The accompanying notes are an integral part of these condensed consolidated statements.
The accompanying notes are an integral part of these condensed consolidated statements.
The accompanying notes are an integral part of these condensed consolidated statements.
The accompanying notes are an integral part of these condensed consolidated statements.
The accompanying notes are an integral part of these condensed consolidated statements.
CBL & Associates Properties, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(Dollars in thousands, except per share and per unit data)
Note 1 – Organization and Basis of Presentation
CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, outlet centers, lifestyle centers, open-air centers, office buildings and other properties, including single-tenant and multi-tenant parcels. Its properties are located in 24 states, but are primarily in the southeastern and midwestern United States.
CBL conducts substantially all its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE.
As of March 31, 2022, the Operating Partnership owned interests in the following properties:
|
|
Malls (1) |
|
|
Outlet Centers (1) |
|
|
Lifestyle Centers (1) |
|
|
Open-Air Centers (2) |
|
|
Other (2) (3) |
|
|
Total |
|
Consolidated Properties |
|
|
41 |
|
|
|
2 |
|
|
|
4 |
|
|
|
21 |
|
|
|
4 |
|
|
|
72 |
|
Unconsolidated Properties (4) |
|
|
9 |
|
|
|
3 |
|
|
|
1 |
|
|
|
8 |
|
|
|
1 |
|
|
|
22 |
|
Total |
|
|
50 |
|
|
|
5 |
|
|
|
5 |
|
|
|
29 |
|
|
|
5 |
|
|
|
94 |
|
(1) |
The Company has aggregated malls, outlet centers and lifestyle centers into one reportable segment, the Malls category, because they have similar economic characteristics and they provide similar products and services to similar types of, and in many cases, the same tenants. |
(2) |
Included in “All Other” for purposes of segment reporting. |
(3) |
CBL's two consolidated corporate office buildings are included in the Other category. |
(4) |
The Operating Partnership accounts for these investments using the equity method because one or more of the other partners have substantive participating rights. |
CBL is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. As of March 31, 2022, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.0% general partner interest in the Operating Partnership and CBL Holdings II, Inc. owned a 98.9% limited partner interest for a combined interest held by CBL of 99.9%. As of March 31, 2022, third parties owned a 0.1% limited partner interest in the Operating Partnership.
As used herein, the term "Company" includes CBL & Associates Properties, Inc. and its subsidiaries, including CBL & Associates Limited Partnership and its subsidiaries, unless the context indicates otherwise. The term "Operating Partnership" refers to CBL & Associates Limited Partnership and its subsidiaries.
The Operating Partnership conducts the Company's property management and development activities through its wholly owned subsidiary, CBL & Associates Management, Inc. (the “Management Company"), to comply with certain requirements of the Internal Revenue Code.
The accompanying condensed consolidated financial statements are unaudited; however, they have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. All intercompany transactions have been eliminated. The results for the interim period ended March 31, 2022 are not necessarily indicative of the results to be obtained for the full fiscal year.
Fresh Start Accounting and Reorganizations
Upon the Company’s emergence from the Chapter 11 Cases (defined below), the Company adopted fresh start accounting, which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. As a result of the application of fresh start accounting and the effects of the implementation of the third amended joint chapter 11 plan of CBL & Associates Properties, Inc. and its affiliated debtors (with technical modifications) (as modified at Docket No. 1521) (the “Plan”), the condensed consolidated financial statements after November 1, 2021 (the “Effective Date”) are not comparable with the condensed consolidated financial statements on or before that date. The lack of comparability is emphasized by the use of a “black line” to separate the Predecessor (defined below) and Successor (defined below) periods in the condensed consolidated financial statements and footnote tables. References to “Successor” or “Successor Company” relate to the financial position and results of operations of the Company after the Effective Date. References to "Predecessor" or "Predecessor Company" refer to the financial position and results of operations of the Company on or before the Effective Date.
6
Table of Contents
During the Predecessor period, the Company applied Accounting Standards Codification (“ASC”) 852 - Reorganizations (“ASC 852”) in preparing the condensed consolidated financial statements. ASC 852 requires the financial statements, for periods subsequent to the commencement of the Chapter 11 Cases, to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. As a result, the Company classified all expenses, gains and losses that were incurred as a result of the Chapter 11 proceedings since filing as “Reorganization items, net” in the Predecessor Company’s condensed consolidated statements of operations.
Liquidity and Loan Defaults
In accordance with the accounting guidance related to the presentation of financial statements, when preparing financial statements for each annual and interim reporting period, management evaluates whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. In making its assessment, management considered the Company’s current financial condition and liquidity sources.
As of March 31, 2022, the Company had $1.15 billion of property-level debt and related obligations maturing or callable within the next 12 months from the issuance of the financial statements. Subsequent to March 31, 2022 and through the issuance of the financial statements, the Company obtained certain waivers and/or refinanced and extended the maturity dates for $0.2 billion of mortgage debt obligations.
Accordingly, the Company still had $0.9 billion of property-level debt and related obligations maturing or callable within the next 12 months from the issuance of the financial statements, including $474 million reported within mortgage debt payable and $474 million related to unconsolidated affiliates, a portion of which is guaranteed by the Company as disclosed in Note 11 to the condensed consolidated financial statements. Such properties serving as collateral for this property-level debt and related obligations represent approximately 10-12% of projected annual operating cash flows of the Company. The Company currently does not have sufficient liquidity to meet these obligations as they become due, which raises substantial doubt about the Company’s ability to continue as a going concern.
Management intends to refinance and/or extend the maturity dates for such mortgage notes payable. In such instances where a refinancing and/or extension of maturity dates is unsuccessful the Company will repay certain of the mortgage notes based on the availability of liquidity and convey certain properties to the lender to satisfy the debt obligation. As a result, the Company has concluded that management’s plans are probable of being achieved to alleviate substantial doubt about the Company’s ability to continue as a going concern.
The Company has prepared its financial statements in conformity with accounting principles generally accepted in the United States of America applicable to a going concern. The financial statements do not reflect any adjustments related to the recoverability of assets and satisfaction of liabilities that might be necessary should the Company be unable to continue as a going concern.
Reclassifications
The Successor Company reclassified mortgage and other notes receivable of $384 into other receivables for the year ended December 31, 2021.
