ITEM 1: Condensed Consolidated Financial Statements (Unaudited)
CBL & Associates Properties, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
|
ASSETS (1) |
|
June 30,
2022 |
|
|
December 31,
2021 |
|
|
Real estate assets: |
|
|
|
|
|
|
|
|
|
Land |
|
$ |
592,553 |
|
|
$ |
599,283 |
|
|
Buildings and improvements |
|
|
1,171,468 |
|
|
|
1,173,106 |
|
|
|
|
|
1,764,021 |
|
|
|
1,772,389 |
|
|
Accumulated depreciation |
|
|
(77,968 |
) |
|
|
(19,939 |
) |
|
|
|
|
1,686,053 |
|
|
|
1,752,450 |
|
|
Developments in progress |
|
|
13,201 |
|
|
|
16,665 |
|
|
Net investment in real estate assets |
|
|
1,699,254 |
|
|
|
1,769,115 |
|
|
Cash and cash equivalents |
|
|
177,065 |
|
|
|
169,554 |
|
|
Available-for-sale securities - at fair value (amortized cost of $150,057 and $149,999 as of June 30, 2022 and December 31, 2021, respectively) |
|
|
150,063 |
|
|
|
149,996 |
|
|
Receivables: |
|
|
|
|
|
|
|
|
|
Tenant |
|
|
27,256 |
|
|
|
25,190 |
|
|
Other |
|
|
4,084 |
|
|
|
4,793 |
|
|
Investments in unconsolidated affiliates |
|
|
85,685 |
|
|
|
103,655 |
|
|
In-place leases, net |
|
|
307,887 |
|
|
|
384,705 |
|
|
Above market leases, net |
|
|
201,499 |
|
|
|
234,286 |
|
|
Intangible lease assets and other assets |
|
|
121,749 |
|
|
|
104,685 |
|
|
|
|
$ |
2,774,542 |
|
|
$ |
2,945,979 |
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
|
Mortgage and other indebtedness, net |
|
$ |
2,035,389 |
|
|
$ |
1,813,209 |
|
|
10% senior secured notes - at fair value (carrying amount of $395,000 as of December 31, 2021) |
|
|
— |
|
|
|
395,395 |
|
|
Below market leases, net |
|
|
131,135 |
|
|
|
151,871 |
|
|
Accounts payable and accrued liabilities |
|
|
146,393 |
|
|
|
184,404 |
|
|
Total liabilities (1) |
|
|
2,312,917 |
|
|
|
2,544,879 |
|
|
Shareholders' equity: |
|
|
|
|
|
|
|
|
|
Common stock, $.001 par value, 200,000,000 shares authorized, 31,814,178 and 20,774,716 issued and outstanding in 2022 and 2021, respectively |
|
32 |
|
|
|
21 |
|
|
Additional paid-in capital |
|
|
705,884 |
|
|
|
547,726 |
|
|
Accumulated other comprehensive income (loss) |
|
|
6 |
|
|
|
(3 |
) |
|
Accumulated deficit |
|
|
(241,609 |
) |
|
|
(151,545 |
) |
|
Total shareholders' equity |
|
|
464,313 |
|
|
|
396,199 |
|
|
Noncontrolling interests |
|
|
(2,688 |
) |
|
|
4,901 |
|
|
Total equity |
|
|
461,625 |
|
|
|
401,100 |
|
|
|
|
$ |
2,774,542 |
|
|
$ |
2,945,979 |
|
|
(1) |
As of June 30, 2022, includes $200,782 of assets related to consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities and $184,458 of liabilities of consolidated variable interest entities for which creditors do not have recourse to the general credit of the Company. See Note 7. |
The accompanying notes are an integral part of these condensed consolidated statements.
1
Table of Contents
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Three Months Ended June 30, |
|
|
|
Three Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
Rental revenues |
|
$ |
131,832 |
|
|
|
$ |
131,316 |
|
|
Management, development and leasing fees |
|
|
1,786 |
|
|
|
|
1,449 |
|
|
Other |
|
|
3,400 |
|
|
|
|
3,796 |
|
|
Total revenues |
|
|
137,018 |
|
|
|
|
136,561 |
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
Property operating |
|
|
(21,312 |
) |
|
|
|
(19,623 |
) |
|
Depreciation and amortization |
|
|
(64,476 |
) |
|
|
|
(47,499 |
) |
|
Real estate taxes |
|
|
(14,254 |
) |
|
|
|
(15,110 |
) |
|
Maintenance and repairs |
|
|
(10,230 |
) |
|
|
|
(8,784 |
) |
|
General and administrative |
|
|
(18,450 |
) |
|
|
|
(11,269 |
) |
|
Loss on impairment |
|
|
(252 |
) |
|
|
|
— |
|
|
Litigation settlement |
|
|
65 |
|
|
|
|
(57 |
) |
|
Other |
|
|
(834 |
) |
|
|
|
(287 |
) |
|
Total expenses |
|
|
(129,743 |
) |
|
|
|
(102,629 |
) |
|
OTHER INCOME (EXPENSES): |
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
910 |
|
|
|
|
752 |
|
|
Interest expense |
|
|
(55,117 |
) |
|
|
|
(22,299 |
) |
|
Gain on sales of real estate assets |
|
|
3 |
|
|
|
|
107 |
|
|
Reorganization items, net |
|
|
613 |
|
|
|
|
(17,073 |
) |
|
Income tax benefit (provision) |
|
|
472 |
|
|
|
|
(705 |
) |
|
Equity in earnings (losses) of unconsolidated affiliates |
|
|
2,039 |
|
|
|
|
(4,275 |
) |
|
Total other income (expenses) |
|
|
(51,080 |
) |
|
|
|
(43,493 |
) |
|
Net loss |
|
|
(43,805 |
) |
|
|
|
(9,561 |
) |
|
Net loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
Operating Partnership |
|
|
44 |
|
|
|
|
230 |
|
|
Other consolidated subsidiaries |
|
|
2,373 |
|
|
|
|
449 |
|
|
Net loss attributable to the Company |
|
|
(41,388 |
) |
|
|
|
(8,882 |
) |
|
Dividends allocable to unvested restricted stock |
|
|
(210 |
) |
|
|
|
— |
|
|
Net loss attributable to common shareholders |
|
$ |
(41,598 |
) |
|
|
$ |
(8,882 |
) |
|
Basic and diluted per share data attributable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common shareholders |
|
$ |
(1.34 |
) |
|
|
$ |
(0.05 |
) |
|
Weighted-average common and potential dilutive common shares outstanding |
|
|
30,973 |
|
|
|
|
196,458 |
|
The accompanying notes are an integral part of these condensed consolidated statements.
2
Table of Contents
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
Rental revenues |
|
$ |
267,164 |
|
|
|
$ |
259,491 |
|
|
Management, development and leasing fees |
|
|
3,555 |
|
|
|
|
3,108 |
|
|
Other |
|
|
6,401 |
|
|
|
|
7,146 |
|
|
Total revenues |
|
|
277,120 |
|
|
|
|
269,745 |
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
Property operating |
|
|
(44,656 |
) |
|
|
|
(41,425 |
) |
|
Depreciation and amortization |
|
|
(133,419 |
) |
|
|
|
(95,611 |
) |
|
Real estate taxes |
|
|
(28,689 |
) |
|
|
|
(31,661 |
) |
|
Maintenance and repairs |
|
|
(20,796 |
) |
|
|
|
(19,565 |
) |
|
General and administrative |
|
|
(36,524 |
) |
|
|
|
(23,881 |
) |
|
Loss on impairment |
|
|
(252 |
) |
|
|
|
(57,182 |
) |
|
Litigation settlement |
|
|
146 |
|
|
|
|
801 |
|
|
Other |
|
|
(834 |
) |
|
|
|
(287 |
) |
|
Total expenses |
|
|
(265,024 |
) |
|
|
|
(268,811 |
) |
|
OTHER INCOME (EXPENSES): |
|
|
|
|
|
|
|
|
|
|
Interest and other income |
|
|
1,064 |
|
|
|
|
1,528 |
|
|
Interest expense |
|
|
(145,776 |
) |
|
|
|
(46,429 |
) |
|
Gain on deconsolidation |
|
|
36,250 |
|
|
|
|
55,131 |
|
|
Gain (loss) on sales of real estate assets |
|
|
19 |
|
|
|
|
(192 |
) |
|
Reorganization items, net |
|
|
(958 |
) |
|
|
|
(40,006 |
) |
|
Income tax provision |
|
|
(329 |
) |
|
|
|
(1,456 |
) |
|
Equity in earnings (losses) of unconsolidated affiliates |
|
|
10,606 |
|
|
|
|
(7,351 |
) |
|
Total other income (expenses) |
|
|
(99,124 |
) |
|
|
|
(38,775 |
) |
|
Net loss |
|
|
(87,028 |
) |
|
|
|
(37,841 |
) |
|
Net loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
Operating Partnership |
|
|
59 |
|
|
|
|
928 |
|
|
Other consolidated subsidiaries |
|
|
4,859 |
|
|
|
|
1,268 |
|
|
Net loss attributable to the Company |
|
|
(82,110 |
) |
|
|
|
(35,645 |
) |
|
Dividends allocable to unvested restricted stock |
|
|
(210 |
) |
|
|
|
— |
|
|
Net loss attributable to common shareholders |
|
$ |
(82,320 |
) |
|
|
$ |
(35,645 |
) |
|
Basic and diluted per share data attributable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common shareholders |
|
$ |
(2.83 |
) |
|
|
$ |
(0.18 |
) |
|
Weighted-average common and potential dilutive common shares outstanding |
|
|
29,091 |
|
|
|
|
196,484 |
|
The accompanying notes are an integral part of these condensed consolidated statements.
3
Table of Contents
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands, except share data)
(Unaudited)
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Three Months Ended June 30, |
|
|
|
Three Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Net loss |
|
$ |
(43,805 |
) |
|
|
$ |
(9,561 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale securities |
|
|
(33 |
) |
|
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
(43,838 |
) |
|
|
|
(9,588 |
) |
|
Comprehensive loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
Operating Partnership |
|
|
44 |
|
|
|
|
230 |
|
|
Other consolidated subsidiaries |
|
|
2,373 |
|
|
|
|
449 |
|
|
Comprehensive loss attributable to the Company |
|
|
(41,421 |
) |
|
|
|
(8,909 |
) |
|
Dividends allocable to unvested restricted stock |
|
|
(210 |
) |
|
|
|
— |
|
|
Comprehensive loss attributable to common shareholders |
|
$ |
(41,631 |
) |
|
|
$ |
(8,909 |
) |
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Net loss |
|
$ |
(87,028 |
) |
|
|
$ |
(37,841 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on available-for-sale securities |
|
|
9 |
|
|
|
|
(24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
(87,019 |
) |
|
|
|
(37,865 |
) |
|
Comprehensive loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
|
|
|
Operating Partnership |
|
|
59 |
|
|
|
|
928 |
|
|
Other consolidated subsidiaries |
|
|
4,859 |
|
|
|
|
1,268 |
|
|
Comprehensive loss attributable to the Company |
|
|
(82,101 |
) |
|
|
|
(35,669 |
) |
|
Dividends allocable to unvested restricted stock |
|
|
(210 |
) |
|
|
|
— |
|
|
Comprehensive loss attributable to common shareholders |
|
$ |
(82,311 |
) |
|
|
$ |
(35,669 |
) |
The accompanying notes are an integral part of these condensed consolidated statements.
4
Table of Contents
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Equity
(In thousands, except share data)
(Unaudited)
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
Noncontrolling
Interests |
|
|
Preferred
Stock |
|
|
Common
Stock |
|
|
Additional
Paid-in
Capital |
|
|
Accumulated
Other
Comprehensive
Income (Loss) |
|
|
Dividends
in
Excess of
Cumulative
Earnings |
|
|
Total
Shareholders'
Equity |
|
|
Noncontrolling
Interests |
|
|
Total
Equity |
|
|
Balance, December 31, 2020 (Predecessor) |
|
$ |
(265 |
) |
|
$ |
25 |
|
|
$ |
1,966 |
|
|
$ |
1,986,269 |
|
|
$ |
18 |
|
|
$ |
(1,456,435 |
) |
|
$ |
531,843 |
|
|
$ |
2,454 |
|
|
$ |
534,297 |
|
|
Net loss |
|
|
(213 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(26,763 |
) |
|
|
(26,763 |
) |
|
|
(1,304 |
) |
|
|
(28,067 |
) |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
|
Cancellation of 111,139 shares of restricted common stock |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
|
Amortization of deferred compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
304 |
|
|
|
— |
|
|
|
— |
|
|
|
304 |
|
|
|
— |
|
|
|
304 |
|
|
Performance stock units |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
93 |
|
|
|
— |
|
|
|
— |
|
|
|
93 |
|
|
|
— |
|
|
|
93 |
|
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11 |
) |
|
|
(11 |
) |
|
Balance, March 31, 2021 (Predecessor) |
|
|
(478 |
) |
|
|
25 |
|
|
|
1,965 |
|
|
|
1,986,666 |
|
|
|
21 |
|
|
|
(1,483,198 |
) |
|
|
505,479 |
|
|
|
1,139 |
|
|
|
506,618 |
|
|
Net loss |
|
|
(70 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,882 |
) |
|
|
(8,882 |
) |
|
|
(609 |
) |
|
|
(9,491 |
) |
|
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(27 |
) |
|
|
— |
|
|
|
(27 |
) |
|
|
— |
|
|
|
(27 |
) |
|
Cancellation of 14,326 shares of restricted stock |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(17 |
) |
|
|
— |
|
|
|
— |
|
|
|
(18 |
) |
|
|
— |
|
|
|
(18 |
) |
|
Amortization of deferred compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
256 |
|
|
|
— |
|
|
|
— |
|
|
|
256 |
|
|
|
— |
|
|
|
256 |
|
|
Performance stock units |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
94 |
|
|
|
— |
|
|
|
— |
|
|
|
94 |
|
|
|
— |
|
|
|
94 |
|
|
Adjustment for noncontrolling interests |
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
(17 |
) |
|
|
— |
|
|
|
— |
|
|
|
(17 |
) |
|
|
12 |
|
|
|
(5 |
) |
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(343 |
) |
|
|
(343 |
) |
|
Balance, June 30, 2021 (Predecessor) |
|
$ |
(543 |
) |
|
$ |
25 |
|
|
$ |
1,964 |
|
|
$ |
1,986,982 |
|
|
$ |
(6 |
) |
|
$ |
(1,492,080 |
) |
|
$ |
496,885 |
|
|
$ |
199 |
|
|
$ |
497,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock |
|
|
Additional
Paid-in
Capital |
|
|
Accumulated
Other
Comprehensive
Income (Loss) |
|
|
Accumulated
Deficit |
|
|
Total
Shareholders'
Equity |
|
|
Noncontrolling
Interests |
|
|
Total
Equity |
|
|
Balance, December 31, 2021 (Successor) |
|
$ |
21 |
|
|
$ |
547,726 |
|
|
$ |
(3 |
) |
|
$ |
(151,545 |
) |
|
$ |
396,199 |
|
|
$ |
4,901 |
|
|
$ |
401,100 |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(40,722 |
) |
|
|
(40,722 |
) |
|
|
(2,501 |
) |
|
|
(43,223 |
) |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
42 |
|
|
|
— |
|
|
|
42 |
|
|
|
— |
|
|
|
42 |
|
|
Share-based compensation expense |
|
|
— |
|
|
|
2,743 |
|
|
|
— |
|
|
|
— |
|
|
|
2,743 |
|
|
|
— |
|
|
|
2,743 |
|
|
Conversion of exchangeable notes into 10,982,795 shares of common stock |
|
|
11 |
|
|
|
152,527 |
|
|
|
— |
|
|
|
— |
|
|
|
152,538 |
|
|
|
— |
|
|
|
152,538 |
|
|
Contributions from noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
143 |
|
|
|
143 |
|
|
Balance, March 31, 2022 (Successor) |
|
|
32 |
|
|
|
702,996 |
|
|
|
39 |
|
|
|
(192,267 |
) |
|
|
510,800 |
|
|
|
2,543 |
|
|
|
513,343 |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(41,388 |
) |
|
|
(41,388 |
) |
|
|
(2,417 |
) |
|
|
(43,805 |
) |
|
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
(33 |
) |
|
|
— |
|
|
|
(33 |
) |
|
|
— |
|
|
|
(33 |
) |
|
Dividends declared - common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,954 |
) |
|
|
(7,954 |
) |
|
|
— |
|
|
|
(7,954 |
) |
|
Share-based compensation expense |
|
|
— |
|
|
|
2,818 |
|
|
|
— |
|
|
|
— |
|
|
|
2,818 |
|
|
|
— |
|
|
|
2,818 |
|
|
Adjustment for noncontrolling interests |
|
|
— |
|
|
|
70 |
|
|
|
— |
|
|
|
— |
|
|
|
70 |
|
|
|
(70 |
) |
|
|
— |
|
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,744 |
) |
|
|
(2,744 |
) |
|
Balance, June 30, 2022 (Successor) |
|
$ |
32 |
|
|
$ |
705,884 |
|
|
$ |
6 |
|
|
$ |
(241,609 |
) |
|
$ |
464,313 |
|
|
$ |
(2,688 |
) |
|
$ |
461,625 |
|
The accompanying notes are an integral part of these condensed consolidated statements.
