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Article by DailyStocks_admin    (10-23-08 07:37 AM)

CBL & Associates Properties Inc. CEO CHARLES B LEBOVITZ bought 50000 shares on 10-13-2008 at $11.58

BUSINESS OVERVIEW

Background



CBL & Associates Properties, Inc. (“CBL”) was organized on July 13, 1993, as a Delaware corporation, to acquire substantially all of the real estate properties owned by CBL & Associates, Inc., and its affiliates (“CBL’s Predecessor”), which was formed by Charles B. Lebovitz in 1978. On November 3, 1993, CBL completed an initial public offering (the “Offering”). Simultaneous with the completion of the Offering, CBL’s Predecessor transferred substantially all of its interests in its real estate properties to CBL & Associates Limited Partnership (the “Operating Partnership”) in exchange for common units of limited partnership interest in the Operating Partnership. The interests in the Operating Partnership contain certain conversion rights that are more fully described in Note 9 to the consolidated financial statements. The terms “we”, “us”, “our” and the “Company” refer to CBL & Associates Properties, Inc. and its subsidiaries.



The Company’s Business



We are a self-managed, self-administered, fully integrated real estate investment trust (“REIT”). We own, develop, acquire, lease, manage, and operate regional malls and open-air and community shopping centers. Our shopping center properties are located in 27 states, but primarily in the southeastern and midwestern United States . We have elected to be taxed as a REIT for federal income tax purposes.



We conduct substantially all of our business through the Operating Partnership. We are the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. CBL Holdings I, Inc. is the sole general partner of the Operating Partnership. At December 31, 2007, CBL Holdings I, Inc. owned a 1.6% general partnership interest and CBL Holdings II, Inc. owned a 55.1% limited partnership interest in the Operating Partnership, for a combined interest held by us of 56.7%.



As of December 31, 2007, we owned:



§


interests in 84 regional malls/open-air centers (the “Malls”), 32 associated centers (the “Associated Centers”), 15 community centers (the “Community Centers”) and 19 office buildings, including our corporate office (the “Office Buildings”);






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interests in four mall expansions, two associated/lifestyle centers, three community/open-air centers, a mixed-use center and an office building that are currently under construction (the “Construction Properties”), as well as options to acquire certain shopping center development sites; and






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mortgages on 16 properties that are secured by first mortgages or wrap-around mortgages on the underlying real estate and related improvements (the “Mortgages”).



The Malls, Associated Centers, Community Centers, Construction Properties, Mortgages and Office Buildings are collectively referred to as the “Properties” and individually as a “Property.”



We conduct our property management and development activities through CBL & Associates Management, Inc. (the “Management Company”) to comply with certain technical requirements of the Internal Revenue Code of 1986, as amended.



The Management Company manages all but 30 of the Properties. The Company purchased a whole or partial interest in a total of 27 properties from the Starmount Company in November 2007. Four of the Properties, located in Virginia, were managed by their pre-acquisition property managers through December 31, 2007. All other properties purchased in the transaction will continue to be managed by their pre-acquisition property managers through February 2008. In addition, Governor’s Square and Governor’s Plaza in Clarksville, TN, and Kentucky Oaks Mall in Paducah, KY are all owned by joint ventures and are managed by a property manager that is affiliated with the third party managing general partner, which receives a fee for its services. The managing partner of each of these Properties controls the cash flow distributions, although our approval is required for certain major decisions.



Revenues are primarily derived from leases with retail tenants and generally include minimum rents, percentage rents based on tenants’ sales volumes and reimbursements from tenants for expenditures related to property operating expenses, real estate taxes, insurance and maintenance and repairs, as well as certain capital expenditures. We also generate revenues from advertising, sponsorships, sales of peripheral land at the Properties and from sales of real estate assets when it is determined that we can realize a premium value for the assets. Proceeds from such sales are generally used to reduce borrowings on our credit facilities.



The following terms used in this annual report on Form 10-K will have the meanings described below:






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GLA – refers to gross leasable area of retail space in square feet, including anchors and mall tenants




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Anchor – refers to a department store or other large retail store




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Freestanding – property locations that are not attached to the primary complex of buildings that comprise the mall shopping center




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Outparcel – land used for freestanding developments, such as retail stores, banks and restaurants, on the periphery of the Properties





Significant Markets and Tenants

Growth Strategy



Our objective is to achieve growth in funds from operations by maximizing cash flows through a variety of methods that are discussed below.



Leasing, Management and Marketing



Our objective is to maximize cash flows from our existing Properties through:






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aggressive leasing that seeks to increase occupancy,




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originating and renewing leases at higher base rents per square foot compared to the previous lease,




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merchandising, marketing, sponsorship and promotional activities and




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actively controlling operating costs and resulting tenant occupancy costs.



Redevelopments and Renovations



Redevelopments represent situations where we capitalize on opportunities to add incremental square footage or increase the productivity of previously occupied space through aesthetic upgrades, retenanting and/or changing the retail use of the space. Many times, redevelopments result from acquiring possession of anchor space and subdividing it into multiple spaces. The following presents redevelopments that we completed during 2007, as well as a redevelopment that was under construction at December 31, 2007, and is scheduled to be completed in 2008:

Renovations usually include renovating existing facades, uniform signage, new entrances and floor coverings, updating interior décor, resurfacing parking lots and improving the lighting of interiors and parking lots. Renovations can result in attracting new retailers, increased rental rates and occupancy levels and maintaining the Property’s market dominance.

