Core Viewpoint - CBL & Associates Properties, Inc. has shown resilience in its stock performance despite a decline in net income and some operational challenges, with strategic acquisitions and leasing activities positioning the company for future growth. Financial Performance - In Q2 2025, net income attributable to common shareholders was $0.08 per share, a decrease of 42.9% from $0.14 a year ago [2] - Funds from Operations (FFO) were $1.48 per diluted share, down 1.9% from $1.51 in the prior-year quarter, while adjusted FFO rose 7.5% to $1.86 from $1.73 [2] Revenue and Income Metrics - Same-center total revenues increased by 1.7% to $156 million from $153.4 million, but same-center Net Operating Income (NOI) decreased by 0.5% year over year to $104.9 million from $105.4 million [3] - Same-center NOI from malls fell by 0.6%, outlet centers dropped by 5.2%, and open-air centers declined by 2%, while lifestyle centers saw a 7.2% increase [3] Occupancy and Leasing - Portfolio occupancy rose by 10 basis points year over year to 88.8% as of June 30, 2025 [4] - CBL executed over 1.2 million square feet of leases during the quarter, with new and renewal leases averaging a 3.2% rent increase [5] Management Commentary - CEO Stephen D. Lebovitz highlighted the acquisition of four malls for $178.9 million as a key part of the portfolio optimization strategy [6] - The acquisition is expected to enhance cash flow per share and support a 12.5% dividend increase [7] Operational Challenges - The decline in same-center NOI was mainly due to higher operating expenses and the impact of bankruptcy-related store closures, which affected mall occupancy by nearly 70 basis points [8] - Operating expenses increased by $3.2 million due to higher real estate taxes [9] Guidance and Future Outlook - CBL updated its 2025 FFO, as adjusted, guidance to a range of $6.98–$7.34 per share [10] - Management reaffirmed its same-center NOI growth outlook for the full year to be between a 2% decline and a 0.5% increase [11] Other Developments - CBL has closed on dispositions totaling over $162.7 million year to date, including significant sales of various properties [12] - Financing activities included a new $78 million non-recourse loan, which reduced the interest rate significantly compared to the prior loan [13]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was approximately $57 million, with cash NOI around $46 million [12] - Net loss attributable to common shareholders was approximately $49.4 million, or $1.35 per share, including a noncash impairment of about $52 million related to potential asset sales in the office segment [12] - Same store cash NOI increased by 4% year-over-year, with a 5.8% increase in the industrial segment and a 3.1% increase in the office segment [12] Business Line Data and Key Metrics Changes - The industrial segment's ABR increased by $2.4 million quarter-over-quarter, driven by a 10% rise in AVR from iOS properties [4] - Industrial segment ABR represented 41% of total ABR at quarter end, increasing to 43% on a pro forma basis after subsequent office dispositions [5] - The company closed $144 million in office asset sales year-to-date, including two properties totaling 251,000 square feet for approximately $34 million during Q1 [8] Market Data and Key Metrics Changes - The company has completed over $2 billion in office sales across more than 30 markets over the past three years, indicating strong investor demand for office assets [9] - Office assets with more than five years of remaining term are generally priced on a cap rate basis between 7.5% and 12.5% on in-place NOI [10] Company Strategy and Development Direction - The company is transitioning to an industrial REIT, focusing on growth in the industrial outdoor storage (iOS) subsector [4] - The strategy includes divesting office assets to reallocate capital to higher growth opportunities within the iOS space [17] - The company aims to reduce leverage while driving sustainable growth and enhancing shareholder value [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth opportunities presented by high-quality iOS properties in supply-constrained markets [17] - The company is committed to maintaining or potentially accelerating the pace of office dispositions, depending on market conditions [10][36] Other Important Information - The company introduced new reporting metrics, core FFO and adjusted EBITDAre, to enhance comparability in evaluating ongoing performance [11] - Total liquidity at quarter end was approximately $336 million, consisting of cash and available revolver capacity [13] - The weighted average interest rate for all debt remains at 4.4%, with 88% of the debt being fixed [15] Q&A Session Summary Question: Can you help us think about the ABR at the remaining five iOS sites? - Management indicated they are not providing specific guidance on ABR ranges due to the variety of locations but expressed comfort with previously indicated returns on cost [19][20] Question: What are you seeing in the market regarding additional acquisition opportunities? - Management noted a balanced approach to growth and leverage, with a good pipeline of individual deals and portfolios being evaluated [21][25] Question: What is your target leverage and timeline for bringing it down? - Management confirmed a target leverage in the six times range or below, with current leverage at 6.8 times after recent asset sales [30][32] Question: What will determine the pace of office dispositions? - Management stated that dispositions are evaluated on a case-by-case basis, aiming to maximize shareholder value while being open to market opportunities [36][38] Question: What characteristics differentiate office assets at the lower and higher ends of the cap rate range? - Management explained that duration and specific asset characteristics play a significant role in determining cap rates, with shorter lease terms complicating the valuation [42][44] Question: How is tenant demand characterized today in the IOS segment? - Management reported stable demand, with ongoing discussions with various tenants and interest in properties being offered as-is [49][51]