5
Table of Contents
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(87,028 |
) |
|
|
$ |
(37,841 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
133,419 |
|
|
|
|
95,611 |
|
|
Net amortization of deferred financing costs and debt discounts |
|
|
98,923 |
|
|
|
|
1,496 |
|
|
Net amortization of intangible lease assets and liabilities |
|
|
11,078 |
|
|
|
|
385 |
|
|
(Gain) loss on sales of real estate assets |
|
|
(19 |
) |
|
|
|
192 |
|
|
Gain on insurance proceeds |
|
|
(803 |
) |
|
|
|
— |
|
|
Gain on deconsolidation |
|
|
(36,250 |
) |
|
|
|
(55,131 |
) |
|
Write-off of development projects |
|
|
834 |
|
|
|
|
287 |
|
|
Share-based compensation expense |
|
|
5,561 |
|
|
|
|
739 |
|
|
Loss on impairment |
|
|
252 |
|
|
|
|
57,182 |
|
|
Equity in (earnings) losses of unconsolidated affiliates |
|
|
(10,606 |
) |
|
|
|
7,351 |
|
|
Distributions of earnings from unconsolidated affiliates |
|
|
12,583 |
|
|
|
|
6,676 |
|
|
Change in estimate of uncollectable revenues |
|
|
(2,699 |
) |
|
|
|
15,525 |
|
|
Change in deferred tax accounts |
|
|
(1,334 |
) |
|
|
|
— |
|
|
Changes in: |
|
|
|
|
|
|
|
|
|
|
Tenant and other receivables |
|
|
937 |
|
|
|
|
19,352 |
|
|
Other assets |
|
|
(513 |
) |
|
|
|
(2,111 |
) |
|
Accounts payable and accrued liabilities |
|
|
(36,246 |
) |
|
|
|
20,784 |
|
|
Net cash provided by operating activities |
|
|
88,089 |
|
|
|
|
130,497 |
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Additions to real estate assets |
|
|
(14,660 |
) |
|
|
|
(13,836 |
) |
|
Proceeds from sales of real estate assets |
|
|
1,569 |
|
|
|
|
5,612 |
|
|
Purchases of available-for-sale securities |
|
|
(299,993 |
) |
|
|
|
(319,887 |
) |
|
Redemptions of available-for-sale securities |
|
|
299,934 |
|
|
|
|
368,380 |
|
|
Proceeds from insurance |
|
|
743 |
|
|
|
|
— |
|
|
Payments received on mortgage and other notes receivable |
|
|
33 |
|
|
|
|
425 |
|
|
Additional investments in and advances to unconsolidated affiliates |
|
|
(1,061 |
) |
|
|
|
124 |
|
|
Distributions in excess of equity in earnings of unconsolidated affiliates |
|
|
17,059 |
|
|
|
|
4,790 |
|
|
Changes in other assets |
|
|
(934 |
) |
|
|
|
(1,420 |
) |
|
Net cash provided by investing activities |
|
|
2,690 |
|
|
|
|
44,188 |
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
Proceeds from mortgage and other indebtedness |
|
|
425,000 |
|
|
|
|
— |
|
|
Principal payments on mortgage and other indebtedness |
|
|
(475,322 |
) |
|
|
|
(23,854 |
) |
|
Additions to deferred financing costs |
|
|
(15,196 |
) |
|
|
|
(1 |
) |
|
Contributions from noncontrolling interests |
|
|
143 |
|
|
|
|
— |
|
|
Payment of tax withholdings for restricted stock awards |
|
|
— |
|
|
|
|
(11 |
) |
|
Distributions to noncontrolling interests |
|
|
(2,744 |
) |
|
|
|
(354 |
) |
|
Net cash used in financing activities |
|
|
(68,119 |
) |
|
|
|
(24,220 |
) |
|
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
|
22,660 |
|
|
|
|
150,465 |
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period |
|
|
236,198 |
|
|
|
|
121,722 |
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period |
|
$ |
258,858 |
|
|
|
$ |
272,187 |
|
|
Reconciliation from condensed consolidated statements of cash flows to condensed consolidated balance sheets: |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
177,065 |
|
|
|
$ |
143,874 |
|
|
Restricted cash (1): |
|
|
|
|
|
|
|
|
|
|
Restricted cash |
|
|
47,155 |
|
|
|
|
100,626 |
|
|
Mortgage escrows |
|
|
34,638 |
|
|
|
|
27,687 |
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period |
|
$ |
258,858 |
|
|
|
$ |
272,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION |
|
|
|
|
|
|
|
|
|
|
Cash paid for interest, net of amounts capitalized |
|
$ |
64,626 |
|
|
|
$ |
26,755 |
|
|
Cash paid for reorganization items |
|
$ |
5,648 |
|
|
|
$ |
35,602 |
|
|
(1) |
Included in intangible lease assets and other assets in the condensed consolidated balance sheets. |
The accompanying notes are an integral part of these condensed consolidated statements.
6
Table of Contents
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 June 30, 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 June 30, 2022, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.00% general partner interest in the Operating Partnership and CBL Holdings II, Inc. owned a 98.97% limited partner interest for a combined interest held by CBL of 99.97%. As of June 30, 2022, third parties owned a 0.03% 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 June 30, 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.
7
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.
Reclassifications
The Successor Company reclassified mortgage and other notes receivable of $384 into other receivables at December 31, 2021 to conform with the current period presentation.
Note 2 – Summary of Significant Accounting Policies
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 June 30, 2022 there was a reversal of $1,831 related to uncollectable revenues, which includes the reversal of $920 for straight line rent receivables. For the six-month Successor period ended June 30, 2022 there was a reversal of $2,699 related to uncollectable revenues, which includes the write-off of $63 for straight line rent receivables. For the three-month Predecessor period ended June 30, 2021, revenues were reduced by $6,704 associated with uncollectable revenues, which includes the write-off of $2,623 for straight line rent receivables. For the six-month Predecessor period ended June 30, 2021, revenues were reduced by $15,525 associated with uncollectable revenues, which includes the write-off of $4,302 for straight line rent receivables.
Note 3 – Revenues
Revenues
The following table presents the Company's revenues disaggregated by revenue source for the three months ended June 30, 2022 and 2021:
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Three Months Ended June 30, |
|
|
|
Three Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Rental revenues |
|
$ |
131,832 |
|
|
|
$ |
131,316 |
|
|
Revenues from contracts with customers (ASC 606): |
|
|
|
|
|
|
|
|
|
|
Operating expense reimbursements |
|
|
1,929 |
|
|
|
|
1,674 |
|
|
Management, development and leasing fees (1) |
|
|
1,786 |
|
|
|
|
1,449 |
|
|
Marketing revenues (2) |
|
|
759 |
|
|
|
|
520 |
|
|
|
|
|
4,474 |
|
|
|
|
3,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues |
|
|
712 |
|
|
|
|
1,602 |
|
|
Total revenues (3) |
|
$ |
137,018 |
|
|
|
$ |
136,561 |
|
|
(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. |
8
Table of Contents
The following table presents the Company's revenues disaggregated by revenue source for the six months ended June 30, 2022 and 2021:
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Rental revenues |
|
$ |
267,164 |
|
|
|
$ |
259,491 |
|
|
Revenues from contracts with customers (ASC 606): |
|
|
|
|
|
|
|
|
|
|
Operating expense reimbursements |
|
|
4,118 |
|
|
|
|
3,830 |
|
|
Management, development and leasing fees (1) |
|
|
3,555 |
|
|
|
|
3,108 |
|
|
Marketing revenues (2) |
|
|
744 |
|
|
|
|
821 |
|
|
|
|
|
8,417 |
|
|
|
|
7,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenues |
|
|
1,539 |
|
|
|
|
2,495 |
|
|
Total revenues (3) |
|
$ |
277,120 |
|
|
|
$ |
269,745 |
|
|
(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 June 30, 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 |
|
$ |
20,928 |
|
|
$ |
46,987 |
|
|
$ |
42,879 |
|
|
$ |
110,794 |
|
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.
Note 4 – Leases
The components of rental revenues for the three months ended June 30, 2022 and 2021 are as follows:
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Three Months Ended June 30, |
|
|
|
Three Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Fixed lease payments |
|
$ |
96,733 |
|
|
|
$ |
69,543 |
|
|
Variable lease payments |
|
|
35,099 |
|
|
|
|
61,773 |
|
|
Total rental revenues |
|
$ |
131,832 |
|
|
|
$ |
131,316 |
|
The components of rental revenues for the six months ended June 30, 2022 and 2021 are as follows:
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Fixed lease payments |
|
$ |
192,381 |
|
|
|
$ |
140,770 |
|
|
Variable lease payments |
|
|
74,783 |
|
|
|
|
118,721 |
|
|
Total rental revenues |
|
$ |
267,164 |
|
|
|
$ |
259,491 |
|
9
Table of Contents
The undiscounted future fixed lease payments to be received under the Successor Company's operating leases as of June 30, 2022, are as follows:
|
Years Ending December 31, |
|
Operating Leases |
|
|
2022 (1) |
|
$ |
182,052 |
|
|
2023 |
|
|
324,701 |
|
|
2024 |
|
|
265,550 |
|
|
2025 |
|
|
206,707 |
|
|
2026 |
|
|
153,831 |
|
|
2027 |
|
|
104,318 |
|
|
Thereafter |
|
|
227,526 |
|
|
Total undiscounted lease payments |
|
$ |
1,464,685 |
|
|
(1) |
Reflects rental payments for the fiscal period July 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 mortgage and other indebtedness was $1,886,786 as of June 30, 2022. The estimated fair value of the 10% senior secured notes due 2029 (the “Secured Notes”) and mortgage and other indebtedness was $2,059,094 as of December 31, 2021. 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.
The Company elected the fair value option in conjunction with the issuance of the Secured Notes because it believed that the fair value option provided the most accurate depiction of the then-current value of the Secured Notes. On June 7, 2022, the Company completed the redemption of all outstanding Secured Notes.
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 |
|
|
Fair value as of December 31, 2021 (1) |
|
|
Secured Notes |
|
$ |
395,000 |
|
|
$ |
395 |
|
|
$ |
395,395 |
|
|
(1) |
The fair value was calculated using Level 1 inputs. |
10
Table of Contents
During the three and six months ended June 30, 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 six months ended June 30, 2022:
|
AFS Security |
|
Amortized
Cost (1) |
|
|
Allowance
for credit
losses (2) |
|
|
Total unrealized gain |
|
|
Fair value as of June 30, 2022 |
|
|
U.S. Treasury securities |
|
$ |
150,057 |
|
|
$ |
— |
|
|
$ |
6 |
|
|
$ |
150,063 |
|
|
(1) |
The U.S. Treasury securities have maturities through November 2022. |
|
(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 six months ended June 30, 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 loss |
|
|
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. |
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 six months ended June 30, 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.
During the three and six months ended June 30, 2022, the Successor Company sold an outparcel at the Pavilion at Port Orange. Gross sales proceeds amounted to $1,660 and the transaction resulted in a loss on sale of $252.
11
Table of Contents
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 six months ended June 30, 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 six months ended June 30, 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%. |
During the six months ended June 30, 2021, the Predecessor Company adjusted the combined negative equity in Asheville Mall and Park Plaza to zero upon deconsolidation, which represented 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
During the six months ended June 30, 2022, the Successor Company deconsolidated Greenbrier Mall. See Note 5 for additional information. Other than the deconsolidation of Greenbrier Mall, the Successor Company had no significant dispositions during the three and six months ended June 30, 2022.
2021 Dispositions
During the six months ended June 30, 2021, the Predecessor Company deconsolidated Asheville Mall and Park Plaza. See Note 5 for additional information. Other than the deconsolidation of Asheville Mall and Park Plaza, the Predecessor Company had no significant dispositions during the three and six months ended June 30, 2021.
12
Table of Contents
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 June 30, 2022, the Company had investments in 26 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
Ambassador Town Center J.V., LLC
In June 2022, the joint venture entered into a new $42,492, non-recourse loan secured by Ambassador Town Center. The loan matures in June 2029 and bears a fixed interest rate of 4.35%. The previous loan was paid off in conjunction with the closing of the new loan.
Asheville Mall CBMS, LLC
Subsequent to June 30, 2022, the Company transferred title to the mall to the mortgage holder in satisfaction of the non-recourse debt secured by the property. See Note 14 for additional information.
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
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 June 30, 2022, the loan secured by Greenbrier Mall had an outstanding balance of $61,647. For the six months ended June 30, 2022, the Company recognized a gain on deconsolidation of $36,250.
Louisville Outlet Shoppes, LLC
In May 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.
13
Table of Contents
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
In April 2022, the joint venture entered into 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 previous partial recourse loan, which was set to mature in October 2022.
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 previous loans.
Condensed Combined Financial Statements - Unconsolidated Affiliates
Condensed combined financial statement information of the unconsolidated affiliates are as follows:
|
|
|
June 30,
2022 |
|
|
December 31,
2021 |
|
|
ASSETS: |
|
|
|
|
|
|
|
|
|
Investment in real estate assets |
|
$ |
2,049,298 |
|
|
$ |
2,364,154 |
|
|
Accumulated depreciation |
|
|
(808,042 |
) |
|
|
(934,374 |
) |
|
|
|
|
1,241,256 |
|
|
|
1,429,780 |
|
|
Developments in progress |
|
|
7,385 |
|
|
|
7,288 |
|
|
Net investment in real estate assets |
|
|
1,248,641 |
|
|
|
1,437,068 |
|
|
Other assets |
|
|
205,152 |
|
|
|
188,683 |
|
|
Total assets |
|
$ |
1,453,793 |
|
|
$ |
1,625,751 |
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
|
Mortgage and other indebtedness, net |
|
$ |
1,501,971 |
|
|
$ |
1,452,794 |
|
|
Other liabilities |
|
|
65,531 |
|
|
|
64,598 |
|
|
Total liabilities |
|
|
1,567,502 |
|
|
|
1,517,392 |
|
|
OWNERS' EQUITY: |
|
|
|
|
|
|
|
|
|
The Company |
|
|
7,893 |
|
|
|
102,792 |
|
|
Other investors |
|
|
(121,602 |
) |
|
|
5,567 |
|
|
Total owners' equity (deficit) |
|
|
(113,709 |
) |
|
|
108,359 |
|
|
Total liabilities and owners’ equity |
|
$ |
1,453,793 |
|
|
$ |
1,625,751 |
|
|
|
|
Three Months Ended June 30, |
|
|
Three Months Ended June 30, |
|
|
|
|
2022 |
|
|
2021 |
|
|
Total revenues |
|
$ |
65,551 |
|
|
$ |
57,747 |
|
|
Net income (loss) (1) |
|
$ |
12,384 |
|
|
$ |
(9,698 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
2021 |
|
|
Total revenues |
|
$ |
129,288 |
|
|
$ |
116,503 |
|
|
Net income (loss) (1) |
|
$ |
33,062 |
|
|
$ |
(13,019 |
) |
|
(1) |
The Successor Company's pro rata share of net income was $2,039 and $10,606 for the three and six months ended June 30, 2022, respectively. The Predecessor Company’s pro rata share of net loss was $(4,275) and $(7,351) for the three and six months ended June 30, 2021, respectively. |
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.
