EDGAR 10-K Filing

Company CIK: 915140
Filing Year: 2021
Filename: 915140_10-K_2021_0001564590-21-018200.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
Background
CBL & Associates Properties, Inc. (“CBL”) was organized on July 13, 1993, as a Delaware corporation, to acquire substantially all of the real estate properties owned by CBL & Associates, Inc., which was formed by Charles B. Lebovitz in 1978, and by certain of its related parties. On November 3, 1993, CBL completed an initial public offering (the “Offering”). Simultaneously with the completion of the Offering, CBL & Associates, Inc., its shareholders and affiliates and certain senior officers of the Company (collectively, “CBL’s Predecessor”) transferred substantially all of their interests in its real estate properties to CBL & Associates Limited Partnership (the “Operating Partnership”) in exchange for common units of limited partner interest in the Operating Partnership. The interests in the Operating Partnership contain certain conversion rights that are more fully described in Note 10 to the consolidated financial statements. The terms “we,” “us” and “our” refer to the Company or the Company and the Operating Partnership collectively, as the context requires.
Developments since January 1, 2020
Voluntary Reorganization under Chapter 11
Beginning on November 1, 2020 (the “Commencement Date”), the Debtors commenced the filing of the Chapter 11 Cases. The Debtors are authorized to continue to operate their businesses and manage their properties as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. Pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure, the Debtors’ Chapter 11 Cases are being jointly administered for procedural purposes only under the caption In re CBL & Associates Properties, Inc., et al., Case No. 20-35226. Documents filed on the docket of and other information related to the Chapter 11 Cases are available free of charge online at https://dm.epiq11.com/case/cblproperties/dockets.
We are currently operating our business as debtors-in-possession in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. After we filed our Chapter 11 petitions, the Bankruptcy Court granted certain relief requested by the Debtors enabling us to conduct our business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing us to pay employee wages and benefits, to pay taxes and certain governmental fees and charges, to continue to operate our cash management system in the ordinary course, and to pay the prepetition claims of certain of our service providers. For goods and services provided following the Commencement Date, we intend to pay service providers in the ordinary course.
Subject to certain exceptions, under the Bankruptcy Code, the filing of the Chapter 11 Cases automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the Commencement Date. Accordingly, although the filing of the Chapter 11 Cases triggered defaults under the Debtors’ funded debt obligations, creditors are stayed from taking any actions against the Debtors as a result of such defaults, subject to certain limited exceptions permitted by the Bankruptcy Code. Absent an order of the Bankruptcy Court, substantially all the Debtors’ prepetition liabilities are subject to settlement under the Bankruptcy Code.
The filing of the Chapter 11 Cases constituted an event of default that resulted in certain monetary obligations becoming immediately due and payable with respect to the secured credit facility and the senior unsecured notes. The filing of the Chapter 11 Cases also constituted an event of default with respect to certain property-level debt of the Operating Partnership’s subsidiaries, which may have resulted in the automatic acceleration of certain monetary obligations or may give the applicable lender the right to accelerate such amounts. Due to the Chapter 11 Cases, however, the creditors’ ability to exercise remedies against the Debtors under their respective credit agreements and debt instruments was stayed as of the date of the Chapter 11 petition and continues to be stayed.
As further detailed in the Company’s Current Report on Form 8-K filed with the SEC on March 22, 2021, after engaging in negotiations in a Bankruptcy Court-ordered mediation, on March 21, 2021 (the “Agreement Effective Date”), the Company entered into the Amended RSA, with certain beneficial owners and/or investment advisors or managers of discretionary funds, accounts or other entities for the holders of beneficial owners (the “Consenting Noteholders”) in excess of 69% (including joinders) of the aggregate principal amount of the Operating Partnership’s 5.25% senior unsecured notes due 2023 (the “2023 Notes”), 4.60% senior unsecured notes due 2024 (the “2024 Notes”) and 5.95% senior unsecured notes due 2026 (the “2026 Notes,” and collectively with the 2023 Notes and the 2024 Notes, the “Notes”) and certain lenders party to the Company’s secured credit facility who hold in the aggregate in excess of 96% (including joinders) of the aggregate outstanding principal amount of debt under the secured credit facility (the “Consenting Bank Lenders” and together with the Consenting Noteholders, the “Consenting Stakeholders”). The Amended RSA amends and restates that
certain Restructuring Support Agreement, dated as of August 18, 2020 (the “Original RSA”), by and between the Company and the Consenting Noteholders and sets forth, subject to certain conditions, the commitments to and obligations of, on the one hand, the Company, and on the other hand, the Consenting Noteholders and Consenting Bank Lenders, in connection with the restructuring transactions (the “Restructuring Transactions”) set forth in the Amended RSA and the plan term sheet attached as Exhibit B to the Amended RSA (the “Plan Term Sheet”). The Amended RSA contemplates that the restructuring and recapitalization of the Debtors will occur through a joint plan of reorganization in the Chapter 11 Cases (the “Amended Plan”).
