CBL Properties Reports Results for Fourth Quarter and Full-Year 2021

Results Demonstrate Strong Recovery and Ongoing Momentum in Operational Improvements

CBL Properties (NYSE: CBL) announced results for the fourth quarter and year ended December 31, 2021. 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.

Fourth Quarter Financial Results:

Full-Year Financial Results:

KEY TAKEAWAYS:

• As of December 31, 2021, the Company had $319.5 million of unrestricted cash and marketable securities.
• Total portfolio same-center Net Operating Income (“NOI”) increased 5.3% for the three months ended December 31, 2021, compared with the prior year period. Total portfolio same-center NOI increased 6.3% for the full year ended December 31, 2021, compared with the prior year.
• Same-center sales per square foot for the fourth quarter and full-year ended December 31, 2021, increased 13.0% and 15.5%, respectively as compared with the fourth quarter and full-year ended December 31, 2019.
• Portfolio occupancy as of December 31, 2021, was 89.3%, representing a 90-basis point improvement from the sequential quarter and a 180-basis point improvement compared with 87.5% as of December 31, 2020. Same-center occupancy for malls, lifestyle centers and outlet centers was 87.6% as of December 31, 2021, representing a 130-basis point increase sequentially and a 170-basis point improvement compared with 85.9% as of December 31, 2020.
• FFO, as adjusted, allocable to Operating Partnership common unitholders, for the three months ended December 31, 2021 was $106.3 million, compared with $75.3 million. The increase in FFO, as adjusted, as compared with the prior year period is principally a result of $7.5 million lower net interest expense and a $3.7 million positive variance from undeclared preferred dividends accrued in the prior year period.
• FFO, as adjusted, allocable to Operating Partnership common unitholders, for the twelve months ended December 31, 2021 was $349.8 million, compared with $140.8 million, for the twelve months ended December 31, 2020.

“2021 was a transformational year for CBL," said Stephen D. Lebovitz, CBL's Chief Executive Officer. "We emerged from our restructuring with a strong balance sheet and a renewed focus to capitalize on the substantial opportunities ahead for CBL.

“2021 was also a year of outstanding financial performance for CBL. Our properties showed dramatic improvement across all key indicators despite ongoing challenges from the pandemic. Results for the fourth quarter built on the positive trends we experienced throughout the year. Higher traffic and sales drove substantial increases in percentage and short-term rents. Occupancy showed sequential and year-over-year improvement, reflecting strong underlying trends for our retailers. Over three million square feet of new and renewal leases were signed, demonstrating continued and growing interest in our properties. Despite inflationary pressures and increased operating hours, we effectively mitigated increases in overall operating expenses. I am grateful to the entire CBL team for their hard work, focus and execution of our strategic priorities.

“Following emergence, we have further improved our balance sheet, reducing debt by more than $200 million in a few short months. We have made solid progress on additional balance sheet initiatives, which will lower interest expense and increase our capital structure flexibility.

“Our strong balance sheet and robust financial performance position us to create substantial value for our shareholders through return of capital as well as opportunistic growth. We are highly confident in the future stability of our portfolio of nearly 45 open-air, lifestyle and outlet and other properties in addition to more than 40 market-dominant malls and see substantial opportunities ahead for CBL.”

COMBINED NON-GAAP FINANCIAL RESULTS

Net loss attributable to common shareholders for the three months ended December 31, 2021, was $544.8 million, compared with net loss of $63.0 million, for the three months ended December 31, 2020.

Net loss attributable to common shareholders for the twelve months ended December 31, 2021, was $622.2 million, compared with net loss of $332.5 million, for the twelve months ended December 31, 2020.

FFO, as adjusted, allocable to Operating Partnership common unitholders, for the three months ended December 31, 2021, was $106.3 million, compared with $75.3 million, for the three months ended December 31, 2020.

FFO, as adjusted, allocable to Operating Partnership common unitholders, for the twelve months ended December 31, 2021, was $349.8 million, compared with $140.8 million, for the twelve months ended December 31, 2020.

