CBL Properties (NYSE:CBL) announced results for the second quarter ended
June 30, 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:
“Our results for this quarter were in-line with our guidance and we are
making solid progress on our strategic initiatives,” commented Stephen
Lebovitz, chief executive officer. “We are diversifying our tenant mix
with more than 60% of new leases executed year-to-date representing
non-apparel uses. In addition, we are replacing former anchors with
dynamic, new uses, which will generate higher levels of traffic and
sales. Just last week, we signed a new lease for a 100,000-square-foot
casino, entertainment and dining complex to replace a former Bon-Ton
location at Westmoreland Mall in Greensburg, PA. We also started
construction on the addition of Cheesecake Factory to Hamilton Place in
Chattanooga as the first step of the redevelopment of the Sears store
there. These additions demonstrate the tremendous opportunity to create
value throughout the CBL portfolio.
“Strengthening our balance sheet is another strategic priority. We
closed last week on the sale of Janesville Mall, a Tier 3 mall with
sales of $243 per square foot. Year-to-date, we have generated more than
$38 million from this and other dispositions. These funds supplement our
significant cash flow, which we utilize to fund portfolio improvements
and debt reduction. We closed during the quarter on a 10-year,
fixed-rate $155 million non-recourse loan secured by CoolSprings
Galleria at very favorable terms and completed the extension of two
additional secured loans for new five-year terms. We also repaid $190
million of our $490 million unsecured term loan in July. We are having
constructive discussions with our bank group to complete a recast of our
$350 million unsecured term loan (due Oct. 2019) and lines of credit
(due Oct. 2020) prior to year-end. Completing the recast well ahead of
maturity will provide further financial flexibility to execute on the
redevelopments and other growth initiatives across our portfolio.”
Net loss attributable to common shareholders for the second quarter 2018
was $35.0 million, or a loss of $0.20 per diluted share, compared with
net income of $30.2 million, or $0.18 per diluted share, for the second
quarter 2017. Net loss attributable to common shareholders for the
second quarter 2018 included a $52.0 million loss on impairment of Cary
Towne Center, primarily related to the accelerated maturity of the
non-recourse loan secured by the property.
FFO allocable to common shareholders, as adjusted, for the second
quarter 2018 was $80.2 million, or $0.46 per diluted share, compared
with $85.6 million, or $0.50 per diluted share, for the second quarter
2017. FFO allocable to the Operating Partnership common unitholders, as
adjusted, for the second quarter 2018 was $92.8 million compared with
$99.7 million for the second quarter 2017.
Percentage change in same-center Net Operating Income (“NOI”) (1):
(1) CBL’s definition of same-center NOI excludes the impact of
lease termination fees and certain non-cash items of straight-line
rents, write-offs of landlord inducements and net amortization of
acquired above and below market leases.
Major variances impacting same-center NOI for the quarter ended June 30,
2018, include:
PORTFOLIO OPERATIONAL RESULTS
Occupancy (1):
(1) Occupancy for malls represents percentage of mall store gross
leasable area 20,000 square feet and under occupied. Occupancy
for associated and community centers represents percentage of
gross leasable area occupied.
(2) Represents occupancy for The Outlet Shoppes at Laredo as of
June 30, 2018. Represents occupancy for The Outlet Shoppes of the
Bluegrass and The Outlet Shoppes at Laredo as of June 30, 2017.
New and Renewal Leasing Activity of Same Small Shop Space Less
Than 10,000 Square Feet:
Three MonthsEnded June 30, 2018
Six Months EndedJune 30, 2018
Same-Center Sales Per Square Foot for Mall Tenants 10,000
Square Feet or Less:
DISPOSITIONS
Year-to-date CBL has raised $38.3 million in gross proceeds through
asset sales, which includes $8.0 million of aggregate gross proceeds
from the sale of various outparcel locations during the second quarter
and the July sale of Janesville Mall in Janesville, WI, for $18.0
million to RockStep Capital.
FINANCING ACTIVITY
In April, CBL, along with its 50% joint venture partner, closed on a
$155.0 million ($77.5 million at CBL’s share) non-recourse loan secured
by CoolSprings Galleria in Nashville, TN. The 10-year loan bears
interest at a fixed rate of 4.839%.
