CBL Properties Reports Results for Second Quarter 2023
Second Quarter Operating Metrics Demonstrate Portfolio Strength;
Low-End of Full-Year Guidance Range Raised
CHATTANOOGA, Tenn., August 09, 2023--(BUSINESS WIRE)--CBL Properties (NYSE: CBL) announced results for the second quarter ended June 30, 2023. Results of operations as reported in the consolidated financial statements for these periods are prepared in accordance with GAAP. 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.
Three Months Ended | Six Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net loss attributable to common shareholders | $ | (0.67 | ) | $ | (1.34 | ) | $ | (0.61 | ) | $ | (2.83 | ) | ||||
Funds from Operations ("FFO") | $ | 1.01 | $ | 0.97 | $ | 2.87 | $ | 2.20 | ||||||||
FFO, as adjusted (1) | $ | 1.56 | $ | 1.88 | $ | 3.12 | $ | 3.92 | ||||||||
(1) | For a reconciliation of FFO to FFO, as adjusted, for the periods presented, please refer to the footnotes to the Company’s reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders on page 8 of this news release. |
KEY TAKEAWAYS:
Over 875,000 square feet of leases were executed in the second quarter, including comparable leases of approximately 411,000 square feet signed at 9.1% higher average rents versus the prior leases.
Portfolio occupancy increased 20 basis points to 89.7% as of June 30, 2023, compared with portfolio occupancy of 89.5% as of June 30, 2022. Same-center occupancy for malls, lifestyle centers and outlet centers was 88.5% as of June 30, 2023, a 50-basis-point increase from 88.0% as of June 30, 2022.
Same-center NOI declined 0.8% during the second quarter 2023 as compared with the prior-year quarter near the high end of the full-year guidance range. As anticipated due to the moderation in tenant sales, percentage rent declined $0.9 million. For the six months ended June 30, 2023, same-center NOI declined 2.7%, near the mid-point of the previously issued guidance range.
FFO, as adjusted, per share for the second quarter 2023, was $1.56, in-line with expectations. FFO, as adjusted, per share was $1.88 for the second quarter 2022.
CBL increased the low end of its 2023 FFO, as adjusted, per share, guidance to a range of $6.00 - $6.47 and 2023 same-center NOI guidance to the range of $423 million - $440 million.
Same-center tenant sales per square foot for the second quarter 2023 declined 7.1%. Same-center tenant sales per square foot for the 12-months ended June 30, 2023, declined 3.8% to $425, compared with $442 for the prior period.
As of June 30, 2023, the Company had $279.8 million of unrestricted cash and marketable securities.
CBL's Board of Directors declared a regular cash dividend for the second quarter 2023 of $0.375 per share, representing an annualized dividend of $1.50 per share.
"Strong leasing was the highlight of our second quarter results as the CBL team successfully leveraged healthy tenant demand for our portfolio," said Stephen D. Lebovitz, CBL's chief executive officer. "Leasing metrics were the strongest in several years, with healthy positive new and renewal lease spreads and year-over-year occupancy growth, providing solid evidence of the constructive environment. We intend to take advantage of the more favorable supply/demand dynamic in our leasing negotiations going forward.
"Second quarter same-center NOI was near the high-end of our full-year guidance range. As a result of the year-to-date performance and our expectations for the remainder of the year, we raised the low-end of our FFO, as adjusted and same-center NOI guidance ranges. Leasing-led revenue gains were offset by an expected reduction in percentage rent. We successfully managed inflationary pressure on costs, generating a modest reduction in operating expense for the quarter on a same-center basis.
"We are also making progress addressing our loan maturities and de-risking our balance sheet. During the quarter, we closed a two-year extension on the loan secured by Cross Creek Mall and are currently in process on the refinancing of the loan secured by The Outlet Shoppes at Atlanta. While the financing markets remain challenging, we are encouraged by the reception we are seeing in the market. As we move into the second half of 2023, we remain focused on achieving further operational improvement, generating greater free cash flow and maintaining a disciplined approach to capital allocation."
