CBL & Associates Properties, Inc. (NYSE:CBL) announced
results for the fourth quarter and year ended December 31,
2018. A description of each 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 EndedDecember 31, Year
EndedDecember 31, 2018 2017
% 2018 2017 % Net income
(loss) attributable to common shareholders per diluted share
$ (0.39 ) $ 0.15 (360.0 )%
$
(0.73 ) $ 0.44 (265.9 )% Funds from Operations
("FFO") per diluted share
$ 0.44 $ 0.55
(20.0 )%
$ 1.70 $ 2.18 (22.0 )% FFO, as
adjusted, per diluted share (1)
$ 0.45 $ 0.56
(19.6 )%
$ 1.73 $ 2.08 (16.8 )%
(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 earnings release.
KEY TAKEAWAYS:
- In January 2019, CBL announced a new
$1.185 billion secured credit facility maturing in July 2023.
- In 2018, CBL completed more than $340
million of financing activity.
- In 2018, CBL completed gross asset
sales of more than $100 million, including a tier 3 mall and
approximately $35 million in outparcel.
- FFO per diluted share, as adjusted, was
$0.45 in the fourth quarter 2018 compared to $0.56 in the
prior-year period. Major items impacting fourth quarter 2018 FFO,
as adjusted, include approximately $0.01 per share of dilution from
asset sales, $0.07 per share lower property net operating income
primarily due to retailer and anchor bankruptcies, $0.01 per share
higher net interest expense and $0.02 per share due to lower gains
on outparcel sales.
- FFO per diluted share, as adjusted, was
$1.73 for 2018, compared with $2.08 in the prior-year period. Major
items impacting 2018 FFO, as adjusted, include approximately $0.08
per share of dilution from asset sales and non-core properties,
$0.20 per share lower property net operating income primarily due
to retailer and anchor bankruptcies, $0.02 per share of higher
G&A expense substantially related to one-time severance
expense, $0.01 per share higher interest expense and $0.02 per
share lower gains on outparcel sales.
- Same-center NOI improved sequentially
to a decline of 4.4% for the fourth quarter 2018, over the
prior-year quarter. For the full-year 2018, same-center NOI
declined 6.0%, over the prior-year period.
- Average gross rent per square foot
declined 10.8% for stabilized mall leases signed in 2018 over the
prior rate.
- Total portfolio occupancy at
December 31, 2018 was 93.1%, representing a sequential
improvement of 110 basis points and a 10 basis point decline from
the prior year-end.
- Same-center sales per square foot for
2018 were $377, an increase of 0.5% compared with $375 for
2017.
CBL's Chief Executive Officer, Stephen D. Lebovitz,
commented, "2018 closed on a positive note with adjusted FFO
and same-center NOI in-line with our guidance range and a
sequential improvement in operating results. We are making
significant progress on our strategic priority of transforming our
properties into suburban town centers, while at the same time
limiting our cash investment. In the fourth quarter, we completed
replacements of four former department stores. We have a dozen
replacements under construction or positioned to start construction
later this year as well as leases out for signature or in
negotiations on numerous other locations. We are using these
opportunities to diversify our properties’ offerings to include
more food, entertainment, fitness, service and non-retail uses.
Over 67% of new leases executed last year were with non-apparel
tenants.
"Our most exciting recent news is the closing in January of a
new $1.185 billion secured credit facility. This new facility is a
major vote of confidence by our bank group and a huge step forward
in providing the flexibility and runway to execute our strategy. As
a result, our balance sheet is stronger and our maturity schedule
is extended. The enhanced retained cash flow provided by the
November 2018 dividend reduction also allows us to fund
redevelopments on a leverage neutral basis as well as reduce debt.
As our 2019 guidance indicates, we are still facing challenges in
our business primarily as a result of the more than 40 anchor
closures between the Bon-Ton and Sears bankruptcies. That being
said, our strategy of owning the best real estate in our markets
positions us to benefit from strong demand from new users looking
to locate in our markets such as the Cheesecake Factory we recently
opened in Chattanooga. As we move into 2019, our top priority is
stabilizing our NOI and FFO with new income from the redevelopments
and anchor replacements as well as improved leasing and other
revenue sources."
Net loss attributable to common shareholders for the fourth
quarter 2018 was $67.0 million, or $(0.39) per diluted share,
compared with net income of $25.2 million, or $0.15 per diluted
share for the fourth quarter 2017. Net loss attributable to common
shareholders for the fourth quarter 2018 included $91.8 million of
loss on impairment of real estate, primarily related to the write
downs of the carrying value of Honey Creek Mall and Eastland Mall
to each property's estimated fair value.
