CBL & Associates Properties, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Amounts below are in U.S. dollars; financial figures are generally rounded to millions. The filing combines CBL and its Operating Partnership, which conducts substantially all of the business.
Business context
CBL is a retail-focused REIT operating malls, open-air and mixed-use centers, outlet and community centers, and other properties. At quarter-end it reported 74 consolidated and 24 unconsolidated properties. The company was operating as a debtor-in-possession after filing for Chapter 11 protection beginning November 1, 2020.
Financial and operating performance
- Revenue: $133.2 million, down 20.5% from $167.6 million in Q1 2020. Rental revenue was $128.2 million, down $33.0 million. Management attributed pressure to pandemic-related rent concessions, tenant financial distress and uncollectible rents.
- Loss and earnings: Net loss was $28.3 million versus $139.3 million; net loss attributable to common shareholders was $26.8 million versus $133.9 million. Basic and diluted loss per share was $0.14 versus $0.75.
- Cash flow: Operating cash flow was $62.8 million, compared with $38.7 million. Investing cash outflow was $2.6 million, versus $172.6 million; financing cash outflow was $13.8 million, versus $260.0 million of inflow. Cash, cash equivalents and restricted cash ended at $168.2 million.
- Liquidity: Unrestricted cash was $84.7 million and available-for-sale U.S. Treasury securities were $232.8 million. Restricted cash was $83.5 million and is subject to escrow or lender-use restrictions.
- Debt: Consolidated mortgage and other indebtedness, net, was $1.037 billion, with a further $2.551 billion classified as liabilities subject to compromise. Management reported total pro rata debt of $4.377 billion, including its share of unconsolidated and other debt. The secured credit facility and senior unsecured notes were in default following the Chapter 11 filing; additional property-level debt faced default or acceleration risk.
- Other performance measures: Same-center NOI declined 17.2% to $100.0 million. FFO attributable to Operating Partnership common unitholders was $90.2 million, or $68.7 million adjusted for specified items; these are non-GAAP measures and are not substitutes for cash flow or GAAP earnings.
Changes versus Q1 2020
- Total expenses fell to $166.2 million from $262.9 million, largely because impairment charges declined to $57.2 million from $133.6 million. Three malls—Eastland, Old Hickory and Stroud—were impaired in Q1 2021.
- Interest expense reported in the income statement fell to $24.1 million from $47.0 million, principally because post-petition interest on the senior unsecured notes and secured credit facility was not accrued under bankruptcy accounting. The filing says $44.8 million of contractual interest expense was unrecognized for Q1 2021.
- A $55.1 million gain on deconsolidation of Asheville Mall and Park Plaza, placed in receivership during foreclosure proceedings, and $22.9 million of Chapter 11 reorganization costs were significant Q1 2021 items.
- Same-center mall sales per square foot for Q1 2021 were 12.5% above Q1 2019; management noted sales for the first two months of 2021 were down 3% versus the comparable 2020 period. Portfolio occupancy was 85.4%, versus 89.5% a year earlier; mall occupancy was 83.2%, versus 87.8%.
Outlook, restructuring and risks
- Management issued no full-year 2021 guidance, citing uncertainty from COVID-19. It expected the pandemic to continue materially affecting revenues, results and cash flows during 2021, while noting improving traffic and sales as restrictions eased and vaccinations increased.
- The Amended Restructuring Support Agreement contemplated eliminating more than $1.6 billion of debt and preferred obligations. Its proposed terms included new secured debt and cash for creditors, 89% of reorganized-company common equity for noteholders, and up to 11% for existing common and preferred stakeholders. The Proposed Plan was filed April 15, 2021; court approval to perform under the RSA was received April 29. Plan confirmation and completion remained pending, with a target effective date no later than November 1, 2021.
- Management stated there was substantial doubt about the company’s ability to continue as a going concern within one year, dependent on successful implementation of the restructuring plan. Debt acceleration, lender actions, lease assumption or rejection, and the uncertain Chapter 11 outcome could materially change the business and capital structure.
- NYSE trading was suspended and delisting proceedings were initiated; common and preferred depositary shares traded on OTC Markets. Dividends and distributions remained suspended, and the company did not expect to resume them before the reorganization concluded.
- COVID-19, tenant bankruptcies and closures, rent collection and leasing conditions, property impairments, refinancing and interest-rate exposure, litigation, and guarantees of joint-venture debt were material risks. The company also reported ineffective disclosure controls due to a material weakness: insufficient accounting and financial-reporting personnel following turnover.
Important facts for investors to verify
- Whether the Bankruptcy Court confirms and the company completes the Proposed Plan, and the final treatment of each creditor and existing equity class.
- Cash available for general use versus restricted cash and Treasury securities, and the timing and accessibility of those securities.
- Actual debt maturities, defaults, lender negotiations and property-level acceleration exposure; confirm how pro rata debt differs from balance-sheet debt.
- Rent collections, tenant concessions and bankruptcies, occupancy, leasing spreads, and whether same-center NOI stabilizes.
- Potential further impairments and the sensitivity of mall valuations to management’s cash-flow, capitalization-rate and discount-rate assumptions.
- Progress in remediating the material weakness in internal controls and the status of NYSE delisting proceedings and OTC trading.