CBL & Associates Properties, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. The unaudited filing covers a mall-focused REIT operating 71 consolidated properties and holding interests in 20 unconsolidated properties across 22 states.
Financial and operating results
Dollar amounts are in millions unless stated otherwise.
| Metric | Q1 2024 | Q1 2023 | Change / context |
|---|---|---|---|
| Total revenue | $129.1 | $136.4 | Down $7.2, or 5.3% |
| Net income (loss) | $(0.5) | $0.5 | Company-attributable net income was $0.05; common shareholders’ net loss was $0.21, or $(0.01) per share |
| Operating cash flow | $30.7 | $33.2 | Down $2.4 |
| Adjusted FFO allocable to Operating Partnership common unitholders | $47.3 | $49.9 | Down; non-GAAP measure |
| Same-center NOI | $108.8 | $105.0 | Up 3.6%; non-GAAP measure |
Rental revenue was $124.0 million, down $6.3 million. Management cited higher reserves for at-risk tenant receivables, lower tenant reimbursements following tax assessment appeals, and lower percentage rents associated with weaker tenant sales. Total property operating expenses fell $7.9 million, primarily from lower real estate taxes and janitorial and security costs. Interest expense decreased $3.7 million, partly offset by higher variable-rate borrowing costs. Q1 included a $3.7 million gain on an anchor-parcel sale and an $0.8 million impairment loss on an outparcel.
Balance sheet, debt and liquidity
- At March 31, 2024, total assets were $2.34 billion, net real estate assets were $1.56 billion, total liabilities were $2.03 billion and total equity was $314.9 million.
- Consolidated debt, before financing-cost and debt-discount deductions, was $1.91 billion; reported net consolidated debt was $1.86 billion. The company reports that consolidated debt is non-recourse and is borrowed by the Operating Partnership or subsidiaries, not CBL itself.
- Total pro rata debt, including unconsolidated affiliates and other debt, was $2.62 billion at a weighted-average rate of 6.53%. Approximately 40% was variable-rate debt. Management estimates a 0.5 percentage-point rate increase would raise annual interest expense by about $5.2 million.
- Management reported $295.3 million of available unrestricted cash and U.S. Treasury securities: $60.3 million in cash and $235.0 million in Treasuries. Cash, cash equivalents and restricted cash totaled $127.3 million; restricted cash is not generally available for unrestricted corporate use.
- Scheduled consolidated debt principal payments, excluding extension options, include $148.6 million for the remainder of 2024 and $933.1 million in 2025. The filing notes that subsequent to quarter-end the company exercised a one-year extension on the Fayette Mall loan. It also reports $69.8 million of pro rata debt from two property loans in receivership that matured before 2024.
- Operating cash flow was $30.7 million; investing cash flow was $26.8 million, including net redemptions of Treasury securities; financing cash outflow was $53.4 million, including $34.3 million of principal payments and $12.9 million of common dividends.
Material changes and operating trends
- Compared with Q1 2023, GAAP results no longer included the prior-year $28.2 million gain from deconsolidating Alamance Crossing East, which had entered receivership. Lower depreciation and amortization, property expenses and interest expense partly offset this comparison effect.
- Same-center tenant sales per square foot declined 3.7% to $417 for the trailing 12 months ended March 31, 2024. Portfolio occupancy was 89.4%, versus 89.9% a year earlier; same-center malls, lifestyle centers and outlet centers were 87.7%, versus 88.2%.
- Comparable small-shop new and renewal leases signed during the quarter showed a 7.1% increase in initial gross rent per square foot versus prior rents; this leasing statistic applies to the reported space and is not a portfolio-wide rent growth measure.
- The company paid a $0.40-per-share common dividend in Q1 and repurchased 239,411 shares under its repurchase program for approximately $5.0 million. It repurchased a further 161,533 shares for $3.6 million in April.
Outlook, risks and notable disclosures
- No specific earnings, revenue, FFO or occupancy guidance is provided. Management says its priorities are improving occupancy, rent growth and tenant mix, redeveloping former anchor space, reducing debt, extending maturities and lowering borrowing costs. It cautions that interim and seasonal results may not indicate full-year performance; the fourth quarter typically benefits from holiday sales and leasing.
- Key risks identified include interest-rate changes, capital availability and refinancing, tenant bankruptcies or closures, retail demand and online competition, occupancy and operating-cost changes, and execution of property acquisitions, dispositions and redevelopment.
- Litigation arises in the ordinary course and is generally expected to be insured; management does not expect these matters to materially harm liquidity or results. Environmental outcomes are considered reasonably possible, but management believes maximum exposure would not be material. The Operating Partnership had $0.5 million of recorded guarantee liabilities; the covered joint-venture loans were reported current and performing.
- Two properties, Alamance Crossing East and WestGate Mall, were deconsolidated after entering receivership in connection with foreclosure processes. The Fayette Mall loan extension and April share repurchases occurred after quarter-end.
- Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Investor facts to verify
- Review the timing, terms and refinancing plan for the large 2025 debt maturities, including the impact and conditions of the Fayette Mall extension.
- Assess exposure to variable rates, the secured term loan, and the $69.8 million of matured property debt tied to properties in receivership.
- Track tenant credit reserves, rent collections, tenant sales, occupancy and the sustainability of same-center NOI improvement.
- Reconcile reported liquidity with restricted cash, Treasury maturities and cash needs for debt service, capital expenditures and dividends.
- Evaluate whether redevelopment and re-tenanting projects achieve stated opening schedules and expected yields, and whether share repurchases and dividends remain consistent with debt-reduction priorities.