CBL & ASSOCIATES PROPERTIES, INC. The following discussion and analysis of financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and accompanying notes that are included in this Form 10-Q. Capitalized terms used, but not defined, in this Management's Discussion and Analysis of Financial Condition and Results of Operations have the same meanings as defined in the notes to the condensed consolidated financial statements. In this discussion, the terms "we," "us" and "our" refer to the Company or the Company and theOperating Partnership collectively, as the text requires. Certain statements made in this section or elsewhere in this report may be deemed "forward-looking statements" within the meaning of the federal securities laws. All statements other than statements of historical fact should be considered to be forward-looking statements. In many cases, these forward-looking statements may be identified by the use of words such as "will," "may," "should," "could," "believes," "expects," "anticipates," "estimates," "intends," "projects," "goals," "objectives," "targets," "predicts," "plans," "seeks," and variations of these words and similar expressions. Any forward-looking statement speaks only as of the date on which it is made and is qualified in its entirety by reference to the factors discussed throughout this report. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance or results and we can give no assurance that these expectations will be attained. It is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of known and unknown risks and uncertainties. Currently, a significant factor that could cause actual outcomes to differ materially from our forward-looking statements is the impact of the risks and uncertainties associated with the Chapter 11 process on our operations and ability to develop and execute the Company's business plans, and to satisfy the conditions and milestones applicable under an amended and restated Restructuring Support Agreement (the "Amended RSA"), for the duration of the Chapter 11 Cases. Another significant factor that could cause actual outcomes to differ materially from our forward-looking statements is the adverse effect of the COVID-19 pandemic, and state and/or local regulatory responses to control it, on our financial condition, operating results and cash flows, our tenants and their customers, the real estate market in which we operate, the global economy and the financial markets. The extent to which the COVID-19 pandemic impacts us and our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the direct and indirect economic effects of the pandemic and containment measures, and potential changes in consumer behavior, among others. In addition to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the year endedDecember 31, 2020 , such known risks and uncertainties, many of which may be influenced by the COVID-19 pandemic, include, without limitation:
• general industry, economic and business conditions;
• the impact of the risks and uncertainties associated with the Chapter 11
process on our operations and ability to develop and execute the
Company's business plans, and to satisfy the conditions and milestones
applicable under the Amended RSA, for the duration of the Chapter 11
Cases;
• interest rate fluctuations;
• costs and availability of capital, including debt, and capital requirements;
• the ongoing suspension of trading, and potential delisting, of our
common stock and depositary shares representing interests in our Series
D Preferred Stock and Series E Preferred Stock, from the NYSE, which has
resulted in our common stock and the depositary shares representing
interests in our Series D Preferred Stock and Series E Preferred Stock
currently trading on the OTC Markets, operated by the OTC Markets Group,
Inc.;
• costs and availability of real estate;
• inability to consummate acquisition opportunities and other risks
associated with acquisitions;
• competition from other companies and retail formats;
• changes in retail demand and rental rates in our markets;
• shifts in customer demands including the impact of online shopping;
• tenant bankruptcies or store closings;
• changes in vacancy rates at our Properties;
• changes in operating expenses;
• changes in applicable laws, rules and regulations;
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Table of Contents • disposition of real property;
• uncertainty and economic impact of pandemics, epidemics or other public
health emergencies or fear of such events, such as the recent COVID-19
pandemic;
• cyber-attacks or acts of cyber-terrorism;
• the withdrawal that occurred during 2020 of the credit ratings of the
Operating Partnership's senior unsecured long-term indebtedness;
• the ability to obtain suitable equity and/or debt financing and thecontinued availability of financing, in the amounts and on the terms
necessary to support our future refinancing requirements and business;
and
• other risks referenced from time to time in filings with the SEC and
those factors listed or incorporated by reference into this report.
This list of risks and uncertainties is only a summary and is not intended to be
exhaustive. We disclaim any obligation to update or revise any forward-looking
statements to reflect actual results or changes in the factors affecting the
forward-looking information.
Executive Overview
We are a self-managed, self-administered, fully integrated REIT that is engaged
in the ownership, development, acquisition, leasing, management and operation of
regional shopping malls, open-air and mixed-use centers, outlet centers,
associated centers, community centers, office and other properties. See Note
1 to the condensed consolidated financial statements for information on our
property interests as of March 31, 2021 . We have elected to be taxed as a REIT
for federal income tax purposes.
On March 11, 2020 , the World Health Organization classified COVID-19 as a
pandemic. Due to the extraordinary governmental actions taken to contain
COVID-19, we are unable to predict the full extent of the pandemic's impact on
our results of operations for 2021. As a result, we did not issue full-year 2021
guidance.
In response to COVID-19, we have implemented strict procedures and guidelines
for our employees, tenants and property visitors based on CDC and other health
agency recommendations. Our properties continue to update these policies and
procedures, following any new mandates and regulations, as required. The safety
and health of our customers, employees and tenants remains a top priority.
Our financial and operating results for the first quarter reflect the ongoing
impact of COVID-19. While all properties are open, many state and local markets
continue to impose occupancy and other restrictions. These additional
restrictions may have the effect of restricting traffic and sales for our
tenants and may put additional pressure on our tenants' financial health. We
have worked with our tenants to enhance customer reach despite the restrictions,
including offering curbside, delivery and opening buy-online-pick-up-instore
locations. We are beginning to see improvements in sales and traffic at our
centers as vaccination rates increase and government restrictions are lessened.
Same-center sales in our mall portfolio for the first two months of 2021 were
down only 3% as compared with the same period in 2020. Additionally, sales for
the first quarter 2021 increased more than 12% as compared with first quarter
2019. However, revenues for the quarter continue to be impacted by a sustained
increase in the estimate for uncollectable revenues related to rents due from
tenants that filed for bankruptcy or are struggling financially. The pandemic
accelerated a number of tenant bankruptcies, resulting in a heightened level of
store closures and lost rent in 2020, the impact of which has carried forward
into 2021. We are optimistic that the improvements to sales and traffic will
continue and will begin to benefit our leasing negotiations later in the year.
The mandated property closures in 2020 resulted in nearly all our tenants
closing for a period of time and/or shortening operating hours. As a result, we
experienced an increased level of requests for rent deferrals and abatements, as
well as defaults on rent obligations. While, in general, we believe that tenants
have a clear contractual obligation to pay rent, we have been working with our
tenants to address rent deferral and abatement requests. We have granted rent
deferrals of $38.5 million since the COVID-19 pandemic began, which includes
rent deferrals of $7.1 million during the three months ended March 31, 2021 . We
also granted rent abatements of approximately $5.3 million during the three
months ended March 31, 2021 .
As discussed under Voluntary Reorganization under Chapter 11 below, the Debtors
commenced the filing of the Chapter 11 Cases. The filing of the Chapter 11 Cases
constituted an event of default that resulted in certain monetary obligations
becoming immediately due and payable with respect to the secured credit facility
and the senior unsecured notes. The filing of the Chapter 11 Cases also
constituted an event of default with respect to certain property-level debt of
the Operating Partnership's subsidiaries, which may result in acceleration of
the outstanding principal and other sums due. See Note 2 and Liquidity and
Capital Resources for additional information.
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We had a net loss for the three months endedMarch 31, 2021 of$28.3 million as compared to a net loss for the three months endedMarch 31, 2020 of$139.3 million . We recorded a net loss attributable to common shareholders for the three months endedMarch 31, 2021 of$26.8 million as compared to a net loss attributable to common shareholders for the three months endedMarch 31, 2020 of$133.9 million . In addition to the ongoing impact of the COVID-19 pandemic, significant items that affected the comparability between the three-month periods include:
• Loss on impairment for the three months ended
$76.5 million lower; • Gain on deconsolidation of$55.1 million for the three months endedMarch 31, 2021 ;
• Interest expense for the three months ended
$22.9 million lower; • Costs of$22.9 million related to our reorganization efforts;
• Equity in losses of unconsolidated affiliates of
three months ended March 31, 2021 compared to equity inearnings of
unconsolidated affiliates of $1.0 million for the three months ended
March 31, 2020 .
