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EX-32.3 - EXHIBIT 32.3 - CBL & ASSOCIATES PROPERTIES INCexhibit323-3312016.htm
EX-12.3 - EXHIBIT 12.3 - CBL & ASSOCIATES PROPERTIES INCexhibit-123x3312016.htm
EX-32.4 - EXHIBIT 32.4 - CBL & ASSOCIATES PROPERTIES INCexhibit-324x3312016.htm
EX-12.2 - EXHIBIT 12.2 - CBL & ASSOCIATES PROPERTIES INCexhibit-122x3312016.htm
EX-12.4 - EXHIBIT 12.4 - CBL & ASSOCIATES PROPERTIES INCexhibit-124x3312016.htm
EX-31.3 - EXHIBIT 31.3 - CBL & ASSOCIATES PROPERTIES INCexhibit-313x3312016.htm
EX-31.1 - EXHIBIT 31.1 - CBL & ASSOCIATES PROPERTIES INCexhibit-311x3312016.htm
EX-12.1 - EXHIBIT 12.1 - CBL & ASSOCIATES PROPERTIES INCexhibit-121x3312016.htm
EX-31.2 - EXHIBIT 31.2 - CBL & ASSOCIATES PROPERTIES INCexhibit-312x3312016.htm
EX-31.4 - EXHIBIT 31.4 - CBL & ASSOCIATES PROPERTIES INCexhibit-314x3312016.htm
EX-32.2 - EXHIBIT 32.2 - CBL & ASSOCIATES PROPERTIES INCexhibit322-3312016.htm
EX-32.1 - EXHIBIT 32.1 - CBL & ASSOCIATES PROPERTIES INCexhibit-321x3312016.htm

UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2016
Or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO _______________
 
COMMISSION FILE NO. 1-12494 (CBL & ASSOCIATES PROPERTIES, INC.)
COMMISSION FILE NO. 333-182515-01 (CBL & ASSOCIATES LIMITED PARTNERSHIP)
______________
CBL & ASSOCIATES PROPERTIES, INC.
CBL & ASSOCIATES LIMITED PARTNERSHIP
(Exact Name of registrant as specified in its charter)
______________
DELAWARE (CBL & ASSOCIATES PROPERTIES, INC.)
 
   62-1545718
DELAWARE (CBL & ASSOCIATES LIMITED PARTNERSHIP)
 
   62-1542285
(State or other jurisdiction of incorporation or organization)     
 
 (I.R.S. Employer Identification Number)
                       
 2030 Hamilton Place Blvd., Suite 500, Chattanooga, TN  37421-6000
(Address of principal executive office, including zip code)
423.855.0001
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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. 
CBL & Associates Properties, Inc.
 
 Yes x   
No o
CBL & Associates Limited Partnership
 
 Yes x   
No o
                      
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
CBL & Associates Properties, Inc.
 
 Yes x   
No o
CBL & Associates Limited Partnership
 
 Yes x   
No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
CBL & Associates Properties, Inc.
Large accelerated filer x
Accelerated filer o
 Non-accelerated filer o 
Smaller Reporting Company o
CBL & Associates Limited Partnership
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller Reporting Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
CBL & Associates Properties, Inc.
 
 Yes o  
No x
CBL & Associates Limited Partnership
 
 Yes o  
No x
As of May 2, 2016, there were 170,794,183 shares of CBL & Associates Properties, Inc.'s common stock, par value $0.01 per share, outstanding.




EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2016 of CBL & Associates Properties, Inc. and CBL & Associates Limited Partnership. Unless stated otherwise or the context otherwise requires, references to the "Company" mean CBL & Associates Properties, Inc. and its subsidiaries. References to the "Operating Partnership" mean CBL & Associates Limited Partnership and its subsidiaries. The terms "we," "us" and "our" refer to the Company or the Company and the Operating Partnership collectively, as the context requires.

The Company is a real estate investment trust ("REIT") whose stock is traded on the New York Stock Exchange. The Company is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. At March 31, 2016, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.0% general partner interest in the Operating Partnership and CBL Holdings II, Inc. owned an 84.4% limited partner interest for a combined interest held by the Company of 85.4%.

As the sole general partner of the Operating Partnership, the Company's subsidiary, CBL Holdings I, Inc., has exclusive control of the Operating Partnership's activities. Management operates the Company and the Operating Partnership as one business. The management of the Company consists of the same individuals that manage the Operating Partnership. The Company's only material asset is its indirect ownership of partnership interests of the Operating Partnership. As a result, the Company conducts substantially all its business through the Operating Partnership as described in the preceding paragraph. The Company also issues public equity from time to time and guarantees certain debt of the Operating Partnership. The Operating Partnership holds all of the assets and indebtedness of the Company and, through affiliates, retains the ownership interests in the Company's joint ventures. Except for the net proceeds of offerings of equity by the Company, which are contributed to the Operating Partnership in exchange for partnership units on a one-for-one basis, the Operating Partnership generates all remaining capital required by the Company's business through its operations and its incurrence of indebtedness.

