CHATTANOOGA, Tenn.--(BUSINESS WIRE)--CBL Properties (NYSE:CBL) announced results for the second quarter ended June 30, 2018. A description of each supplemental non-GAAP financial measure and the related reconciliation to the comparable GAAP financial measure is located at the end of this news release.
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Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2018 | 2017 | % | 2018 | 2017 | % | ||||||||||||||||||
| Net income (loss) attributable to common shareholders per diluted share | $ | (0.20 | ) | $ | 0.18 | (211.1 | )% | $ | (0.26 | ) | $ | 0.31 | (183.9 | )% | |||||||||
| Funds from Operations ("FFO") per diluted share | $ | 0.46 | $ | 0.58 | (20.7 | )% | $ | 0.88 | $ | 1.12 | (21.4 | )% | |||||||||||
| FFO, as adjusted, per diluted share (1) | $ | 0.46 | $ | 0.50 | (8.0 | )% | $ | 0.88 | $ | 1.02 | (13.7 | )% | |||||||||||
| (1) For a reconciliation of FFO to FFO, as adjusted, for the periods presented, please refer to the footnotes to the Company's reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders on page 10 of this news release. | |||||||||||||||||||||||
KEY TAKEAWAYS:
- FFO per diluted share, as adjusted, was $0.46 for the second quarter 2018, compared with $0.50 per share for the second quarter 2017. Second quarter 2018 FFO per share was impacted by approximately $0.01 per share of dilution from asset sales completed in 2017 and year-to-date, $0.07 per share of lower property NOI, $0.02 per share higher corporate interest expense, $0.03 per share lower property level interest expense, $0.01 lower G&A expense and $0.02 per share lower abandoned project expense.
- Total Portfolio Same-center NOI declined 6.9% for the second quarter 2018 and 6.8% for the six-months ended June 30, 2018.
- Portfolio occupancy was 91.1% as of June 30, 2018, compared with 91.6% as of June 30, 2017. Same-center mall occupancy was 89.5% as of June 30, 2018 compared with 90.4% as of June 30, 2017.
- Year-to-date, CBL has completed gross asset sales of $38.3 million including the sale of a Tier 3 mall for a gross sales price of $18.0 million in July.
- Same-center sales per square foot for the stabilized mall portfolio for the twelve-months ended June 30, 2018, were $376 per square foot compared with $375 per square foot for the prior-year period.
- Redevelopment activity is underway at eight properties with two redevelopment projects opened during the quarter and two new projects added to the pipeline.
"Our results for this quarter were in-line with our guidance and we are making solid progress on our strategic initiatives," commented Stephen Lebovitz, chief executive officer. "We are diversifying our tenant mix with more than 60% of new leases executed year-to-date representing non-apparel uses. In addition, we are replacing former anchors with dynamic, new uses, which will generate higher levels of traffic and sales. Just last week, we signed a new lease for a 100,000-square-foot casino, entertainment and dining complex to replace a former Bon-Ton location at Westmoreland Mall in Greensburg, PA. We also started construction on the addition of Cheesecake Factory to Hamilton Place in Chattanooga as the first step of the redevelopment of the Sears store there. These additions demonstrate the tremendous opportunity to create value throughout the CBL portfolio.
"Strengthening our balance sheet is another strategic priority. We closed last week on the sale of Janesville Mall, a Tier 3 mall with sales of $243 per square foot. Year-to-date, we have generated more than $38 million from this and other dispositions. These funds supplement our significant cash flow, which we utilize to fund portfolio improvements and debt reduction. We closed during the quarter on a 10-year, fixed-rate $155 million non-recourse loan secured by CoolSprings Galleria at very favorable terms and completed the extension of two additional secured loans for new five-year terms. We also repaid $190 million of our $490 million unsecured term loan in July. We are having constructive discussions with our bank group to complete a recast of our $350 million unsecured term loan (due Oct. 2019) and lines of credit (due Oct. 2020) prior to year-end. Completing the recast well ahead of maturity will provide further financial flexibility to execute on the redevelopments and other growth initiatives across our portfolio."
Net loss attributable to common shareholders for the second quarter 2018 was $35.0 million, or a loss of $0.20 per diluted share, compared with net income of $30.2 million, or $0.18 per diluted share, for the second quarter 2017. Net loss attributable to common shareholders for the second quarter 2018 included a $52.0 million loss on impairment of Cary Towne Center, primarily related to the accelerated maturity of the non-recourse loan secured by the property.
FFO allocable to common shareholders, as adjusted, for the second quarter 2018 was $80.2 million, or $0.46 per diluted share, compared with $85.6 million, or $0.50 per diluted share, for the second quarter 2017. FFO allocable to the Operating Partnership common unitholders, as adjusted, for the second quarter 2018 was $92.8 million compared with $99.7 million for the second quarter 2017.
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Percentage change in same-center Net Operating Income ("NOI") (1): |
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Three Months Ended June 30, 2018 |
Six Months Ended June 30, 2018 | |||
| Portfolio same-center NOI | (6.9)% | (6.8)% | ||
| Mall same-center NOI | (6.9)% | (7.0)% | ||
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(1) CBL's definition of same-center NOI excludes the impact of lease termination fees and certain non-cash items of straight-line rents, write-offs of landlord inducements and net amortization of acquired above and below market leases. |
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Major variances impacting same-center NOI for the quarter ended June 30, 2018, include:
- Same-center NOI declined $11.5 million, due to an $8.3 million decrease in revenue and a $3.1 million increase in operating expenses.
- Minimum rents and tenant reimbursements declined $8.7 million during the quarter, primarily related to store closures and rent concessions for tenants in bankruptcy.
