Securities Exchange Act of 1934 -- Form 8-K
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
Date of Report :
May 1, 1997
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CBL & ASSOCIATES PROPERTIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-12494 62-1545718
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification Number)
incorporation)
One Park Place, 6148 Lee Highway, Chattanooga, Tennessee 37421
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(Address of principal executive offices)
Registrant's telephone number, including area code:
(423) 855-0001
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CBL & ASSOCIATES PROPERTIES, INC.
Conference Call Outline
May 1, 1997
9:30 a.m.
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Revenue and Expense Sources
We would like to discuss the reasons for our increased funds from
operations for the first quarter of 1997. Our FFO increased by
14.8% due to:
1. The six new shopping centers and one mall expansion opened
over the last fifteen months; and
2. The acquisition of two properties, one of which was acquired
in November 1996 and the other in the first quarter of 1997.
Our expenses increased by 18.3% for the first quarter of 1997 over
the prior year primarily as a result of an increase in reimbursable
expenses and depreciation associated with the addition of nine new
development and acquisition centers opened during the last fifteen
months. Our cost recovery ratio for the first quarter of 1997
decreased to 91.6% from 97.9% for first quarter 1996. This was
due to an under accrual in 1995 of year-end billings which was
reflected in the first quarter of 1996. Also, additional
unrecoverable ground rent expense for St. Clair Square and
Devonshire Place has been included in property operating expense.
Our cost recovery ratio for the 1996 calendar year was 94.8%.
In the first quarter of 1997, the new properties added in the last
fifteen months accounted for 100% of our FFO growth over the prior-year
period. This increased contribution from new properties was
a result of our active development and acquisition program which
outpaced continued consolidation among specialty retailers in our
mall portfolio that occurred in 1996 and the lower cost recovery
ratio that occurred in the first quarter of 1997.
We have observed that fewer of these consolidations have occurred
in the first quarter and in light of recent announcements
concerning the economy, retailing in general should continue to
improve over the rest of the year.
Page 2 of 7
Funds from Operations and Adjusted Funds from Operations
Our total funds from operations for the first quarter of 1997 on a
fully converted basis were $17.4 million, or $.53 per share. We
calculated our FFO in accordance with NAREIT's recommendation
concerning finance costs and non-real estate depreciation.
However, we did not include outparcel sales or straightlined rents
in our calculation. Although NAREIT allows us to include these
items, we felt we should continue our conservative practice of
calculating FFO. Had we included outparcel sales of $.09 per share
and straightlined rents of $.02 per share, our FFO for the first
quarter of 1997 would have increased by $.11 to $.64 per share.
Dividend Increase and Payout Ratio
As previously announced, the board of directors increased our
quarterly dividend by 5.4% to $.4425 per share, which equates to an
annualized dividend of $1.77 per share. Our annual dividend for
1996 was $1.68 per share. Our payout ratio for the first quarter
of 1997 was 83.5% as compared to 84.0% over the prior-year period.
Capital Structure
As of March 31, 1997, our total consolidated and unconsolidated
debt was $578.8 million, with a weighted average interest rate of
7.82% as compared to 8.66% as of March 31, 1996. This amount
includes all properties under construction. Our debt to total
market capitalization ratio was 41.4% based upon our stock price of
$24.50 as of March 31, 1997. Our EBITDA to interest ratio
increased to 3.08 for the first quarter of 1997 compared to 2.82
for 1996. Had we excluded gains on sales of real estate assets
from EBITDA, the interest coverage ratio would have increased to
2.77 in the first quarter from 2.75 in 1996.
Our total fixed rate debt as of March 31, 1997 was $423.1 million,
with a weighted average interest rate of 8.17% as compared to 8.79%
as of March 31, 1996. Our total variable rate debt as of March 31,
1997 was $155.7 million, with a weighted average interest rate of
6.85% as compared to 7.65% as of March 31, 1996. Variable rate
debt related to our projects under construction accounted for $88.4
million of the total. The interest on this construction debt is
being capitalized to the projects. The remaining $67.3 million of
variable rate debt was associated with operating properties. With
$55.3 million of applied interest rate caps and swaps, we have
$88.4 million of variable rate debt exposure on our construction
properties and $12.0 million of exposure on our operating
properties down from $84.5 million at year end.
During the first quarter, we closed on two fixed-rate loans
totaling $127 million, a $52 million loan on Westgate Mall in
Spartanburg, South Carolina, which refinanced our $40 million
construction loan on the project and a $75 million loan on Hamilton
Place in Chattanooga, Tennessee, which refinanced existing fixed
rate debt at a savings of 225 basis points. The combined proceeds
from these two loans reduced variable rate debt by approximately
$61.5 million.
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Capital Structure (Continued)
We also significantly reduced variable rate debt with an offering
of 3 million shares in January which generated net proceeds of
$74.5 million. Management purchased 55,000 shares in this offering
- - a sign of our continued confidence in the company.
During the first quarter, we expanded our First Tennessee credit
facility to $80 million. We also reduced the aggregate pricing on
our total credit facilities of $175 million by 21 basis points to
123 basis points over LIBOR.
Capital Expenditures
Revenue Generating capital expenditures, or tenant allowances for
improvements, for the first quarter of 1997 were $2.6 million which
includes $1.0 million we had expected to spend in 1996. During
1997, we expect to spend approximately $6.0 million.
Revenue Enhancing capital expenditures, or remodeling and
renovation costs, were $55,000 for the first quarter. During
1997, we expect to spend approximately $3.5 million for the
remodeling of Foothills Mall and seven of our community centers.
