CBL & Associates Properties(CBL) - 2022 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) This section presents unaudited financials reflecting fresh start accounting post-bankruptcy emergence Condensed Consolidated Balance Sheets ASSETS (In thousands) | ASSETS (In thousands) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Net investment in real estate assets | $1,699,254 | $1,769,115 | | Cash and cash equivalents | $177,065 | $169,554 | | Available-for-sale securities - at fair value | $150,063 | $149,996 | | Total assets | $2,774,542 | $2,945,979 | | LIABILITIES AND EQUITY (In thousands) | | | | Mortgage and other indebtedness, net | $2,035,389 | $1,813,209 | | 10% senior secured notes - at fair value | — | $395,395 | | Total liabilities | $2,312,917 | $2,544,879 | | Total shareholders' equity | $464,313 | $396,199 | | Total equity | $461,625 | $401,100 | | Total liabilities and equity | $2,774,542 | $2,945,979 | - Total assets decreased from $2,945,979 thousand as of December 31, 2021, to $2,774,542 thousand as of June 30, 2022[8] - Total liabilities decreased from $2,544,879 thousand as of December 31, 2021, to $2,312,917 thousand as of June 30, 2022[8] Condensed Consolidated Statements of Operations Three Months Ended June 30 | (In thousands, except per share data) | Three Months Ended June 30, 2022 (Successor) | Three Months Ended June 30, 2021 (Predecessor) | | :--- | :--- | :--- | | Total revenues | $137,018 | $136,561 | | Total expenses | $(129,743) | $(102,629) | | Total other income (expenses) | $(51,080) | $(43,493) | | Net loss | $(43,805) | $(9,561) | | Net loss attributable to common shareholders | $(41,598) | $(8,882) | | Basic and diluted net loss per share | $(1.34) | $(0.05) | Six Months Ended June 30 | (In thousands, except per share data) | Six Months Ended June 30, 2022 (Successor) | Six Months Ended June 30, 2021 (Predecessor) | | :--- | :--- | :--- | | Total revenues | $277,120 | $269,745 | | Total expenses | $(265,024) | $(268,811) | | Total other income (expenses) | $(99,124) | $(38,775) | | Net loss | $(87,028) | $(37,841) | | Net loss attributable to common shareholders | $(82,320) | $(35,645) | | Basic and diluted net loss per share | $(2.83) | $(0.18) | - Net loss attributable to common shareholders increased significantly from $(8,882) thousand in Q2 2021 (Predecessor) to $(41,598) thousand in Q2 2022 (Successor)[13] - For the six months ended June 30, net loss attributable to common shareholders increased from $(35,645) thousand in 2021 (Predecessor) to $(82,320) thousand in 2022 (Successor)[18] Condensed Consolidated Statements of Comprehensive Loss Three Months Ended June 30 | (In thousands) | Three Months Ended June 30, 2022 (Successor) | Three Months Ended June 30, 2021 (Predecessor) | | :--- | :--- | :--- | | Net loss | $(43,805) | $(9,561) | | Other comprehensive loss: Unrealized loss on available-for-sale securities | $(33) | $(27) | | Comprehensive loss | $(43,838) | $(9,588) | | Comprehensive loss attributable to common shareholders | $(41,631) | $(8,909) | Six Months Ended June 30 | (In thousands) | Six Months Ended June 30, 2022 (Successor) | Six Months Ended June 30, 2021 (Predecessor) | | :--- | :--- | :--- | | Net loss | $(87,028) | $(37,841) | | Other comprehensive loss: Unrealized gain (loss) on available-for-sale securities | $9 | $(24) | | Comprehensive loss | $(87,019) | $(37,865) | | Comprehensive loss attributable to common shareholders | $(82,311) | $(35,669) | Condensed Consolidated Statements of Equity Equity Changes (In thousands) | (In thousands) | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Shareholders' Equity | Noncontrolling Interests | Total Equity | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance, December 31, 2021 (Successor) | $21 | $547,726 | $(3) | $(151,545) | $396,199 | $4,901 | $401,100 | | Net loss | — | — | — | $(40,722) | $(40,722) | $(2,501) | $(43,223) | | Conversion of exchangeable notes into common stock | $11 | $152,527 | — | — | $152,538 | — | $152,538 | | Balance, June 30, 2022 (Successor) | $32 | $705,884 | $6 | $(241,609) | $464,313 | $(2,688) | $461,625 | - Total equity increased from $401,100 thousand as of December 31, 2021, to $461,625 thousand as of June 30, 2022, primarily due to the conversion of exchangeable notes into common stock[24] - Common stock shares issued and outstanding increased from 20,774,716 in 2021 to 31,814,178 in 2022[8] Condensed Consolidated Statements of Cash Flows Six Months Ended June 30 | (In thousands) | Six Months Ended June 30, 2022 (Successor) | Six Months Ended June 30, 2021 (Predecessor) | | :--- | :--- | :--- | | Net cash provided by operating activities | $88,089 | $130,497 | | Net cash provided by investing activities | $2,690 | $44,188 | | Net cash used in financing activities | $(68,119) | $(24,220) | | Net change in cash, cash equivalents and restricted cash | $22,660 | $150,465 | | Cash, cash equivalents and restricted cash, end