Press Release

CORRECTING and REPLACING CBL Properties Reports Results for Third Quarter 2019

Company Release - 11/13/2019 9:00 AM ET

Results In-Line; Guidance Range Maintained

CHATTANOOGA, Tenn.--(BUSINESS WIRE)-- Please replace the revised version to correct certain Q3 2019 financial information issued October 31, 2019, at 4:15p.m. ET.  Please refer to Form 8-K/A furnished on November 13, 2019 for additional information.

The corrected release reads:

CBL PROPERTIES REPORTS RESULTS FOR THIRD QUARTER 2019

Results In-Line; Guidance Range Maintained

CBL Properties (NYSE:CBL) announced results for the third quarter ended September 30, 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
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

%

 

2019

 

2018

 

%

Net loss attributable to common shareholders per diluted share

$

(0.52

)

 

$

(0.07

)

 

(642.9

)%

 

$

(1.01

)

 

$

(0.34

)

 

(197.1

)%

Funds from Operations ("FFO") per diluted share

$

0.45

 

 

$

0.39

 

 

15.4

%

 

$

1.01

 

 

$

1.26

 

 

(19.8

)%

FFO, as adjusted, per diluted share (1)

$

0.34

 

 

$

0.40

 

 

(15.0

)%

 

$

0.98

 

 

$

1.28

 

 

(23.4

)%

 

(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 loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders on page 11 of this news release.

KEY TAKEAWAYS:

  • Same-center sales per square foot for the stabilized mall portfolio for the third quarter improved 3.2%. For the twelve-months ended September 30, 2019, same-center sales increased 1.1% to $383 per square foot compared with the prior-year period.
  • CBL made significant progress on its anchor redevelopment program, including 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 $0.34 for the third quarter 2019, compared with $0.40 per share for the third quarter 2018. Third quarter 2019 FFO per share was impacted by $0.02 per share of dilution from asset sales completed since the prior-year period and $0.04 per share of lower property NOI.
  • Total Portfolio Same-center NOI declined 5.9% for the three months and declined 5.5% for the nine months ended September 30, 2019, as compared with the prior-year periods.
  • Portfolio occupancy as of September 30, 2019, was 90.5%, representing a 30 basis point improvement sequentially, and a 150 basis point decline compared with 92.0% as of September 30, 2018. Same-center mall occupancy was 88.7% as of September 30, 2019, a 60 basis point improvement sequentially and a 200 basis point decline compared with 90.7% as of September 30, 2018.
  • Year-to-date, CBL has completed or announced gross asset sales totaling $161.4 million (details herein).

"Third quarter results demonstrated the resiliency of our portfolio of market dominant properties. With adjusted FFO per share of $0.34 and portfolio same-center NOI of (5.9)%, we are on track to achieve full-year results within the mid-to-high end of our reaffirmed guidance range,” said Stephen D. Lebovitz, Chief Executive Officer. "Operational results were also in-line with improved sales and spreads on new leasing, and our reserve was able to offset additional retailer bankruptcies, store closings and restructurings. For the third quarter, portfolio sales increased 3.2%, bringing our rolling twelve-month sales to $383 per square foot. This trend should provide a positive backdrop for us during the holiday season as well as on future lease negotiations.

"Last week, we celebrated the grand opening of the redevelopment of the former Sears at Brookfield Square in Milwaukee, which represents a milestone in our portfolio transformation strategy. The project has generated a huge amount of excitement with new-to-market entertainment users Whirlyball and Movie Tavern by Marcus Theatres and in-demand restaurants, services and shops. The adjacent city-owned hotel and convention center opening next year will provide an added source of traffic.

"The Brookfield Square project is a great example of our strategy of utilizing redevelopments to transform our properties into suburban town centers. In this case, we are combining successful retail, entertainment, restaurants, fitness and non-retail elements, including medical office and the hotel/convention center. Across our portfolio, we are diversifying our tenant mix in our shop leasing efforts, and we are pursuing opportunities to make more productive use of available land. Year-to-date, 74% of new mall leasing was executed with non-apparel tenants. We also recently commenced construction with joint venture partners on two new self-storage projects and a hotel and have several additional non-retail projects on the drawing board. These projects demonstrate the tangible progress and creativity that helps bring us closer to our goal of stabilizing revenues and returning to growth."

