CBL Properties (NYSE:CBL) announced results for the first quarter ended March 31, 2020, and provided a further update on the impact of the COVID-19 pandemic on its financial and operational performance.
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.
-FFO per diluted share, as adjusted, was $0.26 for the first quarter 2020, compared with $0.30 per share for the first quarter 2019.
-First quarter 2020 FFO per share was impacted by $0.02 per share of dilution from asset sales completed since the prior-year period and $0.07 per share of lower property NOI offset by $0.02 per share lower interest expense and $0.02 per share lower net G&A expense.
-Same-center sales per square foot for the twelve-months ended February 29, 2020, increased 3% to $392 per square foot compared with the prior-year period ended February 28, 2019. The majority of stores in the CBL portfolio closed during the month of March 2020, which resulted in a decline in reported same-center sales per square foot for the month of 45% compared with the prior year month.
-Total Portfolio same-center NOI declined 8.7% for the three months ended March 31, 2020, as compared with the prior-year period.
-Portfolio occupancy as of March 31, 2020, was 89.5%, representing a 180-basis point decline compared with 91.3% as of March 31, 2019. Same-center mall occupancy was 87.8% as of March 31, 2020, a 200-basis point decline compared with 89.8% as of March 31, 2019.
CBL established a comprehensive COVID-19 operational response plan, including enacting a work from home protocol for employees, following CDC and governmental recommended guidelines across the portfolio for operating, closing and reopening plans and providing assistance to its local and regional tenants in various ways, including launching a dynamic informational website to help access local, state and federal resources.
The Company also took significant actions to improve liquidity and reduce costs in response to the COVID-19 pandemic. These steps included drawing $280 million on its line of credit, eliminating all non-essential expenditures, implementing a company-wide furlough and salary reduction program and delaying and suspending capital expenditures, including redevelopment investments (more details herein).
“While first quarter results were largely as anticipated, the COVID-19 pandemic significantly shifted our expectations for the remainder of the year,” said Stephen D. Lebovitz, Chief Executive Officer.
“The majority of the properties in our portfolio closed during March due to government mandates. As of May 25th, 66 of 68 CBL owned or managed malls have re-opened, subject to certain health and safety restrictions, including a dozen properties that are offering curbside or exterior-only service.
"As properties re-open, we have worked in cooperation with our tenants to institute strict guidelines, following CDC and health department recommendations, to help ensure the safety of our employees, tenants and customers.
“For the month of April, we received approximately 27% of billed cash rents. We estimate a collection rate for the month of May in the range of 25-30% based on preliminary cash receipts and conversations with retailers.
“For the month of April, we received approximately 27% of billed cash rents. We estimate a collection rate for the month of May in the range of 25-30% based on preliminary cash receipts and conversations with retailers.
"The majority of our tenants requested rent relief, either in the form of rent deferrals or abatements. We have placed a number of tenants in default for non-payment of rent. We anticipate a significant portion of April and May rents will be collected later in 2020 and into 2021 under agreed upon deferral plans. However, negotiations are ongoing, and it is premature to estimate a recovery rate at this time.
“Our priority during this time of uncertainty has been to preserve cash. We announced significant steps to improve our liquidity position, including drawing down the available amount on our line of credit.
“Our priority during this time of uncertainty has been to preserve cash. We announced significant steps to improve our liquidity position, including drawing down the available amount on our line of credit.
"In addition, we instituted a significant cost reduction program. We have been successful in deferring or halting approximately $60 - $80 million in planned capital expenditures, including redevelopment investments, for 2020. While we have paused several major projects, we are pursuing capital lite solutions for backfilling our remaining available anchors, including joint venture partnerships, favorable lease structures and third-party arrangements – all of which benefit our portfolio while preserving capital.
"Additionally, we were able to achieve debt service payment deferrals for a portion of our secured loans. Securitized lenders in general have shown minimal flexibility in amending loan payments.
