Improved Operating Performance Drives Increase
in Full-Year NOI Guidance
CBL Properties (NYSE: CBL) announced results for the third
quarter ended September 30, 2022. Financial results for the periods
from January 1, 2021, through September 30, 2021, are referred to
as those of the “Predecessor” period. Financial results for the
period from January 1, 2022, through September 30, 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 September
30,
Three Months Ended September
30,
2022
2021
Net loss attributable to common
shareholders
$
(14,510
)
$
(41,720
)
Funds from Operations ("FFO")
$
49,494
$
74,491
FFO, as adjusted (1)
$
59,001
$
95,329
Successor
Predecessor
Nine Months Ended September
30,
Nine Months Ended September
30,
2022
2021
Net loss attributable to common
shareholders
$
(96,830
)
$
(77,365
)
Funds from Operations ("FFO")
$
115,402
$
215,526
FFO, as adjusted (1)
$
176,348
$
243,484
(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.
KEY TAKEAWAYS:
- Ongoing increases in occupancy and improvement in lease spreads
drive increased full-year expectations for NOI and narrows the
range for FFO. 2022 FFO, as adjusted now expected in the range of
$7.40 - $7.67 per diluted share vs. prior guidance of $7.18 - $7.67
per diluted share. 2022 same-center NOI guidance increased by $8.0
million to a range of $424.0 - $438.0 million.
- Portfolio occupancy as of September 30, 2022, was 90.5%.
Portfolio occupancy was 88.4% as of September 30, 2021. Portfolio
occupancy as of September 30, 2022, increased 210-basis points from
the prior-year quarter-end and increased 100-basis points from June
30, 2022. Same-center occupancy for malls, lifestyle centers and
outlet centers was 89.1% as of September 30, 2022. Same-center
occupancy for malls, lifestyle centers and outlet centers was 86.7%
as of September 30, 2021. The quarter-over-quarter improvement in
same-center occupancy for malls, lifestyle centers and outlet
centers was 240-basis points.
- Third quarter new and renewal comparable space leases for
malls, lifestyle centers and outlet centers were signed at 5.2%
higher average rents versus the prior leases, marking a notable
reversal in trends.
- Same-center tenant sales per square foot for the trailing
12-months ended September 30, 2022, was $440. Same-center sales
tenant per square foot for the trailing 12-months (excluding 2020)
ended September 30, 2021, was $431. The year-over-year improvement
in tenant sales per square foot was 2.1%.
- FFO, as adjusted, allocable to Operating Partnership common
unitholders, for the three months ended September 30, 2022, was
$59.0 million. FFO, as adjusted, allocable to Operating Partnership
common unitholders was $95.3 million in the prior-year period.
Interest payments on the senior secured notes and credit facility
were not required to be made during the third quarter 2021, due to
the Company’s bankruptcy filing on November 1, 2020.
- Same-center NOI for the three and nine months ended September
30, 2022, was $105.5 million and $322.9 million, respectively.
Same-center NOI for the three and nine months ended September 30,
2021, was $113.5 million and $317.4 million, respectively.
Same-center NOI declined 7% for the three months and increased 1.8%
for the nine months ended September 30, 2022, from the prior year
periods. NOI growth in the third quarter was impacted by a lower
recovery of uncollectable revenues and increased operating
expenses, primarily due to wage inflation.
- As of September 30, 2022, the Company had $335.7 million of
unrestricted cash and marketable securities.
- CBL’s Board of Directors declared a $0.25 per share cash
dividend for the second and third quarters of 2022, providing cash
returns to shareholders.
"2022 has been an outstanding year for CBL, demonstrating the
strength and resiliency of our portfolio and our company," said
Stephen D. Lebovitz, CBL's chief executive officer. "We are pleased
with our operating results in the third quarter, including
210-basis-point growth in quarter-over-quarter portfolio occupancy
and our first quarter of overall positive lease spreads in several
years, driving an increase in our full-year expectations for
same-center NOI. Additionally, August and September sales growth
was positive, a notable reversal of the year-to-date trend.
"Year-to-date, we completed over $1.1 billion in financing
activity, significantly de-risking our balance sheet, reducing
interest costs and increasing cash flow as we locked in favorable
rates. As a result, we benefit from a simplified capital structure
primarily comprised of non-recourse loans, a strong cash position,
a pool of unencumbered assets and significant free cash flow. We
are focused on maximizing shareholder returns and delivering
capital to our shareholders through our dividend program. As
announced, we expect to provide at least $1.00 per share of
annualized regular cash dividends as well as a special dividend to
be declared later this year. We are also committed to a highly
disciplined approach to capital allocation as we evaluate
opportunities to deploy capital at our properties as well as
externally. We are in an ideal position to be selective and
opportunistic.
