CBL CBL and Associates Properties Inc

CBL Properties (NYSE:CBL) announced results for the third quarter ended September 30, 2017. 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 EndedSeptember 30,

Nine Months EndedSeptember 30,

2017     2016     % 2017     2016     % Net (loss) income attributable to common shareholders per diluted share $ (0.01 ) $ (0.06 ) 83.3 % $ 0.30   $ 0.41   (26.8 )%

Funds from Operations (“FFO”) per diluted share

$ 0.52   $ 0.56   (7.1 )% $ 1.63   $ 1.97   (17.3 )% FFO, as adjusted, per diluted share (1) $ 0.50   $ 0.57   (12.3 )% $ 1.51   $ 1.72   (12.2 )%

(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 on page 10 of this news release.  

KEY TAKEAWAYS:

• FFO per diluted share, as adjusted, was $0.50 for the third quarter 2017, compared with $0.57 per share for the third quarter 2016. Third quarter 2017 was impacted by approximately $0.02 per share of dilution from asset sales.
• Total Portfolio Same-center NOI declined 2.6% for the third quarter 2017 and 1.6% for the nine months ended September 30, 2017.
• Same-center sales per square foot for the stabilized mall portfolio during the third quarter were flat compared with the prior-year quarter. For the twelve months ended September 30, 2017, same-center sales were $373 per square foot.
• Portfolio occupancy was 93.1% as of September 30, 2017, a 40 bps decline compared with 93.5% as of September 30, 2016 and 150 bps increase from 91.6% as of June 30, 2017. Same-center mall occupancy was 91.8% as of September 30, 2017 compared with 93.0% as of September 30, 2016 and 90.6% as of June 30, 2017.
• Year-to-date, CBL has completed gross asset sales of $166.25 million (at CBL’s share) including the sale of its remaining 25% interest in River Ridge Mall to its joint venture partner for $9.0 million.
• During the third quarter, CBL closed on the extension and modification of two unsecured term loans totaling $535 million and completed an offering of $225 million aggregate principal amount of its 5.950% Senior Notes Due 2026.
• The fourth quarter common dividend was declared at $0.20 per share, which represents an annualized rate of $0.80 per share, corresponding with projected taxable income and preserving an estimated $50 million in annual cash flow.

“This quarter’s results fell below our expectations as our revenues were impacted by additional bankruptcies, store closures and rent concessions,” said Stephen Lebovitz, CBL’s president & CEO. “The difficult environment for retailers has put further pressure on our NOI, FFO and lease spreads as we work diligently to mitigate the impact and preserve NOI. As a result, it is necessary to adjust our outlook and guidance for the remainder of the year. Despite the challenges, our portfolio of market dominant properties is resilient as shown by the sequential improvement in occupancy and stabilization in sales during the quarter. We are executing our strategy and successfully replacing underperforming retailers with higher performing tenants and more diverse uses. Year-to-date, only 25% of new leasing has been executed with traditional apparel retailers as we reinvent our properties into suburban town centers that offer unique shopping, more food and beverage, fitness, health and beauty uses, services and more.

“We have continued to enhance our investment grade balance sheet, providing further liquidity and flexibility to navigate the challenges we are facing. This past quarter, we completed the extension of two unsecured term loans at favorable terms, issued $225 million in additional senior unsecured notes and retired two higher-rate secured loans ahead of maturity. As the quality and size of our unencumbered asset pool increases and our credit metrics strengthen, our strong balance sheet provides us with the financial flexibility necessary to execute our business plan.”

Net loss attributable to common shareholders for the third quarter 2017 was $2.3 million, or $(0.01) per diluted share, compared with a net loss of $10.2 million, or $(0.06) per diluted share, for the third quarter 2016.

FFO allocable to common shareholders, as adjusted, for the third quarter 2017 was $84.7 million, or $0.50 per diluted share, compared with $98.1 million, or $0.57 per diluted share, for the third quarter 2016. FFO allocable to the Operating Partnership common unitholders, as adjusted, for the third quarter 2017 was $98.7 million compared with $114.9 million for the third quarter 2016. FFO, as adjusted, for the third quarter 2017 was impacted by $0.02 per share of dilution from asset sales.

CBL’s revenues for the third quarter 2017 were impacted by 1) higher than anticipated retailer bankruptcy activity; 2) lower than anticipated rent from restructured leases with retailers undergoing bankruptcy-related reorganization; 3) lower than anticipated rent from renewed leases with certain retailers; and 4) lower than projected contribution from temporary leasing and permanent lease-up of space vacated in bankruptcy.

 

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

      Three Months Ended     Nine Months Ended September 30, 2017 Portfolio same-center NOI (2.6 )% (1.6 )% Mall same-center NOI (2.8 )% (2.1 )%

(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 September 30, 2017, include:

• NOI declined $4.5 million, due to a $4.1 million decrease in revenue and a $0.4 million increase in operating expenses.
• Minimum rents and tenant reimbursements declined $4.1 million during the quarter, primarily related to store closures and rent concessions for tenants in bankruptcy.
• Percentage rents were flat compared with the prior year quarter.
• Property operating expenses declined $0.7 million, maintenance and repair expense declined $1.0 million, and real estate tax expenses increased $2.1 million.

