CBL & ASSOCIATES PROPERTIES INC (CBL)·Q2 2024 Earnings Summary

Executive Summary

• Q2 2024 delivered resilient operating performance: same-center NOI rose 1.5% YoY to $108.3 million, with adjusted FFO per diluted share up to $1.73 from $1.56, as cost savings and tax benefits offset lower percentage rents and bankruptcy-related store closures .
• Total revenues were essentially flat YoY at $129,665 thousand; diluted EPS was $0.14 vs $(0.67) in Q2 2023 due to markedly lower depreciation and interest expense vs the prior-year quarter .
• Portfolio occupancy declined to 88.7% (same-center malls/lifestyle/outlet: 86.8%) driven by nearly 300,000 sq ft of anticipated bankruptcy closures (≈234,000 sq ft from Express and rue21), but management executed agreements to reopen 14 rue21 locations by Q1 2025 .
• Balance sheet progress and capital returns: Layton Hills Mall sale ($37.125 million) reduced the non-recourse term loan to $749.8 million; the stock repurchase program exceeded $19.4 million; quarterly dividend held at $0.40 per share .
• Guidance reiterated: FY 2024 FFO (as adjusted) of $196–$210 million maintained; per-share guidance nudged up to $6.28–$6.72 on lower share count, while same-center NOI range adjusted to $425–$436 million (–1.2% to +1.4%) .

What Went Well and What Went Wrong

What Went Well

• Positive rent spreads and strong leasing demand: ~1.0 million sq ft signed in Q2; comparable leases (~694,000 sq ft) at an 8.8% average rent increase; new leases +30.8% and renewals +6.2% across malls/lifestyle/outlet .
• Cost and tax tailwinds: ~$1.6 million improvement in operating expenses (lower third-party contracts and tax savings) drove same-center NOI growth despite revenue flatness .
• Management tone on momentum: “Leasing volume was strong…we executed more than one million square feet of leases…Positive spreads on both new and renewal leasing showcased our focus on replacing underperforming tenants and locking in better performing tenants at improving rents” — CEO Stephen Lebovitz .

What Went Wrong

• Occupancy headwinds: portfolio occupancy fell 110 bps YoY to 88.7% and same-center malls/lifestyle/outlet to 86.8% amid bankruptcy-related closures (≈234,000 sq ft from Express and rue21) .
• Percentage rent pressure: percentage rents declined ~$0.3 million on lower tenant sales; trailing‑12‑month sales per sq ft slipped 2.1% to $417 vs $426 .
• Insurance costs higher: insurance expense rose ~$0.6 million in the quarter; estimate for uncollectible revenues positive only ~$1.3 million in Q2 (negative for the six months) .

Financial Results

Segment same‑center NOI (Q2 YoY):

KPIs and operational metrics:

Non‑GAAP notes: Adjusted FFO excludes debt discount accretion, negative investment adjustments, litigation items, and certain one‑time/non‑cash impacts per reconciliation footnotes .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Same‑center NOI grew 1.5%…contributions from new leasing, operating expense savings, and a positive variance from uncollectible revenues, partially offset by a decline in percentage rents and lost rent from recent tenant bankruptcy activity” — CEO Stephen Lebovitz .
• “We executed more than one million square feet of leases in the second quarter, a 23% increase from the prior-year period…lululemon locations…Tilt family entertainment…Shoe Station to open this year…occupancy levels declined…due to anticipated bankruptcy-related store closures” .
• “May and June posted solid 2% sales increases…Back to school shopping is underway now with tax free weekend promotions driving traffic across the CBL portfolio” .
• “Debt levels declined…sale of Layton Hills Mall…used to reduce the principal balance and progressed our goal of meeting our term loan extension test in 2025 while minimizing use of our corporate cash reserves” .

Q&A Highlights

• The Q2 2024 earnings call transcript was not available in our document set or company web links; highlights could not be extracted. Clarifications in the release indicate: expense savings (~$1.6mm) and tax benefits supported NOI, while percentage rents and bankruptcies were headwinds; uncollectible revenue estimate was a ~$1.3mm tailwind in Q2 but a headwind YTD .

Estimates Context

• Wall Street consensus (S&P Global) for Q2 2024 EPS and revenue was not available at time of request due to retrieval limits; no estimate comparison can be provided. We attempted to fetch S&P Global data, but the daily limit prevented access. As a result, estimate-based beat/miss analysis is unavailable.

Key Takeaways for Investors

• Adjusted FFO per share up to $1.73; cost/tax tailwinds enabled SNOI growth despite flat revenues, signaling underlying operating resilience .
• Leasing spreads remain robust (new +30.8%, renewals +6.2%), supporting rent roll quality and future NOI trajectory even as bankruptcies pressure occupancy near term .
• Occupancy declines were largely bankruptcy-driven (~234k sq ft), with planned reopenings (14 rue21 stores) offering medium‑term recovery catalysts .
• Balance sheet actions (Layton Hills sale, Aloft refinancing) and cash/marketable securities (~$295.8mm) underpin liquidity and progress toward the 2025 term loan extension test .
• FY 2024 guidance is maintained for FFO (as adjusted) and modestly improved per share on lower share count; same‑center NOI range narrowed lower, reflecting realistic rent/credit dynamics .
• Capital returns continue: program repurchases >$19.4mm and $0.40 dividend sustained; expect continued focus on shareholder value while strengthening maturities profile .
• Near‑term trading: watch occupancy headlines (bankruptcy reopenings progress), leasing volume/spreads, and any asset sales/mortgage actions that accelerate de‑risking and could re-rate the equity .

Additional Relevant Q2 2024 Press Releases

• Dividend declaration: $0.40 per common share for Q3 2024 .
• Layton Hills Mall sale: $37.125 million all‑cash; term loan reduced to $749.8 million .
• Friendly Center medical office opening (Greensboro, NC): supports daily traffic and portfolio diversification .