of period | $258,858 | $272,187 | - Net cash provided by operating activities decreased by $42,408 thousand from $130,497 thousand (Predecessor) to $88,089 thousand (Successor) for the six months ended June 30[26] - Net cash provided by investing activities decreased significantly from $44,188 thousand (Predecessor) to $2,690 thousand (Successor) for the six months ended June 30[26] - Net cash used in financing activities increased from $(24,220) thousand (Predecessor) to $(68,119) thousand (Successor) for the six months ended June 30[26] Notes to Unaudited Condensed Consolidated Financial Statements Note 1 – Organization and Basis of Presentation - CBL & Associates Properties, Inc is a self-managed, self-administered REIT engaged in the ownership, development, acquisition, leasing, management, and operation of various retail and other properties primarily in the southeastern and midwestern United States[29] - The company conducts substantially all its business through CBL & Associates Limited Partnership (the "Operating Partnership"), which is a variable interest entity (VIE)[29] - The company adopted fresh start accounting upon emergence from Chapter 11 bankruptcy on November 1, 2021, resulting in a new basis of accounting and making financial statements before and after this date (Predecessor vs Successor) not comparable[30] Property Portfolio | Property Type | Consolidated Properties | Unconsolidated Properties | Total | | :--- | :--- | :--- | :--- | | Malls | 41 | 9 | 50 | | Outlet Centers | 2 | 3 | 5 | | Lifestyle Centers | 4 | 1 | 5 | | Open-Air Centers | 21 | 8 | 29 | | Other | 4 | 1 | 5 | | Total | 72 | 22 | 94 | Note 2 – Summary of Significant Accounting Policies - Receivables are assessed for collectability based on management's best estimate, considering disputes, historical collection levels, and current economic trends[34] - For the three-month Successor period ended June 30, 2022, there was a reversal of $1,831 thousand related to uncollectable revenues, including $920 thousand for straight-line rent receivables[34] - For the three-month Predecessor period ended June 30, 2021, revenues were reduced by $6,704 thousand associated with uncollectable revenues, including $2,623 thousand for straight-line rent receivables[34] Note 3 – Revenues - Total revenues for the three months ended June 30, 2022, increased slightly to $137,018 thousand from $136,561 thousand in the prior-year period[35] - Total revenues for the six months ended June 30, 2022, increased to $277,120 thousand from $269,745 thousand in the prior-year period[37] Revenue by Source - Three Months Ended June 30 | Revenue Source (In thousands) | Three Months Ended June 30, 2022 (Successor) | Three Months Ended June 30, 2021 (Predecessor) | | :--- | :--- | :--- | | Rental revenues | $131,832 | $131,316 | | Operating expense reimbursements | $1,929 | $1,674 | | Management, development and leasing fees | $1,786 | $1,449 | | Marketing revenues | $759 | $520 | | Other revenues | $712 | $1,602 | | Total revenues | $137,018 | $136,561 | Revenue by Source - Six Months Ended June 30 | Revenue Source (In thousands) | Six Months Ended June 30, 2022 (Successor) | Six Months Ended June 30, 2021 (Predecessor) | | :--- | :--- | :--- | | Rental revenues | $267,164 | $259,491 | | Operating expense reimbursements | $4,118 | $3,830 | | Management, development and leasing fees | $3,555 | $3,108 | | Marketing revenues | $744 | $821 | | Other revenues | $1,539 | $2,495 | | Total revenues | $277,120 | $269,745 | Note 4 – Leases Rental Revenue Components - Three Months Ended June 30 | Rental Revenue Components (In thousands) | Three Months Ended June 30, 2022 (Successor) | Three Months Ended June 30, 2021 (Predecessor) | | :--- | :--- | :--- | | Fixed lease payments | $96,733 | $69,543 | | Variable lease payments | $35,099 | $61,773 | | Total rental revenues | $131,832 | $131,316 | Rental Revenue Components - Six Months Ended June 30 | Rental Revenue Components (In thousands) | Six Months Ended June 30, 2022 (Successor) | Six Months Ended June 30, 2021 (Predecessor) | | :--- | :--- | :--- | | Fixed lease payments | $192,381 | $140,770 | | Variable lease payments | $74,783 | $118,721 | | Total rental revenues | $267,164 | $259,491 | Undiscounted Future Fixed Lease Payments | Undiscounted Future Fixed Lease Payments (In thousands) | Operating Leases | | :--- | :--- | | Years Ending December 31, 2022 (1) | $182,052 | | 2023 | $324,701 | | 2024 | $265,550 | | 2025 | $206,707 | | 2026 | $153,831 | | 2027 | $104,318 | | Thereafter | $227,526 | | Total undiscounted lease payments | $1,464,685 | Note 5 – Fair Value Measurements - The company categorizes financial assets and liabilities at fair value into a three-level hierarchy (Level 1, 2, 3) based on the observability of valuation inputs[39] - The estimated fair value of mortgage and other indebtedness was $1,886,786 thousand as of June 30, 2022, calculated using Level 2 inputs[39] - The