CBL & Associates Properties Reports Strong First Quarter 2016 Results

CHATTANOOGA, Tenn.--(BUSINESS WIRE)--CBL & Associates Properties, Inc. (NYSE:CBL):

• Same-center NOI for the first quarter 2016 increased 2.8% in the Total Portfolio and 2.5% in the Malls compared with the prior-year period.
• FFO per diluted share, as adjusted, increased 8% to $0.56 for the first quarter 2016, compared with $0.52 in the prior-year period.
• Year-to-date, CBL completed $359 million in disposition activity representing $190 million at CBL's share. These transactions generated net equity proceeds to CBL of nearly $100 million and removed over $90 million of secured debt from its balance sheet.
• Same-center sales increased 2.4% to $378 per square foot for the rolling 12-months ended March 31, 2016 over the prior-period.
• Same-center mall occupancy increased 130 basis points to 91.0% as of March 31, 2016 compared with 89.7% as of March 31, 2015.

CBL & Associates Properties, Inc. (NYSE:CBL) announced results for the first quarter ended March 31, 2016. A description of each non-GAAP financial measure and the related reconciliation to the comparable GAAP measure is located at the end of this news release.

CBL's President and Chief Executive Officer Stephen Lebovitz commented, "During the first quarter, we generated excellent results across all areas of our business. FFO per share increased 8% to $0.56 per share, exceeding market expectations. Same-center NOI grew 2.8%, with occupancy increasing more than 130 basis points and sales improving 2.4% to $378 per square foot. While renewal lease spreads moderated as anticipated, retailer demand remained strong resulting in double-digit increases for new leases.

"We have completed more than $359 million in dispositions year-to-date, with activity in both our mall and community center programs. In aggregate, these transactions generated nearly $100 million of net equity proceeds and removed over $90 million of associated debt, contributing to our improving liquidity position. We remain committed to our disposition program and balance sheet improvement, but we are also investing in our future growth through ongoing redevelopments and strategic new developments, including a new outlet center project that we'll be announcing soon. We look forward to continuing this positive momentum in our performance throughout the year."

FFO allocable to common shareholders, as adjusted, for the first quarter 2016 was $95.0 million, or $0.56 per diluted share, compared with $87.9 million, or $0.52 per diluted share, for the first quarter 2015. FFO allocable to the Operating Partnership common unitholders, as adjusted, for the first quarter 2016 was $111.2 million compared with $102.9 million for the first quarter of 2015.

Net income attributable to common shareholders for the first quarter 2016 was $28.9 million, or $0.17 per diluted share, compared with net income of $34.9 million, or $0.20 per diluted share, for the first quarter 2015. The decline in net income is primarily a result of the write-down of the book value to estimated fair value of properties sold or classified as non-core in the first quarter 2016, partially offset by an increase in equity in earnings related to the sale of our 50% interest in Triangle Town Center. Net income for the first quarter 2015 included a gain on investment related to the sale of marketable securities.

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

MAJOR VARIANCES IMPACTING SAME-CENTER NOI RESULTS FOR THE QUARTER ENDED MARCH 31, 2016

• Same-center revenues increased $4.7 million and operating expenses declined by $0.3 million.
• Minimum rents increased $2.5 million during the quarter as a result of rent growth and occupancy increases over the prior year.
• Percentage rents increased by $0.7 million due to positive sales growth.
• Tenant reimbursement and other revenues increased by $1.5 million.
• Property operating expense declined $0.8 million, partially offset by a $0.3 million increase in real estate tax expense and a $0.2 million increase in maintenance and repair expense.

PORTFOLIO OPERATIONAL RESULTS

Occupancy:

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

Same-Center Sales Per Square Foot for Mall Tenants 10,000 Square Feet or Less:

DISPOSITIONS

Year-to-date, CBL has completed $359 million in disposition activity, representing $190 million at CBL's share, including interest in two malls and two community centers. These transactions generated net equity proceeds of nearly $100 million and additionally removed over $90 million of secured debt from CBL's pro rata share of Total Debt. Net proceeds from the dispositions were used to reduce outstanding balances on the Company's lines of credit.

In February, CBL announced that it closed on a new 10/90 joint venture for Triangle Town Center, Place and Commons in Raleigh, NC, with DRA Advisors LLC (DRA). The new joint venture acquired the property from the existing 50/50 joint venture between CBL and The Richard E. Jacobs Group for a total consideration of $174.0 million, including assumption of a $171.1 million loan secured by the property. CBL now holds a 10% ownership position in the asset and is responsible for leasing and managing, earning customary fees.

Concurrent with the formation of the new joint venture, the new entity closed on a modification and restructuring of the loan, which matured in December 2015. The modified loan has an initial term of three-years maturing in December 2018, with two one-year extension options available to the joint venture, for a final maturity date of December 2020. The interest was reduced from 5.737% to 4.0%, interest-only payments.

In March, CBL closed on the sale of a 75% interest in River Ridge in Lynchburg, VA, to Liberty University and received net cash proceeds of $33.5 million. CBL retains a 25% ownership position in the asset and is responsible for leasing and management, earning customary fees.