Major variances impacting same-center NOI for the twelve months ended December 31, 2021, include:

• Same-center NOI increased $25.7 million, due to a $39.0 million increase in total revenues partially offset by a $13.2 million increase in operating expenses.
• Rental revenues increased $36.9 million, including an $18.9 million increase in percentage rents and a $20.9 million decline in tenant reimbursements. The total estimate for uncollectable revenues for 2021 was $1.7 million compared with $44.0 million in the prior year period.
• Property operating expenses increased $10.2 million compared with the prior year, primarily due to the return to full operations following the reopening of CBL’s properties. Maintenance and repair expenses increased $8.2 million. Real estate tax expenses declined by $5.2 million, partially offsetting the above increases.

LIQUIDITY

As of December 31, 2021, CBL had approximately $319.5 million available in unrestricted cash and marketable securities.

New and Renewal Leasing Activity of Same Small Shop Space Less Than 10,000 Square Feet:

Same-Center Sales Per Square Foot for In-line Tenants 10,000 Square Feet or Less:

Sales per square foot for the fourth quarter 2021 increased 13.0% as compared with the fourth quarter 2019, with all but five of CBL’s 54 reporting properties demonstrating an increase over the comparable period. For the full year ended December 31, 2021, sales per square foot increased 15.5% as compared with the full year ended December 31, 2019, with all but three of CBL’s 54 reporting properties demonstrating an increase over the comparable period.

FINANCING ACTIVITY

In February 2022, CBL closed on the extension and modification of the $134.1 million non-recourse loan secured by Fayette Mall in Lexington, KY. The loan maturity has been extended for two years, with three additional one-year extension options, subject to certain requirements. The fixed interest rate was reduced from 5.42% to 4.25%. As part of the modification, two ground leased outparcels were released from the collateral in exchange for the addition of the redeveloped former middle anchor location.

On February 1, 2022, the Company completed the exchange of its $150 million 7% Senior Secured Exchangeable Notes. The Company issued 10.98 million shares in satisfaction of the full Exchange Amount.

On December 8, 2021, EastGate Mall in Cincinnati, OH ($30.0 million), was placed into receivership and deconsolidated. CBL no longer controls the property following its transfer to receivership. Greenbrier Mall ($61.6 million) was placed into receivership as of March 10, 2022. CBL is cooperating in the foreclosure or conveyance of EastGate Mall, Greenbrier Mall, as well as Asheville Mall in Asheville, NC ($62.1 million), which was placed into receivership and deconsolidated in the first quarter 2021. Once the foreclosures or conveyances are complete, $153.7 million of debt will be removed from CBL’s pro rata share of total debt.

On November 8, 2021, the Company completed the redemption of $60.0 million of its 10% Secured Notes. Following the redemption, the Company has $395 million in 10% Secured Notes outstanding.

In October 2021, the loan secured by The Shoppes at Eagle Point was extended to October 2022. CBL is in the process of securing a new loan.

In October 2021, Brookfield Square Anchor S, LLC filed for bankruptcy. In December 2021, CBL reached an agreement with the lender to amend the $27.5 million loan secured by Brookfield Square Anchor S and dismiss the bankruptcy case. The loan term was extended through December 2023 and contains a one-year extension option.

In December 2021, the $8.1 million loan secured by The Outlet Shoppes of the Bluegrass - Phase II was extended to October 2022 and contains a six-month extension option.

Subsequent to December 31, 2021, the $102.3 million non-recourse loan secured by Cross Creek Mall was extended to May 2022. CBL is in discussions with the lender for a potential longer-term extension and modification.

In February 2022, the loans secured by York Town Center, with a combined outstanding balance of $29.8 million, were extended through May 1, 2022. The Company is in the process of securing a new loan.

CBL and its joint venture partner have an agreement in principle with the lender on modification of the $35.8 million recourse loan secured by The Outlet Shoppes at Gettysburg in Gettysburg, PA. The modified loan will have a non-recourse principal balance of $21.0 million ($10.5 million at CBL’s share). The parties have agreed to a $20.0 million unsecured deficiency claim. Other terms are being finalized.

