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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from___________ to___________
Commission File No. 1-12494
CBL & ASSOCIATES PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 62-1545718
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6148 Lee Highway, Suite 300
Chattanooga, Tennessee 37421
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (423) 855-0001
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of Each Class on which Registered
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Common Stock, $.01 par New York Stock Exchange
value per share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all Reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $592,830,352 based on the closing price on
the New York Stock Exchange for such stock on March 20, 1998.
As of March 20, 1998, there were 24,074,329 shares of the Registrant's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates certain information by reference to the Registrant's
definitive proxy statement filed on March 27, 1998 in respect to the Annual
Meeting of Stockholders to be held on April 30, 1998.
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FORM 10-K
TABLE OF CONTENTS
Item No. Page
PART I
Item 1 Business. . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2 Properties. . . . . . . . . . . . . . . . . . . . . . . . 14
Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . . 35
Item 4 Submission of Matters to a Vote of Security Holders . . . 35
PART II
Item 5 Market for Registrant's Common Equity and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . . 35
Item 6 Selected Financial Data . . . . . . . . . . . . . . . . . 37
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 38
Item 8 Financial Statements and Supplementary Data . . . . . . . 50
Item 9 Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . 50
PART III
Item 10 Directors and Executive Officers of the Registrant . . . 50
Item 11 Executive Compensation . . . . . . . . . . . . . . . . . 50
Item 12 Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . . 50
Item 13 Certain Relationships and Related Transactions . . . . . 50
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . 51
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CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION OR THE PURPOSE
OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements, Certain information contained in
this Annual Report on Form 10-K is forward-looking, such as information
relating to the Company's growth strategy, projects under construction,
liquidity and capital resources, compliance with environmental laws and
regulations, and the year 2000 compliance of the Company's computer systems.
Such statements are subject to certain risks and uncertainties which could
cause actual results to differ materially, including, but not limited to,
those set forth below. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof.
The Company undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances occurring after the date hereof
or to reflect the occurrence of unanticipated events.
PART I
ITEM 1. BUSINESS.
FORMATION OF THE COMPANY
The Company is a self-managed, self-administered, fully-integrated real
estate company which is engaged in the ownership, operation, marketing,
management, leasing, expansion, development, redevelopment, acquisition and
financing of regional malls and community and neighborhood centers. CBL &
Associates Properties, Inc. (the "Company") was incorporated on July 13,
1993 under the laws of the State of Delaware to acquire an interest in
substantially all of the real estate properties owned by CBL & Associates,
Inc. and its affiliates ("CBL") and to provide a public vehicle for the
expansion of CBL's shopping center business.
The Company operates through its two wholly owned subsidiaries, CBL
Holdings I, Inc., a Delaware corporation ("CBL Holdings I"), and CBL
Holdings II, Inc., a Delaware corporation ("CBL Holdings II"). By transfers
dated April 1, 1997, the Company assigned its interests in CBL & Associates
Limited Partnership, a Delaware limited partnership (the "Operating
Partnership"), to CBL Holdings I and CBL Holdings II, which resulted in CBL
Holdings I becoming the 2.8% sole general partner of the Operating
Partnership and CBL Holdings II becoming a 69% limited partner of the
Operating Partnership. The Company conducts substantially all of its
business through the Operating Partnership. To comply with certain
technical requirements of the Internal Revenue Code of 1986, as amended
(the "Code") applicable to Real Estate Investment Trusts' ("REIT's"), the
Operating Partnership carries out the Company's property management and
development activities through CBL & Associates Management, Inc. (the
"Management Company").
On November 3, 1993, the Company completed initial public offerings,
inside and outside the United States (the "Offering"), of 15,400,000 shares
of its common stock, par value $.01 per share (the "Common Stock").
Simultaneously with the completion of the Offering, CBL transferred to the
Operating Partnership substantially all of CBL's interests in its real estate
properties and its management and development operations in exchange for an
aggregate 35.4% limited partner interest in the Operating Partnership. CBL
also acquired an additional 4.9% limited partner interest in the Operating
Partnership for a cash payment of $24.4 million. Each of the partnership
interests in the Operating Partnership may, at the election of its respective
holder, be exchanged for shares of Common Stock of the Company, subject to
certain limitations imposed by the Code. Following the Offering, the
Company owned a 59.7% general partner interest in the Operating Partnership.
The Offering and the application of proceeds therefrom, including the
Operating Partnership's acquisition of certain property interests, and the
contribution by CBL of property interests to the Operating Partnership, are
referred to herein as the "Formation."
In December 1993, CBL exercised its right under the Operating
Partnership's partnership agreement to exchange a 4.7% limited partner
interest in the Operating Partnership for 1,221,744 shares of Common Stock.
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In October 1994, the Operating Partnership exercised its option to
acquire from CBL the former Phar-Mor space at Valley Crossing in Hickory,
North Carolina for a value of $3,575,400. The Operating Partnership issued
a .5377% limited partnership interest (190,688 share equivalents) to CBL in
return for the former Phar-Mor space.
In September 1995, the Company completed a follow-on offering of
4,163,500 shares of its Common Stock at $20.625 per share. CBL purchased
150,000 of these shares. The net proceeds of $80.7 million were used to
to repay variable rate indebtedness incurred in the Company's development
and acquisition program.
In August 1996, the Company exercised its option to acquire from CBL a
parcel of land for the recently constructed Just for Feet on the periphery
of Hamilton Place Mall in Chattanooga, Tennessee for a value of $780,053. The
Operating Partnership issued a .0798% limited partner interest (34,246 share
equivalents) to CBL in return for the parcel.
In January 1997, the Company completed a follow-on offering of
3,000,000 shares of its Common Stock at $26.125 per share. CBL purchased
55,000 of those shares as part of the offering. The net proceeds of $74.3
million, were used to repay variable rate indebtedness incurred in the
Company's development and acquisition program.
In March 1997, the Company purchased from CBL a parcel of land for
additional parking for the expansion and addition of Dillard's to Twin Peaks
Mall in Longmont, Colorado for a value of $59,994. The Operating Partnership
issued a .0057% limited partner interest (2,424 share equivalents) to CBL
in return for the parcel.
In June 1997, the Company purchased from CBL a 49% general partnership
interest in Governor's Plaza in Clarksville, Tennessee for a value of
$1,512,976. The Operating Partnership issued a .1349% limited partner
interest (65,426 share equivalents) to CBL in return for the partnership
interest.
After giving effect to the above transactions, CBL holds a 28.25%
limited partner interest in the Operating Partnership, and the Company holds
a 71.75% general partner interest in the Operating Partnership. In addition,
CBL holds approximately 1.7 million of the outstanding shares of Common Stock
for a total ownership share of 33.18%.
GENERAL
The Company owns interests in a portfolio of properties, consisting of
22 enclosed regional malls (the "Malls"), 12 associated centers (the
"Associated Centers"), each of which is part of a regional shopping mall
complex, and 81 independent community and neighborhood shopping centers (the
"Community Centers"). Except for five Malls, one Associated Center and two
Community Centers which were acquired from third parties, each of these
properties was developed by CBL or the Company.
Additionally, the Company owns one Mall, one Associated Center,
one power center and two neighborhood shopping centers currently under
construction (the "Construction Properties"). The Company also owns options
to acquire certain shopping center development sites (the "Development
Properties").
The Company also holds mortgages (the "Mortgages") on community and
neighborhood shopping centers owned by non-CBL affiliates. The Mortgages were
granted in connection with sales by CBL of certain properties previously
developed by CBL. The Company also owns an interest in a three-story office
building in Chattanooga, Tennessee, a portion of which serves as the
Company's headquarters (the "Office Building"). The Malls, Associated
Centers, Community Centers, Construction Properties, Development Properties,
Mortgages and Office Building are collectively referred to herein as the
"Properties" and individually as a "Property".
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The Company has also entered into standby purchase agreements with
third-party developers for the construction, development and potential
ownership of two community and neighborhood centers in Georgia and Texas
(the "Co-Development Projects"). The developers have utilized these standby
purchase agreements as additional security for their lenders to fund the
construction of the Co-Development Projects. The standby purchase agreements
for each of the Co-Development Projects require the Company to purchase the
related Co-Development Project upon such Co-Development Project meeting
certain completion requirements and rental levels. In return for its
commitment to purchase a Co-Development Project pursuant to a standby
purchase agreement, the Company receives a fee as well as a participation
interest in each Co-Development Project. In addition to the standby purchase
agreements, the Company has extended secured credit to two of these
developers to cover pre-development costs.
The Company and the Operating Partnership generally own a 100% interest
in the Properties. With two exceptions, where the Company and the Operating
Partnership own less than a 100% interest in a Property, the Operating
Partnership is the sole general partner, managing general partner or managing
member of the property partnership or limited liability company which owns
such Property (each, a "Property Partnership"). For one Mall and its
Associated Center, affiliates of the Operating Partnership are non-managing
general partners in the two Property Partnerships owning those Properties.
For a full description of the Properties, see Item 2 -- "Properties."
The Company's executive offices are located at 6148 Lee Highway, Suite
300, Chattanooga, Tennessee 37421-6511. The telephone number at this
address is (423) 855-0001.
MANAGEMENT AND OPERATION OF PROPERTIES
MANAGEMENT COMPANY
The Company is self-managed and self-administered. To comply with
certain technical requirements of the Code, the Operating Partnership
carries out the Company's property management and development activities
through the Management Company.
The Operating Partnership holds 100% of the preferred stock and 5% of
the common stock of the Management Company. The remaining 95% of the common
stock is held by Charles Lebovitz, his family and his associates.
Substantially all of CBL's asset management, property management and leasing
and development operations, including CBL's executive, property, financial,
legal and administrative personnel, were transferred to the Management
Company as part of the Formation. The Management Company manages all of the
Properties (except for Governor's Square and Governor's Plaza -- see below)
pursuant to a management agreement that may be terminated at any time by the
Operating Partnership upon 30 days written notice. In addition, the
Management Company manages certain properties owned by CBL that were not
transferred to the Company in the Formation as well as certain shopping
centers owned by non-CBL affiliates. Through its ownership of the Management
Company's preferred stock, the Operating Partnership enjoys substantially all
of the economic benefits of the Management Company's business. Pursuant to
requirements set forth in the Management Company's Amended and Restated
Certificate of Incorporation, a majority of the Management Company's board of
directors are required to be independent of CBL. From November 1993 to the
current date, the board of directors of the Management Company has consisted
of the same individuals as the Company's board of directors, including the
four independent directors.
ON-SITE MANAGEMENT
The on-site property management functions at the Malls include leasing,
management, data processing, rent collection, project bookkeeping, budgeting,
marketing, and promotion. Each Mall, for itself and its Associated Centers,
has an on-site property manager who oversees the on-site staff and an on-
site marketing director who oversees the marketing program for that mall.
District managers, most of whom are located at the Company's headquarters,
oversee the leasing and operations at a majority of the Community Centers.
The on-site Mall managers are experienced managers with training in
mall management.
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Virtually all operating activities of the Company are supported by a
computer software system which is designed to provide management with
operating data necessary to make informed business decisions on a timely
basis. During 1994, the Company implemented a new management information
system which included hardware and software. During 1997, the Company
implemented a wide area network enabling instantaneous company-wide e-mail
and enhanced data communications on its accounting system. The accounting
software was also upgraded during 1997 to enhance support and dependability.
In the first quarter of 1998, the Company completed a hardware upgrade to
the accounting system and is developing a web site to publish integrated
information on the world wide web. These systems were developed to more
efficiently assist management in efforts to maintain management quality,
enhance investor relations and communications, and enhance tenant relations
while minimizing operating expenses. Retail sales analysis, leasing
information, budget controls, accounts receivable/payable, operating expense
variance reports and income analysis are continually available to management.
Through these systems management also has available information that
facilitates the development and monitoring of budgets and other relevant
information. See Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Year 2000 Issues.
An affiliate of the Management Company also leases certain equipment,
such as furniture, computers and vehicles, to Property Partnerships
for use at the Malls. During a portion of 1997, security, maintenance and
cleaning services at most of the Malls were provided by a company
(ERMC, L.P.) in which certain executive officers of the Company had an
interest. In February 1997, substantially all of the assets of ERMC, L.P.
were sold to a third party MManTec, Inc. ("MManTec") not affiliated with CBL
or any of the Company's executive officers. MManTec continues to operate
security services under the name of ERMC, L.P. and owes a note payable to
ERMC, L.P.
Management pursues periodic preventative maintenance programs, which
encompass paving, roofing, HVAC and general improvements to the Properties'
common areas. The on-site property managers oversee all such work in
accordance with approved budgets with the cordination of and reporting
to management.
GOVERNOR'S SQUARE
Governor's Square and Governor's Plaza are the only Properties in the
Company's portfolio in which the Company is not the sole general partner or
managing general partner. Governor's Square is owned by a Property
Partnership, the managing general partner of which is a non-CBL affiliate
which owns a 47.5% interest in the Mall. The Company is a non-managing
general partner of Governor's Plaza. Although the managing general partner
of this partnership controls the timing of distributions of cash flow, the
Company's approval is required for certain major decisions, including
permanent financing, refinancing and sale of all or substantially all of
the partnership's assets. Property management services, including
accounting, auditing, maintenance, promotional programs, leasing, collection
and insurance, are performed by a property manager affiliated with the non-
CBL managing general partner for which such property manager receives a fee.
EMPLOYEES
The Company, through the Management Company, currently employs
approximately 286 full time and 106 part time persons. None of these
employees is currently represented by any union. The Company does not have
any employees other than its statutory officers.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations,
a current or previous owner or operator of real estate may be liable for the
costs of removal or remediation of petroleum, certain hazardous or toxic
substances on, under or in such real estate. Such laws typically impose such
liability without regard to whether the owner or operator knew of, or was
responsible for, the presence of such substances. The costs of remediation
or removal of such substances may be substantial, and the presence of such
substances, or the failure to promptly remediate such substances, may
adversely affect the owner's or operator's ability to sell such real estate
or to borrow using such real estate as collateral. Persons who arrange for
the disposal or treatment of hazardous or toxic substances
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may also be liable for the costs of removal or remediation of such substances
at the disposal or treatment facility, regardless of whether such facility is
owned or operated by such person. Certain laws also impose requirements on
conditions and activities that may affect the environment or the impact of
the environment on human health. Failure to comply with such requirements
could result in the imposition of monetary penalties (in addition to the
costs to achieve compliance) and potential liabilities to third parties.
Among other things, certain laws require abatement or removal of friable and
certain non-friable asbestos-containing materials ("ACMs") in the event of
demolition or certain renovations or remodeling. Certain laws regarding ACMs
require building owners and lessees, among other things, to notify and train
certain employees working in areas known or presumed to contain ACMs. Certain
laws also impose liability for release of ACMs into the air and third parties
may seek recovery from owners or operators of real properties for personal
injury or property damage associated with ACMs. In connection with its
ownership and operation of the Properties, the Company, the Operating
Partnership or the relevant Property Partnership, as the case may be, may be
potentially liable for such costs or claims.
All of the Properties (but not properties for which the Company holds an
option to purchase but does not yet own) have been subject to Phase I
environmental assessments or updates of existing Phase I environmental
assessments within approximately the last six years. Such assessments
generally consisted of a visual inspection of the Properties, review of
federal and state environmental databases and certain information regarding
historic uses of the Property and adjacent areas and the preparation and
issuance of written reports. Some of the Properties contain, or contained,
underground storage tanks used for storing petroleum products or wastes
typically associated with automobile service or other operations conducted
at the Properties. Certain Properties contain, or contained, dry-cleaning
establishments utilizing solvents. Where believed to be warranted, samplings
of building materials or subsurface investigations were, or, with respect to
one Property, will be undertaken. At certain Properties, where warranted by
the conditions, the Company has developed and implemented an operations and
maintenance program that establishes operating procedures with respect to
ACMs. The costs associated with the development and implementation for such
programs were not material.
Although there can be no assurances that such environmental liability
does not exist, none of the environmental assessments have identified and
the Company is not aware of any environmental liability with respect to the
properties in which the Company or the Operating Partnership has or had
an interest (whether as an owner or operator) that the Company believes
would have a material adverse effect on the Company's financial condition,
results of operations or cash flows. Nevertheless, it is possible that the
environmental assessments available to the Company do not reveal all
potential environmental liabilities, that subsequent investigations will
identify material contamination, that adverse environmental conditions have
arisen subsequent to the performance of the environmental assessments, or
that there are material environmental liabilities of which management is
unaware. Moreover, no assurances can be given that (i) future laws,
ordinances or regulations will not impose any material environmental
liability or (ii) the current environmental condition of the Properties has
not been or will not be affected by tenants and occupants of the Properties,
by the condition of properties in the vicinity of the Properties or by third
parties unrelated to the Company, the Operating Partnership or the relevant
Property Partnership. The existence of any such environmental liability could
have an adverse effect on the Company's results of operations, cash flow and
the funds available to the Company to pay dividends.
The Company has not recorded in its financial statements any material
liability in connection with environmental matters.
GENERAL RISKS OF THE COMPANY'S BUSINESS
General Factors Affecting Investments in Shopping Center Properties
and Effect of Economic and Real Estate Conditions
A shopping center's revenues and value may be adversely affected by a
number of factors, including: the national and regional economic climates;
local real estate conditions (such as an oversupply of retail space);
perceptions by retailers or shoppers of the safety, convenience and
attractiveness of the shopping center; and the willingness and ability of
the shopping center's owner to provide capable management and maintenance
services. In
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addition, other factors may adversely affect a shopping center's value
without affecting its current revenues, including: changes in governmental
regulations, zoning or tax laws; potential environmental or other legal
liabilities; availability of financing; and changes in interest rate levels.
There are numerous shopping facilities that compete with the Properties in
attracting retailers to lease space. In addition, retailers at the
Properties face continued competition from discount shopping centers,
outlet malls, wholesale clubs, direct mail, telemarketing, television
shopping networks and, most recently, shopping via the Internet.
Competition could adversely affect the Operating Partnership's revenues
and funds available for distribution to partners, which in turn will affect
the Company's revenues and funds available for distribution to stockholders.
Geographic Concentration
The Properties are located principally in the southeastern United States
in Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South
Carolina, Tennessee and Virginia. Seventeen Malls, eleven Associated Centers,
sixty-four Community Centers and the Office Building are located in these
states. The Company's results of operations and funds available for
distribution to stockholders therefore will be subject generally to economic
conditions in the southeastern United States. As of December 31, 1997,
the Properties located in the southeastern United States accounted for
54.7% of the Company's total assets, and provided 71.3% of the Company's
total revenues for the year ended December 31, 1997.
Third Party Interests In Certain Properties
The Operating Partnership owns partial interests in six Malls, five
Associated Centers, one Community Center and the Office Building. The
Operating Partnership or an affiliate of the Company is the managing general
partner of the Property Partnerships that own such Properties, except for
the Governor's Square Mall and its Associated Center, Governor's Plaza, in
which affiliates of the Operating Partnership are non-managing general
partners.
Where the Operating Partnership serves as managing general partner of
Property Partnerships, it may have certain fiduciary responsibilities to the
other partners in those partnerships. In certain cases, the approval or
consent of the other partners is required before the Operating Partnership
may sell, finance, expand or make other significant changes in the operations
of such Properties. To the extent such approvals or consents are required,
the Operating Partnership may experience difficulty in, or may be prevented
from implementing its plans with respect to expansion, development, financing
or other similar transactions with respect to such Properties.
With respect to Governor's Square and Governor's Plaza, the Operating
Partnership does not have day-to-day operational control or control over
certain major decisions, including the timing and amount of distributions
and decisions relating to sales, expansions and financings, which could
result in decisions by the managing general partner that do not fully
reflect the interests of the Company, including decisions relating to the
standards that the Company is required to satisfy in order to maintain its
status as a real estate investment trust for tax purposes.
Dependence on Significant Properties
Hamilton Place and Coolsprings Galleria accounted for approximately 8.0%
and 8.0%, respectively, of total
revenues of the Company for the period ended December 31, 1997. The Company's
financial position and results of
operations will therefore be disproportionately affected by the results
experienced at these Properties.
Dependence on Key Tenants
The Limited Inc. stores (including Intimate Brands) maintains 77 Mall
stores and in the year ended December 31, 1997 accounted for approximately
8.0% of total revenues of the Company. Food Lion serves as an anchor tenant
in 37 of the Community Centers and in one Associated Center. In the year
ended December 31, 1997, Food Lion accounted for approximately 4.4% of total
revenues of the Company, Food Lion is a publicly traded North Carolina-
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based operator of supermarkets. The loss or bankruptcy of any of these or
other key tenants could negatively affect the Company's financial position
and results from operations.
THE COMPANY'S STRATEGY FOR GROWTH
Management believes that per share growth in the Company's Funds from
Operations, as defined below, is one of the key factors in enhancing
shareholder value. Management also believes that Funds from Operations is
a widely used measure of the operating performance of REITs, and its
consistent determination in accordance with generally accepted accounting
principles ("GAAP") provides a relevant basis for comparison among REITs.
It is the objective of the Company's management to achieve growth in Funds
from Operations through the aggressive management of the Company's existing
Properties, the expansion and renovation of existing Properties, the
development of new properties, and select acquisitions. Funds from
Operations can also be affected by external factors, such as inflation,
fluctuations in interest rates or changes in general economic conditions,
which are beyond the control of the Company's management.
"Funds from Operations" is defined by the Company as GAAP net income
(loss) before property depreciation, other non-cash items (consisting of the
effect of straight-lining of rents), gains or losses on sales of real estate
and gains or losses on investments in marketable securities. Funds from
Operations also includes the Company's share of Funds from Operations from
unconsolidated affiliates but minority investors' interests are excluded
from Funds from Operations. The Company complies with the National
Association of Real Estate Investment Trust's ("NAREIT") revised definition
of Funds from Operations by not adding back to income from operations
depreciation and amortization of finance costs and non-real estate assets.
The Company continues to exclude outparcel sales and the effect of straight-
line rents from its Funds from Operations calculation, even though the
revised definition allows the inclusion of such items. Funds from
Operations is a non-GAAP statement and does not represent cash flow from
operations as defined by GAAP and is not necessarily indicative of cash
available to fund all cash flow needs and should not be considered an
alternative to net income (loss) for purposes of evaluating the Company's
operating performance or to cash flows as a measure of liquidity.
The Company classifies its regional malls into two categories - stabilized
malls ("Stabilized Malls") which have completed their initial lease-up and
new malls ("New Malls") which are in their initial lease-up phase. At year
end the New Mall category was comprised of WestGate Mall in Spartanburg,
South Carolina which was renovated and expanded and reopened
in October 1996; Turtle Creek Mall in Hattiesburg, Mississippi which opened
partially in October 1994 and the remainder in March 1995 ("Phase II"); Oak
Hollow Mall in High Point, North Carolina which opened in August 1995;
Springdale Mall in Mobile, Alabama which was acquired in September 1997 and
which is being redeveloped and retenanted; and Bonita Lakes Mall in Meridian,
Mississippi which opened in October 1997.
Specifically, the Company has implemented its objective of growing its
Funds from Operations and will continue to do so by:
bullet Maximizing the cash flow from its existing portfolio of Malls,
Associated Centers and Community Centers, and other retail
complexes through aggressive leasing, management, and
marketing, including:
- an active leasing strategy which seeks to increase
occupancy. At December 31, 1997, the occupancy at the
Stabilized Malls, New Malls, Associated Centers, and
Community Centers was 91.7%, 89.2%, 83.3%, and 97.6%,
respectively, as compared to occupancies of 89.0%, 87.7%,
99.6%, and 97.2%, respectively, at December 31, 1996;
- expanded merchandising, marketing and promotional
activities, with the goal of enhancing tenant sales and
thereby increasing percentage rents. Mall store sales
per square foot for the year ended December 31, 1997 were
4.7% higher at the Stabilized Malls than for the year
ended December 31, 1996;
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- increased base rents as tenant leases expire,
renegotiation of leases and negotiation of terminations
of leases of under performing retailers. At December 31,
1997 average base rents per square foot at the Malls,
Associated Centers, and Community Centers was $19.33,
$9.43, and $7.42, respectively, as compared to average
base rents per square foot of $19.64, $8.59, and $6.94,
respectively, at December 31, 1996;
- control of operating costs. Occupancy costs as a
percentage of sales at the Stabilized Malls decreased
to 11.2% for the year ended December 31, 1997 as compared
to 11.5% for the year ended December 31, 1996 (excluding
St. Clair Square and Foothills Mall from 1996).
bullet Expanding and renovating existing properties to maintain their
competitive position.
Most of the Malls were designed to allow for expansion and
growth through the addition of new department stores or other
large retail stores as anchors ("Anchors"). Seventeen of the
twenty-two Malls have undergone expansion or renovation since
their opening, and all of the Malls have been either built or
renovated in the last 10 years or are in the process of being
renovated. Two of the Malls had available Anchor pads at
December 31, 1997. Eighteen existing Anchors at ten Malls
have expansion potential at their existing stores. During
1997, the Company completed the renovation and expansion of
Foothills Mall in Maryville, Tennessee and the addition of a
Dillard's department store to both Twin Peaks Mall in
Longmont, Colorado and Frontier Mall in Cheyenne, Wyoming.
The Company is presently renovating Hamilton Place Mall in
Chattanooga, Tennessee to be completed in 1998 and plans to
renovate Governor's Square in Clarksville, Tennessee beginning
later in 1998. The Company also plans to expand Lakeshore Mall
in Sebring, Flordia in 1999 by adding a fifth department store.
In the Community Center and Associated Center portfolios, the
Company renovated four Community Centers and expanded one
Community Center and one Associated center in 1997. In 1998,
the Company plans to renovate for seven Community Centers and
expand one Mall, one Associated Center and one Community
Center.
bullet Developing new retail properties with profitable returns on
capital, leading to growth for the future.
-10-
In 1997, the Company opened one Mall, two Associated Centers,
two power centers, and four Community Centers. Summary information
concerning these properties is set forth below.
SUMMARY INFORMATION CONCERNING PROPERTIES
OPENED DURING THE YEAR ENDED DECEMBER 31, 1997
Anchor Non-
Name of Center/ Total GLA Anchor Percentage Opening
Location GLA(1) (2) GLA Leased(3) Date Anchors
________________________ _________ _________ _________ __________ _____________ _________________________
MALLS
Bonita Lakes Mall 631,555 449,447 182,108 86% October 1997 Dillards(4), McRae's(4)
Meridian, MS JCPenney, Sears(4),
Goody's
POWER CENTERS
Springhurst Towne Center 798,736 649,317 149,419 86% July 1997/July Meijer(4), Books-A-Million,
Louisville, KY 1998 Target(4), Kohls', Party
Source, Cinemark, Gap,
Old Navy, TJ Maxx, Kitchen
& Company
Cortlandt Town Center 772,451 575,749 196,702 94% October 1997/ Home Depot(4), HomePlace,
Cortland, NY Sept. 1998 Wal*Mart, Barnes & Noble,
Marshals, A & P, United
Artist, Office Max, PetsMart
ASSOCIATED CENTERS
Bonita Lakes Crossing 110,524 96,811 13,713 29% October 1997 Books-A-Million
Meridian, MS
The Terrace 156,317 156,317 0 100% March 1997/ Circuit City(4), HomePlace,
Chattanooga, TN April 1997 Barns & Noble, Gap Old Navy,
Staples
COMMUNITY CENTERS
Massard Crossing 290,717 260,057 30,660 100% March 1997 Wal*Mart(4), Goody's,
Fort Smith, AR TJ Maxx
Salem Crossing 289,305 251,892 37,413 98% April 1997/ Hannaford Bros., Wal*Mart
Virginia Beach, VA May 1997
Northpark Center 62,500 62,500 0 100% March 1997 Hannaford Bros.