PORTFOLIO OPERATIONAL RESULTS

Occupancy:

      As of June 30,     As of September 30, 2017 2017     2016 Portfolio occupancy 91.6 % 93.1 % 93.5 % Mall portfolio 90.2 % 91.6 % 92.6 % Same-center malls 90.6 % 91.8 % 93.0 % Stabilized malls 90.5 % 91.7 % 92.5 % Non-stabilized malls (1) 81.8 % 87.9 % 93.6 % Associated centers 95.5 % 98.2 % 96.1 % Community centers 97.0 % 98.2 % 97.5 %

(1)

  Represents occupancy for The Outlet Shoppes at Laredo and The Outlet Shoppes of the Bluegrass as of June 30, 2017 and September 30, 2017, and The Outlet Shoppes at Atlanta and The Outlet Shoppes of the Bluegrass as of September 30, 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 MonthsEnded

    Nine Months Ended September 30, 2017 Stabilized Malls (13.7 )%

(4.1

)%

New leases (1) 0.3

 %

10.4

 %

Renewal leases (16.1 )%

(7.9

)%

(1)

  Excluding one lease with a significant negative variance, the increase in stabilized mall new leases was 4.3% and 11.5% for the three and nine months ended September 30, 2017, respectively.    

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

      Twelve Months Ended September 30,     2017     2016 % Change Stabilized mall same-center sales per square foot $ 373 $ 380 (1.8 )% Stabilized mall sales per square foot $ 373 $ 377 (1.1 )%  

DIVIDEND

CBL’s Board of Directors has declared a quarterly cash dividend for the Company’s Common Stock of $0.20 per share for the quarter ending December 31, 2017. The dividend is payable on January 16, 2018, to shareholders of record as of December 29, 2017. The dividend represents an annualized rate of $0.80 per share.

“The dividend is an important way that we return value to our shareholders,” commented Lebovitz. “Our approach has been to set the dividend at a level that maximizes available cash flow for investing in our properties and debt reduction, while also maintaining consistency. As one of the largest shareholders of CBL, management and the Board are fully vested in maximizing shareholder value. It is with that perspective that we made the difficult decision to reduce the common dividend to an annualized rate of $0.80 per share from $1.06 per share. Based on our updated projections of taxable income, the common dividend is being re-set to a rate that will preserve an estimated $50 million of cash on an annual basis. This enhanced liquidity will help to fund value-adding redevelopment activity and debt reduction.”

The Board also declared a quarterly cash dividend of $0.4609375 per depositary share for the quarter ending December 31, 2017, for the Company’s 7.375% Series D Cumulative Redeemable Preferred Stock. The dividend, which equates to an annual dividend payment of $1.84375 per depositary share, is payable on December 29, 2017, to shareholders of record as of December 15, 2017.

The Board also declared a quarterly cash dividend of $0.4140625 per depositary share for the quarter ending December 31, 2017, for the Company’s 6.625% Series E Cumulative Redeemable Preferred Stock. The dividend, which equates to an annual dividend payment of $1.65625 per depositary share, is payable on December 29, 2017, to shareholders of record as of December 15, 2017.

DISPOSITIONS

During the quarter, CBL closed on the sale of its remaining 25% interest in River Ridge Mall in Lynchburg, VA, for $9.0 million, cash.

Year-to-date, CBL has completed the sale of two office buildings, interests in three malls and one outlet center for a gross sales price (at CBL’s share) of $166.25 million.

FINANCING ACTIVITY

On September 1, 2017, CBL’s majority-owned operating partnership subsidiary, CBL & Associates Limited Partnership (the “Operating Partnership”), closed on an offering of $225 million aggregate principal amount of its 5.950% Senior Notes Due 2026 (the “notes”). The notes constitute an additional issuance of the 5.950% Senior Notes due 2026, $400 million aggregate principal amount of which the Operating Partnership issued on December 13, 2016. The $625 million aggregate principal amount of notes mature on December 15, 2026.

In September, CBL retired two secured loans totaling $206 million, including a $144.3 million loan secured by its Tier 1 property, Hanes Mall, in Winston-Salem, NC, which bore an interest rate of 6.99% and was scheduled to mature in October 2018. The loan was retired with a minimal prepayment fee. CBL also retired at par the $61.6 million ($46.2 million at CBL’s 75% share) loan secured by its Tier 1 joint venture outlet center, The Outlet Shoppes at El Paso, in El Paso, TX. The loan was scheduled to mature on December 5, 2017, and bore an interest rate of 7.06%.

In July, CBL completed the extension and modification of two unsecured term loans, which were scheduled to mature in 2018. The first, with a balance of $400 million, was increased to a balance of $490 million until July 2018, when it will be reduced to $300 million for the remainder of its term. New borrowings under this term loan were used to reduce outstanding balances on the Company’s unsecured lines of credit. The new term loan has an initial maturity date of July 2020 with two, one-year extension options (the 2nd option is at the lenders’ sole discretion), for a final maturity of July 2022. The term loan bears an interest rate of 150 basis points over LIBOR, based on CBL’s current investment grade rating of BBB-/Baa3/BBB-. Wells Fargo Bank National Association served as Administrative Agent.

