10-K 1 cbl10kvrs3.txt ANNUAL REPORT ON FORM 10-K 12/31/2000 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Fiscal Year Ended December 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to ------- ------- Commission File No. 1-12494 CBL & ASSOCIATES PROPERTIES, INC. ------------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 62-1545718 -------------------------------- ----------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) Number) 6148 Lee Highway, Suite 300 Chattanooga, Tennessee 37421 --------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (423) 855-0001 Securities registered pursuant to Section 12(b) of the Act: Name of each Exchange Title of Each Class on which Registered ------------------------- -------------------------------------- Common Stock, $.01 par New York Stock Exchange value per share 9% Series A Cumulative Redeemable Preferred Stock, par New York Stock Exchange value $.01 per share, Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all Reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ___X___ No ______ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $673,090,299 based on the closing price on the New York Stock Exchange for such stock on March 23, 2001. As of March 23, 2001, there were 25,247,198 shares of the Registrant's Common Stock outstanding and 2,875,000 shares of 9% Series A Cumulative Redeemable Preferred Stock. DOCUMENTS INCORPORATED BY REFERENCE Part III incorporates certain information by reference to the Registrant's definitive proxy statement filed on March 29, 2001 in respect to the Annual Meeting of Stockholders to be held on May 2, 2001. 1 FORM 10-K TABLE OF CONTENTS Item No. Page PART I Item 1 Business................................................... 3 Item 2 Properties................................................. 16 Item 3 Legal Proceedings.......................................... 38 Item 4 Submission of Matters to a Vote of Security Holders........ 38 PART II Item 5 Market for Registrant's Common Equity and Related Shareholder Matters........................................ 39 Item 6 Selected Financial Data.................................... 40 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 41 Item 7A Quantitative and Qualitative Disclosures about Market Risk. 51 Item 8 Financial Statements and Supplementary Data................ 51 Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure........................ 51 PART III Item 10 Directors and Executive Officers of the Registrant......... 51 Item 11 Executive Compensation..................................... 52 Item 12 Security Ownership of Certain Beneficial Owners and Management............................................. 52 Item 13 Certain Relationships and Related Transactions............. 52 PART IV Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K........................................ 52 2 CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION OR THE PURPOSE OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Annual Report on Form 10-K contains "forward-looking statements", such as information relating to the Company's growth strategy, projects targeted for development or under construction, liquidity and capital resources, and compliance with environmental laws and regulations. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially, including, but not limited to, those set forth below. Readers are cautioned not to place undue reliance on these forward-looking statements, which, unless otherwise expressly indicated, speak only as of December 31, 2000. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events. PART I ITEM 1. BUSINESS. FORMATION OF THE COMPANY CBL & Associates Properties, Inc. (the "Company") is a self-managed, self-administered, fully-integrated real estate company which is engaged in the ownership, operation, marketing, management, leasing, expansion, development, redevelopment, acquisition and financing of regional malls and community and neighborhood centers. The Company was incorporated on July 13, 1993 under the laws of the State of Delaware to acquire an interest in substantially all of the real estate properties owned by CBL & Associates, Inc. and its affiliates ("CBL") and to provide a public vehicle for the expansion of CBL's shopping center business. The Company conducts substantially all of its business through CBL & Associates Limited Partnership, a Delaware Limited Partnership (the "Operating Partnership"), in which the Company owns an indirect 68.0% interest and of which the Company's wholly-owned subsidiary is the sole general partner. To comply with certain technical requirements of the Internal Revenue Code of 1986, as amended (the "Code") applicable to Real Estate Investment Trusts' ("REITs"), the Company's property management and development activities, sales of peripheral land and maintenance and security operations are carried out through CBL & Associates Management, Inc. (the "Management Company"). On November 3, 1993, the Company completed the initial public offering (the "Offering") of 15,400,000 shares of its common stock, par value $.01 per share (the "Common Stock"). Simultaneously with the completion of the Offering, CBL transferred to the Operating Partnership substantially all of CBL's interests in its real estate properties and its management and development operations in exchange for an interest in the Operating Partnership. CBL also acquired an additional interest in the Operating Partnership for a cash payment. The Offering and the application of proceeds therefrom, including the Operating Partnership's acquisition of certain property interests, and the contribution by CBL of property interests to the Operating Partnership, are referred to herein as the "Formation." In September 1995, the Company completed a follow-on offering of 4,163,500 shares of its Common Stock at $20.625 per share. CBL purchased 150,000 of these shares. In January 1997, the Company completed a follow-on offering of 3,000,000 shares of its Common Stock at $26.125 per share. CBL purchased 55,000 of these shares. 3 In June 1998, the Company completed a public offering of 2,875,000 shares of 9% Series A Cumulative Redeemable Preferred Stock (the "Series A Preferred Stock") at a price to the public of $25.00 per share. The net proceeds of $70 million were used to repay variable rate indebtedness incurred in the Company's development and acquisition programs. After giving effect to the above transactions, at December 31, 2000 CBL (including interests held by former executives) held a 25.5% limited partner interest in the Operating Partnership, the Company held a 68.0% general and limited partner interest in the Operating Partnership and third parties held a 6.5% limited partner interest. In addition, CBL holds approximately 2.0 million of the outstanding shares of Common Stock for a total ownership share of 30.9%. On September 25, 2000, the Company entered into a series of agreements with Jacobs Realty Investors Limited Partnership and certain of its affiliates and partners ("Jacobs") pursuant to which the Company agreed to acquire from Jacobs a portfolio of 21 malls and 2 associated centers for an aggregate consideration of approximately $1.3 billion. The transaction closed on January 31, 2001. Additionally, in a separate transaction, the Company acquired the remaining 50% interest in Madison Square Mall as of January 31, 2001. In connection with these transactions, the Operating Partnership issued approximately 12.7 million special common units of the Operating Partnership ("SCUs"), representing in the aggregate a 25.48% limited partner interest in the Operating Partnership. Additionally, in connection with these transactions, the Operating Partnership incurred or assumed an aggregate $ 865.5 million of additional indebtedness. After giving effect to this transaction, CBL (including interests held by former executives) held a total 22.9% ownership interest in the Company and the Operating Partnership, the Company held a 50.8% general and limited partner interest in the Operating Partnership and Richard E. Jacobs and his affiliates held a 23.0% limited partner interest in the Operating Partnership. GENERAL The Company owns interests in a portfolio of properties, which as of December 31, 2000 consisted of 30 enclosed regional malls (the "Malls"), 16 associated centers (the "Associated Centers"), each of which is part of a regional shopping mall complex, and 72 independent community and neighborhood shopping centers (the "Community Centers"). Except for eleven Malls, three Associated Centers and four Community Centers which were acquired from third parties, each of these properties were developed by CBL or the Company. Additionally, as of December 31, 2000 the Company owned two regional Malls, one office building, one neighborhood shopping center and one mall expansion currently under construction (the "Construction Properties"). The Company also owned as of December 31, 2000 options to acquire certain shopping center development sites (the "Development Properties"). The Company also owned, as of December 31, 2000, mortgages (the "Mortgages") on community and neighborhood shopping centers owned by non-CBL affiliates. The Mortgages were granted in connection with sales by CBL of certain properties previously developed by CBL. The Company also owns an interest in a three-story office building in Chattanooga, Tennessee, a portion of which serves as the Company's headquarters (the "Office Building"). The Malls, Associated Centers, Community Centers, Construction Properties, Development Properties, Mortgages and Office Building (but without taking into account any of the properties acquired in the Jacobs transaction) are collectively referred to herein as the "Properties" and individually as a "Property". As of December 31, 2000 the Company had also entered into standby purchase agreements with third-party developers for the construction, development and potential ownership of two community centers in Texas (the "Co-Development Projects"). The developers have utilized these standby purchase agreements as additional security for their lenders to fund the construction of the Co-Development Projects. The standby purchase agreements for each of the Co-Development Projects require the Company to purchase the related Co-Development Project upon such Co-Development Project meeting certain completion requirements and rental levels. In return for its commitment to purchase a Co-Development Project pursuant to a standby purchase agreement, the Company receives a fee as well as a participation interest in each Co-Development Project. The outstanding amount of standby purchase agreements at December 31, 2000 is $51.4 million. 4 The Company and the Operating Partnership generally own a 100% interest in the Properties. With two exceptions, where the Company and the Operating Partnership own less than a 100% interest in a Property, the Operating Partnership is the sole general partner, managing general partner or managing member of the property partnership or limited liability company which owns such Property (each a "Property Partnership"). For one Mall and its Associated Center, affiliates of the Operating Partnership are non-managing general partners in the two applicable Property Partnerships. For a full description of the Properties, see Item 2 -- "Properties." The Company's executive offices are located at 6148 Lee Highway, Suite 300, Chattanooga, Tennessee 37421-6511. The telephone number at this address is (423) 855-0001. MANAGEMENT AND OPERATION OF PROPERTIES Management Company The Company is self-managed and self-administered. To comply with certain technical requirements of the Code, the Company's property management and development activities, sales of peripheral land and maintenance and security operations are carried out through the Management Company. The Operating Partnership holds 100% of the preferred stock and 5% of the common stock of the Management Company. The remaining 95% of the common stock is held by Charles Lebovitz, his family and his associates. Substantially all of CBL's asset management, property management and leasing and development operations, including CBL's executive, property, financial, legal and administrative personnel, were transferred to the Management Company as part of the Formation. The Management Company manages all of the Properties (except for Governor's Square and Governor's Plaza in Clarksville, Tennessee -- see below) under a management agreement that may be terminated at any time by the Operating Partnership upon 30 days written notice. In addition, the Management Company manages certain properties owned by CBL that were not transferred to the Company in the Formation as well as certain shopping centers owned by non-CBL affiliates. Through its ownership of the Management Company's preferred stock, the Operating Partnership enjoys substantially all of the economic benefits of the Management Company's business. Requirements set forth in the Management Company's Amended and Restated Certificate of Incorporation, state that a majority of the Management Company's board of directors are required to be independent of CBL. From November 1993 to the current date, the board of directors of the Management Company has consisted of seven of the members of the Company's board of directors, including four of the Company's independent directors. On-Site Management The on-site property management functions at the Malls include leasing, management, data processing, rent collection, project bookkeeping, budgeting, marketing, and promotion. Each Mall, for itself and its Associated Centers, has an on-site property manager who oversees the on-site staff and an on-site marketing director who oversees the marketing program for that Mall. District managers, most of whom are located at the Company's headquarters, oversee the leasing and operations at a majority of the Community Centers. The on-site Mall managers are experienced managers with training in mall management. 5 Virtually all operating activities of the Company are supported by a computer software system which is designed to provide management with operating data necessary to make informed business decisions on a timely basis. The Company has a program of on-going upgrades to hardware and software that support the accounting and management information system. The Company also maintains a web site to publish integrated information on the world wide web about the Company and the properties. These systems were developed to more efficiently assist management in efforts to market the properties, maintain management quality, enhance investor relations and communications and enhance tenant relations while minimizing operating expenses. Retail sales analysis, leasing information, budget controls, accounts receivable/payable, operating expense variance reports and income analysis are continually available to management. Through these systems management also has available information that facilitates the development and monitoring of budgets and other relevant information. Management pursues periodic preventative property maintenance programs, which encompass paving, roofing, HVAC and general improvements to the Properties' common areas. The on-site property managers oversee all such work in accordance with approved budgets with the coordination of, and reporting to home office management. Governor's Square Governor's Square and Governor's Plaza were the only Properties in the Company's portfolio on December 31, 2000 in which the Company was not the sole general partner or managing general partner. Governor's Square is owned by a Property Partnership, the managing general partner of which is a non-CBL affiliate which owns a 47.5% interest in the Mall. The Company is a non-managing general partner of Governor's Plaza. Although the managing general partner of this partnership controls the timing of distributions of cash flow, the Company's approval is required for certain major decisions, including permanent financing, refinancing and sale of all or substantially all of the partnership's assets. Property management services, including accounting, auditing, maintenance, promotional programs, leasing, collection and insurance, are performed by a property manager affiliated with the non-CBL managing general partner for which such property manager receives a fee. EMPLOYEES The Company, through the Management Company, currently employs approximately 560 full time and 517 part time persons. None of these employees is currently represented by any union. The Company does not have any employees other than its statutory officers. ENVIRONMENTAL MATTERS Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal or remediation of petroleum, certain hazardous or toxic substances on, under or in such real estate. Such laws typically impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such substances. The costs of remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner's or operator's ability to sell such real estate or to borrow using such real estate as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at the disposal or treatment facility, regardless of whether such facility is owned or operated by such person. Certain laws also impose requirements on conditions and activities that may affect the environment or the impact of the environment on human health. Failure to comply with such requirements could result in the imposition of monetary penalties (in addition to the costs to achieve compliance) and potential liabilities to third parties. Among other things, certain laws require abatement or removal of friable and certain non-friable asbestos-containing materials ("ACMs") in the event of demolition or certain renovations or remodeling. Certain laws regarding ACMs require building owners and lessees, among other things, to notify and train certain employees working in areas known or presumed to contain ACMs. Certain laws also impose liability for release of ACMs into the air and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with ACMs. In connection with its ownership and operation of the Properties, the Company, the Operating Partnership or the relevant Property Partnership, as the case may be, may be potentially liable for such costs or claims. 6 All of the Properties (excluding properties upon which the Company holds an option to purchase but does not yet own) have been subject to Phase I environmental assessments or updates of existing Phase I environmental assessments by independent environmental consultants. Such assessments generally consisted of a visual inspection of the Properties, review of federal and state environmental databases and certain information regarding historic uses of the Property and adjacent areas and the preparation and issuance of written reports. Some of the Properties contain, or contained, underground storage tanks ("UST"s) used for storing petroleum products or wastes typically associated with automobile service or other operations conducted at the Properties. At Parkway Place in Huntsville Alabama asbestos abatement will occur in portions of the existing mall during demolition which will be completed by the end of the second quarter of 2001. Certain Properties contain, or contained, dry-cleaning establishments utilizing solvents. Where believed to be warranted, samples of building materials or subsurface investigations were, or, will be undertaken. At certain Properties, where warranted by the conditions, the Company has developed and implemented an operations and maintenance program that establishes operating procedures with respect to ACMs. The costs associated with the development and implementation for such programs were not material. Although there can be no assurances that such environmental liability does not exist, other than Parkway Place none of the environmental assessments have identified and the Company is not aware of any environmental liability with respect to the Properties that the Company believes would have a material adverse effect on the Company's financial condition, results of operations or cash flows. Nevertheless, it is possible that the environmental assessments available to the Company do not reveal all potential environmental liabilities, that subsequent investigations will identify material contamination, that adverse environmental conditions have arisen subsequent to the performance of the environmental assessments, or that there are material environmental liabilities of which management is unaware. Moreover, no assurances can be given that (i) future laws, ordinances or regulations will not impose any material environmental liability or (ii) the current environmental condition of the Properties has not been or will not be affected by tenants and occupants of the Properties, by the condition of properties in the vicinity of the Properties or by third parties unrelated to the Company, the Operating Partnership or the relevant Property Partnership. The existence of any such environmental liability could have an adverse effect on the Company's results of operations, cash flow and the funds available to the Company to pay dividends. The Company has not recorded in its financial statements any material liability in connection with environmental matters. GENERAL RISKS OF THE COMPANY'S BUSINESS General Factors Affecting Investments in Shopping Center Properties and Effect of Economic and Real Estate Conditions A shopping center's revenues and value may be adversely affected by a number of factors, including: the national and regional economic climates; local real estate conditions (such as an oversupply of retail space); perceptions by retailers or shoppers of the safety, convenience and attractiveness of the shopping center; and the willingness and ability of the shopping center's owner to provide capable management and maintenance services. In addition, other factors may adversely affect a shopping center's value without affecting its current revenues, including: changes in governmental regulations, zoning or tax laws; potential environmental or other legal liabilities; availability of financing; and changes in interest rate levels. There are numerous shopping facilities that compete with the Properties in attracting retailers to lease space. In addition, retailers at the Properties face continued competition from discount shopping centers, outlet malls, wholesale clubs, direct mail, telemarketing, television shopping networks and shopping via the Internet. Competition could adversely affect the Operating Partnership's revenues and funds available for distribution to partners, which in turn will affect the Company's revenues and funds available for distribution to stockholders. 7 Geographic Concentration The Properties are located principally in the southeastern United States in Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, Tennessee and Virginia. Twenty Malls, fifteen Associated Centers, fifty-four Community Centers and the Office Building are located in these states. The Company's results of operations and funds available for distribution to stockholders therefore will be subject generally to economic conditions in the southeastern United States. As of December 31, 2000, the Properties located in the southeastern United States accounted for 65.0% of the Company's total assets, and provided 65.6% of the Company's total revenues for the year ended December 31, 2000. After giving effect to the Jacobs transaction the properties located in the southeastern United States account for 64.6% of the Company's total assets. Third Party Interests In Certain Properties As of December 31, 2000 the Operating Partnership owned partial interests in seven Malls, five Associated Centers, one Community Center, the Office Building and two Malls under development. The Operating Partnership or an affiliate of the Company is the managing general partner of the Property Partnerships that own such Properties, except for the Governor's Square Mall and its Associated Center, Governor's Plaza, in which affiliates of the Operating Partnership are non-managing general partners. Where the Operating Partnership serves as managing general partner of Property Partnerships, it may have certain fiduciary responsibilities to the other partners in those partnerships. In certain cases, the approval or consent of the other partners is required before the Operating Partnership may sell, finance, expand or make other significant changes in the operations of such Properties. To the extent such approvals or consents are required, the Operating Partnership may experience difficulty in, or may be prevented from implementing its plans with respect to expansion, development, financing or other similar transactions with respect to such Properties. With respect to Governor's Square and Governor's Plaza, the Operating Partnership does not have day-to-day operational control or control over certain major decisions, including the timing and amount of distributions, which could result in decisions by the managing general partner that do not fully reflect the interests of the Company, including decisions relating to the standards that the Company is required to satisfy in order to maintain its status as a real estate investment trust for tax purposes. However decisions relating to sales, expansions, dispositions of all or substantially all of the assets and financings, are subject to approval by the Operating Partnership. On January 31, 2001, in the Jacobs transaction the Company acquired a non-managing interest in Kentucky Oaks Mall. This investment will be subject to similar risks as the investments in Governor's Square and Governor's Plaza. Dependence on Significant Properties Hamilton Place Mall in Chattanooga, Tennessee, Coolsprings Galleria in Nashville, Tennessee and Burnsville Center in Minneapolis (Burnsville), Minnesota and accounted for approximately 4.9%, 4.7% and 4.7%, respectively, of total revenues of the Company for the period ended December 31, 2000. The Company's financial position and results of operations will therefore be disproportionately affected by the results experienced at these Properties. Hamilton Place Mall was renovated in 1999 and the Company has started a renovation of Burnsville Center in 2001. After giving effect to the Jacobs transaction, Hanes Mall in Winston-Salem, North Carolina would represent the largest revenue producing property in the combined portfolio. Hamilton Place, Coolsprings Galleria and Burnsville Center would then represent the next most significant revenue producing properties. The Company will begin a renovation of Hanes Mall in 2001. Generally, a renovation is a pro action step taken to both preserve and enhance a properties dominant position in its markets. 8 Dependence on Key Tenants As of December 31, 2000, The Limited Inc. Stores (including Intimate Brands, Inc.) maintained 121 stores in the Company's properties and in the year ended December 31, 2000 accounted for approximately 6.5% of total revenues of the Company. As of December 31, 2000, the Venator Group, Inc. (Champs Sports, Footlocker, etc.) had 74 stores and in the year ended December 31, 2000, accounted for 2.5% of the total revenues of the Company. As of December 31, 2000, The Gap, Inc. (The Gap, Gap Kids, Old Navy, etc.) had 36 stores and in the year ended December 31, 2000, accounted for 2.1% of the total revenues of the Company. Except for theses top three tenants no other tenant provided more than 2% of total revenues for the year ended December 31, 2000. After giving effect to the Jacobs Transaction The Limited stores (including Intimate Brands, Inc) would have 209 stores and would represent 9.0% of the mall store GLA in the combined portfolio, the Venator Group, Inc. would have 142 stores and would represent 3.0% of mall store GLA in the combined portfolio and The Gap, Inc. would have 62 stores and represent 3.5% of mall store GLA. These tenants would represent approximately the same proportion of total revenues after the transaction as before. The loss or bankruptcy of any of these or other key tenants could negatively affect the Company's financial position and results of operations. THE COMPANY'S STRATEGY FOR GROWTH Management believes that per share growth in the Company's Funds from Operations, as defined below, is one of the key factors in enhancing shareholder value. Management also believes that Funds from Operations is a widely used measure of the operating performance of REITs, and its consistent determination provides a relevant basis for comparison among REITs. It is the objective of the Company's management to achieve growth in Funds from Operations through the aggressive management of the Company's existing Properties, the expansion and renovation of existing Properties, the development of new properties, and select acquisitions. Funds from Operations can also be affected by external factors, such as inflation, fluctuations in interest rates or changes in general economic conditions, which are beyond the control of the Company's management. "Funds from Operations" is defined by the Company as net income (loss) before property depreciation, other non-cash items, gains or losses on sales of real estate assets and gains or losses on investments in marketable securities. The National Association of Real Estate Investment Trusts ("NAREIT") has clarified the definition of Funds from Operations to include all operating results - recurring and non-recurring - except those results defined as "extraordinary items" under accounting principles generally accepted in the United States. The Company implemented this clarification in the first quarter of 2000 and no longer adds back to FFO the development costs charged to net income. This amount was $127,000 for the year ended December 31, 2000. For comparative purposes, the Company has recomputed its 1999 FFO to exclude the add-back of development costs charged to net income of $1,674,000. The cost of interest rate caps and finance costs on the Company's lines of credit are amortized and included in interest expense and, therefore, reduces Funds from Operations. Funds from Operations also includes the Company's share of Funds from Operations in unconsolidated properties and excludes minority interests' share of Funds from Operations in consolidated properties. The Company excludes outparcel sales from its Funds from Operations calculation, even though the NAREIT definition allows their inclusion. Funds from Operations does not represent cash flow from operations as defined by generally accepted accounting principals ("GAAP") and is not necessarily indicative of cash available from operations to fund all cash flow needs and should not be considered an alternative to net income (loss) for purposes of evaluating the Company's operating performance or to cash flows as a measure of liquidity. The Company classifies its regional malls into two categories - stabilized malls ("Stabilized Malls") which have completed their initial lease-up and new malls ("New Malls") which are in their initial lease-up phase or are being redeveloped. At December 31, 2000, the New Mall category was comprised of Springdale Mall in Mobile, Alabama which was acquired in September 1997 and which is currently being redeveloped and retenanted; Bonita Lakes Mall in Meridian, Mississippi which opened in October 1997; Parkway Place Mall in Huntsville, Alabama which was acquired in December, 1998 and which is being redeveloped and Arbor Place in Atlanta (Douglasville), Georgia, which opened in October 1999. 9 Specifically, the Company has implemented its objective of growing its Funds from Operations and will continue to do so by: o Acquiring existing retail properties where cash flow can be enhanced by improved management, leasing, redevelopment and expansion. -- On September 25, 2000, the Company agreed to acquire from Jacobs interests in twenty-one malls and two associated centers. The transaction closed on January 31, 2001. The total gross leasable area of the twenty-three properties is 19.2 million square feet, or an average gross leasable area of 914,000 square feet per mall. The gross leasable area of Mall Stores is approximately 5.9 million square feet. The malls are located in middle markets predominantly in the Southeast and the Midwest. Following is certain information concerning properties acquired from Jacobs:
Year of Sales Percentage most Recent per Mall Store Name of Year of Expansion/ Proposed Total GLA Mall Store Square GLA Mall/Location Opening Renovation Ownership (1) GLA Foot(2) Leased(3) Anchors ---------------------------------------------------------------------------------------------------------------------------- Brookfield Square. 1967 1997 100.00% 1,041,000 317,000 $407 91% Boston Store, Sears, Brookfield, WI JCPenney Cary Towne Center. 1979 1993 80.00% 953,000 296,000 352 96% Dillard's, Hecht's, Cary, NC Hudson, Belk, Cherryvale Mall... 1973 1989 100.00% 714,000 305,000 307 86% Bergner's, Marshall Rockford, IL Fields, Sears Citadel Mall...... 1981 2000 100.00% 1,068,000 299,000 254 84% Parisian, Dillard's, Charleston, SC Belk, Target, Sears Columbia Mall..... 1977 1997 79.00% 1,113,000 299,000 229 87% Dillard's, JCPenney, Columbia, SC Rich's, Sears Eastgate Mall (6). 1980 1995 100.00% 1,099,000 270,000 244 73% JCPenney, Kohl's, Cincinnati,OH Dillard's, Sears East Towne Mall... 1971 1997 65.00% 895,000 301,000 279 92% Boston Store, Younkers, Madison, WI Sears, JCPenney Fashion Square.... 1972 1993 100.00% 786,000 289,000 293 86% Hudson's, JCPenney, Saginaw, MI Sears Fayette Mall...... 1971 1993 100.00% 1,096,000 309,000 492 98% Lazarus, Dillard's, Lexington, KY JCPenney, Sears Hanes Mall........ 1975 1990 100.00% 1,556,000 555,000 335 93% Dillard's, Belk, Hecht's, Winston-Salem, NC Sears, JCPenney Jefferson Mall.... 1978 1999 100.00% 936,000 276,000 262 90% Lazarus, Dillard's, Louisville, KY Sears, JCPenney Kentucky Oaks Mall 1982 1995 50.00% 878,000 278,000 257 98% Dillard's(4), Elder- Paducah, KY(5), Beerman, JCPenney, Midland Mall...... 1991 - 100.00% 514,000 197,000 237 88% Elder-Beerman, Midland, MI JCPenney, Sears, Target Northwoods Mall... 1972 1995 100.00% 833,000 314,000 279 87% Dillard's, Belk, Charleston, SC JCPenney, Sears 10 Old Hickory Mall.. 1967 1994 100.00% 556,000 161,000 308 97% Belk, Goldsmith's, Jackson, TN Sears, JCPenney Parkdale Mall..... 1986 1993 100.00% 1,411,000 475,000 250 86% Dillard's(4), JCPenney, Beaumont,TX Montgomery Ward(5), Sears Randolph Mall..... 1982 1989 100.00% 376,000 147,000 232 84% Belk, JCPenney, Asheboro, NC Roses(5), Sears Regency Mall...... 1981 1999 100.00% 918,000 268,000 244 80% Boston Store, Younkers, Racine, WI JCPenney, Sears Towne Mall........ 1977 - 100.00% 521,000 154,000 310 56% Elder-Beerman, Franklin, OH Dillard's, Sears Wausau Center..... 1983 1999 100.00% 429,000 156,000 297 96% Younkers, JCPenney, Wausau, WI Sears West Towne Mall(6) 1970 1990 65.00% 1,468,000 263,000 355 90% Boston Store, Sears, Madison, WI JCPenney ---------- ---------- Total............. 19,161,000 5,929,000 ========== ========= ----------- (1) Includes improved outparcels acquired in the transaction. (2) Annual sales per square foot for the year ended December 31, 1999. (3) Occupancy as of December 31, 2000. (4) Represents two Dillard's stores. (5) Vacant Anchor Store. (6) Includes Associated Center.
