Securities Exchange Act of 1934 -- Form 8-K
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 :
April 30, 1998
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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 Employers
jurisdiction of File Number) Indentification 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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ITEM 5 OTHER INFORMATION
CBL & ASSOCIATES PROPERTIES, INC.
Conference Call Outline
April 30, 1998
9:30 a.m.
Good morning. We appreciate your participation in our conference call to
discuss the 1998 first quarter results.
Before we begin, I would like to remind everyone that this conference
call contains "forwarding-looking statements" within the meaning of the
federal securities laws. Such statements are inherently subject to risks
and uncertainties, many of which cannot be predicted with accuracy and some
of which might not even be anticipated. Future events and actual results,
financial and otherwise, may differ materially from the events and results
discussed in the forward-looking statements. We direct you to the Company's
various filings with the Securities and Exchange Commission, including
without limitation the Company's Annual Report on Form 10-K and the
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" incorporated by reference therein, for a discussion of such
risks and uncertainties.
GROWTH
In the first quarter of 1998 we achieved outstanding FFO growth primarily
due to our 1997 efforts in development of new properties, acquisitions as
well as management and leasing of existing properties. Our 20.4% increase in
FFO per diluted, fully converted share includes modifications necessary to
comply with changes in FASB policies regarding diluted shares and
capitalization of internal acquisition costs. This 20.4% increase in FFO
per converted, fully diluted share over the first quarter of 1997 breaks
down as follows: 6.5% from the ten new developments we opened during 1997,
8.2% from the five acquisitions completed during 1997 and the first
quarter of 1998 and 5.7% from our stabilized portfolio.
Let us examine the components of our first quarter 1998 growth.
1. The ten new shopping centers opened over the last fifteen months,
representing 2.6 million square feet of developments in operation
throughout the first quarter of 1998;
2. The acquisition of five properties, including a 49% interest in one
property in June, 1997, two properties acquired in August and
September 1997 and two additional properties in January 1998; and
3. Improved operations in our existing properties.
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Our property operating expenses increased by 27.6% for the first quarter
of 1998 over the first quarter of 1997 primarily due to the operating
costs related to the fifteen new development and acquisition centers
opened or acquired during the last fifteen months. Our cost recovery
ratiofor the first quarter of 1998 increased slightly to 92.0% from 91.6%
in the first quarter 1997.
FUNDS FROM OPERATIONS AND ADJUSTED FUNDS FROM OPERATIONS
Our total funds from operations for the first quarter of 1998 was $22.0
million, or $0.65 per diluted, fully converted share. In order to be
consistent with industry practice, beginning with this quarter FFO
includes straight-line rents. As indicated in our earnings release, the
impact on FFO from straight-line rents was an increase of $.03 per diluted,
fully converted share for the first quarter of 1998. We continue,
however, to exclude outparcel sales in our calculation. Although NAREIT
would allow us to include this item, we feel it does not indicate the true
nature of our business. The addition of outparcel sales would have added
$.06 per share, increasing FFO per diluted, fully converted share to $.71.
Restated FFO per diluted, fully converted share giving effect to the
addition of straight line rents for 1997 will be reported in the
transcript of this conference call to be filed as a Form 8-K today.
Per share data 1 Q 97 2 Q 97 3 Q 97 4 Q 97 Year Ended
- ------------------- ------- ------- ------- ------- ----------
Basic FFO as
reported $0.53 $0.53 $0.55 $0.61 $2.22
Diluted FFO $0.52 $0.52 $0.55 $0.61 $2.21
Diluted FFO with
Straight line rents $0.54 $0.54 $0.56 $0.64 $2.28
Effective January 1, 1998, in accordance with the new accounting policy
issued by the FASB's emerging issues task force, we no longer capitalize
internal costs related to acquisitions.
