CBL & Associates Properties, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; this is an annual report, not a standalone fourth-quarter filing. Filed April 8, 2021. CBL is a retail-focused REIT operating malls and other properties, principally in the southeastern and midwestern United States.
Financial and operating performance
| Metric | FY2020 | FY2019 | Change / context |
|---|---|---|---|
| Total revenue | $575.9 million | $768.7 million | Down $192.8 million, or about 25% |
| Net loss | $335.5 million | $131.7 million | Loss increased; diluted loss per share was $1.75 versus $0.89 |
| Same-center NOI | $420.3 million | $535.3 million | Down $115.0 million, or 21.5% |
| FFO allocable to Operating Partnership common unitholders | $108.2 million | $280.3 million | Down 61.4%; adjusted FFO was $140.8 million versus $271.5 million |
| Adjusted FFO per diluted share | $0.70 | $1.36 | Down from prior year |
| Cash provided by operating activities | $133.4 million | $273.4 million | Down $140.0 million |
| Occupancy | 87.5% | 91.2% | Bankruptcy-related store closures reduced occupancy by about 331 basis points |
Revenue pressure reflected mandated closures, lower percentage rents, tenant bankruptcies, concessions and uncollectible rent. CBL recorded $48.2 million of uncollectible rental revenue and granted $25.4 million of abatements and $30.6 million of deferrals. The filing does not provide a directly comparable company-wide operating margin.
At year-end, cash and cash equivalents were $61.8 million and available-for-sale U.S. Treasury securities were $233.1 million. Management reported $294.9 million of unrestricted cash and Treasury securities; an additional $59.9 million was restricted. Capital expenditures were $23.0 million, excluding development and expansion expenditures, versus $72.0 million in 2019.
CBL’s pro rata share of consolidated and unconsolidated debt was approximately $4.389 billion. The secured credit facility had $1.115 billion outstanding and was subject to a 9.50% post-default rate. The $1.375 billion of senior unsecured notes and the secured facility were classified among $2.551 billion of liabilities subject to compromise. Property-level debt also faced defaults or potential acceleration. Interest expense reported for 2020 was $200.7 million; the company disclosed $30.1 million of contractual interest not recognized after the Chapter 11 filing.
Material changes and unusual items
- CBL and the Operating Partnership filed for Chapter 11 protection beginning November 1, 2020 and operated as debtors-in-possession. Creditors’ enforcement actions were generally stayed, but the filing triggered defaults and acceleration provisions.
- Net real estate assets declined to $3.618 billion from $4.062 billion. CBL recorded $213.4 million of impairment charges, primarily on six malls, and transferred Hickory Point Mall and Burnsville Center to lenders, recognizing a $32.5 million debt-extinguishment gain.
- 2020 included $36.0 million of reorganization items and $23.9 million of prepetition restructuring charges. Unconsolidated affiliates contributed a $14.9 million loss, compared with $4.9 million of earnings in 2019.
- The NYSE suspended trading and began delisting proceedings for common and preferred securities in November 2020. The securities moved to OTC Markets under CBLAQ, CBLDQ and CBLEQ; CBL said its appeal remained in process.
Outlook, restructuring and key risks
CBL withdrew its 2020 same-center NOI and adjusted FFO guidance because of COVID-19 uncertainty and said it did not expect to provide guidance until results could be more accurately predicted. Management cited plans to transform malls into diversified suburban town centers, while prioritizing debt reduction and liquidity preservation. The company reported that COVID-19’s effects on revenues, operations and cash flows were expected to continue into 2021.
After year-end, on March 21, 2021, CBL entered an amended restructuring support agreement with holders representing more than 69% of the notes and lenders representing more than 96% of the secured facility. The proposed plan would eliminate more than $1.6 billion of debt and preferred obligations. Noteholders would receive cash, new secured notes and 89% of reorganized-company equity; remaining bank lenders would receive $100 million in cash and a new $883.7 million secured term loan. Existing common and preferred stakeholders were expected to receive up to 11% of new common equity, subject to plan terms, voting and court approval. CBL warned that existing equity could be cancelled or have little or no recovery. The company stated there was substantial doubt about its ability to continue as a going concern, contingent on implementing the plan.
- Common and preferred dividends and Operating Partnership distributions were suspended; CBL did not expect to resume them before completion of the reorganization.
- COVID-19, tenant distress, rent collection, store closures, refinancing needs, debt defaults, property impairments and Chapter 11 milestones create significant uncertainty.
- Management concluded disclosure controls and internal control over financial reporting were ineffective due to a material weakness caused by insufficient accounting and reporting personnel after turnover. Hiring additional personnel and using outside advisers were planned remediation steps.
- The financial statements received an unqualified audit opinion but include a going-concern emphasis; they do not reflect adjustments that might be needed if CBL cannot continue as a going concern.
Important facts for investors to verify
- Bankruptcy Court approval, confirmation and effectiveness of the amended reorganization plan, including the final treatment of each debt and equity class.
- Actual liquidity available for operations, including restrictions on cash, Treasury maturities, rent collections and the effect of post-default interest and debt-service obligations.
- Status of property-level defaults, foreclosures, receiverships and near-term maturities, and any lender extensions or settlements.
- Tenant payment performance, concessions, occupancy and leasing trends; 2020 mall sales and occupancy-cost metrics were not fully comparable because of closures and incomplete tenant reporting.
- Progress remediating the material weakness in financial reporting controls and any subsequent developments in litigation or NYSE delisting proceedings.