"As we approach the holiday season, we are optimistic for a
healthy close to 2022. Retailers are well stocked and aggressively
promoting their business. Brick-and-mortar stores are a key
ingredient to success in today’s retail world. Just a few weeks
ago, we celebrated the grand opening of the new Von Maur premier
fashion department store at West Towne Mall in Madison, Wisconsin.
The community’s embrace of this opening is further evidence of the
attraction of new and exciting stores and their power to drive
traffic and sales. We are working on a number of value-enhancing
projects across our portfolio, further demonstrating our expertise
in delivering financially successful projects that create
substantial value at the properties and for our company."
NON-GAAP FINANCIAL RESULTS
Net loss attributable to common shareholders for the three
months ended September 30, 2022, was $14.5 million. Net loss for
the three months ended September 30, 2021, was $41.7 million,
Net loss attributable to common shareholders for the nine months
ended September 30, 2022, was $96.8 million. Net loss for the nine
months ended September 30, 2021, was $77.4 million,
FFO, as adjusted, allocable to Operating Partnership common
unitholders, for the three months ended September 30, 2022, was
$59.0 million. FFO, as adjusted, allocable to Operating Partnership
common unitholders was $95.3 million, for the three months ended
September 30, 2021.
FFO, as adjusted, allocable to Operating Partnership common
unitholders, for the nine months ended September 30, 2022, was
$176.3 million. FFO, as adjusted, allocable to Operating
Partnership common unitholders was $243.5 million, for the nine
months ended September 30, 2021.
Same-center Net Operating Income (“NOI”) (1):
Successor
Predecessor
Three Months Ended September
30, 2022
Three Months Ended September
30, 2021
Total Revenues
$
161,218
$
164,895
Total Expenses
$
55,671
$
51,361
Total portfolio same-center NOI
$
105,547
$
113,534
Estimate for uncollectable revenues
(recovery)
$
(302
)
$
(3,670
)
(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.
Same-center NOI for the third quarter declined $8.0 million or
7.0% from the prior-year period. The decline was driven by a $3.7
million decline in total revenues and a $4.3 million increase in
operating expenses. Revenues were unfavorably impacted by a $3.4
million variance in the total estimate for uncollectable
revenues.
Successor
Predecessor
Nine Months Ended September
30, 2022
Nine Months Ended September
30, 2021
Total Revenues
$
484,232
$
470,131
Total Expenses
$
161,298
$
152,770
Total portfolio same-center NOI
$
322,933
$
317,361
Estimate for uncollectable revenues
(recovery)
$
(3,719
)
$
2,828
(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.
Same-center NOI for nine months ended September 30, 2022,
increased $5.6 million or 1.8% from the prior-year period. The
increase was driven by a $14.1 million increase in total revenues,
partially offset by an $8.5 million increase in operating expenses.
Revenues were favorably impacted by a $6.5 million variance in the
total estimate for uncollectable revenues.
PORTFOLIO OPERATIONAL RESULTS Occupancy(1):
Successor
Predecessor
As of September 30,
As of September 30,
2022
2021
Total portfolio
90.5%
88.4%
Malls, Lifestyle Centers and Outlet
Centers:
Total malls
88.7%
85.9%
Total lifestyle centers
90.6%
86.8%
Total outlet centers
90.9%
90.1%
Total same-center malls, lifestyle centers
and outlet centers
89.1%
86.7%
All Other:
Total open-air centers
94.7%
94.7%
Total other
93.0%
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 September
30,
Nine Months Ended September
30,
2022
2022
Stabilized Malls, Lifestyle Centers and
Outlet Centers
5.2%
(6.3)%
New leases
85.3%
14.3%
Renewal leases
(2.3)%
(9.1)%
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 September 30,
Sales Per Square Foot for the
Trailing Twelve Months Ended September 30,
2022
2021 (1)
Mall, Lifestyle Center and Outlet Center
same-center sales per square foot
$
440
$
431
(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
September 30, 2021, is comprised of tenant sales reported for the
periods October 1 through December 31, 2019, and January 1 through
September 30, 2021.