Our total investment in the new and expanded Properties opened in 2007 was $323.4 million and the total investment upon completion in the Properties under construction as of December 31, 2007 is projected to be $427.6 million.



Acquisitions



We believe there is opportunity for growth through acquisitions of regional malls and other associated properties. We selectively acquire regional mall and open-air properties where we believe we can increase the value of the property through our development, leasing and management expertise. During 2007, we also acquired a portfolio of office properties as part of an acquisition.

Environmental Matters



A discussion of the current effects and potential future impacts on our business and Properties of compliance with federal, state and local environmental regulations is presented in Item 1A of this Annual Report on Form 10-K under the subheading “Risks Related to Real Estate Investments.”



Competition



The Properties compete with various shopping facilities in attracting retailers to lease space. In addition, retailers at our Properties face competition from discount shopping centers, outlet malls, wholesale clubs, direct mail, television shopping networks, the internet and other retail shopping

developments. The extent of the retail competition varies from market to market. We work aggressively to attract customers through marketing promotions and campaigns.



Seasonality



Our business is somewhat seasonal in nature with tenant sales achieving the highest levels during the fourth quarter because of the holiday season, which results in higher percentage rent income in the fourth quarter. The Malls earn most of their “temporary” rents (rents from short-term tenants) during the holiday period. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the entire year.

CEO BACKGROUND

Charles B. Lebovitz has served as Chairman of the Board and Chief Executive Officer of the Company since the completion of its initial public offering in November 1993 and is Chairman of the Executive Committee of the Board of Directors. Mr. Lebovitz also served as President of the Company until February 1999. Prior to the Company’s formation, he served in a similar capacity with CBL’s Predecessor. Mr. Lebovitz has been involved in shopping center development since 1961 when he joined his family’s development business. In 1970, he became affiliated with Arlen Realty & Development Corp. (“Arlen”) where he served as President of Arlen’s shopping center division, and, in 1978, he founded CBL’s Predecessor together with his associates (the “Associates”), including John N. Foy and Ben S. Landress. Mr. Lebovitz is currently a member of the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”), an Advisory Director of First Tennessee Bank, N.A., Chattanooga, Tennessee and a National Vice Chairman of the United Jewish Appeal. Mr. Lebovitz has previously served as Chairman of the International Council of Shopping Centers (“ICSC”) and as a Trustee and Vice President (Southern Division) of the ICSC. He is the father of Stephen D. Lebovitz and Michael I. Lebovitz, executive officers of the Company, and Alan L. Lebovitz, one of the Company’s vice presidents.



Claude M. Ballard, CRE, M.A.I. has served as a director of the Company since the completion of its initial public offering in November 1993 and is Chairman of the Compensation Committee and a member of the Audit and Nominating/Corporate Governance Committees of the Board of Directors. Mr. Ballard has served as a general partner, limited partner and senior consultant of Goldman, Sachs & Co. and as a Senior Vice President in the real estate division of the Prudential Insurance Company of America. He is currently a director of Quapaw Council, Boy Scouts of America, Horizon Hotel Corp. and Research Solutions, Inc. Mr. Ballard is a member of the Board of Directors of St. Vincent’s Infirmary, Little Rock, Arkansas. In 1999, the United States Tax Court determined that Mr. Ballard had underpaid federal taxes and underreported income over a period of years ending in 1989 as result of participation in transactions found by the Tax Court to have involved serious financial improprieties. (Investment Research Associates, Ltd. and Subsidiaries, et al. v. Commissioner of Internal Revenue Service, T.C. Memo 1999-407). Because of the nature of the transactions, the Tax Court upheld the imposition of penalties under Internal Revenue Code Section 6663 and its predecessors. The Tax Court’s decision was upheld by the United States Court of Appeals for the Eleventh Circuit on February 13, 2003. Upon further appeal of the case to the United States Supreme Court, on March 7, 2005, the Supreme Court in Ballard v. Commissioner (544 U.S. 40 (2005)) reversed the decision of the Eleventh Circuit Court of Appeals and remanded the case for further proceedings consistent with the Supreme Court’s decision. The Eleventh Circuit Court of Appeals subsequently remanded the case to the Tax Court on November 2, 2005, with instructions to review the matter in accordance with the dictates of the Supreme Court. On February 1, 2007, the Tax Court issued an opinion on its reconsideration of the case (Estate of Burton W. Kanter, et al. v. Commissioner of Internal Revenue, T.C. Memo 2007-21), in which the Tax Court affirmed its original findings regarding underreporting of income, underpayment of taxes and the imposition of penalties under Internal Revenue Code Section 6663 and its predecessors. Mr. Ballard has paid the taxes, penalties and interest at issue, and is appealing the Tax Court’s decision on remand in this case.



Gary L. Bryenton joined the Company as a director on January 31, 2001, in accordance with the terms of the Company’s acquisition of a portfolio of properties from Jacobs Realty Investors Limited Partnership, a Delaware limited partnership (“JRI”) and certain of its affiliates and partners (collectively referred to herein as the “Jacobs Group” and the acquisition is referred to herein as the “Jacobs Acquisition”). Mr. Bryenton is Chairman of the Company’s Nominating/Corporate Governance Committee and a member of the Audit Committee of the Board of Directors. Mr. Bryenton is a Senior Partner of the law firm of Baker & Hostetler LLP and has formerly served as the firm’s Executive Partner and Chief Operating Officer. He currently is a member of the Board of Trustees of each of Heidelberg College and the Rutherford B. Hayes Presidential Center.