- Percentage rents increased $0.5 million compared with the prior year quarter due to portfolio sales growth.
- Property operating expenses increased $0.8 million, including a $0.5 million increase in bad debt expense. Maintenance and repair expense increased $1.1 million, including a $0.5 million increase in snow removal, and real estate tax expenses increased $1.2 million. The variance in real estate tax expense was primarily due to a favorable tax assessment that was received in the prior-year period.
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PORTFOLIO OPERATIONAL RESULTS |
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Occupancy (1): |
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| As of June 30, | |||
| 2018 | 2017 | ||
| Portfolio occupancy | 91.1% | 91.6% | |
| Mall portfolio | 89.2% | 90.2% | |
| Same-center malls | 89.5% | 90.4% | |
| Stabilized malls | 89.5% | 90.5% | |
| Non-stabilized malls (2) | 71.9% | 81.8% | |
| Associated centers | 97.9% | 95.5% | |
| Community centers | 96.9% | 97.0% | |
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(1) Occupancy for malls represents percentage of mall store gross leasable area 20,000 square feet and under occupied. Occupancy for associated and community centers represents percentage of gross leasable area occupied. |
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(2) Represents occupancy for The Outlet Shoppes at Laredo as of June 30, 2018. Represents occupancy for The Outlet Shoppes of the Bluegrass and The Outlet Shoppes at Laredo as of June 30, 2017. |
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New and Renewal Leasing Activity of Same Small Shop Space Less Than 10,000 Square Feet: |
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| % Change in Average Gross Rent Per Square Foot: | |||||||
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Three Months |
Six Months Ended |
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| Stabilized Malls | (8.2 | )% | (10.6 | )% | |||
| New leases | (1.4 | )% | (0.5 | )% | |||
| Renewal leases | (9.9 | )% | (12.6 | )% | |||
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Same-Center Sales Per Square Foot for Mall Tenants 10,000 Square Feet or Less: |
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| Twelve Months Ended June 30, | ||||||||||||
| 2018 | 2017 | % Change | ||||||||||
| Stabilized mall same-center sales per square foot | $ | 376 | $ | 375 | 0.3% | |||||||
| Stabilized mall sales per square foot | $ | 376 | $ | 373 | 0.8% | |||||||
DISPOSITIONS
Year-to-date CBL has raised $38.3 million in gross proceeds through asset sales, which includes $8.0 million of aggregate gross proceeds from the sale of various outparcel locations during the second quarter and the July sale of Janesville Mall in Janesville, WI, for $18.0 million to RockStep Capital.
FINANCING ACTIVITY
In April, CBL, along with its 50% joint venture partner, closed on a $155.0 million ($77.5 million at CBL’s share) non-recourse loan secured by CoolSprings Galleria in Nashville, TN. The 10-year loan bears interest at a fixed rate of 4.839%.
Proceeds from the loan were used to retire the existing $97.7 million loan, which bore interest at a fixed rate of 6.98% and was scheduled to mature in June. CBL’s share of nearly $29.0 million in excess proceeds was utilized to reduce outstanding balances on its unsecured lines of credit.
In May, CBL completed the extension of the $56.7 million ($28.4 million at CBL’s share) loan secured by The Pavilion at Port Orange in Port Orange, FL, and the $58.2 million ($29.1 million at CBL’s share) loan secured by Hammock Landing in West Melbourne, FL. Both loans were originally scheduled to mature in February 2019. The loans were extended for an initial term of three years, with two one-year extensions available at the Company’s option, for a final maturity in February 2023. The new loans bear interest at 225 basis points over LIBOR, an increase of 25 bps over the prior rate.
In July, CBL repaid $190.0 million of its $490.0 million unsecured term loan using availability on its line of credit.
DEVELOPMENT
Major redevelopments completed and underway in 2018 include (complete project list can be found in the financial supplement):
| Prior Tenant | New Tenant(s) | ||||||
| Brookfield Square | Sears | Marcus Theaters, Whirlyball | |||||
| Eastland Mall | JCPenney | H&M, Outback, Planet Fitness | |||||
| Frontier Mall | Sports Authority | Planet Fitness | |||||
| Jefferson Mall | Macy's | Round 1 | |||||
| York Galleria | JCPenney | Marshalls | |||||
| Hanes Mall | Shops | Dave & Busters | |||||
OUTLOOK AND GUIDANCE
CBL is maintaining 2018 FFO, as adjusted, guidance in the range of $1.70 - $1.80 per diluted share. Guidance incorporates a full-year budgeted impact of loss in rent related to 2017 tenant bankruptcies, store closures and rent adjustments net of expected new leasing as well as a reserve in the range of $10.0 - $20.0 million (the "Reserve") for potential future unbudgeted loss in rent from tenant bankruptcies, store closures or lease modifications that may occur in 2018. Based on bankruptcy and leasing activity year-to-date, including the impact of any co-tenancy, CBL currently expects to utilize approximately $13 - $15 million of the Reserve. Detail of assumptions underlying guidance follows:
| Low | High | ||||
| 2018 FFO, as adjusted, per share (Includes the Reserve) | $1.70 | $1.80 | |||
| 2018 Change in Same-Center NOI ("SC NOI") (Includes the Reserve) | (6.75)% | (5.25)% | |||
| Reserve for unbudgeted lost rents included in SC NOI and FFO | $20.0 million | $10.0 million | |||
| Gain on outparcel sales | $7.0 million | $10.0 million | |||
| Estimated 2018 Dividend Per Common Share (1) | $0.80 | $0.80 | |||
| (1) Subject to Board approval | |||||
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Reconciliation of GAAP net income to 2018 FFO, as adjusted, per share guidance: |
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| Low | High | |||||||||
| Expected diluted earnings per common share | $ | (0.25 | ) | $ | (0.15 | ) | ||||
| Adjust to fully converted shares from common shares | 0.03 | 0.02 | ||||||||
| Expected earnings per diluted, fully converted common share | (0.22 | ) | (0.13 | ) | ||||||
| Add: depreciation and amortization | 1.60 | 1.60 | ||||||||
| Less: gain on depreciable property | (0.01 | ) | (0.01 | ) | ||||||
| Add: loss on impairment | 0.35 | 0.35 | ||||||||
| Add: noncontrolling interest in loss of Operating Partnership | (0.03 | ) | (0.02 | ) | ||||||
| Expected FFO, as adjusted, per diluted, fully converted common share | $ | 1.69 | $ | 1.79 | ||||||
| Adjustment for certain significant items | 0.01 | 0.01 | ||||||||
| Expected adjusted FFO per diluted, fully converted common share | $ | 1.70 | $ | 1.80 | ||||||
INVESTOR CONFERENCE CALL AND WEBCAST
CBL Properties will host a conference call on Thursday, August 2, 2018, at 11:00 a.m. ET. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 5568536. A replay of the conference call will be available through August 9, 2018, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10120294.