Richmond, VA
Strabridge Market Place 43,570 43,570 0 100% August 1997 Regal Cinemas
Virginia Beach, VA
_________ _________ _________
TOTAL PROPERTIES OPENED 3,155,675 2,545,660 610,015
========= ========= =========
- ---------------------------
(1) Gross Leasable Area ("GLA") includes total square footage of Anchors (whether owned or leased by Anchor)
and Mall stores or shops.
(2) Includes total square footage of Anchors (whether owned or leased by the Anchor).
(3) Percentage leased for malls does not include Anchors GLA. For the Community Centers , Associated Centers,
and power centers, percentage leased includes non-Anchor GLA and leased Anchor GLA.
(4) Owned by Anchor.
-11-
The Company currently has one Mall, one Associated Centers,
one power centers, and two Community Centers under construction.
These properties will add approximately 1,900,000 square feet
to the Company's portfolio at opening and are all scheduled to
open during 1998 or 1999.
SUMMARY INFORMATION CONCERNING CONSTRUCTION PROPERTIES
AS OF MARCH 15, 1998
Ownership
by Company
Anchor Non- and Percentage
Name of Center/ Total GLA Anchor Operating Pre-Leased and Projected
Location GLA(1) (2) GLA Partnership Committed(3) Openings Anchors
- ------------------- ---------- ---------- ---------- ----------- -------------- ----------- ----------------------
MALLS
Arbor Place Mall 1,184,279 744,138 440,141 100% 63% Fall 1999 Dillard's(4), Uptons(4),
Douglasville, GA Sears(4), Regal Cinemas
ASSOCIATED CENTERS
The Landing 163,126 111,976 51,150 100% 0% Fall 1999 Circuit City(4)
Douglasville, GA
POWER CENTERS
Sand Lake Corners 594,223 491,133 103,090 100% 27% April 1999 Lowe's(4), Wal*Mart(4),
Orlando, FL Bealls, PestMart
COMMUNITY CENTERS
Sterling Creek Commons 65,500 55,500 10,000 100% 85% June 1998 Hannaford Bros.
Portsmouth, VA
Fiddler's Run 203,926 170,769 33,157 100% 61% March 1999 Goody's, JCPenney, Belk,
Morganton, NC Food Lion
---------- --------- ---------
TOTAL CONSTRUCTION
PROPERTIES 2,211,054 1,573,516 637,538
========== ========== ==========
(1) Includes total square footage of Anchors (whether owned or leased
by the Anchor) and mall stores or shops after each projects final
phase is complete.
(2) Includes total square footage of Anchors (whether owned or leased
by the Anchor).
(3) Percentage leased and committed for Malls does not include Anchor
GLA. For the Community Centers, Associated Centers, and power
centers, percentage leased and committed includes non-Anchor GLA
and leased Anchor GLA.
(4) Owned by Anchor.
In addition to the Construction Properties, the Company is pursuing
the development of a number of sites which the Company believes are
viable for future development as malls and community and
neighborhood shopping centers. Regional mall development sites are
being pursued in Alabama, Georgia and South Carolina and community
shopping center sites are being pursued in Connecticut, Florida,
Kentucky, Missouri, New York, Tennessee and Virginia.
In general, the Company seeks out development opportunities in
middle-market trade areas that it believes are under-serviced by
existing retail facilities, have demonstrated improving demographic
trends or otherwise afford an opportunity for effective market
penetration and competitive presence.
bullet Acquiring existing retail properties where cash flow can be
enhanced by improved management, leasing, redevelopment and
expansion.
-12-
Management believes that an opportunity for growth exists through
the acquisition of shopping centers that meet the Company's
investment criteria and targeted returns. In general, the Company
seeks to acquire well-located shopping centers in middle-market
geographic areas consistent with management's experience where
management believes significant value can be created through its
development, leasing and management expertise.
In January 1997, the Company purchased Sutton Plaza, a community
center located in Mount Olive, New Jersey for $5.7 million, which
was funded from the Company's credit lines. This
122,000 square foot community center is 100% leased and is
anchored by A&P and Ames. The Company plans to expand the center
during 1998.
In August 1997, the Company acquired Spartan Plaza in Spartanburg,
South Carolina, a 151,000 square foot Associated Center adjacent
to the Company's WestGate Mall. The purchase price
of this property was $4.5 million, which was funded from the
Company's credit lines. It was renamed WestGate Crossing and it
is currently being redeveloped and retenanted.
In September 1997, the Company acquired Springdale Mall in Mobile,
Alabama. The 926,000 square foot mall is anchored by Gayfers,
McRae's, and Montgomery Ward. The purchase price was $26.2 million
which was funded by a $20 million acquisition loan with the
balance funded from the Company's credit lines. This Mall is
being redeveloped, remodeled, retenanted and expanded.
On January 2, 1998, the Company purchased the 823,916 square foot
Asheville Mall in Asheville, North Carolina for $65 million, which
was funded by a $48.9 million acquisition loan with the balance
funded from the Company's credit lines.
On January 30, 1998, the Company purchased the 1,078,568 square foot
Burnsville Center in Burnsville (Minneapolis), Minnesota for $81
million which was funded by a $60.8 million acquisition loan with
the balance funded from the Company's credit lines.
RISKS ASSOCIATED WITH THE COMPANY'S GROWTH STRATEGY
In connection with the implementation of this growth strategy, the Company
and the Operating Partnership will incur various risks including the risk that
development or expansion opportunities explored by the Company and the
Operating Partnership may be abandoned; the risk that construction costs of
aproject may exceed original estimates, possibly making the project not
profitable; the risk that the Company and the Operating Partnership may not
be able to refinance construction loans which are generally with full
recourse to the Company and the Operating Partnership; the risk that
occupancy rates and rents at a completed project will not meet projections,
and will therefore be insufficient to make the project profitable; and the
need for anchor, mortgage lender and property partner approvals for certain
expansion activities. In the event of an unsuccessful development project,
the Company's and the Operating Partnership's loss could exceed its
investment in the project.
The Company has in the past elected not to proceed with certain
development projects and anticipates that it will do so again from time to
time in the future. If the Company elects not to proceed with a development
opportunity, the development costs associated therewith ordinarily will be
charged against income for the then-current period. Any such charge could
have a material adverse effect on the Company's results of operations for
the period in which the charge is taken.
-13-
COMPETITION
There are numerous shopping facilities that compete with the Properties
in attracting retailers to lease space. In addition, retailers at the
Properties face continued competition from discount shopping centers, outlet
malls, wholesale clubs, direct mail, telemarketing, television shopping
networks and shopping via the Internet. Competition could adversely affect
the Operating Partnership's revenues and funds available for distributions
to partners, which in turn will affect the Company's revenues and funds
available for distribution to stockholders.
SEASONALITY
The Company's business is somewhat seasonal in nature with tenant sales
achieving the highest levels during the fourth quarter because of the holiday
season. 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.
QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST
The Company has elected to be taxed as real estate investment trust under
the Code, commencing with its taxable year ended December 31, 1993, and will
seek to maintain such status. As a qualified real estate investment trust,
the Company generally will not be subject to Federal income tax to the extent
it distributes at least 95% of its real estate investment trust taxable income
to its shareholders. If the Company fails to qualify as a real estate
investment trust in any taxable year, the Company will be subject to Federal
income tax (including any applicable alternative minimum tax) on its taxable
income at regular corporate rates.
INSURANCE
The Operating Partnership carries comprehensive liability, fire, extended
coverage and rental loss insurance covering all the Properties, with policy
specifications and insured limits customarily carried for similar properties.
Management believes that the Properties are adequately insured in accordance
with industry standards.
ITEM 2. PROPERTIES.
MALLS
Each of the Malls is an enclosed regional shopping complex. Each Mall
generally has at least three Anchors which own or lease their stores and
numerous non-anchor stores with GLA less than 30,000 square feet ("Mall
Stores"), most of which are national or regional retailers, located along
enclosed malls connecting the Anchors. At most of the Malls, additional
freestanding restaurants and retail stores are located on the periphery of
the Mall complex. These freestanding stores are, in most cases, owned by
their occupants. Eight of the Mall complexes include one or more Associated
Centers.
The total GLA of the 22 Malls is approximately 16.1 million square feet
or an average GLA of approximately 733,000 square feet per Mall. Mall store
GLA is 3,503,490 square feet at December 31, 1997. The Stabilized Mall
occupancy was 91.7% at December 31, 1997 (94.6% including
leased Anchor GLA). The Company wholly owns all but six of its Malls and
manages all but one of them.
In the years ended December 31, 1995, 1996 and 1997, Mall revenues
represented approximately 72.5%, 72.8% and 72.9%, respectively, of total
revenues from the Company's Properties.
-14-
Mall stores in the Stabilized Malls ("Stabilized Mall Stores") occupancy
increased from 89.0% at December 31, 1996, to 91.7% at December 31, 1997.
St. Clair Square and Foothills Mall, which were acquired during 1996, were
included in the Stabilized Mall category at December 31, 1996.
In the years ended December 31, 1995, 1996 and 1997, average Stabilized
Mall Store sales per square foot were approximately $237, $240 and $251,
respectively (computed using a monthly weighted average). Average Stabilized
Mall Store sales per square foot increased by 4.7% for the year ended
December 31, 1997 as compared to the year ended December 31, 1996.
Average base rent per square foot at the Mall Stores decreased from
$19.64 at December 31, 1996 to $18.98 at December 31, 1997. Average
base rents decreased in the Mall Stores during 1997 due to the fact that
several higher quality, larger space tenants leased space during the year.
The revenue increases from increases in occupancy have more than made up
for any reduction in revenues from average base rents going forward.
Occupancy costs as a percentage of sales for tenants in the Stabilized
Malls (excluding St. Clair Square and Foothills Mall from 1995 and 1996)
were 12.3%, 11.7% and 11.2% for the years 1995, 1996, and 1997, respectively.
The Malls are generally located in middle-markets. Management believes
that the Malls have strong competitive positions because they generally are
the only or largest enclosed malls within their respective trade areas.
Trade areas have been identified by management based upon a number of sources
of information, including the location of other malls, publicly available
population information, customer surveys, surveys of customer automobile
license plates as well as ZIP codes and third-party market studies.
The two largest revenue-producing Malls are Hamilton Place and
CoolSprings Galleria. Hamilton Place is located on a 187-acre site in
Chattanooga, Tennessee and represented, as of December 31, 1997, 4.67% of
the Properties' total GLA, 5.48% of total Mall Store GLA and 8.0% of total
revenues from the Company's Properties. CoolSprings Galleria is located on
a 148-acre site in metropolitan Nashville, Tennessee and represented, as of
December 31, 1997, 4.55% of the Properties' total GLA, 5.59% of total Mall
Store GLA and 8.0% of total revenues from the Company's Properties.
Seventeen of the twenty-two Malls have undergone an expansion or
remodeling since their opening, and all but one of the Malls have either
been built or renovated in the last 10 years or are in the process of being
renovated, including the renovation of Hamilton Place and a redevelopment
and expansion of Springdale Mall. The Company plans to renovate Governor's
Square beginning later in 1998 and plans to expand Lakeshore Mall in 1999
by adding a fifth department store. Two of the Malls have
available Anchor pads providing expansion potential totaling approximately
205,700 buildable square feet at December 31, 1997. Eighteen existing
Anchors at ten Malls have aggregate expansion potential at their existing
stores of approximately 473,000 buildable square feet.
With the exception of WestGate Mall, St. Clair Square and Springdale Mall
which were acquired by the Company in March 1995, November, 1996 and
September 1997, respectively, each of the Malls was developed by the Company.
The land underlying the Malls is owned in fee in all cases, except for Walnut
Square, WestGate Mall, St. Clair Square, and Bonita Lakes MAll which are each
subject to long-term ground leases for all or a portion of the land underlying
these Malls.
The table on the following page sets forth certain information for each
of the Malls as of December 31, 1997 and includes Asheville Mall and
Burnsville Center, which were acquired in January 1998.
-15-
Mall
Year Ownership by Total Store Percentage
Most Company and Mall Sales per Mall Store Fee or
Year of Recent Operating Total Store Square GLA Anchor Ground
Name of Mall/Location Opening Expansion Partnership GLA(1) GLA(2) Foot(3) Leased(4) Anchors Vacancies Lease
- --------------------- ------- --------- ------------ --------- --------- --------- ---------- ------------------ --------- -------
NEW MALLS
Bonita Lakes Mall 1997 N/A 100% 631,555 182,108 $ 93(15) 86% Goody's, Dillard's, None Ground
Meridian, MS JCPenney, Sears, Leased
MaRae's (14)
Oak Hollow Mall 1995 N/A 75% 829,194 252,366 223 87% Goody's, JCPenney, None Fee
High Point, NC Belk-Beck, Sears,
Dillard's
Springdale Mall 1960(7) N/A 100% 926,376 325,031 218 84% Gayfers, Montgomery None Fee
Mobile, AL Ward, McRae's
Turtle Creek Mall 1994 1995 100% 846,234 223,140 263 98% JCPenney, Sears, None Fee
Hattiesburg, MS Dillard's, Gayfers,
Goody's, McRae's
WestGate Mall 1975 1996 100% 1,100,575 276,461 272 91% Belk-Hudson, None Fee/
Spartanburg, SC --------- --------- ---- JCPenney, Dillard's, Ground
Sears, Upton's, Lease
JB White (5)
TOTAL NEW MALLS 4,333,934 1,259,106 89%
========= ========= ====
STABILIZED MALLS
Asheville Mall 1972(8) 1994 100% 823,916 260,581 $272 99% Dillard's, Montgomery None Fee
Asheville, NC Ward, JCPenney, Sears,
Belk
Burnsville Center 1977(12) N/A 100% 1,078,568 417,525 281 93% Mervyn's, Dayton's, None Fee
Burnsville, MN JCPenney, Sears
College Square 1988 1993 100% 460,463 157,594 213 86% JCPenney, Sears, None Fee
Morristown, TN Wal*Mart, Goody's,
Proffit's
CoolSpring Galleria 1991 1994 100% 1,130,597 375,582 299 94% Castner-Knott, None Fee
Nashville, TN Dillard's, Sears,
JCPenney, Parisian
Foothills Mall 1983(6) 1997 95% 476,768 180,072 190 89% Sears, JCPenney, None Fee
Maryville, TN Goody's, Proffitt's,
Proffitt's II
Frontier Mall 1981 1983 100% 523,004 202,417 184 85% Dillard's, JCPenney, None Fee
Cheyenne, WY Joslins, Sears
Georgia Square 1981 N/A 100% 680,135 258,581 217 96% Belk, JCPenney, None Fee
Athens, GA Macy's, Sears
Governor's Square 1986 1994 48% 692,320 271,319 225 94% JCPenney, Parks- None Fee
Clarksville, TN Belk, Sears,
Dillard's, Goody's
Hamilton Place 1987 1992 90% 1,159,636 367,988 322 97% Belk, Parisian, None Fee
Chattanooga, TN Proffitt's I,
Proffitt's II,
Sears, JCPenney
Lakeshore Mall 1992 N/A 100% 408,534 153,062 184 79% Kmart, Belk-Lindsey, None Fee
Sebring, FL JCPenney, Beall's (9)
Madison Square 1984 1985 50% 933,845 300,025 301 98% Castner Knott, None Fee
Huntsville, AL JCPenney, McRae's,
Parisian, Sears
Pemberton Square 1985 1990 100% 353,300 135,065 182 92% JCPenney, McRae's, None Fee
Vicksburg, MS Wal*Mart, Goody's
Plaza Del Sol 1979 1990 51% 245,685 89,504 158 97% Beall Bros.(9), None Fee
Del Rio, TX JCPenney, Kmart
Post Oak Mall 1982 1985 100% 776,823 318,642 231 83% Beall Bros.(9), None Fee
College Station, TX Dillard's, Foley's,
Service Merchandise,
Sears, JCPenney
-16-
Mall
Year Ownership by Total Store Percentage
Most Company and Mall Sales per Mall Store Fee or
Year of Recent Operating Total Store Square GLA Anchor Ground
Name of Mall/Location Opening Expansion Partnership GLA(1) GLA(2) Foot(3) Leased(4) Anchors Vacancies Lease
- --------------------- ------- --------- ------------ --------- --------- --------- ---------- ------------------ --------- -------
St. Clair Square 1974(10) N/A 100% 1,044,599 315,656 342 96% Famous Barr, Sears, None Fee/
Fairview Heights, IL JCPenney, Dillard's, Ground
Lease
(11)
Twin Peaks Mall 1985 1987 100% 556,153 245,268 193 87% JCPenney, Dillard's None Fee
Longmont, CO Joslins, Sears
Walnut Square 1980 1992 100% 450,385 171,192 191 96% Belk, JCPenney, None Ground
Dalton, GA ---------- --------- ---- --- Proffitt's, Sears, Lease
Goody's (13)
TOTAL STABILIZED MALLS 11,794,731 4,220,073 $252 92%
========== ========= ==== ===
( 1) Includes the total square footage of the Anchors (whether owned or leased
by the Anchor) and Mall Stores. Does not include future expansion areas.
( 2) Does not include Anchors.
( 3) Totals represent weighted averages.
( 4) Includes tenants paying rent for executed leases as of December 31, 1997.
( 5) The Company is the lessee under several ground leases for approximately
53% of the underlying land. The leases extend through October 31, 2084,
including six ten-year renewal options. Rental amount is $130,000 per
year. In addition to base rent, the landlord receives 20% of the
percentage rents collected. The Company has a right of first refusal to
purchase the fee.
( 6) Originally opened in 1983 and controlling interest acquired by the
Company in December 1996.
( 7) Originally opened in 1960, was acquired by the Company in September 1997,
and is currently under going expansion and renovation.
( 8) Originally opened in 1972, last renovation completed in 1994, and
acquired by the Company in January 1998.
( 9) Beall Bros. operating in Texas is unrelated to Beall's operating in
Florida.
(10) Originally opened in 1974, last renovation completed in 1994, and
acquired by the Company in November, 1996.
(11) The Company is the lessee under a ground lease for 20 acres which
extends through January 31, 2073, including 14 five-year renewal
options and one four-year renewal option. Rental amount is $40,000
per year. In addition to base rent, the landlord receives .25% of
Dillard's sales in excess of $16,200,000.
(12) Originally opened in 1977, last renovation completed in 1989, and
acquired by the Company in January 1998.
(13) The Company is the lessee under several ground leases which extend
through March 14, 2078, including six ten-year renewal options and
one eight-year renewal option. Rental amount is $149,450 per year.
In addition to base rent, the landlord receives 20% of the percentage
rents collected. The Company has a right of first refusal to purchase
the fee.
(14) The Company is the lessee under a ground rent for 116.4 acres which
extends through June 30, 2035. The average annual base rent is $77,509.
(15) Center opened in fourth quarter of 1997.
-17-
Anchors. Anchors are a critical factor in a Mall's success because the
public's identification with a property typically focuses on its Anchors.
Mall Anchors generally are department stores whose merchandise appeals to a
broad range of shoppers. Although the Malls derive a smaller percentage of
their operating income from Anchor stores than from Mall Stores, strong
Anchors play an important part in generating customer traffic and making the
Malls desirable locations for Mall Store tenants.
Anchors either own their stores together with the land under them,
sometimes with adjacent parking areas, or enter into long-term leases with
respect to their stores at rental rates that are significantly lower than
the rents charged to tenants of Mall Stores. Anchors which lease their
stores account for approximately 12.0% of the total revenues from the
Company's Properties. Each Anchor which owns its own store has entered into
a reciprocal easement agreement with the Company covering, among other
things, operating covenants, reciprocal easements, property operations,
initial construction and future expansions.
The Malls have a total of 103 Anchors. No Anchor Stores at any of the
Malls were vacant as of December 31, 1997. The following table indicates all
Mall Anchors and sets forth the aggregate number of square feet owned or
leased by Anchors in the Malls as of March 15, 1998.
-18-
MALL ANCHOR SUMMARY INFORMATION
GLA GLA TOTAL
NUMBER OWNED LEASED OCCUPIED
OF ANCHOR BY BY BY
NAME STORES ANCHOR ANCHOR ANCHOR (1)
- -------------------- ---------- --------- --------- -----------
JCPenney 21 554,971 1,309,823 1,864,794
Sears 18 1,406,551 651,466 2,058,017
Dillard's 11 1,150,247 252,704 1,402,951
Proffitt's
Proffitt's (2) 6 492,654 0 492,654
McRae's 5 383,559 168,000 551,559
Parisian 3 207,520 133,000 340,520
---------- --------- --------- -----------
Subtotal 14 1,083,733 301,000 1,384,733
Belk
Belk 5 0 555,888 555,888
Belk-Lindsey 1 0 61,029 61,029
Belk-Hudson 1 0 152,890 152,890
Parks-Belk 1 0 122,367 122,367
---------- --------- --------- -----------
Subtotal 7 0 892,174 892,174
Mercantile Stores
Castner Knott 2 326,004 30,000 356,004
J.B. White 1 150,000 0 150,000
Gayfers 2 407,800 0 127,800
Joslins 2 152,914 2,500 155,414
---------- --------- --------- -----------
Subtotal 7 1,036,718 32,500 1,069,218
The May Company
Foley's 1 103,888 0 103,888
Famous Barr 1 0 236,489 236,489
- -------------------- ---------- --------- --------- -----------
Subtotal 2 103,888 236,489 340,377
Goody's 8 0 256,838 256,838
Montgomery Ward 2 0 245,829 245,829
Dayton-Hudson 1 221,326 0 221,326
Wal*Mart 2 0 214,653 214,653
Kmart 2 0 173,940 173,940
Mervyn's 1 124,919 0 124,919
Macy's 1 115,623 0 115,623
Uptons 1 0 69,993 69,993
Beall Bros. (Texas) 2 0 61,916 61,916
Beall's (Florida) 1 0 45,844 45,844
Service Merchandise 1 0 40,804 40,804
---------- --------- --------- -----------
Total 103 5,797,976 4,693,489 10,491,465
========== ========= ========= ===========
(1) Includes all square footage owned by or leased to such Anchor including
tire, battery and automotive facilities and storage square footage.
(2) Proffitt's occupies two Anchor spaces at Foothills Mall and three at
Hamilton Place Mall.
Mall Stores. The Malls have approximately 1,624 Mall Stores. National or
regional chains (excluding individually franchised stores) lease
approximately 82.0% of the occupied Mall Store GLA. Although Mall Stores
occupy only 33.7% of total Mall GLA, for the year ended December 31, 1997,
the Malls derived approximately 87.6% of their revenue from Mall Stores.
Among the companies with the largest representation among Mall Stores are:
The Limited, Inc. stores /Intimate Brands (The Limited, Limited Too, Express,
Lerner New York, Lane Bryant, Structure, Victoria Secret, and Bath and Body
Works) and Woolworth Corporation (Footlocker, Lady Footlocker, Kinney Shoes,
Champs Sports Stores, Afterthoughts Boutique and San Francisco Music Box).
As of December 31, 1997, The Limited's Stores, Inc.'s and
-19-
Intimate Brands' 77 stores accounted for 13.1% of total leased GLA and 8.0%
of total revenues from the Company's Properties. No single Mall Store
retailer accounted for more than 13.1% of total leased GLA and no single Mall
Store retailer accounted for more than 8.0% of total revenues from the
Company's Properties.
The following table sets forth certain information for executed renewal
leases with current tenants or leases of previously occupied space with new
tenants at the Malls during the year ended December 31, 1997.
Prior Lease New Lease Increase Increase
Total Base and Initial Year per New Lease per
Number Square Percentage Rent Base Rent Square Average Square
of leases Feet per Square Foot per Square Foot Foot Base Rent Foot
- --------- -------- --------------- --------------- --------- ---------- --------
237 473,272 $19.85 $20.77 $0.91 $21.22 $1.37
The following table sets forth the total Mall Store GLA, the total square
footage of leased Mall Store GLA, the percentage of Mall Store GLA leased,
the average base rent per square foot of Mall Store GLA and average Mall
Store sales per square foot as of the end of each of the past five years.
STABILIZED MALL STORE SUMMARY INFORMATION
Total Percentage Average Average Mall
Total Mall Store of Mall Store Base Rent Store Sales
At Mall Store Leased GLA per Square per Square
December 31, GLA GLA Leased(1) Foot(2) Foot(3)
- ------------- ---------- ---------- ----------- ----------- ------------
1993 2,576,047 2,268,790 88.1% $16.12 $217
1994 2,576,047 2,284,987 88.7 16.55 226
1995 3,003,334 2,697,969 89.8 18.28 237
1996 3,452,997 3,073,190 89.0 19.03 240
1997 3,503,490 3,214,176 91.7 18.98 252
- -------------------
(1) Mall Store occupancy includes tenants with executed leases who are paying
rent.
(2) Average base rent per square foot is based on Mall Store GLA occupied as
of the last day of the indicated period for the preceding twelve-
month period.
(3) Calculated for the preceding twelve-month period.
Lease Expirations. The following table shows the scheduled lease
expirations for the Malls (assuming that none of the tenants exercise
renewal options) for the year ending December 31, 1998 and for the next
nine years for the Mall Stores.
MALL LEASE EXPIRATION
Percentage of Total
Approximate Represented by
Mall Store Expiring Leases
Number of Annualized Base GLA of --------------------------
Leases Rent of Expiring Expiring Annualized Leased Mall
December 31, Expiring Leases (1) Leases Base Rent Store GLA
- -------------- --------- ---------------- ------------- ------------ -----------
1998 233 $6,385,665 359,618 8.00% 8.52%
1999 175 5,925,743 309,889 7.42 7.34
2000 170 6,583,360 389,614 8.25 9.23
2001 129 6,510,819 335,515 8.16 7.95
2002 190 8,433,978 409,572 10.57 9.71
2003 133 6,675,899 341,094 8.36 8.08
2004 129 6,564,279 313,380 8.22 7.43
2005 136 8,319,776 384,254 10.42 9.11
2006 106 5,697,381 288,301 7.14 6.83
2007 137 8,960,179 431,102 11.22 10.22
-20-
(1) Total annualized base rent for all leases executed as of December 31, 1997
includes rent for space that is leased but not yet occupied but excludes (i)
percentage rents, (ii) additional payments by tenants for common area
maintenance, real estate taxes and other expense reimbursements and (iii)
contractual rent escalations and cost of living increases due after
December 31, 1997.
