CBL & Associates Properties, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. CBL is a REIT operating malls, outlet and lifestyle centers, open-air centers, and other properties. Unless otherwise stated, dollar amounts below are in millions.
Financial results and operating metrics
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $140.1 | $133.2 |
| Net loss | $(43.2) | $(28.3) |
| Net loss attributable to common shareholders | $(40.7) | $(26.8) |
| Loss per common share | $(1.45) | $(0.14) |
| Cash provided by operating activities | $42.4 | $62.8 |
| Cash used in investing activities | $(2.4) | $(2.6) |
| Cash used in financing activities | $(31.0) | $(13.8) |
- Revenue rose 5.2%, mainly from higher rental revenue. Management reported same-center NOI of $111.1 million, up 10.7%; the improvement included better collections versus the pandemic-affected prior-year quarter.
- Management said sales increased 0.9% year over year for the quarter. Trailing-12-month same-center sales per square foot reached $447, up 12.6%. Portfolio occupancy was 88.3%, compared with 85.4%; same-center malls, lifestyle and outlet centers were 86.5%, compared with 83.2%.
- Cash, cash equivalents and restricted cash totaled $245.2 million at quarter-end, including $185.7 million of cash and $59.4 million of restricted cash. CBL also held $150.0 million of U.S. Treasuries, reported separately; management described $335.7 million as available unrestricted cash and Treasuries.
- Balance-sheet mortgage and other indebtedness, net, was $1.639 billion; 10% senior secured notes were carried separately at $395.6 million fair value. Management’s pro rata measure of consolidated, unconsolidated and other debt was $2.982 billion before debt discounts and deferred financing costs; its weighted-average interest rate was 5.00%.
Material changes and comparability
- Results are not directly comparable: CBL adopted fresh-start accounting on emergence from Chapter 11 on November 1, 2021, creating a new reporting entity and accounting basis. The filing labels 2022 “Successor” and 2021 “Predecessor.”
- Net loss increased by $14.9 million. The largest adverse year-over-year items were $66.5 million higher interest expense, $20.8 million higher depreciation and amortization, a $18.9 million smaller deconsolidation gain, and $5.5 million higher general and administrative expense. Lower impairment and reorganization charges and improved equity-method earnings partly offset these increases.
- Interest expense included $62.7 million of accretion of fresh-start debt discounts on property-level debt approaching maturity. Cash provided by operations fell $20.3 million, principally because CBL paid interest on its new corporate debt in 2022 but did not pay that interest in the prior-year period following its bankruptcy filing.
- In February, CBL exchanged $150 million of 7% exchangeable notes for 10,982,795 common shares, plus cash in lieu of fractional shares. The exchange increased shares outstanding; share-count changes and fresh-start accounting affect per-share comparisons.
- CBL deconsolidated Greenbrier Mall after it entered receivership and recognized a $36.3 million gain. The loan balance was $61.6 million. No significant consolidated property dispositions occurred in the quarter.
Outlook, liquidity, risks and unusual items
- Going concern: At issuance, CBL reported $0.9 billion of property-level debt and related obligations maturing or callable within the next 12 months, after obtaining waivers, refinancing or extensions for about $0.2 billion. The collateral properties represented approximately 10–12% of projected annual operating cash flows. CBL stated it did not have sufficient liquidity to meet the obligations as due, raising substantial doubt about its ability to continue as a going concern. Management plans to refinance or extend debt; if unsuccessful, it may repay debt where liquidity permits or convey properties to lenders. Management concluded its plans were probable of alleviating the doubt, but the filing provides no assurance of success.
- Debt pressure includes $409.4 million of scheduled consolidated principal payments for April–December 2022, of which $362.7 million related to six operating-property loans. Several loans were already in default or had matured; CBL was negotiating extensions. Cross Creek Mall’s $101.1 million loan had only been extended through May 2022 as of quarter-end. Some joint ventures also entered forbearance agreements following defaults triggered by CBL’s bankruptcy filing.
- After quarter-end, Arbor Place’s loan was extended to May 2026; a new $40 million, 10-year non-recourse loan for Shoppes at Eagle Point replaced a partial-recourse loan; and CBL announced a conditional plan to redeem $60 million of secured notes, dependent on receiving proceeds from new financing. These subsequent transactions do not eliminate the broader refinancing risk described in the filing.
- Management cited improving traffic, sales, tenant demand and occupancy, and a strategy of diversifying tenant mixes and reusing former anchor spaces. No quantitative full-year earnings or operating guidance is provided in the supplied filing text.
- Controls risk: management concluded disclosure controls and internal control over financial reporting were ineffective due to a material weakness involving an insufficient complement of accounting and reporting personnel. Hiring and other remediation efforts were underway.
- Legal matters include securities litigation. On May 3, 2022, the court dismissed CBL from the class action but left individual defendants in the case; the outcome remained uncertain. CBL said other litigation was not expected to have a material adverse effect based on current expectations. Environmental losses were considered reasonably possible, but estimated maximum exposure was not expected to be material.
- Other risk factors include interest-rate exposure, tenant bankruptcies and closures, retail-market changes, access to financing, and COVID-19-related uncertainty. A 0.5 percentage-point change in rates was estimated to change annual cash flows on variable-rate debt by approximately $5.0 million.
Most important facts for investors to verify
- Progress and terms of refinancing, extensions and forbearance agreements for near-term maturities, defaults and callable obligations; verify whether conditional secured-note redemption financing closed.
- Actual liquidity available for debt service, including restrictions on cash and property-level funds, and any further property transfers or receiverships.
- Whether the material weakness in financial reporting controls has been fully remediated and independently tested.
- Whether operating improvement persists in collections, occupancy, sales, leasing spreads and same-center NOI, separating recovery effects from ongoing property performance.
- Effects of fresh-start accounting and the 2022 share issuance on comparisons of debt expense, earnings, FFO and per-share results.