The Amended RSA requires that the Company file the Amended Plan and related disclosure statement no later than 25 days after the Agreement Effective Date and under the Amended RSA we must seek to have the Amended Plan confirmed and declared effective no later than November 1, 2021. Before a Bankruptcy Court will confirm the Amended Plan, the Bankruptcy Code requires at least one “impaired” class of claims votes to accept the Amended Plan. A class of claims votes to “accept” the Amended Plan if voting creditors that hold a majority in number and two-thirds in amount of claims in that class approve the Amended Plan. The Amended RSA requires the Consenting Stakeholders vote in favor of and support the Amended Plan. As of the date hereof, the Consenting Bank Lenders and Consenting Noteholders each represent the requisite amount of claims necessary to accept the Amended Plan in each of their respective classes. For the foregoing reasons, among others, the Debtors believe that they will be able to confirm the Amended Plan in the Chapter 11 Cases.
Under the Amended RSA, the proposed Amended Plan will provide for the elimination of more than $1.6 billion of debt and preferred obligations as well as a significant reduction in interest expense. In exchange for their approximately $1.375 billion in principal amount of senior unsecured notes and $133 million in principal amount of the secured credit facility, Consenting Noteholders and other noteholders will receive, in the aggregate, $95 million in cash, $555 million of new senior secured notes, of which up to $100 million, upon election by the Consenting Noteholders, may be received in the form of new convertible secured notes and 89% in common equity of the newly reorganized Company. Certain Consenting Noteholders will also provide up to $50 million of new money in exchange for additional convertible secured notes. The transactions outlined in the Amended RSA will be implemented in the Chapter 11 Cases and pursuant to the Amended Plan. The Amended RSA provides that the remaining Bank Lenders, holding $983.7 million in principal amount under the secured credit facility, will receive $100 million in cash and a new $883.7 million secured term loan. Existing common and preferred stakeholders are expected to receive up to 11% of common equity in the newly reorganized company. The Amended RSA is subject to Bankruptcy Court approval, which the Company will seek in accordance with the terms of the Amended RSA.
We cannot predict the ultimate outcome of our Chapter 11 Cases at this time. For the duration of the Chapter 11 proceedings, the Company’s operations and ability to develop and execute its business plan are subject to the risks and uncertainties associated with the Chapter 11 process. As a result of these risks and uncertainties, the amount and composition of the Company’s assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 proceedings, and the description of the Company’s operations, properties and liquidity and capital resources included in this quarterly report may not accurately reflect its operations, properties and liquidity and capital resources following the Chapter 11 process.
Going Concern
Given the acceleration of the secured credit facility, the Notes and certain property-level debt, as well as the inherent risks, unknown results and inherent uncertainties associated with the bankruptcy process and the direct correlation between these matters and our ability to satisfy our financial obligations that may arise, the Company believes that there is substantial doubt that it will continue to operate as a going concern within one year after the date its consolidated financial statements are issued. The Company’s ability to continue as a going concern is contingent upon its ability to successfully implement the Amended Plan set forth in the Amended RSA, which is pending approval of the Bankruptcy Court. Our financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the consolidated financial statements do not reflect any adjustments related to the recoverability of assets and satisfaction of liabilities that might be necessary should the Company be unable to continue as a going concern.