Cost of Occupancy. Management believes that in order to maximize the
Company's Funds from Operations, tenants in Mall Stores must be able to
operate profitably. A major factor contributing to tenant profitability is
the tenant's cost of occupancy.
The following table summarizes for Stabilized Mall Store tenants the
occupancy costs under their leases as a percentage of total Mall Store sales
for the last three years.
For the Year Ended
December 31, (1)
------------------------------
1995 1996 1997
--------- --------- --------
Mall Store sales (in thousands)(2) $526,107 $515,121 $666,506
Minimum rents 8.6% 7.9% 7.7%
Percentage rents 0.5 0.3 0.4
Expense recoveries (3) 3.2 3.3 3.1
--------- --------- --------
Mall tenant occupancy costs 12.3% 11.5% 11.2%
======= ========= =======
(1) Excludes Malls not open for full reporting period.
(2) Consistent with industry practice, sales are based on reports by
retailers (excluding theaters) leasing Mall Store GLA and
occupying space for the reporting period. Represents 100% of sales for
these Malls. In certain cases, the Company and the
Operating Partnership will own less than 100% interest in these Malls.
(3) Represents real estate tax and common area maintenance charges.
At December 31, 1997, the Company had investments in three malls in joint
ventures with third parties, all of which are reflected using the equity
method of accounting. Condensed combined results of operations for the
three unconsolidated affiliates are presented in the following table
(dollars in thousands).
Company's Share
Total for the Year for the Year
Ended Ended
December 31, December 31,
------------------- -------------------
1997 1996 1997 1996
------- -------- -------- --------
Revenues $21,295 $21,014 $10,475 $10,318
Depreciation & Amortization 2,678 2,592 1,311 1,268
Interest Expense 8,044 8,278 3,951 4,061
Other Operating Expenses 6,955 6,389 3,432 3,159
------- -------- -------- --------
Net Income Before Extraordinary Item 3,618 3,755 1,781 1,830
Extraordinary Item 0 1,727 0 820
------- -------- -------- --------
Net Income $3,618 $2,028 $1,781 $1,010
======= ======== ======== ========
-21-
ASSOCIATED CENTERS
The twelve Associated Centers are each part of a Mall complex and
generally have one or two Anchor tenants and various smaller tenants.
Anchor tenants in these centers include such retailers as Books-A-Million,
Target, Toys "R" Us, TJ Maxx, and Service Merchandise which are category
dominant retailers that benefit from the regional draw of the Malls. The
Associated Centers also increase the draw to the total Mall complex.
Total leasable GLA of the twelve Associated Centers is approximately 0.9
million square feet, including Anchors, or an average of approximately 76,000
square feet per center. As of December 31, 1997, 83.3% of total leasable GLA
at the Associated Centers was occupied. This decrease in occupancy is due to
the Company relocating a tenant to a Mall store and the retenanting of
Westgate Crossing.
In the years ended December 31, 1995, 1996, and 1997, revenues from the
Associated Centers represented approximately 3.5%, 3.3% and 3.8%,
respectively, of total revenues from the Company's Properties.
In the years ended December 31, 1995, 1996 and 1997, average tenant
sales per square foot at the Associated Centers were approximately $215,
$207 and $189, respectively.
Average base rent per square foot at the Associated Centers increased
from $8.59 at December 31, 1996 to $9.43 at December 31, 1997.
Each of the Associated Centers was developed by the Company, except for
WestGate Crossing which was acquired in August 1997. All of the land
underlying the Associated Centers is owned in fee.
Lease Expirations. The following table shows for the Associated Centers
(assuming that none of the tenants exercise renewal options) the scheduled
lease expirations for the year ending December 31, 1998 and for the next
nine years.
ASSOCIATED CENTER LEASE EXPIRATION
Percentage of Total
Approximate Represented by
Mall Store Expiring Leases
Number of Annualized Base GLA of --------------------------
Leases Rent of Expiring Expiring Annualized Leased Mall
December 31, Expiring Leases (1) Leases Base Rent Store GLA
- -------------- --------- ---------------- ------------- ------------ -----------
1998 13 $278,698 35,696 4.21% 5.03%
1999 14 335,342 24,120 5.06 3.40
2000 22 808,972 72,653 12.21 10.25
2001 5 389,708 43,516 5.88 6.14
2002 14 647,380 52,229 9.77 7.37
2003 9 408,579 52,394 6.17 7.39
2004 4 556,204 94,060 8.40 13.26
2005 2 336,489 46,428 5.08 6.55
2006 2 288,625 32,720 4.36 4.61
2007 4 596,890 8,476 9.01 1.20
(1) Total annualized base rent for all leases executed as of December 31,
1997 includes 12 months of rent for space that is newly leased but not
yet occupied but excludes (i) percentage rents, (ii) additional
payments by tenants for common area maintenance, real estate taxes and
other expenses reimbursements and (iii) contractual rent escalations
and cost of living increases due after December 31, 1997.
-22-
The following table sets forth certain information for executed renewal
leases with current tenants or leases of previously occupied space with new
tenants at the Associated Centers during the year ended December 31, 1997.
Prior Lease New Lease Increase Increase
Total Base and Initial Year per New Lease per
Number Square Percentage Rent Base Rent Square Average Square
of leases Feet per Square Foot per Square Foot Foot Base Rent Foot
- --------- -------- --------------- --------------- --------- ---------- --------
33 58,905 $12.61 $13.29 $0.68 $13.47 $0.87
The following table sets forth certain information for each of the
Associated Centers as of December 31, 1997:
Year of Ownership by
Name of Opening/Most Company and Total Percentage
Associated Recent Operating Total Leased GLA
Center/Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors
- ----------------------- ------------ ------------- ------------ ------------ ---------- ----------------------------
Bonita Crossing 1997 100% 110,524 110,524 100% Books-A-Million
Meridian, MS TJ Maxx
CoolSprings Crossing 1992 100% 340,596 40,513 100% Target, Service Merchandise,
Nashville, TN Toys "R" Us, Uptons, Carmike
Cinemas
Foothills Plaza 1983/1988 100% 204,400(4) 124,400(4) 60.9%(4) Food Lion, Eckerd(6), Carmike
Maryville, TN Cinemas
Frontier Square 1985 100% 161,615 16,615 88% Buttrey Food & Drug, Target
Cheyenne, WY
Georgia Square Plaza 1984 100% 15,393 15,393 100%
General Cinema
Athens, GA
Governor's Square Plaza 1985(5) 49% 180,018 57,820 100% Office Max, Premier Medical
Clarkesville, TN Group, Target
Hamilton Corner 1990 90% 88,298 88,298 100% Michael's, Goody's,
Chattanooga, TN Fresh Market
Hamilton Crossing 1987/1994 92% 171,370 78,257 98% Service Merchandise, Toys
Chattanooga, TN "R" Us, TJ Maxx
Madison Plaza 1984(7) 75% 153,085 98,690 100% Food World, TJ Maxx
Huntsville, AL Service Merchandise
Pemberton Plaza 1986 100% 77,998 27,052 78% Kroger
Vicksburg, MS
The Terrace 1997 92% 156,317 117,045 100% Barnes & Novle, HomePlace,
Chattanooga, TN The Gap, Staples,Circuit City
WestGate Crossing 1985(8) 100% 151,489 151,489 43% Circuit City(9), Toys "R" Us
Spartanburg, SC --------- ------- ----
TOTAL ASSOCIATED CENTERS 1,811,103 896,096 83%
========= ======= ====
-23-
(1) Includes the total square footage of the Anchors (whether owned or leased
by the Anchor) and shops. Does not include future expansion areas.
(2) Includes leasable Anchors.
(3) Includes tenants with executed leases at December 31, 1997.
Calculation includes leased Anchors.
(4) Total GLA includes and Total Leasable GLA and Percentage GLA Leased
exclude a vacant former Hills Department Store (80,000 square feet of
GLA), which is owned by senior management of the Company. The Company
has a ten-year option (with approximately six years remaining) to
acquire this property for a fixed acquisition price of $3,800,000.
Carmike Cinemas is subject to a ground lease (30,000 square feet of
GLA).
(5) Originally opened in 1985, and was acquired by the Company in June 1997.
(6) Eckerd has closed its store but is continuing to meet its financial
obligations under its lease.
(7) Center was renovated during 1995.
(8) Originally opened in 1985, and was acquired by the Company in August
1997, and is currently under going expansion and renovations.
(9) Circuit City has closed its store but is continuing to meet its
financial obligations under its lease.
COMMUNITY AND POWER CENTERS
In addition to Mall development, the Company's development activities focus
on Community Centers, and power centers. Community Centers
pose fewer development risks than Malls because they have shorter development
timetables and lower up-front costs. Community Centers also afford the
Company the opportunity to meet the needs of retailers for whom a
"convenience" type of location is more appropriate and the needs of customers
whose trade areas cannot support a regional mall. Power centers are larger
than other Community Centers, with several large anchor stores which draw
shoppers from a wider geographic area.
The Company's Community Center developments in the 1980's were generally
anchored by supermarkets, and, in certain cases, by drug stores.
Management's current focus has expanded to include the development of larger
centers, anchored by mass merchandisers and department stores, while
continuing the development of smaller centers anchored by supermarkets and
drug stores. Recently completed Community Centers include centers in
Richmond, Virginia; Fort Smith, Arkansas, two centers in Virginia Beach,
Virginia, and Richmond, Virginia. Anchors at these new centers include,
Regal Cinema, Wal*Mart, Goody's and Hannaford Bros. The Company sold, in a
tax deffered exchange, one free-standing Lowe's in Joplin, Missouri in
the last quarter of 1997.
Community Centers, other than power centers, range in size from 25,000
square feet to in excess of 286,000 square feet. Anchors in Community
Centers generally lease their store space and occupy 60-85% of a center's
GLA. The number of stores in a Community Center ranges up to sixteen with
an average of seven stores per center.
The Company's two power centers, which were completed and opened in 1997,
average 785,000 square feet and have a average of nine major anchor stores
and additional small shop space ranging from 38,000 square feet to 136,000
square feet. The projects include expansion area for additional major
retailers and additional space in second phases some of which are currently
being constructed. These power centers are included in the Community Center's
classification in this report.
Total GLA of the 81 Community Centers is approximately 8.4 million square
feet, or an average of approximately 84,000 square feet per center. As of
December 31, 1997, 97.6% of total leasable GLA at the Community Centers was
leased.
In the years ended December 31, 1995, 1996 and 1997, revenues from the
Community Centers represented approximately 21.2%, 21.4% and 21.2%,
respectively, of total revenues from the Company's Properties.
Occupancy at the Community Centers increased from 97.2% at December 31,
1996 to 97.6% at December 31, 1997.
Average base rent per square foot at the Community Centers increased from
$6.94 at December 31, 1996, to $7.42 at December 31, 1997.
-24-
As of December 31, 1997, Food Lion, a major regional supermarket operator
with headquarters in North Carolina served as an anchor tenant in 37 of the
Company's Community Centers and in one Associated Center. For the year
ended December 31, 1997, Food Lion accounted for approximately 4.4% of the
revenues generated by the Company's Properties.
With the exception of Suburban Plaza and Sutton Plaza, which were acquired
by the Company in March, 1995 and January, 1997 respectively, each of the
Community Centers was developed by the Company.
The following table summarizes the percentage of total leasable GLA leased,
average base rent per square foot (excluding percentage rent) and tenant
sales per square foot at the Community Centers for each of the last five
years.
COMMUNITY CENTER SUMMARY INFORMATION
Average
Percentage Base Rent Tenant
Year Ended GLA Per Square Sales Per
December 31, Leased(1) Foot(2) Square Foot(3)
- ------------------- ---------- ---------- --------------
1994 96.5% 6.64 200
1995 96.8% 6.66 202
1996 97.2% 6.94 210
1997 97.6% 7.42 221
(1) Percentage leased includes tenants who have executed leases and are
paying rent as of the specified date.
(2) Average base rent per square foot is based on GLA occupied as of the
last day of the indicated period.
(3) Consistent with industry practice, sales are based on reports by
retailers (excluding theaters) leasing GLA and occupying space for
the 12 months ending on the last day of the indicated period.
Lease Expirations. The following table shows the scheduled lease expirations
for the Community Centers (assuming that none of the tenants exercise renewal
options) for the year ending December 31, 1998, and for the next nine years.
COMMUNITY CENTER LEASE EXPIRATION
Percentage of Total
Represented by
Approximate Expiring Leases
Number of Annualized Base GLA of --------------------------
Leases Rent of Expiring Expiring Annualized Leased Mall
December 31, Expiring Leases (1) Leases Base Rent Store GLA
- -------------- --------- ---------------- ------------- ------------ -----------
1998 106 $2,238,662 272,014 5.87% 5.43%
1999 119 2,473,578 333,807 6.49 6.66
2000 83 2,027,918 237,918 5.32 4.75
2001 52 1,549,880 230,329 4.07 4.59
2002 90 3,015,163 407,610 7.91 8.13
2003 33 1,918,070 372,322 5.03 7.43
2004 15 1,111,590 182,755 2.92 3.65
2005 18 1,695,965 213,370 4.45 4.26
2006 10 1,342,598 212,686 3.52 4.24
2007 17 2,346,601 280,714 6.16 5.60
(1) Total annualized base rent for all leases executed as of December 31,
1997 includes 12 months of rent for space that is newly leased but not yet
occupied but excludes (i) percentage rents, (ii) additional payments by
tenants for common area maintenance, real estate taxes and other expense
reimbursements and (iii) contractual rent escalations and cost of living
increases for periods after December 31, 1997.
The following table sets forth certain information for executed renewal
leases with current tenants or leases of previously occupied space with new
tenants at the Community Centers during the year ended December 31, 1997.
Prior Lease New Lease Increase Increase
Total Base and Initial Year per New Lease per
Number Square Percentage Rent Base Rent Square Average Square
of leases Feet per Square Foot per Square Foot Foot Base Rent Foot
- --------- -------- --------------- --------------- --------- ---------- --------
160 347,126 $7.73 $7.94 $ 0.21 $8.23 $ 0.49
The following table sets forth certain information for each of the
Company's Community Centers at December 31, 1997.
26
Year Ownership
Opening/ by Company
Most and Total Percentage Fee or Number
Name of Recent Operating Total Leasable GLA Anchor Ground of
Community Center Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors Vacancies Lease Stores
- ---------------- ---------------- --------- ----------- -------- -------- ---------- ------------------- --------- ------- ------
Anderson Plaza Greenwood, SC 1983/1994 100% 46,258 46,258 98% Food Lion, Eckerd None Fee 3
Bartow Village Bartow, FL 1990 100% 40,520 40,520 95% Food Lion, Family None Fee 4
Dollar
Beach Crossing Myrtle Beach, SC 1984 100% 45,790 45,790 100% FoodLion(4), 21,000 Fee 6
Revco Drug sq.ft.
Bennington Place Roanoke, VA 1994 100% 42,712 42,712 100% Food Lion None Fee 3
BJ's Plaza Portland, ME 1991 100% 104,233 104,233 100% BJ's Wholesale Club None Ground 1
Lease
(5)
Briarcliff Square Oak Ridge, TN 1989 100% 41,778 41,778 100% Food Lion None Fee 10
Buena Vista Plaza Columbus, GA 1989/1994 100% 151,320 17,500 85% Wal*Mart, Winn Dixie None Fee 7
Bulloch Plaza Statesboro, GA 1986 100% 34,400 34,400 96% Food Lion, Rite Aid None Fee 3
Capital Crossing Raleigh, NC 1995 100% 83,700 83,700 100% Hannaford Bros., None Fee 2
Staples
Cedar Bluff
Crossing Knoxville, TN 1987/1996 100% 53,050 53,050 98% Food Lion None Fee 12
Cedar Plaza Cedar Springs, MI 1988 100% 95,000 50,000 100% Quality Stores None Fee 5
Centerview Plaza China Grove, NC 1986/1994 100% 43,720 43,720 100% Food Lion, Eckerd None Fee 6
Chester Square Richmond, VA 1997 100% 10,000 10,000 100% Hannaford Brothers None Fee 3
Chestnut Hills Murray, KY 1982 100% 68,364 68,364 100% JCPenney None Fee 10
Clark's Pond Portland, ME 1995 100% 134,920 134,920 100% Home Quarters None Fee 1
Warehouse
Colleton Square Walterboro, SC 1986 100% 31,000 31,000 100% Food Lion None Fee 5
Collins Park
Commons Plant City, FL 1989 100% 37,400 37,400 87% Food Lion None Ground 4
Lease
(6)
Conway Plaza Conway, SC 1985 100% 33,000 33,000 96% Food Lion(7) 21,000 Ground 6
sq. ft. Lease
(8)
Cosby Station Douglasville, GA 1994/1995 100% 77,811 77,811 100% Publix None Fee 9
Courtlandt Towne Cortlandt, NY 1997/1998 100% 772,451 639,208 94% Marshalls, Wal*Mart, None Fee 28
Center (Westchester Home Depot, Home
county Place, A & P Food
Store, Steinbach's,
Barnes & Noble,
Office Max, PetsMart
County Park Plaza Scottsboro, AL 1982 100% 47,325 47,325 82% Bi-Lo 28,875 Fee 3
(9)
sq. ft.
Devonshire Place Cary, NC 1996 100% 104,517 104,517 100% Hannaford Bros., None Ground 4
Kinetix, Borders Lease
Books (10)
Dorchester
Crossing Charleston, SC 1985/1997 100% 45,278 45,278 96% Food Lion None Fee 6
East Ridge
Crossing Chattanooga, TN 1988 100% 54,000 54,000 100% Food Lion, Revco None Fee 13
East Towne
Crossing Knoxville, TN 1989/1990 100% 158,751 70,011 97% Home Depot, Regal None Fee 8
Cinemas, Food Lion
58 Crossing Chattanooga, TN 1988 100% 49,984 49,984 100% Food Lion, Revco None Fee 9
Garden City Plaza Garden City, KS 1984/1991 100% 188,446 76,246 95% Wal*Mart(21), JCPenney None Fee 15
Genesis Square Crossville, TN 1990/1996 100% 35,000 35,000 100% Food Lion None Fee 4
Girvin Plaza Jacksonville, FL 1990 100% 56,297 20,375 94% Winn Dixie None Fee 8
Greenport Towne
Centre Hudson, NY 1994 100% 191,622 75,525 100% Wal*Mart, Price- None Fee 3
Chopper
Hampton Plaza Tampa, FL 1990 100% 44,624 44,624 97% Food Lion None Fee 8
-27-
Year Ownership
Opening/ by Company
Most and Total Percentage Fee or Number
Name of Recent Operating Total Leasable GLA Anchor Ground of
Community Center Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors Vacancies Lease Stores
- ---------------- ---------------- --------- ----------- -------- -------- ---------- ------------------- --------- ------- ------
Henderson Square Henderson, NC 1995 100% 268,327 164,329 100% JCPenney, Legget's, None Fee 14
Goody's, Wal*Mart
Hollins
Plantation
Plaza Roanoke, VA 1985 100% 40,640 40,640 100% Food Lion, Revco Drug None Fee 5
Jasper Square Jasper, AL 1986/1990 100% 95,950 50,550 100% Lowe's, Goody's None Fee 7
Jean Ribaut Beaufort, SC 1977/1993 100% 223,497 223,497 100% Belk, Kmart, Bi-Lo None Fee 17
Karns Corner Knoxville, TN 1987/1996 100% 35,000 35,000 100% Food Lion None Fee 4
Keystone Crossing Tampa, FL 1989 100% 40,400 40,400 100% Food Lion None Fee 5
Kingston Overlook Knoxville, TN(20)1996/1997 100% 119,222 119,222 100% Baby Superstore, None Fee/ 3
Home Place, Ground
Michael's Lease
(11)
Lady's Island Beaufort, SC 1983/1993 100% 60,687 60,687 100% Winn Dixie, Eckerd None Fee 9
LaGrange Commons LaGrange, NY 1996 100% 59,799 59,799 90% A & P Food Store None Fee 6
Lakeshore
Crossing Gainesville, GA 1994 100% 8,000 8,000 100% None Fee 5
Longview Crossing Hickory, NC 1988 100% 29,800 29,800 96% Food Lion None Ground 3
Lease(12)
Lunenburg
Crossing Lunenburg, MA 1994 100% 198,115 25,515 92% Wal*Mart,Shop'n Save None Fee 7
Massard Crossing Ft. Smith, AR 1997 100% 290,717 88,410 100% Wal*Mart,TJ Maxx None Fee 14
Goody's
North Creek Plaza Greenwood, SC 1983 100% 28,500 28,500 100% Food Lion None Fee 2
North Haven
Crossing North Haven, CT 1993 100% 104,612 104,612 100% Sports Authority, None Fee 6
Office Max, Barnes &
Noble
Northpark Center Richmond, VA 1997 100% 62,500 62,500 100% Hannaford Brothers, None Fee 3
Lowe's, Wal*Mart
Northridge Plaza Hilton Head, SC 1984/1988 100% 129,570 79,570 99% Winn Dixie, Eckerd None Fee 18
Northwoods Plaza Albemarle, NC 1983/1992 100% 32,705 32,705 100% Food Lion None Fee 2
Oaks Crossing Otsego, MI 1990/1993 100% 144,978 27,280 100% Wal*Mart, Rite Aid None Fee 11
Orange Plaza Roanoke, VA 1983 100% 46,875 46,875 100% Food World (13) 24,900 Fee 9
sq. ft.
Park Village Lakeland, FL 1990 100% 48,570 48,570 89% Food Lion, Family None Fee 8
Dollar
Perimeter Place Chattanooga, TN 1985/1988 100% 156,945 54,525 97% Home Depot, None Fee 16
Fred's Drugs For Less
Rawlinson Place Rock Hill, SC 1987 100% 35,750 35,750 94% Food Lion None Fee 7
Rhett at Remount Charleston, SC 1983/1994 100% 42,628 42,628 100% Food Lion, Eckerd None Fee 3
Salem Crossing Virginia Beach, VA 1997 100% 289,305 92,377 100% Hannaford Brothers None Fee 16
Sattler Square Big Rapids, MI 1989 100% 132,746 94,760 93% Quality Stores, Perry None Fee 14
Drugs
Seacoast Shopping
Center Seabrook, NH 1991 100% 208,690 91,690 97% Wal*Mart None Fee 14
Shaw's Supermarket
Shenandoah
Crossing Roanoke, VA 1988 100% 28,600 28,600 100% Food Lion None Fee 2
Signal Hills
Village Statesville, NC 1987/1989 100% 24,100 24,100 69% (14) None Ground 6
Lease
(15)
Southgate
Crossing Bristol, TN 1985 100% 40,100 40,100 100% Food Lion(4) 25,000 Ground 3
sq. ft. Lease
(16)
-28-
Year Ownership
Opening/ by Company
Most and Total Percentage Fee or Number
Name of Recent Operating Total Leasable GLA Anchor Ground of
Community Center Location Expansion Partnership GLA(1) GLA(2) Leased(3) Anchors Vacancies Lease Stores
- ---------------- ---------------- --------- ----------- -------- -------- ---------- ------------------- --------- ------- ------
Sparta Crossing Sparta, TN 1989 100% 31,400 31,400 100% Food Lion None Fee 2
Springhurst
Towne Center Louisville, KY 1997 100% 798,736 410,736 98% Cinemark, Books None Fee 19
A Million, Kohl's,
Party Source, TJ Maxx,
Old Navy, Target,
Kitchen & Company
Springs Crossing Hickory, NC 1987/1996 100% 42,920 42,920 100% Food Lion, Rite Aid None Ground 4
Lease
(17)
Statesboro Square Statesboro, GA 1986 100% 41,000 41,000 100% Food Lion(7) 25,000 Fee 6
Stone East Plaza Kingsport, TN 1983 100% 45,259 45,259 96% Food Lion(4) None Fee 10
Strawbridge
Market Virginia Beach, VA 1997 100% 43,570 43,570 100% Regal Cinema None Fee 1
Place
Suburban Plaza Knoxville, TN 1995 100% 129,321 129,321 97% Toys "R" Us None Fee 20
Barnes & Noble
Surry Square Elkin, NC 1985 100% 32,900 32,900 96% Food Lion(4), 21,000 Fee 3
Revco Drug sq. ft.
Sutton Plaza Mt. Olive, NJ 1972(19) 100% 122,027 122,027 100% A & P Food Store, None Fee 14
Ames
34th St.
Crossing St. Petersburg, FL 1989 100% 51,120 51,120 94% Food Lion, Family None Fee 11
Dollar
Townshire
ShoppingCenter Bryan, TX 1988 100% 72,440 72,440 75% Blinn College 12,500 Space 2
sq.ft. Lease
(18)
Tyler Square Radford, VA 1987 100% 48,370 48,370 100% Food Lion, Revco Drug None Fee 8
University
Crossing Pueblo, CO 1986 100% 101,964 20,053 69% Wal*Mart None Fee 7
Uvalde Plaza Uvalde, TX 1987/1992 75% 111,160 34,000 100% Wal*Mart, Beall's None Fee 8
Valley Commons Salem, VA 1988/1994 100% 45,580 45,580 97% Food Lion None Fee 10
Valley Crossing Hickory, NC 1988/1991 100% 186,077 186,077 100% Goody's, TJ Maxx, None Fee 21
Office Depot, Circuit
City, Belk Outlet
Store(7), Factory Card
Outlet
The Village
at Wexford Cadillac, MI 1990 100% 102,450 72,450 92% Quality Stores(20), None Fee 8
Village Square Houghton Lake, MI 1990/1993 100% 163,294 27,050 96% Wal*Mart, None Fee 11
Fashion Bug
Wildwood Plaza Salem, VA 1985/1994 100% 39,580 39,580 100% Food Lion None Fee 4
Willow Springs
Plaza Nashua, NH 1991/1994 100% 224,344 121,956 99% Home Depot, Office Max, None Fee 10
--------- --------- ---- JCPenney Home Store
TOTAL COMMUNITY CENTERS 8,384,111 5,757,049 97%
========= ========= ====
- -----------------
-29-
( 1) Includes the total square footage of the Anchors (whether owned by others
or leased by the Anchor) and shops. Does not include future expansion
areas.
( 2) Includes leasable Anchors.
( 3) Includes tenants paying rent on executed leases on December 31, 1997.
Calculation includes leased Anchors.
( 4) Tenant has closed its store but is continuing to meet its financial
obligation and is sub-leasing the space
( 5) Ground Lease term extends to 2051 including four 10-year extensions.
Lessee has an option to purchase and a right of first refusal to
purchase the fee.
( 6) Ground Lease term extends to 2049 including three 10-year extensions.
Lessor receives a share of percentage rents during initial term and
extensions. Lessee has an option to purchase and a right of first
refusal to purchase the fee.
( 7) Represents a tenant which has closed its store but is continuing to meet
its financial obligations under its lease.