- On January 31, 2001, the Company acquired the 50% interest in Madison Square Mall in Huntsville, Alabama not owned by the Company for total consideration of 603,344 special common units in the Operating Partnership(SCUs) and the assumption of $23.8 million of non-recourse mortgage debt. o Maximizing the cash flow from its existing portfolio of Malls, Associated Centers and Community Centers, and other retail complexes through aggressive leasing, management, and marketing, including: - an active leasing strategy which seeks to increase occupancy. At December 31, 2000, the occupancy at the Stabilized Malls, New Malls, Associated Centers, and Community Centers was 94.5%, 90.4%, 94.9%, and 97.8%, respectively, as compared to occupancies of 94.5%, 91.8%, 93.2%, and 97.7%, respectively, at December 31, 1999 (excluding, from both years, Parkway Place which is under redevelopment); - expanded merchandising, marketing and promotional activities, with the goal of enhancing tenant sales and thereby increasing percentage rents. Mall store sales per square foot for the year ended December 31, 2000 were relatively the same at the Stabilized Malls compared with the year ended December 31, 1999; - increased base rents as tenant leases expire, renegotiation of leases and negotiation of terminations of leases of under performing retailers. At December 31, 2000 average base rents per square foot at the Malls, Associated Centers, and Community Centers was $21.57, $9.88, and $8.85, respectively, as compared to average base rents per square foot of $20.68, $9.78, and $8.32, respectively, at December 31, 1999; 11 - control of operating costs. Occupancy costs as a percentage of sales at the Stabilized Malls increased slightly to 11.9% for the year ended December 31, 2000 as compared to 11.5% for the year ended December 31, 1999 (excluding acquisition malls from year of acquisition). o Expanding and renovating existing properties to maintain their competitive position. - Most of the Malls were designed to allow for expansion and growth through the addition of new department stores or other large retail stores as anchors ("Anchors"). Twenty-four of the thirty Malls have undergone expansion or renovation since their opening, and all of the non-acquired Malls have been either built or renovated in the last 10 years. Three of the Malls had available Anchor pads at December 31, 2000. Twenty existing Anchors at eleven Malls have expansion potential at their existing stores. During 2000, the Company renovated and expanded Asheville Mall in Asheville, North Carolina and Meridian Mall in Lansing (Okemos), Michigan and expanded Springdale Mall in Mobile, Alabama. The Company also began construction of a food court at Georgia Square Mall in Athens, Georgia. During 2001, the Company will continue to expand and re-develop Springdale Mall in Mobile, Alabama and complete the expansion of Meridian Mall in Lansing (Okemos), Michigan. The Company will also begin the renovation of Burnsville Center in Minneapolis(Burnsville), Minnesota and three malls acquired in the Jacobs transaction: Hanes Mall in Winston-Salem North Carolina; Fashion Square Mall in Saginaw, Michigan and Cary Towne Center in Cary, North Carolina. - In the Community Center and Associated Center portfolios, the Company renovated three Community Centers, and expanded two Community Centers. In 2001, the Company plans to expand two Community Centers, renovate at least two Community Centers and redevelop a vacant theater location in one Associated Center. o Developing new retail properties with profitable returns on capital, leading to growth in the future. 12 - In 2000, the Company opened three Mall expansions, one Associated Center, two Community Centers and two Community Center expansions. Summary information concerning these properties is set forth below. Summary Information Concerning Properties Opened During the Year Ended December 31, 2000
Anchor Non- Name of Center/ Total GLA Anchor Percentage Opening Location GLA (1) (2) GLA Leased(3) Date Anchors ----------------------------- ------------ ------------ ------------ ------------- ------------ ------------------- Mall Expansions ---------------- Asheville Mall........... 143,000 58,000 85,000 100% Nov-2000 Belk Asheville, NC Meridian Mall............ 85,000 85,000 0 - Nov-2000 Jacobson's Lansing (Okemos), MI Springdale Mall.......... 45,000 45,000 0 100% Apr-2000 Carmike Mobile, AL Associated Centers ------------------ Gunbarrel Pointe......(4) 195,000 126,000 69,000 100% Oct-2000 Goody's, Chattanooga, TN Target(5), Kohl's(4) Community Centers ----------------- Coastal Way.............. 177,000 144,000 33,000 99% Aug-2000 Sears Spring Hill, FL Chesterfield Crossing.... 406,000 391,000 15,000 97% Oct-2000 Home Depot(5), Richmond, VA PetsMart, Wal*Mart(5), Ben Franklin Community Center Expansions --------------------------- Sand Lake Expansion...... 38,000 24,000 14,000 89% May-2000 Staples Orlando, FL Sutton Plaza............. 28,000 28,000 0 100% Feb-2000 A & P Food Market A & P Expansion Mt. Olive, NJ ------------ ------------ ------------ Total Properties Opened. 1,117,000 901,000 216,000 ============ ============ ============ ( 1) Gross Leasable Area ("GLA") includes total square footage of Anchors (whether owned or leased by the Anchor) and Mall stores or shops. ( 2) Includes total square footage of Anchors (whether owned or leased by the Anchor) ( 3) Percentage leased and committed for Malls does not include Anchor GLA. For the Community Centers, Associated Centers and power centers, percentage leased and committed includes non-Anchor GLA and leased Anchor GLA. ( 4) An additional 87,000 square feet opened in March 2001 containing Kohl's. ( 5) Owned by Anchor.
- As of December 31, 2000 the Company had two Malls, one Mall expansion, one Associated Center, one Community Center expansion, and one Office Building under construction. These properties will add approximately 1,901,000 square feet to the Company's portfolio at opening. During 2001 and 2002 the Company expects to open 1,142,000 and 759,000 square feet, respectively. 13 Summary Information Concerning Construction Properties As of February 28, 2001
Ownership by Company Percenage Anchor Non- and Pre-Leased Name of Center/ Total GLA Anchor Operating and Projected Location GLA (1) (2) GLA Partnership Committed(3) Opening Anchors ------------------------- ----------- ----------- ----------- ------------- -------------- --------------- --------------- Malls ----- The Lakes Mall 558,000 339,000 219,000 90% 70.0% Aug-2001 Sears (4), Muskegon, MI Younkers (4), JCPenney (4) Parkway Place 631,000 350,000 281,000 50% 41.0% Oct-2002 Dillard's (4), Huntsville, AL Parisian (4) Mall Expansion ---------- Meridian Mall 93,000 80,000 13,000 100% 0% Apr-2001 Lansing (Okemos), MI Associated Center ------------------ Gunbarrel Pointe 87,000 87,000 0 100% 100.0% Mar-2001 Kohl's(5) Chattanooga, TN Community Center ---------------- Creekwood Crossing 404,000 347,000 57,000 100% 90.0% Apr-2001 Lowe's(4)(5), Bradenton, FL KMart(5), Bealls Office Building --------------- CBL Center 128,000 72,000 56,000 90% 78.0% Dec-2001 CBL & Chattanooga, TN Associates Management ----------- ----------- ----------- Total Construction Properties 1,901,000 1,275,000 626,000 =========== =========== =========== ( 1).....Includes total square footage of Anchors (whether owned or leased by the Anchor). ( 2).....Includes total square footage of Anchors (whether owned or leased by the Anchor). ( 3).....Percentage leased and committed for Malls does not include Anchor GLA. For the Community Centers, Associated Centers and power centers, percentage leased and committed includes non-Anchor GLA and leased Anchor GLA. ( 4).....Owned by Tenant. ( 5).....The anchor store opened in March 2001.
- In addition to the Construction Properties as of December 31, 2000, the Company was pursuing the development of a number of sites which the Company believed were viable for future development as malls and community and neighborhood shopping centers. Regional mall development sites were being pursued in Georgia, Mississippi and South Carolina and Community and Associated Center shopping center sites were being pursued in Florida, Tennessee, Pennsylvania and Virginia. - In general, the Company seeks out development opportunities in middle-market trade areas that it believes are under-serviced by existing retail facilities, have demonstrated improving demographic trends or otherwise afford an opportunity for effective market penetration and competitive presence. 14 RISKS ASSOCIATED WITH THE COMPANY'S GROWTH STRATEGY In connection with the implementation of this growth strategy, the Company and the Operating Partnership will incur various risks including the risk that development or expansion opportunities explored by the Company and the Operating Partnership may be abandoned; the risk that construction costs of a project may exceed original estimates, possibly making the project not profitable; the risk that the Company and the Operating Partnership may not be able to refinance construction loans which are generally with full recourse to the Company and the Operating Partnership; the risk that occupancy rates and rents at a completed project will not meet projections, and will therefore be insufficient to make the project profitable; and the need for anchor, mortgage lender and property partner approvals for certain expansion activities. In the event of an unsuccessful development project, the Company's and the Operating Partnership's loss could exceed its investment in the project. The Company has in the past elected not to proceed with certain development projects and anticipates that it will do so again from time to time in the future. If the Company elects not to proceed with a development opportunity, the development costs associated therewith ordinarily will be charged against income and Funds From Operations for the then-current period. Any such charge could have a material adverse effect on the Company's results of operations for the period in which the charge is taken. COMPETITION There are numerous shopping facilities that compete with the Properties in attracting retailers to lease space. The Malls are generally located in middle-markets. Management believes that the Malls have strong competitive positions because they generally are the only or largest enclosed malls within their respective trade areas. In addition, retailers at the Properties face continued competition from discount shopping centers, outlet malls, wholesale clubs, direct mail, telemarketing, television shopping networks and shopping via the Internet. Competition could adversely affect the Operating Partnership's revenues and funds available for distributions to partners, which in turn will affect the Company's revenues and funds available for distribution to stockholders. SEASONALITY The Company's business is somewhat seasonal in nature with tenant sales achieving the highest levels during the fourth quarter because of the holiday season. The Malls earn most of their "temporary" rents (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 entire year. QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST The Company has elected to be taxed as real estate investment trust under the Code, commencing with its taxable year ended December 31, 1993, and will seek to maintain such status. As a qualified real estate investment trust, the Company generally will not be subject to Federal income tax to the extent it distributes at least 90% of its current year real estate investment trust taxable income to its shareholders. If the Company fails to qualify as a real estate investment trust in any taxable year, the Company will be subject to Federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates. INSURANCE The Operating Partnership carries comprehensive liability, fire, extended coverage and rental loss insurance covering all the Properties, with policy specifications and insured limits customarily carried for similar properties. Management believes that the Properties are adequately insured in accordance with industry standards. 15 ITEM 2. PROPERTIES. MALLS Each of the Malls is an enclosed regional shopping complex. Each Mall generally has at least three Anchors which own or lease their stores and numerous non-anchor stores with GLA less than 30,000 square feet ("Mall Stores"), most of which are national or regional retailers, located along enclosed malls connecting the Anchors. At most of the Malls, additional freestanding restaurants and retail stores are located on the periphery of the Mall complex. These freestanding stores are, in most cases, owned by their occupants. As of December 31, 2000, thirteen of the Mall complexes included one or more Associated Centers. The total GLA of the 30 Malls owned on December 31, 2000 was approximately 22.6 million square feet or an average GLA of approximately 754,000 square feet per Mall. Mall Store GLA was 8,033,000 square feet including leased free-standing buildings at December 31, 2000. The Company wholly owned all but seven of such Malls and managed all but one of them. In the years ended December 31, 1998, 1999 and 2000, Mall revenues represented approximately 74.9%, 76.9% and 77.3%, respectively, of total revenues from the Company's Properties. Occupancy of mall stores in the Stabilized Malls ("Stabilized Mall Stores") was 94.5% at December 31, 1999, and at December 31, 2000. In the years ended December 31, 1998, 1999 and 2000, average Stabilized Mall Store sales per square foot were approximately $272.00, $283.75 and $283.00, respectively (computed using a monthly weighted average). Average base rent per square foot at the Mall Stores increased from $20.73 at December 31, 1999 to $21.57 at December 31, 2000. Occupancy costs as a percentage of sales for tenants in the Stabilized Malls (excluding acquisition malls from the year of acquisition) were 11.1%, 11.5% and 11.9% for the years ended December 31, 1998, 1999, and 2000, respectively. The Malls are generally located in middle-markets. Management believes that the Malls have strong competitive positions because they generally are the only, or the dominant enclosed malls within their respective trade areas. Trade areas have been identified by management based upon a number of sources of information, including the location of other malls, publicly available population information, customer surveys, surveys of customer automobile license plates, as well as ZIP codes and third-party market studies. The three largest revenue-producing Malls in 2000 were Hamilton Place Mall, Coolsprings Galleria and Burnsville Center. Hamilton Place is located on a 187-acre site in Chattanooga, Tennessee and represented, as of December 31, 2000, 3.4% of the Properties' total GLA, 3.6% of total Mall Store GLA and 4.9% of total revenues from the Company's Properties. Coolsprings Galleria is located on a 150-acre site in Nashville, Tennessee and represented, as of December 31, 2000, 3.4% of the Properties' total GLA, 3.6% of total Mall Store GLA and 4.7% of total revenues from the Company's Properties. Burnsville Center is located in the Suburbs of Minneapolis, Minnesota in Burnsville and represented, as of December 31, 2000, 3.1% of the Properties' total GLA, 3.9% of total Mall Store GLA and 4.7% of total revenues from the Company's Properties. Twenty-four of the thirty Malls owned on December 31, 2000 had undergone an expansion or remodeling since their opening, and all but four of the Malls were either built, renovated or expanded in the last 10 years one of which, Parkway Place in Huntsville, Alabama is currently scheduled for 16 demolition and redevelopment. In 2000, the Company renovated and expanded Asheville Mall in Asheville, North Carolina and Meridian Mall in Lansing, Michigan. The Company will complete the expansion of Meridian Mall in 2001 and will begin the renovation of Burnsville Center in Minneapolis (Burnsville), Minnesota and three malls in the Jacobs transaction: Hanes Mall in Winston-Salem, North Carolina, Fashion Square in Saginaw, Michigan and Cary Towne Center in Cary, North Carolina. At December 31, 2000 three of the Malls have available Anchor pads providing expansion potential totaling approximately 405,700 buildable square feet. At December 31, 2000 twenty existing Anchors at eleven Malls have aggregate expansion potential at their existing stores of approximately 473,000 buildable square feet. The land underlying the Malls owned on December 31, 2000 was owned in fee simple in all cases, except for Walnut Square, WestGate Mall, St. Clair Square, Bonita Lakes Mall, Meridian Mall and Stroud Mall which were each subject to long-term ground leases for all or a portion of their land. The table on the following page sets forth certain information for each of the Malls as of December 31, 2000. 17
Percen- Mall tage Store Mall Fee Year of Ownership by Total Sales Store Simple Year of Most Company and Mall per GLA Anchor or Opening/ Recent Operating Total Store Square Leased Vacan- Ground Name of Mall/Location Acquisition Expansion Partnership GLA(1) GLA(2) Foot(3) (4) Anchors cies Lease ----------------------- ----------- --------- ------------- -------- ---------- ------- ------ ---------------------- ------ ------ New Malls --------- Arbor Place.........(5) 1999 N/A 100% 1,035,320 386,380 $281 92% Dillard's, Parisian, None Fee Atlanta(Douglasville),GA Sears, dekor, Old Navy, Bed , Bath & Beyond Bonita Lakes Mall...(5) 1997 N/A 100% 641,047 192,620 250 100% Goody's, Dillard's, None Ground Meridian, MS JCPenney, Sears, McRae's Lease (6) Parkway City Mall...(5) 1957/1998 1974 50% 414,540 187,825 199 N/A McRae's, Parisian None Fee Huntsville, AL Springdale Mall........ 1960/1997 2000 100% 954,237 319,936 221 82% Dillard's, McRae's, None Fee Mobile, AL Burlington Coat, Goody's --------- --------- --- Total New Mals 3,045,144 1,086,761 88% ========= ========= === Stabilized Malls ---------------- Asheville Mall......... 1972/1998 2000 100% 816,755 253,420 $313 99% Dillard's, JCPenney, None Fee Asheville, NC Sears, Belk Burnsville Center...... 1977/1998 N/A 100% 1,069,887 408,844 312 94% Mervyn's, Dayton's, None Fee Burnsville, MN JCPenney, Sears College Square......(5) 1988 1993 100% 459,473 156,604 212 97% JCPenney, Sears, None Fee Morristown, TN Wal*Mart, Goody's, Proffitt's CoolSprings Galleria(5) 1991 1994 100% 1,129,764 374,749 336 100% Hechts, Dillard's, None Fee Nashville, TN Sears, JCPenney, Parisian Foothills Mall......(5) 1983/1996 1997 95% 476,768 180,072 180 92% Sears, JCPenney, None Fee Maryville, TN Goody's, Proffitt's I, Proffitt's II Frontier Mall.......(5) 1981 1997 100% 523,004 234,003 206 90% Dillard's I, JCPenney, None Fee Cheyenne, WY Dillard's II, Sears Georgia Square......(5) 1981 N/A 100% 677,906 256,352 247 97% Belk, JCPenney, None Fee Athens, GA Macy's, Sears Governor's Square...(5) 1986 1999 48% 690,437 269,436 241 95% JCPenney, Parks-Belk, None Fee Clarksville, TN Sears, Dillard's, Goody's Hamilton Place......(5) 1987 1998 90% 1,166,776 375,128 356 100% Dillard's, Parisian, None Fee Chattanooga, TN Proffitt's I, Proffitt's II, Sears, JCPenney Hickory Hollow Mall.... 1978/1998 1991 100% 1,125,946 455,757 248 92% JCPenney, Sears, None Fee Nashville, TN Dillard's, Hechts Janesville Mall........ 1973/1998 1998 100% 609,364 161,535 312 84% JCPenney, Kohl's, None Fee Janesville, WS Boston Store, Sears Lakeshore Mall......(5) 1992 1999 100% 500,890 153,062 214 91% KMart, Belk-Lindsey, None Fee Sebring, FL Sears JCPenney, Beall's (9) Madison Square......(5) 1984 1985 50% 934,161 301,326 311 98% Dillard's, JCPenney, None Fee Huntsville, AL McRae's, Parisian, Sears Meridian Mall.......... 1969/1998 2000 100% 794,461 463,292 332 92% JCPenney, Mervyn's, None Fee Lansing, MI Dayton Hudson, Ground Jacobson's Lease (8) Oak Hollow Mall.....(5) 1995 N/A 75% 802,239 251,411 221 95% Goody's, JCPenney, None Fee High Point, NC Belk-Beck, Sears, Dillard's 18 Percen- Mall tage Store Mall Fee Year of Ownership by Total Sales Store Simple Year of Most Company and Mall per GLA Anchor or Opening/ Recent Operating Total Store Square Leased Vacan- Ground Name of Mall/Location Acquisition Expansion Partnership GLA(1) GLA(2) Foot(3) (4) Anchors cies Lease ----------------------- ----------- --------- ------------- -------- ---------- ------- ------ ---------------------- ------ ----- Pemberton Square....(5) 1985 1999 100% 351,920 133,685 160 84% JCPenney, McRae's, None Fee Vicksburg, MS Dillard's, Goody's Plaza del Sol Mall..(5) 1979 1996 51% 261,507 105,326 190 99% Beall Bros(10), None Fee Del Rio, TX JCPenney, KMart Post Oak Mall.......(5) 1982 1985 100% 776,347 318,166 266 90% Beall Bros.(9), None Fee College Station, TX Dillard's, Foley's, Dillard's, Sears, JCPenney Rivergate Mall......... 1971/1998 1998 100% 1,073,970 326,210 308 89% Sears, Dillard's, None Fee Nashville, TN JCPenney, Hechts St. Clair Square....... 1974/1996 1993 100% 1,044,502 315,559 366 98% Famous Barr, Sears, None Fee/ Fairview Heights, IL JCPenney, Dillard's Ground Lease (10) Stroud Mall............ 1977/1998 1994 100% 427,194 177,011 285 100% JCPenney, Sears, None Ground Stroudsburg, PA The Bon-Ton Lease (11) Turtle Creek Mall...(5) 1994 1995 100% 846,234 223,140 300 100% JCPenney, Sears, None Fee Hattiesburg, MS Dillard's, McRae's I, Goody's, McRae's II Twin Peaks Mall.....(5) 1985 1997 100% 556,248 242,863 247 95% JCPenney, Dillard's I, None Fee Longmont, CO Dillard's II, Sears Walnut Square.......(5) 1980 1992 100% 450,385 223,650 224 96% Belk, JCPenney, None Ground Dalton, GA Proffitt's, Sears, Lease Goody's (12) WestGate Mall.......... 1975/1995 1996 100% 1,100,513 286,044 281 97% Belk-Hudson, JCPenney, None Fee/ Spartanburg, SC Dillard's, Sears, Bed, Ground Bath & Beyond Lease (7) York Galleria.......... 1998/1999 N/A 100% 766,972 229,755 280 88% Boscov's, JCPenney, None Fee York, PA ---------- ---------- --- --- Sears, The Bon-Ton Total Stabilized Malls 19,433,623 6,876,400 $283 94% ========== ========== ==== === Grand Total All Malls 22,478,767 7,963,161 ========== ========= 19 ( 1) Includes the total square footage of the Anchors (whether owned or leased by the Anchor) and Mall Stores. Does not include future expansion areas. ( 2) Does not include Anchors. ( 3) Totals represent weighted averages. ( 4) Includes tenants paying rent for executed leases as of December 31, 2000. ( 5) Developed by the Company. ( 6) Company is the lessee under a ground lease for 82 acres which extends through June 30, 2035. The average annual base rent is $37,656 increasing by 6% per year. (7) The Company is the lessee under several ground leases for approximately 53% of the underlying land. The leases extend through October 31, 2084, including six ten-year renewal options. Rental amount is $130,000 per year. In addition to base rent, the landlord receives 20% of the percentage rents collected. The Company has a right of first refusal to purchase the fee. (8) The Company is the lessee under several ground leases in effect through March 2067 with extension options. Fixed rent is $18,700 per year and 3% to 4% of all rents. (9) Beall Bros. operating in Texas is unrelated to Beall's operating in Florida. (10) The Company is the lessee under a ground lease for 20 acres which extends through January 31, 2073, including 14 five-year renewal options and one four-year renewal option. Rental amount is $40,000 per year. In addition to base rent, the landlord receives .25% of Dillard's sales in excess of $16,200,000. (11) The Company is the lessee under a ground lease which extends through July 2089. The rental amount is $50,000 with an additional $100,000 paid every 10 years. (12) The Company is the lessee under several ground leases which extend through March 14, 2078, including six ten-year renewal options and one eight-year renewal option. Rental amount is $149,450 per year. In addition to base rent, the landlord receives 20% of the percentage rents collected. The Company has a right of first refusal to purchase the fee.
Anchors. Anchors are a critical factor in a Mall's success because the public's identification with a property typically focuses on its Anchors. Mall Anchors generally are department stores whose merchandise appeals to a broad range of shoppers. Although the Malls derive a smaller percentage of their operating income from Anchor stores than from Mall Stores, strong Anchors play an important part in generating customer traffic and making the Malls desirable locations for Mall Store tenants. Anchors either own their stores together with the land under them, sometimes with adjacent parking areas, or enter into long-term leases with respect to their stores at rental rates that are significantly lower than the rents charged to tenants of Mall Stores. Anchors account for approximately 7.1% of the total revenues from the Company's Properties. Each Anchor which owns its own store has entered into a reciprocal easement agreement with the Company covering, among other things, operating covenants, reciprocal easements, property operations, initial construction and future expansions. As of December 31, 2000, the Malls had a total of 135 Anchors and one vacant Anchor store at Asheville Mall. The following table indicates all Mall Anchors and sets forth the aggregate number of square feet owned or leased by Anchors in the Malls as of December 31, 2000. 20 Mall Anchor Summary Information As of December 31, 2000
GLA GLA Total Number Owned Leased Occupied of Anchor by by by Name Stores Anchor Anchor Anchor (1) ----------------------------------------- ----------------- ------------------ ---------------- ------------------ JCPenney............................ 27 1,015,865 1,586,868 2,602,733 Sears............................... 25 1,929,897 1,042,651 2,972,548 Dillard's............................ 21 2,681,459 202,004 2,883,463 Sak's Proffitt's....................... 10 1,203,750 0 1,203,750 McRae's.......................... 7 511,359 243,000 754,359 Parisian......................... 5 351,756 209,541 561,297 ----------------- ------------------ ---------------- ------------------ Subtotal..................... 22 2,066,865 452,541 2,519,406 Belk Belk............................. 4 0 426,991 426,991 Belk-Lindsey..................... 1 0 61,029 61,029 Belk-Hudson...................... 1 0 156,648 156,648 Parks-Belk....................... 1 0 122,367 122,367 ----------------- ------------------ ---------------- ------------------ Subtotal..................... 7 0 767,035 767,035 The May Company Foley's.......................... 1 103,888 0 103,888 Famous Barr...................... 1 0 236,489 236,489 ----------------- ------------------ ---------------- ------------------ Subtotal..................... 2 103,888 236,489 340,377 Goody's.............................. 9 0 292,749 292,749 Montgomery Ward(vacant).............. 1 0 92,484 92,484 Dayton-Hudson........................ 2 323,326 0 323,326 The Bon Ton ......................... 2 131,915 87,024 218,939 Wal*Mart............................. 1 0 112,541 112,541 Kmart................................ 2 0 173,940 173,940 Mervyn's............................. 2 124,919 74,889 199,808 Boscov's............................. 1 150,000 0 150,000 Burlington Coat...................... 1 0 153,345 153,345 Macy's............................... 1 115,623 0 115,623 Boston Store......................... 1 0 96,000 96,000 Kohl's............................... 1 0 88,691 88,691 Dekor................................ 1 0 80,000 80,000 Jacobson's........................... 1 0 83,916 83,916 Bed, Bath & Beyond................... 2 0 73,823 73,823 Old Navy............................. 1 0 37,585 37,585 Beall Bros. (Texas).................. 2 0 61,916 61,916 Beall's (Florida).................... 1 0 45,844 45,844 ----------------- ------------------ ---------------- ------------------ Total........................ 136 8,643,757 5,842,335 14,486,092 ================= ================== ================ ================= (1)Includes all square footage owned by or leased to such Anchor including tire, battery and automotive facilities and storage square footage.
MALL STORES. As of December 31, 2000, the Malls had approximately 4,277 Mall Stores. National or regional chains (excluding individually franchised stores) leased approximately 79.6% of the occupied Mall Store GLA. Although Mall Stores occupied only 35.5% of total Mall GLA, the Malls derived approximately 88.3% of their revenue from Mall Stores for the year ended December 31, 2000. Among the companies with the largest representation among Mall Stores are: The Limited, Inc./Intimate Brands, Inc. stores (The Limited, Limited Too, Express, Lerner New York, Lane Bryant, Structure, Victoria's Secret, and Bath and Body Works) and Venator Group, Inc. (Footlocker, Lady Footlocker and Champs Sports Stores). As of December 31, 2000, The Limited, Inc.'s and Intimate Brands, Inc.'s 121 stores accounted for 10.3% of total mall leased GLA and 6.7% of total revenues from the Company's Properties. As of December 31, 2000 Venator Group, Inc. accounted for 2.9% of total mall leased GLA and 2.5% of total revenues. No single Mall Store retailer accounted for more than 10.3% of total leased GLA and no single Mall Store retailer accounted for more than 6.7% of total revenues from the Company's Properties for the year ended December 31, 2000. 21 The following table sets forth certain information for executed renewal leases with current tenants or leases of previously occupied space with new tenants at the Malls during the year ended December 31, 2000.
Prior Lease New Lease Increase Increase Total Base and Initial Year per New Lease per Number Square Percentage Rent Base Rent Square Average Square of leases Feet per Square Foot per Square Foot Foot Base Rent Foot --------------- --------------- ------------------ ------------------- ------------- ---------------- ------------- 309 688,008 $23.36 $25.05 $1.69 $25.75 $2.39
The following table sets forth the total Mall Store GLA, the total square footage of leased Mall Store GLA, the percentage of Mall Store GLA leased, the average base rent per square foot of Mall Store GLA and average Mall Store sales per square foot as of the end of each of the past five years. Stabilized Mall Store Summary Information
Total Percentage Average Average Mall Total Mall Store of Mall Store Base Rent Store Sales At Mall Store Leased GLA per Square per Square December 31, GLA GLA Leased (1) Foot (2) Foot (3) ---------------------- ---------------- ----------------- ------------------ ----------------- ------------------- 1996............. 3,452,997 3,073,190 89.0% $ 19.03 $ 240 1997............. 3,503,490 3,214,176 91.7 18.98 263 1998.............. 7,166,498 6,707,283 93.6 19.82 273 1999.............. 7,429,503 6,956,451 94.5 20.68 284 2000(4)........... 7,558,160 7,110,705 94.5 21.57 283 (1) Mall Store occupancy includes tenants with executed leases who are paying rent. (2) Average base rent per square foot is based on Mall Store GLA occupied as of the last day of the indicated period for the preceding twelve-month period. (3) Calculated for the preceding twelve-month period. (4) Excludes Parkway Place GLA which will be renovated.
Lease Expirations. The following table shows the scheduled lease expirations for Malls Stores only in the Malls owned on December 31, 2000 (assuming that none of the tenants exercise renewal options). Mall Lease Expiration
Percentage of Total Represented by Approximate Expiring Leases Mall Store ------------------------------ Number of Annualized Base GLA of Base Rent Annualized Leased Mall Year Ending Leases Rent of Expiring Expiring per Square Base Rent Store GLA December 31, Expiring Leases (1) Leases Foot --------------------- -------------- ----------------- --------------- ------------- ------------- ---------------- 2001............. 328 $11,033,751 579,764 $19.03 8.1% 8.4% 2002............. 314 13,372,313 695,278 19.23 9.8 10.1 2003............. 281 13,598,922 696,769 19.52 9.9 10.1 2004............. 311 16,028,501 692,075 23.16 11.7 10.0 2005............. 377 20,809,875 999,520 20.82 15.2 14.5 2006............. 197 9,703,487 484,725 20.02 7.1 7.0 2007............. 205 12,541,485 630,774 19.88 9.2 9.2 2008............. 161 11,208,791 523,183 21.42 8.2 7.6 2009............. 177 11,193,532 447,891 24.99 8.2 6.5 2010............. 147 8,190,658 358,544 22.84 6.0 5.2 (1) Total annualized base rent for all leases executed as of December 31, 2000 includes rent for space that is leased but not yet occupied but excludes (i) percentage rents, (ii) additional payments by tenants for common area maintenance, real estate taxes and other expense reimbursements and (iii) contractual rent escalations and cost of living increases due after December 31, 2000.
Cost of Occupancy. Management believes that in order to maximize the Company's Funds from Operations, tenants in Mall Stores must be able to operate profitably. A major factor contributing to tenant profitability is the tenant's cost of occupancy. 22 The following table summarizes for Stabilized Mall Store tenants the occupancy costs under their leases as a percentage of total Mall Store sales for the last three years.