14
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 June 30, 2022, the Company had investments in 11 consolidated VIEs with ownership interests ranging from 50% to 92%.
Unconsolidated VIEs
The table below lists the Company's unconsolidated VIEs as of June 30, 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 (2) |
|
|
— |
|
|
|
— |
|
|
Atlanta Outlet JV, LLC (1) |
|
|
— |
|
|
|
4,406 |
|
|
CBL-T/C, LLC |
|
|
— |
|
|
|
— |
|
|
EastGate Mall CMBS, LLC |
|
|
— |
|
|
|
— |
|
|
El Paso Outlet Center Holding, LLC |
|
|
— |
|
|
|
— |
|
|
Fremaux Town Center JV, LLC |
|
|
1,762 |
|
|
|
1,762 |
|
|
Greenbrier Mall II, LLC |
|
|
— |
|
|
|
— |
|
|
Louisville Outlet Shoppes, LLC (1) |
|
|
— |
|
|
|
7,797 |
|
|
Mall of South Carolina L.P. |
|
|
— |
|
|
|
— |
|
|
Vision - CBL Hamilton Place, LLC |
|
|
2,421 |
|
|
|
2,421 |
|
|
|
|
$ |
4,183 |
|
|
$ |
23,387 |
|
|
(2) |
Subsequent to June 30, 2022, the property was transferred to lender. |
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 for losses suffered solely by reason of fraud or willful misrepresentation by the Operating Partnership or its affiliates.
15
Table of Contents
Debt of the Operating Partnership
The Company’s Secured Notes and mortgage and other indebtedness, net, consisted of the following:
|
|
|
June 30, 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 December 31, 2021) |
|
$ |
— |
|
|
|
— |
|
|
$ |
395,395 |
|
|
|
10.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchangeable senior secured notes |
|
|
— |
|
|
|
— |
|
|
|
150,000 |
|
|
|
7.00 |
% |
|
Non-recourse loans on operating properties |
|
|
881,513 |
|
|
|
4.90 |
% |
|
|
916,927 |
|
|
|
5.04 |
% |
|
Total fixed-rate debt |
|
|
881,513 |
|
|
|
4.90 |
% |
|
|
1,066,927 |
|
|
|
5.32 |
% |
|
Variable-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured term loan |
|
|
853,331 |
|
|
|
3.81 |
% |
|
|
880,091 |
|
|
|
3.75 |
% |
|
Open-air centers and outparcels loan |
|
|
360,000 |
|
|
|
6.10 |
% |
|
|
— |
|
|
|
— |
|
|
Non-recourse loans on operating properties |
|
|
57,540 |
|
|
|
4.20 |
% |
|
|
66,911 |
|
|
|
3.21 |
% |
|
Total variable-rate debt |
|
|
1,270,871 |
|
|
|
4.48 |
% |
|
|
947,002 |
|
|
|
3.71 |
% |
|
Total fixed-rate and variable-rate debt |
|
|
2,152,384 |
|
|
|
4.65 |
% |
|
|
2,013,929 |
|
|
|
4.56 |
% |
|
Unamortized deferred financing costs |
|
|
(16,028 |
) |
|
|
|
|
|
|
(1,567 |
) |
|
|
|
|
|
Debt discounts (2) |
|
|
(100,967 |
) |
|
|
|
|
|
|
(199,153 |
) |
|
|
|
|
|
Total mortgage and other indebtedness, net |
|
$ |
2,035,389 |
|
|
|
|
|
|
$ |
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 June 30, 2022 will be accreted over a weighted average period of 3.2 years. |
Non-recourse loans on operating properties, the open-air centers and outparcels loan and the secured term loan include loans that are secured by properties owned by the Company that have a carrying value of $943,373 at June 30, 2022.
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.
The loan secured by Cross Creek Mall was extended through July 2022. The Company remains in discussions with the lender regarding an extension. As of June 30, 2022, the loan had an outstanding balance of $99,875.
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 5.10%.
In May 2022, the loan secured by Northwoods Mall was extended for an additional four years, with a new maturity date of April 2026. The interest rate will remain at the current fixed rate of 5.08%.
In May 2022, the Company entered into a new $65,000 non-recourse loan. The loan has a ten-year term with a fixed interest rate of 5.85%. It is interest only for the first three years. The loan is secured by open-air centers, which include Hamilton Crossing, Hamilton Corner, The Terrace and The Shoppes at Hamilton Place. Proceeds from the loan were used to redeem $60,000 aggregate principal amount of the Secured Notes. Also, the previous $7,058 Hamilton Crossing loan was paid off in conjunction with the closing of the new loan.
16
Table of Contents
In June 2022, the Company entered into a new $360,000 loan. The interest rate is a fixed 6.95% for $180,000 of the $360,000 loan, with the other half of the loan bearing a variable interest rate based on the 30-day SOFR plus 4.10%. The loan has an initial term of five years with one two-year extension, subject to certain conditions. The loan is secured by a pool of 90 outparcels and 13 open-air centers. The open-air centers include Alamance Crossing West, CoolSprings Crossing, Courtyard at Hickory Hollow, Frontier Square, Gunbarrel Pointe, Harford Annex, The Plaza at Fayette, Sunrise Commons, The Shoppes at St. Clair Square, The Landing at Arbor Place, West Towne Crossing, West Towne District and WestGate Crossing. Proceeds from the loan were used to complete the redemption of all $335,000 outstanding on the Secured Notes, which eliminated the recourse guaranty. Also, proceeds were used to paydown $8,322 on the Brookfield Square Anchor Redevelopment loan, which had an outstanding balance of $18,690 as of June 30, 2022.
In June 2022, the Company paid off the $14,949 loan secured by CBL Center at maturity.
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 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 June 30, 2022, the Principal Liability Cap had been reduced to $155,021. The Principal Liability Cap is eliminated when the loan balance is reduced below $650,000.
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.
17
Table of Contents
Scheduled Principal Payments
As of June 30, 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) |
|
$ |
162,736 |
|
|
2023 |
|
|
220,033 |
|
|
2024 |
|
|
108,423 |
|
|
2025 |
|
|
790,796 |
|
|
2026 |
|
|
281,741 |
|
|
2027 |
|
|
360,896 |
|
|
Thereafter |
|
|
62,855 |
|
|
Total |
|
|
1,987,480 |
|
|
Principal balance of loans with maturity date prior to June 30, 2022 (2) |
|
|
164,904 |
|
|
Total mortgage and other indebtedness |
|
$ |
2,152,384 |
|
|
(1) |
Reflects scheduled principal amortization and balloon payments for the fiscal period July 1, 2022 through December 31, 2022. |
|
(2) |
Represents the aggregate principal balance as of June 30, 2022 of loans past their maturity date consisting of the loans secured by Parkdale Mall and Crossing, Alamance Crossing and Southpark Mall. The Company is in discussions with the lender regarding the loans secured by these properties. The loan secured by Parkdale Mall and Crossing matured in March 2021 and had a balance of $68,123 as of June 30, 2022. The loan secured by Alamance Crossing matured in July 2021 and had a balance of $41,981 as of June 30, 2022. The loan secured by Southpark Mall matured in June 2022 and had a balance of $54,800 as of June 30, 2022. |
Of the $162,736 of scheduled principal payments for the remainder of 2022, $129,545 relates to the maturing principal balance of two operating property loans. The Company is in discussions with the lenders.
As of June 30, 2022, the Company had $859,821 of property-level debt and related obligations, including the Company’s share of unconsolidated debt and related obligations, maturing or callable within the next 12 months from the issuance of the financial statements. Subsequent to June 30, 2022, the Company extended the maturity date for the $68,123 loan secured by Parkdale Mall and Crossing. See Note 14 for additional information. Management intends to refinance and/or extend the maturity dates for the remaining $791,698 of such mortgage notes payable. In 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.
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.
18
Table of Contents
Information on the Company’s segments is presented as follows:
|
Three Months Ended June 30, 2022 (Successor) |
|
Malls (1) |
|
|
All
Other (2) |
|
|
Total |
|
|
Revenues (3) |
|
$ |
117,191 |
|
|
$ |
19,827 |
|
|
$ |
137,018 |
|
|
Property operating expenses (4) |
|
|
(40,708 |
) |
|
|
(5,088 |
) |
|
|
(45,796 |
) |
|
Interest expense |
|
|
(38,691 |
) |
|
|
(16,426 |
) |
|
|
(55,117 |
) |
|
Gain on sales of real estate assets |
|
|
— |
|
|
|
3 |
|
|
|
3 |
|
|
Other expense |
|
|
— |
|
|
|
(834 |
) |
|
|
(834 |
) |
|
Segment profit (loss) |
|
$ |
37,792 |
|
|
$ |
(2,518 |
) |
|
|
35,274 |
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
(64,476 |
) |
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
(18,450 |
) |
|
Litigation settlement |
|
|
|
|
|
|
|
|
|
|
65 |
|
|
Interest and other income |
|
|
|
|
|
|
|
|
|
|
910 |
|
|
Reorganization items, net |
|
|
|
|
|
|
|
|
|
|
613 |
|
|
Loss on impairment |
|
|
|
|
|
|
|
|
|
|
(252 |
) |
|
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
472 |
|
|
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
2,039 |
|
|
Net loss |
|
|
|
|
|
|
|
|
|
$ |
(43,805 |
) |
|
Capital expenditures (5) |
|
$ |
6,367 |
|
|
$ |
1,351 |
|
|
$ |
7,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021 (Predecessor) |
|
Malls (1) |
|
|
All
Other (2) |
|
|
Total |
|
|
Revenues (3) |
|
$ |
125,504 |
|
|
$ |
11,057 |
|
|
$ |
136,561 |
|
|
Property operating expenses (4) |
|
|
(41,132 |
) |
|
|
(2,385 |
) |
|
|
(43,517 |
) |
|
Interest expense |
|
|
(21,584 |
) |
|
|
(715 |
) |
|
|
(22,299 |
) |
|
Gain on sales of real estate assets |
|
|
— |
|
|
|
107 |
|
|
|
107 |
|
|
Other expense |
|
|
(64 |
) |
|
|
(223 |
) |
|
|
(287 |
) |
|
Segment profit |
|
$ |
62,724 |
|
|
$ |
7,841 |
|
|
|
70,565 |
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
(47,499 |
) |
|
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
(11,269 |
) |
|
Litigation settlement |
|
|
|
|
|
|
|
|
|
|
(57 |
) |
|
Interest and other income |
|
|
|
|
|
|
|
|
|
|
752 |
|
|
Reorganization items |
|
|
|
|
|
|
|
|
|
|
(17,073 |
) |
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
(705 |
) |
|
Equity in losses of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
(4,275 |
) |
|
Net loss |
|
|
|
|
|
|
|
|
|
$ |
(9,561 |
) |
|
Capital expenditures (5) |
|
$ |
10,308 |
|
|
$ |
1,979 |
|
|
$ |
12,287 |
|
|
(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. |
|
(3) |
Management, development and leasing fees are included in All Other category. See Note 3 for information on the Company’s revenues disaggregated by revenue source for each of the above segments. |
|
(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. |
19
Table of Contents
|
Six Months Ended June 30, 2022 (Successor) |
|
Malls (1) |
|
|
All
Other (2) |
|
|
Total |
|
|
Revenues (3) |
|
$ |
238,619 |
|
|
$ |
38,501 |
|
|
$ |
277,120 |
|
|
Property operating expenses (4) |
|
|
(85,392 |
) |
|
|
(8,749 |
) |
|
|
(94,141 |
) |
|
Interest expense |
|
|
(109,850 |
) |
|
|
(35,926 |
) |
|
|
(145,776 |
) |
|
Gain on sales of real estate assets |
|
|
— |
|
|
|
19 |
|
|
|
19 |
|
|
Other expense |
|
|
— |
|
|
|
(834 |
) |
|
|
(834 |
) |
|
Segment profit (loss) |
|
$ |
43,377 |
|
|
$ |
(6,989 |
) |
|
|
36,388 |
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
(133,419 |
) |
|
General and administrative |
|
|
|
|
|
|
|
|
|
|
(36,524 |
) |
|
Litigation settlement |
|
|
|
|
|
|
|
|
|
|
146 |
|
|
Interest and other income |
|
|
|
|
|
|
|
|
|
|
1,064 |
|
|
Reorganization items, net |
|
|
|
|
|
|
|
|
|
|
(958 |
) |
|
Loss on impairment |
|
|
|
|
|
|
|
|
|
|
(252 |
) |
|
Gain on deconsolidation |
|
|
|
|
|
|
|
|
|
|
36,250 |
|
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
(329 |
) |
|
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
10,606 |
|
|
Net loss |
|
|
|
|
|
|
|
|
|
$ |
(87,028 |
) |
|
Capital expenditures (5) |
|
$ |
10,327 |
|
|
$ |
3,221 |
|
|
$ |
13,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021 (Predecessor) |
|
Malls (1) |
|
|
All
Other (2) |
|
|
Total |
|
|
Revenues (3) |
|
$ |
244,832 |
|
|
$ |
24,913 |
|
|
$ |
269,745 |
|
|
Property operating expenses (4) |
|
|
(86,727 |
) |
|
|
(5,924 |
) |
|
|
(92,651 |
) |
|
Interest expense |
|
|
(44,754 |
) |
|
|
(1,675 |
) |
|
|
(46,429 |
) |
|
Other expense |
|
|
(64 |
) |
|
|
(223 |
) |
|
|
(287 |
) |
|
Loss on sales of real estate assets |
|
|
— |
|
|
|
(192 |
) |
|
|
(192 |
) |
|
Segment profit |
|
$ |
113,287 |
|
|
$ |
16,899 |
|
|
|
130,186 |
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
(95,611 |
) |
|
General and administrative expense |
|
|
|
|
|
|
|
|
|
|
(23,881 |
) |
|
Litigation settlement |
|
|
|
|
|
|
|
|
|
|
801 |
|
|
Interest and other income |
|
|
|
|
|
|
|
|
|
|
1,528 |
|
|
Reorganization items |
|
|
|
|
|
|
|
|
|
|
(40,006 |
) |
|
Gain on deconsolidation |
|
|
|
|
|
|
|
|
|
|
55,131 |
|
|
Loss on impairment |
|
|
|
|
|
|
|
|
|
|
(57,182 |
) |
|
Income tax provision |
|
|
|
|
|
|
|
|
|
|
(1,456 |
) |
|
Equity in losses of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
(7,351 |
) |
|
Net loss |
|
|
|
|
|
|
|
|
|
$ |
(37,841 |
) |
|
Capital expenditures (5) |
|
$ |
13,799 |
|
|
$ |
2,616 |
|
|
$ |
16,415 |
|
|
Total assets |
|
Malls (1) |
|
|
All
Other (2) |
|
|
Total |
|
|
June 30, 2022 |
|
$ |
1,792,415 |
|
|
$ |
982,127 |
|
|
$ |
2,774,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. |
|
(3) |
Management, development and leasing fees are included in All Other category. See Note 3 for information on the Company’s revenues disaggregated by revenue source for each of the above segments. |
|
(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.
