CBL & Associates Properties Reports Second Quarter Results

CBL & Associates Properties, Inc. (NYSE:CBL):

• Total FFO increased 2.0% in the quarter ended June 30, 2009, from the prior-year period.
• Same-Center NOI increased 1.3% for the quarter ended June 30, 2009, from the prior-year period, excluding lease-termination fees.
• Stabilized mall occupancy was 89.1% as of June 30, 2009, unchanged from the sequential quarter.
• CBL raised approximately $382.0 million in follow-on equity offering.
• CBL maintains post-offering 2009 FFO guidance range of $2.28 - $2.39 per share.

CBL & Associates Properties, Inc. (NYSE:CBL) announced results for the second quarter ended June 30, 2009. A description of each non-GAAP financial measure and the related reconciliation to the comparable GAAP measure is located at the end of this news release. All share and per share information for the periods presented have been adjusted to reflect the issuance of common stock and common units, as applicable, in connection with the Company’s dividend payment on April 15, 2009. For the second quarter 2009, the per share results include a weighted average adjustment for the 66.63 million shares issued in the June 2009 equity offering discussed in more detail in the section titled - Capital Market Activity.

Funds from Operations ("FFO”) allocable to common shareholders for the quarter ended June 30, 2009, was $59,205,000, or $0.71 per diluted share, compared with $54,545,000, or $0.77 per diluted share for the quarter ended June 30, 2008. FFO allocable to common shareholders for the six months ended June 30, 2009, was $110,369,000, or $1.43 per diluted share, compared with $108,141,000, or $1.52 per diluted share for the six months ended June 30, 2008.

FFO of the operating partnership for the quarter ended June 30, 2009, was $96,299,000, compared with $94,434,000 for the quarter ended June 30, 2008, representing an increase of 2.0%. FFO of the operating partnership for the six months ended June 30, 2009, was $184,749,000, compared with $187,289,000 for the six months ended June 30, 2008. The decline in FFO of the operating partnership for the six months ended June 30, 2009, was primarily the result of a $7,706,000 non-cash impairment charge related to the Company’s investment in a mall real estate development company located in Nanjing, China.

Net income available to common shareholders for the quarter ended June 30, 2009, was $8,137,000, or $0.10 per diluted share, compared with net income of $9,665,000, or $0.14 per diluted share for the prior-year period. Net income available to common shareholders for the six months ended June 30, 2009, was $9,849,000, or $0.13 per diluted share, compared with $15,837,000, or $0.22 per diluted share, for the six months ended June 30, 2008. The decline in net income available to common shareholders for the six months ended June 30, 2009, was primarily the result of a $4,373,000 (adjusted for non-controlling interest) non-cash impairment charge related to the Company’s investment in a mall real estate development company located in Nanjing, China.

HIGHLIGHTS

• Total revenues declined 2.2% during the second quarter ended June 30, 2009, to $266,524,000 from $272,483,000 in the prior-year period. Total revenues declined 2.9% in the six months ended June 30, 2009 to $537,584,000, from $553,415,000 in the prior-year period.
• Same-center net operating income ("NOI”) for the portfolio, excluding lease termination fees, for the quarter ended June 30, 2009, increased 1.3% compared with a decline of 1.8% for the prior-year period. Same-center NOI, excluding lease termination fees, for the six months ended June 30, 2009, declined 0.4%, compared with a 0.4% decline in the prior-year period.
• Same-store sales for mall tenants of 10,000 square feet or less for stabilized malls as of June 30, 2009, declined 6.0% to $321 per square foot compared with $341 per square foot in the prior-year period.
• The debt-to-total-market capitalization ratio as of June 30, 2009, was 82.6% based on the common stock closing price of $5.39 and a fully converted common stock share count of 189,804,000 shares as of the same date. The debt-to-total-market capitalization ratio as of June 30, 2008, was 68.6% based on the common stock closing price of $22.84 and a fully converted common stock share count of 116,960,000 shares as of the same date.
• Consolidated and unconsolidated variable rate debt of $1,327,908,000 represents 17.6% of the total market capitalization for the Company and 21.2% of the Company’s share of total consolidated and unconsolidated debt.

CBL’s Chairman and Chief Executive Officer, Charles B. Lebovitz, said, "I am pleased to report on the significant progress we have made this quarter enhancing our balance sheet flexibility and strengthening our liquidity position. We have secured 99% of the underlying lending commitments to extend the $560 million unsecured and the $525 million secured credit facilities. In addition, we closed $91 million in permanent financings. Combined with the $382 million in capital raised through our June equity offering, these transactions allow us to address all of our 2009 debt maturities and have identified capital to address all of our CMBS maturities through 2011.