Same-center tenant sales per square foot for the trailing twelve
months ended September 30, 2022, increased 2.1% as compared with
the trailing twelve months ended September 30, 2021 (excludes
2020). Same-center tenant sales per square foot for the third
quarter 2022, was $105.41. Same-center tenant sales per square foot
for the third quarter 2021, was $107.32. Same-center tenant sales
for the third quarter 2022 declined 1.8% as compared with the
prior-year period.
DIVIDEND
On November 10, 2022, CBL’s Board of Directors declared a
regular quarterly cash dividend for the three months ended December
31, 2022, of $0.25 per share. The dividend, which equates to an
annual dividend payment of $1.00 per share, is payable on December
30, 2022, to shareholders of record as of December 1, 2022.
Additionally on November 10th, CBL announced that based on
refined tax projections for the twelve months ending December 31,
2022, CBL expects to distribute a special one-time dividend in the
range of $65 to $85 million to meet minimum distribution
requirements. The exact amount of the special dividend will be
determined by CBL’s Board of Directors before year-end and will be
subject to the Board’s ongoing review of the Company’s tax
projections over the remainder of the year in relation to current
projections. Subject to IRS guidelines, the special dividend may be
distributed in all cash or in a combination of cash and common
stock, as determined at the time by CBL’s Board of Directors.
FINANCING ACTIVITY
Year-to-date, CBL completed more than $1.1 billion in financing
activity. Details of financings completed in the third quarter 2022
and subsequent are outlined below.
During the third quarter, CBL completed the modification and
extensions of the loan secured by Parkdale Mall in Beaumont, TX
($64.2 million). The loan was extended to March 2026, at the
existing interest rate of 5.85%.
In October, CBL finalized the modification of the loan secured
by Southpark Mall in Richmond, VA ($54.4 million). The loan was
extended through June 2026 at the existing interest rate of
4.85%.
Additionally in October, the modification of the $35.2 million
recourse loan secured by The Outlet Shoppes at Gettysburg in
Gettysburg, PA was completed. The loan balance was reduced to $21.0
million ($10.5 million at CBL's share), and the loan was converted
to non-recourse.
In August, CBL conveyed Asheville Mall in Asheville, NC, to the
lender in exchange for cancelation of the $62.1 million loan
secured by the property. In September, the foreclosure of Eastgate
Mall in Cincinnati, OH, and in October, the foreclosure of
Greenbrier Mall in Chesapeake, VA, were completed in satisfaction
of an aggregate $91.6 million of loans. CBL is cooperating with a
foreclosure or conveyance of Westgate Mall in Spartanburg, SC,
($29.6 million) and Alamance Crossing East in Burlington, NC,
($41.7 million) and anticipates both properties will be placed into
receivership imminently. The foreclosures or conveyances of
Westgate Mall, Alamance Crossing East and Greenbrier Mall result in
a total of approximately $132.9 million of debt that will be
removed from CBL’s pro rata share of total debt. The three loans
generate an estimated debt yield of approximately 10%. CBL does not
recognize earnings or receive cash flow from the properties in
receivership.
In October, CBL completed a short-term extension to January 2023
for the loan secured by Cross Creek Mall in Fayetteville, NC ($98.7
million). CBL is in discussions with the lender for a two-year
extension/modification of the loan, which it anticipates closing
before year-end. CBL is also in discussions with the lender for a
potential extension/modification of the loan secured by West County
Center located in St. Louis, MO ($81.5 million at CBL’s share).
DISPOSITIONS
During the third quarter 2022, CBL completed the sale of three
land parcels for $6.2 million. Year-to-date, CBL has grossed more
than $9.4 million from dispositions.
REDEVELOPMENT ACTIVITY
On Saturday, October 15, CBL celebrated the opening of the Von
Maur premier fashion department store at West Towne Mall in
Madison, Wisconsin. The more than 82,000-square-foot store opened
in the former Boston Store location and is one of only two
department store openings in the country this year.
Detailed project information is available in CBL’s Financial
Supplement for Q3 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 third quarter 2022, CBL is
providing updated guidance for 2022 for FFO, as adjusted, in the
range of $229.0 million - $237.0 million or $7.40 - $7.67 per
diluted share. The assumption for same-center NOI for the year
increased by $8.0 million at both the high and low end, to the
range of $424.0 million to $438.0 million. The improved
expectations are primarily as a result of better than anticipated
leasing results and occupancy growth.