Net loss attributable to common shareholders for 2018 was $125.3
million, or $(0.73) per diluted share, compared with net income of
$76.0 million, or $0.44 per diluted share, for 2017. Net loss
attributable to common shareholders for 2018 was impacted by $176.4
million of loss on impairment of real estate.
FFO allocable to common shareholders, as adjusted, for the
fourth quarter of 2018 was $77.4 million, or $0.45 per diluted
share, compared with $96.4 million, or $0.56 per diluted share, for
the fourth quarter of 2017. FFO allocable to the Operating
Partnership common unitholders, as adjusted, for the fourth quarter
of 2018 was $89.4 million compared with $112.3 million for the
fourth quarter of 2017.
FFO allocable to common shareholders, as adjusted, for 2018 was
$298.2 million, or $1.73 per diluted share, compared with $355.1
million, or $2.08 per diluted share, for 2017. FFO allocable to the
Operating Partnership common unitholders, as adjusted, for 2018 was
$345.1 million compared with $413.7 million for 2017.
Percentage change in same-center Net Operating Income
("NOI")(1):
Three MonthsEnded December 31, Year
EndedDecember 31, 2018 2018 Portfolio
same-center NOI
(4.4 )% (6.0 )% Mall
same-center NOI
(4.6 )% (6.2 )%
(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 ITEMS IMPACTING SAME-CENTER NOI RESULTS FOR
2018
- NOI declined $40.1 million during 2018,
primarily due to a $41.7 million decrease in revenue offset by a
$1.8 million decrease in expense.
- Minimum rents, tenant reimbursements
and other revenues declined $41.8 million, primarily due to store
closures and rent concessions related to tenants in
bankruptcy.
- Other rents, including business
development and short-term specialty leasing, declined $0.2
million.
- Percentage rents increased $0.3
million, due to an increase in sales.
- Property operating expense declined
$2.5 million and real estate tax expense declined $2.1 million.
Maintenance and repairs expense increased $2.8 million,
substantially due to a $1.8 million increase in snow removal
expense.
PORTFOLIO OPERATIONAL RESULTS
Occupancy (1):
As of December 31, 2018 2017
Portfolio occupancy
93.1% 93.2% Mall portfolio
91.8%
92.0% Same-center malls
92.1% 92.2% Stabilized malls
92.1% 92.1% Non-stabilized malls (2)
76.7% 88.4%
Associated centers
97.4% 97.9% Community centers
97.2% 96.8% (1) Occupancy for malls represents percentage of
mall store gross leasable area less than 20,000 square feet
occupied. Occupancy for associated and community centers represents
percentage of gross leasable area occupied. (2) Represents
occupancy for The Outlet Shoppes at Laredo as of December 31, 2018
and occupancy for The Outlet Shoppes of the Bluegrass and The
Outlet Shoppes at Laredo as of December 31, 2017.
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 December 31, Year
EndedDecember 31, 2018 2018 Stabilized
Malls (9.1)% (10.8)% New leases 2.6% (1.7)% Renewal leases (11.3)%
(12.5)%
Same-center Sales Per Square Foot for Mall Tenants 10,000
Square Feet or Less:
Year Ended December 31, 2018
2017 % Change Stabilized mall same-center sales per
square foot
$ 377 $ 375 0.5% Stabilized mall sales
per square foot
$ 377 $ 372 1.3%
DISPOSITIONS
In 2018, CBL raised more than $100 million in gross proceeds
through asset sales:
Property Location Date
Closed Gross Sales Price (M) Various
Outparcels Various Various $ 35.9 Phase III Gulf Coast Town Center
Ft. Myers, FL March 9.0 Janesville Mall Janesville, WI July 18.0
Statesboro Crossing Statesboro, GA August 21.5 Parkway Plaza Ft.
Oglethorpe, GA October 16.5
Total $ 100.9
In January 2019, CBL completed the sale of Cary Towne Center in
Cary, NC, for $31.5 million. Proceeds from the sale were used to
satisfy a portion of the $43.7 million outstanding non-recourse
loan secured by the property. The remaining principal balance was
forgiven. CBL will provide third party leasing and management
services to the new owners.
In January 2019, CBL completed the transfer of Acadiana Mall to
the holder of the note in exchange for extinguishment of the $119.8
million loan.
