CBL Properties Reports Results for First Quarter 2019

Results in-line; Full-Year Guidance Range Maintained

CHATTANOOGA, Tenn.–(BUSINESS WIRE)–CBL Properties (NYSE:CBL) announced results for the first quarter ended
March 31, 2019. 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:

• CBL has made tremendous progress on its anchor replacement program,
  with nearly two dozen anchor replacements recently opened or pending
  (complete list follows).
• In January 2019, CBL announced a new $1.185 billion secured credit
  facility maturing in July 2023.
• FFO per diluted share, as adjusted, was $0.30 for the first quarter
  2019, compared with $0.42 per share for the first quarter 2018. First
  quarter 2019 FFO per share was impacted by approximately $0.02 per
  share higher G&A expense, primarily related to legal and third party
  fees incurred for the $500 million term loan that closed in January
  and litigation expense, $0.01 per share of lower outparcel sales,
  $0.02 per share of dilution from asset sales completed in 2018 and
  year-to-date and $0.05 per share of lower property NOI.
• Total Portfolio Same-center NOI declined 5.3% for the three months
  ended March 31, 2019.
• Portfolio occupancy increased 20 basis points to 91.3% as of March 31,
  2019, compared with 91.1% as of March 31, 2018. Same-center mall
  occupancy was 89.7% as of March 31, 2019, a 20 basis point improvement
  compared with 89.5% as of March 31, 2018.
• Same-center sales per square foot for the stabilized mall portfolio
  for the twelve-months ended March 31, 2019, of $377 per square foot
  were flat compared with the prior-year period.
• Year-to-date, CBL has completed gross asset sales totaling $51 million.

“First quarter places CBL on-track to achieve results within our
full-year guidance range,” commented Stephen Lebovitz, chief executive
officer. “We signed new leases at an average increase of 9.3% over the
previous lease, and portfolio occupancy increased 20 basis points
year-over-year. Our leasing efforts are successfully diversifying our
tenant mix with nearly 80% of total new leases signed in the first
quarter with non-apparel tenants. We have 22 anchor replacements
committed, with six already open and many more under negotiation,
demonstrating tremendous progress on our anchor replacement program.
This program will help stabilize our income as we replace lost revenues,
mitigate co-tenancy exposure and deliver new uses that drive traffic and
strengthen the entire property. Anchor replacements such as the Stadium
Live! Casino at Westmoreland Mall and Shoprite Supermarket at Stroud
Mall are tangible examples of how we are transforming our centers with
minimal cash investment by CBL.

“We expect ongoing pressure from retail bankruptcies and certain
underperforming retailers in 2019. However, the market is severely
discounting the underlying strength and potential of our properties, the
progress we are making on our strategy and the determination of our
team. We are pushing every day to achieve our top priority of
stabilizing future revenues. We have addressed our significant
maturities for 2019, including the extension of our credit facility in
January, which provides us with both time and flexibility to execute our
plan. Given the overall environment, we have a heightened sense of
urgency across our company as we work together to execute on our
strategic objectives and our goal of ultimately returning CBL to its
proper valuation.”

Net loss attributable to common shareholders for the first quarter 2019
was $50.2 million, or a loss of $0.29 per diluted share, compared with a
net loss of $10.3 million, or a loss of $0.06 per diluted share, for the
first quarter 2018. Net loss for the first quarter 2019 was impacted by
$88.15 million of litigation settlement expense.

FFO allocable to common shareholders, as adjusted, for the first quarter
2019 was $52.4 million, or $0.30 per diluted share, compared with $72.2
million, or $0.42 per diluted share, for the first quarter 2018. FFO
allocable to the Operating Partnership common unitholders, as adjusted,
for the first quarter 2019 was $60.6 million compared with $83.8 million
for the first quarter 2018.

Percentage change in same-center Net Operating Income (“NOI”)⁽¹⁾:

Major variances impacting same-center NOI for the quarter ended
March 31, 2019, include:

• Same-center NOI declined $8.0 million, due to a $13.4 million decrease
  in revenues offset by a $5.4 million decline in operating expenses.
• Rental revenues declined $13.4 million, driven by a $0.2 million
  decline in percentage rents, a $5.9 million decline in tenant
  reimbursements and real estate tax reimbursements and a $7.3 million
  decline in minimum and other rents, including $1.6 million in
  uncollectable revenue. Uncollectable revenue represents amounts
  formerly described as bad debt expense, which were included in
  property operating expense in prior periods.

• Property operating expenses declined $3.0 million compared with the
  prior year, substantially related to $2.1 million in bad debt expense
  included in the prior year period. These amounts for the current
  period are included in rental revenues as uncollectable revenue.
  Maintenance and repair expenses increased $0.7 million. Real estate
  tax expenses declined $1.7 million.

