UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO _______________
COMMISSION FILE NO. 1-12494 (CBL & ASSOCIATES PROPERTIES, INC.)
CBL & ASSOCIATES PROPERTIES, INC.
(Exact Name of registrant as specified in its charter)
Delaware (CBL & ASSOCIATES PROPERTIES, INC.) |
|
62-1545718 |
|
|
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification Number) |
2030 Hamilton Place Blvd., Suite 500, Chattanooga, TN 37421-6000
(Address of principal executive office, including zip code)
423-855-0001
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered under Section 12(b) of the Act:
Title of each Class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
Common Stock, $0.001 par value, with associated Stock Purchase Rights |
|
CBL |
|
New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
|
|
Yes |
☒ |
No |
☐ |
|
|
|
|
|
|
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
|
|
Yes |
☒ |
No |
☐ |
|
|
|
|
|
|
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
|
Accelerated filer |
☐ |
Non-accelerated filer |
☒ |
|
Smaller reporting company |
☒ |
Emerging growth company |
☐ |
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
|
|
Yes ☐ |
No ☒ |
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
|
|
Yes ☒ |
No ☐ |
As of November 8, 2022, 31,834,178 shares of common stock were outstanding.
CBL & Associates Properties, Inc.
Table of Contents
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||
|
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PART I |
1 |
|
Item 1. |
1 |
|
|
|
|
|
Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 |
1 |
|
2 |
|
|
4 |
|
|
5 |
|
|
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 |
6 |
|
|
|
|
Notes to Unaudited Condensed Consolidated Financial Statements |
7 |
|
|
|
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
27 |
Item 3. |
48 |
|
Item 4. |
49 |
|
|
|
|
PART II |
50 |
|
|
|
|
Item 1. |
50 |
|
Item1A. |
50 |
|
Item 2. |
50 |
|
Item 3. |
50 |
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Item 4. |
50 |
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Item 5. |
50 |
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Item 6. |
51 |
|
|
|
|
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52 |
|
PART I – FINANCIAL INFORMATION
ITEM 1: Condensed Consolidated Financial Statements (Unaudited)
CBL & Associates Properties, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
ASSETS (1) |
|
September 30, |
|
|
December 31, |
|
||
Real estate assets: |
|
|
|
|
|
|
||
Land |
|
$ |
598,201 |
|
|
$ |
599,283 |
|
Buildings and improvements |
|
|
1,188,200 |
|
|
|
1,173,106 |
|
|
|
|
1,786,401 |
|
|
|
1,772,389 |
|
Accumulated depreciation |
|
|
(107,462 |
) |
|
|
(19,939 |
) |
|
|
|
1,678,939 |
|
|
|
1,752,450 |
|
Developments in progress |
|
|
5,343 |
|
|
|
16,665 |
|
Net investment in real estate assets |
|
|
1,684,282 |
|
|
|
1,769,115 |
|
Cash and cash equivalents |
|
|
85,754 |
|
|
|
169,554 |
|
Available-for-sale securities - at fair value (amortized cost of $249,638 and $149,999 as of September 30, 2022 and December 31, 2021, respectively) |
|
|
249,912 |
|
|
|
149,996 |
|
Receivables: |
|
|
|
|
|
|
||
Tenant |
|
|
32,290 |
|
|
|
25,190 |
|
Other |
|
|
3,441 |
|
|
|
4,793 |
|
Investments in unconsolidated affiliates |
|
|
81,805 |
|
|
|
103,655 |
|
In-place leases, net |
|
|
277,443 |
|
|
|
384,705 |
|
Above market leases, net |
|
|
186,652 |
|
|
|
234,286 |
|
Intangible lease assets and other assets |
|
|
125,248 |
|
|
|
104,685 |
|
|
|
$ |
2,726,827 |
|
|
$ |
2,945,979 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
||
Mortgage and other indebtedness, net |
|
$ |
2,016,704 |
|
|
$ |
1,813,209 |
|
10% senior secured notes - at fair value (carrying amount of $395,000 as of December 31, 2021) |
|
|
— |
|
|
|
395,395 |
|
Below market leases, net |
|
|
121,741 |
|
|
|
151,871 |
|
Accounts payable and accrued liabilities |
|
|
149,007 |
|
|
|
184,404 |
|
Total liabilities (1) |
|
|
2,287,452 |
|
|
|
2,544,879 |
|
Shareholders' equity: |
|
|
|
|
|
|
||
Common stock, $.001 par value, 200,000,000 shares authorized, 31,834,178 and 20,774,716 issued and outstanding in 2022 and 2021, respectively |
|
32 |
|
|
|
21 |
|
|
Additional paid-in capital |
|
|
708,768 |
|
|
|
547,726 |
|
Accumulated other comprehensive income (loss) |
|
|
274 |
|
|
|
(3 |
) |
Accumulated deficit |
|
|
(263,862 |
) |
|
|
(151,545 |
) |
Total shareholders' equity |
|
|
445,212 |
|
|
|
396,199 |
|
Noncontrolling interests |
|
|
(5,837 |
) |
|
|
4,901 |
|
Total equity |
|
|
439,375 |
|
|
|
401,100 |
|
|
|
$ |
2,726,827 |
|
|
$ |
2,945,979 |
|
The accompanying notes are an integral part of these condensed consolidated statements.
1
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Three Months Ended September 30, |
|
|
|
Three Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
REVENUES: |
|
|
|
|
|
|
|
||
Rental revenues |
|
$ |
131,642 |
|
|
|
$ |
145,539 |
|
Management, development and leasing fees |
|
|
1,783 |
|
|
|
|
1,780 |
|
Other |
|
|
2,855 |
|
|
|
|
3,056 |
|
Total revenues |
|
|
136,280 |
|
|
|
|
150,375 |
|
EXPENSES: |
|
|
|
|
|
|
|
||
Property operating |
|
|
(24,390 |
) |
|
|
|
(23,818 |
) |
Depreciation and amortization |
|
|
(61,050 |
) |
|
|
|
(46,479 |
) |
Real estate taxes |
|
|
(13,880 |
) |
|
|
|
(13,957 |
) |
Maintenance and repairs |
|
|
(10,272 |
) |
|
|
|
(9,482 |
) |
General and administrative |
|
|
(14,625 |
) |
|
|
|
(13,502 |
) |
Loss on impairment |
|
|
— |
|
|
|
|
(63,160 |
) |
Litigation settlement |
|
|
36 |
|
|
|
|
89 |
|
Other |
|
|
— |
|
|
|
|
(104 |
) |
Total expenses |
|
|
(124,181 |
) |
|
|
|
(170,413 |
) |
OTHER INCOME (EXPENSES): |
|
|
|
|
|
|
|
||
Interest and other income |
|
|
152 |
|
|
|
|
510 |
|
Interest expense |
|
|
(37,652 |
) |
|
|
|
(19,039 |
) |
Loss on available-for-sale securities |
|
|
(39 |
) |
|
|
|
— |
|
Gain on sales of real estate assets |
|
|
3,528 |
|
|
|
|
8,684 |
|
Reorganization items, net |
|
|
1,220 |
|
|
|
|
(12,008 |
) |
Income tax (provision) benefit |
|
|
(2,422 |
) |
|
|
|
1,234 |
|
Equity in earnings (losses) of unconsolidated affiliates |
|
|
5,702 |
|
|
|
|
(2,224 |
) |
Total other expenses |
|
|
(29,511 |
) |
|
|
|
(22,843 |
) |
Net loss |
|
|
(17,412 |
) |
|
|
|
(42,881 |
) |
Net (income) loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
||
Operating Partnership |
|
|
(25 |
) |
|
|
|
1,085 |
|
Other consolidated subsidiaries |
|
|
3,143 |
|
|
|
|
76 |
|
Net loss attributable to the Company |
|
|
(14,294 |
) |
|
|
|
(41,720 |
) |
Dividends allocable to unvested restricted stock |
|
|
(216 |
) |
|
|
|
— |
|
Net loss attributable to common shareholders |
|
$ |
(14,510 |
) |
|
|
$ |
(41,720 |
) |
Basic and diluted per share data attributable to common shareholders: |
|
|
|
|
|
|
|
||
Net loss attributable to common shareholders |
|
$ |
(0.47 |
) |
|
|
$ |
(0.21 |
) |
Weighted-average common and potential dilutive common shares outstanding |
|
|
30,973 |
|
|
|
|
196,454 |
|
The accompanying notes are an integral part of these condensed consolidated statements.
2
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
REVENUES: |
|
|
|
|
|
|
|
||
Rental revenues |
|
$ |
398,806 |
|
|
|
$ |
405,030 |
|
Management, development and leasing fees |
|
|
5,338 |
|
|
|
|
4,888 |
|
Other |
|
|
9,256 |
|
|
|
|
10,202 |
|
Total revenues |
|
|
413,400 |
|
|
|
|
420,120 |
|
EXPENSES: |
|
|
|
|
|
|
|
||
Property operating |
|
|
(69,046 |
) |
|
|
|
(65,243 |
) |
Depreciation and amortization |
|
|
(194,469 |
) |
|
|
|
(142,090 |
) |
Real estate taxes |
|
|
(42,569 |
) |
|
|
|
(45,618 |
) |
Maintenance and repairs |
|
|
(31,068 |
) |
|
|
|
(29,047 |
) |
General and administrative |
|
|
(51,149 |
) |
|
|
|
(37,383 |
) |
Loss on impairment |
|
|
(252 |
) |
|
|
|
(120,342 |
) |
Litigation settlement |
|
|
182 |
|
|
|
|
890 |
|
Other |
|
|
(834 |
) |
|
|
|
(391 |
) |
Total expenses |
|
|
(389,205 |
) |
|
|
|
(439,224 |
) |
OTHER INCOME (EXPENSES): |
|
|
|
|
|
|
|
||
Interest and other income |
|
|
1,216 |
|
|
|
|
2,038 |
|
Interest expense |
|
|
(183,428 |
) |
|
|
|
(65,468 |
) |
Gain on deconsolidation |
|
|
36,250 |
|
|
|
|
55,131 |
|
Loss on available-for-sale securities |
|
|
(39 |
) |
|
|
|
— |
|
Gain on sales of real estate assets |
|
|
3,547 |
|
|
|
|
8,492 |
|
Reorganization items, net |
|
|
262 |
|
|
|
|
(52,014 |
) |
Income tax provision |
|
|
(2,751 |
) |
|
|
|
(222 |
) |
Equity in earnings (losses) of unconsolidated affiliates |
|
|
16,308 |
|
|
|
|
(9,575 |
) |
Total other expenses |
|
|
(128,635 |
) |
|
|
|
(61,618 |
) |
Net loss |
|
|
(104,440 |
) |
|
|
|
(80,722 |
) |
Net loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
||
Operating Partnership |
|
|
34 |
|
|
|
|
2,013 |
|
Other consolidated subsidiaries |
|
|
8,002 |
|
|
|
|
1,344 |
|
Net loss attributable to the Company |
|
|
(96,404 |
) |
|
|
|
(77,365 |
) |
Dividends allocable to unvested restricted stock |
|
|
(426 |
) |
|
|
|
— |
|
Net loss attributable to common shareholders |
|
$ |
(96,830 |
) |
|
|
$ |
(77,365 |
) |
Basic and diluted per share data attributable to common shareholders: |
|
|
|
|
|
|
|
||
Net loss attributable to common shareholders |
|
$ |
(3.26 |
) |
|
|
$ |
(0.39 |
) |
Weighted-average common and potential dilutive common shares outstanding |
|
|
29,725 |
|
|
|
|
196,474 |
|
The accompanying notes are an integral part of these condensed consolidated statements.
3
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands, except share data)
(Unaudited)
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Three Months Ended September 30, |
|
|
|
Three Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Net loss |
|
$ |
(17,412 |
) |
|
|
$ |
(42,881 |
) |
|
|
|
|
|
|
|
|
||
Other comprehensive gain: |
|
|
|
|
|
|
|
||
Unrealized gain on available-for-sale securities |
|
|
268 |
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
||
Comprehensive loss |
|
|
(17,144 |
) |
|
|
|
(42,868 |
) |
Comprehensive (income) loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
||
Operating Partnership |
|
|
(25 |
) |
|
|
|
1,085 |
|
Other consolidated subsidiaries |
|
|
3,143 |
|
|
|
|
76 |
|
Comprehensive loss attributable to the Company |
|
|
(14,026 |
) |
|
|
|
(41,707 |
) |
Dividends allocable to unvested restricted stock |
|
|
(216 |
) |
|
|
|
— |
|
Comprehensive loss attributable to common shareholders |
|
$ |
(14,242 |
) |
|
|
$ |
(41,707 |
) |
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Net loss |
|
$ |
(104,440 |
) |
|
|
$ |
(80,722 |
) |
|
|
|
|
|
|
|
|
||
Other comprehensive gain (loss): |
|
|
|
|
|
|
|
||
Unrealized gain (loss) on available-for-sale securities |
|
|
277 |
|
|
|
|
(11 |
) |
|
|
|
|
|
|
|
|
||
Comprehensive loss |
|
|
(104,163 |
) |
|
|
|
(80,733 |
) |
Comprehensive loss attributable to noncontrolling interests in: |
|
|
|
|
|
|
|
||
Operating Partnership |
|
|
34 |
|
|
|
|
2,013 |
|
Other consolidated subsidiaries |
|
|
8,002 |
|
|
|
|
1,344 |
|
Comprehensive loss attributable to the Company |
|
|
(96,127 |
) |
|
|
|
(77,376 |
) |
Dividends allocable to unvested restricted stock |
|
|
(426 |
) |
|
|
|
— |
|
Comprehensive loss attributable to common shareholders |
|
$ |
(96,553 |
) |
|
|
$ |
(77,376 |
) |
The accompanying notes are an integral part of these condensed consolidated statements.
4
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Equity
(In thousands, except share data)
(Unaudited
|
|
|
|
|
Equity |
|
||||||||||||||||||||||||||||||
|
|
|
|
|
Shareholders' Equity |
|
|
|
|
|
|
|
||||||||||||||||||||||||
|
|
Redeemable |
|
|
Preferred |
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Dividends |
|
|
Total |
|
|
Noncontrolling |
|
|
Total |
|
|||||||||
Balance, December 31, 2020 (Predecessor) |
|
$ |
(265 |
) |
|
$ |
25 |
|
|
$ |
1,966 |
|
|
$ |
1,986,269 |
|
|
$ |
18 |
|
|
$ |
(1,456,435 |
) |
|
$ |
531,843 |
|
|
$ |
2,454 |
|
|
$ |
534,297 |
|
Net loss |
|
|
(213 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(26,763 |
) |
|
|
(26,763 |
) |
|
|
(1,304 |
) |
|
|
(28,067 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
3 |
|
Cancellation of 111,139 shares of restricted common stock |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
Amortization of deferred compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
304 |
|
|
|
— |
|
|
|
— |
|
|
|
304 |
|
|
|
— |
|
|
|
304 |
|
Performance stock units |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
93 |
|
|
|
— |
|
|
|
— |
|
|
|
93 |
|
|
|
— |
|
|
|
93 |
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11 |
) |
|
|
(11 |
) |
Balance, March 31, 2021 (Predecessor) |
|
|
(478 |
) |
|
|
25 |
|
|
|
1,965 |
|
|
|
1,986,666 |
|
|
|
21 |
|
|
|
(1,483,198 |
) |
|
|
505,479 |
|
|
|
1,139 |
|
|
|
506,618 |
|
Net loss |
|
|
(70 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,882 |
) |
|
|
(8,882 |
) |
|
|
(609 |
) |
|
|
(9,491 |
) |
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(27 |
) |
|
|
— |
|
|
|
(27 |
) |
|
|
— |
|
|
|
(27 |
) |
Cancellation of 14,326 shares of restricted stock |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(17 |
) |
|
|
— |
|
|
|
— |
|
|
|
(18 |
) |
|
|
— |
|
|
|
(18 |
) |
Amortization of deferred compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
256 |
|
|
|
— |
|
|
|
— |
|
|
|
256 |
|
|
|
— |
|
|
|
256 |
|
Performance stock units |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
94 |
|
|
|
— |
|
|
|
— |
|
|
|
94 |
|
|
|
— |
|
|
|
94 |
|
Adjustment for noncontrolling interests |
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
(17 |
) |
|
|
— |
|
|
|
— |
|
|
|
(17 |
) |
|
|
12 |
|
|
|
(5 |
) |
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(343 |
) |
|
|
(343 |
) |
Balance, June 30, 2021 (Predecessor) |
|
|
(543 |
) |
|
|
25 |
|
|
|
1,964 |
|
|
|
1,986,982 |
|
|
|
(6 |
) |
|
|
(1,492,080 |
) |
|
|
496,885 |
|
|
|
199 |
|
|
|
497,084 |
|
Net loss |
|
|
(330 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(41,720 |
) |
|
|
(41,720 |
) |
|
|
(831 |
) |
|
|
(42,551 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
|
|
— |
|
|
|
13 |
|
Conversion of Operating Partnership common units into shares of common stock |
|
|
— |
|
|
|
— |
|
|
|
12 |
|
|
|
194 |
|
|
|
— |
|
|
|
— |
|
|
|
206 |
|
|
|
(206 |
) |
|
|
— |
|
Cancellation of 7,737 shares of restricted common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8 |
) |
|
|
— |
|
|
|
— |
|
|
|
(8 |
) |
|
|
— |
|
|
|
(8 |
) |
Amortization of deferred compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
252 |
|
|
|
— |
|
|
|
— |
|
|
|
252 |
|
|
|
— |
|
|
|
252 |
|
Performance stock units |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
93 |
|
|
|
— |
|
|
|
— |
|
|
|
93 |
|
|
|
— |
|
|
|
93 |
|
Adjustment for noncontrolling interests |
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
(602 |
) |
|
|
— |
|
|
|
— |
|
|
|
(602 |
) |
|
|
600 |
|
|
|
(2 |
) |
Contributions from noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
298 |
|
|
|
298 |
|
Balance, September 30, 2021 (Predecessor) |
|
$ |
(871 |
) |
|
$ |
25 |
|
|
$ |
1,976 |
|
|
$ |
1,986,911 |
|
|
$ |
7 |
|
|
$ |
(1,533,800 |
) |
|
$ |
455,119 |
|
|
$ |
60 |
|
|
$ |
455,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
Equity |
|
|||||||||||||||||||||||||
|
|
Shareholders' Equity |
|
|
|
|
|
|
|
|||||||||||||||||||
|
|
Common |
|
|
Additional |
|
|
Accumulated |
|
|
Accumulated |
|
|
Total |
|
|
Noncontrolling |
|
|
Total |
|
|||||||
Balance, December 31, 2021 (Successor) |
|
$ |
21 |
|
|
$ |
547,726 |
|
|
$ |
(3 |
) |
|
$ |
(151,545 |
) |
|
$ |
396,199 |
|
|
$ |
4,901 |
|
|
$ |
401,100 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(40,722 |
) |
|
|
(40,722 |
) |
|
|
(2,501 |
) |
|
|
(43,223 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
42 |
|
|
|
— |
|
|
|
42 |
|
|
|
— |
|
|
|
42 |
|
Share-based compensation expense |
|
|
— |
|
|
|
2,743 |
|
|
|
— |
|
|
|
— |
|
|
|
2,743 |
|
|
|
— |
|
|
|
2,743 |
|
Conversion of exchangeable notes into 10,982,795 shares of common stock |
|
|
11 |
|
|
|
152,527 |
|
|
|
— |
|
|
|
— |
|
|
|
152,538 |
|
|
|
— |
|
|
|
152,538 |
|
Contributions from noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
143 |
|
|
|
143 |
|
Balance, March 31, 2022 (Successor) |
|
|
32 |
|
|
|
702,996 |
|
|
|
39 |
|
|
|
(192,267 |
) |
|
|
510,800 |
|
|
|
2,543 |
|
|
|
513,343 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(41,388 |
) |
|
|
(41,388 |
) |
|
|
(2,417 |
) |
|
|
(43,805 |
) |
Other comprehensive loss |
|
|
— |
|
|
|
— |
|
|
|
(33 |
) |
|
|
— |
|
|
|
(33 |
) |
|
|
— |
|
|
|
(33 |
) |
Dividends declared - common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,954 |
) |
|
|
(7,954 |
) |
|
|
— |
|
|
|
(7,954 |
) |
Share-based compensation expense |
|
|
— |
|
|
|
2,818 |
|
|
|
— |
|
|
|
— |
|
|
|
2,818 |
|
|
|
— |
|
|
|
2,818 |
|
Adjustment for noncontrolling interests |
|
|
— |
|
|
|
70 |
|
|
|
— |
|
|
|
— |
|
|
|
70 |
|
|
|
(70 |
) |
|
|
— |
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,744 |
) |
|
|
(2,744 |
) |
Balance, June 30, 2022 (Successor) |
|
|
32 |
|
|
|
705,884 |
|
|
|
6 |
|
|
|
(241,609 |
) |
|
|
464,313 |
|
|
|
(2,688 |
) |
|
|
461,625 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(14,294 |
) |
|
|
(14,294 |
) |
|
|
(3,118 |
) |
|
|
(17,412 |
) |
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
268 |
|
|
|
— |
|
|
|
268 |
|
|
|
— |
|
|
|
268 |
|
Dividends declared - common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,959 |
) |
|
|
(7,959 |
) |
|
|
— |
|
|
|
(7,959 |
) |
Share-based compensation expense |
|
|
— |
|
|
|
2,855 |
|
|
|
— |
|
|
|
— |
|
|
|
2,855 |
|
|
|
— |
|
|
|
2,855 |
|
Adjustment for noncontrolling interests |
|
|
— |
|
|
|
29 |
|
|
|
— |
|
|
|
— |
|
|
|
29 |
|
|
|
(29 |
) |
|
|
— |
|
Distributions to noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
(2 |
) |
Balance, September 30, 2022 (Successor) |
|
$ |
32 |
|
|
$ |
708,768 |
|
|
$ |
274 |
|
|
$ |
(263,862 |
) |
|
$ |
445,212 |
|
|
$ |
(5,837 |
) |
|
$ |
439,375 |
|
The accompanying notes are an integral part of these condensed consolidated statements.