Same-center Net Operating Income ("NOI") (1): | ||||||||
Three Months Ended June 30, | ||||||||
2023 | 2022 | |||||||
Total Revenues | $ | 159,872 | $ | 161,006 | ||||
Total Expenses | $ | (52,798 | ) | $ | (53,054 | ) | ||
Total portfolio same-center NOI | $ | 107,074 | $ | 107,952 | ||||
Total same-center NOI percentage change | (0.8 | )% | ||||||
Estimate for uncollectable revenues (recovery) | $ | 2,134 | $ | (841 | ) | |||
(1) | CBL’s definition of same-center NOI excludes the impact of lease termination fees and certain non-cash items such as straight-line rents and reimbursements, write-offs of landlord inducements and net amortization of above and below market leases. |
Same-center NOI for the second quarter 2023 declined by $0.9 million. Major variances impacting the quarter included a $3.0 million favorable variance from a year-end utility reimbursement accrual adjustment, offset by a $3.0 million unfavorable variance in the estimate for uncollectable revenues and a $0.9 million decline in percentage rents.
Six Months Ended June 30, | ||||||||
2023 | 2022 | |||||||
Total Revenues | $ | 323,549 | $ | 325,667 | ||||
Total Expenses | $ | (110,952 | ) | $ | (107,265 | ) | ||
Total portfolio same-center NOI | $ | 212,597 | $ | 218,402 | ||||
Total same-center NOI percentage change | (2.7 | )% | ||||||
Estimate for uncollectable revenues (recovery) | $ | 968 | $ | (2,985 | ) | |||
Same-center NOI for six months ended June 30, 2023, declined by $5.8 million or 2.7% from the prior-year period. The decline was driven by a $3.9 million unfavorable variance in the estimate for uncollectable revenues, a $2.8 million decline in percentage rents and a $3.7 million increase in operating expense, partially offset by a favorable variance from a year-end utility reimbursement accrual adjustment.
PORTFOLIO OPERATIONAL RESULTS | ||||
Occupancy(1): | ||||
As of June 30, | ||||
2023 | 2022 | |||
Total portfolio | 89.7% | 89.5% | ||
Malls, Lifestyle Centers and Outlet Centers: | ||||
Total malls | 88.0% | 87.9% | ||
Total lifestyle centers | 92.7% | 89.4% | ||
Total outlet centers | 88.4% | 87.5% | ||
Total same-center malls, lifestyle centers and outlet centers | 88.5% | 88.0% | ||
All Other: | ||||
Total open-air centers | 94.7% | 94.4% | ||
Total other | 74.2% | 91.7% | ||
(1) | Occupancy for malls, lifestyle centers and outlet centers represent percentage of in-line gross leasable area under 20,000 square feet occupied. Occupancy for open-air centers represents percentage of gross leasable area occupied. The decline in total other occupancy was related to approximately 52,000-square-feet of vacancy at an office building. |
New and Renewal Leasing Activity of Same Small Shop Space Less Than 10,000 Square Feet: | ||||
% Change in Average Gross Rent Per Square Foot: | ||||
Three Months Ended | Six Months Ended | |||
2023 | 2023 | |||
All Property Types | 9.1% | 5.1% | ||
Stabilized Malls, Lifestyle Centers and Outlet Centers | 7.2% | 3.5% | ||
New leases | 29.6% | 24.9% | ||
Renewal leases | 4.8% | 1.7% | ||
Same-Center Sales Per Square Foot for In-line Tenants 10,000 Square Feet or Less: | ||||||||||
Sales Per Square Foot for the Trailing Twelve Months Ended June 30, | ||||||||||
2023 | 2022 | % Change | ||||||||
Mall, Lifestyle Center and Outlet Center same-center sales per square foot | $ | 425 | $ | 442 | (3.8)% | |||||
DIVIDEND
On August 9, 2023, CBL’s Board of Directors declared a regular quarterly cash dividend for the three months ended September 30, 2023, of $0.375 per share. The dividend, which equates to an annual dividend payment of $1.50 per share, is payable on September 29, 2023, to shareholders of record as of September 15, 2023.
FINANCING ACTIVITY
Year-to-date, CBL has completed more than $406.0 in financing activity.
On June 9, 2023, CBL closed on the extension and modification of the $94.8 million loan secured by Cross Creek Mall in Fayetteville, NC. The newly modified loan has a maturity date of June 9, 2025, and carries a fixed interest rate of 8.19%.
