Chattanooga-based CBL & Associates reported improved operation results for the fourth quarter of 2012 and the year as a whole.
Funds from operations rose from 60 cents a share to 86 cents a share for the fourth quarter and for all of 2012 were at $2.41 - up from $2.22 in 2011.
"We continue to enjoy the benefits of our market-dominant mall portfolio, an expanding pipeline of new growth opportunities and an enhanced capital structure," said Stephen Lebovitz, CBL's president and chief executive officer.
"With NOI at the top end of our guidance, FFO growth well above our expectations and occupancy up across the board, we are executing well in all areas of the company. The acquisitions of Kirkwood Mall (Bismarck, ND) and the remaining joint venture interest in Imperial Valley Mall (El Centro, CA) in December demonstrate our ability to source attractive off-market opportunities. The recent announcements to expand Cross Creek Mall (Fayetteville, NC) and develop Fremaux Town Center (Slidell, LA) should further accelerate the growth we anticipate in 2013 and beyond.
"We are progressing with our plan to achieve an investment grade rating by 2014, using our new unsecured lines of credit completed in the quarter to increase our pool of unencumbered assets. This will allow us to reduce our overall cost of capital over time. The sale of non-core office buildings in Greensboro, NC, in January and the $190 million refinancing on West County Center (St. Louis, MO), at a ten-year fixed-rate of 3.4%, combined with over $818 million of availability on our credit lines position us to improve our credit profile and provide sources for our continued growth."
FFO allocable to common shareholders, as adjusted, for the fourth quarter of 2012 was $99,683,000, or $0.62 per diluted share, compared with $88,686,000, or $0.60 per diluted share, for the fourth quarter of 2011. FFO of the operating partnership, as adjusted, for the fourth quarter of 2012 was $117,968,000, compared with $113,802,000, for the fourth quarter 2011.
FFO allocable to common shareholders, as adjusted, for 2012 was $335,871,000, or $2.17 per diluted share, compared with $304,031,000 or $2.05 per diluted share for 2011. FFO of the operating partnership, as adjusted, for 2012 was $412,821,000, compared with $390,234,000, for 2011.
Net income attributable to common shareholders for the fourth quarter of 2012 was $52,356,000, or $0.33 per diluted share, compared with net income of $72,373,000, or $0.49 per diluted share for the fourth quarter of 2011.
Net income attributable to common shareholders for 2012 was $84,088,000, or $0.54 per diluted share, compared with net income of $91,560,000, or $0.62 per diluted share for 2011.
HIGHLIGHTS
- Portfolio same-center net operating income ("NOI"), excluding lease termination fees, for the quarter ended December 31, 2012, increased 2.2% compared with an increase of 0.6% for the prior-year period. Same-center NOI, excluding lease terminations fees, for the year ended December 31, 2012, increased 2.0% compared with an increase of 1.4% for the prior-year period.
- Average gross rent per square foot on stabilized mall leases signed during the fourth quarter of 2012 for tenants 10,000 square feet or less increased 6.8% over the prior gross rent per square foot. Average gross rent per square foot on stabilized mall leases signed during 2012 for tenants 10,000 square feet or less increased 8.4% 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 year ended December 31, 2012, increased 3.6% to $346 per square foot compared with $334 per square foot in the prior-year period.
- Consolidated and unconsolidated variable rate debt of $1,079,665,000, as of December 31, 2012, represented 10.9% of the total market capitalization for the Company, compared with 10.3% in the prior-year period, and 19.8% of the Company's share of total consolidated and unconsolidated debt, compared with 17.2% in the prior-year period.
- Debt-to-total market capitalization was 54.7% as of December 31, 2012, compared with 59.7% as of December 31, 2011.
ACQUISITIONS
In December 2012, CBL invested a total of $96.1 million, including the assumption of debt, to acquire interests in two enclosed regional malls, Kirkwood Mall and Imperial Valley Mall, in two separate transactions. CBL completed the acquisition of a 49% interest in Kirkwood Mall in Bismarck, ND and executed an agreement to acquire the remaining 51% interest. CBL anticipates closing on the remaining 51% interest within 90 days (subject to lender approval), including the assumption of a $40.4 million (at 100%) non-recourse loan secured by the property. The loan bears a fixed interest rate of 5.75% and matures in April 2018.