The Company will also provide an online webcast and rebroadcast of its second quarter 2018 earnings release conference call. The live broadcast of the quarterly conference call will be available online at cblproperties.com on Thursday, August 2, 2018, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call.
To receive the CBL Properties second quarter earnings release and supplemental information, please visit the Invest section of our website at cblproperties.com or contact Investor Relations at (423) 490-8312.
ABOUT CBL PROPERTIES
Headquartered in Chattanooga, TN, CBL Properties owns and manages a national portfolio of market-dominant properties located in dynamic and growing communities. CBL’s portfolio is comprised of 117 properties totaling 72.8 million square feet across 26 states, including 74 high-quality enclosed, outlet and open-air retail centers and 13 properties managed for third parties. CBL continuously strengthens its company and portfolio through active management, aggressive leasing and profitable reinvestment in its properties. For more information visit cblproperties.com.
NON-GAAP FINANCIAL MEASURES
Funds From Operations
FFO is a widely used non-GAAP measure of the operating performance of real estate companies that supplements net income (loss) determined in accordance with GAAP. The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss) (computed in accordance with GAAP) excluding gains or losses on sales of depreciable operating properties and impairment losses of depreciable properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests. Adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests are calculated on the same basis. We define FFO as defined above by NAREIT less dividends on preferred stock of the Company or distributions on preferred units of the Operating Partnership, as applicable. The Company’s method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
The Company believes that FFO provides an additional indicator of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assumes the value of real estate assets declines predictably over time. Since values of well-maintained real estate assets have historically risen with market conditions, the Company believes that FFO enhances investors’ understanding of its operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of the Company’s properties and interest rates, but also by its capital structure.
The Company presents both FFO allocable to Operating Partnership common unitholders and FFO allocable to common shareholders, as it believes that both are useful performance measures. The Company believes FFO allocable to Operating Partnership common unitholders is a useful performance measure since it conducts substantially all of its business through its Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of the Company’s common shareholders and the noncontrolling interest in the Operating Partnership. The Company believes FFO allocable to its common shareholders is a useful performance measure because it is the performance measure that is most directly comparable to net income (loss) attributable to its common shareholders.
In the reconciliation of net income (loss) attributable to the Company's common shareholders to FFO allocable to Operating Partnership common unitholders, located in this earnings release, the Company makes an adjustment to add back noncontrolling interest in income (loss) of its Operating Partnership in order to arrive at FFO of the Operating Partnership common unitholders. The Company then applies a percentage to FFO of the Operating Partnership common unitholders to arrive at FFO allocable to its common shareholders. The percentage is computed by taking the weighted-average number of common shares outstanding for the period and dividing it by the sum of the weighted-average number of common shares and the weighted-average number of Operating Partnership units held by noncontrolling interests during the period.
FFO does not represent cash flows from operations as defined by GAAP, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income (loss) for purposes of evaluating the Company’s operating performance or to cash flow as a measure of liquidity.
The Company believes that it is important to identify the impact of certain significant items on its FFO measures for a reader to have a complete understanding of the Company's results of operations. Therefore, the Company has also presented adjusted FFO measures excluding these items from the applicable periods. Please refer to the reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders on page 10 of this news release for a description of these adjustments.
Same-center Net Operating Income
NOI is a supplemental non-GAAP measure of the operating performance of the Company's shopping centers and other properties. The Company defines NOI as property operating revenues (rental revenues, tenant reimbursements and other income) less property operating expenses (property operating, real estate taxes and maintenance and repairs).
The Company computes NOI based on the Operating Partnership's pro rata share of both consolidated and unconsolidated properties. The Company believes that presenting NOI and same-center NOI (described below) based on its Operating Partnership’s pro rata share of both consolidated and unconsolidated properties is useful since the Company conducts substantially all of its business through its Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of the Company's common shareholders and the noncontrolling interest in the Operating Partnership. The Company's definition of NOI may be different than that used by other companies and, accordingly, the Company's 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 the Company's shopping center properties, the Company believes that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates, sales at the malls and operating costs and the impact of those trends on the Company's results of operations. The Company’s calculation of same-center NOI excludes lease termination income, straight-line rent adjustments, amortization of above and below market lease intangibles and write-off of landlord inducement assets in order to enhance the comparability of results from one period to another. A reconciliation of same-center NOI to net income is located at the end of this earnings release.
