CBL & Associates Properties, Inc. - 10-Q Summary
Business Context and Reporting Period
This is a Quarterly Report (Form 10-Q) for CBL & Associates Properties, Inc., a real estate investment trust (REIT) specializing in regional malls, community centers, and associated shopping centers. The report covers the quarterly and six-month periods ended June 30, 2001. The Company's portfolio includes 44 regional malls, 16 associated centers, and 71 community centers, along with joint venture investments.
Key Financial Metrics
| Metric (in thousands) | 3 Months Ended Jun 30, 2001 |
6 Months Ended Jun 30, 2001 |
6 Months Ended Jun 30, 2000 |
|---|---|---|---|
| Total Revenues | $134,822 | $255,977 | $174,866 |
| Net Income | $13,743 | $30,540 | $32,942 |
| Net Income Available to Common Shareholders | $12,126 | $27,306 | $29,708 |
| Funds From Operations (FFO) | $47,175 | $89,949 | $64,416 |
| Net Cash Provided by Operating Activities | N/A | $84,997 | $61,418 |
| Net Cash Used in Investing Activities | N/A | $(169,255) | $(63,323) |
| Net Cash Provided by Financing Activities | N/A | $87,716 | $3,998 |
| Total Debt (Mortgage & Other Notes Payable) | $2,318,113 | $2,318,113 | $1,424,337 |
| Cash and Cash Equivalents | $8,642 | $8,642 | $5,184 |
Per Share Data (Diluted): Net income was $0.47 for the quarter and $1.07 for the six months ended June 30, 2001, compared to $0.61 and $1.19 in the prior year periods, respectively.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 55.2% ($48.0 million) for the quarter and 46.4% ($81.1 million) for the six months compared to the prior year. This growth is primarily driven by the acquisition of 23 properties from The Richard E. Jacobs Group on January 31, 2001, and the opening of several new centers.
- Expense Increases: Property operating expenses, depreciation, and interest expense all increased significantly (ranging from 41% to 74%) due to the expanded portfolio size and associated debt.
- Net Income Decline: Despite revenue growth, Net Income available to common shareholders decreased by 21.1% for the six-month period ($2.4 million decrease). This was largely due to higher interest expenses, increased depreciation, and a reduction in gains on sales of real estate assets ($4.6 million in 2001 vs. $9.3 million in 2000).
- Debt Expansion: Total mortgage and other notes payable increased by approximately $894 million year-over-year to $2.32 billion, reflecting the financing of the Jacobs Group acquisition and new developments.
- FFO Growth: Funds From Operations (FFO) increased 39.6% to $89.9 million for the six months ended June 30, 2001, indicating strong operational cash generation despite the decline in GAAP net income.
Guidance, Outlook, and Risks
- Outlook: Management expects to continue capital programs and distributions in accordance with REIT requirements. The Company anticipates refinancing the majority of mortgage notes maturing over the next five years.
- Development Pipeline: Significant projects include the redevelopment of Parkway Place Mall (Huntsville, AL) scheduled to reopen in Fall 2002, and the opening of The Lakes Mall (Muskegon, MI) in August 2001.
- Liquidity: As of June 30, 2001, the Company had $147.1 million available under credit facilities and $84.1 million in unfunded construction loans. The debt-to-total market capitalization ratio was 59.7%.
- Risks and Contingencies:
- Interest Rate Risk: The Company has $781.8 million in variable-rate debt. While $300 million is hedged via swaps, $360.5 million remains subject to variable rates.
- Seasonality: The business is seasonal, with highest sales and occupancy typically occurring in the fourth quarter.
- Legal/Environmental: Management believes pending litigation and environmental exposures (including asbestos remediation at Parkway Place) will not materially affect financial statements.
Key Facts for Investor Verification
- Acquisition Impact: Verify the integration and performance of the 23 properties acquired from The Richard E. Jacobs Group, which drove the majority of revenue growth but also significantly increased debt and operating costs.
- Debt Structure: Review the weighted average interest rate of 7.34% on total debt and the exposure of $360.5 million to variable interest rates.
- FFO vs. Net Income: Note the divergence between rising FFO ($89.9M) and declining Net Income ($27.3M) due to non-cash depreciation and amortization charges associated with the new assets.
- Occupancy Trends: Monitor occupancy rates, which were 91.7% for the total combined portfolio (including newly acquired properties) as of March 31, 2001, compared to 94.3% for the core portfolio in the prior year.
- Capital Expenditures: Confirm the funding sources for ongoing developments, including The Lakes Mall and Springdale Mall expansions, given the high level of debt incurred recently.