CBL is in discussions with the lender on a potential modification and extension of the loans secured by Parkdale Mall in Beaumont, TX ($69.5 million), Arbor Place Mall in Douglasville, GA ($101.8 million) and Northwoods Mall in N. Charleston, SC ($60.7 million).

CBL is in the process of negotiating extensions and modifications of the remaining property level mortgage loans with maturities in 2021 and 2022.

DISPOSITIONS

In December 2021, CBL sold its interest in the Continental 425 Fund LLC joint venture. This joint venture owned the Springs at Port Orange, an apartment complex in Port Orange, FL, which was secured by a $44.4 million loan. CBL received $7.1 million in proceeds after factoring in its share of the outstanding debt.

In November 2021, CBL completed the sale of its self-storage portfolio for a gross sales price of $42.0 million. After repayment of approximately $25.9 million ($16.4 million at CBL’s share) in recourse loans secured by the properties, the sale generated cash to CBL of approximately $7.6 million.

The portfolio included self-storage facilities that CBL and its joint venture partner had developed on available land at CBL’s Mid Rivers Mall in St. Charles, MO, Eastgate Mall in Cincinnati, OH, Parkdale Mall in Beaumont, TX and Hamilton Place in Chattanooga, TN.

In 2021, CBL generated more than $63.0 million in gross proceeds, at its share, from asset sales.

DEVELOPMENT AND LEASING PROGRESS

In 2021, CBL opened more than 1.7 million square feet of new retail, dining, entertainment, and other uses across its portfolio. This included unique uses such as Hollywood Casino at York Galleria Mall in York, PA; the expansion of High Caliber Karting & Entertainment at Meridian Mall in Okemos, MI; Aloft by Marriott hotel and Trader Joe’s at Hamilton Place in Chattanooga, TN; Tilt at Richland Mall in Waco, TX; and the first Belong Gaming location in the United States at Pearland Town Center in Pearland, TX. CBL also welcomed OFFLINE by Aerie to Fayette Mall in Lexington, KY; Pottery Barn at Friendly Center in Greensboro, NC; and Tradehome Shoes at both Oak Park Mall in Kansas City, KS and Post Oak Mall in College Station, TX.

Openings anticipated in 2022 include Von Maur at West Towne Mall in Madison, WI; OFFLINE by Aerie, Rose & Remington and Palmetto Moon at Hamilton Place; Main Event at Sunrise Mall in Brownsville, TX; and a new and expanded Scheels at Dakota Square Mall in Minot, ND.

Additional offerings, including new restaurants, fitness, hotel and other uses are planned or under negotiation and will be announced as details are finalized.

Detailed project information is available in CBL’s Financial Supplement for Q4 2021, which can be found in the Invest – Financial Reports section of CBL’s website at cblproperties.com.

2022 DIVIDEND POLICY

CBL anticipates distributing the minimum required distribution (90% -100% of taxable income) to maintain its status as a Real Estate Investment Trust (REIT). Any required distributions are expected to be determined and announced in the fourth quarter 2022 and, subject to IRS guidelines, may be distributed in all cash or in a combination of cash and common stock, as determined at the time by CBL’s Board of Directors.

OUTLOOK AND GUIDANCE

CBL is providing guidance for 2022 FFO, as adjusted, in the range of $216.5 million - $231.8 million or $7.00 - $7.50 per diluted share, which assumes same-center NOI in the range of $400.0 million to $413.0 million.

Key Guidance Assumptions:

Commenting on 2022 guidance, Lebovitz stated, “Given the range of extraordinary factors which impacted 2021 results, we expect 2022 to be more reflective of CBL’s ongoing financial performance. The largest driver of this normalization is expected to be lower percentage rents and short-term income; however, we also anticipate increases in expenses, driven by inflationary pressure, wage growth and completion of certain maintenance and repair projects that were previously delayed. Our guidance for 2022 also reflects overall uncertainty surrounding headwinds facing the U.S. economy. Despite these impacts, we expect strong levels of leasing activity in 2022 and a renewed focus on our redevelopment program to position us for growth in 2023 and beyond.”

