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CBL Properties Reports Results for First Quarter 2022 and Increases Full Year Guidance

Strong Property Performance Leads to Outstanding First Quarter 2022 Results

CHATTANOOGA, Tenn.--(BUSINESS WIRE)-- CBL Properties announced results for the first quarter ended March 31, 2022. Financial results for the periods from January 1, 2021, through March 31, 2021, are referred to as those of the “Predecessor” period. Financial results for the period from January 1, 2022, through March 31, 2022, are referred to as those of the “Successor” period. 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.

 

 

Successor

 

 

 

Predecessor

 

 

 

Three Months
Ended March 31,

 

 

 

Three Months
Ended March 31,

 

 

 

2022

 

 

 

2021

 

Net loss attributable to common shareholders

 

$

(40,722

)

 

 

$

(26,763

)

Funds from Operations ("FFO")

 

$

35,000

 

 

 

$

90,241

 

FFO, as adjusted (1)

 

$

57,478

 

 

 

$

68,655

 

(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 10 of this news release.

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

 

 

Three Months Ended
March 31,

 

 

 

2022

 

Portfolio same-center NOI

 

10.7%

 

Mall, Lifestyle Center and Outlet Center same-center NOI

 

10.8%

 

(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.

KEY TAKEAWAYS:

  • Increases in percentage rent and operating expense controls contributed to an increase in total portfolio same-center NOI of 10.7% for the three months ended March 31, 2022, compared with the prior year period.
  • First quarter outperformance and revised outlook contribute to full year 2022 same-center NOI guidance increasing to $416 - $430 million from prior guidance of $400 - $413 million and FFO, as adjusted, per share guidance increasing to a range of $7.18 -$7.67 per diluted share compared with prior guidance of $7.00 - $7.50 per diluted share.
  • Portfolio occupancy as of March 31, 2022, was 88.3%, representing a 290-basis point improvement compared with 85.4% as of March 31, 2021. Same-center occupancy for malls, lifestyle centers and outlet centers was 86.5% as of March 31, 2022, representing a 330-basis point improvement compared with 83.2% as of March 31, 2021.
  • Same-center sales per square foot for the trailing 12-months ended March 31, 2022, increased 12.6% as compared to the trailing 12-months (excluding 2020) ended March 31, 2021. Same-center sales per square foot for the first quarter 2022 increased 0.9% as compared with the first quarter 2021.
  • FFO, as adjusted, allocable to Operating Partnership common unitholders, for the three months ended March 31, 2022, was $57.5 million, compared with $68.7 million. The variance in FFO, as adjusted, as compared with the prior year period reflects a significant increase in NOI, offset by an increase in interest expense attributable to the senior unsecured notes and secured credit facility. Interest payments on the notes and credit facility were not required to be made during the first quarter 2021 as a result of the Company’s bankruptcy filing on November 1, 2020.
  • As of March 31, 2022, the Company had $335.7 million of unrestricted cash and marketable securities.
  • Substantial year-to-date balance sheet improvement, resulting in lower interest costs, extended maturity schedule and greater financial flexibility.

“First quarter results sustained the strong operational and financial momentum of 2021, leading us to increase guidance for the full year," said Stephen D. Lebovitz, CBL's chief executive officer. "Significant year-over-year occupancy gains as well as positive tenant sales growth demonstrate the strength of our properties. Percentage rents, short-term income and collections were above expectations, contributing to double-digit NOI growth. While first quarter leasing spreads were negative, we anticipate sequential improvement going forward with higher occupancy and increasing demand driving more favorable terms.

“As we have consistently stated, further improving our balance sheet is also a key priority for us. We’ve made significant progress towards accomplishing our goal of fully refinancing the secured notes, including the recently announced partial redemption. Additionally, since our emergence we have closed several attractive financings, favorable modifications and extensions. These transactions reduce borrowing costs, increase free cash flow and create greater financial flexibility. Our strong and improving balance sheet coupled with our intense focus on operational improvements position CBL to deliver significant value to our shareholders.”

NON-GAAP FINANCIAL RESULTS

Net loss attributable to common shareholders for the three months ended March 31, 2022, was $40.7 million, compared with a net loss of $26.8 million, for the three months ended March 31, 2021.

FFO, as adjusted, allocable to Operating Partnership common unitholders, for the three months ended March 31, 2022, was $57.5 million, compared with $68.7 million, for the three months ended March 31, 2021.