Note 2 – Summary of Significant Accounting Policies
Accounting Guidance Not Yet Adopted
Description |
|
Expected
Adoption Date &
Application
Method |
|
Financial Statement Effect and Other Information |
Accounting Standards Update (“ASU”) 2020-04, Reference Rate Reform |
|
|
On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. This ASU is effective as of March 12, 2020 through December 31, 2022. The Company has not adopted any of the optional expedients or exceptions as of March 31, 2022, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period to determine the impact on its condensed consolidated financial statements. |
|
|
7
Table of Contents
Accounts Receivable
Receivables include amounts billed and currently due from tenants pursuant to lease agreements and receivables attributable to straight-line rents associated with those lease agreements. Individual leases where the collection of rents is in dispute are assessed for collectability based on management’s best estimate of collection considering the anticipated outcome of the dispute. Individual leases that are not in dispute are assessed for collectability and upon the determination that the collection of rents over the remaining lease term is not probable, accounts receivable are reduced as an adjustment to rental revenues. Revenue from leases where collection is deemed to be less than probable is recorded on a cash basis until collectability is determined to be probable. Further, management assesses whether operating lease receivables, at a portfolio level, are appropriately valued based upon an analysis of balances outstanding, historical collection levels and current economic trends. An allowance for the uncollectable portion of the portfolio is recorded as an adjustment to rental revenues. Management’s estimate of the collectability of accounts receivable from tenants is based on the best information available to management at the time of evaluation.
Management’s collection assessment took into consideration the type of retailer, billing disputes, lease negotiation status and executed deferral or abatement agreements, as well as recent rent collection experience and tenant bankruptcies based on the best information available to management at the time of evaluation. For the three-month Successor period ended March 31, 2022 there was a reversal of $737 related to uncollectable revenues. For the three-month Predecessor period ended March 31, 2021, revenues were reduced by $6,486 associated with uncollectable revenues, which includes the write-off of $1,679 for straight line rent receivables.
Note 3 – Revenues
Revenues
The following table presents the Company's revenues disaggregated by revenue source:
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Three Months Ended March 31, |
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
|
2021 |
|
Rental revenues |
|
$ |
135,332 |
|
|
|
$ |
128,175 |
|
Revenues from contracts with customers (ASC 606): |
|
|
|
|
|
|
|
|
|
Operating expense reimbursements |
|
|
2,189 |
|
|
|
|
2,156 |
|
Management, development and leasing fees (1) |
|
|
1,769 |
|
|
|
|
1,659 |
|
Marketing revenues (2) |
|
|
(15 |
) |
|
|
|
301 |
|
|
|
|
3,943 |
|
|
|
|
4,116 |
|
|
|
|
|
|
|
|
|
|
|
Other revenues |
|
|
827 |
|
|
|
|
893 |
|
Total revenues (3) |
|
$ |
140,102 |
|
|
|
$ |
133,184 |
|
(1) |
Included in All Other segment. |
(2) |
Marketing revenues solely relate to the Malls segment for all periods presented. |
(3) |
Sales taxes are excluded from revenues. |
See Note 9 for information on the Company's segments.
Revenues from Contracts with Customers
Outstanding Performance Obligations
The Company has outstanding performance obligations related to certain noncancellable contracts with customers for which it will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2022, the Company expects to recognize these amounts as revenue over the following periods:
Performance obligation |
|
Less than 5
years |
|
|
5-20
years |
|
|
Over 20
years |
|
|
Total |
|
Fixed operating expense reimbursements |
|
$ |
22,877 |
|
|
$ |
50,967 |
|
|
$ |
47,352 |
|
|
$ |
121,196 |
|
The Company evaluates its performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration, which is based on sales, are constrained.
8
Table of Contents
Note 4 – Leases
The components of rental revenues are as follows:
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Three Months Ended March 31, |
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
|
2021 |
|
Fixed lease payments |
|
$ |
95,648 |
|
|
|
$ |
71,227 |
|
Variable lease payments |
|
|
39,684 |
|
|
|
|
56,948 |
|
Total rental revenues |
|
$ |
135,332 |
|
|
|
$ |
128,175 |
|
The undiscounted future fixed lease payments to be received under the Successor Company's operating leases as of March 31, 2022, are as follows:
Years Ending December 31, |
|
Operating Leases |
|
2022 (1) |
|
$ |
266,243 |
|
2023 |
|
|
311,345 |
|
2024 |
|
|
253,351 |
|
2025 |
|
|
196,536 |
|
2026 |
|
|
145,634 |
|
2027 |
|
|
99,328 |
|
Thereafter |
|
|
225,650 |
|
Total undiscounted lease payments |
|
$ |
1,498,087 |
|
(1) |
Reflects rental payments for the fiscal period April 1, 2022 to December 31, 2022. |
Note 5 – Fair Value Measurements
The Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
Level 1 – |
Inputs represent quoted prices in active markets for identical assets and liabilities as of the measurement date. |
Level 2 – |
Inputs, other than those included in Level 1, represent observable measurements for similar instruments in active markets, or identical or similar instruments in markets that are not active, and observable measurements or market data for instruments with substantially the full term of the asset or liability. |
Level 3 – |
Inputs represent unobservable measurements, supported by little, if any, market activity, and require considerable assumptions that are significant to the fair value of the asset or liability. Market valuations must often be determined using discounted cash flow methodologies, pricing models or similar techniques based on the Company’s assumptions and best judgment. |
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance.
Fair Value Measurements on a Recurring Basis
The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. The estimated fair value of the 10% senior secured notes due 2029 (the “Secured Notes”) and mortgage and other indebtedness was $1,854,171 and $2,059,094 at March 31, 2022 and December 31, 2021, respectively. The fair value of mortgage and other indebtedness was calculated using Level 2 inputs by discounting future cash flows for mortgage and other indebtedness using estimated market rates at which similar loans would be made currently.