DEVELOPMENTS - EXTERNAL GROWTH
Development projects under construction and scheduled to open during 1998
are: Sterling Creek Commons in Portsmouth, Virginia, a 65,000 square foot
community center scheduled to open in June 1998 and Sand Lake Corners in
Orlando, Florida, a 594,000 square foot community center the first phase
of which will open in November 1998 with the remainder to open by April
1999. In the first quarter of 1998, we began construction on Fiddler's Run
in Morganton, North Carolina, a 203,000 square foot community center
scheduled to open in March 1999. Other projects currently under
construction are Arbor Place Mall in Douglasville, Georgia, a suburb of
Atlanta. This 860,000 square foot mall is scheduled to open in October
1999 with an additional 550,000 square feet planned. Preliminary grading
work has already begun for the construction of an adjacent 165,000 square
foot associated center to be called the Landing at Arbor Place.
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During April 1998 we opened a 14,000 square foot expansion to Hamilton
Crossing in Chattanooga, Tennessee and we will open a 15,000 square foot
expansion to Girvin Plaza in Jacksonville, Florida in May 1998.
ACQUISITIONS - EXTERNAL GROWTH
January 1998 was a major month for acquisitions. On January 2, 1998 we
acquired Asheville Mall in Asheville, North Carolina, a 820,044 square
foot mall anchored by Belk, Dillard's, JC Penney, Montgomery Ward and
Sears. Asheville Mall is currently 98.2% leased with average sales per
square foot of $272 and with mall shop rental averaging $16.62 psf. On
January 30, 1998 we acquired Burnsville Center in Burnsville
(Minneapolis), Minnesota, a 1,078,568 square foot super regional mall
anchored by Dayton's, JC Penney, Mervyn's and Sears. Burnsville Center
is currently 91.7% leased with average sales per square foot of $281 and
with mall shop rental averaging $19.63 psf. Subsequent to the end of the
quarter, we purchased Stroud Mall in Stroudsburg, Pennsylvania, a 427,145
square foot mall anchored by Sears, The Bon-Ton and JC Penney. Stroud Mall
is currently 86% leased with average sales per square foot of $294 and
with mall shop rental averaging $19.52 psf.
We are pleased that our conservative and disciplined approach to
acquisitions has yielded three quality properties so far this year with
impressive growth potential. Our efforts in 1998 will be concentrated on
maximizing our returns on our acquisitions and identifying new
opportunities.
IMPROVED OPERATIONS - INTERNAL GROWTH
As mentioned in our earnings release, our overall portfolio occupancy was
93.4% at March 31, 1998 compared to 92.5% at March 31, 1997, with the
stabilized malls showing the best increases. Turtle Creek Mall in
Hattiesburg, Mississippi was moved from the new mall category to the
stabilized mall category this quarter as it has reached initial maturity
and lease up. The occupancy of the combined new and stabilized mall
portfolio increased to 90.9% at March 31, 1998 from 88.1% at March 31,
1997.
Our associated center occupancy at March 31, 1998 decreased to 84.1% from
91.1% at March 31, 1997 primarily due to the acquisition and redevelopment
of WestGate Crossing in Spartanburg, South Carolina where a new Goody's
Family and Clothing Store will open later today. Our associated center
occupancy would have increased to 93.0% excluding this redevelopment center.
Our community center occupancy at March 31, 1998 continues to be excellent,
increasing to 97.3% from 96.6% at March 31, 1997.
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During the first quarter of 1998, our results from renewal leasing compared
to the base and percentage rent previously paid were as follows:
Prior PSF New PSF New PSF % Change % Change
Rent Rent-Initial Rent-Avg. Initial Average
---------- ------------ --------- -------- --------
Malls $19.01 $20.11 $20.84 5.8% 9.7%
Associated
Centers $13.28 $15.93 $15.99 19.9% 20.4%
Community
Centers $ 8.03 $ 8.40 $ 8.50 4.6% 5.9%
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 1998.
In the mall portfolio, we leased 152,300 square feet at an average rate
of $21.15 per square foot compared to 52,400 square feet of fallout at
an average rate of $19.23 per square foot.