Due to a net loss for the three- and six-month periods ended June 30, 2022, the computation of diluted EPS does not include contingently issuable shares due to their anti-dilutive nature. Had the Company reported net income for the three months ended June 30, 2022, the denominator for diluted EPS would have been 31,159,633, including 187,121
20
Table of Contents
contingently issuable shares related to performance stock units (“PSUs”) and nonvested restricted stock awards. Had the Company reported net income for the six months ended June 30, 2022, the denominator for diluted EPS would have been 29,268,236, including 176,755 contingently issuable shares related to PSUs and nonvested restricted stock awards. There were no potential dilutive common shares and there were no anti-dilutive shares for the three and six months ended June 30, 2021.
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 period 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, on June 9, 2022, entered a scheduling order. The parties are currently engaged in discovery. 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 2027 for certain environmental claims up to $40,000 per occurrence and up to $40,000 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.
21
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 June 30, 2022 and December 31, 2021:
|
|
|
As of June 30, 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) |
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
|
West Melbourne I, LLC - Phase I |
|
50% |
|
|
$ |
38,331 |
|
|
50% |
|
|
|
$ |
19,165 |
|
|
Feb-2025 |
(2) |
|
$ |
191 |
|
|
$ |
195 |
|
|
West Melbourne I, LLC - Phase II |
|
50% |
|
|
|
13,579 |
|
|
50% |
|
|
|
|
6,789 |
|
|
Feb-2025 |
(2) |
|
|
68 |
|
|
|
69 |
|
|
Port Orange I, LLC |
|
50% |
|
|
|
50,547 |
|
|
50% |
|
|
|
|
25,274 |
|
|
Feb-2025 |
(2) |
|
|
253 |
|
|
|
258 |
|
|
Ambassador Infrastructure, LLC |
|
65% |
|
|
|
7,001 |
|
|
100% |
|
|
|
|
7,001 |
|
|
Mar-2025 |
|
|
|
70 |
|
|
|
83 |
|
|
Shoppes at Eagle Point, LLC |
|
50% |
|
|
|
39,961 |
|
|
|
— |
|
|
|
|
— |
|
|
May-2032 |
(3) |
|
|
— |
|
|
|
127 |
|
|
Atlanta Outlet JV, LLC |
|
50% |
|
|
|
4,406 |
|
|
100% |
|
|
|
|
4,406 |
|
|
Nov-2023 |
|
|
|
— |
|
|
|
— |
|
|
Louisville Outlet Shoppes, LLC |
|
50% |
|
|
|
7,797 |
|
|
100% |
|
|
|
|
7,797 |
|
|
Oct-2022 |
|
|
|
— |
|
|
|
— |
|
|
Total guaranty liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
582 |
|
|
$ |
732 |
|
|
(1) |
Excludes any extension options. |
|
(2) |
These loans have a one-year extension option at the joint venture’s election. |
|
(3) |
The guaranty was removed when the Company entered into a new loan in April 2022. |
For the three and six months ended June 30, 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 and six months ended June 30, 2022.
For the three and six months ended June 30, 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 and six months ended June 30, 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 $1,696 and $3,318 for the three and six months ended June 30, 2022, respectively. The share-based compensation expense related to the restricted stock awards of the Predecessor Company was $246 and $543 for the three and six months ended June 30, 2021, respectively. 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 June 30, 2022, and changes during the period from January 1, 2022 through June 30, 2022, are presented below:
22
Table of Contents
|
|
|
Shares |
|
|
Weighted-
Average
Grant-Date
Fair Value Per Share |
|
|
Nonvested at January 1, 2022 |
|
|
784,999 |
|
|
$ |
27.57 |
|
|
Granted |
|
|
56,667 |
|
|
$ |
27.49 |
|
|
Nonvested at June 30, 2022 |
|
|
841,666 |
|
|
$ |
27.56 |
|
As of June 30, 2022, there was $19,582 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 3.3 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 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.
Management assesses the Stated Goals quarterly to determine whether it is probable they will be achieved. The Company begins recognizing compensation expense on a straight-line basis over the remaining service period once the Stated Goal is deemed probable of achievement. Share-based compensation expense related to the Successor Company’s PSUs was $1,122 and $2,243 for the three and six months ended June 30, 2022, respectively. Share-based compensation expense related to the Predecessor Company’s PSUs was $94 and $189 for the three and six months ended June 30, 2021. The unrecognized compensation expense related to the Successor Company’s PSUs was $15,699 as of June 30, 2022, which is expected to be recognized over a weighted-average period of 3.5 years.
As of the Effective Date, all outstanding PSUs of the Predecessor Company were deemed cancelled.
23
Table of Contents
Note 13 – Noncash Investing and Financing Activities
The Company’s noncash investing and financing activities were as follows:
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Additions to real estate assets accrued but not yet paid |
|
$ |
10,195 |
|
|
|
$ |
8,332 |
|
|
Accrued dividends and distributions payable |
|
|
7,956 |
|
|
|
|
— |
|
|
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 July 2022, the Company redeemed $150,019 in U.S. Treasury securities and purchased $249,712 in new U.S. Treasury securities with maturities through July 2023.
In July 2022, the Company purchased the JC Penney parcel at CoolSprings Galleria for a gross purchase price of $6,040.
In August 2022, the lender foreclosed on the loan secured by Asheville Mall.
In August 2022, the loan secured by Parkdale Mall and Crossing was extended to March 2026.
In August 2022, the Company’s board of directors declared a dividend of $0.25 per common share for the quarter ending September 30, 2022, payable in cash on September 30, 2022 to shareholders of record as of September 15, 2022.
24
Table of Contents
ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and accompanying notes that are included in this Form 10-Q. Capitalized terms used, but not defined, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations have the same meanings as defined in the notes to the condensed consolidated financial statements. Unless stated otherwise or the context otherwise requires, references to the “Company,” “we,” “us” and “our” mean CBL & Associates Properties, Inc. and its subsidiaries.
Certain statements made in this section or elsewhere in this report may be deemed “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical fact should be considered to be forward-looking statements. In many cases, these forward-looking statements may be identified by the use of words such as “will,” “may,” “should,” “could,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “projects,” “goals,” “objectives,” “targets,” “predicts,” “plans,” “seeks,” and variations of these words and similar expressions. Any forward-looking statement speaks only as of the date on which it is made and is qualified in its entirety by reference to the factors discussed throughout this report.
Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance or results and we can give no assurance that these expectations will be attained. It is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of known and unknown risks and uncertainties. Currently, a significant factor that could cause actual outcomes to differ materially from our forward-looking statements is the adverse effect of the COVID-19 pandemic, and state and/or local regulatory responses to control it, on our financial condition, operating results and cash flows, our tenants and their customers, the real estate market in which we operate, the global economy and the financial markets. Although we have operated in the COVID-19 environment for over two years, the extent to which the COVID-19 pandemic impacts us and our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the direct and indirect economic effects of the pandemic and containment measures, and potential changes in consumer behavior, among others. In addition to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, such known risks and uncertainties include, without limitation:
|
|
• |
general industry, economic and business conditions; |
|
|
• |
interest rate fluctuations; |
|
|
• |
costs and availability of capital, including debt, and capital requirements; |
|
|
• |
costs and availability of real estate; |
|
|
• |
inability to consummate acquisition opportunities and other risks associated with acquisitions; |
|
|
• |
competition from other companies and retail formats; |
|
|
• |
changes in retail demand and rental rates in our markets; |
|
|
• |
shifts in customer demands including the impact of online shopping; |
|
|
• |
tenant bankruptcies or store closings; |
|
|
• |
changes in vacancy rates at our properties; |
|
|
• |
changes in operating expenses; |
|
|
• |
changes in applicable laws, rules and regulations; |
|
|
• |
disposition of real property; |
|
|
• |
uncertainty and economic impact of pandemics, epidemics or other public health emergencies or fear of such events, such as the COVID-19 pandemic and related governmental responses; |
|
|
• |
cyber-attacks or acts of cyber-terrorism; |
|
|
• |
the ability to obtain suitable equity and/or debt financing and the continued availability of financing, in the amounts and on the terms necessary to support our future refinancing requirements and business; and |
|
|
• |
other risks referenced from time to time in filings with the Securities and Exchange Commission (“SEC”) and those factors listed or incorporated by reference into this report. |
This list of risks and uncertainties is only a summary and is not intended to be exhaustive. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information.
25
Table of Contents
Fresh Start Accounting
Upon emergence from bankruptcy, we qualified for and adopted fresh start accounting in accordance with Accounting Standards Codification Topic 852 – Reorganizations (“ASC 852”), which resulted in our becoming a new entity for financial reporting purposes. Our financial results for the three and six months ended June 30, 2021 are referred to as those of the “Predecessor.” Our financial results for the three and six months ended June 30, 2022 are referred to as those of the “Successor.” Our results of operations as reported in our condensed consolidated financial statements for these periods are prepared in accordance with GAAP. See Note 3 in the annual report on Form 10-K for the year ended December 31, 2021 for additional information.
Executive Overview
We are a self-managed, self-administered, fully integrated REIT that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, outlet centers, lifestyle centers, open-air centers and other properties. See Note 1 to the condensed consolidated financial statements for information on our property interests as of June 30, 2022. We have elected to be taxed as a REIT for federal income tax purposes.
Our portfolio generated improved lease spreads for new leases and significant sequential and year-over-year occupancy growth. We are setting the stage for future growth through the recent completion of redevelopment projects at Kirkwood Mall, Sunrise Mall and Cross Creek Mall with more planned completions and new project starts anticipated in the coming months. We are seeing ongoing interest across our portfolio from hotels, multi-family, medical, entertainment, restaurants and other new uses, which will further enhance our properties and diversify our revenue stream.
Despite increased volatility in interest rates and other macroeconomic factors, we closed on more than $663.0 million in financings during the quarter, including two new multi-property loans that funded the full redemption of all $395.0 million of outstanding on the senior secured notes. The two new non-recourse financings provided third-party validation of the tremendous value in our open-air and outparcel portfolios. These financings also resulted in improved cash flow through lower interest expense and enhanced our future financial flexibility by creating an unencumbered NOI pool of approximately $75.0 million.
Additionally, we announced the re-start of our regular quarterly cash dividend program. We are focused on executing at a high level to further financial and operational improvements, create value across our portfolio and generate ongoing returns for our shareholders.
We had a net loss for the three and six months ended June 30, 2022 of $43.8 million and $87.0 million, as compared to a net loss for the three and six months ended June 30, 2021 of $9.6 million and $37.8 million, respectively. We recorded a net loss attributable to common shareholders for the three and six months ended June 30, 2022 of $41.6 million and $82.3, respectively, as compared to a net loss attributable to common shareholders for the three and six months ended June 30, 2021 of $8.9 million and $35.6 million, respectively.
Significant items that affected the comparability between the three-month periods include:
|
|
▪ |
Items increasing net loss for the three months ended June 30, 2022 compared to the prior-year period: |
|
|
• |
Depreciation and amortization expense was $17.0 million higher; |
|
|
• |
Interest expense was $32.8 million higher; |
|
|
• |
General and administrative expense was $7.2 million higher. |
|
|
▪ |
Items decreasing net loss for the three months ended June 30, 2022 compared to the prior-year period: |
|
|
• |
Reorganization items, net, was $17.7 million lower; |
|
|
• |
Equity in earnings was $6.3 million higher. |
Significant items that affected the comparability between the six-month periods include:
|
|
▪ |
Items increasing net loss for the six months ended June 30, 2022 compared to the prior-year period: |
|
|
• |
Depreciation and amortization expense was $37.8 million higher; |
|
|
• |
Interest expense was $99.3 million higher; |
|
|
• |
Gain on deconsolidation was $18.9 million lower; |
|
|
• |
General and administrative expense was $12.6 million higher. |
|
|
▪ |
Items decreasing net loss for the six months ended June 30, 2022 compared to the prior-year period: |
|
|
• |
Rental revenues were $7.7 million higher; |
|
|
• |
Loss on impairment was $56.9 million lower; |
|
|
• |
Reorganization items, net, was $39.0 million lower; |
|
|
• |
Equity in earnings was $18.0 million higher. |
26
Table of Contents
Our focus is on continuing to execute our strategy to transform our properties into dominant centers that offer a mix of retail, service, dining, entertainment and other non-retail uses, primarily through the re-tenanting of former anchor locations as well as diversification of in-line tenancy. This operational strategy is also supported by our balance sheet strategy focused on reducing overall debt, extending our debt maturity schedule and lowering our overall cost of borrowings to limit maturity risk, improve net cash flow and enhance enterprise value. While the industry and our Company continue to face challenges, some of which may not be under our control, we believe that the strategies in place to redevelop our properties and diversify our tenant mix will contribute to stabilization of our portfolio and revenues in future years.
Same-center NOI and FFO are non-GAAP measures. For a description of same-center NOI, a reconciliation from net income (loss) to same-center NOI, and an explanation of why we believe this is a useful performance measure, see Non-GAAP Measure - Same-center Net Operating Income in Results of Operations. For a description of FFO, a reconciliation from net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders, and an explanation of why we believe this is a useful performance measure, see Non-GAAP Measure - Funds from Operations.
COVID-19
On March 11, 2020, the World Health Organization classified COVID-19 as a pandemic. In response to COVID-19, we initially implemented strict procedures and guidelines for our employees, tenants and property visitors based on CDC and other health agency recommendations. Our properties continue to update these policies and procedures, following any new mandates and regulations, as required. As of the date of this report, government-imposed capacity restrictions are no longer in place in our markets. The safety and health of our customers, employees and tenants remains a top priority.
Results of Operations
Properties that were in operation for the entire year during 2021 and the six months ended June 30, 2022 are referred to as the “Comparable Properties.” Since January 1, 2021, we have deconsolidated four properties and disposed of six properties:
Deconsolidations
|
Property |
|
Location |
|
Date of Deconsolidation |
|
Asheville Mall (1)(2) |
|
Asheville, NC |
|
January 2021 |
|
Park Plaza (1)(3) |
|
Little Rock, AR |
|
March 2021 |
|
EastGate Mall (1) |
|
Cincinnati, OH |
|
December 2021 |
|
Greenbrier Mall (1) |
|
Chesapeake, VA |
|
March 2022 |
|
(1) |
We deconsolidated the property due to a loss of control when the property was placed into receivership in connection with the foreclosure process. |
|
(2) |
Subsequent to June 30, 2022, the foreclosure process was completed. |
|
(3) |
In October 2021, the foreclosure process was completed. |
Dispositions
|
Property |
|
Location |
|
Date of Sale |
|
The Residences at Pearland Town Center |
|
Pearland, TX |
|
October 2021 |
|
EastGate Mall Self Storage (1) |
|
Cincinnati, OH |
|
November 2021 |
|
Hamilton Place Self Storage (1) |
|
Chattanooga, TN |
|
November 2021 |
|
Mid Rivers Mall Self Storage (1) |
|
St. Peters, MO |
|
November 2021 |
|
Parkdale Mall Self Storage (1) |
|
Beaumont, TX |
|
November 2021 |
|
Springs at Port Orange (1) |
|
Port Orange, FL |
|
December 2021 |
|
(1) |
The property was owned by a joint venture that was accounted for using the equity method of accounting. |
27
Table of Contents
Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021
Revenues
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
Comparable
Properties |
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Change |
|
|
Core |
|
|
Non-core |
|
|
Deconsolidation |
|
|
Dispositions |
|
|
Rental revenues |
|
$ |
131,832 |
|
|
|
$ |
131,316 |
|
|
$ |
516 |
|
|
$ |
3,673 |
|
|
$ |
317 |
|
|
$ |
(3,218 |
) |
|
$ |
(256 |
) |
|
Management, development and leasing fees |
|
|
1,786 |
|
|
|
|
1,449 |
|
|
|
337 |
|
|
|
337 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Other |
|
|
3,400 |
|
|
|
|
3,796 |
|
|
|
(396 |
) |
|
|
(361 |
) |
|
|
17 |
|
|
|
(40 |
) |
|
|
(12 |
) |
|
Total revenues |
|
$ |
137,018 |
|
|
|
$ |
136,561 |
|
|
$ |
457 |
|
|
$ |
3,649 |
|
|
$ |
334 |
|
|
$ |
(3,258 |
) |
|
$ |
(268 |
) |
Rental revenues from the Comparable Properties increased primarily due to a significantly higher estimate of uncollectable revenues in the prior year period due to the impacts of the COVID-19 pandemic, as well as prior year rent concessions to tenants in bankruptcy or that were struggling financially due to the impacts of the COVID-19 pandemic. The increase was partially offset by higher amortization of net above market leases due to the adoption of fresh start accounting upon our emergence from bankruptcy.