( 8) Ground Lease term extends to 2055 including two 20-year extensions.
During extension periods, lessor receives a share of percentage rents.
Lessee has a right of first refusal to purchase the fee. Lessor
receives a share of sale proceeds upon sale of the center to a third
party.
( 9) Bi-Lo is closed but continues to meet its financial obligations under
its lease.
(10) Ground lease extends to 2097 including 12 five year options. Lessor
receives no additional rent.
(11) Ground lease for an out-parcel extends to 2046 including 4 ten
year options. Lessor receives 20% of percentage rentals.
(12) Ground Lease term extends to 2049 including three 10-year extensions.
Lessor receives a share of percentage rents during initial term and
extensions. Lessee has a right of first refusal to purchase the fee.
(13) Represents a Food World which has closed its store but is continuing to
meet its financial obligations under its lease and is sub-leasing the
space.
(14) Signal Hills Village is part of Signal Hills Crossing, a Property on
which the Company holds a Mortgage.
(15) Ground Lease term extends to 2084. Rent for entire term has been
prepaid. Lessee has an option to purchase the fee under certain
circumstances.
(16) Ground Lease term extends to 2055 including one 20-year extension.
Commencing in 2005, rental will be the greater of base rent or a share
of the revenue from the center. Lessee has a right of first refusal
to purchase the fee.
(17) Ground Lease term extends to 2048 including three 10-year extensions.
Lessor receives a share of percentage rents during initial term and
extensions. Lessee has a right of first refusal to purchase the fee.
(18) Represents a space lease for this center. Lease term expires in 1999
with one 10-year extension option available.
(19) Sutton Place opened in 1972 and was acquired by the Company in
January, 1997.
(20) Quality Stores has an option to purchase its 56,850 square foot store
commencing in 1996 for a price based upon capitalizing minimum annual
rent being paid at the time of exercise at a rate of 8.33%.
(21) Wal*Mart who owns their one store has closed and has entered into a
lease commitment with Sear's to occupy the space.
MORTGAGES
The Company owns certain Mortgages which were granted prior to the
Offering in connection with sales by CBL of properties which it had previously
developed.
The Company also holds fee mortgages on six community centers, which
mortgages had, as of December 31, 1997, an aggregate outstanding principal
of $7.9 million. Such mortgages entitle the Company to receive substantially
all of such properties' current cash flow in the form of periodic debt
service payments. The encumbered properties all opened between 1981 and
1984 and have no Anchor vacancies.
In the years ended December 31, 1995, 1996, and 1997, revenues from the
Mortgages represented approximately 2.2%, 2.02%, and 0.7%, respectively, of
total revenues from the Company's Properties. During 1997, a large proportion
of the balances on two mortgages were repaid from the proceeds of
institutional debt financing. The remaining balance on a second and third
mortgage is to be repaid from the remaining cash flow after debt service.
The Company's acquisition of a property at the end of 1996 on which the
Company had a mortgage reduced income from mortgages in 1997.
The following table sets forth certain additional information regarding the
Mortgages as of December 31, 1997.
-30-
Mortgage Information Center Information
_____________________________________________ ________________________________________
Annual Principal Annual Total Percentage Number
Name of Center/ Interest Balance as Debt Maturity Total Leasable GLA of
Location Rate of 12/31/97 Service Date GLS(1) GLS Leased(2) Anchors Stores
- ------------------- --------- ----------- --------- --------- -------- --------- ----------- ----------- -------
BI-LO SOUTH 9.50% $1,479 $175 DEC-2006 48,075 48,075 100% BI-LO, 7
CLEVELAND, TN RITE-AID
GASTON SQUARE 11.00 1,638 179 OCT-97(3) 33,640 33,640 100 FOOD LION, 4
GASTONIA, NC ECKERD
INLET CROSSING 11.00 1,824 327 OCT-97(3) 55,248 55,248 100 FOOD LION, 13
MYRTLE BEACH, SC REVCO DRUG
OLDE BRAINERD
CENTER 9.50 164 48 DEC-2006 57,293 57,293 100 BI-LO, 7
CHATTANOOGA, TN REVCO DRUG
DRUG
SIGNAL HILLS CROSSING 11.00 2,351 244 OCT-1997(3) 44,220 44,220 100 FOOD LION, 6
STATESVILLE, NC REVCO DRUG
SODDY DAISY PLAZA 9.50 446 48 DEC-2006 100,095 47,325 100 WAL*MART,BI- 5
SODDY DAISY, TN ------ ------ ------- -------- ---- LO, REVCO --
DRUG
Total $7,902 $1,021 338,571 285,801 100% 42
====== ====== ======= ======= ==== ==
(1) Includes Anchors.
(2) Includes all leases executed on or before December 31, 1997. Leased
GLA includes non-Anchor GLA and leased Anchor GLA.
(3) The mortgage is on a month-to-month extension pending execution of
extension agreement.
OFFICE BUILDING
The Company owns a 95% interest in a 49,082 square foot office building in
Chattanooga, Tennessee in which the Company's headquarters are located. The
Company occupies 27,088 square feet or 55% of the total square footage of
the Office Building. The Office Building is 100% occupied.
-31-
TOP 25 TENANTS
The following table sets forth the Company's top 25 tenants based upon a
percentage of total revenues from the Company's Properties in 1997.
NUMBER
% OF OF SQUARE
RANK TENANT REVENUES STORES FEET
- ----- --------------------------- --------- ------- ---------
1 The Limited, Inc. 6.61% 59 473,759
2 Food Lion 4.39% 38 1,039,407
3 JC Penney Co., Inc. 2.79% 23 1,724,174
4 Woolworth Corp. 2.19% 47 109,893
5 Goody's Family 1.79% 12 410,347
Clothing, Inc.
6 Belk Atlanta Group Office. 1.63% 9 774,018
7 The Gap 1.50% 13 104,121
8 Barnes & Noble, Inc. 1.39% 8 124,300
9 Intimate Brands 1.35% 22 83,591
10 Regal Cinemas, Inc. 1.25% 5 149,635
11 The Shoe Show 1.18% 17 78,921
12 The Regis Corporation 1.07% 43 47,047
13 Sears, Roebuck, & Co. 0.86% 17 1,731,509
14 Footstar Corporation 0.85% 12 53,299
15 Walden Book Company, Inc. 0.84% 13 46,625
16 Parisian, Inc.. 0.76% 3 340,520
17 The May Department Stores 0.76% 20 396,733
18 Boney Wilson & Sons, Inc. 0.76% 4 225,542
19 U.S. Shoe Corporation 0.73% 12 39,768
20 Consolidated Stores
Corporation 0.70% 14 48,726
21 Tandy Corporation. 0.68% 22 51,293
22 United Artists Theater 0.66% 4 92,779
23 American Eagle Outfitters 0.66% 9 36,469
24 Namco Cybertainment Inc. 0.63% 12 31,927
25 General Nutrition
Corporation 0.61% 25 36,325
MORTGAGE DEBT AND RATIO TO TOTAL MARKET CAPITALIZATION
As of December 31, 1997, the Operating Partnership's proportionate share
of indebtedness of all Properties (whether or not consolidated for financial
statement reporting purposes, including the Construction Properties) was
approximately $761.4 million. The Company's total market capitalization
(the aggregate market value of the Company's outstanding shares of Common
Stock, assuming the full exchange of the limited partnership interests in
the Operating Partnership for Common Stock, plus the $761.4 million total
debt of the Operating Partnership) as of December 31, 1997 was $1.6
billion. Accordingly, the Company's debt to total market capitalization
ratio as of December 31, 1997 was 47.9%. The debt to total market
capitalization ratio, which is based upon the Company's proportionate share
of consolidated and unconsolidated indebtedness and market values of equity,
differs from debt-to-book capitalization ratios, which are based upon
consolidated indebtedness and book values.
-32-
The following table sets forth certain information regarding the mortgages
and secured lines of credit encumbering the Properties.
MORTGAGE DEBT
(Dollars in thousands; numbers may not add due to rounding)
MORTGAGE LOANS OUTSTANDING IN
WHOLE OR IN PART AT DECEMBER 31, 1997
Ownership
Share of Estimated Earliest
Company Balloon Date at
and Principal Annual Annual Payment Which Loans
Operating Annual Balance as of Interest Debt Maturity Due on Can Be
Center Pledged as Collateral Partnership Interest Rate 12/31/97(1) Payment(2) Service Date Maturity Prepaid(3)
- ---------------------------- ----------- ------------- ------------- ---------- --------- -------- --------- -------------
MALLS:
Asheville Mall(4) 100% 6.840% $48,900 $3,345 $3,345 Feb-1998 $48,900 --
Bonita Lakes Mall 100% 7.000% 31,703 2,219 2,219 Oct-1998 31,703 --
College Square 100% 10.000% 13,650 1,365 1,548 Jan-2003 13,393 -- (5)
Coolsprings Galleria 100% 8.290% 68,033 5,640 6,636 Sep-2010 -- Oct-2000(6)
Frontier Mall 100% 10.000% 7,188 719 2,220 Dec-2001 -- -- (7)
Governor's Square 48% 8.230% 36,211 3,485 3,476 Sep-2016 14,454 Sep-2001(8)
Hamilton Place 90% 7.000% 74,147 5,190 6,361 Mar-2009 59,160 -- (9)
Madison Square 50% 9.250% 49,030 4,535 4,936 Mar-2002 46,482 Feb-1997(10)
Oak Hollow Mall 75% 7.310% 52,498 4,037 4,709 Feb-2008 39,567 Feb-2002(11)
Plaza del Sol(12) 51% 9.500%(13) 1,954 186 244 Nov-1998 1,729 --
St. Clair Square 100% 7.250%(14) 66,000 4,785 4,739 Nov-1999 66,000 --
Springdale Mall 100% 6.770% 19,950 1,351 1,351 Nov-1999 19,950 --
Turtle Creek Mall 100% 7.400% 34,300 2,723 2,966 Mar-2006 26,992 Mar-1999(15)
Walnut Square(16) 100% 9.500% 909 92 140 Feb-2008 -- -- (17)
Walnut Square 100% 10.000%(18) 389 39 39 Jun-1998 389 -- (18)
WestGate Mall 100% 6.950% 50,969 3,542 4,819 Feb-2017 44,819 Feb-2002(19)
-------
MALLS SUBTOTAL: 555,831
ASSOCIATED CENTERS:
The Terrace 92% 7.300% 10,939 799 1,047 Sep-2002 9,618 --(20)
Georgia Square Plaza 100% 9.000% 377 34 141 Jan-2001 -- Feb-1997(9)
Hamilton Corner 90% 10.125% 3,477 352 471 Aug-2011 -- --(21)
Madison Plaza 75% 10.125% 2,577 261 537 Feb-2004 -- --(22)
------
ASSOCIATED CENTERS SUBTOTAL: 17,370
======
COMMUNITY CENTERS:
Bennington Place 100% 10.250% 590 60 83 Aug-2010 -- Jul-2000(23)
BJ's Plaza 100% 10.400% 3,503 364 476 Dec-2011 -- --(20)
Briarcliff Square 100% 10.375% 1,721 179 226 Feb-2013(24) -- Feb-1998(25)
Cedar Bluff Crossing 100% 10.625% 1,417 151 230 Jan-2008 -- Jan-2008(26)
Centerview Plaza 100% 10.000% 1,363 136 191 Jan-2010(27) -- Jan-1999(23)
Colleton Square 100% 9.375% 1,060 99 143 Aug-2010(28) -- Aug-1998(23)
Collins Park Commons 100% 10.250% 1,439 147 202 Oct-2010 -- Sept-2000(23)
Cosby Station 100% 8.500% 4,364 371 490 Sep-2014 -- Sep-2001(29)
East Ridge Crossing 100% 10.125% 1,345 136 324 May-2003 -- Jan-2001(30)
Fifty-Eight Crossing 100% 10.125% 1,296 131 312 May-2003 -- Jan-2001(30)
Genesis Square 100% 10.250% 1,094 112 147 Aug-2010 -- Jul-2000(31)
Greenport Towne Center 100% 9.000% 4,569 411 529 Sep-2014 -- --(32)
Henderson Square 100% 7.500% 7,054 529 750 Apr-2014 -- May-2005(33)
Jean Ribaut 100% 8.750% 4,092 358 477 Oct-1998 4,019 --(15)
Karns Corner 100% 10.250% 1,011 104 146 Jan-2010(34) -- Feb-1999(23)
Longview Crossing 100% 10.250% 468 48 66 Aug-2010 -- Aug-2000(23)
North Haven Crossing 100% 9.550% 8,252 788 1,225 Oct-2008 -- Oct-1998(35)
Northwoods Plaza 100% 9.750% 1,323 129 171 Jun-2012 -- --(36)
Perimeter Place 100% 10.625% 1,715 182 278 Jan-2008 -- Jan-2008(26)
Seacoast Shopping Center 100% 9.750% 5,944 580 721 Sep-2002 5,110 Oct-1997(37)
Shenandoah Crossing 100% 10.250% 588 60 83 Aug-2010 -- Aug-2000(23)
-33-
Ownership
Share of Estimated Earliest
Company Balloon Date at
and Principal Annual Annual Payment Which Loans
Operating Annual Balance as of Interest Debt Maturity Due on Can Be
Center Pledged as Collateral Partnership Interest Rate 12/31/97(1) Payment(2) Service Date Maturity Prepaid(3)
- ---------------------------- ----------- ------------- ------------- ---------- --------- -------- --------- -------------
Sparta Crossing 100% 10.250% $899 $92 $127 Aug-2010 -- Jul-2000(38)
Springhurst Towne Center 100% 7.220% 22,700 1,639 1,639 Nov-1998 22,700 --
Suburban Plaza 100% 8.500% 6,940 590 682 May-1999 5,325 --
34th St. Crossing(39) 100% 10.625% 1,647 175 234 Dec-2010 -- Dec-2000(40)
Uvalde Plaza 75% 10.625% 824 88 133 Feb-2008 -- Feb-2008(26)
Valley Commons 100% 10.250% 1,013 104 142 Oct-2010 -- Oct-2000(23)
Willow Springs Plaza 100% 9.750% 5,835 569 934 Aug-2007 601 Aug-1997(38)
------
COMMUNITY CENTERS SUBTOTAL: 94,066
CONSTRUCTION PROPERTIES:
Courtlandt Towne Center 100% 7.370% 45,918 3,384 3,384 Nov-1998 45,918 --
------
CONSTRUCTION PROPERTIES SUBTOTAL: 45,918
OTHER:
Park Place 95% 10.000% 1,891 189 459 Apr-2003 -- --(9)
Credit Lines 100% 6.882%(41) 113,534(41) 7,813 7,867 Various 115,595 --
--------
Total: $828,610
========
OPERATING PARTNERSHIP'S SHARE OF TOTAL: $761,418(42)
(1) The amount listed includes 100% of the loan amount even though the
Company and the Operating Partnership may own less than 100% of the
property.
(2) Interest has been computed by multiplying the annual interest rate by
the outstanding principal balance as of December 31, 1997.
(3) Unless otherwise noted, loans are prepayable at any time.
(4) A replacement loan of $51 million with a two year term at 90 basis
points over LIBOR closed in February 1998.
(5) Prepayment premium is greater of 1% or yield maintenance for any
prepayment prior to January, 1998; thereafter, the prepayment premium
is 5%, decreasing by .5% per year to a minimum of 3%; there is no
prepayment premium after July 15, 2002.
(6) Prepayment premium is the greater of 1% or yield maintenance after
October 1, 2000.
(7) Prepayment premium is based on yield maintenance (not less than 1%)
for any prepayment prior to January, 1997; thereafter, the prepayment
premium is 5%, decreasing by 1% per year to a minimum of 1%; there is
no prepayment premium during the last 120 days of the loan term.
(8) Prepayment premium is based on the greater of yield maintenance or 2%.
(9) Prepayment premium is the greater of 1% or yield maintenance.
(10) Prepayment premium is based on yield maintenance; there is no
prepayment premium after October 1, 2001.
(11) Prepayment premium is the greater of 1% or yield maintenance.
(12) This loan can be extended for 2 one year periods, the extension fee
is 1/4 point for each extension.
(13) Interest is floating at 1% over prime priced at December 31, 1997.
(14) The interest rate is floating at 150 Basis points over LIBOR. Loan may
be extended for 2 years with 90 days written notice prior to maturity
date. Extension fee equal to 1/4% of the outstanding balance.
(15) Prepayment premium is the greater of 1% or yield maintenance.
(16) The loan is secured by a first mortgage lien on the land and
improvements comprising the Goody's anchor store and no other
property.
(17) Prepayment premium is the greater of 1% or yield maintenance; there
is no prepayment premium after November 1, 2007.
(18) Interest is floating at 11/2% over prime priced at December 31, 1997.
The maturity date is 90 days after notice.
(19) Loan is closed to prepayment for the term. Lender shall adjust the
interest rate every 5th year of the loan. If borrower does not
except the new rate loan may be prepaid at that time without
prepayment penalty.
(20) Prepayment penalty is based on yield maintenance.
(21) Prepayment premium is the greater of 1% or yield maintenance; there is
no prepayment premium during the last 120 days of the loan term.
(22) Prepayment premium is the greater of 1% or yield maintenance; there is
no prepayment premium after November 1, 2003.
(23) Prepayment premium is 5%, decreasing by 1% per year to a minimum of 2%
there is no prepayment premium during the last 120 days of the loan term.
(24) Lender has option to accelerate loan between March 1, 2001 and
February 28, 2002; March 1, 2006 and February 28, 2007; and
March 1, 2011 and February 28, 2012.
(25) Prepayment premium is 7%, decreasing by 1% per year to a minimum of 3%.
(26) Loan may not be prepaid.
(27) Lender may accelerate the loan after September, 2006 upon expiration
of the primary term of the lease of either Food Lion or Eckerd,
unless both leases have been extended beyond January 1, 2010.
(28) Lender may accelerate loan on July 1, 2007 unless Food Lion exercises
an extension option.
(29) Prepayment premium of 7% decreasing by 1% per year to a minimum of 2%;
there is no prepayment premium during the last six months of the loan
term.
(30) Prepayment premium is 5%, decreasing 1% per year to a minimum of 1%;
there is no prepayment premium during the last two years of the loan
term.
(31) Prepayment premium is 5% from July 1, 2000 to June 30, 2001;
thereafter decreasing by 1% per year to a minimum of 2%; there is no
prepayment premium after May 1, 2010.
(32) Prepayment premium is the greater of 10% or 1/12 of the annual yield
difference before Oct-2014. Thereafter the prepayment premium is 1%.
(33) Loan may be prepaid after 9 years. The prepayment premium is the
greater of 1% or yield maintenance.
-34-
(34) Lender may accelerate loan after January 1, 2008 unless Food Lion
exercises an extension option beyond January 1, 2008.
(35) Prepayment premium is the greater of 2% or yield maintenance before
October, 1998, afterwards it is the greater of 1% or yield maintenance.
(36) Prepayment premium is based on yield maintenance; there is no loan
prepayment premium during the last 120 days of the loan term.
(37) Prepayment premium is the greater of 1% or yield maintenance; there
is no loan prepayment premium during the last three months of the
loan term.
(38) Prepayment premium is 5% from August 1, 2000 to July 30, 2001;
thereafter decreasing by 1% per year to a minimum of 2%; there is no
prepayment premium after May 1, 2010.
(39) The note is secured by rent payable by the Food Lion Anchor store.
(40) Prepayment premium is 5%, decreasing by 1% per year to a minimum of
2%. There is no loan prepayment premium during the last 90 days of
the loan term.
(41) Interest rates on the credit lines are at various spreads over LIBOR
whose weighted average interest rate is 6.882% with various maturities
through 1999.
(42) Represents non-recourse indebtedness on Properties and reflects the
less than 100% ownership of the Company and the Operating Partnership
with respect to certain Properties subject to such indebtedness.
ITEM 3. LEGAL PROCEEDINGS.
The Company and the Operating Partnership are not currently involved in any
material litigation nor, to management's knowledge, is any material
litigation currently threatened against the Company, the Operating
Partnership, the Property Partnerships or the Properties, other than
litigation arising in the ordinary course of business, most of which is
expected to be covered under liability insurance policies held by the
Company or the Operating Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
(a) Market Information
The principal United States market in which the Common Stock is traded
is the New York Stock Exchange.
The following table sets forth the high and low sales prices for the
Common Stock for each quarter of the Company's two most recent fiscal years.
1996 QUARTER ENDED HIGH LOW
-------------------- ------- --------
March 31 $22.000 $20.375
June 30 22.875 19.750
September 30 23.500 21.500
December 31 25.875 22.750
1997 QUARTER ENDED HIGH LOW
-------------------- ------- -------
March 31 $26.125 $24.500
June 30 25.375 23.125
September 30 27.625 23.563
December 31 26.313 22.625
(b) Holders
The approximate number of shareholders of record of the Common
Stock was 370 as of March 20, 1998.
-35-
(c) Dividends
The following table sets forth the frequency and amounts of dividends
declared and paid for each quarter of the Company's two most recent fiscal
years.
QUARTER ENDED 1996 1997
- --------------------- ------- -------
March 31 $0.4200 $0.4425
June 30 0.4200 0.4425
September 30 0.4200 0.4425
December 31 0.4200 0.4425
Future dividend distributions are subject to the Company's actual
results of operations, economic conditions and such other factors as the
Board of Directors of the Company deems relevant. The Company's actual
results of operations will be affected by a number of factors, including
the revenues received from the Properties, the operating expenses of the
Company, the Operating Partnership and the Property Partnerships, interest
expense, the ability of the anchors and tenants at the Properties to meet
their obligations and unanticipated capital expenditures.
-36-
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data of the Company, which
should be read in conjunction with the financial statements and notes
thereto (IN THOUSANDS, EXCEPT PER SHARE DATA).
CBL
CBL & Associates Properties, Inc. Properties(1)
--------------------------------------------------- -------------
Period From Period From
November 3, January 1,
Year Ended December 31, 1993 to 1993 to
-------------------------------------- December 31 November 2,
1997 1996 1995 1994 1993 1993
-------- -------- -------- -------- ----------- -------------
TOTAL REVENUES $177,604 $146,805 $131,727 $108,094 $17,620 $59,092
TOTAL EXPENSES 135,200 111,012 104,128 84,091 12,806 57,138
-------- -------- -------- -------- ----------- -------------
INCOME FROM OPERATIONS 42,404 35,793 27,599 24,003 4,814 1,954
GAIN ON SALES OF REAL ESTATE
ASSETS 6,040 13,614 2,213 2,135 - 2,072
EQUITY IN EARNINGS (LOSSES) OF
UNCONSOLIDATED AFFILIATES 1,916 1,831 1,450 1,469 490 (117)
MINORITY INTEREST
IN EARNINGS:
Operating partnership (13,819) (15,468) (10,527) (9,836) (598) -
Shopping center properties (508) (527) (386) (312) (35) (199)
-------- -------- -------- -------- ----------- -------------
INCOME BEFORE EXTRAORDINARY
ITEM 36,033 35,243 20,349 17,459 4,671 3,710
EXTRAORDINARY LOSS ON
EXTINGUISHMENT OF DEBT (1,092) (820) (326) - (3,820) -
-------- -------- -------- -------- ----------- -------------
NET INCOME $34,941 $34,423 $20,023 $17,459 $851 $3,710
======== ======== ======== ======== =========== =============
BASIC EARNINGS PER
COMMON SHARE:
Income before extraordinary
item $1.51 $1.69 $1.14 $1.05 $0.31
-------- -------- -------- -------- -----------
Net income $1.46 $1.65 $1.12 $1.05 $0.06
-------- -------- -------- -------- -----------
Weighted average shares
outstanding 23,895 20,890 17,827 16,625 15,442
======== ======== ======== ======== ===========
DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary
item $1.49 $1.68 $1.14 $1.05 $0.30
-------- -------- -------- -------- -----------
Net income $1.45 $1.64 $1.12 $1.05 $0.06
======== ======== ======== ======== ===========
Weighted average shares
and dilutive equivalent
shares outstanding 24,151 21,022 17,856 16,625 15,442
======== ======== ======== ======== ===========
Dividends declared per
share (2) $1.77 $1.68 $1.59 $1.50 $0.31
Year Ended December 31,
----------------------------------------------------
1997 1996 1995 1994 1993 1993
BALANCE SHEET DATA:
Net investment in
real estate assets $1,142,324 $ 987,260 $758,938 $679,725 $578,319 $578,319
Total assets 1,245,025 1,025,925 814,168 728,209 629,545 629,545
Total debt 741,413 590,295 392,754 373,300 276,928 276,928
Minority interest 123,897 114,425 113,692 108,036 109,796 109,796
Shareholders' equity 330,853 272,804 270,892 209,338 216,808 216,808
OTHER DATA:
Cash flows provided
by (used in):
Operating activities $60,120 $ 54,789 $28,977 $29,432 $ --
Investing activities (179,044) (218,016) (99,690) (112,608) --
Financing activities 183,858 164,496 71,689 72,863 --
Funds from Operations
("FFO") of the
Operating Partnership(3) 74,096 61,997 51,236 43,634 --
FFO applicable to the
Company 52,853 42,778 35,353 27,908 --
-37-
(1) Represents the historical combined operations and combined financial
position of CBL Properties, the predecessor entity. On November 3,
1993, the Company completed an initial public offering.
(2) The dividend of $.31 declared in 1993 represents an annualized divided
of $1.50 paid for the period November 3, 1993 through December 31, 1993.
(3) Please refer to Management's Discussion and Analysis of Financial
Condition and Results of Operations for the definition of FFO. FFO
does not represent cash flow from operations as defined by generally
accepted accounting principles (GAAP) and is not necessarily indicative
of the cash available to fund all cash requirements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis of the financial condition and
results of operations should be read in conjunction with CBL & Associates
Properties, Inc. Consolidated Financial Statements and Notes thereto.
Information included herein may contain "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 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 other filings with the
Securities and Exchange Commission, including without limitation the
Company's discussion of such risks and uncertainties elsewhere in this
Annual Report on Form 10-K.
GENERAL BACKGROUND
The Company is the 100% owner of two qualified REIT subsidiaries, CBL
Holdings I and CBL Holdings II, which are the sole general partner and
majority owner, respectively, of the Operating Partnership. As a result,
the CBL & Associates Properties, Inc. Consolidated Financial Statements and
Notes thereto reflect the consolidated financial results of the Operating
Partnership, which includes at December 31, 1997, the operations of a
portfolio of properties consisting of seventeen Malls, eleven Associated
Centers, eighty-one Community Centers, an Office Building, joint venture
investments in three Malls and one Associated Center, and income from six
Mortgages. The Operating Partnership currently has under construction one
Mall, one Associated Center, one power center and two Community Centers and
owns options to acquire certain shopping center development sites. The
consolidated financial statements also include the results of the
Management Company.