9
Table of Contents
The Company elected the fair value option in conjunction with the issuance of the Secured Notes because it believes that the fair value option provides the most accurate depiction of the current value of the Secured Notes. The following table sets forth information regarding the Secured Notes for the three months ended March 31, 2022:
Debt Instrument |
|
Carrying amount as of March 31,2022 |
|
|
Change in fair value (1) |
|
|
Fair value as of March 31, 2022 (2) |
|
Secured Notes |
|
$ |
395,000 |
|
|
$ |
593 |
|
|
$ |
395,593 |
|
(1) |
For the three months ended March 31, 2022, the change in fair value is included within “Interest Expense” in the Company’s condensed consolidated income statement. |
(2) |
The fair value was calculated using Level 1 inputs. |
The following table sets forth information regarding the Secured Notes for the year ended December 31, 2021:
Debt Instrument |
|
Carrying amount as of December 31, 2021 |
|
|
Change in fair value (1) |
|
|
Fair value as of December 31, 2021 (2) |
|
Secured Notes |
|
$ |
395,000 |
|
|
$ |
395 |
|
|
$ |
395,395 |
|
(1) |
For the two months ended December 31, 2021, the change in fair value is included within “Interest Expense” in the Company’s condensed consolidated income statement. |
(2) |
The fair value was calculated using Level 1 inputs. |
During the three months ended March 31, 2022, the Company has continued to reinvest the cash from maturing U.S. Treasury securities into new U.S. Treasury securities. The Company designated the U.S. Treasury securities as available-for-sale (“AFS”). The following table sets forth information regarding the Company’s AFS securities that were measured at fair value for the three months ended March 31, 2022:
AFS Security |
|
Amortized
Cost (1) |
|
|
Allowance
for credit
losses (2) |
|
|
Total unrealized gain |
|
|
Fair value as of March 31, 2022 |
|
U.S. Treasury securities |
|
$ |
149,936 |
|
|
$ |
— |
|
|
$ |
39 |
|
|
$ |
149,975 |
|
(1) |
The U.S. Treasury securities have maturities through May 2022. Subsequent to March 31, 2022, the Company used funds from its matured U.S. Treasury securities to purchase additional U.S. Treasury securities. See Note 14 for more information. |
(2) |
U.S Treasury securities have a long history with no credit losses. Additionally, the Company notes that U.S Treasury securities are explicitly fully guaranteed by a sovereign entity that can print its own currency and that the sovereign entity’s currency is routinely held by central banks and other major financial institutions, is used in international commerce, and commonly viewed as a reserve currency, all of which qualitatively indicate that historical credit loss information should be minimally affected by current conditions and reasonable and supportable forecasts. Therefore, the Company did not record expected credit losses for its U.S Treasury securities for the three months ended March 31, 2022. |
The following table sets forth information regarding the Company’s AFS securities that were measured at fair value for the year ended December 31, 2021:
AFS Security |
|
Amortized
Cost |
|
|
Allowance
for credit
losses (1) |
|
|
Total unrealized gain |
|
|
Fair value as of December 31, 2021 |
|
U.S. Treasury securities |
|
$ |
149,999 |
|
|
$ |
— |
|
|
$ |
(3 |
) |
|
$ |
149,996 |
|
(1) |
U.S Treasury securities have a long history with no credit losses. Additionally, the Company notes that U.S Treasury securities are explicitly fully guaranteed by a sovereign entity that can print its own currency and that the sovereign entity’s currency is routinely held by central banks and other major financial institutions, is used in international commerce, and commonly viewed as a reserve currency, all of which qualitatively indicate that historical credit loss information should be minimally affected by current conditions and reasonable and supportable forecasts. Therefore, the Company did not record expected credit losses for its U.S Treasury securities for the year ended December 31, 2021. |
10
Table of Contents
Fair Value Measurements on a Nonrecurring Basis
The Company measures the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company’s evaluation of the recoverability of long-lived assets involves the comparison of undiscounted future cash flows expected to be generated by each property over the Company’s expected remaining holding period to the respective carrying amount. The determination of whether the carrying value is recoverable also requires management to make estimates related to probability weighted scenarios impacting undiscounted cash flow models. The Company considers both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income, occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. The quantitative and qualitative factors impact the selection of the terminal capitalization rate which is used in both an undiscounted and discounted cash flow model and the discount rate used in a discounted cash flow model. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Company classifies such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. See below for a description of the estimates and assumptions the Company used in its impairment analysis.
See Note 3 in the annual report on Form 10-K for the year ended December 31, 2021 for information regarding the fair value adjustments associated with fresh start accounting.
Long-lived Assets Measured at Fair Value in 2022
During the three months ended March 31, 2022, the Successor Company adjusted the negative equity in Greenbrier Mall to zero upon deconsolidation, which represents the estimated fair value of the Successor Company’s investment in that property. See Note 7 for additional information.
Long-lived Assets Measured at Fair Value in 2021
The following table sets forth information regarding the Predecessor Company's assets that were measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2021:
|
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|
|
|
|
|
|
Total |
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1) |
|
|
Significant
Other
Observable
Inputs (Level 2) |
|
|
Significant
Unobservable
Inputs (Level 3) |
|
|
Total Loss
on Impairment |
|
2021: Predecessor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets |
|
$ |
38,500 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
38,500 |
|
|
$ |
57,182 |
|
During the three months ended March 31, 2021, the Predecessor Company recognized impairments of real estate of $57,182 related to three malls.
Impairment
Date |
|
Property |
|
Location |
|
Segment
Classification |
|
Loss on
Impairment |
|
|
Fair
Value |
|
|
March |
|
Eastland Mall (1) |
|
Bloomington, IL |
|
Malls |
|
$ |
13,243 |
|
|
$ |
10,700 |
|
|
March |
|
Old Hickory Mall (2) |
|
Jackson, TN |
|
Malls |
|
|
20,149 |
|
|
|
12,400 |
|
|
March |
|
Stroud Mall (3) |
|
Stroudsburg, PA |
|
Malls |
|
|
23,790 |
|
|
|
15,400 |
|
|
|
|
|
|
|
|
|
|
$ |
57,182 |
|
|
$ |
38,500 |
|
|
(1) |
In accordance with the Company's quarterly impairment process, the Predecessor Company wrote down the book value of the mall to its estimated fair value of $10,700. The mall had experienced a decline in cash flows due to store closures and rent reductions. Management determined the fair value of Eastland Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of nine years, with a sale at the end of the holding period, a capitalization rate of 14.0% and a discount rate of 15.0%. |
(2) |
In accordance with the Company's quarterly impairment process, the Predecessor Company wrote down the book value of the mall to its estimated fair value of $12,400. The mall had experienced a decline in cash flows due to store closures and rent reductions. Management determined the fair value of Old Hickory Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of nine years, with a sale at the end of the holding period, a capitalization rate of 13.0% and a discount rate of 14.0%. |
(3) |
In accordance with the Company's quarterly impairment process, the Predecessor Company wrote down the book value of the mall to its estimated fair value of $15,400. The mall had experienced a decline in cash flows due to store closures and rent reductions. Management determined the fair value of Stroud Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of nine years, with a sale at the end of the holding period, a capitalization rate of 11.75% and a discount rate of 12.5%. |
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Table of Contents
During the three months ended March 31, 2021, the Predecessor Company adjusted the combined negative equity in Asheville Mall and Park Plaza to zero upon deconsolidation, which represents the estimated fair values of the Predecessor Company’s investments in these properties.
Note 6 – Dispositions
Dispositions
Based on its analysis, the Company determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net loss for all periods presented, as applicable.
2022 Dispositions
The Successor Company had no significant dispositions during the three months ended March 31, 2022.
2021 Dispositions
The Predecessor Company realized a loss of $299 related to the sale of an outparcel during the three months ended March 31, 2021.