5
CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
||
Net loss |
|
$ |
(104,440 |
) |
|
|
$ |
(80,722 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
194,469 |
|
|
|
|
142,090 |
|
Net amortization of deferred financing costs and debt discounts |
|
|
109,669 |
|
|
|
|
1,771 |
|
Net amortization of intangible lease assets and liabilities |
|
|
16,533 |
|
|
|
|
573 |
|
Gain on sales of real estate assets |
|
|
(3,547 |
) |
|
|
|
(8,492 |
) |
Gain on insurance proceeds |
|
|
(805 |
) |
|
|
|
— |
|
Gain on deconsolidation |
|
|
(36,250 |
) |
|
|
|
(55,131 |
) |
Loss on available-for-sale securities |
|
|
39 |
|
|
|
|
— |
|
Write-off of development projects |
|
|
834 |
|
|
|
|
391 |
|
Share-based compensation expense |
|
|
8,416 |
|
|
|
|
1,077 |
|
Loss on impairment |
|
|
252 |
|
|
|
|
120,342 |
|
Equity in (earnings) losses of unconsolidated affiliates |
|
|
(16,308 |
) |
|
|
|
9,575 |
|
Distributions of earnings from unconsolidated affiliates |
|
|
18,185 |
|
|
|
|
14,482 |
|
Change in estimate of uncollectable revenues |
|
|
(3,643 |
) |
|
|
|
8,362 |
|
Change in deferred tax accounts |
|
|
(976 |
) |
|
|
|
— |
|
Changes in: |
|
|
|
|
|
|
|
||
Tenant and other receivables |
|
|
(2,529 |
) |
|
|
|
21,127 |
|
Other assets |
|
|
(2,777 |
) |
|
|
|
(1,577 |
) |
Accounts payable and accrued liabilities |
|
|
(23,302 |
) |
|
|
|
28,302 |
|
Net cash provided by operating activities |
|
|
153,820 |
|
|
|
|
202,170 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
||
Additions to real estate assets |
|
|
(28,155 |
) |
|
|
|
(22,108 |
) |
Acquisitions of real estate assets |
|
|
(5,650 |
) |
|
|
|
— |
|
Proceeds from sales of real estate assets |
|
|
6,349 |
|
|
|
|
21,014 |
|
Purchases of available-for-sale securities |
|
|
(549,631 |
) |
|
|
|
(553,810 |
) |
Redemptions of available-for-sale securities |
|
|
449,953 |
|
|
|
|
685,809 |
|
Proceeds from insurance |
|
|
743 |
|
|
|
|
904 |
|
Payments received on mortgage and other notes receivable |
|
|
54 |
|
|
|
|
641 |
|
Additional investments in and advances to unconsolidated affiliates |
|
|
(1,476 |
) |
|
|
|
272 |
|
Distributions in excess of equity in earnings of unconsolidated affiliates |
|
|
21,460 |
|
|
|
|
10,662 |
|
Changes in other assets |
|
|
(1,479 |
) |
|
|
|
(4,204 |
) |
Net cash (used in) provided by investing activities |
|
|
(107,832 |
) |
|
|
|
139,180 |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
||
Proceeds from mortgage and other indebtedness |
|
|
425,000 |
|
|
|
|
— |
|
Principal payments on mortgage and other indebtedness |
|
|
(503,560 |
) |
|
|
|
(31,609 |
) |
Additions to deferred financing costs |
|
|
(16,387 |
) |
|
|
|
(493 |
) |
Contributions from noncontrolling interests |
|
|
143 |
|
|
|
|
298 |
|
Payment of tax withholdings for restricted stock awards |
|
|
— |
|
|
|
|
(11 |
) |
Distributions to noncontrolling interests |
|
|
(2,746 |
) |
|
|
|
(353 |
) |
Dividends paid to common shareholders |
|
|
(15,913 |
) |
|
|
|
— |
|
Net cash used in financing activities |
|
|
(113,463 |
) |
|
|
|
(32,168 |
) |
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
|
(67,475 |
) |
|
|
|
309,182 |
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period |
|
|
236,198 |
|
|
|
|
121,722 |
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period |
|
$ |
168,723 |
|
|
|
$ |
430,904 |
|
Reconciliation from condensed consolidated statements of cash flows to condensed consolidated balance sheets: |
|
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
85,754 |
|
|
|
$ |
267,982 |
|
Restricted cash (1): |
|
|
|
|
|
|
|
||
Restricted cash |
|
|
41,305 |
|
|
|
|
127,565 |
|
Mortgage escrows |
|
|
41,664 |
|
|
|
|
35,279 |
|
Cash included in assets held for sale |
|
|
— |
|
|
|
|
78 |
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period |
|
$ |
168,723 |
|
|
|
$ |
430,904 |
|
|
|
|
|
|
|
|
|
||
SUPPLEMENTAL INFORMATION |
|
|
|
|
|
|
|
||
Cash paid for interest, net of amounts capitalized |
|
$ |
90,579 |
|
|
|
$ |
39,514 |
|
Cash paid for reorganization items |
|
$ |
6,532 |
|
|
|
$ |
51,488 |
|
The accompanying notes are an integral part of these condensed consolidated statements.
6
CBL & Associates Properties, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(Dollars in thousands, except per share and per unit data)
Note 1 – Organization and Basis of Presentation
CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, outlet centers, lifestyle centers, open-air centers, office buildings and other properties, including single-tenant and multi-tenant parcels. Its properties are located in 22 states, but are primarily in the southeastern and midwestern United States.
CBL conducts substantially all its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE.
As of September 30, 2022, the Operating Partnership owned interests in the following properties:
|
|
Malls (1) |
|
|
Outlet Centers (1) |
|
|
Lifestyle Centers (1) |
|
|
Open-Air Centers (2) |
|
|
Other (2) (3) |
|
|
Total |
|
||||||
Consolidated Properties |
|
|
41 |
|
|
|
2 |
|
|
|
4 |
|
|
|
21 |
|
|
|
4 |
|
|
|
72 |
|
Unconsolidated Properties (4) |
|
|
7 |
|
|
|
3 |
|
|
|
1 |
|
|
|
8 |
|
|
|
1 |
|
|
|
20 |
|
Total |
|
|
48 |
|
|
|
5 |
|
|
|
5 |
|
|
|
29 |
|
|
|
5 |
|
|
|
92 |
|
CBL is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. As of September 30, 2022, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.00% general partner interest in the Operating Partnership and CBL Holdings II, Inc. owned a 98.97% limited partner interest for a combined interest held by CBL of 99.97%. As of September 30, 2022, third parties owned a 0.03% limited partner interest in the Operating Partnership.
As used herein, the term "Company" includes CBL & Associates Properties, Inc. and its subsidiaries, including CBL & Associates Limited Partnership and its subsidiaries, unless the context indicates otherwise. The term "Operating Partnership" refers to CBL & Associates Limited Partnership and its subsidiaries.
The Operating Partnership conducts the Company's property management and development activities through its wholly owned subsidiary, CBL & Associates Management, Inc. (the “Management Company"), to comply with certain requirements of the Internal Revenue Code.
The accompanying condensed consolidated financial statements are unaudited; however, they have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. All intercompany transactions have been eliminated. The results for the interim period ended September 30, 2022 are not necessarily indicative of the results to be obtained for the full fiscal year.
7
Fresh Start Accounting and Reorganizations
Upon the Company’s emergence from the Chapter 11 Cases (defined below), the Company adopted fresh start accounting, which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. As a result of the application of fresh start accounting and the effects of the implementation of the third amended joint chapter 11 plan of CBL & Associates Properties, Inc. and its affiliated debtors (with technical modifications) (as modified at Docket No. 1521) (the “Plan”), the condensed consolidated financial statements after November 1, 2021 (the “Effective Date”) are not comparable with the condensed consolidated financial statements on or before that date. The lack of comparability is emphasized by the use of a “black line” to separate the Predecessor (defined below) and Successor (defined below) periods in the condensed consolidated financial statements and footnote tables. References to “Successor” or “Successor Company” relate to the financial position and results of operations of the Company after the Effective Date. References to "Predecessor" or "Predecessor Company" refer to the financial position and results of operations of the Company on or before the Effective Date.
During the Predecessor period, the Company applied Accounting Standards Codification (“ASC”) 852 - Reorganizations (“ASC 852”) in preparing the condensed consolidated financial statements. ASC 852 requires the financial statements, for periods subsequent to the commencement of the Chapter 11 Cases, to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. As a result, the Company classified all expenses, gains and losses that were incurred as a result of the Chapter 11 proceedings since filing as “Reorganization items, net” in the Predecessor Company’s condensed consolidated statements of operations.
Reclassifications
The Successor Company reclassified mortgage and other notes receivable of $384 into other receivables at December 31, 2021 to conform with the current period presentation.
Note 2 – Summary of Significant Accounting Policies
Accounts Receivable
Receivables include amounts billed and currently due from tenants pursuant to lease agreements and receivables attributable to straight-line rents associated with those lease agreements. Individual leases where the collection of rents is in dispute are assessed for collectability based on management’s best estimate of collection considering the anticipated outcome of the dispute. Individual leases that are not in dispute are assessed for collectability and upon the determination that the collection of rents over the remaining lease term is not probable, accounts receivable are reduced as an adjustment to rental revenues. Revenue from leases where collection is deemed to be less than probable is recorded on a cash basis until collectability is determined to be probable. Further, management assesses whether operating lease receivables, at a portfolio level, are appropriately valued based upon an analysis of balances outstanding, historical collection levels and current economic trends. An allowance for the uncollectable portion of the portfolio is recorded as an adjustment to rental revenues. Management’s estimate of the collectability of accounts receivable from tenants is based on the best information available to management at the time of evaluation.
Management’s collection assessment took into consideration the type of retailer, billing disputes, lease negotiation status and executed deferral or abatement agreements, as well as recent rent collection experience and tenant bankruptcies based on the best information available to management at the time of evaluation. For the three-month Successor period ended September 30, 2022 there was a reversal of $643 related to uncollectable revenues, which includes the write-off of $46 for straight line rent receivables. For the nine-month Successor period ended September 30, 2022 there was a reversal of $3,643 related to uncollectable revenues, which includes the write-off of $108 for straight line rent receivables. For the three-month Predecessor period ended September 30, 2021, there was a reversal of $6,593 related to uncollectable revenues, which includes $2,635 for straight line rent receivables. For the nine-month Predecessor period ended September 30, 2021, revenues were reduced by $8,362 associated with uncollectable revenues, which includes the write-off of $1,666 for straight line rent receivables.
8
Note 3 – Revenues
Revenues
The following table presents the Company's revenues disaggregated by revenue source for the three months ended September 30, 2022 and 2021:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Three Months Ended September 30, |
|
|
|
Three Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Rental revenues |
|
$ |
131,642 |
|
|
|
$ |
145,539 |
|
Revenues from contracts with customers (ASC 606): |
|
|
|
|
|
|
|
||
Operating expense reimbursements |
|
|
1,847 |
|
|
|
|
2,076 |
|
Management, development and leasing fees (1) |
|
|
1,783 |
|
|
|
|
1,780 |
|
Marketing revenues (2) |
|
|
446 |
|
|
|
|
530 |
|
|
|
|
4,076 |
|
|
|
|
4,386 |
|
|
|
|
|
|
|
|
|
||
Other revenues |
|
|
562 |
|
|
|
|
450 |
|
Total revenues (3) |
|
$ |
136,280 |
|
|
|
$ |
150,375 |
|
The following table presents the Company's revenues disaggregated by revenue source for the nine months ended September 30, 2022 and 2021:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Rental revenues |
|
$ |
398,806 |
|
|
|
$ |
405,030 |
|
Revenues from contracts with customers (ASC 606): |
|
|
|
|
|
|
|
||
Operating expense reimbursements |
|
|
5,965 |
|
|
|
|
5,906 |
|
Management, development and leasing fees (1) |
|
|
5,338 |
|
|
|
|
4,888 |
|
Marketing revenues (2) |
|
|
1,190 |
|
|
|
|
1,351 |
|
|
|
|
12,493 |
|
|
|
|
12,145 |
|
|
|
|
|
|
|
|
|
||
Other revenues |
|
|
2,101 |
|
|
|
|
2,945 |
|
Total revenues (3) |
|
$ |
413,400 |
|
|
|
$ |
420,120 |
|
See Note 10 for information on the Company's segments.
Revenues from Contracts with Customers
Outstanding Performance Obligations
The Company has outstanding performance obligations related to certain noncancellable contracts with customers for which it will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of September 30, 2022, the Company expects to recognize these amounts as revenue over the following periods:
Performance obligation |
|
Less than 5 |
|
|
5-20 |
|
|
Over 20 |
|
|
Total |
|
||||
Fixed operating expense reimbursements |
|
$ |
21,106 |
|
|
$ |
45,728 |
|
|
$ |
41,360 |
|
|
$ |
108,194 |
|
The Company evaluates its performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration, which is based on sales, are constrained.
9
Note 4 – Leases
The components of rental revenues for the three months ended September 30, 2022 and 2021 are as follows:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Three Months Ended September 30, |
|
|
|
Three Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Fixed lease payments |
|
$ |
98,267 |
|
|
|
$ |
101,819 |
|
Variable lease payments |
|
|
33,375 |
|
|
|
|
43,720 |
|
Total rental revenues |
|
$ |
131,642 |
|
|
|
$ |
145,539 |
|
The components of rental revenues for the nine months ended September 30, 2022 and 2021 are as follows:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Fixed lease payments |
|
$ |
290,648 |
|
|
|
$ |
242,589 |
|
Variable lease payments |
|
|
108,158 |
|
|
|
|
162,441 |
|
Total rental revenues |
|
$ |
398,806 |
|
|
|
$ |
405,030 |
|
The undiscounted future fixed lease payments to be received under the Successor Company's operating leases as of September 30, 2022, are as follows:
Note 5 – Fair Value Measurements
The Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
Level 1 – |
Inputs represent quoted prices in active markets for identical assets and liabilities as of the measurement date. |
Level 2 – |
Inputs, other than those included in Level 1, represent observable measurements for similar instruments in active markets, or identical or similar instruments in markets that are not active, and observable measurements or market data for instruments with substantially the full term of the asset or liability. |
Level 3 – |
Inputs represent unobservable measurements, supported by little, if any, market activity, and require considerable assumptions that are significant to the fair value of the asset or liability. Market valuations must often be determined using discounted cash flow methodologies, pricing models or similar techniques based on the Company’s assumptions and best judgment. |
10
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance.
Fair Value Measurements on a Recurring Basis
The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. The estimated fair value of mortgage and other indebtedness was $1,959,587 as of September 30, 2022. The estimated fair value of the 10% senior secured notes due 2029 (the “Secured Notes”) and mortgage and other indebtedness was $2,059,094 as of December 31, 2021. The fair value of mortgage and other indebtedness was calculated using Level 2 inputs by discounting future cash flows for mortgage and other indebtedness using estimated market rates at which similar loans would be made currently.
