Chattanooga-based mall operator sees positive sales growth, increases in occupancy

Staff File Photo by Matt Hamilton / Visitors enter Hamilton Place mall on July 30, 2021.

CBL Properties on Monday raised its full-year guidance for net operating income as a result of ongoing increases in occupancy and improved lease spreads at its malls and shopping centers.

Same-center net operating income guidance grew by $8 million to a range of $424 million to $438 million, according to the Chattanooga-based company in reporting third quarter results.

CBL, which operates Hamilton Place and Northgate malls in Chattanooga, also narrowed its guidance of funds from operations for the year. Funds from operators, as adjusted, is now expected in the range of $7.40 to $7.67 per diluted share versus prior guidance of $7.18 to $7.67 per diluted share.

Stephen D. Lebovitz, CBL's chief executive officer, said 2022 has been "an outstanding year for CBL, demonstrating the strength and resiliency of our portfolio and our company."

He said in a statement that August and September sales growth was positive and a notable reversal of the year-to-date trend.

For the third quarter, FFO as adjusted was $59 million, according to CBL. A year ago for the quarter, FFO was $95.3 million. Interest payments on the senior secured notes and credit facility were not required to be made during the third quarter of 2021 due to CBL's bankruptcy filing on Nov. 1, 2020, the company reported.

Net loss attributable to common shareholders for the third quarter was $14.5 million. Net loss for the three months a year ago was $41.7 million, the company reported.

Same-center net operating income for the three and nine months ended Sept. 30 was $105.5 million and $322.9 million, respectively, according to the company. Same-center NOI for the three and nine months a year ago was $113.5 million and $317.4 million respectively, CBL reported. Same-center net operating income declined 7% for the three months and increased 1.8% for the nine months this year from the prior-year periods. NOI growth in the third quarter was impacted by a lower recovery of uncollectable revenues and increased operating expenses, primarily due to wage inflation, according to CBL.

Portfolio occupancy as of Sept. 30 was 90.5%, the company reported. That's compared to 88.4% a year ago.

Third quarter new and renewal comparable space leases for malls, lifestyle centers and outlet centers were signed at 5.2% higher average rents versus the prior leases, marking a notable reversal in trends, according to the company.

Lebovitz said that year-to-date, CBL completed over $1.1 billion in financing activity, significantly de-risking its balance sheet, reducing interest costs and increasing cash flow as it locked in favorable rates.

"As a result, we benefit from a simplified capital structure primarily comprised of non-recourse loans, a strong cash position, a pool of unencumbered assets and significant free cash flow. We are focused on maximizing shareholder returns and delivering capital to our shareholders through our dividend program," he said. "As announced, we expect to provide at least $1 per share of annualized regular cash dividends as well as a special dividend to be declared later this year."

For the holiday season, Lebovitz said he's optimistic for a healthy close to 2022.

"Retailers are well stocked and aggressively promoting their business. Brick-and-mortar stores are a key ingredient to success in today's retail world," he said.

— Compiled by Mike Pare