Our focus is on continuing to execute our strategy to transform our properties
into suburban town centers, primarily through the re-tenanting of former anchor
locations as well as diversification of in-line tenancy. This operational
strategy is also supported by our balance sheet strategy focused on reducing
overall debt, extending our debt maturity schedule and lowering our overall cost
of borrowings to limit maturity risk, improve net cash flow and enhance
enterprise value. As discussed further below under Voluntary Reorganization
under Chapter 11, we are pursuing a plan to recapitalize the Company, including
restructuring portions of its debt, through the Chapter 11 Cases. While the
industry and our Company continue to face challenges, some of which may not be
within our control, we believe that the strategies in place to redevelop our
Properties and diversify our tenant mix will contribute to stabilization of our
portfolio and revenues in future years.
Same-center NOI and FFO are non-GAAP measures. For a description of same-center
NOI, a reconciliation from net income (loss) to same-center NOI, and an
explanation of why we believe this is a useful performance measure, see Non-GAAP
Measure - Same-center Net Operating Income in Results of Operations . For a
description of FFO, a reconciliation from net income (loss) attributable to
common shareholders to FFO allocable to Operating Partnership common
unitholders, and an explanation of why we believe this is a useful performance
measure, see Non-GAAP Measure - Funds from Operations .
Voluntary Reorganization under Chapter 11
Beginning onNovember 1, 2020 (the "Commencement Date"),CBL & Associates Properties, Inc. together with its majority owned subsidiary,CBL & Associates Limited Partnership , together with certain of its direct and indirect subsidiaries (collectively, the "Debtors"), commenced voluntary chapter 11 cases (the "Chapter 11 Cases") by filing voluntary petitions for reorganization under chapter 11 of title 11 ("Chapter 11") of the United States Code (the "Bankruptcy Code") with theUnited States Bankruptcy Court for the Southern District of Texas (the "Bankruptcy Court "). The Debtors are authorized to continue to operate their businesses and manage their properties as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. Pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure, the Debtors' Chapter 11 Cases are being jointly administered for procedural purposes only under the caption In reCBL & Associates Properties, Inc. , et al., Case No. 20-35226. Documents filed on the docket of and other information related to the Chapter 11 Cases are available free of charge online at https://dm.epiq11.com/case/cblproperties/dockets. We are currently operating our business as debtors-in-possession in accordance with the applicable provisions of the Bankruptcy Code and orders of theBankruptcy Court . After we filed our Chapter 11 petitions, theBankruptcy Court granted certain relief requested by the Debtors enabling us to conduct our business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing us to pay employee wages and benefits, to pay taxes and certain governmental fees and charges, to continue to operate our cash management system in the ordinary course, and to pay the prepetition claims of certain of our service providers. For goods and services provided following the Commencement Date, we intend to pay service providers in the ordinary course. Subject to certain exceptions, under the Bankruptcy Code, the filing of the Chapter 11 Cases automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the Commencement Date. Accordingly, although the filing of the Chapter 11 Cases triggered defaults under the Debtors' funded debt obligations, creditors are stayed from taking any actions against the Debtors as a result of such defaults, subject to certain limited exceptions permitted by the Bankruptcy Code. Absent an order of theBankruptcy Court , substantially all the Debtors' prepetition liabilities are subject to settlement under the Bankruptcy Code. The filing of the Chapter 11 Cases constituted an event of default that resulted in certain monetary obligations becoming immediately due and payable with respect to the secured credit facility and the senior unsecured notes. The filing of the Chapter 11 Cases also constituted an event of default with respect to certain property-level debt of theOperating Partnership's subsidiaries, which may have resulted in the automatic acceleration of certain monetary obligations or may give the applicable lender the right to accelerate such amounts. Due to the Chapter 11 Cases, however, 38
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the creditors' ability to exercise remedies against the Debtors under their respective credit agreements and debt instruments was stayed as of the date of the Chapter 11 petition and continues to be stayed.
After engaging in negotiations in aBankruptcy Court -ordered mediation, onMarch 21, 2021 , the Company entered into the Amended RSA, with the Consenting Noteholders in excess of 69% (including joinders) of the aggregate principal amount of the senior unsecured notes and the ConsentingBank Lenders party to the Company's secured credit facilitywho hold in the aggregate in excess of 96% (including joinders) of the aggregate outstanding principal amount of debt under the secured credit facility. The Amended RSA amends and restates the Original RSA, dated as ofAugust 18, 2020 , and sets forth, subject to certain conditions, the commitments to and obligations of, on the one hand, the Company, and on the other hand, the Consenting Noteholders and ConsentingBank Lenders , in connection with the Restructuring Transactions set forth in the Amended RSA and the Plan Term Sheet. The Amended RSA contemplates that the restructuring and recapitalization of the Debtors will occur through a joint plan of reorganization in the Chapter 11 Cases. The Amended RSA requires that the Company file the Amended Plan and related disclosure statement no later than 25 days after the Agreement Effective Date and under the Amended RSA we must seek to have the Amended Plan confirmed and declared effective no later thanNovember 1, 2021 . OnApril 15, 2021 , we filed an amended Chapter 11 plan of reorganization (the "Proposed Plan") and accompanying disclosure statement (the "Proposed Disclosure Statement") with theBankruptcy Court to implement the restructuring transactions. Before theBankruptcy Court will confirm the Proposed Plan, the Bankruptcy Code requires that at least one "impaired" class of claims vote to accept the Proposed Plan. A class of claims votes to "accept" the Proposed Plan if voting creditors that hold a majority in number and two-thirds in amount of claims in that class approve the Proposed Plan. The Amended RSA requires the Consenting Stakeholders vote in favor of and support the Proposed Plan. As of the date hereof, the ConsentingBank Lenders and Consenting Noteholders each represent the requisite amount of claims necessary to accept the Proposed Plan in each of their respective classes. For the foregoing reasons, among others, the Debtors believe that they will be able to confirm the Proposed Plan in the Chapter 11 Cases. Under the Amended RSA, the Proposed Plan provides for the elimination of more than$1.6 billion of debt and preferred obligations as well as a significant reduction in interest expense. In exchange for their approximately$1.375 billion in principal amount of senior unsecured notes and$133 million in principal amount of the secured credit facility, Consenting Noteholders and other noteholders will receive, in the aggregate,$95 million in cash,$555 million of new senior secured notes, of which up to$100 million , upon election by the Consenting Noteholders, may be received in the form of new convertible secured notes and 89% in common equity of the newly reorganized Company. Certain Consenting Noteholders will also provide up to$50 million of new money in exchange for additional convertible secured notes. The Amended RSA provides that the remainingBank Lenders , holding$983.7 million in principal amount under the secured credit facility, will receive$100 million in cash and a new$883.7 million secured term loan. Existing common and preferred stakeholders are expected to receive up to 11% of common equity in the newly reorganized company. OnApril 29, 2021 , we received court approval to perform under the Amended RSA. We cannot predict the ultimate outcome of our Chapter 11 Cases at this time. For the duration of the Chapter 11 proceedings, our operations and ability to develop and execute our business plan are subject to the risks and uncertainties associated with the chapter 11 process. As a result of these risks and uncertainties, the amount and composition of our assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 proceedings, and the description of our operations, properties and liquidity and capital resources included in this quarterly report may not accurately reflect our operations, properties and liquidity and capital resources following the Chapter 11 process. In particular, subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assume and assign or reject executory contracts and unexpired leases subject to the approval of theBankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a prepetition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a prepetition general unsecured claim for damages caused by such deemed breach subject, in the case of the rejection of unexpired leases of real property, to certain caps on damages. Counterparties to such rejected contracts or leases may assert unsecured claims in theBankruptcy Court against the applicable Debtor's estate for such damages. Generally, the assumption or assumption and assignment of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance thereunder. Accordingly, any description of an executory contract or unexpired lease with the Debtors in this quarterly report, including where applicable a quantification of the Company's obligations under any such executory contract or unexpired lease with the Debtors is qualified by any overriding rights we have under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the assumption, assumption and assignment or rejection of any executory contract or unexpired lease and the Debtors expressly preserve all their rights with respect thereto. Given the acceleration of the secured credit facility, the senior unsecured notes and certain property-level debt, as well as the inherent risks, unknown results and inherent uncertainties associated with the bankruptcy process and the direct correlation between these matters and our ability to satisfy our financial obligations that may arise, we believe that 39
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there is substantial doubt that we will continue to operate as a going concern within one year after the date our condensed consolidated financial statements are issued. Our ability to continue as a going concern is contingent upon our ability to successfully implement the Proposed Plan, set forth in the Amended RSA, which is pending confirmation by the Bankruptcy Court. See Note 2 to the condensed consolidated financial statements for additional information.