The Company classifies its regional malls into two categories -
Stabilized Malls and New Malls. The New Mall category is presently comprised
of WestGate Mall in Spartanburg, South Carolina, which was renovated and
expanded and reopened in October 1996; Turtle Creek Mall in Hattiesburg,
Mississippi which opened partially in October 1994 and the remainder in
March 1995; Oak Hollow Mall in High Point, North Carolina which opened
in August 1995; Springdale Mall in Mobile, Alabama which was acquired in
September 1997 and is being redeveloped and retenanted; and Bonita
Lakes Mall in Meridian, Mississippi which opened in October 1997.
On January 15, 1997, the Company completed a spot offering of 3,000,000
shares of common stock at $26.125. Management of the Company purchased
55,000 of those shares. The net proceeds of $74.3 million, after
underwriters' discount, were used to repay variable rate indebtedness
incurred in the development and acquisition program.
On January 2, 1998, the Company purchased the 823,916 square foot
Asheville Mall in Asheville, North Carolina for $65 million, which was
funded by a $48.9 million acquisition loan with the balance funded from
the Company's credit lines. On January 30, 1998 the Company, purchased
the 1,078,568 square foot Burnsville Center
-38-
in Burnsville (Minneapolis), Minnesota for $81 million which was funded
by a $60.8 million acquisition loan with the balance funded from the
Company's credit lines.
SALES
Mall store sales, for those tenants who have reported, in the fifteen
Stabilized Malls in the Company's portfolio, increased by 4.7% on a
comparable per square foot basis as shown below:
Year Ended December 31,
-------------------------
1997 1996
-------- --------
Sales per square foot $251.73 $240.45
Total sales volume in the mall portfolio, including New Malls, increased
21.6% to $875.1 million in 1997 from $719.5 million in 1996.
Occupancy costs as a percentage of sales for the years ended
December 31, 1997, 1996 and 1995 for the stabilized malls (excluding
St. Clair Square and Foothills Mall from 1996 and 1995) were 11.2%, 11.7%
and 12.3%, respectively. The decrease in occupancy costs as a percentage
of sales from 1996 to 1997 was due to both the Company's policy of cost
containment and increasing sales.
OCCUPANCY
Occupancy remained stable for the Company's overall portfolio with a
breakdown by asset category as
follows:
At December 31,
--------------------------
1997 1996
------ ------
Stabilized Malls 91.7% 89.0%
New Malls 89.2 87.7
Associated Centers 83.3 99.6
Community Centers 97.6 97.2
------ ------
Total portfolio 93.7% 93.3%
====== ======
AVERAGE BASE RENTS
Average base rents for the Company's three portfolio categories:
At December 31,
--------------------------------
Percentage
Increase
1997 1996 (Decrease)
-------- -------- ----------
Malls $19.33 $19.64 (1.6)%
Associated Centers 9.43 8.59 9.8
Community Centers 7.42 6.94 6.9
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LEASE ROLLOVERS
On spaces previously occupied, the Company achieved the following results
from rollover leasing for the year ended December 31, 1997 over and above the
base and percentage rent being paid by the previous tenant:
Per Square Per Square
Foot Rent Foot Rent Percentage
Prior Lease(1) New Lease(2) Increase
----------- ------------ -----------
Malls $19.85 $21.22 6.9%
Associated Centers 12.61 13.47 6.8
Community Centers 7.73 8.23 6.5
(1) - Rental achieved for spaces previously occupied at the end
of the lease including percentage rent.
(2) - Average base rent over the term of the lease.
In 1997 and 1996, respectively, revenues from the Malls represented 72.9%
and 72.8% of total revenues from the properties; revenues from Associated
Centers represented 3.8% and 3.3%, respectively; revenues from Community
Centers represented 21.2% and 21.4%, respectively; and revenues from
Mortgages and the Office Building represented 2.1% and 2.5%, respectively.
Accordingly, revenues and results of operations are disproportionately
impacted by the Malls' achievements.
The Company's business is somewhat seasonal in nature with tenant sales
achieving the highest levels during the fourth quarter because of the holiday
season. 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.
COMPARISON OF RESULTS OF OPERATIONS FOR 1997 TO THE RESULTS OF
OPERATIONS FOR 1996
Total revenues in 1997 increased by $30.8 million, or 21.0%, to $177.6
million as compared to $146.8 million in 1996. Of this increase, minimum
rents increased by $22.4 million, or 24.0%, to $115.6 million as compared to
$93.2 million in 1996, percentage rents increased by $1.0 million, or 37.0%,
to $3.7 million as compared to $2.7 million in 1996, other rents increased
by $0.1 million, or 5.6%, to $1.9 million as compared to $1.8 million in
1996, and tenant reimbursements increased by $8.9 million, or 21.0%, to
$51.3 million as compared to $42.4 million in 1996.
Approximately $7.6 million of the increase in revenues resulted from a
full year of operations at the one Mall and three new Community Centers
opened during 1996 and $11.0 million from a full year of operations from
St. Clair Square in Fairview Heights, Illinois. Approximately $10.2 million
of the increase in revenues resulted from the nine new Community Centers and
one Associated Center opened and the one Mall, one Associated Center and one
Community Center acquired during 1997 offset by $1.9 million of revenues no
longer received from five Community Centers sold in 1996. Improved
occupancies and operations, expansions to existing properties, and increased
rents in the Company's operating portfolio generated approximately $3.9
million of the increased revenues with Stabilized Malls contributing
approximately $3.1 million and the Associated Center and Community Center
portfolio contributing $0.8 million in increased revenues.
Management, development and leasing fees were $2.4 million in both 1997
and 1996. Managed properties continue to provide the majority of this
revenue augmented by an increase in development fees. Interest and other
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income decreased by $1.6 million to $2.7 million in 1997 from $4.3 million in
1996. This decrease was primarily due to the acquisition of a mortgaged
property at the end of 1996 and the resulting elimination of interest income
from the property.
Property operating expenses, including real estate taxes and maintenance
and repairs, increased in 1997 by $10.9 million, or 24.3%, to $55.7 million
as compared to $44.8 million in 1996. This increase is primarily the result
of the opening of the thirteen new Properties over the past twenty four
months and the acquisition of four Properties. The Company's cost recovery
ratio decreased to 92.2% in 1997 as compared to 94.7% in 1996 primarily due
the addition of properties with non-recoverable ground rent.
Depreciation and amortization increased in 1997 by $6.9 million, or
27.2%, to $32.3 million as compared to $25.4 million in 1996. This increase
resulted primarily from depreciation and amortization on the thirteen new
Properties opened and the acquisition of four Properties over the past twenty
four months.
Interest expense increased in 1997 by $6.1 million or, 19.2%, to $37.8
million as compared to $31.7 million in 1996. This increase is primarily
due to increased interest expense on the thirteen new Properties opened and
the acquisition of four Properties over the past twenty four months offset
by the reduction of variable rate debt with proceeds from the Company's
follow-on offering in January 1997.
General and administrative expense was $9.0 million in 1997 as compared
to $8.5 million in 1996. This increase was primarily due to increases in
reserves for state tax expense and general increases in overhead.
Other expense was $0.3 million in 1997 and $0.6 million in 1996. These
amounts represent the write-off of development projects which the Company
has elected not to pursue.
Gain on sales of real estate assets was $6.0 million in 1997 as compared
to $13.6 million in 1996. The majority of these gains in 1997 are from
outparcel and pad sales at the Community Centers under development:
Cortlandt Towne Center in Cortlandt, New York, Salem Crossing in Virginia
Beach, Virginia and Springhurst Towne Center in Louisville, Kentucky. The
gain on sales in 1997 also includes a $0.7 million gain on the sale of one
completed Community Center. The majority of gain on sales in 1996 were from
sales of five completed Community Centers for $7.6 million. Most of the
remaining $6.0 million of outparcel sales in 1996 were in connection with
the development of Springhurst Towne Center in Louisville, Kentucky and
Massard Crossing in Ft. Smith, Arkansas.
The extraordinary loss in 1997 of $1.1 million resulted from the
extinguishment of debt on a number of properties, the largest of which was
Hamilton Place Mall in Chattanooga, Tennessee. The reduction in the
interest rate on the refinanced debt on Hamilton Place was 2.25% per annum.
COMPARISON OF RESULTS OF OPERATIONS FOR 1996 TO THE RESULTS OF OPERATIONS
FOR 1995
Total revenues in 1996 increased by $15.1 million, or 11.4%, to $146.8
million as compared to $131.7 million in 1995. Of this increase, minimum
rents increased by $10.9 million, or 13.2%, to $93.2 million as compared
to $82.3 million in 1995, percentage rents decreased by $0.1 million, or
3.1%, to $2.7 million as compared to $2.8 million in 1995, other rents
increased by $0.3 million, or 16.6%, to $1.8 million as compared to $1.5
million in 1995, tenant reimbursements increased by $4.0 million, or 10.6%,
to $42.4 million as compared to $38.4 million in 1995.
Approximately $8.2 million of the increase in revenues resulted from a
full year of operations at the five Community Centers opened during 1995 and
a full year of operations for Phase II of Turtle Creek Mall in Hattiesburg,
Mississippi. The Mall and one Community Center the Company acquired on
March 31, 1995 contributed
-41-
approximately $2.0 million of new revenues in 1996. The four Community
Centers and one Mall opened during 1996 contributed approximately $0.7
million of new revenues during 1996. Those Properties are as follows:
(i) 101,000-square-foot free-standing Lowe's in Adrian, Michigan, opened
June 1996; (ii) 105,000-square-foot Devonshire Place in Cary, North
Carolina, opened September 1996; (iii) 60,000-square-foot LaGrange
Commons in LaGrange, New York, opened November 1996; (iv) 119,000-square-
foot Kingston Overlook in Knoxville, Tennessee, opened November 1996 and
(v) 1,100,000-square-foot WestGate Mall in Spartanburg, South Carolina,
reopened October 1996.
St. Clair Square in Fairview Heights, Illinois, the Mall acquired on
November 25, 1996, contributed $1.3 million of new revenues in 1996.
Improved occupancies and operations, and increased rents in the Company's
operating portfolio generated approximately $2.9 million of the new
revenues with Stabilized Malls contributing approximately $1.8 million
and the Associated Center and Community Center portfolio contributing
$1.1 million in increased revenues.
Management, leasing and development fees decreased $0.1 million to $2.4
million in 1996 from $2.5 million in 1995. This decrease was primarily due
to the curtailment of development fees earned in 1995 from Hannaford Bros.
offset by the increase from a management contract for Ogden City Mall in
Ogden, Utah and increased management and leasing fees from Madison Square
Mall in Huntsville, Alabama, which the Company owns in a joint venture.
Interest and other income increased by $0.1 million to $4.3 million in
1996 from $4.2 million in 1995.
Property operating expenses, including real estate taxes and maintenance
and repairs, increased in 1996 by $4.1 million, or 10.0%, to $44.8 million
as compared to $40.7 million in 1995. This increase is primarily the result
of the opening of the nine new Community Centers and one Mall over the past
twenty four months, the acquisition of the three Properties, and increases
in maintenance and security in the Company's operating portfolio. The
Company's cost recovery ratio increased slightly to approximately 94.7% in
1996 as compared to 94.3% in 1995.
Depreciation and amortization increased in 1996 by $2.6 million, or
11.4%, to $25.4 million as compared to $22.8 million in 1995. This increase
resulted primarily from depreciation and amortization on the nine new
Community Centers and one Mall opened and the acquisition of three
Properties over the past twenty four months.
Interest expense decreased in 1996 by $0.3 million, or 0.8%, to $31.7
million as compared to $32.0 million in 1995. This decrease is primarily
due to the conversion of variable rate debt to permanent rate debt, the
reduction of variable rate debt with proceeds from the Company's follow-on
offering in September 1995, and lower interest rates on variable rate debt
offset by increased interest expense on the nine new Community Centers and
one Mall opened and the acquisition of three Properties over the past twenty
four months.
General and administrative expense was $8.5 million in 1996 as compared
to $8.0 million in 1995. This increase was primarily due to increases in
reserves for state tax expense and for payroll in management and leasing.
Other expense was $0.6 million in 1996 and 1995. These amounts
represent the write-off of development projects which the Company has
elected not to pursue.
Gain on sales of real estate assets was $13.6 million in 1996 as
compared to $2.2 million in 1995. The majority of these gains were from
sales of five completed Community Centers for $7.6 million. These Community
Centers consist of: (i) Lowe's Plaza in Adrian, Michigan; (ii) Lowe's in
Benton Harbor, Michigan; (iii) Hannaford Bros. in Richmond, Virginia; (iv)
Chester Plaza in Chester, Virginia; and (v) Lakeshore Crossing in
Gainesville, Georgia. Most of the remaining $6.0 million of outparcel
sales in 1996 were in connection with the development of Springhurst Towne
Center in Louisville, Kentucky and Massard Crossing in Fort Smith, Arkansas.
-42-
The extraordinary loss in 1996 of $0.8 million resulted from the
Company's share of the early extinguishment of debt from its joint venture
in Governor's Square in Clarksville, Tennessee. The reduction in the
interest rate on the refinanced debt was 1.4% per annum.
LIQUIDITY AND CAPITAL RESOURCES
The principal uses of the Company's liquidity and capital resources
have historically been for property development, expansion and renovation
programs, and debt repayment. To maintain its qualification as a REIT under
the Internal Revenue Code, the Company is required to distribute to its
shareholders at least 95% of its "Real Estate Investment Trust Taxable
Income" as defined in the Code.
As of February 28, 1998, the Company had $12.7 million available in
unfunded construction loans to be used for completion of the construction
projects and replenishment of working capital previously used for
construction. Additionally, as of February 28, 1998, the Company had
obtained revolving credit lines and term loans totaling $187.5 million of
which $36.1 million was available. Also, as a publicly traded company, the
Company has access to capital through both the public equity and debt
markets. The Company has filed a shelf registration statement authorizing
shares of the Company's preferred stock, common stock and warrants to
purchase shares of the Company's Common Stock with an aggregate public
offering price of up to $350 million. The Company anticipates that the
combination of these sources will, for the foreseeable future, provide
adequate liquidity to enable it to continue its capital programs
substantially as in the past and make distributions to its shareholders in
accordance with the Code's requirements applicable to real estate investment
trusts.
Management expects to refinance the majority of the mortgage notes
payable maturing over the next five years with replacement loans.
The Company's current capital structure includes property specific
mortgages, which are generally non-recourse, revolving lines of credit,
common stock and a minority interest in the Operating Partnership. The
minority interest in the Operating Partnership represents the 28.3%
ownership interest in the Operating Partnership held by the Company's
executive and senior officers and certain other persons which may be
exchanged for approximately 9.5 million shares of Common Stock.
Additionally, Company executive officers and directors own approximately
1.7 million shares of the outstanding common stock of the Company, for a
combined total interest in the Operating Partnership of approximately
33.2%. Assuming the exchange of all limited partnership interests in the
Operating Partnership for common stock, there would be outstanding
approximately 33.5 million shares of Common Stock with a market value of
approximately $828.0 million at December 31, 1997 (based on the closing
price of $24.688 per share on December 31, 1997). The ownership interests
in the Operating Partnership of the executive officers and directors of the
Company and their affiliates had a market value of approximately $274.7
million at December 31, 1997.
Mortgage debt consists of debt on certain consolidated properties as
well as on three properties in which the Company owns a non-controlling
interest accounted for under the equity method of accounting. At
December 31, 1997, the Company's share of funded mortgage debt on its
consolidated properties adjusted for minority investors' interests in
seven properties was $718.7 million and its pro rata share of mortgage debt
on unconsolidated properties (accounted for under the equity method) was
$42.7 million for total debt obligations of $761.4 million with a weighted
average interest rate of 7.6%. Variable rate debt accounted for $349.7
million with a weighted average interest rate of 7.0%. Variable rate debt
accounted for approximately 45.9% of the Company's total debt and 22.0% of
its total capitalization. Of this variable rate debt, $159.5 million is
related to construction projects. Periodically, the Company enters into
interest rate cap and swap agreements to reduce interest rate risks on
variable rate debt. The
-43-
Company has entered into interest rate cap and swap agreements for $155.2
million at year end and an additional $146 million in swaps in 1998 on the
variable rate debt associated with operating properties. The Company's
current exposure to interest rate fluctuations which could impact funds
from operations is effectively eliminated after taking into account
interest rate cap and swap agreements.
In April 1995, the Company executed a three-year interest rate swap
agreement with First Union National Bank on $5.5 million of debt on its
shopping center in Benton Charter Township, Michigan. This swap agreement
effectively fixes the interest rate on the $5.5 million of debt at 8.5%.
In June 1995, the Company executed a $50.0 million interest rate swap
agreement with NationsBank N.A. for a three-year period whish has the
effect of fixing $50 million of LIBOR-based variable rate debt at a
LIBOR rate no greater than 5.52%. There were no fees charged to the
Company related to these transactions. In December 1997, the Company
obtained two one year $100 million caps which has the effect of fixing $100
million of LIBOR-based variable rate debt at a LIBOR rate no greater than
7% for 1998 and 7.5% for 1999. There was a fee paid to obtain these caps. In
January 1998, the Company executed an interest
rate swap agreement which has the effect of fixing the LIBOR component of
$65 million of the company's LIBOR-based variable rate debt at 5.72% for a
term of two years. In February 1998, the Company executed an interest rate
swap agreement which has the effect of fixing the LIBOR component of $81
million of the company's LIBOR-based variable rate debt at 5.54% for a term
of two years.
In February 1997, the Company added $38 million and one additional bank
to its credit facilities. The Company has reduced the variable interest
rate on all of its credit facilities to a weighted average interest rate of
99 basis points over LIBOR at January 31, 1998 from a weighted average
interest rate of 144 basis points over LIBOR at December 31, 1996.
The following table sets forth the Company's credit facilities at
January 31, 1998 as follows (in thousands):
Interest Rate Current
Credit Facility Amount Over LIBOR Balance Maturity
- ------------------ ---------- ---------------- -------- ---------------
SunTrust $ 10,000 90 Basis Points $10,000 April 1999
First Tennessee 80,000 100 Basis Points 65,900 June 1999
Wells Fargo 85,000 100 Basis Points 62,134 September 1999
The First Tennessee credit facility has $2.5 million of outstanding
letters of credit which reduce the amount of available credit. Each
of the credit facilities include covenants that require the Company to
maintain minimum net worth levels, interest and debt coverage ratios, total
obligations to capitalized value, and limitations on fixed rate debt. The
credit facilities also require the Company's senior management continue to
consist of certain individuals and to maintain certain levels of minority
ownership in the Operating Partnership. The First Tennessee Bank credit
facility provides that if the Company completes an offering of its securities,
not less than 75% of the net proceeds of any such offering will be applied
for the benfit of the Operating Partnership.
During March 1997, the Company closed on a ten-year loan on Hamilton
Place Mall in Chattanooga, Tennessee, owned 90% by the Company, in the
amount of $75 million at an interest rate of 7.0% and a twenty-year loan
with a five-year rate reset option on WestGate Mall in Spartanburg, South
Carolina in the amount of $52 million at an interest rate of 6.95%. The
proceeds from these loans were used to repay existing fixed rate and
variable rate debt.
On January 15, 1997, the Company completed a spot offering of 3,000,000
shares of common stock at $26.125. Management of the Company purchased
55,000 of those shares. The net proceeds of $74.3 million, after
underwriters' discount, were used to repay variable rate indebtedness
incurred in the development and acquisition
-44-
program. This transaction provided the Company with a stronger capital
structure to pursue its new developments and acquisitions.
In January 1998, the Company extended a term loan with Compass Bank in
the amount of $12.5 million at an interest rate of 50 basis points over
LIBOR. The maturity of this facility has been extended to April 15, 1998.
This loan was used to repay higher variable rate debt.
Based on the debt (including construction projects) and the market value
of equity described above, the Company's debt to total market capitalization
(debt plus market value equity) ratio was 47.9% at December 31, 1997, as
compared to 43.8% at December 31, 1996.
DEVELOPMENT, EXPANSIONS AND ACQUISITIONS
During 1997, the Company opened approximately 3,166,000 square feet of
new retail properties consisting of the following:
Total
Project Name Location GLA Anchors
- --------------------------- ---------------------- --------- -----------------------------------------------
Northpark Center Richmond, Virginia 62,500 Hannaford Food & Drug
The Terrace Chattanooga, Tennessee 156,317 HomePlace, Barnes & Noble, Circuit City,
Staples
Massard Crossing Fort Smith, Arkansas 290,717 Wal*Mart, Goody's, TJ Maxx
Strawbridge Marketplace Virginia Beach, Virginia 43,570 Regal Cinemas
Springhurst Towne Center Louisville, Kentucky 798,736 Target, Meijer, TJ Maxx, Kohl's,
Cinemark, Books-A-Million, Office Max
Bonita Lakes Mall Meridian, Mississippi 631,555 Dillard's, Goody's, JCPenney, McRae's, Sears
Bonita Lakes Crossing Meridian, Mississippi 110,524 Books-A-Million, TJ Maxx, Office Max
Cortlandt Town Center Cortlandt, 772,451 Wal*Mart, Home Depot, HomePlace, Steinbach,
(Westchester County) A&P, Office Max, United Artists, PetsMart,
New York Marshalls, Barnes & Noble
Salem Crossing Virginia Beach, Virginia 289,305 Hannaford, Wal*Mart
Chester Plaza Richmond, Virginia 10,000 Hannaford Food & Drug
During 1997, the Company acquired 1,199,892 square feet consisting
of the following:
Total
Project Name Location GLA Anchors
- --------------------------- ---------------------- --------- -----------------------------------------------
Springdale Mall Mobile, Alabama 926,376 Gayfers, McRae's, Montgomery Ward
Sutton Plaza Mount Olive, New Jersey 122,027 A&P Food Market, Ames Department Store
WestGate Crossing Spartanburg, South 151,489 Circuit City, Toys R Us
Carolina
During the first month of 1998, the Company acquired 1,902,484 square
feet consisting of the following:
Total
Project Name Location GLA Anchors
- --------------------------- ---------------------- ---------- -----------------------------------------------
Asheville Mall Asheville, North 823,916 Dillard's, Belk, JCPenney, Sears,
Carolina Montgomery Ward
Burnsville Center Burnsville (Minneapolis), 1,078,568 Dayton-Hudson, JCPenney, Mervyn's, Sears
Minnesota
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During 1997, the Company added more than 200,000 square feet to existing
centers through expansions as follows:
Total
Project Name Location GLA Additions
- --------------------------- ---------------------- --------- -----------------------------------------------
Buena Vista Plaza Columbus, Georgia 7,500 Shops
Pemberton Plaza Vicksburg, Mississippi 12,000 Shops
Twin Peaks Mall Longmont, Colorado 108,000 Dillard's and shops
Frontier Mall Cheyenne, Wyoming 85,540 Dillard's
The Company currently has approximately 1,900,000 square feet under
construction consisting of:
Total
Project Name Location GLA Opening Date
- --------------------------- ---------------------- --------- -----------------------------------------------
Arbor Place Mall Douglasville, Georgia 854,000 October 1999
The Landing at Arbor Place Douglasville, Georgia 162,000 October 1999
Sand Lake Corners Orlando, Florida 594,000 November 1998/April 1999
Sterling Creek Commons Portsmouth, Virginia 66,000 June 1998
Fiddler's Run Morganton, North 163,000 March 1999
Carolina
Hamilton Crossing
(expansion) Chattanooga, Tennessee 14,000 March/April 1998
Girvin Plaza (expansion) Jacksonville, Florida 23,645 May 1998
Springdale Mall (redevelop) Mobile, Alabama 26,000 May 1998
The Company has also entered into a number of option agreements for the
development of future regional malls and community centers. Except for
these projects and as further described below, the Company currently has no
other capital commitments.
It is management's expectation that the Company will continue to have
access to the capital resources necessary to expand and grow its business.
Future development and acquisition activities will be undertaken by the REIT
as suitable opportunities arise. Such activities are not expected to be
undertaken unless adequate sources of financing are available and a
satisfactory budget with targeted returns on investment has been internally
approved.
The Company will fund its major development, expansion and acquisition
activity with its traditional sources of construction and permanent debt
financing as well as from other debt and equity financings, including public
financings, and its credit facilities.
OTHER CAPITAL EXPENDITURES
Management prepares an annual capital expenditure budget for each
property which is intended to provide for all necessary recurring capital
improvements. Management believes that its annual operating reserve for
maintenance and recurring capital improvements and reimbursements from
tenants will provide the necessary funding for such requirements. The
Company intends to distribute approximately 70% to 90% of its funds from
operations with the remaining 10% to 30% to be held as a reserve for capital
expenditures and continued growth opportunities.
Major tenant finish costs for currently vacant space are expected to be
funded with working capital, operating reserves, or revolving lines of
credit, and a return on the funds so invested is expected to be earned.
For the year ended December 31, 1997, revenue generating capital
expenditures or tenant allowances for improvements were $5.8 million.
These capital expenditures generate a return by increased rents from these
tenants
-46-
over the term of their leases. Revenue enhancing capital expenditures, or
remodeling and renovation costs, were $3.8 million. Revenue neutral capital
expenditures, such as parking lot and roof repairs, which are recovered from
the tenants, were $6.1 million in 1997.
The Company believes that the Properties are in compliance in all
material respects with all federal, state and local ordinances and
regulations regarding the handling, discharge and emission of hazardous or
toxic substances. The Company has not been notified by any governmental
authority, and is not otherwise aware, of any material noncompliance,
liability or claim relating to hazardous or toxic substances in connection
with any of its present or former properties. The Company has not recorded
in its financial statements any material liability in connection with
environmental matters.
IMPACT OF INFLATION
In the last three years, inflation has not had a significant impact on
the Company because of the relatively low inflation rate. Substantially all
tenant leases do, however, contain provisions designed to protect the
Company from the impact of inflation. Such provisions include clauses
enabling the Company to receive percentage rentals based on tenants' gross
sales, which generally increase as prices rise, and/or escalation clauses,
which generally increase rental rates during the terms of the leases. In
addition, many of the leases are for terms of less than ten years which may
enable the Company to replace existing leases with new leases at higher base
and/or percentage rentals if rents from the existing leases are below the
then-existing market rate. Most of the leases require the tenants to pay
their share of operating expenses, including common area maintenance, real
estate taxes and insurance, thereby reducing the Company's exposure to
increases in costs and operating expenses resulting from inflation.
YEAR 2000 ISSUES
The Company has certain existing computer programs that were written
using two digits rather than four to define the applicable year. As a
result, those computer programs have time sensitive software that recognizes
a date using 00 as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send orders and invoices, or engage in similar normal business
activities.
The Company has completed a program to identify its applications that
are not year 2000 compliant. As a result of this identification program,
the Company believes that while its core accounting application is year 2000
compliant, certain of its other applications are not yet year 2000 compliant.
