CBL & Associates Properties CEO Discusses Q3 2010 Results – Earnings Call Transcript
CBL & Associates Properties, Inc. (
)
Q3 2010 Earnings Conference Call
November 3, 2010 11:00 AM ET
Executives
Stephen Lebovitz – President and CEO
Katie Reinsmidt – VP, Corporate Communications and IR
John Foy – Vice-Chairman, CFO, Treasurer and Secretary
Analysts
Jay Habermann – Goldman Sachs
Todd Thomas – Keybanc Capital Markets
Christie McElroy – UBS
Nathan Isby – Stifel Nicolaus
Jim Sullivan – Cowan Group
Michael Mueller – JP Morgan
Jeffrey Donnelley – Wells Fargo
Craig Schmidt – Bank of America/Merrill Lynch
Quinton Villeley [ph] – Citi
Manny Courtman [ph] – Citi
Sergie Lachance [ph] – Greenstreet Advisors
Rich Moore – RBC Capital Markets
Ross [ph] – UBS
RJ Milligan – Raymond James & Associates
Presentation
Operator
Compare to:
Previous Statements by CBL
»
CBL & Associates Properties, Inc. Q2 2010 Earnings Call Transcript
»
CBL & Associates Properties Inc. Q1 2010 Earnings Call Transcript
»
CBL & Associates Properties Inc. Q4 2009 Earnings Call Transcript
»
CBL & Associates Properties, Inc. Q3 2009 Earnings Call Transcript
Ladies and gentlemen, thank you very much for standing by, and welcome to CBL & Associates Properties Incorporated third quarter earnings conference call. During this presentation, all participants are in a listen only mode. Afterwards we will conduct a question and answer session. (Operator Instructions) As a reminder, today’s conference is being recorded on Wednesday, November 3, 2010. It’s now my pleasure to turn the conference over to Stephen Lebovitz, President and Chief Executive Officer at CBL & Associates Properties Incorporated. Please go ahead sir.
Stephen Lebovitz
Thank you and good morning. We appreciate your participation in the CBL & Associates Properties Inc. conference call to discuss the third quarter results. Joining me today is John Foy, CBL’s Chief Financial Officer and Katie Reinsmidt, Vice President Corporate Communications and Investor Relations, who will begin by reading our safe harbor disclosure.
Katie
Reins
midt
This conference call contains forward-looking statements within the meaning of the Federal Securities laws. Such statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which might not even be anticipated. Future events and actual 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 various filings with the Securities and Exchange Commission including without limitation, the company’s annual report on Form 10-K and management’s discussion and analysis of financial condition and results of operations included therein for a discussion of such risks and uncertainties.
During our discussion today, reference is made to per share. Amounts are based on a fully diluted converted share basis. A transcript of today’s comments, the earnings release and additional supplemental schedules will be furnished to the SEC on form 8-K and will be available on our website. This call will also be made available for reply on the internet through a link on our website at CBLproperties.com. This conference call is the property of CBL & Associated Properties Inc. Any redistribution, retransmission or rebroadcast of this call without the express written consent of CBL is strictly prohibited.
During this conference call, the company may discuss non-GAAP financial measures as defined by SEC Regulation G. A description of each non-GAAP measure and a reconciliation of each non-GAAP measure to the comparable GAAP financial measure will be included in the earnings release that is furnished on From 8-K.
Stephen
Lebovitz
Thank you Katie. As we have discussed in our last few calls, a key focus of ours throughout this year has been to stabilized and grow the NOI at our existing centers. We are pleased that our results for this quarter show significant progress in this area.
Same center NOI for the portfolio returned to positive territory, posting an increase of 60 basis points. We have worked hard to accomplish this by generating new revenues at our centers from various sources, while at the same time, continuing to focus on reducing expenses.
John will discuss details surrounding our guidance a little later, but we have been encouraged by the out performance of portfolio versus our original projections. Our improved results have been primarily driven by substantial gains in occupancy, both in the mall portfolio and overall, increases in specialty retail and branding income, as well as sustained low property operating expenses.
We are also benefiting from the positive mindset and pickup in expansion plans by a number of retailers including several new concepts opening in our centers. Examples include Footlockers two new concepts, CCS and House of Hoops, Jamboree’s Crazy Eight division, Best Buy Mobile, Cotton On, and PS by Aeropostale.
Another highlight of the quarter was opening of our first American Girl store in Oak Park Mall in Kansas City. Junior Anchor retailers are also expanding into mall locations, both for their full size stores and for their new smaller concepts. We are working closely with Dick Sporting Goods, Bed, Bath Beyond, and JoAnne Fabrics, Alta, Shoe Department of Encore Shoes and others.
For the year to date, we have opened 18 new big box stores, totaling roughly 500,000 square feet. The recovery in retail is encouraging, and has resulted in significant increases in occupancy throughout the year. During the third quarter portfolio occupancy increased 180 basis points to 91% compared with the prior year period. In the malls, we recorded a 140 basis point increase to a 91.3% occupancy rate.
Third quarter continued the favorable sales trends that we have seen earlier in the year for our portfolio. Back to school season was healthy and shoppers have been coming out for our many promotions and events including those held in conjunction with the tax holidays in several states.
Year to date we have posted a 2.7% increase in sales per square foot over the prior year period. We are anticipating a solid holiday sales season with increases predicted in the 2% to 4% range, even though retailers are still watching inventory levels closely and are highly promotional.
We are also pleased with the significant improvement this quarter in our lease spreads. On a same space basis, rental rates in the third quarter were signed at an average decrease of 4.8% from the prior gross rent per square foot. We are working hard to get lease spreads into positive territory.
In general, retailers have shown a greater willingness to commit to longer lease terms and lock in more favorable rental rates. For leases longer than three years, the average lease spread increase was nearly 10%. This quarter about 51% of the leases signed had terms longer than three years, which is an improvement compared with 2009.
In total, during the third quarter, we signed over one million square feet of leases, the majority of which are in our operating portfolio. This included 317,000 square feet of new leases and 706,000 square feet of renewals.
We have recently taken advantage of a number of attractive external growth opportunities, including acquiring our partner’s interest in Parkway Place Mall in Huntsville, Alabama. We purchased Colonial’s 50% interest in the property for $38.8 million of which roughly $18 million was in cash. The purchase price represented an attractive high single digit cap rate.
Huntsville is one of the few cities in the country to have already demonstrated significant job growth and economic improvement, in part due to the BRAC program creating direct and ancillary employment. Parkway Place is well positioned to begin enjoying the benefits from this growth. This year the center has generated sales increases just under 10% and is maintaining a high occupancy rate. We expect these trends will continue.
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