Results of Operations
Properties that were in operation for the entire year during 2020 and the three months endedMarch 31, 2021 are referred to as the "Comparable Properties ." SinceJanuary 1, 2020 , we have opened two self-storage facilities, deconsolidated two properties and disposed of two properties:
Properties Opened
Property Location Date Opened
(1) The property is owned by a 50/50 joint venture that is accounted for using
the equity method of accounting and is included in equity in earnings of
unconsolidated affiliates in the accompanying condensed consolidated
statements of operations.
Deconsolidations
Property Location Date of Deconsolidation
Asheville Mall (1) Asheville, NC January 2021
Park Plaza (1) Little Rock, AR March 2021
(1) The Company deconsolidated the property due to a loss of control when the
property was placed into receivership in connection with the foreclosure
process.
Dispositions
Property Location Sales Date(1) Title to the property was transferred to the mortgage holder in satisfaction
of the non-recourse debt secured by the property.
Comparison of the Three Months EndedMarch 31, 2021 to the Three Months EndedMarch 31, 2020 Revenues Total for the Three Months Comparable Ended March 31, Properties 2021 2020 Change Core Non-core Deconsolidation Dispositions Total Change Rental revenues$ 128,175 $ 161,173 $ (32,998 ) $ (25,213 ) $ (723 ) $ (3,184 )$ (3,878 ) $ (32,998 ) Management, development and 1,659 2,092 (433 ) (433 ) - - - (433 ) leasing fees Other 3,350 4,309 (959 ) (574 ) (135 ) (90 ) (160 ) (959 ) Total revenues$ 133,184 $ 167,574 $ (34,390 ) $ (26,220 ) $ (858 ) $ (3,274 )$ (4,038 ) $ (34,390 ) Rental revenues from theComparable Properties declined due to rent concessions to tenants that are in bankruptcy or are struggling financially due to the impacts of the COVID-19 pandemic, including$5.3 million of rent abatements on past due rents and$6.8 million in uncollectable revenues for past due rents. 40
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Operating Expenses
Total for the
Three Months Comparable
Ended March 31, Properties
2021 2020 Change Core Non-core Deconsolidation Dispositions Total Change
Property operating $ (21,802 ) $ (25,709 ) $ 3,907 $ 2,340 $ (48 ) $ 637 $ 978 $ 3,907
Real estate taxes (16,551 ) (18,448 ) 1,897 651 155 245 846 1,897
Maintenance and repairs (10,781 ) (11,208 ) 427 (297 ) (30 ) 140 614 427Property operating expenses (49,134 ) (55,365 ) 6,231
2,694 77 1,022 2,438
6,231
Depreciation and amortization (48,112 ) (55,902 ) 7,790
3,624 1,283 1,389 1,494
7,790
General and administrative (12,612 ) (17,836 ) 5,224
5,224 - - - 5,224 Loss on impairment (57,182 ) (133,644 ) 76,462 49,070 830 - 26,562 76,462 Litigation settlement 858 - 858 858 - - - 858 Other - (158 ) 158 158 - - - 158 Total operating expenses$ (166,182 ) $ (262,905 ) $ 96,723 $ 61,628 $ 2,190 $ 2,411$ 30,494 $ 96,723 Property operating expenses at theComparable Properties decreased primarily due to the implementation of comprehensive programs to reduce operating expenses to mitigate the impact of mandated property closures and the effects of the COVID-19 pandemic, including a reduction-in-force and other operating expense initiatives. The decrease in depreciation and amortization expense related to theComparable Properties primarily relates to a lower basis in depreciable assets resulting from impairments recorded since the prior year period and a greater amount of tenant improvement write-offs in the prior year period related to tenants that closed as a result of bankruptcy.
General and administrative expenses decreased primarily due to the implementation of comprehensive programs to reduce expenses, including a reduction-in-force and other general and administrative expenses.
In the first quarter of 2021, we recognized$57.2 million of loss on impairment of real estate to write down the book value of three malls. In the first quarter of 2020, we recognized$133.6 million of loss on impairment of real estate to write down the book value of two malls. See Note 6 to the condensed consolidated financial statements for more information.
Other Income and Expenses
Interest and other income decreased$1.6 million to$0.8 million compared to the prior-year period primarily due to several mortgage and other notes receivable being retired since the prior year period, as well as a reduction in insurance proceeds since the prior year period. This was partially offset by interest income related to theU.S. Treasury securities that we invested in using a portion of the$280 million we drew on our secured line of credit inMarch 2020 to increase liquidity and preserve financial flexibility in light of the uncertainty surrounding the impact of the COVID-19 pandemic. Interest expense decreased$22.9 million primarily due to not recognizing interest expense on the senior unsecured notes and the secured credit facility subsequent to the filing of the Chapter 11 Cases. The decrease was partially offset by an increase of default interest expense related to property-level non-recourse loans that are in default, which may not be payable depending on the outcome of negotiations with the lenders. In accordance with ASC 852, which limits the recognition of interest expense during a bankruptcy proceeding to only amounts that will be paid during the bankruptcy proceeding or that are probable of becoming allowed claims, interest has not been accrued on the secured credit facility or the senior unsecured notes subsequent to the filing of the Chapter 11 Cases. For the three months endedMarch 31, 2021 , we recorded$55.1 million of gain on deconsolidation related to Asheville Mall and Park Plaza. See Note 7 for more information.
For the three months ended
Equity in earnings (losses) of unconsolidated affiliates decreased by$4.1 million during the three months endedMarch 31, 2021 compared to the prior-year period. The decrease was primarily due to the impacts of the COVID-19 pandemic, including an increase in estimates of uncollectable rental revenues and abatements of rent. 41
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Non-GAAP Measure
Same-center Net Operating Income
NOI is a supplemental non-GAAP measure of the operating performance of our shopping centers and other properties. We define NOI as property operating revenues (rental revenues and other income) less property operating expenses (property operating, real estate taxes and maintenance and repairs).
We compute NOI based on theOperating Partnership's pro rata share of both consolidated and unconsolidated Properties. We believe that presenting NOI and same-center NOI (described below) based on ourOperating Partnership's pro rata share of both consolidated and unconsolidated Properties is useful since we conduct substantially all of our business through ourOperating Partnership and, therefore, it reflects the performance of the Properties in absolute terms regardless of the ratio of ownership interests of our common shareholders and the noncontrolling interest in theOperating Partnership . Our definition of NOI may be different than that used by other companies, and accordingly, our calculation of NOI may not be comparable to that of other companies. Since NOI includes only those revenues and expenses related to the operations of our shopping center Properties, we believe that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates, sales at the malls and operating costs and the impact of those trends on our results of operations. Our calculation of same-center NOI excludes lease termination income, straight-line rent adjustments, amortization of above and below market lease intangibles and write-offs of landlord inducement assets in order to enhance the comparability of results from one period to another. We include a Property in our same-center pool when we have owned all or a portion of the Property sinceJanuary 1 of the preceding calendar year and it has been in operation for both the entire preceding calendar year and current year-to-date period.New Properties are excluded from same-center NOI until they meet these criteria. Properties excluded from the same-center pool that would otherwise meet these criteria are categorized as Lender Malls, as defined below under Operational Review.