The second unsecured term loan, which had a balance of $50 million and was due to mature in February 2018, was modified to a new $45 million term loan. The new loan has an initial maturity date of June 2021, with an additional one-year extension option available at CBL’s discretion, for a final maturity of June 2022. The term loan bears interest at a rate of 165 basis points over LIBOR. First Tennessee Bank NA served as Administrative Agent.

In April, the $123.3 million loan secured by Acadiana Mall in Lafayette, LA, matured. CBL is in negotiations with the existing lender to modify the terms of the loan and will announce details of the agreement once it has been finalized.

CBL has entered into preliminary discussions with the lender for the loan secured by Hickory Point Mall in Forsyth, IL, to explore a further modification of the loan or conveyance. In 2016, the original loan was modified to extend the term and provide for increased cash flows to fund redevelopment activity. Since that time, the property has experienced continued deterioration in operating metrics. As a result, CBL recorded a $24.5 million impairment to adjust the property’s carrying value during the third quarter.

During the third quarter, Wausau Center in Wausau, WI, was conveyed to the lender in settlement of the $17.7 million non-recourse loan secured by the property. CBL recorded a gain on extinguishment of debt of $6.9 million related to the conveyance.

DEVELOPMENT

On November 14th, CBL and its joint venture partners CHM, LLC, and Browning Development Solutions will celebrate the groundbreaking of The Shoppes at Eagle Point, a 233,000-square-foot grocery-anchored shopping center located in Cookeville, TN. The project is being developed in a 50/50 joint venture with CBL overseeing leasing and development. The project will be anchored by Publix, Academy Sports & Outdoor, Ross Dress for Less, PetSmart, Ulta Beauty as well as a collection of shops and restaurants including Panera Bread, Chipotle Mexican Grille and Shoe Carnival. The grand opening is scheduled for fall 2018.

OUTLOOK AND GUIDANCE

CBL is updating guidance to incorporate third quarter results and a revised outlook for the remainder of 2017. CBL’s revised assumptions for full-year 2017 are as follows:

            Current         Previous     2017 FFO per share, as adjusted         $2.08 - $2.12         $2.18 - $2.24     2017 Same-Center NOI Growth     (3.0)% - (2.0)%     (2.0)% - 0%     G&A     $61 - 62 million     $62 - 64 million     Gain on outparcel sales     $12 -14 million     $10 - 12 million    

Occupancy

        75 - 125 bps lower total portfolio occupancy with a decline in stabilized mall occupancy near the low end of the range.         75 - 125 bps lower total portfolio and stabilized mall occupancy            

CBL’s updated 2017 FFO, as adjusted, guidance range of $2.08 - $2.12 per diluted share was adjusted to incorporate an approximate $0.05 per share lower expected contribution from same-center NOI; approximately $0.03 per share lower expected contribution from non-same-center properties and sold properties; $0.01 per share lower fee income and approximately $0.02 per share higher expected interest expense compared with previous assumptions. The increase in assumed interest expense is due to additional senior unsecured notes issued in September as well as an increased LIBOR/base-rate assumption, net of interest savings resulting from the early retirement of a secured loan.

        Low High Expected diluted earnings per common share $ 0.45 $ 0.49 Adjust to fully converted shares from common shares (0.06 ) (0.06 ) Expected earnings per diluted, fully converted common share 0.39 0.43 Add: depreciation and amortization 1.64 1.64 Less: gain on depreciable property (0.24 ) (0.24 ) Add: loss on impairment 0.35 0.35 Add: noncontrolling interest in earnings of Operating Partnership 0.07   0.07   Expected FFO per diluted, fully converted common share 2.21 2.25 Adjustment for certain significant items (0.13 ) (0.13 ) Expected adjusted FFO per diluted, fully converted common share $ 2.08   $ 2.12    

INVESTOR CONFERENCE CALL AND WEBCAST

CBL Properties will conduct a conference call on Friday, November 3, 2017, at 11:00 a.m. ET. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 9283024. A replay of the conference call will be available through November 10, 2017, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10111623.

The Company will also provide an online webcast and rebroadcast of its third quarter 2017 earnings release conference call. The live broadcast of the quarterly conference call will be available online at cblproperties.com on Friday, November 3, 2017 beginning at 11:00 a.m. ET. The online replay will follow shortly after the call.

To receive the CBL Properties third quarter earnings release and supplemental information, please visit the Invest section of our website at cblproperties.com or contact Investor Relations at (423) 490-8312.

ABOUT CBL PROPERTIES

Headquartered in Chattanooga, TN, CBL Properties owns and manages a national portfolio of market-dominant properties located in dynamic and growing communities. CBL’s portfolio is comprised of 119 properties totaling 74.4 million square feet across 27 states, including 76 high-quality enclosed, outlet and open-air retail centers and 12 properties managed for third parties. CBL continuously strengthens its company and portfolio through active management, aggressive leasing and profitable reinvestment in its properties. For more information, visit cblproperties.com.