Leo Fields has served as a director of the Company since the completion of its initial public offering in November 1993 and is a member of the Executive Committee of the Board of Directors. Mr. Fields is Co-Chairman of Weisberg & Fields, Inc., an investment advisory firm he started in 1991. From 1984 through 1991, Mr. Fields directed Leo Fields Interests, a private investment firm. He was affiliated with Zale Corporation from 1947 until his retirement in 1984, serving, from 1981 to 1984, as Vice Chairman and a member of Zale’s Executive Committee. Mr. Fields is also a director of the M. B. and Edna Zale Foundation.

Stephen D. Lebovitz has served as President and Secretary of the Company since February 1999 and as a director of the Company since the completion of its initial public offering in November 1993. Since joining CBL’s Predecessor in 1988, Mr. Lebovitz has also served as Executive Vice President - Development/Acquisitions, Executive Vice President - Development, Senior Vice President - New England Office and as Senior Vice President - Community Center Development and Treasurer of the Company. Before joining CBL’s Predecessor, Mr. Lebovitz was affiliated with Goldman, Sachs & Co. from 1984 to 1986. He holds a MBA from Harvard University and he is past president of the Boston Jewish Family and Children’s Service, a member of the Board of Governors of the Combined Jewish Philanthropic, Boston, Massachusetts and a member of the Board of Directors of the Children’s Hospital Trust, Boston, Massachusetts. He is a Trustee and Divisional Vice President of the ICSC. Stephen D. Lebovitz is a son of Charles B. Lebovitz and a brother of Michael I. Lebovitz and Alan L. Lebovitz.



John N. Foy has served as Vice Chairman of the Board of Directors and Treasurer of the Company since February 1999 and as a director and Chief Financial Officer of the Company since the completion of its initial public offering in November 1993. Until February 1999, he served as Executive Vice President – Finance, Chief Financial Officer and Secretary of the Company. Mr. Foy is a member of the Executive Committee of the Board of Directors. Prior to the Company’s formation, he served in similar executive capacities with CBL’s Predecessor. Mr. Foy has been involved in the shopping center industry since 1968 when he joined the Lebovitz family’s shopping center development business. In 1970, he became affiliated with the shopping center division of Arlen, and, in 1978, joined Charles B. Lebovitz in establishing CBL’s Predecessor. Mr. Foy served as Chairman of the Board of First Fidelity Savings Bank in Crossville, Tennessee from December 1985 until April 1994. Mr. Foy currently serves as a member of the Advisory Board of Regions Bank of Chattanooga, Tennessee, as Chairman of the Board of Directors of Chattanooga Neighborhood Enterprise, a non-profit organization based in Chattanooga, Tennessee and as a member of the Board of Directors of the Electric Power Board of Chattanooga, a non-profit agency of the City of Chattanooga, Tennessee. Mr. Foy is a former member of the Board of Governors of NAREIT.



Martin J. Cleary joined the Company as director on January 31, 2001, in accordance with the terms of the Jacobs Acquisition. Mr. Cleary is a member of the Company’s Compensation Committee. Mr. Cleary is the former President and Chief Operating Officer of The Richard E. Jacobs Group, Inc. Mr. Cleary is also an ex-officio Trustee and former Chairman of the ICSC.



Matthew S. Dominski joined the Company as a director on February 2, 2005, when he was appointed to the Board of Directors to fill the un-expired term of William J. Poorvu, who retired from the Company’s Board in July 2004. Mr. Dominski is a member of the Company’s Audit, Compensation and Nominating/Corporate Governance Committees. From 1993 through 2000, Mr. Dominski served as Chief Executive Officer of Urban Shopping Centers (“Urban”). Urban was formerly one of the largest regional mall property companies in the United States and was a publicly traded real estate investment trust (“REIT”) listed on the New York Stock Exchange (“NYSE”) and the Chicago Exchange. Following the purchase of Urban by Rodamco North America in 2000, Mr. Dominski served as Urban’s President until 2002. In 2003, Mr. Dominski formed Polaris Capital, LLC, a Chicago, Illinois based real estate investment firm of which he currently is joint owner. From 1998 until 2004, Mr. Dominski served as a member of the Board of Trustees of the ICSC.



Winston W. Walker has served as a director of the Company since the completion of its initial public offering in November 1993. He is a member of the Compensation and Nominating/Corporate Governance Committees of the Board of Directors and is Chairman of the Company’s Audit Committee. Mr. Walker served as President and Chief Executive Officer of Provident Life and Accident Insurance Company of America (“Provident”) from 1987 until 1993, and served in various other capacities with Provident from 1974 to 1987. Mr. Walker is a director, a member of the Audit Committee and Chairman of the Compensation Committee of American Campus Communities, Inc. of Austin, Texas, a REIT listed on the NYSE.



Ben S. Landress serves as Executive Vice President – Management of the Company. He has held that position since January 1997. Prior to that time, Mr. Landress served as Senior Vice President - Management and prior thereto, he served in a similar capacity with CBL’s Predecessor. Mr. Landress is responsible for general corporate administration and is the Company’s Compliance Officer. Mr. Landress has been involved in the shopping center business since 1961 when he joined the Lebovitz family’s development business. In 1970, he became affiliated with Arlen’s shopping center division, and, in 1978, joined Charles B. Lebovitz as an Associate in establishing CBL’s Predecessor.