Delisting of Common Stock and Depositary Shares
On November 2, 2020, the NYSE announced that (i) it had suspended trading in our stock and (ii) it had determined to commence proceedings to delist our common stock, as well as the depositary shares each representing a 1/10th fractional share of our Series D Preferred Stock and the depositary shares each representing a 1/10th fractional share of our Series E Preferred Stock, due to such securities no longer being suitable for listing based on “abnormally low” trading price levels, pursuant to Section 802.01D of the NYSE Listed Company Manual. We have appealed this decision in accordance with NYSE rules, and the appeal is still in process. In the meantime, effective November 3, 2020, our common stock and the
depositary shares representing fractional interests in our Series D Preferred Stock and Series E Preferred Stock began trading on the OTC Markets, operated by the OTC Markets Group, Inc., under the symbols “CBLAQ”, “CBLDQ” and “CBLEQ”, respectively. A delisting of our common stock from the NYSE could negatively impact us by, among other things, reducing the trading liquidity of, and the market price for, our common stock.
COVID-19
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7 and the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report on Form 10-K for the year ended December 31, 2020 for information on certain recent developments of the Company, including the impact of the COVID-19 pandemic
The Company’s Business
We are a self-managed, self-administered, fully integrated REIT. We own, develop, acquire, lease, manage, and operate regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers, office and other properties. Our Properties are located in 24 states, but are primarily in the southeastern and midwestern United States. We have elected to be taxed as a REIT for federal income tax purposes.
We conduct substantially all our business through the Operating Partnership, which is a variable interest entity ("VIE"). We are the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. CBL Holdings I, Inc. is the sole general partner of the Operating Partnership. At December 31, 2020, CBL Holdings I, Inc. owned a 1.0% general partner interest and CBL Holdings II, Inc. owned an 96.5% limited partner interest in the Operating Partnership, for a combined interest held by us of 97.5%.
See Note 1 to the consolidated financial statements for information on our Properties as of December 31, 2020. As of December 31, 2020, we owned a mortgage on one Property, which is collateralized by assignment of 100% of the ownership interests in the underlying real estate and related improvements (the “Mortgage”). The Malls, All Other Properties ("Associated Centers, Community Centers, Office Buildings and Self-storage Facilities"), Properties under development ("Construction Properties") and Mortgage are collectively referred to as the “Properties” and individually as a “Property.”
We conduct our property management and development activities through CBL & Associates Management, Inc. (the “Management Company”) to comply with certain requirements of the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"). The Operating Partnership owns 100% of the Management Company’s outstanding preferred stock and common stock.
The Management Company manages all but 14 of the Properties. Governor’s Square and Governor’s Square Plaza in Clarksville, TN, Kentucky Oaks Mall in Paducah, KY, Fremaux Town Center in Slidell, LA, Ambassador Town Center in Lafayette, LA, EastGate Mall - Self-Storage in Cincinnati, OH, Mid Rivers Mall - Self-Storage in St. Peters, MO, Hamilton Place - Self-Storage in Chattanooga, TN, Parkdale Mall - Self-Storage in Beaumont, TX, The Outlet Shoppes at El Paso in El Paso, TX, The Outlet Shoppes at Atlanta in Woodstock, GA and The Outlet Shoppes of the Bluegrass in Simpsonville, KY are all owned by unconsolidated joint ventures and are managed by a property manager that is affiliated with the third-party partner, which receives a fee for its services. The third-party partner of each of these Properties controls the cash flow distributions, although our approval is required for certain major decisions. The Outlet Shoppes at Gettysburg in Gettysburg, PA and The Outlet Shoppes at Laredo in Laredo, TX are owned by consolidated joint ventures and managed by a property manager that is affiliated with the third-party partner, which receives a fee for its services.
Rental revenues are primarily derived from leases with retail tenants and generally include fixed minimum rents, percentage rents based on tenants’ sales volumes and reimbursements from tenants for expenditures related to real estate taxes, insurance, common area maintenance ("CAM") and other recoverable operating expenses, as well as certain capital expenditures. We also generate revenues from management, leasing and development fees, sponsorships, sales of peripheral land at the Properties and from sales of operating real estate assets when it is determined that we can realize an appropriate value for the assets. Proceeds from such sales are generally used to retire related indebtedness, reduce outstanding balances on our indebtedness and for general corporate purposes.