NON-GAAP FINANCIAL MEASURES

Funds From Operations

FFO is a widely used non-GAAP measure of the operating performance of real estate companies that supplements net income (loss) determined in accordance with GAAP. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) (computed in accordance with GAAP) excluding gains or losses on sales of depreciable operating properties and impairment losses of depreciable properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests. Adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests are calculated on the same basis. We define FFO as defined above by NAREIT less dividends on preferred stock of the Company or distributions on preferred units of the Operating Partnership, as applicable. The Company’s method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

The Company believes that FFO provides an additional indicator of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assumes the value of real estate assets declines predictably over time. Since values of well-maintained real estate assets have historically risen with market conditions, the Company believes that FFO enhances investors’ understanding of its operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of the Company’s properties and interest rates, but also by its capital structure.

The Company presents both FFO allocable to Operating Partnership common unitholders and FFO allocable to common shareholders, as it believes that both are useful performance measures. The Company believes FFO allocable to Operating Partnership common unitholders is a useful performance measure since it conducts substantially all of its business through its Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of the Company’s common shareholders and the noncontrolling interest in the Operating Partnership. The Company believes FFO allocable to its common shareholders is a useful performance measure because it is the performance measure that is most directly comparable to net income (loss) attributable to its common shareholders.

In the reconciliation of net income (loss) attributable to the Company’s common shareholders to FFO allocable to Operating Partnership common unitholders, located in this earnings release, the Company makes an adjustment to add back noncontrolling interest in income (loss) of its Operating Partnership in order to arrive at FFO of the Operating Partnership common unitholders. The Company then applies a percentage to FFO of the Operating Partnership common unitholders to arrive at FFO allocable to its common shareholders. The percentage is computed by taking the weighted-average number of common shares outstanding for the period and dividing it by the sum of the weighted-average number of common shares and the weighted-average number of Operating Partnership units held by noncontrolling interests during the period.

FFO does not represent cash flows from operations as defined by GAAP, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income (loss) for purposes of evaluating the Company’s operating performance or to cash flow as a measure of liquidity.

The Company believes that it is important to identify the impact of certain significant items on its FFO measures for a reader to have a complete understanding of the Company’s results of operations. Therefore, the Company has also presented adjusted FFO measures excluding these items from the applicable periods. Please refer to the reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders on page 10 of this news release for a description of these adjustments.

Same-center Net Operating Income

NOI is a supplemental non-GAAP measure of the operating performance of the Company’s shopping centers and other properties. The Company defines NOI as property operating revenues (rental revenues, tenant reimbursements and other income) less property operating expenses (property operating, real estate taxes and maintenance and repairs).

The Company computes NOI based on the Operating Partnership’s pro rata share of both consolidated and unconsolidated properties. The Company believes that presenting NOI and same-center NOI (described below) based on its Operating Partnership’s pro rata share of both consolidated and unconsolidated properties is useful since the Company conducts substantially all of its business through its Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of the Company’s common shareholders and the noncontrolling interest in the Operating Partnership. The Company’s definition of NOI may be different than that used by other companies and, accordingly, the Company’s calculation of NOI may not be comparable to that of other companies.

Since NOI includes only those revenues and expenses related to the operations of the Company’s shopping center properties, the Company believes that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates, sales at the malls and operating costs and the impact of those trends on the Company’s results of operations. The Company’s calculation of same-center NOI excludes lease termination income, straight-line rent adjustments, amortization of above and below market lease intangibles and write-off of landlord inducement assets in order to enhance the comparability of results from one period to another. A reconciliation of same-center NOI to net income is located at the end of this earnings release.

Pro Rata Share of Debt

The Company presents debt based on its pro rata ownership share (including the Company’s pro rata share of unconsolidated affiliates and excluding noncontrolling interests’ share of consolidated properties) because it believes this provides investors a clearer understanding of the Company’s total debt obligations which affect the Company’s liquidity. A reconciliation of the Company’s pro rata share of debt to the amount of debt on the Company’s condensed consolidated balance sheet is located at the end of this earnings release.

Information included herein contains “forward-looking statements” within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual events, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements. The reader is directed to the Company’s various filings with the Securities and Exchange Commission, including without limitation the Company’s Annual Report on Form 10-K, and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included therein, for a discussion of such risks and uncertainties.

 

CBL & Associates Properties, Inc.

Consolidated Statements of Operations

(Unaudited; in thousands, except per share amounts)