Note 7 – Unconsolidated Affiliates and Noncontrolling Interests
Unconsolidated Affiliates
Although the Company had majority ownership of certain joint ventures during 2022 and 2021, it evaluated the investments and concluded that the other partners or owners in these joint ventures had substantive participating rights, such as approvals of:
|
• |
the pro forma for the development and construction of the project and any material deviations or modifications thereto; |
|
• |
the site plan and any material deviations or modifications thereto; |
|
• |
the conceptual design of the project and the initial plans and specifications for the project and any material deviations or modifications thereto; |
|
• |
any acquisition/construction loans or any permanent financings/refinancings; |
|
• |
the annual operating budgets and any material deviations or modifications thereto; |
|
• |
the initial leasing plan and leasing parameters and any material deviations or modifications thereto; and |
|
• |
any material acquisitions or dispositions with respect to the project. |
As a result of the joint control over these joint ventures, the Company accounts for these investments using the equity method of accounting.
At March 31, 2022, the Company had investments in 27 entities, which are accounted for using the equity method of accounting. The Company's ownership interest in these unconsolidated affiliates ranges from 20% to 100%. Of these entities, 14 are owned in 50/50 joint ventures.
2022 Activity - Unconsolidated Affiliates
Atlanta Outlet JV, LLC
In February 2022, the joint venture entered into a forbearance agreement with the lender regarding the default triggered by the filing of voluntary petitions (the “Chapter 11 Cases”) under chapter 11 of title 11 (“Chapter 11”) of the United States Code in the United States Bankruptcy Court for the Southern District of Texas related to the loan secured by The Outlet Shoppes at Atlanta.
Bullseye, LLC
In March 2022, the joint venture sold its income-producing property, which generated gross proceeds of $10,500. The Company’s share of the net profit from the sale was $629.
Fremaux Town Center JV, LLC
In March 2022, the joint venture entered into a forbearance agreement with the lender regarding the default triggered by the Chapter 11 Cases related to the loan secured by Fremaux Town Center.
Greenbrier Mall II, LLC
12
Table of Contents
In March 2022, the Company deconsolidated Greenbrier Mall as a result of the Company losing control when the property was placed in receivership. As of March 31, 2022, the loan secured by Greenbrier Mall had an outstanding balance of $61,647. For the three months ended March 31, 2022, the Company recognized a gain on deconsolidation of $36,250.
Louisville Outlet Shoppes, LLC
Subsequent to March 31, 2022, the joint venture entered into a forbearance agreement with the lender regarding the default triggered by the bankruptcy filing related to the loan secured by The Outlet Shoppes of the Bluegrass. See Note 14.
Mall of South Carolina, LP and Mall of South Carolina Outparcel, LP
In March 2022, the joint ventures entered into forbearance agreements with the lenders regarding the default triggered by the Chapter 11 Cases related to the loans secured by Coastal Grand.
Shoppes at Eagle Point, LLC
Subsequent to March 31, 2022, the joint venture entered into a new $40,000, ten-year, non-recourse loan secured by The Shoppes at Eagle Point. See Note 14 for additional information.
York Town Center Holding, LP
In March 2022, the joint venture entered into a $30,000 non-recourse mortgage note payable, secured by York Town Center, that provides for a three-year term and a fixed interest rate of 4.75%. The monthly debt service is interest only for the first eighteen months. Proceeds from the new loan were used to retire the existing loans.
Condensed Combined Financial Statements - Unconsolidated Affiliates
Condensed combined financial statement information of the unconsolidated affiliates are as follows:
|
|
March 31,
2022 |
|
|
December 31,
2021 |
|
ASSETS: |
|
|
|
|
|
|
|
|
Investment in real estate assets |
|
$ |
2,048,670 |
|
|
$ |
2,364,154 |
|
Accumulated depreciation |
|
|
(791,622 |
) |
|
|
(934,374 |
) |
|
|
|
1,257,048 |
|
|
|
1,429,780 |
|
Developments in progress |
|
|
6,717 |
|
|
|
7,288 |
|
Net investment in real estate assets |
|
|
1,263,765 |
|
|
|
1,437,068 |
|
Other assets |
|
|
197,179 |
|
|
|
188,683 |
|
Total assets |
|
$ |
1,460,944 |
|
|
$ |
1,625,751 |
|
LIABILITIES: |
|
|
|
|
|
|
|
|
Mortgage and other indebtedness, net |
|
$ |
1,501,094 |
|
|
$ |
1,452,794 |
|
Other liabilities |
|
|
62,755 |
|
|
|
64,598 |
|
Total liabilities |
|
|
1,563,849 |
|
|
|
1,517,392 |
|
OWNERS' EQUITY: |
|
|
|
|
|
|
|
|
The Company |
|
|
17,238 |
|
|
|
102,792 |
|
Other investors |
|
|
(120,143 |
) |
|
|
5,567 |
|
Total owners' equity |
|
|
(102,905 |
) |
|
|
108,359 |
|
Total liabilities and owners’ equity |
|
$ |
1,460,944 |
|
|
$ |
1,625,751 |
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Three Months Ended March 31, |
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
|
2021 |
|
Total revenues |
|
$ |
63,737 |
|
|
|
$ |
58,756 |
|
Net income (loss) (1) |
|
$ |
20,678 |
|
|
|
$ |
(3,321 |
) |
(1) |
The Successor Company's pro rata share of net income is $8,566 for the three months ended March 31, 2022. The Predecessor Company’s pro rata share of net loss is $(3,076) for the three months ended March 31, 2021. |
Variable Interest Entities
The Operating Partnership and certain of its subsidiaries are deemed to have the characteristics of a VIE primarily because the limited partners of these entities do not collectively possess substantive kick-out or participating rights.
13
Table of Contents
The Company consolidates the Operating Partnership, which is a VIE, for which the Company is the primary beneficiary. The Company, through the Operating Partnership, consolidates all VIEs for which it is the primary beneficiary. Generally, a VIE is a legal entity in which the equity investors do not have the characteristics of a controlling financial interest or the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. A limited partnership is considered a VIE when the majority of the limited partners unrelated to the general partner possess neither the right to remove the general partner without cause, nor certain rights to participate in the decisions that most significantly affect the financial results of the partnership. In determining whether the Company is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Company's investment; the obligation or likelihood for the Company or other investors to provide financial support; and the similarity with and significance to the Company's business activities and the business activities of the other investors.
Consolidated VIEs
As of March 31, 2022, the Company had investments in 12 consolidated VIEs with ownership interests ranging from 50% to 92%.