For the Year Ended December 31, (1) ---------------------------------- 1998 1999 2000 ---------- ----------- ----------- Mall Store sales (in millions)(2)......... $1,105.5 $1,426.3 $1,487.1 ========== =========== ========== Minimum rents............................. 7.7% 7.8% 7.9% Percentage rents.......................... 0.3 0.4 0.5 Expense recoveries (3).................... 3.1 3.3 3.5 ---------- ----------- ----------- Mall tenant occupancy costs............... 11.1% 11.5% 11.9% ========== =========== =========== (1) Excludes Malls not owned or open for full reporting period. (2) Consistent with industry practice, sales are based on reports by retailers (excluding theaters) leasing Mall Store GLA and occupying space for the reporting period. Represents 100% of sales for these Malls. In certain cases, the Company and the Operating Partnership will own less than 100% interest in these Malls. (3) Represents real estate tax and common area maintenance charges.
ASSOCIATED CENTERS The sixteen Associated Centers owned at December 31, 2000 were each part of a Mall complex and generally had one or two Anchor tenants and various smaller tenants. Anchor tenants in these centers included such retailers as Books-A-Million, Target, Toys "R" Us, TJ Maxx, and Goody's, which were category dominant retailers that benefited from the regional draw of the Malls. The Associated Centers also generally increase the draw to the total Mall complex. Total leasable GLA of the sixteen Associated Centers was approximately 2.5 million square feet, including Anchors, or an average of approximately 156,000 square feet per center. As of December 31, 2000, 94.9% of total leasable GLA at the Associated Centers was occupied. During 2000 the Company opened one Associated Center in Chattanooga, Tennessee. In the years ended December 31, 1998, 1999, and 2000, revenues from the Associated Centers represented approximately 3.9%, 3.7% and 4.1%, respectively, of total revenues from the Company's Properties. In the years ended December 31, 1998, 1999 and 2000, average tenant sales per square foot at the Associated Centers were approximately $172, $184 and $185, respectively. Average base rent per square foot at the Associated Centers increased from $9.78 at December 31, 1999 to $9.88 at December 31, 2000. Each of the Associated Centers was developed by the Company, except for WestGate Crossing, Village at Rivergate and Courtyard at Hickory Hollow which were acquired in August 1997, July 1998 and July 1998, respectively. All of the land underlying the Associated Centers is owned in fee simple except for Bonita Crossing. 23 Lease Expirations. The following table shows the scheduled lease expirations for the Associated Centers owned as on December 31, 2000 (assuming that none of the tenants exercise renewal options). Associated Center Lease Expiration
Percentage of Total Represented by Approximate Expiring Leases Mall Store ------------------------------ Number of Annualized Base GLA of Base Rent Annualized Leased Mall Year Ending Leases Rent of Expiring Expiring per Square Base Rent Store GLA December 31, Expiring Leases (1) Leases Foot --------------------- -------------- ----------------- --------------- ------------- ------------- ---------------- 2001........... 17 $442,630 47,467 $9.32 4.1% 4.4% 2002........... 22 960,929 70,339 13.66 8.8 6.4 2003........... 24 1,158,602 128,650 9.01 10.6 11.8 2004........... 25 1,305,010 178,690 7.30 11.9 16.4 2005........... 21 1,825,523 227,783 8.01 16.7 20.9 2006........... 7 473,286 44,453 10.65 4.3 4.1 2007........... 3 96,315 8,476 11.36 0.9 0.8 2008........... 2 224,500 14,000 16.04 2.1 1.3 2009........... 9 1,141,451 75,404 15.14 10.4 6.9 2010........... 4 554,320 59,641 9.29 5.1 5.5 (1) Total annualized base rent for all leases executed as of December 31, 2000 includes 12 months of rent for space that is newly leased but not yet occupied and base rent on ground leases with no square footage but excludes (i) percentage rents, (ii) additional payments by tenants for common area maintenance, real estate taxes and other expense reimbursements and (iii) contractual rent escalations and cost of living increases due after December 31, 2000.
24 The following table sets forth certain information for executed renewal leases with current tenants or leases of previously occupied space with new tenants at the Associated Centers during the year ended December 31, 2000.
Prior Lease New Lease Increase Increase Total Base and Initial Year per New Lease per Number Square Percentage Rent Base Rent Square Average Square of leases Feet per Square Foot per Square Foot Foot Base Rent Foot --------------- --------------- ------------------ ------------------- ------------- ---------------- ------------- 16 50,687 $9.88 $11.04 $1.16 $11.09 $1.21
The following table sets forth certain information for each of the Associated Centers as of December 31, 2000.
Ownership Year of by Company Name of Opening/Most and Total Percentage Associated Recent Operating Total Leasable GLA Center/Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors -------------------------- --------------- ------------- ------------ ----------- ------------ --------------------- Bonita Crossing...(10) 1997/1999 100% 118,884 118,884 97% Books-A-Million, Meridian, MS TJ Maxx, Office Max, The Gap CoolSprings Crossing.. 1992 100% 353,369 53,286 100% Target(7) Nashville, TN Service Merchandise, Toys "R" Us, Lifeway Books Courtyard at Hickory Hollow............... 1979(9) 100% 77,460 77,460 100% Carmike Cinemas, Nashville, TN Just For Feet Foothills Plaza....... 1983/1986 100% 191,216(4) 71,216 100% Eckerd(6), Maryville, TN Carmike Cinemas Frontier Square....... 1985 100% 161,615 16,615 100% Buttrey Food & Drug, Cheyenne, WY Target Georgia Square Plaza.. 1984 100% 15,393 15,393 0% Athens, GA Governor's Square Plaza 1985(5) 50% 180,018 57,820 100% Office Max, Premier Clarksville, TN Medical Group, Target Gunbarrel Pointe...... 2000 100% 281,525 155,525 100% Kohl's(11), Target, Chattanooga, TN Goody's Hamilton Corner....... 1990 90% 88,298 88,298 99% Michael's, Goody's, Chattanooga, TN Fresh Market Hamilton Crossing..... 1987/1994 92% 185,370 92,257 91% Service Chattanooga, TN Merchandise(7) Toys "R" Us, TJ Maxx The Landing........... 1999 100% 163,164 85,507 78% Toys "R" Us, Atlanta(Douglasville),GA Circuit City, Michael's Madison Plaza......... 1984 75% 153,085 98,690 96% Food World, TJ Huntsville, AL Maxx, Service Merchandise Pemberton Plaza....... 1986 100% 77,893 26,947 87% Kroger, Blockbuster Vicksburg, MS The Terrace........... 1997 92% 155,987 116,715 100% Barnes & Noble, Chattanooga, TN Home Place, Old Navy, Staples, Circuit City Village at Rivergate.. 1981(9) 100% 166,366 166,366 100% Target, Just For Nashville, TN Feet WestGate Crossing..... 1985/1999(8) 100% 151,489 151,489 100% Goody's, Toys "R" Spartanburg, SC Us, Old Navy ------------ ----------- ------------ Total Associated Centers 2,521,131 1,392,466 95% ============ =========== =========== 25 (1) Includes the total square footage of the Anchors (whether owned or leased by the Anchor) and shops. Does not include future expansion areas. (2) Includes leasable Anchors. (3) Includes tenants with executed leases at December 31, 2000. Calculation includes leased Anchors. (4) Total GLA include, but total leasable GLA and percentage GLA leased excluding a furniture store of 80,000 square feet owned by others. Carmike Cinemas is subject to a ground lease (40,000 square feet of GLA). (5) Originally opened in 1985, and was acquired by the Company in June 1997. (6) Eckerd has closed its store but is continuing to meet its financial obligations under its lease and is subleased to Dollar General. (7) Owned by tenant. (8) Originally opened in 1985, and was acquired by the Company in August 1997. (9) Acquired by the Company in July 1998. (10)The land is ground leased through June 2015 with options to extend through June 2035. The annual rent is $14,355 increasing by 6% each year. (11)Opened in March 2001.
COMMUNITY AND POWER CENTERS In addition to Mall development, the Company's development activities focus on Community Centers, and power centers. Community Centers pose fewer development risks than Malls because they have shorter development timetables and lower up-front costs. Community Centers also afford the Company the opportunity to meet the needs of retailers for whom a "convenience" type of location is more appropriate and the needs of customers whose trade areas cannot support a regional mall. Power centers are larger than other Community Centers, with several large anchor stores which draw shoppers from a wider geographic area. The Company's Community Center developments in the 1980's were generally anchored by supermarkets, and, in certain cases, by drug stores. Management's current focus has expanded to include the development of larger centers, anchored by mass merchandisers and department stores, while continuing the development of smaller centers anchored by supermarkets and drug stores. Recently completed Community Centers include centers in Richmond Virginia and Spring Hill, Florida. Anchors at these new centers include, Home Depot, Sears, Belk, Goody's and , Wal*Mart. During 2000, the Company sold thirteen Community Centers for total proceeds of $51 million and totaling 799,000 square feet. The proceeds were primarily used to retire debt. The Company also sold one Community Center Jean Ribaut Square in Beaufort, South Carolina in February 2001. The net proceeds of $5.8 million were placed in escrow in anticipation of a like-kind exchange of properties under section 1031 of the Code. Community Centers, other than power centers, range in size from 25,000 square feet to in excess of 286,000 square feet. Anchors in Community Centers generally lease their store space and occupy 60-85% of a center's GLA. The number of stores in a Community Center ranges from one to sixteen with an average of seven stores per center. The Company's two power centers, which were completed and opened in 1997 and 1998, average 786,000 square feet and have an average of nine major anchor stores and additional small shop space ranging from 38,000 square feet to 136,000 square feet. The projects include expansion areas for additional major retailers. These power centers are included in the Community Center classification in this report. Total GLA of the 72 Community Centers is approximately 9.1 million square feet, or an average of approximately 126,000 square feet per center. Excluding power centers the average is 107,000 square feet per center. As of December 31, 2000, 97.8% of total leasable GLA at the Community Centers was leased. In the years ended December 31, 1998, 1999 and 2000, revenues from the Community Centers represented approximately 19.6%, 17.8% and 17.5%, respectively, of total revenues from the Company's Properties. Occupancy at the Community Centers increased from 97.7% at December 31, 1999 to 97.8% at December 31, 2000. Average base rent per square foot at the Community Centers increased from $8.32 at December 31, 1999, to $8.85 at December 31, 2000. As of December 31, 2000, Food Lion, a major regional supermarket operator with headquarters in North Carolina served as an anchor tenant in 27 of the Company's Community Centers. For the year ended December 31, 2000, Food Lion accounted for approximately 1.7% of the revenues generated by the Company's Properties. 26 With the exception of Suburban Plaza, Sutton Plaza, Lions Head Village and the Market Place at Flower Mound, which were acquired by the Company in March 1995, January 1997, July 1998 and March 2000, respectively, each of the Community Centers was developed by the Company. The following table summarizes the percentage of total leasable GLA leased, average base rent per square foot (excluding percentage rent) and tenant sales per square foot at the Community Centers for each of the last five years. Community Center Summary Information
Average Percentage Base Rent Tenant Year Ended GLA Per Square Sales Per December 31, Leased (1) Foot (2) Square Foot (3) ----------------------------------------- -------------- ------------- ------------------- 1996................................. 97.2% $6.94 $210 1997................................. 97.6% 7.42 221 1998................................. 97.0% 8.22 220 1999................................. 97.7% 8.32 214 2000................................. 97.8% 8.85 213 (1) Percentage leased includes tenants who have executed leases and are paying rent as of the specified date. (2) Average base rent per square foot is based on GLA occupied as of the last day of the indicated period. (3) Consistent with industry practice, sales are based on reports by retailers (excluding theaters) leasing GLA and occupying space for the 12 months ending on the last day of the indicated period.
Lease Expirations. The following table shows the scheduled lease expirations for the Community Centers owned on December 31, 2000 (assuming that none of the tenants exercise renewal options). Community Center Lease Expiration
Percentage of Total Represented by Approximate Expiring Leases Mall Store ------------------------------ Number of Annualized Base GLA of Base Rent Annualized Leased Mall Year Ending Leases Rent of Expiring Expiring per Square Base Rent Store GLA December 31, Expiring Leases (1) Leases Foot --------------------- -------------- ----------------- --------------- ------------- ------------- ---------------- 2001.............. 71 $1,696,086 185,464 $9.15 3.7% 3.4% 2002.............. 129 3,635,937 457,901 7.94 8.0 8.5 2003.............. 125 3,952,969 584,816 6.76 8.7 10.8 2004.............. 96 3,394,916 355,729 9.54 7.4 6.6 2005.............. 82 3,330,741 387,562 8.59 7.3 7.2 2006.............. 23 1,381,458 269,309 5.13 3.0 5.0 2007.............. 19 1,535,460 178,553 8.60 3.4 3.3 2008.............. 21 2,419,904 234,428 10.32 5.3 4.3 2009.............. 21 3,789,875 398,381 9.51 8.3 7.4 2010.............. 20 1,558,331 247,915 6.29 3.4 4.6 (1) Total annualized base rent for all leases executed as of December 31, 2000 includes 12 months of rent for space that is newly leased but not yet occupied and base rent on ground leases with no square footage but excludes (i) percentage rents, (ii) additional payments by tenants for common area maintenance, real estate taxes and other expense reimbursements and (iii) contractual rent escalations and cost of living increases for periods after December 31, 2000.
The following table sets forth certain information for executed renewal leases with current tenants or leases of previously occupied space with new tenants at the Community Centers during the year ended December 1, 2000.
Prior Lease New Lease Total Base and Initial Year Increase New Lease Increase Number Square Percentage Rent Base Rent per Square Average per Square of leases Feet per Square Foot per Square Foot Foot Base Rent Foot --------------- --------------- ------------------ ------------------- ------------- ---------------- ------------- 151 322,809 $10.34 $11.14 $0.80 $11.53 $1.19
The following table sets forth certain information for each of the Company's Community Centers at December 31, 2000. 27
Ownership Year of by Opening/ Company Square Most and Total Percentage Feet Fee or Number Name of Community Recent Operating Total Leasable GLA Of Anchor Ground of Center/Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors Vacancies Lease Stores --------------- --------- ----------- ------- --------- --------- ------------------------ ---------- ------ ------ Anderson Plaza 1983/1994 100% 46,258 46,258 100% Food Lion, Eckerd(7) 8,640 Fee 4 Greenwood, SC Bartow Village 1990 100% 40,520 40,520 97% Food Lion, Family Dollar None Fee 5 Bartow, FL Beach Crossing 1984 100% 45,790 45,790 88% Food Lion(4), CVS None Fee 5 Myrtle Beach, SC Bennington Place 1994 100% 42,712 42,712 100% Food Lion None Fee 3 Roanoke, VA BJ's Plaza 1991 100% 104,233 104,233 100% BJ's Wholesale Club None Ground 1 Portland, ME Lease(5) Briarcliff Square 1989 100% 41,778 41,778 86% Food Lion None Fee 7 Oak Ridge, TN Buena Vista Plaza 1989/1997 100% 151,320 17,500 93% Wal*Mart, Winn Dixie None Fee 8 Columbus, GA Bulloch Plaza 1986 100% 34,400 34,400 96% Food Lion None Fee 2 Statesboro, GA Capital Crossing 1995 100% 83,700 83,700 100% Lowe's Food, Staples None Fee 2 Raleigh, NC Cedar Bluff Crossing 1987/1996 100% 53,050 53,050 100% Food Lion None Fee 12 Knoxville, TN Cedar Plaza 1988 100% 95,000 50,000 100% Quality Stores None Fee 5 Cedar Springs, MI Chester Square 1997 100% 64,844 64,844 60% Kroger None Fee 5 Richmond, VA Chesterfield Crossing 2000 100% 404,258 52,986 100% Home Depot, Wal*Mart None Fee 10 Richmond, VA Chestnut Hills 1982 100% 68,364 68,364 92% JCPenney None Fee 10 Murray, KY Coastal Way 2000 100% 170,875 170,875 98% Belk, Sears None Fee 11 Spring Hill, FL Colleton Square 1986 100% 31,000 31,000 96% Food Lion(4) None Fee 4 Walterboro, SC 28 Ownership Year of by Opening/ Company Square Most and Total Percentage Feet Fee or Number Name of Community Recent Operating Total Leasable GLA Of Anchor Ground of Center/Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors Vacancies Lease Stores --------------- --------- ----------- ------- --------- --------- ------------------------ ---------- ------ ------ Collins Park Commons 1989 100% 37,400 37,400 94% Tractor Supply Co. None Ground 5 Plant City, FL Lease(6) Conway Plaza 1985 100% 33,000 33,000 92% Food Lion(7) 21,000 Ground 7 Conway, SC Lease(8) Cosby Station 1994/1995 100% 77,811 77,811 94% Publix None Fee 11 Douglasville, GA Cortlandt Towne Center1997/1998 100% 763,260 630,017 100% Marshalls, Wal*Mart, Home 53,000 Fee 34 Cortlandt, NY Depot, A & P Food Store, Seaman Furniture, Barnes & Noble, Office Max, PetsMart County Park Plaza 1982 100% 60,750 60,750 100% Bi-Lo None Fee 4 Scottsboro, AL Devonshire Place 1996 100% 104,414 104,414 100% Lowe's Food, Kinetix, None Ground 4 Cary, NC Borders Books Lease(9) East Ridge Crossing 1988 100% 58,950 58,950 100% Food Lion None Fee 13 Chattanooga, TN East Towne Crossing 1989/1990 100% 158,751 70,011 100% Home Depot, Regal Cinemas, None Fee 8 Knoxville, TN Food Lion 58 Crossing 1988 100% 49,984 49,984 100% Food Lion, CVS(7) None Fee 9 Chattanooga, TN Garden City Plaza 1984/1991 100% 188,446 76,246 96% Wal*Mart, JCPenney None Fee 16 Garden City, KS Girvin Plaza 1990 100% 78,419 78,419 88% Winn Dixie None Fee 13 Jacksonville, FL Greenport Towne Centre 1994 100% 191,622 75,525 100% Wal*Mart, Price-Chopper None Fee 3 Hudson, NY Hampton Plaza 1990 100% 44,420 44,420 97% Food Lion(4) None Fee 8 Tampa, FL Henderson Square 1995 100% 268,327 164,329 97% JCPenney, Belk Leggett, None Fee 13 Henderson, NC Goody's, Wal*Mart Jasper Square 1986/1990 100% 95,950 50,550 100% Lowe's, Goody's None Fee 7 Jasper, AL 29 Ownership Year of by Opening/ Company Square Most and Total Percentage Feet Fee or Number Name of Community Recent Operating Total Leasable GLA Of Anchor Ground of Center/Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors Vacancies Lease Stores --------------- --------- ----------- ------- --------- --------- ------------------------ ---------- ------ ------ Jean Ribaut (20) 1977/1993 100% 223,497 223,497 98% Belk, KMart, Bi-Lo None Fee 17 Beaufort, SC Keystone Crossing 1989 100% 40,400 40,400 100% Food Lion None Fee 5 Tampa, FL Kingston Overlook 1996/1997 100% 119,350 119,350 100% Baby Superstore, Michael's None Fee/ 3 Knoxville, TN Ground Lease(10) Lady's Island 1983/1993 100% 60,687 60,687 100% Winn Dixie, Eckerd None Fee 9 Beaufort, SC LaGrange Commons 1996 100% 59,340 59,340 100% A & P Food Store None Fee 9 LaGrange, NY Lions Head Village 1980(19) 100% 99,165 99,165 100% Steinmart, Office Max None Fee 15 Nashville, TN Longview Crossing 1988 100% 40,598 40,598 100% Food Lion None Ground 3 Hickory, NC Lease(11) Lunenburg Crossing 1994 100% 198,115 25,515 92% Wal*Mart, Shop'n Save None Fee 7 Lunenburg, MA Marketplace at Flower 1999 100% 118,722 118,722 84% Winn Dixie None Fee 17 Mound Flower Mound, TX Massard Crossing 1997 100% 290,717 88,410 100% Wal*Mart, TJ Maxx, Goody's, None Fee 14 Ft. Smith, AR Cato North Creek Plaza 1983 100% 28,500 28,500 100% Food Lion None Fee 2 Greenwood, SC North Haven Crossing 1993 100% 104,612 104,612 100% Sports Authority, Office None Fee 6 North Haven, CT Max, Barnes & Noble Northridge Plaza 1984/1988 100% 129,570 79,570 99% Winn Dixie(7), Eckerd, P.B. 35,922 Fee 16 Hilton Head, SC Realty Northwoods Plaza 1983/1992 100% 32,705 32,705 100% Food Lion None Fee 2 Albemarle, NC Oaks Crossing 1990/1993 100% 144,998 27,300 100% Wal*Mart, Buck's Variety None Fee 10 Otsego, MI 30 Ownership Year of by Opening/ Company Square Most and Total Percentage Feet Fee or Number Name of Community Recent Operating Total Leasable GLA Of Anchor Ground of Center/Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors Vacancies Lease Stores --------------- --------- ----------- ------- --------- --------- ------------------------ ---------- ------ ------ Orange Plaza 1983 100% 46,875 46,875 100% Food World (12), Dollar 24,900 Fee 9 Roanoke, VA General Park Village 1990 100% 48,505 48,505 100% Food Lion, Family Dollar None Fee 11 Lakeland, FL Perimeter Place 1985/1988 100% 156,945 54,525 100% Home Depot, Fred's(7) 22,500 Fee 17 Chattanooga, TN Rawlinson Place 1987 100% 35,750 35,750 100% Food Lion(7) 25,000 Fee 7 Rock Hills, SC Rhett at Remount 1983/1994 100% 42,628 42,628 100% Food Lion, Eckerd(7) 8640 Fee 3 Charleston, SC Salem Crossing 1997 100% 289,348 92,420 100% Kroger, Wal*Mart None Fee 17 Virginia Beach, VA Sand Lake Corners 1999 100% 558,630 155,250 93% Lowe's, Bealls, Wal*Mart, None Fee 27 Orlando, FL Petsmart, Staples Sattler Square 1989 100% 132,746 94,760 100% Quality Stores, Perry Drug None Fee 15 Big Rapids, MI Seacoast Shopping Cent 1991 100% 208,690 91,690 98% Wal*Mart, Shaw's Supermarket None Fee 13 Seabrook, NH Shenandoah Crossing 1988 100% 28,600 28,600 100% Food Lion(7) 25,000 Fee 2 Roanoke, VA Signal Hills Village 1987/1989 100% 24,100 24,100 100% (13) None Ground 9 Statesville, NC Lease(14) Southgate Crossing 1985 100% 40,100 40,100 100% Food Lion(7) 25,000 Ground 3 Bristol, TN Lease(15) Springhurst Towne 1997 100% 810,539 422,539 99% Cinemark, Kohl's, None Fee 33 Louisville, KY Books A Million, Party Source, TJ Maxx, Meijer, Old Navy, Target, Fashion Shop, Office Max, Dick's Sporting Goods Springs Crossing 1987/1996 100% 42,920 42,920 100% Food Lion, Kerr Drugs None Ground 4 Hickory, NC Lease(16) Statesboro Square 1986 100% 41,000 41,000 100% Food Lion(4), Rentown 25,000 Fee 6 Statesboro, GA 31 Ownership Year of by Opening/ Company Square Most and Total Percentage Feet Fee or Number Name of Community Recent Operating Total Leasable GLA Of Anchor Ground of Center/Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors Vacancies Lease Stores --------------- --------- ----------- ------- --------- --------- ------------------------ ---------- ------ ------ Stone East Plaza 1983 100% 45,259 45,259 100% Food Lion(4) None Fee 10 Kingsport, TN Strawbridge Market Pla 1997 100% 43,764 43,764 100% Regal Cinema None Fee 1 Virginia Beach, VA Suburban Plaza 1995 100% 129,259 127,259 87% Toys "R" Us, Barnes & Noble None Fee 18 Knoxville, TN Sutton Plaza 1972(17) 100% 150,035 150,035 100% A & P Food Store, Ames None Fee 14 Mt. Olive, NJ 34th St. Crossing 1989 100% 51,120 51,120 100% Food Lion, Family Dollar None Fee 11 St. Petersburg, FL Uvalde Plaza 1987/1992 75% 111,160 34,000 100% Wal*Mart, Beall's None Fee 8 Uvalde, TX Valley Commons 1988/1994 100% 45,580 45,580 97% Food Lion None Fee 9 Salem, VA Valley Crossing 1988/1991 100% 186,077 186,077 93% Goody's, TJ Maxx, Office None Fee 20 Hickory, NC Depot, Rack Room Shoes, Circuit City, Factory Card Outlet The Village at Wexford 1990 100% 102,450 72,450 100% Quality Stores(18) None Fee 8 Cadillac, MI Village Square 1990/1993 100% 163,294 27,050 100% Wal*Mart, Fashion Bug None Fee 12 Houghton Lake, MI Willow Springs Plaza 1991/1994 100% 224,910 130,910 100% Home Depot, Office Max, None Fee 11 Nashua, NH JCPenney Home Store --------- --------- --- Total Community Centers 9,140,865 5,883,371 98% ========= ========= === 32 (1) Includes the total square footage of the Anchors (whether owned by others or leased by the Anchor) and shops. Does not include future expansion areas. (2) Includes leasable Anchors. (3) Includes tenants paying rent on executed leases on December 31, 2000. Calculation includes leased Anchors. (4) Tenant has closed its store but is continuing to meet its financial obligation and is sub-leasing the space. (5) Ground Lease term extends to 2051 including four 10-year extensions. Lessee has an option to purchase and a right of first refusal to purchase the fee. (6) Ground Lease term extends to 2049 including three 10-year extensions. Lessor receives a share of percentage rents during initial term and extensions. Lessee has an option to purchase and a right of first refusal to purchase the fee. (7) Represents a tenant which has closed its store but is continuing to meet its financial obligations under its lease. (8) Ground Lease term extends to 2055 including two 20-year extensions. During extension periods, lessor receives a share of percentage rents. Lessee has a right of first refusal to purchase the fee. Lessor receives a share of sale proceeds upon sale of the center to a third party only if sale occurs while fee is subordinated to a mortgage. (9) Ground lease extends to 2076 including 12 five year options. Lessor receives no additional rent. (10) Ground lease for an out-parcel extends to 2046 including 4 ten year options. Lessor receives 20% of percentage rentals. (11) Ground Lease term extends to 2049 including three 10-year extensions. Lessor receives a share of percentage rents during initial term and extensions. Lessee has a right of first refusal to purchase the fee. (12) Represents a Food World which has closed its store but is continuing to meet its financial obligations under its lease and is sub-leasing the space. (13) Signal Hills Village is part of Signal Hills Crossing, a Property on which the Company holds a Mortgage. (14) Ground Lease term extends to 2084. Rent for entire term has been prepaid. Lessee has an option to purchase the fee under certain circumstances. (15) Ground Lease term extends to 2055 including one 20-year extension. Commencing in 2005, rental will be the greater of base rent or a share of the revenue from the center. Lessee has a right of first refusal to purchase the fee. (16) Ground Lease term extends to 2048 including three 10-year extensions. Lessor receives a share of percentage rents during initial term and extensions. Lessee has a right of first refusal to purchase the fee. (17) Sutton Place opened in 1972 and was acquired by the Company in January 1997 and expanded in 2000. (18) Quality Stores has an option to purchase its 56,850 square foot store commencing in 1996 for a price based upon capitalizing minimum annual rent being paid at the time of exercise at a rate of 8.33%. (19) Lionshead opened in 1980 and was acquired by the Company in July 1998 and was expanded in 2000. (20) Sold in February 2001.
MORTGAGES The Company owns certain Mortgages which were granted prior to the Offering in connection with sales by CBL of properties which it had previously developed. The Company holds fee mortgages on seven community centers, which mortgages had, as of December 31, 2000, an aggregate outstanding principal balance of $7.2 million. Such mortgages entitle the Company to receive substantially all of such properties' current cash flow in the form of periodic debt service payments. The encumbered properties all opened between 1981 and 1984 and have one Anchor vacancy. In the years ended December 31, 1998, 1999, and 2000, revenues from the Mortgages represented approximately 0.7%, 0.6%, and 0.3%, respectively, of total revenues from the Company's Properties. 33 The following table sets forth certain additional information regarding the Mortgages as of December 31, 2000.
Mortgage Information Center Information --------------------------------------------------- -------------------------------------------------------- Annual Principal Annual Total Percentage Number Name of Center/ Interest Balance as Debt Maturity Total Leasable GLA of Location Rate of 12/31/00 Service Date GLA(1) GLA Leased(2) Anchors Stores ----------------------- ----------- ------------- ---------- -------------- ---------- ---------- ------------ ----------- --------- BI-LO South............ 9.50% $1,206 $175 Dec-2006 56,557 56,557 100% BI-LO, 7 Cleveland, TN Rite-Aid Gaston Square.......... 11.00 1,665 179 Dec-2001 33,640 33,640 100 Food 4 Gastonia, NC Lion, Eckerd Inlet Crossing......... 11.00 1,443 327 Dec-2001 55,248 55,248 100 Food Lion 13 Myrtle Beach, SC Olde Brainerd Centre... 9.5 14 35 Dec-2006 57,293 57,293 100 Bi-LO 7 Chattanooga, TN Signal Hills Crossing.. 11.00 2,049 244 Dec-2001 44,220 44,220 100 Food 6 Statesville, NC Lion(3) Soddy Daisy Plaza...... 9.5 173 48 Dec-2006 100,095 47,325 100 Wal*Mart, 5 Soddy Daisy, TN Bi-Lo, CVS University Crossing.... 8.75 650 79 Feb-2010 101,964 20,053 N/A Sears 8 Pueblo, CO ------------- ---------- ---------- ---------- ------------ -------- Total................ $7,200 $1,087 449,017 314,336 100% 50 ============= ========== ========== ========== ============ ======== (1) Includes Anchors. (2) Includes all leases executed on or before December 31, 2000. Leased GLA includes non-Anchor GLA and leased Anchor GLA. (3) Tenant has closed but is continuing to meet its financial obligation.