company completed the redemption of all outstanding 10% senior secured notes on June 7, 2022[39] - During the six months ended June 30, 2022, the Successor Company adjusted the negative equity in Greenbrier Mall to zero upon deconsolidation, representing its estimated fair value[44] - During the three and six months ended June 30, 2022, the Successor Company sold an outparcel at the Pavilion at Port Orange for $1,660 thousand, resulting in a loss on sale of $252 thousand[44] Available-for-Sale Securities | AFS Security (In thousands) | Amortized Cost | Allowance for credit losses | Total unrealized gain | Fair value as of June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | U.S. Treasury securities | $150,057 | $— | $6 | $150,063 | Impairment Losses | Impairment Date | Property | Location | Segment Classification | Loss on Impairment | Fair Value | | :--- | :--- | :--- | :--- | :--- | :--- | | March 2021 | Eastland Mall | Bloomington, IL | Malls | $13,243 | $10,700 | | March 2021 | Old Hickory Mall | Jackson, TN | Malls | $20,149 | $12,400 | | March 2021 | Stroud Mall | Stroudsburg, PA | Malls | $23,790 | $15,400 | | Total | | | | $57,182 | $38,500 | Note 6 – Dispositions - The dispositions described do not meet the criteria for classification as discontinued operations and are not considered significant[47] - During the six months ended June 30, 2022, the Successor Company deconsolidated Greenbrier Mall due to loss of control when the property was placed in receivership[48] - During the six months ended June 30, 2021, the Predecessor Company deconsolidated Asheville Mall and Park Plaza[49] Note 7 – Unconsolidated Affiliates and Noncontrolling Interests - The company accounts for investments in joint ventures using the equity method due to substantive participating rights held by other partners, despite majority ownership[51][52] - As of June 30, 2022, the company had investments in 26 entities accounted for using the equity method, with ownership interests ranging from 20% to 100%[52] - In March 2022, the company deconsolidated Greenbrier Mall, recognizing a gain on deconsolidation of $36,250 thousand for the six months ended June 30, 2022[54] Unconsolidated Affiliates Balance Sheet Summary | (In thousands) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Net investment in real estate assets | $1,248,641 | $1,437,068 | | Total assets | $1,453,793 | $1,625,751 | | Mortgage and other indebtedness, net | $1,501,971 | $1,452,794 | | Total liabilities | $1,567,502 | $1,517,392 | | Total owners' equity (deficit) | $(113,709) | $108,359 | Unconsolidated Affiliates Operations Summary | (In thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total revenues | $65,551 | $57,747 | | Net income (loss) | $12,384 | $(9,698) | | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | Total revenues | $129,288 | $116,503 | | Net income (loss) | $33,062 | $(13,019) | Note 8 – Mortgage and Other Indebtedness, Net - CBL & Associates Properties, Inc has no direct indebtedness; all company debt is held by its consolidated subsidiaries[61] - The company completed the redemption of all $395,000 thousand outstanding senior secured notes in June 2022, eliminating the recourse guaranty[66] - In February 2022, 10,982,795 shares of common stock were issued to holders of exchangeable notes, and all exchangeable notes were cancelled[69] Debt Summary | Debt Type (In thousands) | June 30, 2022 Amount | June 30, 2022 Weighted-Average Interest Rate | December 31, 2021 Amount | December 31, 2021 Weighted-Average Interest Rate | | :--- | :--- | :--- | :--- | :--- | | Fixed-rate debt | $881,513 | 4.90% | $1,066,927 | 5.32% | | Variable-rate debt | $1,270,871 | 4.48% | $947,002 | 3.71% | | Total debt | $2,152,384 | 4.65% | $2,013,929 | 4.56% | | Unamortized deferred financing costs | $(16,028) | | $(1,567) | | | Debt discounts | $(100,967) | | $(199,153) | | | Total mortgage and other indebtedness, net | $2,035,389 | | $1,813,209 | | Scheduled Principal Payments | Scheduled Principal Payments (In thousands) | Total | | :--- | :--- | | 2022 (1) | $162,736 | | 2023 | $220,033 | | 2024 | $108,423 | | 2025 | $790,796 | | 2026 | $281,741 | | 2027 | $360,896 | | Thereafter | $62,855 | | Total | $1,987,480 | | Principal balance of loans with maturity date prior to June 30, 2022 (2) | $164,904 | | Total mortgage and other indebtedness | $2,152,384 | Note 9 – Segment Information - The company measures performance and allocates resources based on property type, including Malls and All Other[71][74][77] Segment Performance - Three Months Ended June 30 | (In thousands) | Malls (1) | All Other (2) | Total | | :--- | :--- | :--- | :--- | | Three Months Ended June 30, 2022 (Successor) | | Revenues | $117,191 | $19,827 | $137,018 | | Property operating expenses | $(40,708) | $(5,088) | $(45,796) | | Segment profit (loss) | $37,792 | $(2,518) | $35,274 | | Three Months Ended June 30, 2021 (Predecessor) | | Revenues | $125,504 | $11,057 | $136,561 | | Property operating expenses | $(41,132) | $(2,385) | $(43,517) | | Segment profit | $62,724 | $7,841 | $70,565 | Segment Performance - Six Months Ended June 30 | (In thousands) | Malls (1) | All Other (2) | Total | | :--- | :--- | :--- | :--- | | Six Months Ended June 30, 2022 (Successor) | | Revenues | $238,619 | $38,501 | $277,120 | | Property operating expenses | $(85,392) | $(8,749) | $(94,141) | | Segment profit (loss) | $43,377 | $(6,989) | $36,388 | | Six Months Ended June 30, 2021 (Predecessor) | | Revenues | $244,832 | $24,913 | $269,745 | | Property operating expenses | $(86,727) | $(5,924) | $(92,651) | | Segment profit | $113,287 | $16,899 | $130,186 | Total Assets by Segment | Total Assets (In thousands) | Malls (1) | All Other (2) | Total | | :--- | :--- | :--- | :--- | | June 30, 2022 | $1,792,415 | $982,127 | $2,774,542 | | December 31, 2021 | $1,961,061 | $984,918 | $2,945,979 | Note 10 – Earnings per Share - Basic EPS is calculated by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding[78] - Due to net losses for the three and six months ended June 30, 2022, contingently issuable shares were excluded from diluted EPS calculation as they were anti-dilutive[78] - For the three months ended June 30, 2022, diluted EPS would have been based on 31,159,633 shares if net income was reported, including 187,121 contingently issuable shares[78] Note 11 – Contingencies - The company is involved in securities class action litigation, with the court dismissing the company but not individual defendants on May 3, 2022[81] - Management records a liability for litigation if an unfavorable outcome is probable and the loss can be reasonably estimated; otherwise, it discloses the nature of the litigation[81] - The maximum potential exposure to loss from environmental matters is not expected to be material, with a master insurance policy providing coverage up to $40,000 thousand per occurrence[82] Debt Guarantees for Unconsolidated Affiliates | Unconsolidated Affiliate | Company's Ownership Interest | Outstanding Balance | Percentage Guaranteed by the Operating Partnership | Maximum Guaranteed Amount | Debt Maturity Date | | :--- | :--- | :--- | :--- | :--- | :--- | | West Melbourne I, LLC - Phase I | 50% | $38,331 | 50% | $19,165 | Feb-2025 | | West Melbourne I, LLC - Phase II | 50% | $13,579 | 50% | $6,789 | Feb-2025 | | Port Orange I, LLC | 50% | $50,547 | 50% | $25,274 | Feb-2025 | | Ambassador Infrastructure, LLC | 65% | $7,001 | 100% | $7,001 | Mar-2025 | | Shoppes at Eagle Point, LLC | 50% | $39,961 | — | $— | May-2032 | | Atlanta Outlet JV, LLC | 50% | $4,406 | 100% | $4,406 | Nov-2023 | | Louisville Outlet Shoppes, LLC | 50% | $7,797 | 100% | $7,797 | Oct-2022 | | Total guaranty liability | | | | | | Note 12 – Share-Based Compensation - The CBL & Associates Properties, Inc 2021 Equity Incentive Plan (EIP) authorizes grants of equity awards, with 3,222,222 shares initially available[86] - Share-based compensation expense for restricted stock awards was $1,696 thousand for the three months and $3,318 thousand for the six months ended June 30, 2022 (Successor)[87] - In February 2022, the company issued 727,223 Performance Stock Units (PSUs) to senior officers, with a weighted-average grant date fair value of $24.67[91] - Unrecognized compensation cost for nonvested restricted stock awards was $19,582 thousand as of June 30, 2022, to be recognized over a weighted-average period of 3.3 years[89] Nonvested Restricted Stock Awards | Nonvested Restricted Stock Awards | Shares | Weighted-Average Grant-Date Fair Value Per Share | | :--- | :--- | :--- | | Nonvested at January 1, 2022 | 784,999 | $27.57 | | Granted | 56,667 | $27.49 | | Nonvested at June 30, 2022 | 841,666 | $27.56 | Note 13 – Noncash Investing and Financing Activities Noncash Activities Summary | (In thousands) | Six Months Ended June 30, 2022 (Successor) | Six Months Ended June 30, 2021 (Predecessor) | | :--- | :--- | :--- | | Additions to real estate assets accrued but not yet paid | $10,195 | $8,332 | | Accrued dividends and distributions payable | $7,956 | $— | | Deconsolidation upon loss of control: Decrease in real estate assets | $(18,810) | $(84,860) | | Decrease in mortgage and other indebtedness | $56,226 | $134,354 | | Decrease in operating assets and liabilities | $5,686 | $5,808 | | Decrease in intangible lease and other assets | $(6,852) | $(171) | Note 14 – Subsequent Events - In July 2022, the company redeemed $150,019 thousand in U.S Treasury securities and purchased $249,712 thousand in new U.S Treasury securities[95] - In July 2022, the company purchased the JC Penney parcel at CoolSprings Galleria for a gross purchase price of $6,040 thousand[95] - In August 2022, the lender foreclosed on the loan secured by Asheville Mall, and the loan secured by Parkdale Mall and Crossing was extended to March 2026[95] - In August 2022, the board of directors declared a