We believe that combining the two quarterly reports on Form 10-Q for the Company and the Operating Partnership provides the following benefits:

enhances investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner that management views and operates the business;

eliminates duplicative disclosure and provides a more streamlined and readable presentation, since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and

creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

To help investors understand the differences between the Company and the Operating Partnership, this report provides separate condensed consolidated financial statements for the Company and the Operating Partnership. Noncontrolling interests, shareholders' equity and partners' capital are the main areas of difference between the condensed consolidated financial statements of the Company and those of the Operating Partnership. A single set of notes to condensed consolidated financial statements is presented that includes separate discussions for the Company and the Operating Partnership, when applicable. A combined Management's Discussion and Analysis of Financial Condition and Results of Operations section is also included that presents combined information and discrete information related to each entity, as applicable.

In order to highlight the differences between the Company and the Operating Partnership, this report includes the following sections that provide separate financial information for the Company and the Operating Partnership:

condensed consolidated financial statements;

certain accompanying notes to condensed consolidated financial statements, including Note 5 - Unconsolidated Affiliates, Redeemable Interests, Noncontrolling Interests and Cost Method Investments; Note 6 - Mortgage and Other Indebtedness; Note 7 - Comprehensive Income; and Note 11 - Earnings per Share and Earnings per Unit;

controls and procedures in Item 4 of Part I of this report; and

certifications of the Chief Executive Officer and Chief Financial Officer included as Exhibits 31.1 through 32.4.



CBL & Associates Properties, Inc.
CBL & Associates Limited Partnership
Table of Contents
PART I
FINANCIAL INFORMATION
 
 
 
CBL & Associates Properties, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CBL & Associates Limited Partnership
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CBL & Associates Properties, Inc. and CBL & Associates Limited Partnership
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
 
 
 
 
 
 
 



PART I – FINANCIAL INFORMATION

ITEM 1:   Financial Statements
CBL & Associates Properties, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
ASSETS (1)
March 31,
2016
 
December 31,
2015
Real estate assets:
 
 
 
Land
$
866,890

 
$
876,668

Buildings and improvements
7,159,509

 
7,287,862

 
8,026,399

 
8,164,530

Accumulated depreciation
(2,383,153
)
 
(2,382,568
)
 
5,643,246

 
5,781,962

Held for sale
18,721

 

Developments in progress
87,576

 
75,991

Net investment in real estate assets
5,749,543

 
5,857,953

Cash and cash equivalents
25,031

 
36,892

Receivables:
 
 
 
Tenant, net of allowance for doubtful accounts of $2,034
     and $1,923 in 2016 and 2015, respectively
93,756

 
87,286

Other, net of allowance for doubtful accounts of $1,275
and $1,276 in 2016 and 2015, respectively
13,842

 
17,958

Mortgage and other notes receivable
20,491

 
18,238

Investments in unconsolidated affiliates
294,062

 
276,383

Intangible lease assets and other assets
187,203

 
185,281

 
$
6,383,928

 
$
6,479,991

 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
 

 
 

Mortgage and other indebtedness, net
$
4,683,487

 
$
4,710,628

Accounts payable and accrued liabilities
299,691

 
344,434

Total liabilities (1)
4,983,178

 
5,055,062

Commitments and contingencies (Note 12)


 


Redeemable noncontrolling interests
20,854

 
25,330

Shareholders' equity:
 
 
 
Preferred stock, $.01 par value, 15,000,000 shares authorized:
 
 
 
 7.375% Series D Cumulative Redeemable Preferred
     Stock, 1,815,000 shares outstanding
18

 
18

 6.625% Series E Cumulative Redeemable Preferred
     Stock, 690,000 shares outstanding
7

 
7

Common stock, $.01 par value, 350,000,000 shares
authorized, 170,791,235 and 170,490,948 issued and 
outstanding in 2016 and 2015, respectively
1,708

 
1,705

Additional paid-in capital
1,969,888

 
1,970,333

Accumulated other comprehensive income

 
1,935

Dividends in excess of cumulative earnings
(705,438
)
 
(689,028
)
Total shareholders' equity
1,266,183

 
1,284,970

Noncontrolling interests
113,713

 
114,629

Total equity
1,379,896

 
1,399,599

 
$
6,383,928

 
$
6,479,991

(1)
As of March 31, 2016, include $517,532 of assets related to consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities and $435,213 of liabilities of consolidated variable interest entities for which creditors do not have recourse to the general credit of the Company. See Note 5.
The accompanying notes are an integral part of these condensed consolidated statements.

