CBL & Associates Properties, Inc. — Q3 2021 Form 10-Q
Business context and reporting period. The filing covers the quarter and nine months ended September 30, 2021, when CBL was still operating as a Chapter 11 debtor-in-possession. CBL is a retail-focused REIT with malls and other properties across 24 states. The bankruptcy plan became effective and the company emerged on November 1, 2021; the newly issued common stock began trading on the NYSE on November 2. Unless noted otherwise, financial amounts below are in millions.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $150.4 | $129.9 | $420.1 | $421.7 |
| Net loss | $42.9 | $44.4 | $80.7 | $256.5 |
| Net loss attributable to common shareholders | $41.7 | $54.1 | $77.4 | $269.4 |
| Operating cash flow | Not stated by quarter | $202.2 | $59.2 | |
| Investing cash flow | Not stated by quarter | $139.2 | $(201.5) | |
| Financing cash flow | Not stated by quarter | $(32.2) | $224.5 |
Operating trends. Same-center NOI, a non-GAAP measure, was $112.3 million in Q3, up 26.5%, and $314.7 million for nine months, up 6.7%. Management attributed improvement principally to lower uncollectible revenue and fewer prior-year rent concessions, along with a recovery in tenant sales and traffic. Stabilized mall sales per square foot for the nine months were 16.8% above the comparable 2019 period. Total portfolio occupancy was 88.4%, versus 86.6% a year earlier; mall occupancy was 86.3%, versus 85.0%. Leasing spreads remained negative: year-to-date initial rent spreads for comparable small-shop leases were down 16.7% overall and 18.6% at stabilized malls.
Balance sheet and liquidity at September 30. Cash and cash equivalents were $268.0 million; available-for-sale U.S. Treasury securities were $100.0 million, and restricted cash was approximately $162.8 million. Net real estate assets were $3.28 billion and total assets were $4.23 billion. Recorded mortgage and other indebtedness, net, was $1.02 billion, with an additional $2.55 billion classified as liabilities subject to compromise in bankruptcy. Management reported total pro rata debt of $4.36 billion, including its share of unconsolidated affiliates and other debt. These measures have different scopes and should not be added without reconciliation.
Operating cash flow improved by $143.0 million year over year, reflecting rent collections and the absence of interest payments on the prepetition senior notes and secured credit facility. Cash also benefited from Treasury maturities and reinvestments. Q3 impairment charges were $63.2 million; nine-month charges were $120.3 million. The nine-month results also included a $55.1 million gain on deconsolidation and $52.0 million of reorganization costs. Contractual interest not recognized under bankruptcy accounting was $45.3 million for Q3 and $135.2 million year to date.
Material changes, restructuring, and outlook
- Chapter 11 emergence. The plan provided for more than $1.6 billion of debt and preferred obligations to be eliminated, including $195 million in cash distributions. Noteholders and certain unsecured claimants received $455 million of new 10% secured notes, $100 million of convertible secured notes based on elections, and 89% of the reorganized company’s equity, subject to dilution. Certain noteholders also supplied $50 million of new money for additional convertible notes. Bank lenders with $983.7 million of claims received $100 million cash and an $883.7 million secured term loan. Existing common and preferred shareholders each received 5.5% of new equity. The old equity interests were cancelled.
- Post-emergence debt. The new term loan matures November 2025, with potential extensions to 2026 and 2027 subject to conditions. The company also issued $455 million of 10% secured notes due 2029 and $150 million of 7% exchangeable secured notes due 2028. It redeemed $60 million of the 10% notes on November 8, leaving $395 million outstanding. The filing states that approximately $1.315 billion of property-level debt and related obligations would mature or be callable within 12 months of emergence, equal to approximately 25%–35% of projected annual operating cash flows. Management intended to refinance or extend maturities; if unsuccessful, it could convey properties to lenders.
- Going concern and property-level debt. As of September 30, management concluded substantial doubt existed about the company’s ability to continue as a going concern, citing financial condition and near-term debt maturities. Some property-level loans were in default or subject to lender negotiations; $727.6 million of consolidated debt and $623.0 million of unconsolidated-affiliate debt were identified as having loans without completed forbearance or waiver arrangements at quarter-end. The plan’s later effectiveness changed the position, but refinancing and lender outcomes remained significant risks.
- Management outlook. CBL did not issue full-year 2021 guidance, citing pandemic uncertainty. Management described improving sales, traffic, leasing demand, and occupancy, but warned that COVID-19 variants, tenant failures, retail-sector shifts, and possible restrictions could continue to harm revenues and cash flows. It also highlighted online competition, capital availability, interest rates, and refinancing risk. The company’s strategy is to redevelop properties and diversify tenants while reducing debt and extending maturities.
- Other notable matters. CBL recorded impairments on multiple malls and related assets, reflecting weaker cash flows and, in some cases, increased risk that loans could not be restructured or refinanced. Asheville Mall and Park Plaza were deconsolidated after receivership; Park Plaza foreclosure was completed in October. The company disclosed securities and derivative litigation; derivative claims were released under the plan, while the outcome of the securities case was uncertain. Disclosure controls were deemed ineffective due to a material weakness: insufficient accounting and financial-reporting personnel following turnover. Management planned to hire additional staff and may use outside advisers.
Most important facts for investors to verify
- Whether the stated post-emergence debt maturities and callable obligations were refinanced, extended, or satisfied by property transfers, and the resulting liquidity and covenant headroom.
- The final fresh-start reporting values for assets, liabilities, and equity, which were not finalized in this filing, and the dilution implications of convertible notes and the equity incentive plan.
- Whether occupancy, sales, rent collections, and leasing spreads continued to improve after quarter-end, particularly at lender-designated malls.
- The status and potential exposure of property-level defaults, unconsolidated-affiliate loans, and guarantees.
- Progress in remediating the material weakness in financial reporting controls and any developments in litigation or other contingencies.