Office Building The Company owns a 95% interest in a 49,082 square foot office building in Chattanooga, Tennessee in which the Company's headquarters are located. The Company occupies 34,470 square feet or 70% of the total square footage of the Office Building. The Office Building is 100% occupied. 34 Top 25 Tenants The following table sets forth the Company's top 25 tenants based upon a percentage of total revenues from the Company's Properties owned on December 31, 2000.
% OF NUMBER OF RANK TENANT REVENUES STORES SQUARE FEET ---------- --------------------------------------- ----------------------- ------------------ -------------------- 1 Limited, Inc., The................... 5.10% 80 658,961 2 Venator Group, Inc................... 2.46% 74 234,516 3 Gap Inc., The........................ 2.13% 36 346,290 4 JCPenney Co. Inc..................... 1.79% 32 2,839,343 5 Food Lion............................ 1.70% 27 691,905 6 Goody's Family Clothing, Inc......... 1.45% 17 585,733 7 Intimate Brands. .................... 1.43% 41 164,810 8 Shoe Show, The....................... 0.98% 27 127,800 9 Regal Cinemas, Inc................... 0.98% 6 221,135 10 Camelot - Transworld Entertainment... 0.98% 25 92,476 11 American Eagle Outfitters............ 0.94% 20 87,992 12 Sears, Roebuck, & Co................. 0.88% 27 2,914,307 13 Barnes & Noble, Inc.................. 0.86% 12 137,127 14 Regis Corporation, The............... 0.86% 62 69,433 15 Great Atlantic and Pacific........... 0.86% 3 168,496 16 Footstar............................. 0.86% 15 116,100 17 Consolidated Stores Corporation...... 0.83% 26 91,575 18 Carmike Cinema....................... 0.80% 9 214,235 19 Claire's Boutiques, Inc.............. 0.76% 53 55,862 20 Homeplace Stores Two, Inc............ 0.67% 3 159,465 21 Office Max, Inc...................... 0.65% 6 151,224 22 Belk Atlanta Group Office............ 0.62% 8 688,497 23 United Artists Theatre............... 0.61% 5 151,854 24 Kirkland's........................... 0.60% 17 69,811 25 Tandy Corporation.................... 0.58% 33 78,426
MORTGAGE DEBT AND RATIO TO TOTAL MARKET CAPITALIZATION As of December 31, 2000, the Operating Partnership's proportionate share of indebtedness of all Properties (whether or not consolidated for financial statement reporting purposes, including the Construction Properties) was approximately $1.452 billion. The Company's total market capitalization (the aggregate market value of the Company's outstanding shares of Common and Preferred Stock, assuming the full exchange of the limited partnership interests in the Operating Partnership for Common Stock, plus the $1.452 billion total debt of the Operating Partnership) as of December 31, 2000 was $2.4 billion. Accordingly, the Company's debt to total market capitalization ratio as of December 31, 2000 was 59.4%. The debt to total market capitalization ratio, which is based upon the Company's proportionate share of consolidated and unconsolidated indebtedness and market values of equity, differs from debt-to-book capitalization ratios, which are based upon consolidated indebtedness and book values. 35 The following table sets forth certain information regarding the mortgages and secured lines of credit encumbering the Properties. MORTGAGE DEBT
(Dollars in thousands) Mortgage Loans Outstanding in Whole or in Part at December 31, 2000 ------------------------------------- Ownership Share of Estimated Earliest Company Annual, Balloon Date at and Annual Principal all Annual Payment Which Loans Center Pledged Operating Interest Balance as of Interest Debt Maturity Due on Can Be As Collateral Partnership Rate 12/31/00(1) Payment(2) Service Date Maturity Prepaid(3) --------------------------- ----------- ------------ --------------- ------------ ---------- ------------ ----------- -------------- Malls: Arbor Place......... 100% 7.809%(4) $99,300 $7,754 $7,754 Jun-2001 $99,299 -- Asheville Mall...... 100% 7.563%(4) 51,000 3,857 3,857 Apr-2002 51,000 -- Bonita Lakes Mall... 100% 6.820% 28,936 1,973 2,503 Oct-2009 22,539 Oct-2003(15) Burnsville Center... 100% 8.000% 74,184 5,935 6,900 Aug-2010 60,341 Sep-2005(9) College Square...... 100% 6.750% 14,726 994 1,726 Sep-2013 -- -- (5) Coolsprings Galleria 100% 8.290% 64,654 5,360 6,636 Oct-2010 47,827 Oct-2000(6) Frontier Mall....... 100% 10.000% 1,960 196 2,220 Dec-2001 -- -- (7) Governor's Square... 48% 8.230% 34,538 2,855 3,476 Sep-2016 14,454 Sep-2001(8) Hamilton Place...... 90% 7.000% 70,251 4,918 6,361 Mar-2007 59,505 -- (9) Hickory Hollow Mall. 100% 6.770% 93,775 6,349 7,723 Aug-2008 80,847 May-2008(9) Janesville Mall..... 100% 8.375% 16,010 1,341 1,857 Apr-2016 -- -- Madison Square...... 50% 9.250% 47,651 4,408 4,936 Mar-2002 46,482 Feb-1997(10) Meridian Mall....... 100% 7.612%(4) 80,000 6,090 6,090 Aug-2003 80,000 -- Oak Hollow Mall..... 75% 7.310% 49,585 3,625 4,709 Feb-2008 39,567 Feb-2002(9) Parkway Place....... 50% 8.094%(4) 11,253 911 911 Sep-2001 11,253 -- Plaza del Sol....... 51% 9.150% 5,092 463 796 Aug-2010 -- Sep-2001(9) Rivergate Mall...... 100% 6.770% 75,789 5,131 6,241 Aug-2008 65,340 May-2008(9) Springdale Mall..... 100% 7.867%(4) 21,683 1,704 1,704 Nov-2001 19,950 -- St. Clair Square.... 100% 7.000% 73,047 5,113 6,361 Apr-2009 58,975 --(11) Stroud Mall ........ 100% 8.420% 32,500 2,736 2,977 Dec 2010 29,385 -- Turtle Creek Mall... 100% 7.400% 32,868 2,432 2,966 Mar-2006 26,992 Mar-1999(9) Walnut Square...(12) 100% 10.125% 729 74 194 Feb-2008 -- --(17) Walnut Square....... 100% 9.750%(14) 389 38 38 Feb-2008 389 -- (14) WestGate Mall....... 100% 6.950% 46,724 3,247 4,819 Feb-2002 45,221 Feb-2002(19) York Galleria....... 100% 8.340% 52,000 4,337 4,727 Dec-2010 46,932 -- --------------- Malls Subtotal: 1,078,644 --------------- Associated Centers: Bonita Lakes Crossing 100% 6.820% 9,067 618 784 Oct-2009 7,062 Oct-2003(9) Courtyard At Hickory 100% 6.770% 4,366 296 359 Aug-2008 3,764 May-2008 Hollow.............. Georgia Square Plaza 100% 9.000% 12 1 13 Jan-2001 -- Feb-1997(9) Hamilton Corner..... 90% 10.125% 3,063 310 471 Aug-2011 -- --(21) Madison Plaza....... 75% 10.125% 1,545 156 537 Feb-2004 -- --(22) The Landing At Arbor Place 100% 7.111%(4) 11,162 865 865 Jun-2001 11,162 -- The Terrace......... 92% 7.300% 10,147 741 1,047 Sep-2002 9,596 --(20) Village at Rivergate 100% 6.770% 3,580 242 295 Aug-2008 3,086 May-2008 Westgate Crossing... 100% 8.500% 9,876 839 907 Jul-2010 8,954 Jul-2010 --------------- Associated Centers Subtotal: 52,818 --------------- Community Centers: Bennington Place.... 100% 10.250% 510 52 83 Aug-2010 -- Jul-2000(19) BJ's Plaza.......... 100% 10.400% 3,112 324 476 Dec-2011 -- --(16) Briarcliff Square... 100% 10.375% 1,556 161 226 Feb-2013(20) -- Feb-1998(21) Cedar Bluff Crossing 100% 10.625% 1,129 120 230 Aug-2007 -- Jan-2008(22) Colleton Square..... 100% 9.375% 909 85 143 Aug-2010(24) -- Aug-1998(19) Collins Park Commons 100% 10.250% 727 74 202 Oct-2010 -- Sept-2000(19) Cortlandt Town Center 100% 6.900% 51,949 3,584 4,539 Aug-2008 42,342 Aug-2003(9) Cosby Station....... 100% 8.500% 3,959 337 490 Sep-2014 -- Sep-2001(25) East Ridge Crossing. 100% 10.125% 689 70 324 May-2003 -- Jan-2001(26) Fifty-Eight Crossing 100% 10.125% 664 67 312 May-2003 -- Jan-2001(26) Greenport Towne Center 100% 9.000% 4,165 375 529 Sep-2014 -- --(27) Henderson Square.... 100% 7.500% 6,313 473 750 Apr-2014 -- May-2005(28) Jean Ribaut......... 100% 7.375% 3,661 270 440 Nov-2013 4,019 --(23) Longview Crossing... 100% 10.250% 405 42 128 Aug-2010 -- Aug-2000(19) 36 Ownership Share of Estimated Earliest Company Annual, Balloon Date at and Annual Principal all Annual Payment Which Loans Center Pledged Operating Interest Balance as of Interest Debt Maturity Due on Can Be As Collateral Partnership Rate 12/31/00(1) Payment(2) Service Date Maturity Prepaid(3) --------------------------- ----------- ------------ --------------- ------------ ---------- ------------ ----------- -------------- North Haven Crossing 100% 9.550% 6,740 644 1,225 Oct-2008 -- Oct-1998(30) Northwoods Plaza.... 100% 9.750% 1,178 115 171 Jun-2012 -- --(31) Perimeter Place..... 100% 10.625% 1,378 146 278 Jan-2008 -- Jan-2008(22) Sand Lake Corners... 100% 7.846%(4) 14,000 1,098 1,098 Jun-2001 14,012 -- Seacoast Shopping Center 100% 9.750% 5,452 532 721 Sep-2002 5,110 Oct-1997(32) Shenandoah Crossing. 100% 10.250% 509 52 83 Aug-2010 -- Aug-2000(19) Springhurst Towne Center 100% 6.650% 22,532 1,498 2,179 Aug-2018 19,714 Aug-2004(35) Suburban Plaza...... 100% 7.875% 8,546 673 870 Jan-2004 6,042 --(36) Sutton Plaza........ 100% 7.860%(4) 12,039 894 894 Aug-2002 12,039 -- 34th St. Crossing(33) 100% 10.625% 1,433 152 234 Dec-2010 -- Dec-2000(34) Uvalde Plaza........ 75% 10.625% 660 70 133 Feb-2008 -- Feb-2008(22) Valley Commons...... 100% 10.250% 879 90 142 Oct-2010 -- Oct-2000(19) Willow Springs Plaza 100% 9.750% 4,567 445 934 Aug-2007 601 Aug-1997(32) -------------- Community Centers Subtotal: 159,661 -------------- Construction Properties: Asheville Mall Expansion 100% 7.947%(4) 24,322 1,933 1,933 Apr-2002 24,322 -- Coastal Way......... 100% 8.071%(4) 7,572 611 611 Dec-2002 7,572 -- Chesterfield Crossing 100% 7.811%(4) 7,093 554 554 Dec-2002 7,083 -- Creekwood Crossing.. 100% 8.140%(4) 10,303 839 839 Jul-2002 10,303 -- Gunbarrel Pointe.... 100% 8.125%(4) 12,087 982 982 Jan-2002 12,087 -- The Lakes Mall...... 90% 7.985%(4) 13,536 1,081 1,081 Mar-2002 9,739 -- Meridian Mall Expansion 100% 7.735%(4) 9,739 753 753 Aug-2003 -- -------------- Construction Properties Subtotal: 84,652 --------------- Other: Park Place.......... 95% 10.000% 952 95 459 Apr-2003 -- --(9) Other............... 75% 9.500% 167 15 18 Jun-2004 -- -- Credit Lines........ 100% 7.69%(37) 146,000 (37) 11,236 11,236 Various 146,000 -- -------------- Total: $ 1,522,893 ============== Operating Partnership's Share of Total: $ 1,451,564 (38) (1) The amount listed includes 100% of the loan amount even though the Company and the Operating Partnership may own less than 100% of the property. (2) Interest has been computed by multiplying the annual interest rate by the outstanding principal balance as of December 31, 2000. (3) Unless otherwise noted, loans are prepayable at any time. (4) The interest rate is floating at various spreads over LIBOR priced at the rates in effect at December 31, 2000. (5) Prepayment premium is greater of 1% or modified yield maintenance. (6) Prepayment premium is the greater of 1% or yield maintenance after October 1, 2000. (7) Prepayment premium is based on yield maintenance (not less than 1%) for any prepayment prior to January, 1997; thereafter, the prepayment premium is 5%, decreasing by 1% per year to a minimum of 1%; there is no prepayment premium during the last 120 days of the loan term. (8) Prepayment premium is based on the greater of yield maintenance or 2%. (9) Prepayment premium is the greater of 1% or yield maintenance. (10) Prepayment premium is based on yield maintenance; there is no prepayment premium after October 1, 2001. (11) Prepayment premium is the greater of 1% or yield maintenance, none last 120 days. (12) The loan is secured by a first mortgage lien on the land and improvements comprising the Goody's anchor store and no other property. (13) Prepayment premium is the greater of 1% or yield maintenance; there is no prepayment premium after November 1, 2007. (14) Interest is floating at 1 1/2% over prime priced at December 31, 2000. The maturity date is 90 days after notice. (15) Loan is closed to prepayment for the term. Lender shall adjust the interest rate every 5th year of the loan. If borrower does not except the new rate loan may be prepaid at that time without prepayment penalty. (16) Prepayment penalty is based on yield maintenance. (17) Prepayment premium is the greater of 1% or yield maintenance; there is no prepayment premium during the last 120 days of the loan term. (18) Prepayment premium is the greater of 1% or yield maintenance; there is no prepayment premium after November 1, 2003. (19) Prepayment premium is 5%, decreasing by 1% per year to a minimum of 2% there is no prepayment premium during the last 120 days of the loan term. (20) Lender has option to accelerate loan between March 1, 2001 and February 28, 2002; March 1, 2006 and February 28, 2007; and March 1, 2011 and February 28, 2012. (21) Prepayment premium is 7%, decreasing by 1% per year to a minimum of 3%. (22) Loan may not be prepaid. (23) Open at 21/2% declining1/2of 1% per year beginning December 1999 to a minimum of 1%. (24) Lender may accelerate loan on July 1, 2007 unless Food Lion exercises an extension option. (25) Prepayment premium of 7% decreasing by 1% per year to a minimum of 2%; there is no prepayment premium during the last six months of the loan term. (26) Prepayment premium is 5%, decreasing 1% per year to a minimum of 1%; there is no prepayment premium during the last two years of the loan term. (27) Prepayment premium is the greater of 10% or 1/12 of the annual yield difference before October 2014. Thereafter the prepayment premium is 1%. (28) Loan may be prepaid after 9 years. The prepayment premium is the greater of 1% or yield maintenance. (29) Lender may accelerate loan after January 1, 2008 unless Food Lion exercises an extension option beyond January 1, 2008. (30) Prepayment premium is the greater of 2% or yield maintenance before October, 1998, afterwards it is the greater of 1% or yield maintenance. (31) Prepayment premium is based on yield maintenance; there is no loan prepayment premium during the last 120 days of the loan term. (32) Prepayment premium is the greater of 1% or yield maintenance; there is no loan prepayment premium during the last 90 days of the term. (33) The note is secured by rent payable by the Food Lion Anchor store. 37 (34) Prepayment premium is 5%, decreasing by 1% per year to a minimum of 2%. There is no loan prepayment premium during the last 90 days of the loan term. (35) The loan has a rate reset option in August of 2004, 2009 and 2014. The loan can be prepaid in these years if the Company elects not to accept the rate reset. The prepayment premium is the greater of 1% or yield maintenance. (36) Prepayment penalty is 7.875% until November 2001 then yield maintenance, none last 120 days. (37) Interest rates on the credit lines are at various spreads over LIBOR whose weighted average interest rate is 7.69% with various maturities through 2004. (38) Represents non-recourse indebtedness on Properties and reflects the less than 100% ownership of the Company and the Operating Partnership with respect to certain Properties subject to such indebtedness.
ITEM 3. LEGAL PROCEEDINGS. The Company and the Operating Partnership are not currently involved in any material litigation nor, to management's knowledge, is any material litigation currently threatened against the Company, the Operating Partnership, the Property Partnerships or the Properties, other than litigation arising in the ordinary course of business, most of which is expected to be covered under liability insurance policies held by the Company or the Operating Partnership. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On January 19, 2001 the Company held a special meeting of shareholders in connection with the Jacobs transaction, at which special meeting the shareholders: - approved the issuance by the Operating Partnership to Jacobs of up to 13.94 million special common units (SCUs)(18,343,624 votes were cast for the proposal, 384,048 votes were cast against the proposal and 41,652 votes were withheld). - adopted an amendment to the Company's certificate of incorporation which, among other things, modified the Company's share ownership limit to permit the Lebovitz Group (as defined in the Company's certificate of incorporation) and the Jacobs Group (as defined in the proposed amendment) to beneficially or constructively own in the aggregate up to 37.99% of the outstanding shares of common stock of the Company (186,311,871 votes were cast for the proposal, 394,981 votes were cast against the proposal and 62,473 votes were withheld). 38 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. (a) Market Information The principal United States market in which the Common Stock is traded is the New York Stock Exchange. The following table sets forth the high and low sales prices for the Common Stock for each quarter of the Company's two most recent fiscal years.
2000 Quarter Ended High Low ---------------------------------- ---------------- ------------- March 31...................... $22.8750 $20.1250 June 30....................... 25.6875 20.5625 September 30.................. 25.8750 23.8750 December 31................... 25.3750 22.5000 1999 Quarter Ended High Low ---------------------------------- ---------------- ------------- March 31...................... $25.9375 $22.1250 June 30....................... 26.3750 22.6875 September 30.................. 27.0000 22.8125 December 31................... 24.7500 19.4375
(b) Holders The approximate number of shareholders of record of the Common Stock was 651 as of March 20, 2001. (c) Dividends The following table sets forth the frequency and amounts of dividends declared and paid for each quarter of the Company's two most recent fiscal years.
Quarter Ended 2000 1999 ---------------------------------- ----------- ----------- March 31..................... $ 0.5100 $ 0.4875 June 30...................... 0.5100 0.4875 September 30................. 0.5100 0.4875 December 31.................. 0.5100 0.4875
Future dividend distributions are subject to the Company's actual results of operations, economic conditions and such other factors as the Board of Directors of the Company deems relevant. The Company's actual results of operations will be affected by a number of factors, including the revenues received from the Properties, the operating expenses of the Company, the Operating Partnership and the Property Partnerships, interest expense, the ability of the anchors and tenants at the Properties to meet their obligations and unanticipated capital expenditures. 39 ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected fianacial data of the Company, which should be read in conjunction with the finacial statments and notes therto. Selected Financial Data (In thousands, except per share data)
CBL & Associates Properties, Inc. ------------------------------------------------------------------ Year Ended December 31, ------------------------------------------------------------------ 2000 1999 1998 1997 1996 ---------- ---------- ---------- --------- ---------- TOTAL REVENUES $356,488 $317,603 $254,640 $177,604 $146,805 TOTAL EXPENSES 280,027 250,139 203,001 135,200 111,012 ---------- ---------- ---------- --------- ---------- INCOME FROM OPERATIONS 76,461 67,464 51,639 42,404 35,793 GAIN ON SALES OF REAL ESTATE ASSETS 15,989 8,357 4,183 6,040 13,614 EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES 3,684 3,263 2,379 1,916 1,831 MINORITY INTEREST IN EARNINGS: Operating Partnership (28,507) (23,264) (16,258) (13,819) (15,468) Shopping center properties (1,538) (1,225) (645) (508) (527) ---------- ---------- ---------- --------- ---------- INCOME BEFORE EXTRAORDINARY ITEM 66,089 54,595 41,298 36,033 35,243 EXTRAORDINARY LOSS ON EXTINGUISHMENT OF DEBT (367) - (799) (1,092) (820) ---------- ---------- ---------- --------- ---------- NET INCOME 65,722 54,595 40,499 34,941 34,423 PREFERRED DIVIDENDS (6,468) (6,468) (3,234) - - ---------- ---------- ---------- --------- ---------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 59,254 $ 48,127 $ 37,265 $ 34,941 $ 34,423 ========== ========== ========== ========= ========== BASIC EARNINGS PER COMMON SHARE: Income before extraordinary item $ 2.40 $ 1.95 $ 1.58 $ 1.51 $ 1.69 ========== ========== ========== ========= ========== Net income $ 2.38 $ 1.95 $ 1.55 $ 1.46 $ 1.65 ========== ========== ========== ========= ========== Weighted average common shares outstanding 24,881 24,647 24,079 23,895 20,890 DILUTED EARNINGS PER COMMON SHARE: Income before extraordinary item $ 2.38 $ 1.94 $ 1.56 $ 1.49 $ 1.68 ---------- ---------- ---------- --------- ---------- Net income $ 2.37 $ 1.94 $ 1.53 $ 1.45 $ 1.64 ========== ========== ========== ========= ========== Weighted average common shares and potential 25,021 24,834 24,340 24,151 21,022 dilutive common shares outstanding Dividends declared per share $ 2.04 $ 1.95 $ 1.86 $ 1.77 $ 1.68
December 31, ------------------------------------------------------------------ 2000 1999 1998 1997 1996 ---------- ---------- ---------- ---------- ---------- BALANCE SHEET DATA: Net investment in real estate assets $2,040,614 $1,960,554 $1,805,788 $1,142,324 $ 987,260 Total assets 2,115,565 2,018,838 1,855,347 1,245,025 1,025,925 Total debt 1,424,337 1,360,753 1,208,204 741,413 590,295 Minority interest 174,665 170,750 168,040 123,897 114,425 Shareholders' equity 434,825 419,887 415,782 330,853 272,804 OTHER DATA: Cash flows provided by (used in): Operating activities $ 117,814 $ 114,196 $ 89,123 $ 60,852 $ 54,789 Investing activities (127,073) (212,141) (571,332) (245,884) (218,016) Financing activities 7,369 99,192 484,912 183,858 164,496 Funds from operations (FFO) 1 of the Operating Partnership 132,034 116,273 93,492 76,184 62,398 FFO applicable to the Company 79,495 78,304 64,941 54,597 43,052 (1) Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations for the definition of FFO. FFO does not represent cash flow from operations as defined by accounting principles generally accepted in the United States and is not necessarily indicative of the cash available to fund all cash requirements. FFO is recomputed to exclude the add-back of development costs charged to net income.
40 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the financial condition and results of operations should be read in conjunction with CBL & Associates Properties, Inc. Consolidated Financial Statements and Notes thereto. Information included herein may contain "forward-looking statements" within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements. We direct you to the Company's other filings with the Securities and Exchange Commission, and elsewere in this Annual Report on Form 10-K for a discussion of such risks and uncertainties. GENERAL BACKGROUND On November 3, 1993, CBL & Associates Properties, Inc. (the "Company") completed an initial public offering of 15,400,000 shares of common stock priced at $19.50 per share (the "Offerings"). In connection with the Offerings, CBL & Associates, Inc. and its affiliates contributed their interests in properties to CBL & Associates Limited Partnership (the "Operating Partnership"). The Company is indirectly the sole general partner and as of December 31, 2000, the majority owner, of the Operating Partnership. As a result, the CBL & Associates Properties, Inc. Consolidated Financial Statements and Notes thereto reflect the consolidated financial results of the Operating Partnership, which included at December 31, 2000, the operations of a portfolio of properties consisting of 26 regional malls, 15 associated centers, two power centers, 70 community centers, an office building, joint venture investments in four regional malls and one associated center, and income from seven mortgages (the"Properties"). As of December 31, 2000, the Operating Partnership had under construction two malls, one community center, one office building, one mall expansion, and owns options to acquire certain shopping center development sites. The consolidated financial statements also include the results of CBL & Associates Management, Inc. (the "Management Company"). The Company classifies its regional malls into two categories - stabilized malls which have completed their initial lease-up and new malls which are in their initial lease-up phase. As of December 31, 2000 the new mall category was comprised of Springdale Mall in Mobile, Alabama, which was acquired in September 1997 and is being redeveloped and retenanted; Bonita Lakes Mall in Meridian, Mississippi, which opened in October 1997; Parkway Place in Huntsville, Alabama, which was acquired in December 1998 and is currently being redeveloped; and Arbor Place Mall in Atlanta (Douglasville), Georgia, which opened in October 1999. On September 25, 2000, the Company entered into a series of agreements with Jacobs Realty Investors Limited Partnership and certain of its affiliates and partners ("Jacobs") pursuant to which the Company agreed to acquire from Jacobs interests in 21 malls and two associated centers for total consideration of approximately $1.3 billion. The transaction closed on January 31, 2001. Additionally, in a separate transaction, the Company acquired the remaining 50% interest in Madison Square Mall in Huntsville, Alabama. The purchase price was comprised of $124.5 million in cash including closing costs of approximately $12 million; the assumption of $745.5 million in non-recourse mortgage debt; and the issuance of approximately 12.2 million special common units (SCUs) in the Operating Partnership. The cash portion was funded from a new $212 million credit facility provided by a consortium of banks led by Wells Fargo. The Company will close on the remainder of the Jacobs transaction in 2002, at which time it will assume an additional $25.7 million of non-recourse mortgage debt and issue an additional 499,733 SCUs. 41 CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS SALES Mall shop sales, for those tenants who have reported, in the 26 stabilized malls in the Company's portfolio, remained relatively the same on a comparable per square foot basis as shown below:
Year Ended December 31, ---------------------------------- 2000 1999 -------- ------- Sales per square foot $283.00 $283.75
Total sales volume in the mall portfolio, including new malls, increased 1.9% to $1.690 billion in 2000 from $1.659 billion in 1999. The weighted average occupancy costs as a percentage of sales for the years ended December 31, 2000, 1999 and 1998, for the stabilized malls (excluding malls acquired in 1999 and 1998 from those years) were 11.9%, 11.5% and 11.1%, respectively. OCCUPANCY Occupancy for the Company's overall portfolio increased, with a breakdown by asset category as follows:
At December 31, ------------------------------- 2000 1999 ----- ----- Stabilized malls 94.5% 94.5% New malls (1) 90.4 91.8 Associated centers 94.9 93.2 Community centers 97.8 97.7 ----- ----- Total portfolio 95.7% 95.6% ===== ===== (1) Excludes Parkway Place which is under redevelopment.
AVERAGE BASE RENTS Average base rents for the Company's three portfolio categories was as follows:
At December 31, -------------------------------------------------- Percentage 2000 1999 Increase -------- ------- ---------- Malls (1)........................... $21.57 $20.73 4.1% Associated centers.................. 9.88 9.78 1.0 Community centers................... 8.85 8.32 6.4 (1) Excludes Parkway Place which is under redevelopment.
42 CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LEASE ROLLOVERS For spaces previously occupied, the Company achieved the following results from rollover leasing for the year ended December 31, 2000, over and above the base and percentage rent paid by the previous tenant:
Per Square Per Square Foot Rent Foot Rent Percentage Prior Lease (1) New Lease (2) Increase --------------- ------------- ----------- Malls.............................. $23.36 $25.75 10.2% Associated centers................. 9.88 11.09 12.2 Community centers.................. 10.34 11.53 11.5 (1) - Rental achieved for spaces previously occupied at the end of the lease including percentage rent. (2) - Average base rent over the term of the lease.
