CBL Properties (NYSE: CBL) announced results for the second quarter ended June 30, 2022. Financial results for the periods from January 1, 2021, through June 30, 2021, are referred to as those of the “Predecessor” period. Financial results for the period from January 1, 2022, through June 30, 2022, are referred to as those of the “Successor” period. Results of operations as reported in the consolidated financial statements for these periods are prepared in accordance with GAAP. A description of each supplemental non-GAAP financial measure and the related reconciliation to the comparable GAAP financial measure is located at the end of this news release.

Percentage change in same-center Net Operating Income (“NOI”) ⁽¹⁾:

KEY TAKEAWAYS:

• Increases in occupancy across the portfolio contributed to an increase in total portfolio same-center NOI of 1.6% and 6.7% for the three and six months ended June 30, 2022, respectively, compared with the prior-year periods.
• In-line year-to-date same-center NOI of $217.4 million and FFO, as adjusted, of $3.92 per share, contributes to maintained full-year 2022 same-center NOI guidance in the range of $416.0 - $430.0 million, and FFO, as adjusted, per share guidance in the range of $7.18 - $7.67 per diluted share.
• Portfolio occupancy as of June 30, 2022, was 89.5%, representing 120-basis point sequential improvement from March 31, 2022, and a 250-basis point improvement compared with 87.0% as of June 30, 2021. Same-center occupancy for malls, lifestyle centers and outlet centers was 88.0% as of June 30, 2022, representing a 250-basis point improvement compared with 85.5% as of June 30, 2021.
• Same-center sales per square foot for the trailing 12-months ended June 30, 2022, increased 6.2% to $443 as compared with $417 for the trailing 12-months (excluding 2020) ended June 30, 2021. Same-center sales per square foot for the second quarter 2022 declined 3.9% as compared with the second quarter 2021.
• FFO, as adjusted, allocable to Operating Partnership common unitholders, for the three months ended June 30, 2022, was $59.9 million, compared with $79.5 million in the prior year period. The variance in FFO, as adjusted, as compared with the prior year period reflects an increase in NOI driven by occupancy improvements and a positive variance in uncollectible revenues, offset by an increase in interest expense attributable to the senior unsecured notes and secured credit facility. Interest payments on the notes and credit facility were not required to be made during the second quarter 2021 as a result of the Company’s bankruptcy filing on November 1, 2020.
• As of June 30, 2022, the Company had $327.1 million of unrestricted cash and marketable securities.
• CBL’s Board of Directors declared a $0.25 per share cash dividend for the second and third quarters of 2022, providing cash returns to shareholders.

“CBL delivered another set of impressive operating results in the second quarter,” said Stephen D. Lebovitz, CBL's chief executive officer. “Our resilient portfolio generated improved lease spreads and significant sequential and year-over-year occupancy growth, contributing to the stability of our NOI. We are enhancing our strong free cash flow through the recent completion of redevelopment projects at Kirkwood Mall in Bismarck, North Dakota, Sunrise Mall in Brownsville, Texas, and Cross Creek Mall in Fayetteville, North Carolina, with more planned completions and new project starts anticipated in the coming months. We are seeing ongoing interest across our portfolio from hotels, multi-family, medical, entertainment, restaurants, and other new uses, which will further enhance our properties and diversify our revenue stream.

“A major highlight of the quarter was our financing accomplishments. Despite increased volatility in interest rates and other macroeconomic factors, we successfully closed more than $663.0 million in financings during the quarter, including two new multi-property loans that funded the full redemption of all $395.0 million outstanding 10% Senior Secured Notes. The two new non-recourse financings provided third-party validation of the tremendous value in CBL’s open-air and outparcel portfolios. These financings also resulted in improved cash flow through lower interest expense and enhanced our future financial flexibility by creating an unencumbered NOI pool of approximately $75.0 million.

“We were thrilled to share these financial and operational successes with shareholders through the re-start of our regular quarterly cash dividend program. We are focused on executing at a high level to further financial and operational improvements, create value across our portfolio and generate ongoing returns for our shareholders.”

NON-GAAP FINANCIAL RESULTS

Net loss attributable to common shareholders for the three months ended June 30, 2022, was $41.6 million, compared with a net loss of $8.9 million, for the three months ended June 30, 2021.

