UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
FOR THE QUARTERLY PERIOD ENDED
or
FOR THE TRANSITION PERIOD FROM ____________ TO _______________
COMMISSION FILE NO.
(Exact Name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
(Address of principal executive office, including zip code)
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered under Section 12(b) of the Act:
Title of each Class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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No |
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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No |
☐ |
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Yes |
No ☒ |
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
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Yes |
No ☐ |
As of November 6, 2023,
CBL & Associates Properties, Inc.
Table of Contents
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PART I |
1 |
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Item 1. |
1 |
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Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 |
1 |
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2 |
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3 |
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4 |
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5 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
6 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
24 |
Item 3. |
39 |
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Item 4. |
39 |
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PART II |
40 |
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Item 1. |
40 |
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Item1A. |
40 |
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Item 2. |
40 |
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Item 3. |
40 |
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Item 4. |
40 |
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Item 5. |
40 |
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Item 6. |
41 |
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42 |
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PART I – FINANCIAL INFORMATION
ITEM 1: Condensed Consolidated Financial Statements (Unaudited)
CBL & Associates Properties, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
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September 30, |
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December 31, |
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ASSETS (1) |
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2023 |
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2022 |
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Real estate assets: |
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Land |
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$ |
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$ |
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Buildings and improvements |
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Accumulated depreciation |
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Developments in progress |
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Net investment in real estate assets |
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Cash and cash equivalents |
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Restricted cash |
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Available-for-sale securities - at fair value (amortized cost of $ |
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Receivables: |
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Tenant |
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Other |
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Investments in unconsolidated affiliates |
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In-place leases, net |
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Above market leases, net |
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Intangible lease assets and other assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Mortgage and other indebtedness, net |
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$ |
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$ |
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Below market leases, net |
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Accounts payable and accrued liabilities |
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Total liabilities (1) |
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Shareholders' equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
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( |
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Accumulated deficit |
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( |
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( |
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Total shareholders' equity |
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Noncontrolling interests |
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( |
) |
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( |
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Total equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated statements.
1
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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REVENUES: |
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Rental revenues |
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$ |
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$ |
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$ |
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$ |
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Management, development and leasing fees |
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Other |
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Total revenues |
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EXPENSES: |
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Property operating |
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( |
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( |
) |
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( |
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( |
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Depreciation and amortization |
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( |
) |
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( |
) |
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( |
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( |
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Real estate taxes |
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( |
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( |
) |
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( |
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( |
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Maintenance and repairs |
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( |
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( |
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( |
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( |
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General and administrative |
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( |
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( |
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( |
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( |
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Loss on impairment |
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— |
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— |
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— |
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( |
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Litigation settlement |
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Other |
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— |
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— |
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( |
) |
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( |
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Total expenses |
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( |
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( |
) |
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( |
) |
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( |
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OTHER INCOME (EXPENSES): |
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Interest and other income |
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Interest expense |
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( |
) |
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( |
) |
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( |
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( |
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Gain on deconsolidation |
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— |
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Loss on available-for-sale securities |
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— |
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( |
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— |
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( |
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Gain on sales of real estate assets |
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Reorganization items, net |
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— |
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— |
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Income tax provision |
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( |
) |
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( |
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( |
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( |
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Equity in earnings of unconsolidated affiliates |
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Total other expenses |
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( |
) |
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( |
) |
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( |
) |
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( |
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Net income (loss) |
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( |
) |
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( |
) |
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( |
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Net (income) loss attributable to noncontrolling interests in: |
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Operating Partnership |
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( |
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Other consolidated subsidiaries |
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Net income (loss) attributable to the Company |
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( |
) |
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( |
) |
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( |
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Earnings allocable to unvested restricted stock |
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( |
) |
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( |
) |
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( |
) |
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( |
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Net income (loss) attributable to common shareholders |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Basic and diluted per share data attributable to common shareholders: |
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Basic earnings per share |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Diluted earnings per share |
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( |
) |
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( |
) |
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( |
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Weighted-average basic shares |
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Weighted-average diluted shares |
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The accompanying notes are an integral part of these condensed consolidated statements.
2
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands, except share data)
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Net income (loss) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Other comprehensive income (loss): |
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Unrealized gain on interest rate swap |
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— |
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— |
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Unrealized gain on available-for-sale securities |
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Total other comprehensive income |
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Comprehensive income (loss) |
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( |
) |
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( |
) |
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( |
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Comprehensive (income) loss attributable to noncontrolling interests in: |
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Operating Partnership |
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( |
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Other consolidated subsidiaries |
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Comprehensive income (loss) attributable to the Company |
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( |
) |
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( |
) |
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( |
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Earnings allocable to unvested restricted stock |
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( |
) |
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( |
) |
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( |
) |
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( |
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Comprehensive income (loss) attributable to common shareholders |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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|
The accompanying notes are an integral part of these condensed consolidated statements.
3
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Equity
(In thousands, except share data)
(Unaudited)
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Equity |
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Shareholders' Equity |
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Common |
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Additional |
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Accumulated |
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Accumulated Deficit |
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Total |
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Noncontrolling |
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Total |
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Balance, December 31, 2021 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
) |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Conversion of exchangeable notes into |
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— |
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— |
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— |
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Contributions from noncontrolling interests |
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— |
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— |
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— |
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— |
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— |
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Balance, March 31, 2022 |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
) |
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( |
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Other comprehensive loss |
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— |
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— |
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( |
) |
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— |
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( |
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— |
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( |
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Dividends declared - common stock |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
) |
Share-based compensation expense |
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— |
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— |
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— |
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— |
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Adjustment for noncontrolling interests |
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— |
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— |
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— |
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( |
) |
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— |
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Distributions to noncontrolling interests |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance, June 30, 2022 |
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( |
) |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
) |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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— |
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Dividends declared - common stock |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Adjustment for noncontrolling interests |
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— |
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— |
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— |
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( |
) |
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— |
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Distributions to noncontrolling interests |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance, September 30, 2022 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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Equity |
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Shareholders' Equity |
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Common |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Noncontrolling |
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Total |
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|||||||
Balance, December 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
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Net income (loss) |
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— |
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— |
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— |
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( |
) |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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Dividends declared - common stock |
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— |
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— |
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— |
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( |
) |
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( |
) |
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— |
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( |
) |
Issuance of |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance of |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Amortization of deferred compensation |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Compensation expense related to performance stock units |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance, March 31, 2023 |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Dividends declared - common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Amortization of deferred compensation |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Compensation expense related to performance stock units |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance, June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
|||||
Net income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Dividends declared - common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Cancellation of |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Repurchases of |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Adjustment for noncontrolling interests |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
||
Contributions from noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Amortization of deferred compensation |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Compensation expense related to performance stock units |
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Balance, September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
The accompanying notes are an integral part of these condensed consolidated statements.
4
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Net amortization of deferred financing costs, discounts on available-for-sale securities and debt discounts |
|
|
|
|
|
|
||
Net amortization of intangible lease assets and liabilities |
|
|
|
|
|
|
||
Gain on sales of real estate assets |
|
|
( |
) |
|
|
( |
) |
Gain on insurance proceeds |
|
|
( |
) |
|
|
( |
) |
Gain on deconsolidation |
|
|
( |
) |
|
|
( |
) |
Loss on available-for-sale securities |
|
|
— |
|
|
|
|
|
Write-off of development projects |
|
|
|
|
|
|
||
Share-based compensation expense |
|
|
|
|
|
|
||
Loss on impairment |
|
|
— |
|
|
|
|
|
Equity in earnings of unconsolidated affiliates |
|
|
( |
) |
|
|
( |
) |
Distributions of earnings from unconsolidated affiliates |
|
|
|
|
|
|
||
Change in estimate of uncollectable revenues |
|
|
|
|
|
( |
) |
|
Change in deferred tax accounts |
|
|
( |
) |
|
|
( |
) |
Changes in: |
|
|
|
|
|
|
||
Tenant and other receivables |
|
|
( |
) |
|
|
( |
) |
Other assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable and accrued liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
||
Additions to real estate assets |
|
|
( |
) |
|
|
( |
) |
Acquisitions of real estate assets |
|
|
— |
|
|
|
( |
) |
Proceeds from sales of real estate assets |
|
|
|
|
|
|
||
Purchases of available-for-sale securities |
|
|
( |
) |
|
|
( |
) |
Redemptions of available-for-sale securities |
|
|
|
|
|
|
||
Proceeds from insurance |
|
|
— |
|
|
|
|
|
Additional investments in and advances to unconsolidated affiliates |
|
|
( |
) |
|
|
( |
) |
Distributions in excess of equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
||
Changes in other assets |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Proceeds from mortgage and other indebtedness |
|
|
— |
|
|
|
|
|
Principal payments on mortgage and other indebtedness |
|
|
( |
) |
|
|
( |
) |
Additions to deferred financing costs |
|
|
( |
) |
|
|
( |
) |
Repurchases of common stock |
|
|
( |
) |
|
|
— |
|
Contributions from noncontrolling interests |
|
|
|
|
|
|
||
Payment of tax withholdings for restricted stock awards and performance stock units |
|
|
( |
) |
|
|
— |
|
Distributions to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
Dividends paid to common shareholders |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
|
( |
) |
|
|
( |
) |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period |
|
|
|
|
|
|
||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period |
|
$ |
|
|
$ |
|
||
Reconciliation from condensed consolidated statements of cash flows to condensed consolidated balance sheets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash: |
|
|
|
|
|
|
||
Restricted cash |
|
|
|
|
|
|
||
Mortgage escrows |
|
|
|
|
|
|
||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
SUPPLEMENTAL INFORMATION |
|
|
|
|
|
|
||
Cash paid for interest, net of amounts capitalized |
|
$ |
|
|
$ |
|
||
Cash paid for reorganization items |
|
$ |
— |
|
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated statements.
5
CBL & Associates Properties, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(Dollars in thousands, except per share data)
Note 1 – Organization and Basis of Presentation
CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, outlet centers, lifestyle centers, open-air centers, office buildings and other properties, including single-tenant and multi-tenant parcels. Its properties are located in
CBL conducts substantially all its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE.
As of September 30, 2023, the Operating Partnership owned interests in the following properties:
|
|
Malls (1) |
|
|
Outlet Centers (1) |
|
|
Lifestyle Centers (1) |
|
|
Open-Air Centers (2) |
|
|
Other (2)(3) |
|
|
Total |
|
||||||
Consolidated Properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Unconsolidated Properties (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
CBL is the
As used herein, the term "Company" includes CBL & Associates Properties, Inc. and its subsidiaries, including CBL & Associates Limited Partnership and its subsidiaries, unless the context indicates otherwise. The term "Operating Partnership" refers to CBL & Associates Limited Partnership and its subsidiaries.
The Operating Partnership conducts the Company's property management and development activities through its wholly owned subsidiary, CBL & Associates Management, Inc. (the “Management Company"), to comply with certain requirements of the Internal Revenue Code.
The accompanying condensed consolidated financial statements are unaudited; however, they have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. All intercompany transactions have been eliminated. The results for the interim period ended September 30, 2023 are not necessarily indicative of the results to be obtained for the full fiscal year.
Reclassifications
The Company reclassified restricted cash of $
For the nine months ended September 30, 2022, the Company reclassified payments received on notes receivable of $
6
Note 2 – Summary of Significant Accounting Policies
Accounting Guidance Adopted
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform, which provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates. Additional optional expedients, exceptions and clarifications were created in ASU 2021-01. The guidance is effective upon issuance and generally can be applied to any contract modifications or existing and new hedging relationships through December 31, 2024. The Company elected the expedients in conjunction with transitioning certain debt instruments to alternative benchmark indexes. During the nine months ended September 30, 2023, there was no impact on our condensed consolidated financial statements at adoption through the use of the expedient.
Accounts Receivable
Receivables include amounts billed and currently due from tenants pursuant to lease agreements and receivables attributable to straight-line rents associated with those lease agreements. Individual leases where the collection of rents is in dispute are assessed for collectability based on management’s best estimate of collection considering the anticipated outcome of the dispute. Individual leases that are not in dispute are assessed for collectability and upon the determination that the collection of rents over the remaining lease term is not probable, accounts receivable are reduced as an adjustment to rental revenues. Revenue from leases where collection is deemed to be less than probable is recorded on a cash basis until collectability is determined to be probable. Further, management assesses whether operating lease receivables, at a portfolio level, are appropriately valued based upon an analysis of balances outstanding, historical collection levels and current economic trends. An allowance for the uncollectable portion of the portfolio is recorded as an adjustment to rental revenues.