In the associated centers, we leased 8,900 square feet at an average rate
of $15.17 per square foot compared to 4,400 square feet of fallout at an
average rate of $10.34 per square foot.
In the community centers, we leased 58,600 square feet at an average rate
of $9.24 per square foot compared to 9,700 square feet of fallout at an
average rate of $9.12 per square foot.
SALES
Mall shop sales in our stabilized malls, for those tenants who have
reported, increased 5.5% on a comparable per square foot basis for the
first quarter of 1998 as compared to the first quarter of 1997.
Occupancy costs as a percentage of sales at our stabilized malls at
March 31, 1998 decreased to 12.9% compared to 14.6% at March 31, 1997.
Occupancy costs are generally higher in the first three quarters due to
the seasonality of retail sales.
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CAPITAL STRUCTURE
As of March 31, 1998, our total consolidated and unconsolidated debt was
$869.8 million, with a weighted average interest rate of 7.32% as compared
to 7.82% as of March 31, 1997. This amount includes debt related to all
properties under construction. Our debt to total market capitalization
ratio was 51.4% based upon our stock price of $24.50 as of March 31, 1998.
Our EBITDA to interest ratio decreased to 2.64 for the first quarter of
1998 compared to 3.08 for 1997. Had we excluded gains on sales of real
estate assets from EBITDA, the interest coverage ratio would have
decreased to 2.51 in the first quarter from 2.77 in 1997.
Our total conventional fixed rate debt as of March 31, 1998 was $409.1
million with a weighted average interest rate of 8.07% as compared to
8.17% as of March 31, 1997.
Though the execution of Swap Agreements, we have fixed the interest rates
on $196 million of debt on operating properties at a weighted average
interest rate of 6.52%.
Of our remaining debt of $264.7 million, interest rate Caps of $100.0
million and conventional permanent loan commitments of $78.0 million
leave only $86.7 million of debt fully subject to variable rates.
Interest on $57.1 million of this remainder is capitalized to projects
currently under construction leaving $29.6 million of variable rate debt
exposure on operating properties.
Conventional mortgage loan commitments presently under negotiation will
this quarter eliminate entirely our exposure to variable rate debt.
At the end of the first quarter, we closed on an additional $20 million
credit facility with SouthTrust Bank to bring our total credit facilities
to $207.5 million, which with unfunded construction loans provides $72.6
million of available credit at March 31, 1998.
CAPITAL EXPENDITURES
Revenue generating capital expenditures, or tenant allowances for
improvements, for the first quarter of 1998 were $2.3 million. During
1998, we expect to spend approximately $8 million on revenue generating
capital expenditures.
Revenue enhancing capital expenditures, or remodeling and renovation
costs, were $1.0 million for the first quarter of 1998. During 1998,
we expect to spend approximately $8.3 million for the remodeling of
Hamilton Place and seven of our community centers.
Revenue neutral capital expenditures, which are recovered from the
tenants, were $524,000 for the first quarter of 1998. During 1998,
we expect to spend approximately $3.3 million on revenue neutral
capital expenditures.
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DIVIDEND INCREASE AND PAYOUT RATIO
As previously announced, the board of directors increased our quarterly
dividend by 5.1% to $.465 per share, which equates to an annualized
dividend of $1.86 per share compared to $1.77 per share for 1997. Our
payout ratio for the first quarter of 1998 was 71.54% as compared to
81.94% for the first quarter of 1997. Had outparcel sales been included
in FFO per diluted, fully converted share, as NAREIT allows, our payout
ratio would have been 65.5% for the first quarter of 1998 compared to
70.2% for the first quarter of 1997.
Earlier this week Beth Strauss, CPA, joined our company as Director of
Investor Relations. Working with our shareholders and prospective
shareholders will be Ms. Strauss' top priority. She has a very strong
background in the areas of investor relations and finance, and we look
forward to her contributions to our company's continued growth.
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.
/c/ 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: April 30, 1998
