CHATTANOOGA, Tenn.--(BUSINESS WIRE)--July 19, 2005--CBL &
Associates Properties, Inc. (NYSE: CBL) today announced that it has
entered into definitive agreements whereby CBL will transfer its 8.4%
equity interest in Galileo America, LLC ("Galileo"), a joint venture
between CBL and Galileo America Inc., to Galileo. Additionally, CBL's
management and advisory contracts with Galileo will be purchased by
New Plan Excel Realty Trust, Inc. (NYSE: NXL), a shopping center REIT.
CBL will receive a total consideration of approximately $100.0 million
related to these transactions, which are expected to close in August.
Galileo was formed in November 2003 as a joint venture between CBL
and Galileo America, Inc., the U.S. affiliate of the Australia-based,
Galileo Shopping America Trust (ASX: GSA). Galileo was established to
acquire community and neighborhood shopping centers in the United
States. CBL transferred 90% of its ownership interests in 51 community
and neighborhood shopping centers to Galileo in three phases and
entered into exclusive long-term management and advisory contracts for
the centers owned or acquired by Galileo. CBL's current interest in
the joint venture is 8.4%.
CBL has agreed to transfer all management and advisory contracts
with Galileo to New Plan for a consideration of $22.0 million in cash.
CBL is expected to receive, at the third anniversary of the closing,
an additional $7.0 million in cash related to the transfer to New Plan
of CBL's future rights to manage nine properties that were recently
acquired by Galileo. CBL expects to recognize a gain on the sale of
the management and advisory contracts of $22.0 million in the third
quarter of 2005. This gain will be included in both net income
determined in accordance with generally accepted accounting principles
("GAAP") and Funds From Operations ("FFO"). CBL will pay $1.9 million
to transfer its remaining master lease obligations with Galileo to New
Plan and expects to record a gain on sale of real estate of
approximately $2.0 million in the third quarter resulting from the
transfer. This $2.0 million gain will be included in GAAP net income,
and of this amount $1.0 million will be recorded in FFO.
CBL has also entered into an agreement to transfer to Galileo its
8.4% equity interest in the joint venture in exchange for Galileo's
interest in Springdale Center in Mobile, AL, and Wilkes - Barre
Township Marketplace in Wilkes - Barre Township, PA. New Plan will
assume management and leasing of these two properties. Additionally,
CBL will have the right to put its interest in these two properties to
Galileo at any time for one year following the closing for $60.0
million in cash, as well as additional property at Springdale Center
currently held in a ground lease by CBL for $3.0 million, in cash. CBL
will realize an economic gain of $40.8 million from the sale of the
equity interest. CBL is currently reviewing the applicable accounting
standards to determine when this amount will be recognized in GAAP net
income. This gain will be included in GAAP net income, but excluded
from FFO. The Springdale and Wilkes - Barre properties are being
valued at a 7.5% cap rate.
CBL will also receive from Galileo an $8.0 million acquisition fee
at the closing of Galileo's acquisition of properties from New Plan as
well as $1.0 million per year over the three years, following closing,
for advisory services to be provided to Galileo. CBL expects to record
the $8.0 million as fee income in the third quarter of 2005, which
will be included in both GAAP net income and FFO.
The total impact to FFO in the third quarter of 2005 resulting
from these transactions is estimated at $31.0 million, or $0.26 per
fully diluted, converted share.
CBL intends to use the proceeds from the sale of the management
and advisory contracts to reduce outstanding balances on the Company's
lines of credit. The sale of CBL's equity interest in Galileo and the
management and advisory contracts are expected to produce, in
aggregate, an annual loss in FFO of approximately $0.07 per fully
diluted, converted common share. However, this loss will be offset by
the acquisition of Springdale Center and Wilkes - Barre Township
Marketplace, which will produce approximately $0.04 annually in FFO
per fully diluted, converted common share. Additionally, CBL expects
to realize approximately $0.03 per fully diluted, converted share in
annual G&A and interest expense savings. CBL also expects to record a
one-time charge to G&A in the third quarter of $0.02 per fully
diluted, converted share for compensation expense, which will be
offset by settlement of fee income with Galileo.
