CBL & Associates Properties, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. CBL is a REIT owning, leasing and operating malls, outlet and lifestyle centers, open-air centers and other properties, primarily in the southeastern and midwestern United States. Unless noted otherwise, dollar amounts below are in millions.
Financial performance
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $129.4 | $136.3 | $395.6 | $413.4 |
| Net income (loss) | $12.9 | $(17.4) | $(9.3) | $(104.4) |
| Net income (loss) attributable to common shareholders | $13.0 | $(14.5) | $(6.1) | $(96.8) |
| Basic and diluted EPS | $0.41 | $(0.47) | $(0.19) | $(3.26) |
| Net cash from operating activities | Not presented for quarter | $134.2 | $153.8 |
- Q3 revenue fell 5.1% year over year; nine-month revenue declined 4.3%. Lower rental revenue—attributed mainly to lower percentage rents and less favorable estimates for uncollectible revenue—was the principal pressure.
- Q3 GAAP profit included a $19.7 million gain from deconsolidating WestGate Mall, placed into receivership. Nine-month results included $47.9 million of deconsolidation gains from WestGate Mall and Alamance Crossing East. These gains do not represent recurring property operations.
- Same-center NOI, a non-GAAP measure, increased 0.4% in Q3 to $106.4 million but declined 1.7% for nine months to $319.0 million. Adjusted FFO attributable to Operating Partnership common unitholders fell to $51.2 million from $59.0 million in Q3 and to $151.1 million from $176.3 million for nine months. Management cited lower percentage rents, collection estimates and higher variable-rate interest expense; nine-month results also reflected delayed maintenance work.
- Occupancy improved: total portfolio occupancy was 90.8%, versus 90.5% a year earlier; same-center malls, lifestyle and outlet centers were 89.7%, versus 89.1%. Trailing-twelve-month tenant sales per square foot declined 4.5%, to $420 from $440.
Balance sheet, liquidity and debt
- At September 30, 2023, total assets were $2.436 billion, total liabilities $2.107 billion and total equity $329.0 million. Consolidated mortgage and other indebtedness, net, was $1.900 billion, down from $2.000 billion at December 31, 2022.
- Management reported $292.8 million of available unrestricted cash and U.S. Treasury securities: $34.5 million of cash and $258.3 million of Treasuries, which mature through July 2024. Restricted cash was $85.2 million on the balance sheet. Cash, cash equivalents and restricted cash totaled $119.7 million at period end, down $22.3 million since year-end.
- Gross pro rata debt, including unconsolidated affiliates and excluding financing costs and debt discounts, was $2.675 billion, with a 6.49% weighted-average rate and 2.5-year weighted-average remaining term. Approximately 40.6% was variable-rate debt. Management estimates a 0.5 percentage-point rate increase would raise annual interest expense by about $5.4 million.
- Consolidated scheduled principal and balloon payments were $237.6 million in 2024 and $900.5 million in 2025 as of September 30, excluding optional extensions. Management said subsequent extensions and refinancings addressed all 2023 maturities. The filing also reports $69.8 million of debt associated with two properties in receivership that remained outstanding.
- Nine-month operating cash flow was $134.2 million. Investing activities provided $18.1 million, while financing activities used $174.5 million, including $106.1 million of common dividends paid. Capital expenditures, including the company’s share of unconsolidated affiliates, were $30.7 million for nine months.
Material changes, outlook and risks
- CBL deconsolidated Alamance Crossing East in February and WestGate Mall in September after losing control when each property was placed into receivership in connection with foreclosure. The two loans totaled about $69.8 million at September 30. CBL also reported $41.1 million outstanding on Alamance Crossing East and $28.7 million on WestGate Mall in its notes.
- Q3 interest expense rose $5.2 million year over year, mainly due to higher variable rates on the secured term loan and open-air centers and outparcels loan. For the nine-month period, reported interest expense decreased $52.8 million, largely because debt-discount accretion and interest on redeemed secured notes were lower than in 2022; rising rates partly offset that benefit.
- Management emphasized improving occupancy, growing rents, redeveloping former anchor spaces and diversifying tenant uses, alongside reducing debt and extending maturities. No quantified earnings or operating guidance is provided in the supplied filing text. Management cautioned that Q4 is typically seasonally stronger for occupancy and revenue due to holiday sales and short-term tenants.
- Post-quarter actions included a new $79.3 million, ten-year non-recourse Atlanta outlet loan at 7.85%; extensions or modifications for several property loans; and elimination of the Operating Partnership’s limited guaranty on the secured term loan, which became fully non-recourse on November 2.
- Key risks include refinancing and capital availability, interest-rate fluctuations, tenant bankruptcies or closures, occupancy and rental-rate changes, operating costs, retail demand and online competition. The company’s forward-looking statements are subject to these and other risks; it gives no assurance that planned improvements will be achieved.
- The securities class action settlement received final court approval in August 2023, became final after the appeal deadline, and was fully funded by directors’ and officers’ insurance without company contribution. A separate Delaware shareholder action was voluntarily dismissed. Management said ordinary-course litigation and environmental matters are not expected to have a material adverse effect; environmental exposure is considered reasonably possible but not expected to be material.
- CBL paid regular dividends of $0.375 per share in each of the first three quarters and paid a $2.20-per-share special dividend in January. It began a share-repurchase program authorized for up to $25 million; approximately $24.1 million remained available under the plan at September 30.
Investor verification priorities
- Confirm property-level refinancing, extensions and debt maturities after September 30, particularly the large 2025 scheduled payment amount.
- Track the performance and foreclosure outcomes of Alamance Crossing East and WestGate Mall, including whether any remaining debt or guarantees create further exposure.
- Assess recurring operating performance separately from deconsolidation gains: review same-center NOI, adjusted FFO, rent collections, tenant sales and occupancy trends.
- Monitor floating-rate debt costs, liquidity and cash available after dividends, capital spending and required debt service.
- Verify future dividend and repurchase decisions against cash generation, debt terms and the board’s stated discretion over distributions.