In addition, CBL acquired the remaining 40% interest in its Imperial Valley Mall and Imperial Valley Commons in El Centro, CA from its joint venture partner. Following the transaction, CBL owns 100% of Imperial Valley Mall and Imperial Valley Commons. As a result of the acquisition of the remaining interest in Imperial Valley Mall, CBL recorded a gain on investment of $45.1 million in the fourth quarter 2012. Additionally, CBL recorded a loss on impairment of real estate of $20.3 million related to land that is available for the future expansion of Imperial Valley Commons.
DISPOSITION ACTIVITY
During the fourth quarter CBL completed the sale of Hickory Hollow Mall in Nashville (Antioch), TN; Towne Mall in Franklin, OH; and Willowbrook Plaza, a community center located in Houston, TX, in three separate transactions, for an aggregate sales price of $25.5 million. In 2012, CBL generated aggregate gross proceeds from dispositions of $70.3 million.
Subsequent to the quarter-end, CBL completed the sale of two office buildings located in Greensboro, NC for an aggregate sales price of $30.0 million, which were classified as held for sale as of December 31, 2012.
FINANCING ACTIVITY
In November, CBL closed on the modification and extension of its two major credit facilities, increasing the aggregate capacity by $155.0 million to $1.2 billion. Both facilities were converted from secured to unsecured and the capacity of each facility was increased to $600 million. The maturities were extended to 2016 and 2017, including extension options, and the average borrowing rate reduced by 60 basis points. The outstanding balances on the two facilities bear interest at an annual rate equal to LIBOR plus a range of 155 to 210 basis points, depending on the Company's leverage ratio.
In December, CBL closed on a 10-year, non-recourse loan secured by West County Center in St. Louis, MO. The new 10-year, non-recourse $190 million loan bears a fixed interest rate of 3.4%, representing the lowest fixed interest rate CBL has ever achieved on a secured mortgage. CBL's share of the excess proceeds generated after payoff of the existing loan was approximately $23 million, which was used to reduce outstanding balances on the Company's lines of credit. During 2012, CBL completed more than $558 million of property-specific loan refinancings.
CAPITAL MARKETS ACTIVITY
On October 5, 2012, CBL closed on an underwritten public offering of 6,900,000 depositary shares, each representing 1/10th of a share of its newly designated 6.625% Series E Cumulative Redeemable Preferred Stock ("Series E Shares") with a liquidation preference of $25.00 per depositary share, including 900,000 depositary shares sold pursuant to the underwriters' exercise of their option to purchase additional depositary shares. The offering generated net proceeds to the Company of approximately $166.6 million, after deducting the underwriting discount and estimated offering expenses.
On November 5, 2012, CBL completed the redemption of 460,000 outstanding shares of 7.75% Series C Cumulative Redeemable Preferred Stock ("Series C Shares"), and all outstanding depositary shares ("Depositary Shares"), each representing 1/10th of a Series C Share (NYSE: CBLPrC - CUSIP No.: 124830-50-6). The aggregate amount paid to effect the redemption of the Series C Shares (including the Depositary Shares) was approximately $115.9 million, which was funded with a portion of the net proceeds from the issuance of Series E Shares.
OUTLOOK AND GUIDANCE
Based on today's outlook, the Company is providing 2013 FFO guidance in the range of $2.18 - $2.26 per share. Full-year guidance assumes same-center NOI growth in a range of 1.0% - 3.0%, $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 acquisitions or dispositions. The Company expects to update its annual guidance after each quarter's results.
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Low |
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High |
| Expected diluted earnings per common share |
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$0.63 |
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$0.71 |
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| Adjust to fully converted shares from common shares |
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(0.10 |
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(0.11 |
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| Expected earnings per diluted, fully converted common share |
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0.53 |
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0.60 |
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| Add: depreciation and amortization |
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1.55 |
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1.55 |
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| Add: noncontrolling interest in earnings of Operating Partnership |
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0.10 |
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0.11 |
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| Expected FFO per diluted, fully converted common share |
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$2.18 |
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$2.26 |
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