Press Release

CHATTANOOGA, Tenn.--(BUSINESS WIRE)-- CBL Properties (NYSE:CBL) announced results for the third quarter ended September 30, 2017. 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.

KEY TAKEAWAYS:

• FFO per diluted share, as adjusted, was $0.50 for the third quarter 2017, compared with $0.57 per share for the third quarter 2016. Third quarter 2017 was impacted by approximately $0.02 per share of dilution from asset sales.
• Total Portfolio Same-center NOI declined 2.6% for the third quarter 2017 and 1.6% for the nine months ended September 30, 2017.
• Same-center sales per square foot for the stabilized mall portfolio during the third quarter were flat compared with the prior-year quarter. For the twelve months ended September 30, 2017, same-center sales were $373 per square foot.
• Portfolio occupancy was 93.1% as of September 30, 2017, a 40 bps decline compared with 93.5% as of September 30, 2016 and 150 bps increase from 91.6% as of June 30, 2017. Same-center mall occupancy was 91.8% as of September 30, 2017 compared with 93.0% as of September 30, 2016 and 90.6% as of June 30, 2017.
• Year-to-date, CBL has completed gross asset sales of $166.25 million (at CBL’s share) including the sale of its remaining 25% interest in River Ridge Mall to its joint venture partner for $9.0 million.
• During the third quarter, CBL closed on the extension and modification of two unsecured term loans totaling $535 million and completed an offering of $225 million aggregate principal amount of its 5.950% Senior Notes Due 2026.
• The fourth quarter common dividend was declared at $0.20 per share, which represents an annualized rate of $0.80 per share, corresponding with projected taxable income and preserving an estimated $50 million in annual cash flow.

“This quarter’s results fell below our expectations as our revenues were impacted by additional bankruptcies, store closures and rent concessions,” said Stephen Lebovitz, CBL’s president & CEO. “The difficult environment for retailers has put further pressure on our NOI, FFO and lease spreads as we work diligently to mitigate the impact and preserve NOI. As a result, it is necessary to adjust our outlook and guidance for the remainder of the year. Despite the challenges, our portfolio of market dominant properties is resilient as shown by the sequential improvement in occupancy and stabilization in sales during the quarter. We are executing our strategy and successfully replacing underperforming retailers with higher performing tenants and more diverse uses. Year-to-date, only 25% of new leasing has been executed with traditional apparel retailers as we reinvent our properties into suburban town centers that offer unique shopping, more food and beverage, fitness, health and beauty uses, services and more.

“We have continued to enhance our investment grade balance sheet, providing further liquidity and flexibility to navigate the challenges we are facing. This past quarter, we completed the extension of two unsecured term loans at favorable terms, issued $225 million in additional senior unsecured notes and retired two higher-rate secured loans ahead of maturity. As the quality and size of our unencumbered asset pool increases and our credit metrics strengthen, our strong balance sheet provides us with the financial flexibility necessary to execute our business plan.”

Net loss attributable to common shareholders for the third quarter 2017 was $2.3 million, or $(0.01) per diluted share, compared with a net loss of $10.2 million, or $(0.06) per diluted share, for the third quarter 2016.

FFO allocable to common shareholders, as adjusted, for the third quarter 2017 was $84.7 million, or $0.50 per diluted share, compared with $98.1 million, or $0.57 per diluted share, for the third quarter 2016. FFO allocable to the Operating Partnership common unitholders, as adjusted, for the third quarter 2017 was $98.7 million compared with $114.9 million for the third quarter 2016. FFO, as adjusted, for the third quarter 2017 was impacted by $0.02 per share of dilution from asset sales.

CBL’s revenues for the third quarter 2017 were impacted by 1) higher than anticipated retailer bankruptcy activity; 2) lower than anticipated rent from restructured leases with retailers undergoing bankruptcy-related reorganization; 3) lower than anticipated rent from renewed leases with certain retailers; and 4) lower than projected contribution from temporary leasing and permanent lease-up of space vacated in bankruptcy.

