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Chattanooga mall company CBL sees better outlook, but still faces retail woes
Chattanooga Times Free Press - 4/9/2021
Apr. 9—This story was updated at 4:55 p.m. on Friday, April 9, 2021, with more information.
CBL Properties on Friday posted stable fourth-quarter earnings versus a year ago and the company offered a better outlook with the pandemic waning and a plan to emerge from bankruptcy.
But malls, shopping centers and retail in general still face challenges as the sector consolidates amid too much space, an analyst said.
For all of 2020, CBL reported that funds from operations, as adjusted, came in at 70 cents per share. That's down 48.5% from 2019 as the Chattanooga-based shopping center company was among those struggling in the coronavirus pandemic.
Also, the company that operates Hamilton Place and Northgate malls in the city and more than 100 centers nationally reported a net loss for the year of $1.75 per share, which was wider than a loss of 89 cents per share in 2019.
For the fourth quarter of 2020, CBL reported adjusted FFO of 37 cents per share, the same as the 2019 quarter before the pandemic hit.
"We were encouraged by the improvement in operations during the fourth quarter," said Stephen Lebovitz, CBL's chief executive officer.
CBL stock traded over the counter closed up 0.17% to 12 cents on Friday.
Lebovitz said CBL's rent collection rate increased to 84% for the April 2020 to February 2021 period.
"We have also started collecting on 2020 rent deferrals, with an 84% collection rate on the approximately 60% that has been billed," he said.
In addition, occupancy rates improved sequentially as the company marked a number of openings across its portfolio in the fourth quarter. Those included a new casino at Westmoreland Mall in Pittsburgh, the Whole Foods at its Gunbarrel Road center in Chattanooga and several new boutiques and restaurants that opened ahead of the 2020 holiday season, Lebovitz said.
The company also noted that in connection with its Chapter 11 bankruptcy last year, CBL has entered into a first amended and restated Restructuring Support Agreement with an ad hoc group representing 69% of its unsecured noteholders and 96% of the lenders under its secured credit facility. That paves the way for a fully consensual comprehensive restructuring, according to CBL.
Lebovitz said that by reducing leverage and the preferred obligation by almost $1.7 billion in the agreement, lengthening maturities, lowering interest expense and increasing free cash flow, upon emergence CBL will be well-positioned to execute on its strategic priorities and pursue future growth opportunities.
"We look forward to starting fresh with a newly energized and more financially flexible company later this year," he said.
Still, Alexander Goldfarb, a senior analyst for Piper Sandler, said he expects malls and shopping centers will continue to close as there's "definitely way too much" retail real estate in the United States.
While successful centers will remain open, consolidation is taking place and unfortunately for malls, they take a lot of capital to fix up, he said.
"If a mall loses its position in the marketplace, it starts to slip," Goldfarb said. "Once it goes past a certain point, it's basically unsalvageable."
While currently there are about 1,100 malls, that number is expected to plunge to 300 to 400 over time, said the analyst, who added that he doesn't cover CBL in particular.
On Friday, CBL reported the foreclosure of its Burnsville Center in Minneapolis was completed in the fourth quarter. The company also said it anticipates cooperating with conveyance or foreclosure proceedings for Park Plaza in Little Rock, EastGate Mall in Cincinnati, and Asheville Mall in Asheville, North Carolina.
CBL reported that Asheville Mall was transferred into receivership in January while Park Plaza was transferred in March. EastGate Mall is expected to be transferred into receivership soon, the company said.
Lebovitz has said that CBL plans to bring new uses to its national portfolio of properties, such as it has done at Hamilton Place with Cheesecake Factory, Dave & Buster's and the Aloft Hotel, which is to open this summer.
"We want to broaden the mix of what customers can take advantage of our properties," he said. "That's the suburban-town center mantra we've taken on."
But even before the pandemic, CBL was grappling with the changing tastes of shoppers when it comes to malls and department stores along with more online buying.
When the longtime company filed for Chapter 11 bankruptcy protection in November, it said its centers would remain open and "business as usual" as it reworked its massive debt load in bankruptcy court.
Contact Mike Pare at email@example.com. Follow him on Twitter @MikePareTFP.
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