FFO, as adjusted, allocable to Operating Partnership common unitholders, for the three months ended June 30, 2022, was $59.9 million, compared with $79.5 million, for the three months ended June 30, 2021.

Same-center NOI for the three months ended June 30, 2022, increased 1.6%, or $1.7 million, to $107.4 million as compared with $105.7 million in the prior-year period. The variance was due to a $5.2 million increase in total revenues partially offset by a $3.5 million increase in operating expenses.

Other major variances in same-center NOI for the quarter ended June 30, 2022, include:

• Minimum rents and other rents increased $6.6 million. Percentage rents increased $0.7 million and tenant reimbursements and other revenues declined $2.0 million. The total estimate for uncollectible revenues and abatements for the second quarter 2022 was $0.4 million, due to collections of amounts that were previously reserved compared with an estimate for uncollectible revenues and abatement of $2.5 million for the prior year period.

• Property operating expenses increased $1.8 million compared with the prior year. Maintenance and repair and other expenses increased $2.1 million. Real estate tax expenses declined by $0.4 million, partially offsetting the above increases.

PORTFOLIO OPERATIONAL RESULTS

Occupancy⁽¹⁾:

New and Renewal Leasing Activity of Same Small Shop Space Less Than 10,000 Square Feet:

Same-Center Sales Per Square Foot for In-line Tenants 10,000 Square Feet or Less⁽¹⁾:

Same-center sales per square foot for the trailing twelve months ended June 30, 2022, increased 6.2% as compared with the trailing twelve months ended June 30, 2021 (excludes 2020). Same-center sales per square foot for the second quarter 2022 declined 3.9% as compared with the second quarter 2021.

DIVIDEND

On August 10, 2022, CBL’s Board of Directors declared a regular quarterly cash dividend for the three months ended September 30, 2022, of $0.25 per share. The dividend, which equates to an annual dividend payment of $1.00 per share, is payable on September 30, 2022, to shareholders of record as of September 15, 2022.

FINANCING ACTIVITY

During the quarter, CBL completed more than $663.0 million in financing activity, including funding the full redemption of all outstanding 10% Senior Secured Notes due 2029 (the “10% Notes”) utilizing net proceeds from two new non-recourse loans totaling $425.0 million, generating favorable interest expense savings. More details are outlined below.

On April 28, 2022, CBL and its 50% joint venture partner, closed on a $40.0 million non-recourse loan ($20.0 million at CBL’s share) secured by The Shoppes at Eagle Pointe, an open-air center in Cookeville, TN. The new ten-year CMBS loan bears a fixed interest rate of 5.4%. The loan replaces the maturing $33.6 million existing partially guaranteed term loan. Net proceeds to CBL after repayment of the existing loan were $6.7 million.

In May 2022, CBL completed the extension and modification of the non-recourse loan secured by Arbor Place Mall in Douglasville, GA ($100.4 million). The loan’s maturity was extended to May 2026 and maintained the existing fixed interest rate of 5.1%. CBL also completed the extension and modification of the non-recourse loan secured by Northwoods Mall in Charleston, SC ($59.9 million). The loan maturity was extended to April 2026 at the existing interest rate of 5.08%.

CBL also announced in May that it had closed on a new $65.0 million non-recourse loan secured by a pool of four open-air centers owned in a joint venture, located in Chattanooga, TN. The open-air centers include Hamilton Crossing, Hamilton Corner, The Terrace and The Shoppes at Hamilton Place/ Hamilton Place - Regal. The loan has a ten-year term with a fixed interest rate of 5.85%, interest only for three years and principal amortization based on a 30-year schedule thereafter. Net proceeds from the new loan were used to complete a partial redemption of CBL’s outstanding 10% Senior Secured Notes.

In June, CBL completed the redemption of all outstanding 10% Notes. The redemption was funded utilizing proceeds from a new $360.0 million non-recourse loan secured by a pool of high-quality outparcels and open-air centers. The new loan has an initial five-year term with one two-year extension option available to the Company, subject to certain conditions. The loan bears a floating interest rate based on 30-day SOFR plus 4.10%. $180 million principal amount of the $360 million loan has been fixed at a rate of 6.95% for a term of three years. The balance remains at a floating rate, which will allow for selective hedging at CBL’s option.