Net loss attributable to common shareholders for the third quarter 2019 was $90.1 million, or a loss of $0.52 per diluted share, compared with a net loss of $12.6 million, or a loss of $0.07 per diluted share, for the third quarter 2018. Net loss for the third quarter 2019 was impacted by a $135.7 million loss on impairment of real estate to write down the carrying values of Mid Rivers Mall and Laurel Park Place to the properties' estimated fair values. The impairments were primarily a result of declines in projected future cash flows. Net loss for the third quarter 2019 also included a $22.7 million reduction to the class-action litigation expense accrued during 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 third quarter 2019 was $58.7 million, or $0.34 per diluted share, compared with $68.6 million, or $0.40 per diluted share, for the third quarter 2018. FFO allocable to the Operating Partnership common unitholders, as adjusted, for the third quarter 2019 was $67.8 million compared with $79.2 million for the third quarter 2018.

 

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

 

 

Three Months Ended
September 30, 2019

 

Nine Months Ended
September 30, 2019

Portfolio same-center NOI

 

(5.9

)%

 

(5.5

)%

Mall same-center NOI

 

(6.9

)%

 

(6.4

)%

(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 quarter ended September 30, 2019, include:

  • Same-center NOI declined $8.7 million, due to a $10.0 million decrease in revenues offset by a $1.3 million decline in operating expenses.
  • Rental revenues declined $12.5 million, including a $6.9 million decline in tenant reimbursements and a $5.6 million decline in minimum and other rents. Percentage rents were flat.
  • Property operating expenses declined $1.1 million compared with the prior year. Maintenance and repair expenses declined $0.3 million. Real estate tax expenses increased $0.1 million.

PORTFOLIO OPERATIONAL RESULTS

Occupancy(1):

 

 

 

As of September 30,

 

 

2019

 

2018

Portfolio occupancy

 

90.5

%

 

92.0

%

Mall portfolio

 

88.7

%

 

90.5

%

Same-center malls

 

88.7

%

 

90.7

%

Stabilized malls

 

88.8

%

 

90.8

%

Non-stabilized malls (2)

 

83.8

%

 

73.6

%

Associated centers

 

96.3

%

 

97.2

%

Community centers

 

96.3

%

 

96.8

%

 

(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
September 30,
2019

 

Nine Months
Ended
September 30,
2019

Stabilized Malls

(6.3

)%

 

(6.9

)%

New leases

18.9

%

 

9.3

%

Renewal leases

(11.0

)%

 

(9.6

)%

 

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

 

 

Twelve Months Ended September 30,

 

2019

 

2018

 

% Change

Stabilized mall same-center sales per square foot

$

 

383

 

$

 

379

 

1.1

%

Stabilized mall sales per square foot

$

 

383

 

$

 

378

 

1.3

%

 

DISPOSITIONS

Year-to-date, CBL has closed on $161.4 million in asset sales, as detailed below.

In August, CBL closed on the sale of a 25% interest in The Outlet Shoppes at El Paso to its existing joint venture partner, Horizon Group Properties ("Horizon"), for cash of $9.3 million and the assumption of 25% interest in the existing loan (representing $18.5 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.

 

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

$

27.6

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

El Paso, TX

August

$

27.8

Total

 

 

$

161.4

(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.

DIVIDEND

In March 2019, CBL suspended its quarterly common dividend for two quarters. Prior to year-end, CBL will complete its review of taxable income projections and announce its common dividend policy for 2020. Consistent with CBL's strategy of maximizing internal cash flow available for investing and debt reduction, CBL intends to pay the minimum common dividend required, if any, to distribute taxable income.

ANCHOR REPLACEMENT PROGRESS AND REDEVELOPMENT

CBL recently marked the completion of the Sears redevelopment at Brookfield Square in Milwaukee, Wisconsin. Construction on the approximately 120,000-square-foot project, which included razing the entire Sears building, began in April 2018, and delivered new-to-market dining, entertainment, and other uses to the property.