      Three Months EndedSeptember 30,     Nine Months EndedSeptember 30, 2017     2016 2017     2016 REVENUES: Minimum rents $ 150,836 $ 164,444 $ 468,195 $ 502,289 Percentage rents 3,000 3,225 7,127 10,590 Other rents 3,790 3,866 11,171 13,747 Tenant reimbursements 63,055 69,489 192,577 212,951 Management, development and leasing fees 2,718 4,177 8,747 10,825 Other 1,251   6,520   4,079   19,362   Total revenues 224,650   251,721   691,896   769,764   OPERATING EXPENSES: Property operating 31,295 35,116 96,250 104,804 Depreciation and amortization 71,732 71,794 225,461 220,505 Real estate taxes 21,573 22,492 62,343 68,354 Maintenance and repairs 11,254 13,236 36,322 39,574 General and administrative 13,568 13,222 45,402 46,865 Loss on impairment 24,935 53,558 71,401 116,736 Other 132   5,576   5,151   20,313   Total operating expenses 174,489   214,994   542,330   617,151   Income from operations 50,161 36,727 149,566 152,613 Interest and other income (loss) (200 ) 451 1,235 1,062 Interest expense (53,913 ) (54,292 ) (165,179 ) (162,710 ) Gain on extinguishment of debt 6,452 (6 ) 30,927 — Loss on investment (354 ) — (6,197 ) — Income tax benefit 1,064 2,386 4,784 2,974 Equity in earnings of unconsolidated affiliates 4,706   10,478   16,404   107,217   Income (loss) from continuing operations before gain on sales of real estate assets 7,916 (4,256 ) 31,540 101,156 Gain on sales of real estate assets 1,383   4,926   86,904   14,503   Net income 9,299 670 118,444 115,659 Net (income) loss attributable to noncontrolling interests in: Operating Partnership 81 1,372 (8,702 ) (12,056 ) Other consolidated subsidiaries (415 ) (983 ) (25,266 ) 449   Net income attributable to the Company 8,965 1,059 84,476 104,052 Preferred dividends (11,223 ) (11,223 ) (33,669 ) (33,669 ) Net income (loss) attributable to common shareholders $ (2,258 ) $ (10,164 ) $ 50,807   $ 70,383     Basic and diluted per share data attributable to common shareholders: Net income (loss) attributable to common shareholders $ (0.01 ) $ (0.06 ) $ 0.30 $ 0.41

Weighted-average common and potential dilutive common shares outstanding

171,096 170,792 171,060 170,751   Dividends declared per common share $ 0.265 $ 0.265 $ 0.795 $ 0.795    

The Company’s reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders is as follows:

(in thousands, except per share data)

      Three Months EndedSeptember 30,     Nine Months EndedSeptember 30, 2017     2016 2017     2016 Net income (loss) attributable to common shareholders $ (2,258 ) $ (10,164 ) $ 50,807 $ 70,383 Noncontrolling interest in income (loss) of Operating Partnership (81 ) (1,372 ) 8,702 12,056 Depreciation and amortization expense of: Consolidated properties 71,732 71,794 225,461 220,505 Unconsolidated affiliates 9,633 10,756 28,533 29,090 Non-real estate assets (934 ) (838 ) (2,590 ) (2,397 )

Noncontrolling interests’ share of depreciation and amortization

(2,170 ) (2,237 ) (6,791 ) (6,685 ) Loss on impairment, net of taxes 24,935 51,812 70,185 114,990

(Gain) loss on depreciable property, net of taxes and noncontrolling interests’ share

1,995   (8,685 ) (48,761 ) (44,206 ) FFO allocable to Operating Partnership common unitholders 102,852 111,066 325,546 393,736 Litigation expenses (1) 17 601 69 2,308 Nonrecurring professional fees expense (reimbursement) (1) — 662 (919 ) 1,781 Loss on investment (2) 354 — 6,197 — Equity in (earnings) losses from disposals of unconsolidated affiliates (3) — 1,145 — (54,485 ) Non-cash default interest expense (4) 1,904 1,374 4,398 1,374

Gain on extinguishment of debt, net of noncontrolling interests’ share (5)

(6,452 ) 6   (33,902 ) —   FFO allocable to Operating Partnership common unitholders, as adjusted $ 98,675   $ 114,854   $ 301,389   $ 344,714     FFO per diluted share $ 0.52   $ 0.56   $ 1.63   $ 1.97     FFO, as adjusted, per diluted share $ 0.50   $ 0.57   $ 1.51   $ 1.72     Weighted-average common and potential dilutive common shares outstanding with Operating Partnership units fully converted 199,321 200,004 199,325 199,992   (1)   Litigation expense and nonrecurring professional fees expense are included in General and Administrative expense in the Consolidated Statements of Operations. Nonrecurring professional fees reimbursement is included in Interest and Other Income (Loss) in the Consolidated Statements of Operations. (2) The three months and nine months ended September 30, 2017 represents a loss on investment related to the write down of the Company’s 25% interest in River Ridge Mall based on the contract price to sell such interest to its joint venture partner. The sale closed in August 2017. (3) The three months ended September 30, 2016 includes $1,145 of equity in losses from the disposals of unconsolidated affiliates. The nine months ended September 30, 2016 also includes $26,363 related to the sale of the Company’s 50% interest in Triangle Town Center and $29,267 related to the foreclosure of the loan secured by Gulf Coast Town Center. These amounts are included in Equity in Earnings of Unconsolidated Affiliates in the Consolidated Statements of Operations. (4) The three months and nine months ended September 30, 2017 includes default interest expense related to Acadiana Mall and Wausau Center. The nine months ended September 30, 2017 also includes default interest expense related to Chesterfield Mall and Midland Mall. The three and nine months ended September 30, 2016 includes default interest expense related to Chesterfield Mall, Midland Mall and Wausau Center. (5) The three months ended September 30, 2017 primarily represents a $6,851 gain on extinguishment of debt related to the non-recourse loan secured by Wausau Center, which was conveyed to the lender in the third quarter of 2017, which was partially offset by a loss on extinguishment of debt related to a prepayment fee of $371 related to the early retirement of a mortgage loan. Additionally, the nine months ended September 30, 2017 also includes a gain on extinguishment of debt related to the non-recourse loan secured by Chesterfield Mall, which was conveyed to the lender in the second quarter of 2017, a loss on extinguishment of debt related to a prepayment fee on the early retirement of the loans secured by The Outlet Shoppes at Oklahoma City, which was sold in the second quarter of 2017, and a gain on extinguishment of debt related to the non-recourse loan secured by Midland Mall, which was conveyed to the lender in the first quarter of 2017.    