dividend of $0.25 per common share for the quarter ending September 30, 2022[95] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results post-bankruptcy, highlighting property transformation and debt reduction strategies - The company adopted fresh start accounting upon emergence from bankruptcy, making financial results for 2021 (Predecessor) not comparable to 2022 (Successor)[99] - The company is a self-managed, self-administered REIT focused on owning, developing, acquiring, leasing, managing, and operating various retail and other properties[100] - The company's strategy focuses on transforming properties into dominant centers with a mix of retail, service, dining, entertainment, and non-retail uses[102] - Net loss attributable to common shareholders for the three months ended June 30, 2022, was $41.6 million, compared to $8.9 million in the prior-year period[100] - Net loss attributable to common shareholders for the six months ended June 30, 2022, was $82.3 million, compared to $35.6 million in the prior-year period[100] Executive Overview - The company's portfolio generated improved lease spreads for new leases and significant sequential and year-over-year occupancy growth[100] - Over $663.0 million in financings were closed during the quarter, funding the full redemption of all $395.0 million of outstanding senior secured notes[100] - The company announced the re-start of its regular quarterly cash dividend program[100] Financial Highlights | Financial Metric (In millions) | Three Months Ended June 30, 2022 (Successor) | Three Months Ended June 30, 2021 (Predecessor) | | :--- | :--- | :--- | | Net loss | $(43.8) | $(9.6) | | Net loss attributable to common shareholders | $(41.6) | $(8.9) | | Six Months Ended June 30, 2022 (Successor) | Six Months Ended June 30, 2021 (Predecessor) | | Net loss | $(87.0) | $(37.8) | | Net loss attributable to common shareholders | $(82.3) | $(35.6) | COVID-19 - The company implemented strict procedures and guidelines for employees, tenants, and visitors based on health agency recommendations in response to the COVID-19 pandemic[103] - As of the report date, government-imposed capacity restrictions are no longer in place in the company's markets[103] Results of Operations - Since January 1, 2021, the company has deconsolidated four properties and disposed of six properties[104] Deconsolidations | Deconsolidations | Location | Date of Deconsolidation | | :--- | :--- | :--- | | Asheville Mall | Asheville, NC | January 2021 | | Park Plaza | Little Rock, AR | March 2021 | | EastGate Mall | Cincinnati, OH | December 2021 | | Greenbrier Mall | Chesapeake, VA | March 2022 | Dispositions | Dispositions | Location | Date of Sale | | :--- | :--- | :--- | | The Residences at Pearland Town Center | Pearland, TX | October 2021 | | EastGate Mall Self Storage | Cincinnati, OH | November 2021 | | Hamilton Place Self Storage | Chattanooga, TN | November 2021 | | Mid Rivers Mall Self Storage | St. Peters, MO | November 2021 | | Parkdale Mall Self Storage | Beaumont, TX | November 2021 | | Springs at Port Orange | Port Orange, FL | December 2021 | Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021 - Rental revenues from Comparable Properties increased due to a significantly higher estimate of uncollectable revenues in the prior year and prior year rent concessions[106] - Property operating expenses at Comparable Properties increased due to actions taken in the prior year to reduce expenses post-COVID-19 and increases in utility rates[106] - Interest expense increased by $32.8 million, primarily due to debt discount accretion and recognition of interest expense on secured term loans and notes[106] Q2 Operations Comparison | (In thousands) | Successor Three Months Ended June 30, 2022 | Predecessor Three Months Ended June 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Total revenues | $137,018 | $136,561 | $457 | | Total operating expenses | $(129,743) | $(102,629) | $(27,114) | | Interest expense | $(55,117) | $(22,299) | $(32,818) | | Equity in earnings (losses) of unconsolidated affiliates | $2,039 | $(4,275) | $6,314 | Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021 - Rental revenues from Comparable Properties increased due to higher uncollectable revenue estimates in the prior year and prior year rent concessions[109] - Interest expense increased by $99.3 million, primarily due to debt discount accretion of $98.2 million and recognition of interest expense on new corporate debt[112] - Gain on deconsolidation decreased by $18.9 million, with $36.3 million recorded in 2022 for one mall compared to $55.1 million in 2021 for two malls[112] H1 Operations Comparison | (In thousands) | Successor Six Months Ended June 30, 2022 | Predecessor Six Months Ended June 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Total revenues | $277,120 | $269,745 | $7,375 | | Total operating expenses | $(265,024) | $(268,811) | $3,787 | | Interest expense | $(145,776) | $(46,429) | $(99,347) | | Gain on deconsolidation | $36,250 | $55,131 | $(18,881) | | Reorganization items, net | $(958) | $(40,006) | $39,048 | | Equity in earnings (losses) of unconsolidated affiliates | $10,606 | $(7,351) | $17,957 | Non-GAAP Measure - Same-center Net Operating Income - NOI is defined as property operating revenues less property operating expenses, computed based on the Operating Partnership's pro rata share of both consolidated and unconsolidated properties[113] - Same-center NOI excludes certain items like lease termination income and straight-line rent adjustments to enhance comparability[113] Same-center NOI Reconciliation - Three Months Ended June 30 | (In thousands) | Successor Three Months Ended June 30, 2022 | Predecessor Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net loss | $(43,805) | $(9,561) | | Operating Partnership's share of property NOI | $111,924 | $109,645 | | Non-comparable NOI | $(4,566) | $(3,962) | | Total same-center NOI | $107,358 | $105,683 | Same-center NOI Reconciliation - Six Months Ended June 30 | (In thousands) | Successor Six Months Ended June 30, 2022 | Predecessor Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net loss | $(87,028) | $(37,841) | | Operating Partnership's share of property NOI | $226,580 | $213,565 | | Non-comparable NOI | $(9,194) | $(9,738) | | Total same-center NOI | $217,386 | $203,827 | Inline and Adjacent Freestanding Store Sales - Inline and adjacent freestanding store sales include reporting mall, lifestyle center, and outlet center tenants of 10,000 square feet or less[120] Same-Center Sales Per Square Foot | Sales Metric | Successor Sales Per Square Foot for the Trailing Twelve Months Ended June 30, 2022 | Predecessor Sales Per Square Foot for the Trailing Twelve Months Ended June 30, 2021 | % Change | | :--- | :--- | :--- | :--- | | Mall, Lifestyle Center and Outlet Center same-center sales per square foot | $443 | $417 | 6.2% | Occupancy - Total portfolio occupancy increased from 87.0% in the Predecessor period to 89.5% in the Successor period[120] Occupancy Rates | Occupancy Metric | Successor Six Months Ended June 30, 2022 | Predecessor Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total portfolio | 89.5% | 87.0% | | Malls, Lifestyle Centers and Outlet Centers: Total malls | 87.9% | 85.2% | | Malls, Lifestyle Centers and Outlet Centers: Total lifestyle centers | 89.4% | 83.9% | | Malls, Lifestyle Centers and Outlet Centers: Total outlet centers | 87.5% | 86.2% | | Total same-center malls, lifestyle centers and outlet centers | 88.0% | 85.5% | | All Other: Total open-air centers | 94.4% | 92.2% | | All Other: Total other | 91.7% | 98.7% | Leasing Leased Square Feet - Three Months Ended June 30 | Leased Square Feet (In thousands) | Successor Three Months Ended June 30, 2022 | Predecessor Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Operating portfolio: New leases | 395,752 | 210,225 | | Operating portfolio: Renewal leases | 633,563 | 693,787 | | Development portfolio: New leases | — | 56,759 | | Total leased | 1,029,315 | 960,771 | Leased Square Feet - Six Months Ended June 30 | Leased Square Feet (In thousands) | Successor Six Months Ended June 30, 2022 | Predecessor Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Operating portfolio: New leases | 630,642 | 354,422 | | Operating portfolio: Renewal leases | 1,450,369 | 1,292,105 | | Development portfolio: New leases | — | 60,059 | | Total leased | 2,081,011 | 1,706,586 | Average Annual Base Rents Per Space (PSF) | Average Annual Base Rents Per Space (PSF) | Successor Six Months Ended June 30, 2022 | Predecessor Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Total portfolio | $24.99 | $25.52 | | Total same-center malls, lifestyle centers and outlet centers | $29.43 | $30.38 | | Total malls | $30.02 | $31.10 | | Total lifestyle centers | $27.88 | $27.05 | | Total outlet centers | $26.51 | $26.32 | | Total open-air centers | $15.10 | $15.15 | | Total other | $19.31 | $19.26 | Comparable Small Shop Space Leasing Activity | Comparable Small Shop Space Leasing Activity (Commencement 2022) | Number of Leases | Square Feet | Initial Rent PSF | Initial Rent Spread | Average Rent Spread | | :--- | :--- | :--- | :--- | :--- | :--- | | New leases | 72 | 198,699 | $37.00 | $(1.05) (-2.8%) | $0.52 (1.4%) | | Renewal leases | 408 | 1,283,061 | $30.02 | $(3.29) (-9.9%) | $(3.09) (-9.3%) | | Total | 480 | 1,481,760 | $30.95 | $(3.00) (-8.8%) | $(2.61) (-7.7%) | Liquidity and Capital Resources - As of June 30, 2022, the company had $327.1 million available in unrestricted cash and U.S Treasury securities[125] - Total pro rata share of debt was $2,959.0 million at June 30, 2022[125] - The company had $81.8 million in restricted cash at June 30, 2022, held in escrow accounts[125] - The company intends to refinance and/or extend maturity dates for $791.7 million of mortgage notes payable maturing or callable within the