Press Release

CHATTANOOGA, Tenn.--(BUSINESS WIRE)-- CBL & Associates Properties, Inc. (NYSE:CBL):

• Portfolio occupancy at September 30, 2013, increased 80 basis points to 93.8% from 93.0% for the prior-year period.
• Average gross rent per square foot for stabilized mall leases signed in the third quarter of 2013 increased 12.8% over the prior gross rent per square foot.
• Same-store sales increased 0.9% to $358 per square foot for mall tenants 10,000 square feet or less for stabilized malls for the rolling twelve months ended September 30, 2013, compared with the prior-year period.
• Same-center NOI increased 1.6% for the nine months ended September 30, 2013 over the prior-year period, excluding lease termination fees and a one-time bankruptcy settlement included in the prior-year period.

CBL & Associates Properties, Inc. (NYSE:CBL) announced results for the third quarter ended September 30, 2013. A description of each non-GAAP financial measure and the related reconciliation to the comparable GAAP measure is located at the end of this news release.

“Increased occupancy, double-digit leasing spreads and strong FFO were the highlights of our third quarter as retailers continued to expand in our portfolio of market dominant malls,” noted Stephen Lebovitz, CBL’s president and chief executive officer. “The limited new supply in our markets and high rate of occupancy in our malls will enable us to offset the industry-wide slowdown in retail sales performance this quarter. Despite lower percentage rents and one-time items impacting our NOI results for the quarter, we remain on pace for our projected growth in NOI and FFO for the year.

“We made tremendous progress on our balance sheet strategy this quarter. Most significantly, we fully retired the Westfield preferred units on a leverage neutral basis with $210 million of equity raised earlier in the year through our ATM program and $220 million of portfolio-enhancing dispositions. This clearly demonstrates our ongoing ability to source capital on attractive terms. Our balance sheet is now straightforward and strong. By maintaining a proactive asset recycling program, we will generate additional liquidity to fund our new growth initiatives as well as continue to improve the quality of our portfolio.”

FFO, as adjusted, excludes a partial litigation settlement received in August 2013 of $8,240,000 included in Interest and Other Income in the third quarter of 2013. The partial settlement is related to a lawsuit filed by the Company seeking recovery of alleged property and related damages occurring at The Promenade in D'Iberville, Mississippi.

FFO allocable to common shareholders, as adjusted, for the third quarter of 2013 was $87,290,000, or $0.52 per diluted share, compared with $84,808,000, or $0.54 per diluted share, for the third quarter of 2012. FFO of the operating partnership, as adjusted, for the third quarter of 2013 was $102,465,000, compared with $101,652,000, for the third quarter of 2012. The decline in FFO per share in the quarter was primarily the result of the $0.02 per diluted share impact of the 8.4 million shares issued year-to-date through the ATM program and a $0.02 per diluted share impact from the sale of properties including the write-off of straight line rents receivable.

Net income attributable to common shareholders for the third quarter of 2013 was $23,101,000, or $0.14 per diluted share, compared with a net loss of $2,520,000, or a net loss of $0.02 per diluted share for the third quarter of 2012.

HIGHLIGHTS

• Portfolio same-center NOI for the nine months ended September 30, 2013, increased 1.6% over the prior year period, excluding lease termination fees and a one-time bankruptcy settlement of $1.2 million received in the prior year period.
• Portfolio same-center NOI for the quarter ended September 30, 2013, increased 0.8% compared with an increase of 1.2% for the prior-year period, excluding lease termination fees. Results were negatively impacted by the following items:
  • Lower percentage rent of approximately $0.3 million due to lower sales for the nine months ended September 30, 2013, as compared with the prior year period.
  • A decline of $1.2 million in real estate tax reimbursement revenue. The decline in real estate tax reimbursement revenue was primarily the result of the timing of adjustments to reflect actual billings and current estimates.
  • A decline in straight line rents and net amortization of acquired above and below market leases of $1.0 million.
• Portfolio same-center NOI for the quarter ended September 30, 2013, increased 1.4% over the prior year period, excluding the impact of lease termination fees, non-cash straight line rents and net amortization of above and below market leases.
• Average gross rent per square foot for stabilized mall leases signed during the third quarter of 2013 for tenants 10,000 square feet or less increased 12.8% over the prior gross rent per square foot.
• Same-store sales per square foot for mall tenants 10,000 square feet or less for stabilized malls for the rolling twelve months ended September 30, 2013, increased 0.9% to $358 per square foot compared with $355 per square foot in the prior-year period. Year-to-date same-store sales per square foot for mall tenants 10,000 square feet or less for stabilized malls declined 0.6%.

HIGHLIGHTS CONTINUED

• The Company’s share of consolidated and unconsolidated variable rate debt of $1,482,986,000, as of September 30, 2013, represented 14.8% of the total market capitalization for the Company, compared with 10.0% as of September 30, 2012, and 26.5% of the Company's share of total consolidated and unconsolidated debt, compared with 18.6% as of September 30, 2012.
• Debt-to-total market capitalization was 55.7% as of September 30, 2013, compared with 54.0% as of September 30, 2012.
• The ratio of earnings before interest, taxes, depreciation and amortization (“EBITDA”) to interest expense was 2.9 times for the third quarter of 2013, compared with 2.6 times for the third quarter of 2012.

PORTFOLIO OCCUPANCY

DISPOSITION ACTIVITY

During the third quarter, CBL closed on the sale of three malls and three related associated centers in a portfolio transaction for a gross sales price of $176.0 million in cash. The properties were Georgia Square Mall and Georgia Square Plaza in Athens, GA; Panama City Mall and The Shoppes at Panama City in Panama City, FL; and RiverGate Mall and Village at RiverGate in Nashville, TN. The properties were purchased by an offshore investor with an Atlanta-based partner, Hendon Properties, who will also lease and manage the malls.