Pro Rata Share of Debt
The Company presents debt based on its pro rata ownership share (including the Company's pro rata share of unconsolidated affiliates and excluding noncontrolling interests' share of consolidated properties) because it believes this provides investors a clearer understanding of the Company's total debt obligations which affect the Company's liquidity. A reconciliation of the Company's pro rata share of debt to the amount of debt on the Company's condensed consolidated balance sheet is located at the end of this earnings release.
Information included herein contains "forward-looking statements" within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual events, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements. The reader is directed to the Company's various filings with the Securities and Exchange Commission, including without limitation the Company's Annual Report on Form 10-K, and the "Management's Discussion and Analysis of Financial Condition and Results of Operations" included therein, for a discussion of such risks and uncertainties.
| CBL & Associates Properties, Inc. | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| (Unaudited; in thousands, except per share amounts) | ||||||||||||||||
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Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| REVENUES: | ||||||||||||||||
| Minimum rents | $ | 148,488 | $ | 157,609 | $ | 298,849 | $ | 317,359 | ||||||||
| Percentage rents | 2,138 | 1,738 | 4,181 | 4,127 | ||||||||||||
| Other rents | 2,496 | 3,729 | 4,551 | 7,381 | ||||||||||||
| Tenant reimbursements | 56,614 | 62,231 | 117,227 | 129,522 | ||||||||||||
| Management, development and leasing fees | 2,643 | 2,577 | 5,364 | 6,029 | ||||||||||||
| Other | 2,219 | 1,349 | 4,626 | 2,828 | ||||||||||||
| Total revenues | 214,598 | 229,233 | 434,798 | 467,246 | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Property operating | 29,527 | 30,041 | 62,353 | 64,955 | ||||||||||||
| Depreciation and amortization | 73,566 | 82,509 | 145,316 | 153,729 | ||||||||||||
| Real estate taxes | 20,456 | 18,687 | 42,304 | 40,770 | ||||||||||||
| Maintenance and repairs | 12,059 | 11,716 | 25,238 | 25,068 | ||||||||||||
| General and administrative | 13,490 | 15,752 | 31,794 | 31,834 | ||||||||||||
| Loss on impairment | 51,983 | 43,203 | 70,044 | 46,466 | ||||||||||||
| Other | 245 | 5,019 | 339 | 5,019 | ||||||||||||
| Total operating expenses | 201,326 | 206,927 | 377,388 | 367,841 | ||||||||||||
| Income from operations | 13,272 | 22,306 | 57,410 | 99,405 | ||||||||||||
| Interest and other income | 218 | 31 | 431 | 1,435 | ||||||||||||
| Interest expense | (54,203 | ) | (55,065 | ) | (107,970 | ) | (111,266 | ) | ||||||||
| Gain on extinguishment of debt | — | 20,420 | — | 24,475 | ||||||||||||
| Gain (loss) on investments | 387 | (5,843 | ) | 387 | (5,843 | ) | ||||||||||
| Income tax benefit | 2,235 | 2,920 | 2,880 | 3,720 | ||||||||||||
| Equity in earnings of unconsolidated affiliates | 4,368 | 6,325 | 8,107 | 11,698 | ||||||||||||
| Income (loss) from continuing operations before gain on sales of real estate assets | (33,723 | ) | (8,906 | ) | (38,755 | ) | 23,624 | |||||||||
| Gain on sales of real estate assets | 3,747 | 79,533 | 8,118 | 85,521 | ||||||||||||
| Net income (loss) | (29,976 | ) | 70,627 | (30,637 | ) | 109,145 | ||||||||||
| Net (income) loss attributable to noncontrolling interests in: | ||||||||||||||||
| Operating Partnership | 5,685 | (5,093 | ) | 7,350 | (8,783 | ) | ||||||||||
| Other consolidated subsidiaries | 494 | (24,138 | ) | 393 | (24,851 | ) | ||||||||||
| Net income (loss) attributable to the Company | (23,797 | ) | 41,396 | (22,894 | ) | 75,511 | ||||||||||
| Preferred dividends | (11,223 | ) | (11,223 | ) | (22,446 | ) | (22,446 | ) | ||||||||
| Net income (loss) attributable to common shareholders | $ | (35,020 | ) | $ | 30,173 | $ | (45,340 | ) | $ | 53,065 | ||||||
| Basic and diluted per share data attributable to common shareholders: | ||||||||||||||||
| Net income (loss) attributable to common shareholders | $ | (0.20 | ) | $ | 0.18 | $ | (0.26 | ) | $ | 0.31 | ||||||
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Weighted-average common and potential dilutive common shares outstanding |
172,662 | 171,095 | 172,304 | 171,042 | ||||||||||||
| Dividends declared per common share | $ | 0.200 | $ | 0.265 | $ | 0.400 | $ | 0.530 | ||||||||
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The Company's reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders is as follows:
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(in thousands, except per share data) |
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Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Net income (loss) attributable to common shareholders | $ | (35,020 | ) | $ | 30,173 | $ | (45,340 | ) | $ | 53,065 | |||||||
| Noncontrolling interest in income (loss) of Operating Partnership | (5,685 | ) | 5,093 | (7,350 | ) | 8,783 | |||||||||||
