Press Release

Results In-line With Expectations - Guidance Maintained

CHATTANOOGA, Tenn.--(BUSINESS WIRE)-- CBL Properties (NYSE: CBL) announced results for the first quarter ended March 31, 2018. 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:

• Same-center sales per square foot for the stabilized mall portfolio during the first quarter increased 4.1% compared with the prior-year quarter. For the twelve months ended March 31, 2018, same-center sales were $376 per square foot.
• FFO per diluted share, as adjusted, was $0.42 for the first quarter 2018, compared with $0.52 per share for the first quarter 2017. First quarter 2018 was impacted by approximately $0.01 per share of dilution from asset sales completed in 2017, $0.05 per share of lower property NOI, lower outparcel sales of $0.02 per share, $0.03 per share higher corporate interest expense offset by $0.04 lower property level interest expense and $0.01 higher G&A expense primarily related to lower capitalized overhead, a one-time favorable accrual adjustment in the prior-year period as well as comparatively higher legal expense.
• Total Portfolio Same-center NOI declined 6.8% for the first quarter 2018.
• Portfolio occupancy was 91.1% as of March 31, 2018, compared with 92.1% as of March 31, 2017. Same-center mall occupancy was 89.5% as of March 31, 2018 compared with 90.4% as of March 31, 2017.
• CBL completed gross asset sales of $12.3 million during the first quarter and in April entered into a binding contract for the sale of a Tier 3 mall for a gross sales price of $18.0 million.
• Redevelopment activity is underway at eight properties, including five anchor redevelopments.

“First quarter results were in-line with expectations and, as anticipated, reflect the impact from 2017 and 2018 bankruptcies and rent reductions,” said Stephen Lebovitz, CBL’s president & CEO. “We were encouraged by the solid 4.1% increase in retail sales in our portfolio during the first quarter and reports from a number of brands citing marked improvement in both traffic and sales, which should lead to improved leasing metrics later in the year. Operationally, our focus in 2018 is stabilizing revenues as well as diversifying income by adding more dining, entertainment, value and service users.

“While we are disappointed with the news of Bon-Ton liquidating, we have been proactive by preparing for this outcome. We have identified replacement tenants for the majority of our locations and have several in advanced negotiations, including one lease already executed with a supermarket that will require zero investment by CBL. We are estimating a total investment of $60 - $90 million for the replacement of the Bon-Ton stores in our portfolio over several years. We had already incorporated expected rent loss, including any co-tenancy impact, in our guidance for the year and are on-track to perform within that range.

“Actively managing our balance sheet to maximize liquidity and lengthen maturities is a top priority for us. We are expecting to complete the refinancing of the loan secured by CoolSprings Galleria shortly. We are also holding preliminary discussions to complete early refinancings of our unsecured term loan and line of credit that mature in 2019 and 2020, respectively, which will put us in an even stronger financial position and provide further flexibility to execute our strategies.”

Net loss attributable to common shareholders for the first quarter 2018 was $10.3 million, or $(0.06) per diluted share, compared with net income of $22.9 million, or $0.13 per diluted share, for the first quarter 2017.

FFO allocable to common shareholders, as adjusted, for the first quarter 2018 was $72.2 million, or $0.42 per diluted share, compared with $88.4 million, or $0.52 per diluted share, for the first quarter 2017. FFO allocable to the Operating Partnership common unitholders, as adjusted, for the first quarter 2018 was $83.8 million compared with $103.0 million for the first quarter 2017.

Major variances impacting same-center NOI for the quarter ended March 31, 2018, include:

• Same-center NOI declined $11.2 million, due to a $10.5 million decrease in revenue and a $0.7 million increase in operating expenses.
• Minimum rents and tenant reimbursements declined $9.5 million during the quarter, primarily related to store closures and rent concessions for tenants in bankruptcy.
• Percentage rents declined $0.2 million compared with the prior year quarter.
• Other rents and other income declined $0.8 million.
• Property operating expenses decreased $1.3 million, maintenance and repair expense increased $1.7 million, and real estate tax expenses increased $0.3 million.

DISPOSITIONS

During the quarter, CBL closed on the sale of Gulf Coast Town Center Phase III in Ft. Myers, FL, for a gross sales price of $9.0 million. CBL also completed the sale of various outparcel locations generating an aggregate $3.3 million in gross proceeds.

CBL has entered into a binding contract for the sale of Janesville Mall in Janesville, WI, for $18.0 million to RockStep Capital. The buyer has posted a significant non-refundable deposit. The disposition is expected to close summer 2018, subject to due diligence and customary closing conditions. CBL recorded an impairment charge of $18.1 million in the first quarter to write down the depreciated carrying value of the mall to its net sales price.

FINANCING ACTIVITY

In January, CBL retired the $37.5 million loan secured by Kirkwood Mall in Bismarck, ND, using availability on its lines of credit. The loan bore an interest rate of 5.75% and was scheduled to mature in April 2018.

DEVELOPMENT

In April, CBL commenced construction on the first phase of redevelopment of the former Sears building at Brookfield Square in Milwaukee, WI. The redevelopment will deliver new dining and entertainment options, including new-to-market entertainment concept, WhirlyBall, and BistroPlex℠ from Marcus Theatres®, which combines dining and moviegoing in every auditorium. Planning is underway for additional phases of the redevelopment, which will include new dining options and other non-retail uses. More details will be announced over the coming months.

Anchor redevelopments completed and underway in 2018 include (complete project list can be found in the financial supplement):

OUTLOOK AND GUIDANCE

CBL is maintaining 2018 FFO, as adjusted, guidance in the range of $1.70 - $1.80 per diluted share. Guidance incorporates a full-year budgeted impact of loss in rent related to 2017 tenant bankruptcies, store closures and rent adjustments net of expected new leasing as well as a reserve in the range of $10.0 - $20.0 million (the “Reserve”) for potential future unbudgeted loss in rent from tenant bankruptcies, store closures or lease modifications that may occur in 2018. Based on bankruptcy and leasing activity year-to-date, including the impact of any co-tenancy, CBL expects to utilize $10.0 - $13.0 million of the Reserve.

INVESTOR CONFERENCE CALL AND WEBCAST

CBL Properties will host a conference call on Friday, April 27, 2018, at 11:00 a.m. ET. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 3192915. A replay of the conference call will be available through May 4, 2018, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10117542.

The Company will also provide an online webcast and rebroadcast of its first quarter 2018 earnings release conference call. The live broadcast of the quarterly conference call will be available online at cblproperties.com on Friday, April 27, 2018, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call.

To receive the CBL Properties first 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 117 properties totaling 73.4 million square feet across 26 states, including 75 high-quality enclosed, outlet and open-air retail centers and 11 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 9 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.

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

Source: CBL Properties