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

CherryVale Mall

Bergner's

 

Choice Home Center

Open

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

November 2019

Frontier Mall

Sears

 

Jax Outdoor Gear

November 2019

Stroud Mall

Sears

 

Furniture Outlet

December 2019

Dakota Square

Herberger's

 

Ross Dress for Less

January 2020

Hamilton Place

Sears

 

Dick's Sporting Goods, Dave & Busters, Aloft Hotel, office

Under construction -Spring 2020/ 2021 (Aloft)

CherryVale Mall

Sears

 

Tilt

Under construction - Q1/Q2 '20

Imperial Valley

Sears

 

Hobby Lobby

Under construction - 2020

Westmoreland Mall

BonTon

 

Stadium Live! Casino

2020

York Galleria

Sears

 

Penn National Casino

2020

Richland Mall

Sears

 

Dillard's

2020

Cross Creek Mall

Sears

 

Entertainment User

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

 

OUTLOOK AND GUIDANCE

CBL anticipates achieving 2019 FFO, as adjusted, in the range of $1.30 - $1.35 per diluted share, which is consistent with guidance provided in the prior quarter. Guidance incorporates a reserve in the range of $5.0 - $15.0 million (the "Reserve") for potential future unbudgeted loss in rent from tenant bankruptcies, store closures or lease modifications that may occur in 2019. Based on bankruptcy and leasing activity year-to-date, including the impact of any co-tenancy, CBL currently expects to utilize approximately $8 - $10 million of the Reserve.

Key assumptions underlying guidance are as follows:

 

 

Low

 

High

2019 FFO, as adjusted, per share (includes the Reserve)

1.30

 

1.35

2019 Change in Same-Center NOI ("SC NOI") (includes the Reserve)

(7.75)%

 

(6.25)%

Reserve for unbudgeted lost rents included in SC NOI and FFO

$15.0 million

 

$5.0 million

Updated expectation for gains on outparcel sales

$2.0 million

 

$4.0 million

 

Reconciliation of GAAP net income (loss) to 2019 FFO, as adjusted, per share guidance:

 

 

Low

 

High

Expected diluted earnings per common share

$

(1.10

)

 

$

(1.05

)

Adjust to fully converted shares from common shares

0.15

 

 

0.15

 

Expected earnings per diluted, fully converted common share

(0.95

)

 

(0.90

)

Add: depreciation and amortization

1.53

 

 

1.53

 

Less: gain on depreciable property

(0.11

)

 

(0.11

)

Add: loss on impairment

1.01

 

 

1.01

 

Add: noncontrolling interest in loss of Operating Partnership

(0.14

)

 

(0.14

)

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

$

1.34

 

 

$

1.39

 

Add: Litigation settlement

0.32

 

 

0.32

 

Adjustment for certain significant items

(0.36

)

 

(0.36

)

Expected adjusted FFO per diluted, fully converted common share

$

1.30

 

 

$

1.35

 

 

INVESTOR CONFERENCE CALL AND WEBCAST

CBL Properties will host a conference call on Friday, November 1, 2019, at 11:00 a.m. ET. To access this interactive teleconference, dial (888) 317‑6003 or (412) 317-6061 and enter the confirmation number, 7355952. A replay of the conference call will be available through November 8, 2019, by dialing (877) 344-7529 or (412) 317‑0088 and entering the confirmation number, 10134286.

The Company will also provide an online webcast and rebroadcast of its third quarter 2019 earnings release conference call. The live broadcast of the quarterly conference call will be available online at cblproperties.com on Friday, November 1, 2019, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call.

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

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 continuously strengthens 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 11 of this news release for a description of these adjustments.

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.

 

CBL & Associates Properties, Inc.

Consolidated Statements of Operations

(Unaudited; in thousands, except per share amounts)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2019

 

2018

 

2019

 

2018

 

REVENUES (1):

 

 

 

 

 

 

 

 

Rental revenues

$

180,616

 

 

$

200,311

 

 

$

556,989

 

 

$

620,608

 

 

Management, development and leasing fees

2,216

 

 

2,658

 

 

7,325

 

 

8,022

 

 

Other

4,419

 

 

3,909

 

 

14,344

 

 

13,046

 

 

Total revenues

187,251

 

 

206,878

 

 

578,658

 

 

641,676

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

Property operating

(27,344

)

 

(30,004

)

 

(82,856

)

 

(92,357

)

 

Depreciation and amortization

(64,168

)

 

(71,945

)

 

(198,438

)

 

(217,261

)

 

Real estate taxes

(18,699

)

 