On March 16, 2023, CBL and its 50% joint venture partner closed on the extension and modification of the $161.9 million loan ($80.9 million at CBL’s 50% share) secured by West County Center, a high-performing enclosed mall in St. Louis, MO. At closing, the newly modified non-recourse loan had a principal balance of $156.9 million ($78.5 million at CBL’s share) and was extended for an initial term of two years to December 2024, with one two-year conditional extension available upon meeting certain requirements. The loan maintained the existing fixed interest rate of 3.4%.
On April 4, 2023, CBL and its 50% joint venture partner closed a new $148.0 million loan ($74.0 million at CBL’s 50% share) secured by Friendly Center and The Shops at Friendly Center, the premier lifestyle center located in Greensboro, NC. The new non-recourse five-year loan bears a fixed interest rate of 6.44% and replaces two loans with an aggregate balance of $145.2 million ($72.6 million at CBL’s share) that were set to mature in April 2023.
On April 28, 2023, CBL and its joint venture partner retired the $7.2 million (at 100%) recourse loan secured by Phase II of The Outlet Shoppes of the Bluegrass in Louisville, KY. The venture anticipates securing new financing for the entire project to coincide with the December 2024 maturity of the $64.5 million (at 100%) loan secured by Phase I.
On May 4, 2023, CBL entered into a $32.0 million swap to fix the interest rate on a portion of its $360.0 million loan secured by open-air centers and outparcels. The swap fixed the rate to 7.3975% through the initial maturity in June 2027. Collectively, $212.0 million of the $360.0 million loan has been fixed at a weighted average interest rate of 7.02%.
CBL is cooperating with the foreclosure or conveyance of Westgate Mall in Spartanburg, SC, ($28.7 million) and Alamance Crossing East in Burlington, NC, ($41.1 million). In March, Alamance Crossing East was placed into receivership and deconsolidated.
DISPOSITIONS
During the second quarter 2023, CBL completed the sale of one land parcel generating $0.4 million in gross proceeds at CBL's share. Year-to-date through the second quarter end, CBL has grossed more than $5.3 million from dispositions.
DEVELOPMENT AND REDEVELOPMENT ACTIVITY
Detailed project information is available in CBL’s Financial Supplement for Q2 2023, which can be found in the Invest – Financial Reports section of CBL’s website at cblproperties.com.
OUTLOOK AND GUIDANCE
Based on second quarter 2023 results and Management's expectations for the second half of 2023, CBL is providing the following guidance for FFO, as adjusted, and same-center NOI for full-year 2023. Guidance excludes the impact of any unannounced transactions.
Reconciliation of GAAP Earnings Per Share to 2023 FFO, as Adjusted, Per Share: | ||||||||
Low | High | |||||||
2023 FFO, as adjusted | $ | 193 million | $ | 208 million | ||||
2023 FFO, as adjusted, per share | $ | 6.00 | $ | 6.47 | ||||
Weighted Average Common Shares Outstanding | 32.1 million | 32.1 million | ||||||
2023 Same-Center NOI ("SC NOI") | $ | 423 million | $ | 440 million | ||||
2023 Change in Same-Center NOI | (4.5 | )% | (0.7 | )% | ||||
Low | High | |||||||
Expected diluted earnings per common share | $ | (1.95 | ) | $ | (1.48 | ) | ||
Depreciation and amortization | 6.76 | 6.76 | ||||||
Dividends allocable to unvested restricted stock | 0.04 | 0.04 | ||||||
Debt discount accretion, net of noncontrolling interests' share | 1.93 | 1.93 | ||||||
Adjustment for unconsolidated affiliates with negative investment | 0.08 | 0.08 | ||||||
Non-cash default interest expense | 0.02 | 0.02 | ||||||
Gain on deconsolidation | (0.88 | ) | (0.88 | ) | ||||
Expected FFO, as adjusted, per diluted, fully converted common share | $ | 6.00 | $ | 6.47 | ||||
2023 Estimate of Capital Items: | |||
Low | High | ||
2023 Estimated maintenance capital/tenant allowances | $40 million | $55 million | |
2023 Estimated development/redevelopment expenditures | $15 million | $22 million | |
2023 Estimated principal amortization (including est. term loan ECF) | $75 million | $85 million | |
Total Estimate | $130 million | $162 million | |
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 owned and managed portfolio is comprised of 94 properties totaling 58.5 million square feet across 22 states, including 56 high-quality enclosed malls, outlet centers and lifestyle retail centers as well as more than 30 open-air centers and other assets. CBL seeks to continuously strengthen 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. 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 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.