Augustus N. Stephas serves as Chief Operating Officer – Senior Vice President of the Company. He was promoted to that position in February 2007. Previously, Mr. Stephas served as Senior Vice President – Accounting and Controller of the Company, having held these positions since January 1997. Mr. Stephas joined CBL’s Predecessor in July 1978 as Controller and was promoted to Vice President in 1984. From 1970 to 1978, Mr. Stephas was affiliated with the shopping center division of Arlen, first as accountant and later as assistant controller.



Michael I. Lebovitz serves as Senior Vice President – Chief Development Officer of the Company. He was promoted to that position in June 2006. Previously, Mr. Lebovitz served the Company as Senior Vice President – Mall Projects, having held that position since January 1997. Prior to that time, Mr. Lebovitz served as Vice President - Development and as a project manager for the Company. Mr. Lebovitz joined CBL’s Predecessor in 1988 as a project manager for CoolSprings Galleria in Nashville, Tennessee, and was promoted to Vice President in 1993. Prior to joining CBL’s Predecessor, he was affiliated with Goldman, Sachs & Co. from 1986 to 1988. He is past President of the Jewish Community Federation of Greater Chattanooga, serves on the national boards of United Jewish Communities, Hillel and the United States Holocaust Memorial Council and is a Board Member of the Chattanooga United Way. Michael I. Lebovitz is a son of Charles B. Lebovitz and a brother of Stephen D. Lebovitz and Alan L. Lebovitz.



Victoria S. Berghel serves as Senior Vice President – General Counsel of the Company. She was promoted to that position effective January 1, 2006. Ms. Berghel formerly served as Vice President – Deputy General Counsel since joining the Company in February 2004. Prior to joining the Company, Ms. Berghel served as a Vice President – Law – Real Estate, Construction and Environmental Affairs for Sears, Roebuck and Co. (1996 – 2004). Before joining Sears in 1996, she was a partner with the Baltimore, Maryland law firm of Weinberg & Green (now part of the law firm of Saul Ewing LLP). Ms. Berghel earned her law degree from the University of Maryland School of Law (J.D., 1977) where she was on the Editorial Board of the Maryland Law Review. Ms. Berghel has been a member of the American College of Real Estate Lawyers since 1989 and has served as Chair of the Maryland State Bar Association’s Section of Real Property, Planning and Zoning from 1994 to 1996. She serves on the Advisory Board of the John Marshall School of Law LLM-Real Estate program and is a member of the Law Conference Program Committee for the ICSC having previously served as co-chair (2003) and chair (2004) of the ICSC Law Conference and as a dean of the ICSC University of Shopping Centers School of Shopping Center Law.



Ronald L. Fullam serves as Senior Vice President – Development of the Company. He has held that position since January 1997. Prior to that time, Mr. Fullam served as Vice President - Development of the Company. Mr. Fullam joined Arlen’s shopping center development division as a project manager in August 1977 and CBL’s Predecessor as a Vice President upon its formation in 1978.



Timothy S. Lowe serves as Senior Vice President – Development of the Company. He has held that position since joining the Company in October 2007 in connection with the Company’s acquisition of certain properties from the Westfield Group (“Westfield”). Prior to that time, Mr. Lowe had served as Executive Vice President of Westfield Corporation since 1994, with responsibility for leading Westfield’s shopping center development activities in the Midwest and Mid-Atlantic regions.



Mark D. Mancuso serves as Senior Vice President – Director of Development – New England Office of the Company. He was promoted to that position effective January 1, 2006. Mr. Mancuso formerly served as Vice President and Director of Community Center Development – Boston Office. Prior to joining the Company in 1989, he was a partner with The Pyramid Companies (1984-1989). Mr. Mancuso holds a MBA from Harvard University and is currently a State Director for the ICSC and Chairman of the Board of the West Suburban YMCA in Newton, Massachusetts.



Charles H. May, II serves as a Senior Vice President – Development of the Company. Mr. May joined the Company in June 2003. Prior to joining the Company, he served as Vice President – Real Estate (2002 – 2003) and Senior Director – Real Estate (1994 – 2002), for Sears, Roebuck and Co. Prior to 1994, Mr. May served in various capacities, including Vice President, Secretary and General Counsel and Senior Vice President – Development, with Homart Development and served as Vice President of Coldwell Banker Commercial Real Estate Group. Mr. May is a member of the ICSC and the Urban Land Institute.



Farzana K. Mitchell serves as Senior Vice President – Finance of the Company. She has held that position since September 2000. Prior to joining the Company, Ms. Mitchell was Vice President of Equitable Real Estate (successor to Lend Lease Real Estate Investments prior to its acquisition by Morgan Stanley). Ms. Mitchell served the Equitable and Lend Lease Companies for 18 years in various senior financial positions and as Deputy Portfolio Manager for Equitable/Axa Financial’s mortgage portfolio. From 1976 to 1982, she served as Assistant Treasurer of IRT Property Company, a former REIT. Ms. Mitchell received her BBA degree in Economics, MBA in Accounting and a MS in Real Estate and Urban Affairs from Georgia State University. She is a certified public accountant, licensed in the state of Georgia.



Jerry L. Sink serves as Senior Vice President – Mall Management of the Company. He has held that position since February 1998. Prior to that time, Mr. Sink had served as Vice President - Mall Management since joining the Company in July 1993. Mr. Sink served as Vice President of Retail Asset Management for Equitable Real Estate, Chicago, Illinois, from January 1988 to June 1993 and, prior to January 1988, he was affiliated with General Growth Companies, Inc. as Vice President of Management. Mr. Sink holds the designation of Senior Certified Shopping Center Manager (“SCSM”) as recognized by the ICSC.