The following terms used in this Annual Report on Form 10-K will have the meanings described below:
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GLA - refers to gross leasable area of space in square feet, including Anchors and Mall tenants.
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Anchor - refers to a department store, other large retail store, non-retail space or theater greater than or equal to 50,000 square feet.
▪
Junior Anchor - retail store, non-retail space or theater comprising more than 20,000 square feet and less than 50,000 square feet.
▪
Freestanding - Property locations that are not attached to the primary complex of buildings that comprise the mall shopping center.
▪
Outparcel - land used for freestanding developments, such as retail stores, banks and restaurants, which are generally on the periphery of the Properties.
Significant Markets and Tenants
Top Five Markets
Our top five markets, based on percentage of total revenues, were as follows for the year ended December 31, 2020:
Market
Percentage of
Total Revenues
Chattanooga, TN
7.0
%
St. Louis, MO
6.1
%
Lexington, KY
5.1
%
Laredo, TX
5.0
%
Madison, WI
3.8
%
Top 25 Tenants
Our top 25 tenants based on percentage of total revenues were as follows for the year ended December 31, 2020:
Tenant
Number of
Stores
Square
Feet
Percentage
of Total
Revenues (1)
L Brands, Inc. (2)
691,349
3.96
%
Foot Locker, Inc.
502,473
3.55
%
Signet Jewelers Ltd. (3)
197,953
3.01
%
American Eagle Outfitters, Inc.
418,566
2.57
%
Dick's Sporting Goods, Inc. (4)
1,497,161
2.13
%
Genesco Inc. (5)
190,893
1.78
%
H & M Hennes & Mauritz AB
917,934
1.71
%
Luxottica Group S.P.A. (6)
218,393
1.49
%
Finish Line, Inc.
210,781
1.44
%
The Gap, Inc.
568,426
1.42
%
The Buckle, Inc.
217,042
1.37
%
Express Fashions
271,404
1.22
%
JC Penney Company, Inc. (7)
5,548,339
1.17
%
Cinemark Holdings, Inc.
467,190
1.16
%
Hot Topic, Inc.
231,890
1.15
%
Shoe Show, Inc.
492,682
1.14
%
Abercrombie & Fitch, Co.
234,204
1.03
%
Barnes & Noble Inc.
521,273
0.93
%
The Children's Place, Inc.
171,395
0.90
%
Claire's Stores, Inc.
96,868
0.88
%
Ulta Beauty, Inc.
248,947
0.82
%
Ascena Retail Group, Inc. (8)
260,546
0.74
%
Focus Brands (9)
49,898
0.72
%
Chick-fil-A, Inc.
56,114
0.70
%
Macy's Inc. (10)
4,179,850
0.70
%
1,423
18,461,571
37.69
%
(1)
Includes the Company's proportionate share of total revenues from unconsolidated affiliates based on the Company's ownership percentage in the respective joint venture and any other applicable terms.
(2)
L Brands, Inc. operates Bath & Body Works, PINK and Victoria's Secret.
(3)
Signet Jewelers Limited operates Kay Jewelers, Marks & Morgan, JB Robinson, Shaw's Jewelers, Osterman's Jewelers, LeRoy's Jewelers, Jared Jewelers, Belden Jewelers, Ultra Diamonds, Rogers Jewelers, Zales, Peoples and Piercing Pagoda.
(4)
Dick's Sporting Goods, Inc. operates Dick's Sporting Goods, Golf Galaxy, and Field & Stream.
(5)
Genesco Inc. operates Journey's, Underground by Journey's, Shi by Journey's, Johnston & Murphy, Hat Shack, Hat Zone, and Clubhouse.
(6)
Luxottica Group S.P.A. operates Lenscrafters, Pearle Vision and Sunglass Hut.
(7)
JC Penney Company, Inc. owns 28 of these stores.
(8)
Ascena Retail Group, Inc. operates Ann Taylor, Catherines, Justice, Dressbarn, Maurices, Lane Bryant, LOFT and Lou & Grey.
(9)
Focus Brands operates certain Auntie Anne’s, Cinnabon, Moe’s Southwest Grill and Planet Smoothie locations.