“We have addressed nearly all of our major debt maturities for 2020 and are in discussions with existing lenders for certain 2021 secured loan maturities. As a reminder, we have no significant unsecured debt maturities until December 2023, and have time to evaluate the optimal financial roadmap for CBL. We are being proactive to determine the best strategies for addressing these future maturities and significantly reducing leverage.”
Financial Results
Net loss attributable to common shareholders for the first quarter 2020 was $133.9 million, or $0.75 per diluted share, compared with a net loss of $50.2 million, or a loss of $0.29 per diluted share, for the first quarter 2019. Net loss for the first quarter 2020 was impacted by a $133.6 million loss on impairment of real estate to write down the carrying values of Monroeville Mall in Monroeville, PA, and Burnsville Center in Minneapolis, MN, to the properties’ estimated fair values.
FFO allocable to common shareholders, as adjusted, for the first quarter 2020 was $45.9 million, or $0.26 per diluted share, compared with $52.4 million, or $0.30 per diluted share, for the first quarter 2019. FFO allocable to the Operating Partnership common unitholders, as adjusted, for the first quarter 2020 was $51.6 million compared with $60.5 million for the first quarter 2019.
COVID-19 Update
On March 11, 2020, the World Health Organization classified COVID-19 as a pandemic. As a result of extraordinary governmental actions taken to contain COVID-19, the Company is unable to predict the full extent of the pandemic’s impact to the Company’s results of operations for the remainder of 2020.
As a result, on March 25, 2020, CBL withdrew its full-year 2020 FFO per share, as adjusted, guidance and underlying assumptions and does not plan to reinstate full-year 2020 guidance until there is further clarity on the financial impact of the pandemic.
In response to local and state mandated closures, the majority of the properties in the CBL portfolio closed during the month of March 2020.
In response to local and state mandated closures, the majority of the properties in the CBL portfolio closed during the month of March 2020.
Beginning in late April, government agencies began allowing the reopening of certain properties with various health and safety restrictions or solely for curbside service. As of May 25, 66 of 68 owned or managed mall properties have reopened including twelve for curbside or exterior-only service. The safety and health of our customers, employees and tenants remains a top priority.
With each re-opening, CBL has instituted a comprehensive re-opening plan that includes strict procedures and guidelines for our employees, tenants and property visitors based on CDC and other health agency recommendations.
During the month of April, CBL collected approximately 27% of billed cash-based rents and estimates May rent collections will be in the range of 25-30%. Many tenants have requested deferral of rent or in certain instances, abatement of rents due.
During the month of April, CBL collected approximately 27% of billed cash-based rents and estimates May rent collections will be in the range of 25-30%. Many tenants have requested deferral of rent or in certain instances, abatement of rents due.
While, in general, under the leases, CBL believes that the tenants have a clear contractual obligation to pay rent, CBL is working with tenants that may require rent deferral or relief. These tenant discussions are ongoing and at this time, CBL is unable to estimate the outcome of these discussions, the impact of these relief packages or the ultimate recoverability of any amounts deferred.
Expense Reduction and Liquidity
As previously announced, CBL has implemented comprehensive programs to halt all non-essential expenditures, to reduce operating and overhead expenses and to reduce, defer or suspend capital expenditures, including redevelopment investments. These programs include:
Expense Reduction and Liquidity
As previously announced, CBL has implemented comprehensive programs to halt all non-essential expenditures, to reduce operating and overhead expenses and to reduce, defer or suspend capital expenditures, including redevelopment investments. These programs include:
-reductions to executive compensation, including a 50% reduction for CBL’s Chairman, CEO and President, a 50% reduction to independent director fees and a 20% reduction for other officers;
a broad-based temporary furlough program impacting approximately 300 employees, or 60% of CBL’s workforce;
-salary reductions for the remaining staff;
-capital expenditure reductions or deferrals, including redevelopment expenditures, estimated in the range of $60 million - $80 million;
-suspension or delay of all other non-essential expenditures.
CBL has also taken actions to improve its liquidity position to help offset the impact to near-term cash flows. In March, CBL completed a $280 million aggregate draw on its line of credit, which represented substantially all of the remaining available balance. CBL has also been able to achieve debt service payment deferrals for certain secured loans.
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