Revenue Neutral capital expenditures, which are recovered from the
tenants, were $160,000 for the first quarter.
Developments/Acquisitions - External Growth
During the first quarter, we opened The Terrace, a 156,000-square-foot
associated center in Chattanooga, Tennessee and Massard
Crossing, a 291,000-square-foot community center in Fort Smith,
Arkansas and a freestanding Hannaford Food & Drug in Richmond,
Virginia. Subsequent to the end of the quarter, we opened the
first phase of the 289,000-square-foot Salem Crossing in Virginia
Beach, Virginia. In March we also opened a new Dillard's
department store and United Artists' 10-screen cinema at Twin Peaks
Mall in Longmont, Colorado; and the addition of Dillard's to
Frontier Mall in Cheyenne, Wyoming.
The projects under construction and scheduled to open in 1997 are:
Springhurst Towne Center, an 808,000-square-foot power center in
Louisville, Kentucky scheduled to open in phases beginning in
August; Cortlandt Town Center, a 773,000-square-foot power center
in Cortlandt, New York scheduled to open in phases beginning in
September; a freestanding 44,000-square-foot Regal Cinemas in
Virginia Beach, Virginia scheduled to open in September; Bonita
Lakes Mall, a 631,000-square-foot regional mall in Meridian,
Mississippi scheduled to open in October; Bonita Lakes Crossing, a
74,000-square-foot associated center in Meridian, Mississippi
scheduled to open in October; and a 10,000-square-foot addition to
Chester Square in Richmond, Virginia.
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Developments/Acquisitions - External Growth (Continued)
During the latter part of 1997, we also expect to start
construction on the 1.0-million square-foot Arbor Place Mall in
suburban Atlanta, Georgia and the 600,000-square-foot Sand Lakes
Corner in Orlando, Florida.
In January, we acquired Sutton Plaza, a 122,000-square-foot
community center in Mt. Olive, New Jersey. Our largest acquisition
to date was St. Clair Square, a 1.1-million-square-foot mall
located in Fairview Heights, Illinois, a suburb of St. Louis,
Missouri, which was acquired in November 1996. We plan to expand
the A & P Store at Sutton Plaza and are in the process of re-merchandising
St. Clair Square.
We will continue to be selective in our acquisitions and believe
that there are several opportunities available in the current
environment to complement our development program.
Occupancy/Leasing
As mentioned in our earnings release, our overall portfolio occupancy was
92.5% at March 31, 1997 as compared to 92.8% at March 31, 1996, with the new
malls and stabilized malls showing the best increases.
Our associated center occupancy declined to 91.1% primarily due to
the relocation of one of the anchors at Foothills Plaza to
Foothills Mall in Maryville, Tennessee. Excluding this relocation,
our associated center occupancy would have been 98.7% at March 31,
1997.
If you will recall, we finalized negotiations to convert Foothills
Mall from a mortgage property to an owned property in the fourth
quarter of 1996 by becoming a 95% partner in this center in
exchange for extending the mortgage term for another five years.
The preference return and cash flow support associated with this
mortgage, which amounted to $263,000 in the first quarter of 1996,
was eliminated. The anchor relocation from Foothills Plaza is part
of our plan to increase the leasing and cash flows of this center
through retenanting and remodeling.
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Occupancy/Leasing (Continued)
During the first quarter, our results from renewal leasing compared
to the base and percentage rent previously paid were as follows:
<TABLE>
Prior PSF New PSF New PSF % Change % Change
Rent Rent Initial Rent-Avg. Initial Average
<S> <C> <C> <C> <C> <C>
Malls $17.87 $19.64 $19.95 9.9% 11.6%
Associated
Centers $13.40 $14.69 $14.87 9.7% 11.0%
Community
Centers $ 7.89 $ 7.97 $ 8.23 1.1% 4.3%
</TABLE>
Another measure of the strength of our portfolio is a comparison of
new and renewal leasing rates and square footage to the amount of
fallout (tenants vacating) we had for the first quarter of 1997.
In the mall portfolio, we leased 119,000 square feet at an average
rate of $20.69 per square foot compared to 58,000 square feet of
fallout at an average rate of $9.25 per square foot.
In the associated centers, we leased 19,000 square feet at an
average rate of $14.87 per square foot compared to 6,000 square
feet of fallout at an average rate of $9.98 per square foot.
In the community centers, we leased 94,000 square feet at an
average rate of $8.23 per square foot compared to 6,000 square feet
of fallout at an average rate of $7.84 per square foot.
Sales
Mall shop sales in our stabilized malls, for those tenants who have
reported, increased 3% on a comparable per square foot basis for
the first quarter of 1997 as compared to the previous year.
Occupancy costs as a percentage of sales at our stabilized malls at
March 31, 1997 increased to 14.6% compared to 14.3% at March 31,
1996. This increase is primarily due to the addition of St. Clair
Square to our stabilized mall portfolio and the 6% increase in
average rents per square foot. Occupancy costs are generally
higher in the first three quarters due to the seasonality of
retail sales.
I would like to note that a transcript of my comments will be filed
as a Form 8K and will be available upon request. I would now be
happy to answer any questions you may have.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CBL & ASSOCIATES PROPERTIES, INC.
John N. Foy
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John N. Foy
Executive Vice President,
Chief Financial Officer and
Secretary
(Authorized Officer of the
Registrant,
Principal Financial Officer and
Principal Accounting Officer)
Date: May 1, 1997
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