(10)
Macy’s, Inc. owns 18 of these stores.
Operating Strategy
Our primary objective is to maximize the long-term value of our company for all of our stakeholders by reducing debt, lowering our cost of capital and stabilizing and growing net operating income (“NOI”), total earnings before income taxes, depreciation and amortization for real estate ("EBITDAre") and cash flows through a variety of methods as further discussed below.
NOI is a non-GAAP measure. For a description of NOI, a reconciliation from net income (loss) to NOI, and an explanation of why we believe this is a useful performance measure, see Non-GAAP Measure - Same-center Net Operating Income in “Results of Operations.”
Property Transformation Strategy
Since the formation of the predecessor company in 1978, we have built our portfolio with a strategy of owning dominant properties in dynamic and growing middle markets. Our properties play a vital role in the communities in which we are located. They serve as a center of commerce and large employment base. We are a valuable community member, partnering with local and regional organizations in civic engagements. Our properties also generate significant property and sales taxes that support programs in our communities. While the shifts in retail and, more recently, the impact of COVID-19, have had an effect on our business, we believe that our strong locations and continued implementation of our redevelopment and portfolio transformation strategy, as outlined below, will allow CBL to first stabilize and ultimately return to growth.
Our strategy of owning dominant properties in thriving markets has served the company well as CBL’s dominant locations generate significant demand from retail and non-retail users alike. This broad demand allows CBL to shift and evolve our portfolio as consumer preferences change. More recently, the rise of e-commerce and other changes have resulted in major shifts in the retail industry. Retailers, including many traditional department stores have culled their store base either proactively or through bankruptcy, closing brick-and-mortar retail stores. Several large anchor retailers, such as Sears and Bon-Ton, have liquidated the majority or all of their stores. While there is near term income loss and vacancy that results from the closures, we also utilize the closures as an opportunity to transform our traditional enclosed malls into a portfolio of dominant suburban town centers that offer a diversity of tenants and uses to enhance the experience and shopping conveniences for visitors. We began this strategy with our first major anchor redevelopment in 2013 and have grown the program in more recent years. While this strategy will take time to effect, we have already been successful in delivering an increasing number of non-retail uses to our properties such as hotels, residential facilities, medical facilities, offices and in 2020 we opened our first casino. While these uses and redevelopments can oftentimes demand significant capital, we have utilized several strategies such as land sales, ground leases, and joint ventures to mitigate the capital infusion while, at the same time, allowing us to effect transformational redevelopments.
In order to support the transformation of our assets into suburban town centers, our leasing and redevelopment efforts are focused on matching the targeted tenancy to the unique demands and demographics of the local market. We aggressively lease our properties in order to maximize cash flows, improve occupancy and facilitate an optimal merchandising mix that attracts today’s consumer, all with the end goal of enhancing the value of our assets. As leases mature, we seek to renew leases at higher gross rents as compared to the previous lease where possible. For underperforming tenants, rather than allow the lease to terminate, we may elect to renew leases at the same or lower gross rents generally for a shorter lease term of three years or less to limit downtime and revenue loss. This strategy allows us to maintain occupancy and revenue while providing our leasing team the time to identify a potential replacement. Additionally, this strategy provides the tenant with the opportunity to improve operations and sales, and eventually renew at a higher gross rent at the end of their lease term. Our new leasing efforts are focused on a broadening array of non-retail as well as
successful retail uses including local, regional and national tenants. We have extensive existing relationships and continually canvas our markets as well as online sources for potential new relationships.
Redevelopments represent situations where we capitalize on opportunities to increase the productivity of previously occupied space through aesthetic upgrades, re-tenanting and/or changing the use of the space. We may use all or only a portion of the prior-tenant square footage. Many times, redevelopments result from acquiring or regaining possession of Anchor space (such as former Sears and Bon-Ton stores) and re-leasing to a single user, subdividing it into multiple spaces or razing the building for new development. When evaluating a redevelopment project, we review the stand-alone cost and returns, co-tenancy, as well as the impact that the project and new tenant(s) is expected to have on the rest of the property including the aesthetic impact and improvements to traffic and sales.
See Liquidity and Capital Resources section for information on the projects completed during 2020 and under construction at December 31, 2020.
