Reading Time: 14 minutes

CHATTANOOGA, Tenn.–(BUSINESS WIRE)–$CBL–Please replace the revised version to correct certain Q4 2019 financial information issued on February 6, 2020, at 4:15 p.m. ET. Please refer to Form 8-K/A furnished on March 11, 2020, for additional information.

The corrected release reads:

CBL PROPERTIES REPORTS RESULTS FOR FOURTH QUARTER AND FULL-YEAR 2019

CBL Properties (NYSE:CBL) announced results for the fourth quarter and year ended December 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.

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2019

 

 

2018

 

 

%

 

 

2019

 

 

2018

 

 

%

 

Net income (loss) attributable to common shareholders per diluted share

 

$

0.12

 

 

$

(0.38

)

 

 

131.6

%

 

$

(0.89

)

 

$

(0.72

)

 

 

(23.8

)%

Funds from Operations (“FFO”) per diluted share

 

$

0.39

 

 

$

0.44

 

 

 

(12.4

)%

 

$

1.40

 

 

$

1.70

 

 

 

(17.7

)%

FFO, as adjusted, per diluted share (1)

 

$

0.37

 

 

$

0.45

 

 

 

(17.1

)%

 

$

1.36

 

 

$

1.73

 

 

 

(21.6

)%

(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 income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders on page 9 of this news release.

KEY TAKEAWAYS:

  • Same-center sales per square foot for the stabilized mall portfolio for the fourth quarter 2019 improved 3%. For the twelve-months ended December 31, 2019, same-center sales increased 2% to $386 per square foot compared with the prior-year period.
  • During 2019, CBL made significant progress on its anchor redevelopment program, completing a dozen redevelopment projects. CBL currently has 27 former anchor spaces committed, under construction or with replacements already open featuring dining, entertainment, fitness and other mixed-use components.
  • FFO per diluted share, as adjusted, was $0.37 for the fourth quarter 2019, compared with $0.45 per share for the fourth quarter 2018. Fourth quarter 2019 FFO per share was impacted by $0.02 per share of dilution from asset sales completed since the prior-year period and $0.06 per share of lower property NOI.
  • FFO per diluted share, as adjusted, was $1.36 for 2019, compared with $1.73 for 2018. 2019 FFO per share was impacted by $0.06 per share of dilution from asset sales completed since the prior-year period, $0.04 lower gains on the sale of outparcels and $0.20 per share of lower property NOI.
  • Total Portfolio Same-center NOI declined 6.5% for 2019, as compared with 2018.
  • Portfolio occupancy as of December 31, 2019, was 91.2%, representing a 70-basis point improvement sequentially, and a 190-basis point decline compared with 93.1% as of December 31, 2018. Same-center mall occupancy was 89.8% as of December 31, 2019, a 110-basis point improvement sequentially and a 210-basis point decline compared with 91.9% as of December 31, 2018.
  • During 2019, CBL completed gross asset sales totaling $185.7 million (details herein).

“As our results indicate, our properties are facing ongoing challenges as retailers struggle to adapt to today’s consumer preferences. For the year 2019, our financial results were at the high end of our guidance range with same-center NOI of (6.5%) and adjusted FFO of $1.36 per share,” said Stephen D. Lebovitz, Chief Executive Officer. “2019 results, as well as 2020 guidance, reflect the significant impact of retailer bankruptcies and store closings on revenues and occupancy. Our guidance range for 2020 incorporates the carryover from 2019 plus anticipated challenges by retailers in 2020 and a reserve for unbudgeted impacts.

“At the same time, we are working to diversify and stabilize revenues. In recent months we have opened 15 new tenants in former anchor locations, adding more productive, higher traffic-driving uses. And we have another dozen committed replacements either under construction or with planning underway. We are proactively reducing our exposure to apparel retailers with more than 76% of 2019 mall leasing completed with non-apparel tenants. As we approach our redevelopments, we are evaluating our capital investments closely and successfully stretching our dollars through ground leases, joint ventures and other creative structures. The steps we took in December 2019 to suspend our common and preferred dividends in 2020 are key elements of our strategy to preserve our significant level of internally generated cash flow, providing us with the capital to execute on our redevelopment and leasing strategies that will lead to stabilized future revenues and growth.”

