CBL & Associates Properties(CBL) - 2021 Q4 - Annual Report

Part I Item 1. Business CBL & Associates Properties, Inc., a REIT, emerged from Chapter 11 bankruptcy, eliminating $1.6 billion in debt and focusing on property transformation, despite significant debt maturities - On November 1, 2021, the company emerged from Chapter 11 bankruptcy, which resulted in the cancellation of prior equity interests and the issuance of new common stock. The reorganization eliminated over $1.6 billion of debt and preferred obligations[20][22][278] - The company has substantial doubt about its ability to continue as a going concern due to $1.2 billion of property-level debt and related obligations maturing or callable within the next twelve months from the financial statement issuance date[23][65] - The company's business model involves owning, developing, acquiring, leasing, and managing a portfolio of regional shopping malls, outlet centers, lifestyle centers, and other properties, primarily located in the southeastern and midwestern United States[25] Top Five Markets by Revenue (FY 2021) | Market | Percentage of Total Revenues | | :--- | :--- | | St. Louis, MO | 7.2% | | Chattanooga, TN | 6.0% | | Lexington, KY | 4.5% | | Laredo, TX | 4.0% | | Fayetteville, NC | 3.4% | - The company's operating strategy is to transform traditional malls into dominant centers with diverse tenants, including non-retail uses like hotels, medical facilities, and offices. This involves redeveloping former anchor spaces and prudently allocating capital through land sales, ground leases, and joint ventures[31] - As of December 31, 2021, the company's management company had 400 full-time and 60 part-time employees. The workforce was 13% racially diverse and 64% female[47] Item 1A. Risk Factors The company faces significant post-bankruptcy risks, including adverse business relationships, internal control weaknesses, and substantial financial risks from high indebtedness and refinancing challenges - The company recently emerged from bankruptcy, which may adversely affect relationships with tenants, suppliers, and employees. Its historical financial information is not indicative of future performance due to significant capital structure changes and the application of fresh-start accounting[61][62] - A material weakness in internal control over financial reporting was identified due to not maintaining a sufficient complement of personnel for accounting and financial reporting requirements. This creates a reasonable possibility of a material misstatement in financial statements[90][349][350] - The company faces substantial risk from its significant indebtedness of approximately $3.17 billion (pro-rata share) as of December 31, 2021. This leverage could impair its ability to obtain additional financing and requires a substantial portion of cash flow for debt service[136][138] - The business is highly susceptible to risks from the retail industry, including tenant bankruptcies, store closings, and competition from online shopping, which could reduce revenues and property values[100][106] - The company's properties are geographically concentrated in the southeastern and midwestern United States, making it vulnerable to economic conditions in these regions. The top five markets accounted for 25.1% of total pro-rata revenues in 2021[171][172] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[192] Item 2. Properties As of December 31, 2021, the company's portfolio comprised 60 properties totaling 45.4 million square feet with an 88% leased rate, and $3.86 billion in mortgage loans outstanding Portfolio Summary (Malls, Lifestyle & Outlet Centers) as of Dec 31, 2021 | Property Type | Number of Properties | Total Center Square Footage | Total In-Line GLA | In-Line Sales per Square Foot | Percentage In-Line GLA Leased | | :--- | :--- | :--- | :--- | :--- | :--- | | Malls | 50 | 39,850,438 | 12,728,398 | $444 | 87% | | Lifestyle Centers | 5 | 4,236,637 | 1,674,902 | $466 | 87% | | Outlet Centers | 5 | 1,266,264 | 1,172,718 | $526 | 94% | | Total | 60 | 45,353,339 | 15,576,018 | $454 | 88% | Mall, Lifestyle Center & Outlet Center Lease Expirations (as of Dec 31, 2021) | Year Ending Dec 31, | Number of Leases Expiring | Annualized Gross Rent (in millions) | GLA of Expiring Leases | Expiring Leases as % of Total Annualized Gross Rent | | :--- | :--- | :--- | :--- | :--- | | 2022 | 659 | $57.6 | 1,724,479 | 13.7% | | 2023 | 786 | $102.1 | 2,797,417 | 24.3% | | 2024 | 597 | $68.9 | 1,969,147 | 16.4% | | 2025 | 348 | $52.6 | 1,217,737 | 12.5% | | Thereafter | 885 | $140.0 | 3,562,212 | 33.2% | - As of December 31, 2021, the properties had a total of 442 Anchors and Junior Anchors, including 52 vacant locations. Key anchors by number of stores include JC Penney (42), Dillard's (36), and Macy's (23)[223] - Total consolidated and unconsolidated debt outstanding as of December 31, 2021, was approximately $3.86 billion, with a pro-rata share of $3.17 billion[230][232] Item 3. Legal Proceedings The company faces a pending securities class action lawsuit alleging false statements, while several shareholder derivative lawsuits were dismissed post-bankruptcy due to claim releases - The company and certain officers/directors are defendants in a consolidated securities class action lawsuit alleging false and misleading statements. A motion to dismiss is pending[123][124][556] - Nine shareholder derivative lawsuits that had been filed against directors and officers have all been voluntarily dismissed after the company's emergence from bankruptcy, as the claims were released by the approved bankruptcy plan[558] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[234] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Upon bankruptcy emergence on November 1, 2021, all prior equity was cancelled, new common stock began trading on NYSE, and dividend payments remained suspended - On the Effective Date of the bankruptcy emergence (November 1, 2021), all old common and preferred stock was cancelled. New common stock was issued to various stakeholders, including previous shareholders, noteholders, and other claimants[237] - The newly issued common