Specialty Leasing, Branding and Sponsorship
We pursue opportunities to generate ancillary revenues and activate our properties when space is available for shorter terms through temporary leases and license agreements, as well as sponsorships and branding and promotional activities. These programs allow us to maximize revenues in our centers during downtime between permanent leases, as well as monetize other aspects of the property.
Management and Operations
We actively manage our properties including a focus on controlling operating costs while maintaining a high-quality customer experience. Where possible, we utilize national or regional contracts with vendors and service providers to generate cost and service efficiencies.
Active Portfolio Management and Asset Recycling
We actively manage our asset base with the goal of enhancing the overall quality and value of our portfolio. We regularly review our portfolio to identify assets that no longer fit our strategy or where we believe it appropriate to redeploy resources into higher growth opportunities. We also selectively acquire properties we believe can appreciate in value by increasing NOI through our redevelopment, leasing and management expertise. However, our primary focus at this time is on opportunities to acquire anchors at our Properties and utilize vacant land for future redevelopment and development uses.
Balance Sheet Strategy
Our balance sheet strategy is focused on reducing overall debt, extending our debt maturity schedule and lowering our overall cost of borrowings in order to limit maturity risk, improve net cash flow and enhance enterprise value. Beginning on November 1, 2020, the Debtors filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas, in Houston, TX in order to implement a plan to recapitalize the Company, including restructuring portions of its debt.
We also pursue opportunities to improve the terms of our secured property-level, mortgage loans including seeking lower interest rates and longer terms. We are exploring refinancing opportunities in the open lending market, as appropriate, in addition to working with our current lenders toward favorable modifications of existing loans.
Green Building Practices/ESG
We are committed to reducing waste through the use of environmentally friendly materials, domestic products, and the implementation of green building practices in our new development projects, redevelopments and renovations. We have completed more than 60 energy efficiency projects across our portfolio that have resulted in more than 40 million kWh saved annually. We have active cardboard or plastic recycling programs at 30 centers across our portfolio and have building management systems at nearly every property. These programs are ongoing as we strive to find ways to enhance our commitment to being environmentally conscious. More information on our sustainability, social responsibility and community involvement initiatives is available on dedicated web pages at cblproperties.com/about. The information on our web site is not, and should not be considered, a part of this Form 10-K.
Environmental Matters
A discussion of the current effects and potential impacts on our business and Properties of compliance with federal, state and local environmental regulations is presented in Item 1A of this Annual Report on Form 10-K under the subheading “Risks Related to Real Estate Investments and Our Business.”
Competition
The Properties compete with various shopping facilities in attracting retailers to lease space. In addition, retailers at our Properties face competition from discount shopping centers, outlet centers, wholesale clubs, direct mail, television shopping networks, the internet and other retail shopping developments. The extent of the retail and non-retail competition varies from market to market. We work aggressively to attract customers through marketing promotions and social media campaigns. Many of our retailers have adopted an omni-channel approach which leverages sales through both digital and traditional retailing channels.
Seasonality
The shopping center business is, to some extent, seasonal in nature with tenants typically achieving the highest levels of sales during the fourth quarter due to the holiday season, which generally results in higher percentage rent income in the fourth quarter. Additionally, the Malls earn most of their “temporary” rents (rents from short-term tenants) during the holiday period. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of our fiscal year.
Equity
Common Stock and Common Units
Our authorized common stock consists of 350,000,000 shares at $0.01 par value per share. We had 196,569,917 and 174,115,111 shares of common stock issued and outstanding as of December 31, 2020 and 2019, respectively. The Operating Partnership had 201,687,773 and 200,189,077 common units outstanding as of December 31, 2020 and 2019, respectively.
Preferred Stock
Our authorized preferred stock consists of 15,000,000 shares at $0.01 par value per share. See Note 10 to the consolidated financial statements for a description of our outstanding cumulative redeemable preferred stock.
Financial Information about Segments
See Note 13 to the consolidated financial statements for information about our reportable segments.