1


CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

 
Three Months Ended
March 31,
 
2016
 
2015
REVENUES:
 
 
 
Minimum rents
$
170,629

 
$
169,081

Percentage rents
4,673

 
4,137

Other rents
5,062

 
5,171

Tenant reimbursements
73,366

 
72,133

Management, development and leasing fees
2,581

 
2,778

Other
6,767

 
7,609

Total revenues
263,078

 
260,909

 
 
 
 
OPERATING EXPENSES:
 
 
 
Property operating
38,628

 
38,904

Depreciation and amortization
76,506

 
76,266

Real estate taxes
23,028

 
22,785

Maintenance and repairs
14,548

 
14,216

General and administrative
17,168

 
17,230

Loss on impairment
19,685

 

Other
9,685

 
6,476

Total operating expenses
199,248

 
175,877

Income from operations
63,830

 
85,032

Interest and other income
360

 
5,274

Interest expense
(55,231
)
 
(59,157
)
Gain on extinguishment of debt
6

 

Gain on investment

 
16,560

Equity in earnings of unconsolidated affiliates
32,390

 
3,823

Income tax benefit
537

 
916

Income from continuing operations before gain on sales of real estate assets
41,892

 
52,448

Gain on sales of real estate assets

 
757

Net income
41,892


53,205

Net (income) loss attributable to noncontrolling interests in:
 
 
 
Operating Partnership
(4,945
)
 
(6,172
)
Other consolidated subsidiaries
3,127

 
(869
)
Net income attributable to the Company
40,074

 
46,164

Preferred dividends
(11,223
)
 
(11,223
)
Net income attributable to common shareholders
$
28,851

 
$
34,941

 
 
 
 
Basic per share data attributable to common shareholders:
 
 
 
Net income attributable to common shareholders
$
0.17

 
$
0.21

Weighted-average common shares outstanding
170,669

 
170,420

 
 
 
 
Diluted per share data attributable to common shareholders:
 
 
 
Net income attributable to common shareholders
$
0.17

 
$
0.20

Weighted-average common and potential dilutive common shares outstanding
170,669

 
170,510

 
 
 
 
Dividends declared per common share
$
0.265

 
$
0.265


The accompanying notes are an integral part of these condensed consolidated statements.

2


CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)

 
Three Months Ended
March 31,
 
2016
 
2015
Net income
$
41,892

 
$
53,205

 
 
 
 
Other comprehensive income (loss):
 
 
 
Unrealized holding gain on available-for-sale securities

 
242

Reclassification to net income of realized gain on available-for-sale securities

 
(16,560
)
   Unrealized gain on hedging instruments
877

 
883

   Reclassification of hedging effect on earnings
(443
)
 
(523
)
Total other comprehensive income (loss)
434

 
(15,958
)
 
 
 
 
Comprehensive income
42,326

 
37,247

Comprehensive (income) loss attributable to noncontrolling interests in:
 
 
 
  Operating Partnership
(5,008
)
 
(3,018
)
  Other consolidated subsidiaries
3,127

 
(869
)
Comprehensive income attributable to the Company
$
40,445

 
$
33,360


The accompanying notes are an integral part of these condensed consolidated statements.


3


CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Equity
(In thousands, except share data)
 (Unaudited)
 
 
 
Equity
 
 
 
Shareholders' Equity
 
 
 
 
 
Redeemable
Noncontrolling
Interests
 
Preferred
 Stock
 
Common
 Stock
 
Additional
 Paid-in
 Capital
 
Accumulated
 Other
 Comprehensive
 Income
 
Dividends in
Excess of
Cumulative
Earnings
 
Total
Shareholders'
Equity
 
Noncontrolling
Interests
 
Total
 Equity
Balance, January 1, 2015
$
37,559

 
$
25

 
$
1,703

 
$
1,958,198

 
$
13,411

 
$
(566,785
)
 
$
1,406,552

 
$
143,376

 
$
1,549,928

Net income
1,111

 

 

 

 

 
46,164

 
46,164

 
5,930

 
52,094

Other comprehensive loss
(382
)
 

 

 

 
(12,804
)
 

 
(12,804
)
 
(2,772
)
 
(15,576
)
Performance stock units

 

 

 
156

 

 

 
156

 

 
156

Redemption of redeemable noncontrolling
preferred joint venture interest

 

 

 

 

 

 

 
(286
)
 
(286
)
Dividends declared - common stock

 

 

 

 

 
(45,180
)
 
(45,180
)
 

 
(45,180
)
Dividends declared - preferred stock

 

 

 

 

 
(11,223
)
 
(11,223
)
 

 
(11,223
)
Issuances of 269,929 shares of common stock
and restricted common stock

 

 
2

 
539

 

 

 
541

 

 
541

Cancellation of 37,217 shares of restricted
common stock

 

 

 
(725
)
 

 

 
(725
)
 

 
(725
)
Amortization of deferred compensation

 

 

 
1,847

 

 

 
1,847

 

 
1,847

Contributions from noncontrolling interests

 

 

 

 

 

 

 
(37
)
 
(37
)
Distributions to noncontrolling interests
(1,640
)
 

 

 

 

 

 

 
(9,276
)
 
(9,276
)
Adjustment for noncontrolling interests
674

 

 

 
(1,398
)
 

 

 
(1,398
)
 
724

 
(674
)
Adjustment to record redeemable
     noncontrolling interests at redemption value
146

 

 

 
(47
)
 

 

 
(47
)
 
(100
)
 
(147
)
Balance, March 31, 2015
$
37,468

 
$
25

 
$
1,705

 
$
1,958,570

 
$
607

 
$
(577,024
)
 
