Chattanooga-based CBL & Associates Properties, Inc. (NYSE:CBL) announced results for the third quarter ended Sept. 30, including a rise in revenues and occupancy.
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Three Months
Ended September 30, |
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Nine Months
Ended September 30, |
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2013 |
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2012 |
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2013 |
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2012 |
| Funds from Operations ("FFO") per diluted share |
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$ |
0.56 |
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$ |
0.54 |
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$ |
1.60 |
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$ |
1.55 |
| FFO, as adjusted, per diluted share |
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$ |
0.52 |
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$ |
0.54 |
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$ |
1.60 |
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$ |
1.55 |
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“Increased occupancy, double-digit leasing spreads and strong FFO were the highlights of our third quarter as retailers continued to expand in our portfolio of market dominant malls,” noted Stephen Lebovitz, CBL’s president and chief executive officer.
“The limited new supply in our markets and high rate of occupancy in our malls will enable us to offset the industry-wide slowdown in retail sales performance this quarter. Despite lower percentage rents and one-time items impacting our NOI results for the quarter, we remain on pace for our projected growth in NOI and FFO for the year.
“We made tremendous progress on our balance sheet strategy this quarter. Most significantly, we fully retired the Westfield preferred units on a leverage neutral basis with $210 million of equity raised earlier in the year through our ATM program and $220 million of portfolio-enhancing dispositions. This clearly demonstrates our ongoing ability to source capital on attractive terms. Our balance sheet is now straightforward and strong. By maintaining a proactive asset recycling program, we will generate additional liquidity to fund our new growth initiatives as well as continue to improve the quality of our portfolio.”
FFO, as adjusted, excludes a partial litigation settlement received in August 2013 of $8,240,000 included in Interest and Other Income in the third quarter of 2013. The partial settlement is related to a lawsuit filed by the Company seeking recovery of alleged property and related damages occurring at The Promenade in D'Iberville, Mississippi.
FFO allocable to common shareholders, as adjusted, for the third quarter of 2013 was $87,290,000, or $0.52 per diluted share, compared with $84,808,000, or $0.54 per diluted share, for the third quarter of 2012. FFO of the operating partnership, as adjusted, for the third quarter of 2013 was $102,465,000, compared with $101,652,000, for the third quarter of 2012. The decline in FFO per share in the quarter was primarily the result of the $0.02 per diluted share impact of the 8.4 million shares issued year-to-date through the ATM program and a $0.02 per diluted share impact from the sale of properties including the write-off of straight line rents receivable.
Net income attributable to common shareholders for the third quarter of 2013 was $23,101,000, or $0.14 per diluted share, compared with a net loss of $2,520,000, or a net loss of $0.02 per diluted share for the third quarter of 2012.
HIGHLIGHTS
- Portfolio same-center NOI for the nine months ended September 30, 2013, increased 1.6% over the prior year period, excluding lease termination fees and a one-time bankruptcy settlement of $1.2 million received in the prior year period.
- Portfolio same-center NOI for the quarter ended September 30, 2013, increased 0.8% compared with an increase of 1.2% for the prior-year period, excluding lease termination fees. Results were negatively impacted by the following items:
- Lower percentage rent of approximately $0.3 million due to lower sales for the nine months ended September 30, 2013, as compared with the prior year period.
- A decline of $1.2 million in real estate tax reimbursement revenue. The decline in real estate tax reimbursement revenue was primarily the result of the timing of adjustments to reflect actual billings and current estimates.
- A decline in straight line rents and net amortization of acquired above and below market leases of $1.0 million.
- Portfolio same-center NOI for the quarter ended September 30, 2013, increased 1.4% over the prior year period, excluding the impact of lease termination fees, non-cash straight line rents and net amortization of above and below market leases.
- Average gross rent per square foot for stabilized mall leases signed during the third quarter of 2013 for tenants 10,000 square feet or less increased 12.8% over the prior gross rent per square foot.
- Same-store sales per square foot for mall tenants 10,000 square feet or less for stabilized malls for the rolling twelve months ended September 30, 2013, increased 0.9% to $358 per square foot compared with $355 per square foot in the prior-year period. Year-to-date same-store sales per square foot for mall tenants 10,000 square feet or less for stabilized malls declined 0.6%.
