Chattanooga-based mall owner CBL sees earnings fall by 85% in second quarter

Staff file photo / CBL Chief Executive Officer Stephen Lebovitz, right, along with brother Michael, left, CBL president, and father Charles, chairman, sit inside their offices near Hamilton Place mall.
Staff file photo / CBL Chief Executive Officer Stephen Lebovitz, right, along with brother Michael, left, CBL president, and father Charles, chairman, sit inside their offices near Hamilton Place mall.

Hit by closings during the coronavirus outbreak and shoppers' deliberate return to stores, CBL & Associates Properties Inc. on Thursday reported second quarter earnings fell 85% over a year ago.

Also, the Chattanooga-based shopping center operator said it expects to collect about 61% of rents for the quarter with the remainder likely deferred or abated as retailers struggle.

Still, CBL's stock soared more than 30% on Thursday on the news that it had made $30 million in interest payments on some of its debt and ended forbearance agreements.

CBL Chief Executive Stephen Lebovitz said the company is seeing increased traffic levels at the more than 100 properties its operates, including Hamilton Place and Northgate Malls in Chattanooga.

"In addition to traditional in-store shopping, retailers have innovated by adding curbside pick-up, order-online and pick-up in-store and other programs designed to ease the shopping experience. These conveniences are an increasingly important part of successful retailing," he said.

But CBL reported that second quarter funds from operations, as adjusted, fell 85.3%. The company posted FFO of $9.2 million, or 5 cents per diluted share, compared with $59.4 million, or 34 cents per diluted share, a year ago.

"Our financial and operating results for the second quarter reflect the temporary closure of the CBL portfolio for a significant period due to government mandates," Lebovitz said. "Revenues for the quarter were impacted by a major increase in the estimate for uncollectible revenues related to rents due from tenants that recently filed for bankruptcy or are struggling financially, as well as amounts that were abated as part of negotiations."

CBL's net loss in the quarter attributable to common shareholders was $69.8 million, or 36 cents per diluted share, compared with a net loss of $35.4 million, or a loss of 20 cents per diluted share, for the second quarter 2019, the company reported.

Lebovitz said that store closures and rent loss from prior tenant bankruptcies and lower percentage rent related to lower retail sales impacted revenues.

A portion of the decline was offset through actions to reduce costs both at the property and corporate levels, including company-wide salary reductions, furloughs, reductions-in-force and other expense reduction initiatives, he said.

But the pandemic has accelerated a number of tenant bankruptcies, resulting in an expectation of additional store closures and lost rent through the remainder of the year, Lebovtiz said.

"As a result of the difficulty in accurately predicting the impact to our business, we expect our visibility over the next few quarters to remain limited. Accordingly, we are continuing the suspension of full-year guidance until there are signs of more stability in our operating environment," he said.

CBL's stock closed Thursday at 25.36 cents per share, up 0.0598 cents, or 30.85% on the New York Stock Exchange. Before the market opened Thursday, shares were up around 70% in after-hours trading. Trading volume Thursday was more than 80 million shares, or five times the average day.

Chris Kuiper, an analyst for the firm CFRA, said that CBL making the interest payments removes the event of default and the forbearance period is terminated, and it gives the company added time.

"While the interest payment is a marginal improvement that gives CBL some more time and options, it does not change the drastically deteriorating underlying fundamentals of the business," he said.

CFRA reiterated a strong sell opinion on CBL shares.

Nick Shields, senior analyst for investment research firm Third Bridge, said one misconception is that malls are dead.

"I don't think that's 100% true," he said. "Top-of-the-line malls come out of the pandemic weak but those for the most part survive."

Shields said that, effectively, what's underway is a paring back of the number of malls.

"It's a painful transition," he said.

Contact Mike Pare at mpare@timesfreepress.com. Follow him on Twitter @MikePareTFP.

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