CBL & Associates' CEO Discusses Q4 2011 Results - Earnings Call Transcript

CBL & Associates Properties, Inc. ( CBL)

Q4 2011 Earnings Conference Call

February 9, 2012 11:00 AM ET


Katie Reinsmidt – Vice President, Corporate Communications and Investor Relations

Stephen Lebovitz – President and Chief Executive Officer

John Foy – Chief Financial Officer


Paul Morgan – Morgan Stanley

Christy McElroy – UBS

Todd Thomas – Keybanc Capital Markets

Nathan Isbee – Stifel Nicolaus

Michael Mueller – JP Morgan

Ben Yang – KBW

Carol Kemple – Hilliard Lyons

Quentin Velleley – Citi

Sedrick Litchien [ph] – Green Street Advisors

Craig Smith – Bank of America/Merrill Lynch

Rich Moore – RBC Capital Markets



Ladies and gentlemen, thank you for standing by and welcome to the CBL & Associates Fourth Quarter 2011 Conference Call. During today’s presentation, all participants will be in a listen-only mode. And afterwards, we will conduct a question-and-answer session. (Operator instructions) As a reminder, this conference is being recorded Thursday, February 9, 2012.

And I would now like to turn the conference over to Mr. Stephen Lebovitz, President and Chief Executive Officer. Please go ahead, Mr. Lebovitz.

Stephen Lebovitz

Thank you, and good morning. We appreciate your participation in the CBL & Associates Properties, Inc. conference call to discuss fourth quarter and full year 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. 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 on 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

Thank you, Katie. During the fourth quarter, we continued our string of improving results. We achieved growth in occupancy of 120 basis points, a 60 basis point increase in same-center NOI, positive leasing spreads in the high single digits, and our eighth consecutive quarter of sales growth.

We are encouraged by the over 38% increase in our stock price in the fourth quarter, and sustained share price gain so far in 2012 that reflect these continued improvements. 2011 was also a very productive year for improving our balance sheet. In total, we ended the year with nearly $500 million less in debt than 2010, with proceeds generated by asset sales in the TIAA joint venture.

At the end of the fourth quarter, we have more than $1.1 million in availability on our credit lines, providing us with tremendous financial flexibility. We have kept our focus on reducing our overall leverage, and have been successful at selling off non-core property at attractive pricing. For 2012, we expect to see more attractive growth opportunities, while remaining focused on strengthening our balance sheet.

We recently announced that we were partnering with Horizon Group to develop our second outlet center, The Outlet Shoppes, at Atlanta. The project is located in the affluent suburb of Woodstock north of the city. We plan to begin construction on this center this spring. The 370,000 square foot project is already 70% leased or committed with a first-class line-up of retailers, including Saks Fifth Avenue OFF 5TH, Nike, Michael Kors, J. Crew, Puma, and Under Armour.

Similar to the outlet shops at Oklahoma City, this project will be developed in a 75:25 joint venture with Horizon Group with an initial unleveraged yield above 10%. Our new venture with Horizon builds on the outstanding results being generated by our project in Oklahoma City, which continues to exceed our projections. Based on current results, the center is on track to generate an unleveraged 11% return and sales are trending over $400 per square foot for the first year.

In December, we closed a $60 million 10 year non-recourse CMBS loan secured by the outlet shops at Oklahoma City. Another strong revenue of growth for us is the expansion and redevelopment opportunities within our existing portfolio. These projects enhance the center’s increasing traffic and solidifying the mall’s dominant position in the market. One of our most recent projects, a new 12 screen cinema theater at Stroud Mall in Stroudsburg, Pennsylvania, open during the fourth quarter. And soon we will open a new 12-screen Carmike theater at Foothills Mall in Maryville, Tennessee.

In total, in 2011, we opened seven anchor locations, 34 new junior anchor locations, and added 14 restaurants to our centers. We recently announced our renovation program for 2012. We will renovate four malls, including Cross Creek Mall in Fayetteville, North Carolina; Mall del Norte, in Laredo, Texas; Post Oak Mall in College Station, Texas, and Turtle Creek Mall in Hattiesburg, Mississippi.

The aggregate expenditure for the renovation is estimated at approximately $20 million. These renovations are important to the continued growth of the centers, helping to attract new retailers and driving traffic and sales. Overall, it was a solid holiday sales season, given the generally mild weather across most of our portfolio. Department stores posted healthy increases with Macy’s leading the pack.

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