CBL & Associates Properties, Inc. - 2008 Annual Report (10-K) Summary
Business Context and Reporting Period
Company: CBL & Associates Properties, Inc. (CBL)
Reporting Period: Fiscal year ended December 31, 2008
Business Overview: CBL is a self-managed, self-administered Real Estate Investment Trust (REIT) owning, developing, and operating regional shopping malls, open-air centers, community centers, and office properties. As of year-end 2008, the portfolio included interests in 84 regional malls, 33 associated centers, 12 community centers, one mixed-use center, and 19 office buildings, primarily located in the southeastern and midwestern United States, with limited international exposure in Brazil.
Key Financial Metrics
| Metric | 2008 | 2007 |
|---|---|---|
| Total Revenues | $1,138.2 million | $1,039.9 million |
| Net Income | $31.6 million | $89.1 million |
| Net Income Available to Common Shareholders | $9.8 million | $59.4 million |
| Funds From Operations (FFO) - Operating Partnership | $376.3 million | $361.5 million |
| FFO Allocable to Company Shareholders | $212.9 million | $203.6 million |
| Cash Flows from Operating Activities | $419.1 million | $470.3 million |
| Total Consolidated Debt | $6.10 billion | $5.87 billion |
| Pro-Rata Share of Total Debt (Consolidated + Unconsolidated) | $6.63 billion | $6.23 billion |
| Portfolio Occupancy (Total) | 92.3% | 93.2% |
| Dividends Declared (Common) | $2.01 per share | $2.06 per share |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 9.5% to $1.138 billion, driven primarily by $92.9 million in revenue from new properties acquired or opened in 2007-2008. This was partially offset by a $9.0 million decrease in revenue from comparable properties due to lower percentage rents, straight-line rental income, and marketing reimbursements.
- Profitability Decline: Net income available to common shareholders dropped 83.5% to $9.8 million. This sharp decline was caused by a $17.2 million impairment of marketable securities, increased interest expense ($25.3 million increase), higher bad debt expense ($7.9 million increase), and a $10.1 million write-off of abandoned development projects.
- Occupancy Pressure: Total portfolio occupancy declined 90 basis points to 92.3%. Same-store sales in stabilized malls declined 4.3% due to the economic downturn. Major tenant bankruptcies (e.g., Steve & Barry's, Circuit City, Linens 'N Things) impacted the portfolio.
- Dividend Reduction: In November 2008, the quarterly dividend was reduced from $0.545 to $0.37 per share to preserve liquidity. In February 2009, the company announced a hybrid cash-and-stock dividend for Q1 2009.
Guidance, Outlook, and Risks
Liquidity and Capital Resources: The company faces significant liquidity challenges due to the credit crisis. Approximately $1.65 billion of debt is scheduled to mature in 2009, though extensions are available for roughly $1.3 billion. The company has completed over $1 billion in financings during 2008 and is actively negotiating refinancings for 2009 maturities. Management is suspending major new development projects and reducing capital expenditures to conserve cash.
Outlook: Management anticipates continued pressure on fundamentals, including tenant bankruptcies and reduced consumer spending. The company is focused on preserving liquidity, maintaining earnings growth through FFO, and managing debt maturities. The debt-to-total-market capitalization ratio increased to 86.3% as of December 31, 2008, due to the decline in stock price.
Key Risks:
- Credit Market Disruption: Difficulty in refinancing maturing debt or obtaining new financing on favorable terms.
- Tenant Solvency: Increased risk of tenant bankruptcies and lease terminations reducing rental income.
- Asset Impairment: Potential for further write-downs on real estate assets or marketable securities if economic conditions worsen.
- Dividend Sustainability: Risk of further dividend reductions or payment in stock to maintain REIT status and liquidity.
Investor Verification Checklist
- Debt Maturities: Verify the status of refinancing negotiations for the ~$355 million of 2009 debt maturities that do not have automatic extension options.
- Tenant Exposure: Assess the specific impact of major bankruptcies (Steve & Barry's, Circuit City) on specific mall properties and the timeline for re-leasing vacant anchor spaces.
- Dividend Policy: Monitor the board's decision on future dividend payments, specifically the ratio of cash to stock in the hybrid dividend structure.
- Development Pipeline: Review the status of suspended development projects and the potential for further write-offs of pre-development costs.
- Market Value of Equity: Track the stock price volatility and its impact on the debt-to-market capitalization ratio relative to bank covenants.