CBL Properties announced results for the third quarter ended Sept. 30. Results of operations as reported in the consolidated financial statements for these periods are prepared in accordance with GAAP. 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 release.
KEY TAKEAWAYS:
Same center NOI for the nine months ended Sept. 30 increased 1 percent compared with the prior-year period, and FFO, as adjusted, per share increased to $4.77, compared with $4.72 for the prior-year period. CBL reported a decline in same-center NOI of 2.0 percent for third quarter 2024 compared with the prior-year period, and FFO, as adjusted, per share of $1.54, compared with $1.60 for third quarter 2023. Results were in-line with the previously issued guidance range for 2024 same-center NOI and FFO, as adjusted.
Over 880,000 square feet of leases were executed in third quarter 2024. Third quarter 2024 leasing results included comparable leases of approximately 362,000 square feet signed at a 9.5 percent increase in average rents versus the prior leases including a 3.3 percent increase in renewal leases signed for malls, lifestyle centers and outlet centers.
Portfolio occupancy was 89.3 percent as of Sept. 30, a 60 basis-point-increase sequentially from June 30, and a 150 bps decline compared with portfolio occupancy of 90.8 percent as of Sept. 30, 2023. Same-center occupancy for malls, lifestyle centers and outlet centers was 87.4 percent as of Sept. 30, a 230-basis-point decline from 89.7 percent as of Sept. 30, 2023. Anticipated bankruptcy related store closures representing nearly 300,000-square-feet comprised 163 basis points of the decline in mall occupancy compared with the prior-year quarter including approximately 234,000 square feet of closures in the second quarter 2024 related to rue21 and Express. CBL has executed agreements to reopen 14 stores representing approximately 94,400 square feet of rue21 stores under its new ownership by first quarter 2025, with the majority opening in 2024.
Same-center tenant sales per square foot for the third quarter 2024 increased 1.5 percent as compared with the prior-year period. Same-center tenant sales per square foot for the 12-months ended Sept. 30, declined 0.7 percent to $418, compared with $421 for the prior period.
As of Sept. 30, the company had $307.0 million of unrestricted cash and marketable securities.
In October, CBL announced that it completed the repurchase of 500,000 shares of CBL stock for $12.525 million, in a privately negotiated block trade from a single shareholder. In addition, CBL completed the previously announced $25 million share repurchase program in September. Through the program, 1,074,826 shares were repurchased in total at a weighted average share price of $23.539 per share.
CBL's Board of Directors declared a cash dividend of $0.40 per common share for the quarter ending Dec. 31. The dividend equates to an annual dividend payment of $1.60 per common share.
"The overall environment for the shopping center industry remains positive," said CBL's Chief Executive Officer Stephen D. Lebovitz. "While same-center NOI declined 2 percent for the third quarter, we have achieved a 1 percent year-to-date increase, tracking near the high-end of our full-year guidance. Revenue on a same-center basis was relatively flat for the quarter with new tenant openings partially offsetting the impact of recent bankruptcy-related closures as well as a $1.1 million decline in percentage rents. We also experienced increased operating expense related to the timing of maintenance and repair projects and higher net utility and insurance expense.
"Leasing results remained strong in our portfolio. We signed over 880,000 square feet of leases during the third quarter with 9.5 percent increases for comparable new and renewal leases. We also added two new retailers to our portfolio, signing our first lease with popular western wear retailer Cavender's during the third quarter as well as our first two leases with Rowan, a fashionable jewelry and piercing store. We added four new leases with Miniso, which will bring them into a total of 24 CBL properties. During the quarter, portfolio occupancy decreased 150 basis points primarily from the 234,000-square-feet of store closures in the previous quarter related to the bankruptcies of Express and rue21 as well as additional closures of underperforming tenants. We have a solid pipeline of new leasing that we expect to offset this decrease over time.
"Tenant sales per square foot showed positive growth of 1.5 percent across the portfolio in the third quarter. The back-to-school season started earlier this year with promotions and high inventory levels driving traffic and sales beginning in July. Our teams are gearing up for an active holiday sales season with forecasts calling for sales growth despite the short timeframe between Thanksgiving and Christmas.
"In October, we further demonstrated our commitment to returning significant capital to shareholders with the repurchase of 500,000 CBL shares. We also completed our previously announced $25 million repurchase program, acquiring more than one million shares through the program. This is in addition to our fourth quarter dividend of $0.40 per share which we declared on Oct. 14. These meaningful investments underscore our confidence in CBL's value and its future.
"We also made progress strengthening our balance sheet. Including the Layton Hills sales this quarter, we have reduced our debt by more than $188 million from the prior year period. We proactively refinanced two partial recourse loans that were secured by one of our open-air centers in Florida. The new 10-year loan is fully non-recourse and bears a fixed interest rate of 5.86 percent, over 200 basis points in savings compared with the prior floating rate. We also successfully refinanced the maturing loan secured by The Outlet Shoppes of the Bluegrass with a new $66.0 million loan, extending the maturity through 2034. We are actively pursuing additional opportunities to further improve and de-risk our balance sheet and strengthen our overall financial position."
