CBL & Associates Properties, Inc. Q2 2010 Earnings Call Transcript

CBL & Associates Properties, Inc. Q2 2010 Earnings Call Transcript
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CBL & Associates Properties, Inc. (CBL)

Q2 2010 Earnings Call Transcript

August 4, 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

Todd Thomas – KeyBanc Capital Markets

Jay Habermann – Goldman Sachs

Paul Morgan – Morgan Stanley

Jim Sullivan – Cowen and Company

Ben Yang – Keefe Bruyette & Woods

Carol Kemple – Hilliard Lyons

Quentin Velleley – Citi

Christy McElroy – UBS

Ross Nussbaum – UBS

Nathan Isbee – Stifel Nicolaus

Presentation

Operator

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Ladies and gentlemen, thank you for standing by and welcome to the CBL & Associates Properties, Inc second quarter earnings conference call. During the presentation all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. (Operator Instructions) As a remind they are conference is being recorded, today Wednesday, August 4, 2010.

I would now like to turn the conference over to Mr. Stephen Lebovitz, President and Chief Executive Officer. 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 second quarter results. Joining me today is John Foy, CBL's Chief Financial Officer and Katie Reinsmidt, Vice President, Corporate Communications and Investor Relation who will begin by reading our Safe Harbor disclosure.

Katie Reinsmidt

This conference call contains forward-looking statements within the meaning of the federal securities laws. Such statements are inherently subject to risk and uncertainties many of which cannot we 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, references made to per-share amounts are based upon 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 available for replay on the internet through a link on our website at CBLProperties.com. This conference call is the property of CBL & Associates Properties, Inc. Any redistribution, retransmission or rebroadcast of this call without the 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 financial measure to the comparable GAAP financial measure will be included in the earnings release that is furnished on Form 8-K.

Stephen Lebovitz

Thank you, Katie. Last night, we welcomed over 120 retailers to our 14th annual connection event in Chattanooga. We experienced a 25% increase in retailer attendance this year including quite a few new retail names such as cotton on, clarks, aerosols, route 21, complete nutrition and others. This event has been an extremely successful leasing tool over the years, proving us with a great opportunity to turn conversation started at ICSE's recon into signed deals.

We recognize that the leasing environment remains challenging and macro-economic trends have been inconsistent. However, we are encouraged by the continuation of positive sales growth, the limited retail bankruptcy activity and the retailers' ability to maintain their improved operating margins.

In part because of the strong relationships we enjoy with our retail partners we have been able to achieve market improvement in our occupancy rates. Our portfolio occupancy advanced 160 basis points and stabilized mall occupancy improved by 100 basis points compared with last year. Contributing to this growth was the released box locations taking occupancy in the associated center and community center portfolio, as well as specialty stores continuing to fulfill their expansion plans and sign new deals.

Our occupancy improvements this year are an indication of the demand that we are receiving from retailers and their desire to locate in our dominant properties in each market. During the second quarter, we signed nearly $1.3 million square feet of leases including $1.2 million square feet of leases in our operating portfolio with the balance in new development.

The leases signed in our operating portfolio included 725,000 square feet of new leases and 480,000 square feet of renewals. While we are far from satisfied, we are encouraged that leasing spreads will improve as we move into the second half of the year. On a same space basis, rental rates were signed at an average decrease of 10.9% from the prior gross rent per square foot in the second quarter. We point out that the expiring rents per square foot were about 7% higher on stabilized malls than the first quarter expirations.

There were a few deals that disproportionately impacted our results this quarter that we thought notable enough to mention. We sign nine leases totaling approximately 70,000 square feet with two national a pair retailers this quarter. These nine deals negatively impacted our mall average leasing spread by nearly 4.5%.

The leases turns on these spaces are two years or less as we intend to back fill the locations at market rents. We are continuing to sign shorter term deals where the rents are below where we would like to see them but with less frequency. This quarter roughly 40% of the deals had terms of three years or less compared with 60% in the first quarter and roughly 70% in 2009.

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