Same-center NOI for the three months ended March 31, 2022, increased 10.7%, or $10.8 million, to $111.1 million as compared with $100.4 million in the prior-year period, due to a $12.8 million increase in total revenues partially offset by a $2.1 million increase in operating expenses.

Other major variances in same-center NOI for the quarter ended March 31, 2022, include:

  • Minimum rents and other rents increased $12.1 million. Percentage rents increased $3.0 million and tenant reimbursements declined $2.8 million. Minimum rents included a $6.9 million positive variance in the estimate for uncollectable revenues. The total estimate for uncollectable revenues for the first quarter 2022 was a reversal of $2.0 million due to collections of amounts that were previously reserved, while the prior-year period reflects an estimate for uncollectable revenues of $4.9 million.
  • Property operating expenses increased $2.5 million compared with the prior year. Maintenance and repair expenses increased $1.0 million. Real estate tax expenses declined by $1.4 million, partially offsetting the above increases.

LIQUIDITY

As of March 31, 2022, CBL had approximately $335.7 million available in unrestricted cash and marketable securities.

PORTFOLIO OPERATIONAL RESULTS

Occupancy(1):

 

Successor

Predecessor

 

Three Months
Ended March 31,

Three Months
Ended March 31,

 

2022

2021

Total portfolio

88.3%

 

85.4%

Malls, Lifestyle Centers and Outlet Centers:

 

 

 

Total malls

86.4%

 

83.0%

Total lifestyle centers

86.3%

 

82.8%

Total outlet centers

87.0%

 

85.4%

Total same-center malls, lifestyle centers and outlet centers

86.5%

 

83.2%

All Other:

 

 

 

Total open-air centers

94.4%

 

92.0%

Total other

89.0%

 

98.7%

(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.

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
March 31,

 

 

 

2022

 

Stabilized Malls, Lifestyle Centers and Outlet Centers

 

(11.6)%

 

New leases

 

(10.1)%

 

Renewal leases

 

(11.8)%

 

Same-Center Sales Per Square Foot for In-line Tenants 10,000 Square Feet or Less(1):

 

 

Successor

 

 

 

Predecessor

 

 

 

 

 

 

 

Sales Per Square
Foot for the
Trailing Twelve
Months Ended
March 31,

 

 

 

Sales Per Square
Foot for the
Trailing Twelve
Months Ended
March 31,

 

 

 

 

 

 

 

2022

 

 

 

2021 (1)

 

 

% Change

 

Mall, Lifestyle Center and Outlet Center same-center sales per square foot

 

$

447

 

 

 

$

397

 

 

12.6%

 

(1)

Due to the temporary property closures that occurred during 2020 related to COVID-19, the majority of our tenants did not report sales for the full reporting period. As a result, we are not able to provide a complete measure of sales per square foot for the periods in the year ended December 31, 2020. Sales per square foot for the trailing twelve months ended March 31, 2021, is comprised of sales reported for the periods April 1 through December 31, 2019 and January 1 through March 31, 2021.

Same-center sales per square foot for the trailing twelve months ended March 31, 2022, increased 12.6% as compared with the trailing twelve months ended March 31, 2021 (excludes 2020). Same-center sales per square foot for the first quarter 2022 increased 0.9% as compared with the first quarter 2021.

FINANCING ACTIVITY

In May 2022, CBL completed the extension and modification of the non-recourse loan secured by Arbor Place Mall in Douglasville, GA ($101.1 million). The loan’s maturity was extended to May 2026 and maintained the existing fixed interest rate of 5.1%.

On April 28, 2022, CBL and its 50% joint venture partner, closed on a $40.0 million non-recourse loan ($20 million at CBL’s share) secured by The Shoppes at Eagle Pointe, an open-air center in Cookeville, TN. The new ten-year CMBS loan bears a fixed interest rate of 5.4%. The loan replaces the maturing $33.6 million existing partially guaranteed term loan. Net proceeds to CBL after repayment of the existing loan were $6.7 million.

On April 26, 2022, CBL announced that it has entered into a term sheet for a new $65.0 million non-recourse loan. The new CMBS loan will be secured by a pool of five open-air centers owned in a 92/8 joint venture, located in Chattanooga, TN. The open-air centers include Hamilton Crossing, Hamilton Corner, The Terrace, The Shoppes at Hamilton Place, and Hamilton Place - Regal.

