CBL Properties Reports Results For Third Quarter 2021

  • Tuesday, November 16, 2021
CBL Properties announced results for the third quarter ended Sept. 30. 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2020

 

%

 

2021

 

2020

 

%

Net loss attributable to common shareholders per diluted share

 

$

(0.21

)

 

$

(0.28

)

 

 

25.0

%

 

$

(0.39

)

 

$

(1.43

)

 

 

72.7

%

Funds from Operations ("FFO") per diluted share

 

$

0.37

 

 

$

0.06

 

 

 

516.7

%

 

$

1.07

 

 

$

0.28

 

 

 

282.1

%

FFO, as adjusted, per diluted share(1)

 

$

0.47

 

 

$

0.04

 

 

 

1,075.0

%

 

$

1.21

 

 

$

0.32

 

 

 

278.1

%


 
(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 loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders.

 

On Nov.

1, CBL successfully completed its Chapter 11 reorganization. CBL emerged with a significantly improved capital structure, greater financial flexibility and a lowered cost of capital, positioning the company to pursue future growth opportunities, said officials. 

Following emergence from Bankruptcy on Nov. 1, 2021, and $60 million redemption of 10% Notes, on a consolidated basis, the company had approximately $260 million available in unrestricted cash and marketable securities.

Total portfolio same-center Net Operating Income increased 26.5 percent for the three months ended Sept. 30. Total portfolio same-center NOI for the nine months ended Sept. 30, increased 6.7 percent.

Sales for the third quarter and the nine-months ended Sept. 30, increased 17 percent as compared with the third quarter and nine-months ended Sept. 30, 2019.

Portfolio occupancy as of Sept. 30 was 88.4 percent, representing a 140-basis point improvement from the sequential quarter and a 180-basis point improvement compared with 86.6 percent as of Sept. 30, 2020. Same-center mall occupancy was 86.3 percent as of Sept. 30, representing a 110-basis point increase sequentially and an 80-basis point improvement compared with 85.5 percent as of Sept. 30, 2020.

FFO, as adjusted, per diluted share, was $0.47 for the third quarter 2021, compared with $0.04 per share for the third quarter 2020. The increase in FFO, as adjusted, per diluted share, as compared with the prior year period is principally a result of $0.21 per diluted share lower net interest expense and an $0.18 per diluted share positive variance in the estimate for uncollectable revenues, rent abatements and write-offs for past due rents. The positive variance in the estimate for uncollectable revenues, abatements and write-offs for past due rents was primarily a result of the tenant accommodations that were made in the prior-year period due to the impact of the pandemic. The third quarter 2021 also benefited from a $0.06 per diluted share positive variance from undeclared preferred dividends accrued in the prior year period.

“We are at an exciting time for CBL," said Stephen Lebovitz, chief executive officer. "Fresh from our successful emergence from bankruptcy, the entire CBL organization is energized to execute on our strategy and take advantage of our significantly enhanced balance sheet and free cash flow. We have seen an improving operating environment in 2021 and it is the ideal time to focus on new opportunities, including refinancing our high-interest rate secured notes and property-level loans, creating value across our portfolio from available land and new partnerships, and other growth strategies. We are primed and ready to bring to life the vision we have for the new CBL.

“Our portfolio performance in the third quarter was above expectations, as healthy traffic and sales growth fueled a strong rebound. Improvements in the leasing environment, including increasing tenant demand and lower bankruptcy-related store closures, drove healthy occupancy growth as new leases signed year-to-date took occupancy. It is worth noting that we achieved our first quarter of year-over-year occupancy growth since the first quarter of 2019. Lease spreads also improved from prior quarters. Robust sales by retailers are leading to higher levels of percentage rent, one driver of better NOI results. We have successfully held expenses in check despite inflation pressures.

“As we say on the home page of our new website, which we debuted last week in conjunction with our emergence, we are redefining what the mall means to our communities by combining retail, dining, entertainment, and other mixed uses. We made progress this quarter in bringing this vision to life through anchor redevelopments, adding new uses that drive increased traffic and new customers. Highly productive Scheel’s All Sports commenced construction on their newly expanded store at Dakota Square, following their acquisition of the former Sears last month. Entertainment user, Main Event, is under construction in a portion of the former Sears at Sunrise Mall. We completed the sale of a former Sears at Harford Mall, which will be redeveloped into a future grocery store, and we sold a parcel of excess parking at Monroeville Mall for development into a future VA Center. At York Galleria, we recently opened Hollywood Casino and Life Storage is developing a new facility in a former anchor space. As outlined in our department store update in the supplemental, we are actively in negotiation or finalizing deals that will continue this significant progress.