Management’s collection assessment took into consideration the type of retailer, billing disputes, lease negotiation status and executed deferral or abatement agreements, as well as recent rent collection experience and tenant bankruptcies based on the best information available to management at the time of evaluation.
Note 3 – Revenues
Revenues
The following table presents the Company's revenues disaggregated by revenue source for the three and nine months ended September 30, 2023 and 2022:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Rental revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Revenues from contracts with customers (Accounting Standards Codification ("ASC") 606): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expense reimbursements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management, development and leasing fees (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Marketing revenues (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues (3) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
See Note 10 for information on the Company's segments.
7
Revenues from Contracts with Customers
Outstanding Performance Obligations
The Company has outstanding performance obligations related to certain noncancelable contracts with customers for which it will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above.
Performance obligation |
|
Less than |
|
|
|
|
|
Over |
|
|
Total |
|
||||
Fixed operating expense reimbursements |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company evaluates its performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration, which is based on sales, are constrained.
Note 4 – Leases
The components of rental revenues for the three and nine months ended September 30, 2023 and 2022 are as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Fixed lease payments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable lease payments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total rental revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The undiscounted future fixed lease payments to be received under the Company's operating leases as of September 30, 2023, are as follows:
Years Ending December 31, |
|
Operating Leases |
|
|
2023 (1) |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Total undiscounted lease payments |
|
$ |
|
|
Note 5 – Fair Value Measurements
The Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
Level 1 – |
Inputs represent quoted prices in active markets for identical assets and liabilities as of the measurement date. |
Level 2 – |
Inputs, other than those included in Level 1, represent observable measurements for similar instruments in active markets, or identical or similar instruments in markets that are not active, and observable measurements or market data for instruments with substantially the full term of the asset or liability. |
Level 3 – |
Inputs represent unobservable measurements, supported by little, if any, market activity, and require considerable assumptions that are significant to the fair value of the asset or liability. Market valuations must often be determined using discounted cash flow methodologies, pricing models or similar techniques based on the Company’s assumptions and best judgment. |
8
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance.
The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. The estimated fair value of mortgage and other indebtedness was $
Fair Value Measurements on a Recurring Basis
The following table sets forth information regarding the Company's interest rate swap that was designated as a cash flow hedge of interest rate risk for the nine months ended September 30, 2023. See Note 9 for more information.
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
||||||||||
Asset |
|
Fair Value at September 30, 2023 |
|
|
Quoted Prices in |
|
|
Significant |
|
|
Significant |
|
||||
Interest rate swap |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
During the three and nine months ended September 30, 2023, the Company has continued to reinvest the cash from maturing U.S. Treasury securities into new U.S. Treasury securities. The Company designated the U.S. Treasury securities as available-for-sale (“AFS”).
AFS Security (1) |
|
Amortized |
|
|
Allowance |
|
|
Total unrealized loss |
|
|
Fair value as of September 30, 2023 (3) |
|
||||
U.S. Treasury securities |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
The following table sets forth information regarding the Company’s AFS securities that were measured at fair value for the year ended December 31, 2022:
AFS Security |
|
Amortized |
|
|
Allowance |
|
|
Total unrealized loss |
|
|
Fair value as of December 31, 2022 (2) |
|
||||
U.S. Treasury securities |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
9
Fair Value Measurements on a Nonrecurring Basis
The Company measures the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company’s evaluation of the recoverability of long-lived assets involves the comparison of undiscounted future cash flows expected to be generated by each property over the Company’s expected remaining holding period to the respective carrying amount. The determination of whether the carrying value is recoverable also requires management to make estimates related to probability weighted scenarios impacting undiscounted cash flow models. The Company considers both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income, occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. The quantitative and qualitative factors impact the selection of the terminal capitalization rate which is used in both an undiscounted and discounted cash flow model and the discount rate used in a discounted cash flow model. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Company classifies such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models.
Long-lived Assets Measured at Fair Value in 2023
During the three and nine months ended September 30, 2023, the Company adjusted the negative equity in WestGate Mall to
During the nine months ended September 30, 2023, the Company adjusted the negative equity in Alamance Crossing East to
Long-lived Assets Measured at Fair Value in 2022
During the nine months ended September 30, 2022, the Company adjusted the negative equity in Greenbrier Mall to
During the nine months ended September 30, 2022, the Company sold an outparcel at the Pavilion at Port Orange. Gross proceeds amounted to $
Note 6 – Acquisitions
Since the adoption of ASU 2017-01, Clarifying the Definition of a Business, the Company's acquisition of shopping centers and other properties have been accounted for as acquisitions of assets. The Company includes the results of operations of real estate assets acquired in the consolidated statements of operations from the date of the acquisition.
2023 Acquisition
There were
2022 Acquisition
In July 2022, the Company acquired the JC Penney parcel located at CoolSprings Galleria for $
Note 7 – Dispositions and Held for Sale
Dispositions
Based on its analysis, the Company determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income (loss) for all periods presented, as applicable.
2023 Dispositions
During the three and nine months ended September 30, 2023, the Company deconsolidated WestGate Mall, which resulted in $
During the nine months ended September 30, 2023, the Company deconsolidated Alamance Crossing East, which resulted in $
10
During the three months ended September 30, 2023, the Company realized a gain of $
2022 Dispositions
During the nine months ended September 30, 2022, the Company deconsolidated Greenbrier Mall. For the three and nine months ended September 30, 2022 the Company realized a gain of $
Held for Sale
During the nine months ended September 30, 2023 and 2022, the Company determined that there were
Note 8 – Unconsolidated Affiliates and Noncontrolling Interests
Unconsolidated Affiliates
Although the Company had majority ownership of certain joint ventures during 2023 and 2022, it evaluated the investments and concluded that the other partners or owners in these joint ventures had substantive participating rights, such as approvals of:
As a result of the joint control over these joint ventures, the Company accounts for these investments using the equity method of accounting.
At September 30, 2023, the Company had investments in
2023 Activity - Unconsolidated Affiliates
Alamance Crossing CMBS, LLC
In February 2023, the Company deconsolidated Alamance Crossing East as a result of the Company losing control when the property was placed in receivership. As of September 30, 2023, the loan secured by Alamance Crossing East had an outstanding balance of $
Atlanta Outlet Shoppes CMBS, LLC
Subsequent to September 30, 2023, the joint venture entered into a new $
CBL-TRS Med OFC Holding, LLC
In June 2023, the Company and its joint venture partner in Friendly Center and The Shops at Friendly entered into a new 50/50 joint venture, CBL-TRS Med OFC Holding, LLC, for the purpose of entering into a joint venture, CBL DMC I, LLC, with a third party to develop a medical office building on a parcel of land adjacent to those centers. CBL-TRS Med OFC Holding, LLC contributed the parcel of land valued at $
11
CBL-TRS Joint Venture, LLC
In April 2023, the Company and its joint venture partner entered into a new $
Louisville Outlet Shoppes, LLC
In April 2023, the $
West County Mall CMBS, LLC
In March 2023, the loan secured by West County Mall was extended through December 2024, with one two-year conditional extension available upon meeting certain requirements.
Westgate Mall CMBS, LLC
In September 2023, the Company deconsolidated WestGate Mall as a result of the Company losing control when the property was placed in receivership. As of September 30, 2023, the loan secured by WestGate Mall had an outstanding balance of $
Condensed Combined Financial Statements - Unconsolidated Affiliates
Condensed combined financial statement information of the unconsolidated affiliates is as follows:
|
|
September 30, |
|
|
December 31, |
|
||
ASSETS: |
|
|
|
|
|
|
||
Investment in real estate assets |
|
$ |
|
|
$ |
|
||
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Developments in progress |
|
|
|
|
|
|
||
Net investment in real estate assets |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
LIABILITIES: |
|
|
|
|
|
|
||
Mortgage and other indebtedness, net |
|
$ |
|
|
$ |
|
||
Other liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
OWNERS' EQUITY (DEFICIT): |
|
|
|
|
|
|
||
The Company |
|
|
|
|
|
|
||
Other investors |
|
|
( |
) |
|
|
( |
) |
Total owners' deficit |
|
|
( |
) |
|
|
( |
) |
Total liabilities and owners’ deficit |
|
$ |
|
|
$ |
|
||
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Net income (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Variable Interest Entities
The Operating Partnership and certain of its subsidiaries are deemed to have the characteristics of a VIE primarily because the limited partners of these entities do not collectively possess substantive kick-out or participating rights.
12
The Company consolidates the Operating Partnership, which is a VIE, for which the Company is the primary beneficiary. The Company, through the Operating Partnership, consolidates all VIEs for which it is the primary beneficiary. Generally, a VIE is a legal entity in which the equity investors do not have the characteristics of a controlling financial interest or the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. A limited partnership is considered a VIE when the majority of the limited partners unrelated to the general partner possess neither the right to remove the general partner without cause, nor certain rights to participate in the decisions that most significantly affect the financial results of the partnership. In determining whether the Company is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Company's investment; the obligation or likelihood for the Company or other investors to provide financial support; and the similarity with and significance to the Company's business activities and the business activities of the other investors.
Consolidated VIEs
As of September 30, 2023, the Company had investments in 10 consolidated VIEs with ownership interests ranging from
Unconsolidated VIEs
The table below lists the Company's unconsolidated VIEs as of September 30, 2023:
Unconsolidated VIEs: |
|
Investment in |
|
|
Maximum |
|
||
Alamance Crossing CMBS, LLC (1) |
|
$ |
— |
|
|
$ |
— |
|
Ambassador Infrastructure, LLC (2) |
|
|
— |
|
|
|
|
|
Atlanta Outlet JV, LLC (2)(3) |
|
|
— |
|
|
|
|
|
BI Development, LLC |
|
|
|
|
|
|
||
BI Development II, LLC |
|
|
|
|
|
|
||
CBL-T/C, LLC |
|
|
— |
|
|
|
— |
|
CBL-TRS Med OFC Holding, LLC (4) |
|
|
|
|
|
|
||
El Paso Outlet Center Holding, LLC |
|
|
— |
|
|
|
— |
|
Fremaux Town Center JV, LLC |
|
|
— |
|
|
|
— |
|
Louisville Outlet Shoppes, LLC |
|
|
— |
|
|
|
— |
|
Mall of South Carolina L.P. |
|
|
— |
|
|
|
— |
|
Vision - CBL Hamilton Place, LLC |
|
|
|
|
|
|
||
Vision - CBL Mayfaire TC Hotel, LLC |
|
|
|
|
|
|
||
Westgate Mall CMBS, LLC (5) |
|
|
— |
|
|
|
— |
|
|
|
$ |
|
|
$ |
|
||
Note 9 – Mortgage and Other Indebtedness, Net
CBL has no indebtedness. Either the Operating Partnership or one of its consolidated subsidiaries that it has a direct or indirect ownership interest in are the borrowers on all the Company's debt.
CBL is a limited guarantor of the secured term loan for losses suffered solely by reason of fraud or willful misrepresentation by the Operating Partnership or its affiliates. Subsequent to September 30, 2023, the limited guaranty provided by the Operating Partnership was eliminated and the loan became fully non-recourse. See Note 15 for more information.
13
The Company’s mortgage and other indebtedness, net, consisted of the following:
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
|
Amount |
|
|
Weighted- |
|
|
Amount |
|
|
Weighted- |
|
||||
Fixed-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Open-air centers and outparcels loan (2) |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Non-recourse loans on operating properties |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total fixed-rate debt |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Variable-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Secured term loan (3) |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Open-air centers and outparcels loan (2) |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Non-recourse loans on operating properties |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total variable-rate debt |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total fixed-rate and variable-rate debt |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Unamortized deferred financing costs |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Debt discounts (4) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Total mortgage and other indebtedness, net |
|
$ |
|
|
|
|
|
$ |
|
|
|
|
||||
Non-recourse loans on operating properties, the open-air centers and outparcels loan and the secured term loan include loans that are secured by properties owned by the Company that have a carrying value of $
2023 Loan Activity
In February 2023, the Company exercised its first option to extend the loan secured by Fayette Mall through . The interest rate remains fixed at
In March 2023, the secured term loan was amended to replace LIBOR with the secured overnight financing rate ("SOFR") for purposes of calculating interest. The transition to SOFR is effective as of June 30, 2023. As of the conversion date, the interest rate is SOFR plus the applicable margin (
In April 2023, the Company exercised its extension option on the loan secured by The Outlet Shoppes at Laredo for an extended maturity date of June 2024.