| Depreciation and amortization expense of: | |||||||||||||||||
| Consolidated properties | 73,566 | 82,509 | 145,316 | 153,729 | |||||||||||||
| Unconsolidated affiliates | 10,338 | 9,357 | 20,739 | 18,900 | |||||||||||||
| Non-real estate assets | (917 | ) | (792 | ) | (1,838 | ) | (1,656 | ) | |||||||||
| Noncontrolling interests' share of depreciation and amortization | (2,122 | ) | (2,642 | ) | (4,288 | ) | (4,621 | ) | |||||||||
| Loss on impairment, net of taxes | 51,983 | 43,183 | 70,044 | 45,250 | |||||||||||||
| Gain on depreciable property, net of taxes and noncontrolling interests' share | — | (50,797 | ) | (2,236 | ) | (50,756 | ) | ||||||||||
| FFO allocable to Operating Partnership common unitholders | 92,143 | 116,084 | 175,047 | 222,694 | |||||||||||||
| Litigation expenses (1) | — | 9 | — | 52 | |||||||||||||
| Nonrecurring professional fees expense (reimbursement) (1) | — | 6 | — | (919 | ) | ||||||||||||
| (Gain) loss on investments, net of taxes (2) | (287 | ) | 5,843 | (287 | ) | 5,843 | |||||||||||
| Non-cash default interest expense (3) | 916 | 1,187 | 1,832 | 2,494 | |||||||||||||
| Gain on extinguishment of debt, net of noncontrolling interests' share (4) | — | (23,395 | ) | — | (27,450 | ) | |||||||||||
| FFO allocable to Operating Partnership common unitholders, as adjusted | $ | 92,772 | $ | 99,734 | $ | 176,592 | $ | 202,714 | |||||||||
| FFO per diluted share | $ | 0.46 | $ | 0.58 | $ | 0.88 | $ | 1.12 | |||||||||
| FFO, as adjusted, per diluted share | $ | 0.46 | $ | 0.50 | $ | 0.88 | $ | 1.02 | |||||||||
| Weighted-average common and potential dilutive common shares outstanding with Operating Partnership units fully converted | 199,767 | 199,371 | 199,731 | 199,326 | |||||||||||||
| (1) Litigation expense and nonrecurring professional fees expense are included in general and administrative expense in the consolidated statements of operations. Nonrecurring professional fees reimbursement is included in interest and other income in the consolidated statements of operations. | |||||||||||||||||
| (2) The three months and six months ended June 30, 2018 includes a gain on investment related to the land contributed by the Company to the Self Storage at Mid Rivers 50/50 joint venture. The three months and six months ended June 30, 2017 includes a loss on investment related to the write down of the Company's 25% interest in River Ridge Mall based on the contract price to sell such interest to its joint venture partner. The sale closed in August 2017. | |||||||||||||||||
| (3) The three months and six months ended June 30, 2018 includes default interest expense related to Acadiana Mall. The three months and six months ended June 30, 2017 includes default interest expense related to Wausau Center and Chesterfield Mall. The six months ended June 30, 2017 also includes default interest expense related to Midland Mall. | |||||||||||||||||
| (4) The three months and six months ended June 30, 2017 primarily represents gain on extinguishment of debt related to the non-recourse loan secured by Chesterfield Mall, which was conveyed to the lender in the second quarter of 2017. The three months and six months ended June 30, 2017 also includes loss on extinguishment of debt related to a prepayment fee on the early retirement of the loans secured by The Outlet Shoppes at Oklahoma City, which was sold in April 2017. The six months ended June 30, 2017 also includes gain on extinguishment of debt related to the non-recourse loan secured by Midland Mall, which was conveyed to the lender in the first quarter of 2017. | |||||||||||||||||
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The reconciliation of diluted EPS to FFO per diluted share is as follows: |
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Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| Diluted EPS attributable to common shareholders | $ | (0.20 | ) | $ | 0.18 | $ | (0.26 | ) | $ | 0.31 | ||||||||
| Eliminate amounts per share excluded from FFO: | ||||||||||||||||||
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Depreciation and amortization expense, including amounts from consolidated properties, unconsolidated affiliates, non-real estate assets and excluding amounts allocated to noncontrolling interests |
0.40 | 0.44 | 0.80 | 0.83 | ||||||||||||||
| Loss on impairment, net of taxes | 0.26 | 0.22 | 0.35 | 0.23 | ||||||||||||||
| Gain on depreciable property, net of taxes and noncontrolling interests' share | — | (0.26 | ) | (0.01 | ) | (0.25 | ) | |||||||||||
| FFO per diluted share | $ | 0.46 | $ | 0.58 | $ | 0.88 | $ | 1.12 | ||||||||||
|
The reconciliations of FFO allocable to Operating Partnership common unitholders to FFO allocable to common shareholders, including and excluding the adjustments noted above, are as follows: |
|||||||||||||||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| FFO allocable to Operating Partnership common unitholders | $ | 92,143 | $ | 116,084 | $ | 175,047 | $ | 222,694 | |||||||||