The Company has undertaken to correct or replace all non-compliant systems
and applications. Given the information known at this time about the
Company's systems that are noncompliant and the Company's ongoing efforts
to correct or replace all non-compliant systems, Management does not expect
the year 2000 compliance of the Company's systems to have a material effect
on the Company's future liquidity or results of operations. No assurance can
be given, however, that all of the Company's systems will be year 2000
compliant or that compliance costs or the impact of a failure by the Company
to achieve substantial year 2000 compliance will not have a material adverse
effect on the Company's future liquidity or results of operations.
The Company has initiated communications with its significant suppliers
and tenants to determine the extent to which the Company is vulnerable to
the failure of such parties to remediate their year 2000 compliance issues.
No assurance can be given, however, that the systems of these outside
parties will be made year 2000
-47-
compliant in a timely manner or that the noncompliance of the systems of any
of these parties would not have a materially affect on the Company's
liquidity or results of operations.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." This statement requires that all items required to
be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. The Company will adopt SFAS
No. 130 for all periods ending after January 1, 1998. The adoption of SFAS
No. 130 is not expected to have any material effect on the results of
operations of the Company.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise & Related Information". This statement requires that
segments of a business be disclosed in interim and annual financial
statements. The Company will adopt SFAS No. 131 for all periods ending after
January 1998.
CASH FLOWS
Cash flows provided by operating activities for 1997 increased by $6.1
million, or 11.1%, to $60.9 million from $54.8 million in 1996. This
increase was primarily due to the cash provided from the operations of
thirteen new Properties and the acquisition of four Properties in the last
twenty-four months. Cash flows used in investing activities for 1997
increased by $27.9 million, or 12.8%, to $245.9 million compared to $218.0
million in 1996. This increase was due primarily to the borrowing and
escrow of cash on December 31, 1997 to purchase Asheville Mall in Asheville,
North Carolina on January 2, 1998, offset by a smaller dollar amount of
acquisitions in 1997 as compared to 1996. Cash flows provided by financing
activities for 1997 increased by $19.4 million, or 11.8%, compared to 1996
primarily due to increased borrowings related to the development and
acquisition program offset by the January 1997 follow-on offering which was
used to pay down borrowings.
FUNDS FROM OPERATIONS
Management believes that Funds from Operations as defined on page 9
provides an additional indicator of the financial performance of the
Properties. Funds from Operations is defined by the Company as net income
(loss) before property depreciation, other non-cash items (consisting of the
effect of straight-lining of rents and the write-off of development projects
not being pursued), gains or losses on sales of real estate assets and gains
or losses on investments in marketable securities. The cost of interest
rate caps and finance costs on the Company's lines of credit are amortized
in interest expense and therefore reduces Funds from Operations. The
Company's calculation of Funds from Operations excludes the difference in
average rents (straight-lining) and actual rents received. Funds From
Operations also includes the Company's share of Funds from Operations in
unconsolidated properties and excludes minority interests' share of Funds
From Operations in consolidated properties.
The use of Funds from Operations as an indicator of financial
performance is influenced not only by the operations of the Properties,
but also by the capital structure of the Operating Partnership and the
Company. Accordingly, management expects that Funds from Operations will
be one of the significant factors considered by the Board of Directors in
determining the amount of cash distributions the Operating Partnership will
make to its partners (including the Company). Management also believes that
Funds from Operations is a widely used measure of the operating performance
of REITs and provides a relevant basis for comparison among REITs. Funds
From Operations does not represent cash flow from operations as defined by
generally accepted accounting principles and is not necessarily indicative
of cash from operations available to fund all cash flow needs and should not
be considered
-48-
as an alternative to net income for purposes of evaluating the Company's
operating performance or to cash flows as a measure of liquidity.
In 1997, Funds from Operations increased by $12.1 million, or 19.5%, to
$74.1 million as compared to $62.0 million in 1996. The increase in Funds
From Operations was primarily attributable to the continuing increase in
revenues and income from operations, new developments and acquisitions.
Beginning with the first quarter of 1996 the Company complied with
NAREIT's revised definition of Funds from Operations by not adding back
depreciation and amortization of finance costs and non-real estate assets
to income from operations. The Company has restated prior year's Funds
From Operations to conform with the revised definition. Although NAREIT
allows it the Company will continue to exclude outparcel sales (which would
have added $5.3 million in 1997) and the effect of straight-line rents
(which would have added $2.4 million in 1997) from its Funds from
Operations calculation, even though the revised definition allows their
inclusion.
The Company's calculation of Funds from Operations is as follows
(dollars in thousands):
Three Months Ended Year Ended
December 31, December 31,
------------------- ------------------
1997 1996 1997 1996
--------- -------- -------- -------
Income from operations $12,336 $ 9,622 $42,404 $35,793
ADD:
Depreciation & amortization
from consolidated properties 8,669 6,856 32,308 25,439
Income from operations of
unconsolidated affiliates 402 302 1,916 1,831
Depreciation & amortization
from unconsolidated affiliates 341 306 1,334 1,203
Write-off of development costs
charged to net income 285 196 330 646
SUBTRACT:
Minority investors' share
of income from operations
in nine properties (103) (142) (508) (527)
Minority investors' share
of depreciation and amortization
in nine properties (252) (173) (834) (659)
Preference return paid to mortgagees -- (64) -- (395)
Adjustment for the straight-
lining of rents:
Consolidated properties (917) (311) (2,445) (1,039)
Unconsolidated affiliates (44) 5 (46) 9
Minority investor's share of
nine propertiese 16 (28) 73 (17)
Depreciation and amortization
of non-real estate assets amd
finance costs (116) (93) (436) (287)
--------- -------- -------- -------
TOTAL FUNDS FROM OPERATIONS $20,617 $16,476 $74,096 $61,997
========= ======== ======== =======
-49-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to the Index to Financial statements contained in
Item 14 on page 58.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated herein by reference from the Company's definitive proxy
statement filed on March 27, 1997 with the Securities and Exchange Commission
(the "Commission") with respect to its Annual Meeting of Stockholders to be
held on April 30, 1998.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated herein by reference from the Company's definitive proxy
statement filed on March 27, 1998 with the Commission with respect to its
Annual Meeting of Stockholders to be held on April 30, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated herein by reference from the Company's definitive proxy
statement filed on March 27, 1998 with the Commission with respect to its
Annual Meeting of Stockholders to be held on April 30, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by reference from the Company's definitive proxy
statement filed on March 27, 1998 with the Commission with respect to its
Annual Meeting of Stockholders to be held on April 30, 1998.
-50-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(1) Financial Statements Page
Report of Independent Public Accountants 59
CBL & Associates Properties, Inc. Consolidated Balance Sheets as of 60
December 31, 1997 and 1996.
CBL & Associates Properties, Inc. Consolidated Statements of 61
Operations for the Years Ended December 31, 1995, 1996 and 1997
CBL & Associates Properties, Inc. Consolidated Statements of 62
Shareholders' Equity for the Years Ended December 31, 1995, 1996
and 1997
CBL & Associates Properties, Inc. Consolidated Statements of 63
Cash Flows for the Years Ended December 31, 1995, 1996 and 1997
Notes to Financial Statements 64
(2) Financial Statement Schedules
Schedule II Allowance for Credit Losses 77
Schedule III Real Estate and Accumulated Depreciation 78
Schedule IV Mortgage Loans on Real Estate 86
Financial Statement Schedules not listed herein are either not required
or are not present in amounts sufficient to require submission of the schedule
or the information required to be included therein is included in the
Company's Consolidated Financial Statements in item 14 or are reported
elseware.
(3) Exhibits
EXHIBIT
NUMBER DESCRIPTION
3.1 -- Amended and Restated Certificate of Incorporation of the
Company(a)
3.2 -- Certificate of Amendment to the Amended & Restated
Certificate of Incorporation of the Company (b)
3.3 -- Amended and Restated Bylaws of the Company(a)
-51-
4 -- See Amended and Restated Certificate of Incorporation of
the Company, relating to the Common Stock(a)
10.1 -- Partnership Agreement of the Operating Partnership(a)
10.2 -- Property Management Agreement between the Operating
Partnership and the Management Company(a)
10.3 -- Property Management Agreement relating to Retained
Properties(a)
10.4.1 -- CBL & Associates Properties, Inc. 1993 Stock Incentive
Plan(a)dagger
10.4.2 -- Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Charles B. Lebovitz dagger
10.4.3 -- Non-Qualified Stock Option Agreement, dated May 10, 1994,
for James L. Wolford dagger
10.4.4 -- Non-Qualified Stock Option Agreement, dated May 10, 1994,
for John N. Foy dagger
10.4.5 -- Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Jay Wiston dagger
10.4.6 -- Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Ben S. Landress dagger
10.4.7 -- Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Stephen D. Lebovitz dagger
10.4.8 -- Stock Restriction Agreement, dated December 28, 1994, for
Charles B. Lebovitz dagger
10.4.9 -- Stock Restriction Agreement, dated December 2, 1994, for
John N. Foy dagger
10.4.10 -- Stock Restriction Agreement, dated December 2, 1994, for
Jay Wiston dagger
10.4.11 -- Stock Restriction Agreement, dated December 2, 1994, for
Ben S. Landress dagger
10.4.12 -- Stock Restriction Agreement, dated December 2, 1994, for
Stephen D. Lebovitz dagger
-52-
10.5 -- Purchase Agreement relating to Frontier Mall(c)
10.6.1 -- Purchase Agreement relating to Georgia Square (JMB)(c)
10.6.2 -- Purchase Agreement Relating to Georgia Square
(JCPenney)(c)
10.7 -- Purchase Agreement relating to Post Oak Mall(c)
10.8 -- Indemnification Agreements between the Company and the
Management Company and their officers and directors(a)
10.9.1 -- Employment Agreement for Charles B. Lebovitz(a) dagger
10.9.2 -- Employment Agreement for James L. Wolford(a)dagger
10.9.3 -- Employment Agreement for John N. Foy(a)dagger
10.9.4 -- Employment Agreement for Jay Wiston(a)dagger
10.9.5 -- Employment Agreement for Ben S. Landress(a)dagger
10.9.6 -- Employment Agreement for Stephen D. Lebovitz(a)dagger
10.10 -- Subscription Agreement relating to purchase of the Common
Stock and Preferred Stock of the Management Company(a)
10.11 -- Option Agreement relating to certain Retained Properties(a)
10.12 -- Option Agreement relating to Outparcels(a)
10.13.1 -- Property Partnership Agreement relating to Hamilton Place(a)
10.13.2 -- Property Partnership Agreement relating to CoolSprings
Galleria(a)
10.14.1 -- Acquisition Option Agreement relating to Hamilton Place(a)
10.14.2 -- Acquisition Option Agreement relating to the Hamilton Place
Centers(a)
10.14.3 -- Acquisition Option Agreement relating to the Office
Building(a)
10.15 -- Revolving Credit Agreement between the Operating
Partnership and First Tennessee Bank, National
Association, dated as of March 2, 1994(d)
10.16 -- Revolving Credit Agreement, dated July 28, 1994,
between the Operating Partnership and Wells Fargo
Advisors Funding, Inc., NationsBank of Georgia, N.A.
and First Bank National Association(e)
-53-
10.17 -- Revolving Credit Agreement, dated October 14, 1994,
between the Operating Partnership and American
National Bank and Trust Company of Chattanooga(f)
10.18 -- Revolving Credit Agreement, dated November 2, 1994,
between the Operating Partnership and First Tennessee
Bank National Association(f)
10.19 -- Promissory Note Agreement between the Operating
Partnership and Union Bank of Switzerland dated
May 5, 1995(g)
10.20 -- Amended and Restated Loan Agreement between the
Operating Partnership and First Tennessee Bank
National Association dated July 12, 1995(h)
10.21 -- Second Amendment to Credit Agreement between the
Operating Partnership and Wells Fargo Realty
Advisors Funding, Inc. dated July 5, 1995(h)
10.22 -- Consolidation, Amendment, Renewal, and Restatement
of Notes between the Galleria Associates, L.P. and
The Northwestern Mutual Life Insurance Company(i)
10.23 -- Promissory Note Agreement between High Point
Development Limited Partnership and The
Northwestern Mutual Life Insurance Company dated
January 26, 1996(j)
10.24 -- Promissory Note Agreement between Turtle Creek
Limited Partnership and Connecticut General Life
Insurance Company dated February 14, 1996(j)
10.25 -- Amended and Restated Credit Agreement between the
Operating Partnership and Wells Fargo Bank N.A.
etal dated September 26, 1996. (k)
10.26 -- Promissory Note Agreement between the Operating
Partnership and Compass Bank dated
September 17, 1996. (k)
10.27 -- Promissory Note Agreement between St Clair Square
Limited Partnership and Wells Fargo National
Bank dated, December 11, 1996.(l)
10.28 -- Promissory Note Agreement between Lebcon Associates
and Principal Mutual Life Insurance Company dated,
March 18, 1997.(l)
-54-
10.29 -- Promissory Note Agreement between Westgate Mall
Limited Partnership and Principal Mutual Life
Insurance Company dated, February 16, 1997.(l)
10.30 -- Amended and Restated Credit Agreement between the
Operating Partnership and First Tennessee Bank
etal dated February 24, 1997.(l)
10.31 -- Amended and Restated Credit Agreement between the
Operating Partnership and First Tennessee Bank
etal dated July 29, 1997
10.32 -- Second Amended and Restated Credit Agreement between
the Operating Partnership and Wells Fargo Bank N.A.
etal dated June 5, 1997 Effective April 1,1997.
10.33 -- First Amendment to Second Amended and Restated Credit
Agreement between the Operating Partnership and Wells
Fargo Bank N.A. etal dated November 11, 1997.
10.34 -- Loan Agreement between Asheville LLC and Wells Fargo
Bank N.A. dated February 17, 1998
10.35 -- Loan Agreement between Burnsville Minnesota LLC
and U.S. Bank National Association dated
January 30, 1998
10.36 -- Modification No. One to the Amended and Restated
Agreement of Limited Partnership of CBL & Associates
Limited Partnership Dated March 31, 1997.
10.37 -- Modification No. Two to the Amended and Restated
Agreement of Limited Partnership of CBL & Associates
Limited Partnership Dated February 19, 1998.
21 -- Subsidiaries of the Company
23 -- Consent of Arthur Andersen LLP
(a) Incorporated by reference to Post-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-11 (No. 33-67372), as
filed with the Commission on January 27, 1994.
(b) Incorporated by reference to Exhibit B to the Company's Definitive
Schedule 14A, Dated April 1, 1996.
-55-
(c) Incorporated by reference to Amendment No. 2 to the Company's
Registration Statement on Form S-11 (No. 33-67372), as filed with
the Commission on October 26, 1993.
(d) Incorporated herein by reference to the Company's Annual Report in
Form 10-K for the fiscal year ended December 31, 1993.
(e) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994.
(f) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1994.
(g) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995.
(h) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995.
(i) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.
(j) Incorporated by reference to the Company's Annual Report in Form 10-K for
the fiscal year ended December 31, 1995.
(k) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.
(l) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996.
dagger A management contract or compensatory plan or arrangement required to
be filed pursuant to Item 14(c) of this report.
(4) Reports on Form 8-K
Information on the Acquisition of Asheville Mall in Asheville, North
Carolina was filed on January 16, 1998.
The outline from the Company's February 4, 1998 conference call
with analysts regarding earnings (Item 5) was filed on
February 4, 1998.
Information on the Acquisition of Burnsville Center in
Burnsville, Minneapolis was filed on February 13, 1998.
Additional Information on the acquisition of Asheville
Mall in Asheville, North Carolina was filed in an 8-K/A
on February 18, 1998.
-56-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant)
By: /s/ Charles B. Lebovitz
------------------------
Charles B. Lebovitz
Chairman of the Board,
President and Chief
Executive Officer
Dated: March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- ---------- ------ -----
/s/ Charles B. Lebovitz Chairman of the Board, March 30, 1998
- ------------------------ President and Chief
Charles B. Lebovitz Executive Officer (Principal
Executive Officer)
/s/ John N. Foy Director, Executive March 30, 1998
- ------------------------ Vice President, Chief
John N. Foy Financial Officer and
Secretary (Principal Financial
Officer and Principal
Accounting Officer)
/s/ Stephen D. Lebovitz
- ------------------------ Director, Senior Vice March 30, 1998
Stephen D. Lebovitz President and Treasurer
/s/ Claude M. Ballard Director March 30, 1998
- ------------------------
Claude M. Ballard
/s/ Leo Fields Director March 30, 1998
- -------------------------
Leo Fields
/s/ Willian J. Poorvu Director March 30, 1998
- -------------------------
William J. Poorvu
/s/ Winston W. Walker Director March 30, 1998
- -------------------------
Winston W. Walker
*By:/s/ Charles B. Lebovitz Attorney-in-Fact March 30, 1998
- --------------------------
Charles B. Lebovitz
-57-
INDEX TO FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants 59
CBL & Associates Properties, Inc. Consolidated Balance Sheets as of 60
December 31, 1997 and 1996.
CBL & Associates Properties, Inc. Consolidated Statements of 61
Operations for the Years Ended December 31, 1995, 1996 and 1997
CBL & Associates Properties, Inc. Consolidated Statements of 62
Shareholders' Equity for the Years Ended December 31, 1995,
1996 and 1997
CBL & Associates Properties, Inc. Consolidated Statements of Cash 63
Flows for the Years Ended December 31, 1995, 1996 and 1997
Notes to Financial Statements 64
Schedule II Allowance for Credit Losses 77
Schedule III-Real Estate and Accumulated Depreciation 78
Schedule IV- Mortgage Loans on Real Estate 86
-58-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of CBL & Associates Properties, Inc.:
We have audited the accompanying consolidated balance sheets of CBL &
ASSOCIATES PROPERTIES, INC. (a Delaware corporation) and subsidiary as
of December 31, 1997 and 1996, and the related consolidated statements
of operations, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of CBL &
Associates Properties, Inc. and subsidiary as of December 31, 1997 and
1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index of
financial statements are presented for purposes of complying with the
Securities and Exchange Commissions rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in
our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
Arthur Andersen LLP
Chattanooga, Tennessee
February 3, 1998
-59-
CBL & ASSOCIATES PROPERTIES, INC. CONSOLDATED BALANCE SHEETS
(In thousands, except share and per share data)
December 31,
----------------------
ASSETS 1997 1996
---------- ----------
REAL ESTATE ASSETS:
Land $ 164,895 $ 119,965
Buildings and improvements 1,019,283 883,683
---------- ----------
1,184,178 1,003,648
Less: Accumulated depreciation (145,641) (114,536)
---------- ----------
1,038,537 889,112
Developments in progress 103,787 98,148
---------- ----------
Net investment in real estate assets 1,142,324 987,260
CASH AND CASH EQUIVALENTS 3,124 4,298
CASH IN ESCROW 66,108 -
RECEIVABLES:
Tenant, net of allowance for doubtful
accounts of $1,300 in 1997 and
$450 in 1996 12,891 11,417
Other 1,121 1,087
MORTGAGE NOTES RECEIVABLE 11,678 14,858
OTHER ASSETS 7,779 7,005
---------- ----------
$1,245,025 $1,025,925
LIABILITIES AND SHAREHOLDERS' EQUITY
MORTGAGE AND OTHER NOTES PAYABLE $ 741,413 $ 590,295
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 41,978 39,785
---------- ----------
Total liabilities 783,391 630,080
DISTRIBUTIONS AND LOSSES IN EXCESS OF
INVESTMENT IN UNCONSOLIDATED AFFILIATES 6,884 8,616
---------- ----------
MINORITY INTEREST 123,897 114,425
---------- ----------
COMMITMENTS AND COMTIGENCIES (NOTES 4 AND 13)
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, - -
5,000,000 shares authorized, none issued
Common stock, $.01 par value, 95,000,000
shares authorized, 24,063,963 and
20,965,790 shares issued and outstanding
in 1997 and 1996, respectively 241 210
Excess stock, $.01 par value, 100,000,000
shares authorized, none issued - -
Additional paid-in capital 359,541 293,824
Accumulated deficit (28,433) (20,855)
Deferred compensation (496) (375)
---------- ----------
Total shareholders' equity 330,853 272,804
---------- ----------
$1,245,025 $1,025,925
========== ==========
The accompanying notes are an integral part of these balance sheets.
-60-
CBL & ASSOCIATES PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Year Ended December 31,
-----------------------------
1997 1996 1995
--------- -------- --------
REVENUES:
Rentals:
Minimum $115,640 $93,217 $82,319
Percentage 3,660 2,724 2,811
Other 1,949 1,758 1,507
Tenant reimbursements 51,302 42,447 38,370
Management, development and leasing fees 2,378 2,384 2,506
Interest and other 2,675 4,275 4,214
--------- -------- --------
Total revenues 177,604 146,805 131,727
EXPENSES:
Property operating 30,585 24,232 21,611
Depreciation and amortization 32,308 25,439 22,834
Real estate taxes 14,859 11,587 10,087
Maintenance and repairs 10,239 8,957 8,991
General and administrative 9,049 8,467 8,049
Interest 37,830 31,684 31,951
Other 330 646 605
--------- -------- --------
Total expenses 135,200 111,012 104,128
--------- -------- --------
INCOME FROM OPERATIONS 42,404 35,793 27,599
GAIN ON SALES OF REAL ESTATE ASSETS 6,040 13,614 2,213
EQUITY IN EARNINGS OF
UNCONSOLIDATED AFFILIATES 1,916 1,831 1,450
MINORITY INTEREST IN EARNINGS:
Operating partnership (13,819) (15,468) (10,527)
Shopping center properties (508) (527) (386)
--------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM 36,033 35,243 20,349
EXTRAORDINARY LOSS ON
EXTINGUISHMENT OF DEBT (1,092) (820) (326)
--------- -------- --------
NET INCOME $34,941 $34,423 $20,023
========= ======== ========
BASIC EARNINGS PER COMMON SHARE:
Income before extraordinary item $1.51 $1.69 $1.14
Extraordinary loss on
extinguishment of debt (0.05) (0.04) (0.02)
--------- -------- --------
Net income $1.46 $1.65 $1.12
========= ======== ========
Weighted average shares outstanding 23,895 20,890 17,827
DILUTED EARNINGS PER COMMON SHARE:
Income before extraordinary item $1.49 $1.68 $1.14
Extraordinary loss on
extinguishment of debt (0.05) (0.04) (0.02)
--------- -------- --------
Net income $1.45 $1.64 $1.12
========= ======== ========
Weighted average shares and
dilutive equivalent shares
outstanding: 24,151 21,022 17,856
========= ======== ========
The accompanying notes are an integral part of these statements.
-61-
CBL & ASSOCIATES PROPERTIES, INC. CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY
(In thousands, except share and per share data)
Additional
Common Paid-in Accumulated Deferred
Stock Capital Deficit Compensation Total
--------- ---------- ----------- ------------ --------
BALANCE, DECEMBER 31, 1994 $ 166 $219,776 $(10,366) $ (238) $209,338
Net income - - 20,023 - 20,023
Dividends, $1.59 per share - - (29,799) - (29,799)
Issuance of 29,624 shares of
common stock - 602 - (282) 320
Issuance of 4,163,500 shares of
common stock through a
public offering 42 80,618 - - 80,660
through a public offering
Minority interest in Operating
Partnership - (9,924) - - (9,924)
Exercise of stock options - 110 - - 110
Amortization of deferred
compensation - - - 164 164
--------- ---------- ----------- ------------ --------
BALANCE, December 31, 1995 208 291,182 (20,142) (356) 270,892
Net income - - 34,423 - 34,423
Dividends, $1.68 per share - - (35,136) - (35,136)
Issuance of 34,891 shares of
common stock 1 804 - (347) 458
Exercise of stock options 1 1,838 - - 1,839
Amortization of deferred
compensation - - - 328 328
--------- ---------- ----------- ------------ --------
BALANCE, December 31, 1996 210 293,824 (20,855) (375) 272,804
Net income - - 34,941 - 34,941
Dividends, $1.77 per share - - (42,519) - (42,519)
Issuance of 42,573 shares of
common stock - 1,047 - (459) 588
Issuance of 3,000,000 shares
of common stock through
a public offering 30 74,242 - - 74,272
Minority interest in Operating
Partnership - (10,680) - - (10,680)
Exercise of stock options 1 1,108 - - 1,109
Amortization of deferred
compensation - - - 338 338
--------- ---------- ----------- ------------ --------
BALANCE, December 31, 1997 $ 241 $359,541 $(28,433) $ (496) $330,853
The accompanying notes are an integral part of these statements.
-62-
CBL & ASSOCIATES PROPERTIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Year Ended December 31,
----------------------------
1997 1996 1995
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,941 $ 34,423 $ 20,023
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest in earnings 14,327 15,995 10,913
Depreciation 29,091 24,036 22,190
Amortization 3,934 2,677 1,217
Extraordinary loss on extinguishment
of debt 1,092 820 326
Gain on sales of real estate assets (6,040) (13,614) (2,213)
Equity in earnings of unconsolidated
affiliates (1,916) (1,831) (1,450)
Issuance of stock under incentive plan 331 146 80
Amortization of deferred compensation 338 328 94
Write-off of development projects 330 646 605
Distributions from unconsolidated
affiliates 2,192 3,398 3,186
Distributions to minority investors (16,868) (15,874) (15,182)
Changes in assets and liabilities:
Tenant and other receivables (1,639) (1,051) (2,837)
Other assets (330) (487) (75)
Accounts payable and accrued
libilities 1,069 5,177 (7,900)
-------- -------- --------
Net cash provided by
operating activities 60,852 54,789 28,977
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate assets (139,746) (141,842) (57,654)
Acquisitions of real estate assets (36,429) (103,464) (32,301)
Capitalized interest (9,218) (6,978) (4,290)
Other capital expenditures (15,681) (9,538) (8,313)
Deposits in escrow (66,108) - -
Proceeds from sales of real estate assets 19,341 47,968 7,185
Additions to mortgage notes receivable (3,461) (3,697) (2,006)
Payments received on mortgage notes receivable 6,771 3,193 396
Additional investments in and advances
to unconsolidated affiliates (491) (2,566) (859)
Additions to other assets (862) (1,092) (1,848)
-------- -------- --------
Net cash used in investing
activities (245,884) (218,016) (99,690)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage and other notes payable 316,813 309,494 149,831
Principal payments on mortgage and other
notes payable (165,694) (111,953) (130,377)
Additions to deferred finance costs (1,174) (1,173) (708)
Refunds of finance costs - 721 -
Proceeds from issuance of common stock 74,530 178 80,681
Proceeds from exercise of stock options 1,109 1,839 110
Prepayment penalties on extinguishment of debt (1,049) - (95)
Dividends paid (40,677) (34,610) (27,753)
-------- -------- --------
Net cash provided by financing
activities 183,858 164,496 71,689
-------- -------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,174) 1,269 976
CASH AND CASH EQUIVALENTS, beginning of period 4,298 3,029 2,053
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of period $ 3,124 $ 4,298 $ 3,029
======== ======== ========
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest,
net of amounts capitalized $ 37,791 $ 30,587 $ 31,923
======== ======== ========
The accompanying notes are an integral part of these statements.