The loan will have a ten-year term with a fixed interest rate determined at closing and based upon an agreed upon spread plus the greater of the 10-year swap rate or 10-year US Treasury Rate. The rate is expected to be in the range of 5.5% - 5.75%, assuming interest rates at closing are comparable to today’s rates. The loan is expected to close on or around May 25th, subject to completion of customary due diligence and documentation.

In connection with the above financing, the Company’s wholly owned subsidiary, CBL & Associates Holdco II, LLC (the “Issuer”) delivered a conditional notice of redemption to holders of its 10% Senior Secured Notes due 2029 (the “10% Notes”), pursuant to the terms of the indenture governing the 10% Notes, to redeem $60.0 million aggregate principal amount of 10% Notes (the “Redemption”) on May 26, 2022. The Redemption is conditioned upon the receipt by the Issuer of net cash proceeds from the new financing. There can be no assurances as to when or if such condition will be satisfied and the Issuer may waive the condition at its discretion. Following the planned redemption, $335.0 million principal amount of 10% Notes will remain outstanding.

In March 2022, CBL closed on a new $30.0 million non-recourse loan secured by York Town Center, that provides for a three-year term and a fixed interest rate of 4.75%, interest only for the first 18 months.

In February 2022, CBL closed on the extension and modification of the $133.5 million non-recourse loan secured by Fayette Mall in Lexington, KY. The loan maturity has been extended for two years, with three additional one-year extension options, subject to certain conditions. The fixed interest rate was reduced from 5.42% to 4.25%. As part of the modification, two ground leased outparcels were released from the collateral in exchange for the addition of a redeveloped former middle anchor location.

On February 1, 2022, the Company completed the exchange of its $150 million 7% Senior Secured Exchangeable Notes. The Company issued 10.98 million shares in satisfaction of the full Exchange Amount.

On December 8, 2021, EastGate Mall in Cincinnati, OH ($30.0 million), was placed into receivership and deconsolidated. CBL no longer controls the property following its transfer to receivership. Greenbrier Mall ($61.6 million) was placed into receivership as of March 10, 2022, and deconsolidated. CBL is cooperating in the foreclosure or conveyance of EastGate Mall, Greenbrier Mall, as well as Asheville Mall in Asheville, NC ($62.1 million), which was placed into receivership and deconsolidated in the first quarter 2021. Once the foreclosures or conveyances are complete, $153.7 million of debt will be removed from CBL’s pro rata share of total debt.

CBL and its joint venture partner have an agreement in principle with the lender on modification of the $35.6 million recourse loan secured by The Outlet Shoppes at Gettysburg in Gettysburg, PA. The modified loan will have a non-recourse principal balance of $21.0 million ($10.5 million at CBL’s share). The parties have agreed to a $20.0 million general unsecured claim in the Predecessor’s bankruptcy case.

CBL is in the process of completing modifications and extensions of the loans secured by Parkdale Mall in Beaumont, TX ($68.7 million) and Northwoods Mall in N. Charleston, SC ($60.3 million). These modifications/extensions are expected to close within next 60-90 days.

CBL and its 50% JV partner have signed a term sheet with an institutional lender for a new $42.5 million loan at Ambassador Town Center. The new loan will have a term of 7-Years and a fixed interest rate of 4.35%. Closing is anticipated within the next 60-90 days. Proceeds will be used to retire the existing $40.9 million loan, which matures in June 2023.

CBL currently expects to repay a $15.1 million loan (CBL’s share $13.9 million) secured by CBL Center that matures in June 2022.

CBL is in the process of negotiating extensions and modifications of the remaining property level mortgage loans with maturities in 2021 and 2022.

DISPOSITIONS

CBL did not complete any significant dispositions in the first quarter 2022.

REDEVELOPMENT ACTIVITY

Detailed project information is available in CBL’s Financial Supplement for Q1 2022, which can be found in the Invest – Financial Reports section of CBL’s website at cblproperties.com.

OUTLOOK AND GUIDANCE

After incorporating results for the first quarter 2022 and Management’s revised full year outlook, CBL is providing updated guidance for 2022 FFO, as adjusted, in the range of $222 million - $237 million or $7.18 - $7.67 per diluted share, which assumes same-center NOI in the range of $416.0 million to $430.0 million. Improvements in expected FFO, as adjusted, are primarily driven by higher than anticipated NOI, partially offset by higher G&A expense and the impact of above and below market lease amortization following the implementation of Fresh Start accounting.