Due to the exclusions noted above, same-center NOI should only be used as a
supplemental measure of our performance and not as an alternative to GAAP
operating income (loss) or net income (loss). A reconciliation of our
same-center NOI to net loss for the three-month periods ended
Three Months Ended March 31,
2021 2020
Net loss $ (28,280 ) $ (139,294 )
Adjustments: (1)
Depreciation and amortization 61,061 68,489
Interest expense 33,012 54,086
Abandoned projects expense - 158
(Gain) loss on sales of real estate assets 299 (140 )
Gain on deconsolidation (55,131 ) -
Loss on impairment 57,182 133,644
Litigation settlement (858 ) -
Reorganization items 22,933 -
Income tax provision 751 526
Lease termination fees (1,111 ) (220 )
Straight-line rent and above- and below-market rent 3,211 (1,795 )
Net loss attributable to noncontrolling interests in 819 207
other consolidated subsidiaries
General and administrative expenses 12,612 17,836
Management fees and non-property level revenues (2,580 ) (4,177 ) Operating Partnership's share of property NOI 103,920 129,320 Non-comparable NOI (3,896 ) (8,542 ) Total same-center NOI$ 100,024 $ 120,778
(1) Adjustments are based on our
share, including our share of unconsolidated affiliates and excluding
noncontrolling interests' share of consolidated properties.
Same-center NOI decreased 17.2% for the three months endedMarch 31, 2021 as compared to the prior-year period. The$20.8 million decrease for the three months endedMarch 31, 2021 compared to the same period in 2020 primarily consisted of a$24.1 million decrease in revenues offset by a$3.3 million decline in operating expenses. Rental revenues declined$23.7 million during the quarter primarily related to rent concessions to tenants that are in bankruptcy or are struggling financially due to the impacts of the COVID-19 pandemic, including$5.8 million of rent abatements on past due rents and$4.9 million in uncollectable revenues for past due rents. 42
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Our consolidated unencumbered properties generated approximately 35.6% of total consolidated NOI of$80.3 million (which excludes NOI related to dispositions) for the three months endedMarch 31, 2021 .
Operational Review
The shopping center business is, to some extent, seasonal in nature with tenants typically achieving the highest levels of sales during the fourth quarter due to the holiday season, which generally results in higher percentage rents in the fourth quarter. Additionally, the malls earn most of their rents from short-term tenants during the holiday period. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year.
We classify our regional malls into three categories:
(1) Stabilized Malls - Malls that have completed their initial lease-up and
have been open for more than three complete calendar years.
(2) Non-stabilized Malls - Malls that are in their initial lease-up phase.
After three complete calendar years of operation, they are reclassified
on January 1 of the fourth calendar year to the stabilized mall
category. The Outlet Shoppes at Laredo was classified as a
non-stabilized mall as of March 31, 2020 .
(3) Excluded Malls - We exclude malls from our core portfolio if they are
categorized as a Lender Mall , for which operational metrics are
excluded:
• Lender Malls - Malls for which we are working or intend to work with
the lender on a restructure of the terms of the loan secured by the
property or convey the secured property to the lender. EastGate Mall ,
Greenbrier Mall and The Outlet Shoppes of Laredo wereclassified as
Lender Malls as of March 31, 2021 . Burnsville Center, EastGate Mall,
Hickory Point Mall ,Greenbrier Mall andPark Plaza were
classified as
Lender Malls as of March 31, 2020 . Lender Malls are excluded from our
same-center pool as decisions made while in discussions with the
lender may lead to metrics that do not provide relevantinformation
related to the condition of these properties.
We derive the majority of our total revenues from the mall properties. The sources of our total revenues by property type were as follows:
As of March 31,
2021 2020
Malls 89.6 % 91.5 %
Other Properties 10.4 % 8.5 %
Mall Store Sales
Mall store sales include reporting mall tenants of 10,000 square feet or less
for stabilized malls and exclude license agreements, which are retail contracts
that are temporary or short-term in nature and generally last more than three
months but less than twelve months. Due to temporary mall and store closures
that occurred in 2020 because of the COVID-19 pandemic, the majority of CBL's
tenants did not report sales for the full reporting period. As a result, the
following is a comparison of the change in our same-center sales per square foot
for the three months ended March 31, 2021 compared to the three months ended
March 31, 2019 :
% Change
Stabilized mall same-center sales per square foot 12.5%
Occupancy
Our portfolio occupancy is summarized in the following table (1):
As of March 31,
2021 2020
Total portfolio 85.4 % 89.5 %
Malls:
Total Mall portfolio 83.2 % 87.8 %
Same-center Malls 83.2 % 88.0 %
Stabilized Malls 83.2 % 88.0 %
Other Properties: 92.4 % 94.7 %
Associated centers 91.0 % 93.2 %
Community centers 93.2 % 95.8 %
(1) As noted above, excluded properties are not included in occupancy metrics.
Occupancy for malls represents percentage of mall store gross leasable area
occupied under 20,000 square feet. Occupancy for other properties represents
percentage of gross leasable area occupied.
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Bankruptcy-related store closures impacted 2021 occupancy by approximately 391 basis points or 645,000 square feet.
Leasing
The following is a summary of the total square feet of leases signed in the
three-month periods ended
Three Months Ended March 31,
2021 2020
Operating portfolio:
New leases 144,197 278,366
Renewal leases 594,582 632,760
Development portfolio:
New leases 3,300 7,929
Total leased 742,079 919,055
Average annual base rents per square foot are based on contractual rents in
effect as of March 31, 2021 and 2020, including the impact of any rent
concessions. Average annual base rents per square foot for comparable small shop
space of less than 10,000 square feet were as follows for each property type:
March 31,
2021 2020
Malls (1):
Same-center Stabilized Malls $ 30.99 $ 31.90
Stabilized Malls 30.99 31.91
Other Properties (2): 15.36 15.74
Associated centers 13.82 14.26
Community centers 16.64 17.02
Office buildings 19.25 19.13
(1) Excluded properties are not included.
(2) Average base rents for associated centers, community centers and office
buildings include all leased space, regardless of size.
Results from new and renewal leasing of comparable small shop space of less than 10,000 square feet during the three-month period endedMarch 31, 2021 for spaces that were previously occupied, based on the contractual terms of the related leases inclusive of the impact of any rent concessions, are as follows: New Initial New Average Square Prior Gross Gross Rent % Change Gross Rent % Change Property Type Feet Rent PSF PSF Initial PSF (2) Average All Property Types (1) 609,765$ 30.44 $ 24.08 (20.9 )%$ 24.64 (19.1 )% Stabilized Malls 545,441 31.69 24.11 (23.9 )% 24.62 (22.3 )% New leases 67,504 31.88 22.63 (29.0 )% 23.81 (25.3 )% Renewal leases 477,937 31.66 24.32 (23.2 )% 24.73 (21.9 )%
(1) Average gross rent does not incorporate allowable future increases for
recoverable common area expenses.
(2) Includes stabilized malls, associated centers, community centers and office
buildings.