FINANCING ACTIVITY
In 2018, CBL completed more than $340 million of financing
activity.
CBL closed on two non-recourse secured loans during the year
aggregating $230.0 million ($133.75 at CBL's share). The new loans
included a $155.0 million ($77.5 million at CBL’s share)
non-recourse loan secured by CoolSprings Galleria in Nashville, TN
and a $75.0 million ($56.25 million at CBL's share) non-recourse
loan secured by The Outlet Shoppes at El Paso in El Paso, TX. Both
loans have 10-year terms and bear a weighted average fixed interest
rate of 4.925%.
CBL completed five-year extensions of two loans including the
$56.7 million ($28.4 million at CBL’s share) loan secured by The
Pavilion at Port Orange in Port Orange, FL, and the $58.2 million
($29.1 million at CBL’s share) loan secured by Hammock Landing in
West Melbourne, FL. The loans were extended for an initial term of
three years, with two one-year extensions available at the
Company’s option, for a final maturity in February 2023. The new
loans bear interest at 225 basis points over LIBOR, an increase of
25 bps over the prior rate.
In January 2019, CBL closed on a new $1.185 billion senior
secured facility (the “Facility”), which includes a fully-funded
$500 million term loan (the “Term Loan”) and a revolving line of
credit (the ”Line of Credit”) with total borrowing capacity of $685
million. The Facility matures in July 2023 and bears a floating
interest rate of 225 basis points over LIBOR. The Term Loan will be
reduced by $35 million per year, paid in quarterly installments.
The Facility replaces all of the Company’s prior unsecured bank
facilities, which totaled $1.795 billion.
REDEVELOPMENT
During the fourth quarter, CBL announced details of its
transformation plan for the former Sears at Hamilton Place in
Chattanooga, TN. As part of the project, Chattanooga will welcome
new-to-market entertainment venue Dave & Buster’s, which will
feature the latest arcade games, state-of-the-art sports viewing,
chef-crafted food and innovative cocktails. In addition, the
project will include Dick's Sporting Goods, an approximately
145-room boutique-style hotel, Class “A” office space and
additional restaurants and specialty tenants. These new additions
will join Cheesecake Factory, which opened in December 2018 on a
parcel adjacent to the Sears building. Construction is expected to
commence in early 2019.
OUTLOOK AND GUIDANCE
CBL is providing 2019 FFO, as adjusted, guidance in the range of
$1.41 - $1.46 per diluted share. Guidance incorporates a full-year
budgeted impact of loss in rent related to 2018 tenant
bankruptcies, store and anchor closures and rent adjustments net of
expected new leasing as well as a reserve in the range of $5.0 -
$15.0 million (the "Reserve") for potential future unbudgeted loss
in rent from tenant bankruptcies, store closures or lease
modifications that may occur in 2019. Detail of assumptions
underlying guidance follows:
Low High 2019 FFO per share, as
adjusted (includes the Reserve) $1.41 $1.46 2019 Change in
Same-Center NOI ("SC NOI") (includes the Reserve) (7.75)% (6.25)%
Reserve for unbudgeted lost rents included in SC NOI and FFO $15.0
million $5.0 million Gains on outparcel sales $10.0 million $15.0
million
Assumptions underlying the change in 2019 Same-Center NOI are as
follows:
Estimated Impact to 2019
SC NOI
Explanation New Leasing/Contractual Rent Increases
3.0% Rent loss from Anchor Closures (1.8)% Includes 2018 actual and
2019 budgeted anchor closures Store Closures/Non-renewals (3.1)%
Includes 2018 actual and budgeted 2019 store closures at natural
lease maturation as well as mid-term store closures primarily
related to tenants in bankruptcy Lease Renewals (2.1)% Impact of
net lease renewals completed in 2018 and budgeted for 2019,
including certain tenants in bankruptcy reorganization Lease
Modifications/Co-tenancy (1.4)% Mid-term lease modifications or
co-tenancy rent triggered in 2018 and budgeted for 2019 Reserve for
lost rents (1.6)% Mid-point ($10M) of reserve for future unbudgeted
lost rents Total 2019 SC NOI Change at Midpoint (7.0)%
Reconciliation of major variances in 2018 FFO, as adjusted, per
share to 2019 FFO per share guidance at mid-point:
2018 FFO per share, as adjusted $ 1.73 Change in SC NOI
(excluding reserve for unbudgeted lost rents) (0.17 ) Reserve for
unbudgeted lost rents ($10M) (0.05 ) Outparcel Sales Gains —
Dilution from 2018 Asset Sales (0.04 ) Net Interest Expense (pro
rata share of consolidated and unconsolidated) — Net Impact of
Non-Core and Other Corporate Items (0.03 ) Mid-point of 2019 FFO,
per share, as adjusted guidance $ 1.44
Reconciliation of GAAP net income to 2019 FFO, as adjusted, per
share guidance:
Low High Expected diluted earnings per
common share $ 0.42 $ 0.47 Adjust to fully converted shares from
common shares (0.06 ) (0.06 ) Expected earnings per diluted, fully
converted common share 0.36 0.41 Add: depreciation and amortization
1.36 1.36 Add: noncontrolling interest in earnings of Operating
Partnership 0.06 0.06 Expected FFO per diluted, fully
converted common share 1.78 1.83 Gain on extinguishment of debt
(0.37 ) (0.37 ) Expected FFO, as adjusted, per diluted, fully
converted common share $ 1.41 $ 1.46
INVESTOR CONFERENCE CALL AND WEBCAST
CBL & Associates Properties, Inc. will conduct a conference
call at 11:00 a.m. ET on Friday, February 8, 2019, to discuss its
fourth quarter and full year results. The number to call for this
interactive teleconference is (888) 317-6003 or (412) 317-6061 and
the confirmation number is 6970542. A replay of the conference call
will be available through February 15, 2019, by dialing
(877) 344-7529 or (412) 317-0088 and entering the confirmation
number 10126294. A transcript of the Company's prepared remarks
will be furnished on a Form 8-K following the conference call.
To receive the CBL & Associates Properties, Inc., fourth
quarter and full year earnings release and supplemental information
please visit the Investing section of our website at
cblproperties.com or contact Investor Relations at
(423) 490-8312.
The Company will also provide an online webcast and rebroadcast
of its 2018 fourth quarter and full year earnings release
conference call. The live broadcast of the quarterly conference
call will be available online at cblproperties.com on Friday,
February 8, 2019 beginning at 11:00 a.m. ET. The online replay will
follow shortly after the call and continue for three months.
ABOUT CBL & ASSOCIATES PROPERTIES, INC.
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
115 properties totaling 71.5 million square feet across 26 states,
including 72 high-quality enclosed, outlet and open-air retail
centers and 11 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 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 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 its Operating Partnership. The Company then applies a
percentage to FFO of its Operating Partnership in order to arrive
at FFO of the Operating Partnership common unitholders. 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 outstanding for the
period and the weighted average number of Operating Partnership
units outstanding during the period.
FFO does not represent cash flows from operations as defined by
accounting principles generally accepted in the United States, 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 significant 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 earnings release
for a description of these adjustments.
Same-center Net Operating Income
NOI is a supplemental 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).
We believe that presenting NOI and same-center NOI (described
below) based on our Operating Partnership’s pro rata share of both
consolidated and unconsolidated properties is useful since we
conduct substantially all of our business through our Operating
Partnership and, therefore, it reflects the performance of the
properties in absolute terms regardless of the ratio of ownership
interests of our common shareholders and the noncontrolling
interest in the Operating Partnership. The Company computes NOI
based on the Operating Partnership's pro rata share of both
consolidated and unconsolidated properties. The Company's
definition of NOI may be different than that used by other
companies and, accordingly, the Company's NOI may not be comparable
to that of other companies.