In May 2023, the Operating Partnership entered into an interest rate swap with a notional amount of $
In June 2023, the loan secured by Cross Creek Mall was modified for an extended maturity date of . The interest rate is fixed at
Subsequent to September 30, 2023, the Company exercised the optional
Subsequent to September 30, 2023, the Company and its joint venture partner modified the loan secured by The Outlet Shoppes at Laredo. See Note 15 for more information.
Subsequent to September 30, 2023, the Company modified and extended the loan secured by Volusia Mall. See Note 15 for more information.
14
Scheduled Principal Payments
As of September 30, 2023, the scheduled principal amortization and balloon payments of the Company’s consolidated debt, excluding extensions available at the Company’s option, on all mortgage and other indebtedness, are as follows:
2023 (1) |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
Thereafter |
|
|
|
|
Total mortgage and other indebtedness |
|
$ |
|
Of the $
Interest Rate Hedge Instruments
The Company may use derivative financial instruments, including interest rate swaps, caps, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. The Company does not intend to utilize derivatives for speculative or other purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company and its affiliates may also have other financial relationships. The Company does not anticipate that its counterparty will fail to meet their obligation.
The Company records its derivative instruments in its condensed consolidated balance sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the derivative has been designated as a hedge and, if so, whether the hedge has met the criteria necessary to apply hedge accounting.
The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
The effective portion of changes in the fair value of derivatives designated as, and that qualify as, cash flow hedges is recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Such derivatives were used to hedge the variable cash flows associated with variable-rate debt.
Instrument Type |
|
Location in the Condensed Consolidated Balance Sheet |
|
Notional |
|
|
Index |
|
Fair Value at September 30, 2023 |
|
|
Maturity Date |
||
Pay fixed/Receive variable swap |
|
Intangible lease assets and other assets |
|
$ |
|
|
1-month USD-SOFR CME |
|
$ |
|
|
|||
15
|
|
Gain Recognized in Other Comprehensive Income (Loss) |
|
|
|
|
Gain Recognized in Earnings |
|
||||||||||
|
|
Three Months Ended September 30, |
|
|
|
|
Three Months Ended September 30, |
|
||||||||||
Hedging Instrument |
|
2023 |
|
|
2022 |
|
|
Location of Gain Reclassified from Accumulated Other Comprehensive Income (Loss) into Earnings |
|
2023 |
|
|
2022 |
|
||||
Interest rate swap |
|
$ |
|
|
$ |
— |
|
|
Interest Expense |
|
$ |
|
|
$ |
— |
|
||
|
|
Gain Recognized in Other Comprehensive Income (Loss) |
|
|
|
|
Gain Recognized in Earnings |
|
||||||||||
|
|
Nine Months Ended September 30, |
|
|
|
|
Nine Months Ended September 30, |
|
||||||||||
Hedging Instrument |
|
2023 |
|
|
2022 |
|
|
Location of Gain Reclassified from Accumulated Other Comprehensive Income (Loss) into Earnings |
|
2023 |
|
|
2022 |
|
||||
Interest rate swap |
|
$ |
|
|
$ |
— |
|
|
Interest Expense |
|
$ |
|
|
$ |
— |
|
||
Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that $
The Company has an agreement with each derivative counterparty that contains a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.
As of September 30, 2023, the Company did
Note 10 – Segment Information
The Company measures performance and allocates resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments.
16
Information on the Company’s segments is presented as follows:
|
|
|
|
|
|
|
|
|
|
|||
Three Months Ended September 30, 2023 |
|
Malls (1) |
|
|
All |
|
|
Total |
|
|||
Revenues (3) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Property operating expenses (4) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gain on sales of real estate assets |
|
|
— |
|
|
|
|
|
|
|
||
Segment profit (loss) |
|
$ |
|
|
$ |
( |
) |
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
|
|
( |
) |
||
General and administrative expense |
|
|
|
|
|
|
|
|
( |
) |
||
Litigation settlement |
|
|
|
|
|
|
|
|
|
|||
Interest and other income |
|
|
|
|
|
|
|
|
|
|||
Gain on deconsolidation |
|
|
|
|
|
|
|
|
|
|||
Income tax provision |
|
|
|
|
|
|
|
|
( |
) |
||
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|||
Net income |
|
|
|
|
|
|
|
$ |
|
|||
Capital expenditures (5) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Three Months Ended September 30, 2022 |
|
Malls (1) |
|
|
All |
|
|
Total |
|
|||
Revenues (3) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Property operating expenses (4) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gain on sales of real estate assets |
|
|
— |
|
|
|
|
|
|
|
||
Segment profit |
|
$ |
|
|
$ |
|
|
|
|
|||
Depreciation and amortization |
|
|
|
|
|
|
|
|
( |
) |
||
General and administrative expense |
|
|
|
|
|
|
|
|
( |
) |
||
Litigation settlement |
|
|
|
|
|
|
|
|
|
|||
Interest and other income |
|
|
|
|
|
|
|
|
|
|||
Loss on available-for-sale securities |
|
|
|
|
|
|
|
|
( |
) |
||
Reorganization items, net |
|
|
|
|
|
|
|
|
|
|||
Income tax provision |
|
|
|
|
|
|
|
|
( |
) |
||
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
|
|
|
|
|
|
$ |
( |
) |
||
Capital expenditures (5) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
17
Nine Months Ended September 30, 2023 |
|
Malls (1) |
|
|
All |
|
|
Total |
|
|||
Revenues (3) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Property operating expenses (4) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gain on sales of real estate assets |
|
|
— |
|
|
|
|
|
|
|
||
Other expense |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Segment profit (loss) |
|
$ |
|
|
$ |
( |
) |
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
|
|
( |
) |
||
General and administrative expense |
|
|
|
|
|
|
|
|
( |
) |
||
Litigation settlement |
|
|
|
|
|
|
|
|
|
|||
Interest and other income |
|
|
|
|
|
|
|
|
|
|||
Gain on deconsolidation |
|
|
|
|
|
|
|
|
|
|||
Income tax provision |
|
|
|
|
|
|
|
|
( |
) |
||
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
|
|
|
|
|
|
$ |
( |
) |
||
Capital expenditures (5) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Nine Months Ended September 30, 2022 |
|
Malls (1) |
|
|
All |
|
|
Total |
|
|||
Revenues (3) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Property operating expenses (4) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gain on sales of real estate assets |
|
|
— |
|
|
|
|
|
|
|
||
Other expense |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Segment profit (loss) |
|
$ |
|
|
$ |
( |
) |
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
|
|
( |
) |
||
General and administrative expense |
|
|
|
|
|
|
|
|
( |
) |
||
Litigation settlement |
|
|
|
|
|
|
|
|
|
|||
Interest and other income |
|
|
|
|
|
|
|
|
|
|||
Loss on available-for-sale securities |
|
|
|
|
|
|
|
|
( |
) |
||
Reorganization items, net |
|
|
|
|
|
|
|
|
|
|||
Loss on impairment |
|
|
|
|
|
|
|
|
( |
) |
||
Gain on deconsolidation |
|
|
|
|
|
|
|
|
|
|||
Income tax provision |
|
|
|
|
|
|
|
|
( |
) |
||
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|||
Net loss |
|
|
|
|
|
|
|
$ |
( |
) |
||
Capital expenditures (5) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Total assets |
|
Malls (1) |
|
|
All |
|
|
Total |
|
|||
September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
December 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Earnings per share ("EPS") is calculated under the two-class method. Under the two-class method, all earnings (distributed and undistributed) are allocated to common stock and participating securities. The Company grants restricted stock awards to certain employees under its share-based compensation program, which entitle recipients to receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. These unvested restricted stock awards meet the definition of participating securities based on their respective rights to receive nonforfeitable dividends.
18
Diluted EPS incorporates the potential impact of contingently issuable shares. Diluted EPS is calculated under both the two-class and treasury stock methods, and the more dilutive amount is reported. Performance stock units ("PSUs") and unvested restricted stock awards are contingently issuable common shares and are included in diluted EPS if the effect is dilutive.
The following table presents the calculation of basic and diluted EPS (in thousands, except per share amounts):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Basic earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to the Company |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Less: Earnings allocable to unvested restricted stock |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net income (loss) attributable to common shareholders |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Weighted-average basic shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per share attributable to common shareholders |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted earnings per share (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) attributable to common shareholders |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Weighted-average diluted shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per share attributable to common shareholders |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
Note 12 – Contingencies
Securities Litigation
The Company and certain of its officers and directors were named as defendants in three putative securities class action lawsuits (collectively, the “Securities Class Action Litigation”), each filed in the United States District Court for the Eastern District of Tennessee, on behalf of all persons who purchased or otherwise acquired the Company’s securities during a specified period of time. Those cases were consolidated on July 17, 2019, under the caption In re CBL & Associates Properties, Inc. Securities Litigation, 1:19-cv-00149-JRG-CHS, and a consolidated amended complaint was filed on November 5, 2019, seeking to represent a class of purchasers from July 29, 2014 through March 26, 2019.
The operative complaint filed in the Securities Class Action Litigation alleged violations of the securities laws, including, among other things, that the defendants made certain materially false and misleading statements and omissions regarding the Company’s contingent liabilities, business, operations, and prospects during the period of time specified above. On May 3, 2022, the court dismissed the Company from the Securities Class Action Litigation but declined to dismiss the individual defendants. The court also lifted the stay of the proceedings and, on June 9, 2022, entered a scheduling order. Plaintiffs’ motion for class certification, which was opposed, was fully briefed and pending as of December 31, 2022. Following mediation on January 31, 2023, before a private mediator, the parties reached an agreement in principle to resolve the Securities Class Action Litigation, subject to documentation and court approval. On April 24, 2023, the court entered an order preliminarily approving the proposed settlement, subject to a final fairness hearing in August 2023. On August 23, 2023, after conducting a final fairness hearing, the court entered an order granting final approval of the settlement. The deadline to appeal the order granting final approval of the settlement has expired and the settlement is final. The settlement was fully funded by directors and officers' liability insurance, with no contribution from the Company or the individual defendants. By agreeing to resolve the matter, neither the Company nor any of the individual defendants have admitted any liability or wrongdoing, and they have expressly denied both. Rather, defendants entered into the settlement to eliminate the risks, costs, and distractions associated with further litigation of this matter.
19
On January 12, 2023, a purported shareholder filed a putative class action lawsuit captioned John Haynes v. Charles B. Lebovitz, et al., C.A. No. 2023-0033-NAC, in the Delaware Court of Chancery (the “Delaware Action”), naming the Company and certain directors as defendants. The Delaware Action alleged a claim against the Company for violation of Delaware General Corporation Law § 213(a) due to an improper record date for the 2022 annual meeting, and a claim for breach of fiduciary duty against the director defendants. The Delaware Action sought, among other things, a declaration that the directors breached their fiduciary duties, an equitable accounting, unspecified monetary relief, and attorneys’ fees. Defendants denied that any such relief was warranted, and on February 15, 2023, the Delaware Action was voluntarily dismissed.
The Company is currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Company records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Company accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Company discloses the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Company.
Environmental Contingencies
The Company evaluates potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Company believes its maximum potential exposure to loss would not be material to its results of operations or financial condition. The Company has a master insurance policy that provides coverage through 2027 for certain environmental claims up to $
Guarantees
The Operating Partnership may guarantee the debt of a joint venture primarily because it allows the joint venture to obtain funding at a lower cost than could be obtained otherwise. This results in a higher return for the joint venture on its investment, and a higher return on the Operating Partnership's investment in the joint venture. The Operating Partnership may receive a fee from the joint venture for providing the guaranty. Additionally, when the Operating Partnership issues a guaranty, the terms of the joint venture agreement typically provide that the Operating Partnership may receive indemnification from the joint venture partner or have the ability to increase its ownership interest. The guarantees expire upon repayment of the debt, unless noted otherwise.
