CBL & Associates Properties, Inc. (NYSE:CBL) announced results for the first quarter ended March 31, 2014. A description of each non-GAAP financial measure and the related reconciliation to the comparable GAAP measure is located at the end of this news release.
| Three Months Ended March 31, | |||||||
| 2014 | 2013 | ||||||
| Funds from Operations (“FFO”) per diluted share | $ | 0.73 | $ | 0.53 | |||
| FFO, as adjusted, per diluted share (1) | $ | 0.52 | $ | 0.53 | |||
(1) FFO, as adjusted, for the quarter ended March 31, 2014 excludes a partial legal settlement of $0.8 million and the net gain on extinguishment of debt of $42.7 million primarily related to the foreclosure of the mortgage loan secured by Citadel Mall in January 2014.
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CBL’s President and Chief Executive Officer Stephen Lebovitz commented, “Results for 2014’s first quarter were in-line with our expectations and encouraging given the impact from increased store closings and bankruptcies as well as the harsh winter season. Looking forward, we expect the stronger sales gains reported by retailers in April to continue and offset the sluggish sales results in the first quarter. We are on pace to deliver 2014 same-center NOI and FFO goals that we recently outlined in our special update call earlier this month. As we stated, our priorities include executing both our near-term operational initiatives for 2014 and our longer-term strategic objectives to position CBL for a higher sustainable growth rate.”
FFO allocable to common shareholders, as adjusted, for the first quarter of 2014 was $87.7 million, or $0.52 per diluted share, compared with $85.9 million, or $0.53 per diluted share, for the first quarter of 2013. FFO of the operating partnership for the first quarter of 2014 was $102.9 million compared with $101.6 million, for the first quarter of 2013. FFO per share declined from the prior-year period primarily as a result of dilution from the equity raised through the Company’s At-The-Market (“ATM”) program in the second quarter 2013 and the sale of assets in the third quarter 2013.
Net income attributable to common shareholders for the first quarter of 2014 was $44.1 million, or $0.26 per diluted share, compared with net income of $19.1 million, or $0.12 per diluted share for the first quarter of 2013.
Percentage change in same-center Net Operating Income (“NOI”)(1):
| Three Months Ended March 31, | ||
| 2014 | ||
| Portfolio same-center NOI | 1.5% | |
| Mall same-center NOI | 1.6% | |
(1) CBL's definition of NOI excludes the impact of lease termination fees and certain non-cash items of straight line rents and net amortization of acquired above and below market leases. NOI is for real estate properties and excludes income of the Company's subsidiary that provides maintenance, janitorial and security services.
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MAJOR VARIANCES IMPACTING SAME-CENTER NOI RESULTS FOR THE QUARTER ENDED MARCH 31, 2014
- Occupancy growth and contributions from new and renewal lease spreads resulted in $4.0 million of growth in minimum rent compared with the prior-year period.
- Severe weather and a shortened sales calendar contributed to a decline in percentage rents of $0.9 million compared with the prior-year-period.
- Operating expenses benefited from a favorable $1.1 million adjustment to insurance reserves offset by an increase in bad debt and utility expense of $1.5 million due to higher bankruptcy and store closure activity.
- Severe weather during the first quarter resulted in an increase in snow removal expense of $1.4 million compared with the prior-year period.
PORTFOLIO OPERATIONAL RESULTS
Occupancy:
| As of March 31, | ||||
| 2014 | 2013 | |||
| Portfolio occupancy | 92.5% | 92.2% | ||
| Mall portfolio | 92.3% | 91.8% | ||
| Same-center stabilized malls | 92.2% | 92.1% | ||
| Stabilized malls | 92.2% | 91.7% | ||
| Non-stabilized malls (1) | 96.9% | 99.3% | ||
| Associated centers | 94.8% | 93.5% | ||
| Community centers | 94.4% | 96.0% | ||
(1) Includes The Outlet Shoppes at Oklahoma City and The Outlet Shoppes at Atlanta as of March 31, 2014. Includes The Outlet Shoppes at Oklahoma City as of March 31, 2013.