Proceeds from the loan were used to retire the existing $97.7 million
loan, which bore interest at a fixed rate of 6.98% and was scheduled to
mature in June. CBL’s share of nearly $29.0 million in excess proceeds
was utilized to reduce outstanding balances on its unsecured lines of
credit.
In May, CBL completed the extension of the $56.7 million ($28.4 million
at CBL’s share) loan secured by The Pavilion at Port Orange in Port
Orange, FL, and the $58.2 million ($29.1 million at CBL’s share) loan
secured by Hammock Landing in West Melbourne, FL. Both loans were
originally scheduled to mature in February 2019. The loans were extended
for an initial term of three years, with two one-year extensions
available at the Company’s option, for a final maturity in February
2023. The new loans bear interest at 225 basis points over LIBOR, an
increase of 25 bps over the prior rate.
In July, CBL repaid $190.0 million of its $490.0 million unsecured term
loan using availability on its line of credit.
DEVELOPMENT
Major 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 currently expects to utilize approximately $13 – $15
million of the Reserve. Detail of assumptions underlying guidance
follows:
Reconciliation of GAAP net income to 2018 FFO, as adjusted, per
share guidance:
INVESTOR CONFERENCE CALL AND WEBCAST
CBL Properties will host a conference call on Thursday, August 2, 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,
5568536. A replay of the conference call will be available through
August 9, 2018, by dialing (877) 344-7529 or (412) 317-0088 and entering
the confirmation number, 10120294.
The Company will also provide an online webcast and rebroadcast of its
second quarter 2018 earnings release conference call. The live broadcast
of the quarterly conference call will be available online at cblproperties.com
on Thursday, August 2, 2018, beginning at 11:00 a.m. ET. The online
replay will follow shortly after the call.
To receive the CBL Properties second 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 72.8 million square feet across 26 states, including 74
high-quality enclosed, outlet and open-air retail centers and 13
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.
Weighted-average common and potential dilutive common shares
outstanding
The Company’s reconciliation of net income (loss) attributable
to common shareholders to FFO allocable to Operating Partnership
common unitholders is as follows:
(in thousands, except per share data)
The reconciliation of diluted EPS to FFO per diluted share is as
follows:
Depreciation and amortization expense, including amounts from
consolidated properties, unconsolidated affiliates, non-real
estate assets and excluding amounts allocated to noncontrolling
interests
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:
As of June 30,
2018
$
57,402
Same-center Net Operating Income
(Dollars in thousands)
Same-center Net Operating Income
(Continued)
(1) CBL 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). Same-center NOI excludes lease
termination income, straight-line rent adjustments, amortization
of above and below market lease intangibles and write-offs of
landlord inducement assets. We include a property in our
same-center pool when we own all or a portion of the property as
of June 30, 2018, and we owned it and it was in operation for both
the entire preceding calendar year and the current year-to-date
reporting period ending June 30, 2018. New properties are
excluded from same-center NOI, until they meet this
criteria. Properties excluded from the same-center pool that
would otherwise meet this criteria are properties which are either
under major redevelopment, being considered for repositioning,
where we intend to renegotiate the terms of the debt secured by
the related property or return the property to the lender, or
minority interest properties in which we own an interest of 25% or
less.
Company’s Share of Consolidated and Unconsolidated Debt
(Dollars in thousands)
Total per Debt
Schedule
Unamortized
Deferred
Financing
Costs
Total per Debt
Schedule
Unamortized
Deferred
Financing
Costs
Debt-To-Total-Market Capitalization Ratio as of June 30, 2018
(In thousands, except stock price)
Price (1)
(1) Stock price for common stock and Operating Partnership units
equals the closing price of the common stock on
June 29, 2018. The stock prices for the preferred stocks
represent the liquidation preference of each respective series.
Reconciliation of Shares and Operating Partnership Units
Outstanding
(In thousands)
Dividend Payout Ratio
(Unaudited; in thousands, except share data)
Tenant, net of allowance for doubtful accounts of $2,097 and
$2,011 in 2018 and 2017, respectively
7.375% Series D Cumulative Redeemable Preferred Stock, 1,815,000
shares outstanding
6.625% Series E Cumulative Redeemable Preferred Stock, 690,000
shares outstanding
Common stock, $.01 par value, 350,000,000 shares authorized,
172,661,708 and 171,088,778 issued and outstanding in 2018 and
2017, respectively
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