CBL cuts dividend, lowers outlook in tough retail market

CBL cuts dividend, lowers outlook in tough retail market

November 2nd, 2017 by Dave Flessner in Breaking News

CBL President and CEO Stephen Lebovitz introduces his father, CBL Chairman Charles B. Lebovitz during festivities in August celebrating Hamilton Place mall's 30th anniversary. Also present of the stage, from left are Congressman Chuck Fleischmann, Chattanooga Mayor Andy Berke (obscured), Hamilton Place Marketing Director Kim Lyons (obscured), Hamilton County Mayor Jim Coppinger, singer Tiffany Darwich, and CBL Senior Vice President Allan L. Lebovitz.

Photo by Robin Rudd /Times Free Press.

CBL Properties Inc. cut its dividend Thursday for the first time in nearly a decade and revised downward its outlook for the rest of 2017 after third quarter results fell short of expectations.

The Chattanooga-based shopping center and property management company said mall occupancy and net operating income from its centers were down in the summer quarter from a year ago because of an unusual number of retail bankruptcies and the ongoing shift of buyers from brick-and-mortar stores to online purchasing.

CBL's funds from operations in the third quarter totaled $84.7 million, or 50 cents per share, compared with $98.1 million, or 57 cents per share, a year ago.

Income fell 4 cents short of analysts expectations and CBL said it expects funds from operations in the fourth quarter to be about 10 cents per share less than previous guidance, or between $2.08 and $2.12 per share.

In response to the tougher retail market, CBL is trying to reposition more of its shopping centers as suburban town centers with more entertainment and restaurants.

"This quarter's results fell below our expectations as our revenues were impacted by additional bankruptcies, store closures and rent concessions," CBL President Stephen Lebovitz said in the earnings report released after the close of the market. "The difficult environment for retailers has put further pressure on our net operating income, funds from operations and lease spreads."

The company also announced Thursday it will cut its quarterly dividend in the fourth quarter for the first time since the end of 2008, reducing the annual dividend by nearly 25 percent from $1.06 per share to 80 cents per share.

"Our approach has been to set the dividend at a level that maximizes available cash flow for investing in our properties and debt reduction," Lebovitz said. "The common dividend is being re-set to a rate that will preserve an estimated $50 million of cash on an annual basis. This enhanced liquidity will help to fund value-adding redevelopment activity and debt reduction."

Katie Reinsmidt, chief investment officer for CBL, said CBL is replacing underperforming retailers with higher performing tenants and more diverse uses and is using its properties for new types of hotel, restaurant and office developments.

"At Sears here in Chattanooga at Hamilton Place, there are some exciting opportunities for us in the future," Reinsmidt said. Sears continues to operate its Hamilton Place store, which is owned by CBL.

So far in 2017, only 25 percent of new leasing by CBL has been executed with traditional apparel retailers "as we reinvent our properties into suburban town centers that offer unique shopping, more food and beverage, fitness, health and beauty uses, services and more," Lebovitz said.

Net loss attributable to common shareholders for the third quarter 2017 was $2.3 million, or 1 cent per share, compared with a net loss of $10.2 million, or 6 cents per share, for the third quarter 2016.

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.

This story was updated Nov. 2 at 10:45 p.m.