In 2000 and 1999, revenues from the malls represented 77.3% and 76.9%, respectively, of total revenues from consolidated and unconsolidated properties; revenues from associated centers represented 4.1% and 3.7%; revenues from community centers represented 17.5% and 17.8%; and revenues from mortgages and the office building represented 1.1% and 1.6%. Accordingly, revenues and results of operations are disproportionately impacted by the malls' achievements. The shopping center business is somewhat seasonal in nature with tenant sales achieving the highest levels during the fourth quarter because of the holiday season. The malls earn most of their "temporary" rents (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 entire year. COMPARISON OF RESULTS OF OPERATIONS FOR 2000 TO THE RESULTS OF OPERATIONS FOR 1999 Total revenues in 2000 increased by $38.9 million, or 12.2%, to $356.5 million compared with $317.6 million in 1999. Of this increase, minimum rents increased by $22.4 million, or 11.1%, to $225.5 million compared with $203.0 million in 1999, percentage rents increased by $1.4 million, or 19.1%, to $8.8 million compared with $7.4 million in 1999; other rents increased by $0.8 million, or 14.8%, to $6.2 million compared with $5.4 million in 1999; and tenant reimbursements increased by $17.0 million, or 18.9%, to $106.8 million compared with $89.8 million in 1999. Approximately $22.3 million of the increase in revenues resulted from the ten new centers opened or acquired during 1999 and 2000. The centers opened or acquired in 1999 and contributing to 2000 increases are Arbor Place Mall in Atlanta (Douglasville) Georgia; The Landing at Arbor Place in Atlanta (Douglasville) Georgia; York Galleria, in York, Pennsylvania; Sand Lake Corner in Orlando, Florida; and Fiddler's Run in Morganton, North Carolina, which were sold in 2000. The six new centers opened or acquired in 2000 are fully described in the Developments, Acquisitions and Expansions section of the annual report. Improved occupancies and operations and increased rents in the Company's operating portfolio generated approximately $21.8 million of the increased revenues, with the largest increases derived from Rivergate Mall in Nashville, Tennessee, and Meridian Mall in Lansing, Michigan. These increases were offset by a decrease in revenues of $2.2 million from 13 community centers sold in 2000 and a decrease of $3.1 million in management and development fees relating to a one time fee earned in the Company's co-development program in 1999. Management, development and leasing fees decreased in 2000 by $3.6 million, or 46.7%, to $4.2 million compared with $7.8 million in 1999. Most of the decrease was due to a one-time fees totaling $3.1 million earned in the co-development program in 1999. The balance of the decrease was due to the reduction in continuing co-development fees. Interest and other income increased in 2000 by $0.9 million, or 21.4%, to $5.1 million compared with $4.2 million in 1999. This increase resulted primarily from the ten new centers opened or acquired over the past 24 months and interest income on the proceeds from community center sales held in escrow during the year. 43 CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Property operating expenses, including real estate taxes and maintenance and repairs, increased in 2000 by $10.7 million, or 11.1%, to $106.9 million compared with $96.2 million in 1999. This increase is primarily the result of the ten new centers opened or acquired over the past 24 months. The Company's cost recovery ratio, which includes redistribution of utilities, increased to 99.1% in 2000 compared with 93.3% in 1999 due to increases in occupancy at the end of 1999 and continued through calendar year 2000. Depreciation and amortization increased in 2000 by $7.1 million, or 13.2%, to $60.6 million compared with $53.5 million in 1999. This increase resulted primarily from depreciation and amortization on the ten new centers opened or acquired over the past 24 months and the Company's capital investment in operating properties. Interest expense increased in 2000 by $12.1 million, or 14.7%, to $94.6 million compared with $82.5 million in 1999. This increase is primarily due to increased interest expense on the ten new centers opened or acquired over the past 24 months offset by reductions in interest expense on debt retired with the proceeds from the sales of properties. General and administrative expenses increased in 2000 by $1.6 million, or 9.6%, to $17.8 million compared with $16.2 million in 1999. A portion of this increase was due to increases in general overhead in preparation to assume management of The Richard E. Jacobs Group's interest's in 21 malls and two associated centers that were subsequently acquired in January 2001. Gain on sales of real estate assets was $16.0 million in 2000 compared with $8.4 million in 1999. The majority of the gain in 2000 is from the $10.5 million gain on 13 community centers sold in 2000. The centers sold were: Centerview Plaza in China Grove, North Carolina; Clark's Pond in South Portland, Maine; Dorchester Crossing in Charleston, South Carolina; Fiddler's Run in Morganton, North Carolina; Genesis Square in Crossville, Tennessee; Hollins Plantation in Roanoke, Virginia; Karns Korner in Knoxville, Tennessee; Lakeshore Station in Gainsville, Georgia; Sparta Crossing in Sparta, Tennessee; Sterling Creek Commons in Portsmouth, Virginia; Tyler Square in Radford, Virginia; University Crossing in Pueblo, Colorado; and Wildwood Plaza in Salem, Virginia. Additional gains were generated by outparcel and pad sales at two centers under development in 2000, Creekwood Crossing in Bradenton, Florida and The Lakes Mall in Muskegon, Michigan, as well as outparcel sales at Sand Lake Corners in Orlando, Florida, which opened in 1999. COMPARISON OF RESULTS OF OPERATIONS FOR 1999 TO THE RESULTS OF OPERATIONS FOR 1998 Total revenues in 1999 increased by $63.0 million, or 24.7%, to $317.6 million compared with $254.6 million in 1998. Of this increase, minimum rents increased by $36.4 million, or 21.8%, to $203.0 million compared with $166.6 million in 1998, percentage rents increased by $2.6 million, or 54.8%, to $7.4 million compared with $4.8 million in 1998, other rents increased by $1.4 million, or 35.8%, to $5.4 million compared with $4.0 million in 1998; and tenant reimbursements increased by $15.9 million, or 21.6%, to $89.8 million compared with $73.8 million in 1998. Approximately $11.3 million of the increase in revenues resulted from the five new centers opened or acquired during 1999, and $35.9 million of the increase in revenues resulted from the ten new centers opened or acquired during the past 24 months. The centers opened in 1998 and contributing to 1999 increases are Sterling Creek Commons in Portsmouth, Virginia, and 641,000 square feet of expansions. The centers acquired in 1998 and contributing to 1999 increases are Stroud Mall in Stroudsburg, Pennsylvania; Hickory Hollow Mall, Rivergate Mall, Courtyard at Hickory Hollow, Village at Rivergate, and Lions Head Village, all in Nashville, Tennessee; Meridian Mall in Lansing, Michigan; and Janesville Mall in Janesville, Wisconsin. The five new centers opened or acquired in 1999 are Arbor Place Mall in Atlanta (Douglasville), Georgia; The Landing at Arbor Place in Atlanta (Douglasville), Georgia; Sand Lake Corners in Orlando, Florida; and Fiddler's Run in Morganton, North Carolina. Fiddler's Run was sold in March 2000 almost a year after it had opened. Improved occupancies and operations and increased rents in the Company's operating portfolio generated approximately $12.4 million of the increased revenues, with the largest increases from Hamilton Place in Chattanooga, Tennessee, and St. Clair Square in Fairview Heights, Illinois. New revenues of $3.4 million were from one-time fees earned in the Company's co-development program. 44 CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management, development and leasing fees increased in 1999 by $5.1 million, or 188.9%, to $7.8 million compared with $2.7 million in 1998. Most of the increase was due to one-time fees totaling $3.4 million earned in the co-development program. The balance of the increase was provided from the Company's managed properties and development operations. Interest and other income increased in 1999 by $1.5 million, or 55.0%, to $4.2 million compared with $2.7 million in 1998. This increase resulted primarily from the 15 new centers opened or acquired over the past 24 months. Property operating expenses, including real estate taxes and maintenance and repairs, increased in 1999 by $16.0 million, or 20.0%, to $96.2 million compared with $80.2 million in 1998. This increase is primarily the result of the 15 new centers opened or acquired over the past 24 months. The Company's cost recovery ratio increased to 93.3% in 1999 compared with 92.1% in 1998. Depreciation and amortization increased in 1999 by $10.0 million, or 23.0%, to $53.5 million compared with $43.5 million in 1998. This increase resulted primarily from depreciation and amortization on the 15 new centers opened or acquired over the past 24 months. Interest expense increased in 1999 by $15.2 million, or 22.5%, to $82.5 million compared with $67.3 million in 1998. This increase is primarily due to increased interest expense on the 15 new centers opened or acquired over the past 24 months. General and administrative expenses increased in 1999 by $4.4 million, or 36.9%, to $16.2 million compared with $11.8 million in 1998. This increase was due to increases in state tax expense, payroll, and general overhead. Gain on sales of real estate assets was $8.4 million in 1999 compared with $4.2 million in 1998. The majority of the gain in 1999 is from outparcel and pad sales at centers under development in 1999: Chesterfield Crossing in Richmond, Virginia; Arbor Place Mall and The Landing at Arbor Place in Atlanta (Douglasville), Georgia; and Sand Lake Corners in Orlando, Florida. The gain on sales in 1999 also includes gain on the sale of two centers, North Park Plaza in Richmond, Virginia, and a free-standing Regal Cinema in Jacksonville, Florida. LIQUIDITY AND CAPITAL RESOURCES The principal uses of the Company's liquidity and capital resources have historically been for property development, acquisitions, expansion and renovation programs, and debt repayment. To maintain its qualification as a real estate investment trust under the Internal Revenue Code, the Company currently is required to distribute to its shareholders at least 90% of its "Real Estate Investment Trust Taxable Income" as defined in the Internal Revenue Code of 1986, as amended (the "Code"). As of December 31, 2000, the Company had $93.6 million available in unfunded construction loans to be used for completion of construction projects and replenishment of working capital previously used for construction. Additionally, as of December 31, 2000, the Company had obtained revolving credit lines and term loans totaling $240 million, of which $99.0 million was available. Also, as a publicly traded company, the Company has access to capital through both the public equity and debt markets. The Company has filed a shelf registration statement authorizing shares of the Company's common stock, preferred stock, and warrants to purchase shares of the Company's common stock with an aggregate public offering price of up to $350 million, with $278 million available as of December 31, 2000. The Company anticipates that the combination of these sources will, for the foreseeable future, provide adequate liquidity to enable it to continue its capital programs substantially as in the past and make distributions to its shareholders in accordance with the Code's requirements applicable to real estate investment trusts. 45 CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management expects to refinance the majority of the mortgage notes payable maturing over the next five years with replacement loans. The Company's capital structure at December 31, 2000, included property specific mortgages, which are generally non-recourse, revolving lines of credit, common stock, preferred stock, and a minority interest in the Operating Partnership. The minority interest in the Operating Partnership represented the 25.5% ownership interest in the Operating Partnership held on December 31, 2000 by certain of the Company's current and former executive and senior officers . Additionally, these current and former executive and senior officers and the Company's directors own approximately 2.0 million shares of the outstanding common stock of the Company, for a combined total interest in the Operating Partnership on December 31, 2000 of approximately 30.9%. Ownership interests issued to fund acquisitions in 1998 and 1999 represented on December 31, 2000 a 6.5% interest in the Operating Partnership. Assuming the exchange of all limited partnership interests in the Operating Partnership for common stock, there would have been approximately 36.9 million shares of common stock outstanding with a market value of approximately $933.9 million at December 31, 2000 (based on the closing price of the Company's common stock of $25.3125 per share on December 31, 2000). The Company's total market equity is $992.8 million at December 31, 2000, including 2.9 million shares of preferred stock (based on the closing price of its preferred stock of $20.50 per share on December 31, 2000). The Company's current and former executive and senior officers' ownership interests had a market value of approximately $288.3 million at December 31, 2000. Mortgage debt consists of debt on certain consolidated properties as well as debt on four properties in which the Company owns non-controlling interests, accounted for under the equity method of accounting. At December 31, 2000, the Company's share of funded mortgage debt on its consolidated properties (adjusted for minority investors' interests in seven properties) was $883.2 million and its pro rata share of mortgage debt on unconsolidated properties (accounted for under the equity method) was $42.8 million for total fixed-rate debt obligations of $926.0 million with a weighted average interest rate of 7.5%. Consolidated and unconsolidated variable-rate debt accounted for $525.6 million with a weighted average interest rate of 7.2% (after application of swap instruments). Total debt obligations amounted to $1.452 billion. Variable-rate debt accounted for approximately 36.2% of the Company's total debt and 21.5% of its total capitalization. Through the execution of interest rate swap agreements, the Company has fixed the interest rates on $473.0 million of variable-rate debt at a weighted average interest rate of 7.1%. Of the Company's remaining variable-rate debt of $52.6 million, interest rate caps in place of $50.0 million leave $2.6 million of debt subject to variable rates on construction properties and no debt subject to variable rates on operating properties. There were no fees charged to the Company related to these swap agreements. The Company's interest rate swap and cap agreements in place at December 31, 2000, are as follows:
Amount Fixed LIBOR (in millions) Swap/Cap Component Effective Date Expiration Date ------------- -------- ----------- -------------- --------------- $100 swap 6.405% 01/27/2000 01/29/2001 75 swap 6.610% 02/24/2000 02/24/2001 50 swap 5.700% 06/11/1998 06/15/2001 38 swap 5.730% 06/26/1998 06/30/2001 80 swap 5.490% 09/01/1998 09/01/2001 80 swap 5.830% 12/22/2000 08/30/2003 50 cap 7.500% 09/29/2000 10/01/2001
Subsequent to year end, the Company executed new interest rate swap agreements totaling $140 million at a weighted-average LIBOR interest rate of 5.051%. The outstanding balance of $146 million on the Company's credit facilities had a weighted- average interest rate of 7.7% (before applied swap instruments) at December 31, 2000. Each of the credit facilities includes covenants that require the Company to maintain minimum net worth levels, maintain interest and debt coverage ratios, maintain total obligations to capitalized value ratios, and maintain limitations on variable-rate debt. The credit facilities also require that the Company's senior management continue to consist of certain individuals and to 46 CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS maintain certain levels of minority ownership in the Operating Partnership. The First Tennessee Bank credit facility provides that if the Company completes an offering of its securities, not less than 75% of the net proceeds of any such offering will be applied for the benefit of the Operating Partnership. The following table sets forth the Company's credit facilities at December 31, 2000 (in millions):
Credit Facility Amount Current Balance Maturity ---------------- -------- --------------- ----------- SunTrust $10 $10 April 2002 SouthTrust 20 20 March 2004 First Tennessee 80 25 June 2002 Wells Fargo 130 91 September 2002
During 2000 the Company closed permanent loans of $174 million at a weighted average interest rate of 8.24%. The details of those loans are: in June a $9.9 million loan on Westgate Crossing in Spartanburg, South Carolina, at an interest rate of 8.42%; in July a $5.2 million loan on Plaza Del Sol Mall in Del Rio, Texas, at an interest rate of 9.15% (the Company's share of this loan was $2.6 million); in August a $74.5 million loan on Burnsville Center in Burnsville, Minnesota, at an interest rate of 8.0%; in November a loan of $32.5 million on Stroud Mall in Stroudsburg, Pennsylvania, at an interest rate of 8.42%; and also in November a $52.0 million loan on York Galleria in York, Pennsylvania, at an interest rate of 8.34%. The proceeds of these loans were used to repay existing variable rate indebtedness and to fund distribution to equity partners. Based on the debt (including construction projects) and the market value of equity described above, the Company's debt to total market capitalization (debt plus market value equity) ratio was 59.4% at December 31, 2000, compared to 63.0% at December 31, 1999. On January 31, 2001, the Company, assumed in connection with the Jacobs acquisition total debt obligations of $745.5 million, including permanent debt of $661.5 million (adjusted for minority interest in one property); variable-rate debt of $12.5 million; and its pro rata share of mortgage debt on unconsolidated properties (accounted for under the equity method) of $71.5 million. In addition, the Company closed a $212 million unsecured credit facility provided by a consortium of banks led by Wells Fargo. The outstanding balance under this facility was $115 million at February 28, 2001. Of the revolving component of this facility, $97 million is still available and will be used to fund capital improvements in certain of the acquired properties. DEVELOPMENT, EXPANSIONS AND ACQUISITIONS During 2000, the Company opened and acquired approximately 1,236,000 square feet of new retail properties consisting of the following:
Project Name Location Total GLA Anchors ---------------------------- ----------------------------- ---------- ----------------------- ACQUISITION Marketplace at Flower Mound Dallas (Flower Mound), Texas 119,000 AMC Theater, Winn Dixie OPENINGS Sutton Plaza Expansion Mt. Olive, New Jersey 28,000 A & P Food Market Coastal Way Spring Hill, Florida 177,000 Belk, Sears Sand Lake Corners Expansion Orlando, Florida 38,000 Staples Chesterfield Crossing Richmond, Virginia 406,000 Home Depot, Wal*Mart Gunbarrel Pointe Chattanooga, Tennessee 195,000 Goody's, Target 47 Asheville Mall Expansion Asheville, North Carolina 143,000 Belk, Dillards Meridian Mall Lansing (Okemos), Michigan 85,000 Jacobson's Springdale Mall Mobile, Alabama 45,000 Carmike
As of February 28, 2001, the Company had approximately 1,901,000 square feet under construction consisting of:
Project Name Location Total GLA Opening Date --------------------------- ----------------------------- ---------- --------------- Meridian Mall Expansion Lansing (Okemos), Michigan 93,000 March 2001 Gunbarrel Pointe - Kohls Chattanooga, Tennessee 87,000 March 2001 Creekwood Crossing Bradenton, Florida 404,000 April 2001 The Lakes Mall Muskegon, Michigan 558,000 August 2001 CBL Center Chattanooga, Tennessee 128,000 January 2002 Parkway Place Mall Huntsville, Alabama 631,000 October 2002
On January 31, 2001, the Company acquired Jacobs interests in 21 malls and two associated centers. The total gross leasable area of the 23 properties was 19.2 million square feet, or an average gross leasable area of 914,000 square feet per mall. The gross leasable area of the mall stores in the Jacobs properties was approximately 5.9 million square feet. The malls are located in middle markets predominantly in the Southeast and the Midwest. Additionaly, the Company acquired the remaing 50% interest in Madison Square Mall in Huntsville, Alabama. The Company has also entered into a number of option agreements for the development of future regional malls and community centers. Except for these projects and as further described below, the Company currently has no other capital commitments. It is management's expectation that the Company will continue to have access to the capital resources necessary to expand and grow its business. Future development and acquisition activities will be undertaken by the Company as suitable opportunities arise. Such activities are not expected to be undertaken unless adequate sources of financing are available and a satisfactory budget with targeted returns on investment has been internally approved. The Company will fund its major development, expansion and acquisition activity with its traditional sources of construction and permanent debt financing as well as from other debt and equity financings, including public financings, and its credit facilities. OTHER CAPITAL EXPENDITURES Management prepares an annual capital expenditures budget for each property which is intended to provide for all necessary recurring capital improvements and maintenance items. Management believes that its annual operating reserve for maintenance and recurring capital improvements as well as reimbursements from tenants will provide the necessary funding for such requirements. The Company intends to distribute approximately 50% to 90% of its funds from operations with the remaining 10% to 50% to be held as a reserve for capital expenditures and continued growth opportunities. Major tenant finish costs for currently vacant space are expected to be funded with working capital, operating reserves, or revolving lines of credit. Funds invested for tenant finish costs are expected to earn a return on that investment. 48 CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS For the year ended December 31, 2000, revenue generating capital expenditures, or tenant allowances for improvements, were $10.0 million. These capital expenditures generate a return through increased rents from these tenants over the term of their leases. Revenue enhancing capital expenditures, or remodeling and renovation costs, were $7.4 million, the majority of which was for the renovation of Asheville Mall in Asheville, North Carolina, and three community centers. Revenue neutral capital expenditures, such as parking lot and roof repairs that are recovered from the tenants, were $9.6 million in 2000. Environmental Matter The Company believes that the Properties, with the exception of Parkway Place in Huntsville, Alabama, are in compliance in all material respects with all federal, state and local ordinances and regulations regarding the handling, discharge, and emission of hazardous or toxic substances. At Parkway Place asbestos abatement will occur in portions of the existing mall during demolition which will be completed by the end of the second quarter of 2001. The Company has not been notified by any governmental authority and is not otherwise aware of any material noncompliance, liability, or claim relating to hazardous or toxic substances in connection with any of its present or former properties. The Company has not recorded in its financial statements any material liability in connection with environmental matters. Cash Flows Cash flows provided by operating activities for 2000 increased by $3.6 million, or 3.2%, to $117.8 million from $114.2 million in 1999. This increase was primarily due to increases in cash provided from the operations of ten new centers opened or acquired in the last 24 months offset by decreases in cash flow from the sales of properties. Cash flows used in investing activities for 2000 decreased by $85.1 million, or 40.1%, to $127.1 million compared with $212.1 million in 1999. This decrease was primarily due to the smaller number of acquisitions in 2000 compared with the number of acquisitions in 1999. Cash flows provided by financing activities for 2000 decreased by $91.8 million, or 92.6%, to $7.4 million from $99.2 million in 1999. This decrease is primarily due to decreased borrowings related to the acquisition program and the retirement of debt with proceeds from sales of the properties. Impact of Inflation In the last three years, inflation has not had a significant impact on the Company because of the relatively low inflation rate. Substantially all tenant leases do, however, contain provisions designed to protect the Company from the impact of inflation. Such provisions include clauses enabling the Company to receive percentage rentals based on tenants' gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. In addition, many of the leases are for terms of less than ten years which may enable the Company to replace existing leases with new leases at higher base and/or percentage rentals if rents from the existing leases are below the then-existing market rate. Most of the leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. New Accounting Pronouncements Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended, ("SFAS No. 133") establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement; and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. 49 CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company has determined that a portion of its derivative instruments (swap agreements and an interest rate cap agreement) in place are ineffective as defined by SFAS No. 133. The terms of ineffective derivative instruments expire in 2001, thus while the Company may experience some volatility in earnings in interim periods, there will be no effect to current earnings in the Company's financial statements for the year ended December 31, 2001. If the Company had implemented SFAS No. 133 as of December 31, 2000, ineffective derivative instruments would have increased total assets by $514,000 and would have increased net income by $514,000. Effective derivative instruments would have increased liabilities by $262,000 and comprehensive income, also recorded on the balance sheet, would have decreased by $262,000. Funds from Operations Management believes that Funds from Operations ("FFO") provides an additional indicator of the financial performance of the Properties. FFO is defined by the Company as net income (loss) before depreciation of real estate assets, gains or losses on sales of real estate and gains or losses on investments in marketable securities. FFO also includes the Company's share of FFO in unconsolidated properties and excludes minority interests' share of FFO in consolidated properties other than the Operating Partnership. The Company computes FFO in accordance with the National Association of Real Estate Investment Trusts ("NAREIT") recommendation concerning finance costs and non-real estate depreciation. The Company excludes gains or losses on outparcel sales, even though NAREIT permits their inclusion when calculating FFO. Gains or losses on outparcel sales would have added to FFO $5.4 million in 2000 compared with $8.4 million in 1999. The use of FFO as an indicator of financial performance is influenced not only by the operations of the Properties, but also by the capital structure of the Operating Partnership and the Company. Accordingly, management expects that FFO will be one of the significant factors considered by the Board of Directors in determining the amount of cash distributions the Operating Partnership will make to its partners (including the Company). Management also believes that FFO is a widely used measure of the operating performance of REITs and provides a relevant basis for comparison among companies. FFO does not represent cash flow from operations as defined by accounting principles generally accepted in the United States ("GAAP"), is not necessarily indicative of cash from operations available to fund all cash flow needs, and should not be considered as an alternative to net income for purposes of evaluating the Company's operating performance or to cash flows as a measure of liquidity. Effective January 1, 2000, NAREIT clarified FFO to include all operating results - recurring and non-recurring - except those results defined as "extraordinary items" under accounting principles generally accepted in the United States. The Company implemented this clarification in the first quarter of 2000 and no longer adds back to FFO development costs charged to net income. This amount was $127,000 for the year ended December 31, 2000. For comparatice purposes, the Company has recomputed its 1999 FFO herein to exclude the add-back of development costs charged to net income of $1,674,000. In 2000, FFO increased by $15.8 million, or 13.6%, to $132.0 million compared with $116.3 million in 1999. The increase in FFO was primarily attributable to the continuing increase in revenues and income from operations from ten new developments and acquisitions, and increases in occupancy levels and higher rents in the Company's stabilized portfolio offset by FFO decreases from the sales of thirteen properties. 50 CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company's calculation of FFO is as follows (in thousands):
Three Months Ended Year Ended December 31, December 31, --------------------------------------------------------------- 2000 1999 2000 1999 ------------- --------------- -------------- --------------- Income from operations............................ $ 20,622 $ 17,765 $ 76,461 $ 67,464 ADD: Depreciation and amortization from consolidated properties................. 15,644 14,676 60,646 53,551 Income from operations of unconsolidated affiliates . ................. 1,099 844 3,684 3,263 Depreciation and amortization from unconsolidated affiliates.................... 288 368 1,511 1,619 SUBTRACT: Minority investors' share of income from operations.............................. (516) (284) (1,538) (1,225) Minority investors' share of depreciation and amortization.............................. (245) (212) (981) (920) Depreciation and amortization of non-real estate assets and finance costs.............. (301) (276) (1,281) (1,011) Preferred dividends............................... (1,617) (1,617) (6,468) (6,468) ------------- --------------- -------------- --------------- TOTAL FUNDS FROM OPERATIONS....................... $ 34,974 $ 31,264 $ 132,034 $ 116,273 ============= =============== ============== ===============