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.
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 8 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 (loss) is located at the end of this earnings release.
Pro Rata Share of Debt
The Company presents debt based on the carrying value of its pro rata ownership share (including the carrying value of 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.
Consolidated Statements of Operations | ||||||||||||||||
(Unaudited; in thousands, except per share amounts) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
REVENUES: | ||||||||||||||||
Rental revenues | $ | 124,842 | $ | 131,832 | $ | 255,166 | $ | 267,164 | ||||||||
Management, development and leasing fees | 1,822 | 1,786 | 4,256 | 3,555 | ||||||||||||
Other | 3,203 | 3,400 | 6,804 | 6,401 | ||||||||||||
Total revenues | 129,867 | 137,018 | 266,226 | 277,120 | ||||||||||||
EXPENSES: | ||||||||||||||||
Property operating | (21,507 | ) | (21,312 | ) | (46,121 | ) | (44,656 | ) | ||||||||
Depreciation and amortization | (49,742 | ) | (64,476 | ) | (103,011 | ) | (133,419 | ) | ||||||||
Real estate taxes | (14,481 | ) | (14,254 | ) | (29,269 | ) | (28,689 | ) | ||||||||
Maintenance and repairs | (9,991 | ) | (10,230 | ) | (21,515 | ) | (20,796 | ) | ||||||||
General and administrative | (16,156 | ) | (18,450 | ) | (35,385 | ) | (36,524 | ) | ||||||||
Loss on impairment | — | (252 | ) | — | (252 | ) | ||||||||||
Litigation settlement | 74 | 65 | 118 | 146 | ||||||||||||
Other | — | (834 | ) | (198 | ) | (834 | ) | |||||||||
Total expenses | (111,803 | ) | (129,743 | ) | (235,381 | ) | (265,024 | ) | ||||||||
OTHER INCOME (EXPENSES): | ||||||||||||||||
Interest and other income | 2,967 | 910 | 5,632 | 1,064 | ||||||||||||
Interest expense | (44,173 | ) | (55,117 | ) | (87,697 | ) | (145,776 | ) | ||||||||
Gain on deconsolidation | — | — | 28,151 | 36,250 | ||||||||||||
(Loss) gain on sales of real estate assets | (114 | ) | 3 | 1,482 | 19 | |||||||||||
Reorganization items, net | — | 613 | — | (958 | ) | |||||||||||
Income tax (provision) benefit | (219 | ) | 472 | (118 | ) | (329 | ) | |||||||||
Equity in earnings (losses) of unconsolidated affiliates | 812 | 2,039 | (444 | ) | 10,606 | |||||||||||
Total other expenses | (40,727 | ) | (51,080 | ) | (52,994 | ) | (99,124 | ) | ||||||||
Net loss | (22,663 | ) | (43,805 | ) | (22,149 | ) | (87,028 | ) | ||||||||
Net loss attributable to noncontrolling interests in: | ||||||||||||||||
Operating Partnership | — | 44 | — | 59 | ||||||||||||
Other consolidated subsidiaries | 1,875 | 2,373 | 3,620 | 4,859 | ||||||||||||
Net loss attributable to the Company | (20,788 | ) | (41,388 | ) | (18,529 | ) | (82,110 | ) | ||||||||
Dividends allocable to unvested restricted stock | (281 | ) | (210 | ) | (561 | ) | (210 | ) | ||||||||
Net loss attributable to common shareholders | $ | (21,069 | ) | $ | (41,598 | ) | $ | (19,090 | ) | $ | (82,320 | ) | ||||
Basic and diluted per share data attributable to common shareholders: | ||||||||||||||||
Basic earnings per share | $ | (0.67 | ) | $ | (1.34 | ) | $ | (0.61 | ) | $ | (2.83 | ) | ||||
Diluted earnings per share | (0.67 | ) | (1.34 | ) | (0.61 | ) | (2.83 | ) | ||||||||
Weighted-average basic shares | 31,313 | 30,973 | 31,309 | 29,091 | ||||||||||||
Weighted-average diluted shares | 31,313 | 30,973 | 31,309 | 29,091 | ||||||||||||
The Company's reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders is as follows: | ||||||||||||||||
(in thousands, except per share data) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net loss attributable to common shareholders | $ | (21,069 | ) | $ | (41,598 | ) | $ | (19,090 | ) | $ | (82,320 | ) | ||||
