CBL & Associates Properties Inc. on Thursday reported a 7.1 percent drop in earnings for 2007.
Year-end 2007 funds from operations or FFO were $3.10 per share, compared to $3.34 per share a year ago, a 7.1 percent drop. Fourth-quarter FFO were 83 cents per share, down from 97 cents per share in the fourth quarter 2006, a 14.4 percent decrease.
Excluding a writedown, CBL reported that FFO was 99 cents for the fourth quarter, up from 97 cents a year ago. FFO for the year was $3.10 in 2007, down from $3.34 the prior year.
The company’s focus in 2007 was to increase same-center net operating income, gain momentum in leasing and expand its portfolio through acquisitions and developments, Charles B. Lebovitz, chairman and chief executive, said in a statement.
“The execution of this strategy in 2007 reflected improvement in new and renewal leasing spreads while raising the total square footage of leases signed for the year to 6.6 million square feet, the most ever in our 30-year history,” Mr. Lebovitz said.
Earlier this week, CBL lowered its 2007 FFO per share earnings guidance for the second time since November. On Monday the company said it was dropping its guidance to $3.09-$3.11 per share from $3.35-$3.41. In November 2007, CBL announced it was dropping its guidance to $3.35-$3.41 per share from the original $3.37-$3.47 per share.
FFO is a measure of a real estate company’s performance that is an accepted replacement for net income measurements.
Total revenues increased 8.5 percent to nearly $294.3 million during the fourth quarter. Year-end revenues increased 4.5 percent to $1.04 billion.
CBL is providing 2008 FFO guidance from $3.46 per share to $3.56 per share. The guidance assumes same-center NOI growth from between 0 percent to 2 percent.
A year ago CBL’s shares were trading at $50.36. Shares closed Thursday at $24.59, prior to the earnings release.
Real estate investment trusts, or REITs, such as CBL had a rough time in 2007, but are performing better than the general stock market, according to a trade organization.
REITs are down 4.35 percent for the year ending Feb. 6, according to the National Association of Real Estate Investment Trusts, or NAREIT. The Nasdaq composite was down 14.08 percent for the same period, compared to the Dow Jones Industrial’s loss of 8.03 percent, according to the organization.
“REITs had a really rough 2007,” said Brad Case, vice president of research and industry information for NAREIT. “The peak of the market was a year ago.”
Concern over the subprime credit crisis scared investors of real estate trusts, Mr. Case said.
“So, regional mall REITs suffered with everyone else,” he said.
If this downturn follows the trend of previous REIT drops, the end may be in sight, Mr. Case said. Previous downturns in the late 1980s and late 1990s lasted 15 months and 22 months, respectively, Mr. Case said, and the amount of equity lost in the past 12 months is similar to what was lost in the past.
“People have taken out their concerns on the REIT industry and wonder whether it’s time to get back in,” he said.
The value of REIT stocks is conversely related to the value of commercial property, he said, meaning that when one investment goes up the other goes down. REITs generally lead the commercial property market by 14 months, and if the trend continues, then REIT prices could start to rise, he said, and owners of commercial property could start seeing their property values decline.
“We’re at a transition period,” Mr. Case said.
