CBL & Associates Properties, Inc. - Q1 1999 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 1999. CBL & Associates Properties, Inc. is a real estate investment trust (REIT) owning and operating a portfolio of regional malls, community centers, and associated centers. As of the reporting date, the portfolio included 24 regional malls, 13 associated centers, and 82 community centers, along with joint venture investments and mortgage income.
Key Financial Metrics
| Metric | Q1 1999 | Q1 1998 |
|---|---|---|
| Total Revenues | $74.5 million | $55.1 million |
| Net Income | $13.7 million | $10.6 million |
| Net Income Available to Common Shareholders | $12.1 million | $10.6 million |
| Diluted EPS | $0.49 | $0.44 |
| Funds From Operations (FFO) | $27.3 million | $22.0 million |
| Operating Cash Flow | $22.1 million | $16.0 million |
| Total Debt (Mortgage & Other) | $1.239 billion | $1.208 billion |
| Cash and Cash Equivalents | $10.2 million | $5.8 million |
| Debt to Total Market Capitalization | 57.8% | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 35.4% to $74.5 million. This was driven by a 32.7% increase in minimum rents and a 33.8% increase in tenant reimbursements. Approximately $16.3 million of the revenue increase is attributed to eleven new centers opened or acquired in the prior 15 months.
- Expense Increases: Property operating expenses rose 33.9% to $22.5 million, and interest expense increased 43.5% to $19.8 million, primarily due to the addition of new properties and associated debt.
- Occupancy and Sales: Total portfolio occupancy improved to 93.8% from 93.4%. Mall shop sales in stabilized malls increased 6.6% on a comparable per square foot basis.
- Asset Sales: Gains on sales of real estate assets increased to $4.8 million from $1.9 million, largely due to outparcel sales at Sand Lake Corner and The Landing at Arbor Place.
Outlook, Risks, and Management Commentary
- Liquidity: The company maintains $64.9 million in available credit facilities and $46.1 million in unfunded construction loans. Management expects adequate liquidity to fund capital programs and REIT distributions.
- Development Pipeline: Significant projects under construction include Arbor Place Mall (Douglasville, GA), The Mall of South Carolina (Myrtle Beach, SC), and Parkway Place (Huntsville, AL). Fiddler's Run (Morganton, NC) opened in March 1999 at 100% leased.
- Debt Management: The company has utilized interest rate swaps to fix rates on $314 million of variable debt. Remaining variable debt exposure on operating properties is effectively eliminated via caps or capitalization of interest on construction projects.
- Year 2000 Compliance: Management believes core systems are compliant, though risks remain regarding third-party vendors and tenants. Contingency plans are in place.
- Environmental Contingencies: Environmental studies are ongoing at Parkway Place in Huntsville, AL, regarding potential petroleum hydrocarbon contamination. Management does not expect this to be material to financial position.
Investor Verification Checklist
- Verify the occupancy rates and sales performance of the "New Malls" category (Springdale, Bonita Lakes, Parkway Place) as they are in the initial lease-up phase.
- Confirm the status of the $116.4 million in standby purchase agreements for co-development projects and the conditions required for funding.
- Monitor the environmental remediation progress and potential costs at Parkway Place in Huntsville, AL.
- Review the maturity schedule of the $1.239 billion in debt, noting the company's intent to refinance maturing notes.
- Assess the impact of the 25.8% minority interest in the Operating Partnership held by executives on potential future share dilution upon exchange.