Key Guidance Assumptions:

 

 

Low

 

 

High

 

2022 FFO, as adjusted

 

$222 million

 

 

$237 million

 

2022 FFO, as adjusted, per share

 

$

7.18

 

 

$

7.67

 

Weighted Average Common Shares Outstanding

 

30.9 million

 

 

30.9 million

 

2022 Same-Center NOI ("SC NOI")

 

$416 million

 

 

$430 million

 

2022 Change in Same-Center NOI

 

 

(6.9

)%

 

 

(3.8

)%

Updated Assumptions driving the projected change in 2022 SC NOI:

 

2022 SC NOI
Low End
(in millions)

 

2022 SC NOI
High End
(in millions)

 

Category Explanation

Variance From Prior Guidance

2021 Actual Same-Center NOI

$

447.0

 

$

447.0

 

 

 

Rent from new leases and contractual rent increases

$

13.5

 

$

17.0

 

New rent from stores that opened in 2021 or expected to open in 2022 and net increases from existing tenants including contractual rent bumps and variable rent.

$3.0 million improved expectation following first quarter results, including higher expected percentage rents, and stronger leasing momentum.

Lease Terminations

$

(2.5

)

$

(2.5

)

Represents rent lost in 2022 related to stores that terminated leases in 2021.

No change

Store Closures/Non-Renewals

$

(13.5

)

$

(11.5

)

Represents rent lost in 2022 related to stores that closed for a partial year in 2021 or are expected to close before year-end 2022.

$3.0 million improved expectation due to lower stores closures in 2022 following positive tenant sales and stronger leasing activity year-to-date.

Lease Renewals/Modifications

$

(12.0

)

$

(10.0

)

Impact of negative rent spreads related to renewals or lease modifications completed in 2021 and budgeted for 2022.

$4.0 million improved expectation following strong leasing activity year-to-date.

Operating Expense

$

(9.5

)

$

(7.0

)

Increases in operating expenses are primarily driven by the return to normal operating hours versus the shortened operating hours in 2021 due to the impact of COVID, higher contract wage rates (security/janitorial) due to the tight labor market and inflation and higher maintenance and repair expense related to projects that were delayed in 2021, primarily due to labor shortages.

$4.0 million improved expectation of operating expense for 2022 following first quarter results and expense management.

Reserve for Watch List Tenants

$

(7.0

)

$

(3.0

)

Represents credit loss related to tenants that may file for bankruptcy and/or close stores due to underperformance. 2021 was impacted by a negligible credit loss.

$2.0 - $3.0 million improved expectation of the loss related to watch list tenants following first quarter results.

Total Variance

$

(31.0

)

$

(17.0

)

 

 

2022 SC NOI Guidance

$

416.0

 

$

430.0

 

 

$16.0 - $17.0 million total increase from prior guidance range of $400 - $413 million

% Variance

 

(6.9

)%

 

(3.8

)%

 

 

Reconciliation of GAAP Earnings Per Share to 2022 FFO, as Adjusted, Per Share:

 

 

Low

 

 

High

 

Expected diluted earnings per common share

 

$

(8.97

)

 

$

(8.50

)

Add: depreciation and amortization

 

 

12.81

 

 

 

12.81

 

Add: debt discount accretion, net of noncontrolling interests' share

 

 

5.18

 

 

 

5.18

 

Less: Gain on depreciable property

 

 

(0.02

)

 

 

(0.02

)

Adjustment for unconsolidated affiliates with negative investment

 

 

(0.41

)

 

 

(0.41

)

Non-cash default interest expense

 

 

(0.29

)

 

 

(0.29

)

Gain on deconsolidated

 

 

(1.17

)

 

 

(1.17

)

Reorganization item, net

 

 

0.05

 

 

 

0.05

 

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

 

$

7.18

 

 

$

7.65

 

2022 Estimate of Capital Items:

 

 

Low

High

2022 Estimated Deferred Maintenance/Tenant Allowances

 

$35 million

$45 million

2022 Estimated Development/Redevelopment Expenditures

 

$20 million

$30 million

2022 Estimated Principal Amortization (Including Est. Term Loan ECF)

 

$105 million

$120 million

Total Estimate

 

$160 million

$195 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 95 properties totaling 59.6 million square feet across 24 states, including 57 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 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 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)

 

 

Successor

 

 

 

Predecessor

 

 

 

For the Three
Months Ended
March 31,

 