| Percentage allocable to common shareholders (1) | 86.43 | % | 85.82 | % | 86.27 | % | 85.81 | % | |||||||||
| FFO allocable to common shareholders | $ | 79,639 | $ | 99,623 | $ | 151,013 | $ | 191,094 | |||||||||
| FFO allocable to Operating Partnership common unitholders, as adjusted | $ | 92,772 | $ | 99,734 | $ | 176,592 | $ | 202,714 | |||||||||
| Percentage allocable to common shareholders (1) | 86.43 | % | 85.82 | % | 86.27 | % | 85.81 | % | |||||||||
| FFO allocable to common shareholders, as adjusted | $ | 80,183 | $ | 85,592 | $ | 152,346 | $ | 173,949 | |||||||||
| (1) Represents the weighted average number of common shares outstanding for the period divided by the sum of the weighted average number of common shares and the weighted average number of Operating Partnership units outstanding during the period. See the reconciliation of shares and Operating Partnership units outstanding on page 16. | |||||||||||||||||
| SUPPLEMENTAL FFO INFORMATION: | ||||||||||||||||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| Lease termination fees | $ | 2,744 | $ | 864 | $ | 9,005 | $ | 1,111 | ||||||||||
| Lease termination fees per share | $ | 0.01 | $ | — | $ | 0.05 | $ | 0.01 | ||||||||||
| Straight-line rental income (write-offs) | $ | (725 | ) | $ | 559 | $ | (4,358 | ) | $ | 632 | ||||||||
| Straight-line rental income (write-offs) per share | $ | — | $ | — | $ | (0.02 | ) | $ | — | |||||||||
| Gains on outparcel sales | $ | 4,338 | $ | 2,094 | $ | 6,485 | $ | 8,091 | ||||||||||
| Gains on outparcel sales per share | $ | 0.02 | $ | 0.01 | $ | 0.03 | $ | 0.04 | ||||||||||
| Net amortization of acquired above- and below-market leases | $ | 1,387 | $ | 1,198 | $ | 2,192 | $ | 2,416 | ||||||||||
| Net amortization of acquired above- and below-market leases per share | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | 0.01 | ||||||||||
| Net amortization of debt premiums and discounts | $ | 306 | $ | (206 | ) | $ | 413 | $ | (403 | ) | ||||||||
| Net amortization of debt premiums and discounts per share | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Income tax benefit | $ | 2,235 | $ | 2,920 | $ | 2,880 | $ | 3,720 | ||||||||||
| Income tax benefit per share | $ | 0.01 | $ | 0.01 | $ | 0.01 | $ | 0.02 | ||||||||||
| Gain on extinguishment of debt, net of noncontrolling interests' share | $ | — | $ | 23,395 | $ | — | $ | 27,450 | ||||||||||
| Gain on extinguishment of debt, net of noncontrolling interests' share per share | $ | — | $ | 0.12 | $ | — | $ | 0.14 | ||||||||||
| Gain (loss) on investments, net of taxes | $ | 287 | $ | (5,843 | ) | $ | 287 | $ | (5,843 | ) | ||||||||
| Gain (loss) on investments, net of taxes per share | $ | — | $ | (0.03 | ) | $ | — | $ | (0.03 | ) | ||||||||
| Non-cash default interest expense | $ | (916 | ) | $ | (1,187 | ) | $ | (1,832 | ) | $ | (2,494 | ) | ||||||
| Non-cash default interest expense per share | $ | — | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | |||||||
| Abandoned projects expense | $ | (245 | ) | $ | (5,019 | ) | $ | (339 | ) | $ | (5,019 | ) | ||||||
| Abandoned projects expense per share | $ | — | $ | (0.03 | ) | $ | — | $ | (0.03 | ) | ||||||||
| Interest capitalized | $ | 951 | $ | 385 | $ | 1,538 | $ | 1,224 | ||||||||||
| Interest capitalized per share | $ | — | $ | — | $ | 0.01 | $ | 0.01 | ||||||||||
| Litigation expenses | $ | — | $ | (9 | ) | $ | — | $ | (52 | ) | ||||||||
| Litigation expenses per share | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Nonrecurring professional fees (expense) reimbursement | $ | — | $ | (6 | ) | $ | — | $ | 919 | |||||||||
| Nonrecurring professional fees (expense) reimbursement per share | $ | — | $ | — | $ | — | $ | — | ||||||||||
|
|
As of June 30, |
|||||||||||||||||
|
|
2018 |
2017 | ||||||||||||||||
| Straight-line rent receivable |
|
$ |
57,402 |
$ | 62,989 | |||||||||||||
|
Same-center Net Operating Income (Dollars in thousands) |
|||||||||||||||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Net income (loss) | $ | (29,976 | ) | $ | 70,627 | $ | (30,637 | ) | $ | 109,145 | |||||||
| Adjustments: | |||||||||||||||||
| Depreciation and amortization | 73,566 | 82,509 | 145,316 | 153,729 | |||||||||||||
| Depreciation and amortization from unconsolidated affiliates | 10,338 | 9,357 | 20,739 | 18,900 | |||||||||||||
| Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries | (2,122 | ) | (2,642 | ) | (4,288 | ) | (4,621 | ) | |||||||||
| Interest expense | 54,203 | 55,065 | 107,970 | 111,266 | |||||||||||||
| Interest expense from unconsolidated affiliates | 6,344 | 6,410 | 12,298 | 12,571 | |||||||||||||
| Noncontrolling interests' share of interest expense in other consolidated subsidiaries | (2,186 | ) | (1,870 | ) | (4,037 | ) | (3,576 | ) | |||||||||
| Abandoned projects expense | 245 | 5,019 | 339 | 5,019 | |||||||||||||
| Gain on sales of real estate assets | (3,747 | ) | (79,533 | ) | (8,118 | ) | (85,521 | ) | |||||||||
