Press Release

CHATTANOOGA, Tenn.--(BUSINESS WIRE)-- CBL & Associates Properties, Inc. (NYSE: CBL) announced results for the fourth quarter and year ended December 31, 2016. A description of each non-GAAP financial measure and the related reconciliation to the comparable GAAP financial measure is located at the end of this news release.

HIGHLIGHTS:

• Same-center NOI increased 0.3% for the fourth quarter and 2.3% for the year ended December 31, 2016, over the prior-year periods.
• 2016 FFO per diluted share, as adjusted, decreased 4.2% to $0.68 in the fourth quarter 2016 and increased 3.9% to $2.41 for 2016, compared with the prior-year periods.
• Average gross rent per square foot increased 11.5% for stabilized mall leases signed in the fourth quarter 2016 and 7.6% for the full-year 2016 over the prior rate.
• Total portfolio occupancy at December 31, 2016 was 94.8%, representing an increase of 120 basis points from the prior year-end.
• Same-center sales per square foot for 2016 were $376, compared with $382 for 2015.
• In 2016, CBL completed the disposition of interests in eight malls, five community centers and five office buildings, generating gross proceeds of more than $369 million.
• In 2016, CBL completed more than $1.0 billion in financing activity, including closing a $400 million unsecured notes offering.

"2016 was an excellent year for CBL. Operationally we generated improved growth from our higher-quality portfolio with a same-center NOI increase of 2.3% and a 120 basis point improvement in occupancy. The progress we've made on our disposition program and focus on reducing debt has resulted in a balance sheet that is stronger and more flexible than ever. We meaningfully reduced shorter-term, floating rate debt through a well-executed 10-year unsecured bond offering in December and applied asset sales proceeds and cash flow to debt reduction, ending the year with our lowest debt balance in ten years.

"2017 represents a year of reinvention for the CBL portfolio as we embark on a number of transformational redevelopment projects at some of our best assets. With our track record of executing profitably on anchor redevelopments, we are excited about the opportunity to transform our properties to meet changing consumer preferences and attract high-quality in-demand uses, all while delivering enhanced returns to our shareholders."

Net income attributable to common shareholders for the fourth quarter 2016 was $57.6 million, or $0.34 per diluted share, compared with a net loss of $33.5 million, or $0.20 per diluted share for the fourth quarter 2015.

Net income attributable to common shareholders for 2016 was $128.0 million, or $0.75 per diluted share, compared with net income of $58.5 million, or $0.34 per diluted share for 2015.

FFO allocable to common shareholders, as adjusted, for the fourth quarter of 2016 was $116.6 million, or $0.68 per diluted share, compared with $120.4 million, or $0.71 per diluted share, for the fourth quarter of 2015. FFO allocable to the Operating Partnership common unitholders, as adjusted, for the fourth quarter of 2016 was $135.9 million compared with $141.0 million for the fourth quarter of 2015.

FFO allocable to common shareholders, as adjusted, for 2016 was $411.0 million, or $2.41 per diluted share, compared with $395.1 million, or $2.32 per diluted share, for 2015. FFO allocable to the Operating Partnership common unitholders, as adjusted, for 2016 was $480.8 million compared with $462.9 million for 2015.

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

MAJOR ITEMS IMPACTING SAME-CENTER NOI RESULTS FOR 2016

• Revenues for 2016 grew $17.3 million as compared with 2015. Major items included:
  • a $13.6 million increase in minimum rents;
  • a $1.0 million increase in percentage rents;
  • a $3.2 million increase in other rent and other income resulting primarily from increases in specialty leasing; and
  • a $0.5 million decline in tenant reimbursements.

• Same-center expenses for 2016 were $0.9 million higher in 2016 compared with 2015. Major items included:
  • a $1.4 million increase in maintenance and repair expenses primarily driven by higher maintenance and snow removal expenses;
  • a $2.5 million decline in operating expenses, primarily due to lower utility and central energy expenses and marketing and advertising expenses compared with the prior year, partially offset by an increase in seasonal expense; and
  • an increase of $2.0 million in real estate tax expenses.

