Same-center NOI for the nine months ended September 30, 2024, increased 1% over the prior-year period

CBL Properties (NYSE: CBL) announced results for the third quarter ended September 30, 2024. 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.

KEY TAKEAWAYS:

• Same center NOI for the nine months ended September 30, 2024 increased 1% compared with the prior-year period, and FFO, as adjusted, per share increased to $4.77, compared with $4.72 for the prior-year period. CBL reported a decline in same-center NOI of 2.0% for third quarter 2024 compared with the prior-year period, and FFO, as adjusted, per share of $1.54, compared with $1.60 for third quarter 2023. Results were in-line with the previously issued guidance range for 2024 same-center NOI and FFO, as adjusted.
• Over 880,000 square feet of leases were executed in third quarter 2024. Third quarter 2024 leasing results included comparable leases of approximately 362,000 square feet signed at a 9.5% increase in average rents versus the prior leases including a 3.3% increase in renewal leases signed for malls, lifestyle centers and outlet centers.
• Portfolio occupancy was 89.3% as of September 30, 2024, a 60 basis-point-increase sequentially from June 30, 2024, and a 150 bps decline compared with portfolio occupancy of 90.8% as of September 30, 2023. Same-center occupancy for malls, lifestyle centers and outlet centers was 87.4% as of September 30, 2024, a 230-basis-point decline from 89.7% as of September 30, 2023. Anticipated bankruptcy related store closures representing nearly 300,000-square-feet comprised 163 basis points of the decline in mall occupancy compared with the prior-year quarter including approximately 234,000 square feet of closures in the second quarter 2024 related to rue21 and Express. CBL has executed agreements to reopen 14 stores representing approximately 94,400 square feet of rue21 stores under its new ownership by first quarter 2025, with the majority opening in 2024.
• Same-center tenant sales per square foot for the third quarter 2024 increased 1.5% as compared with the prior-year period. Same-center tenant sales per square foot for the 12-months ended September 30, 2024, declined 0.7% to $418, compared with $421 for the prior period.
• As of September 30, 2024, the Company had $307.0 million of unrestricted cash and marketable securities.
• In October, CBL announced that it completed the repurchase of 500,000 shares of CBL stock for $12.525 million, in a privately negotiated block trade from a single shareholder. In addition, CBL completed the previously announced $25 million share repurchase program in September 2024. Through the program, 1,074,826 shares were repurchased in total at a weighted average share price of $23.539 per share.
• CBL's Board of Directors declared a cash dividend of $0.40 per common share for the quarter ending December 31, 2024. The dividend equates to an annual dividend payment of $1.60 per common share.

"The overall environment for the shopping center industry remains positive," said CBL's chief executive officer, Stephen D. Lebovitz. "While same-center NOI declined 2% for the third quarter, we have achieved a 1% year-to-date increase, tracking near the high-end of our full-year guidance. Revenue on a same-center basis was relatively flat for the quarter with new tenant openings partially offsetting the impact of recent bankruptcy-related closures as well as a $1.1 million decline in percentage rents. We also experienced increased operating expense related to the timing of maintenance and repair projects and higher net utility and insurance expense.

"Leasing results remained strong in our portfolio. We signed over 880,000 square feet of leases during the third quarter with 9.5% increases for comparable new and renewal leases. We also added two new retailers to our portfolio, signing our first lease with popular western wear retailer Cavender's during the third quarter as well as our first two leases with Rowan, a fashionable jewelry and piercing store. We added four new leases with Miniso, which will bring them into a total of 24 CBL properties. During the quarter, portfolio occupancy decreased 150 basis points primarily from the 234,000-square-feet of store closures in the previous quarter related to the bankruptcies of Express and rue21 as well as additional closures of underperforming tenants. We have a solid pipeline of new leasing that we expect to offset this decrease over time.

"Tenant sales per square foot showed positive growth of 1.5% across the portfolio in the third quarter. The back-to-school season started earlier this year with promotions and high inventory levels driving traffic and sales beginning in July. Our teams are gearing up for an active holiday sales season with forecasts calling for sales growth despite the short timeframe between Thanksgiving and Christmas.

"In October, we further demonstrated our commitment to returning significant capital to shareholders with the repurchase of 500,000 CBL shares. We also completed our previously announced $25 million repurchase program, acquiring more than one million shares through the program. This is in addition to our fourth quarter dividend of $0.40 per share which we declared on October 14th. These meaningful investments underscore our confidence in CBL's value and its future.

"We also made progress strengthening our balance sheet. Including the Layton Hills sales this quarter, we have reduced our debt by more than $188 million from the prior year period. We proactively refinanced two partial recourse loans that were secured by one of our open-air centers in Florida. The new 10-year loan is fully non-recourse and bears a fixed interest rate of 5.86%, over 200 basis points in savings compared with the prior floating rate. We also successfully refinanced the maturing loan secured by The Outlet Shoppes of the Bluegrass with a new $66.0 million loan, extending the maturity through 2034. We are actively pursuing additional opportunities to further improve and de-risk our balance sheet and strengthen our overall financial position."

Same-center Net Operating Income (“NOI”) ⁽¹⁾:

Same-center NOI for the third quarter 2024 declined $2.0 million. Third quarter 2024 results were impacted by a $1.1 million decline in percentage rents. Operating expense was $1.6 million higher, primarily driven by the timing of maintenance and repair projects and higher utility and insurance expense, partially offset by increases in tenant recoveries. The estimate for uncollectible revenues positively impacted the quarter by approximately $0.7 million.