$
1,383,883

 
$
137,559

 
$
1,521,442





4


CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Equity
(In thousands, except share data)
(Unaudited)
(Continued)
 
 
 
Equity
 
 
 
Shareholders' Equity
 
 
 
 
 
Redeemable
Noncontrolling
Interests
 
Preferred
 Stock
 
Common
 Stock
 
Additional
 Paid-in
 Capital
 
Accumulated
Other
Comprehensive
Income
 
Dividends in
Excess of
Cumulative
Earnings
 
Total
Shareholders'
Equity
 
Noncontrolling
 Interests
 
Total
 Equity
Balance, January 1, 2016
$
25,330

 
$
25

 
$
1,705

 
$
1,970,333

 
$
1,935

 
$
(689,028
)
 
$
1,284,970

 
$
114,629

 
$
1,399,599

Net income (loss)
(3,225
)
 

 

 

 

 
40,074

 
40,074

 
5,043

 
45,117

Other comprehensive income
3

 

 

 

 
371

 

 
371

 
60

 
431

Performance stock units

 

 

 
258

 

 

 
258

 

 
258

Dividends declared - common stock

 

 

 

 

 
(45,261
)
 
(45,261
)
 

 
(45,261
)
Dividends declared - preferred stock

 

 

 

 

 
(11,223
)
 
(11,223
)
 

 
(11,223
)
Issuances of 323,353 shares of common stock
and restricted common stock

 

 
3

 
339

 

 

 
342

 

 
342

Cancellation of 23,066 shares of restricted
common stock

 

 

 
(214
)
 

 

 
(214
)
 

 
(214
)
Amortization of deferred compensation

 

 

 
1,254

 

 

 
1,254

 

 
1,254

Distributions to noncontrolling interests
(2,134
)
 

 

 

 

 

 

 
(9,528
)
 
(9,528
)
Adjustment for noncontrolling interests
288

 

 

 
(1,490
)
 
(2,306
)
 

 
(3,796
)
 
3,509

 
(287
)
Adjustment to record redeemable
     noncontrolling interests at redemption value
592

 

 

 
(592
)
 

 

 
(592
)
 

 
(592
)
Balance, March 31, 2016
$
20,854

 
$
25

 
$
1,708

 
$
1,969,888

 
$

 
$
(705,438
)
 
$
1,266,183

 
$
113,713

 
$
1,379,896


The accompanying notes are an integral part of these condensed consolidated statements.


5



CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

 
Three Months Ended
March 31,
 
2016
 
2015
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 
Net income
$
41,892

 
$
53,205

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 

Depreciation and amortization
76,506

 
76,266

Net amortization of deferred finance costs and debt premiums
717

 
1,577

Net amortization of intangible lease assets and liabilities
(622
)
 
(175
)
Gain on sales of real estate assets

 
(757
)
Gain on investment

 
(16,560
)
Write-off of development projects
1

 
125

Share-based compensation expense
1,802

 
2,488

Loss on impairment
19,685

 

Equity in earnings of unconsolidated affiliates
(32,390
)
 
(3,823
)
Distributions of earnings from unconsolidated affiliates
4,113

 
4,538

Provision for doubtful accounts
2,104

 
1,372

Change in deferred tax accounts
99

 
507

Changes in:
 

 
 

Tenant and other receivables
(4,458
)
 
51

Other assets
(5,115
)
 
(8,692
)
Accounts payable and accrued liabilities
(18,557
)
 
(4,388
)
Net cash provided by operating activities
85,777

 
105,734

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Additions to real estate assets
(34,304
)
 
(43,324
)
(Additions) reductions to restricted cash
(3,133
)
 
4,955

Proceeds from sales of real estate assets
33,425

 
11,261

Additions to mortgage and other notes receivable
(2,484
)
 

Payments received on mortgage and other notes receivable
231

 
202

Net proceeds from sales of available-for-sale securities

 
20,755

Additional investments in and advances to unconsolidated affiliates
(4,363
)
 
(3,629
)
Distributions in excess of equity in earnings of unconsolidated affiliates
9,023

 
5,156

Changes in other assets
(528
)
 
(3,336
)
Net cash used in investing activities
(2,133
)
 
(7,960
)

6


CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
(Continued)

 
Three Months Ended
March 31,
 
2016
 
2015
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from mortgage and other indebtedness
$
90,702

 
$
82,133

Principal payments on mortgage and other indebtedness
(118,102
)
 
(112,215
)
Additions to deferred financing costs
(79
)
 
(120
)
Proceeds from issuances of common stock
40

 
52

Purchase of noncontrolling interest in the Operating Partnership

 
(286
)
Contributions from noncontrolling interests

 
(31
)
Distributions to noncontrolling interests
(11,662
)
 
(10,925
)
Dividends paid to holders of preferred stock
(11,223
)
 
(11,223
)
Dividends paid to common shareholders
(45,181
)
 
(45,119
)
Net cash used in financing activities
(95,505
)
 
(97,734
)
 
 
 
 
NET CHANGE IN CASH AND CASH EQUIVALENTS
(11,861
)
 
40

CASH AND CASH EQUIVALENTS, beginning of period
36,892

 
37,938

CASH AND CASH EQUIVALENTS, end of period
$
25,031

 
$
37,978

 
 
 
 
SUPPLEMENTAL INFORMATION:
 

 
 

Cash paid for interest, net of amounts capitalized
$
45,115

 
$
47,874


 
The accompanying notes are an integral part of these condensed consolidated statements.