Human Capital
The driving force behind our business is our employees. We are committed to attracting, developing and retaining diverse individuals that further our inclusive culture. We promote collaboration and have employee led programs such as CBL Cares, which is designed to ensure engagement with and contributions to the communities we serve, including paid community service time. CBL Fit focuses on the whole person at work and serves as a strong advocate of perpetuating previous certification as a great place to work. CBL Social enables interconnectivity within the organization. In 2021, we are launching CBL Community as another employee-led program focusing on our collective commitment to advance diversity, equity, and inclusion in all forms.
We utilize a variety of means to ensure employee engagement remains high. In addition to providing competitive compensation and a comprehensive benefits program, CBL employees enjoy a wide range of learning and development opportunities: conferences, leadership programs including CBL U, our companywide sales force education conference, leadership and managerial content, introductory and refresher training in diversity, equity, and inclusion and cyber-security, and on-demand content including physical, mental/social, financial well-being as well as internal technology and tools for self-guided learning. As part of the benefits program, employees may further their formal education by way of a tuition reimbursement program.
CBL does not have any employees other than its statutory officers. Our Management Company had 418 full-time and 56 part-time employees as of December 31, 2020, of which 60% were female. Generationally, the population is nearly evenly represented across the Gen X, Gen Y and Baby Boomer array with an emerging presence of Gen Z and a meaningful
contribution by Traditionalists. A testament to the strength of our culture: more than 60% of the team has been with CBL for five or more years. We enjoy direct relationships as none of our employees are represented by a union.
Corporate Offices
Our principal executive offices are located at CBL Center, 2030 Hamilton Place Boulevard, Suite 500, Chattanooga, Tennessee, 37421 and our telephone number is (423) 855-0001.
Available Information
There is additional information about us on our web site at cblproperties.com. Electronic copies of our Annual Report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments to those reports, are available free of charge by visiting the “invest” section of our web site. These reports are posted as soon as reasonably practical after they are electronically filed with, or furnished to, the SEC. The information on our web site is not, and should not be considered, a part of this Form 10-K.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Set forth below are certain factors that may adversely affect our business, financial condition, results of operations and cash flows. Any one or more of the following factors may cause our actual results for various financial reporting periods to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. See “Cautionary Statement Regarding Forward-Looking Statements” contained herein on page 1. In addition, these risks could be heightened as a result of the COVID-19 pandemic.
RISK FACTOR SUMMARY
The following is a summary of the most significant risks relating to our business activities that we have identified. If any of these risks occur, our business, financial condition or results of operation, including our ability to generate cash and make distributions, could be materially adversely affected. For a more complete understanding of our material risk factors, this summary should be read in conjunction with the detailed description of our risk factors which follows this summary.
Risks Related to Our Voluntary Bankruptcy Filing
• The Amended RSA is subject to significant conditions and milestones that may be beyond our control and may be difficult for us to satisfy. If the Amended RSA is terminated, our ability to confirm and consummate the Amended Plan could be materially and adversely affected.
• We are subject to the risks and uncertainties associated with chapter 11 proceedings and may not be able to obtain confirmation of the Amended Plan as outlined in the Amended RSA.
• Upon emergence from bankruptcy, the composition of our Board of Directors may change significantly, and our historical financial information may not be indicative of our future financial performance.
• Trading in our securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. It is possible that our equity securities will be cancelled pursuant to the Amended Plan and holders of any such equity securities will receive only such distributions as set forth in the Amended Plan, which may result in such holders being unable to recover their investments.
• Negotiating the Amended RSA, and the chapter 11 proceedings, has and will continue to consume a substantial portion of our management’s time and attention, which may adversely affect us and may increase employee attrition.
• If the Amended RSA is terminated our ability to confirm and consummate the Amended Plan could be materially and adversely affected.
• We depend on the continued presence of key personnel for critical management decisions.
• Transfers or issuances of equity before, or in connection with, our chapter 11 proceedings may impair our ability to utilize the existing tax basis in our assets, our federal income tax net operating loss carryforwards and other tax attributes.
• We have determined that there is substantial doubt about our ability to continue as a going concern.
Risks Related to Real Estate Investments and Our Business
• The current pandemic of the novel coronavirus, or COVID-19, has, and could continue to, materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance, as could any future outbreak of another highly infectious or contagious disease.