Since NOI includes only those revenues and expenses related to
the operations of its shopping center and other properties, the
Company believes that same-center NOI provides a measure that
reflects trends in occupancy rates, rental rates and operating
costs and the impact of those trends on the Company's results of
operations. The Company’s calculation of same-center NOI also
excludes lease termination income, straight-line rent adjustments,
and amortization of above and below market lease intangibles in
order to enhance the comparability of results from one period to
another, as these items can be impacted by one-time events that may
distort same-center NOI trends and may result in same-center NOI
that is not indicative of the ongoing operations of the Company’s
shopping center and other properties. 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 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 EndedDecember 31, Year
EndedDecember 31, 2018 2017
2018 2017 REVENUES: Minimum rents
$ 146,910 $ 155,966
$ 588,007 $ 624,161
Percentage rents
5,149 4,747
11,759 11,874 Other
rents
5,136 7,837
12,034 19,008 Tenant reimbursements
44,712 61,975
217,313 254,552 Management, development
and leasing fees
2,520 3,235
10,542 11,982 Other
12,454 1,596
18,902 5,675
Total revenues
216,881 235,356
858,557 927,252
OPERATING EXPENSES: Property operating
29,660
31,780
122,017 128,030 Depreciation and amortization
68,140 73,629
285,401 299,090 Real estate taxes
20,554 21,574
82,291 83,917 Maintenance and repairs
11,591 12,284
48,304 48,606 General and
administrative
13,661 13,064
61,506 58,466 Loss on
impairment
91,769 —
176,413 71,401 Other
410
29
787 5,180 Total operating
expenses
235,785 152,360
776,719
694,690
Income (loss) from operations (18,904
) 82,996
81,838 232,562 Interest and other income
1,144 471
1,858 1,706 Interest expense
(56,874
) (53,501 )
(220,038 ) (218,680 ) Gain on
extinguishment of debt
— —
— 30,927 Loss on
investment
— —
— (6,197 ) Income tax benefit
(provision)
(295 ) (2,851 )
1,551 1,933 Equity
in earnings of unconsolidated affiliates
4,808 6,535
14,677 22,939 Gain on sales of real estate assets
3,003 6,888
19,001 93,792
Net income (loss) (67,118 ) 40,538
(101,113 ) 158,982 Net (income) loss attributable to
noncontrolling interests in: Operating Partnership
10,710
(3,950 )
19,688 (12,652 ) Other consolidated subsidiaries
604 (124 )
973 (25,390 )
Net income
(loss) attributable to the Company (55,804 )
36,464
(80,452 ) 120,940 Preferred dividends
(11,223 ) (11,223 )
(44,892 ) (44,892 )
Net income (loss) attributable to common shareholders
$ (67,027 ) $ 25,241
$
(125,344 ) $ 76,048
Basic and
diluted per share data attributable to common shareholders: Net
income (loss) attributable to common shareholders
$
(0.39 ) $ 0.15
$ (0.73 ) $ 0.44
Weighted-average common shares outstanding
172,665 171,098
172,486 171,070 Dividends declared per common share
$ 0.075 $ 0.200
$ 0.675 $ 0.995
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 EndedDecember 31, Year
EndedDecember 31, 2018 2017
2018 2017 Net income (loss) attributable to
common shareholders
$ (67,027 ) $ 25,241
$ (125,344 ) $ 76,048 Noncontrolling interest
in income (loss) of Operating Partnership
(10,710 )
3,950
(19,688 ) 12,652 Depreciation and amortization
expense of: Consolidated properties
68,140 73,629
285,401 299,090 Unconsolidated affiliates
10,681
9,591
41,858 38,124 Non-real estate assets
(913
) (936 )
(3,661 ) (3,526 ) Noncontrolling
interests' share of depreciation and amortization
(2,177
) (2,186 )
(8,601 ) (8,977 ) Loss on
impairment, net of taxes
91,657 —
176,300 70,185 Loss
on impairment of unconsolidated affiliates
— —
1,022
— Gain on depreciable property, net of taxes and noncontrolling
interests' share
(1,941 ) (222 )
(7,484
) (48,983 )
FFO allocable to Operating Partnership common
unitholders 87,710 109,067
339,803 434,613
Litigation expenses (1)
— 34
— 103 Nonrecurring
professional fees reimbursement (1)
— —
— (919 ) Loss
on investment (2)
— —
— 6,197 Non-cash default
interest expense (3)
1,669 921
5,285 5,319 Impact of
new tax law on income tax expense
— 2,309
— 2,309
Gain on extinguishment of debt, net of
noncontrolling interests' share (4)
— —
— (33,902 )
FFO allocable to Operating Partnership
common unitholders, as adjusted
$ 89,379 $ 112,331
$
345,088 $ 413,720
FFO per diluted
share $ 0.44 $ 0.55
$
1.70 $ 2.18
FFO, as adjusted, per
diluted share $ 0.45 $ 0.56
$ 1.73 $ 2.08 Weighted average
common and potential dilutive common shares outstanding with
Operating Partnership units fully converted
199,430 199,314
199,580 199,322
(1)
Litigation expenses are included in
general and administrative expense in the consolidated statements
of operations. Nonrecurring professional fees reimbursement is
included in interest and other income in the consolidated
statements of operations.
(2)
The year ended December 31, 2017 includes
a loss on investment related to the write down of our 25% interest
in River Ridge Mall based on the contract price to sell such
interest to our joint venture partner. The sale closed in August
2017.