Unconsolidated VIEs
The table below lists the Company's unconsolidated VIEs as of March 31, 2022:
Unconsolidated VIEs: |
|
Investment in
Real Estate
Joint
Ventures
and
Partnerships |
|
|
Maximum
Risk of Loss |
|
Ambassador Infrastructure, LLC (1) |
|
$ |
— |
|
|
$ |
7,001 |
|
Asheville Mall CMBS, LLC |
|
|
— |
|
|
|
— |
|
Atlanta Outlet JV, LLC (1) |
|
|
881 |
|
|
|
5,318 |
|
CBL-T/C, LLC |
|
|
— |
|
|
|
— |
|
EastGate Mall CMBS, LLC |
|
|
— |
|
|
|
— |
|
El Paso Outlet Center Holding, LLC |
|
|
285 |
|
|
|
285 |
|
Fremaux Town Center JV, LLC |
|
|
2,052 |
|
|
|
2,052 |
|
Greenbrier Mall II, LLC |
|
|
— |
|
|
|
— |
|
Louisville Outlet Shoppes, LLC (1) |
|
|
— |
|
|
|
7,947 |
|
Mall of South Carolina L.P. |
|
|
— |
|
|
|
— |
|
Shoppes at Eagle Point, LLC (1)(2) |
|
|
21,058 |
|
|
|
33,798 |
|
Vision - CBL Hamilton Place, LLC |
|
|
2,112 |
|
|
|
2,112 |
|
|
|
$ |
26,388 |
|
|
$ |
58,513 |
|
Note 8 – Mortgage and Other Indebtedness, Net
Debt of the Company
CBL has no indebtedness. Consolidated subsidiaries that it has a direct or indirect ownership interest in are the borrowers on all the Company's debt.
CBL is a limited guarantor of the secured term loan and the Secured Notes for losses suffered solely by reason of fraud or willful misrepresentation by the Operating Partnership or its affiliates.
14
Table of Contents
Debt of the Operating Partnership
Our Secured Notes and mortgage and other indebtedness, net, consisted of the following:
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
|
|
Amount |
|
|
Weighted-
Average
Interest
Rate (1) |
|
|
Amount |
|
|
Weighted-
Average
Interest
Rate (1) |
|
Fixed-rate debt at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Notes - at fair value (carrying amount of $395,000 as of March 31, 2022 and December 31, 2021) |
|
$ |
395,593 |
|
|
|
10.00 |
% |
|
$ |
395,395 |
|
|
|
10.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchangeable senior secured notes |
|
|
— |
|
|
|
— |
|
|
|
150,000 |
|
|
|
7.00 |
% |
Non-recourse loans on operating properties |
|
|
847,208 |
|
|
|
4.83 |
% |
|
|
916,927 |
|
|
|
5.04 |
% |
Total fixed-rate debt |
|
|
847,208 |
|
|
|
4.83 |
% |
|
|
1,066,927 |
|
|
|
5.32 |
% |
Variable-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured term loan |
|
|
864,611 |
|
|
|
3.75 |
% |
|
|
880,091 |
|
|
|
3.75 |
% |
Non-recourse loans on operating properties |
|
|
66,386 |
|
|
|
3.45 |
% |
|
|
66,911 |
|
|
|
3.21 |
% |
Total variable-rate debt |
|
|
930,997 |
|
|
|
3.73 |
% |
|
|
947,002 |
|
|
|
3.71 |
% |
Total fixed-rate and variable-rate debt |
|
|
1,778,205 |
|
|
|
4.26 |
% |
|
|
2,013,929 |
|
|
|
4.56 |
% |
Unamortized deferred financing costs |
|
|
(2,928 |
) |
|
|
|
|
|
|
(1,567 |
) |
|
|
|
|
Debt discounts (2) |
|
|
(135,808 |
) |
|
|
|
|
|
|
(199,153 |
) |
|
|
|
|
Total mortgage and other indebtedness, net |
|
$ |
1,639,469 |
|
|
|
|
|
|
$ |
1,813,209 |
|
|
|
|
|
(1) |
Weighted-average interest rate excludes amortization of deferred financing costs. |
(2) |
In conjunction with fresh start accounting, the Company estimated the fair value of its mortgage notes with the assistance of a third-party valuation advisor. This resulted in recognizing a debt discount on the Effective Date. The debt discount is accreted over the term of the respective debt using the effective interest method. The remaining debt discounts at March 31, 2022 will be accreted over a weighted average period of 3.1 years. |
As of March 31, 2022, all the real estate assets and working capital of the Company’s consolidated subsidiaries are secured as collateral on either property-level loans, the secured term loan or the Secured Notes.
In February 2022, the loan secured by Fayette Mall was modified to reduce the fixed interest rate to 4.25% and extend the maturity date through May 2023, with three one-year extension options, subject to certain requirements. As part of the modification, two ground leased outparcels were released from the collateral in exchange for the addition of the redeveloped former middle anchor location.
In March 2022, the Company deconsolidated Greenbrier Mall as a result of the Company losing control when the property was placed in receivership. See Note 7 for additional information.
In March 2022, the loan secured by Cross Creek Mall was extended through May 2022. The Company remains in discussions with the lender regarding an extension. As of March 31, 2022, the loan had an outstanding balance of $101,077.
Several of the Company’s properties are owned by special purpose entities, created as a requirement under certain loan agreements that are included in the Company’s condensed consolidated financial statements. The sole business purpose of the special purpose entities is to own and operate these properties. The real estate and other assets owned by these special purpose entities are restricted under the loan agreements in that they are not available to settle other debts of the Company. However, so long as the loans are not under an event of default, as defined in the loan agreement, the cash flows from these properties, after payments of debt service, operating expenses and reserves, are available for distribution to the Company.
Exit Credit Agreement
On November 1, 2021, CBL & Associates HoldCo I, LLC (“HoldCo I”), a wholly owned subsidiary of the Operating Partnership, entered into an amended and restated credit agreement (the “Exit Credit Agreement”), providing for an $883,700 senior secured term loan that matures
15
Table of Contents
November 1, 2025. The Operating Partnership provided a limited guaranty up to a maximum of $175,000 (the “Principal Liability Cap”). The Principal Liability Cap will be reduced by an amount equal to 100% of the first $2,500 in principal amortization made by HoldCo I each calendar year and will be reduced further by 50% of the principal amortization payments made by HoldCo I each calendar year in excess of the first $2,500 in principal amortization for such calendar year. As of March 31, 2022, the Principal Liability Cap had been reduced to $160,661. The Principal Liability Cap is eliminated when the loan balance is reduced below $650,000.
Secured Notes Indenture
Subsequent to March 31, 2022, HoldCo II delivered a conditional notice of redemption to holders of the Secured Notes, pursuant to the terms of the indenture governing the Secured Notes, to redeem $60,000 aggregate principal amount of the Secured Notes on May 26, 2022. See Note 14 for additional information.