The reconciliation of diluted EPS to FFO per diluted share is as follows:

      Three Months EndedSeptember 30,     Nine Months EndedSeptember 30, 2017     2016 2017     2016 Diluted EPS attributable to common shareholders $ (0.01 ) $ (0.06 ) $ 0.30 $ 0.41 Eliminate amounts per share excluded from FFO: Depreciation and amortization expense, including amounts from consolidated properties, unconsolidated affiliates, non-real estate assets and excluding amounts allocated to noncontrolling interests 0.40 0.40 1.23 1.21 Loss on impairment, net of taxes 0.13 0.26 0.35 0.57

Gain on depreciable property, net of tax and noncontrolling interests’ share

—   (0.04 ) (0.25 ) (0.22 ) FFO per diluted share $ 0.52   $ 0.56   $ 1.63   $ 1.97      

The reconciliations of FFO allocable to Operating Partnership common unitholders to FFO allocable to common shareholders, including and excluding the adjustments noted above, are as follows:

      Three Months EndedSeptember 30,     Nine Months EndedSeptember 30, 2017     2016 2017     2016 FFO allocable to Operating Partnership common unitholders $ 102,852 $ 111,066 $ 325,546 $ 393,736 Percentage allocable to common shareholders (1) 85.84 % 85.39 % 85.82 % 85.38 % FFO allocable to common shareholders $ 88,288   $ 94,839   $ 279,384   $ 336,172     FFO allocable to Operating Partnership common unitholders, as adjusted $ 98,675 $ 114,854 $ 301,389 $ 344,714 Percentage allocable to common shareholders (1) 85.84 % 85.39 % 85.82 % 85.38 % FFO allocable to common shareholders, as adjusted $ 84,703   $ 98,074   $ 258,652   $ 294,317     (1)   Represents the weighted average number of common shares outstanding for the period divided by the sum of the weighted average number of common shares and the weighted average number of Operating Partnership units outstanding during the period. See the reconciliation of shares and Operating Partnership units outstanding on page 16.                   SUPPLEMENTAL FFO INFORMATION: Three Months EndedSeptember 30, Nine Months EndedSeptember 30, 2017 2016 2017 2016 Lease termination fees $ 879 $ 857 $ 1,990 $ 2,202 Lease termination fees per share $ — $ — $ 0.01 $ 0.01   Straight-line rental income (including write-offs) $ (409 ) $ (319 ) $ 223 $ 1,241 Straight-line rental income (including write-offs) per share $ — $ — $ — $ 0.01   Gains on outparcel sales $ 3,605 $ 4,387 $ 11,696 $ 8,170 Gains on outparcel sales per share $ 0.02 $ 0.02 $ 0.06 $ 0.04   Net amortization of acquired above- and below-market leases $ 1,046 $ 783 $ 3,462 $ 2,765 Net amortization of acquired above- and below-market leases per share $ 0.01 $ — $ 0.02 $ 0.01   Net amortization of debt premiums and discounts $ (369 ) $ 1,162 $ (772 ) $ 2,000 Net amortization of debt premiums and discounts per share $ — $ 0.01 $ — $ 0.01   Income tax benefit $ 1,064 $ 2,386 $ 4,784 $ 2,974 Income tax benefit per share $ 0.01 $ 0.01 $ 0.02 $ 0.01  

Gain on extinguishment of debt, net of noncontrolling interests’ share

$ 6,452 $ (6 ) $ 33,902 $ —

Gain on extinguishment of debt, net of noncontrolling interests’ share, per share

$ 0.03 $ — $ 0.17 $ —   Loss on investment $ (354 ) $ — $ (6,197 ) $ — Loss on investment per share $ — $ — $ (0.03 ) $ —   Equity in earnings (losses) from disposals of unconsolidated affiliates $ — $ (1,145 ) $ — $ 54,485 Equity in earnings (losses) from disposals of unconsolidated affiliates per share $ — $ (0.01 ) $ — $ 0.27   Non-cash default interest expense $ (1,904 ) $ (1,374 ) $ (4,398 ) $ (1,374 ) Non-cash default interest expense per share $ (0.01 ) $ (0.01 ) $ (0.02 ) $ (0.01 )   Abandoned projects expense $ (132 ) $ (11 ) $ (5,151 ) $ (44 ) Abandoned projects expense per share $ — $ — $ (0.03 ) $ —   Interest capitalized $ 452 $ 616 $ 1,676 $ 1,612 Interest capitalized per share $ — $ — $ 0.01 $ 0.01   Litigation expenses $ (17 ) $ (601 ) $ (69 ) $ (2,308 ) Litigation expenses per share $ — $ — $ — $ (0.01 )   Nonrecurring professional fees (expense) reimbursement $ — $ (662 ) $ 919 $ (1,781 ) Nonrecurring professional fees (expense) reimbursement per share $ — $ — $ — $ (0.01 )      