Operating Expenses
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
|
Three Months Ended June 30, |
|
|
|
|
|
|
Comparable
Properties |
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Change |
|
|
Core |
|
|
Non-core |
|
|
Deconsolidation |
|
|
Dispositions |
|
|
Property operating |
|
$ |
(21,312 |
) |
|
|
$ |
(19,623 |
) |
|
$ |
(1,689 |
) |
|
$ |
(2,620 |
) |
|
$ |
78 |
|
|
$ |
729 |
|
|
$ |
124 |
|
|
Real estate taxes |
|
|
(14,254 |
) |
|
|
|
(15,110 |
) |
|
|
856 |
|
|
|
241 |
|
|
|
70 |
|
|
|
446 |
|
|
|
99 |
|
|
Maintenance and repairs |
|
|
(10,230 |
) |
|
|
|
(8,784 |
) |
|
|
(1,446 |
) |
|
|
(1,791 |
) |
|
|
(18 |
) |
|
|
294 |
|
|
|
69 |
|
|
Property operating expenses |
|
|
(45,796 |
) |
|
|
|
(43,517 |
) |
|
|
(2,279 |
) |
|
|
(4,170 |
) |
|
|
130 |
|
|
|
1,469 |
|
|
|
292 |
|
|
Depreciation and amortization |
|
|
(64,476 |
) |
|
|
|
(47,499 |
) |
|
|
(16,977 |
) |
|
|
(18,206 |
) |
|
|
438 |
|
|
|
725 |
|
|
|
66 |
|
|
General and administrative |
|
|
(18,450 |
) |
|
|
|
(11,269 |
) |
|
|
(7,181 |
) |
|
|
(7,181 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Loss on impairment |
|
|
(252 |
) |
|
|
|
— |
|
|
|
(252 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(252 |
) |
|
Litigation settlement |
|
|
65 |
|
|
|
|
(57 |
) |
|
|
122 |
|
|
|
122 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Other |
|
|
(834 |
) |
|
|
|
(287 |
) |
|
|
(547 |
) |
|
|
(547 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total operating expenses |
|
$ |
(129,743 |
) |
|
|
$ |
(102,629 |
) |
|
$ |
(27,114 |
) |
|
$ |
(29,982 |
) |
|
$ |
568 |
|
|
$ |
2,194 |
|
|
$ |
106 |
|
Property operating expenses at the Comparable Properties increased primarily due to the actions taken in the prior year period to reduce operating expenses as we returned to normal operations after the early impacts of COVID-19, as well as increases in utility rates across our properties.
The increase in depreciation and amortization expense related to the Comparable Properties primarily relates to a new basis in depreciable assets and intangible in-place lease assets resulting from the adoption of fresh start accounting upon our emergence from bankruptcy.
General and administrative expenses increased due to an increase in compensation expense, including share-based compensation expense, as we returned to normal operations and compensation practices following the early impacts of COVID-19, as well as our emergence from bankruptcy. Also, professional fees associated with loan modifications and extensions, and fees incurred to obtain credit ratings on our secured term loan in accordance with the term loan agreement contributed to the increase.
Other Income and Expenses
Interest expense increased $32.8 million during the three months ended June 30, 2022 compared to the prior-year period primarily due to the recognition of debt discount accretion of $34.8 million on property-level debt that is approaching maturity and an increase in interest expense because we recognized interest expense on the secured term loan and the secured notes in the current-year period, but we did not recognize interest expense on corporate debt in the prior-year period while we were in bankruptcy. The increase was partially offset by a decrease of $16.0 million related to the reversal of previously recognized default interest expense when forbearance/waiver agreements were obtained. The property-level debt discounts were recognized in conjunction with recording our property-level debt at fair value upon the adoption of fresh start accounting.
For the three months ended June 30, 2021, we recorded $17.1 million of reorganization items, which consisted of professional, legal fees, retention bonuses and U.S. Trustee fees directly related to the bankruptcy filing.
28
Table of Contents
Equity in earnings of unconsolidated affiliates improved $6.3 million during the three months ended June 30, 2022 compared to the prior-year period. The improvement was primarily due to the application of fresh start accounting and recognizing equity in losses of certain unconsolidated affiliates that had losses in the prior-year period.
Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021
Revenues
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
Comparable
Properties |
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Change |
|
|
Core |
|
|
Non-core |
|
|
Deconsolidation |
|
|
Dispositions |
|
|
Rental revenues |
|
$ |
267,164 |
|
|
|
$ |
259,491 |
|
|
$ |
7,673 |
|
|
$ |
15,337 |
|
|
$ |
265 |
|
|
$ |
(7,539 |
) |
|
$ |
(390 |
) |
|
Management, development and leasing fees |
|
|
3,555 |
|
|
|
|
3,108 |
|
|
|
447 |
|
|
|
447 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Other |
|
|
6,401 |
|
|
|
|
7,146 |
|
|
|
(745 |
) |
|
|
(640 |
) |
|
|
65 |
|
|
|
(130 |
) |
|
|
(40 |
) |
|
Total revenues |
|
$ |
277,120 |
|
|
|
$ |
269,745 |
|
|
$ |
7,375 |
|
|
$ |
15,144 |
|
|
$ |
330 |
|
|
$ |
(7,669 |
) |
|
$ |
(430 |
) |
Rental revenues from the Comparable Properties increased primarily due to a significantly higher estimate of uncollectable revenues in the prior year period due to the impacts of the COVID-19 pandemic, as well as prior year rent concessions to tenants in bankruptcy or that were struggling financially due to the impacts of the COVID-19 pandemic. The increase was partially offset by higher amortization of net above market leases due to the adoption of fresh start accounting upon our emergence from bankruptcy. Percentage rent increased due to higher sales in the current period as sales and traffic have improved as vaccination rates increased and government restrictions were lessened.
Operating Expenses
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
Comparable
Properties |
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Change |
|
|
Core |
|
|
Non-core |
|
|
Deconsolidation |
|
|
Dispositions |
|
|
Property operating |
|
$ |
(44,656 |
) |
|
|
$ |
(41,425 |
) |
|
$ |
(3,231 |
) |
|
$ |
(5,349 |
) |
|
$ |
(2 |
) |
|
$ |
1,866 |
|
|
$ |
254 |
|
|
Real estate taxes |
|
|
(28,689 |
) |
|
|
|
(31,661 |
) |
|
|
2,972 |
|
|
|
1,711 |
|
|
|
108 |
|
|
|
960 |
|
|
|
193 |
|
|
Maintenance and repairs |
|
|
(20,796 |
) |
|
|
|
(19,565 |
) |
|
|
(1,231 |
) |
|
|
(1,760 |
) |
|
|
(181 |
) |
|
|
635 |
|
|
|
75 |
|
|
Property operating expenses |
|
|
(94,141 |
) |
|
|
|
(92,651 |
) |
|
|
(1,490 |
) |
|
|
(5,398 |
) |
|
|
(75 |
) |
|
|
3,461 |
|
|
|
522 |
|
|
Depreciation and amortization |
|
|
(133,419 |
) |
|
|
|
(95,611 |
) |
|
|
(37,808 |
) |
|
|
(39,224 |
) |
|
|
196 |
|
|
|
1,265 |
|
|
|
(45 |
) |
|
General and administrative |
|
|
(36,524 |
) |
|
|
|
(23,881 |
) |
|
|
(12,643 |
) |
|
|
(12,643 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Loss on impairment |
|
|
(252 |
) |
|
|
|
(57,182 |
) |
|
|
56,930 |
|
|
|
56,888 |
|
|
|
294 |
|
|
|
— |
|
|
|
(252 |
) |
|
Litigation settlement |
|
|
146 |
|
|
|
|
801 |
|
|
|
(655 |
) |
|
|
(655 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Other |
|
|
(834 |
) |
|
|
|
(287 |
) |
|
|
(547 |
) |
|
|
(547 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total operating expenses |
|
$ |
(265,024 |
) |
|
|
$ |
(268,811 |
) |
|
$ |
3,787 |
|
|
$ |
(1,579 |
) |
|
$ |
415 |
|
|
$ |
4,726 |
|
|
$ |
225 |
|
Property operating expenses at the Comparable Properties increased primarily due to the actions taken in the prior year period to reduce operating expenses as we returned to normal operations after the early impacts of COVID-19, as well as increases in utility rates across our properties.
The increase in depreciation and amortization expense related to the Comparable Properties primarily relates to a new basis in depreciable assets and intangible in-place lease assets resulting from the adoption of fresh start accounting upon our emergence from bankruptcy.
General and administrative expenses increased due to an increase in compensation expense, including share-based compensation expense, as we returned to normal operations and compensation practices following the early impacts of COVID-19, as well as our emergence from bankruptcy. Also, professional fees associated with loan modifications and extensions, and fees incurred to obtain credit ratings on our secured term loan in accordance with the term loan agreement contributed to the increase.
In the second quarter of 2021, we recognized $57.2 million of loss on impairment of real estate to write down the book value of three malls. See Note 5 to the condensed consolidated financial statements for more information.
29
Table of Contents
Other Income and Expenses
Interest expense increased $99.3 million during the six months ended June 30, 2022 compared to the prior-year period primarily due to the recognition of debt discount accretion of $98.2 million on property-level debt that is approaching maturity and recognizing interest expense on the secured term loan, the exchangeable notes and the secured notes. We did not recognize interest expense on corporate debt in the prior-year period while we were in bankruptcy. The increase was partially offset by a decrease of $28.9 million related to the reversal of previously recognized default interest expense when forbearance/waiver agreements were obtained. The property-level debt discounts were recognized in conjunction with recording our property-level debt at fair value upon the adoption of fresh start accounting.
For the six months ended June 30, 2022, we recorded a $36.3 million gain on deconsolidation related to a mall that was deconsolidated due to a loss of control when the mall was placed into receivership in connection with the foreclosure process. For the six months ended June 30, 2021, we recorded a $55.1 million gain on deconsolidation related to two malls that were deconsolidated due to a loss of control when each mall was placed into receivership in connection with the foreclosure process.
For the six months ended June 30, 2022, we recorded $1.0 million of reorganization items, net, which mostly consisted of professional fees and U.S. Trustee fees directly related to the bankruptcy filing. For the six months ended June 30, 2021, we recorded $40.0 million of reorganization items, which consisted of professional fees, legal fees, retention bonuses and U.S. Trustee fees directly related to the bankruptcy filing.
Equity in earnings of unconsolidated affiliates improved $18.0 million during the six months ended June 30, 2022 compared to the prior-year period. The improvement was primarily due to the application of fresh start accounting and recognizing equity in losses of certain unconsolidated affiliates that had losses in the prior-year period.
Non-GAAP Measure
Same-center Net Operating Income
NOI is a supplemental non-GAAP measure of the operating performance of our shopping centers and other properties. We define NOI as property operating revenues (rental revenues and other income) less property operating expenses (property operating, real estate taxes and maintenance and repairs).
We compute NOI based on the Operating Partnership's pro rata share of both consolidated and unconsolidated properties. 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 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. Our definition of NOI may be different than that used by other companies, and accordingly, our calculation of NOI may not be comparable to that of other companies.
Since NOI includes only those revenues and expenses related to the operations of our shopping center properties, we believe that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates, sales at our properties and operating costs and the impact of those trends on our results of operations. Our calculation of 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 in order to enhance the comparability of results from one period to another.
We include a property in our same-center pool when we have owned all or a portion of the property since January 1 of the preceding calendar year and it has been in operation for both the entire preceding calendar year and current year-to-date period. New properties are excluded from same-center NOI until they meet these criteria. Properties excluded from the same-center pool that would otherwise meet these criteria are categorized as excluded properties. We exclude properties for which we are working or intend to work with the lender on a restructure of the terms of the loan secured by the property or convey the secured property to the lender (“Excluded Properties”).
Due to the exclusions noted above, same-center NOI should only be used as a supplemental measure of our performance and not as an alternative to GAAP operating income (loss) or net income (loss).
30
Table of Contents
A reconciliation of our same-center NOI to net loss for the three-month periods ended June 30, 2022 and 2021 is as follows (in thousands):
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Three Months Ended June 30, |
|
|
|
Three Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Net loss |
|
$ |
(43,805 |
) |
|
|
$ |
(9,561 |
) |
|
Adjustments: (1) |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
72,357 |
|
|
|
|
60,397 |
|
|
Interest expense |
|
|
74,252 |
|
|
|
|
31,933 |
|
|
Abandoned projects expense |
|
|
834 |
|
|
|
|
287 |
|
|
Gain on sales of real estate assets |
|
|
(3 |
) |
|
|
|
(107 |
) |
|
Adjustment for unconsolidated affiliates with negative investment |
|
|
(10,460 |
) |
|
|
|
— |
|
|
Loss on impairment, net of taxes |
|
|
186 |
|
|
|
|
— |
|
|
Litigation settlement |
|
|
(65 |
) |
|
|
|
57 |
|
|
Reorganization items, net |
|
|
(613 |
) |
|
|
|
17,073 |
|
|
Income tax (benefit) provision |
|
|
(472 |
) |
|
|
|
705 |
|
|
Lease termination fees |
|
|
(1,052 |
) |
|
|
|
(167 |
) |
|
Straight-line rent and above- and below-market lease amortization |
|
|
467 |
|
|
|
|
2,476 |
|
|
Net loss attributable to noncontrolling interests in other consolidated subsidiaries |
|
|
2,373 |
|
|
|
|
449 |
|
|
General and administrative expenses |
|
|
18,450 |
|
|
|
|
11,269 |
|
|
Management fees and non-property level revenues |
|
|
(525 |
) |
|
|
|
(5,166 |
) |
|
Operating Partnership's share of property NOI |
|
|
111,924 |
|
|
|
|
109,645 |
|
|
Non-comparable NOI |
|
|
(4,566 |
) |
|
|
|
(3,962 |
) |
|
Total same-center NOI |
|
$ |
107,358 |
|
|
|
$ |
105,683 |
|
|
(1) |
Adjustments are based on our Operating Partnership's pro rata ownership share, including our share of unconsolidated affiliates and excluding noncontrolling interests' share of consolidated properties. |
Same-center NOI increased 1.6% for the three months ended June 30, 2022 as compared to the prior-year period. The $1.7 million increase for the three months ended June 30, 2022 compared to the same period in 2021 primarily consisted of a $5.2 million increase in revenues offset by a $3.5 million increase in operating expenses. Rental revenues increased $4.7 million during the quarter primarily due to increases in occupancy and a positive variance in uncollectable revenues in the current period as compared to the prior year period, as well as prior year rent concessions to tenants that are in bankruptcy or were struggling financially due to the impacts of the COVID-19 pandemic.