20
The following table represents the Operating Partnership's guarantees of unconsolidated affiliates' debt as reflected in the accompanying condensed consolidated balance sheets as of September 30, 2023 and December 31, 2022:
|
|
As of September 30, 2023 |
|
Obligation |
|
|||||||||||||||||
Unconsolidated Affiliate |
|
Company's |
|
Outstanding |
|
|
Percentage |
|
Maximum |
|
|
Debt |
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||
West Melbourne I, LLC - Phase I |
|
|
$ |
|
|
|
$ |
|
|
Feb-2025 |
(2) |
$ |
|
|
$ |
|
||||||
West Melbourne I, LLC - Phase II |
|
|
|
|
|
|
|
|
|
Feb-2025 |
(2) |
|
|
|
|
|
||||||
Port Orange I, LLC |
|
|
|
|
|
|
|
|
|
Feb-2025 |
(2) |
|
|
|
|
|
||||||
Ambassador Infrastructure, LLC |
|
|
|
|
|
|
|
|
|
Mar-2025 |
|
|
|
|
|
|
||||||
CBL-TRS Med OFC Holding, LLC (3) |
|
|
|
— |
|
|
|
|
|
|
Jun-2030 |
|
|
|
|
|
— |
|
||||
Atlanta Outlet JV, LLC (4) |
|
|
|
|
|
|
|
|
|
Nov-2023 |
|
|
— |
|
|
|
— |
|
||||
Total guaranty liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
For the three and nine months ended September 30, 2023 and 2022, the Company evaluated each guaranty, listed in the table above, individually by evaluating the debt service ratio, cash flow forecasts and the performance of each loan, where applicable. The result of the analysis was that each loan is current and performing. The Company did not record a credit loss related to the guarantees listed in the table above for the three or nine months ended September 30, 2023 and 2022.
Restricted Stock Awards
Compensation expense is recognized on a straight-line basis over the requisite service period. The share-based compensation expense related to restricted stock awards granted under the CBL & Associates Properties, Inc. 2021 Equity Incentive Plan ("EIP") was $
A summary of the status of the Company’s nonvested restricted stock awards as of September 30, 2023, and changes during the nine months ended September 30, 2023, are presented below:
|
|
Shares |
|
|
Weighted- |
|
||
Nonvested at January 1, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Nonvested at September 30, 2023 |
|
|
|
|
$ |
|
||
The total grant-date fair value of restricted stock awards granted during the nine months ended September 30, 2023 was $
21
Performance Stock Awards
In February 2023, the compensation committee of the board of directors established a long-term incentive program (“LTIP”) under the EIP and approved 2023 LTIP awards consisting of both a PSU component (
Compensation cost for the PSUs granted in February 2023 is recognized on a straight-line basis over the service period since it is longer than the performance period. The resulting expense is recorded regardless of whether any PSU awards are earned as long as the required service period is met. For the PSUs granted in February 2022, each quarter, management assesses the probability that the measures associated with the Company's outstanding PSU awards will be attained. The Company begins recognizing compensation expense on a straight-line basis over the remaining service period once the PSU award measures are deemed probable of achievement. See Note 16 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for a description of the PSUs granted in February 2022. Share-based compensation expense related to the 2022 and 2023 PSUs granted under the EIP was $
A summary of the status of the Company’s outstanding 2022 and 2023 PSU awards as of September 30, 2023, and changes during the nine months ended September 30, 2023, are presented below:
|
|
PSUs |
|
|
Weighted- |
|
||
Outstanding at January 1, 2023 |
|
|
|
|
$ |
|
||
2023 PSUs granted |
|
|
|
|
$ |
|
||
Incremental PSUs granted (1) |
|
|
|
|
$ |
|
||
Forfeited |
|
|
( |
) |
|
$ |
|
|
Outstanding at September 30, 2023 |
|
|
|
|
$ |
|
||
The total grant-date fair value of PSU awards granted during the nine months ended September 30, 2023 was $
22
The following table summarizes the assumptions used in the Monte Carlo simulation pricing model related to the PSUs granted in 2023:
|
|
2023 PSUs |
|
|
Grant date |
|
February 17, 2023 |
|
|
Fair value per share on valuation date (1) |
|
$ |
|
|
Risk-free interest rate (2) |
|
|
% |
|
Expected share price volatility (3) |
|
|
% |
|
Note 14 – Noncash Investing and Financing Activities
The Company’s noncash investing and financing activities were as follows:
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Additions to real estate assets accrued but not yet paid |
|
$ |
|
|
$ |
|
||
Deconsolidation upon loss of control (1): |
|
|
|
|
|
|
||
Decrease in real estate assets |
|
|
( |
) |
|
|
( |
) |
Decrease in mortgage and other indebtedness |
|
|
|
|
|
|
||
Decrease in operating assets and liabilities |
|
|
|
|
|
|
||
Decrease in intangible lease and other assets |
|
|
( |
) |
|
|
( |
) |
Note 15 – Subsequent Events
In October 2023, the loans secured by The Outlet Shoppes at Atlanta was paid off using proceeds from a new $
In October 2023, the Company paid down $
In October 2023, the Company and its joint venture partner modified the loan secured by The Outlet Shoppes at Laredo. The principal balance was reduced to $
On November 2, 2023, due to the debt yield ratio being greater than
In November 2023, the Company closed on a loan modification with the existing lender to extend the loan secured by Volusia Mall. Escrow balances will be applied to pay down the principal amount by $
23
ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and accompanying notes that are included in this Form 10-Q. Capitalized terms used, but not defined, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations have the same meanings as defined in the notes to the condensed consolidated financial statements. Unless stated otherwise or the context otherwise requires, references to the “Company,” “we,” “us” and “our” mean CBL & Associates Properties, Inc. and its subsidiaries.
Certain statements made in this section or elsewhere in this report may be deemed “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical fact should be considered to be forward-looking statements. In many cases, these forward-looking statements may be identified by the use of words such as “will,” “may,” “should,” “could,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “projects,” “goals,” “objectives,” “targets,” “predicts,” “plans,” “seeks,” and variations of these words and similar expressions. Any forward-looking statement speaks only as of the date on which it is made and is qualified in its entirety by reference to the factors discussed throughout this report.
Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance or results and we can give no assurance that these expectations will be attained. It is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of known and unknown risks and uncertainties. In addition to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022, such known risks and uncertainties include, without limitation:
This list of risks and uncertainties is only a summary and is not intended to be exhaustive. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information.
24
Executive Overview
We are a self-managed, self-administered, fully integrated REIT that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, outlet centers, lifestyle centers, open-air centers and other properties. See Note 1 to the condensed consolidated financial statements for information on our property interests as of September 30, 2023. We have elected to be taxed as a REIT for federal income tax purposes.
Occupancy improvements contributed to same-center NOI growth in the third quarter of 2023. We maintained a high volume of leasing in the third quarter and new lease spreads increased more than 25%. While renewal spreads were negative for the quarter, this was driven by a subset of portfolio renewal packages with certain underperforming tenants. The combination of rising occupancy and strong leasing demand positions us to more readily replace underperforming tenants going forward.
Considering loan activity that occurred subsequent to September 30, 2023, we have fully addressed all 2023 loan maturities. We also began executing our stock repurchase program during the quarter.
The following summarizes our net income (loss) and net income (loss) attributable to common shareholders (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net income (loss) |
|
$ |
12,875 |
|
|
$ |
(17,412 |
) |
|
$ |
(9,274 |
) |
|
$ |
(104,440 |
) |
Net income (loss) attributable to common shareholders |
|
$ |
12,957 |
|
|
$ |
(14,510 |
) |
|
$ |
(6,104 |
) |
|
$ |
(96,830 |
) |
Significant items that affected comparability between the three-month periods include:
Significant items that affected comparability between the nine-month periods include:
Our focus is on continuing to execute our strategy to improve occupancy, drive rent growth and transform the offerings available at our diverse portfolio of properties to include a targeted mix of retail, service, dining, entertainment and other non-retail uses, primarily through the re-tenanting of former anchor locations as well as diversification of in-line tenancy. This operational strategy is also supported by our balance sheet strategy. This strategy focuses on reducing overall debt, extending our debt maturity schedule and lowering our overall cost of borrowings to limit maturity risk, as well as improving net cash flow and enhancing enterprise value. While the industry and our Company continue to face challenges, some of which may not be in our control, we believe that the strategies in place to redevelop our properties, improve occupancy and diversify our tenant mix will contribute to stabilization of our portfolio and revenues in future years.
25
Same-center NOI and FFO are non-GAAP measures. For a description of same-center NOI, a reconciliation from net income (loss) to same-center NOI, and an explanation of why we believe this is a useful performance measure, see Non-GAAP Measure - Same-center Net Operating Income in Results of Operations. For a description of FFO, a reconciliation from net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders, and an explanation of why we believe this is a useful performance measure, see Non-GAAP Measure - Funds from Operations.
Results of Operations
Properties that were in operation for the entire year during 2022 and the nine months ended September 30, 2023 are referred to as the "Comparable Properties." Since January 2022, we have deconsolidated:
Deconsolidations
Property |
|
Location |
|
Date of Deconsolidation |
Greenbrier Mall (1)(2) |
|
Chesapeake, VA |
|
March 2022 |
Alamance Crossing East (1) |
|
Burlington, NC |
|
February 2023 |
WestGate Mall (1) |
|
Spartanburg, SC |
|
September 2023 |
Comparison of the Three Months Ended September 30, 2023 to the Three Months Ended September 30, 2022
Revenues
|
|
Three Months Ended September 30, |
|
|
|
|
|
Comparable |
|
|
|
|
|
|
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
Core |
|
|
Non-core |
|
|
Deconsolidation |
|
|
Dispositions |
|
|||||||
Rental revenues |
|
$ |
124,783 |
|
|
$ |
131,642 |
|
|
$ |
(6,859 |
) |
|
$ |
(4,299 |
) |
|
$ |
17 |
|
|
$ |
(2,451 |
) |
|
$ |
(126 |
) |
Management, development and leasing fees |
|
|
1,840 |
|
|
|
1,783 |
|
|
|
57 |
|
|
|
57 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other |
|
|
2,728 |
|
|
|
2,855 |
|
|
|
(127 |
) |
|
|
(75 |
) |
|
|
(2 |
) |
|
|
(50 |
) |
|
|
— |
|
Total revenues |
|
$ |
129,351 |
|
|
$ |
136,280 |
|
|
$ |
(6,929 |
) |
|
$ |
(4,317 |
) |
|
$ |
15 |
|
|
$ |
(2,501 |
) |
|
$ |
(126 |
) |
Rental revenues from the Comparable Properties decreased primarily due to lower percentage rents and an unfavorable variance in the estimate for uncollectable revenues as compared to the prior-year period.
Operating Expenses
|
|
Three Months Ended September 30, |
|
|
|
|
|
Comparable |
|
|
|
|
|
|
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
Core |
|
|
Non-core |
|
|
Deconsolidation |
|
|
Dispositions |
|
|||||||
Property operating |
|
$ |
(22,621 |
) |
|
$ |
(24,390 |
) |
|
$ |
1,769 |
|
|
$ |
1,504 |
|
|
$ |
(36 |
) |
|
$ |
316 |
|
|
$ |
(15 |
) |
Real estate taxes |
|
|
(13,794 |
) |
|
|
(13,880 |
) |
|
|
86 |
|
|
|
(151 |
) |
|
|
(5 |
) |
|
|
227 |
|
|
|
15 |
|
Maintenance and repairs |
|
|
(8,487 |
) |
|
|
(10,272 |
) |
|
|
1,785 |
|
|
|
1,601 |
|
|
|
3 |
|
|
|
176 |
|
|
|
5 |
|
Property operating expenses |
|
|
(44,902 |
) |
|
|
(48,542 |
) |
|
|
3,640 |
|
|
|
2,954 |
|
|
|
(38 |
) |
|
|
719 |
|
|
|
5 |
|
Depreciation and amortization |
|
|
(45,118 |
) |
|
|
(61,050 |
) |
|
|
15,932 |
|
|
|
15,107 |
|
|
|
(66 |
) |
|
|
891 |
|
|
|
— |
|
General and administrative |
|
|
(14,398 |
) |
|
|
(14,625 |
) |
|
|
227 |
|
|
|
227 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Litigation settlement |
|
|
2,060 |
|
|
|
36 |
|
|
|
2,024 |
|
|
|
2,024 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total operating expenses |
|
$ |
(102,358 |
) |
|
$ |
(124,181 |
) |
|
$ |
21,823 |
|
|
$ |
20,312 |
|
|
$ |
(104 |
) |
|
$ |
1,610 |
|
|
$ |
5 |
|
Total property operating expenses at the Comparable Properties decreased primarily due to lower utility, janitorial and security costs.
Depreciation and amortization expense at the Comparable Properties decreased primarily due to assets becoming fully depreciated or amortized since the prior-year period related to the shorter useful lives that were implemented upon the adoption of fresh start accounting when we emerged from bankruptcy.