 

 

For the Three
Months Ended
March 31,

 

 

 

2022

 

 

 

2021

 

REVENUES:

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

135,332

 

 

 

$

128,175

 

Management, development and leasing fees

 

 

1,769

 

 

 

 

1,659

 

Other

 

 

3,001

 

 

 

 

3,350

 

Total revenues

 

 

140,102

 

 

 

 

133,184

 

EXPENSES:

 

 

 

 

 

 

 

 

 

Property operating

 

 

(23,344

)

 

 

 

(21,802

)

Depreciation and amortization

 

 

(68,943

)

 

 

 

(48,112

)

Real estate taxes

 

 

(14,435

)

 

 

 

(16,551

)

Maintenance and repairs

 

 

(10,566

)

 

 

 

(10,781

)

General and administrative

 

 

(18,074

)

 

 

 

(12,612

)

Loss on impairment

 

 

 

 

 

 

(57,182

)

Litigation settlement

 

 

81

 

 

 

 

858

 

Total expenses

 

 

(135,281

)

 

 

 

(166,182

)

OTHER INCOME (EXPENSES):

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

155

 

 

 

 

776

 

Interest expense

 

 

(90,659

)

 

 

 

(24,130

)

Gain on deconsolidation

 

 

36,250

 

 

 

 

55,131

 

Gain (loss) on sales of real estate assets

 

 

16

 

 

 

 

(299

)

Reorganization items, net

 

 

(1,571

)

 

 

 

(22,933

)

Income tax provision

 

 

(801

)

 

 

 

(751

)

Equity in earnings (losses) of unconsolidated affiliates

 

 

8,566

 

 

 

 

(3,076

)

Total other income (expenses)

 

 

(48,044

)

 

 

 

4,718

 

Net loss

 

 

(43,223

)

 

 

 

(28,280

)

Net loss attributable to noncontrolling interests in:

 

 

 

 

 

 

 

 

 

Operating Partnership

 

 

15

 

 

 

 

698

 

Other consolidated subsidiaries

 

 

2,486

 

 

 

 

819

 

Net loss attributable to common shareholders

 

$

(40,722

)

 

 

$

(26,763

)

Basic and diluted per share data attributable to common shareholders:

 

 

 

 

 

 

 

 

 

Net loss attributable to common shareholders

 

$

(1.45

)

 

 

$

(0.14

)

Weighted-average common and potential dilutive common shares outstanding

 

 

27,998

 

 

 

 

196,509

 

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)

 

 

Successor

 

 

 

Predecessor

 

 

 

Three Months
Ended March 31,

 

 

 

Three Months
Ended March 31,

 

 

 

2022

 

 

 

2021

 

Net loss attributable to common shareholders

 

$

(40,722

)

 

 

$

(26,763

)

Noncontrolling interest in loss of Operating Partnership

 

 

(15

)

 

 

 

(698

)

Depreciation and amortization expense of:

 

 

 

 

 

 

 

 

 

Consolidated properties

 

 

68,943

 

 

 

 

48,112

 

Unconsolidated affiliates

 

 

8,520

 

 

 

 

13,530

 

Non-real estate assets

 

 

(198

)

 

 

 

(541

)

Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries

 

 

(899

)

 

 

 

(581

)

Loss on impairment

 

 

 

 

 

 

57,182

 

Gain on depreciable property

 

 

(629

)

 

 

 

 

FFO allocable to Operating Partnership common unitholders

 

 

35,000

 

 

 

 

90,241

 

Debt discount accretion, net of noncontrolling interests' share (1)

 

 

78,463

 

 

 

 

 

Adjustment for unconsolidated affiliates with negative investment (2)

 

 

(12,547

)

 

 

 

 

Senior secured notes fair value adjustment (3)

 

 

198

 

 

 

 

 

Litigation settlement (4)

 

 

(81

)

 

 

 

(858

)

Non-cash default interest expense (5)

 

 

(8,876

)

 

 

 

11,470

 

Gain on deconsolidation (6)

 

 

(36,250

)

 

 

 

(55,131

)

Reorganization items, net (7)

 

 

1,571

 

 

 

 

22,933

 

FFO allocable to Operating Partnership common unitholders, as adjusted

 

$

57,478

 

 

 

$

68,655

 

FFO per diluted share

 

$

1.25

 

 

 

$

0.45

 

FFO, as adjusted, per diluted share

 

$

2.05

 

 

 

$

0.34

 

Weighted-average common and potential dilutive common shares outstanding with Operating Partnership units fully converted

 

 

28,009

 

 

 

 

201,627

 

(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 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 Company’s 10% senior secured notes (the “Secured Notes”) as interest expense for the three months ended March 31, 2022. The Company elected the fair value option in conjunction with the issuance of its Secured Notes.