(3)
The three months and year ended December
31, 2018 includes non-cash default interest expense related to
Acadiana Mall, Cary Town Center and Triangle Town Center. The three
months and year ended December 31, 2017 includes default interest
expense related to Acadiana Mall. The year ended December 31, 2017
also includes default interest expense related to Chesterfield
Mall, Midland Mall and Wausau Center.
(4)
The year ended December 31, 2017 includes
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, 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 EndedDecember 31, Year
EndedDecember 31, 2018 2017
2018 2017 Diluted EPS attributable to
common shareholders $ (0.39 ) $ 0.15
$ (0.73 ) $ 0.44 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
0.38 0.40
1.58 1.64 Loss on
impairment, net of taxes
0.46 —
0.89 0.35 Gain on
depreciable property, net of taxes and noncontrolling interests'
share
(0.01 ) —
(0.04 ) (0.25 )
FFO per diluted share $ 0.44 $ 0.55
$ 1.70 $ 2.18
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 EndedDecember 31, Year
EndedDecember 31, 2018 2017
2018 2017 FFO allocable to Operating
Partnership common unitholders $ 87,710 $ 109,067
$ 339,803 $ 434,613 Percentage allocable to common
shareholders (1)
86.58 % 85.84 %
86.42
% 85.83 %
FFO allocable to common shareholders
$ 75,939 $ 93,623
$
293,658 $ 373,028
FFO allocable to Operating Partnership
common unitholders, as adjusted
$ 89,379 $ 112,331
$ 345,088 $ 413,720
Percentage allocable to common shareholders (1)
86.58
% 85.84 %
86.42 % 85.83 %
FFO allocable to
common shareholders, as adjusted $ 77,384
$ 96,425
$ 298,225 $ 355,096
(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.
Three Months EndedDecember 31, Year
EndedDecember 31, 2018 2017
2018 2017 SUPPLEMENTAL FFO INFORMATION: Lease
termination fees
$ 317 $ 2,042
$ 10,105
$ 4,036 Lease termination fees per share
$ — $ 0.01
$ 0.05 $ 0.02 Straight-line rental income
$ (1,108 ) $ (197 )
$ (5,031
) $ 31 Straight-line rental income per share
$
(0.01 ) $ —
$ (0.03 ) $ —
Gains on outparcel sales
$ 1,679 $ 6,678
$
13,138 $ 18,374 Gains on outparcel sales per share
$
0.01 $ 0.03
$ 0.07 $ 0.09 Net
amortization of acquired above- and below-market leases
$
662 $ 903
$ 1,644 $ 4,365 Net amortization of
acquired above- and below-market leases per share
$ —
$ —
$ 0.01 $ 0.02 Net amortization of debt
(premiums) discounts
$ 316 $ 140
$
1,043 $ (632 ) Net amortization of debt (premiums) discounts
per share
$ — $ —
$ 0.01 $ —
Income tax benefit (provision) prior to impact of 2017 tax law
$ (295 ) $ (542 )
$ 1,551 $
4,242 Income tax benefit (provision) prior to impact of 2017 tax
law per share
$ — $ —
$ 0.01 $ 0.02
Impact of new tax law on income tax expense
$
— $ (2,309 )
$ — $ (2,309 ) Impact of new tax
law on income tax expense per share
$ — $ (0.01 )
$ — $ (0.01 ) Abandoned projects expense
$ (410 ) $ (29 )
$ (787 )
$ (5,180 ) Abandoned projects expense per share
$ — $
—
$ — $ (0.03 ) Gain on extinguishment of
debt, net of noncontrolling interests' share
$ — $ —
$ — $ 33,902 Gain on extinguishment of debt, net of
noncontrolling interests' share, per share
$ — $ —
$ — $ 0.17 Non cash default interest expense
$ (1,669 ) $ (921 )
$ (5,285
) $ (5,319 ) Non cash default interest expense per share
$ (0.01 ) $ —
$ (0.03 ) $
(0.03 ) Loss on investment
$ — $ —
$
— $ (6,197 ) Loss on investment per share
$ —
$ —