Eric P. Snyder serves as Senior Vice President – Director of Corporate Leasing of the Company. He has held this position since January 1997. Mr. Snyder joined CBL’s Predecessor as a project manager in 1978 and was promoted to Vice President in 1984 and to Vice President and Director of Corporate Leasing in 1992. From 1974 to 1978, Mr. Snyder was a leasing agent and project manager for Arlen’s shopping centers. Mr. Snyder has announced his retirement from the Company, effective March 31, 2008.



R. Stephen Tingle serves as Senior Vice President – Development of the Company. He has held that position since January 2000. Prior to that time, Mr. Tingle served as Vice President and Director of Community Center Development – Chattanooga Office. Mr. Tingle joined CBL’s Predecessor in 1986 as a project manager for community and neighborhood shopping centers and was promoted to Vice President of Development in 1988. From 1978 to 1986, Mr. Tingle engaged in the practice of law.



Charles W.A. Willett, Jr. serves as Senior Vice President – Real Estate Finance of the Company. He has held that position since January 2002. Mr. Willett was promoted to Vice President - Real Estate Finance in 1996 and held that position until his promotion to Senior Vice President as stated above. Prior to 1996, Mr. Willett participated in the Company’s finance department and he served in a similar capacity with CBL’s Predecessor prior to 1993. Mr. Willett joined CBL’s Predecessor in 1978 and prior thereto, he was affiliated with Arlen in its finance and accounting departments.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

EXECUTIVE OVERVIEW

We are a self-managed, self-administered, fully integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional malls and open-air and community shopping centers. Our shopping center properties are located in 27 states, but primarily in the southeastern and midwestern United States. We have elected to be taxed as a REIT for federal income tax purposes.

As of June 30, 2008, we owned controlling interests in 75 regional malls/open-air centers, 28 associated centers (each adjacent to a regional shopping mall), eight community centers and 13 office buildings, including our corporate office building. We consolidate the financial statements of all entities in which we have a controlling financial interest or where we are the primary beneficiary of a variable interest entity. As of June 30, 2008, we owned noncontrolling interests in nine regional malls/open-air centers, four associated centers, three community centers and six office buildings. Because one or more of the other partners have substantive participating rights, we do not control these partnerships and joint ventures and, accordingly, account for these investments using the equity method. We had five mall expansions, two associated/lifestyle centers (one of which is owned in a joint venture), one mixed-use center and six community/open-air centers (five of which are owned in joint ventures) under construction at June 30, 2008.

The majority of our revenues is derived from leases with retail tenants and generally includes base minimum rents, percentage rents based on tenants’ sales volumes and reimbursements from tenants for expenditures, including property operating expenses, real estate taxes and maintenance and repairs, as well as certain capital expenditures. We also generate revenues from sales of outparcel land at the properties and from sales of operating real estate assets when it is determined that we can realize the maximum value of the assets. Proceeds from such sales are generally used to pay off related construction loans or reduce borrowings on our credit facilities.

We were pleased with the positive growth in Funds From Operations (“FFO”) for the three and six months ended June 30, 2008 compared with the respective prior year periods, especially in light of the current retail climate. FFO was positively impacted by the properties acquired in 2007, decreased interest expense on our variable rate debt and higher lease termination fees and outparcel sales. Partially offsetting these increases were higher income tax expense, bad debt expense and abandoned project costs. FFO is a key performance measure for real estate companies. Please see the more detailed discussion of this measure on page 41.

Despite the tight credit markets, in April 2008, we successfully closed on a new, unsecured term facility of $228.0 million. In addition, we have several new developments, redevelopments and expansions in process for which the equity has been funded and construction financing for the balance of each project’s cost is already in place.

Store closures and bankruptcies have significantly increased in 2008. During July 2008, Steve & Barry’s announced that it had filed for bankruptcy. This tenant represents our largest outstanding bankruptcy exposure. However, overall store closures and tenant bankruptcies through June 30, 2008 have represented less than one percent of total revenues. We have a group dedicated to exploring strategies designed to limit the impact from store closures, including temporary tenants, options for space redevelopment, signing junior anchor replacements, and other alternative uses.

Aside from concerns surrounding the economy and credit markets, our 2008 results are beginning to reflect the benefits from the expansions and enhancements that we made to our existing portfolio in 2007, as well as the properties that we acquired in the latter part of that year. Our new development projects that are scheduled to open in 2008 should serve to maintain the positive momentum. We saw this first-hand at the grand opening of Pearland Town Center in July 2008. This project represents our first mixed-use development combining retail, hotel, office and residential components. The center opened 85% leased and committed and 70% occupied.

RESULTS OF OPERATIONS

We have acquired or opened five malls/open-air centers, one associated center, 13 community centers and 19 office buildings since January 1, 2007 (collectively referred to as the “New Properties”). These transactions impact the comparison of the results of operations for the three and six months ended June 30, 2008 to the results of operations for the comparable periods ended June 30, 2007. Properties that were in operation as of January 1, 2007 and June 30, 2008 are referred to as the “Comparable Properties.” We do not consider a property to be one of the Comparable Properties until it has been owned or open for one complete calendar year. Any reference to the New Properties in this section excludes those properties that are accounted for using the equity method of accounting or that are included in Discontinued Operations. The New Properties are as follows:

Comparison of the Three Months Ended June 30, 2008 to the Three Months Ended June 30, 2007

Revenues

The $23.2 million increase in rental revenues and tenant reimbursements was attributable to an increase of $23.0 million from the New Properties and an increase of $0.2 million from the Comparable Properties. The increase in revenues of the Comparable Properties was driven by higher lease termination fees of $1.4 million and base rents of $1.0 million, partially offset by decreases in percentage rents and tenant reimbursements of $0.5 million and $0.5 million, respectively, and a decrease in below-market lease amortization of $1.1 million. The lease termination fees were primarily attributable to a tenant who recently closed their remaining nine locations with us. We have already executed leases on six of these nine locations. Base rents have increased for new and renewal leases. As of June 30, 2008 base rents increased to $29.17 per square foot for stabilized malls, compared to $28.00 per square foot as of June 30, 2007. Percentage rents decreased during the current quarter due to lower sales. Below-market lease amortization decreased due to a higher amount of write-offs in the prior year quarter combined with an increasing number of tenant leases becoming fully amortized in the piror year.