(19,433

)

 

(57,766

)

 

(61,737

)

 

Maintenance and repairs

(10,253

)

 

(11,475

)

 

(34,327

)

 

(36,713

)

 

General and administrative

(12,467

)

 

(16,051

)

 

(48,901

)

 

(47,845

)

 

Loss on impairment

(135,688

)

 

(14,600

)

 

(202,121

)

 

(84,644

)

 

Litigation settlement

22,688

 

 

 

 

(65,462

)

 

 

 

Other

(7

)

 

(38

)

 

(41

)

 

(377

)

 

Total operating expenses

(245,938

)

 

(163,546

)

 

(689,912

)

 

(540,934

)

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSES):

 

 

 

 

 

 

 

 

Interest and other income

1,367

 

 

283

 

 

2,212

 

 

714

 

 

Interest expense

(50,515

)

 

(55,194

)

 

(156,995

)

 

(163,164

)

 

Gain on extinguishment of debt

 

 

 

 

71,722

 

 

 

 

Gain on investments/deconsolidation

11,174

 

 

 

 

11,174

 

 

387

 

 

Gain on sales of real estate assets

8,056

 

 

7,880

 

 

13,811

 

 

15,998

 

 

Income tax benefit (provision)

(1,670

)

 

(1,034

)

 

(2,622

)

 

1,846

 

 

Equity in earnings (losses) of unconsolidated affiliates

(1,759

)

 

1,762

 

 

3,421

 

 

9,869

 

 

Total other expenses

(33,347

)

 

(46,303

)

 

(57,277

)

 

(134,350

)

 

Net loss

(92,034

)

 

(2,971

)

 

(168,531

)

 

(33,608

)

 

Net (income) loss attributable to noncontrolling interests in:

 

 

 

 

 

 

 

 

Operating Partnership

13,904

 

 

1,628

 

 

27,116

 

 

8,978

 

 

Other consolidated subsidiaries

(763

)

 

(24

)

 

(631

)

 

369

 

 

Net loss attributable to the Company

(78,893

)

 

(1,367

)

 

(142,046

)

 

(24,261

)

 

Preferred dividends

(11,223

)

 

(11,223

)

 

(33,669

)

 

(33,669

)

 

Net loss attributable to common shareholders

$

(90,116

)

 

$

(12,590

)

 

$

(175,715

)

 

$

(57,930

)

 

 

 

 

 

 

 

 

 

 

Basic and diluted per share data attributable to common shareholders:

 

 

 

 

 

 

 

 

Net loss attributable to common shareholders

$

(0.52

)

 

$

(0.07

)

 

$

(1.01

)

 

$

(0.34

)

 

Weighted-average common and potential dilutive common shares outstanding

173,471

 

 

172,665

 

 

173,400

 

 

172,426

 

 

 

 

 

 

 

 

 

 

 

(1) See "Adoption of New 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.

The Company's reconciliation of net 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
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Net loss attributable to common shareholders

$

(90,116

)

 

$

(12,590

)

 

$

(175,715

)

 

$

(57,930

)

Noncontrolling interest in loss of Operating Partnership

(13,904

)

 

(1,628

)

 

(27,116

)

 

(8,978

)

Depreciation and amortization expense of:

 

 

 

 

 

 

 

Consolidated properties

64,168

 

 

71,945

 

 

198,438

 

 

217,261

 

Unconsolidated affiliates

14,471

 

 

10,438

 

 

36,599

 

 

31,177

 

Non-real estate assets

(920

)

 

(910

)

 

(2,719

)

 

(2,748

)

Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries

(2,031

)

 

(2,136

)

 

(6,836

)

 

(6,424

)

Loss on impairment

135,688

 

 

14,600

 

 

202,121

 

 

84,644

 

Loss on impairment of unconsolidated affiliates

 

 

1,022

 

 

 

 

1,022

 

Gain on depreciable property, net of taxes

(16,914

)

 

(3,307

)

 

(21,755

)

 

(5,543

)

FFO allocable to Operating Partnership common unitholders

90,442

 

 

77,434

 

 

203,017

 

 

252,481

 

Litigation settlement, net of taxes (1)

(22,688

)

 

 

 

64,979

 

 

 

Gain on investments, net of taxes (2)

 

 

 

 

 

 

(287

)