Key Guidance Assumptions:
Low
High
2022 FFO, as adjusted
$229 million
$237 million
2022 FFO, as adjusted, per share
$
7.40
$
7.67
Weighted Average Common Shares
Outstanding
30.9 million
30.9 million
2022 Same-Center NOI ("SC NOI")
$424 million
$438 million
2022 Change in Same-Center NOI
(3.4
)%
(0.2
)%
Reconciliation of GAAP Earnings Per Share to 2022 FFO, as
Adjusted, Per Share:
Low
High
Expected diluted earnings per common
share
$
(4.83
)
$
(4.56
)
Depreciation and amortization
9.57
9.57
Debt discount accretion, net of
noncontrolling interests' share
5.68
5.68
Loss on Impairment
0.01
0.01
Gain on depreciable property
(0.02
)
(0.02
)
Adjustment for unconsolidated affiliates
with negative investment
(1.17
)
(1.17
)
Non-cash default interest expense
(0.64
)
(0.64
)
Gain on deconsolidated
(1.17
)
(1.17
)
Adjustment for litigation settlement
(0.02
)
(0.02
)
Reorganization item, net
(0.01
)
(0.01
)
Expected FFO, as adjusted, per diluted,
fully converted common share
$
7.40
$
7.67
2022 Estimate of Capital Items:
Low
High
2022 Estimated Deferred Maintenance/Tenant
Allowances
$35 million
$45 million
2022 Estimated Development/Redevelopment
Expenditures
$10 million
$20 million
2022 Estimated Principal Amortization
(Including Est. Term Loan ECF)
$85 million
$105 million
Total Estimate
$130 million
$170 million
ABOUT CBL PROPERTIES
Headquartered in Chattanooga, TN, CBL Properties owns and
manages a national portfolio of market-dominant properties located
in dynamic and growing communities. CBL’s owned and managed
portfolio is comprised of 94 properties totaling 58.5 million
square feet across 22 states, including 56 high-quality enclosed
malls, outlet centers and lifestyle retail centers as well as more
than 30 open-air centers and other assets. CBL seeks to
continuously strengthen its company and portfolio through active
management, aggressive leasing and profitable reinvestment in its
properties. For more information visit cblproperties.com.
NON-GAAP FINANCIAL MEASURES
Funds From Operations
FFO is a widely used non-GAAP measure of the operating
performance of real estate companies that supplements net income
(loss) determined in accordance with GAAP. The National Association
of Real Estate Investment Trusts ("NAREIT") defines FFO as net
income (loss) (computed in accordance with GAAP) excluding gains or
losses on sales of depreciable operating properties and impairment
losses of depreciable properties, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships
and joint ventures and noncontrolling interests. Adjustments for
unconsolidated partnerships and joint ventures and noncontrolling
interests are calculated on the same basis. We define FFO as
defined above by NAREIT 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
Three Months Ended September
30,
Three Months Ended September
30,
2022
2021
REVENUES:
Rental revenues
$
131,642
$
145,539
Management, development and leasing
fees
1,783
1,780
Other
2,855
3,056
Total revenues
136,280
150,375
EXPENSES:
Property operating
(24,390
)
(23,818
)
Depreciation and amortization
(61,050
)
(46,479
)
Real estate taxes
(13,880
)
(13,957
)
Maintenance and repairs
(10,272
)
(9,482
)
General and administrative
(14,625
)
(13,502
)
Loss on impairment
—
(63,160
)
Litigation settlement
36
89
Other
—
(104
)
Total expenses
(124,181
)
(170,413
)
OTHER INCOME (EXPENSES):
Interest and other income
152
510
Interest expense
(37,652
)
(19,039
)
Loss on available-for-sale securities
(39
)
—
Gain on sales of real estate assets
3,528
8,684
Reorganization items, net
1,220
(12,008
)
Income tax (provision) benefit
(2,422
)
1,234
Equity in earnings (losses) of
unconsolidated affiliates
5,702
(2,224
)
Total other expenses
(29,511
)
(22,843
)
Net loss
(17,412
)
(42,881
)
Net (income) loss attributable to
noncontrolling interests in:
Operating Partnership
(25
)
1,085
Other consolidated subsidiaries
3,143
76
Net loss attributable to the
Company
(14,294
)
(41,720
)
Dividends allocable to unvested restricted
stock
(216
)
—
Net loss attributable to common
shareholders
$
(14,510
)
$
(41,720
)
Basic and diluted per share data
