CBL & Associates Properties(US:CBL)2020-02-07 21:39Financial Data and Key Metrics Changes - For 2019, the company reported adjusted FFO of $1.36 per share, down from $1.73 in 2018, reflecting a decline in property level NOI and dilution from asset sales [41][42] - Same-center NOI decreased by 6.5% for the year, with a 9.1% decline in the fourth quarter due to bankruptcies and store closures [42][43] - Fourth quarter adjusted FFO per share was $0.37, a decrease of $0.08 compared to $0.45 per share for the same quarter in 2018 [41] Business Line Data and Key Metrics Changes - The company completed nearly 3.9 million square feet of total leasing activity in 2019, including 1.4 million square feet of new leases and 2.5 million square feet of renewals [21] - On a comparable same-space basis, new and renewal leases had an average gross rent decline of 8%, with renewal leases signed at an average of 11.5% lower than expiring rents [22] - Same-center mall occupancy improved by 110 basis points sequentially to 89.8%, but declined by 210 basis points year-over-year [23] Market Data and Key Metrics Changes - Mall sales increased by 3% in the fourth quarter, bringing the trailing 12-month sales to $387 per square foot compared to $379 in the prior year [25] - The company expects an additional 6 to 7 store closures over the next three years, but none are anticipated in 2020 [12] Company Strategy and Development Direction - The company is transitioning its mall business by replacing traditional retail spaces with dynamic uses such as educational facilities, fitness centers, and restaurants [6][7] - The strategy includes diversifying revenue streams and stabilizing income through redevelopment efforts, with a focus on non-apparel tenants [13][14] - The company has suspended common and preferred dividends to maintain cash flow for redevelopment and leasing programs [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in the retail environment but expressed confidence in their strategy and progress made in 2019 [9][10] - The company anticipates that the changes being implemented will yield positive results in the near future [20][49] - Guidance for 2020 includes an adjusted FFO range of $1.03 to $1.13 per share, assuming a same-center NOI decline of 8% to 9.5% [45] Other Important Information - The company has reduced its total pro rata share of debt to $4.25 billion, a decrease of $409 million from December 2018 [37] - An impairment of $37.4 million was recognized on Park Plaza Mall due to declining net operating income [43][44] Q&A Session Summary Question: Will the shift away from apparel tenants lead to increased sales volume from new tenants? - Management confirmed that new users are expected to generate significantly more sales and traffic compared to previous tenants [50] Question: How does the leasing environment in 2020 compare to 2019? - Management indicated that while there are positive sales trends, challenges remain for many retailers, making the environment similar to the previous year [52] Question: What is the company's approach to capital allocation and debt management? - Management emphasized a focus on improving the balance sheet, including paying off high-yield loans and exploring refinancing options [55][60] Question: How is the company addressing debt covenants in light of declining NOI? - Management stated that they are actively working to reduce debt levels to improve coverage ratios [67] Question: What flexibility does the company have regarding preferred shares? - Management noted that while preferred shares are trading at a discount, they are not the immediate focus compared to secured debt [88] Question: How does the company plan to manage its unsecured debt? - Management is primarily focused on secured maturities but is considering options for unsecured debt as well [70]