“Take a fresh look at CBL. Our new capital structure allows us to pursue opportunities both within our portfolio and externally to create value for stakeholders. We have a new, highly engaged Board that brings fresh perspective. And the CBL management team is more committed than ever to the success and growth of the company.”

FINANCIAL RESULTS

Net loss attributable to common shareholders for the three months ended Sept. 30, 2021 was $41.7 million, or a loss of $0.21 per diluted share, compared with net loss of $54.1 million, or a loss of $0.28 per diluted share, for the three months ended Sept. 30, 2020. Net loss for the third quarter 2021 was also impacted by a $63.2 million loss on impairment of real estate to write down the carrying value of Parkdale Mall and Crossing, Laurel Park and a land parcel to their estimated fair values.

Net loss attributable to common shareholders for the nine months ended Sept. 30 was $77.4 million, or a loss of $0.39 per diluted share, compared with net loss of $269.4 million, or a loss of $1.43 per diluted share, for the nine months ended Sept. 30, 2020.

FFO, as adjusted, allocable to common shareholders, for the three months ended Sept. 30, was $92.9 million, or $0.47 per diluted share, compared with $8.6 million, or $0.04 per diluted share, for the three months ended Sept. 30, 2020. FFO, as adjusted, allocable to the Operating Partnership common unitholders, for the three months ended Sept. 30 was $95.3 million compared with $9.0 million for the three months ended Sept. 30, 2020.

FFO, as adjusted, allocable to common shareholders, for the nine months ended Sept. 30 was $237.3 million, or $1.21 per diluted share, compared with $61.1 million, or $0.32 per diluted share, for the nine months ended Sept. 30, 2020. FFO, as adjusted, allocable to the Operating Partnership common unitholders, for the nine months ended Sept. 30 was $243.5 million compared with $65.5 million for the nine months ended Sept. 30, 2020.

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

 

 

Three Months Ended
September 30,

Nine Months Ended
September 30,

 

 

2021

 

2021

Portfolio same-center NOI

 

26.5%

 

6.7%

Mall same-center NOI

 

29.9%

 

7.2%

(1)
 

       
         
         
         

(1)
CBL’s definition of same-center NOI excludes the impact of lease termination fees and certain non-cash items such as straight-line rents and reimbursements, write-offs of landlord inducements and net amortization of acquired above and below market leases.

Major variances impacting same-center NOI for the three months ended Sept. 30 include:

Same-center NOI increased $23.5 million, due to a $27.4 million increase in total revenues partially offset by a $3.9 million increase in operating expenses.

Rental revenues increased $26.8 million, including a $25.0 million increase in minimum and other rents, a $3.1 million increase in percentage rents and a $1.3 million decline in tenant reimbursements. The increase in rental revenues for the quarter was primarily due to the $26.4 million positive variance from uncollectable revenues and abatements. The total estimate for uncollectable revenues and abatements for the third quarter 2021 was a net reversal of $0.3 million compared with a total write-off of $26.1 million in the prior year period.

Property operating expenses increased $4.9 million compared with the prior year, primarily due to the return to full operations following the reopening of CBL’s portfolio. Maintenance and repair expenses increased $1.6 million. Real estate tax expenses declined by $2.2 million, partially offsetting the above increases.

COVID-19 RENT COLLECTION UPDATE

The company has collected 93 percent of related gross rents for the period April 2020 through September 2021. As of October 2021, CBL had deferred approximately $45.8 million in rents. Of the approximately 72 percent of the deferred amounts billed to-date, CBL has collected nearly 97  percent.

LIQUIDITY

Following emergence from Bankruptcy on Nov. 1, and $60 million redemption of 10% Notes, on a consolidated basis, the company had approximately $260 million available in unrestricted cash and marketable securities.

PORTFOLIO OPERATIONAL RESULTS
Occupancy(1):

 

 

As of September 30,

 

 

2021

 

2020

Total portfolio

 

88.4%

 

86.6%

Malls:

 

 

 

 

Total Mall portfolio

 

86.3%

 

85.0%

Same-center Malls

 

86.3%

 

85.5%

Stabilized Malls

 

86.3%

 

85.4%

Associated centers

 

94.8%

 

89.1%

Community centers

 

94.5%

 

94.4%

(1)
Occupancy for malls represents percentage of mall store gross leasable area under 20,000 square feet occupied. Occupancy for associated and community centers represents percentage of gross leasable area occupied.