Noncontrolling interest in loss of Operating Partnership | — | (44 | ) | — | (59 | ) | ||||||||||
Dividends allocable to unvested restricted stock | 281 | 210 | 561 | 210 | ||||||||||||
Depreciation and amortization expense of: | ||||||||||||||||
Consolidated properties | 49,742 | 64,476 | 103,011 | 133,419 | ||||||||||||
Unconsolidated affiliates | 4,433 | 8,819 | 9,071 | 17,339 | ||||||||||||
Non-real estate assets | (304 | ) | (203 | ) | (452 | ) | (401 | ) | ||||||||
Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries | (708 | ) | (938 | ) | (1,373 | ) | (1,837 | ) | ||||||||
Loss on impairment, net of taxes | — | 186 | — | 186 | ||||||||||||
Gain on depreciable property | — | — | — | (629 | ) | |||||||||||
FFO allocable to Operating Partnership common unitholders | 32,375 | 30,908 | 91,728 | 65,908 | ||||||||||||
Debt discount accretion, including our share of unconsolidated affiliates and net of noncontrolling interests' share (1) | 16,574 | 50,036 | 33,190 | 128,499 | ||||||||||||
Adjustment for unconsolidated affiliates with negative investment (2) | 888 | (10,460 | ) | 2,479 | (23,007 | ) | ||||||||||
Senior secured notes fair value adjustment (3) | — | (593 | ) | — | (395 | ) | ||||||||||
Litigation settlement (4) | (74 | ) | (65 | ) | (118 | ) | (146 | ) | ||||||||
Non-cash default interest expense (5) | 287 | (9,344 | ) | 781 | (18,220 | ) | ||||||||||
Gain on deconsolidation (6) | — | — | (28,151 | ) | (36,250 | ) | ||||||||||
Reorganization items, net (7) | — | (613 | ) | — | 958 | |||||||||||
FFO allocable to Operating Partnership common unitholders, as adjusted | $ | 50,050 | $ | 59,869 | $ | 99,909 | $ | 117,347 | ||||||||
FFO per diluted share | $ | 1.01 | $ | 0.97 | $ | 2.87 | $ | 2.20 | ||||||||
FFO, as adjusted, per diluted share | $ | 1.56 | $ | 1.88 | $ | 3.12 | $ | 3.92 | ||||||||
Weighted-average common and potential dilutive common shares outstanding with Operating Partnership units fully converted | 32,071 | 31,822 | 32,000 | 29,926 | ||||||||||||
(1) | In conjunction with fresh start accounting upon emergence from bankruptcy, the Company recognized debt discounts equal to the difference between the outstanding balance of mortgage notes payable and the estimated fair value of such mortgage notes payable. The debt discounts are accreted as additional interest expense over the terms of the respective mortgage notes payable using the effective interest method. | |
(2) | Represents the Company’s share of the earnings (losses) before depreciation and amortization expense of unconsolidated affiliates where the Company is not recognizing equity in earnings (losses) because its investment in the unconsolidated affiliate is below zero. | |
(3) | Represents the fair value adjustment recorded on the senior secured notes as interest expense. | |
(4) | Represents a credit to litigation settlement expense in each of the three- and six-month periods ended June 30, 2023 and 2022 related to claim amounts that were released pursuant to the terms of the settlement agreement related to the settlement of a class action lawsuit. | |
(5) | The three and six months ended June 30, 2023 includes default interest on loans past their maturity dates. The three and six months ended June 30, 2022 includes the reversal of default interest expense when waivers or forbearance agreements were obtained. | |
(6) | For the six months ended June 30, 2023, the Company deconsolidated Alamance Crossing East due to a loss of control when the property was placed into receivership in connection with the foreclosure process. For the six months ended June 30, 2022, the Company deconsolidated Greenbrier Mall due to a loss of control when the property was placed into receivership in connection with the foreclosure process. | |
