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CBL Reaps $176M from Asset Sale

Zacks Equity Research

CBL & Associates Properties, Inc. (CBL) recently sold a mall portfolio to an offshore investor with an Atlanta-based partner, Hendon Properties, for $176 million. This real estate investment trust (:REIT) used the net proceeds from the divestiture to reduce outstanding debt under its unsecured credit lines.

The sold property portfolio comprised three malls and three associated properties, includes Panama City Mall and The Shoppes at Panama City in Panama City, Fla.; Georgia Square Mall and Georgia Square Plaza in Athens, Ga.; and Rivergate Mall and Village at Rivergate in Nashville, Tenn. Jones Lang LaSalle Incorporated (JLL) represented CBL & Associates in this divestiture transaction.

We believe that the divestiture is a strategic fit as the funds generated will help in reducing CBL & Associates’ debt as well as finance its growth plans in core U.S. markets. This, in turn, will help the company to overcome competitive pressure. Notably, the company expects its 2013 funds from operations (:FFO) to experience a benefit of 2 cents per share from the divestiture.

Off late, CBL & Associates has been focusing on raising capital for reducing debt and enhancing portfolio quality. As a part of such measures year to date, the company has raised over $425 million in equity. This was achieved through ATM offerings, office buildings offload as well as the above-mentioned portfolio divestiture.

CBL & Associates is slated to release third-quarter 2013 results on Nov 5, 2013. The Zacks Consensus Estimate for the company’s third-quarter FFO is currently pegged at 54 cents per share.

Better performing REITs include Acadia Realty Trust (AKR) and Cedar Realty Trust, Inc. (CDR), both of which have a Zacks Rank #2 (Buy).

Note: FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.

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