The Company elected the fair value option in conjunction with the issuance of the Secured Notes because it believed that the fair value option provided the most accurate depiction of the then-current value of the Secured Notes. On June 7, 2022, the Company completed the redemption of all outstanding Secured Notes.
The following table sets forth information regarding the Secured Notes for the year ended December 31, 2021:
Debt Instrument |
|
Carrying amount as of December 31, 2021 |
|
|
Change in fair value |
|
|
Fair value as of December 31, 2021 (1) |
|
|||
Secured Notes |
|
$ |
395,000 |
|
|
$ |
395 |
|
|
$ |
395,395 |
|
11
During the three and nine months ended September 30, 2022, the Company has continued to reinvest the cash from maturing U.S. Treasury securities into new U.S. Treasury securities. The Company designated the U.S. Treasury securities as available-for-sale (“AFS”). The table below sets forth information regarding the Company’s AFS securities that were measured at fair value for the nine months ended September 30, 2022. Subsequent to September 30, 2022, we redeemed and purchased additional U.S. Treasury securities. See Note 16 for additional information.
AFS Security |
|
Amortized |
|
|
Allowance |
|
|
Total unrealized gain |
|
|
Fair value as of September 30, 2022 |
|
||||
U.S. Treasury securities |
|
$ |
249,638 |
|
|
$ |
— |
|
|
$ |
274 |
|
|
$ |
249,912 |
|
The following table sets forth information regarding the Company’s AFS securities that were measured at fair value for the year ended December 31, 2021:
AFS Security |
|
Amortized |
|
|
Allowance |
|
|
Total unrealized loss |
|
|
Fair value as of December 31, 2021 |
|
||||
U.S. Treasury securities |
|
$ |
149,999 |
|
|
$ |
— |
|
|
$ |
(3 |
) |
|
$ |
149,996 |
|
Fair Value Measurements on a Nonrecurring Basis
The Company measures the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company’s evaluation of the recoverability of long-lived assets involves the comparison of undiscounted future cash flows expected to be generated by each property over the Company’s expected remaining holding period to the respective carrying amount. The determination of whether the carrying value is recoverable also requires management to make estimates related to probability weighted scenarios impacting undiscounted cash flow models. The Company considers both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income, occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. The quantitative and qualitative factors impact the selection of the terminal capitalization rate which is used in both an undiscounted and discounted cash flow model and the discount rate used in a discounted cash flow model. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Company classifies such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. See below for a description of the estimates and assumptions the Company used in its impairment analysis.
See Note 3 in the annual report on Form 10-K for the year ended December 31, 2021 for information regarding the fair value adjustments associated with fresh start accounting.
Long-lived Assets Measured at Fair Value in 2022
During the nine months ended September 30, 2022, the Successor Company adjusted the negative equity in Greenbrier Mall to zero upon deconsolidation, which represents the estimated fair value of the Successor Company’s investment in that property. See Note 8 for additional information.
During the nine months ended September 30, 2022, the Successor Company sold an outparcel at the Pavilion at Port Orange. Gross sales proceeds amounted to $1,660 and the transaction resulted in a loss on sale of $252.
12
Long-lived Assets Measured at Fair Value in 2021
The following table sets forth information regarding the Predecessor Company's assets that were measured at fair value on a nonrecurring basis and related impairment charges for the nine months ended September 30, 2021:
|
|
|
|
|
Fair Value Measurements at Reporting Date Using |
|
|
|
|
|||||||||||
|
|
Total |
|
|
Quoted Prices in |
|
|
Significant |
|
|
Significant |
|
|
Total Loss |
|
|||||
2021: Predecessor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-lived assets |
|
$ |
99,390 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
99,390 |
|
|
$ |
120,342 |
|
During the nine months ended September 30, 2021, the Predecessor Company recognized impairments of real estate of $120,342 related to five malls, a redeveloped anchor parcel, an associated center and one outparcel.
Impairment |
|
Property |
|
Location |
|
Segment |
|
Loss on |
|
|
Fair |
|
|
||
March |
|
Eastland Mall (1) |
|
Bloomington, IL |
|
Malls |
|
$ |
13,243 |
|
|
$ |
10,700 |
|
|
March |
|
Old Hickory Mall (2) |
|
Jackson, TN |
|
Malls |
|
|
20,149 |
|
|
|
12,400 |
|
|
March |
|
Stroud Mall (3) |
|
Stroudsburg, PA |
|
Malls |
|
|
23,790 |
|
|
|
15,400 |
|
|
July |
|
The Landing at Arbor Place - Outparcel (4) |
|
Douglasville, GA |
|
All Other |
|
|
1,682 |
|
|
|
590 |
|
|
September |
|
Laurel Park Place (5) |
|
Livonia, MI |
|
Malls |
|
|
14,267 |
|
|
|
9,800 |
|
|
September |
|
Parkdale Mall and Crossing (6) |
|
Beaumont, TX |
|
Malls/All Other |
|
|
47,211 |
|
|
|
50,500 |
|
|
|
|
|
|
|
|
|
|
$ |
120,342 |
|
|
$ |
99,390 |
|
|
During the nine months ended September 30, 2021, the Predecessor Company adjusted the combined negative equity in Asheville Mall and Park Plaza to zero upon deconsolidation, which represented the estimated fair values of the Predecessor Company’s investments in these properties.
Note 6 – Acquisitions
Since the adoption of ASU 2017-01, Clarifying the Definition of a Business, as of January 1, 2017, the Company's acquisitions of shopping centers and other properties have been accounted for as acquisitions of assets. The Company includes the results of operations of real estate assets acquired in the consolidated statements of operations from the date of the related acquisition.
2022 Acquisition
In July 2022, the Company acquired the JC Penney parcel located at CoolSprings Galleria for $5,650.
13
2021 Acquisition
There were no acquisitions during 2021.
Note 7 – Dispositions and Held for Sale
Dispositions
Based on its analysis, the Company determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net loss for all periods presented, as applicable.
2022 Dispositions
During the nine months ended September 30, 2022, the Successor Company deconsolidated Greenbrier Mall. For the three and nine months ended September 30, 2022, the Successor Company realized a gain of $3,528 and $3,547, respectively, primarily related to the sale of three outparcels. During the nine months ended September 30, 2022, the Successor Company sold an outparcel that resulted in a loss on sale. See Note 5 for additional information.
2021 Dispositions
The Predecessor Company realized a gain of $8,684 related to the sale of two anchors and three outparcels, during the three months ended September 30, 2021; and realized a gain of $8,492 primarily related to the sale of three anchors and three outparcels during the nine months ended September 30, 2021.
Held for Sale
2021 Held for Sale Analysis
In the third quarter of 2021, the Predecessor Company determined that the Residences at Pearland Town Center met the criteria to be classified as a held for sale ("HFS"). The sale closed on October 1, 2021 and generated gross proceeds of $8,750. The sale did not qualify as discontinued operations.
Note 8 – Unconsolidated Affiliates and Noncontrolling Interests
Unconsolidated Affiliates
Although the Company had majority ownership of certain joint ventures during 2022 and 2021, it evaluated the investments and concluded that the other partners or owners in these joint ventures had substantive participating rights, such as approvals of:
As a result of the joint control over these joint ventures, the Company accounts for these investments using the equity method of accounting.
At September 30, 2022, the Company had investments in 25 entities, which are accounted for using the equity method of accounting. The Company's ownership interest in these unconsolidated affiliates ranges from 33% to 100%. Of these entities, 16 are owned in 50/50 joint ventures.
14
2022 Activity - Unconsolidated Affiliates
Ambassador Town Center J.V., LLC
In June 2022, the joint venture entered into a new $42,492, non-recourse loan secured by Ambassador Town Center. The loan matures in and bears a fixed interest rate of 4.35%. The previous loan was paid off in conjunction with the closing of the new loan.
Asheville Mall CBMS, LLC
In August 2022, the Company transferred title to the mall to the mortgage holder in satisfaction of the non-recourse debt secured by the property, which had a balance of $62,121.
Atlanta Outlet JV, LLC
In February 2022, the joint venture entered into a forbearance agreement with the lender regarding the default triggered by the filing of voluntary petitions (the “Chapter 11 Cases”) under chapter 11 of title 11 (“Chapter 11”) of the United States Code in the United States Bankruptcy Court for the Southern District of Texas related to the loan secured by The Outlet Shoppes at Atlanta.
BI Development, LLC and BI Development II, LLC
In August 2022, the Company and another joint venture member bought out a third member's interest increasing the Company's interest from 20% to a 50% membership interest in each joint venture.
Bullseye, LLC
In March 2022, the joint venture sold its income-producing property, which generated gross proceeds of $10,500. The Company’s share of the net profit from the sale was $662.
EastGate Mall CMBS, LLC
In September 2022, the Company transferred title to the mall to the mortgage holder in satisfaction of the non-recourse debt secured by the property, which had a balance of $29,951.
Fremaux Town Center JV, LLC
In March 2022, the joint venture entered into a forbearance agreement with the lender regarding the default triggered by the Chapter 11 Cases related to the loan secured by Fremaux Town Center.
Greenbrier Mall II, LLC
In March 2022, the Company deconsolidated Greenbrier Mall as a result of the Company losing control when the property was placed in receivership. As of September 30, 2022, the loan secured by Greenbrier Mall had an outstanding balance of $61,647. For the nine months ended September 30, 2022, the Company recognized a gain on deconsolidation of $36,250. Subsequent to September 30, 2022, the Company transferred title to the mall to the mortgage holder in satisfaction of the non-recourse debt secured by the property. See Note 16.
Louisville Outlet Shoppes, LLC
In May 2022, the joint venture entered into a forbearance agreement with the lender regarding the default triggered by the bankruptcy filing related to the loan secured by The Outlet Shoppes of the Bluegrass. In August 2022, the joint venture notified the lender of its election to extend the loan secured by The Outlet Shoppes of the Bluegrass - Phase II through April 15, 2023. The loan secured by The Outlet Shoppes of the Bluegrass - Phase II had a balance of $7,647 as of September 30, 2022.
15
Mall of South Carolina, LP and Mall of South Carolina Outparcel, LP
In March 2022, the joint ventures entered into forbearance agreements with the lenders regarding the default triggered by the Chapter 11 Cases related to the loans secured by Coastal Grand and Coastal Grand Crossing.
Shoppes at Eagle Point, LLC
In April 2022, the joint venture entered into a new $40,000, ten-year, non-recourse loan secured by The Shoppes at Eagle Point. The new loan bears a fixed interest rate of 5.4%. Proceeds from the new loan were utilized to retire the previous partial recourse loan, which was set to mature in .
York Town Center Holding, LP
In March 2022, the joint venture entered into a $30,000 non-recourse mortgage note payable, secured by York Town Center, that provides for a three-year term and a fixed interest rate of 4.75%. The monthly debt service is interest only for the first eighteen months. Proceeds from the new loan were used to retire the previous loans.
Condensed Combined Financial Statements - Unconsolidated Affiliates
Condensed combined financial statement information of the unconsolidated affiliates are as follows:
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
ASSETS: |
|
|
|
|
|
|
||
Investment in real estate assets |
|
$ |
1,986,409 |
|
|
$ |
2,364,154 |
|
Accumulated depreciation |
|
|
(816,218 |
) |
|
|
(934,374 |
) |
|
|
|
1,170,191 |
|
|
|
1,429,780 |
|
Developments in progress |
|
|
8,802 |
|
|
|
7,288 |
|
Net investment in real estate assets |
|
|
1,178,993 |
|
|
|
1,437,068 |
|
Other assets |
|
|
192,930 |
|
|
|
188,683 |
|
Total assets |
|
$ |
1,371,923 |
|
|
$ |
1,625,751 |
|
LIABILITIES: |
|
|
|
|
|
|
||
Mortgage and other indebtedness, net |
|
$ |
1,403,629 |
|
|
$ |
1,452,794 |
|
Other liabilities |
|
|
52,707 |
|
|
|
64,598 |
|
Total liabilities |
|
|
1,456,336 |
|
|
|
1,517,392 |
|
OWNERS' EQUITY: |
|
|
|
|
|
|
||
The Company |
|
|
2,541 |
|
|
|
102,792 |
|
Other investors |
|
|
(86,954 |
) |
|
|
5,567 |
|
Total owners' equity (deficit) |
|
|
(84,413 |
) |
|
|
108,359 |
|
Total liabilities and owners’ equity |
|
$ |
1,371,923 |
|
|
$ |
1,625,751 |
|
. |
|
Three Months Ended September 30, |
|
|
Three Months Ended September 30, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Total revenues |
|
$ |
64,656 |
|
|
$ |
65,482 |
|
Net income (loss) (1) |
|
$ |
48,316 |
|
|
$ |
(3,206 |
) |
|
|
|||||||
|
|
|
|
|
|
|
||
|
|
Nine Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
2021 |
|
||
Total revenues |
|
$ |
193,944 |
|
|
$ |
181,985 |
|
Net income (loss) (1) |
|
$ |
81,378 |
|
|
$ |
(16,225 |
) |
Variable Interest Entities
The Operating Partnership and certain of its subsidiaries are deemed to have the characteristics of a VIE primarily because the limited partners of these entities do not collectively possess substantive kick-out or participating rights.
16
The Company consolidates the Operating Partnership, which is a VIE, for which the Company is the primary beneficiary. The Company, through the Operating Partnership, consolidates all VIEs for which it is the primary beneficiary. Generally, a VIE is a legal entity in which the equity investors do not have the characteristics of a controlling financial interest or the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. A limited partnership is considered a VIE when the majority of the limited partners unrelated to the general partner possess neither the right to remove the general partner without cause, nor certain rights to participate in the decisions that most significantly affect the financial results of the partnership. In determining whether the Company is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Company's investment; the obligation or likelihood for the Company or other investors to provide financial support; and the similarity with and significance to the Company's business activities and the business activities of the other investors.
Consolidated VIEs
As of September 30, 2022, the Company had investments in 11 consolidated VIEs with ownership interests ranging from 50% to 92%.
Unconsolidated VIEs
The table below lists the Company's unconsolidated VIEs as of September 30, 2022:
Unconsolidated VIEs: |
|
Investment in |
|
|
Maximum |
|
||
Ambassador Infrastructure, LLC (1) |
|
$ |
— |
|
|
$ |
7,001 |
|
Atlanta Outlet JV, LLC (1) |
|
|
— |
|
|
|
4,388 |
|
BI Development, LLC |
|
|
54 |
|
|
|
54 |
|
BI Development II, LLC |
|
|
54 |
|
|
|
54 |
|
CBL-T/C, LLC |
|
|
— |
|
|
|
— |
|
El Paso Outlet Center Holding, LLC |
|
|
— |
|
|
|
— |
|
Fremaux Town Center JV, LLC |
|
|
1,597 |
|
|
|
1,597 |
|
Greenbrier Mall II, LLC (2) |
|
|
— |
|
|
|
— |
|
Louisville Outlet Shoppes, LLC (1) |
|
|
— |
|
|
|
7,647 |
|
Mall of South Carolina L.P. |
|
|
— |
|
|
|
— |
|
Vision - CBL Hamilton Place, LLC |
|
|
2,375 |
|
|
|
2,375 |
|
|
|
$ |
4,080 |
|
|
$ |
23,116 |
|
Note 9 – Mortgage and Other Indebtedness, Net
Debt of the Company
CBL has no indebtedness. Consolidated subsidiaries that it has a direct or indirect ownership interest in are the borrowers on all the Company's debt.
CBL is a limited guarantor of the secured term loan for losses suffered solely by reason of fraud or willful misrepresentation by the Operating Partnership or its affiliates.
17
Debt of the Operating Partnership
The Company’s Secured Notes and mortgage and other indebtedness, net, consisted of the following:
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||||||||||
|
|
Amount |
|
|
Weighted- |
|
|
Amount |
|
|
Weighted- |
|
||||
Fixed-rate debt at fair value: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Secured Notes - at fair value (carrying amount of $395,000 as of December 31, 2021) |
|
$ |
— |
|
|
|
— |
|
|
$ |
395,395 |
|
|
|
10.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fixed-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exchangeable senior secured notes |
|
|
— |
|
|
|
— |
|
|
|
150,000 |
|
|
|
7.00 |
% |
Open-air centers and outparcels loan |
|
|
180,000 |
|
|
|
6.95 |
% |
|
|
— |
|
|
|
— |
|
Non-recourse loans on operating properties |
|
|
869,307 |
|
|
|
4.89 |
% |
|
|
916,927 |
|
|
|
5.04 |
% |
Total fixed-rate debt |
|
|
1,049,307 |
|
|
|
5.25 |
% |
|
|
1,066,927 |
|
|
|
5.32 |
% |
Variable-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Secured term loan |
|
|
837,824 |
|
|
|
5.31 |
% |
|
|
880,091 |
|
|
|
3.75 |
% |
Open-air centers and outparcels loan |
|
|
180,000 |
|
|
|
6.61 |
% |
|
|
— |
|
|
|
— |
|
Non-recourse loans on operating properties |
|
|
57,015 |
|
|
|
5.70 |
% |
|
|
66,911 |
|
|
|
3.21 |
% |
Total variable-rate debt |
|
|
1,074,839 |
|
|
|
5.55 |
% |
|
|
947,002 |
|
|
|
3.71 |
% |
Total fixed-rate and variable-rate debt |
|
|
2,124,146 |
|
|
|
5.40 |
% |
|
|
2,013,929 |
|
|
|
4.56 |
% |
Unamortized deferred financing costs |
|
|
(16,621 |
) |
|
|
|
|
|
(1,567 |
) |
|
|
|
||
Debt discounts (2) |
|
|
(90,821 |
) |
|
|
|
|
|
(199,153 |
) |
|
|
|
||
Total mortgage and other indebtedness, net |
|
$ |
2,016,704 |
|
|
|
|
|
$ |
1,813,209 |
|
|
|
|
||
Non-recourse loans on operating properties, the open-air centers and outparcels loan and the secured term loan include loans that are secured by properties owned by the Company that have a carrying value of $915,905 at September 30, 2022.
In February 2022, the loan secured by Fayette Mall was modified to reduce the fixed interest rate to 4.25% and extend the maturity date through , with three one-year extension options, subject to certain requirements. As part of the modification, two ground leased outparcels were released from the collateral in exchange for the addition of the redeveloped former middle anchor location. As of September 30, 2022, the loan secured by Fayette Mall had a balance of $129,580.