Non-cash default interest expense (3)

 

 

1,784

 

 

542

 

 

3,616

 

Gain on extinguishment of debt (4)

 

 

 

 

(71,722

)

 

 

FFO allocable to Operating Partnership common unitholders, as adjusted

$

67,754

 

 

$

79,218

 

 

$

196,816

 

 

$

255,810

 

 

 

 

 

 

 

 

 

FFO per diluted share

$

0.45

 

 

$

0.39

 

 

$

1.01

 

 

$

1.26

 

 

 

 

 

 

 

 

 

FFO, as adjusted, per diluted share

$

0.34

 

 

$

0.40

 

 

$

0.98

 

 

$

1.28

 

 

 

 

 

 

 

 

 

Weighted-average common and potential dilutive common shares outstanding with Operating Partnership units fully converted

200,230

 

 

199,432

 

 

200,158

 

 

199,630

 

 

 

 

 

 

 

 

 

(1) The three months ended September 30, 2019 represents a reduction of $22,688 to the accrued maximum expense of $88,150 related to the settlement of a class action lawsuit that was recorded in the three months ended March 31, 2019. A majority of the reduction of $22,688 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. The nine months ended September 30, 2019 is comprised of the accrued maximum expense related to the settlement of a class action lawsuit less the reduction recorded in the three months ended September 30, 2019.
(2) The nine months ended September 30, 2018 includes a gain on investment related to the land contributed by the Company to the Self-Storage at Mid Rivers 50/50 joint venture.
(3) The nine months ended September 30, 2019 includes default interest expense related to Acadiana Mall and Cary Towne Center. The three months and nine months ended September 30, 2018 include default interest expense related to Acadiana Mall and Cary Towne Center.
(4) The nine months ended September 30, 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.

 

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

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Diluted EPS attributable to common shareholders

$

(0.52

)

 

$

(0.07

)

 

$

(1.01

)

 

$

(0.34

)

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

0.38

 

 

0.40

 

 

1.13

 

 

1.20

 

Loss on impairment

0.68

 

 

0.08

 

 

1.00

 

 

0.43

 

Gain on depreciable property, net of taxes

(0.09

)

 

(0.02

)

 

(0.11

)

 

(0.03

)

FFO per diluted share

$

0.45

 

 

$

0.39

 

 

$

1.01

 

 

$

1.26

 

 

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
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

FFO allocable to Operating Partnership common unitholders

$

90,442

 

 

$

77,434

 

 

$

203,017

 

 

$

252,481

 

Percentage allocable to common shareholders (1)

86.64

%

 

86.58

%

 

86.63

%

 

86.37

%

FFO allocable to common shareholders

$

78,359

 

 

$

67,042

 

 

$

175,874

 

 

$

218,068

 

 

 

 

 

 

 

 

 

FFO allocable to Operating Partnership common unitholders, as adjusted

$

67,754

 

 

$

79,218

 

 

$

196,816

 

 

$

255,810

 

Percentage allocable to common shareholders (1)

86.64

%

 

86.58

%

 

86.63

%

 

86.37

%

FFO allocable to common shareholders, as adjusted

$

58,702

 

 

$

68,587

 

 

$

170,502

 

 

$

220,943

 

 

 

 

 

 

 

 

 

(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 16.

 
SUPPLEMENTAL FFO INFORMATION:

 

 

 

 

 

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Lease termination fees

$

848

 

 

$

783

 

 

$

2,938

 

 

$

9,788

 

Lease termination fees per share

$

 

 

$

 

 

$

0.01

 

 

$

0.05

 

 

 

 

 

 

 

 

 

Straight-line rental income

$

1,348

 

 

$

388

 

 

$

2,302

 

 

$

(3,923

)

Straight-line rental income per share

$

0.01

 

 

$

 

 

$

0.01

 

 

$

(0.02

)

 

 

 

 

 

 

 

 

Gains on outparcel sales, net of taxes

$

1,961

 

 

$

4,548

 

 

$

2,894

 

 

$

11,033

 

Gains on outparcel sales, net of taxes per share

$

0.01

 

 

$

0.02

 

 

$

0.01

 

 

$

0.06

 

 

 

 

 

 

 

 

 

Net amortization of acquired above- and below-market leases

$

533

 

 

$

(1,210

)