Net income attributable to common shareholders for the fourth quarter 2019 was $22.0 million, or $0.12 per diluted share, compared with a net loss of $65.5 million, or a loss of $0.38 per diluted share, for the fourth quarter of 2018. Net income for the fourth quarter 2019 was impacted by a $37.4 million loss on impairment of real estate to write down the carrying value of Park Plaza to the property’s estimated fair value.

Net loss attributable to common shareholders for 2019 was $153.7 million, or a loss of $0.89 per diluted share, compared with a net loss of $123.5 million, or a loss of $0.72 per diluted share, for 2018. Net loss for the full-year 2019 included a $26.4 million reduction to the class-action litigation expense recorded in the first quarter 2019. The majority of the reduction relates to past tenants that did not submit a claim pursuant to the terms of the settlement agreement with the remainder relating to tenants that opted out of the lawsuit.

FFO allocable to common shareholders, as adjusted, for the fourth quarter 2019 was $64.7 million, or $0.37 per diluted share, compared with $77.0 million, or $0.45 per diluted share, for the fourth quarter 2018. FFO allocable to the Operating Partnership common unitholders, as adjusted, for the fourth quarter 2019 was $74.7 million compared with $89.0 million for the fourth quarter 2018.

FFO allocable to common shareholders, as adjusted, for 2019 was $235.3 million, or $1.36 per diluted share, compared with $298.2 million, or $1.73 per diluted share, for 2018. FFO allocable to the Operating Partnership common unitholders, as adjusted, for 2019 was $271.5 million compared with $345.1 million for 2018.

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

 

 

Three Months Ended

December 31,

 

 

Year Ended

December 31,

 

 

 

2019

 

 

2019

 

Portfolio same-center NOI

 

 

(9.1

)%

 

 

(6.5

)%

Mall same-center NOI

 

 

(9.8

)%

 

 

(7.3

)%

(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 acquired above and below market leases.

Major variances impacting same-center NOI for the year ended December 31, 2019, include:

  • Same-center NOI declined $38.9 million, due to a $48.8 million decrease in revenues offset by a $9.9 million decline in operating expenses.
  • Rental revenues declined $57.9 million, including a $26.5 million decline in tenant reimbursements and a $32.8 million decline in minimum and other rents. Percentage rents improved $1.4 million.
  • Property operating expenses declined $5.8 million compared with the prior year. Maintenance and repair expenses were flat. Real estate tax expenses declined $4.1 million.

PORTFOLIO OPERATIONAL RESULTS

Occupancy(1):

 

 

As of December 31,

 

 

 

2019

 

 

2018

 

Total portfolio

 

 

91.2

%

 

 

93.1

%

Malls:

 

 

 

 

 

 

 

 

Total Mall portfolio

 

 

89.8

%

 

 

91.8

%

Same-center Malls

 

 

89.8

%

 

 

91.9

%

Stabilized Malls

 

 

90.0

%

 

 

92.1

%

Non-stabilized Malls (2)

 

 

83.8

%

 

 

76.7

%

Associated centers

 

 

95.6

%

 

 

97.4

%

Community centers

 

 

96.0

%

 

 

97.2

%

(1) Occupancy for malls represents percentage of mall store gross leasable area under 20,000 square feet occupied. Occupancy for associated and community centers represents percentage of gross leasable area occupied.

(2) Represents occupancy for The Outlet Shoppes at Laredo.

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

December 31,

 

 

Year Ended

December 31,

 

 

 

2019

 

 

2019

 

Stabilized Malls

 

 

(12.1

)%

 

 

(8.6

)%

New leases

 

 

8.8

%

 

 

9.1

%

Renewal leases

 

 

(15.7

)%

 

 

(11.5

)%

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

 

 

Year Ended December 31,

 

 

 

 

 

 

 

2019

 

 

2018

 

 

% Change

 

Stabilized mall same-center sales per square foot

 

$

386

 

 

$

379

 

 

 

2

%

Stabilized mall sales per square foot

 

$

386

 

 

$

377

 

 

 

2

%

DISPOSITIONS

Year-to-date, CBL has closed on $185.7 million in asset sales, as detailed below.