$ — $ (0.03 ) Interest capitalized
$ 919 $ 554
$ 3,655 $ 2,230 Interest
capitalized per share
$ — $ —
$ 0.02 $
0.01 Litigation expenses
$ — $ (34 )
$
— $ (103 ) Litigation expenses per share
$ — $
—
$ — $ — Nonrecurring professional fees
reimbursement
$ — $ —
$ — $ 919
Nonrecurring professional fees reimbursement per share
$
— $ —
$ — $ —
As of
December 31, 2018 2017 Straight-line rent
receivable
$ 55,902 $ 61,506
Same-center Net Operating Income
(Dollars in Thousands)
Three Months EndedDecember 31, Year
EndedDecember 31, 2018 2017
2018 2017 Net income (loss) $
(67,118 ) $ 40,538
$ (101,113 )
$ 158,982
Adjustments: Depreciation and amortization
68,140 73,629
285,401 299,090 Depreciation and
amortization from unconsolidated affiliates
10,681 9,591
41,858 38,124
Noncontrolling interests' share of
depreciation and amortization in other consolidated
subsidiaries
(2,177 ) (2,186 )
(8,601 ) (8,977 )
Interest expense
56,874 53,501
220,038 218,680
Interest expense from unconsolidated affiliates
6,754 6,268
25,603 25,083
Noncontrolling interests' share of
interest expense in other consolidated subsidiaries
(1,837 ) (1,902 )
(7,749 ) (7,062 )
Abandoned projects expense
410 29
787 5,180 Gain on
sales of real estate assets
(3,003 ) (6,888 )
(19,001 ) (93,792 )
Gain on sales of real estate assets of
unconsolidated affiliates
(1,043 ) (12 )
(1,607 ) (201 )
Noncontrolling interests' share of gain on sales of real estate
assets in other consolidated subsidiaries
— —
—
26,639 Loss on investment
— —
— 6,197 Gain on
extinguishment of debt
— —
— (30,927 ) Noncontrolling
interests' share of loss on extinguishment of debt in other
consolidated subsidiaries
— —
— (2,975 ) Loss on
impairment
91,769 —
176,413 71,401 Income tax
(benefit) provision
295 2,851
(1,551 ) (1,933
) Lease termination fees
(317 ) (2,042 )
(10,105 ) (4,036 )
Straight-line rent and above- and
below-market lease amortization
446 (711 )
3,387 (4,396 )
Net (income) loss attributable to
noncontrolling interest in other consolidated subsidiaries
604 (124 )
973 (25,390 ) General and administrative
expenses
13,661 13,064
61,506 58,466 Management fees
and non-property level revenues
(4,501 ) (4,046 )
(14,143 ) (14,115 )
Operating Partnership's share
of property NOI 169,638 181,560
652,096 714,038
Non-comparable NOI
(5,367 ) (9,750 )
(26,582
) (48,420 )
Total same-center NOI (1) $
164,271 $ 171,810
$ 625,514
$ 665,618
Total same-center NOI percentage
change (4.4 )% (6.0 )%
Same-center Net Operating Income
(Continued)
Three Months EndedDecember 31, Year
EndedDecember 31, 2018 2017
2018 2017 Malls
$ 148,862 $
155,970
$ 564,855 $ 602,394 Associated centers
8,337 8,282
32,566 33,173 Community centers
5,616 5,609
21,918 22,618 Offices and other
1,456 1,949
6,175 7,433
Total
same-center NOI (1) $ 164,271 $
171,810
$ 625,514 $ 665,618
Percentage Change: Malls
(4.6 )% (6.2
)% Associated centers
0.7 % (1.8
)% Community centers
0.1 % (3.1
)% Offices and other
(25.3 )% (16.9
)% Total same-center NOI (1) (4.4
)% (6.0 )%
(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 December 31,
2018, 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 December 31, 2018. 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 under major redevelopment or being
considered for repositioning, where we intend to renegotiate the
terms of the debt secured by the related property or return the
property to the lender.