PORTFOLIO OPERATIONAL RESULTS

New and Renewal Leasing Activity of Same Small Shop Space Less Than
10,000 Square Feet:

Same-Center Sales Per Square Foot for Mall Tenants 10,000 Square Feet
or Less:

DISPOSITIONS

Year-to-date, CBL has closed on $51.0 million in asset sales including
the sale of Cary Towne Center in Cary, NC, for $31.5 million. Proceeds
from the sale were used to satisfy a portion of the $43.7 million
outstanding non-recourse loan secured by the property. The remaining
principal balance was forgiven. Additionally, in April, CBL completed
the sale of Honey Creek Mall in Terre Haute, IN, for $14.6 million to
Out of the Box Ventures, a subsidiary of Lionheart Capital. CBL will
provide third party leasing and management services for Cary Towne
Center and Honey Creek Mall.

FINANCING ACTIVITY

In January 2019, CBL closed on a new $1.185 billion senior secured
facility (the “Facility”), which includes a fully-funded $500 million
term loan (the “Term Loan”) and a revolving line of credit (the ”Line of
Credit”) with total borrowing capacity of $685 million. The Facility
matures in July 2023 and bears a floating interest rate of 225 basis
points over LIBOR. The Term Loan will be reduced by $35 million per
year, paid in quarterly installments. The Facility replaces all of the
Company’s prior unsecured bank facilities, which totaled $1.795 billion.

In January, CBL completed the transfer of Acadiana Mall in Lafayette,
LA, to the holder of the note in exchange for extinguishment of the
$119.8 million loan.

In April, CBL closed a new $50 million non-recourse loan secured by
Volusia Mall in Daytona, FL, for a term of five years at a fixed
interest rate of 4.56%. CBL concurrently retired the existing
cross-collateralized loans secured by Honey Creek Mall in Terre Haute,
IN, and Volusia Mall in Daytona, FL, which aggregated to $64.0 million
and bore an interest rate of 8%. CBL used proceeds from the new loan as
well as the sale of Honey Creek Mall to retire the maturing loans.

CBL has entered into discussion with the lender for the $67.2 million
loan secured by Greenbrier Mall, which matures in December 2019. CBL’s
results for the first quarter 2019 included a $22.8 million loss on
impairment of real estate related to the write down of the carrying
value of Greenbrier Mall to the property’s estimated fair value. The
impairment was primarily the result of a change in the anticipated hold
period as well as declines in the property’s cash flow.

ANCHOR REPLACEMENT PROGRESS

Anchor replacements recently opened or pending include (complete list
and additional information can be found in the financial supplement):

LITIGATION SETTLEMENT

In April, CBL entered into a settlement agreement, which replaced and
superseded the term sheet entered into in March 2019, in the class
action lawsuit filed on March 16, 2016, in the United States District
Court for the Middle District of Florida (the “Court”). The settlement
agreement was preliminarily approved by the Court on April 24, 2019, but
remains subject to the final approval order. CBL accrued in its
financial statements for the first quarter of 2019, an amount equal to
the maximum expected settlement of approximately $88.15 million. This
amount will be reduced in subsequent periods to reflect amounts actually
paid through the claims process and credits actually made or as CBL is
relieved of liability pursuant to the terms of the settlement agreement.

OUTLOOK AND GUIDANCE

Based on year-to-date results and expectations for the first quarter
2019, CBL anticipates achieving 2019 FFO, as adjusted, within its
previously issued guidance range of $1.41 – $1.46 per diluted share.
Guidance incorporates a reserve in the range of $5.0 – $15.0 million
(the “Reserve”) for potential future unbudgeted loss in rent from tenant
bankruptcies, store closures or lease modifications that may occur in
2019. Based on bankruptcy and leasing activity year-to-date, including
the impact of any co-tenancy, CBL currently expects to utilize
approximately $6 – $8 million of the Reserve. Key assumptions underlying
guidance are as follows:

Reconciliation of GAAP net income (loss) to 2019 FFO, as adjusted, per
share guidance:

INVESTOR CONFERENCE CALL AND WEBCAST

CBL Properties will host a conference call on Wednesday, May 1, 2019, at
11:00 a.m. ET. To access this interactive teleconference, dial
(888) 317-6003 or (412) 317-6061 and enter the confirmation number,
9433932. A replay of the conference call will be available through May
8, 2019, by dialing (877) 344-7529 or (412) 317-0088 and entering the
confirmation number, 10128914.

The Company will also provide an online webcast and rebroadcast of its
first quarter 2019 earnings release conference call. The live broadcast
of the quarterly conference call will be available online at cblproperties.com
on Wednesday, May 1, 2019, 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.

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 114 properties
totaling 71.1 million square feet across 26 states, including 71
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.

ADOPTION OF NEW LEASE ACCOUNTING STANDARD

The Company adopted Accounting Standards Codification (“ASC”) 842, Leases,
effective January 1, 2019, which resulted in the Company revising the
presentation of rental revenues in its consolidated statements of
operations. In the past, certain components of rental revenues were
shown separately in the consolidated statements of operations. Upon the
adoption of ASC 842, these amounts have been combined into a single line
item. Please see the Company’s Supplemental Financial and Operating
Information located in the Invest section of the Company’s website for
more information regarding the components of rental revenues.

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.

Contacts

Katie Reinsmidt, Executive Vice President – Chief Investment Officer,
423.490.8301, [email protected]

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