HIGHLIGHTS CONTINUED
- The company’s share of consolidated and unconsolidated variable rate debt of $1,482,986,000, as of September 30, 2013, represented 14.8% of the total market capitalization for the Company, compared with 10.0% as of September 30, 2012, and 26.5% of the company's share of total consolidated and unconsolidated debt, compared with 18.6% as of September 30, 2012.
- Debt-to-total market capitalization was 55.7% as of September 30, 2013, compared with 54.0% as of September 30, 2012.
- The ratio of earnings before interest, taxes, depreciation and amortization (“EBITDA”) to interest expense was 2.9 times for the third quarter of 2013, compared with 2.6 times for the third quarter of 2012.
PORTFOLIO OCCUPANCY
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September 30, |
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2013 |
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2012 |
| Portfolio occupancy |
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93.8% |
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93.0% |
| Mall portfolio |
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93.5% |
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93.1% |
| Stabilized malls |
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93.4% |
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93.0% |
| Non-stabilized malls (1) |
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97.1% |
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100.0% |
| Associated centers |
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94.6% |
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94.0% |
| Community centers |
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96.1% |
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91.5% |
| (1) Non-stabilized malls category includes The Outlet Shoppes at Oklahoma City and The Outlet Shoppes at Atlanta as of September 30, 2013. Category includes The Outlet Shoppes at Oklahoma City as of September 30, 2012. |
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DISPOSITION ACTIVITY
During the third quarter, CBL closed on the sale of three malls and three related associated centers in a portfolio transaction for a gross sales price of $176.0 million in cash. The properties were Georgia Square Mall and Georgia Square Plaza in Athens, GA; Panama City Mall and The Shoppes at Panama City in Panama City, FL; and RiverGate Mall and Village at RiverGate in Nashville, TN. The properties were purchased by an offshore investor with an Atlanta-based partner, Hendon Properties, who will also lease and manage the malls.
FINANCING ACTIVITY
In July, CBL closed on a $400 million unsecured term loan with a term of five years. Based on the Company’s current credit ratings, the loan has a floating interest rate of 150 basis points over LIBOR.
In October, CBL closed on a new $80.0 million loan secured by The Outlet Shoppes at Atlanta, its 75/25 joint venture with Horizon Group Properties, located in Atlanta (Woodstock), GA. The new 10-year non-recourse loan bears interest at a fixed rate of 4.9%. Proceeds from the loan were primarily used to repay a $53.2 million recourse construction loan and to reduce outstanding balances on the Company’s unsecured credit facilities.
CAPITAL MARKETS ACTIVITY
During the third quarter of 2013, CBL completed the redemption of all outstanding perpetual preferred joint venture units of its joint venture, CW Joint Venture, LLC, (“CWJV”) with Westfield America Limited Partnership (“Westfield”). The units were redeemed for approximately $408.6 million (plus any accrued and unpaid preferred return). The preferred units were originally issued in 2007 as part of the acquisition of four malls in St. Louis, MO, by CWJV.
During the third quarter, CBL did not complete any sales under its At-The-Market (“ATM”) equity offering program. Year-to-date, CBL has sold 8.4 million shares generating net proceeds of $209.6 million through the ATM program. CBL has approximately $88.5 million available for issuance under the ATM program.
OUTLOOK AND GUIDANCE
Based on third quarter results, including the impact of dispositions completed during the quarter, the Company is providing 2013 FFO guidance in the range of $2.18 - $2.22 per share, after adjusting for the net impact of one-time items included in the third quarter 2013 results. The Company is also guiding to the low-to-mid-point of the previously issued same-center NOI growth range of 1.0% - 3.0%. The guidance assumes $2.0 million to $4.0 million of outparcel sales and a 25-50 basis point increase in year-end occupancy. The guidance excludes the impact of any future unannounced transactions.
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Low |
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High |
| Expected diluted earnings per common share |
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$ |
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0.44 |
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$ |
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0.48 |
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| Adjust to fully converted shares from common shares |
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(0.06 |
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(0.07 |
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| Expected earnings per diluted, fully converted common share |
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0.38 |
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0.41 |
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| Add: depreciation and amortization |
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1.59 |
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1.59 |
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| Add: loss on impairment |
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0.12 |
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0.12 |
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| Add: noncontrolling interest in earnings of Operating Partnership |
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0.09 |
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0.10 |
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| Expected FFO per diluted, fully converted common share |
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$ |
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2.18 |
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$ |
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2.22 |
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