CBL & Associates Properties, Inc. announced results for the first quarter ended March 31. 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.
Three Months Ended
March 31, |
|
|
|
2017 |
|
2016 |
|
% |
| Net income attributable to common shareholders per diluted share |
|
|
$ |
0.13 |
|
$ |
0.17 |
|
(23.5 |
)% |
| Funds from Operations ("FFO") per diluted share |
|
|
$ |
0.53 |
|
$ |
0.68 |
|
(22.1 |
)% |
| FFO, as adjusted, per diluted share(1) |
|
|
$ |
0.52 |
|
$ |
0.56 |
|
(7.1 |
)% |
|
(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 income attributable to common shareholders to FFO allocable to Operating Partnership common unitholders
|
HIGHLIGHTS:
Entered into binding contract for the sale of two malls and completed the sale of an outlet center and two office buildings year-to-date.
The transactions are expected to generate aggregate equity proceeds of nearly $100 million, at CBL's share.
FFO per diluted share, as adjusted, was $0.52 for the first quarter 2017, compared with FFO, as adjusted, of $0.56 per share for the first quarter 2016. First quarter 2017 was impacted by approximately $0.05 per share of dilution from asset sales.
Total Portfolio Same-center NOI for the first quarter 2017 declined 1.0 percent.
Portfolio occupancy increased 50 bps to 92.1 percent and same-center mall occupancy declined 100 basis points to 90.5 percent as of March 31 compared with 91.5 percent as of March 31, 2016.
Stabilized Mall leases were signed at an average increase of 2 percent over the expiring gross rent per square foot, including a 18 percent increase in average gross rents for more than 130,000 square feet of new leases executed in the quarter.
CBL's President and Chief Executive Officer Stephen Lebovitz commented, “Our malls are evolving into suburban town centers as we add more dining, entertainment, value and off-price, health and wellness, service and non-retail uses to adapt to the changing retail landscape. We faced a challenging retail environment in the first quarter, which impacted our NOI results. However, leasing demand remains strong, and we are making major progress on our anchor redevelopment program.
“We are improving our balance sheet through additional dispositions including the sale of The Outlet Shoppes at Oklahoma City and two office buildings as well as a binding contract for the sale of two malls. These transactions will generate equity proceeds of nearly $100 million, contributing to further reductions in debt. Coupled with our significant free cash flow, this will create additional liquidity to fund redevelopment activity.”
Net income attributable to common shareholders for the first quarter 2017 was $22.9 million, or $0.13 per diluted share, compared with net income of $28.9 million, or $0.17 per diluted share, for the first quarter 2016.
FFO allocable to common shareholders, as adjusted, for the first quarter 2017 was $88.4 million, or $0.52 per diluted share, compared with $95.0 million, or $0.56 per diluted share, for the first quarter 2016. FFO allocable to the Operating Partnership common unitholders, as adjusted, for the first quarter 2017 was $103.0 million compared with $111.2 million for the first quarter 2016.
Three Months
Ended
March 31, 2017 |
| Portfolio same-center NOI |
|
|
(1.0 |
)% |
| Mall same-center NOI |
|
|
(1.6 |
)% |
|
|
(1)CBL's definition of same-center NOI excludes the impact of lease termination fees and certain non-cash items of straight-line rents, write-offs of landlord inducements and net amortization of acquired above and below market leases.
|
Major variances impacting same-center NOI for the quarter ended March 31 include:
NOI declined $1.8 million, due to a $2.6 million decrease in revenue, partially offset by a $0.8 million decrease in operating expense.
Minimum rents increased $1.4 million during the quarter as a result of rent growth over the prior year.
Percentage rents decreased $2.0 million as sales declined in the first quarter.
Tenant reimbursements and other rents declined $2.0 million.
Property operating expense declined $0.5 million, maintenance and repair expense declined $1.7 million, and real estate tax expense increased $1.4 million.