Major variances impacting same-center NOI for the quarter ended September 30, 2017, include:

• NOI declined $4.5 million, due to a $4.1 million decrease in revenue and a $0.4 million increase in operating expenses.
• Minimum rents and tenant reimbursements declined $4.1 million during the quarter, primarily related to store closures and rent concessions for tenants in bankruptcy.
• Percentage rents were flat compared with the prior year quarter.
• Property operating expenses declined $0.7 million, maintenance and repair expense declined $1.0 million, and real estate tax expenses increased $2.1 million.

PORTFOLIO OPERATIONAL RESULTS

DIVIDEND

CBL’s Board of Directors has declared a quarterly cash dividend for the Company’s Common Stock of $0.20 per share for the quarter ending December 31, 2017. The dividend is payable on January 16, 2018, to shareholders of record as of December 29, 2017. The dividend represents an annualized rate of $0.80 per share.

“The dividend is an important way that we return value to our shareholders,” commented Lebovitz. “Our approach has been to set the dividend at a level that maximizes available cash flow for investing in our properties and debt reduction, while also maintaining consistency. As one of the largest shareholders of CBL, management and the Board are fully vested in maximizing shareholder value. It is with that perspective that we made the difficult decision to reduce the common dividend to an annualized rate of $0.80 per share from $1.06 per share. Based on our updated projections of taxable income, the common dividend is being re-set to a rate that will preserve an estimated $50 million of cash on an annual basis. This enhanced liquidity will help to fund value-adding redevelopment activity and debt reduction.”

The Board also declared a quarterly cash dividend of $0.4609375 per depositary share for the quarter ending December 31, 2017, for the Company’s 7.375% Series D Cumulative Redeemable Preferred Stock. The dividend, which equates to an annual dividend payment of $1.84375 per depositary share, is payable on December 29, 2017, to shareholders of record as of December 15, 2017.

The Board also declared a quarterly cash dividend of $0.4140625 per depositary share for the quarter ending December 31, 2017, for the Company’s 6.625% Series E Cumulative Redeemable Preferred Stock. The dividend, which equates to an annual dividend payment of $1.65625 per depositary share, is payable on December 29, 2017, to shareholders of record as of December 15, 2017.

DISPOSITIONS

During the quarter, CBL closed on the sale of its remaining 25% interest in River Ridge Mall in Lynchburg, VA, for $9.0 million, cash.

Year-to-date, CBL has completed the sale of two office buildings, interests in three malls and one outlet center for a gross sales price (at CBL’s share) of $166.25 million.

FINANCING ACTIVITY

On September 1, 2017, CBL’s majority-owned operating partnership subsidiary, CBL & Associates Limited Partnership (the “Operating Partnership”), closed on an offering of $225 million aggregate principal amount of its 5.950% Senior Notes Due 2026 (the “notes”). The notes constitute an additional issuance of the 5.950% Senior Notes due 2026, $400 million aggregate principal amount of which the Operating Partnership issued on December 13, 2016. The $625 million aggregate principal amount of notes mature on December 15, 2026.

In September, CBL retired two secured loans totaling $206 million, including a $144.3 million loan secured by its Tier 1 property, Hanes Mall, in Winston-Salem, NC, which bore an interest rate of 6.99% and was scheduled to mature in October 2018. The loan was retired with a minimal prepayment fee. CBL also retired at par the $61.6 million ($46.2 million at CBL’s 75% share) loan secured by its Tier 1 joint venture outlet center, The Outlet Shoppes at El Paso, in El Paso, TX. The loan was scheduled to mature on December 5, 2017, and bore an interest rate of 7.06%.