In March 2022, the Company deconsolidated Greenbrier Mall as a result of the Company losing control when the property was placed in receivership. As of September 30, 2022, the loan secured by Greenbrier Mall had a balance of $61,647. See Note 8 for additional information.
In May 2022, the loan secured by Arbor Place was extended for an additional four years, with a new maturity date of . The interest rate will remain at the current fixed rate of 5.10%. As of September 30, 2022, the loan secured by Arbor Place had a balance of $99,042.
In May 2022, the loan secured by Northwoods Mall was extended for an additional four years, with a new maturity date of . The interest rate will remain at the current fixed rate of 5.08%. As of September 30, 2022, the loan secured by Northwoods Mall had a balance of $59,034.
In May 2022, the Company entered into a new $65,000 non-recourse loan. The loan has a ten-year term with a fixed interest rate of 5.85%. It is interest only for the first three years. The loan is secured by open-air centers, which include Hamilton Crossing, Hamilton Corner, The Terrace and The Shoppes at Hamilton Place. Proceeds from the loan were used to redeem $60,000 aggregate principal amount of the Secured Notes. Also, the previous $7,058 Hamilton Crossing loan was paid off in conjunction with the closing of the new loan.
18
In June 2022, the Company entered into a new $360,000 loan. The interest rate is a fixed 6.95% for $180,000 of the $360,000 loan, with the other half of the loan bearing a variable interest rate based on the 30-day SOFR plus 4.10%. The loan has an initial term of five years with one two-year extension, subject to certain conditions. The loan is secured by a pool of 90 outparcels and 13 open-air centers. The open-air centers include Alamance Crossing West, CoolSprings Crossing, Courtyard at Hickory Hollow, Frontier Square, Gunbarrel Pointe, Harford Annex, The Plaza at Fayette, Sunrise Commons, The Shoppes at St. Clair Square, The Landing at Arbor Place, West Towne Crossing, West Towne District and WestGate Crossing. Proceeds from the loan were used to complete the redemption of all $335,000 outstanding on the Secured Notes, which eliminated the recourse guaranty. Also, proceeds were used to paydown $8,322 on the Brookfield Square Anchor Redevelopment loan, which had an outstanding balance of $18,465 as of September 30, 2022.
In June 2022, the Company paid off the $14,949 loan secured by CBL Center at maturity.
In August 2022, the loan secured by Parkdale Mall and Crossing was extended to March 2026. As of September 30, 2022, the loan secured by Parkdale Mall and Crossing had a balance of $64,242.
Subsequent to September 30, 2022, the loans secured by Jefferson Mall, The Outlet Shoppes at Gettysburg and Southpark Mall were modified. See Note 16 for additional information.
Several of the Company’s properties are owned by special purpose entities, created as a requirement under certain loan agreements that are included in the Company’s condensed consolidated financial statements. The sole business purpose of the special purpose entities is to own and operate these properties. The real estate and other assets owned by these special purpose entities are restricted under the loan agreements in that they are not available to settle other debts of the Company. However, so long as the loans are not under an event of default, as defined in the loan agreement, the cash flows from these properties, after payments of debt service, operating expenses and reserves, are available for distribution to the Company.
Exit Credit Agreement
On November 1, 2021, CBL & Associates HoldCo I, LLC (“HoldCo I”), a wholly owned subsidiary of the Operating Partnership, entered into an amended and restated credit agreement (the “Exit Credit Agreement”), providing for an $883,700 senior secured term loan that matures November 1, 2025. Upon satisfaction of certain conditions, the maturity date will automatically extend to November 1, 2026 and upon further satisfaction of certain conditions the maturity date will automatically extend to November 1, 2027. The Operating Partnership provided a limited guaranty up to a maximum of $175,000 (the “Principal Liability Cap”). The Principal Liability Cap will be reduced by an amount equal to 100% of the first $2,500 in principal amortization made by HoldCo I each calendar year and will be reduced further by 50% of the principal amortization payments made by HoldCo I each calendar year in excess of the first $2,500 in principal amortization for such calendar year. As of September 30, 2022, the Principal Liability Cap had been reduced to $144,426. The Principal Liability Cap is eliminated when the loan balance is reduced below $650,000.
Exchangeable Notes Indenture
On the Effective Date, HoldCo II entered into a secured exchangeable notes indenture relating to the issuance of 7.0% exchangeable senior secured notes due 2028 (the “Exchangeable Notes”) in an aggregate principal amount of $150,000. In December 2021, the Company announced that HoldCo II exercised its optional exchange right with respect to all the $150,000 aggregate principal amount of the Exchangeable Notes. The exchange date was January 28, 2022, and settlement occurred on February 1, 2022. Per the terms of the indenture governing the Exchangeable Notes, shares of the Company’s common stock, par value $0.001, plus cash in lieu of fractional shares, were issued to settle the exchange. On February 1, 2022, the Company issued 10,982,795 shares of common stock to holders of the Exchangeable Notes in satisfaction of principal, accrued interest and the makewhole payment, and all the Exchangeable Notes were cancelled in accordance with the terms of the indenture.
19
Scheduled Principal Payments
As of September 30, 2022, the scheduled principal amortization and balloon payments of the Company’s consolidated debt, excluding extensions available at the Company’s option, on all mortgage and other indebtedness, are as follows:
2022 (1) |
|
$ |
126,313 |
|
2023 |
|
|
205,047 |
|
2024 |
|
|
98,385 |
|
2025 |
|
|
813,010 |
|
2026 |
|
|
331,956 |
|
2027 |
|
|
360,896 |
|
Thereafter |
|
|
62,854 |
|
Total |
|
|
1,998,461 |
|
Principal balance of loans with maturity date prior to September 30, 2022 (2) |
|
|
125,685 |
|
Total mortgage and other indebtedness |
|
$ |
2,124,146 |
|
Of the $126,313 of scheduled principal payments for the remainder of 2022, $98,662 relates to the maturing principal balance of the loan secured by Cross Creek Mall. Subsequent to September 30, 2022, the loan was extended through January 5, 2023. The Company remains in discussions with the lender regarding a long term extension. See Note 16.
As of September 30, 2022, the Company had $699,516 of property-level debt and related obligations, including unconsolidated debt and related obligations, maturing or callable within the next 12 months from the issuance of the financial statements. Subsequent to September 30, 2022, the Company extended the maturity date or obtained waives of default for $150,880 of mortgage notes. See Note 16 for additional information. Management intends to refinance and/or extend the maturity dates for the remaining $548,636 of such mortgage notes payable. In instances where a refinancing and/or extension of maturity dates is unsuccessful the Company will repay certain of the mortgage notes based on the availability of liquidity and convey certain properties to the lender to satisfy the debt obligation.
Note 10 – Segment Information
The Company measures performance and allocates resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments.
20
Information on the Company’s segments is presented as follows:
Three Months Ended September 30, 2022 (Successor) |
|
Malls (1) |
|
|
All |
|
|
Total |
|
|||
Revenues (3) |
|
$ |
116,430 |
|
|
$ |
19,850 |
|
|
$ |
136,280 |
|
Property operating expenses (4) |
|
|
(44,382 |
) |
|
|
(4,160 |
) |
|
|
(48,542 |
) |
Interest expense |
|
|
(19,915 |
) |
|
|
(17,737 |
) |
|
|
(37,652 |
) |
Gain on sales of real estate assets |
|
|
— |
|
|
|
3,528 |
|
|
|
3,528 |
|
Segment profit |
|
$ |
52,133 |
|
|
$ |
1,481 |
|
|
|
53,614 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
(61,050 |
) |
||
General and administrative |
|
|
|
|
|
|
|
|
(14,625 |
) |
||
Litigation settlement |
|
|
|
|
|
|
|
|
36 |
|
||
Interest and other income |
|
|
|
|
|
|
|
|
152 |
|
||
Loss on available-for-sale securities |
|
|
|
|
|
|
|
|
(39 |
) |
||
Reorganization items, net |
|
|
|
|
|
|
|
|
1,220 |
|
||
Income tax provision |
|
|
|
|
|
|
|
|
(2,422 |
) |
||
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
5,702 |
|
||
Net loss |
|
|
|
|
|
|
|
$ |
(17,412 |
) |
||
Capital expenditures (5) |
|
$ |
8,159 |
|
|
$ |
3,142 |
|
|
$ |
11,301 |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Three Months Ended September 30, 2021 (Predecessor) |
|
Malls (1) |
|
|
All |
|
|
Total |
|
|||
Revenues (3) |
|
$ |
131,870 |
|
|
$ |
18,505 |
|
|
$ |
150,375 |
|
Property operating expenses (4) |
|
|
(40,466 |
) |
|
|
(6,791 |
) |
|
|
(47,257 |
) |
Interest expense |
|
|
(18,698 |
) |
|
|
(341 |
) |
|
|
(19,039 |
) |
Gain on sales of real estate assets |
|
|
4,836 |
|
|
|
3,848 |
|
|
|
8,684 |
|
Other expense |
|
|
— |
|
|
|
(104 |
) |
|
|
(104 |
) |
Segment profit |
|
$ |
77,542 |
|
|
$ |
15,117 |
|
|
|
92,659 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
(46,479 |
) |
||
General and administrative expense |
|
|
|
|
|
|
|
|
(13,502 |
) |
||
Litigation settlement |
|
|
|
|
|
|
|
|
89 |
|
||
Interest and other income |
|
|
|
|
|
|
|
|
510 |
|
||
Reorganization items |
|
|
|
|
|
|
|
|
(12,008 |
) |
||
Loss on impairment |
|
|
|
|
|
|
|
|
(63,160 |
) |
||
Income tax benefit |
|
|
|
|
|
|
|
|
1,234 |
|
||
Equity in losses of unconsolidated affiliates |
|
|
|
|
|
|
|
|
(2,224 |
) |
||
Net loss |
|
|
|
|
|
|
|
$ |
(42,881 |
) |
||
Capital expenditures (5) |
|
$ |
11,853 |
|
|
$ |
380 |
|
|
$ |
12,233 |
|
21
Nine Months Ended September 30, 2022 (Successor) |
|
Malls (1) |
|
|
All |
|
|
Total |
|
|||
Revenues (3) |
|
$ |
355,049 |
|
|
$ |
58,351 |
|
|
$ |
413,400 |
|
Property operating expenses (4) |
|
|
(129,774 |
) |
|
|
(12,909 |
) |
|
|
(142,683 |
) |
Interest expense |
|
|
(129,765 |
) |
|
|
(53,663 |
) |
|
|
(183,428 |
) |
Gain on sales of real estate assets |
|
|
— |
|
|
|
3,547 |
|
|
|
3,547 |
|
Other expense |
|
|
— |
|
|
|
(834 |
) |
|
|
(834 |
) |
Segment profit (loss) |
|
$ |
95,510 |
|
|
$ |
(5,508 |
) |
|
|
90,002 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
(194,469 |
) |
||
General and administrative |
|
|
|
|
|
|
|
|
(51,149 |
) |
||
Litigation settlement |
|
|
|
|
|
|
|
|
182 |
|
||
Interest and other income |
|
|
|
|
|
|
|
|
1,216 |
|
||
Loss on available-for-sale securities |
|
|
|
|
|
|
|
|
(39 |
) |
||
Reorganization items, net |
|
|
|
|
|
|
|
|
262 |
|
||
Loss on impairment |
|
|
|
|
|
|
|
|
(252 |
) |
||
Gain on deconsolidation |
|
|
|
|
|
|
|
|
36,250 |
|
||
Income tax provision |
|
|
|
|
|
|
|
|
(2,751 |
) |
||
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
16,308 |
|
||
Net loss |
|
|
|
|
|
|
|
$ |
(104,440 |
) |
||
Capital expenditures (5) |
|
$ |
18,486 |
|
|
$ |
6,363 |
|
|
$ |
24,849 |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Nine Months Ended September 30, 2021 (Predecessor) |
|
Malls (1) |
|
|
All |
|
|
Total |
|
|||
Revenues (3) |
|
$ |
377,478 |
|
|
$ |
42,642 |
|
|
$ |
420,120 |
|
Property operating expenses (4) |
|
|
(130,364 |
) |
|
|
(9,544 |
) |
|
|
(139,908 |
) |
Interest expense |
|
|
(63,441 |
) |
|
|
(2,027 |
) |
|
|
(65,468 |
) |
Other expense |
|
|
(65 |
) |
|
|
(326 |
) |
|
|
(391 |
) |
Gain on sales of real estate assets |
|
|
4,836 |
|
|
|
3,656 |
|
|
|
8,492 |
|
Segment profit |
|
$ |
188,444 |
|
|
$ |
34,401 |
|
|
|
222,845 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
(142,090 |
) |
||
General and administrative expense |
|
|
|
|
|
|
|
|
(37,383 |
) |
||
Litigation settlement |
|
|
|
|
|
|
|
|
890 |
|
||
Interest and other income |
|
|
|
|
|
|
|
|
2,038 |
|
||
Reorganization items |
|
|
|
|
|
|
|
|
(52,014 |
) |
||
Gain on deconsolidation |
|
|
|
|
|
|
|
|
55,131 |
|
||
Loss on impairment |
|
|
|
|
|
|
|
|
(120,342 |
) |
||
Income tax provision |
|
|
|
|
|
|
|
|
(222 |
) |
||
Equity in losses of unconsolidated affiliates |
|
|
|
|
|
|
|
|
(9,575 |
) |
||
Net loss |
|
|
|
|
|
|
|
$ |
(80,722 |
) |
||
Capital expenditures (5) |
|
$ |
24,056 |
|
|
$ |
2,996 |
|
|
$ |
27,052 |
|
Total assets |
|
Malls (1) |
|
|
All |
|
|
Total |
|
|||
September 30, 2022 |
|
$ |
1,758,254 |
|
|
$ |
968,573 |
|
|
$ |
2,726,827 |
|
|
|
|
|
|
|
|
|
|
|
|||
December 31, 2021 |
|
$ |
1,961,061 |
|
|
$ |
984,918 |
|
|
$ |
2,945,979 |
|
Basic earnings per share ("EPS") is computed by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS assumes the issuance of common stock for all potential dilutive common shares outstanding.
22
Due to a net loss for the three- and nine-month periods ended September 30, 2022, the computation of diluted EPS does not include contingently issuable shares due to their anti-dilutive nature. Had the Company reported net income for the three months ended September 30, 2022, the denominator for diluted EPS would have been 31,286,714, including 314,202 contingently issuable shares related to performance stock units (“PSUs”) and nonvested restricted stock awards. Had the Company reported net income for the nine months ended September 30, 2022, the denominator for diluted EPS would have been 29,960,500, including 235,119 contingently issuable shares related to PSUs and nonvested restricted stock awards. There were no potential dilutive common shares and there were no anti-dilutive shares for the three and nine months ended September 30, 2021.
Note 12 – Contingencies
Securities Litigation
The Company and certain of its officers and directors were named as defendants in three putative securities class action lawsuits (collectively, the “Securities Class Action Litigation”), each filed in the United States District Court for the Eastern District of Tennessee, on behalf of all persons who purchased or otherwise acquired the Company’s securities during a specified period of time. Those cases were consolidated on July 17, 2019, under the caption In re CBL & Associates Properties, Inc. Securities Litigation, 1:19-cv-00149-JRG-CHS, and a consolidated amended complaint was filed on November 5, 2019, seeking to represent a class of purchasers from July 29, 2014 through March 26, 2019.
The operative complaint filed in the Securities Class Action Litigation alleges violations of the securities laws, including, among other things, that the defendants made certain materially false and misleading statements and omissions regarding the Company’s contingent liabilities, business, operations, and prospects during the period of time specified above. The plaintiffs seek compensatory damages and attorneys’ fees and costs, among other relief, but have not specified the amount of damages sought. On May 3, 2022, the court dismissed the Company from the Securities Class Action Litigation but declined to dismiss the individual defendants. The court also lifted the stay of the proceedings and, on June 9, 2022, entered a scheduling order. The parties are currently engaged in discovery. On August 18, 2022, the plaintiffs in the Securities Class Action Litigation filed a motion for class certification. On October 28, 2022, the individual defendants filed a response in opposition to plaintiffs' motion for class certification. We expect that the motion will be fully briefed in December 2022. The outcome of these legal proceedings cannot be predicted with certainty.
The Company's insurance carriers remain on notice of the Securities Class Action Litigation.
The Company is currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Company records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Company accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Company discloses the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Company.
Environmental Contingencies
The Company evaluates potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Company believes its maximum potential exposure to loss would not be material to its results of operations or financial condition. The Company has a master insurance policy that provides coverage through 2027 for certain environmental claims up to $40,000 per occurrence and up to $40,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place.
23
Guarantees
The Operating Partnership 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 the Operating Partnership's investment in the joint venture. The Operating Partnership may receive a fee from the joint venture for providing the guaranty. Additionally, when the Operating Partnership issues a guaranty, the terms of the joint venture agreement typically provide that the Operating Partnership may receive indemnification from the joint venture partner or have the ability to increase its ownership interest. The guarantees expire upon repayment of the debt, unless noted otherwise.
The following table represents the Operating Partnership's guarantees of unconsolidated affiliates' debt as reflected in the accompanying condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021:
|
|
As of September 30, 2022 |
|
|
Obligation |
|
||||||||||||||||||||
Unconsolidated Affiliate |
|
Company's |
|
Outstanding |
|
|
Percentage |
|
|
|
Maximum |
|
|
Debt |
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
|||||
West Melbourne I, LLC - Phase I |
|
50% |
|
$ |
37,971 |
|
|
50% |
|
|
|
$ |
18,985 |
|
|
Feb-2025 |
(2) |
|
$ |
190 |
|
|
$ |
195 |
|
|
West Melbourne I, LLC - Phase II |
|
50% |
|
|
13,414 |
|
|
50% |
|
|
|
|
6,707 |
|
|
Feb-2025 |
(2) |
|
|
67 |
|
|
|
69 |
|
|
Port Orange I, LLC |
|
50% |
|
|
50,023 |
|
|
50% |
|
|
|
|
25,011 |
|
|
Feb-2025 |
(2) |
|
|
250 |
|
|
|
258 |
|
|
Ambassador Infrastructure, LLC |
|
65% |
|
|
7,001 |
|
|
100% |
|
|
|
|
7,001 |
|
|
Mar-2025 |
|
|
|
70 |
|
|
|
83 |
|
|
Shoppes at Eagle Point, LLC |
|
50% |
|
|
39,820 |
|
|
|
— |
|
|
|
|
— |
|
|
May-2032 |
(3) |
|
|
— |
|
|
|
127 |
|
Atlanta Outlet JV, LLC |
|
50% |
|
|
4,388 |
|
|
100% |
|
|
|
|
4,388 |
|
|
Nov-2023 |
|
|
|
— |
|
|
|
— |
|
|
Louisville Outlet Shoppes, LLC |
|
50% |
|
|
7,647 |
|
|
100% |
|
|
|
|
7,647 |
|
|
Apr-2023 |
|
|
|
— |
|
|
|
— |
|
|
Total guaranty liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
577 |
|
|
$ |
732 |
|
|||
For the three and nine months ended September 30, 2022, the Successor Company evaluated each guaranty, listed in the table above, individually by evaluating the debt service ratio, cash flow forecasts and the performance of each loan. The result of the analysis was that each loan is current and performing. The Successor Company did not record a credit loss related to the guarantees listed in the table above for the three and nine months ended September 30, 2022.