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has managed the market risk for its variable rate debt with derivative financial instruments. The derivative instruments are described in the Liquidity and Capital Resources section in Item 7 above and in Note 8 to the Financial Statements. The fair value of the Company's long term debt is estimated based on discounted cash flows at interest rates that management believes reflects the risks associated with long term debt of similar risk and duration. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. Reference is made to the Index to Financial statements contained in Item 14 on page 56. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Incorporated herein by reference from the Company's definitive proxy statement filed on March 29, 2001 with the Securities and Exchange Commission (the "Commission") with respect to its Annual Meeting of Stockholders to be held on May 2, 2001. 51 ITEM 11. EXECUTIVE COMPENSATION. Incorporated herein by reference from the Company's definitive proxy statement filed on March 29, 2001 with the Commission with respect to its Annual Meeting of Stockholders to be held on May 2, 2001. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Incorporated herein by reference from the Company's definitive proxy statement filed on March 29, 2001 with the Commission with respect to its Annual Meeting of Stockholders to be held on May 2, 2001. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Incorporated herein by reference from the Company's definitive proxy statement filed on March 29, 2001 with the Commission with respect to its Annual Meeting of Stockholders to be held on May 2, 2001. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (1) Financial Statements Page Number Report of Independent Public Accountants 59 CBL & Associates Properties, Inc. Consolidated Balance Sheets as of December 31, 2000 and 1999. 60 CBL & Associates Properties, Inc. Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998 61 CBL & Associates Properties, Inc. Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998 62 CBL & Associates Properties, Inc. Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 63 Notes to Financial Statements 64 (2) Financial Statement Schedules Schedule II Allowance For Credit Losses 78 Schedule III Real Estate and Accumulated Depreciation 79 Schedule IV Mortgage Loans on Real Estate 88 Financial Statement Schedules not listed herein are either not required or are not present in amounts sufficient to require submission of the schedule or the information required to be included therein is included in the Company's Consolidated Financial Statements in item 14 or are reported elsewhere. 52 (3) Exhibits Exhibit Number Description 3.1 -- Amended and Restated Certificate of Incorporation of the Company(a) 3.2 -- Certificate of Amendment to the Amended & Restated Certificate of Incorporation of the Company (b) 3.3 -- Amended and Restated Bylaws of the Company(a) 4 -- See Amended and Restated Certificate of Incorporation of the Company, relating to the Common Stock(a) 10.1 -- Partnership Agreement of the Operating Partnership(a) 10.2 -- Property Management Agreement between the Operating Partnership and the Management Company(a) 10.3 -- Property Management Agreement relating to Retained Properties(a) 10.4.1 -- CBL & Associates Properties, Inc. 1993 Stock Incentive Plan(a)+ 10.4.2 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for Charles B. Lebovitz+ 10.4.3 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for John N. Foy+ 10.4.4 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for Ben S. Landress+ 10.4.5 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for Stephen D. Lebovitz+ 10.4.6 -- Stock Restriction Agreement, dated December 28, 1994, for Charles B. Lebovitz+ 10.4.7 -- Stock Restriction Agreement, dated December 2, 1994, for John N. Foy+ 10.4.8 -- Stock Restriction Agreement, dated December 2, 1994, for Ben S. Landress+ 10.4.9 -- Stock Restriction Agreement, dated December 2, 1994, for Stephen D. Lebovitz+ 10.5 -- Indemnification Agreements between the Company and the Management Company and their officers and directors(a) 10.6.1 -- Employment Agreement for Charles B. Lebovitz(a)+ 10.6.2 -- Employment Agreement for John N. Foy(a)+ 10.6.3 -- Employment Agreement for Ben S. Landress(a)+ 53 10.6.4 -- Employment Agreement for Stephen D. Lebovitz(a)+ 10.7 -- Subscription Agreement relating to purchase of the Common Stock and Preferred Stock of the Management Company(a) 10.8 -- Option Agreement relating to certain Retained Properties(a) 10.9 -- Option Agreement relating to Outparcels(a) 10.10.1 -- Property Partnership Agreement relating to Hamilton Place(a) 10.10.2 -- Property Partnership Agreement relating to CoolSprings Galleria(a) 10.11.1 -- Acquisition Option Agreement relating to Hamilton Place(a) 10.11.2 -- Acquisition Option Agreement relating to the Hamilton Place Centers(a) 10.12.3 -- Acquisition Option Agreement relating to the Office Building(a) 10.13 -- Loan agreement with South Trust Bank dated January 15 , 1998.(d) 10.14 -- Amended and restated Loan Agreement between CBL & Associates Properties , Inc. and First Tennessee Bank National Association Dated June 12, 1998 (e) 10.15 -- First Amendment To Third Amended And Restated Credit Agreement and Third Amended And Restated Credit Agreement between CBL & Associates Properties, Inc. and Wells Fargo Bank, National Association, dated August 4, 1998 (e) 10.16 -- Master Contribution Agreement, dated as of September 25, 2000, by and among the Registrant, CBL & Associates Limited Partnership, Jacobs Realty Investors Limited Partnership, Richard E. Jacobs, solely as Trustee for the Richard E. Jacobs Revocable Living Trust, and Richard E. Jacobs, Solely as Trustee for the David H. Jacobs Marital Trust. (f) 10.17 -- Press Release of the Registrant, dated January 31, 2001. (g) 10.18 -- First Amendment to Second Amended and Restated Agreement of Limited Partnership of CBL & Associates Limited Partnership. (g) 10.19 -- Terms of Series J Special Common Units of CBL & Associates Limited Partnership, pursuant to Article 4.4 of the Second Amended and Restated Partnership Agreement of CBL & Associates Limited Partnership. (g) 10.20 -- Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant. (g) 10.21 -- Share Ownership Agreement, dated as if January 31, 2001, by and among the Registrant, CBL & Associates, Inc., LebFam, Inc. Charles B. Lebovitz, Stephen D. Lebovitz; Jacobs Realty Investors Limited Partnership, Richard E. Jacobs, solely as trustee for the Richard E. Jacobs Revocable Living Trust and Richard E. Jacobs solely as trustee for the David H. Jacobs Marital Trust. (g) 54 10.22 -- Registration Rights Agreement, dated as of January 31, 2001 by and between the Registrant and the Holders of SCU's listed on Schedule 1 thereto. (g) 10.23 -- Registration Rights Agreement, dated as of January 31, 2001 by and between the Registrant and Frankel Midland Limited Partnership. (i) 10.24 -- Registration Rights Agreement, dated as of January 31, 2001 by and between the Registrant and Hess Abroms Properties of Huntsville. (g) 10.25 -- Loan Agreement, as of the January 31, 2001, by and between CBL & Associates Limited Partnership, Wells Fargo Bank, National Association, Fleet National Bank, U.S. Bank National Association, Commerzbank AG, New York And Grand Cayman Branches, and Keybank National Association, together certain other lenders parties thereto pursuant to Section 8.6 thereof. (g) 21 -- Subsidiaries of the Company 23 -- Consent of Arthur Andersen LLP 24 -- Power of Attorney (a) Incorporated by reference to Post-Effective Amendment No. 1 to the Company's Registration Statement on Form S-11(No. 33-67372), as filed with the Commission on January 27, 1994. (b) Incorporated by reference to Exhibit B to the Company's Definitive Schedule 14A, Dated April 1, 1996. (c) Incorporated by reference to Amendment No. 2 to the Company's Registration Statement on Form S-11 (No. 33-67372), as filed with the Commission on October 26, 1993. (d) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998. (e) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998. (f) Incorporated by reference from the Registrant's Form 8-K, filed on October 27, 2000. (g) Incorporated by reference to the Company's 8K filed on February 6, 2001. + A management contract or compensatory plan or arrangement required to be filed pursuant to Item 14(c) of this report. (4) Reports on Form 8-K 55 An 8-K disclosing the results of a special meeting of shareholders, in connection with the Jacobs transaction, (Item 5: other events) was filed on January 19, 2001. The outline from the Company's February 1, 2001 conference call with analysts regarding earnings (Item 5) was filed on February 1, 2001. A summary of the Jacobs transaction together with certain of the material agreements associated with the closing of the transaction on January 31, 2001 was filed on February 6, 2001 56 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CBL & ASSOCIATES PROPERTIES, INC. (Registrant) By: /s/ Charles B. Lebovitz ------------------------------------------ Charles B. Lebovitz Chairman of the Board, and Chief Executive Officer Dated: April 2, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Charles B. Lebovitz Chairman of the Board April 2, 2001 ------------------------ and Chief Charles B. Lebovitz Executive Officer (Principal Executive Officer) /s/ John N. Foy Vice Chairman of the Board, April 2, 2001 ------------------------ Chief Financial Officer and John N. Foy Treasurer (Principal Financial Officer and Principal Accounting Officer) /s/ Stephen D. Lebovitz Director, President April 2, 2001 ------------------------ and Secretary Stephen D. Lebovitz /s/ Claude M.Ballard Director April 2, 2001 ------------------------ Claude M. Ballard /s/ Leo Fields Director April 2, 2001 ------------------------ Leo Fields /s/ William J.Poorvu Director April 2, 2001 ------------------------ William J. Poorvu /s/ Winston W. Walker Director April 2, 2001 ------------------------ Winston W. Walker /s/ Gary L. Bryenton Director April 2, 2001 ------------------------ Gary L. Bryenton /s/ Martin J. Cleary Director April 2, 2001 ------------------------ Martin J. Cleary *By: /s/ Charles B. Lebovitz ------------------------ Charles B. Lebovitz Attorney-in-Fact April 2, 2001 57 INDEX TO FINANCIAL STATEMENTS Report of Independent Public Accountants 59 CBL & Associates Properties, Inc. Consolidated Balance Sheets as of December 31, 2000 and 1999 60 CBL & Associates Properties, Inc. Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998 61 CBL & Associates Properties, Inc. Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998 62 CBL & Associates Properties, Inc. Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 63 Notes to Financial Statements 64 Schedule II Allowance For Credit Losses 78 Schedule III Real Estate and Accumulated Depreciation 79 Schedule IV Mortgage Loans on Real Estate 88 58 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of CBL & Associates Properties, Inc.: We have audited the accompanying consolidated balance sheets of CBL & ASSOCIATES PROPERTIES, INC. (a Delaware corporation) and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CBL & Associates Properties, Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index to financial statements are presented for the purpose of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Chattanooga, Tennessee January 31, 2001 59 CBL & Associates Properties, Inc. Consolidated Balance Sheets (In thousands, except share data)
December 31, ------------------------- 2000 1999 ----------- ---------- ASSETS REAL ESTATE ASSETS: Land $ 290,366 $ 284,881 Buildings and improvements 1,919,619 1,834,020 ----------- ---------- 2,209,985 2,118,901 Less: accumulated depreciation (271,046) (223,548) ----------- ---------- 1,938,939 1,895,353 Developments in progress 101,675 65,201 ----------- ---------- Net investment in real estate assets 2,040,614 1,960,554 CASH AND CASH EQUIVALENTS 5,184 7,074 RECEIVABLES: Tenant, net of allowance for doubtful accounts of $1,854 in 2000 and 1999 29,641 21,557 Other 3,472 1,536 MORTGAGE NOTES RECEIVABLE 8,756 9,385 OTHER ASSETS 27,898 18,732 ----------- ---------- $2,115,565 $2,018,838 =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY MORTGAGE AND OTHER NOTES PAYABLE $1,424,337 $1,360,753 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 78,228 64,236 ----------- ---------- Total liabilities 1,502,565 1,424,989 ----------- ---------- COMMITMENTS AND CONTINGENCIES (NOTES 4 AND 14) DISTRIBUTIONS AND LOSSES IN EXCESS OF INVESTMENT IN UNCONSOLIDATED AFFILIATES 3,510 3,212 ----------- ---------- MINORITY INTERESTS 174,665 170,750 ----------- ---------- SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value, 5,000,000 shares authorized, 2,875,000 shares issued and outstanding in 2000 and 1999 29 29 Common stock, $.01 par value, 95,000,000 shares authorized, 25,067,287 and 24,755,793 shares issued and outstanding in 2000 and 1999, respectively 251 251 Additional paid-in capital 462,480 455,875 Accumulated deficit (27,935) (36,265) ----------- ---------- Total shareholders' equity 434,825 419,887 ----------- ---------- $2,115,565 $2,018,838 =========== ==========
The accompanying notes are an integral part of these balance sheets. 60 CBL & Associates Properties, Inc. Consolidated Statements of Operations (In thousands, except per share data)
Year Ended December 31, --------------------------------------------- 2000 1999 1998 ---------- ---------- ---------- REVENUES: Rentals: Minimum $225,460 $203,022 $166,630 Percentage 8,760 7,356 4,751 Other 6,246 5,442 4,007 Tenant reimbursements 106,764 89,774 73,837 Management, development and leasing fees 4,170 7,818 2,711 Interest and other 5,088 4,191 2,704 ---------- ---------- ---------- Total revenues 356,488 317,603 254,640 ---------- ---------- ---------- EXPENSES: Property operating 57,301 50,832 41,942 Depreciation and amortization 60,646 53,551 43,547 Real estate taxes 30,398 27,580 23,360 Maintenance and repairs 19,192 17,783 14,860 General and administrative 17,766 16,214 11,841 Interest 94,597 82,505 67,329 Other 127 1,674 122 ---------- ---------- ---------- Total expenses 280,027 250,139 203,001 ---------- ---------- ---------- INCOME FROM OPERATIONS 76,461 67,464 51,639 GAIN ON SALES OF REAL ESTATE ASSETS 15,989 8,357 4,183 EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES 3,684 3,263 2,379 MINORITY INTEREST IN EARNINGS: Operating Partnership (28,507) (23,264) (16,258) Shopping center properties (1,538) (1,225) (645) ---------- ---------- ---------- INCOME BEFORE EXTRAORDINARY ITEM 66,089 54,595 41,298 EXTRAORDINARY LOSS ON EXTINGUISHMENT OF DEBT (367) - (799) ---------- ---------- ---------- NET INCOME 65,722 54,595 40,499 PREFERRED DIVIDENDS (6,468) (6,468) (3,234) ---------- ---------- ---------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 59,254 $48,127 $37,265 ========== ========== ========== BASIC EARNINGS PER COMMON SHARE: Income before extraordinary item $ 2.40 $ 1.95 $ 1.58 Extraordinary loss on extinguishment of debt (0.02) - (0.03) ---------- ---------- ---------- Net income $ 2.38 $ 1.95 $ 1.55 ========== ========== ========== Weighted average common shares outstanding 24,881 24,647 24,079 DILUTED EARNINGS PER COMMON SHARE: Income before extraordinary item $ 2.38 $ 1.94 $ 1.56 Extraordinary loss on extinguishment of debt (0.01) - (0.03) ---------- ---------- ---------- Net income $ 2.37 $ 1.94 $ 1.53 ========== ========== ========== Weighted average common shares and potential dilutive common shares outstanding 25,021 24,834 24,340
The accompanying notes are an integral part of these statements. 61 CBL & Associates Properties, Inc. Consolidated Statements of Shareholders' Equity (In thousands, except share data)
Additional Preferred Common Paid-in Accumulated Deferred Stock Stock Capital Deficit Compensation Total --------- --------- ---------- ----------- ------------ ---------- BALANCE, December 31, 1997 $ - $ 241 $359,541 $(28,433) $ (496) $330,853 Net income - - - 40,499 - 40,499 Dividends, $1.86 per common share - - - (45,067) - (45,067) Dividends, $2.25 per preferred share - - - (3,234) - (3,234) Issuance of 439,623 shares of common stock - 4 6,726 - (649) 6,081 Issuance of 2,875,000 shares of preferred stock through a public offering 29 - 69,758 - - 69,787 Minority interest in Operating Partnership - - 14,436 - - 14,436 Exercise of stock options - 1 1,791 - - 1,792 Amortization of deferred compensation - - - - 635 635 ----- ---- ------- ------- ----- ------- BALANCE, December 31, 1998 29 246 452,252 (36,235) (510) 415,782 Net income - - - 54,595 - 54,595 Dividends, $1.95 per common share - - - (48,157) - (48,157) Dividends, $2.25 per preferred share - - - (6,468) - (6,468) Issuance of 93,661 shares of common stock - 1 2,154 - - 2,155 Exercise of stock options - 1 1,469 - - 1,470 Amortization of deferred compensation - - - - 510 510 ----- ---- ------- ------- ----- ------- BALANCE, December 31, 1999 29 248 455,875 (36,265) 0 419,887 Net income - - - 65,722 - 65,722 Dividends, $2.04 per common share - - - (50,924) - (50,924) Dividends, $2.25 per preferred share - - - (6,468) - (6,468) Issuance of 152,311 shares of common stock - 2 3,343 - - 3,345 Exercise of stock options - 1 3,262 - - 3,263 ----- ---- ------- ------- ----- ------- BALANCE, December 31, 2000 $ 29 $251 $462,480 $(27,935) $ 0 $434,825 ===== ==== ======== ======== ===== ========
The accompanying notes are an integral part of these statements. 62 CBL & Associates Properties, Inc. Consolidated Statements of Cash Flows (In thousands)
Year Ended December 31, ---------------------------------------- 2000 1999 1998 ---------- ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $65,722 $54,595 $40,499 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest in earnings 30,045 24,489 16,903 Depreciation 47,329 44,245 36,948 Amortization 14,581 10,485 7,774 Extraordinary loss on extinguishment of debt 367 - 799 Gain on sales of real estate assets (15,989) (8,357) (4,183) Equity in earnings of unconsolidated affiliates (3,684) (3,263) (2,379) Issuance of stock under incentive plan 1,634 914 287 Amortization of deferred compensation - 510 635 Write-off of development projects 127 1,674 122 Distributions from unconsolidated affiliates 9,256 10,547 3,862 Distributions to minority investors (25,327) (23,645) (18,543) Changes in assets and liabilities: Tenant and other receivables (10,020) (3,680) (4,395) Other assets (2,156) (1,211) (4,275) Accounts payable and accrued liabilities 5,929 6,893 15,069 ---------- ---------- ---------- Net cash provided by operating activities 117,814 114,196 89,123 ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to real estate assets (139,884) (147,894) (110,991) Acquisitions of real estate assets (11,089) (69,027) (503,820) Capitalized interest (6,288) (6,749) (5,175) Other capital expenditures (24,654) (29,830) (21,652) Deposits in escrow - - 66,108 Proceeds from sales of real estate assets 67,865 50,373 9,596 Additions to mortgage notes receivable (825) (1,690) (1,619) Payments received on mortgage notes receivable 1,454 1,423 3,403 Additional investments in and advances to unconsolidated affiliates (5,247) (4,927) (5,012) Additions to other assets (8,405) (3,820) (2,170) ---------- ---------- ---------- Net cash used in investing activities (127,073) (212,141) (571,332) ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from mortgage and other notes payable 256,220 237,716 642,788 Principal payments on mortgage and other notes payable (192,636) (85,167) (175,997) Additions to deferred financing costs (3,568) (2,075) (2,665) Proceeds from issuance of common stock 1,711 1,241 334 Proceeds from issuance of preferred stock - - 69,855 Purchase of minority interest (761) - (3,012) Proceeds from exercise of stock options 3,263 1,470 1,792 Prepayment penalties on extinguishment of debt (184) - (676) Dividends paid (56,676) (53,993) (47,507) ---------- ---------- ---------- Net cash provided by financing activities 7,369 99,192 484,912 ---------- ---------- ---------- NET CHANGE IN CASH AND CASH EQUIVALENTS (1,890) 1,247 2,703 CASH AND CASH EQUIVALENTS, beginning of period 7,074 5,827 3,124 ---------- ---------- ---------- CASH AND CASH EQUIVALENTS, end of period $ 5,184 $ 7,074 $ 5,827 ========== ========== ========== SUPPLEMENTAL INFORMATION: Cash paid during the period for interest, net of amounts $94,405 $81,181 $67,599 capitalized ========== ========== ==========
The accompanying notes are an integral part of these statements. 63 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION CBL & Associates Properties, Inc. (the "Company"), a Delaware corporation, is engaged in the development, acquisition, and operation of regional shopping malls and community centers, primarily in the Southeast and select markets in the Northeast and Midwest regions of the United States. The Company is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc., which are the sole general partner and majority owner, respectively, of CBL & Associates Limited Partnership (the "Operating Partnership"). As a result, the Company conducts its business through the Operating Partnership, which at December 31, 2000, owns controlling interests in a portfolio of properties consisting of 26 regional malls; 15 associated centers, each of which is part of a regional shopping mall complex; two power centers; 70 community centers; and one office building. Additionally, the Operating Partnership owns non-controlling interests in four regional malls and one associated center. The Operating Partnership has two malls and one community center currently under construction and has options to acquire certain development properties owned by third parties. At December 31, 2000, CBL Holdings I, Inc. owned a 2.5% general partnership interest and CBL Holdings II, Inc. owned a 65.4% limited partnership interest in the Operating Partnership for a combined interest held by the Company of 67.9%. The minority interest in the Operating Partnership is held primarily by CBL & Associates, Inc. and its affiliates (collectively "CBL") who contributed their interests in certain real estate properties and joint ventures to the Operating Partnership in exchange for a limited partnership interest in connection with the formation of the Operating Partnership in November 1993. At December 31, 2000, CBL owns a 25.5% limited partnership interest in the Operating Partnership (Note 10). To comply with certain technical requirements of the Internal Revenue Code of 1986, as amended (the "Code"), the Operating Partnership carries out the Company's property management and development activities through CBL & Associates Management, Inc. (the "Management Company"). The Operating Partnership holds 100% of the preferred stock and 5% of the common stock of the Management Company, with CBL holding the remaining 95% of the common stock. Through the ownership of the preferred stock, the Operating Partnership receives substantially all of the cash flow and, therefore, enjoys substantially all of the economic benefits of the Management Company's operations. Due to the Company's ability, as sole general partner, to control the Operating Partnership and the Operating Partnership's rights to substantially all of the economic benefits of the Management Company, the accounts of each entity are included in the accompanying consolidated financial statements. The Company, the Operating Partnership, and the Management Company are referred to collectively as the "Company". All significant intercompany balances and transactions have been eliminated in the consolidated presentation. On January 31, 2001, the Company completed the first stage of the acquisition of The Richard E. Jacobs Group's interests in 21 malls and two associated centers for total consideration of approximately $1.26 billion, including the acquisition of minority interests in certain properties. The purchase price is comprised of $124.5 million in cash including closing costs of approximately $12 million; the assumption of $745.5million in non-recourse mortgage debt; and the issuance of 12,056,692 special common units of the Operating Partnership with a face value of $32.25 per unit and a fair value of $27.25 per unit. The cash portion was funded from a new $212 million unsecured credit facility provided by a consortium of banks led by Wells Fargo. The Company will close on the second stage in 2002, which will consist of cash of $0.3 million, the assumption of $25.7 million in non-recourse mortgage debt, and the issuance of 499,733 special common units of the Operating Partnership with a face value of $32.25 per unit. In a separate transaction, the Company issued an additional 603,344 special common units of the Operating Partnership to purchase the remaining 50% interest in Madison Square Mall in Huntsville, Alabama. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Real Estate Assets Costs directly related to the development of real estate assets, including overhead costs directly attributable to property development, are capitalized. Interest costs incurred during the development and construction period are capitalized. 64 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis generally over 40 years for buildings and improvements and seven to ten years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the life of the related lease. Long-Lived Assets The Company periodically evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the projected undiscounted future cash flow of such asset is less than its carrying value. Management believes that no material impairment existed at December 31, 2000, and accordingly, no loss was recognized. Cash and Cash Equivalents Cash and cash equivalents include all cash and cash equivalent investments with original maturities of three months or less, primarily consisting of demand deposits in banks. Deferred Financing Costs Deferred financing costs are included in other assets in the accompanying consolidated balance sheets, include fees and costs incurred to obtain long-term financing, and are being amortized over the terms of the respective mortgage notes payable. Unamortized deferred financing costs are written off when mortgage notes payable are retired before the maturity date. Deferred Transaction Costs Deferred transaction costs of $5.4 million are included in other assets in the accompanying consolidated balance sheet at December 31, 2000, and include fees and costs incurred in connection with the acquisition of The Richard E. Jacobs Group's interests in 21 malls and two associated centers. These costs will be capitalized as part of the value assigned to these assets. Revenue Recognition Rental revenue attributable to operating leases is recognized on a straight-line basis over the initial term of the related leases. Certain tenants are required to pay additional rent if sales volume exceeds specified amounts. The Company recognizes this additional rent as revenue when such amounts become determinable. A substantial portion of the Company's rental income is derived from various national and regional retail companies. Tenant Reimbursements The Company receives reimbursements from tenants for certain costs as provided in the lease agreements. These costs consist of real estate taxes, common area maintenance, and other recoverable costs. Tenant reimbursements are recognized as revenue in the period the costs are incurred. Management, Development and Leasing Fees Management fees are charged as a percentage of rentals and are recognized as revenue as they are earned. Leasing fees are charged for newly executed leases. These fees are recognized as revenues as they are earned. Development fees are recognized as revenue on a pro rata basis over the development period. Gain on Sales of Real Estate Assets Gain on sales of real estate assets is recognized at the time title to the asset is transferred to the buyer, subject to the adequacy of the buyer's initial and continuing investment and the assumption by the buyer of all future ownership risks of the asset. 65 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income Taxes The Company is qualified as a real estate investment trust under Sections 856 through 860 of the Code and applicable treasury regulations. In order to maintain qualification as a real estate investment trust, the Company is currently required to distribute at least 90% of its taxable income to shareholders and meet certain other asset and income tests as well as other requirements. As a real estate investment trust, the Company will generally not be liable for federal corporate income taxes. Thus, no provision for federal income taxes has been included in the accompanying consolidated financial statements. If the Company fails to qualify as a real estate investment trust in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate tax rates. Even if the Company maintains its qualification for taxation as a real estate investment trust, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed income. State income taxes were not significant in 2000, 1999 and 1998. Derivative Financial Instruments Interest rate cap and swap agreements, which are principally used by the Company in the management of interest rate exposure, are accounted for on an accrual basis. Amounts to be paid or received under interest rate cap and swap agreements are recorded in interest expense in the period in which they accrue. See Note 8 for additional information. Concentration of Credit Risk The Company's tenants consist of national, regional and local retailers. Financial instruments which subject the Company to concentrations of credit risk consist primarily of tenant leases. The Company does not generally obtain collateral or other security to support financial instruments subject to credit risk but monitors the credit standing of tenants. Earnings Per Share Basic earnings per share ("EPS") excludes dilution and is computed by dividing earnings available to common shareholders by the weighted-average number of unrestricted common shares outstanding for the period. Diluted EPS assumes the issuance of common stock for all potential dilutive common shares outstanding. The limited partners' rights to convert their minority interest in the Operating Partnership into shares of common stock are not dilutive (Note 10). The difference in basic and diluted EPS is due to the assumed exercise of outstanding stock options and restricted stock resulting in 140,000, 187,000 and 261,000 additional potential dilutive common shares in 2000, 1999 and 1998, respectively. Stock-Based Compensation The Company accounts for its stock-based compensation plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25). Effective in 1996, the Company adopted the disclosure option of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 requires companies that do not choose to account for stock-based compensation as prescribed by the statement to disclose the pro forma effects on net income and earnings per share as if SFAS No. 123 had been adopted. Additionally, certain other disclosures are required with respect to stock-based compensation and the assumptions used to determine the pro forma effects of SFAS No. 123. See Note 12 for the required disclosures. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. 66 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. UNCONSOLIDATED AFFILIATES The Company has investments in five partnerships and joint ventures, all of which are reflected on the equity method of accounting in the accompanying consolidated financial statements and consist of the following at December 31, 2000:
