Strong Property Performance Leads to Outstanding First Quarter 2022 Results

CBL Properties (NYSE: CBL) announced results for the first quarter ended March 31, 2022. Financial results for the periods from January 1, 2021, through March 31, 2021, are referred to as those of the “Predecessor” period. Financial results for the period from January 1, 2022, through March 31, 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 percentage rent and operating expense controls contributed to an increase in total portfolio same-center NOI of 10.7% for the three months ended March 31, 2022, compared with the prior year period.
• First quarter outperformance and revised outlook contribute to full year 2022 same-center NOI guidance increasing to $416 - $430 million from prior guidance of $400 - $413 million and FFO, as adjusted, per share guidance increasing to a range of $7.18 -$7.67 per diluted share compared with prior guidance of $7.00 - $7.50 per diluted share.
• Portfolio occupancy as of March 31, 2022, was 88.3%, representing a 290-basis point improvement compared with 85.4% as of March 31, 2021. Same-center occupancy for malls, lifestyle centers and outlet centers was 86.5% as of March 31, 2022, representing a 330-basis point improvement compared with 83.2% as of March 31, 2021.
• Same-center sales per square foot for the trailing 12-months ended March 31, 2022, increased 12.6% as compared to the trailing 12-months (excluding 2020) ended March 31, 2021. Same-center sales per square foot for the first quarter 2022 increased 0.9% as compared with the first quarter 2021.
• FFO, as adjusted, allocable to Operating Partnership common unitholders, for the three months ended March 31, 2022, was $57.5 million, compared with $68.7 million. The variance in FFO, as adjusted, as compared with the prior year period reflects a significant increase in NOI, 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 first quarter 2021 as a result of the Company’s bankruptcy filing on November 1, 2020.
• As of March 31, 2022, the Company had $335.7 million of unrestricted cash and marketable securities.
• Substantial year-to-date balance sheet improvement, resulting in lower interest costs, extended maturity schedule and greater financial flexibility.

“First quarter results sustained the strong operational and financial momentum of 2021, leading us to increase guidance for the full year," said Stephen D. Lebovitz, CBL's chief executive officer. "Significant year-over-year occupancy gains as well as positive tenant sales growth demonstrate the strength of our properties. Percentage rents, short-term income and collections were above expectations, contributing to double-digit NOI growth. While first quarter leasing spreads were negative, we anticipate sequential improvement going forward with higher occupancy and increasing demand driving more favorable terms.

“As we have consistently stated, further improving our balance sheet is also a key priority for us. We’ve made significant progress towards accomplishing our goal of fully refinancing the secured notes, including the recently announced partial redemption. Additionally, since our emergence we have closed several attractive financings, favorable modifications and extensions. These transactions reduce borrowing costs, increase free cash flow and create greater financial flexibility. Our strong and improving balance sheet coupled with our intense focus on operational improvements position CBL to deliver significant value to our shareholders.”

NON-GAAP FINANCIAL RESULTS

Net loss attributable to common shareholders for the three months ended March 31, 2022, was $40.7 million, compared with a net loss of $26.8 million, for the three months ended March 31, 2021.

FFO, as adjusted, allocable to Operating Partnership common unitholders, for the three months ended March 31, 2022, was $57.5 million, compared with $68.7 million, for the three months ended March 31, 2021.

Same-center NOI for the three months ended March 31, 2022, increased 10.7%, or $10.8 million, to $111.1 million as compared with $100.4 million in the prior-year period, due to a $12.8 million increase in total revenues partially offset by a $2.1 million increase in operating expenses.

Other major variances in same-center NOI for the quarter ended March 31, 2022, include:

• Minimum rents and other rents increased $12.1 million. Percentage rents increased $3.0 million and tenant reimbursements declined $2.8 million. Minimum rents included a $6.9 million positive variance in the estimate for uncollectable revenues. The total estimate for uncollectable revenues for the first quarter 2022 was a reversal of $2.0 million due to collections of amounts that were previously reserved, while the prior-year period reflects an estimate for uncollectable revenues of $4.9 million.
• Property operating expenses increased $2.5 million compared with the prior year. Maintenance and repair expenses increased $1.0 million. Real estate tax expenses declined by $1.4 million, partially offsetting the above increases.

LIQUIDITY

As of March 31, 2022, CBL had approximately $335.7 million available in unrestricted cash and marketable securities.

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 March 31, 2022, increased 12.6% as compared with the trailing twelve months ended March 31, 2021 (excludes 2020). Same-center sales per square foot for the first quarter 2022 increased 0.9% as compared with the first quarter 2021.

FINANCING ACTIVITY

In May 2022, CBL completed the extension and modification of the non-recourse loan secured by Arbor Place Mall in Douglasville, GA ($101.1 million). The loan’s maturity was extended to May 2026 and maintained the existing fixed interest rate of 5.1%.

On April 28, 2022, CBL and its 50% joint venture partner, closed on a $40.0 million non-recourse loan ($20 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.