(4)

Represents a credit to litigation settlement expense in each of the three-month periods ended March 31, 2022 and 2021 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 months ended March 31, 2022 includes the reversal of default interest expense when waivers or forbearance agreements were obtained. The three months ended March 31, 2021 includes default interest expense related to loans secured by properties that were in default prior to the Company filing the Chapter 11 Cases, as well as loans secured by properties that were in default due to the Company filing the Chapter 11 Cases.

(6)

For the three months ended March 31, 2022, the Successor Company deconsolidated Greenbrier Mall due to a loss of control when the property was placed into receivership in connection with the foreclosure process. For the three months ended March 31, 2021, the Predecessor Company deconsolidated Asheville Mall and Park Plaza due to a loss of control when the properties were 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, retention bonuses, U.S. Trustee fees and debt discounts expensed in accordance with ASC 852.

 

 

Successor

 

 

 

Predecessor

 

 

 

Three Months
Ended March 31,

 

 

 

Three Months
Ended March 31,

 

 

 

2022

 

 

 

2021

 

Diluted EPS attributable to common shareholders

 

$

(1.45

)

 

 

$

(0.14

)

Eliminate amounts per share excluded from FFO:

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense, including amounts from

consolidated properties, unconsolidated affiliates, non-real estate

assets and excluding amounts allocated to noncontrolling

interests

 

 

2.72

 

 

 

 

0.30

 

Loss on impairment

 

 

 

 

 

 

0.29

 

Gain on depreciable property

 

 

(0.02

)

 

 

 

 

FFO per diluted share

 

$

1.25

 

 

 

$

0.45

 

 

 

Successor

 

 

 

Predecessor

 

 

 

Three Months
Ended March 31,

 

 

 

Three Months
Ended March 31,

 

 

 

2022

 

 

 

2021

 

SUPPLEMENTAL FFO INFORMATION:

 

 

 

 

 

 

 

 

 

Lease termination fees

 

$

1,395

 

 

 

$

1,111

 

 

 

 

 

 

 

 

 

 

 

Straight-line rental income adjustment

 

$

2,917

 

 

 

$

(3,263

)

 

 

 

 

 

 

 

 

 

 

Gain (loss) on outparcel sales

 

$

16

 

 

 

$

(299

)

 

 

 

 

 

 

 

 

 

 

Net amortization of acquired above- and below-market leases

 

$

(6,157

)

 

 

$

52

 

 

 

 

 

 

 

 

 

 

 

Income tax provision

 

$

(801

)

 

 

$

(751

)

 

 

 

 

 

 

 

 

 

 

Interest capitalized

 

$

228

 

 

 

$

19

 

 

 

 

 

 

 

 

 

 

 

Estimate of uncollectable revenues

 

$

2,076

 

 

 

$

(6,486

)

 

 

 

 

 

 

 

 

 

 

 

 

Successor

 

 

 

Predecessor

 

 

 

Three Months
Ended March 31,

 

 

 

Three Months
Ended March 31,

 

 

 

2022

 

 

 

2021

 

Straight-line rent receivable

 

$

5,402

 

 

 

$

48,528

 

Same-center Net Operating Income
(Dollars in thousands)

 

 

Successor

 

 

 

Predecessor

 

 

 

Three Months
Ended March 31,

 

 

 

Three Months
Ended March 31,

 

 

 

2022

 

 

 

2021

 

Net loss

 

$

(43,223

)

 

 

$

(28,280

)

Adjustments:

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

68,943

 

 

 

 

48,112

 

Depreciation and amortization from unconsolidated affiliates

 

 

8,520

 

 

 

 

13,530

 

Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries

 

 

(899

)

 

 

 

(581

)

Interest expense

 

 

90,659

 

 

 

 

24,130

 

Interest expense from unconsolidated affiliates

 

 

18,497

 

 

 

 

9,849

 

Noncontrolling interests' share of interest expense in other consolidated subsidiaries

 

 

(2,570

)

 

 

 

(967

)

(Gain) loss on sales of real estate assets

 