Exchangeable Notes Indenture
On the Effective Date, HoldCo II entered into a secured exchangeable notes indenture relating to the issuance of 7.0% exchangeable senior secured notes due 2028 (the “Exchangeable Notes”) in an aggregate principal amount of $150,000. In December 2021, the Company announced that HoldCo II exercised its optional exchange right with respect to all the $150,000 aggregate principal amount of the Exchangeable Notes. The exchange date was January 28, 2022, and settlement occurred on February 1, 2022. Per the terms of the indenture governing the Exchangeable Notes, shares of the Company’s common stock, par value $0.001, plus cash in lieu of fractional shares, were issued to settle the exchange. On February 1, 2022, the Company issued 10,982,795 shares of common stock to holders of the Exchangeable Notes in satisfaction of principal, accrued interest and the makewhole payment, and all the Exchangeable Notes were cancelled in accordance with the terms of the indenture.
Scheduled Principal Payments
As of March 31, 2022, the scheduled principal amortization and balloon payments of the Company’s consolidated debt, excluding extensions available at the Company’s option, on all mortgage and other indebtedness, are as follows:
2022 (1) (2) |
|
$ |
409,393 |
|
2023 |
|
|
215,407 |
|
2024 |
|
|
111,867 |
|
2025 |
|
|
785,230 |
|
2026 |
|
|
137,616 |
|
Thereafter |
|
|
395,000 |
|
Total |
|
|
2,054,513 |
|
Principal balance of loans with maturity date prior to March 31, 2022 (3) |
|
|
118,692 |
|
Total mortgage and other indebtedness |
|
$ |
2,173,205 |
|
(1) |
Reflects scheduled principal amortization and balloon payments for the fiscal period April 1, 2022 through December 31, 2022. |
(2) |
Subsequent to March 31, 2022, the loan secured by Arbor Place was extended for an additional four years, with a new maturity date of May 2026. See Note 14. |
(3) |
Represents the aggregate principal balance as of March 31, 2022 of the loans secured by Alamance Crossing, Hamilton Crossing and Parkdale Mall & Crossing, which are in default. The Company is in discussions with the lender regarding the loans secured by these properties. The loan secured by Parkdale Mall & Crossing matured in March 2021 and had a balance of $68,662 as of March 31, 2022. The loan secured by Hamilton Crossing matured in April 2021 and had a balance of $7,780 as of March 31, 2022. The loan secured by Alamance Crossing matured in July 2021 and had a balance of $42,250 as of March 31, 2022. |
Of the $409,393 of scheduled principal payments for the remainder of 2022, $362,722 relates to the maturing principal balance of six operating property loans. The Company is in discussions with the lenders regarding extensions.
Note 9 – Segment Information
The Company measures performance and allocates resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments.
16
Table of Contents
Information on the Company’s segments is presented as follows:
Three Months Ended March 31, 2022 (Successor) |
|
Malls (1) |
|
|
All
Other (2) |
|
|
Total |
|
Revenues (3) |
|
$ |
121,428 |
|
|
$ |
18,674 |
|
|
$ |
140,102 |
|
Property operating expenses (4) |
|
|
(44,684 |
) |
|
|
(3,661 |
) |
|
|
(48,345 |
) |
Interest expense |
|
|
(71,159 |
) |
|
|
(19,500 |
) |
|
|
(90,659 |
) |
Gain on sales of real estate assets |
|
|
— |
|
|
|
16 |
|
|
|
16 |
|
Segment profit (loss) |
|
$ |
5,585 |
|
|
$ |
(4,471 |
) |
|
|
1,114 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
(68,943 |
) |
General and administrative |
|
|
|
|
|
|
|
|
|
|
(18,074 |
) |
Litigation settlement |
|
|
|
|
|
|
|
|
|
|
81 |
|
Interest and other income |
|
|
|
|
|
|
|
|
|
|
155 |
|
Gain on deconsolidation |
|
|
|
|
|
|
|
|
|
|
36,250 |
|
Reorganization items, net |
|
|
|
|
|
|
|
|
|
|
(1,571 |
) |
Income tax provision |
|
|
|
|
|
|
|
|
|
|
(801 |
) |
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
8,566 |
|
Net loss |
|
|
|
|
|
|
|
|
|
$ |
(43,223 |
) |
Capital expenditures (5) |
|
$ |
3,960 |
|
|
$ |
1,870 |
|
|
$ |
5,830 |
|
Three Months Ended March 31, 2021 (Predecessor) |
|
Malls (1) |
|
|
All
Other (2) |
|
|
Total |
|
Revenues (3) |
|
$ |
119,328 |
|
|
$ |
13,856 |
|
|
$ |
133,184 |
|
Property operating expenses (4) |
|
|
(45,595 |
) |
|
|
(3,539 |
) |
|
|
(49,134 |
) |
Interest expense |
|
|
(23,170 |
) |
|
|
(960 |
) |
|
|
(24,130 |
) |
Loss on sales of real estate assets |
|
|
— |
|
|
|
(299 |
) |
|
|
(299 |
) |
Segment profit |
|
$ |
50,563 |
|
|
$ |
9,058 |
|
|
|
59,621 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
(48,112 |
) |
General and administrative |
|
|
|
|
|
|
|
|
|
|
(12,612 |
) |
Litigation settlement |
|
|
|
|
|
|
|
|
|
|
858 |
|
Interest and other income |
|
|
|
|
|
|
|
|
|
|
776 |
|
Reorganization items |
|
|
|
|
|
|
|
|
|
|
(22,933 |
) |
Loss on impairment |
|
|
|
|
|
|
|
|
|
|
(57,182 |
) |
Gain on deconsolidation |
|
|
|
|
|
|
|
|
|
|
55,131 |
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
(751 |
) |
Equity in losses of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
(3,076 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
$ |
(28,280 |
) |
Capital expenditures (5) |
|
$ |
3,491 |
|
|
$ |
637 |
|
|
$ |
4,128 |
|
Total assets |
|
Malls (1) |
|
|
All
Other (2) |
|
|
Total |
|
March 31, 2022 |
|
$ |
1,860,718 |
|
|
$ |
988,606 |
|
|
$ |
2,849,324 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
$ |
1,961,061 |
|
|
$ |
984,918 |
|
|
$ |
2,945,979 |
|
(1) |
The Malls category includes malls, lifestyle centers and outlet centers. |
(2) |
The All Other category includes open-air centers, outparcels, office buildings, self-storage facilities, corporate-level debt and the Management Company. |
(4) |
Property operating expenses include property operating, real estate taxes and maintenance and repairs. |
(5) |
Includes additions to and acquisitions of real estate assets and investments in unconsolidated affiliates. Developments in progress are included in the All Other category. |
Note 10 – Earnings per Share
Basic earnings per share ("EPS") is computed by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS assumes the issuance of common stock for all potential dilutive common shares outstanding. There were no potential dilutive common shares and there were no anti-dilutive shares for the three months ended March 31, 2022 and 2021.