In December, CBL closed on the sale of a 15% interest in The Outlet Shoppes at Atlanta to its existing joint venture partner, Horizon Group Properties (“Horizon”), for $20.8 million, including cash of $9.4 million and the assumption of 15% interest in the existing loan (representing $11.4 million at closing). Following the completion of the sale, CBL and Horizon each own a 50% interest, with Horizon continuing to lease and manage the asset.

Property

 

Location

 

Date Closed

 

Gross Sales

Price (M)

 

Cary Towne Center(1)

 

Cary, NC

 

January

 

$

31.5

 

Honey Creek Mall (1)

 

Terre Haute, IN

 

April

 

 

14.6

 

The Shoppes at Hickory Point

 

Forsyth, IL

 

April

 

 

2.5

 

Courtyard by Marriott at Pearland Town Center

 

Pearland, TX

 

June

 

 

15.1

 

The Forum at Grandview

 

Madison, MS

 

July

 

 

31.8

 

850 Greenbrier Circle

 

Chesapeake, VA

 

July

 

 

10.5

 

Various parcels

 

Various

 

Various

 

 

31.1

 

25% interest in The Outlet Shoppes at El Paso (2)

 

El Paso, TX

 

August

 

 

27.8

 

15% interest in The Outlet Shoppes at Atlanta (3)

 

Woodstock, GA

 

December

 

 

20.8

 

Total

 

 

 

 

 

$

185.7

 

(1) 100% of sale proceeds utilized to retire existing secured loans.

(2) Gross amount shown above is comprised of $9.3 million in equity and 25% interest in loan balance at closing of $18.5 million.

(3) Gross amount shown above is comprised of $9.4 million in equity and 15% interest in loan balance at closing of $11.4 million.

ANCHOR REPLACEMENT PROGRESS AND REDEVELOPMENT

During 2019, CBL completed a dozen redevelopment projects and had five additional projects under construction at year-end. Anchor replacements recently opened or pending include (complete list and additional information can be found in the financial supplement):

Property

 

Prior Tenant

 

New Tenant(s)

 

Construction/Opening Status

Eastland Mall

 

JCPenney

 

H&M, Planet Fitness

 

Open

Jefferson Mall

 

Macy’s

 

Round1

 

Open

Northwoods Mall

 

Sears

 

Burlington

 

Open

Kentucky Oaks Mall

 

Sears

 

Burlington, Ross Dress for Less

 

Open

West Towne

 

Sears

 

Dave & Busters, Total Wine

 

Open

Hanes Mall

 

Shops

 

Dave & Busters

 

Open

Parkdale Mall

 

Macy’s

 

Dick’s, Five Below, HomeGoods

 

Open

Brookfield Square

 

Sears

 

Marcus Theatres, Whirlyball

 

Open

Laurel Park Place

 

Carson’s

 

Dunham’s Sports

 

Open

Meridian Mall

 

Younkers

 

High Caliber Karts

 

Open

Stroud Mall

 

Boston

 

Shoprite

 

Open

Kentucky Oaks Mall

 

Elder Beerman

 

HomeGoods and Five Below

 

Open

Frontier Mall

 

Sears

 

Jax Outdoor Gear

 

Open

Stroud Mall

 

Sears

 

EFO Furniture Outlet

 

Open

Dakota Square

 

Herberger’s

 

Ross Dress for Less

 

Open

Hamilton Place

 

Sears

 

Dick’s Sporting Goods, Dave & Busters, Aloft Hotel, Malones

 

Under construction – Spring 2020/ 2021 (Aloft)

CherryVale Mall

 

Sears

 

Tilt

 

Under construction – Q1/Q2 ‘20

Richland Mall

 

Sears

 

Dillard’s

 

Under construction – 2020

Post Oak Mall

 

Sears

 

Conn’s HomePlus

 

Under construction – 2020

Kirkwood Mall

 

BonTon

 

Restaurants

 

2020

Imperial Valley

 

Sears

 

Hobby Lobby

 

2020

Westmoreland Mall

 

BonTon

 

Stadium Live! Casino

 

2020

York Galleria

 

Sears

 

Hollywood Casino

 

2020

Cross Creek Mall

 

Sears

 

Dave & Busters

 

Construction start in 2020

South County Center

 

Sears

 

Round1

 

Opening TBD

Hanes Mall

 

Sears

 

Novant Health

 

Opening TBD

West Towne Mall

 

Sears

 

Von Maur

 

2021

DIVIDENDS

In December 2019, CBL announced that it is suspending all future dividends on its common stock, 7.375% Series D Cumulative Redeemable Preferred Stock and 6.625% Series E Cumulative Redeemable Preferred Stock. The dividend suspension will be reviewed quarterly by the Board of Directors but is expected to remain in place until year-end 2020. The Company made this determination following a review of taxable income projections for 2019 and 2020. The Company will review taxable income on a regular basis and take measures, if necessary, to ensure that it meets the minimum distribution requirements to maintain its status as a Real Estate Investment Trust (REIT).