In July, CBL completed the extension and modification of two unsecured term loans, which were scheduled to mature in 2018. The first, with a balance of $400 million, was increased to a balance of $490 million until July 2018, when it will be reduced to $300 million for the remainder of its term. New borrowings under this term loan were used to reduce outstanding balances on the Company’s unsecured lines of credit. The new term loan has an initial maturity date of July 2020 with two, one-year extension options (the 2nd option is at the lenders’ sole discretion), for a final maturity of July 2022. The term loan bears an interest rate of 150 basis points over LIBOR, based on CBL’s current investment grade rating of BBB-/Baa3/BBB-. Wells Fargo Bank National Association served as Administrative Agent.

The second unsecured term loan, which had a balance of $50 million and was due to mature in February 2018, was modified to a new $45 million term loan. The new loan has an initial maturity date of June 2021, with an additional one-year extension option available at CBL’s discretion, for a final maturity of June 2022. The term loan bears interest at a rate of 165 basis points over LIBOR. First Tennessee Bank NA served as Administrative Agent.

In April, the $123.3 million loan secured by Acadiana Mall in Lafayette, LA, matured. CBL is in negotiations with the existing lender to modify the terms of the loan and will announce details of the agreement once it has been finalized.

CBL has entered into preliminary discussions with the lender for the loan secured by Hickory Point Mall in Forsyth, IL, to explore a further modification of the loan or conveyance. In 2016, the original loan was modified to extend the term and provide for increased cash flows to fund redevelopment activity. Since that time, the property has experienced continued deterioration in operating metrics. As a result, CBL recorded a $24.5 million impairment to adjust the property’s carrying value during the third quarter.

During the third quarter, Wausau Center in Wausau, WI, was conveyed to the lender in settlement of the $17.7 million non-recourse loan secured by the property. CBL recorded a gain on extinguishment of debt of $6.9 million related to the conveyance.

DEVELOPMENT

On November 14^th, CBL and its joint venture partners CHM, LLC, and Browning Development Solutions will celebrate the groundbreaking of The Shoppes at Eagle Point, a 233,000-square-foot grocery-anchored shopping center located in Cookeville, TN. The project is being developed in a 50/50 joint venture with CBL overseeing leasing and development. The project will be anchored by Publix, Academy Sports & Outdoor, Ross Dress for Less, PetSmart, Ulta Beauty as well as a collection of shops and restaurants including Panera Bread, Chipotle Mexican Grille and Shoe Carnival. The grand opening is scheduled for fall 2018.

OUTLOOK AND GUIDANCE

CBL is updating guidance to incorporate third quarter results and a revised outlook for the remainder of 2017. CBL’s revised assumptions for full-year 2017 are as follows:

CBL’s updated 2017 FFO, as adjusted, guidance range of $2.08 - $2.12 per diluted share was adjusted to incorporate an approximate $0.05 per share lower expected contribution from same-center NOI; approximately $0.03 per share lower expected contribution from non-same-center properties and sold properties; $0.01 per share lower fee income and approximately $0.02 per share higher expected interest expense compared with previous assumptions. The increase in assumed interest expense is due to additional senior unsecured notes issued in September as well as an increased LIBOR/base-rate assumption, net of interest savings resulting from the early retirement of a secured loan.

INVESTOR CONFERENCE CALL AND WEBCAST

CBL Properties will conduct a conference call on Friday, November 3, 2017, at 11:00 a.m. ET. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 9283024. A replay of the conference call will be available through November 10, 2017, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10111623.

The Company will also provide an online webcast and rebroadcast of its third quarter 2017 earnings release conference call. The live broadcast of the quarterly conference call will be available online at cblproperties.com on Friday, November 3, 2017 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 or contact Investor Relations at (423) 490-8312.

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 119 properties totaling 74.4 million square feet across 27 states, including 76 high-quality enclosed, outlet and open-air retail centers and 12 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.

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 10 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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20171102006747/en/

CBL Properties
Katie Reinsmidt, 423-490-8301
Executive Vice President - Chief Investment Officer
katie.reinsmidt@cblproperties.com

Source: CBL Properties