17
Table of Contents
Note 11 – Contingencies
Securities Litigation
The Company and certain of its officers and directors were named as defendants in three putative securities class action lawsuits (collectively, the “Securities Class Action Litigation”), each filed in the United States District Court for the Eastern District of Tennessee, on behalf of all persons who purchased or otherwise acquired the Company’s securities during a specified period of time. Those cases were consolidated on July 17, 2019, under the caption In re CBL & Associates Properties, Inc. Securities Litigation, 1:19-cv-00149-JRG-CHS, and a consolidated amended complaint was filed on November 5, 2019, seeking to represent a class of purchasers from July 29, 2014 through March 26, 2019.
The operative complaint filed in the Securities Class Action Litigation alleges violations of the securities laws, including, among other things, that the defendants made certain materially false and misleading statements and omissions regarding the Company’s contingent liabilities, business, operations, and prospects during the periods of time specified above. The plaintiffs seek compensatory damages and attorneys’ fees and costs, among other relief, but have not specified the amount of damages sought. On May 3, 2022, the court dismissed the Company from the Securities Class Action Litigation but declined to dismiss the individual defendants. The court also lifted the stay of the proceedings and instructed the parties to confer on a proposed schedule. The outcome of these legal proceedings cannot be predicted with certainty.
The Company's insurance carriers remain on notice of the Securities Class Action Litigation.
The Company is currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Company records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Company accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Company discloses the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Company.
Environmental Contingencies
The Company evaluates potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Company believes its maximum potential exposure to loss would not be material to its results of operations or financial condition. The Company has a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place.
Guarantees
The Operating Partnership may guarantee the debt of a joint venture primarily because it allows the joint venture to obtain funding at a lower cost than could be obtained otherwise. This results in a higher return for the joint venture on its investment, and a higher return on the Operating Partnership's investment in the joint venture. The Operating Partnership may receive a fee from the joint venture for providing the guaranty. Additionally, when the Operating Partnership issues a guaranty, the terms of the joint venture agreement typically provide that the Operating Partnership may receive indemnification from the joint venture partner or have the ability to increase its ownership interest. The guarantees expire upon repayment of the debt, unless noted otherwise.
18
Table of Contents
The following table represents the Operating Partnership's guarantees of unconsolidated affiliates' debt as reflected in the accompanying condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021:
|
|
As of March 31, 2022 |
|
|
Obligation
recorded to reflect
guaranty |
|
Unconsolidated Affiliate |
|
Company's
Ownership
Interest |
|
|
Outstanding
Balance |
|
|
Percentage
Guaranteed
by the
Operating
Partnership |
|
|
|
Maximum
Guaranteed
Amount |
|
|
Debt
Maturity
Date (1) |
|
|
March 31, 2022 |
|
|
December 31, 2021 |
|
West Melbourne I, LLC - Phase I |
|
50% |
|
|
$ |
38,691 |
|
|
50% |
|
|
|
$ |
19,345 |
|
|
Feb-2025 |
(2) |
|
$ |
193 |
|
|
$ |
195 |
|
West Melbourne I, LLC - Phase II |
|
50% |
|
|
|
13,743 |
|
|
50% |
|
|
|
|
6,872 |
|
|
Feb-2025 |
(2) |
|
|
69 |
|
|
|
69 |
|
Port Orange I, LLC |
|
50% |
|
|
|
51,073 |
|
|
50% |
|
|
|
|
25,536 |
|
|
Feb-2025 |
(2) |
|
|
255 |
|
|
|
258 |
|
Ambassador Infrastructure, LLC |
|
65% |
|
|
|
7,001 |
|
|
100% |
|
|
|
|
7,001 |
|
|
Mar-2025 |
|
|
|
82 |
|
|
|
83 |
|
Shoppes at Eagle Point, LLC |
|
50% |
|
|
|
33,585 |
|
|
35% |
|
(3) |
|
|
12,740 |
|
|
Oct-2022 |
|
|
|
127 |
|
|
|
127 |
|
Atlanta Outlet JV, LLC |
|
50% |
|
|
|
4,437 |
|
|
100% |
|
|
|
|
4,437 |
|
|
Nov-2023 |
|
|
|
— |
|
|
|
— |
|
Louisville Outlet Shoppes, LLC |
|
50% |
|
|
|
7,947 |
|
|
100% |
|
|
|
|
7,947 |
|
|
Oct-2022 |
|
|
|
— |
|
|
|
— |
|
Total guaranty liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
726 |
|
|
$ |
732 |
|
(1) |
Excludes any extension options. |
(2) |
These loans have a one-year extension option at the joint venture’s election. |
(3) |
The guaranty is for a fixed amount of $12,740 throughout the term of the loan, including any extensions. Subsequent to March 31, 2022, the joint venture entered into a new non-recourse loan, which removed the guaranty. See Note 14 for additional information. |
For the three months ended March 31, 2022, the Successor Company evaluated each guaranty, listed in the table above, individually by evaluating the debt service ratio, cash flow forecasts and the performance of each loan. The result of the analysis was that each loan is current and performing. The Successor Company did not record a credit loss related to the guarantees listed in the table above for the three months ended March 31, 2022.
For the three months ended March 31, 2021, the Predecessor Company evaluated each guaranty, listed in the table above, individually by evaluating the debt service ratio, cash flow forecasts, the performance of each loan and, where applicable, the collateral value in relation to the outstanding amount of the loan. The result of the analysis was that each loan is current, performing and, where applicable, the collateral value was greater than the outstanding amount of the loan. The Predecessor Company did not record a credit loss related to the guarantees listed in the table above for the three months ended March 31, 2021.
Note 12 – Share-Based Compensation
2021 Equity Incentive Plan
Following the Effective Date, the board of directors of the Successor Company adopted the CBL & Associates Properties, Inc. 2021 Equity Incentive Plan (the “EIP”). The EIP authorizes the grant of equity awards to eligible participants based on the new common stock, in the form of stock options, stock appreciation rights, restricted stock, restricted stock units and other equity awards. Awards under the EIP may be granted to officers, employees, directors, consultants and independent contractors of the reorganized company. Initially, 3,222,222 shares of new common stock are available under the EIP. The initial new common stock under the EIP is subject to an annual increase of a number of shares equal to 3% of the number of shares of new common stock issued and outstanding at the end of the relevant calendar year (beginning January 2023), or such lesser amount as the board of directors may determine. The EIP will be administered by the compensation committee of the board of directors, which will determine the participants who will be granted awards under the EIP and the terms and conditions of EIP awards.
In accordance with the provisions of ASU 2016-09, which are designed to simplify the accounting for share-based payments transactions, the Successor Company elected to account for forfeitures of share-based payments as they occur rather than estimating them in advance.