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New and renewal leasing activity of comparable small shop space of less than 10,000 square feet based on the lease commencement date is as follows:
Number Term Initial Average Expiring
of Square (in Rent Rent Rent Initial Rent Average Rent
Leases Feet years) PSF PSF PSF Spread Spread
Commencement 2021:
New 38 125,563 6.93 $ 29.78 $ 31.84 $ 31.66 $ (1.88 ) (5.9 )% $ 0.18 0.6 %
Renewal 259 893,260 2.06 25.36 25.52 31.22 (5.86 ) (18.8 )% (5.70 ) (18.3 )%
Commencement 2021 Total 297 1,018,823 2.68 25.90 26.30 31.27 (5.37 ) (17.2 )% (4.97 ) (15.9 )%
Commencement 2022:
New 1 2,617 9.67 42.36 44.40 42.37 (0.01 ) 0.0 % 2.03 4.8 %
Renewal 58 188,773 2.57 38.08 38.36 42.41 (4.33 ) (10.2 )% (4.05 ) (9.5 )%
Commencement 2022 Total 59 191,390 2.69 38.14 38.44 42.41 (4.27 ) (10.1 )% (3.97 ) (9.4 )%
Total 2021/2022 356 1,210,213 2.74 $ 27.84 $ 28.22 $ 33.03 $ (5.19 ) (15.7 )% $ (4.81 ) (14.6 )%
Liquidity and Capital Resources
As ofMarch 31, 2021 , we had$84.7 million available in unrestricted cash,$232.8 million inU.S. Treasury securities and$1,114.7 million outstanding on our secured credit facility. Our total pro rata share of debt atMarch 31, 2021 was$4,377.2 million . The$83.5 million in restricted cash atMarch 31, 2021 related to cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable, as well as amounts related to cash management agreements with lenders of certain property-level mortgage indebtedness that are designated for debt service and operating expense obligations. DuringJanuary 2021 , the Company purchased$22.0 million inU.S. Treasury securities that matured inFebruary 2021 . DuringFebruary 2021 , the Company purchased$32.0 million inU.S. Treasury securities that matured inMarch 2021 . DuringMarch 2021 , the Company purchased$82.4 million inU.S. Treasury securities that are scheduled to mature inJune 2021 . The Company designated theU.S. Treasury securities purchased in these transactions as available-for-sale. InMarch 2021 , the Company reached agreements with the lenders to modify the loans secured by Hammock Landing Phases I &II and The Pavilion at Port Orange. Each agreement provides an additional four-year term, with a one-year extension option, for a fully extended maturity date ofFebruary 2026 . These loans had a combined outstanding loan balance of$107.2 million atMarch 31, 2021 . Additionally, each such agreement provides forbearance related to the default triggered as a result of the Chapter 11 Cases. Also, inMarch 2021 , the Company reached an agreement with the lender to modify the loan secured by Ambassador Infrastructure. The agreement provides an additional four-year term with a fixed interest rate of 3.0%. The extended loan, maturing inMarch 2025 , had an outstanding balance of$8.3 million , as$1.1 million was paid down in conjunction with the modification. The agreement provides a waiver related to the default triggered as a result of the Chapter 11 Cases. The filing of the Chapter 11 Cases constituted an event of default that resulted in certain monetary obligations becoming immediately due and payable with respect to the secured credit facility and the senior unsecured notes. We anticipate restructuring our unsecured debt maturities through the Chapter 11 bankruptcy process. Our total share of consolidated, unconsolidated and other outstanding debt maturing during 2021, assuming all extension options are elected, is$501.9 million , and we are in discussions with the existing lenders to modify and extend or otherwise refinance the loans. We anticipate restructuring our unsecured debt maturities through the Chapter 11 bankruptcy process. The filing of the Chapter 11 Cases also constituted an event of default with respect to certain property-level debt of theOperating Partnership's subsidiaries, which may have resulted in the automatic acceleration of certain monetary obligations or may give the applicable lender the right to accelerate such amounts. See
Note 8 and Note 9 for more information.
We derive the majority of our revenues from leases with retail tenants, which have historically been the primary source for funding short-term liquidity and capital needs such as operating expenses, debt service, tenant construction allowances, recurring capital expenditures, dividends and distributions. We believe that the combination of cash flows generated from our operations, combined with cash on hand and our investment inU.S. Treasury securities will, for the foreseeable future, provide adequate liquidity to meet our cash needs assuming we continue to operate as a going concern within twelve months of the date our condensed consolidated financial statements are issued. In addition to these factors, we have options available to us to generate additional liquidity, including but not limited to, joint venture investments and decreasing expenditures related to tenant construction allowances and other capital expenditures. We also generate revenues from sales of peripheral land at our properties and from sales of real estate assets when it is determined that we can realize an optimal value for the assets. 45
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Cash Flows - Operating, Investing and Financing Activities
There was$168.2 million of cash, cash equivalents and restricted cash as ofMarch 31, 2021 , an increase of$46.4 million fromDecember 31, 2020 . Of this amount,$84.7 million was unrestricted cash and cash equivalents as ofMarch 31, 2021 . Also, atMarch 31, 2021 , we had$232.8 million inU.S. Treasuries that are scheduled to mature betweenApril 2021 andJune 2021 .
Our net cash flows are summarized as follows (in thousands):
Three Months Ended
2021 2020 Change
Net cash provided by operating activities
38,728$ 24,041 Net cash used in investing activities (2,564 ) (172,631 ) 170,067 Net cash provided by (used in) financing activities (13,760 ) 259,971 (273,731 ) Net cash flows$ 46,445 $ 126,068 $ (79,623 )
Cash Provided by Operating Activities
Cash provided by operating activities increased$24.0 million primarily due to not paying interest on the secured credit facility and senior unsecured notes as a result of the filing of the Chapter 11 Cases.
Cash Used in Investing Activities
Net cash used in investing activities for first quarter of 2020 was primarily related to the purchase ofU.S. Treasury securities for$153.2 million using a portion of the$280.0 million that we drew on our secured line of credit. Whereas, in the first quarter of 2021, we hadU.S. Treasury securities mature that we immediately reinvested in additionalU.S. Treasury securities. We also had a decrease in additions to real estate assets in the first quarter of 2021 as compared to the first quarter of 2020 as a result of programs put in place to reduce capital expenditures and preserve liquidity.
Cash Provided by (Used in) Financing Activities
The net cash inflow for the first quarter of 2020 is primarily due to the$280.0 million draw on our secured credit facility in order to increase liquidity and preserve financial flexibility in light of the uncertainty surrounding the impact of the COVID-19 pandemic. In the first quarter of 2021, cash used in financing activities primarily relates to principal payments on mortgages.
Debt of the Company
CBL has no indebtedness. Either theOperating Partnership or one of its consolidated subsidiaries, that it has a direct or indirect ownership interest in, is the borrower on all our debt. CBL is a limited guarantor of the Notes, as described in Note 9 to the condensed consolidated financial statements, for losses suffered solely by reason of fraud or willful misrepresentation by theOperating Partnership or its affiliates. We also provide a similar limited guarantee of theOperating Partnership's obligations with respect to our secured credit facility as ofMarch 31, 2021 . 46
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Debt of the
The following tables summarize debt based on our pro rata ownership share,
including our pro rata share of unconsolidated affiliates and excluding
noncontrolling investors' share of consolidated properties, because we believe
this provides investors and lenders a clearer understanding of our total debt
obligations and liquidity (in thousands):
Weighted-
Average
Noncontrolling Other Debt Unconsolidated Interest
March 31, 2021: Consolidated Interests (1) Affiliates Total Rate (2)
Fixed-rate debt:
Non-recourse loans on operating
Properties (3) $ 972,553 $ (29,922 ) $ 138,926 $ 609,197 $ 1,690,754 4.74 %
Recourse loans on operating Properties
(4) - - - 8,250 8,250 3.00 %
Construction loan - - - 3,449 3,449 5.05 %
Total fixed-rate debt 972,553 (29,922 ) 138,926 620,896 1,702,453 4.73 %
Variable-rate debt:
Recourse loans on operating Properties 67,611 - - 87,937 155,548 3.60 %
Construction loans - - - 35,372 35,372 2.87 %
Total variable-rate debt 67,611 - - 123,309 190,920 3.46 %
Total fixed-rate and variable-rate
debt 1,040,164 (29,922 ) 138,926 744,205 1,893,373 4.60 %
Unamortized deferred financing costs
(5) (3,194 ) 251 - (2,865 ) (5,808 )
Total mortgage and other indebtedness,
net $ 1,036,970 $ (29,671 ) $ 138,926 $ 741,340 $ 1,887,565
Weighted-
Average
Noncontrolling Other Debt Unconsolidated Interest
March 31, 2021: Consolidated Interests (1) Affiliates Total Rate (2)
Fixed-rate debt:
Senior unsecured notes due 2023 (6) $ 450,000 $ - $ - $ - $ 450,000 5.25 %