"The commitment of the CBL team and the resiliency of our properties were also evident in the quarter. In the face of a deteriorating retail environment, we posted an increase in NOI in the mall portfolio, signed over one million square feet of leases and maintained the sequential stabilized mall occupancy rate. While leasing rates continue to reflect the tough economic climate, we remain confident in our properties and our markets.”

CAPITAL MARKET ACTIVITY

During the second quarter, CBL sold a total of 66,630,000 of newly-issued common stock in an underwritten public offering for net proceeds of approximately $382.0 million, after deducting the underwriting discount and other estimated offering expenses. The Company used the net proceeds from the offering to repay outstanding borrowings under its credit facilities.

FINANCING

CBL has received commitments from lenders representing approximately 99% of the aggregate underlying facility amounts for the extension and modification of its $525 million secured line of credit and its $560 million unsecured line of credit. The commitments include lenders representing $512 million of its $525 million secured facility and 100% of its $560 million unsecured facility. The commitments reflect an extension of the $525 million secured facility from February 2010 to February 2012, with an option to extend the maturity for one additional year to February 2013 (subject to continued compliance with the terms of the facility). The commitments provide that the $560 million unsecured facility will be converted over an 18-month period into a secured facility, and that the maturity of the facility will be extended from August 2011 to April 2014. The Company anticipates closing on the extension and modification of the secured and unsecured lines of credit in the third quarter 2009. Full terms and conditions of the facility will be announced at that time.

The Company also announced that it had closed two 10-year, non-recourse loans including a $33.6 million loan secured by Honey Creek Mall in Terre Haute, IN and a $57.8 million loan secured by Volusia Mall in Daytona Beach, FL. The loans are with the existing institutional lender and have an interest rate of 8.0%. These loans replace an existing $30.1 million loan secured by Honey Creek Mall and a $51.2 million loan secured by Volusia Mall. CBL used the approximately $10.1 million of excess proceeds, plus cash on hand, to pay off the $30.2 million loan secured by Bonita Lakes Mall in Meridian, MS. These advancements successfully address all of the Company’s 2009 loan maturities, except for a $53.0 million non-recourse loan secured by Eastgate Mall in Cincinnati, OH which may be paid-off using amounts made available on the $560 million credit facility from the June equity offering.

DIVIDEND

During the quarter, CBL’s Board of Directors established its Common Stock dividend policy for the remainder of 2009. The Board determined to reduce the dividend for the remainder of 2009 to the minimum level required to distribute 100% of the Company’s estimated taxable income. Future dividends payable will be determined by the Company’s Board of Directors based upon circumstances at the time of declaration.

Pursuant to the 2009 Common Stock dividend policy the Board declared a quarterly cash dividend for the Company’s Common Stock of $0.11 per share for the quarter ending June 30, 2009. The dividend was paid on July 15, 2009, to shareholders of record as of June 30, 2009.

OUTLOOK AND GUIDANCE

Based on today’s outlook and the Company’s second quarter results, the Company is maintaining 2009 FFO guidance of $2.28 to $2.39 per share. The guidance incorporates the dilution from the June 2009 equity offering and assumes the closing of the secured and unsecured credit facilities in third quarter 2009. The full year guidance also assumes $6.0 million to $9.0 million of outparcel sales and same-center NOI growth in the range of (1.5%) to (3.5%), excluding the impact of lease termination fees from both applicable periods. The guidance excludes the impact of any future unannounced acquisitions or dispositions. The Company expects to update its annual guidance after each quarter’s results.

INVESTOR CONFERENCE CALL AND SIMULCAST

CBL & Associates Properties, Inc. will conduct a conference call at 11:00 a.m. ET on Wednesday, August 5, 2009, to discuss the second quarter results. The number to call for this interactive teleconference is (480) 629-9738. A seven-day replay of the conference call will be available by dialing (303) 590-3030 and entering the passcode 4065610. A transcript of the Company’s prepared remarks will be furnished on a Form 8-K following the conference call.

To receive the CBL & Associates Properties, Inc., second quarter earnings release and supplemental information please visit our website at cblproperties.com or contact Investor Relations at 423-490-8312.

The Company will also provide an online Web simulcast and rebroadcast of its 2009 second quarter earnings release conference call. The live broadcast of CBL’s quarterly conference call will be available online at the Company’s Web site at cblproperties.com, as well as http://www.talkpoint.com/viewer/starthere.asp?Pres=126803 on Wednesday, August 5, 2009, beginning at 11:00 a.m. ET. The online replay will follow shortly after the call and continue through August 13, 2009.