 

(16

)

 

 

 

299

 

Gain on sales of real estate assets of unconsolidated affiliates

 

 

(629

)

 

 

 

 

Adjustment for unconsolidated affiliates with negative investment

 

 

(12,547

)

 

 

 

 

Gain on deconsolidation

 

 

(36,250

)

 

 

 

(55,131

)

Loss on impairment

 

 

 

 

 

 

57,182

 

Litigation settlement

 

 

(81

)

 

 

 

(858

)

Reorganization items, net

 

 

1,571

 

 

 

 

22,933

 

Income tax provision

 

 

801

 

 

 

 

751

 

Lease termination fees

 

 

(1,395

)

 

 

 

(1,111

)

Straight-line rent and above- and below-market lease amortization

 

 

3,240

 

 

 

 

3,211

 

Net loss attributable to noncontrolling interests in other consolidated subsidiaries

 

 

2,486

 

 

 

 

819

 

General and administrative expenses

 

 

18,074

 

 

 

 

12,612

 

Management fees and non-property level revenues

 

 

(1,086

)

 

 

 

(2,580

)

Operating Partnership's share of property NOI

 

 

114,095

 

 

 

 

103,920

 

Non-comparable NOI

 

 

(2,979

)

 

 

 

(3,569

)

Total same-center NOI (1)

 

$

111,116

 

 

 

$

100,351

 

Total same-center NOI percentage change

 

 

10.7

%

 

 

 

 

 

(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 March 31, 2022, 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 March 31, 2022. 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)

 

 

Successor

 

 

 

Predecessor

 

 

 

Three Months
Ended March 31,

 

 

 

Three Months
Ended March 31,

 

 

 

2022

 

 

 

2021

 

Malls

 

$

78,490

 

 

 

$

71,240

 

Outlet centers

 

 

4,326

 

 

 

 

3,745

 

Lifestyle centers

 

 

10,124

 

 

 

 

8,874

 

Open-air centers

 

 

12,815

 

 

 

 

11,572

 

Outparcels and other

 

 

5,361

 

 

 

 

4,920

 

Total same-center NOI (1)

 

$

111,116

 

 

 

$

100,351

 

Percentage Change:

 

 

 

 

 

 

 

 

 

Malls

 

 

10.2

%

 

 

 

 

 

Outlet centers

 

 

15.5

%

 

 

 

 

 

Lifestyle centers

 

 

14.1

%

 

 

 

 

 

Open-air centers

 

 

10.7

%

 

 

 

 

 

Outparcels and other

 

 

9.0

%

 

 

 

 

 

Total same-center NOI (1)

 

 

10.7

%

 

 

 

 

 

(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 March 31, 2022, 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 March 31, 2022. 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 March 31, 2022 (Successor)

 

 

 

Fixed Rate

 

 

Variable
Rate

 

 

Total per
Debt
Schedule

 

 

Unamortized
Deferred
Financing
Costs

 

 

Unamortized
Debt
Discounts (1)

 

 

Total

 

Consolidated debt (2)

 

$

1,242,208

 

 

$

930,997

 

 

$

2,173,205

 

 

$

(2,928

)

 

$

(135,808

)

 

$

2,034,469

 

Noncontrolling interests' share of consolidated debt

 

 

(29,212

)

 

 

(13,703

)

 

 

(42,915

)

 

 

(5

)

 

 

17,276

 

 

 

(25,644

)

Company's share of unconsolidated affiliates' debt

 

 

608,984

 

 

 

89,330

 

 

 

698,314

 

 

 

(2,012

)

 

 

 

 

 

696,302

 

Other debt (3)

 

 

153,719

 

 

 

 

 

 

153,719

 

 

 

 

 

 

 

 

 

153,719

 

Company's share of consolidated, unconsolidated and other debt

 

$

1,975,699

 

 

$

1,006,624

 

 

$

2,982,323

 

 

$

(4,945

)

 

$

(118,532

)

 

$

2,858,846

 

Weighted-average interest rate

 

 

5.68

%

 

 

3.66

%

 

 

5.00

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2021 (Predecessor)

 

 

 

Fixed Rate

 

 

Variable
Rate

 

 

Total per
Debt
Schedule

 

 

Unamortized
Deferred
Financing
Costs

 

 

Unamortized
Deferred
Financing
Costs

 

 

Total

 

Consolidated debt (4)

 

$

2,347,553

 