For the three and nine months ended September 30, 2021, the Predecessor Company evaluated each guaranty, listed in the table above, individually by evaluating the debt service ratio, cash flow forecasts, the performance of each loan and, where applicable, the collateral value in relation to the outstanding amount of the loan. The result of the analysis was that each loan was current, performing and, where applicable, the collateral value was greater than the outstanding amount of the loan. The Predecessor Company did not record a credit loss related to the guarantees listed in the table above for the three and nine months ended September 30, 2021.
2021 Equity Incentive Plan
Following the Effective Date, the board of directors of the Successor Company adopted the CBL & Associates Properties, Inc. 2021 Equity Incentive Plan (the “EIP”). The EIP authorizes the grant of equity awards to eligible participants based on the new common stock, in the form of stock options, stock appreciation rights, restricted stock, restricted stock units and other equity awards. Awards under the EIP may be granted to officers, employees, directors, consultants and independent contractors of the reorganized company. Initially, 3,222,222 shares of new common stock are available under the EIP. The initial new common stock under the EIP is subject to an annual increase of a number of shares equal to 3% of the number of shares of new common stock issued and outstanding at the end of the relevant calendar year (beginning January 2023), or such lesser amount as the board of directors may determine. The EIP is administered by the compensation committee of the board of directors, which will determine the participants who will be granted awards under the EIP and the terms and conditions of EIP awards.
In accordance with the provisions of ASU 2016-09, which are designed to simplify the accounting for share-based payments transactions, the Successor Company elected to account for forfeitures of share-based payments as they occur rather than estimating them in advance.
24
Restricted Stock Awards
Compensation expense is recognized on a straight-line basis over the requisite service period. The share-based compensation expense related to the restricted stock awards of the Successor Company was $1,734 and $5,052 for the three and nine months ended September 30, 2022, respectively. The share-based compensation expense related to the restricted stock awards of the Predecessor Company was $241 and $784 for the three and nine months ended September 30, 2021, respectively. Share-based compensation cost resulting from share-based awards is recorded at the Management Company, which is a taxable entity.
As of the Effective Date, nonvested restricted stock of the Predecessor Company was deemed vested and the Company’s 2012 stock incentive plan, as amended, pursuant to which such restricted stock had been granted, was terminated.
A summary of the status of the Company’s nonvested restricted stock awards as of September 30, 2022, and changes during the period from January 1, 2022 through September 30, 2022, are presented below:
|
|
Shares |
|
|
Weighted- |
|
||
Nonvested at January 1, 2022 |
|
|
784,999 |
|
|
$ |
27.57 |
|
Granted |
|
|
76,667 |
|
|
$ |
27.65 |
|
Nonvested at September 30, 2022 |
|
|
861,666 |
|
|
$ |
27.58 |
|
As of September 30, 2022, there was $18,412 of total unrecognized compensation cost related to nonvested restricted stock awards granted under the EIP, which is expected to be recognized over a weighted-average period of 3.1 years.
Performance Stock Awards
In February 2022, the compensation committee of the board of directors of the Company approved the terms of new awards of PSUs. The PSUs are earned over a four-year performance period aligned with fiscal years 2022 (includes the Successor period from November 1, 2021 through December 31, 2021) through 2025, with one-quarter of the PSUs assigned to each fiscal year within the four-year performance period (each, an “Annual Performance Period” and all four, collectively, the “Full Performance Period”). The number of PSUs earned for each fiscal year within the four-year performance period will be determined based on the achievement of both (i) a quantitative total market return goal (the “TMR Goal”), and (ii) a Company-specific stated goal (the “Stated Goal”), for such fiscal year. The total market return (or TMR) is calculated as the sum of: (i) the average of the multiple of the Company’s average number of shares of common stock outstanding and the average closing share price of common stock for twenty consecutive trading days, and (ii) the value of cash dividends declared during the applicable fiscal year performance period. The TMR Goal will be met if the required level of total market return is achieved at any time during the last 90 trading days of the applicable fiscal year; provided that an additional six month extended measurement period will be applied for the fourth and final fiscal year (the “TMR Year 4 Grace Period”). The Stated Goal for each year will be met if it is achieved at any time during a cumulative performance period beginning November 1, 2021 and ending on December 31 of the applicable calendar year (the “Stated Goal Performance Period”), subject to a grace period of 6-months following the last day of each Stated Goal Performance Period (the “Stated Goal Grace Period”). If the Stated Goal is not achieved for any fiscal year measurement period (including the applicable grace period), then the PSUs allocable to that fiscal year will be forfeited. If the Stated Goal for a fiscal year is achieved but the TMR Goal is not achieved, then the unearned PSUs for the fiscal year will carry over to the succeeding fiscal year and may be earned based on attainment of the goals for the subsequent performance period. If the Stated Goal is achieved for all four fiscal years, then 50% of any outstanding PSUs will be earned. If a participating officer’s employment is terminated prior to the end of any annual performance period due to death or disability (as defined in the PSU award agreements), or due to a termination by the Company without cause (as defined in the PSU award agreements), then the officer will be entitled to receive a pro rata portion of any PSUs earned for that annual performance period (determined by dividing the number of days from January 1 of the applicable annual performance period through the date of such termination by 365), and any remaining PSUs for such annual performance period, and any subsequent annual performance period, will be forfeited.
In February 2022, the Company issued 727,223 PSUs to senior officers. The PSUs had a weighted-average grant date fair value of $24.67.
25
Management assesses the Stated Goals quarterly to determine whether it is probable they will be achieved. The Company begins recognizing compensation expense on a straight-line basis over the remaining service period once the Stated Goal is deemed probable of achievement. Share-based compensation expense related to the Successor Company’s PSUs was $1,121 and $3,364 for the three and nine months ended September 30, 2022, respectively. Share-based compensation expense related to the Predecessor Company’s PSUs was $94 and $283 for the three and nine months ended September 30, 2021. The unrecognized compensation expense related to the Successor Company’s PSUs was $14,578 as of September 30, 2022, which is expected to be recognized over a weighted-average period of 3.3 years.
As of the Effective Date, all outstanding PSUs of the Predecessor Company were deemed cancelled.
Note 14 – Noncash Investing and Financing Activities
The Company’s noncash investing and financing activities were as follows:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Additions to real estate assets accrued but not yet paid |
|
$ |
7,814 |
|
|
|
$ |
11,527 |
|
Deconsolidation upon loss of control (1): |
|
|
|
|
|
|
|
||
Decrease in real estate assets |
|
|
(18,810 |
) |
|
|
|
(84,860 |
) |
Decrease in mortgage and other indebtedness |
|
|
56,226 |
|
|
|
|
134,354 |
|
Decrease in operating assets and liabilities |
|
|
5,686 |
|
|
|
|
5,808 |
|
Decrease in intangible lease and other assets |
|
|
(6,852 |
) |
|
|
|
(171 |
) |
Note 15 – Shareholders' Equity
On September 8, 2022, the Company's board of directors adopted a short-term rights plan (the “Rights Plan”) that will expire on September 8, 2023, or sooner under certain circumstances. Pursuant to the Rights Plan, the board of directors authorized a dividend of one share purchase right (a “Right”) for each outstanding share of the Company's common stock. If a person or group of affiliated or associated persons acquires beneficial ownership of 10.0% or more of the Company's outstanding common shares, subject to certain exceptions (including exceptions for existing holders who do not increase their holdings as provided in the Rights Plan), each Right would effectively entitle its holder (other than the acquiring person or group of affiliated or associated persons) to purchase additional common shares at a substantial discount to the public market price. In addition, under certain circumstances, the Company may exchange the Rights (other than Rights beneficially owned by the acquiring person or group of affiliated or associated persons), in whole or in part, for common shares on a one-for-one basis, or the Company may redeem the Rights for cash at a price of $0.001 per Right.
Note 16 – Subsequent Events
In October 2022, the lender foreclosed on the $61,647 loan secured by Greenbrier Mall.
In October 2022, the loan secured by The Outlet Shoppes at Gettysburg was modified and the corporate recourse was eliminated. The lender's claim against the general unsecured claim pool related to the Company's bankruptcy filing was allowed. The modified loan balance is $21,000.
In October 2022, the Company entered into a short term extension with the lender regarding the $98,662 loan secured by Cross Creek Mall. This action extended the maturity date to January 5, 2023. The Company remains in discussions with the lender regarding a long term extension.
In October 2022, the Company reached an agreement with the lender to extend the $54,417 loan secured by Southpark Mall through June 2026, as well as waive the default triggered by the Company's bankruptcy filing.
In October 2022, the Company entered into a loan reinstatement and reaffirmation agreement with the lender regarding the $56,638 loan secured by Jefferson Mall, which waived the default triggered by the Company's bankruptcy filing.
In October 2022, the Company redeemed $49,959 in U.S. Treasury securities and purchased $90,251 in new U.S. Treasury securities with maturities through .
26
ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
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. Unless stated otherwise or the context otherwise requires, references to the “Company,” “we,” “us” and “our” mean CBL & Associates Properties, Inc. and its subsidiaries.
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 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. Although we have operated in the COVID-19 environment for over two years, 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 ended December 31, 2021, such known risks and uncertainties include, without limitation:
27
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.
Fresh Start Accounting
Upon emergence from bankruptcy, we qualified for and adopted fresh start accounting in accordance with Accounting Standards Codification Topic 852 – Reorganizations (“ASC 852”), which resulted in our becoming a new entity for financial reporting purposes. Our financial results for the three and nine months ended September 30, 2022 are referred to as those of the “Successor.” The financial results for the three and nine months ended September 30, 2021 are referred to as those of the “Predecessor.” Our results of operations as reported in our condensed consolidated financial statements for these periods are prepared in accordance with GAAP. See Note 3 in the annual report on Form 10-K for the year ended December 31, 2021 for additional 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, outlet centers, lifestyle centers, open-air centers and other properties. See Note 1 to the condensed consolidated financial statements for information on our property interests as of September 30, 2022. We have elected to be taxed as a REIT for federal income tax purposes.
As of September 30, 2022, portfolio occupancy of the Successor was 90.5%. As of September 30, 2021, portfolio occupancy of the Predecessor was 88.4%. The third quarter of 2022 was our first quarter of overall positive lease spreads in several years. As anticipated, NOI growth decelerated in the third quarter of 2022. Sales and percentage rents moderated, and operating expenses increased slightly, primarily due to wage inflation.
Year-to-date, we completed over $1.1 billion in financing activity, reducing interest costs and increasing cash flow. As a result, we are benefiting from a capital structure comprised of primarily non-recourse loans, a strong cash position, a pool of unencumbered assets and significant free cash flow. We are focused on maximizing shareholder returns and delivering capital to our shareholders through our dividend program. We are committed to a disciplined approach to capital allocation as we evaluate opportunities to deploy capital at our properties as well as externally.
We recently celebrated the grand opening of the new Von Maur premier fashion department store at West Towne Mall in Madison, Wisconsin. The community’s embrace of this opening is further evidence of the attraction of new and exciting stores and their ability to drive traffic and sales. We are working on a number of value-enhancing projects across our portfolio, further demonstrating our expertise in delivering financially successful projects that create substantial value.
The Successor had a net loss for the three and nine months ended September 30, 2022 of $17.4 million and $104.4 million, respectively. The Predecessor had a net loss for the three and nine months ended September 30, 2021 of $42.9 million and $80.7 million, respectively. The Successor recorded a net loss attributable to common shareholders for the three and nine months ended September 30, 2022 of $14.5 million and $96.8 million, respectively. The Predecessor had a net loss attributable to common shareholders for the three and nine months ended September 30, 2021 of $41.7 million and $77.4 million, respectively.
28
Our focus is on continuing to execute our strategy to transform our properties into dominant centers that offer a mix of retail, service, dining, entertainment and other non-retail uses, 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. While the industry and our Company continue to face challenges, some of which may not be under 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.
COVID-19
On March 11, 2020, the World Health Organization classified COVID-19 as a pandemic. In response to COVID-19, we initially 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. As of the date of this report, government-imposed capacity restrictions are no longer in place in our markets. The safety and health of our customers, employees and tenants remains a top priority.
Results of Operations
The tables below summarize deconsolidations and dispositions of properties that impact the results of operations of the Successor and Predecessor periods.
Successor Deconsolidations
Property |
|
Location |
|
Date of Deconsolidation |
EastGate Mall (1)(2) |
|
Cincinnati, OH |
|
December 2021 |
Greenbrier Mall (1)(3) |
|
Chesapeake, VA |
|
March 2022 |
Predecessor Deconsolidations
Property |
|
Location |
|
Date of Deconsolidation |
Asheville Mall (1)(2) |
|
Asheville, NC |
|
January 2021 |
Park Plaza (1)(3) |
|
Little Rock, AR |
|
March 2021 |
Successor Dispositions
Property |
|
Location |
|
Date of Sale |
EastGate Mall Self Storage (1) |
|
Cincinnati, OH |
|
November 2021 |
Hamilton Place Self Storage (1) |
|
Chattanooga, TN |
|
November 2021 |
Mid Rivers Mall Self Storage (1) |
|
St. Peters, MO |
|
November 2021 |
Parkdale Mall Self Storage (1) |
|
Beaumont, TX |
|
November 2021 |
Springs at Port Orange (1) |
|
Port Orange, FL |
|
December 2021 |
29
Predecessor Dispositions
Property |
|
Location |
|
Date of Sale |
The Residences at Pearland Town Center |
|
Pearland, TX |
|
October 2021 |
Discussion of the Results of Operation for the Three Month Successor Period Ended September 30, 2022 and the Three Month Predecessor Period Ended September 30, 2021
Revenues
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Three Months Ended September 30, |
|
|
|
Three Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Rental revenues |
|
$ |
131,642 |
|
|
|
$ |
145,539 |
|
Management, development and leasing fees |
|
|
1,783 |
|
|
|
|
1,780 |
|
Other |
|
|
2,855 |
|
|
|
|
3,056 |
|
Total revenues |
|
$ |
136,280 |
|
|
|
$ |
150,375 |
|
Rental revenues of the Successor were $131.6 million for the three months ended September 30, 2022. Rental revenues of the Predecessor were $145.5 million for the three months ended September 30, 2021. Rental revenues of the Successor were lower primarily due to higher amortization of net above market leases due to the adoption of fresh start accounting upon our emergence from bankruptcy, as well as lower collections of receivables for which we had previously reserved. Additionally, rental revenues for the three months ended September 30, 2022 were lower as a result of the properties that were deconsolidated during the Successor period.
Operating Expenses
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Three Months Ended September 30, |
|
|
|
Three Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Property operating |
|
$ |
(24,390 |
) |
|
|
$ |
(23,818 |
) |
Real estate taxes |
|
|
(13,880 |
) |
|
|
|
(13,957 |
) |
Maintenance and repairs |
|
|
(10,272 |
) |
|
|
|
(9,482 |
) |
Property operating expenses |
|
|
(48,542 |
) |
|
|
|
(47,257 |
) |
Depreciation and amortization |
|
|
(61,050 |
) |
|
|
|
(46,479 |
) |
General and administrative |
|
|
(14,625 |
) |
|
|
|
(13,502 |
) |
Loss on impairment |
|
|
— |
|
|
|
|
(63,160 |
) |
Litigation settlement |
|
|
36 |
|
|
|
|
89 |
|
Other |
|
|
— |
|
|
|
|
(104 |
) |
Total operating expenses |
|
$ |
(124,181 |
) |
|
|
$ |
(170,413 |
) |
Total property operating expenses of the Successor were $48.5 million for the three months ended September 30, 2022. Total property operating expenses of the Predecessor were $47.3 million for the three months ended September 30, 2021. Total property operating expenses of the Successor reflect growth in costs due to returning to more normal operations following the impacts of COVID-19, as well as increases in utility rates across our properties and the impact of wage inflation on third party contracts and services.
Depreciation and amortization expense of the Successor was $61.1 million for the three months ended September 30, 2022. Depreciation and amortization expense of the Predecessor was $46.5 million for the three months ended September 30, 2021. Depreciation and amortization expense of the Successor was higher primarily due to a new basis in depreciable assets and intangible in-place lease assets that have shorter useful lives resulting from the adoption of fresh start accounting upon our emergence from bankruptcy.
General and administrative expenses of the Successor were $14.6 million for the three months ended September 30, 2022. General and administrative expenses of the Predecessor were $13.5 million for the three months ended September 30, 2021. General and administrative expenses of the Successor included higher compensation and share-based compensation expenses as we returned to normal operations and compensation practices following the early impacts of COVID-19, as well as our emergence from bankruptcy.
30
Other Income and Expenses
Interest expense of the Successor was $37.7 million for the three months ended September 30, 2022. Interest expense of the Predecessor was $19.0 million for the three months ended September 30, 2021. Interest expense of the Successor included accretion of debt discounts of $10.1 million on property-level debt that is approaching maturity. The property-level debt discounts were recognized in conjunction with recording our property-level debt at fair value upon the adoption of fresh start accounting. The Successor period also included interest expense related to the secured term loan and the new loans entered into this year that are secured by certain of our open-air centers and outparcels. Also, the Successor had a reversal of previously recognized default interest expense of $1.4 million when forbearance/waiver agreements were obtained. During the Predecessor period we did not recognize interest expense on corporate debt while we were in bankruptcy.
Reorganizations items, net, of the Successor were an addition to income of $1.2 million for the three months ended September 30, 2022, which mostly related to the true up of estimated accrued expenses to actual amounts, partially offset by professional fees and U.S. Trustee fees directly related to the bankruptcy filing. Reorganizations items, net, of the Predecessor were a reduction to income of $12.0 million for the three months ended September 30, 2021, which consisted of professional, legal fees, retention bonuses and U.S. Trustee fees directly related to the bankruptcy filing.