attributable to common shareholders:
Net loss attributable to common
shareholders
$
(0.47
)
$
(0.21
)
Weighted-average common and potential
dilutive common shares outstanding
30,973
196,454
Consolidated Statements of Operations (Unaudited; in
thousands, except per share amounts)
Successor
Predecessor
Nine Months Ended September
30,
Nine Months Ended September
30,
2022
2021
REVENUES:
Rental revenues
$
398,806
$
405,030
Management, development and leasing
fees
5,338
4,888
Other
9,256
10,202
Total revenues
413,400
420,120
EXPENSES:
Property operating
(69,046
)
(65,243
)
Depreciation and amortization
(194,469
)
(142,090
)
Real estate taxes
(42,569
)
(45,618
)
Maintenance and repairs
(31,068
)
(29,047
)
General and administrative
(51,149
)
(37,383
)
Loss on impairment
(252
)
(120,342
)
Litigation settlement
182
890
Other
(834
)
(391
)
Total expenses
(389,205
)
(439,224
)
OTHER INCOME (EXPENSES):
Interest and other income
1,216
2,038
Interest expense
(183,428
)
(65,468
)
Gain on deconsolidation
36,250
55,131
Loss on available-for-sale securities
(39
)
—
Gain on sales of real estate assets
3,547
8,492
Reorganization items, net
262
(52,014
)
Income tax provision
(2,751
)
(222
)
Equity in earnings (losses) of
unconsolidated affiliates
16,308
(9,575
)
Total other expenses
(128,635
)
(61,618
)
Net loss
(104,440
)
(80,722
)
Net loss attributable to noncontrolling
interests in:
Operating Partnership
34
2,013
Other consolidated subsidiaries
8,002
1,344
Net loss attributable to the
Company
(96,404
)
(77,365
)
Dividends allocable to unvested restricted
stock
(426
)
—
Net loss attributable to common
shareholders
$
(96,830
)
$
(77,365
)
Basic and diluted per share data
attributable to common shareholders:
Net loss attributable to common
shareholders
$
(3.26
)
$
(0.39
)
Weighted-average common and potential
dilutive common shares outstanding
29,725
196,474
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 September
30,
Three Months Ended September
30,
2022
2021
Net loss attributable to common
shareholders
$
(14,510
)
$
(41,720
)
Noncontrolling interest in income (loss)
of Operating Partnership
25
(1,085
)
Depreciation and amortization expense
of:
Consolidated properties
61,050
46,479
Unconsolidated affiliates
3,665
13,480
Non-real estate assets
(123
)
(416
)
Dividends allocable to unvested restricted
stock
216
—
Noncontrolling interests' share of
depreciation and amortization in other consolidated
subsidiaries
(829
)
(571
)
Loss on impairment
—
63,160
Gain on depreciable property
—
(4,836
)
FFO allocable to Operating Partnership
common unitholders
49,494
74,491
Debt discount accretion, net of
noncontrolling interests' share (1)
25,425
—
Adjustment for unconsolidated affiliates
with negative investment (2)
(13,116
)
—
Litigation settlement (3)
(36
)
(89
)
Non-cash default interest expense (4)
(1,585
)
8,919
Loss on available-for-sale securities
39
—
Reorganization items, net (5)
(1,220
)
12,008
FFO allocable to Operating Partnership
common unitholders, as adjusted
$
59,001
$
95,329
FFO per diluted share
$
1.55
$
0.37
FFO, as adjusted, per diluted
share
$
1.85
$
0.47
Weighted-average common and potential
dilutive common shares outstanding with Operating Partnership units
fully converted
31,831
201,559
(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 a credit to litigation
settlement expense in each of the three-month periods ended
September 30, 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.
(4)
The three months ended September 30, 2022
includes the reversal of default interest expense when waivers or
forbearance agreements were obtained. The three months ended
September 30, 2021 includes default interest expense related to
loans secured by properties that were in default prior to the
Company filing bankruptcy, as well as loans secured by properties
that remain in default due to the Company filing bankruptcy.
(5)
Represents costs incurred subsequent to
the Company filing bankruptcy associated with the Company’s
reorganization efforts, which consists of professional fees, legal
fees, retention bonuses and U.S. Trustee fees expensed in
accordance with ASC 852.
