CBL & Associates Properties' CEO Discusses Q3 2011 Results - Earnings Call Transcript

CBL & Associates Properties, Inc. ( CBL)

Q3 2011 Earnings Conference Call

November 2, 2011 11:00 ET

Executives

Stephen Lebovitz – President and Chief Executive Officer

John Foy – Chief Financial Officer

Katie Reinsmidt – Vice President, Corporate Communications and Investor Relations

Analysts

Christy McElroy – UBS

Rich Moore – RBC Capital Markets

Ben Yang – KBW

Carol Kemple – Hilliard Lyons

Jim Sullivan – Cowen and Company

Jeffrey Donnelly – Wells Fargo

Michael Mueller – JPMorgan

Michael Bilerman – Citigroup

RJ Milligan – Raymond James

Todd Thomas – Keybanc Capital Markets

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the CBL & Associates Properties Third Quarter 2011 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 reminder, this conference is being recorded Wednesday, November 2, 2011.

I would now like to turn the conference over to Stephen Lebovitz, President and Chief Executive Officer. You may proceed sir.

Stephen Lebovitz – President and Chief Executive Officer

Thank you, and good morning. We appreciate your participation in the CBL & Associates Properties, Inc. conference call to discuss third 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 – Vice President, Corporate Communications and Investor Relations

This conference call contains forward-looking statements within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties. 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.

During our discussion today, references made to per share amounts are based upon a fully diluted converted share basis. During this call, the company may discuss non-GAAP financial measures as defined by SEC Regulation G. 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 along with the transcript of today’s comments and additional supplemental schedules.

This call will also be available for replay on the Internet through a link on our website at cblproperties.com.

Stephen Lebovitz – President and Chief Executive Officer

Thank you, Katie. Over the past few months, we have seen a disconnect in the public markets valuation of our stock compared with the strength of the fundamentals in our business. While we experienced positive movement over the past two weeks, our current stock price still undervalues our company. It does not reflect the positive results that we have seen in our operations nor the tremendous improvement in our balance sheet. At the end of the quarter, we had over $1 billion of availability on our credit facilities and cash on hand.

In October, we closed a TIAA-CREF joint venture further reducing our debt by $486 million. Portfolio performance metrics have been steadily improving with NOI in the third quarter increasing more than 2% for the portfolio and more than 4% for the malls. We are having ongoing success in negotiating positive leasing spreads, up 8% in the quarter.

Additionally, portfolio occupancy improved sequentially and from the prior year to 91.3% and we anticipate closing the year to 93%. As a result of this positive momentum, we are increasing our guidance for this year for both FFO and NOI. While headline news has diminished confidence in the economy, the reality is that the consumer is shopping and retail sales are growing. Retailers are expanding their store counts and our portfolio has been benefiting from new store openings both new concepts and existing retailers. We recently announced a new American Girl store opening at Chesterfield Mall in St. Louis in the spring of 2012.

At West Towne Mall in Madison, Wisconsin, we opened Dry Goods owned by Von Maur, one of only four openings for this new juniors’ concept. We also opened new mall stores for also Alta, J. Crew, Carters, (indiscernible) and many others. Restaurants boxes in theaters are opening at our malls. Later this week, Cinemark is opening a new state-of-the-art theater at Stroud Mall in Stroudsburg, Pennsylvania. Retailers have generally capped a long-term deal on their businesses and are going forward with store expansion plans.

Third quarter leasing results demonstrate this demand and build on the positive momentum we established earlier this year. Overall leases for stabilized malls in the third quarter were signed at an 8% increase over the prior gross rent per square foot. This compares with spreads of negative 4.9% for leases in the third quarter of 2010, a significant positive swing of more than 13%.

Renewal leasing spreads were positive, up 80 basis points over the prior rents and new leases were signed at a more than 22% increase of our prior rents, but strong increase. We are happy to see that short-term deals of three years are less or consistent with the reduced levels in the second quarter at 42%. This compares with 55% for 2010.

Our leasing volume has increased significantly as well. In total, we signed approximately 2 million square feet of leases during the third quarter almost doubled the square footage signed in the prior year period. This included approximately 700,000 square feet of new leases and 1.3 million square feet of renewal leases. We have been pleased that traffic and sales have steadily increased despite the uncertainty about the economy.

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