Equity in earnings of unconsolidated affiliates of the Successor was $5.7 million for the three months ended September 30, 2022. Equity in losses of unconsolidated affiliates of the Predecessor was $2.2 million for the three months ended September 30, 2021. Equity in earnings of unconsolidated affiliates of the Successor does not include equity in losses of certain unconsolidated affiliates where the Successor's investment in those unconsolidated affiliates was reduced to zero in connection with the application of fresh start accounting. The Predecessor period includes recognition of equity in losses of certain unconsolidated affiliates.
The income tax provision of the Successor was $2.4 million for the three months ended September 30, 2022. Income tax benefit of the Predecessor was $1.2 million for the three months ended September 30, 2021.
During the three months ended September 30, 2022, the Successor recognized $3.5 million of gain on sales of real estate assets primarily related to the sale of three outparcels. During the three months ended September 30, 2021, the Predecessor recognized $8.7 million of gain on sales of real estate assets primarily related to the sale of two anchors and three outparcels.
Discussion of the Results of Operation for the Nine Month Successor Period Ended September 30, 2022 and the Nine Month Predecessor Period Ended September 30, 2021
Revenues
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Rental revenues |
|
$ |
398,806 |
|
|
|
$ |
405,030 |
|
Management, development and leasing fees |
|
|
5,338 |
|
|
|
|
4,888 |
|
Other |
|
|
9,256 |
|
|
|
|
10,202 |
|
Total revenues |
|
$ |
413,400 |
|
|
|
$ |
420,120 |
|
Rental revenues of the Successor were $398.8 million for the nine months ended September 30, 2022. Rental revenues of the Predecessor were $405.0 million for the nine months ended September 30, 2021. Rental revenues of the Successor were lower primarily due to higher amortization of net above market leases due to the adoption of fresh start accounting upon our emergence from bankruptcy. Percentage rent of the Successor was higher due to increased tenant sales as tenant sales and traffic have improved. Additionally, rental revenues for the nine months ended September 30, 2022 were lower as a result of the properties that were deconsolidated during the Successor period.
31
Operating Expenses
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Property operating |
|
$ |
(69,046 |
) |
|
|
$ |
(65,243 |
) |
Real estate taxes |
|
|
(42,569 |
) |
|
|
|
(45,618 |
) |
Maintenance and repairs |
|
|
(31,068 |
) |
|
|
|
(29,047 |
) |
Property operating expenses |
|
|
(142,683 |
) |
|
|
|
(139,908 |
) |
Depreciation and amortization |
|
|
(194,469 |
) |
|
|
|
(142,090 |
) |
General and administrative |
|
|
(51,149 |
) |
|
|
|
(37,383 |
) |
Loss on impairment |
|
|
(252 |
) |
|
|
|
(120,342 |
) |
Litigation settlement |
|
|
182 |
|
|
|
|
890 |
|
Other |
|
|
(834 |
) |
|
|
|
(391 |
) |
Total operating expenses |
|
$ |
(389,205 |
) |
|
|
$ |
(439,224 |
) |
Total property operating expenses of the Successor was $142.7 million for the nine months ended September 30, 2022. Total property operating expenses of the Predecessor was $139.9 million for the nine months ended September 30, 2021. Total property operating expenses of the Successor reflect growth in costs due to returning to more normal operations following the impacts of COVID-19, as well as increases in utility rates across our properties and the impact of wage inflation on third party contracts and services.
Depreciation and amortization expense of the Successor was $194.5 million for the nine months ended September 30, 2022. Depreciation and amortization expense of the Predecessor was $142.1 million for the nine months ended September 30, 2021. Depreciation and amortization expense of the Successor was higher primarily due to a new basis in depreciable assets and intangible in-place lease assets that have shorter useful lives resulting from the adoption of fresh start accounting upon our emergence from bankruptcy.
General and administrative expenses of the Successor were $51.1 million for the nine months ended September 30, 2022. General and administrative expenses of the Predecessor were $37.4 million for the nine months ended September 30, 2021. General and administrative expenses of the Successor included higher compensation and share-based compensation expenses as we returned to normal operations and compensation practices following the early impacts of COVID-19, as well as our emergence from bankruptcy. Also, general and administrative expenses of the Successor include incremental professional fees associated with loan modifications and extensions, and fees incurred to obtain credit ratings on our secured term loan in accordance with the term loan agreement.
For the nine months ended September 30, 2021, the Predecessor recognized $120.3 million of loss on impairment of real estate, which was primarily related to five malls, a redeveloped anchor parcel, an associated center and an outparcel. See Note 5 to the condensed consolidated financial statements for more information.
Other Income and Expenses
Interest expense of the Successor was $183.4 million for the nine months ended September 30, 2022. Interest expense of the Predecessor was $65.5 million for the nine months ended September 30, 2021. Interest expense of the Successor included accretion of debt discounts of $108.3 million on property-level debt that is approaching maturity. The property-level debt discounts were recognized in conjunction with recording our property-level debt at fair value upon the adoption of fresh start accounting. The Successor period also included interest expense related to the secured term loan, the exchangeable notes, the secured notes and the new loans entered into this year that are secured by certain of our open-air centers and outparcels. The Successor also recognized a reversal of previously recognized default interest expense of $12.0 million when forbearance/waiver agreements were obtained. The Predecessor did not recognize interest expense on corporate debt during bankruptcy.
For the nine months ended September 30, 2022, the Successor recorded a $36.3 million gain on deconsolidation related to a mall that was deconsolidated due to a loss of control when the mall was placed into receivership in connection with the foreclosure process. For the nine months ended September 30, 2021, the Predecessor recorded a $55.1 million gain on deconsolidation related to two malls that were deconsolidated due to a loss of control when each mall was placed into receivership in connection with the foreclosure process.
Reorganization items, net, of the Successor were an addition to income of $0.3 million for the nine months ended September 30, 2022, which related to the true up of estimated accrued expenses to actual amounts, partially offset by professional fees and U.S. Trustee fees directly related to the bankruptcy filing. Reorganization items, net, of the Predecessor were a reduction to income of $52.0 million for the nine months ended September 30, 2021, which consisted of professional fees, legal fees, retention bonuses and U.S. Trustee fees directly related to the bankruptcy filing.
32
Equity in earnings of unconsolidated affiliates of the Successor was $16.3 million for the nine months ended September 30, 2022. Equity in losses of unconsolidated affiliates of the Predecessor was $9.6 million for the nine months ended September 30, 2021. Equity in earnings of the Successor does not include equity in losses of certain unconsolidated affiliates where the Successor's investment in those unconsolidated affiliates was reduced to zero in connection with the application of fresh start accounting. The Predecessor period includes recognition of equity in losses of certain unconsolidated affiliates.
The income tax provision of the Successor was $2.8 million for the nine months ended September 30, 2022. The income tax provision of the Predecessor was $0.2 million for the nine months ended September 30, 2021.
During the nine months ended September 30, 2022, the Successor recognized $3.5 million of gain on sales of real estate assets primarily related to the sale of three outparcels. During the nine months ended September 30, 2021, the Predecessor recognized $8.5 million of gain on sales of real estate assets primarily related to the sale of three anchors and three outparcels.
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 the Operating Partnership's pro rata share of both consolidated and unconsolidated properties. We believe that presenting NOI and same-center NOI (described below) based on our Operating Partnership’s pro rata share of both consolidated and unconsolidated properties is useful since we conduct substantially all our business through our Operating 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 the Operating 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 our properties 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 since January 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 excluded properties. We exclude properties 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 (“Excluded Properties”).
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).
33
A reconciliation of our same-center NOI to net loss for the three-month Successor period ended September 30, 2022 and the three-month Predecessor period ended September 30, 2021 is as follows (in thousands):
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Three Months Ended September 30, |
|
|
|
Three Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Net loss |
|
$ |
(17,412 |
) |
|
|
$ |
(42,881 |
) |
Adjustments: (1) |
|
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
63,886 |
|
|
|
|
59,388 |
|
Interest expense |
|
|
60,261 |
|
|
|
|
29,023 |
|
Abandoned projects expense |
|
|
— |
|
|
|
|
104 |
|
Gain on sales of real estate assets |
|
|
(3,528 |
) |
|
|
|
(8,684 |
) |
Gain on sales of real estate assets of unconsolidated affiliates |
|
|
(33 |
) |
|
|
|
(70 |
) |
Adjustment for unconsolidated affiliates with negative investment |
|
|
(13,116 |
) |
|
|
|
— |
|
Loss on available-for-sale securities |
|
|
39 |
|
|
|
|
— |
|
Loss on impairment |
|
|
— |
|
|
|
|
63,160 |
|
Litigation settlement |
|
|
(36 |
) |
|
|
|
(89 |
) |
Reorganization items, net |
|
|
(1,220 |
) |
|
|
|
12,008 |
|
Income tax provision (benefit) |
|
|
2,422 |
|
|
|
|
(1,234 |
) |
Lease termination fees |
|
|
(1,572 |
) |
|
|
|
(2,051 |
) |
Straight-line rent and above- and below-market lease amortization |
|
|
3,380 |
|
|
|
|
(2,771 |
) |
Net loss attributable to noncontrolling interests in other consolidated subsidiaries |
|
|
3,143 |
|
|
|
|
76 |
|
General and administrative expenses |
|
|
14,625 |
|
|
|
|
13,502 |
|
Management fees and non-property level revenues |
|
|
(683 |
) |
|
|
|
(1,344 |
) |
Operating Partnership's share of property NOI |
|
|
110,156 |
|
|
|
|
118,137 |
|
Non-comparable NOI |
|
|
(4,609 |
) |
|
|
|
(4,603 |
) |
Total same-center NOI |
|
$ |
105,547 |
|
|
|
$ |
113,534 |
|
Same-center NOI of the Successor was $105.5 million for the three months ended September 30, 2022. Same-center NOI of the Predecessor was $113.5 million for the three months ended September 30, 2021. Same-center NOI of the Successor was 7.0% lower primarily due to $3.7 million of lower revenues and $4.3 million of higher operating expenses. Rental revenues of the Successor were $3.2 million lower primarily due to lower collections of receivables for which we had previously reserved. Property operating expenses of the Successor were higher partially due to the cost of returning to more normal operations following the impacts of COVID-19, as well as increases in utility rates across our properties and the impact of wage inflation on third party contracts and services.
34
A reconciliation of our same-center NOI to net loss for the nine-month Successor period ended September 30, 2022 and the nine-month Predecessor period ended September 30, 2021 is as follows (in thousands):
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Net loss |
|
$ |
(104,440 |
) |
|
|
$ |
(80,722 |
) |
Adjustments: (1) |
|
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
212,807 |
|
|
|
|
180,846 |
|
Interest expense |
|
|
241,099 |
|
|
|
|
93,968 |
|
Abandoned projects expense |
|
|
834 |
|
|
|
|
391 |
|
Gain on sales of real estate assets |
|
|
(3,547 |
) |
|
|
|
(8,492 |
) |
Gain on sales of real estate assets of unconsolidated affiliates |
|
|
(662 |
) |
|
|
|
(70 |
) |
Adjustment for unconsolidated affiliates with negative investment |
|
|
(36,123 |
) |
|
|
|
— |
|
Gain on deconsolidation |
|
|
(36,250 |
) |
|
|
|
(55,131 |
) |
Loss on available-for-sale securities |
|
|
39 |
|
|
|
|
— |
|
Loss on impairment |
|
|
252 |
|
|
|
|
120,342 |
|
Litigation settlement |
|
|
(182 |
) |
|
|
|
(890 |
) |
Reorganization items, net |
|
|
(262 |
) |
|
|
|
52,014 |
|
Income tax provision |
|
|
2,751 |
|
|
|
|
222 |
|
Lease termination fees |
|
|
(4,020 |
) |
|
|
|
(3,329 |
) |
Straight-line rent and above- and below-market lease amortization |
|
|
7,087 |
|
|
|
|
961 |
|
Net loss attributable to noncontrolling interests in other consolidated subsidiaries |
|
|
8,002 |
|
|
|
|
1,344 |
|
General and administrative expenses |
|
|
51,149 |
|
|
|
|
37,383 |
|
Management fees and non-property level revenues |
|
|
(1,798 |
) |
|
|
|
(7,135 |
) |
Operating Partnership's share of property NOI |
|
|
336,736 |
|
|
|
|
331,702 |
|
Non-comparable NOI |
|
|
(13,803 |
) |
|
|
|
(14,341 |
) |
Total same-center NOI |
|
$ |
322,933 |
|
|
|
$ |
317,361 |
|
Same-center NOI of the Successor was $322.9 million for the nine months ended September 30, 2022. Same-center NOI of the Predecessor was $317.4 million for the nine months ended September 30, 2021. Same-center NOI of the Successor was 1.8% higher primarily due to $14.1 million of higher revenues partially offset by $8.5 million of higher operating expenses. Rental revenues of the Successor were $13.6 million higher primarily due to increases in occupancy and an increase in percentage rent due to higher trailing twelve-month tenant sales, which was partially offset by lower tenant reimbursements. Property operating expenses of the Successor were higher partially due to the cost of returning to more normal operations following the impacts of COVID-19, as well as increases in utility rates across our properties and the impact of wage inflation on third party contracts and services.
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, malls, lifestyle centers and outlet centers earn a large portion 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 derive the majority of our revenues from the malls, lifestyle centers and outlet centers. The sources of our revenues by property type were as follows:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Malls, Lifestyle Centers and Outlet Centers |
|
|
85.9 |
% |
|
|
|
89.9 |
% |
All Other |
|
|
14.1 |
% |
|
|
|
10.1 |
% |
35
Inline and Adjacent Freestanding Tenant Store Sales
Inline and adjacent freestanding tenant store sales include reporting mall, lifestyle center and outlet center tenants of 10,000 square feet or less and exclude license agreements, which are retail leases that are temporary or short-term in nature and generally last more than three months but less than twelve months. The following is a comparison of our same-center tenant sales per square foot for mall, lifestyle center and outlet center tenants of 10,000 square feet or less (Excluded Properties are not included in sales metrics):
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Sales Per Square Foot for the Trailing Twelve Months Ended September 30, |
|
|
|
Sales Per Square Foot for the Trailing Twelve Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 (1) |
|
||
Mall, Lifestyle Center and Outlet Center same-center sales per square foot |
|
$ |
440 |
|
|
|
$ |
431 |
|
Occupancy
Our portfolio occupancy is summarized in the following table (Excluded Properties are not included in occupancy metrics):
|
|
Successor |
|
|
Predecessor |
|
|
As of September 30, |
|
|
As of September 30, |
|
|
2022 |
|
|
2021 |
Total portfolio |
|
90.5% |
|
|
88.4% |
Malls, Lifestyle Centers and Outlet Centers: |
|
|
|
|
|
Total malls |
|
88.7% |
|
|
85.9% |
Total lifestyle centers |
|
90.6% |
|
|
86.8% |
Total outlet centers |
|
90.9% |
|
|
90.1% |
Total same-center malls, lifestyle centers and outlet centers |
|
89.1% |
|
|
86.7% |
All Other: |
|
|
|
|
|
Total open-air centers |
|
94.7% |
|
|
94.7% |
Total other |
|
93.0% |
|
|
98.7% |
Leasing
The following is a summary of the total square feet of leases signed in the three-month periods ended September 30, 2022 and 2021:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Three Months Ended September 30, |
|
|
|
Three Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Operating portfolio: |
|
|
|
|
|
|
|
||
New leases |
|
|
272,462 |
|
|
|
|
118,683 |
|
Renewal leases |
|
|
608,551 |
|
|
|
|
379,096 |
|
Development portfolio: |
|
|
|
|
|
|
|
||
New leases |
|
|
15,703 |
|
|
|
|
— |
|
Total leased |
|
|
896,716 |
|
|
|
|
497,779 |
|
36
The following is a summary of the total square feet of leases signed in the nine-month periods ended September 30, 2022 and 2021:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Operating portfolio: |
|
|
|
|
|
|
|
||
New leases |
|
|
903,104 |
|
|
|
|
473,105 |
|
Renewal leases |
|
|
2,058,920 |
|
|
|
|
1,671,201 |
|
Development portfolio: |
|
|
|
|
|
|
|
||
New leases |
|
|
15,703 |
|
|
|
|
60,059 |
|
Total leased |
|
|
2,977,727 |
|
|
|
|
2,204,365 |
|
Average annual base rents per square foot are based on contractual rents in effect as of September 30, 2022 and 2021, 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:
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Total portfolio |
|
$ |
25.10 |
|
|
|
$ |
25.17 |
|
Malls, Lifestyle Centers and Outlet Centers (1): |
|
|
|
|
|
|
|
||
Total same-center malls, lifestyle centers and outlet centers |
|
|
29.57 |
|
|
|
|
30.03 |
|
Total malls |
|
|
30.14 |
|
|
|
|
30.55 |
|
Total lifestyle centers |
|
|
28.53 |
|
|
|
|
27.00 |
|
Total outlet centers |
|
|
26.45 |
|
|
|
|
27.32 |
|
All Other: |
|
|
|
|
|
|
|
||
Total open-air centers |
|
|
15.14 |
|
|
|
|
14.97 |
|
Total other |
|
|
19.18 |
|
|
|
|
19.35 |
|
Results from new and renewal leasing of comparable small shop space of less than 10,000 square feet during the three- and nine-month periods ended September 30, 2022 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:
Property Type |
|
Square |
|
|
Prior Gross |
|
|
New Initial |
|
|
% Change |
|
|
New Average |
|
|
% Change |
|
||||||
Quarter-to-Date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
All Property Types (2) |
|
|
371,178 |
|
|
$ |
35.20 |
|
|
$ |
37.03 |
|
|
|
5.2 |
% |
|
$ |
37.48 |
|
|
|
6.5 |
% |
Malls, Lifestyle Centers & Outlet Centers |
|
|
321,756 |
|
|
|
37.76 |
|
|
|
39.28 |
|
|
|
4.0 |
% |
|
|
39.72 |
|
|
|
5.2 |
% |
New leases |
|
|
28,278 |
|
|
|
36.47 |
|
|
|
64.08 |
|
|
|
75.7 |
% |
|
|
67.56 |
|
|
|
85.3 |
% |
Renewal leases |
|
|
293,478 |
|
|
|
37.89 |
|
|
|
36.89 |
|
|
|
(2.6 |
)% |
|
|
37.03 |
|
|
|
(2.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Year-to-Date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
All Property Types (2) |
|
|
1,465,986 |
|
|
$ |
34.44 |
|
|
$ |
31.97 |
|
|
|
(7.2 |
)% |
|
$ |
32.54 |
|
|
|
(5.5 |
)% |
Malls, Lifestyle Centers & Outlet Centers |
|
|
1,341,160 |
|
|
|
35.90 |
|
|
|
33.06 |
|
|
|
(7.9 |
)% |
|
|
33.64 |
|
|
|
(6.3 |
)% |
New leases |
|
|
135,827 |
|
|
|
42.42 |
|
|
|
45.47 |
|
|
|
7.2 |
% |
|
|
48.49 |
|
|
|
14.3 |
% |
Renewal leases |
|
|
1,205,333 |
|
|
|
35.16 |
|
|
|
31.66 |
|
|
|
(9.9 |
)% |
|
|
31.97 |
|
|
|
(9.1 |
)% |
37
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 |
|
|
Square |
|
|
Term |
|
|
Initial |
|
|
Average |
|
|
Expiring |
|
|
Initial Rent |
|
|
Average Rent |
|
||||||||||||||||
Commencement 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
New |
|
|
81 |
|
|
|
222,588 |
|
|
|
6.38 |
|
|
$ |
41.03 |
|
|
$ |
42.97 |
|
|
$ |
38.17 |
|
|
$ |
2.86 |
|
|
|
7.5 |
% |
|
$ |
4.80 |
|
|
|
12.6 |
% |
Renewal |
|
|
471 |
|
|
|
1,490,972 |
|
|
|
2.55 |
|
|
|
30.29 |
|
|
|
30.58 |
|
|
|
33.32 |
|
|
|
(3.03 |
) |
|
|
(9.1 |
)% |
|
|
(2.74 |
) |
|
|
(8.2 |
)% |
Commencement 2022 Total |
|
|
552 |
|
|
|
1,713,560 |
|
|
|
3.11 |
|
|
|
31.69 |
|
|
|
32.19 |
|
|
|
33.95 |
|
|
|
(2.26 |
) |
|
|
(6.7 |
)% |
|
|
(1.76 |
) |
|
|
(5.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Commencement 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
New |
|
|
6 |
|
|
|
18,617 |
|
|
|
8.36 |
|
|
|
29.84 |
|
|
|
42.36 |
|
|
|
31.57 |
|
|
|
(1.73 |
) |
|
|
(5.5 |
)% |
|
|
10.79 |
|
|
|
34.2 |
% |
Renewal |
|
|
99 |
|
|
|
258,840 |
|
|
|
2.75 |
|
|
|
45.72 |
|
|
|
46.10 |
|
|
|
46.02 |
|
|
|
(0.30 |
) |
|
|
(0.7 |
)% |
|
|
0.08 |
|
|
|
0.2 |
% |
Commencement 2023 Total |
|
|
105 |
|
|
|
277,457 |
|
|
|
3.07 |
|
|
|
44.66 |
|
|
|
45.85 |
|
|
|
45.05 |
|
|
|
(0.39 |
) |
|
|
(0.9 |
)% |
|
|
0.80 |
|
|
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total 2022/2023 |
|
|
657 |
|
|
|
1,991,017 |
|
|
|
3.10 |
|
|
$ |
33.50 |
|
|
$ |
34.09 |
|
|
$ |
35.50 |
|
|
$ |
(2.00 |
) |
|
|
(5.6 |
)% |
|
$ |
(1.41 |
) |
|
|
(4.0 |
)% |
Liquidity and Capital Resources
As of September 30, 2022, we had $335.7 million available in unrestricted cash and U.S. Treasury securities. Our total pro rata share of debt, excluding unamortized deferred financing costs and debt discounts, at September 30, 2022 was $2,837.7 million, which includes $61.6 million of a deconsolidated property loan that was in receivership. We had $83.0 million in restricted cash at September 30, 2022 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, which are designated for debt service and operating expense obligations.