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New and Renewal Leasing Activity of Same Small Shop Space Less Than 10,000 Square Feet:
| % Change in Average Gross Rent Per Square Foot | ||||||||||
| Three Months Ended March 31, 2014 | ||||||||||
| Stabilized Malls | 9.5% | |||||||||
| New leases | 37.5% | |||||||||
| Renewal leases | 2.4% | |||||||||
Same-Store Sales Per Square Foot for Mall Tenants 10,000 Square Feet or Less:
| Twelve Months Ended March 31, | |||||||||||
| 2014 | 2013 | % Change | |||||||||
| Stabilized mall same-store sales per square foot | $ | 351 | $ | 363 | (3.2 | )% | |||||
TRANSACTIONS
Consistent with CBL’s disposition strategy, the Company has entered into a binding contract for the sale of Lakeshore Mall in Sebring, FL for $14.0 million. The sale is expected to close in May 2014.
In March 2014, the Company exercised its right to acquire the 12.0% noncontrolling interest in Pearland Town Center from its joint venture partner for $17.9 million.
FINANCING ACTIVITY
In January, the foreclosure of the mortgage loan secured by Citadel Mall was completed. CBL recorded a gain on extinguishment of debt of $44.0 million related to the foreclosure.
During the first quarter 2014, CBL retired the $122 million loan secured by St. Clair Square in Fairview Heights, IL. CBL recorded a prepayment fee of $1.2 million related to the early payoff.
OUTLOOK AND GUIDANCE
The Company is affirming 2014 Adjusted FFO guidance in the range of $2.22 - $2.26 per share. CBL is assuming same-center NOI growth of 1.0-2.0% in 2014.
The guidance also assumes the following:
- Flat interest expense
- $2.0 million to $4.0 million of outparcel sales
- 0-25 basis point increase in total portfolio occupancy as well as stabilized mall occupancy throughout 2014
- The sale of Lakeshore Mall in May 2014
- No additional unannounced acquisition or disposition activity
- No unannounced capital markets activity - equity or debt
| Low | High | |||||||
| Expected diluted earnings per common share | $ | 0.56 | $ | 0.60 | ||||
| Adjust to fully converted shares from common shares | (0.09 | ) | (0.10 | ) | ||||
| Expected earnings per diluted, fully converted common share | 0.47 | 0.50 | ||||||
| Depreciation and amortization | 1.79 | 1.79 | ||||||
| Noncontrolling interest in earnings of Operating Partnership | 0.08 | 0.09 | ||||||
| Impairment of real estate | 0.09 | 0.09 | ||||||
| Expected FFO per diluted, fully converted common share | $ | 2.43 | $ | 2.47 | ||||
| Net gain on debt extinguishment and litigation settlement | (0.21 | ) | (0.21 | ) | ||||
| Expected adjusted FFO per diluted, fully converted common share | $ | 2.22 | $ | 2.26 | ||||
INVESTOR CONFERENCE CALL AND WEBCAST
CBL & Associates Properties, Inc. will conduct a conference call at 11:00 a.m. ET on Tuesday, April 29, 2014, to discuss its first quarter results. The number to call for this interactive teleconference is (800) 736-4594 or (212) 231-2902. A replay of the conference call will be available through May 6, 2014, by dialing (800) 633-8284 or (402) 977-9140 and entering the confirmation number 21706208. A transcript of the Company’s prepared remarks will be furnished on a Form 8-K following the conference call.
To receive the CBL & Associates Properties, Inc., first quarter earnings release and supplemental information please visit our website at cblproperties.com or contact Investor Relations at 423-490-8312.
The Company will also provide an online webcast and rebroadcast of its 2014 first quarter earnings release conference call. The live broadcast of the quarterly conference call will be available online at cblproperties.com on Tuesday, April 29, 2014 beginning at 11:00 a.m. ET. The online replay will follow shortly after the call and continue for one year.
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