Lebovitz Says CBL On Track For Growth Strategy

Tuesday, July 29, 2014

CBL & Associates Properties, Inc. (NYSE:CBL) announced results for the second quarter ended June 30, including a gain in funds from operations.


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Funds from Operations ("FFO") per diluted share	$	0.55	$	0.51	$	1.28	$	1.04
FFO, as adjusted, per diluted share ⁽¹⁾	$	0.55	$	0.55	$	1.06	$	1.08

(1) FFO, as adjusted, for the six months ended June 30, 2014, excludes a partial legal settlement of $0.8 million and gain on extinguishment of debt of $42.7 million primarily related to the January 2014 foreclosure of the mortgage loan secred by Citadel Mall. FFO, as adjusted, for the three and six months ended June 30, 2013, excludes a loss on extinguishment of debt of $9.1 million, primarily related to the prepayment of a secured loan and a gain on investment of $2.4 million related to collection of a note receivable.

CBL's President and Chief Executive Officer Stephen Lebovitz commented, "With our strong second quarter results, we remain on track to meet our outlined goals for the year for same-center NOI growth and other key operating metrics. We are also making progress on our asset disposition program with one additional mall under contract and several others under active negotiations. We are committed to the successful execution of our strategy to dispose of non-core properties and reinvest into higher growth assets.

"We are also excited about this week's opening of The Outlet Shoppes of the Bluegrass between Louisville and Lexington, Kentucky, which is 100 percent leased with an incredible line-up of more than 80 premium brands. This property is a terrific addition to the CBL portfolio. "

FFO allocable to common shareholders, as adjusted, for the second quarter of 2014 was $93 million, or $0.55 per diluted share, compared with $90.8 million, or $0.55 per diluted share, for the second quarter of 2013. FFO of the operating partnership, as adjusted, for the second quarter of 2014 was $109.1 million compared with $106.9 million, for the second quarter of 2013. FFO per share was flat from the prior-year period primarily as a result of dilution from the equity raised through the Company's At-The-Market program during the second quarter 2013 and the sale of assets in the third quarter 2013.

Net income attributable to common shareholders for the second quarter of 2014 was $26.7 million, or $0.16 per diluted share, compared with net income of $0.5 million, or $0.00 per diluted share, for the second quarter of 2013.

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


		Three Months Ended June 30, 2014
Portfolio same-center NOI		1.9%
Mall same-center NOI		1.4%

(1) CBL's definition of same-center NOI excludes the impact of lease termination fees and certain non-cash items of straight line rents and net amortization of acquired above and below market leases. NOI is for real estate properties and excludes income of the Company's subsidiary that provides maintenance, janitorial and security services.

MAJOR VARIANCES IMPACTING SAME-CENTER NOI RESULTS FOR THE QUARTER ENDED JUNE 30, 2014

Contributions from new and renewal lease spreads resulted in $3.5 million of growth in minimum rent compared with the prior-year period, partially offset by a $0.7 million decline in percentage rents due to lower sales year-to-date.
Operating expenses improved by $0.4 million and maintenance and repairs improved by $0.8 million, primarily as a result of expense controls and cost saving measures.
Real estate taxes increased by $0.5 million.

PORTFOLIO OPERATIONAL RESULTS

Occupancy:


	As of June 30,
	2014	2013
Portfolio occupancy	93.5%	93.0%
Mall portfolio	93.1%	92.7%
Same-center stabilized malls	92.9%	93.0%
Stabilized malls	92.9%	92.6%
Non-stabilized malls ⁽¹⁾	97.6%	100.0%
Associated centers	95.0%	93.6%
Community centers	97.0%	96.4%

(1) Includes The Outlet Shoppes at Oklahoma City and The Outlet Shoppes at Atlanta as of June 30, 2014. Includes The Outlet Shoppes at Oklahoma City as of June 30, 2013.

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

% Change in Average Gross Rent Per Square Foot

		Six Months Ended June 30, 2014
Stabilized Malls		11.7%
New leases		27.8%
Renewal leases		4.2%

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

	Twelve Months Ended June 30,
	2014		2013		% Change
Stabilized mall same-store sales per square foot	$	354	$	364	(2.7)%

DEVELOPMENT

On July 31st, the Company will celebrate the Grand Opening of The Outlet Shoppes of the Bluegrass in Simpsonville (Louisville), KY. The 375,000-square-foot outlet center will open 100% leased or committed with more than 80 stores, including Michael Kors, Nike, Saks Fifth Avenue off 5th and The North Face.

TRANSACTIONS

In May 2014, the company completed the sale of Lakeshore Mall in Sebring, FL, for $14.0 million. In June 2014, the company completed the sale of an expansion to the Foothills Plaza associated center in Maryville, TN, for $2.6 million.

Subsequent to the quarter-end, CBL entered into non-binding contracts for the sale of one mall and its associated center and a community center. Subject to the completion of normal due diligence and closing conditions, the sales are expected to close in the fourth quarter 2014. The aggregate scale of the transactions is less than $25.0 million. Additional details will be announced following the expiration of due diligence.

FINANCING ACTIVITY

In July, CBL closed on a $126 million non-recourse loan secured by Coastal Grand in Myrtle Beach, SC. The mall is owned in a 50/50 joint venture. The new ten-year loan bears interest at a fixed rate of 4.0865% and matures in August 2024. Proceeds from the loan were used to retire the existing $75.2 million loan. Excess proceeds were distributed 50/50 to the company and its partner. The company used its share of net proceeds to pay down outstanding balances on the company's lines of credit.