During the three and nine months ended September 30, 2022, we continued to reinvest the cash from maturing U.S. Treasury securities into new U.S. Treasury securities. We designated our U.S. Treasury securities as available-for-sale. As of September 30, 2022, our U.S. Treasury securities have maturities through July 2023. Subsequent to September 30, 2022, we redeemed and purchased additional U.S. Treasury securities. See Note 16 for additional information.
In February 2022, we issued 10,982,795 shares of common stock to holders of the exchangeable notes in satisfaction of principal, accrued interest and the make-whole payment, and all the exchangeable notes were cancelled in accordance with the terms of the indenture.
In February 2022, the loan secured by Fayette Mall was modified to reduce the fixed interest rate to 4.25% and extend the maturity date through May 2023, with three one-year extension options, subject to certain requirements. As part of the modification, two ground leased outparcels were released from the collateral in exchange for the addition of the redeveloped former middle anchor location. As of September 30, 2022, the loan had an outstanding balance of $129.6 million.
In February 2022, we entered into a forbearance agreement with the lender regarding the default triggered by the bankruptcy filing related to the loan secured by The Outlet Shoppes at Atlanta. As of September 30, 2022, the loan had an outstanding balance of $4.4 million.
In March 2022, we deconsolidated Greenbrier Mall as a result of losing control when the property was placed in receivership. As of September 30, 2022, the loan secured by Greenbrier Mall had an outstanding balance of $61.6 million. Subsequent to September 30, 2022, the lender foreclosed on the loan secured by Greenbrier Mall. See Note 16.
In March 2022, we entered into a new $30.0 million non-recourse mortgage note payable, secured by York Town Center, that provides for a three-year term and a fixed interest rate of 4.75%. The monthly debt service is interest only for the first eighteen months. As of September 30, 2022, the loan had an outstanding balance of $30.0 million ($15.0 million at our share).
In March 2022, we entered into a forbearance agreement with the respective lenders regarding the default triggered by the bankruptcy filing related to the loans secured by Coastal Grand and Fremaux Town Center. As of September 30, 2022, the loans secured by Coastal Grand had an outstanding balance of $105.5 million ($52.8 million at our share). As of September 30, 2022, the loan secured by Fremaux Town Center had an outstanding balance of $60.8 million ($39.5 million at our share).
In April 2022, we closed on a new $40.0 million, ten-year, non-recourse loan secured by The Shoppes at Eagle Point. The new loan bears a fixed interest rate of 5.4%. Proceeds from the new loan were utilized to retire the previous $33.6 million partial recourse loan, which was set to mature in October 2022. As of September 30, 2022, the loan had an outstanding balance of $39.8 million ($19.9 million at our share).
38
In May 2022, the loan secured by Arbor Place was extended for an additional four years, with a new maturity date of May 2026. The interest rate will remain at the current fixed rate of 5.1%. As of September 30, 2022, the loan had an outstanding balance of $99.0 million.
In May 2022, we entered into a forbearance agreement with the lender regarding the default triggered by the bankruptcy filing related to the loan secured by The Outlet Shoppes of the Bluegrass. As of September 30, 2022, the loan had an outstanding balance of $65.4 million ($32.7 million at our share).
In May 2022, the loan secured by Northwoods Mall was extended on the same terms through April 2026. As of September 30, 2022, the loan had an outstanding balance of $59.0 million.
In May 2022, we entered into a new $65.0 million non-recourse loan. The loan has a ten-year term with a fixed interest rate of 5.85%. It is interest only for the first three years. The loan is secured by open-air centers, which include Hamilton Crossing, Hamilton Corner, The Terrace and The Shoppes at Hamilton Place. Proceeds from the loan were used to redeem $60.0 million aggregate principal amount of the senior secured notes. Also, the previous $7.1 million Hamilton Crossing loan was paid off in conjunction with the closing of the new loan. As of September 30, 2022, the loan had an outstanding balance of $65.0 million.
In June 2022, we entered into a new $360.0 million loan. The interest rate is a fixed 6.95% for $180.0 million of the $360.0 million loan, with the other half of the loan bearing a floating interest rate based on the 30-day SOFR plus 4.10%. The loan has an initial term of five years with one two-year extension, subject to certain conditions. The loan is secured by a pool of 90 outparcels and 13 open-air centers. The open-air centers include Alamance Crossing West, CoolSprings Crossing, Courtyard at Hickory Hollow, Frontier Square, Gunbarrel Pointe, Harford Annex, The Plaza at Fayette, Sunrise Commons, The Shoppes at St. Clair Square, The Landing at Arbor Place, West Towne Crossing, West Towne District and WestGate Crossing. Proceeds from the loan were used to redeem all $335.0 million outstanding on the senior secured notes, which eliminated the recourse guaranty. Also, proceeds were used to paydown $8.3 million on the Brookfield Square Anchor Redevelopment loan, which had an outstanding balance of $18.5 million as of September 30, 2022.
In June 2022, we paid off the $14.9 million loan secured by CBL Center at maturity.
In June 2022, we entered into a new $42.5 million loan secured by Ambassador Town Center. The loan matures in June 2029 and bears a fixed interest rate of 4.35%. The previous $40.7 million loan was paid off in conjunction with the closing of the new loan. Our share of the new loan was $27.5 million as of September 30, 2022.
In June 2022, our board of directors established a regular quarterly dividend. We paid common stock dividends of $0.25 per share in each of the second and third quarters of 2022.
In August 2022, the loan secured by Parkdale Mall and Crossing was extended to March 2026. As of September 30, 2022, the loan had an outstanding balance of $64.2 million.
In August 2022, we notified the lender of our election to extend the loan secured by The Outlet Shoppes of the Bluegrass - Phase II through April 15, 2023.
As of September 30, 2022, the loan secured by Cross Creek Mall had an outstanding balance of $98.7 million. Subsequent to September 30, 2022, the loan was extended through January 5, 2023. The Company remains in discussions with the lender regarding a long term extension. See Note 16.
Subsequent to September 30, 2022, the loan secured by The Outlet Shoppes at Gettysburg was modified. As of September 30, 2022, the loan had an outstanding balance of $35.2 million. See Note 16 for additional information.
Subsequent to September 30, 2022, we reached an agreement with the lender to extend the loan secured by Southpark Mall through June 2026, as well as waive the default triggered by our bankruptcy filing. As of September 30, 2022, the loan had an outstanding balance of $54.4 million. See Note 16.
Subsequent to September 30, 2022, we entered into a loan reinstatement and reaffirmation agreement with the lender regarding the loan secured by Jefferson Mall, which waived the default triggered by our bankruptcy filing. As of September 30, 2022, the loan had an outstanding balance of $56.6 million. See Note 16.
Our total share of consolidated, unconsolidated and other outstanding debt, excluding debt discounts and deferred financing costs, maturing during 2022, assuming all extension options are elected, is $265.6 million, and our total share of consolidated, unconsolidated and other outstanding debt, excluding debt discounts and deferred financing costs, that matured prior to 2022, which remains outstanding at September 30, 2022, is $103.4 million. We are in discussions with the existing lenders to modify and extend or otherwise refinance the loans.
39
As of September 30, 2022, we had $699.5 million of property-level debt and related obligations, including unconsolidated debt and related obligations, maturing or callable within the next 12 months from the issuance of the financial statements. Subsequent to September 30, 2022, we extended the maturity date or obtained waivers of default for $150.9 million of mortgage notes. See Note 16 for additional information. We intend to refinance and/or extend the maturity dates for the remaining $548.6 million of such mortgage notes payable. In instances where a refinancing and/or extension of maturity dates is unsuccessful we will repay certain of the mortgage notes based on the availability of liquidity and convey certain properties to the lender to satisfy the debt obligation.
Cash Flows - Operating, Investing and Financing Activities
There was $168.7 million of cash, cash equivalents and restricted cash as of September 30, 2022, a decrease of $67.5 million from December 31, 2021. Of this amount, $85.8 million was unrestricted cash and cash equivalents as of September 30, 2022. Also, at September 30, 2022, we had $249.9 million in U.S. Treasuries with maturities through July 2023.
Our net cash flows are summarized as follows (in thousands):
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Net cash provided by operating activities |
|
$ |
153,820 |
|
|
|
$ |
202,170 |
|
Net cash (used in) provided by investing activities |
|
|
(107,832 |
) |
|
|
|
139,180 |
|
Net cash used in financing activities |
|
|
(113,463 |
) |
|
|
|
(32,168 |
) |
Net cash flows |
|
$ |
(67,475 |
) |
|
|
$ |
309,182 |
|
Cash Provided By Operating Activities
Cash provided by operating activities of the Successor was $153.8 million for the nine months ended September 30, 2022. Cash provided by operating activities of the Predecessor was $202.2 million for the nine months ended September 30, 2021. Cash provided by operating activities of the Successor reflects a significant increase in interest expense because we incurred interest expense on our new corporate and property-level debt during the nine months ended September 30, 2022. The Predecessor did not pay interest in the prior-year period on the secured credit facility and senior unsecured notes during bankruptcy. The Successor also had higher general and administrative expenses as we returned to normal operations and compensation practices following the early impacts of COVID-19, as well as our emergence from bankruptcy, and because we incurred professional fees associated with loan modifications/extensions and obtained credit ratings on our secured term loan. Conversely, the Successor had higher same-center net operating income and a lower amount of reorganization items, net.
Cash (Used In) Provided By Investing Activities
During the nine months ended September 30, 2022, the Successor had net cash used in investing activities of $107.8 million. During the nine months ended September 30, 2021, the Predecessor had net cash provided by investing activities of $139.2 million. Net cash used in investing activities of the Successor was higher primarily due to the timing of the reinvestment of cash in U.S. Treasury securities. During the Predecessor period there were certain redemptions of U.S. Treasury securities where the subsequent reinvestment in additional U.S. Treasury securities did not occur until after September 30, 2021. Also, the Successor had lower proceeds from sales of real estate assets during the nine months ended September 30, 2022. Conversely, the Successor had higher distributions from unconsolidated affiliates during the nine months ended September 30, 2022.
Cash Used In Financing Activities
During the nine months ended September 30, 2022, the Successor had net cash used in financing activities of $113.5 million. During the nine months ended September 30, 2021, the Predecessor had net cash used in financing activities of $32.2 million. Net cash used in financing activities of the Successor was higher primarily due to principal payments on the secured term loan and costs incurred to obtain new mortgage loans. Proceeds received from the new mortgage loans were used to redeem all the senior secured notes and retire two mortgage notes payable.
40
Debt
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. Prior to consideration of unamortized deferred financing costs or debt discounts, of our $2,837.7 million outstanding debt at September 30, 2022, $1,969.1 million constituted non-recourse debt obligations and $868.6 million constituted recourse debt obligations. We believe the tables below provide investors and lenders a clearer understanding of our total debt obligations and liquidity (in thousands):
September 30, 2022: |
|
Consolidated |
|
|
Noncontrolling |
|
|
Other Debt (1) |
|
|
Unconsolidated |
|
|
Total |
|
|
Weighted- |
|
|||||
Fixed-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-recourse loans on operating properties |
|
$ |
869,307 |
|
|
$ |
(32,594 |
) |
|
$ |
61,647 |
|
|
$ |
614,231 |
|
|
$ |
1,512,591 |
|
|
4.60% |
|
Open-air centers and outparcels loan |
|
|
180,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
180,000 |
|
|
6.95% |
(3) |
Recourse loans on operating properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10,439 |
|
|
|
10,439 |
|
|
3.68% |
|
Total fixed-rate debt |
|
|
1,049,307 |
|
|
|
(32,594 |
) |
|
|
61,647 |
|
|
|
624,670 |
|
|
|
1,703,030 |
|
|
4.85% |
|
Variable-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-recourse loans on operating properties |
|
|
57,015 |
|
|
|
(13,493 |
) |
|
|
— |
|
|
|
53,011 |
|
|
|
96,533 |
|
|
5.38% |
|
Recourse loans on operating properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20,345 |
|
|
|
20,345 |
|
|
5.80% |
|
Open-air centers and outparcels loan |
|
|
180,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
180,000 |
|
|
6.61% |
(3) |
Secured term loan |
|
|
837,824 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
837,824 |
|
|
5.31% |
|
Total variable-rate debt |
|
|
1,074,839 |
|
|
|
(13,493 |
) |
|
|
— |
|
|
|
73,356 |
|
|
|
1,134,702 |
|
|
5.53% |
|
Total fixed-rate and variable-rate debt |
|
|
2,124,146 |
|
|
|
(46,087 |
) |
|
|
61,647 |
|
|
|
698,026 |
|
|
|
2,837,732 |
|
|
5.12% |
|
Unamortized deferred financing costs |
|
|
(16,621 |
) |
|
|
85 |
|
|
|
— |
|
|
|
(2,294 |
) |
|
|
(18,830 |
) |
|
|
|
Debt discounts (4) |
|
|
(90,821 |
) |
|
|
13,548 |
|
|
|
— |
|
|
|
— |
|
|
|
(77,273 |
) |
|
|
|
Total mortgage and other indebtedness, net |
|
$ |
2,016,704 |
|
|
$ |
(32,454 |
) |
|
$ |
61,647 |
|
|
$ |
695,732 |
|
|
$ |
2,741,629 |
|
|
|
|
41
December 31, 2021: |
|
Consolidated |
|
|
Noncontrolling |
|
|
Other Debt (1) |
|
|
Unconsolidated |
|
|
Total |
|
|
Weighted- |
|||||
Fixed-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Non-recourse loans on operating properties (3) |
|
$ |
916,927 |
|
|
$ |
(29,381 |
) |
|
$ |
92,072 |
|
|
$ |
600,598 |
|
|
$ |
1,580,216 |
|
|
4.37% |
Senior secured notes - at carrying value (fair value of $395,395 as of December 31, 2021) |
|
|
395,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
395,000 |
|
|
10.00% |
Exchangeable senior secured notes |
|
|
150,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
150,000 |
|
|
7.00% |
Recourse loans on operating properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,724 |
|
|
|
11,724 |
|
|
3.61% |
Total fixed-rate debt |
|
|
1,461,927 |
|
|
|
(29,381 |
) |
|
|
92,072 |
|
|
|
612,322 |
|
|
|
2,136,940 |
|
|
5.84% |
Variable-rate debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Recourse loans on operating properties |
|
|
66,911 |
|
|
|
— |
|
|
|
— |
|
|
|
90,691 |
|
|
|
157,602 |
|
|
2.97% |
Secured term loan |
|
|
880,091 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
880,091 |
|
|
3.75% |
Total variable-rate debt |
|
|
947,002 |
|
|
|
— |
|
|
|
— |
|
|
|
90,691 |
|
|
|
1,037,693 |
|
|
3.63% |
Total fixed-rate and variable-rate debt |
|
|
2,408,929 |
|
|
|
(29,381 |
) |
|
|
92,072 |
|
|
|
703,013 |
|
|
|
3,174,633 |
|
|
5.12% |
Unamortized deferred financing costs |
|
|
(1,567 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,971 |
) |
|
|
(3,538 |
) |
|
|
Debt discounts (4) |
|
|
(199,153 |
) |
|
|
13,519 |
|
|
|
— |
|
|
|
— |
|
|
|
(185,634 |
) |
|
|
Total mortgage and other indebtedness, net |
|
$ |
2,208,209 |
|
|
$ |
(15,862 |
) |
|
$ |
92,072 |
|
|
$ |
701,042 |
|
|
$ |
2,985,461 |
|
|
|
The weighted-average remaining term of our total share of consolidated, unconsolidated and other debt, excluding debt discounts and deferred financing costs, was 2.4 years and 3.3 years at September 30, 2022 and December 31, 2021, respectively. The weighted-average remaining term of our pro rata share of consolidated, unconsolidated and other fixed-rate debt, excluding debt discounts and deferred financing costs, was 2.2 years and 3.2 years at September 30, 2022 and December 31, 2021, respectively.