PORTFOLIO OPERATIONAL RESULTS
Occupancy:

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

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

ANCHOR TRANSACTIONS

In January, CBL closed on a sale-leaseback transaction for five Sears department stores and two Sears Auto Centers located at CBL malls, providing CBL with control of these locations for future redevelopment.

CBL acquired the locations for a total consideration of $72.5 million. Sears will continue to operate the department stores under new 10-year leases. Under the terms of the leases, CBL will receive aggregate initial base rent of approximately $5.075 million, with Sears also responsible for paying common area maintenance charges, taxes, insurance and utilities. CBL will have the right to terminate each Sears lease at any time (except November through January), with six months advance notice.

Additionally in January, CBL closed on the acquisition of three Macy's stores located at Jefferson Mall in Louisville, KY; Parkdale Mall in Beaumont, TX and Eastland Mall in Bloomington, IL, for future redevelopment. CBL acquired the locations for $5.0 million.

FINANCING ACTIVITY

During 2016, CBL completed more than $1.0 billion in financing activity including:

• In December CBL's majority-owned operating partnership subsidiary, CBL & Associates Limited Partnership, closed a $400 million offering of 5.95% Senior Notes Due 2026 (the “notes”) under its existing shelf registration statement. The notes mature on December 15, 2026. Net proceeds from the offering were used to reduce amounts outstanding under the unsecured revolving credit facilities and for general business purposes.
• During the fourth quarter, CBL closed on a $60.0 million ($30.0 million at CBL's share) non-recourse loan secured by The Shops at Friendly Center in Greensboro, NC, which is owned in a 50/50 joint venture. The new loan has a term of six-years to coincide with the maturity date of the existing loan secured by The Friendly Center, and has a fixed interest rate of 3.34%. Proceeds were used to retire the maturing $37.6 million loan ($18.8 million at CBL's share), which had a fixed interest rate of 5.9%, with excess proceeds used to reduce outstanding balances on the Company's lines of credit.
• In June, CBL closed three separate non-recourse secured loans with an aggregate borrowing amount of $227.7 million. The loans have a weighted average interest rate of 3.9% and a weighted average term of 9 years. The loans included a $47.7 million 7-year loan secured by Ambassador Town Center in Lafayette, LA, bearing a fixed rate of 3.22%; a 10-year non-recourse $73.0 million loan secured by Fremaux Town Center in Slidell, LA, bearing a fixed interest rate of 3.69% and a 10-year non-recourse $107.0 million loan secured by Hamilton Place in Chattanooga, TN, bearing a fixed interest rate of 4.36%.
• Additionally, in June the foreclosure of Gulf Coast Town Center in Fort Myers, FL (owned in a 50/50 joint venture) was completed, reducing debt by $95.4 million, at CBL's share.

CBL also completed four loan restructures in 2016, representing an aggregate loan balance of $162 million. The loans were restructured at a weighted average interest rate of 4.75%, representing a 188 basis point improvement over the prior weighted average rate.

• In December, CBL closed on a restructure of the existing $46.7 million loan secured by Cary Towne Center in Cary, NC. The term of the loan was extended two years with an additional two-year extension available at the Company's option for a final maturity of March 2021 and the interest rate reduced from 8.5% to 4.0%, interest only (retroactive to August 2016). Excess cash flow generated from the property will be used to fund a proposed redevelopment. More details of the project will be announced once finalized.
• In December, CBL closed on a restructure of the existing $70.8 million loan secured by Greenbrier Mall in Chesapeake, VA. The term was extended three years with an additional one-year extension available at the Company's option for a final maturity of December 2020. The interest rate was reduced from $5.91% to 5.0%, interest only.
• In April, CBL closed on a restructure of the existing $27.4 million non-recourse loan secured by Hickory Point Mall in Forsyth, IL. The term of the loan was extended three years, with an additional one-year extension available at the Company's option, for a final maturity of December 2019. The interest rate was maintained at 5.85%, with future amortization payments eliminated.
• In February, CBL closed on a restructure of the existing $171.09 million ($17.1 million at CBL's share) loan secured by Triangle Town Center in Raleigh, NC. The term was extended two years with two additional one-year extensions available at the Company's option, for a final maturity date of December 2020. The interest rate was reduced to 4.0% from 5.74%.