Additionally in June, CBL and its 65% joint venture partner closed on a new $42.5 million loan ($27.6 million at CBL’s share) secured by Ambassador Town Center. The new loan has a term of 7-years and a fixed interest rate of 4.35%. Proceeds were used to retire the existing $40.9 million loan, which was scheduled to mature in June 2023.

In June, CBL also repaid a $14.9 million loan (CBL’s share $13.9 million) secured by CBL Center, that was scheduled to mature.

Subsequent to second quarter end, CBL completed the modification and extensions of the loan secured by Parkdale Mall in Beaumont, TX ($68.1 million). The loan was extended to March 2026, at the existing interest rate of 5.85%.

CBL is also in the process of finalizing a modification of the loan secured by Southpark Mall in Richmond, VA ($54.8 million). The loan is expected to be extended through June 2026 at the existing interest rate of 4.85%.

As previously announced, the modification of the $35.5 million recourse loan secured by The Outlet Shoppes at Gettysburg in Gettysburg, PA is in process and is expected to be completed within the next 30 to 45 days.

In July, CBL conveyed Asheville Mall in Asheville, NC, to the lender in exchange for forgiveness of the $62.1 million loan secured by the property. The loans secured by EastGate Mall in Cincinnati, OH ($30.0 million) and Greenbrier Mall Chesapeake, VA ($61.6 million), remain in receivership and were deconsolidated based on each respective transfer date. CBL recently advised the servicer for the loan secured by Westgate Mall in Spartanburg, SC ($29.7 million) that it would cooperate with a foreclosure or conveyance of the property. CBL is in discussions with the servicer for the loan secured by Alamance Crossing East in Burlington, NC, ($42.0 million) to modify and/or extend the existing loan. If it is unable to reach a favorable agreement, CBL plans to cooperate with a foreclosure or conveyance of the property. Assuming the foreclosures or conveyances are completed for each of the four properties listed above and including the foreclosure of the $62.1 loan secured by Asheville Mall, a total of $225.4 million of debt will be removed from CBL’s pro rata share of total debt with an estimated debt yield of approximately 8.1%. CBL does not recognize earnings or receive cash flow from the properties in receivership.

CBL is in discussions with the lender to extend and/or modify the loan secured by Cross Creek Mall in Fayetteville, NC ($99.9 million) as well as West County Center located in St. Louis, MO ($82.1 million at CBL’s share). Both loans are currently scheduled to mature in 2022.

DISPOSITIONS

CBL did not complete any significant dispositions in the second quarter 2022.

REDEVELOPMENT ACTIVITY

Detailed project information is available in CBL’s Financial Supplement for Q2 2022, which can be found in the Invest – Financial Reports section of CBL’s website at cblproperties.com.

OUTLOOK AND GUIDANCE

After incorporating results for the second quarter 2022, CBL is maintaining guidance for 2022 FFO, as adjusted, in the range of $222.0 million - $237.0 million or $7.18 - $7.67 per diluted share. Same-center NOI guidance for the year was adjusted to exclude approximately $4.0 million of NOI related to Alamance Crossing East. This adjustment was fully offset by improved portfolio leasing expectations, resulting in same-center NOI guidance remaining in the range of $416.0 million to $430.0 million.

Key Guidance Assumptions:

Reconciliation of GAAP Earnings Per Share to 2022 FFO, as Adjusted, Per Share:

2022 Estimate of Capital Items:

ABOUT CBL PROPERTIES

Headquartered in Chattanooga, TN, CBL Properties owns and manages a national portfolio of market-dominant properties located in dynamic and growing communities. CBL’s owned and managed portfolio is comprised of 95 properties totaling 59.6 million square feet across 24 states, including 57 high-quality enclosed malls, outlet centers and lifestyle retail centers as well as more than 30 open-air centers and other assets. CBL seeks to continuously strengthen its company and portfolio through active management, aggressive leasing and profitable reinvestment in its properties. For more information visit cblproperties.com.