CBL is one of the largest and most active owners and developers of malls and shopping centers in the United States. CBL owns, holds interests in or manages 160 properties, including 88 regional malls/open-air centers. The properties are located in 27 states and total 86.4 million square feet including 2.2 million square feet of non-owned shopping centers managed for third parties. CBL currently has four projects under construction totaling 2.3 million square feet including Settlers Ridge in Pittsburgh, PA; The Pavilion at Port Orange in Port Orange, FL; The Promenade in D’Iberville (Biloxi/Gulfport), MS; and one community center. Headquartered in Chattanooga, TN, CBL has regional offices in Boston (Waltham), MA, Dallas, TX, and St. Louis, MO. Additional information can be found at cblproperties.com.

NON-GAAP FINANCIAL MEASURES

Funds From Operations

FFO is a widely used measure of the operating performance of real estate companies that supplements net income determined in accordance with GAAP. The National Association of Real Estate Investment Trusts ("NAREIT”) defines FFO as net income (computed in accordance with GAAP) excluding gains or losses on sales of operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests. Adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests are calculated on the same basis. The Company defines FFO allocable to its common shareholders as defined above by NAREIT less dividends on preferred stock. The Company’s method of calculating FFO allocable to its common shareholders may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

The Company believes that FFO provides an additional indicator of the operating performance of its properties without giving effect to real estate depreciation and amortization, which assumes the value of real estate assets declines predictably over time. Since values of well-maintained real estate assets have historically risen with market conditions, the Company believes that FFO enhances investors’ understanding of its operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of the Company’s properties and interest rates, but also by its capital structure.

The Company presents both FFO of its operating partnership and FFO allocable to its common shareholders, as it believes that both are useful performance measures. The Company believes FFO of its operating partnership is a useful performance measure since it conducts substantially all of its business through its operating partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of the Company’s common shareholders and the noncontrolling interest in the operating partnership. The Company believes FFO allocable to its common shareholders is a useful performance measure because it is the performance measure that is most directly comparable to net income available to its common shareholders.

In the reconciliation of net income available to the Company’s common shareholders to FFO allocable to its common shareholders, the Company makes an adjustment to add back noncontrolling interest in earnings of its operating partnership in order to arrive at FFO of its operating partnership. The Company then applies a percentage to FFO of its operating partnership to arrive at FFO allocable to its common shareholders. The percentage is computed by taking the weighted average number of common shares outstanding for the period and dividing it by the sum of the weighted average number of common shares and the weighted average number of operating partnership units outstanding during the period.

FFO does not represent cash flows from operations as defined by accounting principles generally accepted in the United States, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income for purposes of evaluating the Company’s operating performance or to cash flow as a measure of liquidity.

Same-Center Net Operating Income

NOI is a supplemental measure of the operating performance of the Company’s shopping centers. The Company defines NOI as operating revenues (rental revenues, tenant reimbursements and other income) less property operating expenses (property operating, real estate taxes and maintenance and repairs).

Similar to FFO, the Company computes NOI based on its pro rata share of both consolidated and unconsolidated properties. The Company’s definition of NOI may be different than that used by other companies and, accordingly, the Company’s NOI may not be comparable to that of other companies. A reconciliation of same-center NOI to net income is located at the end of this earnings release.

Since NOI includes only those revenues and expenses related to the operations of its shopping center properties, the Company believes that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates and operating costs and the impact of those trends on the Company’s results of operations. Additionally, there are instances when tenants terminate their leases prior to the scheduled expiration date and pay the Company one-time, lump-sum termination fees. These one-time lease termination fees may distort same-center NOI trends and may result in same-center NOI that is not indicative of the ongoing operations of the Company’s shopping center properties. Therefore, the Company believes that presenting same-center NOI, excluding lease termination fees, is useful to investors.

Pro Rata Share of Debt

The Company presents debt based on its pro rata ownership share (including the Company’s pro rata share of unconsolidated affiliates and excluding noncontrolling interests’ share of consolidated properties) because it believes this provides investors a clearer understanding of the Company’s total debt obligations which affect the Company’s liquidity. A reconciliation of the Company’s pro rata share of debt to the amount of debt on the Company’s consolidated balance sheet is located at the end of this earnings release.

Information included herein contains "forward-looking statements” within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual events, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements. The reader is directed to the Company’s various filings with the Securities and Exchange Commission, including without limitation the Company’s Annual Report on Form 10-K and the "Management’s Discussion and Analysis of Financial Condition and Results of Operations” incorporated by reference therein, for a discussion of such risks and uncertainties.