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
Nine Months Ended September
30,
Nine Months Ended September
30,
2022
2021
Net loss attributable to common
shareholders
$
(96,830
)
$
(77,365
)
Noncontrolling interest in loss of
Operating Partnership
(34
)
(2,013
)
Depreciation and amortization expense
of:
Consolidated properties
194,469
142,090
Unconsolidated affiliates
21,004
40,466
Non-real estate assets
(524
)
(1,448
)
Dividends allocable to unvested restricted
stock
426
—
Noncontrolling interests' share of
depreciation and amortization in other consolidated
subsidiaries
(2,666
)
(1,710
)
Loss on impairment, net of taxes
186
120,342
Gain on depreciable property
(629
)
(4,836
)
FFO allocable to Operating Partnership
common unitholders
115,402
215,526
Debt discount accretion, net of
noncontrolling interests' share (1)
153,924
—
Adjustment for unconsolidated affiliates
with negative investment (2)
(36,123
)
—
Senior secured notes fair value adjustment
(3)
(395
)
—
Litigation settlement (4)
(182
)
(890
)
Non-cash default interest expense (5)
(19,805
)
31,965
Gain on deconsolidation (6)
(36,250
)
(55,131
)
Loss on available-for-sale securities
39
—
Reorganization items, net (7)
(262
)
52,014
FFO allocable to Operating Partnership
common unitholders, as adjusted
$
176,348
$
243,484
FFO per diluted share
$
3.78
$
1.07
FFO, as adjusted, per diluted
share
$
5.77
$
1.21
Weighted-average common and potential
dilutive common shares outstanding with Operating Partnership units
fully converted
30,568
201,587
(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 senior secured notes as interest expense.
(4)
Represents a credit to litigation
settlement expense in each of the nine-month periods ended
September 30, 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 nine months ended September 30, 2022
includes the reversal of default interest expense when waivers or
forbearance agreements were obtained. The nine months ended
September 30, 2021 includes default interest expense related to
loans secured by properties that were in default prior to the
Company filing bankruptcy, as well as loans secured by properties
that remain in default due to the Company filing bankruptcy.
(6)
For the nine months ended September 30,
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 nine months ended
September 30, 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 bankruptcy associated with the Company’s
reorganization efforts, which consists of professional fees, legal
fees, retention bonuses and U.S. Trustee fees expensed in
accordance with ASC 852.
Successor
Predecessor
Three Months Ended September
30,
Three Months Ended September
30,
2022
2021
Diluted EPS attributable to common
shareholders
$
(0.47
)
$
(0.21
)
Add amounts per share included in FFO:
Unvested restricted stock
0.02
—
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
2.00
0.29
Loss on impairment
—
0.31
Gain on depreciable property
—
(0.02
)
FFO per diluted share
$
1.55
$
0.37
Successor
Predecessor
Nine Months Ended September
30,
Nine Months Ended September
30,
2022
2021
Diluted EPS attributable to common
shareholders
$
(3.26
)
$
(0.39
)
Add amounts per share included in FFO:
Unvested restricted stock
0.09
—
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
6.96
0.89
Loss on impairment, net of taxes
0.01
0.59
Gain on depreciable property
(0.02
)
(0.02
)
FFO per diluted share
$
3.78
$
1.07
Successor
Predecessor
Three Months Ended September
30,
Three Months Ended September
30,
2022
2021
SUPPLEMENTAL FFO INFORMATION:
Lease termination fees
$
1,572
$
2,051
Straight-line rental income adjustment
$
2,058
$
2,711
Gain on outparcel sales, net of taxes
$
3,561
$
3,864
Net amortization of acquired above- and
below-market leases
$
(5,438
)
$
60
Income tax benefit (provision)
$
(2,422
)
$
1,234
Abandoned projects expense
$
—
$
(104
)
Interest capitalized
$
156
$
—
Estimate of uncollectable revenues
$
(368
)
$
4,348
Successor
Predecessor
Nine Months Ended September
30,
Nine Months Ended September
30,
2022
2021
SUPPLEMENTAL FFO INFORMATION:
Lease termination fees
$
4,020
$
3,329
Straight-line rental income adjustment
$
9,400
$
(1,146
)
Gain on outparcel sales, net of taxes
$
3,580
$
3,655
Net amortization of acquired above- and
below-market leases
$
(16,487
)
$
185
Income tax provision
$
(2,751
)
$
(222
)
Abandoned projects expense
