CBL & Associates Properties, Inc. ( CBL)

Q2 2011 Earnings Call

August 3, 2011 11:00 AM ET

Executives

Stephen Lebovitz – President and CEO

Katie Reinsmidt – VP, Corporate Communications and IR

John Foy – CFO

Analysts

Quentin Velleley – CitiGroup

Christine McElroy – UBS

Todd Thomas – KeyBanc Capital Markets

Craig Schmidt – Bank of America Merrill Lynch

Jay Haberman – Goldman Sachs

RJ Milligan – Raymond James

Michael Mueller – JPMorgan

Rich Moore – RBC Capital Markets

Cedric Lachance – Green Street Advisors

Nathan Isbee – Stifel Nicolaus

Ben Yang – Keefe, Bruyette & Woods

Carol Kemple – Hilliard Lyons

Michael Bilerman – Citigroup

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the CBL & Associates Properties Second Quarter 2011 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 reminder this conference is being recorded Wednesday, August 3, 2011.

I would now like to turn the conference over to the President and Chief Executive Officer, Mr. Stephen Lebovitz. 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 2011 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 Reinsmidt

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 most recent Annual Report on Form 10-K as amended 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 on a fully diluted converted share basis. A transcript of today’s comments, 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, or retransmission or rebroadcast of this call without the expressed written consent of CBL is strictly prohibited.

During this 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 a comparable GAAP financial measure will be included in the earnings release that is furnished on the 8-K.

Stephen Lebovitz

Thank you, Katie. We have a great list of highlights to share with you, including positive FFO growth and positive 1.4% same-center NOI growth. We are turning the corner with our leasing results, achieving a 100 basis points year-over-year improvement in portfolio occupancy and more importantly 10% growth in lease spreads.

Our sales increased 5.4% and we have been very active on the financing front with the announcement of our $1 billion-plus joint venture with TIAA-CREF, and more than $1.15 billion in financing activity.

Needless to say, we have had a very productive quarter and are proud of these results and achievements. They reflect the strength of our company and our portfolio of market dominance centers and the hard work of the entire CBL team.

We have been busy this quarter meeting with many of our major retailers. Over a thousand people visited our booth at ICSC RECon, in Las Vegas this May, a double digit increase over the prior year. We followed up ICSC with our own annual leasing connection event here in Chattanooga in June, more than 120 retailers attended and we welcomed several first-time attendees such as Chile’s, Oakley, Windsor Fashion and Bare Escentuals.

We spent three very productive days together doing deals and strengthening our relationships. Leasing activity has been picking up with several new concepts and new retail names moving into CBL Malls. Recently we signed a lease with Cotnon, a very successful Australian retailer that has been expanding its footprint in the U.S. They will open at Volusia Mall in Daytona Beach and we are working to put them in several other locations. We recently opened the foundry, J.C. Penny’s new concept at Oak Park Mall in Kansas City. Other new retail names we’ll soon introduce to the CBL portfolio include LEGO, Clark’s, Armani Exchange and Von Maur’s new Junior Fashion consent, Dry Goods.

Our leasing team has been more successful in using positive sales and higher occupancy rates in our portfolio to push rental growth and improved the terms of renewals and new leases.

Our efforts to replace underperforming retailers and achieve market rates were evident in the significant improvement in our lease spreads this quarter. Overall leases for stabilized malls in the second quarter were signed at a 10% increase over the prior gross rent per square foot.

Renewal leasing spreads were also positive, up 3% over the prior rents. Short-term deals of three years or less also significantly declined during the quarter to 38% compared with 55% for the first quarter and 60% for the fourth quarter.

In total, we signed approximately 1.7 million square feet of leases during the second quarter, a 36% increase over the prior year period. This included approximately 700,000 square feet of new leases and 1 million square feet of renewal leases.

In addition to rent growth, we have also achieved impressive occupancy gains. Portfolio occupancy improved to 100 basis points from the prior year to 90.6% from 89.6%. Stabilized mall occupancy improved 40 basis points to 90.5%. We anticipate occupancy to end the year 75 to 100 basis points higher than the prior year end.

Read the rest of this transcript for free on seekingalpha.com

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