As of September 30, 2022 and December 31, 2021, our total share of consolidated and unconsolidated variable-rate debt, excluding debt discounts and deferred financing costs, represented 40.0% and 32.8%, respectively, of our total pro rata share of debt, excluding debt discounts and deferred financing costs.
See Note 8 to the condensed consolidated financial statements for information concerning activity related to unconsolidated affiliates.
Equity
In February 2022, we issued 10,982,795 shares of common stock to holders of the exchangeable notes in satisfaction of principal, accrued interest and the make-whole payment, and all the exchangeable notes were cancelled in accordance with the terms of the indenture.
In June 2022, our board of directors established a regular quarterly dividend. We paid common stock dividends of $0.25 per share in each of the second and third quarters of 2022.
The decision to declare and pay dividends on any outstanding shares of our common stock, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our board of directors and will depend on our earnings, taxable income, cash flows, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our then-current indebtedness, the annual distribution requirements under the REIT provisions of the Internal Revenue Code, Delaware law and such other factors as our board of directors deems relevant. Any dividends payable will be determined by our board of directors based upon the circumstances at the time of declaration. Our actual results of operations will be affected by a number of factors, including the revenues received from our properties, our operating expenses, interest expense, unanticipated capital expenditures and the ability of our anchors and tenants at our properties to meet their obligations for payment of rents and tenant reimbursements.
42
As a publicly traded company, we previously accessed capital through both the public equity and debt markets. We had a shelf registration statement on Form S-3 on file with the Securities and Exchange Commission (“SEC”) that expired in July 2021. Until we regain Form S-3 eligibility, we will be required to use a registration statement on Form S-11 to register securities with the SEC. On May 6, 2022, we filed a resale registration statement on Form S-11 covering the offer and sale, from time to time, of up to 12,380,260 shares of common stock by the selling shareholders named therein, pursuant to the requirements of the registration rights agreement. We will not receive any proceeds from resales of share of common stock by the selling shareholders pursuant to this registration statement.
Capital Expenditures
The following tables, which exclude expenditures for developments, redevelopments and expansions, summarize our capital expenditures, including our share of unconsolidated affiliates' capital expenditures, for the three- and nine-month Successor periods ended September 30, 2022 and for the three- and nine-month Predecessor periods ended September 30, 2021 (in thousands):
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Three Months Ended September 30, |
|
|
|
Three Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Tenant allowances (1) |
|
$ |
5,639 |
|
|
|
$ |
4,990 |
|
|
|
|
|
|
|
|
|
||
Deferred maintenance: |
|
|
|
|
|
|
|
||
Parking area and parking area lighting |
|
|
1,702 |
|
|
|
|
802 |
|
Roof replacements |
|
|
149 |
|
|
|
|
220 |
|
Other capital expenditures |
|
|
2,761 |
|
|
|
|
1,873 |
|
Total deferred maintenance |
|
|
4,612 |
|
|
|
|
2,895 |
|
|
|
|
|
|
|
|
|
||
Capitalized overhead |
|
|
377 |
|
|
|
|
198 |
|
|
|
|
|
|
|
|
|
||
Capitalized interest |
|
|
156 |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
||
Total capital expenditures |
|
$ |
10,784 |
|
|
|
$ |
8,083 |
|
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Tenant allowances (1) |
|
$ |
12,679 |
|
|
|
$ |
9,242 |
|
|
|
|
|
|
|
|
|
||
Deferred maintenance: |
|
|
|
|
|
|
|
||
Parking area and parking area lighting |
|
|
3,215 |
|
|
|
|
859 |
|
Roof replacements |
|
|
275 |
|
|
|
|
538 |
|
Other capital expenditures |
|
|
6,858 |
|
|
|
|
4,126 |
|
Total deferred maintenance |
|
|
10,348 |
|
|
|
|
5,523 |
|
|
|
|
|
|
|
|
|
||
Capitalized overhead |
|
|
1,200 |
|
|
|
|
665 |
|
|
|
|
|
|
|
|
|
||
Capitalized interest |
|
|
531 |
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
||
Total capital expenditures |
|
$ |
24,758 |
|
|
|
$ |
15,462 |
|
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.
43
Developments
Properties Opened During the Nine Months Ended September 30, 2022
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
CBL's Share of |
|
|
|
|
|
||||||||||
Property |
|
Location |
|
CBL |
|
Total |
|
|
Total |
|
|
Cost to |
|
|
2022 |
|
|
Opening |
|
Initial |
||||
Outparcel Developments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Kirkwood Mall - Five Guys, Blaze Pizza, Thrifty White, Pancheros, Chick-fil-A |
|
Bismarck, ND |
|
100% |
|
|
15,275 |
|
|
$ |
7,976 |
|
|
$ |
6,738 |
|
|
$ |
2,380 |
|
|
Q2 '22 |
|
8.9% |
Properties Under Redevelopment at September 30, 2022
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
CBL's Share of |
|
|
|
|
|
||||||||||
Property |
|
Location |
|
CBL |
|
Total |
|
|
Total |
|
|
Cost to |
|
|
2022 |
|
|
Expected Opening |
|
Initial |
||||
Outparcel Development: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mayfaire Town Center - hotel development |
|
Wilmington, NC |
|
49% |
|
|
83,021 |
|
|
$ |
15,435 |
|
|
$ |
- |
|
|
$ |
- |
|
|
Spring '24 |
|
11.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Redevelopments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Dakota Square Herberger's - Five Below |
|
Minot, ND |
|
100% |
|
|
9,502 |
|
|
|
1,834 |
|
|
|
1,891 |
|
|
|
1,891 |
|
|
Fall '22 |
|
8.7% |
The Terrace - Nordstrom Rack (former Staples) |
|
Chattanooga, TN |
|
92% |
|
|
24,155 |
|
|
|
2,527 |
|
|
|
416 |
|
|
|
416 |
|
|
Spring '23 |
|
13.0% |
York Town Center - Burlington (former Bed Bath & Beyond) |
|
York, PA |
|
50% |
|
|
28,000 |
|
|
|
1,247 |
|
|
|
972 |
|
|
|
972 |
|
|
Spring '23 |
|
18.5% |
|
|
|
|
|
|
|
61,657 |
|
|
$ |
5,608 |
|
|
$ |
3,279 |
|
|
$ |
3,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Properties Under Development |
|
|
|
|
|
|
144,678 |
|
|
$ |
21,043 |
|
|
$ |
3,279 |
|
|
$ |
3,279 |
|
|
|
|
|
Off-Balance Sheet Arrangements
Unconsolidated Affiliates
We have ownership interests in 25 unconsolidated affiliates as of September 30, 2022 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:
44
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 September 30, 2022 and December 31, 2021.
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 ended December 31, 2021 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 nine months ended September 30, 2022. Our significant accounting policies are disclosed in Note 4 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021.
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. 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.
45
We present both FFO allocable to Operating Partnership common unitholders and FFO allocable to common shareholders, as we believe that both are useful performance measures. We believe FFO allocable to Operating Partnership common unitholders is a useful performance measure since we conduct substantially all our business through our Operating 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 our Operating 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 loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders that is presented below, we make an adjustment to add back noncontrolling interest in loss of our Operating Partnership in order to arrive at FFO of the Operating Partnership common unitholders. We then apply a percentage to FFO of the Operating 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 of Operating 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.
We believe that it is important to identify the impact of certain significant items on our FFO measures for a reader to have a complete understanding of our results of operations. Therefore, we have also presented adjusted FFO measures excluding these significant items from the applicable periods. Please refer to the reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders below for a description of these adjustments.
FFO of the Operating Partnership for the three month Successor period ended September 30, 2022 was $49.5 million. FFO of the Operating Partnership for the three month Predecessor period ended September 30, 2021 was $74.5 million. Excluding the adjustments noted below, FFO of the Operating Partnership, as adjusted, for the three month Successor period ended September 30, 2022 was $59.0 million. Excluding the adjustments noted below, FFO of the Operating Partnership, as adjusted, for the three month Predecessor period ended September 30, 2021 was $95.3 million. For the three month Successor period ended September 30, 2022, FFO of the Operating Partnership and FFO of the Operating Partnership, as adjusted, include the recognition of interest expense of $17.8 million by the Successor on the secured term loan and the new loans entered into this year that are secured by certain of our open-air centers and outparcels, as well as lower rental revenues due to lower collections of receivables for which we had previously reserved. FFO of the Operating Partnership and FFO of the Operating Partnership, as adjusted, of the Predecessor does not reflect interest expense on the senior unsecured notes and the secured credit facility as interest expense was not recognized on this debt due to the bankruptcy filing.
46
The reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders for the three month Successor period ended September 30, 2022 and for the three month Predecessor period ended September 30, 2021 is as follows (in thousands):
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Three Months Ended September 30, |
|
|
|
Three Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Net loss attributable to common shareholders |
|
$ |
(14,510 |
) |
|
|
$ |
(41,720 |
) |
Noncontrolling interest in income (loss) of Operating Partnership |
|
|
25 |
|
|
|
|
(1,085 |
) |
Depreciation and amortization expense of: |
|
|
|
|
|
|
|
||
Consolidated properties |
|
|
61,050 |
|
|
|
|
46,479 |
|
Unconsolidated affiliates |
|
|
3,665 |
|
|
|
|
13,480 |
|
Non-real estate assets |
|
|
(123 |
) |
|
|
|
(416 |
) |
Dividends allocable to unvested restricted stock |
|
|
216 |
|
|
|
|
— |
|
Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries |
|
|
(829 |
) |
|
|
|
(571 |
) |
Loss on impairment |
|
|
— |
|
|
|
|
63,160 |
|
Gain on depreciable property |
|
|
— |
|
|
|
|
(4,836 |
) |
FFO allocable to Operating Partnership common unitholders |
|
|
49,494 |
|
|
|
|
74,491 |
|
Debt discount accretion, net of noncontrolling interests' share (1) |
|
|
25,425 |
|
|
|
|
— |
|
Adjustment for unconsolidated affiliates with negative investment (2) |
|
|
(13,116 |
) |
|
|
|
— |
|
Litigation settlement (3) |
|
|
(36 |
) |
|
|
|
(89 |
) |
Non-cash default interest expense (4) |
|
|
(1,585 |
) |
|
|
|
8,919 |
|
Loss on available-for-sale securities |
|
|
39 |
|
|
|
|
— |
|
Reorganization items, net (5) |
|
|
(1,220 |
) |
|
|
|
12,008 |
|
FFO allocable to Operating Partnership common unitholders, as adjusted |
|
$ |
59,001 |
|
|
|
$ |
95,329 |
|
47
FFO of the Operating Partnership for the nine month Successor period ended September 30, 2022 was $115.4 million. FFO of the Operating Partnership for the nine month Predecessor period ended September 30, 2021 was $215.5 million. Excluding the adjustments noted below, FFO of the Operating Partnership, as adjusted, for the nine month Successor period ended September 30, 2022 was $176.3 million. Excluding the adjustments noted below, FFO of the Operating Partnership, as adjusted, for the nine month Predecessor period ended September 30, 2021 was $243.5 million. For the nine months ended September 30, 2022, FFO of the Operating Partnership and FFO of the Operating Partnership, as adjusted, include the recognition of interest expense of $53.7 million on the secured term loan, the exchangeable notes, the secured notes and the new loans entered into this year that are secured by certain of our open-air centers and outparcels. The Predecessor did not recognize interest expense on the senior unsecured notes and the secured credit facility due to the bankruptcy filing.
The reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders for the nine month Successor period ended September 30, 2022 and for the nine month Predecessor period ended September 30, 2021 is as follows (in thousands):
|
|
Successor |
|
|
|
Predecessor |
|
||
|
|
Nine Months Ended September 30, |
|
|
|
Nine Months Ended September 30, |
|
||
|
|
2022 |
|
|
|
2021 |
|
||
Net loss attributable to common shareholders |
|
$ |
(96,830 |
) |
|
|
$ |
(77,365 |
) |
Noncontrolling interest in loss of Operating Partnership |
|
|
(34 |
) |
|
|
|
(2,013 |
) |
Depreciation and amortization expense of: |
|
|
|
|
|
|
|
||
Consolidated properties |
|
|
194,469 |
|
|
|
|
142,090 |
|
Unconsolidated affiliates |
|
|
21,004 |
|
|
|
|
40,466 |
|
Non-real estate assets |
|
|
(524 |
) |
|
|
|
(1,448 |
) |
Dividends allocable to unvested restricted stock |
|
|
426 |
|
|
|
|
— |
|
Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries |
|
|
(2,666 |
) |
|
|
|
(1,710 |
) |
Loss on impairment, net of taxes |
|
|
186 |
|
|
|
|
120,342 |
|
Gain on depreciable property |
|
|
(629 |
) |
|
|
|
(4,836 |
) |
FFO allocable to Operating Partnership common unitholders |
|
|
115,402 |
|
|
|
|
215,526 |
|
Debt discount accretion, net of noncontrolling interests' share (1) |
|
|
153,924 |
|
|
|
|
— |
|
Adjustment for unconsolidated affiliates with negative investment (2) |
|
|
(36,123 |
) |
|
|
|
— |
|
Senior secured notes fair value adjustment (3) |
|
|
(395 |
) |
|
|
|
— |
|
Litigation settlement (4) |
|
|
(182 |
) |
|
|
|
(890 |
) |
Non-cash default interest expense (5) |
|
|
(19,805 |
) |
|
|
|
31,965 |
|
Gain on deconsolidation (6) |
|
|
(36,250 |
) |
|
|
|
(55,131 |
) |
Loss on available-for-sale securities |
|
|
39 |
|
|
|
|
— |
|
Reorganization items, net (7) |
|
|
(262 |
) |
|
|
|
52,014 |
|
FFO allocable to Operating Partnership common unitholders, as adjusted |
|
$ |
176,348 |
|
|
|
$ |
243,484 |
|
ITEM 3: Quantitative and Qualitative Disclosures About Market Risk
We are exposed to various market risk exposures, including interest rate risk. The following discussion regarding our risk management activities includes forward-looking statements that involve risk and uncertainties. Estimates of future performance and economic conditions are reflected assuming certain changes in interest rates. Caution should be used in evaluating our overall market risk from the information presented below, as actual results may differ.
48
Interest Rate Risk
Based on our proportionate share of consolidated and unconsolidated variable-rate debt at September 30, 2022, a 0.5% increase or decrease in interest rates on variable-rate debt would increase or decrease annual cash flows by approximately $5.7 million.
Based on our proportionate share of total consolidated and unconsolidated debt at September 30, 2022, a 0.5% increase in interest rates would decrease the fair value of debt by approximately $14.0 million, while a 0.5% decrease in interest rates would increase the fair value of debt by approximately $14.6 million.
ITEM 4: Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this quarterly report, an evaluation was performed under the supervision of our Chief Executive Officer and Chief Financial Officer and with the participation of our management, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. The Company's disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and to ensure that information we are required to disclose is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
49
PART II - OTHER INFORMATION
ITEM 1: Legal Proceedings
The information in this Item 1 is incorporated by reference herein from Note 12.
ITEM 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risks that could materially affect our business, financial condition or results of operations that are discussed under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021. The risk factor set forth below updates, and should be read together with, such risk factors.
The shareholders’ rights plan adopted by our board of directors may discourage a third party from acquiring us in a manner that might result in a premium price to our shareholders.
On September 8, 2022, our board of directors adopted a short-term rights plan (the “Rights Plan”) that will expire on September 8, 2023, or sooner under certain circumstances. Pursuant to the Rights Plan, the board of directors authorized a dividend of one share purchase right (a “Right”) for each outstanding share of our common stock. If a person or group of affiliated or associated persons acquires beneficial ownership of 10.0% or more of our outstanding common shares, subject to certain exceptions (including exceptions for existing holders who do not increase their holdings as provided in the Rights Plan), each Right would effectively entitle its holder (other than the acquiring person or group of affiliated or associated persons) to purchase additional common shares at a substantial discount to the public market price. In addition, under certain circumstances, we may exchange the Rights (other than Rights beneficially owned by the acquiring person or group of affiliated or associated persons), in whole or in part, for common shares on a one-for-one basis, or we may redeem the Rights for cash at a price of $0.001 per Right. The Rights Plan could make it more difficult for a third party to acquire us or a large block of our common shares without the approval of our board of directors, which may discourage a third party from acquiring us in a manner that might result in a premium price to our shareholders.
ITEM 2: Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable.
ITEM 3: Defaults Upon Senior Securities
Not applicable.
ITEM 4: Mine Safety Disclosures
Not applicable.
ITEM 5: Other Information
None.
50
ITEM 6: Exhibits
INDEX TO EXHIBITS
Exhibit Number |
|
Description |
4.1 |
|
|
10.1 |
|
|
10.2 |
|
|
31.1 |
|
|
31.2 |
|
|
32.1 |
|
|
32.2 |
|
|
101.INS |
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. (Filed herewith.) |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. (Filed herewith.) |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.) |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.) |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.) |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.) |
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*). (Filed herewith.) |
51
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
CBL & ASSOCIATES PROPERTIES, INC. |
|
|
Date: November 14, 2022 |
/s/ Farzana Khaleel |
|
Farzana Khaleel |
|
Executive Vice President - |
|
Chief Financial Officer and Treasurer |
|
(Authorized Officer and Principal Financial Officer) |
52