31
Table of Contents
A reconciliation of our same-center NOI to net loss for the six-month periods ended June 30, 2022 and 2021 is as follows (in thousands):
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Net loss |
|
$ |
(87,028 |
) |
|
|
$ |
(37,841 |
) |
|
Adjustments: (1) |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
148,921 |
|
|
|
|
121,458 |
|
|
Interest expense |
|
|
180,838 |
|
|
|
|
64,945 |
|
|
Abandoned projects expense |
|
|
834 |
|
|
|
|
287 |
|
|
(Gain) loss on sales of real estate assets |
|
|
(19 |
) |
|
|
|
192 |
|
|
Gain on sales of real estate assets of unconsolidated affiliates |
|
|
(629 |
) |
|
|
|
— |
|
|
Adjustment for unconsolidated affiliates with negative investment |
|
|
(23,007 |
) |
|
|
|
— |
|
|
Gain on deconsolidation |
|
|
(36,250 |
) |
|
|
|
(55,131 |
) |
|
Loss on impairment, net of taxes |
|
|
186 |
|
|
|
|
57,182 |
|
|
Litigation settlement |
|
|
(146 |
) |
|
|
|
(801 |
) |
|
Reorganization items, net |
|
|
958 |
|
|
|
|
40,006 |
|
|
Income tax provision |
|
|
329 |
|
|
|
|
1,456 |
|
|
Lease termination fees |
|
|
(2,448 |
) |
|
|
|
(1,278 |
) |
|
Straight-line rent and above- and below-market lease amortization |
|
|
3,707 |
|
|
|
|
5,320 |
|
|
Net loss attributable to noncontrolling interests in other consolidated subsidiaries |
|
|
4,859 |
|
|
|
|
1,268 |
|
|
General and administrative expenses |
|
|
36,524 |
|
|
|
|
23,881 |
|
|
Management fees and non-property level revenues |
|
|
(1,049 |
) |
|
|
|
(7,379 |
) |
|
Operating Partnership's share of property NOI |
|
|
226,580 |
|
|
|
|
213,565 |
|
|
Non-comparable NOI |
|
|
(9,194 |
) |
|
|
|
(9,738 |
) |
|
Total same-center NOI |
|
$ |
217,386 |
|
|
|
$ |
203,827 |
|
|
(1) |
Adjustments are based on our Operating Partnership's pro rata ownership share, including our share of unconsolidated affiliates and excluding noncontrolling interests' share of consolidated properties. |
Same-center NOI increased 6.7% for the six months ended June 30, 2022 as compared to the prior-year period. The $13.6 million increase for the six months ended June 30, 2022 compared to the same period in 2021 primarily consisted of a $17.8 million increase in revenues offset by a $4.2 million increase in operating expenses. Rental revenues increased $16.8 million during the period primarily due to increases in occupancy and a positive variance in uncollectable revenues in the current period as compared to the prior year period, as well as prior year rent concessions to tenants that are in bankruptcy or were struggling financially due to the impacts of the COVID-19 pandemic. Percentage rent increased due to higher sales in the current period as sales and traffic have improved as vaccination rates increased and government restrictions were lessened.
Operational Review
The shopping center business is, to some extent, seasonal in nature with tenants typically achieving the highest levels of sales during the fourth quarter due to the holiday season, which generally results in higher percentage rents in the fourth quarter. Additionally, malls, lifestyle centers and outlet centers earn a large portion of their rents from short-term tenants during the holiday period. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year.
We derive the majority of our revenues from the malls, lifestyle centers and outlet centers. The sources of our revenues by property type were as follows:
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Malls, Lifestyle Centers and Outlet Centers |
|
|
86.1 |
% |
|
|
|
91.9 |
% |
|
All Other |
|
|
13.9 |
% |
|
|
|
8.1 |
% |
32
Table of Contents
Inline and Adjacent Freestanding Store Sales
Inline and adjacent freestanding store sales include reporting mall, lifestyle center and outlet center tenants of 10,000 square feet or less and exclude license agreements, which are retail leases that are temporary or short-term in nature and generally last more than three months but less than twelve months. The following is a comparison of our same-center sales per square foot for mall, lifestyle center and outlet center tenants of 10,000 square feet or less (Excluded Properties are not included in sales metrics):
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
|
|
|
|
Sales Per Square Foot for the Trailing Twelve Months Ended June 30, |
|
|
|
Sales Per Square Foot for the Trailing Twelve Months Ended June 30, |
|
|
|
|
|
|
|
|
2022 |
|
|
|
2021 (1) |
|
|
% Change |
|
|
Mall, Lifestyle Center and Outlet Center same-center sales per square foot |
|
$ |
443 |
|
|
|
$ |
417 |
|
|
6.2% |
|
|
(1) |
Due to the temporary property and store closures that occurred during 2020 related to COVID-19, the majority of our tenants did not report sales for the full reporting period. As a result, we are not able to provide a complete measure of sales per square foot for periods in the year ended December 31, 2020. Sales per square foot for the trailing twelve months ended June 30, 2021 is comprised of sales reported for the periods July through December 2019 and January through June 30, 2021. |
Occupancy
Our portfolio occupancy is summarized in the following table (Excluded Properties are not included in occupancy metrics):
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Total portfolio |
|
89.5% |
|
|
|
87.0% |
|
|
Malls, Lifestyle Centers and Outlet Centers: |
|
|
|
|
|
|
|
|
|
|
Total malls |
|
87.9% |
|
|
|
85.2% |
|
|
Total lifestyle centers |
|
89.4% |
|
|
|
83.9% |
|
|
Total outlet centers |
|
87.5% |
|
|
|
86.2% |
|
|
Total same-center malls, lifestyle centers and outlet centers |
|
88.0% |
|
|
|
85.5% |
|
|
All Other: |
|
|
|
|
|
|
|
|
|
|
Total open-air centers |
|
94.4% |
|
|
|
92.2% |
|
|
Total other |
|
91.7% |
|
|
|
98.7% |
|
Leasing
The following is a summary of the total square feet of leases signed in the three-month periods ended June 30, 2022 and 2021:
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Three Months Ended June 30, |
|
|
|
Three Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Operating portfolio: |
|
|
|
|
|
|
|
|
|
|
New leases |
|
|
395,752 |
|
|
|
|
210,225 |
|
|
Renewal leases |
|
|
633,563 |
|
|
|
|
693,787 |
|
|
Development portfolio: |
|
|
|
|
|
|
|
|
|
|
New leases |
|
|
— |
|
|
|
|
56,759 |
|
|
Total leased |
|
|
1,029,315 |
|
|
|
|
960,771 |
|
33
Table of Contents
The following is a summary of the total square feet of leases signed in the six-month periods ended June 30, 2022 and 2021:
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Operating portfolio: |
|
|
|
|
|
|
|
|
|
|
New leases |
|
|
630,642 |
|
|
|
|
354,422 |
|
|
Renewal leases |
|
|
1,450,369 |
|
|
|
|
1,292,105 |
|
|
Development portfolio: |
|
|
|
|
|
|
|
|
|
|
New leases |
|
|
— |
|
|
|
|
60,059 |
|
|
Total leased |
|
|
2,081,011 |
|
|
|
|
1,706,586 |
|
Average annual base rents per square foot are based on contractual rents in effect as of June 30, 2022 and 2021, including the impact of any rent concessions. Average annual base rents per square foot for comparable small shop space of less than 10,000 square feet were as follows for each property type:
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Total portfolio |
|
$ |
24.99 |
|
|
|
$ |
25.52 |
|
|
Malls, Lifestyle Centers and Outlet Centers (1): |
|
|
|
|
|
|
|
|
|
|
Total same-center malls, lifestyle centers and outlet centers |
|
|
29.43 |
|
|
|
|
30.38 |
|
|
Total malls |
|
|
30.02 |
|
|
|
|
31.10 |
|
|
Total lifestyle centers |
|
|
27.88 |
|
|
|
|
27.05 |
|
|
Total outlet centers |
|
|
26.51 |
|
|
|
|
26.32 |
|
|
All Other: |
|
|
|
|
|
|
|
|
|
|
Total open-air centers |
|
|
15.10 |
|
|
|
|
15.15 |
|
|
Total other |
|
|
19.31 |
|
|
|
|
19.26 |
|
|
(1) |
Excluded Properties are not included. |
Results from new and renewal leasing of comparable small shop space of less than 10,000 square feet during the three- and six-month periods ended June 30, 2022 for spaces that were previously occupied, based on the contractual terms of the related leases inclusive of the impact of any rent concessions, are as follows:
|
Property Type |
|
Square
Feet |
|
|
Prior Gross
Rent PSF |
|
|
New Initial
Gross Rent
PSF |
|
|
% Change
Initial |
|
|
New Average
Gross Rent
PSF (1) |
|
|
% Change
Average |
|
|
Quarter-to-Date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Property Types (2) |
|
|
542,294 |
|
|
$ |
35.09 |
|
|
$ |
31.43 |
|
|
|
(10.4 |
)% |
|
$ |
32.20 |
|
|
|
(8.2 |
)% |
|
Malls, Lifestyle Centers & Outlet Centers |
|
|
481,508 |
|
|
|
37.15 |
|
|
|
33.08 |
|
|
|
(11.0 |
)% |
|
|
33.91 |
|
|
|
(8.7 |
)% |
|
New leases |
|
|
44,980 |
|
|
|
38.71 |
|
|
|
42.02 |
|
|
|
8.6 |
% |
|
|
44.22 |
|
|
|
14.2 |
% |
|
Renewal leases |
|
|
436,528 |
|
|
|
36.99 |
|
|
|
32.16 |
|
|
|
(13.1 |
)% |
|
|
32.85 |
|
|
|
(11.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Property Types (2) |
|
|
1,094,808 |
|
|
$ |
34.18 |
|
|
$ |
30.26 |
|
|
|
(11.5 |
)% |
|
$ |
30.86 |
|
|
|
(9.7 |
)% |
|
Malls, Lifestyle Centers & Outlet Centers |
|
|
1,019,404 |
|
|
|
35.31 |
|
|
|
31.10 |
|
|
|
(11.9 |
)% |
|
|
31.73 |
|
|
|
(10.1 |
)% |
|
New leases |
|
|
107,549 |
|
|
|
43.99 |
|
|
|
40.58 |
|
|
|
(7.7 |
)% |
|
|
43.48 |
|
|
|
(1.2 |
)% |
|
Renewal leases |
|
|
911,855 |
|
|
|
34.28 |
|
|
|
29.98 |
|
|
|
(12.6 |
)% |
|
|
30.34 |
|
|
|
(11.5 |
)% |
|
(1) |
Average gross rent does not incorporate allowable future increases for recoverable common area expenses. |
|
(2) |
Includes malls, lifestyle centers, outlet centers, open-air centers and other. |
34
Table of Contents
New and renewal leasing activity of comparable small shop space of less than 10,000 square feet based on the lease commencement date is as follows:
|
|
|
Number
of
Leases |
|
|
Square
Feet |
|
|
Term
(in
years) |
|
|
Initial
Rent
PSF |
|
|
Average
Rent
PSF |
|
|
Expiring
Rent
PSF |
|
|
Initial Rent
Spread |
|
|
Average Rent
Spread |
|
|
Commencement 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New |
|
|
72 |
|
|
|
198,699 |
|
|
|
6.45 |
|
|
$ |
37.00 |
|
|
$ |
38.57 |
|
|
$ |
38.05 |
|
|
$ |
(1.05 |
) |
|
|
(2.8 |
)% |
|
$ |
0.52 |
|
|
|
1.4 |
% |
|
Renewal |
|
|
408 |
|
|
|
1,283,061 |
|
|
|
2.57 |
|
|
|
30.02 |
|
|
|
30.22 |
|
|
|
33.31 |
|
|
|
(3.29 |
) |
|
|
(9.9 |
)% |
|
|
(3.09 |
) |
|
|
(9.3 |
)% |
|
Commencement 2022 Total |
|
|
480 |
|
|
|
1,481,760 |
|
|
|
3.15 |
|
|
|
30.95 |
|
|
|
31.34 |
|
|
|
33.95 |
|
|
|
(3.00 |
) |
|
|
(8.8 |
)% |
|
|
(2.61 |
) |
|
|
(7.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commencement 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New |
|
|
3 |
|
|
|
1,682 |
|
|
|
6.69 |
|
|
|
128.45 |
|
|
|
141.29 |
|
|
|
102.57 |
|
|
|
25.88 |
|
|
|
25.2 |
% |
|
|
38.72 |
|
|
|
37.7 |
% |
|
Renewal |
|
|
67 |
|
|
|
157,822 |
|
|
|
2.61 |
|
|
|
52.06 |
|
|
|
52.40 |
|
|
|
51.86 |
|
|
|
0.20 |
|
|
|
0.4 |
% |
|
|
0.54 |
|
|
|
1.0 |
% |
|
Commencement 2023 Total |
|
|
70 |
|
|
|
159,504 |
|
|
|
2.78 |
|
|
|
52.86 |
|
|
|
53.34 |
|
|
|
52.39 |
|
|
|
0.47 |
|
|
|
0.9 |
% |
|
|
0.95 |
|
|
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total 2022/2023 |
|
|
550 |
|
|
|
1,641,264 |
|
|
|
3.10 |
|
|
$ |
33.08 |
|
|
$ |
33.48 |
|
|
$ |
35.74 |
|
|
$ |
(2.66 |
) |
|
|
(7.4 |
)% |
|
$ |
(2.26 |
) |
|
|
(6.3 |
)% |
Liquidity and Capital Resources
As of June 30, 2022, we had $327.1 million available in unrestricted cash and U.S. Treasury securities. Our total pro rata share of debt, excluding unamortized deferred financing costs and debt discounts, at June 30, 2022 was $2,959.0 million, which includes $153.7 million of deconsolidated property loans that are in receivership. We had $81.8 million in restricted cash at June 30, 2022 related to cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable, as well as amounts related to cash management agreements with lenders of certain property-level mortgage indebtedness, which are designated for debt service and operating expense obligations.
During the three and six months ended June 30, 2022, we continued to reinvest the cash from maturing U.S. Treasury securities into new U.S. Treasury securities. We designated our U.S. Treasury securities as available-for-sale. As of June 30, 2022, our U.S. Treasury securities have maturities through November 2022. Subsequent to June 30, 2022, we redeemed and purchased additional U.S. Treasury securities. See Note 14 for additional information.
In February 2022, we issued 10,982,795 shares of common stock to holders of the exchangeable notes in satisfaction of principal, accrued interest and the make-whole payment, and all the exchangeable notes were cancelled in accordance with the terms of the indenture.
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. As of June 30, 2022, the loan had an outstanding balance of $131.6 million.
In February 2022, we 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 at Atlanta. As of June 30, 2022, the loan had an outstanding balance of $4.4 million.
The loan secured by Cross Creek Mall was extended through July 2022. We remain in discussions with the lender regarding a long-term extension. As of June 30, 2022, the loan had an outstanding balance of $99.9 million.
In March 2022, we deconsolidated Greenbrier Mall as a result of losing control when the property was placed in receivership. As of June 30, 2022, the loan secured by Greenbrier Mall had an outstanding balance of $61.6 million.
In March 2022, we entered into a new $30.0 million 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. As of June 30, 2022, the loan had an outstanding balance of $30.0 million ($15.0 million at our share).
In March 2022, we entered into a forbearance agreement with the respective lenders regarding the default triggered by the bankruptcy filing related to the loans secured by Coastal Grand and Fremaux Town Center. As of June 30, 2022, the loans secured by Coastal Grand had an outstanding balance of $106.3 million ($53.1 million at our share). As of June 30, 2022, the loan secured by Fremaux Town Center had an outstanding balance of $61.3 million ($39.9 million at our share).
In April 2022, we closed on a new $40.0 million, 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 previous $33.6 million partial recourse loan, which was set to mature in October 2022. As of June 30, 2022, the loan had an outstanding balance of $40.0 million ($20.0 million at our share).
35
Table of Contents
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%. As of June 30, 2022, the loan had an outstanding balance of $100.4 million.
In May 2022, we 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. As of June 30, 2022, the loan had an outstanding balance of $65.9 million ($32.9 million at our share).
