CBL & Associates Properties, Inc. - 10-Q Summary
Business Context and Reporting Period
This Quarterly Report on Form 10-Q covers the period ended June 30, 1998. CBL & Associates Properties, Inc. is a real estate investment trust (REIT) operating a portfolio of regional malls, associated centers, community centers, and an office building. As of June 30, 1998, the portfolio included 20 regional malls, 11 associated centers, and 82 community centers. The company is actively engaged in development, expansion, and acquisition programs.
Key Financial Metrics
| Metric | Six Months Ended June 30, 1998 | Six Months Ended June 30, 1997 |
|---|---|---|
| Total Revenues | $112.5 million | $83.7 million |
| Net Income | $19.7 million | $16.6 million |
| Funds From Operations (FFO) | $43.9 million | $36.0 million |
| Net Cash from Operating Activities | $34.1 million | $24.7 million |
| Net Cash Used in Investing Activities | ($179.1 million) | ($73.1 million) |
| Net Cash from Financing Activities | $148.3 million | $47.7 million |
| Total Debt Obligations | $861.9 million | N/A |
| Debt to Total Market Capitalization | 49.3% | N/A |
| Portfolio Occupancy | 94.2% | 92.9% |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 34.4% year-over-year, driven by a 35.7% increase in minimum rents and a 31.2% increase in tenant reimbursements. This growth is attributed to improved operations in the existing portfolio and the addition of 16 new centers opened or acquired in the prior 18 months.
- Expense Increases: Interest expense rose 60.7% to $28.8 million due to debt incurred for new developments and acquisitions. Property operating expenses increased 32.9% to $34.9 million, primarily due to the addition of new properties.
- Acquisitions: Significant acquisitions in 1998 included Stroud Mall (April), Asheville Mall, Burnsville Center (January), and a major Nashville-area portfolio in July (Hickory Hollow Mall, Rivergate Mall, and associated centers) for $247.4 million.
- Capital Markets: In June 1998, the company completed a public offering of 2,875,000 shares of 9% Series A Cumulative Redeemable Preferred Stock, raising net proceeds of $70 million to repay variable-rate indebtedness.
Guidance, Outlook, and Risks
- Liquidity: As of August 6, 1998, the company had $79.1 million available in revolving credit facilities and $79.9 million in unfunded construction loans. Management expects adequate liquidity to continue capital programs and meet REIT distribution requirements.
- Development Pipeline: Projects scheduled to open in 1998 include Sand Lake Corners (Orlando) and expansions in Nashville and Jacksonville. Major 1999 openings include Fiddler's Run (North Carolina) and Arbor Place Mall (Georgia).
- Debt Management: The company maintains a conservative debt-to-market-capitalization ratio. It has utilized swap agreements to fix rates on $234 million of variable debt and holds interest rate caps on $100 million of variable debt.
- Risks:
- Year 2000 Compliance: While core accounting systems are compliant, some other applications are not. Management does not expect a material effect on liquidity or operations but notes no assurance can be given regarding third-party systems.
- Seasonality: The business is seasonal, with highest sales and occupancy typically occurring in the fourth quarter.
- Forward-Looking Statements: Future results may differ materially due to risks inherent in real estate development and market conditions.
Investor Verification Checklist
- Debt Maturities: Verify the schedule of mortgage notes payable maturing over the next five years and the company's refinancing strategy.
- Year 2000 Remediation: Confirm the status of non-compliant systems and the potential impact of third-party (tenant/supplier) failures.
- Acquisition Integration: Monitor the lease-up progress and operational performance of the recently acquired Nashville portfolio and Stroud Mall.
- Preferred Stock Terms: Review the specific redemption terms and dividend obligations of the newly issued 9% Series A Preferred Stock.
- FFO vs. Net Income: Analyze the divergence between Net Income and Funds From Operations (FFO) to understand the impact of depreciation and non-cash items on reported earnings.