Senior unsecured notes due 2024 (6) 300,000 - - - 300,000 4.60 %
Senior unsecured notes due 2026 (6) 625,000 - - - 625,000 5.95 %
Total fixed-rate debt 1,375,000 - - - 1,375,000 5.43 %
Variable-rate debt:
Secured line of credit (7) 675,926 - - - 675,926 9.50 %
Secured term loan (7) 438,750 - - - 438,750 9.50 %
Total variable-rate debt 1,114,676 - - - 1,114,676 9.50 %
Total fixed-rate and variable-rate
debt 2,489,676 - - - 2,489,676 7.25 %
Unpaid accrued interest (8) 57,644 - - - 57,644
Prepetition unsecured or under secured
liabilities 4,034 - - - 4,034
Total liabilities subject to
compromise $ 2,551,354 $ - $ - $ - $ 2,551,354
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Weighted-
Average
Noncontrolling Unconsolidated Interest
December 31, 2020: Consolidated Interests Affiliates Total Rate (2)
Fixed-rate debt:
Non-recourse loans on operating
Properties (3) $ 1,120,203 $ (30,177 ) $ 612,458 $ 1,702,484 4.74 %
Recourse loans on operating Properties
(4) - - 9,360 9,360 3.74 %
Construction loan - - 3,406 3,406 5.05 %
Total fixed-rate debt 1,120,203 (30,177 ) 625,224 1,715,250 4.74 %
Variable-rate debt:
Recourse loans on operating Properties 68,061 - 88,511 156,572 4.59 %
Construction loans - - 33,222 33,222 3.11 %
Total variable-rate debt 68,061 - 121,733 189,794 4.33 %
Total fixed-rate and variable-rate
debt 1,188,264 (30,177 ) 746,957 1,905,044 4.70 %
Unamortized deferred financing costs (3,433 ) 265 (2,844 ) (6,012 )
Total mortgage and other indebtedness,
net $ 1,184,831 $ (29,912 ) $ 744,113 $ 1,899,032
Weighted-
Average
Noncontrolling Unconsolidated Interest
December 31, 2020: Consolidated Interests Affiliates Total Rate (2)
Fixed-rate debt:
Senior unsecured notes due 2023 (6) $ 450,000 $ - $ - $ 450,000 5.25 %
Senior unsecured notes due 2024 (6) 300,000 - - 300,000 4.60 %
Senior unsecured notes due 2026 (6) 625,000 - - 625,000 5.95 %
Total fixed-rate debt 1,375,000 - - 1,375,000 5.43 %
Variable-rate debt:
Secured line of credit (7) 675,926 - - 675,926 9.50 %
Secured term loan (7) 438,750 - - 438,750 9.50 %
Total variable-rate debt 1,114,676 - - 1,114,676 9.50 %
Total fixed-rate and variable-rate
debt 2,489,676 - - 2,489,676 7.25 %
Unpaid accrued interest (8) 57,644 - - 57,644
Prepetition unsecured or under secured
liabilities 4,170 - - 4,170
Total liabilities subject to
compromise $ 2,551,490 $ - $ - $ 2,551,490 (1) During the three months ended
Mall and
into receivership in connection with the foreclosure process.
(2) Weighted-average interest rate excludes amortization of deferred financing
costs.
(3) An unconsolidated affiliate has an interest rate swap on a notional amount
outstanding of
2020 related to a variable-rate loan on
fix the interest rate on this loan to a fixed-rate of 3.22%.
(4) The unconsolidated affiliate had an interest rate swap on a notional amount
outstanding of
on
the interest rate on this loan to a fixed-rate of 3.74%. In
loan was modified and provides an additional four-year term with a fixed
interest rate of 3.0%. In conjunction with the modification, we paid
additional principal of
(5) Unamortized deferred financing costs amounting to
certain consolidated and unconsolidated property-level, non-recourse mortgage
loans, respectively, may be required to be written off in the event that a
waiver or restructuring of terms cannot be negotiated and the debt is either
redeemed or otherwise extinguished.
(6) In accordance with ASC 852, which limits the recognition of interest expense
during a bankruptcy proceeding to only amounts that will be paid during the
bankruptcy proceeding or that are probable of becoming allowed claims,
interest has not been accrued on the senior unsecured notes subsequent to the
filing of the Chapter 11 Cases. The outstanding amount of the senior
unsecured notes is included in liabilities subject to compromise in the
accompanying condensed consolidated balance sheets as of
(7) The administrative agent informed the Company that interest will accrue on
all outstanding obligations at the post-default rate, which is equal to the
rate that otherwise would be in effect plus 5.0%. The post-default interest
rate at
ASC 852, which limits the recognition of interest expense during a bankruptcy
proceeding to only amounts that will be paid during the bankruptcy proceeding
or that are probable of becoming allowed claims, interest has not been
accrued on the secured credit facility subsequent to the filing of the
Chapter 11 Cases. The outstanding amount of the secured credit facility isincluded in liabilities subject to compromise in the accompanying condensed
consolidated balance sheets as of
(8) Represents interest accrued on the secured credit facility and senior
unsecured notes prior to the filing of the Chapter 11 Cases.
The weighted-average remaining term of our total share of consolidated, unconsolidated and other debt was 2.9 years and 3.1 years atMarch 31, 2021 andDecember 31, 2020 , respectively. The weighted-average remaining term of our pro rata share of fixed-rate debt was 3.1 years and 3.4 years atMarch 31, 2021 andDecember 31, 2020 , respectively. As ofMarch 31, 2021 andDecember 31, 2020 , our pro rata share of consolidated and unconsolidated variable-rate debt represented 29.8% and 29.7%, respectively, of our total pro rata share of debt.
See Note 8 to the condensed consolidated financial statements for information concerning activity related to unconsolidated affiliates.
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Issuer and Guarantor Subsidiaries of
InMarch 2020 , theSEC issued Rule Release No. 33-10762, Financial Disclosures About Guarantors and Issuers ofGuaranteed Securities and Affiliates Whose Securities Collateralize a Registrant's Securities ("Release 33-10762"). Release 33-10762 simplifies the disclosure requirements related to certain registered securities under Rules 3-10 and 3-16 of SEC Regulation S-X, permitting registrants to provide certain alternative financial disclosures and non-financial disclosures in lieu of separate consolidating financial statements for subsidiary issuers and guarantors of registered debt securities if certain conditions are met. The amendments in Release 33-10762 are generally effective for filings on or afterJanuary 4, 2021 , with early application permitted. We adopted the new disclosure requirements permitted under Release 33-10762 effective for the period as of and for the nine months endedSeptember 30, 2020 .The Operating Partnership's senior secured credit facility is secured by 17 malls and 3 associated centers that are directly or indirectly owned by 36 wholly owned subsidiaries of theOperating Partnership (the "Guarantor Subsidiaries"). The Guarantor Subsidiaries own an additional four malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The Guarantor Subsidiaries also entered into agreements to guarantee theOperating Partnership's obligations under the senior secured credit facility. Based on the terms of the Notes, to the extent that any subsidiary of theOperating Partnership executes and delivers a guarantee to another debt facility, theOperating Partnership shall also cause the subsidiary to guarantee theOperating Partnership's obligations under the Notes on a senior basis. In connection with entering the guarantee agreements related to the senior secured credit facility, the Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The guarantees of the Guarantor Subsidiaries are joint and several and full and unconditional. The guarantees are unsecured and effectively subordinated to any existing and future secured debt that a Guarantor Subsidiary may have to the extent of the value of the assets securing such debt. Each Guarantor Property's obligation will remain until the earlier of such time as (i) all guaranteed obligations have been paid in full in cash and each guaranteed obligation has been terminated or cancelled in accordance with its terms or (ii) any such Guarantor Subsidiary ceases to be a guarantor under the senior secured credit facility. The Guarantor Subsidiaries' maximum guarantee related to the secured credit facility is$1,114.7 million as ofMarch 31, 2021 , and the maximum guarantee related to the Notes is$1,375.0 million as ofMarch 31, 2021 . The following tables present summarized financial information for theOperating Partnership and the Guarantor Subsidiaries on a combined basis. The summarized financial information does not include theOperating Partnership's investments in non-guarantor subsidiaries nor the earnings from non-guarantor subsidiaries. Intercompany transactions between theOperating Partnership and the Guarantor Subsidiaries have been eliminated. The summarized balance sheet information is as ofMarch 31, 2021 andDecember 31, 2020 and the summarized statement of operations information is for the three-month periods endedMarch 31, 2021 and 2020 (amounts are presented in thousands). Three Months Year Ended Ended March 31, December 31, 2021 2020 Net investment in real estate assets$ 1,374,789 $ 1,428,482 Total assets (1) 1,650,983 1,673,179 Total liabilities (2) 2,812,130 2,884,808 Three Months Three Months Ended March 31, Ended March 31, 2021 2020 Total revenues (3)$ 54,772 $ 65,427 Total expenses (4) (76,955 ) (43,860 ) Net income 20,806 18,835
(1) Total assets include an intercompany note receivable with a non-guarantor
subsidiary of
respectively.