7


CBL & Associates Limited Partnership
Condensed Consolidated Balance Sheets
(In thousands, except unit data)
(Unaudited)
ASSETS (1)
March 31,
2016
 
December 31,
2015
Real estate assets:
 
 
 
Land
$
866,890

 
$
876,668

Buildings and improvements
7,159,509

 
7,287,862

 
8,026,399

 
8,164,530

Accumulated depreciation
(2,383,153
)
 
(2,382,568
)
 
5,643,246

 
5,781,962

Held for sale
18,721

 

Developments in progress
87,576

 
75,991

Net investment in real estate assets
5,749,543

 
5,857,953

Cash and cash equivalents
25,026

 
36,887

Receivables:
 

 
 

Tenant, net of allowance for doubtful accounts of $2,034
and $1,923 in 2016 and 2015, respectively
93,756

 
87,286

Other, net of allowance for doubtful accounts of $1,275
and $1,276 in 2016 and 2015, respectively
13,794

 
17,958

Mortgage and other notes receivable
20,491

 
18,238

Investments in unconsolidated affiliates
294,596

 
276,946

Intangible lease assets and other assets
187,083

 
185,162

 
$
6,384,289

 
$
6,480,430

 
 
 
 
LIABILITIES, REDEEMABLE INTERESTS AND CAPITAL
 

 
 

Mortgage and other indebtedness, net
$
4,683,487

 
$
4,710,628

Accounts payable and accrued liabilities
299,416

 
344,434

Total liabilities (1)
4,982,903

 
5,055,062

Commitments and contingencies (Note 12)


 


Redeemable interests:  
 

 
 

Redeemable noncontrolling interests  
1,698

 
5,586

Redeemable common units  
19,156

 
19,744

Total redeemable interests
20,854

 
25,330

Partners' capital:
 

 
 

Preferred units
565,212

 
565,212

Common units:
 
 
 
 General partner
8,224

 
8,435

 Limited partners
803,219

 
822,383

Accumulated other comprehensive income (loss)

 
(868
)
Total partners' capital
1,376,655

 
1,395,162

Noncontrolling interests
3,877

 
4,876

Total capital
1,380,532

 
1,400,038

 
$
6,384,289

 
$
6,480,430


(1)
As of March 31, 2016, includes $517,532 of assets related to consolidated variable interest entities that can only be used to settle obligations of the consolidated variable interest entities and $435,213 of liabilities of consolidated variable interest entities for which creditors do not have recourse to the general credit of the Company. See Note 5.

The accompanying notes are an integral part of these condensed consolidated statements.


8


CBL & Associates Limited Partnership
Condensed Consolidated Statements of Operations
(In thousands, except per unit data)
(Unaudited)

 
Three Months Ended
March 31,
 
2016
 
2015
REVENUES:
 
 
 
Minimum rents
$
170,629

 
$
169,081

Percentage rents
4,673

 
4,137

Other rents
5,062

 
5,171

Tenant reimbursements
73,366

 
72,133

Management, development and leasing fees
2,581

 
2,778

Other
6,767

 
7,609

Total revenues
263,078

 
260,909

 
 
 
 
OPERATING EXPENSES:
 
 
 
Property operating
38,628

 
38,904

Depreciation and amortization
76,506

 
76,266

Real estate taxes
23,028

 
22,785

Maintenance and repairs
14,548

 
14,216

General and administrative
17,168

 
17,230

Loss on impairment
19,685

 

Other
9,685

 
6,476

Total operating expenses
199,248

 
175,877

Income from operations
63,830

 
85,032

Interest and other income
360

 
5,274

Interest expense
(55,231
)
 
(59,157
)
Gain on extinguishment of debt
6

 

Gain on investment

 
16,560

Equity in earnings of unconsolidated affiliates
32,390

 
3,823

Income tax benefit
537

 
916

Income from continuing operations before gain on sales of real estate assets
41,892

 
52,448

Gain on sales of real estate assets

 
757

Net income
41,892


53,205

Net (income) loss attributable to noncontrolling interests
3,127

 
(869
)
Net income attributable to the Operating Partnership
45,019

 
52,336

Distributions to preferred unitholders
(11,223
)
 
(11,223
)
Net income attributable to common unitholders
$
33,796

 
$
41,113

 
 
 
 
Basic per unit data attributable to common unitholders:
 
 
 
Net income attributable to common unitholders
$
0.17

 
$
0.21

Weighted-average common units outstanding
199,926

 
199,681

 
 
 
 
Diluted per unit data attributable to common unitholders:
 
 
 
Net income attributable to common unitholders
$
0.17

 
$
0.21

Weighted-average common and potential dilutive common units outstanding
199,926

 
199,771

 
 
 
 
Distributions declared per common unit
$
0.273

 
$
0.273



The accompanying notes are an integral part of these condensed consolidated statements.