Assumptions driving the projected change in 2022 SC NOI:

Reconciliation of GAAP Earnings Per Share to 2022 FFO, as Adjusted, Per Share:

ABOUT CBL PROPERTIES

Headquartered in Chattanooga, TN, CBL Properties owns and manages a national portfolio of market-dominant properties located in dynamic and growing communities. CBL’s owned and managed portfolio is comprised of 95 properties totaling 59.6 million square feet across 24 states, including 57 high-quality enclosed malls, outlet centers and lifestyle retail centers as well as more than 30 open-air centers and other assets. CBL seeks to continuously strengthen its company and portfolio through active management, aggressive leasing and profitable reinvestment in its properties. For more information visit cblproperties.com.

NON-GAAP FINANCIAL MEASURES

Funds From Operations

FFO is a widely used non-GAAP measure of the operating performance of real estate companies that supplements net income (loss) determined in accordance with GAAP. The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss) (computed in accordance with GAAP) excluding gains or losses on sales of depreciable operating properties and impairment losses of depreciable properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests. Adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests are calculated on the same basis. We define FFO as defined above by NAREIT less dividends on preferred stock of the Company or distributions on preferred units of the Operating Partnership, as applicable. The Company’s method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

The Company believes that FFO provides an additional indicator of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assumes the value of real estate assets declines predictably over time. Since values of well-maintained real estate assets have historically risen with market conditions, the Company believes that FFO enhances investors’ understanding of its operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of the Company’s properties and interest rates, but also by its capital structure.

The Company presents both FFO allocable to Operating Partnership common unitholders and FFO allocable to common shareholders, as it believes that both are useful performance measures. The Company believes FFO allocable to Operating Partnership common unitholders is a useful performance measure since it conducts substantially all of its business through its Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of the Company’s common shareholders and the noncontrolling interest in the Operating Partnership. The Company believes FFO allocable to its common shareholders is a useful performance measure because it is the performance measure that is most directly comparable to net income (loss) attributable to its common shareholders.

In the reconciliation of net income (loss) attributable to the Company’s common shareholders to FFO allocable to Operating Partnership common unitholders, located in this earnings release, the Company makes an adjustment to add back noncontrolling interest in income (loss) of its Operating Partnership in order to arrive at FFO of the Operating Partnership common unitholders. The Company then applies a percentage to FFO of the Operating Partnership common unitholders to arrive at FFO allocable to its common shareholders. The percentage is computed by taking the weighted-average number of common shares outstanding for the period and dividing it by the sum of the weighted-average number of common shares and the weighted-average number of Operating Partnership units held by noncontrolling interests during the period.

FFO does not represent cash flows from operations as defined by GAAP, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income (loss) for purposes of evaluating the Company’s operating performance or to cash flow as a measure of liquidity.

The Company believes that it is important to identify the impact of certain significant items on its FFO measures for a reader to have a complete understanding of the Company’s results of operations. Therefore, the Company has also presented adjusted FFO measures excluding these items from the applicable periods. Please refer to the reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders on page 11 of this news release for a description of these adjustments.

Same-center Net Operating Income

NOI is a supplemental non-GAAP measure of the operating performance of the Company’s shopping centers and other properties. The Company defines NOI as property operating revenues (rental revenues, tenant reimbursements and other income) less property operating expenses (property operating, real estate taxes and maintenance and repairs).

The Company computes NOI based on the Operating Partnership’s pro rata share of both consolidated and unconsolidated properties. The Company believes that presenting NOI and same-center NOI (described below) based on its Operating Partnership’s pro rata share of both consolidated and unconsolidated properties is useful since the Company conducts substantially all of its business through its Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of the Company’s common shareholders and the noncontrolling interest in the Operating Partnership. The Company's definition of NOI may be different than that used by other companies and, accordingly, the Company's calculation of NOI may not be comparable to that of other companies.

