CBL

Business Context and Reporting Period

Company: CBL & Associates Properties, Inc.
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 1998
Business Overview: A self-managed, self-administered Real Estate Investment Trust (REIT) engaged in the ownership, operation, and development of regional malls, community centers, and neighborhood shopping centers. As of year-end, the portfolio consisted of 28 enclosed regional malls, 14 associated centers, and 82 independent community/neighborhood centers, primarily located in the southeastern United States.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Total revenues increased 43.4% to $254.6 million, driven primarily by the acquisition of 14 new centers and the opening of 12 new centers over the preceding 24 months. Minimum rents increased 44.1%.
• Acquisitions: Significant portfolio expansion included the acquisition of Hickory Hollow Mall, Rivergate Mall, and related centers in Nashville, TN ($247.4 million); Meridian Mall and Janesville Mall ($138 million); Asheville Mall ($65 million); Burnsville Center ($81 million); and Stroud Mall ($38 million).
• Debt Levels: Total debt increased significantly to $1.208 billion (from $741.4 million) to fund acquisitions and development. Variable rate debt accounted for approximately 41.4% of total debt, though interest rate swaps and caps mitigated exposure.
• Occupancy: Overall portfolio occupancy increased to 94.8% from 93.7%. Stabilized mall occupancy rose to 93.6% from 91.7%.
• Preferred Stock: In June 1998, the company issued 2,875,000 shares of 9% Series A Cumulative Redeemable Preferred Stock, raising $70 million in net proceeds used to repay variable rate indebtedness.

Guidance, Outlook, and Risks

• Outlook: Management expects to continue growth through aggressive leasing, expansion of existing properties, and selective acquisitions. The company anticipates adequate liquidity from credit facilities, construction loans, and capital markets to fund capital programs and maintain REIT distributions.
• Construction Pipeline: Approximately 2.2 million square feet of properties were under construction as of March 1999, including Arbor Place Mall in Atlanta, GA, scheduled to open in October 1999.
• Environmental Risks: The company identified potential environmental liabilities at Parkway City Mall in Huntsville, AL, specifically regarding Total Petroleum Hydrocarbons near an auto service center. Remediation is proceeding as part of redevelopment.
• Year 2000 Compliance: The company reported that core accounting and non-information processing applications were compliant by the end of 1998. Risks remain regarding third-party vendors and tenants.
• Concentration Risk: The portfolio is geographically concentrated in the southeastern U.S. (60.5% of assets). Two malls, Hamilton Place and CoolSprings Galleria, accounted for 12.1% of total revenues. The Limited, Inc. accounted for 8.8% of total revenues.

Investor Verification Checklist

• Debt Maturities: Verify the schedule of debt maturities, noting $165.7 million due in 1999 and $263.9 million due in 2000, and the company's refinancing strategy.
• Environmental Remediation Costs: Monitor the costs and timeline associated with the remediation of Total Petroleum Hydrocarbons at Parkway City Mall.
• Variable Rate Exposure: Confirm the effectiveness of interest rate swaps and caps in managing the 41.4% of debt subject to variable rates.
• Construction Progress: Track the opening dates and pre-leasing status of the 2.2 million square feet of properties under construction, particularly Arbor Place Mall.
• Tenant Concentration: Assess the impact of potential lease expirations or financial distress of major tenants like The Limited, Inc. (8.8% of revenue) and Food Lion (3.1% of revenue).