 

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
September 30,

 

Nine Months Ended
September 30,

 

 

2021

 

2021

Stabilized Malls

 

(12.2)%

 

(17.5)%

New leases

 

(20.3)%

 

(18.4)%

Renewal leases

 

(10.4)%

 

(17.3)%


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

Sales for the third quarter 2021 increased 17 percent as compared with the third quarter 2019, with all but two of CBL’s 54 reporting malls demonstrating an increase over the comparable period. For the nine months ended Sept. 30, sales increased 17 percent as compared with the nine months ended Sept. 30, 2019. Due to the temporary mall and store closures that occurred in 2020, the majority of CBL’s tenants did not report sales for the full reporting period. As a result, CBL is not able to provide a complete measure of sales for the trailing twelve-month period.

FINANCING ACTIVITY AND LENDER DISCUSSIONS

On Nov. 1, pursuant to the Chapter 11 Plan of Reorganization, the company issued $455 million of 10% senior secured notes (the “10% Notes”) and $150 million of 7% convertible senior secured notes (the “7% Notes”), including $50 million in notes issued in exchange for new money. CBL also entered into a new $883.7 million term loan on Nov. 1, which replaced the company’s previous credit facility.

On Nov. 8, the company completed the redemption of $60 million of 10% Notes. Following the redemption, the company has $395 million in 10% Notes outstanding.

CBL anticipates cooperating with conveyance or foreclosure proceedings for EastGate Mall in Cincinnati, OH ($30.1 million), Asheville Mall in Asheville, NC ($62.1 million) and Parkdale Mall in Beaumont, TX ($70.5 million). Asheville Mall was deconsolidated during the first quarter 2021. CBL no longer controls the property following its transfer to receivership. EastGate Mall and Parkdale Mall are expected to be transferred into receivership in the near future. In October, the foreclosure of Park Plaza in Little Rock, AR ($76.8 million) was completed.

Subsequent to Sept. 30, Brookfield Square Anchor S, LLC filed for bankruptcy, which is the borrower under the $27.5 million recourse term loan. The company has entered in a confidential mediation under bankruptcy court order with the lender.

CBL is also in discussions with the lender on modification of the $36.0 million recourse loan secured by The Outlet Shoppes at Gettysburg in Gettysburg, PA, which is in default.

CBL is in the process of negotiating extensions and modifications of the remaining property level mortgage loans with maturities in 2021 and 2022.

RESTRUCTURING UPDATE

On Nov. 1, CBL emerged from bankruptcy and entered a notice of Effective Date for the company’s Plan of Reorganization. The notice and other documents related to the proceedings, can be found at https://dm.epiq11.com/case/cblproperties/info.

DISPOSITIONS

In July 2021, CBL completed the sale of the former Sears location at Dakota Square Mall in Minot, ND to Scheel’s for $4.0 million. Scheel’s plans to expand the former Sears building to approximately 100,000-square-feet to accommodate their new prototype and relocate from their existing location in the mall to the new store. Additionally, in July, CBL sold a former department store in Cincinnati, Ohio for $5.5 million, for redevelopment into a future grocer.

In September, CBL completed the sale of a parcel of excess parking at Monroeville Mall in Monroeville, PA, to a developer for the construction of a future VA center. The gross sales price was $3.5 million.

In October 2021, CBL completed the sale of a former Sears store at Harford Mall in Bel Air, MD, for $5.0 million and the sale of 62 residential units at Pearland Town Center in Houston, TX, for $8.75 million.

Year-to-date, CBL has generated $35.3 million in gross proceeds from asset sales.

DEVELOPMENT AND LEASING PROGRESS

During the third quarter, Hollywood Casino at York Galleria in York, PA held its grand opening. Hobby Lobby at West Towne Mall in Madison, WI, celebrated its grand opening recently and Rooms to Go at Cross Creek in Fayetteville, NC will open later this year.

Construction recently commenced on a new LifeStorage facility at York Galleria in York, PA in a former anchor location. Entertainment user, Main Event, is under construction in a portion of the former Sears at Sunrise Mall in Brownsville, TX. Scheel’s All Sports commenced construction on an expanded store at Dakota Square in Minot, ND, following their acquisition of the former Sears last month.

Additional offerings, including new restaurants, fitness, hotel and other uses are planned or under negotiation and will be announced as details are finalized.

Detailed project information is available in CBL’s Financial Supplement for Q3 2021, which can be found in the Invest – Financial Reports section of CBL’s website at cblproperties.com.

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