Our cost recovery ratio declined to 96.7% for the three months ended June 30, 2008 from 102.8% for the prior year quarter. We are in the process of converting tenants to a fixed common area maintenance ("CAM") charge as compared to a pro rata charge that was applicable to more tenants in the prior year quarter. Approximately 75% of our leases have been converted to fixed CAM. Due to the conversion, the recovery ratio will fluctuate during the year as seasonal items impact the ratio. The decline in the current quarter is primarily the result of increased bad debt expense.

The decrease in management, development and leasing fees of $1.5 million was mainly attributable to a decrease of $0.5 million in each of development fees, leasing fees and financing fees primarily related to our joint ventures. We received one-time fees during the prior year quarter from Triangle Town Center and Gulf Coast Town Center.

Operating Expenses

Property operating expenses, including real estate taxes and maintenance and repairs, increased $9.7 million as a result of $8.1 million of expenses attributable to the New Properties and $1.6 million related to the Comparable Properties. The increase in property operating expenses of the Comparable Properties is primarily attributable to increases in bad debt expense and real estate tax expense.

The increase in depreciation and amortization expense of $12.6 million resulted from an increase of $13.3 million from the New Properties and a decrease of $0.7 million from the Comparable Properties. The decrease attributable to the Comparable Properties is due to a reduction in amortization expense related to tenant allowances.

General and administrative expenses increased $0.5 million primarily as a result of increases in state taxes. As a percentage of revenues, general and administrative expenses decreased to 4.1% for the second quarter of 2008 compared with 4.3% for the prior year quarter.

Other expenses increased $1.7 million primarily due to increased expenses of $1.1 million related to our subsidiary that provides security and maintenance services to third parties and due to an increase of $0.6 million in abandoned projects expense.

Other Income and Expenses

Interest expense increased $7.6 million primarily due to the debt on the New Properties, the refinancings that were completed in the prior year on the Comparable Properties and borrowings outstanding that were used to redeem our 8.75% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”) in June 2007. While we experienced a decrease in the weighted average fixed and variable interest rates as compared to the second quarter of 2007, the total outstanding principal amounts have increased.

During the second quarter of 2008, we recognized gain on sales of real estate assets of $4.3 million related to the sale of five parcels of land during the quarter and one parcel of land for which the gain had previously been deferred. The gain of $2.7 million in the second quarter of 2007 related to the recognition of gain on one parcel of land for which the gain had previously been deferred.

Equity in earnings of unconsolidated affiliates decreased by $1.3 million during the second quarter of 2008 compared to the prior year quarter, primarily due to higher interest expense on debt, the write-off of an above-market lease intangible and higher depreciation expense from the acquisition of new properties by CBL-TRS Joint Venture, LLC.

The income tax provision of $3.8 million for the three months ended June 30, 2008 relates to the earnings of our taxable REIT subsidiary. The income tax provision increased by $2.9 million primarily due to the significantly larger amount of gains in the current year period related to sales of outparcels and discontinued operations. The provision consists of current and deferred income taxes of $2.2 million and $1.6 million, respectively. During the three months ended June 30, 2007, we recorded an income tax provision of $1.0 million, consisting of a provision for deferred income taxes of $1.2 million, partially offset by a current tax benefit of $0.2 million. We have cumulative share-based compensation deductions that can be used to offset the current income tax payable; therefore, the payable for current income taxes has been reduced to zero by recognizing a portion of the benefit of the cumulative share-based compensation deductions.

We recognized income from discontinued operations of $3.3 million during the second quarter of 2008, compared to $0.6 million during the second quarter of 2007. Discontinued operations for the three months ended June 30, 2008 reflect the operating results of 19 retail and office properties that meet the criteria for held-for-sale classification. These properties were originally acquired in the fourth quarter of 2007. Discontinued operations for the 2008 quarter also include the results of Chicopee Marketplace III, a community center located in Chicopee, MA. Discontinued operations for the three months ended June 30, 2007 reflect the results of operations of Twin Peaks Mall and The Shops at Pineda Ridge, plus the true up of estimated expenses to actual amounts for properties sold during previous years.

We recognized a gain on the sale of discontinued operations of $3.1 million during the three months ended June 30, 2008. During this time, we sold five community centers and an office property, all located in Greensboro, NC, for an aggregate sales price of $25.5 million and recognized a gain of $1.6 million. We also sold Chicopee Marketplace III for an aggregate sales price of $7.5 million and recognized a gain of $1.5 million.

Preferred dividends decreased $5.8 million during the three months ended June 30, 2008 due to the redemption of 2,000,000 shares of Series B Preferred Stock in June 2007. In connection with the 2007 redemption, we incurred a charge of $3.6 million to write off direct issuance costs that were recorded as a reduction of additional paid-in-capital when the preferred stock was issued. This charge was recorded as additional preferred dividends.