Litigation settlement expense decreased during the three months ended September 30, 2023 as compared to the prior-year period. The decrease results from a revision to the estimate of amounts to be paid out under the terms of the class action settlement agreement that was executed in 2019.
26
Other Income and Expenses
Interest and other income increased $3.5 million during the three months ended September 30, 2023 as compared to the prior-year period. The increase was primarily due to holding U.S. Treasury securities that carry higher interest rates in the current-year period.
Interest expense increased $5.2 million during the three months ended September 30, 2023 as compared to the prior-year period. The increase in interest expense was primarily driven by $7.2 million in the current period related to the term loan and open-air centers and outparcels loan due to increased variable rates. The increase in interest expense was partially offset by a $3.8 million decrease in the current period related to less accretion on property level debt discounts as certain discounts became fully accreted since the prior year period.
For the three months ended September 30, 2023, we recorded a $19.7 million gain on deconsolidation related to WestGate Mall that was deconsolidated due to a loss of control when the mall was placed into receivership in connection with the foreclosure process.
Equity in earnings of unconsolidated affiliates decreased $2.4 million for the three months ended September 30, 2023 as compared to the prior-year period. The decrease primarily relates to a decline in distributions as compared to the prior-year period attributable to certain investments in unconsolidated affiliates in which our investment is below zero.
Comparison of the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Nine Months Ended September 30, |
|
|
|
|
|
Comparable |
|
|
|
|
|
|
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
Core |
|
|
Non-core |
|
|
Deconsolidation |
|
|
Dispositions |
|
|||||||
Rental revenues |
|
$ |
379,949 |
|
|
$ |
398,806 |
|
|
$ |
(18,857 |
) |
|
$ |
(12,623 |
) |
|
$ |
17 |
|
|
$ |
(6,188 |
) |
|
$ |
(63 |
) |
Management, development and leasing fees |
|
|
6,096 |
|
|
|
5,338 |
|
|
|
758 |
|
|
|
758 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other |
|
|
9,532 |
|
|
|
9,256 |
|
|
|
276 |
|
|
|
447 |
|
|
|
(2 |
) |
|
|
(164 |
) |
|
|
(5 |
) |
Total revenues |
|
$ |
395,577 |
|
|
$ |
413,400 |
|
|
$ |
(17,823 |
) |
|
$ |
(11,418 |
) |
|
$ |
15 |
|
|
$ |
(6,352 |
) |
|
$ |
(68 |
) |
Rental revenues from the Comparable Properties decreased primarily due to lower percentage rents and an unfavorable variance in the estimate for uncollectable revenues as compared to the prior-year period.
Operating Expenses
|
|
Nine Months Ended September 30, |
|
|
|
|
|
Comparable |
|
|
|
|
|
|
|
|||||||||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
Core |
|
|
Non-core |
|
|
Deconsolidation |
|
|
Dispositions |
|
|||||||
Property operating |
|
$ |
(68,742 |
) |
|
$ |
(69,046 |
) |
|
$ |
304 |
|
|
$ |
(823 |
) |
|
$ |
(13 |
) |
|
$ |
1,096 |
|
|
$ |
44 |
|
Real estate taxes |
|
|
(43,063 |
) |
|
|
(42,569 |
) |
|
|
(494 |
) |
|
|
(908 |
) |
|
|
(127 |
) |
|
|
517 |
|
|
|
24 |
|
Maintenance and repairs |
|
|
(30,002 |
) |
|
|
(31,068 |
) |
|
|
1,066 |
|
|
|
570 |
|
|
|
(18 |
) |
|
|
511 |
|
|
|
3 |
|
Property operating expenses |
|
|
(141,807 |
) |
|
|
(142,683 |
) |
|
|
876 |
|
|
|
(1,161 |
) |
|
|
(158 |
) |
|
|
2,124 |
|
|
|
71 |
|
Depreciation and amortization |
|
|
(148,129 |
) |
|
|
(194,469 |
) |
|
|
46,340 |
|
|
|
44,197 |
|
|
|
(252 |
) |
|
|
2,408 |
|
|
|
(13 |
) |
General and administrative |
|
|
(49,783 |
) |
|
|
(51,149 |
) |
|
|
1,366 |
|
|
|
1,366 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Loss on impairment |
|
|
— |
|
|
|
(252 |
) |
|
|
252 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
252 |
|
Litigation settlement |
|
|
2,178 |
|
|
|
182 |
|
|
|
1,996 |
|
|
|
1,996 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other |
|
|
(198 |
) |
|
|
(834 |
) |
|
|
636 |
|
|
|
636 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total operating expenses |
|
$ |
(337,739 |
) |
|
$ |
(389,205 |
) |
|
$ |
51,466 |
|
|
$ |
47,034 |
|
|
$ |
(410 |
) |
|
$ |
4,532 |
|
|
$ |
310 |
|
Total property operating expenses at the Comparable Properties increased primarily due to the completion of previously delayed maintenance projects and the timing of certain third-party contracts. The increase was partially offset by lower utility, janitorial and security costs.
Depreciation and amortization expense at the Comparable Properties decreased primarily due to assets becoming fully depreciated or amortized since the prior-year period related to the shorter useful lives that were implemented upon the adoption of fresh start accounting when we emerged from bankruptcy.
General and administrative expenses decreased primarily due to professional fees associated with loan modifications and extensions, and fees incurred to obtain credit ratings on our secured term loan in the prior-year period. The decrease was partially offset by higher compensation and share-based compensation expenses as compared to the prior-year period.
Litigation settlement expense decreased during the nine months ended September 30, 2023 as compared to the prior-year period. The decrease results from a revision to the estimate of amounts to be paid out under the terms of the class action settlement agreement that was executed in 2019.
27
Other Income and Expenses
Interest and other income increased $8.0 million during the nine months ended September 30, 2023 as compared to the prior-year period. The increase was primarily due to holding U.S. Treasury securities that carry higher interest rates in the current-year period.
Interest expense decreased $52.8 million during the nine months ended September 30, 2023 as compared to the prior-year period. The decrease was primarily due to $84.2 million less accretion of property-level debt discounts as certain discounts became fully accreted since the prior-year period. The property-level debt discounts were recognized in conjunction with recording our property-level debt at fair value upon the adoption of fresh start accounting. Also, the decrease includes $17.3 million of interest expense in the prior-year period on the secured notes that were fully redeemed in 2022. The decrease in interest expense was partially offset by an increase of $34.5 million in the current period related to the open-air centers and outparcels loan that was entered into during the second quarter of 2022 and higher interest expense on the term loan due to increased variable rates.
For the nine months ended September 30, 2023, we recorded a $47.9 million gain on deconsolidation related to Alamance Crossing East and WestGate Mall. These properties were deconsolidated due to a loss of control when the malls were placed into receivership in connection with the foreclosure process. For the nine months ended September 30, 2022, we recorded a $36.3 million gain on deconsolidation related to Greenbrier Mall that was deconsolidated due to a loss of control when the mall was placed into receivership in connection with the foreclosure process.
Equity in earnings of unconsolidated affiliates decreased $13.5 million for the nine months ended September 30, 2023 as compared to the prior-year period. The decrease primarily relates to an increase in contributions made by us during the current-year period and a decline in distributions as compared to the prior-year period attributable to certain investments in unconsolidated affiliates in which our investment is below zero.
Non-GAAP Measure
Same-center Net Operating Income
NOI is a supplemental non-GAAP measure of the operating performance of our shopping centers and other properties. We define NOI as property operating revenues (rental revenues and other income) less property operating expenses (property operating, real estate taxes and maintenance and repairs).
We compute NOI based on the Operating Partnership's pro rata share of both consolidated and unconsolidated properties. We believe that presenting NOI and same-center NOI (described below) based on our Operating Partnership’s pro rata share of both consolidated and unconsolidated properties is useful since we conduct substantially all our business through our Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of our common shareholders and the noncontrolling interest in the Operating Partnership. Our definition of NOI may be different than that used by other companies, and accordingly, our calculation of NOI may not be comparable to that of other companies.
Since NOI includes only those revenues and expenses related to the operations of our shopping center properties, we believe that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates, sales at our properties and operating costs and the impact of those trends on our results of operations. Our calculation of same-center NOI excludes lease termination income, straight-line rent adjustments, amortization of above and below market lease intangibles and write-offs of landlord inducement assets in order to enhance the comparability of results from one period to another.
We include a property in our same-center pool when we have owned all or a portion of the property since January 1 of the preceding calendar year and it has been in operation for both the entire preceding calendar year and current year-to-date period. New properties are excluded from same-center NOI until they meet these criteria. Properties excluded from the same-center pool that would otherwise meet these criteria are categorized as excluded properties. We exclude properties for which we are working or intend to work with the lender on a restructure of the terms of the loan secured by the property or convey the secured property to the lender (“Excluded Properties”). As of September 30, 2023, Alamance Crossing East and WestGate Mall were classified as Excluded Properties.
Due to the exclusions noted above, same-center NOI should only be used as a supplemental measure of our performance and not as an alternative to GAAP operating income (loss) or net income (loss).
28
A reconciliation of our same-center NOI to net income (loss) for the three- and nine-month periods ended September 30, 2023 and 2022 is as follows (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net income (loss) |
|
$ |
12,875 |
|
|
$ |
(17,412 |
) |
|
$ |
(9,274 |
) |
|
$ |
(104,440 |
) |
Adjustments: (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
48,748 |
|
|
|
63,886 |
|
|
|
159,457 |
|
|
|
212,807 |
|
Interest expense |
|
|
59,843 |
|
|
|
60,261 |
|
|
|
179,635 |
|
|
|
241,099 |
|
Abandoned projects expense |
|
|
— |
|
|
|
— |
|
|
|
17 |
|
|
|
834 |
|
Gain on sales of real estate assets, net of taxes and noncontrolling interests' share |
|
|
(3,073 |
) |
|
|
(3,528 |
) |
|
|
(4,610 |
) |
|
|
(3,547 |
) |
Gain on sales of real estate assets of unconsolidated affiliates |
|
|
— |
|
|
|
(33 |
) |
|
|
(768 |
) |
|
|
(662 |
) |
Adjustment for unconsolidated affiliates with negative investment |
|
|
(3,659 |
) |
|
|
(13,116 |
) |
|
|
(1,180 |
) |
|
|
(36,123 |
) |
Gain on deconsolidation |
|
|
(19,728 |
) |
|
|
— |
|
|
|
(47,879 |
) |
|
|
(36,250 |
) |
Loss on available-for-sale securities |
|
|
— |
|
|
|
39 |
|
|
|
— |
|
|
|
39 |
|
Loss on impairment, net of taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
186 |
|
Litigation settlement |
|
|
(2,060 |
) |
|
|
(36 |
) |
|
|
(2,178 |
) |
|
|
(182 |
) |
Reorganization items, net |
|
|
— |
|
|
|
(1,220 |
) |
|
|
— |
|
|
|
(262 |
) |
Income tax provision |
|
|
1,263 |
|
|
|
2,422 |
|
|
|
1,381 |
|
|
|
2,751 |
|
Lease termination fees |
|
|
(127 |
) |
|
|
(1,572 |
) |
|
|
(2,081 |
) |
|
|
(4,020 |
) |
Straight-line rent and above- and below-market lease amortization |
|
|
2,612 |
|
|
|
3,380 |
|
|
|
9,702 |
|
|
|
7,087 |
|
Net loss attributable to noncontrolling interests in other consolidated subsidiaries |
|
|
381 |
|
|
|
3,143 |
|
|
|
4,001 |
|
|
|
8,002 |
|
General and administrative expenses |
|
|
14,398 |
|
|
|
14,625 |
|
|
|
49,783 |
|
|
|
51,149 |
|
Management fees and non-property level revenues |
|
|
(4,709 |
) |
|
|
(683 |
) |
|
|
(14,727 |
) |
|
|
(1,732 |
) |
Operating Partnership's share of property NOI |
|
|
106,764 |
|
|
|
110,156 |
|
|
|
321,279 |
|
|
|
336,736 |
|
Non-comparable NOI |
|
|
(315 |
) |
|
|
(4,083 |
) |
|
|
(2,233 |
) |
|
|
(12,261 |
) |
Total same-center NOI |
|
$ |
106,449 |
|
|
$ |
106,073 |
|
|
$ |
319,046 |
|
|
$ |
324,475 |
|
Same-center NOI increased 0.4% for the three months ended September 30, 2023 as compared to the prior-year period. The $0.4 million increase for the three months ended September 30, 2023 compared to the same period in 2022 primarily consisted of a $3.2 million decrease in revenues offset by a $3.6 million decrease in operating expenses. Rental revenues were $3.1 million lower primarily due to decreased percentage rents and an unfavorable variance in the estimate for uncollectable revenues in the current-year period as compared to the prior-year period. Property operating expenses decreased in the current-year period primarily due to lower utility, janitorial and security costs.