Same-center NOI for the third quarter 2024 declined $2.0 million. Third quarter 2024 results were impacted by a $1.1 million decline in percentage rents. Operating expense was $1.6 million higher, primarily driven by the timing of maintenance and repair projects and higher utility and insurance expense, partially offset by increases in tenant recoveries. The estimate for uncollectible revenues positively impacted the quarter by approximately $0.7 million.
Same-center NOI for the nine months ended Sept. 30 increased $3.1 million. Results included real estate and other tax expense savings and improved operating expenses from lower third-party contract expense. Percentage rents for the nine months ended September 30, 2024, were $1.8 million lower. The estimate for uncollectible revenues favorably impacted the current nine-month period by $0.1 million.
On Nov. 7, CBL announced that its Board of Directors had approved an accelerated record and payment date for the cash dividend of $0.40 per common share for the quarter ending Dec. 31, previously declared on Oct. 14. The dividend, which equates to an annual dividend payment of $1.60 per share, is payable on Dec. 11 to shareholders of record as of Nov. 25.
FINANCING ACTIVITY
In November, CBL and its 50 percent joint venture partner took advantage of improved financing terms and closed on new non-recourse ten-year loans totaling $45.0 million, secured by Hammock Landing in West Melbourne, FL. The loans bear a fixed interest rate of 5.86 percent and replace two existing partially guaranteed loans totaling $44.5 million, which bore a floating interest rate (8.2 percent as of Sept. 30). The loans had a maturity of February 2025, with one additional one-year extension option to February 2026.
In October, CBL and its joint venture partner closed on a new $66 million loan secured by The Outlet Shoppes of the Bluegrass. The new non-recourse loan bears a fixed interest rate of 6.84 percent and matures in October 2034. Proceeds were used to retire the $61.6 million existing loan that was set to mature in December 2024.
In August 2024, CBL and its 50 percent joint venture partner began discussion with the lender regarding a loan modification/extension of the $91.2 million in loans secured by Coastal Grand Mall and Coastal Grand Crossing in Myrtle Beach, N.C.
In July 2024, CBL and its 50 percent joint venture partner closed on a new $14.5 million five-year loan secured by the Aloft Hotel at Hamilton Place in Chattanooga. The loan bears a fixed interest rate of 7.2 percent and is non-recourse to CBL and replaced the existing $16.0 million loan that was set to mature in November.
In May 2024, CBL transferred the title of Westgate Mall in Spartanburg, S.C., to the mortgage holder in satisfaction of the $28.7 million non-recourse loan secured by the property.
In February 2024, CBL retired the $15.3 million recourse loan secured by Brookfield Square Anchor Redevelopment in Brookfield, Wi.
CBL is cooperating with the foreclosure or conveyance of Alamance Crossing East in Burlington, NC, ($41.1 million).
STOCK REPURCHASE PROGRAM ACTIVITY
On Oct. 10, CBL announced that it completed the repurchase of 500,000 shares of CBL stock for $12.525 million, in a privately negotiated block trade from a single shareholder. The block repurchase was completed separately from CBL’s existing stock repurchase program described below.
On Aug. 10, 2023, CBL announced that its Board of Directors authorized a stock repurchase program for the company to buy up to $25.0 million of its common stock. As of Sept. 20, CBL had completed all repurchase activity under this program. A total of 1,074,826 shares were repurchased under the program at a weighted average share price of $23.259 per share.
DISPOSITIONS
On Aug. 6, CBL closed on the sale of Layton Hills Mall in Layton, Ut, for $37.125 million. The property served as collateral under CBL's non-recourse term loan. Net proceeds from the sale were used to reduce the term loan balance.
In September, CBL closed on the sale of Layton Hills Convenience Center, Layton Hills Plaza and nine related outparcels in Layton (Salt Lake City), Ut., to an unaffiliated third party for $28.5 million, all cash. Layton Hills Convenience Center and Plaza served as collateral under CBL’s non-recourse term loan. The nine improved outparcels served as collateral under CBL’s non-recourse open-air and outparcel loan. Net proceeds from the sale were applied to the term loan principal balance and open-air and outparcel loan, as applicable.
In addition to the sale of Layton Hills Mall and adjacent properties, CBL completed the sale of two outparcels for $1.2 million during the third quarter. Year-to-date, CBL's disposition activity has generated approximately $74.2 million in gross proceeds at CBL's share.
DEVELOPMENT AND REDEVELOPMENT ACTIVITY
Detailed project information is available in CBL’s Financial Supplement for Q3 2024, which can be found in the Invest – Financial Reports section of CBL’s website at cblproperties.com
OUTLOOK AND GUIDANCE
Based on year-to-date results and Management's expectations, CBL is reiterating its full-year 2024 FFO, as adjusted, guidance. Per share amounts have been adjusted to reflect the impact of year-to-date share repurchase activity. Management anticipates same-center NOI for full-year 2024 in the range of (1.2) percent to 1.4 percent. Guidance excludes the impact of any unannounced transactions.