next 12 months[129] Cash Flows - Operating, Investing and Financing Activities - Cash provided by operating activities decreased primarily due to increased interest expense on new corporate debt and higher general and administrative expenses[133] - Cash provided by investing activities decreased due to fewer net redemptions of U.S Treasury securities and lower proceeds from real estate sales[134] - Cash used in financing activities increased due to principal payments on the secured term loan and costs for new financings[135] Cash Flow Summary | (In thousands) | Successor Six Months Ended June 30, 2022 | Predecessor Six Months Ended June 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $88,089 | $130,497 | $(42,408) | | Net cash provided by investing activities | $2,690 | $44,188 | $(41,498) | | Net cash used in financing activities | $(68,119) | $(24,220) | $(43,899) | | Net cash flows | $22,660 | $150,465 | $(127,805) | Debt - As of June 30, 2022, the company's total outstanding debt was $2,959.0 million, comprising $2,074.6 million in non-recourse debt and $884.4 million in recourse debt[137] - The weighted-average remaining term of total debt was 3.0 years at June 30, 2022, down from 3.3 years at December 31, 2021[139] - Variable-rate debt constituted 38.8% of total debt at June 30, 2022, an increase from 32.8% at December 31, 2021[139] Pro Rata Share of Debt | Debt Type (In thousands) | Consolidated | Noncontrolling Interests | Other Debt (1) | Unconsolidated Affiliates | Total | Weighted-Average Interest Rate (2) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Fixed-rate debt | $881,513 | $(32,771) | $153,719 | $627,434 | $1,629,895 | 4.67% | | Variable-rate debt | $1,270,871 | $(13,597) | $— | $71,786 | $1,329,060 | 4.44% | | Total debt | $2,152,384 | $(46,368) | $153,719 | $699,220 | $2,958,955 | 4.57% | | Unamortized deferred financing costs | $(16,028) | $92 | $— | $(2,490) | $(18,426) | | | Debt discounts (4) | $(100,967) | $15,424 | $— | $— | $(85,543) | | | Total net mortgage and other indebtedness | $2,035,389 | $(30,852) | $153,719 | $696,730 | $2,854,986 | | Equity - In February 2022, 10,982,795 shares of common stock were issued to holders of exchangeable notes, leading to their cancellation[140] - In June 2022, the board of directors established a regular quarterly dividend of $0.25 per common share[140] - The company filed a resale registration statement on Form S-11 on May 6, 2022, for up to 12,380,260 shares of common stock by selling shareholders[141] Capital Expenditures - Total capital expenditures for the six months ended June 30, 2022, increased to $13,974 thousand from $7,357 thousand in the prior-year period[145] Capital Expenditures - Three Months Ended June 30 | Capital Expenditures (In thousands) | Successor Three Months Ended June 30, 2022 | Predecessor Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Tenant allowances (1) | $4,173 | $3,375 | | Total deferred maintenance | $3,257 | $2,147 | | Capitalized overhead | $374 | $209 | | Capitalized interest | $147 | $13 | | Total capital expenditures | $7,951 | $5,744 | Capital Expenditures - Six Months Ended June 30 | Capital Expenditures (In thousands) | Successor Six Months Ended June 30, 2022 | Predecessor Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Tenant allowances (1) | $7,040 | $4,252 | | Total deferred maintenance | $5,736 | $2,606 | | Capitalized overhead | $823 | $467 | | Capitalized interest | $375 | $32 | | Total capital expenditures | $13,974 | $7,357 | Developments Projects Opened in 2022 | Property | Location | CBL Ownership Interest | Total Project Square Feet | Total Cost (1) | CBL's Share of Cost to Date (2) | 2022 Cost | Opening Date | Initial Unleveraged Yield | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Kirkwood Mall - Five Guys, Blaze Pizza, Thrifty White, Pancheros, Chick-fil-A | Bismarck, ND | 100% | 15,275 | $7,976 | $6,377 | $2,019 | Q2 '22 | 8.9% | Projects Under Development | Property | Location | CBL Ownership Interest | Total Project Square Feet | Total Cost (1) | Cost to Date (2) | 2022 Cost | Expected Opening Date | Initial Unleveraged Yield | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Dakota Square Herberger's Redevelopment - Five Below | Minot, ND | 100% | 9,502 | $1,834 | $481 | $481 | Fall-22 | 8.7% | Off-Balance Sheet Arrangements - The company has ownership interests in 26 unconsolidated affiliates, accounted for using the equity method[148] - Joint ventures are considered for opportunities where third parties lack capital or expertise, or to capitalize on property value by selling interests to third parties[148] - The Operating Partnership may guarantee joint venture debt to obtain lower funding costs[148] Critical Accounting Policies - The preparation of financial statements requires management to make estimates and assumptions that affect reported financial statements and disclosures[151] - There have been no material changes to