Partnership Property Name Company's Interest ------------------------------- ------------------- ------------------- Governor's Square IB Governor's Plaza 50.0% Governor's Square Company Governor's Square 47.5% Madison Square Associates, Ltd. Madison Square 50.0% Mall Shopping Center Company Plaza del Sol 50.6% Parkway Place L.P. Parkway Place 50.0%
Condensed combined financial statement information of the partnerships and joint ventures is presented as follows (in thousands):
December 31, 2000 1999 ------------------ ---------------- ASSETS: Net investment in real estate assets $ 85,135 $ 75,185 Other assets 4,445 3,066 ------------------ ---------------- Total assets $ 89,580 $ 78,251 ================== ================ LIABILITIES: Mortgage notes payable $ 108,582 $ 92,733 Other liabilities 2,317 1,946 ------------------ ---------------- Total liabilities 110,899 94,679 ------------------ ---------------- OWNERS' DEFICIT: Company (3,510) (3,212) Other investors (17,809) (13,216) ------------------ ---------------- Total owners' deficit (21,319) (16,428) ------------------ ---------------- Total liabilities and owners' deficit $ 89,580 $ 78,251 ================== ================
Year Ended December 31, ------------------------------------------------------- 2000 1999 1998 ------------------ ---------------- ----------------- Revenues $ 27,294 $ 26,859 $ 22,530 Depreciation expense 3,080 3,253 2,913 Other operating expenses 8,255 8,398 6,849 Interest expense 8,397 8,757 7,935 Gain on sale of real estate assets 186 - - ------------------ ---------------- ----------------- Net income $ 7,748 $ 6,451 $ 4,833 ================== ================ ================= Company's share of net income $ 3,684 $ 3,263 $ 2,379 ================== ================ =================
In general, contributions and distributions of capital or cash flows and allocations of income and expense are made on a pro rata basis in proportion to the equity interest held by each general or limited partner. 67 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. MORTGAGE AND OTHER NOTES PAYABLE Mortgage and other notes payable consist of the following at December 31, 2000 and 1999 (in thousands):
2000 1999 ------------------ ---------------- Permanent loans $ 1,193,685 $ 1,196,829 Construction loans 84,652 7,924 Lines of credit 146,000 156,000 ------------------ ---------------- $ 1,424,337 $ 1,360,753 ================== ================
Permanent Loans Permanent loans consist of loans secured by properties held by the Company at December 31, 2000, with an asset carrying amount of $1,891,446,000. At December 31, 2000, permanent loans totaling $904,357,000 bear interest at fixed rates ranging from 6.65% to 10.625%. Permanent loans totaling $289,328,000 bear interest at variable interest rates indexed to the prime lending rate or London Interbank Offered Rate ("LIBOR") (7.56% to 9.50% at December 31, 2000). Permanent loans mature at various dates from 2001 through 2016. Construction Loans At December 31, 2000, the Company had construction loans on seven properties. The total commitment under the construction loans is $156,104,000, of which $84,652,000 is outstanding at December 31, 2000. The construction loans mature in 2002 and 2003, and bear interest at variable interest rates indexed to the prime lending rate or LIBOR (7.74% to 8.14% at December 31, 2000). Lines of Credit The Company maintains line of credit agreements with banks for construction, acquisition, and working capital purposes. At December 31, 2000, the Company had $240,000,000 available under its line of credit agreements, of which $146,000,000 was outstanding. The lines expire at various dates from 2002 through 2004 and bear interest at variable rates indexed to the prime lending rate or LIBOR (weighted average interest rate 7.70% at December 31, 2000). At December 31, 2000, outstanding letters of credit total approximately $1,235,000. The line of credit agreements contain, among other restrictions, certain restrictive covenants including the maintenance of certain coverage ratios and a minimum net worth and limitations on distributions. The Company was in compliance with all debt covenants on its lines of credit at December 31, 2000. Debt Maturities As of December 31, 2000, the scheduled principal payments on all mortgage and other notes payable, including construction loans and lines of credit, are as follows (in thousands): 2001 $ 188,632 2002 249,237 2003 126,519 2004 119,882 2005 22,268 Thereafter 717,799 $ 1,424,337
68 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. MORTGAGE NOTES RECEIVABLE Substantially all mortgage notes receivable are collateralized by wrap-around mortgages which are first mortgages on the underlying real estate and related improvements. Interest rates on these notes receivable range from 8.0% to 11.0% at December 31, 2000. 6. MINIMUM RENTS Tenant leases are usually for 5 to 20 year periods and generally provide for renewals and annual rentals which are subject to upward adjustments based on tenant sales volume. Future minimum rents are scheduled to be received under noncancellable tenant leases at December 31, 2000, as follows (in thousands): 2001 $ 210,313 2002 191,610 2003 176,566 2004 158,118 2005 131,865 Thereafter 638,662
No single tenant collectively accounts for more than 10% of the Company's total revenues. 7. SHAREHOLDERS' EQUITY In June 1998, the Company completed a public offering of 2,875,000 shares of 9% Series A Cumulative Redeemable Preferred Stock (the "Series A Preferred Stock") at a price to the public of $25.00 per share, including 715,875 shares purchased by an affiliate of Wells Fargo Bank. The net proceeds of $69.8 million were used to repay variable-rate indebtedness incurred in the Company's development and acquisition programs. The dividends on the Series A Preferred Stock are cumulative and accrue from the date of issue and are payable quarterly in arrears commencing on September 30, 1998, at a rate of $2.25 per share per annum. The Series A Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not redeemable prior to July 1, 2003. On or after July 1, 2003, the Company may redeem the Series A Preferred Stock, in whole or in part, at any time for a cash redemption price of $25.00 per share, plus dividends accrued and unpaid. 8. DERIVATIVE FINANCIAL INSTRUMENTS The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. They are used to manage well defined interest rate risks. Under interest rate swap agreements, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed rate and variable rate interest amounts calculated by reference to an agreed-upon notional amount. Under these agreements, the Company receives interest payments at a rate equal to LIBOR (6.56% at December 31, 2000) and pays interest at fixed rates shown below. 69 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company has the following interest rate swaps in place at December 31, 2000, totaling $423 million:
Notional Amount Fixed LIBOR (in millions) Component Effective Date Expiration Date --------------- ------------ --------------- --------------- $100 6.405% 01/27/00 01/29/01 75 6.610% 02/24/00 02/24/01 50 5.700% 06/11/98 06/15/01 38 5.730% 06/26/98 06/30/01 80 5.490% 09/01/98 09/01/01 80 5.830% 12/22/00 08/30/03
The Company has a $50 million interest rate cap on LIBOR based variable rate debt at 7.5% terminating October 1, 2001. The Company also obtained a $50 million interest rate swap with a fixed LIBOR component of 5.737% effective January 3, 2001, and expiring June 1, 2002. The Company is exposed to credit losses in the event of nonperformance by the counterparties to its interest rate swap and cap agreements and nonderivative financial assets but has no off-balance sheet credit risk of accounting loss. The Company anticipates, however, that counterparties will be able to fully satisfy their obligations under the contracts. The Company does not obtain collateral or other security to support financial instruments subject to credit risk but monitors the credit standing of counterparties. Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended, ("SFAS No. 133") establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. The Company will implement SFAS No.133 beginning January 1, 2001, and it will recognize as separate assets and liabilities only those derivatives embedded in hybrid instruments issued, acquired, or substantively modified by the entity on or after the selected transition date. The Company has determined that a portion of its derivative instruments (swap agreements and an interest rate cap agreement) in place are ineffective as defined by SFAS No. 133. The terms of ineffective derivative instruments expire in 2001; thus, while the Company may experience some volatility in earnings in interim periods, there will be no effect to current earnings in the Company's financial statements for the year ended December 31, 2001. If the Company had implemented SFAS No. 133 as of December 31, 2000, ineffective derivative instruments would have increased total assets by $514,000 and would have increased net income by $514,000. Effective derivative instruments would have increased liabilities by $262,000 and comprehensive income, also recorded on the balance sheet, would have decreased by $262,000. 9. FAIR VALUE OF FINANCIAL INSTRUMENTS 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 maturity of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of mortgage notes receivable is a reasonable estimation of fair value. The carrying value of mortgage and other notes payable, based on borrowing rates currently available to the Company, is a reasonable estimation of fair value at December 31, 2000 and 1999. The fair value of the interest rate swap and cap agreements, which represents the cash requirement if the existing agreements had been settled at year end, was not significant at December 31, 2000 and 1999. 70 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. CONVERSION RIGHTS Pursuant to the Operating Partnership agreement, the limited partners were granted rights to convert their partnership interests in the Operating Partnership into shares of common stock, subject to certain limits, and to sell to the Company after November 3, 1996, part or all of their partnership interest in the Operating Partnership in exchange for shares of common stock or their cash equivalent at the Company's election, as defined. The Operating Partnership acquired properties from CBL in exchange for 1,336 and 63,904 limited partnership units in the Operating Partnership during 2000 and 1998, respectively. In October 1999 the Company issued 79,715 limited partnership units valued at $1,928,000 to a third party in exchange for land. During 1998, the Operating Partnership issued 2,749,888 limited partnership units in the Operating Partnership valued at $68.3 million to third parties in exchange for seven properties. In November 2000, the Company purchased 34,463 limited partnerships units valued at $761,000 from a third party. In July 1998, the Company purchased 122,008 limited partnership units valued at $3.0 million from a former executive and minority investor in the Operating Partnership. Also during 1998, a third party converted 388,022 limited partnership units to common stock. At December 31, 2000 and 1999, there remained outstanding rights to convert CBL's minority interest in the Operating Partnership to 9,419,088 and 9,417,752 shares of common stock, respectively. At December 31, 2000 and 1999, there remained outstanding rights to convert third parties' minority interests in the Operating Partnership to 2,407,000 and 2,442,000 shares of common stock, respectively. 11. 401(K) PROFIT SHARING PLAN The Management Company maintains a 401(k) profit sharing plan, which is qualified under Section 401(a) and Section 401(k) of the Code to cover employees of the Management Company. All employees who have attained the age of 21 and have completed at least one year of service are eligible to participate in the plan. The plan provides for employer matching contributions on behalf of each participant equal to 50% of the portion of such participant's contribution which does not exceed 2.5% of such participant's compensation for the plan year. Additionally, the Management Company has the discretion to make additional profit-sharing-type contributions not related to participant elective contributions. Total contributions by the Management Company were not significant for 2000, 1999, and 1998. 12. STOCK INCENTIVE PLAN The Company maintains the CBL & Associates Properties, Inc. 1993 Stock Incentive Plan, as amended (the "Plan") which permits the issuance of stock options and common stock to selected officers, employees and directors of the Company, up to 2,800,000 shares of common stock. The Plan is administered by the Compensation Committee of the Board of Directors (the "Committee"). Stock options issued under the Plan allow for the purchase of common stock at the fair market value of the stock at the date of grant. Stock options granted to officers and employees under the Plan vest and become exercisable in installments on each of the first five anniversaries of the date of grant and expire ten years after the date of grant. Stock options granted to directors are fully vested upon grant, but may not be sold, pledged or otherwise transferred in any manner during the director's term or for one year thereafter. The Company accounts for its stock-based compensation plans under APB No. 25, under which no compensation expense has been recognized for stock options granted as all employee options have been granted with an exercise price equal to the fair value of the Company's common stock on the date of grant. For SFAS No. 123 purposes, the fair value of each employee option grant has been estimated as of the date of grant using the Black-Sholes option pricing model and the following weighted average assumptions for 2000, 1999 and 1998, respectively: 71 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2000 1999 1998 ------------------ ---------------- ----------------- Risk-free interest rate 6.65% 5.25% 5.90% Dividend yield 8.98% 8.33% 8.09% Expected volatility 17.00% 16.00% 16.00% Expected life 6.0 years 7.2 years 7.2 years
Using these assumptions, the fair value of the employee stock options granted in 2000, 1999 and 1998 is $500,000, $468,000 and $468,000, respectively, which would be amortized as compensation expense over the vesting period of the options. Had compensation cost for the plan been determined in accordance with SFAS No. 123, utilizing the assumptions detailed above, the Company's pro forma net income and net income per share would have been as follows for the years ended December 31, 2000, 1999, and 1998, respectively (in thousands, except per share data):
2000 1999 1998 ------------------ ---------------- ----------------- Net income available to common shareholders: As reported $ 59,254 $ 48,127 $ 37,265 Pro forma 58,585 47,458 36,692 Net income per share: Basic as reported $ 2.38 $ 1.95 $ 1.55 Pro forma basic 2.35 1.93 1.52 Diluted as reported 2.37 1.94 1.53 Pro forma diluted 2.34 1.91 1.51
The pro forma effect on net income in this disclosure is not representative of the pro forma effect on net income in future years because it does not take into consideration pro forma compensation expense related to grants made prior to 1995. A summary of the Company's stock option activity for 2000, 1999 and 1998 is as follows: Weighted- Average Shares Option Price Exercise Price
Weighted-Average Shares Option Price Exercise Price --------- ------------------- ---------------- Outstanding at December 31, 1997 1,691,600 $19.5625 - $25.6250 $21.11 Granted 319,000 $24.0940 - $25.5938 24.10 Exercised (87,350) $19.5625 - $25.6250 20.52 --------- Outstanding at December 31, 1998 1,923,250 $19.5625 - $25.6250 21.64 Granted 382,500 $20.7200 - $24.5625 24.49 Exercised (71,200) $19.5625 - $23.6250 20.63 Lapsed (27,500) $19.6250 - $24.0940 22.40 --------- Outstanding at December 31, 1999 2,207,050 $19.5625 - $25.6250 22.16 Granted 377,000 $23.7190 - $25.5625 23.73 Exercised (159,183) $19.5625 - $23.6250 20.50 Lapsed (60,050) $19.5625 - $24.5000 22.25 --------- Outstanding at December 31, 2000 2,364,817 $19.5625 - $25.5620 $22.51 =========
72 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The weighted-average fair value of options granted during 2000, 1999, and 1998 was $1.54, $1.22 and $1.49, respectively. Shares subject to options outstanding at December 31, 2000, have a weighted-average remaining contractual life of 6.6 years. Of the options outstanding at December 31, 2000, 1,284,067 are currently exercisable with a weighted-average exercise price of $21.47 per share. Under the Plan, common stock may be awarded either alone, in addition to, or in tandem with other stock awards granted under the Plan. The Committee has the authority to determine eligible persons to whom common stock will be awarded, the number of shares to be awarded, and the duration of the vesting period, as defined. During 2000, the Company issued 72,329 shares of common stock under the Plan with a weighted-average grant-date fair value of $22.59 per share, of which 36,606 shares of common stock were immediately vested. The remaining 35,723 shares of common stock vest at various dates from 2001 to 2005. During 1999, the Company issued 38,989 shares of common stock under the Plan with a weighted-average grant-date fair value of $23.44 per share, of which 6,533 shares of common stock were immediately vested. The remaining 32,456 shares of common stock vest at various dates from 2000 to 2006. During 1998, the Company issued 37,333 shares of common stock under the Plan with a weighted-average grant-date fair value of $25.19 per share, of which 10,789 shares of common stock were immediately vested. The remaining 26,544 shares of common stock vest at various dates from 1999 to 2003. 13. RELATED PARTY TRANSACTIONS CBL and certain officers of the Company have a significant minority interest in the construction company that has been engaged by the Company in the building of substantially all of the Company's properties. The Management Company provides management and leasing services to affiliated partnerships and joint ventures not controlled by the Company. Revenue recognized for these services amounted to $1,166,000, $1,086,000 and $1,034,000 in 2000, 1999 and 1998, respectively. 14. COMMITMENTS AND CONTINGENCIES The Company is currently involved in certain litigation arising in the ordinary course of business. In the opinion of management, the pending litigation will not materially affect the financial statements of the Company. Additionally, based on environmental studies completed to date on the real estate properties, management believes exposure related to environmental cleanup will be immaterial to the consolidated financial position and consolidated results of operations of the Company. The Company has entered into standby purchase agreements with third-party developers (the "Developers") for the construction, development and potential ownership of two community centers in Texas (the "Co-Development Projects"). The Developers have utilized these standby purchase agreements to assist in obtaining financing to fund the construction of the Co-Development Projects. The standby purchase agreements, which expire in 2001, are dependent upon certain completion requirements, rental levels, the inability of the Developers to obtain adequate permanent financing, and the inability to sell the Co-Development Project before the Company has to fund its equity contribution or purchase the Co-Development Project. In return for its commitment to purchase a Co-Development Project pursuant to a standby purchase agreement, the Company receives a fee as well as a participation interest in each Co-Development Project. The outstanding amount of standby purchase agreements at December 31, 2000, is $51.4 million. 73 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. DIVIDENDS The allocations of dividends declared and paid for income tax purposes are as follows:
Year Ended December 31, ------------------------------------------------------- 2000 1999 1998 ---------------- ----------------- ------------------ Dividends per common share $ 2.04 $ 1.95 $ 1.86 Allocations: Ordinary income 92.16% 88.00% 86.86% Capital gain 20% 3.80% 0.00% 0.30% Capital gain 25% 4.04% 0.00% 0.30% Return of capital 0.00% 12.00% 12.54% ---------------- ----------------- ------------------ Total 100.00% 100.00% 100.00% ================ ================= ==================
74 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. SEGMENT INFORMATION Management of the Company measures performance and allocates resources according to property type, which are determined based on differences such as nature of tenants, capital requirements, economic risks, and leasing terms. Rent income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on management's reportable segments is presented as follows (in thousands):
Mall Associated Community YEAR ENDED DECEMBER 31, 2000 Properties Properties Properties All Other Total -------------------------------- ------------ ------------ ----------- ------------ ----------- Revenues $267,150 $14,831 $66,649 $ 7,858 $ 356,488 Property operating expenses (1) (90,889) (2,675) (14,451) 1,124 (106,891) Interest expense (74,105) (3,804) (13,240) (3,448) (94,597) Gain (loss) on sales of real estate (400) - 10,617 5,772 15,989 assets ------------ ------------ ----------- ------------ ---------- Segment profit $101,756 $ 8,352 $49,575 $11,306 170,989 ============ ============ =========== ============ Depreciation and amortization (60,646) General and administrative and other (17,893) Equity in earnings and minority interest adjustment (26,361) ---------- Income before extraordinary item $ 66,089 ========== Total assets $1,450,948 $120,178 $453,749 $90,690 $2,115,565 Capital expenditures $ 83,411 $13,053 $64,223 $13,240 $ 173,927 YEAR ENDED DECEMBER 31, 1999 Revenues $ 234,207 $12,288 $60,223 $10,885 $ 317,603 Property operating expenses 1 (83,672) (2,404) (11,311) 1,192 (96,195) Interest expense (62,678) (2,693) (12,540) (4,594) (82,505) Gain (loss) on sales of real estate (1,273) - 1,208 8,422 8,357 assets ------------ ------------ ----------- ------------ ---------- Segment profit $ 86,584 $7,191 $37,580 $15,905 147,260 ============ ============ =========== ============ Depreciation and amortization (53,551) General and administrative and other (17,888) Equity in earnings and minority interest adjustment (21,226) ------------ Income before extraordinary item $ 54,595 ============ Total assets $1,400,793 $103,424 $451,165 $63,456 $ 2,018,838 Capital expenditures $ 142,789 $7,426 $25,003 $26,040 $ 201,258 YEAR ENDED DECEMBER 31, 1998 Revenues $185,305 $10,063 $53,890 $5,382 $ 254,640 Property operating expenses 1 (66,250) (1,870) (10,740) (1,302) (80,162) Interest expense (49,616) (1,771) (11,957) (3,985) (67,329) Gain on sales of real estate assets 42 - 151 3,990 4,183 ------------ ------------ ----------- ------------ ----------- Segment profit $ 69,481 $6,422 $31,344 $4,085 111,332 ============ ============ =========== ============ Depreciation and amortization (43,547) General and administrative and other (11,963) Equity in earnings and minority interest adjustment (14,524) ------------ Income before extraordinary item $ 41,298 ============ Total assets $1,249,204 $81,570 $412,228 $112,345 $ 1,855,347 Capital expenditures $ 577,492 $21,193 $33,695 $62,498 $ 694,878 (1) Property operating expenses include property operating, real estate taxes and maintenance and repairs.
75 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17. OPERATING PARTNERSHIP Condensed consolidated financial statement information for the Operating Partnership is presented as follows (in thousands):
December 31, ------------------------------ 2000 1999 ----------- ----------- ASSETS: Net investment in real estate assets $2,040,614 $1,960,554 Other assets 74,485 57,940 ----------- ----------- Total assets $2,115,099 $2,018,494 =========== =========== LIABILITIES: Mortgage and other notes payable $1,424,337 $1,360,753 Other liabilities 65,443 52,168 ----------- ----------- Total liabilities 1,489,780 1,412,921 Distributions and losses in excess of investment in 2,972 2,920 unconsolidated affiliates Minority interest 1,301 1,226 OWNERS' EQUITY 621,046 601,427 ----------- ----------- Total liabilities and owners' equity $2,115,099 $2,018,494 =========== ===========
Year Ended December 31, ------------------------------------------------- 2000 1999 1998 ----------- ----------- ----------- Revenues $356,488 $317,603 $254,640 Depreciation and amortization expense 60,646 53,551 43,547 Other operating expenses 218,545 195,882 159,101 ----------- ----------- ----------- Operating income 77,297 68,170 51,992 Gain on sales of real estate assets 15,989 8,357 4,183 Equity in earnings of unconsolidated affiliates 3,684 3,263 2,379 Minority investors' interest (1,538) (1,225) (645) ----------- ----------- ----------- Income before extraordinary item 95,432 78,565 57,909 Extraordinary loss on extinguishment of debt (367) - (799) ----------- ----------- ----------- Net income $95,065 $78,565 $57,110 =========== =========== ===========
76 CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. QUARTERLY INFORMATION (UNAUDITED) (in thousands, except per share amounts)
First Second Third Fourth Quarter Quarter Quarter Quarter Total (1) -------- -------- ------- ------- --------- 2000 Total revenues $88,009 $86,857 $88,621 $93,001 $356,488 Income from operations 18,967 18,215 18,657 20,622 76,461 Income before extraordinary item 15,967 17,112 16,252 16,758 66,089 Net income available to common shareholders 14,350 15,358 14,551 14,995 59,254 Basic per share data: Income before extraordinary item $ 0.58 $ 0.62 $ 0.59 $ 0.61 $ 2.40 Net income $ 0.58 $ 0.62 $ 0.58 $ 0.60 $ 2.38 Diluted per share data: Income before extraordinary item $ 0.58 $ 0.62 $ 0.58 $ 0.60 $ 2.38 Net income $ 0.58 $ 0.62 $ 0.58 $ 0.60 $ 2.37 1999 Total revenues $74,548 $74,191 $81,722 $87,142 $317,603 Income from operations 15,033 15,737 18,929 17,765 67,464 Income before extraordinary item 13,746 14,556 14,197 12,096 54,595 Net income available to common shareholders 12,129 12,939 12,580 10,479 48,127 Basic per share data: Income before extraordinary item $ 0.49 $ 0.53 $ 0.58 $ 0.42 $ 1.95 Net income $ 0.49 $ 0.53 $ 0.51 $ 0.42 $ 1.95 Diluted per share data: Income before extraordinary item $ 0.49 $ 0.52 $ 0.50 $ 0.42 $ 1.94 Net income $ 0.49 $ 0.52 $ 0.50 $ 0.42 $ 1.94 (1) The sum of quarterly earnings per share amounts may differ from annual earnings per share due to rounding.
77 CBL & Associates Properties, Inc. Schedule II Allowance for Credit Losses (in thousands)
Balance of Allowance at Provision Bad Debts Balance of Year Ended Beginning of For Credit Charged Against Allowance at December 31, Year Losses Allowance End of Year ----------------------------------------- ----------------- ----------------- ------------------ ----------------- 1998................................. $1,300 $941 $(291) $1,950 1999................................. 1,950 341 (437) 1,854 2000................................. 1,854 1380 (1380) 1,854
78 CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (Dollars in Thousands)
