreciable property, net of taxes

 

 

(83,783

)

 

 

(1,941

)

 

 

(105,538

)

 

 

(7,484

)

FFO allocable to Operating Partnership common unitholders

 

 

77,207

 

 

 

87,323

 

 

 

280,224

 

 

 

339,803

 

Litigation settlement, net of taxes (1)

 

 

(3,708

)

 

 

 

 

 

61,271

 

 

 

 

Non-cash default interest expense (2)

 

 

1,146

 

 

 

1,669

 

 

 

1,688

 

 

 

5,285

 

Gain on extinguishment of debt (3)

 

 

 

 

 

 

 

 

(71,722

)

 

 

 

FFO allocable to Operating Partnership common unitholders, as

   adjusted

 

$

74,645

 

 

$

88,992

 

 

$

271,461

 

 

$

345,088

 

FFO per diluted share

 

$

0.39

 

 

$

0.44

 

 

$

1.40

 

 

$

1.70

 

FFO, as adjusted, per diluted share

 

$

0.37

 

 

$

0.45

 

 

$

1.36

 

 

$

1.73

 

Weighted-average common and potential dilutive common shares

   outstanding with Operating Partnership units fully converted

 

 

200,201

 

 

 

199,430

 

 

 

200,169

 

 

 

199,580

 

 

(1)

The three months ended December 31, 2019 represents a reduction of $3,708 to the accrued expense related to the settlement of a class action lawsuit that was recorded in the three months ended March 31, 2019. The year ended December 31, 2019 is comprised of the accrued maximum expense of $88,150 recorded in the three months ended March 31, 2019 less total subsequent reductions of $26,396 pursuant to the terms of the settlement agreement related to past tenants that did not submit a claim pursuant to the terms of the settlement agreement, tenants that opted out of the lawsuit and other permissible reductions.

(2)

The three months ended December 31, 2019 includes default interest expense related to Greenbrier Mall and Hickory Point Mall. The year ended December 31, 2019 includes default interest expense related to Acadiana Mall, Cary Towne Center, Greenbrier Mall and Hickory Point Mall. The three months and year ended December 31, 2018 include default interest expense related to Acadiana Mall, Cary Towne Center and Triangle Town Center.

(3)

The year ended December 31, 2019 includes a gain on extinguishment of debt related to the non-recourse loan secured by Acadiana Mall, which was conveyed to the lender in the first quarter of 2019, and a gain on extinguishment of debt related to the non-recourse loan secured by Cary Towne Center, which was sold in the first quarter of 2019.

9


 

CBL & Associates Properties, Inc.

Supplemental Financial and Operating Information

For the Three Months and Year Ended December 31, 2019

The reconciliation of diluted EPS to FFO per diluted share is as follows:

 

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Diluted EPS attributable to common shareholders

 

$

0.27

 

 

$

(0.38

)

 

$

(0.74

)

 

$

(0.72

)

Eliminate amounts per share excluded from FFO:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense, including amounts from

   consolidated properties, unconsolidated affiliates, non-real estate

   assets and excluding amounts allocated to noncontrolling

   interests

 

 

0.35

 

 

 

0.38

 

 

 

1.48

 

 

 

1.58

 

Loss on impairment, net of taxes

 

 

0.19

 

 

 

0.45

 

 

 

1.19

 

 

 

0.88

 

Gain on depreciable property, net of taxes

 

 

(0.42

)

 

 

(0.01

)

 

 

(0.53

)

 

 

(0.04

)

FFO per diluted share

 

$

0.39

 

 

$

0.44

 

 

$

1.40

 

 

$

1.70

 

 

The reconciliations of FFO allocable to Operating Partnership common unitholders to FFO allocable to common shareholders, including and excluding the adjustments noted above, are as follows:

 

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

FFO allocable to Operating Partnership common unitholders

 

$

77,207

 

 

$

87,323

 

 

$

280,224

 

 

$

339,803

 

Percentage allocable to common shareholders (1)

 

 

86.70

%

 

 

86.58

%

 

 

86.65

%

 

 

86.42

%

FFO allocable to common shareholders

 

$

66,938

 

 

$

75,604

 

 

$

242,814

 

 

$

293,658

 

FFO allocable to Operating Partnership common unitholders, as

   adjusted

 

$

74,645

 

 

$

88,992

 

 

$

271,461

 

 

$

345,088

 

Percentage allocable to common shareholders (1)

 

 

86.70

%

 

 

86.58

%

 

 

86.65

%

 

 

86.42

%

FFO allocable to common shareholders, as adjusted

 

$

64,717

 

 

$

77,049

 

 

$

235,221

 

 

$

298,225

 

 

(1)

Represents the weighted-average number of common shares outstanding for the period divided by the sum of the weighted-average number of common shares and the weighted-average number of Operating Partnership units outstanding during the period. See the reconciliation of shares and Operating Partnership units outstanding on page 14.

10


 

CBL & Associates Properties, Inc.

Supplemental Financial and Operating Information

For the Three Months and Year Ended December 31, 2019

 

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

SUPPLEMENTAL FFO INFORMATION:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease termination fees

 

$

856

 

 

$

317

 

 

$

3,794

 

 

$

10,105

 

Lease termination fees per share

 

$

 

 

$

 

 

$

0.02

 

 

$

0.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Straight-line rental income

 

$

984

 

 

$

(1,108

)

 

$

3,286

 

 

$

(5,031

)

Straight-line rental income per share

 

$

 

 

$

(0.01

)

 

$

0.02

 

 

$

(0.03

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains on outparcel sales, net of taxes

 

$

3,021

 

 

$

1,679

 

 

$

5,915

 

 

$

13,138

 

Gains on outparcel sales, net of taxes per share

 

$

0.02

 

 

$

0.01

 

 

$

0.03

 

 

$

0.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net amortization of acquired above- and below-market leases

 

$

930

 

 

$

662

 

 

$

2,962

 

 

$

1,644

 

Net amortization of acquired above- and below-market leases per share

 

$

 

 

$

 

 

$

0.01

 

 

$

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net amortization of debt premiums and discounts

 

$

334

 

 

$

316

 

 

$

1,316

 

 

$

1,043

 

Net amortization of debt premiums and discounts per share

 

$

 

 

$

 

 

$

0.01

 

 

$

0.01