CBL & Associates Properties(US:CBL)2019-08-01 20:50Financial Data and Key Metrics Changes - Adjusted FFO per share for Q2 was $0.34, a decline of $0.12 compared to $0.46 in Q2 2018 [39] - Same-center NOI decreased by 5.7% for the quarter and 5.3% for the year [40] - Portfolio same-center NOI guidance maintained despite ongoing retailer restructurings [6][8] Business Line Data and Key Metrics Changes - Total leasing activity for the quarter was approximately 775,000 square feet, including 451,000 square feet of new leasing and 257,000 square feet of renewals [21] - Average gross rent decline for new and renewal leases was 3.3% [22] - Same-center sales increased by 4.1%, bringing trailing 12-month sales to $381 per square foot [25] Market Data and Key Metrics Changes - Mall occupancy declined by 130 basis points to 88.1% due to bankruptcy-related store closures [23] - Portfolio occupancy decreased by 90 basis points to 90.2% [23] - Significant sales increases were noted in fast casual dining, electronics, and wellness categories [26] Company Strategy and Development Direction - The company is focused on transforming traditional malls into market-dominant suburban town centers with a diverse tenant base [5][6] - Redevelopment efforts are being funded through significant free cash flow of over $200 million [7] - 86% of new mall leasing and 64% of total mall leasing this year has been non-apparel, reflecting a strategic shift [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience despite challenges from retailer bankruptcies [6] - Future performance is expected to be impacted by ongoing bankruptcies, with a cautious outlook for the remainder of the year [22][72] - The company is adapting to industry transformations to maintain market dominance [46] Other Important Information - The company has completed or announced approximately $145 million in gross asset sales year-to-date [11] - Legal expenses related to ongoing litigation have increased, impacting G&A costs [18][40] - The company is reviewing 2020 taxable income projections to determine future dividend levels [19] Q&A Session Summary Question: What are the assumptions for backfilling vacant shop space impacted by bankruptcies? - Management indicated that most closures occurred in Q2, and while temporary users are being sought, the majority of leasing will be completed in 2020 [49] Question: What is the expectation regarding Forever 21's impact on reserves? - A small amount is built into the reserve for Forever 21, but uncertainty remains regarding their future [50] Question: Are mixed-use densifications part of the anchor replacement pool? - Mixed-use developments are being integrated into several projects, maximizing productivity from existing spaces [53] Question: Can you provide examples of creative revenue sources? - The company is focusing on specialty leasing and local non-retail users to generate revenue [57] Question: What is the rationale behind shifting to ground leases? - Ground leases provide stable long-term income and strong valuations, which is why the company is opting for them over direct sales [59] Question: How does the board view the dividend moving forward? - Discussions regarding the dividend will take place closer to year-end when taxable income is clearer [67]