(2) Total liabilities include intercompany liabilities of
31, 2021.
(3) Total revenues include revenues derived from non-guarantor subsidiaries of
(4) Total expenses include expenses incurred with non-guarantor subsidiaries of
$8,331 and$10,890 for the three months endedMarch 31, 2021 and 2020, respectively.
Financial Covenants and Restrictions
As discussed in Note 2 to the condensed consolidated financial statements, the filing of the Chapter 11 Cases constituted an event of default that resulted in certain monetary obligations becoming immediately due and payable with respect to the secured credit facility and the senior unsecured notes. The filing of the Chapter 11 Cases also constituted an event of default with respect to certain property-level debt of theOperating Partnership's subsidiaries, which may have resulted in the automatic acceleration of certain monetary obligations or may give the applicable lender the right to accelerate such amounts. 49
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Equity
In 2019, we suspended all future dividends on our common stock and preferred stock, as well as distributions to all noncontrolling interest investors in ourOperating Partnership . The dividend arrearage created by our board of directors' decision to suspend the dividends that continue to accrue on our outstanding preferred stock currently makes us ineligible to use the abbreviated, and less costly, SEC Form S-3 registration statement to register our securities for sale. This means we will be required to use a registration statement on Form S-1 to register additional securities for sale with theSEC , which we expect to hinder our ability to act quickly in relation to, and raise our costs incurred in, future capital raising activities. This preferred dividend arrearage (and theOperating Partnership's related arrearage in distributions to its preferred units of limited partnership underlying our outstanding preferred shares), under the terms of our preferred stock, also require that we not resume any payment of dividends on our common stock unless full cumulative dividends accrued with respect to our preferred stock (and such underlying preferred units) for all past quarters and the then-current quarter are first declared and paid in cash, or declared with a sum sufficient for the payment thereof having been set apart for such payment in cash. In addition, for so long as this distribution suspension results in the existence of a distribution shortfall (as described in the Partnership Agreement of theOperating Partnership ) with respect to any of the S-SCUs, the L-SCUs or the K-SCUs (an "SCU Distribution Shortfall"), the terms of the Operating Partnership Agreement state that we (i) may not cause theOperating Partnership to resume distributions to holders of its outstanding common units of limited partnership until all holders of SCUs have received distributions sufficient to satisfy the SCU Distribution Shortfall for all prior quarters and the then-current quarter (which effectively would also prevent the resumption of common stock dividends, since our common stock dividends are funded by distributions the Company receives on the underlying common units it holds in theOperating Partnership ) and (ii) may not elect to settle any exchange requested by a holder of common units of theOperating Partnership in cash, and may only settle any such exchange through the issuance of shares of common stock or other units of theOperating Partnership ranking junior to any such units as to which a distribution shortfall exists. Our board of directors prospectively approved that, to the extent any partners exercise any or all of their exchange rights while the existence of the SCU Distribution Shortfall requires an exchange to be settled through the issuance of shares of common stock or other units of theOperating Partnership , the consideration paid shall be in the form of shares of common stock. We do not expect to pay any further dividends with respect to the Company's outstanding common stock and preferred stock, or any distributions with respect to theOperating Partnership's outstanding units of partnership interest, prior to the conclusion of our reorganization pursuant to the pending Chapter 11 Cases, which reorganization we also expect will extinguish all claims related to the accrued and unpaid preferred stock dividends and theOperating Partnership unit SCU Distribution Shortfall discussed above. If we successfully complete such reorganization, in connection with future dividend distributions with respect to new equity securities issued pursuant to the Chapter 11 Cases, we will review taxable income on a regular basis and take measures, if necessary, to ensure that we meet the minimum distribution requirements to maintain our status as a REIT. See Delisting of Common Stock and Depositary Shares in Note 2 to the condensed consolidated financial statements for additional information regarding the suspension of NYSE trading in our common stock and the depositary shares representing our Series D Preferred Stock and Series E Preferred Stock pursuant to a notice we received from the NYSE regarding our non-compliance with the NYSE Listing Standards and the current status of our related appeal to the NYSE.
Market Capitalization
Our total-market capitalization as of
Shares Stock
Outstanding Price (1)
Common stock and operating partnership units 201,577 $ 0.13
7.375% Series D Cumulative Redeemable Preferred Stock 1,815
250.00
6.625% Series E Cumulative Redeemable Preferred Stock 690
250.00
(1) Stock price for common stock and
closing price of CBL's common stock on
operated by the OTC Markets Group, Inc. The stock prices for the preferred
stock represent the liquidation preference of each respective series of
preferred stock.
Capital Expenditures
Deferred maintenance expenditures are generally included in the determination of
common area maintenance ("CAM") expense that is billed to tenants in accordance
with their lease agreements. These expenditures are generally recovered over a 5
to 15-year period. Renovation expenditures are primarily for remodeling and
upgrades of malls, of which a portion is recovered from tenants over a 5 to
15-year period. We recover these costs through fixed amounts with annual
increases or pro rata cost reimbursements based on the tenant's occupied space.
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The following table, which excludes expenditures for developments,
redevelopments and expansions, summarizes these capital expenditures, including
our share of unconsolidated affiliates' capital expenditures, for the three
months ended
Three Months Ended March 31,
2021 2020
Tenant allowances (1) $ 877 $ 7,223
Deferred maintenance:
Parking area and parking area lighting - 254
Roof repairs and replacements - 151 Other capital expenditures 459 3,090 Total deferred maintenance 459 3,495 Capitalized overhead 258 631 Capitalized interest 19 726 Total capital expenditures$ 1,613 $ 12,075
(1) Tenant allowances primarily relate to new leases. Tenant allowances related
to renewal leases were not material for the periods presented.
Annual capital expenditures budgets are prepared for each of our properties that are intended to provide for all necessary recurring and non-recurring capital expenditures. We believe that property operating cash flows, which include reimbursements from tenants for certain expenses, and readily available cash on hand will provide the necessary funding for these expenditures.
Developments and Redevelopments
(Dollars in thousands)
CBL's Share of
CBL Total Expected Initial
Ownership Project Total Cost to 2021 Opening Unleveraged
Property Location Interest Square
Feet Cost (1) Date (2) Cost Date Yield
Outparcel Developments:
89,674
100% 48,416 14,186 7,947 525 Q2 '21 11.8%
HCA Offices
138,090 26,186 18,120 1,872
Redevelopments:
Cross Creek Sears Redevelopment - Fayetteville, NC 100% 13,494 5,252 2,259 1,035 Q3 '21 5.3% Longhorn's,Rooms To Go (5) Total Properties Under
151,584
Development
(1) Total Cost is presented net of reimbursements to be received.
(2) Cost to Date does not reflect reimbursements until they are received.
(3) Yield is based on expected yield upon stabilization.
(4) Total cost includes a non-cash allocated value for the Company's land
contribution and amounts funded by a construction loan.
(5) The return reflected represents a pro forma incremental return as Total Cost
excludes the cost related to the acquisition of the Sears (
building.
Off-Balance Sheet Arrangements
Unconsolidated Affiliates
We have ownership interests in 29 unconsolidated affiliates as ofMarch 31, 2021 that are described in Note 8 to the condensed consolidated financial statements. The unconsolidated affiliates are accounted for using the equity method of accounting and are reflected in the condensed consolidated balance sheets as investments in unconsolidated affiliates.
