CBL & Associates Properties' CEO Discusses Q1 2012 Results - Earnings Call Transcript

CBL & Associates Properties, Inc. (CBL)

Q1 2012 Earnings Call

May 1, 2012 11:00 am ET

Executives

Stephen D. Lebovitz – President and Chief Executive Officer

Katie Reinsmidt – Vice President-Corporate Communications and Investor Relations

John N. Foy – Vice Chairman, Chief Financial Officer, Secretary and Treasurer

Analysts

Paul Morgan – Morgan Stanley

Craig R. Schmidt – Bank of America/Merrill Lynch

Nathan Isbee – Stifel, Nicolaus & Co., Inc.

Quentin Velleley – Citigroup Global Markets (United States)

Michael Bilerman – Citi Investment Research

Benjamin Yang – Keefe, Bruyette & Woods, Inc.

Carol L. Kemple – J.J.B. Hilliard, W.L. Lyons LLC

Todd M. Thomas – KeyBanc Capital Markets

James Sullivan – Cowen and Company, LLC

Cedrik Lachance – Green Street Advisors, Inc.

Michael W. Mueller – JPMorgan Securities LLC

Richard C. Moore – RBC Capital Markets Equity Research

R.J. Milligan – Raymond James

Jeffrey Donnelly – Wells Fargo Securities, LLC

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the CBL & Associates Properties, Inc. First Quarter 2012 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, Tuesday, May 1, 2012.

I would now like to turn the conference over to Stephen Lebovitz, President and CEO. Please go ahead.

Stephen D. Lebovitz

Thank you and good morning. We appreciate your participation in the CBL & Associates Properties, Inc. conference call to discuss first 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 Reinsmidt

This conference call contains forward-looking statements within the meaning of 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 a transcript of today’s comments and additional supplemental schedules.

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

Stephen D. Lebovitz

Thank you, Katie. We’re pleased that 2012 has started out so well for CBL. Our results for the first quarter show continued progress in driving growth in our core portfolio. Occupancy increased 150 basis points in this time last year. Sales growth was particularly strong with a comp store increase of just under 6%. Lease spreads increased over 7% and same-center NOI grew by 1.5%.

We’re also laying the ground work for future growth at CBL sourcing attractive new investments to add value to our portfolio. Over the past year, we have made meaningful progress building our presence in the outlet industry, with two ground-up development projects, and our recent investment in two operating outlet centers. In aggregate, outlets comprise a small percentage of our revenues, but we are encouraged by the potential we see in that area.

Many retailers have made their outlet strategy a priority and this sector will provide one of our best avenues for external growth over the next few years. Horizon has been a terrific partner for us. Through this venture we see additional opportunities for new outlet projects where we will be able to meet our pre-leasing requirements and achieve attractive financial returns.

We recently announced our investment in two additional outlet centers that are operated by Horizon. We acquired a 75% stake in The Outlet Shoppes at El Paso and a 50% interest in The Outlet Shoppes at Gettysburg. The blended cap rate was very attractive in the high severance, and we see near long-term growth prospectus for both centers.

The Outlet Shoppes at El Paso opened in 2007 with 350,000 square feet is 99.6% leased with sales trending towards $400 per square foot. The center serves the market with more than 2 million residents, plus a significant tourist population and is located near the Fort Bliss army base, which is benefiting from the BRAC program.

The Outlet Shoppes at Gettysburg is a 250,000 square foot center, which serves more than 2 million tourists that visit the area annually. A new $95 million civil war museum opened just a few years ago and is driving additional traffic to the center.

Sales are in the mid-200s per square foot today and we are working on continuing opportunity to increase sales. Both centers also have additional land available for future expansions.

On the development side, construction is set to start in the next few weeks on The Outlet Shoppes at Atlanta, located in the affluent suburb of Woodstock, north of the city. The 370,000 square foot project is approximately 70% leased or committed with the first class line up of retailers, including Saks Fifth Avenue Off 5th, Nike, Levis, Brooks Brothers, Converse, and Cole Haan.

Similar to The Outlet Shoppes at Oklahoma City, this project will be developed in 75:25 joint venture with the Horizon Group with an initial unleveraged yield above 10%. We are also pursuing plans to add a second phase to our project at Oklahoma City. Sales for this project during the $400 per square foot range, and it continues to exceed our financial projections. Phase II will encompass approximately 30,000 square feet that will be under construction shortly.

Other important sources of growth are expansions and redevelopments to our existing centers. We recently celebrated openings for several major boxes within the CBL portfolio. In Maryville, Tennessee at our Foothills Mall, we opened a new Carmike 12-screen during the first quarter. The theater filled the former second (Inaudible) location in the mall, which closed so they can consolidate their operations into and renovate their other location at the mall.

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

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