$
(834
)
$
(391
)
Interest capitalized
$
531
$
32
Estimate of uncollectable revenues
$
3,850
$
(6,561
)
Successor
Predecessor
As of September 30,
As of September 30,
2022
2021
Straight-line rent receivable
$
12,343
$
50,609
Same-center Net Operating Income (Dollars in
thousands)
Successor
Predecessor
Three Months Ended September
30,
Three Months Ended September
30,
2022
2021
Net loss
$
(17,412
)
$
(42,881
)
Adjustments:
Depreciation and amortization
61,050
46,479
Depreciation and amortization from
unconsolidated affiliates
3,665
13,480
Noncontrolling interests' share of
depreciation and amortization in other consolidated
subsidiaries
(829
)
(571
)
Interest expense
37,652
19,039
Interest expense from unconsolidated
affiliates
25,297
10,647
Noncontrolling interests' share of
interest expense in other consolidated subsidiaries
(2,688
)
(663
)
Abandoned projects expense
—
104
Gain on sales of real estate assets
(3,528
)
(8,684
)
Gain on sales of real estate assets of
unconsolidated affiliates
(33
)
(70
)
Adjustment for unconsolidated affiliates
with negative investment
(13,116
)
—
Loss on available-for-sale securities
39
—
Loss on impairment
—
63,160
Litigation settlement
(36
)
(89
)
Reorganization items, net
(1,220
)
12,008
Income tax provision (benefit)
2,422
(1,234
)
Lease termination fees
(1,572
)
(2,051
)
Straight-line rent and above- and
below-market lease amortization
3,380
(2,771
)
Net loss attributable to noncontrolling
interests in other consolidated subsidiaries
3,143
76
General and administrative expenses
14,625
13,502
Management fees and non-property level
revenues
(683
)
(1,344
)
Operating Partnership's share of
property NOI
110,156
118,137
Non-comparable NOI
(4,609
)
(4,603
)
Total same-center NOI (1)(2)
$
105,547
$
113,534
(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 September 30,
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 September 30, 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.
(2)
Same-center NOI of the successor company
was $105,547 for the three months ended September 30, 2022.
Same-center NOI of the predecessor company was $113,534 for the
three months ended September 30, 2021. Same-center NOI of the
successor company was 7.0% lower for the three months ended
September 30, 2022.
Same-center Net Operating Income (Dollars in
thousands)
Successor
Predecessor
Nine Months Ended September
30,
Nine Months Ended September
30,
2022
2021
Net loss
$
(104,440
)
$
(80,722
)
Adjustments:
Depreciation and amortization
194,469
142,090
Depreciation and amortization from
unconsolidated affiliates
21,004
40,466
Noncontrolling interests' share of
depreciation and amortization in other consolidated
subsidiaries
(2,666
)
(1,710
)
Interest expense
183,428
65,468
Interest expense from unconsolidated
affiliates
65,454
31,008
Noncontrolling interests' share of
interest expense in other consolidated subsidiaries
(7,783
)
(2,508
)
Abandoned projects expense
834
391
Gain on sales of real estate assets
(3,547
)
(8,492
)
Gain on sales of real estate assets of
unconsolidated affiliates
(662
)
(70
)
Adjustment for unconsolidated affiliates
with negative investment
(36,123
)
—
Gain on deconsolidation
(36,250
)
(55,131
)
Loss on available-for-sale securities
39
—
Loss on impairment
252
120,342
Litigation settlement
(182
)
(890
)
Reorganization items, net
(262
)
52,014
Income tax provision
2,751
222
Lease termination fees
(4,020
)
(3,329
)
Straight-line rent and above- and
below-market lease amortization
7,087
961
Net loss attributable to noncontrolling
interests in other consolidated subsidiaries
8,002
1,344
General and administrative expenses
51,149
37,383
Management fees and non-property level
revenues
(1,798
)
(7,135
)
Operating Partnership's share of
property NOI
336,736
331,702
Non-comparable NOI
(13,803
)
(14,341
)
Total same-center NOI (1)(2)
$
322,933
$
317,361
(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 September 30,
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 September 30, 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.
(2)
Same-center NOI of the successor company
was $322,933 for the nine months ended September 30, 2022.
Same-center NOI of the predecessor company was $317,361 for the
nine months ended September 30, 2021. Same-center NOI of the
successor company was 1.8% higher for the nine months ended
September 30, 2022.