Subsequent to the end of the fourth quarter, CBL retired loans secured by Hamilton Corner in Chattanooga, TN; The Plaza at Fayette Mall in Lexington, KY and The Plaza at St. Clair Square in Fairview Heights, IL. The aggregate balance retired was $70.1 million. The properties were added to CBL's unencumbered pool. CBL's consolidated unencumbered pool of properties currently represents nearly 53% of 2016 total consolidated NOI.

CBL currently has three properties in receivership with an aggregate loan balance of $189.6 million: Chesterfield Mall in Chesterfield, MO; Midland Mall in Midland, MI and Wausau Center in Wausau, WI. Foreclosure proceedings are in process and are expected to be finalized in early 2017.

DISPOSITIONS

During 2016, CBL completed dispositions of properties generating gross proceeds of $369.8 million and net proceeds of $225.7 million.

Additionally, in January 2017, CBL closed on the sale of two wholly-owned office buildings in Newport News, VA for $6.25 million.

OUTLOOK AND GUIDANCE

The Company is providing 2017 FFO guidance in the range of $2.26 - $2.33 per share. CBL is assuming same-center NOI growth of 0.0% - 1.5% in 2017.

The guidance also assumes the following:

• $8.0 million to $12.0 million of outparcel sales gains;
• flat year-end total portfolio occupancy as well as stabilized mall occupancy;
• G&A expense in the range of $62.0 - $64.0 million for the full year;
• no unannounced capital markets or disposition activity.

INVESTOR CONFERENCE CALL AND WEBCAST

CBL & Associates Properties, Inc. will conduct a conference call at 11:00 a.m. ET on Thursday, February 2, 2017, to discuss its fourth quarter and full year results. The number to call for this interactive teleconference is (888) 317-6003 or (412) 317-6061 and enter the confirmation number 5940738. A replay of the conference call will be available through February 9, 2017, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number 10097491. 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., fourth quarter and full year earnings release and supplemental information please visit the Investing section of our website at cblproperties.com or contact Investor Relations at (423) 490-8312.

The Company will also provide an online webcast and rebroadcast of its 2016 fourth quarter and full year earnings release conference call. The live broadcast of the quarterly conference call will be available online at cblproperties.com on Thursday, February 2, 2017 beginning at 11:00 a.m. ET. The online replay will follow shortly after the call and continue for three months.

ABOUT CBL & ASSOCIATES PROPERTIES, INC.

Headquartered in Chattanooga, TN, 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 128 properties, including 84 regional malls/open-air centers. The properties are located in 29 states and total 79.1 million square feet including 7.0 million square feet of non-owned shopping centers managed for third parties. 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 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 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 its Operating Partnership. The Company then applies a percentage to FFO of its Operating Partnership in order to arrive at FFO of the Operating Partnership common unitholders. 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 outstanding for the period 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.

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 significant 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 earnings release for a description of these adjustments.

Same-center Net Operating Income

NOI is a supplemental 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).

We believe that presenting NOI and same-center NOI (described below) based on our Operating Partnership’s pro rata share of both consolidated and unconsolidated properties is useful since we conduct substantially all of our business through our Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of our common shareholders and the noncontrolling interest in the Operating Partnership. The Company computes NOI based on the Operating Partnership's 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.

Since NOI includes only those revenues and expenses related to the operations of its shopping center and other 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. The Company’s calculation of same-center NOI also excludes lease termination income, straight-line rent adjustments, and amortization of above and below market lease intangibles in order to enhance the comparability of results from one period to another, as these items can be impacted by one-time events that 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 and other properties. 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 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.

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:

View source version on businesswire.com: http://www.businesswire.com/news/home/20170201006285/en/

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.