Restricted Stock Awards
Compensation expense is recognized on a straight-line basis over the requisite service period. The share-based compensation expense related to the restricted stock awards of the Successor Company was $1,622 for the three months ended March 31, 2022. The share-based compensation expense related to the restricted stock awards of the Predecessor Company was $297 for the three months ended March 31, 2021. Share-based compensation cost resulting from share-based awards is recorded at the Management Company, which is a taxable entity.
A summary of the status of the Company’s nonvested restricted stock awards as of March 31, 2022, and changes during the period from January 1, 2022 through March 31, 2022, are presented below:
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|
|
Shares |
|
|
Weighted-
Average
Grant-Date
Fair Value Per Share |
|
Nonvested at January 1, 2022 |
|
|
784,999 |
|
|
$ |
27.57 |
|
Granted |
|
|
50,000 |
|
|
$ |
27.69 |
|
Nonvested at March 31, 2022 |
|
|
834,999 |
|
|
$ |
27.58 |
|
As of March 31, 2022, there was $21,106 of total unrecognized compensation cost related to nonvested restricted stock awards granted under the EIP, which is expected to be recognized over a weighted-average period of 3.5 years.
As of the Effective Date, nonvested restricted stock of the Predecessor Company was deemed vested and the Company’s 2012 stock incentive plan, as amended, pursuant to which such restricted stock had been granted, was terminated.
Performance Stock Awards
In February 2022, the compensation committee of the board of directors of the Company approved the terms of new awards of performance stock units (“PSUs”). The PSUs are earned over a four-year performance period aligned with fiscal years 2022 (includes the Successor period from November 1, 2021 through December 31, 2021) through 2025, with one-quarter of the PSUs assigned to each fiscal year within the four-year performance period (each, an “Annual Performance Period” and all four, collectively, the “Full Performance Period”). The number of PSUs earned for each fiscal year within the four-year performance period will be determined based on the achievement of both (i) a quantitative total market return goal (the “TMR Goal”), and (ii) a Company-specific stated goal (the “Stated Goal”), for such fiscal year. The total market return (or TMR) is calculated as the sum of: (i) the average of the multiple of the Company’s average number of shares of common stock outstanding and the average closing share price of common stock for twenty consecutive trading days, and (ii) the value of cash dividends declared during the applicable fiscal year performance period. The TMR Goal will be met if the required level of total market return is achieved at any time during the last 90 trading days of the applicable fiscal year; provided that an additional six month extended measurement period will be applied for the fourth and final fiscal year (the “TMR Year 4 Grace Period”). The Stated Goal for each year will be met if it is achieved at any time during a cumulative performance period beginning November 1, 2021 and ending on December 31 of the applicable calendar year (the “Stated Goal Performance Period”), subject to a grace period of 6-months following the last day of each Stated Goal Performance Period (the “Stated Goal Grace Period”). If the Stated Goal is not achieved for any fiscal year measurement period (including the applicable grace period), then the PSUs allocable to that fiscal year will be forfeited. If the Stated Goal for a fiscal year is achieved but the TMR Goal is not achieved, then the unearned PSUs for the fiscal year will carry over to the succeeding fiscal year and may be earned based on attainment of the goals for the subsequent performance period. If the Stated Goal is achieved for all four fiscal years, then 50% of any outstanding PSUs will be earned. If a participating officer’s employment is terminated prior to the end of any annual performance period due to death or disability (as defined in the PSU award agreements), or due to a termination by the Company without cause (as defined in the PSU award agreements), then the officer will be entitled to receive a pro rata portion of any PSUs earned for that annual performance period (determined by dividing the number of days from January 1 of the applicable annual performance period through the date of such termination by 365), and any remaining PSUs for such annual performance period, and any subsequent annual performance period, will be forfeited.
In February 2022, the Company issued 727,223 PSUs to senior officers. The PSUs had a weighted-average grant date fair value of $24.67.
Compensation cost is recognized on a tranche-by-tranche basis using the accelerated attribution method. The resulting expense, for awards classified as equity, is recorded regardless of whether any PSU awards are earned as long as the required service period is met. Share-based compensation expense related to the Successor Company’s PSUs was $1,121 for the three months ended March 31, 2022. Share-based compensation expense related to the Predecessor Company’s PSUs was $94 for the three months ended March 31, 2021. The unrecognized compensation expense related to the Successor Company’s PSUs was $16,821 as of March 31, 2022, which is expected to be recognized over a weighted-average period of 3.8 years.
As of the Effective Date, all outstanding PSUs of the Predecessor Company were deemed cancelled.
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Note 13 – Noncash Investing and Financing Activities
The Company’s noncash investing and financing activities were as follows:
|
|
Successor |
|
|
|
Predecessor |
|
|
|
Three Months Ended March 31, |
|
|
|
Three Months Ended March 31, |
|
|
|
2022 |
|
|
|
2021 |
|
Additions to real estate assets accrued but not yet paid |
|
$ |
11,177 |
|
|
|
$ |
3,190 |
|
Deconsolidation upon loss of control (1): |
|
|
|
|
|
|
|
|
|
Decrease in real estate assets |
|
|
(18,810 |
) |
|
|
|
(84,860 |
) |
Decrease in mortgage and other indebtedness |
|
|
56,226 |
|
|
|
|
134,354 |
|
Decrease in operating assets and liabilities |
|
|
5,686 |
|
|
|
|
5,808 |
|
Decrease in intangible lease and other assets |
|
|
(6,852 |
) |
|
|
|
(171 |
) |
(1) |
See Note 7 for additional information. |
Note 14 – Subsequent Events
In April 2022, HoldCo II delivered a conditional notice of redemption to holders of the Secured Notes, pursuant to the terms of the indenture governing the Secured Notes, to redeem $60,000 aggregate principal amount of the Secured Notes on May 26, 2022. The redemption is conditioned upon the receipt by HoldCo II of cash proceeds from a new debt financing. There can be no assurances as to when or if such condition will be satisfied and HoldCo II may waive the condition at its discretion.
In April 2022, the Company and its joint venture partner closed on a new $40,000, ten-year, non-recourse loan secured by The Shoppes at Eagle Point. The new loan bears a fixed interest rate of 5.4%. Proceeds from the new loan were utilized to retire the existing $33,585 partial recourse loan, which was set to mature in October 2022.
In May 2022, the Company used funds from its matured U.S. Treasury securities to purchase $148,965 in U.S. Treasury securities with maturities through November 2022.
In May 2022, the loan secured by Arbor Place was extended for an additional four years, with a new maturity date of May 2026. The interest rate will remain at the current fixed rate of 5.1%.
In May 2022, the Company and its joint venture partner entered into a forbearance agreement with the lender regarding the default triggered by the bankruptcy filing related to the loan secured by The Outlet Shoppes of the Bluegrass.
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