 

$

2,032

 

 

$

982

 

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

$

 

 

$

(0.01

)

 

$

0.01

 

 

$

 

 

 

 

 

 

 

 

 

Net amortization of debt premiums and discounts

$

333

 

 

$

314

 

 

$

982

 

 

$

727

 

Net amortization of debt premiums and discounts per share

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

Income tax benefit (provision)

$

(1,670

)

 

$

(1,034

)

 

$

(2,622

)

 

$

1,846

 

Income tax benefit (provision) per share

$

(0.01

)

 

$

(0.01

)

 

$

(0.01

)

 

$

0.01

 

 

 

 

 

 

 

 

 

Gain on extinguishment of debt

$

 

 

$

 

 

$

71,722

 

 

$

 

Gain on extinguishment of debt per share

$

 

 

$

 

 

$

0.36

 

 

$

 

 

 

 

 

 

 

 

 

Gain on investments, net of taxes

$

 

 

$

 

 

$

 

 

$

287

 

Gain on investments, net of taxes per share

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

Non-cash default interest expense

$

 

 

$

(1,784

)

 

$

(542

)

 

$

(3,616

)

Non-cash default interest expense per share

$

 

 

$

(0.01

)

 

$

 

 

$

(0.02

)

 

 

 

 

 

 

 

 

Abandoned projects expense

$

(7

)

 

$

(38

)

 

$

(41

)

 

$

(377

)

Abandoned projects expense per share

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

Interest capitalized

$

787

 

 

$

1,198

 

 

$

1,969

 

 

$

2,736

 

Interest capitalized per share

$

 

 

$

0.01

 

 

$

0.01

 

 

$

0.01

 

 

 

 

 

 

 

 

 

Litigation settlement, net of taxes

$

22,688

 

 

$

 

 

$

(64,979

)

 

$

 

Litigation settlement, net of taxes per share

$

0.11

 

 

$

 

 

$

(0.32

)

 

$

 

 

 

As of September 30,

 

2019

 

2018

Straight-line rent receivable

$

55,974

 

 

$

57,284

 

 

Same-center Net Operating Income

(Dollars in thousands)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Net loss

$

(92,034

)

 

$

(2,971

)

 

$

(168,531

)

 

$

(33,608

)

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

Depreciation and amortization

64,168

 

 

71,945

 

 

198,438

 

 

217,261

 

Depreciation and amortization from unconsolidated affiliates

14,471

 

 

10,438

 

 

36,599

 

 

31,177

 

Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries

(2,031

)

 

(2,136

)

 

(6,836

)

 

(6,424

)

Interest expense

50,515

 

 

55,194

 

 

156,995

 

 

163,164

 

Interest expense from unconsolidated affiliates

6,686

 

 

6,551

 

 

19,842

 

 

18,849

 

Noncontrolling interests' share of interest expense in other consolidated subsidiaries

(1,561

)

 

(1,875

)

 

(5,044

)

 

(5,912

)

Abandoned projects expense

7

 

 

38

 

 

41

 

 

377

 

Gain on sales of real estate assets

(8,056

)

 

(7,880

)

 

(13,811

)

 

(15,998

)

(Gain) loss on sales of real estate assets of unconsolidated affiliates

 

 

28

 

 

(627

)

 

(564

)

Gain on investments/deconsolidation

(11,174

)

 

 

 

(11,174

)

 

(387

)

Gain on extinguishment of debt

 

 

 

 

(71,722

)

 

 

Loss on impairment

135,688

 

 

14,600

 

 

202,121

 

 

84,644

 

Litigation settlement

(22,688

)

 

 

 

65,462

 

 

 

Income tax (benefit) provision

1,670

 

 

1,034

 

 

2,622

 

 

(1,846

)

Lease termination fees

(848

)

 

(783

)

 

(2,938

)

 

(9,788

)

Straight-line rent and above- and below-market lease amortization

(1,881

)

 

822

 

 

(4,334

)

 

2,941

 

Net (income) loss attributable to noncontrolling interests in other consolidated subsidiaries

(763

)

 

(24

)

 

(631

)

 

369

 

General and administrative expenses

12,467

 

 

16,051

 

 

48,901

 

 

47,845

 

Management fees and non-property level revenues

(2,293

)

 

(2,293

)