| (Gain) loss on sales of real estate assets of unconsolidated affiliates | (592 | ) | 3 | (592 | ) | 38 | |||||||||||
| Noncontrolling interests' share of gain on sales of real estate assets in other consolidated affiliates | — | 26,639 | — | 26,639 | |||||||||||||
| (Gain) loss on investment | (387 | ) | 5,843 | (387 | ) | 5,843 | |||||||||||
| Gain on extinguishment of debt | — | (20,420 | ) | — | (24,475 | ) | |||||||||||
| Noncontrolling interests' share of loss on extinguishment of debt in other consolidated subsidiaries | — | (2,975 | ) | — | (2,975 | ) | |||||||||||
| Loss on impairment | 51,983 | 43,203 | 70,044 | 46,466 | |||||||||||||
| Income tax benefit | (2,235 | ) | (2,920 | ) | (2,880 | ) | (3,720 | ) | |||||||||
| Lease termination fees | (2,744 | ) | (864 | ) | (9,005 | ) | (1,111 | ) | |||||||||
| Straight-line rent and above- and below-market lease amortization | (662 | ) | (1,757 | ) | 2,166 | (3,048 | ) | ||||||||||
| Net (income) loss attributable to noncontrolling interests in other consolidated subsidiaries | 494 | (24,138 | ) | 393 | (24,851 | ) | |||||||||||
| General and administrative expenses | 13,490 | 15,752 | 31,794 | 31,834 | |||||||||||||
| Management fees and non-property level revenues | (3,509 | ) | (2,293 | ) | (7,396 | ) | (7,550 | ) | |||||||||
| Operating Partnership's share of property NOI | 162,503 | 181,015 | 323,719 | 360,002 | |||||||||||||
| Non-comparable NOI | (5,486 | ) | (12,440 | ) | (12,020 | ) | (25,530 | ) | |||||||||
| Total same-center NOI (1) | $ | 157,017 | $ | 168,575 | $ | 311,699 | $ | 334,472 | |||||||||
| Total same-center NOI percentage change | (6.9)% | (6.8)% | |||||||||||||||
|
Same-center Net Operating Income (Continued) |
|||||||||||||||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||
| 2017 | 2016 | 2018 | 2017 | ||||||||||||||
| Malls | $ | 141,694 | $ | 152,119 | $ | 280,510 | $ | 301,686 | |||||||||
| Associated centers | 7,846 | 8,185 | 15,772 | 16,491 | |||||||||||||
| Community centers | 6,035 | 6,373 | 12,041 | 12,561 | |||||||||||||
| Offices and other | 1,442 | 1,898 | 3,376 | 3,734 | |||||||||||||
| Total same-center NOI (1) | $ | 157,017 | $ | 168,575 | $ | 311,699 | $ | 334,472 | |||||||||
| Percentage Change: | |||||||||||||||||
| Malls | (6.9)% | (7.0)% | |||||||||||||||
| Associated centers | (4.1)% | (4.4)% | |||||||||||||||
| Community centers | (5.3)% | (4.1)% | |||||||||||||||
| Offices and other | (24.0)% | (9.6)% | |||||||||||||||
| Total same-center NOI (1) | (6.9)% | (6.8)% | |||||||||||||||
|
(1) CBL defines NOI as property operating revenues (rental revenues, tenant reimbursements and other income), less property operating expenses (property operating, real estate taxes and maintenance and repairs). Same-center NOI excludes lease termination income, straight-line rent adjustments, amortization of above and below market lease intangibles and write-offs of landlord inducement assets. We include a property in our same-center pool when we own all or a portion of the property as of June 30, 2018, and we owned it and it was in operation for both the entire preceding calendar year and the current year-to-date reporting period ending June 30, 2018. New properties are excluded from same-center NOI, until they meet this criteria. Properties excluded from the same-center pool that would otherwise meet this criteria are properties which are either under major redevelopment, being considered for repositioning, where we intend to renegotiate the terms of the debt secured by the related property or return the property to the lender, or minority interest properties in which we own an interest of 25% or less. |
|||||||||||||||||
|
Company's Share of Consolidated and Unconsolidated Debt (Dollars in thousands) |
|||||||||||||||||||||
| As of June 30, 2018 | |||||||||||||||||||||
| Fixed Rate |
Variable Rate |
Total per Debt Schedule |
Unamortized Deferred Financing Costs |
Total | |||||||||||||||||
| Consolidated debt | $ | 3,099,680 | $ | 1,089,189 | $ | 4,188,869 | $ | (16,516 | ) | $ | 4,172,353 | ||||||||||
| Noncontrolling interests' share of consolidated debt | (76,413 | ) | (5,387 | ) | (81,800 | ) | 642 | (81,158 | ) | ||||||||||||
| Company's share of unconsolidated affiliates' debt | 555,880 | 82,180 | 638,060 | (2,177 | ) | 635,883 | |||||||||||||||
| Company's share of consolidated and unconsolidated debt | $ | 3,579,147 | $ | 1,165,982 | $ | 4,745,129 | $ | (18,051 | ) | $ | 4,727,078 | ||||||||||
| Weighted-average interest rate | 5.16 | % | 3.57 | % | 4.77 | % | |||||||||||||||
| As of June 30, 2017 | |||||||||||||||||||||
| Fixed Rate |
Variable Rate |
Total per Debt Schedule |
Unamortized Deferred Financing Costs |
Total | |||||||||||||||||
| Consolidated debt | $ | 3,184,580 | $ | 1,081,266 | $ | 4,265,846 | $ | (16,406 | ) | $ | 4,249,440 | ||||||||||
| Noncontrolling interests' share of consolidated debt | (93,377 | ) | (5,449 | ) | (98,826 | ) | 765 | (98,061 | ) | ||||||||||||
