Market Overview

CBL Properties Reports Results for Third Quarter 2019

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Results In-Line; Guidance Range Maintained

CBL Properties (NYSE:CBL) announced results for the third quarter ended September 30, 2019. A description of each supplemental non-GAAP financial measure and the related reconciliation to the comparable GAAP financial measure is located at the end of this news release.

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2019

 

2018

 

%

 

2019

 

2018

 

%

Net loss attributable to common shareholders per diluted share

$

(0.26

)

 

$

(0.07

)

 

(271.4

)%

 

$

(0.75

)

 

$

(0.34

)

 

(120.6

)%

Funds from Operations ("FFO") per diluted share

$

0.45

 

 

$

0.39

 

 

15.4

%

 

$

1.01

 

 

$

1.26

 

 

(19.8

)%

FFO, as adjusted, per diluted share (1)

$

0.34

 

 

$

0.40

 

 

(15.0

)%

 

$

0.98

 

 

$

1.28

 

 

(23.4

)%

 

(1) For a reconciliation of FFO to FFO, as adjusted, for the periods presented, please refer to the footnotes to the Company's reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders on page 11 of this news release.

KEY TAKEAWAYS:

  • Same-center sales per square foot for the stabilized mall portfolio for the third quarter improved 3.2%. For the twelve-months ended September 30, 2019, same-center sales increased 1.1% to $383 per square foot compared with the prior-year period.
  • CBL made significant progress on its anchor redevelopment program, including 27 former anchor spaces committed, under construction or with replacements already open featuring dining, entertainment, fitness and other mixed-use components.
  • FFO per diluted share, as adjusted, was $0.34 for the third quarter 2019, compared with $0.40 per share for the third quarter 2018. Third quarter 2019 FFO per share was impacted by $0.02 per share of dilution from asset sales completed since the prior-year period and $0.04 per share of lower property NOI.
  • Total Portfolio Same-center NOI declined 5.9% for the three months and declined 5.5% for the nine months ended September 30, 2019, as compared with the prior-year periods.
  • Portfolio occupancy as of September 30, 2019, was 90.5%, representing a 30 basis point improvement sequentially, and a 150 basis point decline compared with 92.0% as of September 30, 2018. Same-center mall occupancy was 88.7% as of September 30, 2019, a 60 basis point improvement sequentially and a 200 basis point decline compared with 90.7% as of September 30, 2018.
  • Year-to-date, CBL has completed or announced gross asset sales totaling $161.4 million (details herein).

"Third quarter results demonstrated the resiliency of our portfolio of market dominant properties. With adjusted FFO per share of $0.34 and portfolio same-center NOI of (5.9)%, we are on track to achieve full-year results within the mid-to-high end of our reaffirmed guidance range," said Stephen D. Lebovitz, Chief Executive Officer. "Operational results were also in-line with improved sales and spreads on new leasing, and our reserve was able to offset additional retailer bankruptcies, store closings and restructurings. For the third quarter, portfolio sales increased 3.2%, bringing our rolling twelve-month sales to $383 per square foot. This trend should provide a positive backdrop for us during the holiday season as well as on future lease negotiations.

"Last week, we celebrated the grand opening of the redevelopment of the former Sears at Brookfield Square in Milwaukee, which represents a milestone in our portfolio transformation strategy. The project has generated a huge amount of excitement with new-to-market entertainment users Whirlyball and Movie Tavern by Marcus Theatres and in-demand restaurants, services and shops. The adjacent city-owned hotel and convention center opening next year will provide an added source of traffic.

"The Brookfield Square project is a great example of our strategy of utilizing redevelopments to transform our properties into suburban town centers. In this case, we are combining successful retail, entertainment, restaurants, fitness and non-retail elements, including medical office and the hotel/convention center. Across our portfolio, we are diversifying our tenant mix in our shop leasing efforts, and we are pursuing opportunities to make more productive use of available land. Year-to-date, 74% of new mall leasing was executed with non-apparel tenants. We also recently commenced construction with joint venture partners on two new self-storage projects and a hotel and have several additional non-retail projects on the drawing board. These projects demonstrate the tangible progress and creativity that helps bring us closer to our goal of stabilizing revenues and returning to growth."

Net loss attributable to common shareholders for the third quarter 2019 was $44.1 million, or a loss of $0.26 per diluted share, compared with a net loss of $12.6 million, or a loss of $0.07 per diluted share, for the third quarter 2018. Net loss for the third quarter 2019 was impacted by an $82.6 million loss on impairment of real estate to write down the carrying value of Mid Rivers Mall to the property's estimated fair value. The impairment was primarily a result of declines in projected future cash flows. Net loss for the third quarter 2019 also included a $22.7 million reduction to the class-action litigation expense accrued during the first quarter 2019. The majority of the reduction relates to past tenants that did not submit a claim pursuant to the terms of the settlement agreement with the remainder relating to tenants that opted out of the lawsuit.

FFO allocable to common shareholders, as adjusted, for the third quarter 2019 was $58.7 million, or $0.34 per diluted share, compared with $68.6 million, or $0.40 per diluted share, for the third quarter 2018. FFO allocable to the Operating Partnership common unitholders, as adjusted, for the third quarter 2019 was $67.8 million compared with $79.2 million for the third quarter 2018.

 

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

 

 

Three Months Ended

September 30, 2019

 

Nine Months Ended

September 30, 2019

Portfolio same-center NOI

 

(5.9

)%

 

(5.5

)%

Mall same-center NOI

 

(6.9

)%

 

(6.4

)%

(1) CBL's definition of same-center NOI excludes the impact of lease termination fees and certain non-cash items such as straight-line rents and reimbursements, write-offs of landlord inducements and net amortization of acquired above and below market leases.

Major variances impacting same-center NOI for the quarter ended September 30, 2019, include:

  • Same-center NOI declined $8.7 million, due to a $10.0 million decrease in revenues offset by a $1.3 million decline in operating expenses.
  • Rental revenues declined $12.5 million, including a $6.9 million decline in tenant reimbursements and a $5.6 million decline in minimum and other rents. Percentage rents were flat.
  • Property operating expenses declined $1.1 million compared with the prior year. Maintenance and repair expenses declined $0.3 million. Real estate tax expenses increased $0.1 million.

PORTFOLIO OPERATIONAL RESULTS

Occupancy(1):

 
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