Same-center NOI for the nine months ended September 30, 2024 increased $3.1 million. Results included real estate and other tax expense savings and improved operating expenses from lower third-party contract expense. Percentage rents for the nine months ended September 30, 2024, were $1.8 million lower. The estimate for uncollectible revenues favorably impacted the current nine-month period by $0.1 million.

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:

DIVIDEND

On November 7, 2024, CBL announced that its Board of Directors had approved an accelerated record and payment date for the cash dividend of $0.40 per common share for the quarter ending December 31, 2024, previously declared on October 14, 2024. The dividend, which equates to an annual dividend payment of $1.60 per share, is payable on December 11, 2024, to shareholders of record as of November 25, 2024.

FINANCING ACTIVITY

In November, CBL and its 50% joint venture partner took advantage of improved financing terms and closed on new non-recourse ten-year loans totaling $45.0 million, secured by Hammock Landing in West Melbourne, FL. The loans bear a fixed interest rate of 5.86% and replace two existing partially guaranteed loans totaling $44.5 million, which bore a floating interest rate (8.2% as of September 30, 2024). The loans had a maturity of February 2025, with one additional one-year extension option to February 2026.

In October, CBL and its joint venture partner closed on a new $66 million loan secured by The Outlet Shoppes of the Bluegrass. The new non-recourse loan bears a fixed interest rate of 6.84% and matures in October 2034. Proceeds were used to retire the $61.6 million existing loan that was set to mature in December 2024.

In August 2024, CBL and its 50% joint venture partner began discussion with the lender regarding a loan modification/extension of the $91.2 million in loans secured by Coastal Grand Mall and Coastal Grand Crossing in Myrtle Beach, NC.

In July 2024, CBL and its 50% joint venture partner closed on a new $14.5 million five-year loan secured by the Aloft Hotel at Hamilton Place in Chattanooga, TN. The loan bears a fixed interest rate of 7.2% and is non-recourse to CBL and replaced the existing $16.0 million loan that was set to mature in November 2024.

In May 2024, CBL transferred the title of Westgate Mall in Spartanburg, SC, to the mortgage holder in satisfaction of the $28.7 million non-recourse loan secured by the property.

In February 2024, CBL retired the $15.3 million recourse loan secured by Brookfield Square Anchor Redevelopment in Brookfield, WI.

CBL is cooperating with the foreclosure or conveyance of Alamance Crossing East in Burlington, NC, ($41.1 million).

STOCK REPURCHASE PROGRAM ACTIVITY

On October 10, 2024, CBL announced that it completed the repurchase of 500,000 shares of CBL stock for $12.525 million, in a privately negotiated block trade from a single shareholder. The block repurchase was completed separately from CBL’s existing stock repurchase program described below.

On August 10, 2023, CBL announced that its Board of Directors authorized a stock repurchase program for the Company to buy up to $25.0 million of its common stock. As of September 20, 2024, CBL had completed all repurchase activity under this program. A total of 1,074,826 shares were repurchased under the program at a weighted average share price of $23.259 per share.

DISPOSITIONS

On August 6, 2024, CBL closed on the sale of Layton Hills Mall in Layton, UT, for $37.125 million. The property served as collateral under CBL's non-recourse term loan. Net proceeds from the sale were used to reduce the term loan balance.

In September, CBL closed on the sale of Layton Hills Convenience Center, Layton Hills Plaza and nine related outparcels in Layton (Salt Lake City), UT, to an unaffiliated third party for $28.5 million, all cash. Layton Hills Convenience Center and Plaza served as collateral under CBL’s non-recourse term loan. The nine improved outparcels served as collateral under CBL’s non-recourse open-air and outparcel loan. Net proceeds from the sale were applied to the term loan principal balance and open-air and outparcel loan, as applicable.

In addition to the sale of Layton Hills Mall and adjacent properties, CBL completed the sale of two outparcels for $1.2 million during the third quarter. Year-to-date, CBL's disposition activity has generated approximately $74.2 million in gross proceeds at CBL's share.

DEVELOPMENT AND REDEVELOPMENT ACTIVITY

Detailed project information is available in CBL’s Financial Supplement for Q3 2024, which can be found in the Invest – Financial Reports section of CBL’s website at cblproperties.com

OUTLOOK AND GUIDANCE

Based on year-to-date results and Management's expectations, CBL is reiterating its full-year 2024 FFO, as adjusted, guidance. Per share amounts have been adjusted to reflect the impact of year-to-date share repurchase activity. Management anticipates same-center NOI for full-year 2024 in the range of (1.2)% to 1.4%. Guidance excludes the impact of any unannounced transactions.

Reconciliation of GAAP Earnings Per Share to 2024 FFO, as Adjusted, Per Share:

2024 Estimate of Capital Items (in millions):

ABOUT CBL PROPERTIES

Headquartered in Chattanooga, TN, CBL Properties owns and manages a national portfolio of properties located in dynamic and growing communities. CBL’s owned and managed portfolio is comprised of 91 properties totaling more than 57.7 million square feet across 21 states, including 55 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. 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 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.

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.

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 income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders on page 9 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 (loss) 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.