critical accounting policies and estimates during the six months ended June 30, 2022[151] Recent Accounting Pronouncements - Information on recently issued accounting pronouncements is provided in Note 2 to the condensed consolidated financial statements[152] Non-GAAP Measure - Funds from Operations - FFO is a non-GAAP measure of operating performance, defined by NAREIT as net income (loss) excluding certain non-cash items like depreciation and gains/losses on property sales[152] - FFO allocable to Operating Partnership common unitholders for Q2 2022 was $30.9 million, a decrease of $19.9 million from $50.8 million in the prior-year period[154] - Adjusted FFO allocable to Operating Partnership common unitholders for Q2 2022 was $59.9 million, a decrease of $19.6 million from $79.5 million in the prior-year period[154] FFO Reconciliation - Three Months Ended June 30 | (In thousands) | Successor Three Months Ended June 30, 2022 | Predecessor Three Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net loss attributable to common shareholders | $(41,598) | $(8,882) | | Depreciation and amortization expense of consolidated properties | $64,476 | $47,499 | | FFO allocable to Operating Partnership common unitholders | $30,908 | $50,793 | | FFO allocable to Operating Partnership common unitholders, as adjusted | $59,869 | $79,499 | FFO Reconciliation - Six Months Ended June 30 | (In thousands) | Successor Six Months Ended June 30, 2022 | Predecessor Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net loss attributable to common shareholders | $(82,320) | $(35,645) | | Depreciation and amortization expense of consolidated properties | $133,419 | $95,611 | | FFO allocable to Operating Partnership common unitholders | $65,908 | $141,035 | | FFO allocable to Operating Partnership common unitholders, as adjusted | $117,347 | $148,155 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to market risks, primarily focusing on interest rate risk - A 0.5% increase or decrease in interest rates on variable-rate debt would increase or decrease annual cash flows by approximately $6.6 million[156] - A 0.5% increase in interest rates would decrease the fair value of debt by approximately $13.1 million, while a 0.5% decrease would increase it by approximately $14.0 million[156] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and the remediation of a material weakness - The company's disclosure controls and procedures were evaluated and concluded to be effective as of June 30, 2022[159] - A previously reported material weakness in internal control over financial reporting, related to insufficient accounting personnel, has been remediated as of June 30, 2022[160] - Remediation steps included evaluating responsibility assignments, hiring additional accounting personnel, and designing a specific quarterly control for enhanced oversight[160] PART II OTHER INFORMATION Item 1. Legal Proceedings This section incorporates information on legal proceedings from Note 11 of the financial statements - Information on legal proceedings is incorporated by reference from Note 11 of the condensed consolidated financial statements[162] Item 1A. Risk Factors This section refers to the Annual Report for risk factors, noting no material changes - Readers should refer to the 'Risk Factors' in the Annual Report on Form 10-K for the year ended December 31, 2021[163] - There have been no material changes to the company's risk factors since the filing of its Annual Report[163] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is marked as not applicable for the reporting period - This item is not applicable[163] Item 3. Defaults Upon Senior Securities This item is marked as not applicable for the reporting period - This item is not applicable[163] Item 4. Mine Safety Disclosures This item is marked as not applicable for the reporting period - This item is not applicable[163] Item 5. Other Information This section details a new $360.0 million loan entered into on June 7, 2022 - On June 7, 2022, the company entered into a new $360.0 million loan[164] - The loan has a fixed interest rate of 6.95% for $180.0 million and a variable interest rate (30-day SOFR plus 4.10%) for the other $180.0 million[164] - The loan has an initial term of five years with one two-year extension option and is secured by 90 outparcels and 13 open-air centers[164] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including agreements and certifications - Exhibits include the Credit Agreement for the $360 million open-air centers and outparcels loan (Exhibit 4.1)[167] - Certifications by the Chief Executive Officer and Chief Financial Officer are included pursuant to Securities Exchange Act Rule 13a-14(a) and 13a-14(b)[167] - XBRL Instance Document and Taxonomy Extension Documents are also filed[167] SIGNATURES - The report was signed on August 15, 2022, by Farzana Khaleel, Executive Vice President, Chief Financial Officer and Treasurer[172]