As of September 30,

2017

2016

Straight-line rent receivable

$

62,681

$

67,861

   

Same-center Net Operating Income

(Dollars in thousands)

      Three Months EndedSeptember 30,     Nine Months EndedSeptember 30, 2017     2016 2017     2016 Net income $ 9,299 $ 670 $ 118,444 $ 115,659   Adjustments: Depreciation and amortization 71,732 71,794 225,461 220,505 Depreciation and amortization from unconsolidated affiliates 9,633 10,756 28,533 29,090

Noncontrolling interests’ share of depreciation and amortization in other consolidated subsidiaries

(2,170 ) (2,237 ) (6,791 ) (6,685 ) Interest expense 53,913 54,292 165,179 162,710 Interest expense from unconsolidated affiliates 6,244 6,109 18,815 19,787

Noncontrolling interests’ share of interest expense in other consolidated subsidiaries

(1,584 ) (1,769 ) (5,160 ) (5,126 ) Abandoned projects expense 132 11 5,151 44 Gain on sales of real estate assets (1,383 ) (4,926 ) (86,904 ) (14,503 ) Gain on sales of real estate assets of unconsolidated affiliates (227 ) (8,018 ) (189 ) (93,340 )

Noncontrolling interests’ share of gain on sales of real estate assets in other consolidated affiliates

— — 26,639 — Loss on investment 354 — 6,197 — Gain on extinguishment of debt (6,452 ) 6 (30,927 ) —

Noncontrolling interests’ share of loss on extinguishment of debt in other consolidated subsidiaries

— — (2,975 ) — Loss on impairment 24,935 53,558 71,401 116,736 Income tax benefit (1,064 ) (2,386 ) (4,784 ) (2,974 ) Lease termination fees (879 ) (857 ) (1,990 ) (2,202 ) Straight-line rent and above- and below-market lease amortization (637 ) (464 ) (3,685 ) (4,006 ) Net (income) loss attributable to noncontrolling interests in other consolidated subsidiaries (415 ) (983 ) (25,266 ) 449 General and administrative expenses 13,568 13,222 45,402 46,865 Management fees and non-property level revenues (2,762 ) (1,379 ) (10,312 ) (12,429 )

Operating Partnership’s share of property NOI

172,237 187,399 532,239 570,580 Non-comparable NOI (4,513 ) (15,169 ) (22,766 ) (52,998 ) Total same-center NOI (1) $ 167,724   $ 172,230   $ 509,473   $ 517,582   Total same-center NOI percentage change (2.6)% (1.6)%    

Same-center Net Operating Income

(Continued)

      Three Months EndedSeptember 30,     Nine Months EndedSeptember 30, 2017     2016 2017     2016 Malls $ 152,677 $ 157,129 $ 463,020 $ 472,990 Associated centers 7,899 8,131 24,390 24,162 Community centers 5,398 5,343 16,579 15,533 Offices and other   1,750     1,627   5,484     4,897 Total same-center NOI (1) $ 167,724   $ 172,230 $ 509,473   $ 517,582   Percentage Change: Malls (2.8 )% (2.1 )% Associated centers (2.9 )% 0.9

 %

Community centers 1.0

 %

6.7

 %

Offices and other   7.6

 %

  12.0

 %

Total same-center NOI (1)   (2.6 )%   (1.6 )%   (1)   CBL defines NOI as property operating revenues (rental revenues, tenant reimbursements and other income), less property operating expenses (property operating, real estate taxes and maintenance and repairs). Same-center NOI excludes lease termination income, straight-line rent adjustments, amortization of above and below market lease intangibles and write-offs of landlord inducement assets. We include a property in our same-center pool when we own all or a portion of the property as of September 30, 2017, and we owned it and it was in operation for both the entire preceding calendar year and the current year-to-date reporting period ending September 30, 2017. New properties are excluded from same-center NOI, until they meet this criteria. Properties excluded from the same-center pool that would otherwise meet this criteria are properties which are either under major redevelopment, being considered for repositioning or minority interest properties in which we own an interest of 25% or less.    