FINANCING ACTIVITY

In July, CBL closed on a $400 million unsecured term loan with a term of five years. Based on the Company’s current credit ratings, the loan has a floating interest rate of 150 basis points over LIBOR.

In October, CBL closed on a new $80.0 million loan secured by The Outlet Shoppes at Atlanta, its 75/25 joint venture with Horizon Group Properties, located in Atlanta (Woodstock), GA. The new 10-year non-recourse loan bears interest at a fixed rate of 4.9%. Proceeds from the loan were primarily used to repay a $53.2 million recourse construction loan and to reduce outstanding balances on the Company’s unsecured credit facilities.

CAPITAL MARKETS ACTIVITY

During the third quarter of 2013, CBL completed the redemption of all outstanding perpetual preferred joint venture units of its joint venture, CW Joint Venture, LLC, (“CWJV”) with Westfield America Limited Partnership (“Westfield”). The units were redeemed for approximately $408.6 million (plus any accrued and unpaid preferred return). The preferred units were originally issued in 2007 as part of the acquisition of four malls in St. Louis, MO, by CWJV.

During the third quarter, CBL did not complete any sales under its At-The-Market (“ATM”) equity offering program. Year-to-date, CBL has sold 8.4 million shares generating net proceeds of $209.6 million through the ATM program. CBL has approximately $88.5 million available for issuance under the ATM program.

OUTLOOK AND GUIDANCE

Based on third quarter results, including the impact of dispositions completed during the quarter, the Company is providing 2013 FFO guidance in the range of $2.18 - $2.22 per share, after adjusting for the net impact of one-time items included in the third quarter 2013 results. The Company is also guiding to the low-to-mid-point of the previously issued same-center NOI growth range of 1.0% - 3.0%. The guidance assumes $2.0 million to $4.0 million of outparcel sales and a 25-50 basis point increase in year-end occupancy. The guidance excludes the impact of any future unannounced transactions.

INVESTOR CONFERENCE CALL AND SIMULCAST

CBL & Associates Properties, Inc. will conduct a conference call at 11:00 a.m. ET on Wednesday, November 6, 2013, to discuss its third quarter results. The number to call for this interactive teleconference is (800) 736-4594 or (212) 231-2901. A replay of the conference call will be available through November 13, 2013, by dialing (800) 633-8284 or (402) 977-9140 and entering the confirmation number, 21646865. A transcript of the Company's prepared remarks will be furnished on a Form 8-K following the conference call.

To receive the CBL & Associates Properties, Inc., third quarter earnings release and supplemental information please visit our website at cblproperties.com or contact Investor Relations at 423-490-8312.

The Company will also provide an online web simulcast and rebroadcast of its 2013 third quarter earnings release conference call. The live broadcast of the quarterly conference call will be available online at cblproperties.com on Wednesday, November 6, 2013, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call and continue for one year.

CBL is one of the largest and most active owners and developers of malls and shopping centers in the United States. CBL owns, holds interests in or manages 156 properties, including 95 regional malls/open-air centers. The properties are located in 30 states and total 90.7 million square feet including 10.7 million square feet of non-owned shopping centers managed for third parties. Headquartered in Chattanooga, TN, CBL has regional offices in Boston (Waltham), MA, Dallas (Irving), TX, and St. Louis, MO. Additional information can be found at cblproperties.com.

NON-GAAP FINANCIAL MEASURES

Funds From Operations

FFO is a widely used 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 allocable to common shareholders as defined above by NAREIT less dividends on preferred stock. The Company’s method of calculating FFO allocable to its common shareholders 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 of its operating partnership and FFO allocable to its common shareholders, as it believes that both are useful performance measures. The Company believes FFO of its operating partnership 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 attributable to the Company's common shareholders to FFO allocable to its common shareholders, 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 its operating partnership. The Company then applies a percentage to FFO of its operating partnership 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 outstanding during the period.

FFO does not represent cash flows 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 (loss) for purposes of evaluating the Company’s operating performance or to cash flow as a measure of liquidity.

As described above, during the three and nine months ended September 30, 2013, the Company received income of $8.2 million as a partial settlement of ongoing litigation. Additionally, during the nine months ended September 30, 2013, the Company recorded $2.4 million of gain on investment and $9.1 million of loss on extinguishment of debt. Considering the significance and nature of these items, the Company believes that it is important to identify their impact 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.

Same-Center Net Operating Income

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

Similar to FFO, the Company computes NOI based on its pro rata share of both consolidated and unconsolidated properties. The Company's definition of NOI may be different than that used by other companies and, accordingly, the Company's NOI may not be comparable to that of other companies. A reconciliation of same-center NOI to net income is located at the end of this earnings release.

Since NOI includes only those revenues and expenses related to the operations of its shopping center properties, the Company believes that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates and operating costs and the impact of those trends on the Company's results of operations. Additionally, there are instances when tenants terminate their leases prior to the scheduled expiration date and pay the Company one-time, lump-sum termination fees. These one-time lease termination fees may distort same-center NOI trends and may result in same-center NOI that is not indicative of the ongoing operations of the Company's shopping center properties. Therefore, the Company believes that presenting same-center NOI, excluding lease termination fees, is useful to investors.

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 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.
Katie Reinsmidt, 423-490-8301
Senior Vice President - Investor Relations/Corporate Investments
katie_reinsmidt@cblproperties.com

Source: CBL & Associates Properties, Inc.