In May 2022, the loan secured by Northwoods Mall was extended on the same terms through April 2026. As of June 30, 2022, the loan had an outstanding balance of $59.9 million.
In May 2022, we entered into a new $65.0 million non-recourse loan. The loan has a ten-year term with a fixed interest rate of 5.85%. It is interest only for the first three years. The loan is secured by open-air centers, which include Hamilton Crossing, Hamilton Corner, The Terrace and The Shoppes at Hamilton Place. Proceeds from the loan were used to redeem $60.0 million aggregate principal amount of the senior secured notes. Also, the previous $7.1 million Hamilton Crossing loan was paid off in conjunction with the closing of the new loan. As of June 30, 2022, the loan had an outstanding balance of $65.0 million.
In June 2022, we entered into a new $360.0 million loan. The interest rate is a fixed 6.95% for $180.0 million of the $360.0 million loan, with the other half of the loan bearing a floating interest rate based on the 30-day SOFR plus 4.10%. The loan has an initial term of five years with one two-year extension, subject to certain conditions. The loan is secured by a pool of 90 outparcels and 13 open-air centers. The open-air centers include Alamance Crossing West, CoolSprings Crossing, Courtyard at Hickory Hollow, Frontier Square, Gunbarrel Pointe, Harford Annex, The Plaza at Fayette, Sunrise Commons, The Shoppes at St. Clair Square, The Landing at Arbor Place, West Towne Crossing, West Towne District and WestGate Crossing. Proceeds from the loan were used to redeem all $335.0 million outstanding on the senior secured notes, which eliminated the recourse guaranty. Also, proceeds were used to paydown $8.3 million on the Brookfield Square Anchor Redevelopment loan, which had an outstanding balance of $18.7 million as of June 30, 2022.
In June 2022, we paid off the $14.9 million loan secured by CBL Center at maturity.
In June 2022, we entered into a new $42.5 million loan secured by Ambassador Town Center. The loan matures in June 2029 and bears a fixed interest rate of 4.35%. The previous $40.7 million loan was paid off in conjunction with the closing of the new loan. Our share of the new loan was $27.6 million as of June 30, 2022.
In June 2022, our board of directors established a regular quarterly dividend. Our board of directors declared a dividend of $0.25 per common share, payable in all cash, for the quarter ended June 30, 2022. The dividend was paid on July 20, 2022, to shareholders of record as of July 11, 2022.
Our total share of consolidated, unconsolidated and other outstanding debt, excluding debt discounts and deferred financing costs, maturing during 2022, assuming all extension options are elected, is $266.4 million, and our total share of consolidated, unconsolidated and other outstanding debt, excluding debt discounts and deferred financing costs, that matured prior to 2022, which remains outstanding at June 30, 2022, is $263.8 million. We are in discussions with the existing lenders to modify and extend or otherwise refinance the loans.
As of June 30, 2022, we had $859.8 million of property-level debt and related obligations, including our share of unconsolidated debt and related obligations, maturing or callable within the next 12 months from the issuance of the financial statements. Subsequent to June 30, 2022, we extended the maturity date for the $68.1 million loan secured by Parkdale Mall and Crossing. See Note 14 for additional information. We intend to refinance and/or extend the maturity dates for the remaining $791.7 million of such mortgage notes payable. In instances where a refinancing and/or extension of maturity dates is unsuccessful we 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.
Cash Flows - Operating, Investing and Financing Activities
There was $258.9 million of cash, cash equivalents and restricted cash as of June 30, 2022, an increase of $22.7 million from December 31, 2021. Of this amount, $177.1 million was unrestricted cash and cash equivalents as of June 30, 2022. Also, at June 30, 2022, we had $150.1 million in U.S. Treasuries with maturities through November 2022.
36
Table of Contents
Our net cash flows are summarized as follows (in thousands):
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Change |
|
|
Net cash provided by operating activities |
|
$ |
88,089 |
|
|
|
$ |
130,497 |
|
|
$ |
(42,408 |
) |
|
Net cash provided by investing activities |
|
|
2,690 |
|
|
|
|
44,188 |
|
|
|
(41,498 |
) |
|
Net cash used in financing activities |
|
|
(68,119 |
) |
|
|
|
(24,220 |
) |
|
|
(43,899 |
) |
|
Net cash flows |
|
$ |
22,660 |
|
|
|
$ |
150,465 |
|
|
$ |
(127,805 |
) |
Cash Provided By Operating Activities
Cash provided by operating activities decreased primarily because we incurred interest expense on our new corporate debt during the six months ended June 30, 2022 while we did not pay interest in the prior-year period on the secured credit facility and senior unsecured notes while we were in bankruptcy. We also had an increase in general and administrative expenses as we returned to normal operations and compensation practices following the early impacts of COVID-19, as well as our emergence from bankruptcy and incurred professional fees associated with loan modifications/extensions and obtaining credit ratings on our secured term loan. These items were partially offset by an increase in same-center net operating income and a reduction in reorganization items.
Cash Provided By Investing Activities
During the six months ended June 30, 2022, net cash provided by investing activities decreased primarily due to more net redemptions of U.S. Treasury securities in the prior-year period as compared to the six months ended June 30, 2022, as well as lower proceeds from sales of real estate assets during the six months ended June 30, 2022 as compared to the prior-year period. The decrease was partially offset by an increase in distributions from unconsolidated affiliates as compared to the prior-year period.
Cash Used In Financing Activities
During the six months ended June 30, 2022, net cash used in financing activities increased primarily due to principal payments on the secured term loan and costs incurred to obtain new financings. Proceeds received from the new financings were used to redeem all of the senior secured notes and retire two mortgage notes payable.
37
Table of Contents
Debt
The following tables summarize debt based on our pro rata ownership share, including our pro rata share of unconsolidated affiliates and excluding noncontrolling investors’ share of consolidated properties. Prior to consideration of unamortized deferred financing costs or debt discounts, of our $2,959.0 million outstanding debt at June 30, 2022, $2,074.6 million constituted non-recourse debt obligations and $884.4 million constituted recourse debt obligations. We believe the tables below provide investors and lenders a clearer understanding of our total debt obligations and liquidity (in thousands):
|
June 30, 2022: |
|
Consolidated |
|
|
Noncontrolling
Interests |
|
|
Other Debt (1) |
|
|
Unconsolidated
Affiliates |
|
|
Total |
|
|
Weighted-
Average
Interest
Rate (2) |
|
|
|
Fixed-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse loans on operating properties |
|
$ |
881,513 |
|
|
$ |
(32,771 |
) |
|
$ |
153,719 |
|
|
$ |
616,983 |
|
|
$ |
1,619,444 |
|
|
4.68% |
|
|
|
Recourse loans on operating properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,451 |
|
|
|
10,451 |
|
|
3.68% |
|
|
|
Total fixed-rate debt |
|
|
881,513 |
|
|
|
(32,771 |
) |
|
|
153,719 |
|
|
|
627,434 |
|
|
|
1,629,895 |
|
|
4.67% |
|
|
|
Variable-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse loans on operating properties |
|
|
57,540 |
|
|
|
(13,597 |
) |
|
|
— |
|
|
|
51,228 |
|
|
|
95,171 |
|
|
3.84% |
|
|
|
Recourse loans on operating properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20,558 |
|
|
|
20,558 |
|
|
4.32% |
|
|
|
Open-air centers and outparcels loan |
|
|
360,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
360,000 |
|
|
6.10% |
|
(3) |
|
Secured term loan |
|
|
853,331 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
853,331 |
|
|
3.81% |
|
|
|
Total variable-rate debt |
|
|
1,270,871 |
|
|
|
(13,597 |
) |
|
|
— |
|
|
|
71,786 |
|
|
|
1,329,060 |
|
|
4.44% |
|
|
|
Total fixed-rate and variable-rate debt |
|
|
2,152,384 |
|
|
|
(46,368 |
) |
|
|
153,719 |
|
|
|
699,220 |
|
|
|
2,958,955 |
|
|
4.57% |
|
|
|
Unamortized deferred financing costs |
|
|
(16,028 |
) |
|
|
92 |
|
|
|
— |
|
|
|
(2,490 |
) |
|
|
(18,426 |
) |
|
|
|
|
|
|
Debt discounts (4) |
|
|
(100,967 |
) |
|
|
15,424 |
|
|
|
— |
|
|
|
— |
|
|
|
(85,543 |
) |
|
|
|
|
|
|
Total mortgage and other indebtedness, net |
|
$ |
2,035,389 |
|
|
$ |
(30,852 |
) |
|
$ |
153,719 |
|
|
$ |
696,730 |
|
|
$ |
2,854,986 |
|
|
|
|
|
|
|
(1) |
Represents the outstanding loan balance for properties that were deconsolidated due to a loss of control when the properties were placed into receivership in connection with the foreclosure process. |
|
(2) |
Weighted-average interest rate excludes amortization of deferred financing costs. |
|
(3) |
The interest rate is a fixed 6.95% for $180,000 of the $360,000 loan, with the other half of the loan bearing a variable interest rate based on the 30-day SOFR plus 4.10%. |
|
(4) |
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 upon emergence from bankruptcy on November 1, 2021. The debt discount is accreted over the term of the respective debt using the effective interest method. |
|
December 31, 2021: |
|
Consolidated |
|
|
Noncontrolling
Interests |
|
|
Other Debt (1) |
|
|
Unconsolidated
Affiliates |
|
|
Total |
|
|
Weighted-
Average
Interest
Rate (2) |
|
|
Fixed-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-recourse loans on operating properties (3) |
|
$ |
916,927 |
|
|
$ |
(29,381 |
) |
|
$ |
92,072 |
|
|
$ |
600,598 |
|
|
$ |
1,580,216 |
|
|
4.37% |
|
|
Senior secured notes - at carrying value (fair value of $395,395 as of December 31, 2021) |
|
|
395,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
395,000 |
|
|
10.00% |
|
|
Exchangeable senior secured notes |
|
|
150,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
150,000 |
|
|
7.00% |
|
|
Recourse loans on operating properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,724 |
|
|
|
11,724 |
|
|
3.61% |
|
|
Total fixed-rate debt |
|
|
1,461,927 |
|
|
|
(29,381 |
) |
|
|
92,072 |
|
|
|
612,322 |
|
|
|
2,136,940 |
|
|
5.84% |
|
|
Variable-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recourse loans on operating properties |
|
|
66,911 |
|
|
|
— |
|
|
|
— |
|
|
|
90,691 |
|
|
|
157,602 |
|
|
2.97% |
|
|
Secured term loan |
|
|
880,091 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
880,091 |
|
|
3.75% |
|
|
Total variable-rate debt |
|
|
947,002 |
|
|
|
— |
|
|
|
— |
|
|
|
90,691 |
|
|
|
1,037,693 |
|
|
3.63% |
|
|
Total fixed-rate and variable-rate debt |
|
|
2,408,929 |
|
|
|
(29,381 |
) |
|
|
92,072 |
|
|
|
703,013 |
|
|
|
3,174,633 |
|
|
5.12% |
|
|
Unamortized deferred financing costs |
|
|
(1,567 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,971 |
) |
|
|
(3,538 |
) |
|
|
|
|
|
Debt discounts (4) |
|
|
(199,153 |
) |
|
|
13,519 |
|
|
|
— |
|
|
|
— |
|
|
|
(185,634 |
) |
|
|
|
|
|
Total mortgage and other indebtedness, net |
|
$ |
2,208,209 |
|
|
$ |
(15,862 |
) |
|
$ |
92,072 |
|
|
$ |
701,042 |
|
|
$ |
2,985,461 |
|
|
|
|
|
|
(1) |
Represents the outstanding loan balance for properties that were deconsolidated due to a loss of control when the properties were placed into receivership in connection with the foreclosure process. |
|
(2) |
Weighted-average interest rate excludes amortization of deferred financing costs. |
|
(3) |
An unconsolidated affiliate had an interest rate swap on a notional amount outstanding of $41,310 as of December 31, 2021 related to a variable-rate loan on Ambassador Town Center to effectively fix the interest rate on this loan to a fixed-rate of 3.22%. |
|
(4) |
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 upon emergence from bankruptcy on November 1, 2021. The debt discount is accreted over the term of the respective debt using the effective interest method. |
38
Table of Contents
The weighted-average remaining term of our total share of consolidated, unconsolidated and other debt, excluding debt discounts and deferred financing costs, was 3.0 years and 3.3 years at June 30, 2022 and December 31, 2021, respectively. The weighted-average remaining term of our pro rata share of consolidated, unconsolidated and other fixed-rate debt, excluding debt discounts and deferred financing costs, was 2.3 years and 3.2 years at June 30, 2022 and December 31, 2021, respectively.
As of June 30, 2022 and December 31, 2021, our total share of consolidated and unconsolidated variable-rate debt, excluding debt discounts and deferred financing costs, represented 38.8% and 32.8%, respectively, of our total pro rata share of debt, excluding debt discounts and deferred financing costs.
See Note 7 to the condensed consolidated financial statements for information concerning activity related to unconsolidated affiliates.
Equity
In February 2022, we issued 10,982,795 shares of common stock to holders of the exchangeable notes in satisfaction of principal, accrued interest and the make-whole payment, and all the exchangeable notes were cancelled in accordance with the terms of the indenture.
In June 2022, our board of directors established a regular quarterly dividend. Our board of directors declared a dividend of $0.25 per common share, payable in all cash, for the quarter ended June 30, 2022. The dividend was paid on July 20, 2022, to shareholders of record as of July 11, 2022. Subsequent to June 30, 2022, the Company’s board of directors declared a dividend of $0.25 per common share for the quarter ending September 30, 2022. See Note 14 for additional information.
The decision to declare and pay dividends on any outstanding shares of our common stock, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our board of directors and will depend on our earnings, taxable income, cash flows, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our then-current indebtedness, the annual distribution requirements under the REIT provisions of the Internal Revenue Code, Delaware law and such other factors as our board of directors deems relevant. Any dividends payable will be determined by our board of directors based upon the circumstances at the time of declaration. Our actual results of operations will be affected by a number of factors, including the revenues received from our properties, our operating expenses, interest expense, unanticipated capital expenditures and the ability of our anchors and tenants at our properties to meet their obligations for payment of rents and tenant reimbursements.
As a publicly traded company, we previously accessed capital through both the public equity and debt markets. We had a shelf registration statement on Form S-3 on file with the Securities and Exchange Commission (“SEC”) that expired in July 2021. Until we regain Form S-3 eligibility, we will be required to use a registration statement on Form S-11 to register securities with the SEC. On May 6, 2022, we filed a resale registration statement on Form S-11 covering the offer and sale, from time to time, of up to 12,380,260 shares of common stock by the selling shareholders named therein, pursuant to the requirements of the registration rights agreement. We will not receive any proceeds from resales of share of common stock by the selling shareholders pursuant to this registration statement.
