CBL & Associates Properties, Inc. announced results for the first quarter ended March 31 on Wednesday.
CBL's President and Chief Executive Officer Stephen Lebovitz said, "During the first quarter, we generated excellent results across all areas of our business. FFO per share increased 8 percent to $0.56 per share, exceeding market expectations. Same-center NOI grew 2.8 percent, with occupancy increasing more than 130 basis points and sales improving 2.4 percent to $378 per square foot. While renewal lease spreads moderated as anticipated, retailer demand remained strong resulting in double-digit increases for new leases.
"We have completed more than $359 million in dispositions year-to-date, with activity in both our mall and community center programs. In aggregate, these transactions generated nearly $100 million of net equity proceeds and removed over $90 million of associated debt, contributing to our improving liquidity position. We remain committed to our disposition program and balance sheet improvement, but we are also investing in our future growth through ongoing redevelopments and strategic new developments, including a new outlet center project that we'll be announcing soon. We look forward to continuing this positive momentum in our performance throughout the year."
FFO allocable to common shareholders, as adjusted, for the first quarter 2016 was $95.0 million, or $0.56 per diluted share, compared with $87.9 million, or $0.52 per diluted share, for the first quarter 2015. FFO allocable to the Operating Partnership common unitholders, as adjusted, for the first quarter 2016 was $111.2 million compared with $102.9 million for the first quarter of 2015.
Net income attributable to common shareholders for the first quarter 2016 was $28.9 million, or $0.17 per diluted share, compared with net income of $34.9 million, or $0.20 per diluted share, for the first quarter 2015. The decline in net income is primarily a result of the write-down of the book value to estimated fair value of properties sold or classified as non-core in the first quarter 2016, partially offset by an increase in equity in earnings related to the sale of the 50 percent interest in Triangle Town Center. Net income for the first quarter 2015 included a gain on investment related to the sale of marketable securities.
Same-center revenues increased $4.7 million and operating expenses declined by $0.3 million.
Minimum rents increased $2.5 million during the quarter as a result of rent growth and occupancy increases over the prior year.
Percentage rents increased by $0.7 million due to positive sales growth.
Tenant reimbursement and other revenues increased by $1.5 million.
Property operating expense declined $0.8 million, partially offset by a $0.3 million increase in real estate tax expense and a $0.2 million increase in maintenance and repair expense.
DISPOSITIONS
Year-to-date, CBL has completed $359 million in disposition activity, representing $190 million at CBL's share, including interest in two malls and two community centers. These transactions generated net equity proceeds of nearly $100 million and additionally removed over $90 million of secured debt from CBL's pro rata share of Total Debt. Net proceeds from the dispositions were used to reduce outstanding balances on the company's lines of credit.
In February, CBL announced that it closed on a new 10/90 joint venture for Triangle Town Center, Place and Commons in Raleigh, N.C., with DRA Advisors LLC. The new joint venture acquired the property from the existing 50/50 joint venture between CBL and The Richard E. Jacobs Group for a total consideration of $174.0 million, including assumption of a $171.1 million loan secured by the property. CBL now holds a 10 percent ownership position in the asset and is responsible for leasing and managing, earning customary fees.
Concurrent with the formation of the new joint venture, the new entity closed on a modification and restructuring of the loan, which matured in December 2015. The modified loan has an initial term of three-years maturing in December 2018, with two one-year extension options available to the joint venture, for a final maturity date of December 2020. The interest was reduced from 5.737 percent to 4.0 percent, interest-only payments.
In March, CBL closed on the sale of a 75 percent interest in River Ridge in Lynchburg, Va., to Liberty University and received net cash proceeds of $33.5 million. CBL retains a 25 percent ownership position in the asset and is responsible for leasing and management, earning customary fees.
In April, CBL and its 50/50 joint venture partner closed on the sale of 100 percent of Renaissance Center, the 363,000-square-foot community shopping center located in Durham, N.C. Renaissance Center was sold for a sales price of $129.2 million, including the assumption of a $16.0 million loan by the buyer and a $31.6 million loan that was retired at closing. The transaction generated net equity to CBL of $40.8 million.
In April, CBL completed the sale of The Crossings at Marshalls Creek, the 86,000-square-foot community center located in Middle Smithfield, Pa., for a sales price of $22.3 million, in cash.
In April, CBL and the existing lender agreed to a restructure of the existing $27.4 million non-recourse loan secured by Hickory Point Mall in Forsyth, Ill. The term of the loan was extended three years to December 2018, with an additional one-year extension option available at the company's option, for a final maturity of December 2019. The interest rate was maintained at 5.85 percent, with future amortization payments eliminated. The projected cash flow above the new debt service over the next three years is expected to fully fund the property's proposed redevelopment.
Gulf Coast Town Center in Fort Myers, Fla. (owned in a 50/50 joint venture) is in receivership. Foreclosure proceedings have commenced, and CBL anticipates the foreclosure to be completed in 2016.
In March, CBL and its joint venture partner, Stirling Properties, celebrated the grand opening of Ambassador Town Center in Lafayette, La., a 438,000-square-foot community center. The center opened 97 percent leased with anchors Costco, Dick's Sporting Goods, Field & Stream, Marshalls, HomeGoods, and Nordstrom Rack.
Based on first quarter results and its current outlook, the company is reiterating 2016 guidance for FFO, as adjusted, in the range of $2.32 - $2.38 per diluted share. CBL anticipates achieving same-center NOI growth in the range of 0.5-2.0 percent in 2016.
The guidance also assumes the following:
$3.0 million to $5.0 million of outparcel sales;
25-75 basis point increase in total portfolio occupancy as well as stabilized mall occupancy throughout 2016;
G&A, net of litigation expense, of $58 million to $60 million; and
No unannounced capital markets activity.