CONF CALL

Stephen Lebovitz

Thank you and good morning. We appreciate your participation in the CBL & Associates Properties Inc. conference call to discuss second quarter results. Joining me today is John Foy, Chief Financial Officer, and Katie Reinsmidt, Director of Corporate Communications and Investor Relations, who will begin by reading our Safe Harbor disclosure.

Katie Reinsmidt

This conference call contains forward-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 events, 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.

During our discussion today, references made to per share are based on a fully diluted converted share. A transcript of today's comments, the earnings release and additional supplement schedules will be furnished to the SEC on Form 8-K and will be available on our website.

This call will also be available for replay on the Internet through a link on our website at cblproperties.com. This conference call is the property of CBL & Associates Properties, Inc. Any redistribution, retransmission, or rebroadcast of this call without the expressed written consent of CBL is strictly prohibited. During this conference call, the company may discuss non-GAAP financial measures as defined by SEC Regulation G. A description of each non-GAAP measure and a reconciliation of each non-GAAP financial measure to the comparable GAAP financial measure will be included in the earnings release that is furnished on Form 8-K.

Stephen Lebovitz

Thank you, Katie. We are pleased to report 9.5% FFO growth per share this quarter, particularly in light of the retail climate. We were disappointed with our same-center NOI growth, which was impacted by the increase in bankruptcy and store closure activity. However, we are still seeing positive leasing progress as retailers focus on quality expansion. Our senior management team has weathered many previous economic downturns, we are confident we will work through this one as well.

Last week we were joined by representatives from the department stores, specialty retailers, area officials, lenders as well as shoppers and other guests for the ribbon cutting for Pearland Town Center. Our new mixed-used centers located 20 miles south of Houston in Pearland, Texas.

The Houston market including the Pearland submarket is experiencing considerable growth and Pearland Town Center is well position to capitalize on this growth. This project represents our first mixed-used development incorporating retail, hotel, office and residential components.

Despite the retail climate, the CBI leasing team did an outstanding job and the center open an impressive 85% lease committed and 70% occupied. We are excited to share the news of this successful opening and invite you all to visit the center and experience the success for yourselves.

In addition to Pearland we currently have four large new projects under construction, plus 1.5 million square feet of additional development expansion and redevelopment projects. These projects combined represent a total net investment of approximately $440 million though 2010.

All the equity has been funded and construction financing for the balance of the cost is in place. While the leasing environment is challenging, we believe that each of these projects will have a strong grand openings, similar to what we were able to accomplish at Pearland.

One of these projects the Promenade in D'Iberville, Mississippi celebrated its ground breaking in June. This 700,000 square foot power center project has commencement from retailers for approximately 405,000 square feet including Best Buy, Dick's Sporting Goods, Marshalls and others it will be announced shortly.

Our development project in Brazil, Plaza Macaé is going extremely well. We anticipate opening in the fall 95% leased and committed. The Brazilian retail market fundamentals are very strong and while we will maintain a controlled international strategy we believe this market will be a great source of growth for us. Our Brazilian joint venture partner Tenco Realty has identified several new opportunities that we are looking into and completing due diligence.

We also announced an expansion to our sustainability initiative in the second quarter. The program will address sustainability opportunities in the three major areas of our business, including the corporate and regional offices, our properties and new developments. We are continuing to look for way to make a positive impact on the markets we serve.

During the second quarter, our leasing activity remained solid. We signed a total of approximately 1.4 million square feet of leases, including approximately 557,000 square feet of development leases and 863,000 square feet of leases in our operating portfolio. The 863, 000 square feet in our operating portfolio was comprised of 412,000 square feet of new leases and 451,000 square feet of renewal leases.

Today we have completed approximately 81% of our 2008 renewals, for stabilized mall leasing year-to-date on a same-space basis, we achieved an average increase of 11.6% over the prior gross rent per square foot. Portfolio occupancy excluding the centers acquired in 2007 was flat, year-over-year at 91.6%. Stabilized mall occupancy excluding centers acquired in 2007, declined 100 basis points to 91.2%.

Following the first quarter call, we experienced a significant increase in bankruptcy activity. We are working to minimize downtime on this space and have made headway in replacing some of the locations. Despite the increase in bankruptcy store closures through the second quarter, have amounted to less than 1% of total revenues.

The largest outstanding bankruptcy exposure is Steve & Barry's. Since there is still uncertainty surrounding the future of this retailer, our guidance does not anticipate any lost income, other than the write-off during the second quarter of accounts receivable of approximately $632,000. We have 21 Steve & Barry's locations in our portfolio, comprising 813,000 square feet and representing $7.3 million of annual gross rents.

In the meantime, we have a team in place exploring strategy to limit the impact, should we receive some of the space back. They are developing a plan for each space, which will include maximizing temporary income as well as options for redevelopment, replacement with another junior anchor, alternative uses or subdividing the space. Most locations are between 25,000 and 35,000 square feet. Average gross rent for the Steve & Barry's stores is approximately $9 per square foot.

Same store sales declined 2.3% to $341 per square foot recording tenants 10,000 square feet or less and stabilized malls for the rolling 12 months ended June 30, 2008. Consumer sentiment continues to way on sales with traffic at the centers declining year-over-year. Same store sales held up best in the Midwest, Texas and the non-costal south east.

Now I will turn the call over to John for our financial review.

John Foy

Thank you, Stephen. We were pleased this quarter to achieve a 9.5% increase in FFO per share to $0.81, compared with $0.74 per share in the prior year period.