(7) | Represents costs incurred subsequent to the Company filing the chapter 11 cases associated with the Company's reorganization efforts, which consists of professional fees, legal fees and U.S. Trustee fees. |
Three Months Ended | Six Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Diluted EPS attributable to common shareholders | $ | (0.67 | ) | $ | (1.34 | ) | $ | (0.61 | ) | $ | (2.83 | ) | ||||
Add amounts per share included in FFO: | ||||||||||||||||
Unvested restricted stock | 0.02 | 0.04 | 0.03 | 0.08 | ||||||||||||
Eliminate amounts per share excluded from FFO: | ||||||||||||||||
Depreciation and amortization expense, including amounts from | 1.66 | 2.26 | 3.45 | 4.96 | ||||||||||||
Loss on impairment, net of taxes | — | 0.01 | — | 0.01 | ||||||||||||
Gain on depreciable property | — | — | — | (0.02 | ) | |||||||||||
FFO per diluted share | $ | 1.01 | $ | 0.97 | $ | 2.87 | $ | 2.20 | ||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
SUPPLEMENTAL FFO INFORMATION: | ||||||||||||||||
Lease termination fees | $ | 793 | $ | 1,052 | $ | 1,954 | $ | 2,448 | ||||||||
Straight-line rental income adjustment | $ | 1,722 | $ | 4,425 | $ | 3,355 | $ | 7,342 | ||||||||
Gain on outparcel sales, net of taxes and noncontrolling interests' share | $ | 725 | $ | 3 | $ | 2,305 | $ | 19 | ||||||||
Net amortization of acquired above- and below-market leases | $ | (5,123 | ) | $ | (4,892 | ) | $ | (10,445 | ) | $ | (11,049 | ) | ||||
Income tax (provision) benefit | $ | (219 | ) | $ | 472 | $ | (118 | ) | $ | (329 | ) | |||||
Abandoned projects expense | $ | — | $ | (834 | ) | $ | (17 | ) | $ | (834 | ) | |||||
Interest capitalized | $ | 111 | $ | 147 | $ | 217 | $ | 375 | ||||||||
Estimate of uncollectable revenues | $ | (2,375 | ) | $ | 940 | $ | (1,616 | ) | $ | 3,301 | ||||||
As of June 30, | ||||||||||||||||
2023 | 2022 | |||||||||||||||
Straight-line rent receivable | $ | 18,902 | $ | 9,440 | ||||||||||||
Same-center Net Operating Income | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net loss | $ | (22,663 | ) | $ | (43,805 | ) | $ | (22,149 | ) | $ | (87,028 | ) | ||||
Adjustments: | ||||||||||||||||
Depreciation and amortization | 49,742 | 64,476 | 103,011 | 133,419 | ||||||||||||
Depreciation and amortization from unconsolidated affiliates | 4,433 | 8,819 | 9,071 | 17,339 | ||||||||||||
Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries | (708 | ) | (938 | ) | (1,373 | ) | (1,837 | ) | ||||||||
Interest expense | 44,173 | 55,117 | 87,697 | 145,776 | ||||||||||||
Interest expense from unconsolidated affiliates | 18,531 | 21,660 | 36,056 | 40,157 | ||||||||||||
Noncontrolling interests' share of interest expense in other consolidated subsidiaries | (1,918 | ) | (2,525 | ) | (3,961 | ) | (5,095 | ) | ||||||||
Abandoned projects expense | — | 834 | 17 | 834 | ||||||||||||
Loss (gain) on sales of real estate assets, net of taxes and noncontrolling interests' share | 59 | (3 | ) | (1,537 | ) | (19 | ) | |||||||||
Gain on sales of real estate assets of unconsolidated affiliates | (784 | ) | — | (768 | ) | (629 | ) | |||||||||
Adjustment for unconsolidated affiliates with negative investment | 888 | (10,460 | ) | 2,479 | (23,007 | ) | ||||||||||
Gain on deconsolidation | — | — | (28,151 | ) | (36,250 | ) | ||||||||||
Loss on impairment, net of taxes | — | 186 | — | 186 | ||||||||||||
Litigation settlement | (74 | ) | (65 | ) | (118 | ) | (146 | ) | ||||||||
Reorganization items, net | — | (613 | ) | — | 958 | |||||||||||
Income tax provision (benefit) | 219 | (472 | ) | 118 | 329 | |||||||||||
Lease termination fees | (793 | ) | (1,052 | ) | (1,954 | ) | (2,448 | ) | ||||||||