Gross Amounts at Which Carried at Initial Cost (A) Close of Period ---------------------- --------------------------------------------- Costs Capitalized Buildings Subsequent Buildings Date of (B) and to and Accumulated Contruction Description Encumbrances Land Improvements Improvements Land Improvements Total(C) Depreciation(D) /Purchase -------------------- ---------- -------- ---------- -------- -------- --------- ------------------ ------------ MALLS Arbor Place.......... $99,300 $7,637 $95,330 $9,758 $7,637 $105,087 $112,724 $5,098 1998-1999 Atlanta, GA Asheville Mall....... 75,322 7,139 58,747 23,747 6,675 82,958 89,633 4,324 1998 Asheville, NC Bonita Lakes Mall.... 28,936 4,924 31,933 4,545 4,924 36,477 41,401 4,635 1997 Meridian, MS Burnsville Center... 74,184 12,804 69,167 4,175 12,804 73,342 86,146 5,477 1998 Burnsville, MN College Square....... 14,726 2,954 17,787 8,707 2,927 26,521 29,448 7,053 1987-1988 Morristown, TN Coolsprings Galleria. 64,654 13,527 86,755 22,466 13,527 109,221 122,748 23,821 1989-1991 Nashville, TN Frontier Mall........ 1,960 2,681 15,858 8,123 2,681 23,981 26,662 7,831 1984-1985 Cheyenne, WY Foothills Mall....... ---- 4,537 15,226 5,861 4,537 21,089 25,626 4,340 1996 Maryville, TN Georgia Square....(E) ---- 2,982 31,071 6,474 2,959 37,568 40,527 11,426 1982 Athens, GA Hamilton Place...... 70,251 2,880 42,211 12,401 2,439 55,053 57,492 15,146 1986-1987 Chattanooga, TN Hickory Hollow Mall.. 93,775 13,813 111,431 2,034 13,813 113,465 127,278 7,166 1998 Nashville, TN JCP.............. (E) ---- ---- 2,650 $0 ---- 2,650 2,650 1,082 1983 Maryville, TN Janesville Mall...... 16,010 8,074 26,009 (962) 8,074 25,046 33,120 1,637 1998 Janesville, WI Lakeshore Mall....(E) ---- 1,443 28,819 3,479 1,274 32,467 33,741 6,717 1991-1992 Sebring, FL Meridian Mall........ 89,739 529 103,678 9,091 529 112,769 113,298 6,409 1998 Lansing, MI Oak Hollow Mall...... 49,585 4,344 52,904 2,495 4,344 55,399 59,743 9,340 1994-1995 High Point, NC Pemberton Square..(E) ---- 1,191 14,305 572 244 15,824 16,068 5,487 1986 Vicksburg, MS Post Oak Mall.... (E) ---- 3,936 48,948 (9,790) 3,608 39,488 43,096 8,332 1984-1985 College Station, TX Rivergate Mall....... 75,789 17,896 86,767 11,752 17,896 98,519 116,415 6,078 1998 Nashville, TN 79 Gross Amounts at Which Carried at Initial Cost (A) Close of Period ---------------------- --------------------------------------------- Costs Capitalized Buildings Subsequent Buildings Date of (B) and to and Accumulated Contruction Description Encumbrances Land Improvements Improvements Land Improvements Total(C) Depreciation(D) /Purchase -------------------- ---------- -------- ---------- -------- -------- --------- ------------------ ------------ Springdale Mall...... 21,661 19,538 6,676 5,669 19,543 12,340 31,883 883 1997 Mobile, AL Stroud Mall.......... 32,500 14,711 23,936 1,299 14,711 25,235 39,946 1,705 1998 Stroudsburg, PA St. Clair Square..... 73,047 11,028 75,581 3,732 11,027 79,314 90,341 8,112 1996 Fairview Heights, IL Turtle Creek Mall.... 32,868 2,345 26,418 7,606 3,535 32,834 36,369 7,980 1993-1995 Hattiesburg, MS Twin Peaks....... (E) ---- 1,873 22,022 16,363 1,828 38,430 40,258 12,534 1984 Longmont,CO Walnut Square.... (E) 1,118 50 15,138 4,320 50 19,458 19,508 8,014 1984-1985 Dalton,GA Westgate Mall........ 46,724 2,150 23,257 38,004 1,742 61,669 63,411 8,895 1995 Spartanburg, SC York Galleria........ 52,000 5,757 63,316 214 5,757 63,531 69,288 2,264 1995 York, PA ASSOCIATED CENTERS Bonita Crossing...... 9,067 794 4,786 7,149 794 11,935 12,729 829 1997 Meridian, MS Coolsprings Xing..(E) ---- 2,803 14,985 1,786 3,554 16,020 19,574 3,583 1991-1993 Nashville, TN Courtyard at 4,366 3,314 2,771 109 3,314 2,881 6,195 175 1998 Hickory Hollow..... Nashville, TN Foothills Plaza...(E) ---- 132 2,123 520 141 2,634 2,775 1,060 1984-1988 Maryville, TN Foothills Plaza ---- 137 1,960 153 148 2,102 2,250 620 1984-1988 Expansion............ Maryville, TN Frontier Square...... ---- 346 684 82 260 852 1,112 281 1985 Cheyenne, WY General Cinema....... 12 100 1,082 14 100 1,096 1,196 575 1984 Athens, GA Gunbarrel Pointe..... 12,087 4,170 10,874 --- 4,170 10,875 15,045 71 2000 Chattanooga, TN Hamilton Corner...... 3,063 960 3,670 423 734 4,319 5,053 1,262 1986-1987 Chattanooga, TN 80 Gross Amounts at Which Carried at Initial Cost (A) Close of Period ---------------------- --------------------------------------------- Costs Capitalized Buildings Subsequent Buildings Date of (B) and to and Accumulated Contruction Description Encumbrances Land Improvements Improvements Land Improvements Total(C) Depreciation(D) /Purchase -------------------- ---------- -------- ---------- -------- -------- --------- ------------------ ------------ Hamilton Crossing.... ---- 4,014 5,906 (904) 2,644 6,372 9,016 1,850 1987 Chattanooga, TN Hamilton Place ---- 322 408 57 322 465 787 28 1998 Outparcel............ Chattanooga, TN The Landing at 11,162 4,993 14,330 526 4,993 14,856 19,849 712 Arbor Place........ Atlanta, GA Madison Plaza........ 1,545 473 2,888 187 473 3,075 3,548 1,159 1984 Hunstville, AL Pemberton Plaza...... ---- ---- 662 893 ---- 1,556 1,556 381 1986 Vicksburg, MS The Terrace.......... 10,147 4,166 9,729 1 4,166 9,730 13,896 925 1997 Chattanooga, TN Village at Rivergate. 3,580 2,641 2,808 474 2,641 3,282 5,923 211 1998 Nashville, TN Westgate Crossing.... 9,876 1,082 3,422 6,332 1,082 9,755 10,837 979 1997 Spartanburg, SC COMMUNITY CENTERS Anderson Plaza....... ---- 198 1,316 1,558 198 2,873 3,071 710 1983 Greenwood, SC Bartow Plaza......... ---- 224 2,010 225 224 2,235 2,459 623 1989 Bartow, FL Beach Xing........... ---- 725 1,749 30 623 1,881 2,504 603 1984 Myrtle Beach, SC Bennington........... 510 256 1,754 652 175 2,487 2,662 829 1988 Roanoke, VA BJ's Wholesale....... 3,112 170 4,735 13 170 4,748 4,918 1,105 1991 Portland, ME Briarcliff Sq........ 1,556 299 1,936 32 267 2,000 2,267 569 1989 Oak Ridge, TN Buena Vista Plaza.... ---- 980 1,943 (819) 754 1,350 2,104 262 1988-1989 Columbus, GA Bullock Plaza........ ---- 98 1,493 93 98 1,586 1,684 545 1986 Statesboro, GA Capital Crossing..... ---- 1,908 756 2,264 2,544 2,385 4,929 293 1995 Raleigh, NC Cedar Bluff.......... 1,129 412 2,128 883 412 3,011 3,423 960 1987 Knoxville, TN 81 Gross Amounts at Which Carried at Initial Cost (A) Close of Period ---------------------- --------------------------------------------- Costs Capitalized Buildings Subsequent Buildings Date of (B) and to and Accumulated Contruction Description Encumbrances Land Improvements Improvements Land Improvements Total(C) Depreciation(D) /Purchase -------------------- ---------- -------- ---------- -------- -------- --------- ------------------ ------------ Cedar Springs Crossing ---- 206 1,845 129 206 1,974 2,180 585 1988 Cedar Springs, MI Chesterfield Crossing 7,093 1,580 11,243 --- 1,580 11,243 12,823 64 Richmond, VA Chester Plaza........ 0 165 720 12 165 732 897 63 1997 Chester, VA Chestnut Hills....(E) ---- 600 1,775 328 600 2,103 2,703 429 1992 Murray, KY Coastal Way.......... 7,572 3,356 9,335 --- 3,356 9,335 12,691 85 Spring Hill, FL Colleton Square...... 909 190 1,349 9 156 1,392 1,548 483 1986 Walterboro, SC Collins Park Commons. 727 25 1,858 24 25 1,882 1,907 540 1989 Plant City, FL Conway Plaza......... ---- 110 1,071 794 ---- 1,976 1,976 667 1984 Conway, SC Cortlandt Towne Center 51,949 17,010 80,809 46 15,112 82,753 97,865 6,237 1996 Cortlandt, NY Cosby Station........ 3,959 999 4,516 597 999 5,113 6,112 839 1993-1994 Douglasville, GA County Park Plaza.(E) ---- 196 1,500 379 140 1,935 2,075 524 1980 Scottsboro, AL Devonshire Place..... ---- 371 3,449 2,489 520 5,789 6,309 674 1995-1996 Cary, NC E Ridge Xing......... 689 832 2,494 1,505 731 4,099 4,830 921 1988 East Ridge, TN Eastowne Xing.....(E) ---- 867 2,765 1,852 786 4,698 5,484 1,102 1989 Knoxville, TN Fifty Eight Xing..... 664 839 2,360 (55) 743 2,401 3,144 742 1988 Chattanooga, TN Garden City Plaza.(E) ---- 1,056 2,569 629 580 3,674 4,254 1,350 1984 Garden City, KS Girvin Plaza......... ---- 898 1,998 997 702 3,191 3,893 527 1989-1990 Jacksonville, FL Greenport Towne Center 4,165 659 6,161 (220) 659 5,941 6,600 1,001 1993-1994 Hudson, NY Hampton Plaza........ ---- 973 2,689 44 965 2,741 3,706 700 1989-1990 Tampa, FL 82 Gross Amounts at Which Carried at Initial Cost (A) Close of Period ---------------------- --------------------------------------------- Costs Capitalized Buildings Subsequent Buildings Date of (B) and to and Accumulated Contruction Description Encumbrances Land Improvements Improvements Land Improvements Total(C) Depreciation(D) /Purchase -------------------- ---------- -------- ---------- -------- -------- --------- ------------------ ------------ Henderson Square..... 6,313 428 8,074 69 241 8,330 8,571 1,223 1994-1995 Henderson, NC Jasper Square.....(E) ---- 235 1,423 1,763 235 3,186 3,421 814 1986 Jasper, AL Jean Ribaut Kmart(E) ---- 317 2,065 765 340 2,807 3,147 598 1983-1984 Beaufort, SC Jean Ribaut Square... 3,661 505 4,007 1,392 505 5,400 5,905 1,831 1983 Beaufort, SC Keystone............. ---- 938 2,216 (16) 825 2,313 3,138 767 1989 Tampa, FL Kingston Overlook.(E) ---- 1,693 5,664 1,983 2,105 7,235 9,340 727 1996 Knoxville, TN Lady's Island.....(E) ---- 300 2,323 325 292 2,652 2,944 545 1992 Beaufort, SC LaGrange Commons..... ---- 835 5,765 633 835 6,397 7,232 667 1995-1996 LaGrange, NY Lionshead Village.... ---- 3,674 4,153 2,770 3,674 6,923 10,597 299 1998 Nashville, TN Longview Xing........ 405 ---- 1,308 432 ---- 1,739 1,739 403 1988 Longview, NC Lunenburg Crossing... ---- 1,020 2,308 (14) 1,019 2,294 3,313 355 1993-1994 Lunenburg, MA Marketplace at Flower Mound....... ---- 2,269 8,820 --- 2,269 8,820 11,089 165 Flowermound, TX Massard Crossing..(E) ---- 843 5,726 (196) 843 5,530 6,373 549 1997 Fort Smith, AR North Haven Crossing. 6,740 3,229 8,061 4 3,229 8,065 11,294 1,530 1992-1993 North Haven, CT Northcreek Plaza..... ---- 98 1,201 51 97 1,253 1,350 271 1983 Greenwood, SC Northridge Plaza..(E) ---- 1,087 2,970 2,008 1,244 4,821 6,065 1,785 1984 Hilton Head, SC Northwoods Plaza..... 1,178 496 1,403 106 496 1,509 2,005 328 1995 Albemarle, NC Oaks Crossing........ ---- 571 2,885 (1,318) 655 1,483 2,138 507 1988 Otsego, MI Orange Plaza......... ---- 395 2,111 125 395 2,237 2,632 477 1992 Roanoke, VA 83 Gross Amounts at Which Carried at Initial Cost (A) Close of Period ---------------------- --------------------------------------------- Costs Capitalized Buildings Subsequent Buildings Date of (B) and to and Accumulated Contruction Description Encumbrances Land Improvements Improvements Land Improvements Total(C) Depreciation(D) /Purchase -------------------- ---------- -------- ---------- -------- -------- --------- ------------------ ------------ Park Place........... 952 ---- 3,590 836 231 4,194 4,425 1,625 1984 Chattanooga, TN Park Village......... ---- 586 2,874 79 520 3,019 3,539 763 1990 Lakeland, FL Perimeter Place...... 1,378 764 2,049 326 770 2,369 3,139 896 1985 Chattanooga, TN Rawlinson Place..... ---- 279 1,573 82 292 1,642 1,934 542 1987 Rock Hill, SC Rhett @ Remount...... ---- 67 1,877 883 67 2,760 2,827 973 1992 Charleston, SC Salem Crossing....... ---- 2,385 7,094 (316) 2,385 6,777 9,162 645 1997 Virginia Beach, VA Sand Lake Corners.... 14,000 3,182 15,952 2,513 3,054 18,592 21,646 647 1998-1999 Orlando, FL Sattler Square....(E) ---- 792 4,155 277 705 4,519 5,224 1,252 1988-1989 Big Rapids, MI Seacoast Shopping Center............. 5,452 1,374 4,164 2,483 1,195 6,826 8,021 1,531 1991 Seabrook, NH Shenandoah Crossing.. 509 122 1,382 64 115 1,453 1,568 437 1988 Roanoke, VA Signal Hills Village. ---- ---- 579 484 ---- 1,063 1,063 321 1983-1984 Statesville, NC Southgate Xing....... ---- ---- 1,002 25 ---- 1,027 1,027 358 1984-1985 Bristol, TN Springhurst Towne 22,532 7,424 30,672 6,173 7,463 36,806 44,269 2,848 1997 Center............... Louisville, KY Springs Crossing..... ---- ---- 1,422 932 ---- 2,354 2,354 653 1987 Hickory, NC Statesboro Square.(E) ---- 237 1,643 142 227 1,795 2,022 655 1986 Statesboro, GA Stone East Plaza..(E) ---- 266 1,635 254 217 1,938 2,155 748 1987 Kingsport, TN Strawbridge MK Place. ---- 1,969 2,492 --- 1,969 2,492 4,461 249 1997 Strawbridge, VA Suburban Plaza....... 8,546 3,223 3,796 3,239 3,223 7,035 10,258 1,181 1995 Knoxville, TN Sutton Plaza......... 12,039 1,042 4,671 10,441 2,582 13,573 16,155 717 1997 Mt. Olive, NJ 84 Gross Amounts at Which Carried at Initial Cost (A) Close of Period ---------------------- --------------------------------------------- Costs Capitalized Buildings Subsequent Buildings Date of (B) and to and Accumulated Contruction Description Encumbrances Land Improvements Improvements Land Improvements Total(C) Depreciation(D) /Purchase -------------------- ---------- -------- ---------- -------- -------- --------- ------------------ ------------ Townshire Center..... ---- ---- ---- 27 ---- 27 27 4 1997 Bryan, TX Uvalde Plaza......... 660 574 1,506 (230) 319 1,532 1,851 514 1987 Uvalde, TX Valley Commons....... 879 342 1,819 623 342 2,442 2,784 747 1988 Salem, VA Valley Crossing...(E) ---- 2,390 6,471 5,099 3,034 10,927 13,961 2,566 1988 Hickory, NC Village at Wexford... ---- 555 3,009 112 501 3,175 3,676 851 1989-1990 Cadillac, MI Village Square....... ---- 750 3,591 (871) 142 3,328 3,470 968 1989-1990 Houghton Lake, MI Willow Springs....... 4,567 2,917 6,107 5,007 2,917 11,114 14,031 1,976 1991 Nashua, NH 34th St Xing......... 1,433 1,102 2,743 85 1,023 2,907 3,930 832 1989 St. Petersburg, FL DISPOSITIONS Centerview Plaza..... ---- 246 1,584 (1,830) ---- ---- ---- ---- 1986 China Grove, NC Clark's Pond......... ---- 2,739 ---- (2,739) ---- ---- ---- ---- 1994 Portland, ME Dorchester Xing...... ---- 493 1,483 (1,976) ---- ---- ---- ---- 1985 Charleston, SC Fiddler's Run........ ---- 1,319 13,793 (15,112) ---- ---- ---- ---- Morganton, NC Genesis Square....... ---- 227 1,435 (1,662) ---- ---- ---- ---- 1990 Crossville, TN Hollins Plantation ---- 229 1,845 (2,074) ---- ---- ---- ---- 1985 Plaza................ Roanoke, VA Karnes Corner........ ---- 206 1,360 (1,566) ---- ---- ---- ---- 1987 Knoxville, TN Lakeshore Station.... ---- 200 401 (601) ---- ---- ---- ---- 1993-1994 Gainesville, GA Sparta Crossing...... ---- 180 1,463 (1,643) ---- ---- ---- ---- 1989 Sparta, TN Sterling Creek Commons ---- 732 3,048 (3,780) ---- ---- ---- ---- 1998 Portsmouth, VA 85 Gross Amounts at Which Carried at Initial Cost (A) Close of Period ---------------------- --------------------------------------------- Costs Capitalized Buildings Subsequent Buildings Date of (B) and to and Accumulated Contruction Description Encumbrances Land Improvements Improvements Land Improvements Total(C) Depreciation(D) /Purchase -------------------- ---------- -------- ---------- -------- -------- --------- ------------------ ------------ Tyler Square......... ---- 196 2,021 (2,217) ---- ---- ---- ---- 1986 Radford, VA University Crossing.. ---- 545 1,216 (1,761) ---- ---- ---- ---- 1985 Pueblo, CO Wildwood Plaza....... ---- 429 1,082 (1,511) ---- ---- ---- ---- 1985 Salem, VA OTHER Land................. ---- ---- ---- 2,764 893 1,871 2,764 412 High Point, NC Willowbrook Land..... ---- 4,543 ---- --- 4,543 ---- 4,543 Houston, TX Developments in 170,005 2,955 ---- (2,297) 227 ---- 227 775 ---- Progress Consisting of Construction and Development Properties (F) ---------- -------- ---------- -------- -------- --------- ---------- -------- TOTALS $1,424,337 $303,906 $1,660,436 $246,073 $290,366 $1,919,619 $2,209,985 $271,046 ========== ======== ========== ======== ======== ========== ========== ======== (A) Initial cost represents the total cost capitalized including carrying cost at the end of the first fiscal year in which the property opened or was acquired. (B) Encumbrances represent the mortgage notes payable balance at December 31, 2000. (C) The aggregate cost of land and buildings and improvements for federal income tax purposes is approximately $2.120 billion. (D) Depreciation for all properties is computed over the useful life which is generally forty years. (E) Property is pledged as collateral on the secured lines of credit used for development properties. (F) Includes non-property mortgages and credit line mortgages.
86 CBL & ASSOCIATES PROPERTIES, INC. REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION The changes in real estate assets and accumulated depreciation for the years ending December 31, 2000, 1999, and 1998 (dollars in thousands).
2000 1999 1998 --------------- ---------------- --------------- REAL ESTATE ASSETS: Balance at beginning of period $2,184,102 $1,982,843 $1,287,965 Additions during the period: Additions and improvements 173,916 180,094 130,728 Acquisitions of real estate assets 11,089 69,027 499,795 Acquisitions of real estate assets with -- -- 69,889 limited partnership interest Deductions during the period: Cost of sales (57,320) (46,188) (5,412) Write-off of development projects (127) (1,674) (122) --------------- ---------------- --------------- Balance at end of period $2,311,660 $2,184,102 $1,982,843 =============== ================ ============== ACCUMULATED DEPRECIATION: Balance at beginning of period $223,548 $177,055 $145,641 Accumulated depreciation on properties sold (6,193) (6,640) (11,324) Depreciation expense 53,691 53,133 42,738 --------------- ---------------- --------------- Balance at end of period $271,046 $223,548 $177,055 =============== ================ ==============
87 Schedule IV CBL & ASSOCIATES PROPERTIES, INC. MORTGAGE LOANS ON REAL ESTATE AT DECEMBER 31, 2000 (Dollars in thousands)
Principal Amount of Carrying Mortgages Monthly Balloon Face Amount Subject to Final Payment Payment Amount of Delinquent Interest Maturity Amount at Prior of Mortgage Principal Name of Center/Location Rate Date (1) Maturity Liens Mortgage (2) or Interest -------------------------------- ---------- ----------- ----------- ----------- -------- ----------- ----------- --------------- Bi-Lo South 9.50% 12/06 $22 $87 None $1,206 $1,206 $0 Cleveland, TN Gaston Square 11.00% 12/01 15 1,665 None 1,665 1,665 0 Gastonia, NC Inlet Crossing 11.00% 12/01 27 1,443 None 1,443 1,443 60 Myrtle Beach, SC Olde Brainerd Centre 9.50% 12/06 4 14 None 14 14 0 Chattanooga, TN Signal Hills Plaza 11.00% 12/01 20 2,049 None 2,049 2,049 132 Statesville, NC Soddy Daisy Plaza 9.50% 12/06 4 45 None 172 172 0 Soddy Daisy, TN University Crossing 8.75% 02/10 7 399 None 650 650 0 Pueblo, CO Other 10.00% 02/01- 09/07 0 1,741 1,557 1,557 0 ----------- ----------- ----------- ----------- --------------- $96 $7,443 $8,756 $8,756 $192 =========== =========== =========== =========== =============== (1) Equal monthly installments comprised of principal and interest unless otherwise noted. (2) The aggregate carrying value for federal income tax purposes is approximately $8,756 at December 31, 2000.
CBL & ASSOCIATES PROPERTIES, INC. --------------------------------------------------------------- Year Ended Year Ended Year Ended December 31, December 31, December 31, 2000 1999 1998 --------------------- -------------------- -------------------- Beginning Balance $9,385 $9,118 $11,678 Additions 825 1,690 1,620 Payments (1,454) (1,423) (4,180) --------------------- -------------------- -------------------- Ending Balance $8,756 $9,385 $9,118 ===================== ==================== ====================
88 EXHIBIT INDEX Exhibit Number Description 3.1 -- Amended and Restated Certificate of Incorporation of the Company(a) 3.2 -- Certificate of Amendment to the Amended & Restated Certificate of Incorporation of the Company (b) 3.3 -- Amended and Restated Bylaws of the Company(a) 4 -- See Amended and Restated Certificate of Incorporation of the Company, relating to the Common Stock(a) 10.1 -- Partnership Agreement of the Operating Partnership(a) 10.2 -- Property Management Agreement between the Operating Partnership and the Management Company(a) 10.3 -- Property Management Agreement relating to Retained Properties(a) 10.4.1 -- CBL & Associates Properties, Inc. 1993 Stock Incentive Plan(a)+ 10.4.2 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for Charles B. Lebovitz+ 10.4.3 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for John N. Foy+ 10.4.4 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for Ben S. Landress+ 10.4.5 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for Stephen D. Lebovitz+ 10.4.6 -- Stock Restriction Agreement, dated December 28, 1994, for Charles B. Lebovitz+ 10.4.7 -- Stock Restriction Agreement, dated December 2, 1994, for John N. Foy+ 10.4.8 -- Stock Restriction Agreement, dated December 2, 1994, for Ben S. Landress+ 10.4.9 -- Stock Restriction Agreement, dated December 2, 1994, for Stephen D. Lebovitz+ 10.5 -- Indemnification Agreements between the Company and the Management Company and their officers and directors(a) 10.6.1 -- Employment Agreement for Charles B. Lebovitz(a)+ 10.6.2 -- Employment Agreement for John N. Foy(a)+ 10.6.3 -- Employment Agreement for Ben S. Landress(a)+ 10.6.4 -- Employment Agreement for Stephen D. Lebovitz(a)+ 89 10.7 -- Subscription Agreement relating to purchase of the Common Stock and Preferred Stock of the Management Company(a) 10.8 -- Option Agreement relating to certain Retained Properties(a) 10.9 -- Option Agreement relating to Outparcels(a) 10.10.1 -- Property Partnership Agreement relating to Hamilton Place(a) 10.10.2 -- Property Partnership Agreement relating to CoolSprings Galleria(a) 10.11.1 -- Acquisition Option Agreement relating to Hamilton Place(a) 10.11.2 -- Acquisition Option Agreement relating to the Hamilton Place Centers(a) 10.12.3 -- Acquisition Option Agreement relating to the Office Building(a) 10.13 -- Loan agreement with South Trust Bank dated January 15 , 1998.(d) 10.14 -- Amended and restated Loan Agreement between CBL & Associates Properties , Inc. and First Tennessee Bank National Association Dated June 12, 1998 (e) 10.15 -- First Amendment To Third Amended And Restated Credit Agreement and Third Amended And Restated Credit Agreement between CBL & Associates Properties, Inc. and Wells Fargo Bank, National Association, dated August 4, 1998 (e) 10.16 -- Master Contribution Agreement, dated as of September 25, 2000, by and among the Registrant, CBL & Associates Limited Partnership, Jacobs Realty Investors Limited Partnership, Richard E. Jacobs, solely as Trustee for the Richard E. Jacobs Revocable Living Trust, and Richard E. Jacobs, Solely as Trustee for the David H. Jacobs Marital Trust. (f) 10.17 -- Press Release of the Registrant, dated January 31, 2001. (g) 10.18 -- First Amendment to Second Amended and Restated Agreement of Limited Partnership of CBL & Associates Limited Partnership. (g) 10.19 -- Terms of Series J Special Common Units of CBL & Associates Limited Partnership, pursuant to Article 4.4 of the Second Amended and Restated Partnership Agreement of CBL & Associates Limited Partnership. (g) 10.20 -- Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant. (g) 10.21 -- Share Ownership Agreement, dated as if January 31, 2001, by and among the Registrant, CBL & Associates, Inc., LebFam, Inc. Charles B. Lebovitz, Stephen D. Lebovitz; Jacobs Realty Investors Limited Partnership, Richard E. Jacobs, solely as trustee for the Richard E. Jacobs Revocable Living Trust and Richard E. Jacobs solely as trustee for the David H. Jacobs Marital Trust. (g) 90 10.22 -- Registration Rights Agreement, dated as of January 31, 2001 by and between the Registrant and the Holders of SCU's listed on Schedule 1 thereto. (g) 10.23 -- Registration Rights Agreement, dated as of January 31, 2001 by and between the Registrant and Frankel Midland Limited Partnership. (g) 10.24 -- Registration Rights Agreement, dated as of January 31, 2001 by and between the Registrant and Hess Abroms Properties of Huntsville. (g) 10.25 -- Loan Agreement, as of the January 31, 2001, by and between CBL & Associates Limited Partnership, Wells Fargo Bank, National Association, Fleet National Bank, U.S. Bank National Association, Commerzbank AG, New York And Grand Cayman Branches, and Keybank National Association, together certain other lenders parties thereto pursuant to Section 8.6 thereof. (g) 21 -- Subsidiaries of the Company 91 23 -- Consent of Arthur Andersen LLP 96 24 -- Power of Attorney 97 (a) Incorporated by reference to Post-Effective Amendment No. 1 to the Company's Registration Statement on Form S-11(No. 33-67372), as filed with the Commission on January 27, 1994. (b) Incorporated by reference to Exhibit B to the Company's Definitive Schedule 14A, Dated April 1, 1996. (c) Incorporated by reference to Amendment No. 2 to the Company's Registration Statement on Form S-11 (No. 33-67372), as filed with the Commission on October 26, 1993. (d) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998. (e) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998. (f) Incorporated by reference to the Company's Form 8-K, filed on October 27, 2000. (g) Incorporated by reference to the Company's Form 8-K filed on February 6, 2001. + A management contract or compensatory plan or arrangement required to be filed pursuant to Item 14(c) of this report. (4) Reports on Form 8-K An 8-K disclosing the results of a special meeting of shareholders, in connection with the Jacobs transaction, (Item 5: other events) was filed on January 19, 2001. The outline from the Company's February 1, 2001 conference call with analysts regarding earnings (Item 5) was filed on February 1, 2001. A summary of the Jacobs transaction together with certain of the material agreements associated with the closing of the transaction on January 31, 2001 was filed on February 6, 2001 91 SUBSIDIARIES OF THE COMPANY STATE OF INCORPORATION OR SUBSIDIARY FORMATION Albemarle Partners Limited Partnership North Carolina APWM, LLC Georgia Arbor Place GP, Inc. Georgia Arbor Place Limited Partnership Georgia Asheville, LLC North Carolina BJ/Portland Limited Partnership Maine Bonita Lakes Mall Limited Partnership Mississippi Bursnville Minnesota, LLC Minnesota Cadillac Associates Limited Partnership Tennessee Capital Crossing Limited Partnership North Carolina Cary Limited Partnership North Carolina CBL & Associates Limited Partnership Delaware CBL & Associates Management, Inc. Delaware CBL/34th Street St. Petersburg Limited Partnership Florida CBL/Bartow Limited Partnership Florida CBL/Brushy Creek Limited Partnership Florida CBL/Buena Vista Limited Partnership Georgia CBL/Cedar Bluff Crossing Limited Partnership Tennessee CBL/Foothills Plaza Partnership Tennessee CBL/GP, Inc. Wyoming CBL/GP I, Inc. Tennessee CBL/GP II, Inc. Wyoming CBL/GP III, Inc. Mississippi CBL/GP V, Inc. Tennessee CBL/GP VI, Inc. Tennessee CBL/GP Cary, Inc. North Carolina CBL Holdings I, Inc. Delaware CBL Holdings II, Inc. Delaware CBL/Karns Corner Limited Partnership Tennessee CBL/Low Limited Partnership Wyoming CBL Morristown, LTD. Tennessee CBL/Nashua Limited Partnership New Hampshire CBL/North Haven, Inc. Connecticut CBL/Perimeter Place Limited Partnership Tennessee CBL/Plant City Limited Partnership Florida CBL/Plantation Plaza, L.P. Virginia CBL/Rawlinson Place Limited Partnership Tennessee CBL/Springs Crossing Limited Partnership Tennessee CBL/Stroud, Inc. Pennsylvania CBL/Suburban, Inc. Tennessee 92 STATE OF INCORPORATION OR SUBSIDIARY FORMATION CBL/Tampa Keystone Limited Partnership Florida CBL Terrace Limited Partnership Tennessee CBL/Uvalde, Ltd. Texas CBL/York, Inc. Pennsylvania Chester Square Limited Partnership Virginia Chesterfield Crossing, LLC Virginia Coastal Way, L.C. Florida Cobblestone Village at St. Augustine, LLC Florida College Station Partners, Ltd. Texas CoolSprings Crossing Limited Partnership Tennessee Cortlandt Town Center, Inc. New York Cortlandt Town Center Limited Partnership New York Cosby Station Limited Partnership Georgia Courtyard at Hickory Hollow Limited Partnership Delaware Creekwood Gateway, LLC Florida Crossville Associates Limited Partnership Tennessee CV at North Columbus, LLC Georgia Development Options, Inc. Wyoming East Ridge Partners, L.P. Tennessee East Towne Crossing Limited Partnership Tennessee ERMC II Tennessee ERMC IV Tennessee ERMC V Tennessee Fifty-Eight Partners, L.P. Tennessee Foothills Mall, Inc. Tennessee Foothills Mall Associates, LP Tennessee Frontier Mall Associates Limited Partnership Wyoming Georgia Square Associates, Ltd. Georgia Georgia Square Partnership Georgia Governor's Square Company Ohio Governor's Square Company IB Ohio Gunbarrel Commons, LLC Tennessee Henderson Square Limited Partnership North Carolina Hickory Hollow Courtyard, Inc. Delaware Hickory Hollow Mall, Inc. Delaware Hickory Hollow Mall Limited Partnership Delaware High Point Development Limited Partnership North Carolina High Point Development Limited Partnership II North Carolina Hudson Plaza Limited Partnership New York Houston Willowbrook LLC Texas Jarnigan Road Limited Partnership Tennessee Janesville Mall Limited Partnership Wisconsin Janesville Wisconsin, Inc. Wisconsin 93 STATE OF INCORPORATION OR SUBSIDIARY FORMATION Joplin-Low Limited Partnership Missouri Kingston Overlook Limited Partnership Tennessee LaGrange Commons Limited Partnership New York Lakeshore Gainesville Limited Partnership Georgia Lakeshore/Sebring Limited Partnership Florida Leaseco, Inc. New York Lebcon Associates Tennessee Lebcon I, Ltd. Tennessee Lee Partners Tennessee Lion's Head Limited Partnership Tennessee Longview Associates Limited Partnership North Carolina Lunenburg Crossing Limited Partnership Massachusetts Madison Plaza Associates, Ltd. Alabama Madison Square Associates, Ltd. Alabama Mall Shopping Center Company, L.P. Texas Maryville Department Stores Associates Tennessee Maryville Partners, L.P. Tennessee Meridian Mall Company, Inc. Michigan Meridian Mall Limited Partnership Michigan Montgomery Partners, L.P. Tennessee Massard Crossing Limited Partnership Arkansas NewLease Corp. Tennessee North Haven Crossing Limited Partnership Connecticut Oak Ridge Associates Limited Partnership Tennessee Park Village Limited Partnership Florida Parkway Place, Inc. Alabama Parkway Place Limited Parntership Alabama Portland/HQ Limited Partnership Maine Post Oak Mall Associates Limited Partnership Texas Property Taxperts, LLC Nevada RC Jacksonville, LC Florida RC Strawbridge Limited Partnership Virginia Rivergate Mall, Inc. Delaware Rivergate Mall Limited Partnership Delaware Salem Crossing Limited Partnership Virginia Sand Lake Corners, LC Florida Sand Lake Corners Limited Partnership Florida Scottsboro Associates, Ltd. Alabama Seacoast Shopping Center Limited Partnership New Hampshire Shopping Center Finance Corp. Wyoming Springdale/Mobile GP, Inc. Alabama Springdale/Mobile GP II, Inc. Alabama Springdale/Mobile Limited Partnership Alabama 94 STATE OF INCORPORATION OR SUBSIDIARY FORMATION Springdale/Mobile Limited Partnership II Alabama Springhurst Limited Partnership Kentucky St. Clair Square GP, Inc. Illinois St. Clair Square Limited Partnership Illinois Sterling Creek Commons Limited Partnership Virginia Stone East Partners, Ltd. Tennessee Stoney Brook Landing LLC Kentucky Stroud Mall LLC Pennsylvania Suburban Plaza Limited Partnership Tennessee Sutton Plaza GP, Inc. New Jersey Sutton Plaza Limited Partnership New Jersey The Marketplace at Mill Creek, LLC Georgia The Lakes Mall, LLC Michigan The Landing at Arbor Place Limited Partnership Georgia The Galleria Associates, L.P. Tennessee Turtle Creek Limited Partnership Mississippi Twin Peaks Mall Associates, Ltd. Colorado Valley Crossing Associates Limited Partnership North Carolina Vicksburg Mall Associates, Ltd. Mississippi Village at Rivergate, Inc. Delaware Village at Rivergate Limited Partnership Delaware Walnut Square Associates Limited Partnership Wyoming Westgate Crossing Limited Partnership North Carolina Westgate Mall Limited Partnership South Carolina York Galleria Limited Partnership Virginia Brookfield Square Joint Venture Ohio Cary Venture Limited Partnership Delaware CBL/Brookfield I, LLC Delaware CBL/Brookfield II, LLC Delaware CBL/Cary I, LLC Delaware CBL/Cary II, LLC Delaware CBL/Cherryvale I, LLC Delaware CBL/Citadel I, LLC Delaware CBL/Citadel II, LLC Delaware CBL/Columbia I, LLC Delaware CBL/Columbia II, LLC Delaware CBL/Eastgate I, LLC Delaware CBL/Eastgate II, LLC Delaware CBL/Fayette I, LLC Delaware CBL/Fayette II, LLC Delaware CBL/J I, LLC Delaware CBL/J II, LLC Delaware 95 STATE OF INCORPORATION OR SUBSIDIARY FORMATION CBL/ Jefferson I, LLC Delaware CBL/Jefferson II, LLC Delaware CBL/Kentucky Oaks, LLC Delaware CBL/Madison I, LLC Delaware CBL/Midland I, LLC Delaware CBL/Midland II, LLC Delaware CBL/Northwoods I, LLC Delaware CBL/Northwoods II, LLC Delaware CBL/Old Hickory I, LLC Delaware CBL/Old Hickory II, LLC Delaware CBL/Parkdale, LLC Texas CBL/Regency I, LLC Delaware CBL/Regency II, LLC Delaware CBL/Towne Mall I, LLC Delaware CBL/Towne Mall II, LLC Delaware CBL/Wausau I, LLC Delaware CBL/Wausau II, LLC Delaware CBL/Wausau III, LLC Delaware CBL/Wausau IV, LLC Delaware CBL/Weston I, LLC Delaware CBL/Weston II, LLC Delaware Charleston Joint Venture Ohio Columbia Joint Venture Ohio Eastgate Company Ohio JC Randolph, LLC Ohio JG Saginaw, LLC Ohio JG Winston-Salem, LLC Ohio Jefferson Mall Company Ohio Kentucky Oaks Mall Company Ohio Lexington Joint Venture Ohio Madison Joint Venture Ohio Midland Joint Venture Michigan North Charleston Joint Venture Ohio Old Hickory Mall Venture Tennessee Parkdale Mall Associates Texas Racine Joint Venture Ohio Towne Mall Ohio Wausau Joint Venture Ohio 96 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into CBL & Associates Properties, Inc.'s previously filed Registration Statements on Form S-3 (File No. 333-47041) and Form S-8 (File No. 33-73376). ARTHUR ANDERSEN LLP Chattanooga, Tennessee March 29, 2001 97 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Charles B. Lebovitz, John N. Foy and Stephen D. Lebovitz and each of them, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report of CBL & Associates Properties, Inc. on Form 10-K for the fiscal year ended December 31, 2000, including one or more amendments to such Form 10-K, which amendments may make such changes as such person deems appropriate, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary fully to all intents and purposes as he might or could do in person thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has executed this Power-of-Attorney on the date set opposite his respective name. Signature Title Date /s/ Charles B. Lebovitz Chairman of the Board March 29, 2001 ------------------------ and Chief Charles B. Lebovitz Executive Officer (Principal Executive Officer) /s/ John N. Foy Vice Chairman of the Board, March 29, 2001 ------------------------ Chief Financial Officer and John N. Foy Treasurer (Principal Financial Officer and Principal Accounting Officer) /s/ Stephen D. Lebovitz Director, President March 29, 2001 ------------------------ and Secretary Stephen D. Lebovitz /s/ Claude M.Ballard Director March 29, 2001 ------------------------ Claude M. Ballard /s/ Leo Fields Director March 29, 2001 ------------------------ Leo Fields /s/ William J.Poorvu Director March 29, 2001 ------------------------ William J. Poorvu /s/ Winston W. Walker Director March 29, 2001 ------------------------ Winston W. Walker /s/ Gary L. Bryenton Director March 29, 2001 ------------------------ Gary L. Bryenton /s/ Martin J. Cleary Director March 29, 2001 ------------------------ Martin J. Cleary 98