Commenting on the transactions, Charles B. Lebovitz, Chairman and
Chief Executive Officer said, "Our two-year joint venture with Galileo
proved valuable for both CBL and Galileo. We believe that today's
strategic transaction is opportunistic and maximizes value for our
shareholders. With a wide variety of retail formats currently under
development, CBL is successfully serving and looks forward to
continuing to serve all aspects of our retail partners' growing needs.
We are excited that our increasing pipeline of community and power
centers, regional malls and open-air lifestyle centers is one of the
strongest in our Company's history."
CBL & Associates Properties will conduct a conference call on
Wednesday, July 20, 2005, at 11:30 a.m. EDT to further discuss this
announcement and will provide an online Web simulcast and rebroadcast
of this conference call. The number to call for this interactive
teleconference is (212) 231-6006. A replay of the conference call will
be available until July 27, 2005, by dialing (402) 977-9140 and
entering the passcode, 21252691. The live Web simulcast of the
conference call will be available online at the Company's Web site at
http://cblproperties.com, as well as http://phx.corporate-ir.net/
phoenix.zhtml?p=irol-eventDetails&c=106929&eventID=1104748. (Due to
its length, this URL may need to be copied/pasted into your Internet
browser's address field. Remove the extra space if one exists.)
The online replay will follow shortly after the call and continue
through August 3, 2005.
Non GAAP Financial Measures
FFO is a widely used measure of the operating performance of real
estate companies that supplements net income determined in accordance
with generally accepted accounting principles ("GAAP"). The National
Association of Real Estate Investment Trusts defines FFO as net income
(computed in accordance with GAAP) excluding gains or losses on sales
of operating properties, plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. The
Company believes that FFO provides an additional indicator of the
operating performance of the Company's properties without giving
effect to real estate depreciation and amortization, which assumes the
value of real estate assets decline predictably over time. Since
values of well-maintained real estate assets have historically risen
or fallen with market conditions, the Company believes that FFO
enhances investors' understanding of the Company's operating
performance.
FFO does not represent cash flow from operations as defined by
accounting principles generally accepted in the United States, is not
necessarily indicative of cash available to fund all cash flow needs
and should not be considered as an alternative to net income for
purposes of evaluating the Company's operating performance or to cash
flow as measure of liquidity.
The following table provides a reconciliation of the amounts of
FFO per fully diluted, converted share discussed above with the
comparable earnings per share amounts where those amounts are
different.
Annual Loss in Impact to
FFO Net of Savings FFO in Q3 '05
------------------ -------------
Expected diluted earnings per
common share $(0.02) $0.26
Adjust to fully converted
shares from common shares 0.01 (0.12)
------ ------
Expected earnings per fully diluted,
converted common share (0.01) 0.14
Add: depreciation and amortization (0.02) -
Add: minority interest in
earnings of Operating Partnership (0.01) 0.12
------ ------
Expected FFO per fully diluted,
converted common share $(0.04) $0.26
====== ======
CBL is not able to provide a reconciliation of the annual increase
of $0.04 per fully diluted, converted share of FFO from Springdale
Center and Wilkes - Barre Township Marketplace. This is because CBL is
currently reviewing the applicable accounting standards related to
this component of the transaction and, as a result, cannot determine
the amounts of depreciation and amortization expense and the related
impact on minority interest in earnings to allow for reconciliation to
the comparable amounts of earnings per share.
CBL & Associates Properties, Inc. is the fourth largest mall REIT
in North America and the largest owner of malls and shopping centers
in the Southeast, ranked by GLA. CBL owns, holds interests in or
manages 173 properties, including 72 enclosed regional malls. The
properties are located in 30 states and total 75.7 million square feet
including 2.0 million square feet of non-owned shopping centers
managed for third parties. CBL currently has seven projects under
construction totaling approximately 1.5 million square feet. The
projects include two open-air shopping centers located in Ft. Myers,
FL, and Memphis (Southaven, MS), TN, three community centers and two
expansions. In addition to its office in Chattanooga, TN, CBL has a
regional office in Boston (Waltham), MA. Additional information can be
found at http://cblproperties.com.
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" incorporated by reference therein, for a
discussion of such risks and uncertainties.
CONTACT: CBL & Associates Properties, Inc.
Investor Contact:
Katie Knight, 423-490-8301
or
Media Contact:
Deborah Gibb, 423-490-8315
SOURCE: CBL & Associates Properties, Inc.