Straight-line rent and above- and below-market lease amortization | 3,401 | 467 | 7,090 | 3,707 | ||||||||||||
Net loss attributable to noncontrolling interests in other consolidated subsidiaries | 1,875 | 2,373 | 3,620 | 4,859 | ||||||||||||
General and administrative expenses | 16,156 | 18,450 | 35,385 | 36,524 | ||||||||||||
Management fees and non-property level revenues | (5,038 | ) | (525 | ) | (10,018 | ) | (1,049 | ) | ||||||||
Operating Partnership's share of property NOI | 107,499 | 111,924 | 214,515 | 226,580 | ||||||||||||
Non-comparable NOI | (425 | ) | (3,972 | ) | (1,918 | ) | (8,178 | ) | ||||||||
Total same-center NOI (1) | $ | 107,074 | $ | 107,952 | $ | 212,597 | $ | 218,402 | ||||||||
Total same-center NOI percentage change | (0.8 | )% | (2.7 | )% | ||||||||||||
(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). 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, 2023, 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, 2023. New properties are excluded from same-center NOI, until they meet these criteria. Properties excluded from the same-center pool that would otherwise meet these criteria are properties which are under major redevelopment or 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. |
Same-center Net Operating Income | ||||||||||||||||
(Continued) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Malls | $ | 73,660 | $ | 75,491 | $ | 145,697 | $ | 153,693 | ||||||||
Outlet centers | 5,301 | 4,894 | 10,415 | 9,529 | ||||||||||||
Lifestyle centers | 8,898 | 8,727 | 18,099 | 17,830 | ||||||||||||
Open-air centers | 13,580 | 13,177 | 27,562 | 26,259 | ||||||||||||
Outparcels and other | 5,635 | 5,663 | 10,824 | 11,091 | ||||||||||||
Total same-center NOI (1) | $ | 107,074 | $ | 107,952 | $ | 212,597 | $ | 218,402 | ||||||||
Percentage Change: | ||||||||||||||||
Malls | (2.4 | )% | (5.2 | )% | ||||||||||||
Outlet centers | 8.3 | % | 9.3 | % | ||||||||||||
Lifestyle centers | 2.0 | % | 1.5 | % | ||||||||||||
Open-air centers | 3.1 | % | 5.0 | % | ||||||||||||
Outparcels and other | (0.5 | )% | (2.4 | )% | ||||||||||||
Total same-center NOI (1) | (0.8 | )% | (2.7 | )% | ||||||||||||
(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). 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, 2023, and we owned it and it was in operation for both the entire preceding calendar year and the current year-to-date reporting period ended June 30, 2023. New properties are excluded from same-center NOI, until they meet these criteria. Properties excluded from the same-center pool that would otherwise meet these criteria are properties which are under major redevelopment or 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. |
Company's Share of Consolidated and Unconsolidated Debt | ||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||
As of June 30, 2023 | ||||||||||||||||||||||||
Fixed | Variable | Total per | Unamortized | Unamortized | Total | |||||||||||||||||||
Consolidated debt | $ | 963,501 | $ | 1,048,478 | $ | 2,011,979 | $ | (15,407 | ) | $ | (54,523 | ) | $ | 1,942,049 | ||||||||||
Noncontrolling interests' share of consolidated debt | (25,222 | ) | (13,177 | ) | (38,399 | ) | 298 | 4,680 | (33,421 | ) | ||||||||||||||
Company's share of unconsolidated affiliates' debt | 622,022 | 62,919 | 684,941 | (3,397 | ) | — | 681,544 | |||||||||||||||||
Other debt (2) | 41,122 | — | 41,122 | — | — | 41,122 | ||||||||||||||||||
Company's share of consolidated, unconsolidated and other debt | $ | 1,601,423 | $ | 1,098,220 | $ | 2,699,643 | $ | (18,506 | ) | $ | (49,843 | ) | $ | 2,631,294 | ||||||||||
Weighted-average interest rate | 5.18 | % | 8.15 | % | 6.39 | % | ||||||||||||||||||
