CBL & Associates Properties, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. CBL is a retail-focused REIT operating malls, outlet and lifestyle centers, open-air centers, and other properties, primarily in the Southeast and Midwest. It reported interests in 72 consolidated and 20 unconsolidated properties.
Comparability caution: CBL emerged from Chapter 11 on November 1, 2021 and adopted fresh start accounting. The 2022 “Successor” and 2021 “Predecessor” periods therefore use different accounting bases and are not directly comparable.
Financial and operating highlights
Amounts below are in millions, except per-share data, percentages, and where noted.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $136.3 | $150.4 | $413.4 | $420.1 |
| Net loss | $17.4 | $42.9 | $104.4 | $80.7 |
| Net loss attributable to common shareholders | $14.5 | $41.7 | $96.8 | $77.4 |
| Operating cash flow | Not separately stated | Not separately stated | $153.8 | $202.2 |
| Same-center NOI | $105.5 | $113.5 | $322.9 | $317.4 |
| Operating Partnership FFO | $49.5 | $74.5 | $115.4 | $215.5 |
| Adjusted Operating Partnership FFO | $59.0 | $95.3 | $176.3 | $243.5 |
- Revenue and property performance: Revenue fell about 9% year over year in Q3 and 2% year to date. Same-center NOI declined 7.0% in Q3 but increased 1.8% year to date. Management attributed Q3 pressure to lower revenues and higher operating costs; year-to-date NOI benefited from occupancy gains and higher percentage rent.
- Leasing and occupancy: Portfolio occupancy was 90.5%, versus 88.4% a year earlier. Trailing-twelve-month same-center tenant sales per square foot rose to $440 from $431. Management said Q3 was the first quarter of overall positive lease spreads in several years; it also noted moderation in sales and percentage rents.
- Profitability and unusual items: Q3 net loss narrowed year over year, while the nine-month net loss widened. The 2022 nine-month results included a $36.3 million gain on deconsolidation of Greenbrier Mall. Interest expense was $183.4 million for the nine months, including $108.3 million of debt-discount accretion related to fresh start accounting. The 2021 comparison included $120.3 million of impairment charges and $52.0 million of reorganization costs.
- Cash and liquidity: At September 30, CBL had $85.8 million of cash and $249.9 million of U.S. Treasury securities, or $335.7 million of unrestricted cash and securities in total. Restricted cash was $83.0 million. Nine-month operating cash flow was $153.8 million; cash, cash equivalents, and restricted cash decreased $67.5 million to $168.7 million.
- Debt: Consolidated mortgage and other indebtedness, net, was $2.017 billion. CBL’s pro rata share of consolidated, unconsolidated, and other debt was $2.838 billion before deferred financing costs and debt discounts; 40.0% was variable-rate debt. The weighted-average rate on that pro rata debt was 5.12%, versus 5.12% at year-end 2021, while the variable-rate share increased from 32.8%. A 0.5 percentage-point rate change was estimated to affect annual cash flows by about $5.7 million.
- Financing and dividends: CBL issued 10.98 million common shares to settle $150 million of exchangeable notes. It redeemed all $335 million of 10% senior secured notes using proceeds from new property-level financing, eliminating the notes’ recourse guaranty. The board established a regular quarterly dividend; $0.25 per share was paid in each of Q2 and Q3. Future dividends remain subject to board discretion.
Outlook, risks, and contingencies
- Refinancing risk: At September 30, $699.5 million of property-level debt and related obligations, including unconsolidated debt, was maturing or callable within 12 months. Subsequent extensions or waivers covered $150.9 million, leaving $548.6 million for which management intended to refinance or extend. If unsuccessful, CBL said it may repay debt using available liquidity or convey properties to lenders. Several loans were already past maturity at quarter-end.
- Subsequent events: After quarter-end, Greenbrier Mall’s lender foreclosed; Southpark Mall’s $54.4 million loan was extended through June 2026; Jefferson Mall’s $56.6 million loan was reinstated with a default waiver; and Gettysburg’s loan was modified, eliminating corporate recourse. Cross Creek Mall’s $98.7 million loan received only a short extension through January 5, 2023, with longer-term discussions continuing.
- Management’s strategy: CBL plans to redevelop properties, diversify tenant mixes, reduce debt, extend maturities, and lower borrowing costs. It reported no quantified earnings or operating guidance in the supplied filing text.
- Risks and legal matters: Risks include refinancing availability and cost, higher interest rates, tenant bankruptcies and store closures, changing retail demand, operating-cost inflation, and economic or pandemic effects. In a securities class action, the company was dismissed in May 2022, but individual defendants remain; discovery is ongoing and a class-certification motion was pending. The filing says the outcome cannot be predicted. CBL also adopted a rights plan expiring September 8, 2023, with a 10% ownership trigger subject to exceptions, which may deter an acquisition.
Investor verification priorities
- Confirm the status, terms, and funding plan for the $548.6 million of debt still requiring refinancing or extension after reported post-quarter actions, and assess potential property conveyances.
- Reconcile consolidated debt with CBL’s $2.838 billion pro rata debt measure, including unconsolidated and deconsolidated-property obligations.
- Assess operating trends using same-center NOI, occupancy, leasing spreads, sales, and expense growth, while accounting for fresh start comparability limits and excluded properties.
- Evaluate cash generation and interest burden apart from noncash debt-discount accretion; review adjusted FFO alongside GAAP losses and cash flows.
- Track the securities litigation, rights-plan terms, and the board’s future dividend decisions.