9


CBL & Associates Limited Partnership
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)

 
Three Months Ended
March 31,
 
2016
 
2015
Net income
$
41,892

 
$
53,205

 
 
 
 
Other comprehensive income (loss):
 
 
 
Unrealized holding gain on available-for-sale securities

 
242

Reclassification to net income of realized gain on available-for-sale securities

 
(16,560
)
   Unrealized gain on hedging instruments
877

 
883

Reclassification of hedging effect on earnings
(443
)
 
(523
)
Total other comprehensive income (loss)
434

 
(15,958
)
 
 
 
 
Comprehensive income
42,326

 
37,247

Comprehensive (income) loss attributable to noncontrolling interests
3,127

 
(869
)
Comprehensive income of the Operating Partnership
$
45,453

 
$
36,378


The accompanying notes are an integral part of these condensed consolidated statements.


10


CBL & Associates Limited Partnership
Condensed Consolidated Statements of Capital
(In thousands)
 (Unaudited)
 
Redeemable Interests
 
Number of
 
 
 
Common Units
 
 
 
 
 
 
 
 
 
Redeemable Noncontrolling Interests
 
Redeemable
Common
Units
 
Total
Redeemable
Interests
 
Preferred
Units
 
Common
Units
 
Preferred
Units
 
General
Partner
 
Limited
Partners
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total Partners' Capital
 
Noncontrolling
Interests
 
Total Capital
Balance, January 1, 2015
$
6,455

 
$
31,104

 
$
37,559

 
25,050

 
199,532

 
$
565,212

 
$
9,789

 
$
953,349

 
$
13,183

 
$
1,541,533

 
$
8,908

 
$
1,550,441

Net income (loss)
782

 
329

 
1,111

 

 

 
11,223

 
419

 
40,365

 

 
52,007

 
87

 
52,094

Other comprehensive loss

 
(382
)
 
(382
)
 

 

 

 

 

 
(15,576
)
 
(15,576
)
 

 
(15,576
)
Performance stock units

 

 

 

 

 

 
2

 
154

 

 
156

 

 
156

Distributions declared - common units

 
(1,126
)
 
(1,126
)
 

 

 

 
(533
)
 
(52,808
)
 

 
(53,341
)
 

 
(53,341
)
Distributions declared - preferred units

 

 

 

 

 
(11,223
)
 

 

 

 
(11,223
)
 

 
(11,223
)
Issuances of common units

 

 

 

 
270

 

 

 
541

 

 
541

 

 
541

Redemption of common units

 

 

 

 
(15
)
 

 

 
(285
)
 

 
(285
)
 

 
(285
)
Cancellation of restricted common stock

 

 

 

 
(37
)
 

 

 
(725
)
 

 
(725
)
 

 
(725
)
Amortization of deferred compensation

 

 

 

 

 

 
19

 
1,828

 

 
1,847

 

 
1,847

Contributions from noncontrolling interests

 

 

 

 

 

 

 

 

 

 
(37
)
 
(37
)
Distributions to noncontrolling interests
(514
)
 

 
(514
)
 

 

 

 

 

 

 

 
(1,115
)
 
(1,115
)
Allocation of partners' capital

 
674

 
674

 

 

 

 
(37
)
 
(727
)
 

 
(764
)
 

 
(764
)
Adjustment to record redeemable
     interests at redemption value
(566
)
 
712

 
146

 

 

 

 
(2
)
 
(144
)
 

 
(146
)
 

 
(146
)
Balance, March 31, 2015
$
6,157

 
$
31,311

 
$
37,468

 
25,050

 
199,750

 
$
565,212

 
$
9,657

 
$
941,548

 
$
(2,393
)
 
$
1,514,024

 
$
7,843

 
$
1,521,867





11


CBL & Associates Limited Partnership
Condensed Consolidated Statements of Capital
(In thousands)
(Unaudited)
(Continued)
 
Redeemable Interests
 
Number of
 
 
 
Common Units
 
 
 
 
 
 
 
 
 
Redeemable Noncontrolling Interests
 
Redeemable
Common
Units
 
Total
Redeemable
Interests
 
Preferred
Units
 
Common
Units
 
Preferred
Units
 
General
Partner
 
Limited
Partners
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Partners'
Capital
 
Noncontrolling
Interests
 
Total Capital
Balance, January 1, 2016
$
5,586

 
$
19,744

 
$
25,330

 
25,050

 
199,748

 
$
565,212

 
$
8,435

 
$
822,383

 
$
(868
)
 
$
1,395,162

 
$
4,876

 
$
1,400,038

Net income
(3,489
)
 
264

 
(3,225
)
 

 

 
11,223

 
344

 
33,188

 

 
44,755

 
362

 
45,117

Other comprehensive income (loss)

 
3

 
3

 

 

 

 

 


 
431

 
431

 

