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CBL & Associates Properties, Inc. (CBL): A Comprehensive Analysis of This Diversified REIT
Published on September 24, 2024 | Ticker: CBL

CBL & Associates Properties, Inc. (NYSE:CBL) is a self-managed, self-administered, fully integrated real estate investment trust (REIT) that is engaged in the ownership, development, acquisition, leasing, management, and operation of regional shopping malls, outlet centers, lifestyle centers, open-air centers, office buildings, and other properties. The company's portfolio is primarily located in the southeastern and midwestern United States, with properties spanning 22 states.

Business Overview

CBL's diverse property portfolio includes 47 malls, 5 outlet centers, 5 lifestyle centers, 29 open-air centers, and 5 other properties, for a total of 91 properties as of March 31, 2024. The company has aggregated malls, outlet centers, and lifestyle centers into one reportable segment, the "Malls" segment, as they have similar economic characteristics and provide similar products and services to similar types of tenants. The "All Other" segment includes open-air centers, outparcels, office buildings, corporate-level debt, and the Management Company.

Financials

For the full year 2023, CBL reported annual net income of $6,546,000, annual revenue of $535,285,999, annual operating cash flow of $188,813,000, and annual free cash flow of $186,150,000. In the first quarter of 2024, the company reported net loss of $474,000, total revenues of $129,117,000, and net cash provided by operating activities of $30,738,000.

The decrease in net income for the first quarter of 2024 compared to the prior-year period was primarily due to a $7.2 million decrease in revenues, a $28.2 million decrease in gain on deconsolidation, and a $1.2 million increase in general and administrative expenses. These negative factors were partially offset by a $15.2 million decrease in depreciation and amortization expense, a $7.9 million decrease in total property operating expenses, a $5.9 million increase in equity in earnings of unconsolidated affiliates, a $3.7 million decrease in interest expense, and a $1.3 million increase in interest income.

Segmental Performance

The Malls segment, which includes malls, lifestyle centers, and outlet centers, generated $109,576,000 in revenues during the first quarter of 2024, compared to $115,883,000 in the prior-year period. The decrease was primarily due to an unfavorable variance in the estimate for uncollectable revenues, as well as lower tenant reimbursements and percentage rents. The All Other segment, which includes open-air centers, outparcels, office buildings, corporate-level debt, and the Management Company, generated $19,541,000 in revenues during the first quarter of 2024, compared to $20,476,000 in the prior-year period.

Occupancy and Leasing

As of March 31, 2024, the company's total portfolio occupancy was 89.4%, with the Malls segment at 87.7% and the All Other segment at 94.8%. During the first quarter of 2024, the company signed 1,146,801 square feet of new and renewal leases, with average annual base rents per square foot of $26.00 for the total portfolio.

Liquidity

As of March 31, 2024, CBL had $295.3 million available in unrestricted cash and U.S. Treasury securities. The company's total pro rata share of debt, excluding unamortized deferred financing costs and debt discounts, was $2,618.1 million, with a weighted-average interest rate of 6.53%. The company's total share of consolidated, unconsolidated, and other outstanding debt maturing during 2024, assuming all extension options are elected, is $102.6 million.

Developments and Redevelopments

As of March 31, 2024, CBL had two properties under development or redevelopment, with a total project square footage of 119,661 and a total cost of $18,083,000. The projects include a hotel development at Mayfaire Town Center in Wilmington, North Carolina, and a redevelopment of the Crunch Fitness space at Hamilton Place in Chattanooga, Tennessee.

Risks and Challenges

CBL faces several risks and challenges, including interest rate fluctuations, competition from other companies and retail formats, shifts in customer demand, tenant bankruptcies or store closings, changes in vacancy rates, and the ongoing impact of the COVID-19 pandemic. The company also faces risks related to its ability to obtain suitable equity and/or debt financing, as well as the availability and cost of real estate.

Outlook

The company has not provided any specific financial guidance or outlook for the remainder of 2024. However, management has stated that it remains focused on executing its strategy to improve occupancy, drive rent growth, and transform the offerings available at its diverse portfolio of properties to include a targeted mix of retail, service, dining, entertainment, and other non-retail uses.

Conclusion

CBL & Associates Properties, Inc. is a diversified REIT with a portfolio of regional shopping malls, outlet centers, lifestyle centers, open-air centers, and other properties. While the company has faced challenges in recent years, it continues to execute its strategy to improve occupancy, drive rent growth, and diversify its tenant mix. With a strong liquidity position and a focus on reducing debt and improving net cash flow, CBL appears well-positioned to navigate the evolving retail landscape and enhance shareholder value over the long term.

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