On April 26, 2022, CBL announced that it has entered into a term sheet for a new $65.0 million non-recourse loan. The new CMBS loan will be secured by a pool of five open-air centers owned in a 92/8 joint venture, located in Chattanooga, TN. The open-air centers include Hamilton Crossing, Hamilton Corner, The Terrace, The Shoppes at Hamilton Place, and Hamilton Place - Regal.

The loan will have a ten-year term with a fixed interest rate determined at closing and based upon an agreed upon spread plus the greater of the 10-year swap rate or 10-year US Treasury Rate. The rate is expected to be in the range of 5.5% - 5.75%, assuming interest rates at closing are comparable to today’s rates. The loan is expected to close on or around May 25th, subject to completion of customary due diligence and documentation.

In connection with the above financing, the Company’s wholly owned subsidiary, CBL & Associates Holdco II, LLC (the “Issuer”) delivered a conditional notice of redemption to holders of its 10% Senior Secured Notes due 2029 (the “10% Notes”), pursuant to the terms of the indenture governing the 10% Notes, to redeem $60.0 million aggregate principal amount of 10% Notes (the “Redemption”) on May 26, 2022. The Redemption is conditioned upon the receipt by the Issuer of net cash proceeds from the new financing. There can be no assurances as to when or if such condition will be satisfied and the Issuer may waive the condition at its discretion. Following the planned redemption, $335.0 million principal amount of 10% Notes will remain outstanding.

In March 2022, CBL closed on a new $30.0 million non-recourse loan secured by York Town Center, that provides for a three-year term and a fixed interest rate of 4.75%, interest only for the first 18 months.

In February 2022, CBL closed on the extension and modification of the $133.5 million non-recourse loan secured by Fayette Mall in Lexington, KY. The loan maturity has been extended for two years, with three additional one-year extension options, subject to certain conditions. The fixed interest rate was reduced from 5.42% to 4.25%. As part of the modification, two ground leased outparcels were released from the collateral in exchange for the addition of a redeveloped former middle anchor location.

On February 1, 2022, the Company completed the exchange of its $150 million 7% Senior Secured Exchangeable Notes. The Company issued 10.98 million shares in satisfaction of the full Exchange Amount.

On December 8, 2021, EastGate Mall in Cincinnati, OH ($30.0 million), was placed into receivership and deconsolidated. CBL no longer controls the property following its transfer to receivership. Greenbrier Mall ($61.6 million) was placed into receivership as of March 10, 2022, and deconsolidated. CBL is cooperating in the foreclosure or conveyance of EastGate Mall, Greenbrier Mall, as well as Asheville Mall in Asheville, NC ($62.1 million), which was placed into receivership and deconsolidated in the first quarter 2021. Once the foreclosures or conveyances are complete, $153.7 million of debt will be removed from CBL’s pro rata share of total debt.

CBL and its joint venture partner have an agreement in principle with the lender on modification of the $35.6 million recourse loan secured by The Outlet Shoppes at Gettysburg in Gettysburg, PA. The modified loan will have a non-recourse principal balance of $21.0 million ($10.5 million at CBL’s share). The parties have agreed to a $20.0 million general unsecured claim in the Predecessor’s bankruptcy case.

CBL is in the process of completing modifications and extensions of the loans secured by Parkdale Mall in Beaumont, TX ($68.7 million) and Northwoods Mall in N. Charleston, SC ($60.3 million). These modifications/extensions are expected to close within next 60-90 days.

CBL and its 50% JV partner have signed a term sheet with an institutional lender for a new $42.5 million loan at Ambassador Town Center. The new loan will have a term of 7-Years and a fixed interest rate of 4.35%. Closing is anticipated within the next 60-90 days. Proceeds will be used to retire the existing $40.9 million loan, which matures in June 2023.

CBL currently expects to repay a $15.1 million loan (CBL’s share $13.9 million) secured by CBL Center that matures in June 2022.

CBL is in the process of negotiating extensions and modifications of the remaining property level mortgage loans with maturities in 2021 and 2022.

DISPOSITIONS

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

REDEVELOPMENT ACTIVITY

Detailed project information is available in CBL’s Financial Supplement for Q1 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 first quarter 2022 and Management’s revised full year outlook, CBL is providing updated guidance for 2022 FFO, as adjusted, in the range of $222 million - $237 million or $7.18 - $7.67 per diluted share, which assumes same-center NOI in the range of $416.0 million to $430.0 million. Improvements in expected FFO, as adjusted, are primarily driven by higher than anticipated NOI, partially offset by higher G&A expense and the impact of above and below market lease amortization following the implementation of Fresh Start accounting.

Key Guidance Assumptions:

Updated Assumptions driving the projected change in 2022 SC NOI:

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 income (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)

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)

Same-center Net Operating Income

(Dollars in thousands)

Same-center Net Operating Income

(Continued)

Company's Share of Consolidated and Unconsolidated Debt

(Dollars in thousands)

Consolidated Balance Sheets

(Unaudited; in thousands, except share data)

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