 
431

Performance stock units

 

 

 

 

 

 
3

 
255

 

 
258

 

 
258

Distributions declared - common units

 
(1,143
)
 
(1,143
)
 

 

 

 
(533
)
 
(52,895
)
 

 
(53,428
)
 

 
(53,428
)
Distributions declared - preferred units

 

 

 

 

 
(11,223
)
 

 


 

 
(11,223
)
 

 
(11,223
)
Issuances of common units

 

 

 

 
323

 

 

 
342

 

 
342

 

 
342

Cancellation of restricted common stock

 

 

 

 
(23
)
 

 

 
(214
)
 

 
(214
)
 

 
(214
)
Amortization of deferred compensation

 

 

 

 

 

 
12

 
1,242

 

 
1,254

 

 
1,254

Distributions to noncontrolling interests
(991
)
 

 
(991
)
 

 

 

 

 


 

 

 
(1,361
)
 
(1,361
)
Allocation of partners' capital

 
288

 
288

 

 

 

 
(31
)
 
(496
)
 
437

 
(90
)
 

 
(90
)
Adjustment to record redeemable
     interests at redemption value
592

 

 
592

 

 

 

 
(6
)
 
(586
)
 

 
(592
)
 

 
(592
)
Balance, March 31, 2016
$
1,698

 
$
19,156

 
$
20,854

 
25,050

 
200,048

 
$
565,212

 
$
8,224

 
$
803,219

 
$

 
$
1,376,655

 
$
3,877

 
$
1,380,532


The accompanying notes are an integral part of these condensed consolidated statements.


12



CBL & Associates Limited Partnership
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

 
Three Months Ended
March 31,
 
2016
 
2015
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 
Net income
$
41,892

 
$
53,205

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 

Depreciation and amortization
76,506

 
76,266

Net amortization of deferred finance costs and debt premiums
717

 
1,577

Net amortization of intangible lease assets and liabilities
(622
)
 
(175
)
Gain on sales of real estate assets

 
(757
)
Gain on investment

 
(16,560
)
Write-off of development projects
1

 
125

Share-based compensation expense
1,802

 
2,488

Loss on impairment
19,685

 

Equity in earnings of unconsolidated affiliates
(32,390
)
 
(3,823
)
Distributions of earnings from unconsolidated affiliates
4,113

 
4,538

Provision for doubtful accounts
2,104

 
1,372

Change in deferred tax accounts
99

 
507

Changes in:
 

 
 

Tenant and other receivables
(4,410
)
 
51

Other assets
(5,115
)
 
(8,692
)
Accounts payable and accrued liabilities
(18,605
)
 
(4,392
)
Net cash provided by operating activities
85,777

 
105,730

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Additions to real estate assets
(34,304
)
 
(43,324
)
(Additions) reductions to restricted cash
(3,133
)
 
4,955

Proceeds from sales of real estate assets
33,425

 
11,261

Additions to mortgage and other notes receivable
(2,484
)
 

Payments received on mortgage and other notes receivable
231

 
202

Net proceeds from sales of available-for-sale securities

 
20,755

Additional investments in and advances to unconsolidated affiliates
(4,363
)
 
(3,629
)
Distributions in excess of equity in earnings of unconsolidated affiliates
9,023

 
5,156

Changes in other assets
(528
)
 
(3,336
)
Net cash used in investing activities
(2,133
)
 
(7,960
)

13


CBL & Associates Limited Partnership
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
(Continued)

 
Three Months Ended
March 31,
 
2016
 
2015
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from mortgage and other indebtedness
$
90,702

 
$
82,133

Principal payments on mortgage and other indebtedness
(118,102
)
 
(112,215
)
Additions to deferred financing costs
(79
)
 
(120
)
Proceeds from issuances of common units
40

 
52

Redemption of common units

 
(286
)
Contributions from noncontrolling interests

 
(31
)
Distributions to noncontrolling interests
(2,352
)
 
(10,925
)
Distributions to preferred unitholders
(11,223
)
 
(11,223
)
Distributions to common unitholders
(54,491
)
 
(45,119
)
Net cash used in financing activities
(95,505
)
 
(97,734
)
 
 
 
 
NET CHANGE IN CASH AND CASH EQUIVALENTS
(11,861
)
 
36

CASH AND CASH EQUIVALENTS, beginning of period
36,887

 
37,926

CASH AND CASH EQUIVALENTS, end of period
$
25,026

 
$
37,962

 
 
 
 
SUPPLEMENTAL INFORMATION:
 

 
 

Cash paid for interest, net of amounts capitalized
$
45,115

 
$
47,874


 
The accompanying notes are an integral part of these condensed consolidated statements.


