Store bankruptcies fueled a $2 million increase in losses for CBL & Associates Properties Inc. in the second quarter, but funds from operations per share still jumped 9.5 percent, officials said Wednesday.
“We are pleased to report 9.5 percent FFO growth per share this quarter, particularly in light of the retail climate,” Stephen Lebovitz, president of CBL, said during a conference call with analysts.
Shares on Wednesday closed at $21, up $1.33.
Funds from operation for the quarter was $53.4 million, or 81 cents per diluted share, compared to $48.3 million, or 74 cents per diluted share a year ago.
While it’s too early to forecast dividends for the year, CBL expects dividend payouts to stay secure, said John Foy, chief financial officer.
Dividends increased 7.9 percent in November and are $2.18 per share on an annual basis, said Katie Reinsmidt, director of corporate communications and investor relations.
Same-center net operating income (NOI) was hurt by a $2 million increase in write-offs of bad debt from store closures for the second quarter as well as a year-over-year decrease in occupancy, Mr. Foy said.
“We were disappointed with our same-center NOI growth which was impacted by the increase in bankruptcies and store closure activity,” Mr. Lebovitz said. “However, we are still seeing positive leasing as retailers focus on quality expansions.”
CBL experienced an increase in store bankruptcies in the second quarter, although that accounts for less than 1 percent of total revenues, Mr. Lebovitz said. The largest threat is from teen apparel chain Steve & Barry’s, which has 21 stores at CBL properties totaling 813,000 square feet of space and $7.3 million in annual gross rents.
Bay Harbour Management has made a $163 million offer to buy some of Steve & Barry’s assets, according to the Associated Press. The investment firm says it intends to operate the Steve & Barry’s chain as a going concern with current staff and key facilities.
Steve & Barry’s, which filed for bankruptcy protection in July, operates a store at the junction of Lee Highway and Highway 153 at a shopping center that is not owned by CBL.
CBL also wrote off bad debt from at least nine other retailers, Mr. Lebovitz said, including Linens ’n Things, Goody’s and Friedman’s.
Holiday sales at CBL’s tenants likely will be flat, Mr. Lebovitz said, because retailers have cut back on inventory this year. Specialty leasing should be flat this holiday season compared to last year.
“It’s just a weak retail environment,” Mr. Lebovitz said. “We’ve seen it before. There’s no way holiday sales won’t decrease.”
CBL abandoned two or three developments it had been considering, Mr. Lebovitz said, with a write-off of $1.2 million.
The company should finish refinancing its debt within 60 days on Hickory Hollow Mall in Nashville, he said. The mall, which had a Dillard’s close, is being hurt by competition from a new shopping center in Murfreesboro, Tenn., he said. Nashville political leaders are pressing for a revitalization of the mall, and CBL is looking at redevelopment plans for the site, which was overdeveloped in size previously, Mr. Lebovitz said.
In addition to Pearland Town Center, which opened last week near Houston, CBL has four large projects under construction, Mr. Lebovitz said, as well as 1.5 million square feet of expansions and renovations, for a total investment of $440 million through 2010.
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