Same-center Net Operating Income (Continued)
Successor
Predecessor
Three Months Ended September
30,
Three Months Ended September
30,
2022
2021
Malls
$
73,562
$
81,716
Outlet centers
4,604
4,189
Lifestyle centers
8,695
8,732
Open-air centers
13,534
13,369
Outparcels and other
5,152
5,528
Total same-center NOI (1)
$
105,547
$
113,534
Successor
Predecessor
Nine Months Ended September
30,
Nine Months Ended September
30,
2022
2021
Malls
$
226,968
$
225,802
Outlet centers
13,450
12,180
Lifestyle centers
26,525
25,259
Open-air centers
39,793
37,931
Outparcels and other
16,197
16,189
Total same-center NOI (1)
$
322,933
$
317,361
(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 September 30,
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 September 30, 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 September 30, 2022
(Successor)
Fixed Rate
Variable Rate
Total per Debt
Schedule
Unamortized Deferred Financing
Costs
Unamortized Debt Discounts
(1)
Total
Consolidated debt
$
1,049,307
$
1,074,839
$
2,124,146
$
(16,621
)
$
(90,821
)
$
2,016,704
Noncontrolling interests' share of
consolidated debt
(32,594
)
(13,493
)
(46,087
)
85
13,548
(32,454
)
Company's share of unconsolidated
affiliates' debt
624,670
73,356
698,026
(2,294
)
—
695,732
Other debt (2)
61,647
—
61,647
—
—
61,647
Company's share of consolidated,
unconsolidated and other debt
$
1,703,030
$
1,134,702
$
2,837,732
$
(18,830
)
$
(77,273
)
$
2,741,629
Weighted-average interest rate
4.85
%
5.53
%
5.12
%
As of September 30, 2021
(Predecessor)
Fixed Rate
Variable Rate
Total per Debt
Schedule
Unamortized Deferred Financing
Costs
Unamortized Debt Discounts
(1)
Total
Consolidated debt (3)
$
2,330,175
$
1,181,787
$
3,511,962
$
(3,202
)
$
—
$
3,508,760
Noncontrolling interests' share of
consolidated debt
(29,563
)
—
(29,563
)
225
—
(29,338
)
Company's share of unconsolidated
affiliates' debt
615,166
127,337
742,503
(2,404
)
—
740,099
Other debt (2)
138,926
—
138,926
—
—
138,926
Company's share of consolidated and
unconsolidated debt
$
3,054,704
$
1,309,124
$
4,363,828
$
(5,381
)
$
—
$
4,358,447
Weighted-average interest rate
5.04
%
8.52
%(4)
6.09
%
(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)
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.
(3)
Includes $2,489,676 of liabilities subject
to compromise.
(4)
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 September 30, 2021 was 9.50%.
Consolidated Balance Sheets (Unaudited; in thousands,
except share data)
September 30, 2022
December 31, 2021
ASSETS
Real estate assets:
Land
$
598,201
$
599,283
Buildings and improvements
1,188,200
1,173,106
1,786,401
1,772,389
Accumulated depreciation
(107,462
)
(19,939
)
1,678,939
1,752,450
Developments in progress
5,343
16,665
Net investment in real estate assets
1,684,282
1,769,115
Cash and cash equivalents
85,754
169,554
Available-for-sale securities - at fair
value (amortized cost of $249,638 and $149,999 as of September 30,
2022 and December 31, 2021, respectively)
249,912
149,996
Receivables:
Tenant
32,290
25,190
Other
3,441
4,793
Investments in unconsolidated
affiliates
81,805
103,655
In-place leases, net
277,443
384,705
Above market leases, net
186,652
234,286
Intangible lease assets and other
assets
125,248
104,685
$
2,726,827
$
2,945,979
LIABILITIES AND EQUITY
Mortgage and other indebtedness, net
$
2,016,704
$
1,813,209
10% senior secured notes - at fair value
(carrying amount of $395,000 as of December 31, 2021)
—
395,395
Below market leases, net
121,741
151,871
Accounts payable and accrued
liabilities
149,007
184,404
Total liabilities
2,287,452
2,544,879
Shareholders' equity:
Common stock, $.001 par value, 200,000,000
shares authorized, 31,834,178 and 20,774,716 issued and outstanding
in 2022 and 2021, respectively
32
21
Additional paid-in capital
708,768
547,726
Accumulated other comprehensive income
(loss)
274
(3
)
Accumulated deficit
(263,862
)
(151,545
)
Total shareholders' equity
445,212
396,199
Noncontrolling interests
(5,837
)
4,901
Total equity
439,375
401,100
$
2,726,827
$
2,945,979
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221114005398/en/
Katie Reinsmidt, Executive Vice President - Chief Investment
Officer, 423.490.8301, katie.reinsmidt@cblproperties.com
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