In April, CBL and its 50/50 joint venture partner closed on the sale of 100% of Renaissance Center, the 363,000-square-foot community shopping center located in Durham, NC. Renaissance Center was sold for a sales price of $129.2 million, including the assumption of a $16.0 million loan by the buyer and a $31.6 million loan that was retired at closing. The transaction generated net equity to CBL of $40.8 million.

In April, CBL completed the sale of The Crossings at Marshalls Creek, the 86,000-square-foot community center located in Middle Smithfield, PA, for a sales price of $22.3 million, in cash.

FINANCINGS

In April, CBL and the existing lender agreed to a restructure of the existing $27.4 million non-recourse loan secured by Hickory Point Mall in Forsyth, IL. The term of the loan was extended three years to December 2018, with an additional one-year extension option available at the Company's option, for a final maturity of December 2019. The interest rate was maintained at 5.85%, with future amortization payments eliminated. The projected cash flow above the new debt service over the next three years is expected to fully fund the property's proposed redevelopment.

Gulf Coast Town Center in Fort Myers, FL (owned in a 50/50 joint venture) is in receivership. Foreclosure proceedings have commenced, and CBL anticipates the foreclosure to be completed in 2016.

DEVELOPMENT

In March, CBL and its joint venture partner, Stirling Properties, celebrated the grand opening of Ambassador Town Center in Lafayette, LA, a 438,000-square-foot community center. The center opened 97% leased with anchors Costco, Dick's Sporting Goods, Field & Stream, Marshalls, HomeGoods, and Nordstrom Rack.

OUTLOOK AND GUIDANCE

Based on first quarter results and its current outlook, the Company is reiterating 2016 guidance for FFO, as adjusted, in the range of $2.32 - $2.38 per diluted share. CBL anticipates achieving same-center NOI growth in the range of 0.5% - 2.0% in 2016.

The guidance also assumes the following:

• $3.0 million to $5.0 million of outparcel sales;
• 25-75 basis point increase in total portfolio occupancy as well as stabilized mall occupancy throughout 2016;
• G&A, net of litigation expense, of $58 million to $60 million; and
• No unannounced capital markets activity.

INVESTOR CONFERENCE CALL AND WEBCAST

CBL & Associates Properties, Inc. will conduct a conference call on Thursday, April 28, 2016, at 11:00 a.m. ET. To access this interactive teleconference, dial (888) 317-6003 or (412) 317-6061 and enter the confirmation number, 7449843. A replay of the conference call will be available through May 5, 2016, by dialing (877) 344-7529 or (412) 317-0088 and entering the confirmation number, 10082081. A transcript of the Company's prepared remarks will be furnished on a Form 8-K following the conference call.

To receive the CBL & Associates Properties, Inc., first quarter earnings release and supplemental information, please visit the Investing section of our website at cblproperties.com or contact Investor Relations at (423) 490-8312.

The Company will also provide an online webcast and rebroadcast of its 2016 first quarter earnings release conference call. The live broadcast of the quarterly conference call will be available online at cblproperties.com on Thursday, April 28, 2016, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call.

ABOUT CBL & ASSOCIATES PROPERTIES, INC.

Headquartered in Chattanooga, TN, CBL is one of the largest and most active owners and developers of malls and shopping centers in the United States. CBL owns, holds interests in or manages 141 properties, including 91 regional malls/open-air centers. The properties are located in 31 states and total 85.6 million square feet including 8.0 million square feet of non-owned shopping centers managed for third parties. Additional information can be found at cblproperties.com.

NON-GAAP FINANCIAL MEASURES

Funds From Operations

FFO is a widely used 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 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 outstanding during the period.

FFO does not represent cash flows from operations as defined by accounting principles generally accepted in the United States, 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.

As described above, during the first quarter of 2016, the Company recognized $1.7 million of litigation expense as well as a $26.4 million increase in equity in earnings related to the sale of our 50% interest in Triangle Town Center. Additionally, during the first quarter of 2015, the Company recognized a $16.6 million gain on investment related to the sale of marketable securities and received income of $4.7 million, net of related expenses, as a partial settlement of ongoing litigation. Considering the significance and nature of these items, the Company believes it is important to identify their impact on its FFO measures for readers 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.

Same-center Net Operating Income

NOI is a supplemental 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. 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 of 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. The Company's definition of NOI may be different than that used by other companies and, accordingly, the Company's NOI may not be comparable to that of other companies.

Since NOI includes only those revenues and expenses related to the operations of its shopping center and other properties, the Company believes that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates and operating costs and the impact of those trends on the Company's results of operations. The Company's calculation of same-center NOI also excludes lease termination income, straight-line rent adjustments, and amortization of above and below market lease intangibles in order to enhance the comparability of results from one period to another, as these items can be impacted by one-time events that may distort same-center NOI trends and may result in same-center NOI that is not indicative of the ongoing operations of the Company's shopping center and other properties. 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 its pro rata ownership share (including 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 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.