Although lease termination fees and outparcel sales were $0.03 higher in the second quarter 2008 than the prior year. This was partially offset by an increase in the non-cash income tax provision. FFO was also reduced by an increase in the write-off for bad debt and an increase in abandoned project cost.

FFO was positively impacted by properties acquired in the prior year and lower interest expense on floating rate debt during the quarter. Same-center NOI declined 80 basis points for the quarter and declined 70 basis points for the six months ended June 30, 2008, compared with the prior year.

Excluding lease termination fees same-center NOI growth declined 1.8% for the quarter and declined 40 basis points for the six months compared with the prior year period. Same-centre NOI was negatively impacted by $2 million increase in the write-off of bad debt for store closures as well as a year-over-year decline in occupancy. If you exclude lease termination fees and bad debt expense from both periods same-centre NOI in the second quarter was flat and year-to-date was up 60 basis points.

Our cost recovery ratio for the quarter ended June 30, 2008 was 96.7% compared with 102.8% in the prior year period. Excluding the bad debt expense and the quarter the cost recovery ratio would have been 100%. Today, we are about 75% converted to fixed CAM. We anticipate the cost recovery ratio for the full year to be close to 100%.

G&A represented approximately 4.1% of total revenue in the second quarter ended June 30, 2008 compared with 4.3% of revenues for the quarter ended June 30, 2007.

Our debt-to-total market capitalization ratio was 68.6% as of the end of the June compared with up 53.2% as of the end of the prior year period. The increase in our debt-to-market cap is primarily a result of the decline in our stock price. All of our bank covenants are based on gross asset value test, and are not influenced by market volatility.

Variable rate debt was 15.1% of the total market capitalization as of the end of June 30, versus 9.6% as of the end of the prior year period. Variable rate debt represented 22% of CBL share of consolidated and unconsolidated debt compared with 18.1% in the prior year period.

Our EBITDA to interest coverage ratio for the quarter ended June 30, 2008 was 2.27 times compared with 2.35 times for the prior year period. Our dividend pay out ratio in the second quarter was 68% of FFO, which we are very comfortable with. We view the safety of our dividend to be very important.

We are maintaining our FFO guidance for 2008 range of $3.46 to $3.56 per share, which represents a 6.1% to 9.2% increase over 2007 FFO per share excluding the prior year impairment charge for marketable securities. The guidance assumes NOI growth of 0 to 2%, excluding the impact of lease termination fees for both periods.

At this time, we believe that the lower end of this NOI range is more probable. The guidance incorporates a write off of outstanding receivables for bankruptcies to date, including $632,000 related to the recent Steve & Barry's bankruptcy filing, but does not anticipate any lost rent and common area maintenance reimbursements resulting from the potential future Steve & Barry's store closures or other future store closures. The guidance also assumed out parcel sales of $0.12 to $0.16 per share. It does not include any unannounced acquisitions or dispositions. Once the full impact of the Steve & Barry's bankruptcy is known, we will incorporate any closures or rental reductions in our quarterly update.

In conjunction with the Starmount transaction on the second quarter, we saw one office build in Westridge Suites located in Greensburg, North Carolina for $1.2 million. Additionally, we have entered into a contract to sell New Garden center, a community center located in Greensburg North Carolina for $19.45 million. We anticipate closing the sale this month.

As we announced on last quarter's call, we completed sale of five community centers located in Greensburg, North Carolina in April for approximately $24.3 million to three separate buyers. All of the proceeds are used to reduce outstanding balances on the Starmount facilities.

As of June 30th, we had retired the $193 million bridge loan and have reduced the term loan balance to $240 million. We are continuing to market the remaining properties and will announce information on any additional sales quarterly.

We are comfortable with our liquidity position and ability to fund our future capital needs excluding loans and facilities that have remaining extension options, we have approximately $340 million of remaining maturities this year. We have term sheets and commitments in place and anticipate completely new loans within the next 60 days. The terms we are receiving on the loans are relatively favorable, and we anticipate just a slight increase in the weighted average interest rate.

The loans on Hanes Mall and Meridian mall are fully non-recourse. Rivergate Mall (Inaudible) Mall may include a portion that would be recourse to the company.

We will provide specific loan information once we have closed. We also have approximately $305 million of loans maturing in 2009 and are presently discussing refinancing options for those. These assets are very high quality with low loan to values. So, we anticipate benefiting from significant excess proceeds.

In these tough economic times, we are all experiencing the importance of strong relationships. Maintaining relationships with retailers as well as our financial partners is crucial. The successful opening of Pearland Town Center is evidence of how strong retailer relationships have benefited us.

In addition to the completion of our new $220 million term loan with our banks, at a spread of $150 to $180 over LIBOR, likewise shows how the relationships with our banks and financial partners have been beneficial to us as well.

There are many other examples that we can tell you, about illustrating how our relationships as well as the confidence in our management team by these industry leaders, enhances the ability of CBL's team to produce not only in good times, but in challenging times as well. Senior management has gone through many other difficult times and we are determined to continue the success, we have enjoyed over the years.

Our ownership position in CBL continues to increase with management currently owning over 21% of the company. We believe that during these times, we will see an increase in number of opportunities to grow our company, in a very sound and secure way.

We understand the vague reason volatility of the market, as well as the need to ensure that our company is running in the sound financial manner. We are operating proactively and believe we are position to weather the economic strains and strengths, and strengthen CBL.

We appreciate your joining us today and we would now be happy to answer any questions you may have.

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