CBL & Associates Properties, Inc. - Q1 1998 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended March 31, 1998. CBL & Associates Properties, Inc. is a real estate investment trust (REIT) operating a portfolio of nineteen regional malls, eleven associated centers, eighty-one community centers, an office building, and joint venture investments. The company classifies its malls into "Stabilized" and "New" categories, with Turtle Creek Mall recently reclassified as stabilized.
Key Financial Metrics
| Metric | Q1 1998 | Q1 1997 |
|---|---|---|
| Total Revenues | $55.1 million | $41.2 million |
| Net Income | $10.6 million | $9.0 million |
| Diluted EPS | $0.44 | $0.38 |
| Funds From Operations (FFO) | $22.0 million | $17.9 million |
| Operating Cash Flow | $16.0 million | $7.0 million |
| Total Debt Obligations | $869.8 million | N/A |
| Cash and Equivalents | $9.0 million | $3.1 million |
| Debt to Market Cap Ratio | 51.4% | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 33.5% to $55.1 million. This was driven by $10.1 million in revenue from fourteen new centers opened or acquired in the prior 15 months and $3.8 million from improved operations in existing centers.
- Expense Increases: Interest expense rose 54.1% to $13.8 million due to financing for new acquisitions. Property operating expenses increased 31.3% to $16.8 million, primarily due to the addition of new centers.
- Occupancy: Total portfolio occupancy improved to 93.4% from 92.5%. Stabilized mall occupancy rose to 91.6% from 88.1%.
- Acquisitions: Significant acquisitions in Q1 1998 included Asheville Mall (NC) and Burnsville Center (MN). Subsequent to quarter-end, Stroud Mall (PA) was purchased.
- Cash Flow: Operating cash flow surged 127% to $16.0 million. Investing cash outflows increased to $107.6 million due to $140.4 million in acquisitions, partially offset by a $66.1 million reduction in escrow deposits.
Guidance, Outlook, and Risks
- Liquidity: As of May 1, 1998, the company had $37.4 million available under revolving credit lines and $13.8 million in unfunded construction loans. A $20 million credit facility was closed with SouthTrust Bank in March 1998.
- Interest Rate Management: The company has utilized interest rate swaps to fix rates on $196 million of debt. Interest rate caps cover $100 million of variable debt. Only $29.6 million of variable rate debt exposure remains on operating properties.
- Development Pipeline: Projects under construction include Sterling Creek Commons (VA), Sand Lake Corners (FL), and Fiddler's Run (NC). Arbor Place Mall (GA) is scheduled to open in October 1999.
- Risks: Management notes that pending litigation and environmental exposures are not expected to materially affect financial statements. Forward-looking statements are subject to risks regarding future events and actual results differing from projections.
Investor Verification Checklist
- Verify the impact of the $140.4 million in acquisitions on future debt service requirements and interest rate exposure.
- Confirm the occupancy and lease-up rates for the "New Malls" category (Westgate, Oak Hollow, Springdale, Bonita Lakes) to ensure they meet stabilization targets.
- Review the status of the $49.1 million in standby purchase agreements for co-development projects and the associated contingent liabilities.
- Monitor the company's ability to maintain the 95% REIT distribution requirement given the high capital expenditure program.
- Assess the performance of the recently acquired Asheville Mall and Burnsville Center in subsequent quarters.