Company’s Share of Consolidated and Unconsolidated Debt

(Dollars in thousands)

      As of September 30, 2017 Fixed Rate    

VariableRate

   

Total perDebtSchedule

   

UnamortizedDeferredFinancingCosts

    Total Consolidated debt $ 3,170,000 $ 1,065,450 $ 4,235,450 $ (19,272 ) $ 4,216,178

Noncontrolling interests’ share of consolidated debt

(77,494 ) (5,434 ) (82,928 ) 719 (82,209 )

Company’s share of unconsolidated affiliates’ debt

  535,134     58,692     593,826     (2,357 )   591,469  

Company’s share of consolidated and unconsolidated debt

$ 3,627,640   $ 1,118,708   $ 4,746,348   $ (20,910 ) $ 4,725,438   Weighted-average interest rate   5.19 %   2.79 %   4.63 %   As of September 30, 2016 Fixed Rate

VariableRate

Total perDebtSchedule

UnamortizedDeferredFinancingCosts

Total Consolidated debt $ 3,251,443 $ 1,294,531 $ 4,545,974 $ (14,705 ) $ 4,531,269

Noncontrolling interests’ share of consolidated debt

(109,701 ) (7,537 ) (117,238 ) 1,015 (116,223 )

Company’s share of unconsolidated affiliates’ debt

  523,833     73,562     597,395     (2,286 )   595,109  

Company’s share of consolidated and unconsolidated debt

$ 3,665,575   $ 1,360,556   $ 5,026,131   $ (15,976 ) $ 5,010,155   Weighted-average interest rate   5.30 %   1.96 %   4.39 %    

Debt-To-Total-Market Capitalization Ratio as of September 30, 2017

(In thousands, except stock price)

     

SharesOutstanding

   

StockPrice (1)

    Value Common stock and Operating Partnership units 199,316 $ 8.39 $ 1,672,261 7.375% Series D Cumulative Redeemable Preferred Stock 1,815 250.00 453,750 6.625% Series E Cumulative Redeemable Preferred Stock 690 250.00   172,500   Total market equity 2,298,511

Company’s share of total debt, excluding unamortized deferred financing costs

  4,746,348   Total market capitalization $ 7,044,859   Debt-to-total-market capitalization ratio 67.4 %   (1)   Stock price for common stock and Operating Partnership units equals the closing price of the common stock on September 29, 2017. The stock prices for the preferred stocks represent the liquidation preference of each respective series.    

Reconciliation of Shares and Operating Partnership Units Outstanding

(In thousands)

     

Three Months EndedSeptember 30,

   

Nine Months EndedSeptember 30,

Basic     Diluted Basic     Diluted 2017: Weighted-average shares - EPS 171,096 171,096 171,060 171,060 Weighted-average Operating Partnership units   28,225     28,225     28,265     28,265   Weighted-average shares- FFO   199,321     199,321     199,325     199,325     2016: Weighted-average shares - EPS 170,792 170,792 170,751 170,751 Weighted-average Operating Partnership units   29,212     29,212     29,241     29,241   Weighted-average shares- FFO   200,004     200,004     199,992     199,992        

Dividend Payout Ratio

 

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2017 2016 2017

2016

Weighted-average cash dividend per share $ 0.27281 $ 0.27282 $ 0.81843 $ 0.81838 FFO, as adjusted, per diluted fully converted share $ 0.50   $ 0.57   $ 1.51   $ 1.72   Dividend payout ratio   54.6 %   47.9 %   54.2 %   47.6 %     Consolidated Balance Sheets

(Unaudited; in thousands, except share data)

      As of ASSETS September 30, 2017     December 31, 2016 Real estate assets: Land $ 811,742 $ 820,979 Buildings and improvements 6,668,312   6,942,452   7,480,054 7,763,431 Accumulated depreciation (2,411,560 ) (2,427,108 ) 5,068,494 5,336,323 Held for sale — 5,861 Developments in progress 100,106   178,355   Net investment in real estate assets 5,168,600 5,520,539 Cash and cash equivalents 31,351 18,951 Receivables:

Tenant, net of allowance for doubtful accounts of $2,075 and $1,910 in 2017 and 2016, respectively

86,947 94,676 Other, net of allowance for doubtful accounts of $838 in 2017 and 2016 5,554 6,227 Mortgage and other notes receivable 19,279 16,803 Investments in unconsolidated affiliates 251,664 266,872 Intangible lease assets and other assets 180,361   180,572   $ 5,743,756   $ 6,104,640     LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY Mortgage and other indebtedness, net $ 4,216,178 $ 4,465,294 Accounts payable and accrued liabilities 270,046   280,498   Total liabilities 4,486,224   4,745,792   Commitments and contingencies Redeemable noncontrolling interests 13,076   17,996  

Shareholders’ equity:

Preferred stock, $.01 par value, 15,000,000 shares authorized:

7.375% Series D Cumulative Redeemable Preferred Stock, 1,815,000 shares outstanding

18 18

6.625% Series E Cumulative Redeemable Preferred Stock, 690,000 shares outstanding

7 7

Common stock, $.01 par value, 350,000,000 shares authorized, 171,096,895 and 170,792,645 issued and outstanding in 2017 and 2016, respectively

1,711 1,708 Additional paid-in capital 1,971,447 1,969,059 Dividends in excess of cumulative earnings (827,292 ) (742,078 )

Total shareholders’ equity

1,145,891 1,228,714 Noncontrolling interests 98,565   112,138   Total equity 1,244,456   1,340,852   $ 5,743,756   $ 6,104,640  

View source version on businesswire.com: http://www.businesswire.com/news/home/20171102006747/en/

CBL PropertiesKatie Reinsmidt, 423-490-8301Executive Vice President - Chief Investment Officerkatie.reinsmidt@cblproperties.com