OUTLOOK AND GUIDANCE

CBL is providing 2020 FFO, as adjusted, guidance in the range of $1.03 – $1.13 per diluted share. Guidance incorporates a reserve in the range of $8.0 – $18.0 million (the “Reserve”) for potential future unbudgeted loss in rent from tenant bankruptcies, store closures or lease modifications that may occur in 2020.

Key assumptions underlying guidance are as follows:

 

 

Low

 

 

High

 

2020 FFO, as adjusted, per share (includes the Reserve)

 

$

1.03

 

 

$

1.13

 

2020 Change in Same-Center NOI (“SC NOI”) (includes the Reserve)

 

 

(9.5

)%

 

 

(8.0

)%

Reserve for unbudgeted lost rents included in SC NOI and FFO

 

$18.0 million

 

 

$8.0 million

 

Updated expectation for gains on outparcel sales

 

$2.0 million

 

 

$5.0 million

 

Assumptions underlying the change in 2020 SC NOI are as follows:

 

Estimated

Impact to 2020

SC NOI

 

 

Explanation

New Leasing/Contractual Rent Increases

 

2.30

%

 

 

Specialty Retail/Branding

 

(0.50

)%

 

2019 actual and 2020 budgeted closures

Store Closures/Non-renewals

 

(4.00

)%

 

2019 actual and 2020 budgeted store closures at natural lease maturity as well as mid-term store closures primarily due to tenants in bankruptcy

Lease Renewals

 

(1.50

)%

 

Impact of new renewals completed in 2019 and budgeted for 2020, including certain tenants in bankruptcy reorganization

Lease Modifications/Co-tenancy

 

(2.10

)%

 

Mid-term lease modifications and co-tenancy rents triggered in 2019 or budgeted in 2020

Expenses

 

(0.65

)%

 

Increases in operating expenses

Reserve for lost rents

 

(2.30

)%

 

Mid-point of reserve for unbudgeted lost rents

Total 2020 SC NOI Change at Midpoint

 

(8.75

)%

 

 

Reconciliation of GAAP net income (loss) to 2020 FFO, as adjusted, per share guidance:

 

 

Low

 

 

High

 

Expected diluted earnings per common share

 

$

(0.26

)

 

$

(0.16

)

Adjust to fully converted shares from common shares

 

 

0.02

 

 

 

0.02

 

Expected earnings per diluted, fully converted common share

 

 

(0.24

)

 

 

(0.14

)

Add: depreciation and amortization

 

 

1.28

 

 

 

1.28

 

Add: noncontrolling interest in loss of Operating Partnership

 

 

(0.01

)

 

 

(0.01

)

Expected FFO, as adjusted, per diluted, fully converted common share

 

$

1.03

 

 

$

1.13

 

INVESTOR CONFERENCE CALL AND WEBCAST

CBL Properties will host a conference call on Friday, February 7, 2020, at 11:00 a.m. ET. To access this interactive teleconference, dial (888) 317‑6003 or (412) 317-6061 and enter the confirmation number, 1982728. A replay of the conference call will be available through February 14, 2020, by dialing (877) 344-7529 or (412) 317‑0088 and entering the confirmation number, 10136909.

The Company will also provide an online webcast and rebroadcast of its fourth quarter 2019 earnings release conference call. The live broadcast of the quarterly conference call will be available online at cblproperties.com on Friday, February 7, 2020, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call.

To receive the CBL Properties fourth 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 108 properties totaling 68.2 million square feet across 26 states, including 68 high-quality enclosed, outlet and open-air retail centers and 9 properties managed for third parties. 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.

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 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.

Contacts

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

Read full story here