 

(9,077

)

 

(9,642

)

Operating Partnership's share of property NOI

142,343

 

 

158,739

 

 

436,296

 

 

482,458

 

Non-comparable NOI

(3,292

)

 

(10,967

)

 

(14,855

)

 

(36,409

)

Total same-center NOI (1)

$

139,051

 

 

$

147,772

 

 

$

421,441

 

 

$

446,049

 

Total same-center NOI percentage change

(5.9

)%

 

(5.5

)%

 

 

Same-center Net Operating Income

(Continued)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

2019

 

2018

 

2019

 

2018

Malls

$

124,649

 

 

$

133,908

 

 

$

378,364

 

 

$

404,369

 

Associated centers

8,317

 

 

8,133

 

 

24,610

 

 

24,094

 

Community centers

5,052

 

 

4,869

 

 

15,216

 

 

14,610

 

Offices and other

1,033

 

 

862

 

 

3,251

 

 

2,976

 

Total same-center NOI (1)

$

139,051

 

 

$

147,772

 

 

$

421,441

 

 

$

446,049

 

 

 

 

 

 

 

 

 

Percentage Change:

 

 

 

 

 

 

 

Malls

(6.9

)%

 

 

 

(6.4

)%

 

 

Associated centers

2.3

%

 

 

 

2.1

%

 

 

Community centers

3.8

%

 

 

 

4.1

%

 

 

Offices and other

19.8

%

 

 

 

9.2

%

 

 

Total same-center NOI (1)

(5.9

)%

 

 

 

(5.5

)%

 

 

 

(1) CBL 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). Same-center NOI excludes lease termination income, straight-line rent adjustments, amortization of above and below market lease intangibles and write-offs of landlord inducement assets. We include a property in our same-center pool when we own all or a portion of the property as of September 30, 2019, and we owned it and it was in operation for both the entire preceding calendar year and the current year-to-date reporting period ending September 30, 2019. New properties are excluded from same-center NOI, until they meet this criteria. Properties excluded from the same-center pool that would otherwise meet this criteria are properties which are either under major redevelopment or being considered for repositioning, where we intend to renegotiate the terms of the debt secured by the related property or return the property to the lender.

 

Company's Share of Consolidated and Unconsolidated Debt

(Dollars in thousands)

 

 

As of September 30, 2019

 

Fixed Rate

 

Variable
Rate

 

Total per Debt
Schedule

 

Unamortized
Deferred
Financing Costs

 

Total

Consolidated debt

$

2,860,889

 

 

$

855,758

 

 

$

3,716,647

 

 

$

(17,640

)

 

$

3,699,007

 

Noncontrolling interests' share of consolidated debt

(74,486

)

 

 

 

(74,486

)

 

516

 

 

(73,970

)

Company's share of unconsolidated affiliates' debt

565,242

 

 

82,995

 

 

648,237

 

 

(2,607

)

 

645,630

 

Company's share of consolidated and unconsolidated debt

$

3,351,645

 

 

$

938,753

 

 

$

4,290,398

 

 

$

(19,731

)

 

$

4,270,667

 

Weighted-average interest rate

5.10

%

 

4.40

%

 

4.95

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of September 30, 2018

 

Fixed Rate

 

Variable
Rate

 

Total per Debt
Schedule

 

Unamortized
Deferred
Financing Costs

 

Total

Consolidated debt

$

3,160,776

 

 

$

970,508

 

 

$

4,131,284

 

 

$

(15,476

)

 

$

4,115,808

 

Noncontrolling interests' share of consolidated debt

(94,787

)

 

 

 

(94,787

)

 

611

 

 

(94,176

)

Company's share of unconsolidated affiliates' debt

553,339

 

 

96,598

 

 

649,937

 

 

(2,826

)

 

647,111

 

Company's share of consolidated and unconsolidated debt

$

3,619,328

 

 

$

1,067,106

 

 

$

4,686,434

 

 

$

(17,691

)

 

$

4,668,743

 

Weighted-average interest rate

5.16

%

 

4.01

%

 

4.90

%

 

 

 

 

 

Total Market Capitalization as of September 30, 2019

(In thousands, except stock price)

 

Shares
Outstanding

 

Stock
Price (1)

 

Value

Common stock and Operating Partnership units

200,228

 