| Company's share of unconsolidated affiliates' debt | 526,136 | 72,002 | 598,138 | (2,506 | ) | 595,632 | |||||||||||||||
| Company's share of consolidated and unconsolidated debt | $ | 3,617,339 | $ | 1,147,819 | $ | 4,765,158 | $ | (18,147 | ) | $ | 4,747,011 | ||||||||||
| Weighted-average interest rate | 5.25 | % | 2.58 | % | 4.61 | % | |||||||||||||||
|
Debt-To-Total-Market Capitalization Ratio as of June 30, 2018 (In thousands, except stock price) |
|||||||||||
|
Shares Outstanding |
Stock
Price (1) |
Value | |||||||||
| Common stock and Operating Partnership units | 199,428 | $ | 5.57 | $ | 1,110,814 | ||||||
| 7.375% Series D Cumulative Redeemable Preferred Stock | 1,815 | 250.00 | 453,750 | ||||||||
| 6.625% Series E Cumulative Redeemable Preferred Stock | 690 | 250.00 | 172,500 | ||||||||
| Total market equity | 1,737,064 | ||||||||||
| Company's share of total debt, excluding unamortized deferred financing costs | 4,745,129 | ||||||||||
| Total market capitalization | $ | 6,482,193 | |||||||||
| Debt-to-total-market capitalization ratio | 73.2 | % | |||||||||
|
(1) Stock price for common stock and Operating Partnership units equals the closing price of the common stock on June 29, 2018. The stock prices for the preferred stocks represent the liquidation preference of each respective series. |
|||||||||||
|
Reconciliation of Shares and Operating Partnership Units Outstanding (In thousands) |
|||||||||||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||
| Basic | Diluted | Basic | Diluted | ||||||||||
| 2018: | |||||||||||||
| Weighted-average shares - EPS | 172,662 | 172,662 | 172,304 | 172,304 | |||||||||
| Weighted-average Operating Partnership units | 27,105 | 27,105 | 27,427 | 27,427 | |||||||||
| Weighted-average shares - FFO | 199,767 | 199,767 | 199,731 | 199,731 | |||||||||
| 2017: | |||||||||||||
| Weighted-average shares - EPS | 171,095 | 171,095 | 171,042 | 171,042 | |||||||||
| Weighted-average Operating Partnership units | 28,276 | 28,276 | 28,284 | 28,284 | |||||||||
| Weighted-average shares - FFO | 199,371 | 199,371 | 199,326 | 199,326 | |||||||||
|
Dividend Payout Ratio |
|||||||||||||||||
|
Three Months Ended June 30, |
Six Months Ended June 30, |
||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Weighted-average cash dividend per share | $ | 0.20888 | $ | 0.27281 | $ | 0.41773 | $ | 0.54562 | |||||||||
| FFO, as adjusted, per diluted fully converted share | $ | 0.46 | $ | 0.50 | $ | 0.88 | $ | 1.02 | |||||||||
| Dividend payout ratio | 45.4 | % | 54.6 | % | 47.5 | % | 53.5 | % | |||||||||
|
Consolidated Balance Sheets
(Unaudited; in thousands, except share data) |
|||||||||
| As of | |||||||||
|
June 30, 2018 |
December 31, 2017 |
||||||||
| ASSETS | |||||||||
| Real estate assets: | |||||||||
| Land | $ | 797,045 | $ | 813,390 | |||||
| Buildings and improvements | 6,591,966 | 6,723,194 | |||||||
| 7,389,011 | 7,536,584 | ||||||||
| Accumulated depreciation | (2,501,864 | ) | (2,465,095 | ) | |||||
| 4,887,147 | 5,071,489 | ||||||||
| Held for sale | 17,412 | — | |||||||
| Developments in progress | 109,562 | 85,346 | |||||||
| Net investment in real estate assets | 5,014,121 | 5,156,835 | |||||||
| Cash and cash equivalents | 23,428 | 32,627 | |||||||
| Receivables: | |||||||||
|
Tenant, net of allowance for doubtful accounts of $2,097 and $2,011 in 2018 and 2017, respectively |
76,367 | 83,552 | |||||||
| Other, net of allowance for doubtful accounts of $838 in 2018 and 2017 | 6,056 | 7,570 | |||||||
| Mortgage and other notes receivable | 8,429 | 8,945 | |||||||
| Investments in unconsolidated affiliates | 278,168 | 249,192 | |||||||
| Intangible lease assets and other assets | 172,438 | 166,087 | |||||||
| $ | 5,579,007 | $ | 5,704,808 | ||||||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | |||||||||
| Mortgage and other indebtedness, net | $ | 4,172,353 | $ | 4,230,845 | |||||
| Accounts payable and accrued liabilities | 221,507 | 228,650 | |||||||
| Total liabilities | 4,393,860 | 4,459,495 | |||||||
| Commitments and contingencies | |||||||||
| Redeemable noncontrolling interests | 8,694 | 8,835 | |||||||
| Shareholders' equity: | |||||||||
| Preferred stock, $.01 par value, 15,000,000 shares authorized: | |||||||||
|
7.375% Series D Cumulative Redeemable Preferred Stock, 1,815,000 shares outstanding |
18 | 18 | |||||||
|
6.625% Series E Cumulative Redeemable Preferred Stock, 690,000 shares outstanding |
7 | 7 | |||||||
|
Common stock, $.01 par value, 350,000,000 shares authorized, 172,661,708 and 171,088,778 issued and outstanding in 2018 and 2017, respectively |
1,727 | 1,711 | |||||||
| Additional paid-in capital | 1,966,491 | 1,974,537 | |||||||
| Dividends in excess of cumulative earnings | (880,292 | ) | (836,269 | ) | |||||
| Total shareholders' equity | 1,087,951 | 1,140,004 | |||||||
| Noncontrolling interests | 88,502 | 96,474 | |||||||
| Total equity | 1,176,453 | 1,236,478 | |||||||
| $ | 5,579,007 | $ | 5,704,808 | ||||||