Company's Share of Consolidated and Unconsolidated
Debt
(Dollars in thousands)
As of December 31, 2018 Fixed Rate
VariableRate Total perDebt
Schedule UnamortizedDeferred
Financing Costs Total Consolidated debt
$ 3,147,108 $ 955,751 $
4,102,859
(1)
$ (15,963 ) $ 4,086,896
Noncontrolling interests' share of consolidated debt
(94,361
) — (94,361 ) 804 (93,557
) Company's share of unconsolidated affiliates' debt
550,673 99,904 650,577
(2,687 ) 647,890 Company's share of
consolidated and unconsolidated debt
$ 3,603,420
$ 1,055,655 $ 4,659,075
$ (17,846 ) $ 4,641,229
Weighted average interest rate
5.16 %
4.28 % 4.96 % As of December
31, 2017 Fixed Rate VariableRate Total
perDebt Schedule
UnamortizedDeferred Financing Costs
Total Consolidated debt $ 3,158,973 $ 1,090,810 $ 4,249,783
$ (18,938 ) $ 4,230,845 Noncontrolling interests' share of
consolidated debt (77,155 ) (5,418 ) (82,573 ) 687 (81,886 )
Company's share of unconsolidated affiliates' debt 532,766
64,455 597,221 (2,441 ) 594,780 Company's
share of consolidated and unconsolidated debt $ 3,614,584 $
1,149,847 $ 4,764,431 $ (20,692 ) $ 4,743,739
Weighted average interest rate 5.19 % 2.93 % 4.65 %
(1)
Includes $43,716 of debt related to Cary
Town Center that is classified in liabilities related to assets
held for sale in the consolidated balance sheet as of December 31,
2018. The mall was sold in January 2019.
Debt-To-Total-Market Capitalization
Ratio as of December 31, 2018
(In thousands, except stock price)
Shares
Outstanding
Stock Price (1) Value Common stock and
Operating Partnership units 199,415 $ 1.92 $ 382,877 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 1,009,127 Company's share of total debt,
excluding unamortized deferred financing costs 4,659,075
Total market capitalization $ 5,668,202 Debt-to-total-market
capitalization ratio 82.2 %
(1)
Stock price for common stock and Operating
Partnership units equals the closing price of the common stock on
December 31, 2018. 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 EndedDecember 31, Year
EndedDecember 31, 2018: Basic
Diluted Basic Diluted Weighted average
shares - EPS
172,665 172,665 172,486
172,486 Weighted average Operating Partnership units
26,765 26,765 27,094
27,094 Weighted average shares - FFO
199,430
199,430 199,580 199,580
2017: Weighted average shares - EPS 171,098 171,098 171,070
171,070 Weighted average Operating Partnership units 28,216
28,216 28,252 28,252 Weighted average shares - FFO
199,314 199,314 199,322 199,322
Dividend Payout Ratio
Three Months EndedDecember 31, Year
EndedDecember 31, 2018 2017
2018 2017 Weighted average cash dividend per
share
$ 0.08590 $ 0.20888
$ 0.71251 $
1.02731 FFO as adjusted, per diluted fully converted share
$
0.45 $ 0.56
$ 1.73 $ 2.08
Dividend payout ratio
19.1 % 37.3 %
41.2 % 49.4 %
Consolidated Balance
Sheets
(Unaudited; in thousands, except share
data)
As of December 31, 2018 2017
ASSETS Real estate assets: Land
$ 793,944 $
813,390 Buildings and improvements
6,413,003
6,723,194
7,206,947 7,536,584 Accumulated
depreciation
(2,493,082 ) (2,465,095 )
4,713,865 5,071,489 Held for sale
30,971 —
Developments in progress
38,807 85,346 Net
investment in real estate assets
4,783,643 5,156,835 Cash
and cash equivalents
25,138 32,627 Receivables:
Tenant, net of allowance for doubtful
accounts of $2,337 and $2,011 in 2018 and 2017, respectively
77,788 83,552 Other, net of allowance for doubtful accounts
of $838 in 2017
7,511 7,570 Mortgage and other notes
receivable
7,672 8,945 Investments in unconsolidated
affiliates
283,553 249,192 Intangible lease assets and other
assets
153,665 166,087
$
5,338,970 $ 5,704,808
LIABILITIES,
REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY Mortgage and
other indebtedness, net
$ 4,043,180 $ 4,230,845
Accounts payable and accrued liabilities
218,217 228,650
Liabilities related to assets held for sale
43,716 —
Total liabilities
4,305,113 4,459,495
Commitments and contingencies Redeemable noncontrolling interests
3,575 8,835 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, 172,656,458 and 171,088,778 issued and
outstanding in 2018 and 2017, respectively
1,727 1,711 Additional paid-in capital
1,968,280
1,974,537 Dividends in excess of cumulative earnings
(1,007,778 ) (836,269 ) Total shareholders' equity
962,254 1,140,004 Noncontrolling interests
68,028
96,474 Total equity
1,030,282 1,236,478
$ 5,338,970 $ 5,704,808
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190207005841/en/
Katie Reinsmidt, EVP - Chief Investment Officer, 423.490.8301,
katie.reinsmidt@cblproperties.com
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