CBL — CBL & Associates Properties, Inc.

CBL Properties Q4 2019 Earnings Call Summary

1. Key Financial Results and Metrics

• Adjusted FFO: $0.37 per share for Q4 2019, down from $0.45 per share in Q4 2018. Full-year adjusted FFO was $1.36 per share, compared to $1.73 in 2018.
• Same-Center NOI: Declined 9.1% in Q4 and 6.5% for the full year, significantly impacted by retailer bankruptcies and store closures.
• Occupancy Rates: Same-center occupancy improved sequentially to 89.8%, but declined 210 basis points year-over-year. Overall portfolio occupancy was 91.2%, down 190 basis points from the previous year.
• Mall Sales: Increased 3% in Q4, with a trailing 12-month sales figure of $387 per square foot, up from $379 the previous year.

2. Strategic Updates and Business Highlights

• CBL is transitioning its mall portfolio by replacing traditional retail anchors with diverse uses such as educational facilities, fitness centers, casinos, and restaurants.
• Over 40 anchor closures were reported last year, with two-thirds of that space now filled with new tenants, primarily non-apparel retailers.
• Significant redevelopment projects are underway, including the former Sears location at Hamilton Place, which will feature Dave & Busters, Dick’s Sporting Goods, and an Aloft Hotel.
• The company has suspended common and preferred dividends to preserve cash flow for redevelopment and leasing efforts.

3. Forward Guidance and Outlook

• For 2020, CBL anticipates adjusted FFO in the range of $1.03 to $1.13 per share, with same-center NOI expected to decline between 8% to 9.5%.
• The guidance includes a reserve for potential unbudgeted revenue declines due to additional store closures or bankruptcies, estimated between $8 million and $18 million.

4. Bad News, Challenges, or Points of Concern

• The company faces ongoing challenges from retailer bankruptcies, with expectations of 6 to 7 additional store closures over the next three years, although none are anticipated in 2020.
• The impairment of $37.4 million was recognized on Park Plaza Mall due to declining NOI and upcoming loan maturity.
• CBL's debt levels remain high at $4.25 billion, with ongoing efforts to manage and reduce leverage through asset sales and refinancing.

5. Notable Q&A Insights

• Management expressed confidence in the strategy of replacing apparel tenants with more traffic-driving uses, indicating that new tenants are expected to generate significantly higher sales volumes.
• There was discussion about the balance sheet and capital allocation, with an emphasis on securing liquidity and reducing debt. The company is actively exploring refinancing options and has made recent loan payoffs to improve its financial position.
• Questions from analysts highlighted concerns about the disconnect between positive sales growth in certain categories and the overall decline in NOI, attributed to the impact of bankruptcies and store closures on the portfolio.

Overall, CBL Properties is navigating a challenging retail environment with a strategic focus on redevelopment and diversification of its tenant base, while facing significant financial headwinds.