As of June 30, 2022 | ||||||||||||||||||||||||
Fixed | Variable | Total per | Unamortized | Unamortized | Total | |||||||||||||||||||
Consolidated debt | $ | 881,513 | $ | 1,270,871 | $ | 2,152,384 | $ | (16,028 | ) | $ | (100,967 | ) | $ | 2,035,389 | ||||||||||
Noncontrolling interests' share of consolidated debt | (32,771 | ) | (13,597 | ) | (46,368 | ) | 92 | 15,424 | (30,852 | ) | ||||||||||||||
Company's share of unconsolidated affiliates' debt | 627,434 | 71,786 | 699,220 | (2,490 | ) | — | 696,730 | |||||||||||||||||
Other debt (2) | 153,719 | — | 153,719 | — | — | 153,719 | ||||||||||||||||||
Company's share of consolidated, unconsolidated and other debt | $ | 1,629,895 | $ | 1,329,060 | $ | 2,958,955 | $ | (18,426 | ) | $ | (85,543 | ) | $ | 2,854,986 | ||||||||||
Weighted-average interest rate | 4.67 | % | 4.44 | % | 4.57 | % | ||||||||||||||||||
(1) | In conjunction with fresh start accounting, the Company estimated the fair value of its mortgage notes with the assistance of a third-party valuation advisor. This resulted in recognizing debt discounts upon emergence from bankruptcy. The debt discounts are accreted over the term of the respective debt using the effective interest method. | |
(2) | Represents the outstanding loan balance for properties that were deconsolidated due to a loss of control when the properties were placed into receivership in connection with the foreclosure process. |
Consolidated Balance Sheets | ||||||||
(Unaudited; in thousands, except share data) | ||||||||
June 30, | December 31, | |||||||
2023 | 2022 | |||||||
ASSETS | ||||||||
Real estate assets: | ||||||||
Land | $ | 589,557 | $ | 596,715 | ||||
Buildings and improvements | 1,200,096 | 1,198,597 | ||||||
1,789,653 | 1,795,312 | |||||||
Accumulated depreciation | (183,529 | ) | (136,901 | ) | ||||
1,606,124 | 1,658,411 | |||||||
Developments in progress | 6,431 | 5,576 | ||||||
Net investment in real estate assets | 1,612,555 | 1,663,987 | ||||||
Cash and cash equivalents | 24,919 | 44,718 | ||||||
Restricted cash | 88,674 | 97,231 | ||||||
Available-for-sale securities - at fair value (amortized cost of $255,412 and $293,476 as of June 30, 2023 and December 31, 2022, respectively) | 254,872 | 292,422 | ||||||
Receivables: | ||||||||
Tenant | 34,764 | 40,620 | ||||||
Other | 3,318 | 3,876 | ||||||
Investments in unconsolidated affiliates | 74,138 | 77,295 | ||||||
In-place leases, net | 197,245 | 247,497 | ||||||
Above market leases, net | 143,453 | 171,265 | ||||||
Intangible lease assets and other assets | 41,474 | 39,332 | ||||||
$ | 2,475,412 | $ | 2,678,243 | |||||
LIABILITIES AND EQUITY | ||||||||
Mortgage and other indebtedness, net | $ | 1,942,049 | $ | 2,000,186 | ||||
Below market leases, net | 94,180 | 110,616 | ||||||
Accounts payable and accrued liabilities | 114,082 | 200,312 | ||||||
Total liabilities | 2,150,311 | 2,311,114 | ||||||
Shareholders' equity: | ||||||||
Common stock, $.001 par value, 200,000,000 shares authorized, 32,054,421 and 31,780,075 issued and outstanding as of June 30, 2023, and December 31, 2022, respectively (in each case, excluding 34 treasury shares) | 32 | 32 | ||||||
Additional paid-in capital | 715,163 | 710,497 | ||||||
Accumulated other comprehensive income (loss) | 339 | (1,054 | ) | |||||
Accumulated deficit | (381,509 | ) | (338,934 | ) | ||||
Total shareholders' equity | 334,025 | 370,541 | ||||||
Noncontrolling interests | (8,924 | ) | (3,412 | ) | ||||
Total equity | 325,101 | 367,129 | ||||||
$ | 2,475,412 | $ | 2,678,243 | |||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20230809471891/en/
Contacts
Katie Reinsmidt, Executive Vice President - Chief Operating Officer, 423.490.8301, katie.reinsmidt@cblproperties.com