14


CBL & Associates Properties, Inc.
CBL & Associates Limited Partnership
Notes to Unaudited Condensed Consolidated Financial Statements
(Dollars in thousands, except per share and per unit data)

Note 1 – Organization and Basis of Presentation
CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties.  Its properties are located in 27 states, but are primarily in the southeastern and midwestern United States.
CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). In accordance with the guidance in ASC 810, Consolidations, the Company is exempt from providing further disclosures related to the Operating Partnership's VIE classification. The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE.  As of March 31, 2016, the Operating Partnership owned interests in the following properties:
 
Malls (1)
 
Associated
Centers
 
Community
Centers
 
Office
Buildings (2)
 
Total
Consolidated properties
71

 
21

 
6

 
8

 
106

Unconsolidated properties (3)
10

 
4

 
5

 
5

 
24

Total
81

 
25

 
11

 
13

 
130

(1)
Category consists of regional malls, open-air centers and outlet centers (including one mixed-use center).
(2)
Includes CBL's corporate office buildings.
(3)
The Operating Partnership accounts for these investments using the equity method because one or more of the other partners have substantive participating rights.

At March 31, 2016, the Operating Partnership had interests in the following properties under development:
 
Consolidated
Properties
 
Unconsolidated
Properties
 
Malls
 
Community
Centers
 
Malls
 
Community
Centers
Development

 

 

 
1

Expansions

 
1

 
1

 
2

Redevelopments
2

 

 
2

 

The Operating Partnership also holds options to acquire certain development properties owned by third parties.
CBL is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. At March 31, 2016, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.0% general partner interest in the Operating Partnership and CBL Holdings II, Inc. owned an 84.4% limited partner interest for a combined interest held by CBL of 85.4%.
As used herein, the term "Company" includes CBL & Associates Properties, Inc. and its subsidiaries, including CBL & Associates Limited Partnership and its subsidiaries, unless the context indicates otherwise. The term "Operating Partnership" refers to CBL & Associates Limited Partnership and its subsidiaries.
The noncontrolling interest in the Operating Partnership is held by CBL & Associates, Inc., its shareholders and affiliates and certain senior officers of the Company (collectively "CBL's Predecessor"), all of which contributed their interests in certain real estate properties and joint ventures to the Operating Partnership in exchange for a limited partner interest when the Operating Partnership was formed in November 1993, and by various third parties. At March 31, 2016, CBL’s Predecessor owned a 9.1% limited partner interest and third parties owned a 5.5% limited partner interest in the Operating Partnership.  CBL's Predecessor also owned 3.7 million shares of CBL’s common stock at March 31, 2016, for a total combined effective interest of 10.9% in the Operating Partnership.
The Operating Partnership conducts the Company’s property management and development activities through its wholly-owned subsidiary, CBL & Associates Management, Inc. (the “Management Company”), to comply with certain requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

15


The accompanying condensed consolidated financial statements are unaudited; however, they have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. All intercompany transactions have been eliminated. The results for the interim period ended March 31, 2016 are not necessarily indicative of the results to be obtained for the full fiscal year.
These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2015.
Note 2 – Recent Accounting Pronouncements
Accounting Guidance Adopted
In February 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2015-02, Amendments to the Consolidation Analysis ("ASU 2015-02"). The guidance modified the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities, eliminated the presumption that a general partner should consolidate a limited partnership and affected the evaluation of fee arrangements and related party relationships in the primary beneficiary determination. For public companies, ASU 2015-02 was effective for annual periods beginning after December 15, 2015 and interim periods within those years using either a retrospective or a modified retrospective approach. The adoption of ASU 2015-02 resulted in the identification of several VIEs as discussed in Note 5 but did not alter any of the Company's consolidation conclusions. The adoption of the guidance did not have an impact on the Company's consolidated financial statements other than the additional disclosures that were noted.     
Accounting Guidance Not Yet Effective
In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"). ASU 2016-09 identifies areas for simplification of accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. For public companies, ASU 2016-09 is effective for fiscal years beginning after December 15, 2016 including interim periods within that reporting period and may be applied on a modified retrospective basis as a cumulative-effect adjustment to retained earnings as of the date of adoption. Early adoption is permitted. The Company expects to adopt ASU 2016-09 as of January 1, 2017 and is currently assessing the potential impact of adopting the new guidance.
In February 2016, the FASB issued ASU 2016-02, Leases ("ASU 2016-02"). The objective of ASU 2016-02 is to increase transparency and comparability by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. Under ASU 2016-02, lessees will be required to recognize a right-of-use asset and corresponding lease liability on the balance sheet for all leases with terms greater than 12 months. The guidance applied by a lessor under ASU 2016-02 is substantially similar to existing GAAP. For public companies, ASU 2016-02 is effective for annual periods beginning after December 15, 2018 and interim periods within those years. Early adoption is permitted. Lessees and lessors are required to use a modified retrospective transition method for all leases existing at, or entered into after, the date of initial application. Accordingly, they would apply the new accounting model for the earliest year presented in the financial statements. A number of practical expedients may also be elected. The Company expects to adopt ASU 2016-02 as of January 1, 2019 and is evaluating the impact that this update may have on its consolidated financial statements and related disclosures.    
In May 2014, the FASB and the International Accounting Standards Board jointly issued ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). The objective of this converged standard is to enable financial statement users to better understand and analyze revenue by replacing current transaction and industry-specific guidance with a more principles-based approach to revenue recognition. The core principle of