Since NOI includes only those revenues and expenses related to the operations of the Company’s shopping center properties, the Company believes that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates, sales at the malls and operating costs and the impact of those trends on the Company’s results of operations. The Company’s calculation of same-center NOI excludes lease termination income, straight-line rent adjustments, amortization of above and below market lease intangibles and write-off of landlord inducement assets in order to enhance the comparability of results from one period to another. A reconciliation of same-center NOI to net income is located at the end of this earnings release.

Pro Rata Share of Debt

The Company presents debt based on the carrying value of its pro rata ownership share (including the carrying value of the Company’s pro rata share of unconsolidated affiliates and excluding noncontrolling interests’ share of consolidated properties) because it believes this provides investors a clearer understanding of the Company’s total debt obligations which affect the Company’s liquidity. A reconciliation of the Company’s pro rata share of debt to the amount of debt on the Company’s condensed consolidated balance sheet is located at the end of this earnings release.

Combined Results

Our financial results for the periods from January 1, 2021 through October 31, 2021, and the year ended December 31, 2020 are referred to as those of the “Predecessor” period. Our financial results for the period from November 1, 2021 through December 31, 2021 are referred to as those of the “Successor” period. Our results of operations as reported in our consolidated financial statements for these periods are prepared in accordance with GAAP. Although GAAP requires that we report our results for the period from January 1, 2021 through October 31, 2021 and the period from November 1, 2021 through December 31, 2021 separately, management views the Company’s operating results for the year ended December 31, 2021 by combining the results of the applicable Predecessor and Successor periods because such presentation provides the most meaningful comparison of our results to prior periods.

The Company cannot adequately benchmark the operating results of the period from November 1, 2021 through December 31, 2021 against any of the previous periods reported in its consolidated financial statements without combining it with the period from October 1, 2021 through October 31, 20221 or January 1, 2021 through October 31, 2021 and does not believe that reviewing the results of this period in isolation would be useful in identifying trends in or reaching conclusions regarding the Company’s overall operating performance. Management believes that the key performance metrics such as revenue, NOI and FFO for the Successor period when combined with the Predecessor period provide more meaningful comparisons to other periods and are useful in identifying current business trends. Accordingly, in addition to presenting our results of operations as reported in our consolidated financial statements in accordance with GAAP, the tables and discussion herein also present the combined results for the three months and year ended December 31, 2021.

The combined results for the three months ended December 31, 2021, which we refer to herein as the results for the “three months ended December 31, 2021” represent the sum of the reported amounts for the Predecessor period from October 1, 2021 through October 31, 2021 and the Successor period from November 1, 2021 through December 31, 2021. The combined results for the year ended December 31, 2021, which we refer to herein as the results for the "year ended December 31, 2021" represent the sum of the reported amounts for the Predecessor period from January 1, 2021 through October 31, 2021 and the Successor period from November 1, 2021 through December 31, 2021. These combined results are not considered to be prepared in accordance with GAAP and have not been prepared as pro forma results per applicable regulations. The combined operating results do not reflect the actual results we would have achieved absent our emergence from bankruptcy and may not be indicative of future results. Accordingly, the results for the three months and year ended December 31, 2020 may not be comparable, particularly for statement of operations line items significantly impacted by the reorganization transactions, the impact of fresh start accounting on depreciation and amortization, the discount to the carrying value of its debt and the impact of interest expense not being recognized while in Chapter 11 bankruptcy protection from the Petition Date of November 1, 2020 to October 31, 2021.

Information included herein contains “forward-looking statements” within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual events, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements. The reader is directed to the Company’s various filings with the Securities and Exchange Commission, including without limitation the Company’s Annual Report on Form 10-K, and the “Management's Discussion and Analysis of Financial Condition and Results of Operations” included therein, for a discussion of such risks and uncertainties.

The Company's reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders is as follows:

(in thousands, except per share data)

The Company's reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders is as follows:

(in thousands, except per share data)