NON-GAAP FINANCIAL MEASURES

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. The National Association of Real Estate Investment Trusts ("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 and joint ventures and noncontrolling interests are calculated on the same basis. We define FFO as defined above by NAREIT less dividends on preferred stock of the Company or distributions on preferred units of the Operating Partnership, as applicable. The Company’s method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

The Company believes that FFO provides an additional indicator of the operating performance of its 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 well-maintained real estate assets have historically risen with market conditions, the Company believes that FFO enhances investors’ understanding of its operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of the Company’s properties and interest rates, but also by its capital structure.

The Company presents both FFO allocable to Operating Partnership common unitholders and FFO allocable to common shareholders, as it believes that both are useful performance measures. The Company believes FFO allocable to Operating Partnership common unitholders is a useful performance measure since it conducts substantially all of its business through its Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of the Company’s common shareholders and the noncontrolling interest in the Operating Partnership. The Company believes FFO allocable to its common shareholders is a useful performance measure because it is the performance measure that is most directly comparable to net income (loss) attributable to its common shareholders.

In the reconciliation of net income (loss) attributable to the Company’s common shareholders to FFO allocable to Operating Partnership common unitholders, located in this earnings release, the Company makes an adjustment to add back noncontrolling interest in income (loss) of its Operating Partnership in order to arrive at FFO of the Operating Partnership common unitholders. The Company then applies a percentage to FFO of the Operating Partnership common unitholders to arrive at FFO allocable to its 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 the Company’s operating performance or to cash flow as a measure of liquidity.

The Company believes that it is important to identify the impact of certain significant items on its FFO measures for a reader to have a complete understanding of the Company’s results of operations. Therefore, the Company has also presented adjusted FFO measures excluding these 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 on page 10 of this news release for a description of these adjustments.

Same-center Net Operating Income

NOI is a supplemental non-GAAP measure of the operating performance of the Company’s shopping centers and other properties. The Company defines NOI as property operating revenues (rental revenues, tenant reimbursements and other income) less property operating expenses (property operating, real estate taxes and maintenance and repairs).

The Company computes NOI based on the Operating Partnership’s pro rata share of both consolidated and unconsolidated properties. The Company believes that presenting NOI and same-center NOI (described below) based on its Operating Partnership’s pro rata share of both consolidated and unconsolidated properties is useful since the Company conducts substantially all of its business through its Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of the Company’s common shareholders and the noncontrolling interest in the Operating Partnership. The Company's definition of NOI may be different than that used by other companies and, accordingly, the Company's 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 the Company’s shopping center properties, the Company believes that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates, sales at the malls and operating costs and the impact of those trends on the Company’s results of operations. The Company’s calculation of same-center NOI excludes lease termination income, straight-line rent adjustments, amortization of above and below market lease intangibles and write-off of landlord inducement assets in order to enhance the comparability of results from one period to another. A reconciliation of same-center NOI to net income is located at the end of this earnings release.

Pro Rata Share of Debt

The Company presents debt based on the carrying value of its pro rata ownership share (including the carrying value of the Company’s pro rata share of unconsolidated affiliates and excluding noncontrolling interests’ share of consolidated properties) because it believes this provides investors a clearer understanding of the Company’s total debt obligations which affect the Company’s liquidity. A reconciliation of the Company’s pro rata share of debt to the amount of debt on the Company’s condensed consolidated balance sheet is located at the end of this earnings release.

Information included herein contains “forward-looking statements” within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual events, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements. The reader is directed to the Company’s various filings with the Securities and Exchange Commission, including without limitation the Company’s Annual Report on Form 10-K, and the “Management's Discussion and Analysis of Financial Condition and Results of Operations” included therein, for a discussion of such risks and uncertainties.

Consolidated Statements of Operations

(Unaudited; in thousands, except per share amounts)

Consolidated Statements of Operations

(Unaudited; in thousands, except per share amounts)

The Company's reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders is as follows:

(in thousands, except per share data)

The Company's reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders is as follows:

(in thousands, except per share data)

The reconciliation of diluted EPS to FFO per diluted share for the three and six months ended June 30, 2022 and 2021 is as follows:

Same-center Net Operating Income

(Dollars in thousands)

Same-center Net Operating Income

(Dollars in thousands)

Same-center Net Operating Income

(Continued)