 

$

1,182,287

 

 

$

3,529,840

 

 

$

(3,194

)

 

$

 

 

$

3,526,646

 

Noncontrolling interests' share of consolidated debt

 

 

(29,922

)

 

 

 

 

 

(29,922

)

 

 

251

 

 

 

 

 

 

(29,671

)

Company's share of unconsolidated affiliates' debt

 

 

620,896

 

 

 

123,309

 

 

 

744,205

 

 

 

(2,865

)

 

 

 

 

 

741,340

 

Other debt (3)

 

 

138,926

 

 

 

 

 

 

138,926

 

 

 

 

 

 

 

 

 

138,926

 

Company's share of consolidated and unconsolidated debt

 

$

3,077,453

 

 

$

1,305,596

 

 

$

4,383,049

 

 

$

(5,808

)

 

$

 

 

$

4,377,241

Weighted-average interest rate

 

 

5.04

%

 

 

8.62

%

(5)

 

6.11

%

 

 

 

 

 

 

 

 

 

 

 

 

(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 a debt discount on the Effective Date. The debt discount is accreted over the term of the respective debt using the effective interest method.

(2)

Includes the Company’s senior secured notes which had a fair value of $395,593 as of March 31, 2022.

(3)

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.

(4)

Includes $2,489,676 of liabilities subject to compromise.

(5)

The administrative agent informed the Company that interest would accrue on all outstanding obligations at the post-default rate, which was equal to the rate that otherwise would be in effect plus 5.0%. The post-default interest rate on March 31, 2021 was 9.50%.

Consolidated Balance Sheets
(Unaudited; in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

March 31,
2022

 

 

December 31,
2021

 

ASSETS

 

 

 

 

 

 

 

 

Real estate assets:

 

 

 

 

 

 

 

 

Land

 

$

594,355

 

 

$

599,283

 

Buildings and improvements

 

 

1,161,414

 

 

 

1,173,106

 

 

 

 

1,755,769

 

 

 

1,772,389

 

Accumulated depreciation

 

 

(49,188

)

 

 

(19,939

)

 

 

 

1,706,581

 

 

 

1,752,450

 

Developments in progress

 

 

18,493

 

 

 

16,665

 

Net investment in real estate assets

 

 

1,725,074

 

 

 

1,769,115

 

Cash and cash equivalents

 

 

185,744

 

 

 

169,554

 

Available-for-sale securities - at fair value (amortized cost of $149,936 and $149,999 as of March 31, 2022 and December 31, 2021, respectively)

 

 

149,975

 

 

 

149,996

 

Receivables:

 

 

 

 

 

 

 

 

Tenant

 

 

21,818

 

 

 

25,190

 

Other

 

 

5,356

 

 

 

4,793

 

Investments in unconsolidated affiliates

 

 

100,685

 

 

 

103,655

 

In-place leases, net

 

 

341,152

 

 

 

384,705

 

Above market leases, net

 

 

216,648

 

 

 

234,286

 

Intangible lease assets and other assets

 

 

102,872

 

 

 

104,685

 

 

 

$

2,849,324

 

 

$

2,945,979

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

 

 

 

 

 

 

 

Mortgage and other indebtedness, net

 

$

1,639,469

 

 

$

1,813,209

 

10% senior secured notes - at fair value (carrying amount of $395,000 as of March 31, 2022 and December 31, 2021, respectively)

 

 

395,593

 

 

 

395,395

 

Below market leases, net

 

 

141,388

 

 

 

151,871

 

Accounts payable and accrued liabilities

 

 

159,531

 

 

 

184,404

 

Total liabilities

 

 

2,335,981

 

 

 

2,544,879

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock, $.001 par value, 200,000,000 shares authorized, 31,807,511 and 20,774,716 issued and outstanding in 2022 and 2021, respectively

 

 

32

 

 

 

21

 

Additional paid-in capital

 

 

702,996

 

 

 

547,726

 

Accumulated other comprehensive income (loss)

 

 

39

 

 

 

(3

)

Accumulated deficit

 

 

(192,267

)

 

 

(151,545

)

Total shareholders' equity

 

 

510,800

 

 

 

396,199

 

Noncontrolling interests

 

 

2,543

 

 

 

4,901

 

Total equity

 

 

513,343

 

 

 

401,100

 

 

 

$

2,849,324

 

 

$

2,945,979

 

 

Source: CBL Properties

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News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.