CBL & Associates Properties, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. CBL is a retail-focused REIT operating malls and other properties, primarily in the southeastern and midwestern United States. Unless noted otherwise, amounts below are in millions of dollars.
Financial performance and key metrics
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Total revenue | $167.6 | $198.0 |
| Net loss | $(139.3) | $(46.8) |
| Net loss attributable to common shareholders | $(133.9), or $(0.75) per share | $(50.2), or $(0.29) per share |
| Cash from operating activities | $38.7 | $55.5 |
| Same-center NOI | $123.7 | $135.5 |
| Adjusted FFO allocable to Operating Partnership common unitholders | $51.6 | $60.5 |
- Rental revenue was $161.2 million, down $29.8 million year over year. Same-center NOI declined 8.7%, reflecting store closures, tenant rent concessions and bankruptcies, with most of the portfolio closing during March.
- Operating expenses included $133.6 million of impairment charges on Burnsville Center and Monroeville Mall, versus $24.8 million in Q1 2019. The prior-year quarter also included an $88.2 million litigation settlement expense and a $71.7 million gain on debt extinguishment.
- Operating cash flow fell $16.8 million. Investing cash flow was $(172.6) million, mainly because the company purchased $153.2 million of U.S. Treasury securities; financing cash flow was $260.0 million, largely reflecting $365.0 million of debt proceeds and $103.6 million of principal payments.
- At March 31, cash and cash equivalents were $159.1 million; cash, cash equivalents and restricted cash totaled $185.1 million. The company also held $153.2 million of Treasury securities scheduled to mature in 2021. Availability under the secured line was only $4.3 million after letters of credit.
- Consolidated mortgage and other indebtedness, net, was $3.79 billion, up from $3.53 billion at year-end; the company reported $4.50 billion of pro rata consolidated and unconsolidated debt. Consolidated debt carried a 4.85% weighted-average rate. The credit facility had $675.9 million drawn on its revolving line and a $456.3 million term loan.
- Common and preferred dividends were suspended; no dividends were paid in Q1 2020. Unpaid preferred dividends totaled $22.4 million at quarter-end, with another $4.8 million of unpaid distributions on special common units.
Material changes, outlook and risks
- COVID-19 and outlook: Management said the pandemic was expected to materially adversely affect 2020 revenue, results and cash flows. The company withdrew its full-year 2020 same-center NOI and adjusted FFO-per-share guidance and did not expect to reinstate guidance until there was greater clarity.
- Most tenants requested rent relief. CBL reported collecting approximately 27% of billed cash rent for April and estimated May collections at 25%–30%; negotiations were ongoing, and management said it could not yet estimate ultimate recoveries. As of May 25, all but three malls had reopened, with some operating only for curbside or exterior service.
- Going concern and debt defaults: Management concluded that substantial doubt existed about the company’s ability to continue as a going concern within one year. At March 31, CBL was in default on a secured credit facility covenant limiting cash on hand funded by line borrowings. Lenders reserved their rights, including acceleration, although they had not accelerated the facility. Management also considered failure of the facility’s minimum debt-yield covenant probable in Q3 and Q4 2020 and Q1 2021.
- After quarter-end, the lender said EastGate Mall’s loan was in default because its April debt-service payment was missed. CBL also elected not to make the $11.8 million interest payment due June 1 on its 2023 notes and entered the 30-day grace period. An uncured event of default could trigger cross-defaults and acceleration under other debt. CBL was in discussions with creditors and advisers regarding debt exchanges, covenant amendments, leverage reduction and other possible restructuring alternatives, potentially including reorganization.
- Management implemented furloughs, salary reductions, expenditure controls and capital-spending deferrals, estimating $60–$80 million of 2020 capital expenditure reductions or deferrals. It had also obtained some debt-service deferrals. These measures do not resolve the disclosed covenant defaults or going-concern uncertainty.
- Other notable risks include NYSE notice that the common stock did not meet the $1 minimum-price standard; the board had not yet acted on a shareholder-approved reverse-split authorization. Securities class-action and derivative litigation remained pending, with outcomes not predictable. CBL also disclosed that 6,134 shares had inadvertently been issued through its dividend reinvestment plan while it was ineligible to use Form S-3 registration.
Important facts for investors to verify
- Current status and terms of any lender waivers, covenant amendments, restructuring discussions, and the missed 2023-note interest payment and grace period.
- Actual rent collections, deferrals and abatements; tenant bankruptcies and store closures; and the pace and conditions of property reopenings.
- Liquidity available after restrictions, debt service, collateral requirements and any lender remedies; also the maturity and refinancing plan for substantial debt due in 2023.
- Whether further property impairments, additional defaults, cross-defaults or acceleration occur, and whether the going-concern assessment changes.
- Progress toward NYSE listing compliance, any reverse stock split, and the status or potential exposure from securities and derivative litigation and the unregistered DRIP shares.