Same-center NOI decreased 1.7% for the nine months ended September 30, 2023 as compared to the prior-year period. The $5.4 million decrease for the nine months ended September 30, 2023 compared to the same period in 2022 primarily consisted of a $5.3 million decrease in revenues and a $0.1 million increase in operating expenses. Rental revenues were $6.1 million lower primarily due to decreased percentage rents and an unfavorable variance in the estimate for uncollectable revenues in the current-year period as compared to the prior-year period. Property operating expenses increased primarily due to the completion of previously delayed maintenance projects and the timing of certain third-party contracts, which was partially offset by lower utility, janitorial and security costs.
Operational Review
The shopping center business is, to some extent, seasonal in nature with tenants typically achieving the highest levels of sales during the fourth quarter due to the holiday season, which generally results in higher percentage rents in the fourth quarter. Additionally, malls, lifestyle centers and outlet centers earn a large portion of their rents from short-term tenants during the holiday period. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year.
We derive the majority of our revenues from the malls, lifestyle centers and outlet centers. The sources of our revenues by property type were as follows:
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Malls, Lifestyle Centers and Outlet Centers |
|
|
85.1 |
% |
|
|
85.9 |
% |
All Other |
|
|
14.9 |
% |
|
|
14.1 |
% |
29
Inline and Adjacent Freestanding Tenant Store Sales
Inline and adjacent freestanding tenant store sales include reporting mall, lifestyle center and outlet center tenants of 10,000 square feet or less and exclude license agreements, which are retail leases that are temporary or short-term in nature and generally last more than three months but less than twelve months. The following is a comparison of our same-center tenant sales per square foot for mall, lifestyle center and outlet center tenants of 10,000 square feet or less (Excluded Properties are not included in sales metrics):
|
|
Sales Per Square Foot for the Trailing Twelve Months Ended September 30, |
|
|
|
|||||
|
|
2023 |
|
|
2022 |
|
|
% Change |
||
Mall, Lifestyle Center and Outlet Center same-center sales per square foot |
|
$ |
420 |
|
|
$ |
440 |
|
|
(4.5)% |
Occupancy
Our portfolio occupancy is summarized in the following table (Excluded Properties are not included in occupancy metrics):
|
|
As of September 30, |
||
|
|
2023 |
|
2022 |
Total portfolio |
|
90.8% |
|
90.5% |
Malls, Lifestyle Centers and Outlet Centers: |
|
|
|
|
Total malls |
|
89.2% |
|
88.7% |
Total lifestyle centers |
|
92.6% |
|
90.6% |
Total outlet centers |
|
90.3% |
|
90.9% |
Total same-center malls, lifestyle centers and outlet centers |
|
89.7% |
|
89.1% |
All Other: |
|
|
|
|
Total open-air centers |
|
95.0% |
|
94.7% |
Total other |
|
82.5% |
|
93.0% |
Leasing
The following is a summary of the total square feet of leases signed in the three- and nine-month periods ended September 30, 2023 and 2022:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Operating portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
New leases |
|
|
749,615 |
|
|
|
272,462 |
|
|
|
1,324,809 |
|
|
|
903,104 |
|
Renewal leases |
|
|
194,589 |
|
|
|
608,551 |
|
|
|
1,769,116 |
|
|
|
2,058,920 |
|
Development portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
New leases |
|
|
25,151 |
|
|
|
15,703 |
|
|
|
25,151 |
|
|
|
15,703 |
|
Total leased |
|
|
969,355 |
|
|
|
896,716 |
|
|
|
3,119,076 |
|
|
|
2,977,727 |
|
30
Average annual base rents per square foot are based on contractual rents in effect as of September 30, 2023 and 2022, including the impact of any rent concessions. Average annual base rents per square foot for comparable small shop space of less than 10,000 square feet were as follows for each property type:
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Total portfolio (1) |
|
$ |
25.46 |
|
|
$ |
25.09 |
|
Malls, Lifestyle Centers and Outlet Centers: |
|
|
|
|
|
|
||
Total same-center malls, lifestyle centers and outlet centers |
|
|
30.14 |
|
|
|
29.55 |
|
Total malls |
|
|
30.47 |
|
|
|
30.11 |
|
Total lifestyle centers |
|
|
30.07 |
|
|
|
28.49 |
|
Total outlet centers |
|
|
27.79 |
|
|
|
26.45 |
|
All Other: |
|
|
|
|
|
|
||
Total open-air centers |
|
|
15.14 |
|
|
|
15.15 |
|
Total other |
|
|
18.76 |
|
|
|
19.18 |
|
Results from new and renewal leasing of comparable small shop space of less than 10,000 square feet during the three- and nine-month period ended September 30, 2023 for spaces that were previously occupied, based on the contractual terms of the related leases inclusive of the impact of any rent concessions, are as follows:
Property Type |
|
Square |
|
|
Prior Gross |
|
|
New Initial |
|
|
% Change |
|
|
New Average |
|
|
% Change |
|
||||||
Three Months Ended September 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
All Property Types (2) |
|
|
691,476 |
|
|
$ |
44.46 |
|
|
|
42.22 |
|
|
|
(5.0 |
)% |
|
$ |
42.69 |
|
|
|
(4.0 |
)% |
Malls, Lifestyle Centers & Outlet Centers |
|
|
639,399 |
|
|
|
46.17 |
|
|
|
43.59 |
|
|
|
(5.6 |
)% |
|
|
44.04 |
|
|
|
(4.6 |
)% |
New leases |
|
|
31,030 |
|
|
|
54.53 |
|
|
|
65.41 |
|
|
|
20.0 |
% |
|
|
69.18 |
|
|
|
26.9 |
% |
Renewal leases |
|
|
608,369 |
|
|
|
45.74 |
|
|
|
42.48 |
|
|
|
(7.1 |
)% |
|
|
42.76 |
|
|
|
(6.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Nine Months Ended September 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
All Property Types (2) |
|
|
1,839,287 |
|
|
$ |
38.72 |
|
|
|
38.55 |
|
|
|
(0.4 |
)% |
|
$ |
39.17 |
|
|
|
1.2 |
% |
Malls, Lifestyle Centers & Outlet Centers |
|
|
1,680,123 |
|
|
|
40.22 |
|
|
|
39.59 |
|
|
|
(1.6 |
)% |
|
|
40.21 |
|
|
|
(0.0 |
)% |
New leases |
|
|
113,444 |
|
|
|
41.18 |
|
|
|
48.99 |
|
|
|
19.0 |
% |
|
|
51.71 |
|
|
|
25.6 |
% |
Renewal leases |
|
|
1,566,679 |
|
|
|
40.15 |
|
|
|
38.91 |
|
|
|
(3.1 |
)% |
|
|
39.37 |
|
|
|
(1.9 |
)% |
New and renewal leasing activity of comparable small shop space of less than 10,000 square feet based on the lease commencement date is as follows:
|
|
Number |
|
|
Square |
|
|
Term |
|
|
Initial |
|
|
Average |
|
|
Expiring |
|
|
Initial Rent |
|
|
Average Rent |
|
||||||||||||||||
Commencement 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
New |
|
|
63 |
|
|
|
174,578 |
|
|
|
6.37 |
|
|
$ |
39.45 |
|
|
$ |
41.59 |
|
|
$ |
32.92 |
|
|
$ |
6.53 |
|
|
|
19.8 |
% |
|
$ |
8.67 |
|
|
|
26.3 |
% |
Renewal |
|
|
558 |
|
|
|
1,815,663 |
|
|
|
2.62 |
|
|
|
35.07 |
|
|
|
35.40 |
|
|
|
35.41 |
|
|
|
(0.34 |
) |
|
|
(1.0 |
)% |
|
|
(0.01 |
) |
|
|
(0.0 |
)% |
Commencement 2023 Total |
|
|
621 |
|
|
|
1,990,241 |
|
|
|
3.00 |
|
|
|
35.45 |
|
|
|
35.95 |
|
|
|
35.19 |
|
|
|
0.26 |
|
|
|
0.7 |
% |
|
|
0.76 |
|
|
|
2.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commencement 2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
New |
|
|
10 |
|
|
|
25,975 |
|
|
|
8.94 |
|
|
|
60.78 |
|
|
|
65.01 |
|
|
|
50.20 |
|
|
|
10.58 |
|
|
|
21.1 |
% |
|
|
14.81 |
|
|
|
29.5 |
% |
Renewal |
|
|
122 |
|
|
|
327,276 |
|
|
|
2.95 |
|
|
|
48.29 |
|
|
|
48.69 |
|
|
|
50.20 |
|
|
|
(1.91 |
) |
|
|
(3.8 |
)% |
|
|
(1.51 |
) |
|
|
(3.0 |
)% |
Commencement 2024 Total |
|
|
132 |
|
|
|
353,251 |
|
|
|
3.40 |
|
|
|
49.20 |
|
|
|
49.89 |
|
|
|
50.20 |
|
|
|
(1.00 |
) |
|
|
(2.0 |
)% |
|
|
(0.31 |
) |
|
|
(0.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total 2023/2024 |
|
|
753 |
|
|
|
2,343,492 |
|
|
|
3.07 |
|
|
$ |
37.53 |
|
|
$ |
38.05 |
|
|
$ |
37.45 |
|
|
$ |
0.08 |
|
|
|
0.2 |
% |
|
$ |
0.60 |
|
|
|
1.6 |
% |
31
Liquidity and Capital Resources
As of September 30, 2023, we had $292.8 million available in unrestricted cash and U.S. Treasury securities. Our total pro rata share of debt, excluding unamortized deferred financing costs and debt discounts, at September 30, 2023 was $2,675.3 million, which includes two unconsolidated property loans totaling $69.8 million that are in receivership. We had $57.5 million in restricted cash at September 30, 2023 related to cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable, as well as amounts related to cash management agreements with lenders of certain property-level mortgage indebtedness, which are designated for debt service and operating expense obligations. We also had restricted cash of $27.7 million related to the properties that secure the corporate term loan and the open-air centers and outparcels loan of which we may receive a portion via distributions semiannually and quarterly in accordance with the provisions of the term loan and the open-air centers and outparcels loan, respectively.
During the three and nine months ended September 30, 2023, we continued to reinvest the cash from maturing U.S. Treasury securities into new U.S. Treasury securities. We designated our U.S. Treasury securities as available-for-sale. As of September 30, 2023, our U.S. Treasury securities have maturities through July 2024.
During the nine months ended September 30, 2023, we extended the maturity dates on four loans, which had a combined outstanding balance of $316.0 million at our share as of September 30, 2023. In April 2023, the Company and its joint venture partner entered into a new $148.0 million loan secured by Friendly Center and The Shops at Friendly Center and the $7.2 million loan secured by The Outlet Shoppes of the Bluegrass - Phase II was paid off. See Note 8 and Note 9 for more information. Subsequent to September 30, 2023, the limited guaranty provided by the Operating Partnership on the secured term loan was eliminated, we exercised our extension option on the loan secured by Brookfield Square Anchor Redevelopment, we entered into a new loan secured by The Outlet Shoppes at Atlanta, we modified the loan secured by The Outlet Shoppes at Laredo and we modified and extended the loan secured by Volusia Mall. See Note 15 for more information.
In May 2023, the Operating Partnership entered into an interest rate swap with a notional amount of $32.0 million to fix the interest rate at 7.3975% on $32.0 million of the variable rate portion of the open-air centers and outparcels loan. The swap has a maturity date of June 7, 2027. We designated the swap as a cash flow hedge on our variable rate debt. See Note 9 for more information.
In February 2023, we deconsolidated Alamance Crossing East as a result of losing control when the property was placed in receivership. The loan secured by Alamance Crossing East had an outstanding balance of $41.1 million as of September 30, 2023. In September 2023, we deconsolidated WestGate Mall as a result of losing control when the property was placed in receivership. The loan secured by WestGate Mall had an outstanding balance of $28.7 million as of September 30, 2023.
We paid common stock dividends of $0.375 per share in each of the first, second and third quarters of 2023. Additionally, our board of directors declared a special dividend of $2.20 per share of common stock, which was paid in cash on January 18, 2023, to stockholders of record as of the close of business on December 12, 2022.
During the nine months ended September 30, 2023, we sold seven land parcels which generated approximately $8.9 million in gross proceeds at our share.
