CBL & Associates Properties, Inc. - Q1 2004 Filing Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 2004. CBL & Associates Properties, Inc. is a self-managed, self-administered Real Estate Investment Trust (REIT) engaged in the ownership, development, acquisition, leasing, management, and operation of regional shopping malls and community centers. As of the reporting date, the company held controlling interests in 58 regional malls, 23 associated centers, and 14 community centers, primarily located in the Southeast and Midwest United States.
Key Financial Metrics
| Metric | Q1 2004 | Q1 2003 |
|---|---|---|
| Total Revenues | $172.97 million | $163.59 million |
| Net Income | $34.61 million | $26.47 million |
| Net Income Available to Common Shareholders | $30.19 million | $22.78 million |
| Diluted EPS (Common) | $0.96 | $0.74 |
| Funds From Operations (FFO) | $69.66 million | $67.30 million |
| Cash Flow from Operating Activities | $78.75 million | $58.51 million |
| Total Debt (Consolidated) | $2.81 billion | $2.71 billion |
| Cash and Cash Equivalents | $35.79 million | $22.99 million |
| Portfolio Occupancy | 90.8% | 90.5% |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased by $9.4 million (5.7%) year-over-year. This was driven primarily by the inclusion of "New Properties" (acquisitions and developments since April 2003) which added $17.2 million in minimum rents and tenant reimbursements.
- Gain on Sales: A significant non-recurring gain of $19.8 million was recorded in Q1 2004, compared to $1.1 million in Q1 2003. This was primarily due to the sale of six community centers to Galileo America, Inc. (Phase II of the joint venture transaction).
- Acquisitions: The company acquired Honey Creek Mall (Terre Haute, IN) and Volusia Mall (Daytona Beach, FL) in March 2004 for a combined purchase price of approximately $201.6 million.
- Expense Increases: Depreciation and amortization increased by $6.5 million, largely due to new properties and the consolidation of PPG Venture I Limited Partnership following the adoption of FASB Interpretation No. 46. General and administrative expenses rose $1.9 million due to personnel additions for new properties.
- Debt Structure: Total consolidated debt increased by approximately $104 million. The company maintained a conservative structure with 81.3% of total debt being fixed-rate. Variable-rate debt represented 18.7% of the total.
Outlook, Risks, and Management Commentary
- Economic Outlook: Management notes signs of economic improvement, citing a 7.5% increase in same-store sales for stabilized malls. However, they anticipate continued tenant bankruptcies and store closings, though they believe the worst of the downturn is behind them.
- Interest Rate Risk: The company is monitoring potential interest rate hikes. They have minimized exposure by securing long-term, non-recourse, fixed-rate debt. Only $190 million of debt matures within the next 24 months.
- Liquidity: The company maintains $35.8 million in unrestricted cash and has access to $365 million in secured credit facilities and $130 million in an unsecured line of credit. They expect adequate liquidity to fund capital programs and distributions.
- Future Transactions: Phase III of the Galileo America transaction, involving the sale of five community centers for $86.8 million, is scheduled to close in January 2005. Additionally, the company acquired Greenbrier Mall (Chesapeake, VA) on April 8, 2004, for $107.3 million.
- Contingencies: The company has guaranteed portions of debt for unconsolidated affiliates, including $29.1 million for Parkway Place L.P. and up to $70 million for Imperial Valley Mall L.P. Management believes pending litigation and environmental exposures will not materially affect financial position.
Investor Verification Checklist
- Verify the sustainability of the $19.8 million gain on sales, as it is a non-recurring item driven by the Galileo America transaction.
- Monitor the impact of the 64 store closings due to bankruptcies on future rental income and vacancy rates.
- Review the terms of the $130 million unsecured line of credit maturing May 31, 2004, and the company's refinancing plans for the $154 million of debt maturing before March 31, 2005.
- Assess the progress of the Phase III Galileo America sale scheduled for January 2005 and its impact on future cash flows.
- Confirm the occupancy trends in "Non-Stabilized Malls" (currently at 81.5%) versus "Stabilized Malls" (91.5%) to gauge lease-up performance.