-63-
CBL & ASSOCIATES PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
CBL & Associates Properties, Inc. (the "REIT"), a Delaware corporation, is
engaged in the development and operation of regional shopping malls and
community centers, primarily in the southeast and northeast regions of the
United States. During 1997, the REIT transferred its general partnership
and majority ownership interest in CBL & Associates Properties Limited
Partnership (the "Operating Partnership") to its newly formed and wholly
owned qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings,
II, Inc. This was treated similar to a pooling of interests. As a result,
the REIT will continue to own and will conduct its business through the
Operating Partnership, which at December 31, 1997, owns controlling
interests in a portfolio of properties consisting of seventeen regional
malls, eleven associated centers, each of which is part of a regional
shopping mall complex, two power centers, seventy-nine community centers
and one office building. Additionally, the Operating Partnership owns
noncontrolling interests in three regional malls and one associated center.
The Operating Partnership has one mall, one associated center, one power
center and two community centers currently under construction and owns
options to acquire certain development properties owned by third parties.
At December 31, 1997, CBL Holdings I, Inc. owned a 2.8% general partnership
interest and CBL Holdings II, Inc. owned a 68.95% limited partnership
interest in the Operating Partnership for a combined interest held by
the REIT of 71.75%.
The minority interest in the Operating Partnership is held primarily by
CBL & Associates, Inc. and its affiliates (collectively "CBL") who
contributed their interests in certain real estate properties and joint
ventures to the Operating Partnership in exchange for a limited partnership
interest in connection with the formation of the Operating Partnership in
November 1993. At December 31, 1997, CBL owns a 28.25% limited partnership
interest in the Operating Partnership (Note 9).
In September 1995, the REIT completed a follow-on offering of 4,163,500
shares of its common stock at $20.625 per share. The net proceeds of
$80.7 million were used to repay variable rate indebtedness incurred in
the REIT's development and acquisition program.
In January 1997, the REIT completed a spot offering of 3,000,000 shares
of its common stock at $26.125 per share. The net proceeds of $74.3
million were used to repay variable rate indebtedness incurred in the
REIT's development and acquisition program.
To comply with certain technical requirements of the Internal Revenue
Code of 1986, as amended (the "Code"), the Operating Partnership carries
out the REIT's property management and development activities through
CBL & Associates Management, Inc. (the "Management Company"). The
Operating Partnership holds 100% of the preferred stock and 5% of the
common stock of the Management Company, with CBL holding the remaining
95% of the common stock. Through the ownership of the preferred stock,
the Operating Partnership receives substantially all of the cash flow, and
therefore enjoys substantially all of the economic benefits of the
Management Company's operations. Due to the REIT's ability, as sole
general partner, to control the Operating Partnership and Operating
Partnership's rights to substantially all of the economic benefits of the
Management Company, the accounts of each entity are included in the
accompanying consolidated financial statements. The REIT, the Operating
Partnership and the Management Company are referred to collectively as
the "Company".
All significant intercompany balances and transactions have been eliminated
in the consolidated presentation.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Real Estate Assets
Costs directly related to the acquisition and development of real estate
assets, including overhead costs directly attributable to property
development, are capitalized. Interest costs incurred during the
development and construction period are capitalized.
Ordinary repairs and maintenance are expensed as incurred. Major
replacements and betterments are capitalized and depreciated over their
estimated useful lives. Depreciation is computed on a straight-line basis
generally over forty years for buildings and improvements and seven to
ten years for equipment and fixtures. Tenant improvements are
capitalized and depreciated on a straight-line basis over the life of the
related lease.
Long-Lived Assets
The Company periodically evaluates the carrying value of a long-lived asset
to be held and used when events or changes in circumstances warrant such
a review. The carrying value of a long-lived asset is considered impaired
when the projected undiscounted future cash flow of such asset is less
than its carrying value. Management believes that no material impairment
existed at December 31, 1997, and accordingly, no loss was recognized.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and cash equivalent investments
with original maturities of three months or less, primarily consisting of
demand deposits in banks.
Cash in Escrow
Cash in escrow includes cash deposited in escrow accounts which is to be
used for the purchase of specific real estate assets.
Deferred Financing Costs
Deferred financing costs are included in other assets in the accompanying
consolidated balance sheets and include fees and costs incurred to obtain
long-term financing and are being amortized over the terms of the respective
mortgage notes payable. Unamortized deferred financing costs are written off
when mortgage notes payable are retired before the maturity date.
Revenue Recognition
Rental revenue attributable to operating leases is recognized on a
straight-line basis over the initial term of the related leases. Certain
tenants are required to pay additional rent if sales volume exceeds
specified amounts. The Company recognizes this additional rent as revenue
when such amounts become determinable. A substantial portion of the
Company's rental income is derived from various national and regional
retail companies.
Tenant Reimbursements
The Company receives reimbursements from tenants for certain costs as
provided in the lease agreements. These costs consist of real estate
taxes, common area maintenance and other recoverable costs. Tenant
reimbursements are recognized as revenue in the period the costs are
incurred.
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Management, Development and Leasing Fees
Management fees are charged as a percentage of rentals and are recognized
as revenue as they are earned. Leasing fees are charged for newly executed
leases. These fees are recognized as revenues as they are earned.
Development fees are recognized as revenue on a pro rata basis over the
development period.
Gain on Sales of Real Estate Assets
Gain on sales of real estate assets are recognized at the time title to the
asset is transferred to the buyer, subject to the adequacy of the buyer's
initial and continuing investment and the assumption by the buyer of all
future ownership risks of operations of the property.
Income Taxes
The REIT is qualified as a real estate investment trust under Section 856
through 860 of the Code and applicable treasury regulations. In order to
maintain qualification as a real estate investment trust, the REIT is
required to distribute at least 95% of its taxable income to shareholders
and meet certain other asset and income tests as well as other requirements.
As a real estate investment trust, the REIT will generally not be liable for
federal corporate income taxes. Thus, no provision for federal income taxes
has been included in the accompanying consolidated financial statements.
If the REIT fails to qualify as a real estate investment trust in any
taxable year, the REIT will be subject to federal income tax on its taxable
income at regular corporate tax rates. Even if the REIT maintains its
qualification for taxation as a real estate investment trust, the REIT may
be subject to certain state and local taxes on its income and property and
to federal income and excise taxes on its undistributed income. State
income taxes were not significant in 1997, 1996 and 1995.
Derivative Financial Instruments
Interest rate cap and swap agreements, which are principally used by the
Company in the management of interest rate exposure, are accounted for on
an accrual basis. Amounts to be paid or received under interest rate cap
and swap agreements are recorded in interest expense in the period in which
they accrue.
Concentration of Credit Risk
The Company's tenants consist of national, regional and local retailers.
Financial instruments which subject the Company to concentrations of credit
risk consist primarily of tenant receivables. The Company does not obtain
collateral or other security to support financial instruments subject to
credit risk but monitors the credit standing of tenants.
Earnings Per Common Share
Effective for the year ended December 31, 1997, the Company adopted Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share,"
which replaces the presentation of primary earnings per share ("EPS") and
fully diluted EPS with a presentation of basic EPS and diluted EPS,
respectively. Basic EPS excludes dilution and is computed by dividing
earnings available to common shareholders by the weighted-average number
of common shares outstanding for the period. Similar to fully diluted EPS,
diluted EPS assumes the issuance of common stock for all potentially
dilutive equivalent shares outstanding. The right to convert CBL's
minority interest in the Operating Partnership into shares of common stock
is not dilutive (Note 9). All prior period EPS data have been restated.
The difference in basic and diluted EPS was due to the assumed conversion
of outstanding stock options resulting in 256,000, 132,000 and 29,000
equivalent shares in 1997, 1996 and 1995, respectively.
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Stock-Based Compensation
The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB No. 25). Effective in 1996, the Company adopted the disclosure option
of SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123
requires companies that do not choose to account for stock-based
compensation as prescribed by the statement to disclose the pro forma
effects on net income and earnings per share as if SFAS No. 123 had been
adopted. Additionally, certain other disclosures are required with respect
to stock-based compensation and the assumptions used to determine the pro
forma effects of SFAS No. 123.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those
estimates.
3. UNCONSOLIDATED AFFILIATES
The Company has investments in four partnerships and joint ventures, all of
which are reflected on the equity method of accounting in the accompanying
consolidated financial statements and consist of the following at
December 31, 1997:
Company's
Partnership Property Name Interest
Governor's Square IB Governor's Plaza 49.0%
Governor's Square Company Governor's Square 47.5%
Madison Square Associates, Ltd. Madison Square 50.0%
Mall Shopping Center Company Plaza Del Sol 50.6%
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Condensed combined financial statement information of the partnerships and
joint ventures are presented as follows (in thousands):
December 31,
-------------------
1997 1996
-------- --------
ASSETS:
Net investment in real estate assets $ 62,624 $ 62,779
Other assets 3,002 3,132
-------- --------
Total assets 65,626 65,911
LIABILITIES:
Mortgage note payable 87,192 88,667
Other liabilities 1,204 1,253
-------- --------
Total liabilities 88,396 89,920
OWNERS' DEFICIT:
Company (6,884) (8,616)
Other investors (15,886) (15,393)
-------- --------
Total owners' deficit (22,770) (24,009)
-------- --------
Total liabilities and owners'
deficit $ 65,626 $ 65,911
======== ========
Year Ended December 31,
-------------------------------
1997 1996 1995
-------- -------- --------
Revenues $ 21,684 $ 21,014 $ 20,729
Depreciation expense 2,724 2,592 2,583
Other operating expenses 15,066 14,668 15,171
-------- -------- --------
Operating income 3,894 3,754 2,975
Gain on sales of real estate assets - 1 -
-------- -------- --------
Income before extraordinary item 3,894 3,755 2,975
Extraordinary loss on extinguishment of debt - (1,727) -
-------- -------- --------
Net income $3,894 $2,028 $2,975
======== ======== ========
Company's share of:
Income before extraordinary item $1,916 $1,831 $1,450
Extraordinary loss on extinguishment of debt - (820) -
-------- -------- --------
Net income $1,916 $1,011 $1,450
======== ======== ========
During 1996, the mortgage note payable on Governor's Square was
refinanced with lower fixed rate debt. A prepayment penalty of approximately
$1,727,000 was incurred in connection with the refinancing. The Company's
share of this prepayment penalty has been reflected as extraordinary loss
on extinguishment of debt in the accompanying consolidated statement of
operations.
In general, contributions and distributions of capital or cash flows
and allocations of income and expense are made on a pro rata basis in
proportion to the equity interest held by each general or limited partner.
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4. MORTGAGE AND OTHER NOTES PAYABLE
Mortgage and other notes payable consist of the following at
December 31, 1997 and 1996 (in thousands):
1997 1996
-------- --------
Permanent loans $527,558 $473,305
Construction loans 100,321 26,395
Lines of credit 113,534 90,595
-------- --------
$741,413 $590,295
======== ========
Permanent Loans
Permanent loans consist of loans secured by properties held by the Company
at December 31, 1997 with a carrying amount of $682,814,000. At
December 31, 1997, permanent loans totaling $392,708,000 bear interest at
fixed rates ranging from 6.95% to 10.625%. Permanent loans totaling
$134,850,000 bear interest at variable interest rates indexed to the prime
lending rate or LIBOR rate (6.77% to 8.50% at December 31, 1997). Permanent
loans mature at various dates from 1998 through 2014. Extraordinary loss
on extinguishment of debt consist of prepayment penalties on extinguishment
of debt before maturity and the write off of related unamortized deferred
finance costs.
Construction Loans
At December 31, 1997, the Company had construction loans on three
properties, one of which was still under construction. The total
commitment under the construction loans is $120,275,000, of which
$100,321,000 is outstanding at December 31, 1997. The construction loans
mature in 1998 (extention options are available on all three) and bear
interest at variable interest rates indexed to the prime lending rate or
LIBOR rate (7.00% to 7.37% at December 31, 1997).
Lines of Credit
The Company maintains line of credit agreements with banks for construction
and working capital purposes. At December 31, 1997, the Company has
$187,500,000 available under its line of credit agreements, of which
$113,534,000 is outstanding. The lines expire at various dates through
1999 and bear interest at variable rates indexed to the prime lending rate
or LIBOR rate (6.47% to 7.07% at December 31, 1997). At December 31, 1997,
outstanding letters of credit issued under the line of credit agreements,
not reflected in the accompanying consolidated balance sheet, total
approximately $1,316,000. The line of credit agreements contain, among
other restrictions, certain restrictive covenants including the maintenance
of certain coverage ratios, minimum net worth and limitations on
distributions.
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Debt Maturities
As of December 31, 1997, the scheduled principal payments on all mortgage
and other notes payable are as follows (in thousands):
1998 $176,480
1999 205,257
2000 12,530
2001 13,363
2002 70,228
Thereafter 263,555
--------
$741,413
========
5. MORTGAGE NOTES RECEIVABLE
Substantially all mortgage notes receivable are collateralized by wrap-
around mortgages which are first mortgages on the underlying real estate
and related improvements. Interest rates on these notes range from 9.5%
to 11.0% at December 31, 1997.
6. MINIMUM RENTS
Tenant leases are usually for five to twenty year periods and generally
provide for renewals and annual rentals which are subject to upward
adjustments based on tenant sales volume. Future minimum rents are
scheduled to be received under noncancellable tenant leases at
December 31, 1997, as follows (in thousands):
1998 $134,869
1999 126,803
2000 117,814
2001 110,108
2002 99,792
Thereafter 582,598
No single tenant collectively accounts for more than 10% of the Company's
total revenue.
7. DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. They are used to
manage well defined interest rate risks.
Under interest rate swap agreements, the Company agrees with other parties
to exchange, at specified intervals, the difference between fixed rate and
variable rate interest amounts calculated by reference to an agreed-upon
notional amount. At December 31, 1997, 1996 and 1995, the Company had two
interest rate swap agreements outstanding with financial institutions, each
expiring in 1998. One interest rate swap agreement fixes the LIBOR
component on $50 million of the Company's LIBOR based variable rate debt at
5.52%. The Company will receive interest payments from the financial
institution for the amount LIBOR exceeds 5.52% for each monthly settlement
period. The second interest rate swap agreement has a notional amount of
$5.2 million. Under this agreement, the Company will receive interest
payments at a rate equal to LIBOR plus 140 basis points (7.36% at
December 31, 1997) and will pay interest at a fixed rate of 8.5%.
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In December, 1997, the Company obtained two $100 million interest rate caps
on LIBOR based variable rate debt, one at 7.0% for 1998 and one at 7.5% for
1999. In January 1998, the Company executed an interest rate swap agreement
which fixes the LIBOR component of $65 million of the company's LIBOR based
variable rate debt at 5.72% for a term of two years. In February 1998, the
Company executed an interest rate swap agreement which fixes the LIBOR
component of $81 million of the company's LIBOR based variable rate debt at
5.54% for a term of two years.
The Company is exposed to credit losses in the event of nonperformance by
the counterparties to its interest rate swap and cap agreements and
nonderivative financial assets but has no off-balance sheet credit risk of
accounting loss. The Company anticipates, however, that counterparties will
be able to fully satisfy their obligations under the contracts. The
Company does not obtain collateral or other security to support financial
instruments subject to credit risk but monitors the credit standing of
counterparties.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash and cash equivalents, cash in escrow,
receivables, accounts payable and accrued liabilities are reasonable
estimates of their fair values because of the short maturity of these
financial instruments. Based on the interest rates for similar financial
instruments, the carrying value of mortgage notes receivable is a
reasonable estimation of fair value. The carrying value of mortgage and
other notes payable, based on borrowing rates currently available to the
Company, is a reasonable estimation of fair value at December 31, 1997 and
1996. The fair value of the interest rate swap and cap agreements, which
represent the cash requirement if the existing agreements had been settled
at year end, was not significant at December 31, 1997 and 1996.
9. CBL RIGHTS
Pursuant to the Operating Partnership agreement, the limited partners were
granted rights (the "CBL Rights") to convert their limited partnership
interests in the Operating Partnership into shares of common stock, subject
to certain limits, and to sell to the REIT after November 3, 1996 part or
all of their limited partnership interest in the Operating Partnership in
exchange for shares of common stock or their cash equivalent at the REIT's
election, as defined.
CBL sold properties to the Operating Partnership in exchange for 67,850 and
34,246 limited partnership units in the Operating Partnership during 1997
and 1996, respectively.
At December 31, 1997 and 1996, there remained outstanding CBL Rights to
convert CBL's minority interest in the Operating Partnership to 9,475,856
and 9,408,006 shares of common stock, respectively.
10. 401(K) PROFIT SHARING PLAN
The Management Company maintains a 401(k) profit sharing plan, which is
qualified under Section 401(a) and Section 401(k) of the Code to cover
employees of the Management Company. All employees who have attained the
age of 21 and have completed at least one year of service are eligible to
participate in the plan. The plan provides for employer matching
contributions on behalf of each participant equal to 50% of the portion of
such participant's contribution which does not exceed 2.5% of such
participant's compensation for the plan year. Additionally, the Management
Company has the discretion to make additional profit-sharing-type
contributions not related to participant elective contributions. Total
contributions by the Management Company were not significant for 1997,
1996, and 1995.
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11. STOCK INCENTIVE PLAN
The Company maintains the 1993 Stock Incentive Plan (the "Plan") which
permits the issuance of stock options and common stock to selected
officers, employees and directors of the Company, up to 2,800,000
shares of common stock. The Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee").
Stock options issued under the Plan allow for the purchase of common stock
at the fair market value of the stock at the date of grant. Stock options
granted to officers and employees under the Plan vest and become
exercisable in installments on each of the first five anniversaries of the
date of grant and expire ten years after the date of grant. Stock options
granted to directors are fully vested upon grant, but may not be sold,
pledged or otherwise transferred in any manner during the director's term
or for one year thereafter.
The Company accounts for its stock-based compensation plans under APB
No. 25, under which no compensation expense has been recognized for stock
options granted as all employee options have been granted with an exercise
price equal to the fair value of the Company's common stock on the date of
grant. The Company adopted SFAS No. 123 for disclosure purposes only in
1996. For SFAS No. 123 purposes, the fair value of each employee option
grant has been estimated as of the date of grant using the Black-Sholes
option pricing model and the following weighted average assumptions for
1997, 1996 and 1995, respectively:
1997 1996 1995
---------- --------- ----------
Risk-free interest rate 6.73% 6.53% 6.58%
Dividend yield 7.87% 7.64% 7.75%
Expected volatility 16.00% 16.00% 16.00%
Expected life 7.0 years 6.5 years 6.7 years
Using these assumptions, the fair value of the employee stock options
granted in 1997, 1996 and 1995 is $989,000, $860,000 and $965,000,
respectively, which would be amortized as compensation expense over the
vesting period of the options. Had compensation cost for the plan been
determined in accordance with SFAS No. 123, utilizing the assumptions
detailed above, the Company's pro forma net income and net income per
share would have been as follows for the years ended December 31, 1997,
1996 and 1995, respectively.
1997 1996 1995
------- ------- -------
Net income (in thousands):
As reported $34,941 $34,423 $20,023
Pro forma 34,442 34,117 19,910
Net income per share:
Basic as reported $1.46 $1.65 $1.12
Pro forma basic 1.44 1.63 1.12
Diluted as reported 1.45 1.64 1.12
Pro forma diluted 1.43 1.62 1.12
The pro forma effect on net income in this disclosure is not
representative of the pro forma effect on net income in future years
because it does not take into consideration pro forma compensation expense
related to grants made prior to 1995.
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A summary of the Company's stock option activity for 1997, 1996, and 1995
is as follows:
Weighted-Average
Shares Option Price Exercise Price
-------- ------------------- ----------
Outstanding at December 31, 1994 384,000 $19.5625 - $20.3125 $ 19.57
Granted 532,000 $19.6250 - $21.6250 19.63
Exercised (5,600) $19.5625 19.56
Outstanding at December 31, 1995 910,400 $19.5625 - $21.6250 19.61
Granted 582,000 $20.5000 - $25.6250 20.52
Exercised (93,800) $19.5625 - $21.6250 19.60
Outstanding at December 31, 1996 1,398,600 $19.5625 - $25.6250 19.99
Granted 539,000 $23.6250 23.63
Exercised (55,600) $19.5625 - $20.5000 19.95
Lapsed (190,400) $19.5625 - $23.6250 20.26
Outstanding at December 31, 1997 1,691,600 $19.5625 - $25.6250 $ 21.11
The weighted-average fair value of options granted during 1997, 1996 and
1995 was $1.84, $1.66 and $1.62, respectively.
Shares subject to options outstanding at December 31, 1997 have a weighted-
average remaining contractual life of 8.0 years. Of the options outstanding
at December 31, 1997, 381,000 are currently exercisable with a weighted-
average exercise price of $19.83 per share.
Under the Plan, common stock may be awarded either alone, in addition to,
or in tandem with other stock awards granted under the Plan. The Committee
has the authority to determine eligible persons to whom common stock will
be awarded, the number of shares to be awarded and the duration of the
vesting period, as defined.
During 1997, the Company issued 31,745 shares of common stock under the
Plan with a weighted-average grant-date fair value of $24.86 per share, of
which 13,483 shares of common stock were immediately vested. The remaining
18,262 shares of common stock vest at various dates from 1998 to 1999.
During 1996, the Company issued 26,780 shares of common stock under the
Plan with a weighted-average grant-date fair value of $23.35 per share, of
which 12,391 shares of common stock were immediately vested. The remaining
14,389 shares of common stock vest at various dates from 1997 to 1999.
During 1995, the Company issued 28,606 shares of common stock under the
Plan with a weighted-average grant-date fair value of $20.43 per share, of
which 14,910 shares of common stock were immediately vested. The remaining
13,696 shares of common stock vest at various dates in 1997.
Deferred compensation related to the common stock issued under the Plan
is reflected in the accompanying consolidated statements of shareholders'
equity based on the market value of the common stock at the date of grant and
is amortized ratably over the period the awards vest.
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12. RELATED PARTY TRANSACTIONS
CBL and certain officers of the Company have a significant minority interest
in the construction company that has been engaged by the Company in the
building of substantially all of the properties.
The Management Company provides management and leasing services to
affiliated partnerships and joint ventures not controlled by the Company.
Revenue recognized for these services amounted to $837,000 in 1997,
$1,537,000 in 1996, and $1,419,000 in 1995.
A company that provides security, maintenance, cleaning services and
background music for certain of the real estate properties was majority
owned by officers of the Company during a portion of 1997. The company was
sold to an independent third party in 1997. Expenses related to these
services were not significant in 1997, 1996 and 1995.
In 1995, officers of the Company had an ownership interest in a company
engaged in the title insurance business that had written title insurance on
certain of the real estate properties. Expenses related to these services
were not significant in 1995.
An insurance agency that has served as agent with respect to the placing of
insurance on certain of the real estate properties was majority owned by
certain employees of the Management Company at December 31, 1996. Total
insurance premiums paid by the Company to the related insurance agency were
$2,229,000 in 1996 and $1,750,000 in 1995. Due to a change in insurance
agent, no premiums were paid in 1997 to this agency.
13. COMMITMENTS AND CONTINGENCIES
The Company is currently involved in certain litigation arising in the
ordinary course of business. In the opinion of management, the pending
litigation will not materially affect the financial statements of the
Company. Additionally, based on environmental studies completed to date
on the real estate properties, management believes exposure related to
environmental cleanup will be immaterial to the consolidated financial
position and consolidated results of operations of the Company.
The Company has entered into standby purchase agreements with third-party
developers (the "Developers") for the construction, development and
potential ownership of two community centers in Georgia and Texas (the "Co-
Development Projects"). The Developers have utilized theses standby
purchase agreements to assist in obtaining financing to fund the
construction of the Co-Development Projects. The standby purchase
agreements, which expire in 1999, are dependent upon certain completion
requirements, rental levels, the inability of the Developers to obtain
adequate permanent financing and the inability to sell the Co-Development
Project before the Company has to fund their equity contribution or
purchase the Co-Development Project. In return for its commitment to
purchase a Co-Development Project pursuant to a standby purchase agreement,
the Company receives a fee as well as a participation interest in each Co-
Development Project. In addition to the standby purchase agreements, the
Company has extended secured credit to two of these developers to cover
pre-development costs. The outstanding amount of purchase and secured
credit agreements at December 31, 1997 is $52.8 million.
14. EVENTS SUBSEQUENT TO YEAR END
On January 2, 1998, the REIT purchased Asheville Mall in Asheville, North
Carolina for $65 million, which was funded by a $48.9 million acquisition
loan with the balance funded from the REIT's credit lines. On January 30,
1998, the REIT purchased Burnsville Center in Burnsville (Minneapolis),
Minnesota for $81 million which was funded by a $60.8 million acquisition
loan with the balance funded from the REIT's credit lines.
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15. DIVIDENDS
The allocations of dividends declared and paid for income tax purposes
are as follows:
Year Ended December 31,
----------------------------
1997 1996 1995
-------- -------- --------
Dividends per share $1.77 $1.68 $1.59
ALLOCATIONS
Ordinary income 81.54% 89.67% 77.31%
Capital gain 0.04% 8.93% 0.53%
Return of capital 18.42% 1.40% 22.16%
-------- -------- --------
Total 100.00% 100.00% 100.00%
======== ======== ========
16. OPERATING PARTNERSHIP
Condensed financial statement information for the Operating Partnership is
presented as follows (in thousands):
DECEMBER 31,
----------------------
1997 1996
---------- ----------
ASSETS:
Net investment in real estate assets $1,135,707 $ 987,260
Other assets 70,361 38,665
---------- ----------
Total assets $1,206,068 $1,025,925
LIABILITIES:
Mortgage and other notes payable $ 741,413 $ 590,295
Other liabilities 29,745 27,027
---------- ----------
Total liabilities 771,158 617,322
Distributions and losses in excess of
investment in unconsolidated affiliates 6,884 8,616
Minority interest 123,902 729
OWNERS' EQUITY 304,124 399,258
---------- ----------
Total liabilities and owners' equity $1,206,068 $1,025,925
========== ==========
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Year Ended December 31,
----------------------------
1997 1996 1995
-------- -------- --------
Revenues $174,903 $146,805 $131,727
Depreciation expense 32,102 25,439 22,837
Other operating expenses 99,468 85,573 81,294
-------- -------- --------
Operating income 43,333 35,793 27,599
Gain on sales of real estate assets 3,278 13,614 2,213
Equity in earnings of
unconsolidated affiliates 1,916 1,831 1,450
Minority investors' interest (430) (527) (386)
-------- -------- --------
Income before extraordinary item 48,097 50,711 30,876
Extraordinary loss on
extinguishment of debt (1,092) (820) (326)
-------- -------- --------
Net income $47,005 $49,891 $30,550
======== ======== ========
17. RECLASSIFICATIONS
Certain reclassifications have been made to prior years' financial
information to conform with the 1997 presentation.