39
Table of Contents
Capital Expenditures
The following tables, which exclude expenditures for developments, redevelopments and expansions, summarize our capital expenditures, including our share of unconsolidated affiliates' capital expenditures, for the three and six months ended June 30, 2022 compared to the same periods in 2021 (in thousands):
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Three Months Ended June 30, |
|
|
|
Three Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Tenant allowances (1) |
|
$ |
4,173 |
|
|
|
$ |
3,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred maintenance: |
|
|
|
|
|
|
|
|
|
|
Parking area and parking area lighting |
|
|
980 |
|
|
|
|
57 |
|
|
Roof replacements |
|
|
2 |
|
|
|
|
308 |
|
|
Other capital expenditures |
|
|
2,275 |
|
|
|
|
1,782 |
|
|
Total deferred maintenance |
|
|
3,257 |
|
|
|
|
2,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized overhead |
|
|
374 |
|
|
|
|
209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized interest |
|
|
147 |
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures |
|
$ |
7,951 |
|
|
|
$ |
5,744 |
|
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Tenant allowances (1) |
|
$ |
7,040 |
|
|
|
$ |
4,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred maintenance: |
|
|
|
|
|
|
|
|
|
|
Parking area and parking area lighting |
|
|
1,513 |
|
|
|
|
57 |
|
|
Roof replacements |
|
|
126 |
|
|
|
|
308 |
|
|
Other capital expenditures |
|
|
4,097 |
|
|
|
|
2,241 |
|
|
Total deferred maintenance |
|
|
5,736 |
|
|
|
|
2,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized overhead |
|
|
823 |
|
|
|
|
467 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized interest |
|
|
375 |
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures |
|
$ |
13,974 |
|
|
|
$ |
7,357 |
|
|
(1) |
Tenant allowances primarily relate to new leases. Tenant allowances related to renewal leases were not material for the periods presented. |
Annual capital expenditures budgets are prepared for each of our properties that are intended to provide for all necessary recurring and non-recurring capital expenditures. We believe that property operating cash flows, which include reimbursements from tenants for certain expenses, and readily available cash on hand will provide the necessary funding for these expenditures.
40
Table of Contents
Developments
Properties Opened During the Six Months Ended June 30, 2022
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
CBL's Share of |
|
|
|
|
|
|
|
|
Property |
|
Location |
|
CBL
Ownership
Interest |
|
|
Total
Project
Square Feet |
|
|
Total
Cost (1) |
|
|
Cost to
Date (2) |
|
|
2022
Cost |
|
|
Opening
Date |
|
Initial
Unleveraged
Yield |
|
|
Outparcel Developments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kirkwood Mall - Five Guys, Blaze Pizza, Thrifty White, Pancheros, Chick-fil-A |
|
Bismarck, ND |
|
100% |
|
|
|
15,275 |
|
|
$ |
7,976 |
|
|
$ |
6,377 |
|
|
$ |
2,019 |
|
|
Q2 '22 |
|
8.9% |
|
|
(1) |
Total Cost is presented net of reimbursements to be received. Represents total cost incurred by the Predecessor and the Successor. |
|
(2) |
Cost to Date does not reflect reimbursements until they are received. Represents total cost to date incurred by the Predecessor and the Successor. |
Properties Under Redevelopment at June 30, 2022
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
CBL's Share of |
|
|
|
|
|
|
|
|
Property |
|
Location |
|
CBL
Ownership
Interest |
|
|
Total
Project
Square Feet |
|
|
Total
Cost (1) |
|
|
Cost to
Date (2) |
|
|
2022
Cost |
|
|
Expected Opening
Date |
|
Initial
Unleveraged
Yield |
|
|
Redevelopments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dakota Square Herberger's Redevelopment - Five Below |
|
Minot, ND |
|
100% |
|
|
|
9,502 |
|
|
$ |
1,834 |
|
|
$ |
481 |
|
|
$ |
481 |
|
|
Fall-22 |
|
8.7% |
|
|
(1) |
Total Cost is presented net of reimbursements to be received. Represents total cost incurred by the Predecessor and the Successor. |
|
(2) |
Cost to Date does not reflect reimbursements until they are received. Represents total cost to date incurred by the Predecessor and the Successor. |
Off-Balance Sheet Arrangements
Unconsolidated Affiliates
We have ownership interests in 26 unconsolidated affiliates as of June 30, 2022 that are described in Note 7 to the condensed consolidated financial statements. The unconsolidated affiliates are accounted for using the equity method of accounting and are reflected in the condensed consolidated balance sheets as investments in unconsolidated affiliates.
The following are circumstances when we may consider entering into a joint venture with a third party:
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|
• |
Third parties may approach us with opportunities in which they have obtained land and performed some pre-development activities, but they may not have sufficient access to the capital resources or the development and leasing expertise to bring the project to fruition. We enter into such arrangements when we determine such a project is viable and we can achieve a satisfactory return on our investment. We typically earn development fees from the joint venture and provide management and leasing services to the property for a fee once the property is placed in operation. |
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|
• |
We determine that we may have the opportunity to capitalize on the value we have created in a property by selling an interest in the property to a third party. This provides us with an additional source of capital that can be used to develop or acquire additional real estate assets that we believe will provide greater potential for growth. When we retain an interest in an asset rather than selling a 100% interest, it is typically because this allows us to continue to manage the property, which provides us the ability to earn fees for management, leasing, development and financing services provided to the joint venture. |
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|
• |
We also pursue opportunities to contribute available land at our properties into joint venture partnerships for development of primarily non-retail uses such as hotels, office, self-storage and multifamily. We typically partner with developers who have expertise in the non-retail property types. |
Guarantees
We 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 our investment in the joint venture. We may receive a fee from the joint venture for providing the guaranty. Additionally, when we issue a guaranty, the terms of the joint venture agreement typically provide that we may receive indemnification from the joint venture or have the ability to increase our ownership interest.
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See Note 11 to the condensed consolidated financial statements for information related to our guarantees of unconsolidated affiliates' debt as of June 30, 2022 and December 31, 2021.
Critical Accounting Policies
Our discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the financial statements and disclosures. Some of these estimates and assumptions require application of difficult, subjective, and/or complex judgment about the effect of matters that are inherently uncertain and that may change in subsequent periods. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our Annual Report on Form 10-K for the year ended December 31, 2021 contains a discussion of our critical accounting policies and estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations section. There have been no material changes to these policies and estimates during the six months ended June 30, 2022. Our significant accounting policies are disclosed in Note 4 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.
Recent Accounting Pronouncements
See Note 2 to the condensed consolidated financial statements for information on recently issued accounting pronouncements.
Non-GAAP Measure
Funds from Operations
FFO is a widely used non-GAAP measure of the operating performance of real estate companies that supplements net income (loss) determined in accordance with GAAP. 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, joint ventures and noncontrolling interests are calculated on the same basis. We define FFO as defined above by NAREIT. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
We believe that FFO provides an additional indicator of the operating performance of our 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 real estate assets have historically risen or fallen with market conditions, we believe that FFO, which excludes historical cost depreciation and amortization, enhances investors’ understanding of our operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of our properties and interest rates, but also by our capital structure.
We present both FFO allocable to Operating Partnership common unitholders and FFO allocable to common shareholders, as we believe that both are useful performance measures. We believe FFO allocable to Operating Partnership common unitholders is a useful performance measure since we conduct substantially all 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 our Operating Partnership. We believe FFO allocable to common shareholders is a useful performance measure because it is the performance measure that is most directly comparable to net income (loss) attributable to common shareholders.
In our reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders that is presented below, we make an adjustment to add back noncontrolling interest in loss of our Operating Partnership in order to arrive at FFO of the Operating Partnership common unitholders. We then apply a percentage to FFO of the Operating Partnership common unitholders to arrive at FFO allocable to common shareholders. The percentage is computed by taking the weighted-average number of common shares outstanding for the period and dividing it by the sum of the weighted-average number of common shares and the weighted-average number of Operating Partnership units held by noncontrolling interests during the period.
FFO does not represent cash flows from operations as defined by GAAP, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income (loss) for purposes of evaluating our operating performance or to cash flow as a measure of liquidity.
We believe that it is important to identify the impact of certain significant items on our FFO measures for a reader to have a complete understanding of our results of operations. Therefore, we have also presented adjusted FFO measures excluding these significant items from the applicable periods. Please refer to the reconciliation of net loss attributable to
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common shareholders to FFO allocable to Operating Partnership common unitholders below for a description of these adjustments.
FFO of the Operating Partnership for the three months ended June 30, 2022 was $30.9 million compared to $50.8 million for the prior-year period, which represents a decrease of $19.9 million. Excluding the adjustments noted below, FFO of the Operating Partnership, as adjusted, for the three months ended June 30, 2022 was $59.9 million compared to $79.5 million for the same period in 2021, which represents a decrease of $19.6 million. The decrease in FFO, as adjusted, was primarily driven by the recognition of interest expense in the current period on the secured term loan and the secured notes. We did not recognize interest expense in the prior-year period on the senior unsecured notes and the secured credit facility due to the bankruptcy filing.
The reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders for the three months ended June 30, 2022 and 2021 is as follows (in thousands):
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Three Months Ended June 30, |
|
|
|
Three Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Net loss attributable to common shareholders |
|
$ |
(41,598 |
) |
|
|
$ |
(8,882 |
) |
|
Noncontrolling interest in loss of Operating Partnership |
|
|
(44 |
) |
|
|
|
(230 |
) |
|
Depreciation and amortization expense of: |
|
|
|
|
|
|
|
|
|
|
Consolidated properties |
|
|
64,476 |
|
|
|
|
47,499 |
|
|
Unconsolidated affiliates |
|
|
8,819 |
|
|
|
|
13,456 |
|
|
Non-real estate assets |
|
|
(203 |
) |
|
|
|
(492 |
) |
|
Dividends allocable to unvested restricted stock |
|
|
210 |
|
|
|
|
— |
|
|
Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries |
|
|
(938 |
) |
|
|
|
(558 |
) |
|
Loss on impairment, net of taxes |
|
|
186 |
|
|
|
|
— |
|
|
FFO allocable to Operating Partnership common unitholders |
|
|
30,908 |
|
|
|
|
50,793 |
|
|
Debt discount accretion, net of noncontrolling interests' share (1) |
|
|
50,036 |
|
|
|
|
— |
|
|
Adjustment for unconsolidated affiliates with negative investment (2) |
|
|
(10,460 |
) |
|
|
|
— |
|
|
Senior secured notes fair value adjustment (3) |
|
|
(593 |
) |
|
|
|
— |
|
|
Litigation settlement (4) |
|
|
(65 |
) |
|
|
|
57 |
|
|
Non-cash default interest expense (5) |
|
|
(9,344 |
) |
|
|
|
11,576 |
|
|
Reorganization items, net (6) |
|
|
(613 |
) |
|
|
|
17,073 |
|
|
FFO allocable to Operating Partnership common unitholders, as adjusted |
|
$ |
59,869 |
|
|
|
$ |
79,499 |
|
|
(1) |
In conjunction with fresh start accounting upon emergence from bankruptcy, we recognized debt discounts equal to the difference between the outstanding balance of mortgage notes payable and the estimated fair value of such mortgage notes payable. The debt discounts are accreted over the terms of the respective mortgage notes payable using the effective interest method. |
|
(2) |
Represents our share of the earnings (losses) before depreciation and amortization expense of unconsolidated affiliates where we are not recognizing equity in earnings (losses) because our investment in the unconsolidated affiliate is below zero. |
|
(3) |
Represents the fair value adjustment recorded on the secured notes as interest expense. |
|
(4) |
Represents a credit to litigation settlement expense for the three-month period ended June 30, 2022 related to claim amounts that were released pursuant to the terms of the settlement agreement related to the settlement of a class action lawsuit. |
|
(5) |
The three months ended June 30, 2022 includes the reversal of default interest expense when waivers or forbearance agreements were obtained. The three months ended June 30, 2021 includes default interest expense related to loans secured by properties that were in default prior to the Company filing bankruptcy, as well as loans secured by properties that remain in default due to the Company filing bankruptcy. |
|
(6) |
Represents costs incurred subsequent to the bankruptcy filing, which consists of professional fees, legal fees, retention bonuses and U.S. Trustee fees expensed in accordance with ASC 852. |
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FFO of the Operating Partnership for the six months ended June 30, 2022 was $65.9 million compared to $141.0 million for the prior-year period, which represents a decrease of $75.1 million. Excluding the adjustments noted below, FFO of the Operating Partnership, as adjusted, for the six months ended June 30, 2022 was $117.3 million compared to $148.2 million for the same period in 2021, which represents a decrease of $30.8 million. The decrease in FFO, as adjusted, was primarily driven by the recognition of interest expense in the current period on the secured term loan, the exchangeable notes and the secured notes. We did not recognize interest expense in the prior-year period on the senior unsecured notes and the secured credit facility due to the bankruptcy filing.
The reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders for the six months ended June 30, 2022 and 2021 is as follows (in thousands):
|
|
|
Successor |
|
|
|
Predecessor |
|
|
|
|
Six Months Ended June 30, |
|
|
|
Six Months Ended June 30, |
|
|
|
|
2022 |
|
|
|
2021 |
|
|
Net loss attributable to common shareholders |
|
$ |
(82,320 |
) |
|
|
$ |
(35,645 |
) |
|
Noncontrolling interest in loss of Operating Partnership |
|
|
(59 |
) |
|
|
|
(928 |
) |
|
Depreciation and amortization expense of: |
|
|
|
|
|
|
|
|
|
|
Consolidated properties |
|
|
133,419 |
|
|
|
|
95,611 |
|
|
Unconsolidated affiliates |
|
|
17,339 |
|
|
|
|
26,986 |
|
|
Non-real estate assets |
|
|
(401 |
) |
|
|
|
(1,032 |
) |
|
Dividends allocable to unvested restricted stock |
|
|
210 |
|
|
|
|
— |
|
|
Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries |
|
|
(1,837 |
) |
|
|
|
(1,139 |
) |
|
Loss on impairment, net of taxes |
|
|
186 |
|
|
|
|
57,182 |
|
|
Gain on depreciable property |
|
|
(629 |
) |
|
|
|
— |
|
|
FFO allocable to Operating Partnership common unitholders |
|
|
65,908 |
|
|
|
|
141,035 |
|
|
Debt discount accretion, net of noncontrolling interests' share (1) |
|
|
128,499 |
|
|
|
|
— |
|
|
Adjustment for unconsolidated affiliates with negative investment (2) |
|
|
(23,007 |
) |
|
|
|
— |
|
|
Senior secured notes fair value adjustment (3) |
|
|
(395 |
) |
|
|
|
— |
|
|
Litigation settlement (4) |
|
|
(146 |
) |
|
|
|
(801 |
) |
|
Non-cash default interest expense (5) |
|
|
(18,220 |
) |
|
|
|
23,046 |
|
|
Gain on deconsolidation (6) |
|
|
(36,250 |
) |
|
|
|
(55,131 |
) |
|
Reorganization items, net (7) |
|
|
958 |
|
|
|
|
40,006 |
|
|
FFO allocable to Operating Partnership common unitholders, as adjusted |
|
$ |
117,347 |
|
|
|
$ |
148,155 |
|
|
(1) |
In conjunction with fresh start accounting upon emergence from bankruptcy, we recognized debt discounts equal to the difference between the outstanding balance of mortgage notes payable and the estimated fair value of such mortgage notes payable. The debt discounts are accreted over the terms of the respective mortgage notes payable using the effective interest method. |
|
(2) |
Represents our share of the earnings (losses) before depreciation and amortization expense of unconsolidated affiliates where we are not recognizing equity in earnings (losses) because our investment in the unconsolidated affiliate is below zero. |
|
(3) |
Represents the fair value adjustment recorded on the secured notes as interest expense. |
|
(4) |
Represents a credit to litigation settlement expense for the six-month period ended June 30, 2022 related to claim amounts that were released pursuant to the terms of the settlement agreement related to the settlement of a class action lawsuit. |
|
(5) |
The six months ended June 30, 2022 includes the reversal of default interest expense when waivers or forbearance agreements were obtained. The six months ended June 30, 2021 includes default interest expense related to loans secured by properties that were in default prior to the Company filing bankruptcy, as well as loans secured by properties that remain in default due to the Company filing bankruptcy. |
|
(6) |
For the six months ended June 30, 2022, we deconsolidated Greenbrier Mall due to a loss of control when the property was placed into receivership in connection with the foreclosure process. For the six months ended June 30, 2021, we deconsolidated Asheville Mall and Park Plaza due to a loss of control when the properties were placed into receivership in connection with the foreclosure process. |
|
(7) |
Represents costs incurred subsequent to the bankruptcy filing, which consists of professional fees, legal fees, retention bonuses and U.S. Trustee fees expensed in accordance with ASC 852. |