 

$

1.29

 

 

$

258,294

 

7.375% Series D Cumulative Redeemable Preferred Stock

1,815

 

 

250.00

 

 

453,750

 

6.625% Series E Cumulative Redeemable Preferred Stock

690

 

 

250.00

 

 

172,500

 

Total market equity

 

 

 

 

884,544

 

Company's share of total debt, excluding unamortized deferred financing costs

 

 

 

 

4,290,398

 

Total market capitalization

 

 

 

 

$

5,174,942

 

 

(1) Stock price for common stock and Operating Partnership units equals the closing price of the common stock on September 30, 2019. The stock prices for the preferred stocks represent the liquidation preference of each respective series.

 

Reconciliation of Shares and Operating Partnership Units Outstanding

(In thousands)

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

Basic

 

Diluted

 

Basic

 

Diluted

2019:

 

 

 

 

 

 

 

Weighted-average shares - EPS

173,471

 

 

173,471

 

 

173,400

 

 

173,400

 

Weighted-average Operating Partnership units

26,759

 

 

26,759

 

 

26,758

 

 

26,758

 

Weighted-average shares - FFO

200,230

 

 

200,230

 

 

200,158

 

 

200,158

 

 

 

 

 

 

 

 

 

2018:

 

 

 

 

 

 

 

Weighted-average shares - EPS

172,665

 

 

172,665

 

 

172,426

 

 

172,426

 

Weighted-average Operating Partnership units

26,767

 

 

26,767

 

 

27,204

 

 

27,204

 

Weighted-average shares - FFO

199,432

 

 

199,432

 

199,630

 

199,630

 

 

Consolidated Balance Sheets

(Unaudited; in thousands, except share data)

 

As of

 

September 30,
2019

 

December 31,
2018

ASSETS

 

 

 

Real estate assets:

 

 

 

Land

$

741,060

 

 

$

793,944

 

Buildings and improvements

5,819,655

 

 

6,414,886

 

 

6,560,715

 

 

7,208,830

 

Accumulated depreciation

(2,404,565

)

 

(2,493,082

)

 

4,156,150

 

 

4,715,748

 

Held for sale

 

 

30,971

 

Developments in progress

63,891

 

 

38,807

 

Net investment in real estate assets

4,220,041

 

 

4,785,526

 

Cash and cash equivalents

34,565

 

 

25,138

 

Receivables:

 

 

 

Tenant, net of allowance for doubtful accounts of $2,337 in 2018

76,947

 

 

77,788

 

Other, net of allowance for doubtful accounts of $838 in 2018

6,577

 

 

7,511

 

Mortgage and other notes receivable

5,818

 

 

7,672

 

Investments in unconsolidated affiliates

279,934

 

 

283,553

 

Intangible lease assets and other assets

146,036

 

 

153,665

 

 

$

4,769,918

 

 

$

5,340,853

 

 

 

 

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

 

 

Mortgage and other indebtedness, net

$

3,699,007

 

 

$

4,043,180

 

Accounts payable and accrued liabilities

260,264

 

 

218,217

 

Liabilities related to assets held for sale

 

 

43,716

 

Total liabilities

3,959,271

 

 

4,305,113

 

Commitments and contingencies

 

 

 

Redeemable noncontrolling interests

1,864

 

 

3,575

 

Shareholders' equity:

 

 

 

Preferred stock, $.01 par value, 15,000,000 shares authorized:

 

 

 

7.375% Series D Cumulative Redeemable Preferred Stock, 1,815,000 shares outstanding

18

 

 

18

 

6.625% Series E Cumulative Redeemable Preferred Stock, 690,000 shares outstanding

7

 

 

7

 

Common stock, $.01 par value, 350,000,000 shares authorized, 173,469,264 and 172,656,458 issued and outstanding in 2019 and 2018, respectively

1,735

 

 

1,727

 

Additional paid-in capital

1,965,230

 

 

1,968,280

 

Dividends in excess of cumulative earnings

(1,194,620

)

 

(1,005,895

)

Total shareholders' equity

772,370

 

 

964,137

 

Noncontrolling interests

36,413

 

 

68,028

 

Total equity

808,783

 

 

1,032,165

 

 

$

4,769,918

 

 

$

5,340,853

 

 

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

Source: CBL Properties