After factoring in all financing activity subsequent to September 30, 2023, we have extended or refinanced all loans that were set to mature during 2023. Our total share of consolidated, unconsolidated and other outstanding debt, excluding debt discounts and deferred financing costs, that matured prior to 2023, which remains outstanding at September 30, 2023, is $69.8 million, consisting of two property loans that are in receivership.
Cash Flows - Operating, Investing and Financing Activities
There was $119.7 million of cash, cash equivalents and restricted cash as of September 30, 2023, a decrease of $49.0 million from September 30, 2022. Of this amount, $34.5 million was unrestricted cash and cash equivalents as of September 30, 2023. Also, at September 30, 2023, we had $258.3 million in U.S. Treasuries with maturities through July 2024.
32
Our net cash flows are summarized as follows (in thousands):
|
|
Nine Months Ended September 30, |
|
|
|
|
||||||
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|||
Net cash provided by operating activities |
|
$ |
134,155 |
|
|
$ |
153,820 |
|
|
$ |
(19,665 |
) |
Net cash provided by (used in) investing activities |
|
|
18,099 |
|
|
|
(107,832 |
) |
|
|
125,931 |
|
Net cash used in financing activities |
|
|
(174,527 |
) |
|
|
(113,463 |
) |
|
|
(61,064 |
) |
Net cash flows |
|
$ |
(22,273 |
) |
|
$ |
(67,475 |
) |
|
$ |
45,202 |
|
Cash Provided By Operating Activities
Cash provided by operating activities decreased primarily due to lower percentage rents and higher interest expense resulting from rising variable interest rates, as well as higher operating expenses related to previously delayed maintenance projects and the timing of certain third-party contracts.
Cash Provided By (Used In) Investing Activities
Cash provided by investing activities increased primarily due to more net redemptions of U.S. Treasury securities during the current-year period as compared to the prior-year period, as well as higher proceeds from sales of real estate assets during the nine months ended September 30, 2023. The increase was partially offset by a decrease in distributions from unconsolidated affiliates.
Cash Used In Financing Activities
Cash used in financing activities increased primarily due to the payment of a first, second and third quarter 2023 common stock dividend and the special dividend that was declared during the fourth quarter of 2022. There were no dividends paid during the first and second quarters of 2022. Also, the decrease was attributable to a reduction in net proceeds from new loans during the current-year period as compared to the prior-year period. The increase was partially offset by a reduction in principal payments during the current-year period as compared to the prior-year period.
Debt
The following tables summarize debt based on our pro rata ownership share, including our pro rata share of unconsolidated affiliates and excluding noncontrolling investors’ share of consolidated properties. Prior to consideration of unamortized deferred financing costs or debt discounts, of our $2,675.3 million outstanding debt at September 30, 2023, $2,535.3 million constituted non-recourse debt obligations and $140.0 million constituted recourse debt obligations. Subsequent to September 30, 2023, the limited guaranty provided by the Operating Partnership on the secured term loan was eliminated. See Note 15 for more information. We believe the tables below provide investors and lenders a clearer understanding of our total debt obligations and liquidity (in thousands):
September 30, 2023: |
|
Consolidated |
|
|
Noncontrolling |
|
|
Other Debt (1) |
|
|
Unconsolidated |
|
|
Total |
|
|
Weighted- |
|
|||||
Fixed-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-recourse loans on operating properties |
|
$ |
746,548 |
|
|
$ |
(25,122 |
) |
|
$ |
69,783 |
|
|
$ |
609,340 |
|
|
$ |
1,400,549 |
|
|
4.97% |
|
Open-air centers and outparcels loan |
|
|
179,415 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
179,415 |
|
|
6.95% |
(3) |
Recourse loans on operating properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9,137 |
|
|
|
9,137 |
|
|
3.76% |
|
Total fixed-rate debt |
|
|
925,963 |
|
|
|
(25,122 |
) |
|
|
69,783 |
|
|
|
618,477 |
|
|
|
1,589,101 |
|
|
5.18% |
|
Variable-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-recourse loans on operating properties |
|
|
54,915 |
|
|
|
(13,072 |
) |
|
|
— |
|
|
|
49,789 |
|
|
|
91,632 |
|
|
8.25% |
|
Recourse loans on operating properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12,467 |
|
|
|
12,467 |
|
|
7.87% |
|
Open-air centers and outparcels loan |
|
|
179,415 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
179,415 |
|
|
9.43% |
(3) |
Secured term loan |
|
|
802,645 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
802,645 |
|
|
8.19% |
|
Total variable-rate debt |
|
|
1,036,975 |
|
|
|
(13,072 |
) |
|
|
— |
|
|
|
62,256 |
|
|
|
1,086,159 |
|
|
8.40% |
|
Total fixed-rate and variable-rate debt |
|
|
1,962,938 |
|
|
|
(38,194 |
) |
|
|
69,783 |
|
|
|
680,733 |
|
|
|
2,675,260 |
|
|
6.49% |
|
Unamortized deferred financing costs |
|
|
(14,264 |
) |
|
|
274 |
|
|
|
— |
|
|
|
(3,185 |
) |
|
|
(17,175 |
) |
|
|
|
Debt discounts (4) |
|
|
(48,201 |
) |
|
|
4,192 |
|
|
|
— |
|
|
|
— |
|
|
|
(44,009 |
) |
|
|
|
Total mortgage and other indebtedness, net |
|
$ |
1,900,473 |
|
|
$ |
(33,728 |
) |
|
$ |
69,783 |
|
|
$ |
677,548 |
|
|
$ |
2,614,076 |
|
|
|
|
33
December 31, 2022: |
|
Consolidated |
|
|
Noncontrolling |
|
|
Unconsolidated |
|
|
Total |
|
|
Weighted- |
|
||||
Fixed-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-recourse loans on operating properties |
|
$ |
843,634 |
|
|
$ |
(25,420 |
) |
|
$ |
611,215 |
|
|
$ |
1,429,429 |
|
|
4.57% |
|
Open-air centers and outparcels loan |
|
|
180,000 |
|
|
|
— |
|
|
|
— |
|
|
|
180,000 |
|
|
6.95% |
(2) |
Recourse loans on operating properties |
|
|
— |
|
|
|
— |
|
|
|
10,427 |
|
|
|
10,427 |
|
|
3.67% |
|
Total fixed-rate debt |
|
|
1,023,634 |
|
|
|
(25,420 |
) |
|
|
621,642 |
|
|
|
1,619,856 |
|
|
4.83% |
|
Variable-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-recourse loans on operating properties |
|
|
56,490 |
|
|
|
(13,387 |
) |
|
|
51,539 |
|
|
|
94,642 |
|
|
6.91% |
|
Recourse loans on operating properties |
|
|
— |
|
|
|
— |
|
|
|
20,045 |
|
|
|
20,045 |
|
|
7.54% |
|
Open-air centers and outparcels loan |
|
|
180,000 |
|
|
|
— |
|
|
|
— |
|
|
|
180,000 |
|
|
8.22% |
(2) |
Secured term loan |
|
|
829,452 |
|
|
|
— |
|
|
|
— |
|
|
|
829,452 |
|
|
6.87% |
|
Total variable-rate debt |
|
|
1,065,942 |
|
|
|
(13,387 |
) |
|
|
71,584 |
|
|
|
1,124,139 |
|
|
7.10% |
|
Total fixed-rate and variable-rate debt |
|
|
2,089,576 |
|
|
|
(38,807 |
) |
|
|
693,226 |
|
|
|
2,743,995 |
|
|
5.76% |
|
Unamortized deferred financing costs |
|
|
(17,101 |
) |
|
|
317 |
|
|
|
(2,142 |
) |
|
|
(18,926 |
) |
|
|
|
Debt discounts (3) |
|
|
(72,289 |
) |
|
|
7,448 |
|
|
|
— |
|
|
|
(64,841 |
) |
|
|
|
Total mortgage and other indebtedness, net |
|
$ |
2,000,186 |
|
|
$ |
(31,042 |
) |
|
$ |
691,084 |
|
|
$ |
2,660,228 |
|
|
|
|
The weighted-average remaining term of our total share of consolidated and unconsolidated debt, excluding debt discounts and deferred financing costs, was 2.5 years and 2.4 years at September 30, 2023 and December 31, 2022, respectively. The weighted-average remaining term of our pro rata share of fixed-rate debt, excluding debt discounts and deferred financing costs, was 2.6 years and 2.3 years at September 30, 2023 and December 31, 2022, respectively.
As of September 30, 2023 and December 31, 2022, our total share of consolidated and unconsolidated variable-rate debt, excluding debt discounts and deferred financing costs, represented 40.6% and 41.0%, respectively, of our total pro rata share of debt, excluding debt discounts and deferred financing costs.
See Note 8 to the condensed consolidated financial statements for information concerning activity related to unconsolidated affiliates.
Equity
We paid common stock dividends of $0.375 per share in each of the first, second and third quarters of 2023. The decision to declare and pay dividends on any outstanding shares of our common stock, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our board of directors and will depend on our earnings, taxable income, FFO, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our then-current indebtedness, the annual distribution requirements under the REIT provisions of the Internal Revenue Code, Delaware law and such other factors as our board of directors deems relevant. Any dividends payable will be determined by our board of directors based upon the circumstances at the time of declaration. Our actual results of operations will be affected by a number of factors, including the revenues received from our properties, our operating expenses, interest expense, capital expenditures and the ability of the anchors and tenants at our properties to meet their obligations for payment of rents and tenant reimbursements.
On September 8, 2022, the Company's board of directors adopted a short-term rights plan (the “Rights Plan”). Pursuant to the Rights Plan, the board of directors authorized a dividend of one share purchase right (a “Right”) for each outstanding share of the Company's common stock. If a person or group of affiliated or associated persons acquires beneficial ownership of 10.0% or more of the Company's outstanding common shares, subject to certain exceptions (including exceptions for existing holders who do not increase their holdings as provided in the Rights Plan), each Right would effectively entitle its holder (other than the acquiring person or group of affiliated or associated persons) to purchase additional common shares at a substantial discount to the public market price. In addition, under certain circumstances, the Company may exchange the Rights (other than Rights beneficially owned by the acquiring person or group of affiliated or associated persons), in whole or in part, for common shares on a one-for-one basis, or the Company may redeem the Rights for cash at a price of $0.001 per Right. On September 8, 2023, the Rights Plan expired pursuant to its terms.
34
Capital Expenditures
The following table, which excludes expenditures for developments, redevelopments and expansions, summarizes our capital expenditures, including our share of unconsolidated affiliates' capital expenditures, for the three and nine months ended September 30, 2023 compared to the same period in 2022 (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Tenant allowances (1) |
|
$ |
6,616 |
|
|
$ |
5,639 |
|
|
$ |
13,265 |
|
|
$ |
12,679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Maintenance capital expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Parking area and parking area lighting |
|
|
1,604 |
|
|
|
1,702 |
|
|
|
2,800 |
|
|
|
3,215 |
|
Roof replacements |
|
|
1,396 |
|
|
|
149 |
|
|
|
2,821 |
|
|
|
275 |
|
Other capital expenditures |
|
|
4,014 |
|
|
|
2,761 |
|
|
|
10,003 |
|
|
|
6,858 |
|
Total maintenance capital expenditures |
|
|
7,014 |
|
|
|
4,612 |
|
|
|
15,624 |
|
|
|
10,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Capitalized overhead |
|
|
360 |
|
|
|
377 |
|
|
|
1,495 |
|
|
|
1,200 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Capitalized interest |
|
|
125 |
|
|
|
156 |
|
|
|
342 |
|
|
|
531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total capital expenditures |
|
$ |
14,115 |
|
|
$ |
10,784 |
|
|
$ |
30,726 |
|
|
$ |
24,758 |
|
Annual capital expenditures budgets are prepared for each of our properties that are intended to provide for all necessary recurring and non-recurring capital expenditures. We believe that property operating cash flows, which include reimbursements from tenants for certain expenses, and readily available cash on hand will provide the necessary funding for these expenditures.