PORTFOLIO OPERATIONAL RESULTS
Occupancy:
|
|
|
As of March 31, |
|
|
|
2017 |
|
2016 |
| Portfolio occupancy |
|
|
92.1 |
% |
|
91.6 |
% |
| Mall portfolio |
|
|
90.5 |
% |
|
90.9 |
% |
| Same-center malls |
|
|
90.5 |
% |
|
91.5 |
% |
| Stabilized malls |
|
|
90.5 |
% |
|
90.9 |
% |
| Non-stabilized malls(1) |
|
|
92.7 |
% |
|
91.4 |
% |
| Associated centers |
|
|
97.7 |
% |
|
91.5 |
% |
| Community centers |
|
|
98.2 |
% |
|
96.0 |
% |
|
|
(1)Represents occupancy for The Outlet Shoppes of the Bluegrass as of March31,2017 and The Outlet Shoppes of Atlanta and The Outlet Shoppes of the Bluegrass as of March31, 2016.
|
|
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, 2017
|
| Stabilized Malls |
|
|
1.8% |
| New leases |
|
|
17.9% |
| Renewal leases |
|
|
(3.4)% |
|
|
|
Same-Center Sales Per Square Foot for Mall Tenants 10,000 Square Feet or Less:
|
|
|
|
|
Twelve Months Ended March 31, |
|
|
|
|
|
2017 |
|
2016 |
|
% Change |
| Stabilized mall same-center sales per square foot |
|
|
$ |
372 |
|
|
$ |
382 |
|
|
(2.6)% |
| Stabilized mall sales per square foot |
|
|
$ |
372 |
|
|
$ |
378 |
|
|
(1.6)% |
DISPOSITIONS
CBL has entered into a binding contract for the sale of two malls, College Square in Morristown, Tn. (2016 sales psf $265) and Foothills Mall in Maryville, Tn. (2016 sales psf $283), for a total gross sales price of $53.5 million. The buyer has posted a significant nonrefundable deposit. The transaction is expected to close in May.
During the first quarter 2017, CBL closed on the sale of two office buildings located in Newport News, Va., generating gross proceeds of $6.25 million.
On April 28, CBL closed on the sale of The Outlet Shoppes at Oklahoma City in Oklahoma City, Ok. for a gross sales price of $130.0 million. Approximately $70.1 million, including defeasance costs, in loans secured by the property were retired concurrent with the closing. CBL’s share of net equity proceeds, after retirement of secured loans and closing costs, was $38.0 million. Net proceeds were used to reduce outstanding balances on the company’s lines of credit. CBL anticipates recording a gain on sale of approximately $44.0 million in second quarter 2017 results related to the sale.
FINANCING ACTIVITY
During the quarter, CBL retired four loans totaling $158.3 million (at CBL's share) and added the properties to its unencumbered pool of assets. The loans were secured by Layton Hills Mall in Layton, Ut., The Plaza at Fayette in Lexington, Ky., The Shoppes at St. Clair Square in Fairview Heights, Il. and Hamilton Corner in Chattanooga.
During the quarter the foreclosure of Midland Mall in Midland, Mi., was completed. CBL recorded a gain on extinguishment of debt of $4.1 million related to the foreclosure.
In April, the $125 million loan secured by Acadiana Mall in Lafayette, La., matured. CBL is currently in discussions with the lender to restructure and extend the loan maturity.
OUTLOOK AND GUIDANCE
CBL is updating its 2017 FFO, as adjusted, guidance to reflect first quarter results, dilution from announced disposition activity (approximately $0.04 per share) and its current outlook. CBL anticipates FFO, as adjusted, in the range of $2.18 - $2.24 per diluted share. This FFO assumes same-center NOI growth in the range of (2.0) percent - 0 percent in 2017, which includes an additional estimated income loss of $10.0 - 14.0 million from store closure and bankruptcy activity for the remainder of 2017.
The guidance also assumes the following:
$10.0 million to $12.0 million in gains on outparcel sales;
75 to 125 basis points lower total portfolio occupancy as well as stabilized mall occupancy at year-end;
G&A expense of $62 million to $64 million for the full year; and
No unannounced capital markets activity.
Low |
|
|
High |
| Expected diluted earnings per common share |
|
|
$ |
0.62 |
|
|
|
$ |
0.68 |
|
| Adjust to fully converted shares from common shares |
|
|
(0.08 |
) |
|
|
(0.09 |
) |
| Expected earnings per diluted, fully converted common share |
|
|
0.54 |
|
|
|
0.59 |
|
| Add: depreciation and amortization |
|
|
1.56 |
|
|
|
1.56 |
|
| Add: Loss on impairment |
|
|
0.01 |
|
|
|
0.01 |
|
| Add: noncontrolling interest in earnings of Operating Partnership |
|
|
0.09 |
|
|
|
0.10 |
|
| Expected FFO per diluted, fully converted common share |
|
|
2.20 |
|
|
|
2.26 |
|
|
Adjustment for certain significant items
|
|
|
(0.02 |
) |
|
|
(0.02 |
) |
| Expected adjusted FFO per diluted, fully converted common share |
|
|
$ |
2.18 |
|
|
|
$ |
2.24
|