The following are circumstances when we may consider entering into a joint venture with a third party:
• Third parties may approach us with opportunities in which they have
obtained land and performed some pre-development activities, but they
may not have sufficient access to the capital resources or thedevelopment and leasing expertise to bring the project to fruition. We
enter into such arrangements when we determine such a project is viable
and we can achieve a satisfactory return on our investment. We typically
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earn development fees from the joint venture and provide management and
leasing services to the property for a fee once the property is placed
in operation.
• We determine that we may have the opportunity to capitalize on the value
we have created in a property by selling an interest in the property to
a third party. This provides us with an additional source of capital
that can be used to develop or acquire additional real estate assets
that we believe will provide greater potential for growth. When we
retain an interest in an asset rather than selling a 100% interest, it
is typically because this allows us to continue to manage the property,
which provides us the ability to earn fees for management, leasing,
development and financing services provided to the joint venture.
• We also have the ability to contribute land into a joint venture
partnership with diverse uses, such as hotels, self-storage and
multifamily. We typically partner with developers
the diverse property types.
Guarantees
We may guarantee the debt of a joint venture primarily because it allows the joint venture to obtain funding at a lower cost than could be obtained otherwise. This results in a higher return for the joint venture on its investment, and a higher return on our investment in the joint venture. We may receive a fee from the joint venture for providing the guaranty. Additionally, when we issue a guaranty, the terms of the joint venture agreement typically provide that we may receive indemnification from the joint venture or have the ability to increase our ownership interest.
See Note 12 to the condensed consolidated financial statements for
information related to our guarantees of unconsolidated affiliates' debt as of
Critical Accounting Policies
Our discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the financial statements and disclosures. Some of these estimates and assumptions require application of difficult, subjective, and/or complex judgment about the effect of matters that are inherently uncertain and that may change in subsequent periods. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our Annual Report on Form 10-K for the year endedDecember 31, 2020 contains a discussion of our critical accounting policies and estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations section. There have been no material changes to these policies and estimates during the three months endedMarch 31, 2021 . Our significant accounting policies are disclosed in Note 3 to the consolidated financial statements included in our Annual Report on Form 10-K for the year endedDecember 31, 2020 .
Recent Accounting Pronouncements
See Note 3 to the condensed consolidated financial statements for information on recently issued accounting pronouncements.
Non-GAAP Measure
Funds from Operations
FFO is a widely used non-GAAP measure of the operating performance of real estate companies that supplements net income (loss) determined in accordance with GAAP. NAREIT defines FFO as net income (loss) (computed in accordance with GAAP) excluding gains or losses on sales of depreciable operating properties and impairment losses of depreciable properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests. Adjustments for unconsolidated partnerships, joint ventures and noncontrolling interests are calculated on the same basis. We define FFO as defined above by NAREIT less dividends on preferred stock of the Company or distributions on preferred units of theOperating Partnership , as applicable. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. We believe that FFO provides an additional indicator of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes the value of real estate assets declines predictably over time. Since values of real estate assets have historically risen or fallen with market conditions, we believe that FFO, which excludes historical cost depreciation and amortization, enhances investors' understanding of our operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of our properties and interest rates, but also by our capital structure. 52
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We present both FFO allocable toOperating Partnership common unitholders and FFO allocable to common shareholders, as we believe that both are useful performance measures. We believe FFO allocable toOperating Partnership common unitholders is a useful performance measure since we conduct substantially all our business through ourOperating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of our common shareholders and the noncontrolling interest in ourOperating Partnership . We believe FFO allocable to common shareholders is a useful performance measure because it is the performance measure that is most directly comparable to net income (loss) attributable to common shareholders. In our reconciliation of net income (loss) attributable to common shareholders to FFO allocable toOperating Partnership common unitholders that is presented below, we make an adjustment to add back noncontrolling interest in income (loss) of ourOperating Partnership in order to arrive at FFO of theOperating Partnership common unitholders. We then apply a percentage to FFO of theOperating Partnership common unitholders to arrive at FFO allocable to common shareholders. The percentage is computed by taking the weighted-average number of common shares outstanding for the period and dividing it by the sum of the weighted-average number of common shares and the weighted-average number ofOperating Partnership units held by noncontrolling interests during the period. FFO does not represent cash flows from operations as defined by GAAP, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income (loss) for purposes of evaluating our operating performance or to cash flow as a measure of liquidity. The Company believes that it is important to identify the impact of certain significant items on its FFO measures for a reader to have a complete understanding of the Company's results of operations. Therefore, the Company has also presented adjusted FFO measures excluding these significant items from the applicable periods. Please refer to the reconciliation of net income (loss) attributable to common shareholders to FFO allocable toOperating Partnership common unitholders below for a description of these adjustments. FFO of theOperating Partnership increased to$90.2 million for the three months endedMarch 31, 2021 from$50.9 million for the prior-year period. Excluding the adjustments noted below, FFO of theOperating Partnership , as adjusted, increased to$68.7 million for the three months endedMarch 31, 2021 from$51.6 million for the same period in 2020. The increase in FFO, as adjusted, was primarily driven by lower operating expenses and the reduction in interest expense due to not recognizing post-petition interest expense on the senior unsecured notes and the secured credit facility subsequent to the filing of the Chapter 11 Cases.
The reconciliation of net loss attributable to common shareholders to FFO
allocable to
Three Months Ended
March 31,
2021 2020
Net loss attributable to common shareholders $ (26,763 ) $ (133,896 )
Noncontrolling interest in loss of Operating (698 ) (16,414 )
Partnership
Depreciation and amortization expense of:
Consolidated properties 48,112 55,902
Unconsolidated affiliates 13,530 13,510
Non-real estate assets (541 ) (917 )
Noncontrolling interests' share of depreciation and (581 ) (923 )
amortization in other consolidated subsidiaries
Loss on impairment 57,182 133,644
Loss on depreciable property -
25
FFO allocable toOperating Partnership common 90,241
50,931
unitholders
Litigation settlement (1) (858 )
-
Non-cash default interest expense (2) 11,470 690 Gain on deconsolidation (3) (55,131 ) - Reorganization items (4) 22,933 - FFO allocable toOperating Partnership common unitholders, as$ 68,655 $ 51,621 adjusted FFO per diluted share$ 0.45 $ 0.25 FFO, as adjusted, per diluted share$ 0.34 $
0.26
(1) Represents a credit to litigation settlement expense related to claim amounts
that were released pursuant to the terms of the settlement agreement related
to the settlement of a class action lawsuit.
(2) The three months ended
related to loans secured by properties that were in default prior to the
filing of the Chapter 11 Cases, as well as loans secured by properties that
are in default due to the filing of the Chapter 11 Cases. The three months
ended
Mall and
(3) During the three months ended
Mall and
into receivership in connection with the foreclosure process.
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(4) Represents costs incurred subsequent to the filing of the Chapter 11 Cases,
which consists of professional and legal fees.
The reconciliation of diluted EPS to FFO per diluted share is as follows:
Three Months Ended
March 31,
2021 2020
Diluted EPS attributable to common shareholders $ (0.14 ) $ (0.75 )
Eliminate amounts per share excluded from FFO:
Depreciation and amortization expense, including amounts
from
consolidated properties, unconsolidated affiliates, non-real estate
0.30 0.34
assets and excluding amounts allocated to noncontrolling interests Loss on impairment 0.29 0.66 FFO per diluted share$ 0.45 $ 0.25 The reconciliations of FFO allocable toOperating Partnership common unitholders to FFO allocable to common shareholders, including and excluding the adjustments noted above, are as follows (in thousands): Three Months Ended March 31, 2021 2020
FFO allocable to
97.46 % 89.01 %
FFO allocable to common shareholders $ 87,949 FFO allocable to Operating Partnership common unitholders,$ 68,655 $ 51,621 as adjusted Percentage allocable to common shareholders (1) 97.46 % 89.01 % FFO allocable to common shareholders, as adjusted$ 66,911
(1) Represents the weighted-average number of common shares outstanding for the
period divided by the sum of the weighted-average number of common shares and
the weighted-average number of
the period.
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