Developments
Developments Completed as of September 30, 2023
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
CBL's Share of |
|
|
|
|
|
||||||||||
Property |
|
Location |
|
CBL |
|
Total |
|
|
Total |
|
|
Cost to |
|
|
2023 |
|
|
Opening |
|
Initial |
||||
Mall Expansion: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sunrise Mall - Bubba's 33 |
|
Brownsville, TX |
|
100% |
|
|
7,575 |
|
|
$ |
1,049 |
|
|
$ |
1,393 |
|
|
$ |
1,193 |
|
|
Q3 '23 |
|
18.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Redevelopments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Kirkwood Mall - Five Below |
|
Bismarck, ND |
|
100% |
|
|
19,478 |
|
|
|
2,323 |
|
|
|
1,694 |
|
|
|
1,692 |
|
|
Q3 '23 |
|
16.3% |
The Terrace - Nordstrom Rack (former Staples) |
|
Chattanooga, TN |
|
92% |
|
|
24,155 |
|
|
|
2,513 |
|
|
|
1,750 |
|
|
|
127 |
|
|
Q2 '23 |
|
13.0% |
York Town Center - Burlington (former Bed Bath & Beyond) |
|
York, PA |
|
50% |
|
|
28,000 |
|
|
|
1,247 |
|
|
|
1,268 |
|
|
|
281 |
|
|
Q1 '23 |
|
18.5% |
|
|
|
|
|
|
|
71,633 |
|
|
|
6,083 |
|
|
|
4,712 |
|
|
|
2,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Properties Completed |
|
|
|
|
|
|
79,208 |
|
|
$ |
7,132 |
|
|
$ |
6,105 |
|
|
$ |
3,293 |
|
|
|
|
|
35
Properties Under Development at September 30, 2023
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
CBL's Share of |
|
|
|
|
|
||||||||||
Property |
|
Location |
|
CBL |
|
Total |
|
|
Total |
|
|
Cost to |
|
|
2023 |
|
|
Expected Opening |
|
Initial |
||||
Open-Air Center: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fremaux Town Center - Marshall's |
|
Slidell, LA |
|
65% |
|
|
22,132 |
|
|
$ |
2,356 |
|
|
$ |
1,452 |
|
|
$ |
1,389 |
|
|
Winter '23 |
|
10.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Outparcel Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mayfaire Town Center - hotel development |
|
Wilmington, NC |
|
49% |
|
|
83,021 |
|
|
|
15,435 |
|
|
|
2,350 |
|
|
|
1,177 |
|
|
Spring '24 |
|
11.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Redevelopments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Hamilton Place - Crunch Fitness |
|
Chattanooga, TN |
|
100% |
|
|
36,640 |
|
|
|
2,648 |
|
|
|
1,012 |
|
|
|
994 |
|
|
Winter '24 |
|
23.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Properties Under Development |
|
|
|
|
|
|
141,793 |
|
|
$ |
20,439 |
|
|
$ |
4,814 |
|
|
$ |
3,560 |
|
|
|
|
|
Off-Balance Sheet Arrangements
Unconsolidated Affiliates
We have ownership interests in 26 unconsolidated affiliates as of September 30, 2023 that are described in Note 8 to the condensed consolidated financial statements. The unconsolidated affiliates are accounted for using the equity method of accounting and are reflected in the condensed consolidated balance sheets as investments in unconsolidated affiliates.
The following are circumstances when we may consider entering into a joint venture with a third party:
Guarantees
We may guarantee the debt of a joint venture primarily because it allows the joint venture to obtain funding at a lower cost than could be obtained otherwise. This results in a higher return for the joint venture on its investment, and a higher return on our investment in the joint venture. We may receive a fee from the joint venture for providing the guaranty. Additionally, when we issue a guaranty, the terms of the joint venture agreement typically provide that we may receive indemnification from the joint venture or have the ability to increase our ownership interest.
See Note 12 to the condensed consolidated financial statements for information related to our guarantees of unconsolidated affiliates' debt as of September 30, 2023 and December 31, 2022.
36
Critical Accounting Policies
Our discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the financial statements and disclosures. Some of these estimates and assumptions require application of difficult, subjective, and/or complex judgment about the effect of matters that are inherently uncertain and that may change in subsequent periods. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our Annual Report on Form 10-K for the year ended December 31, 2022 contains a discussion of our critical accounting policies and estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations section. There have been no material changes to these policies and estimates during the nine months ended September 30, 2023. Our significant accounting policies are disclosed in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022
Non-GAAP Measure
Funds from Operations
FFO is a widely used non-GAAP measure of the operating performance of real estate companies that supplements net income (loss) determined in accordance with GAAP. NAREIT defines FFO as net income (loss) (computed in accordance with GAAP) excluding gains or losses on sales of depreciable operating properties and impairment losses of depreciable properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests. Adjustments for unconsolidated partnerships, joint ventures and noncontrolling interests are calculated on the same basis. We define FFO as defined above by NAREIT. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
We believe that FFO provides an additional indicator of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes the value of real estate assets declines predictably over time. Since values of real estate assets have historically risen or fallen with market conditions, we believe that FFO, which excludes historical cost depreciation and amortization, enhances investors’ understanding of our operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of our properties and interest rates, but also by our capital structure.
We believe FFO allocable to Operating Partnership common unitholders is a useful performance measure since we conduct substantially all our business through our Operating Partnership and, therefore, it reflects the performance of our properties in absolute terms regardless of the ratio of ownership interests of our common shareholders and the noncontrolling interest in our Operating Partnership.
In our reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders that is presented below, we make an adjustment to add back noncontrolling interest in income (loss) of our Operating Partnership in order to arrive at FFO of the Operating Partnership common unitholders.
FFO does not represent cash flows from operations as defined by GAAP, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income (loss) for purposes of evaluating our operating performance or to cash flow as a measure of liquidity.
We believe that it is important to identify the impact of certain significant items on our FFO measures for a reader to have a complete understanding of our results of operations. Therefore, we have also presented adjusted FFO measures excluding these significant items from the applicable periods. Please refer to the reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders below for a description of these adjustments.
FFO of the Operating Partnership increased to $61.8 million for the three months ended September 30, 2023 from $49.5 million for the prior-year period. Excluding the adjustments noted above, FFO of the Operating Partnership, as adjusted, decreased to $51.2 million for the three months ended September 30, 2023 from $59.0 million for the prior-year period. The decrease in FFO, as adjusted, for the three months ended September 30, 2023 was primarily driven by lower percentage rents, an unfavorable variance in the estimate for uncollectable revenues in the current-year period as compared to the prior-year period and higher interest expense due to rising variable interest rates. The decrease was partially offset by increased interest income on our U.S. Treasury securities, as well as lower utility, janitorial and security costs.
37
FFO of the Operating Partnership increased to $153.5 million for the nine months ended September 30, 2023 from $115.4 million for the prior-year period. Excluding the adjustments noted above, FFO of the Operating Partnership, as adjusted, decreased to $151.1 million for the nine months ended September 30, 2023 from $176.3 million for the prior-year period. The decrease in FFO, as adjusted, for the nine months ended September 30, 2023 was primarily driven by lower percentage rents, an unfavorable variance in the estimate for uncollectable revenues in the current-year period as compared to the prior-year period and higher interest expense due to rising variable interest rates, as well as previously delayed maintenance projects and timing of certain third-party contracts. The decrease was partially offset by increased interest income on our U.S. Treasury securities, as well as lower utility, janitorial and security costs.
The reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders for the three and nine months ended September 30, 2023 and 2022 is as follows (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net income (loss) attributable to common shareholders |
|
$ |
12,957 |
|
|
$ |
(14,510 |
) |
|
$ |
(6,104 |
) |
|
$ |
(96,830 |
) |
Noncontrolling interest in loss of Operating Partnership |
|
|
(6 |
) |
|
|
25 |
|
|
|
(6 |
) |
|
|
(34 |
) |
Earnings allocable to unvested restricted stock |
|
|
305 |
|
|
|
216 |
|
|
|
837 |
|
|
|
426 |
|
Depreciation and amortization expense of: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consolidated properties |
|
|
45,118 |
|
|
|
61,050 |
|
|
|
148,129 |
|
|
|
194,469 |
|
Unconsolidated affiliates |
|
|
4,192 |
|
|
|
3,665 |
|
|
|
13,263 |
|
|
|
21,004 |
|
Non-real estate assets |
|
|
(221 |
) |
|
|
(123 |
) |
|
|
(673 |
) |
|
|
(524 |
) |
Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries |
|
|
(562 |
) |
|
|
(829 |
) |
|
|
(1,935 |
) |
|
|
(2,666 |
) |
Loss on impairment, net of taxes |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
186 |
|
Gain on depreciable property |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(629 |
) |
FFO allocable to Operating Partnership common unitholders |
|
|
61,783 |
|
|
|
49,494 |
|
|
|
153,511 |
|
|
|
115,402 |
|
Debt discount accretion, including our share of unconsolidated affiliates and net of noncontrolling interests' share (1) |
|
|
14,689 |
|
|
|
25,425 |
|
|
|
47,879 |
|
|
|
153,924 |
|
Adjustment for unconsolidated affiliates with negative investment (2) |
|
|
(3,659 |
) |
|
|
(13,116 |
) |
|
|
(1,180 |
) |
|
|
(36,123 |
) |
Senior secured notes fair value adjustment (3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(395 |
) |
Litigation settlement (4) |
|
|
(2,060 |
) |
|
|
(36 |
) |
|
|
(2,178 |
) |
|
|
(182 |
) |
Non-cash default interest expense (5) |
|
|
191 |
|
|
|
(1,585 |
) |
|
|
972 |
|
|
|
(19,805 |
) |
Gain on deconsolidation (6) |
|
|
(19,728 |
) |
|
|
— |
|
|
|
(47,879 |
) |
|
|
(36,250 |
) |
Loss on available-for-sale securities |
|
|
— |
|
|
|
39 |
|
|
|
— |
|
|
|
39 |
|
Reorganization items, net (7) |
|
|
— |
|
|
|
(1,220 |
) |
|
|
— |
|
|
|
(262 |
) |
FFO allocable to Operating Partnership common unitholders, as adjusted |
|
$ |
51,216 |
|
|
$ |
59,001 |
|
|
$ |
151,125 |
|
|
$ |
176,348 |
|
38
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risk exposures, including interest rate risk. The following discussion regarding our risk management activities includes forward-looking statements that involve risk and uncertainties. Estimates of future performance and economic conditions are reflected assuming certain changes in interest rates. Caution should be used in evaluating our overall market risk from the information presented below, as actual results may differ.
Interest Rate Risk
Based on our proportionate share of consolidated and unconsolidated variable-rate debt at September 30, 2023, a 0.5% increase or decrease in interest rates on variable-rate debt would increase or decrease annual interest expense by approximately $5.4 million.
Based on our proportionate share of total consolidated, unconsolidated and other debt at September 30, 2023, a 0.5% increase in interest rates would decrease the fair value of debt by approximately $12.3 million, while a 0.5% decrease in interest rates would increase the fair value of debt by approximately $12.5 million.
ITEM 4: Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this quarterly report, an evaluation was performed under the supervision of our Chief Executive Officer and Chief Financial Officer and with the participation of our management, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. The Company's disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and to ensure that information we are required to disclose is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
39
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
The information in this Item 1 is incorporated by reference herein from Note 12.
ITEM 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risks that could materially affect our business, financial condition or results of operations that are discussed under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022. There have been no material changes to such risk factors since the filing of our Annual Report.
ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds
Period |
|
Total |
|
|
Average |
|
|
Total Number of |
|
|
Approximate Dollar |
|
||||
July 1–31, 2023 |
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
August 1–31, 2023 |
|
|
12,915 |
|
|
|
21.67 |
|
|
|
12,915 |
|
|
|
24,720,070 |
|
September 1–30, 2023 |
|
|
29,965 |
|
(2) |
|
21.22 |
|
(3) |
|
28,747 |
|
|
|
24,110,372 |
|
Total |
|
|
42,880 |
|
|
|
|
|
|
41,662 |
|
|
|
|
||
ITEM 3: Defaults Upon Senior Securities
Not applicable.
ITEM 4: Mine Safety Disclosures
Not applicable.
ITEM 5: Other Information
40
ITEM 6: Exhibits
INDEX TO EXHIBITS
Exhibit Number |
|
Description |
31.1 |
|
|
31.2 |
|
|
32.1 |
|
|
32.2 |
|
|
101.INS |
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. (Filed herewith.) |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. (Filed herewith.) |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.) |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.) |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.) |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.) |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*). (Filed herewith.) |
41
SIGNATURES
Pursuant to the requirements 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. |
|
|
Date: November 9, 2023 |
/s/ Benjamin W. Jaenicke |
|
Benjamin W. Jaenicke |
|
Executive Vice President - |
|
Chief Financial Officer and Treasurer |
|
(Authorized Officer and Principal Financial Officer) |
42