18. QUARTERLY INFORMATION (UNAUDITED)
(in thousands, except per share amounts)
Basic Diluted
Earnings Earnings
Per Per
Net Common Common
Revenues Operations Income Share(1) Share(1)
-------- ---------- ------- -------- --------
1997 QUARTER ENDED:
March 31 $ 41,242 $ 9,573 $ 8,980 $0.38 $0.38
June 30 42,458 9,789 7,607 0.32 0.31
September 30 43,243 10,706 8,055 0.33 0.33
December 31 50,661 12,336 10,299 0.43 0.42
Total $177,604 $42,404 $34,941 $1.46 $1.45
1996 QUARTER ENDED:
March 31 $ 35,380 $ 8,621 $ 6,737 $0.32 $0.32
June 30 35,969 8,614 10,897 0.52 0.52
September 30 35,491 8,935 6,779 0.32 0.32
December 31 39,965 9,623 10,010 0.48 0.47
Total $146,805 $35,793 $34,423 $1.65 $1.64
(1) The sum of quarterly earnings per share amounts may differ from
annual earnings per share.
-76-
SCHEDULE II Allowance For Credit Losses (in thousands)
Year Ended Balance At Provision Balance At
Beginning Of For Credit Account End of
Year Losses Written Off Year
December 31, 1995 $ 0 $ 363 $ (363) $ 0
====== ====== ====== =====
December 31, 1996 0 812 (362) 450
====== ====== ====== =====
December 31, 1997 450 1,027 (177) 1,300
====== ====== ====== =====
-77-
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
MALLS
Asheville Mall $48,900 $ ---- $ ---- $ ---- $ ---- $ ---- $ ---- $ ---- ----
Asheville, NC
Georgia Square (E) ---- 2,982 31,071 3,742 2,982 34,813 37,795 6,275 1982
Athens, GA
Hamilton Place 74,147 2,880 42,211 10,227 2,932 52,386 55,318 12,539 1986-1987
Chattanooga, TN
Frontier Mall 7,188 2,681 15,858 5,899 2,681 21,757 24,438 3,857 1984-1985
Cheyenne, WY
Post Oak Mall (E) ---- 3,936 48,948 1,233 3,936 50,181 54,117 15,242 1984-1985
College Station, TX
Walnut Square (E) 1,298 50 15,138 4,721 50 19,859 19,909 7,653 1984-1985
Dalton, GA
St. Clair Square 66,000 11,028 75,581 2,711 11,028 78,292 89,320 2,109 1996
Fairview Heights, IL
Turtle Creek Mall 34,300 2,345 26,418 7,120 3,535 32,348 35,883 3,977 1994-1995
Hattiesburg, MS
Oak Hollow Mall 52,498 4,344 52,904 2,701 4,344 55,605 59,949 4,312 1994-1995
High Point, NC
Twin Peaks Mall (E) ---- 1,873 22,022 13,657 1,828 35,724 37,552 8,715 1984
Longmont, CO
Foothills Mall ---- 4,537 15,226 5,715 4,537 20,941 25,478 944 1996
Maryville, TN
Foothills Mall JCP ---- ---- 2,650 5 ---- 2,655 2,655 883 1983
Maryville, TN
Bonita Lakes Mall 31,703 4,924 31,933 ---- 4,924 31,933 36,857 203 1997
Meridian, MS
Springdale Mall 19,950 19,538 6,676 ---- 19,538 6,676 26,214 42 1997
Mobile, AL
College Square 13,650 2,954 17,787 3,613 2,927 21,427 24,354 5,197 1987-1988
Morristown, TN
Coolsprings Galleria 68,033 13,527 86,755 20,254 13,527 107,009 120,536 13,686 1989-1991
Nashville, TN
Lakeshore Mall ---- 1,443 28,819 656 1,443 29,475 30,918 4,382 1991-1992
Sebring, FL
Westgate Mall 50,969 2,150 23,257 34,150 2,150 57,407 59,557 3,019 1995
Spartanburg, SC
Pemberton Square ---- 1,191 14,305 3,729 581 18,644 19,225 4,787 1986
Vicksburg, MS
-78-
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
ASSOCIATED CENTERS
Coolsprings Xing (E) ---- 2,803 14,985 34 2,804 15,018 17,822 1,954 1991-1993
Nashville, TN
Madison Plaza 2,577 473 2,888 155 473 3,043 3,516 339 1984
Hunstville,AL
Bonita Crossing ---- 794 4,786 ---- 794 4,786 5,580 26 1997
Meridian,MS
Foothills Pl.Exp ---- 137 1,960 403 148 2,352 2,500 841 1984-1988
Maryville,TN
Foothills Plaza (E) ---- 132 2,123 14 141 2,128 2,269 485 1984-1988
Maryville,TN
The Terrace 10,939 4,166 9,729 ---- 4,166 9,729 13,895 196 1997
Chattanooga,TN
Hamilton Corner 3,477 960 3,670 405 734 4,301 5,035 844 1986-1987
Chattanooga,TN
Frontier Square ---- 346 684 99 260 869 1,129 216 1985
Cheyenne,WY
Hamilton Crossing ---- 3,318 4,387 (885) 1,948 4,872 6,820 1,339 1987
Chattanooga,TN
General Cinema 377 100 1,082 14 100 1,096 1,196 493 1984
Athens,GA
Pemberton Plaza ---- ---- 662 124 ---- 786 786 212 1986
Vicksburg,MS
Westgate Crossing ---- 1,082 3,422 ---- 1,082 3,422 4,504 36 1997
Spartanburg,SC
COMMUNITY CENTERS
Northwoods Plaza 1,323 496 1,403 93 496 1,496 1,992 212 1995
Albemarle,NC
Bartow Plaza ---- 224 2,010 229 224 2,239 2,463 395 1989
Bartow,FL
Jean Ribaut Kmart (E) ---- 317 2,065 674 340 2,716 3,056 391 1983-1984
Beaufort,SC
Jean Ribaut Square 4,092 505 4,007 1,313 505 5,320 5,825 1,415 1983
Beaufort,SC
Lady's Island (E) ---- 300 2,323 278 300 2,601 2,901 349 1992
Beaufort,SC
Sattler Square (E) ---- 792 4,155 161 705 4,403 5,108 939 1988-1989
Big Rapids,MI -79-
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
Southgate Crossing ---- ---- 1,002 12 ---- 1,014 1,014 283 1984-1985
Bristol,TN
Townshire Center ---- ---- ---- 27 ---- 27 27 4 1997
Bryan,TX
Village @ Wexford ---- 555 3,009 25 501 3,088 3,589 605 1989-1990
Cadillac,MI
Devonshire Place ---- 371 3,449 2,481 520 5,781 6,301 196 1995-1996
Cary,NC
Ceder Springs Plaza ---- 206 1,845 108 206 1,953 2,159 432 1988
Cedar Springs,MI
Dorchester Plaza ---- 493 1,483 334 443 1,867 2,310 528 1985
Charleston,SC
Rhett @ Remount ---- 67 1,877 848 67 2,725 2,792 558 1992
Charleston,SC
Fifty Eight Crossing 1,296 839 2,360 (71) 743 2,385 3,128 555 1988
Chattanooga,TN
Perimeter Place 1,715 764 2,049 321 770 2,364 3,134 726 1985
Chattanooga,TN
Chester Plaza 0 165 720 0 165 720 885 3 1997
Chester,VA
Centerview Plaza 1,363 246 1,584 706 197 2,339 2,536 562 1986
China Grove,NC
Buena Vista Plaza ---- 830 1,476 (404) 604 1,298 1,902 207 1988-1989
Columbus,GA
Conway Plaza ---- 110 1,071 787 ---- 1,968 1,968 552 1984
Conway,SC
Cortlandt Towne Ctr 45,918 7,000 10,000 1,186 7,000 11,186 18,186 271 1996
Cortlandt,NY
Genesis Square 1,094 227 1,435 970 223 2,409 2,632 278 1990
Crossville,TN
Cosby Station 4,364 999 4,516 480 999 4,996 5,995 436 1993-1994
Douglasville,GA
Ridge Crossing 1,345 832 2,494 (9) 731 2,586 3,317 593 1988
East Ridge,TN
Surrey Square ---- ---- 1,402 ---- ---- 1,402 1,402 412 1985
Elkin,NC
-80-
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
Massard Crossing ---- 843 5,726 79 843 5,805 6,648 93 1997
Fort Smith,AR
Lakeshore Station ---- 200 401 10 200 411 611 40 1993-1994
Gainesville,GA
Garden City Plaza (E) ---- 1,056 2,569 122 580 3,167 3,747 1,036 1984
Garden City,KS
Anderson Plaza ---- 198 1,316 1,562 198 2,878 3,076 423 1983
Greenwood,SC
Northcreek Plaza ---- 98 1,201 38 97 1,240 1,337 178 1983
Greenwood,SC
Henderson Square 7,054 428 8,074 68 435 8,135 8,570 596 1994-1995
Henderson,NC
Springs Crossing ---- ---- 1,422 927 ---- 2,349 2,349 405 1987
Hickory,NC
Valley Crossing (E) ---- 2,390 6,471 4,377 3,034 10,204 13,238 1,647 1988
Hickory,NC
Northridge Plaza (E) ---- 1,087 2,970 1,999 1,244 4,812 6,056 1,423 1984
Hilton Head,SC
Village Square ---- 750 3,591 (933) 142 3,266 3,408 675 1989-1990
Houghton Lake,MI
Greenport Towne Ctr 4,569 659 6,161 194 659 6,355 7,014 587 1993-1994
Hudson,NY
Girvin Plaza ---- 898 1,998 (86) 727 2,083 2,810 370 1989-1990
Jacksonville,FL
Jasper Square (E) ---- 235 1,423 592 235 2,015 2,250 545 1986
Jasper,AL
Stone East Plaza (E) ---- 266 1,635 14 217 1,698 1,915 599 1987
Kingsport,TN
Cedar Bluff 1,417 412 2,128 824 412 2,952 3,364 656 1987
Knoxville,TN
Eastowne Center (E) ---- 867 2,765 533 786 3,379 4,165 668 1989
Knoxville,TN
Karnes Corner 1,010 206 1,360 788 206 2,148 2,354 437 1987
Knoxville,TN
Kingston Overlook ---- 1,693 8,274 (624) 2,105 7,238 9,343 182 1996-1997
Knoxville,TN
Suburban Plaza 6,940 3,223 3,796 3,084 3,223 6,880 10,103 432 1995
Knoxville,TN
-81-
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
LaGrange Commons ---- 835 5,765 403 835 6,168 7,003 172 1995-1996
LaGrange,NY
Park Village ---- 586 2,874 72 520 3,012 3,532 455 1990
Lakeland,FL
Longview Crossing 468 ---- 1,308 4 ---- 1,312 1,312 301 1988
Longview,NC
Springhurst Town Ctr 22,700 7,424 31,716 (1,044) 7,424 30,672 38,096 189 1997
Louisville,KY
Lunenburg Crossing ---- 1,020 2,308 (26) 1,019 2,283 3,302 190 1993-1994
Lunenburg,MA
Sutton Plaza ---- 1,042 4,671 0 1,042 4,671 5,713 116 1997
Mt. Olive,NJ
Chestnut Hills (E) ---- 600 1,775 134 600 1,909 2,509 311 1992
Murray,KY
Beach Crossing ---- 725 1,749 20 623 1,871 2,494 450 1984
Myrtle Beach,SC
Willow Springs 5,835 2,917 6,107 4,991 2,917 11,098 14,015 1,420 1991
Nashua,NH
North Haven Crossing 8,252 3,229 8,061 1 3,229 8,062 11,291 924 1992-1993
North Haven,CT
Briarcliff Square 1,721 299 1,936 45 267 2,013 2,280 427 1989
Oak Ridge,TN
Oaks Crossing ---- 571 2,885 (1,388) 655 1,413 2,068 563 1988
Otsego,MI
Collins Park Common 1,439 25 1,858 6 25 1,864 1,889 392 1989
Plant City,FL
BJ's Wholesale 3,503 170 4,735 ---- 170 4,735 4,905 750 1991
Portland,ME
Clark's Pond ---- 2,739 ---- 59 2,738 60 2,798 9 1994
Portland,ME
University Crossing ---- 545 1,216 (27) 377 1,357 1,734 418 1985
Pueblo,CO
Tyler Square ---- 196 2,021 (48) 103 2,066 2,169 569 1986
Radford,VA
Capital Crossing ---- 1,908 756 2,261 2,544 2,381 4,925 110 1995
Raleigh,NC
Northpark Center ---- 1,465 1,581 ---- 1,465 1,581 3,046 29 1997
Richmond,VA -82-
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
Bennington Place 589 256 1,754 623 175 2,458 2,633 608 1988
Roanoke,VA
Hollins Plantation ---- 229 1,845 234 198 2,110 2,308 639 1985
Roanoke,VA
Orange Plaza ---- 395 2,111 75 395 2,186 2,581 309 1992
Roanoke,VA
Shenandoah 588 122 1,382 13 115 1,402 1,517 330 1988
Roanoke,VA
Rawlinson Place ---- 279 1,573 63 292 1,623 1,915 417 1987
Rock Hill,SC
Valley Commons 1,013 342 1,819 596 342 2,415 2,757 520 1988
Salem,VA
Wildwood Plaza ---- 429 1,082 1,033 357 2,187 2,544 565 1985
Salem,VA
County Park Plaza ---- 196 1,500 40 140 1,596 1,736 315 1980
Scottsboro,AL
Seacoast 5,944 1,374 4,164 2,480 1,195 6,823 8,018 1,023 1991
Seabrook,NH
Sparta Crossing 899 180 1,463 927 145 2,425 2,570 366 1989
Sparta,TN
Bullock Plaza ---- 98 1,493 15 98 1,508 1,606 432 1986
Statesboro,GA
Statesboro Square (E) ---- 237 1,643 135 227 1,788 2,015 520 1986
Statesboro,GA
Signal Hills Villag ---- ---- 579 427 ---- 1,006 1,006 235 1983-1984
Statesville,NC
Strawbridge Mrkt Pl ---- 1,969 2,492 ---- 1,969 2,492 4,461 62 1997
Strawbridge,VA
34th Street Crossin 1,647 1,102 2,743 48 1,023 2,870 3,893 603 1989
St. Petersburg,FL
Hampton Plaza ---- 973 2,689 21 965 2,718 3,683 484 1989-1990
Tampa,FL
Keystone Plaza ---- 938 2,216 (48) 825 2,281 3,106 582 1989
Tampa,FL
Uvalde Plaza 824 574 1,506 (167) 319 1,594 1,913 470 1987
Uvalde,TX
Salem Crossing ---- 2,385 7,564 (470) 2,385 7,094 9,479 109 1997
Virginia Beach,VA -83-
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
Initial Cost(A) Costs Gross Amounts at Which Carried at
----------------------- Capitalized Close of Period
Buildings Subsequent ---------------------------------- (D) Date of
Encumbrances and To Buildings and Accumulated Construction
Description (B) Land Improvements Acquisition Land Improvements Total(C) Depreciation /Purchase
---------- ------- ----------- ------------ ------ ----------- --------- ------------ ----------
Colleton Square 1,060 190 1,349 (10) 156 1,373 1,529 379 1986
Walterboro,SC
DISPOSALS
Lowe's Plaza ---- 1,427 4,440 (5,867) ---- ---- ---- ---- 1992-1993
Joplin, Mo
OTHER
Park Place 1,891 ---- 3,590 721 231 4,080 4,311 1,313 1984
Chattanooga,TN
High Point,NC - Land ---- ---- ---- 1,294 ---- 1,294 1,294 93 ----
CBL & Associates,LP ---- ---- ---- ---- ---- ---- ---- 775 ----
DEVELOPMENTS IN PROGRESS
Consisting of
Construction and
Development
Properties 113,534 2,955 ---- 100,947 115 103,787 103,902 ---- ----
-----------------------------------------------------------------------------------------------------------
TOTALS $741,413 $171,487 $863,272 $253,206 $164,893 $1,123,070 $1,287,965 $145,641
===========================================================================================================
(A) Initial cost represents the total cost capitalized including carrying
cost at the end of the first fiscal year in which the property opened
or was aquired.
(B) Encumbrances represent the mortgage notes payable balance at
December 31, 1997.
(C) The aggregate cost of land and buildings and improvements for federal
income tax purposes is approximately $1.143 billion.
(D) Depreciation for all properties is computed over the useful life which
is generally forty years.
(E) Property is pledged as collateral on the secured lines of credit used
for development properties.
-84-
CBL & ASSOCIATES PROPERTIES, INC.
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
The changes in real estate assets and accumulated depreciation for the years
ending December 31, 1997, 1996, and 1995 (dollars in thousands).
1997 1996 1995
---------- ---------- ----------
REAL ESTATE ASSETS:
Balance at beginning of period $1,101,797 $ 848,756 $ 747,228
Additions during the period:
Additions and improvements 163,807 165,035 75,533
Acquisitions of real estate assets 36,431 123,372 32,301
Deductions during the period:
Cost of sales (13,741) (34,720) (5,701)
Write-off of development projects (330) (646) (605)
---------- ---------- ----------
Balance at end of period $1,287,964 $1,101,797 $ 848,756
========== ========== ==========
ACCUMULATED DEPRECIATION:
Balance at beginning of period $ 114,536 $ 89,818 $ 67,503
Accumulated depreciation on
properties sold (777) (423) --
Depreciation expense 31,881 25,141 22,315
---------- ---------- ----------
Balance at end of period $ 145,640 $ 114,536 $ 89,818
-85-
Schedule IV
CBL & ASSOCIATES PROPERTIES, INC.
MORTGAGE LOANS ON REAL ESTATE
AT DECEMBER 31, 1997
(Dollars in thousands)
Principal
Amount of
Carrying Mortgages
Monthly Balloon Face Amount Subject to
Final Payment Payment Amount of Delinquent
Interest Maturity Amount at Prior of Mortgage Principal
Name of Center/Location Rate Date (1) Maturity Liens Mortgage (2) or Interest
- ---------------------------- --------- ------------- -------- --------- -------- --------- ---------- -------
COMMUNITY CENTERS
Bi-Lo South 9.50% 12/06 $22 $ 0 None $ 1,479 $ 1,479 $0
Cleveland, Tennessee
Gaston Square 11.00% 10/97(3) 15 1,638 None 1,638 1,638 0
Gastonia, North Carolina
Inlet Crossing
Myrtle Beach,
South Carolina 11.00% 10/97(3) 27 1,824 None 1,824 1,824 0
Olde Brainerd Centre 9.50% 12/06 4 0 None 164 164 0
Chattanooga, Tennessee
Signal Hills Plaza 11.00% 10/97(3) 20 2,351 None 2,351 2,351 0
Statesville, North Carolina
Soddy Daisy Plaza 9.50% 12/06 4 337 None 446 446 0
Soddy Daisy, Tennessee
Other 10.00% 07/98-09/03 0 3,776 3,776 3,776 0
------ ------- ------ --------- -------- ------
$92 $9,926 $11,678 $11,678 $0
------ ------- ------- -------- --------- -------
(1) Equal monthly installments comprised of principal and interest unless
otherwise noted.
(2) The aggregate carrying value for federal income tax purposes is
approximately $11,678 at December 31, 1997.
(3) Mortgage has been extended on a month to month basis at the same terms
while renegotiating mortgage extension.
CBL & ASSOCIATES PROPERTIES, INC.
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1997 1996 1995
------------ ------------ ------------
Beginning Balance $14,858 $34,262 $32,651
Additions 3,591 3,697 2,006
Other Reductions(a) 0 19,908 0
Payments (6,771) (3,193) (395)
------------ ------------ ------------
Ending Balance $11,678 $14,858 $34,262
============ ============ ============
(a) Other reductions in 1996 represent the acquisition of Foothills Mall
and conversion of the mortgage note receivable to the basis in the
acquired asset.
-86-
EXHIBIT INDEX
Exhibit
Number Description Page
3.1 Amended and Restated Certificate of Incorporation
of the Company(a)
3.2 Certificate of Amendment to the Amended & Restated
Certificate of Incorporation of the Company (b)
3.3 Amended and Restated Bylaws of the Company(a)
4 See Amended and Restated Certificate of Incorporation
of the Company, relating to the Common Stock(a)
10.1 Partnership Agreement of the Operating Partnership(a)
10.2 Property Management Agreement between the Operating
Partnership and the Management Company(a)
10.3 Property Management Agreement relating to Retained
Properties(a)
10.4.1 CBL & Associates Properties, Inc. 1993 Stock
Incentive Plan(a)
10.4.2 Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Charles B. Lebovitz dagger
10.4.3 Non-Qualified Stock Option Agreement, dated May 10, 1994,
for James L. Wolford dagger
10.4.4 Non-Qualified Stock Option Agreement, dated May 10, 1994,
for John N. Foy dagger
10.4.5 Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Jay Wiston dagger
10.4.6 Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Ben S. Landress dagger
10.4.7 Non-Qualified Stock Option Agreement, dated May 10, 1994,
for Stephen D. Lebovitz dagger
10.4.8 Stock Restriction Agreement, dated December 28, 1994, for
Charles B. Lebovitz dagger
10.4.9 Stock Restriction Agreement, dated December 2, 1994, for
John N. Foy dagger
10.4.10 Stock Restriction Agreement, dated December 2, 1994, for
Jay Wiston dagger
10.4.11 Stock Restriction Agreement, dated December 2, 1994, for
Ben S. Landress dagger
-87-
10.4.12 Stock Restriction Agreement, dated December 2, 1994, for
Stephen D. Lebovitz dagger
10.5 Purchase Agreement relating to Frontier Mall(c)
10.6.1 Purchase Agreement relating to Georgia Square (JMB)(c)
10.6.2 Purchase Agreement Relating to Georgia Square (JCPenney)(c)
10.7 Purchase Agreement relating to Post Oak Mall(c)
10.8 Indemnification Agreements between the Company and the
Management Company and their officers and directors(a)
10.9.1 Employment Agreement for Charles B. Lebovitz(a) dagger
10.9.2 Employment Agreement for James L. Wolford(a) dagger
10.9.3 Employment Agreement for John N. Foy(a) dagger
10.9.4 Employment Agreement for Jay Wiston(a) dagger
10.9.5 Employment Agreement for Ben S. Landress(a) dagger
10.9.6 Employment Agreement for Stephen D. Lebovitz(a) dagger
10.10 Subscription Agreement relating to purchase of the Common
Stock and Preferred Stock of the Management Company(a)
10.11 Option Agreement relating to certain Retained Properties(a)
10.12 Option Agreement relating to Outparcels(a)
10.13.1 Property Partnership Agreement relating to Hamilton Place(a)
10.13.2 Property Partnership Agreement relating to CoolSprings
Galleria(a)
10.14.1 Acquisition Option Agreement relating to Hamilton Place(a)
10.14.2 Acquisition Option Agreement relating to the Hamilton
Place Centers(a)
10.14.3 Acquisition Option Agreement relating to the Office
Building(a)
10.15 Revolving Credit Agreement between the Operating
Partnership and First Tennessee Bank, National
Association, dated as of March 2, 1994(d)
10.16 Revolving Credit Agreement, dated July 28, 1994,
between the Operating Partnership and Wells Fargo
Advisors Funding, Inc., NationsBank of Georgia, N.A.
and First Bank National Association(e)
-88-
10.17 Revolving Credit Agreement, dated October 14, 1994,
between the Operating Partnership and American
National Bank and Trust Company of Chattanooga(f)
10.18 Revolving Credit Agreement, dated November 2, 1994,
between the Operating Partnership and First Tennessee
Bank National Association(f)
10.19 Promissory Note Agreement between the Operating
Partnership and Union Bank of Switzerland dated
May 5, 1995(g)
10.20 Amended and Restated Loan Agreement between the
Operating Partnership and First Tennessee Bank
National Association dated July 12, 1995(h)
10.21 Second Amendment to Credit Agreement between the
Operating Partnership and Wells Fargo Realty
Advisors Funding, Inc. dated July 5, 1995(h)
10.22 Consolidation, Amendment, Renewal, and Restatement
of Notes between the Galleria Associates, L.P. and
The Northwestern Mutual Life Insurance Company(i)
10.23 Promissory Note Agreement between High Point
Development Limited Partnership and The Northwestern
Mutual Life Insurance Company dated January 26, 1996(j)
10.24 Promissory Note Agreement between Turtle Creek
Limited Partnership and Connecticut General Life
Insurance Company dated February 14, 1996(j)
10.25 Amended and Restated Credit Agreement between the
Operating Partnership and Wells Fargo Bank N.A. etal
dated September 26, 1996. (k)
10.26 Promissory Note Agreement between the Operating
Partnership and Compass Bank dated
September 17, 1996. (k)
10.27 Promissory Note Agreement between St Clair Square
Limited Partnership and and Wells Fargo National
Bank dated, December 11, 1996.(l)
10.28 Promissory Note Agreement between Lebcon Associates
and Principal Mutual Life Insurance Company dated,
March 18, 1997.(l)
10.29 Promissory Note Agreement between Westgate Mall
Limited Partnership and and Principal Mutual Life
Insurance Company dated, February 16, 1997.(l)
10.30 Amended and Restated Credit Agreement between the
Operating Partnership and First Tennessee Bank etal
dated February 24, 1997.(l)
-89-
10.31 Amended and Restated Credit Agreement between the
Operating Partnership and First Tennessee
Bank etal dated July 29, 1997.
10.32 Second Amended and Restated Credit Agreement between
the Operating Partnership and Wells Fargo Bank
N.A. etal dated June 5, 1997 Effective April 1,1997.
10.33 First Amendment to Second Amended and Restated Credit
Agreement between the Operating Partnership and Wells
Fargo Bank N.A. etal dated November 11, 1997.
10.34 Loan Agreement between Ashville LLC and Wells Fargo
Bank N.A. dated February 17, 1998
10.35 Loan Agreement between Burnsville Minnesota LLC and
U.S. Bank National Association dated
January 30, 1998
10.36 Modification No. One to the Amended and Restated
Agreement of Limited Partnership of CBL & Associates
Limited Partnership Dated March 31, 1997.
10.37 Modification No. Two to the Amended and Restated
Agreement of Limited Partnership of CBL & Associates
Limited Partnership Dated February 19, 1998.
21 Subsidiaries of the Company
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule
(a) Incorporated by reference to Post-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-11 (No. 33-67372), as
filed with the Commission on January 27, 1994.
(b) Incorporated by reference to Exhibit B to the Company's Definitive
Schedule 14A, Dated April 1, 1996.
=
(c) Incorporated by reference to Amendment No. 2 to the Company's
Registration Statement on Form S-11 (No. 33-67372), as filed with
the Commission on October 26, 1993.
(d) Incorporated herein by reference to the Company's Annual Report in
Form 10-K for the fiscal year ended December 31, 1993.
(e) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994.
(f) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994.
(g) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995.
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(h) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995.
(i) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995.
(j) Incorporated by reference to the Company's Annual Report in
Form 10-K for the fiscal year ended December 31, 1995.
(k) Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996.
(l) Incorporated by reference to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996.
dagger A management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c) of this report.
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