stock commenced trading on the NYSE under the symbol 'CBL' on November 2, 2021[237] - Dividend payments on all equity securities were suspended in 2019, and any future dividend policy will be determined by the board of directors based on earnings, liquidity, and REIT requirements[237] Item 6. [Reserved] This item is reserved and contains no information - This item is reserved[238] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The company's 2021 financial results are split into Predecessor and Successor periods due to bankruptcy, showing a combined net loss of $639.1 million from reorganization expenses, with improved operational metrics, but liquidity remains a critical concern due to $1.2 billion in maturing debt - Due to the adoption of fresh start accounting upon bankruptcy emergence, the financial results are presented for two periods in 2021: a ten-month 'Predecessor' period (Jan 1 - Oct 31) and a two-month 'Successor' period (Nov 1 - Dec 31). The combined results are non-GAAP but provide a more meaningful comparison to prior years[240] Combined Financial Results Comparison (in millions) | Metric | Year Ended Dec 31, 2021 (Combined) | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Total Revenues | $576.9 | $575.9 | | Reorganization Items Expense, net | $436.6 | $36.0 | | Net Loss | ($639.1) | ($335.5) | - Same-center Net Operating Income (NOI) increased by 6.3% for the year ended December 31, 2021, compared to the prior year, driven by a $39.0 million increase in revenues partially offset by a $13.2 million increase in operating expenses[269] Portfolio Occupancy Rates | Portfolio | As of Dec 31, 2021 | As of Dec 31, 2020 | | :--- | :--- | :--- | | Total Portfolio | 89.3% | 87.5% | | Malls, Lifestyle & Outlet Centers | 87.6% | 85.8% | | Open-Air Centers | 94.8% | 93.4% | - As of December 31, 2021, the company had $319.5 million in unrestricted cash and U.S. Treasury securities. Its total pro rata share of debt was $3.17 billion[278] Funds from Operations (FFO) Reconciliation Summary (in millions) | Metric | Year Ended Dec 31, 2021 (Combined) | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net loss attributable to common shareholders | ($622.2) | ($332.5) | | FFO allocable to Operating Partnership common unitholders | ($237.7) | $108.2 | | FFO, as adjusted | $349.8 | $140.8 | Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuations, where a 0.5% change in rates on variable-rate debt would impact annual cash flows by $5.1 million and total debt fair value by $4.4 million to $4.5 million - The company is exposed to interest rate risk. A 0.5% increase or decrease in interest rates on its variable-rate debt would change annual cash flows by approximately $5.1 million[342] - A 0.5% change in interest rates would impact the fair value of the company's total debt portfolio by approximately $4.4 million to $4.5 million[343] Item 8. Financial Statements and Supplementary Data This section refers to Item 15 for the company's financial statements and schedules - This item references the Index to Financial Statements and Schedules contained in Item 15[344] Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[344] Item 9A. Controls and Procedures Management concluded that disclosure controls were ineffective due to a material weakness in internal control over financial reporting, stemming from insufficient accounting personnel, with a remediation plan underway - Management concluded that the company's disclosure controls and procedures were not effective as of the end of the period covered by this report[347] - A material weakness was identified in internal control over financial reporting because the company did not maintain a sufficient complement of personnel commensurate with its accounting and financial reporting requirements, partly due to turnover[349][350] - The company's remediation plan includes hiring additional personnel and utilizing external parties to assist with reporting requirements. The plan is in the process of being implemented[353] Item 9B. Other Information The company reports no other information for this item - None[361] Part III Items 10-14 Information for Items 10 through 14, covering governance, executive compensation, and security ownership, is incorporated by reference from the company's 2022 proxy statement - Item 10 (Directors, Executive Officers and Corporate Governance) is incorporated by reference from the 2022 proxy statement[364] - Item 11 (Executive Compensation) is incorporated by reference from the 2022 proxy statement[366] - Item 12 (Security Ownership) and Item 13 (Certain Relationships and Related Transactions) are incorporated by reference from the 2022 proxy statement[367][368] - Item 14 (Principal Accounting Fees and Services) is incorporated by reference from the 2022 proxy statement[369] Part IV Item 15. Exhibits, Financial Statement Schedules This section contains the company's consolidated financial statements, auditor's report, and detailed financial schedules, including a critical audit matter on Fresh Start Accounting's fair value estimations - This section includes the consolidated financial statements and the report from the independent registered public accounting firm, Deloitte & Touche LLP[372][375] - The auditor's report highlights the adoption of fresh-start accounting upon emergence from bankruptcy as a key aspect of the financial statements, noting that carrying values are not comparable with prior periods[377] - A critical audit matter identified was the application of Fresh Start Accounting, specifically the significant estimation uncertainty in determining the fair value of real estate assets using assumptions like terminal capitalization rates and discount rates[379][381] - The section includes Schedule III (Real Estate and Accumulated Depreciation) and Schedule IV (Mortgage Loans on Real Estate), providing detailed supporting data for the financial statements[372] - An index of all exhibits filed with the Form 10-K is provided, including governance documents, debt agreements, and executive compensation plans[623] Item 16. Form 10-K Summary The company reports no information for this item - None[372]