• Real property investments are subject to various risks, many of which are beyond our control, which could cause declines in the revenues and/or underlying value of one or more of our Properties. These include, among others:
➢
Adverse changes to national, regional and local economic conditions, including increased volatility in the capital and credit markets, as well as changes in consumer confidence and consumer spending patterns.
➢
Possible inability to lease space in our properties on favorable terms, or at all.
➢
Potential loss of one or more significant tenants, due to bankruptcies or consolidations in the retail industry.
➢
Local real estate market conditions, and the illiquidity of real estate investments.
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Adverse changes that cause us not to proceed with certain developments, redevelopments or expansions.
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Increased operating costs, such as repairs and maintenance, real property taxes, utility rates and insurance.
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Adverse changes in governmental regulations and related costs, including potential significant costs related to compliance with environmental laws.
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Competition from other retail facilities, and from alternatives to traditional retail such as online shopping.
• Certain of our Properties are subject to ownership interests held by third parties, whose interests may conflict with ours.
• Bankruptcy of joint venture partners could impose delays and costs on us with respect to jointly owned retail Properties.
• We identified a material weakness in internal control over financial reporting, which we may not remediate on a timely basis, and we may identify additional material weaknesses, which may result in material misstatements of our financial statements or cause us to fail to meet our reporting obligations.
• Possible terrorist activity or other acts of violence could adversely affect our financial condition and results of operations. We also face possible risks associated with climate change.
• Increased expenses, decreased occupancy rates, tenants converting to gross leases and requesting deferrals and rent abatements may not allow us to recover the majority of our CAM, real estate taxes and other operating expenses.
• Our Properties may be subject to impairment charges, which could impact our compliance with certain debt covenants and could otherwise adversely affect our financial results.
• While cybersecurity attacks, to date, have not materially impacted our financial results, future cyber-attacks, cyber intrusions or other disruptions of our information technology networks could disrupt our operations, compromise confidential information and adversely impact our financial condition.
• Pending litigation could distract our officers from attending to the Company’s business and could have a material adverse effect on our business, financial condition and results of operation.
• Certain agreements with prior owners of Properties that we have acquired may inhibit our ability to enter into future sale or refinancing transactions affecting such Properties.
• Uninsured losses could adversely affect us, and in the future our insurance may not cover acts of terrorism.
Risks Related to Debt and Financial Markets
• A deterioration of the capital and credit markets could adversely affect our ability to access funds and the capital needed to refinance debt or obtain new debt.
• Our indebtedness is substantial and could impair our ability to obtain additional financing.
• Rising interest rates could both increase our borrowing costs, thereby adversely affecting our cash flows and the amounts available for distributions to our stockholders, and decrease our stock price, if investors seek higher yields through other investments.
• We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined.
• The agreements governing our debt, including our senior credit facility and the indentures governing our Notes, contain various covenants that impose restrictions on us that may affect our ability to operate our business.
• Federal and state statutes allow courts, under specific circumstances, to void guarantees and require holders of indebtedness and lenders to return payments received from guarantors.
Risks Related to Dividends and Our Stock
• A delisting of our stock from the NYSE could have materially adverse effects on our business, financial condition and results of operations.
• Our post-bankruptcy capital structure is yet to be determined, and any changes to our capital structure may have a material adverse effect on existing debt and security holders.
• We have suspended paying dividends on our common stock and preferred stock and distributions on our units and we cannot assure you of our ability to pay dividends or distributions in the future or the amount of any dividends or distributions.
• As a result of the cumulative, unpaid dividends on our preferred stock we are no longer eligible to register the offer and sale of securities on SEC Form S-3.
• Our ability to pay dividends on our common and preferred stock depends on the distributions we receive from our Operating Partnership, through which we conduct substantially all of our business.
Risks Related to Geographic Concentrations
• Our Properties are located principally in the southeastern and midwestern United States, so our business is subject generally to economic conditions in these regions and, in particular, to adverse economic developments affecting the operating results of Properties in our five largest markets.
Risks Related to Federal Income Tax Laws
• We conduct a portion of our business through taxable REIT subsidiaries, which are subject to certain tax risks.
• Complying with REIT requirements might cause us to forego otherwise attractive opportunities, and failing to qualify as a REIT would reduce our funds available for distribution to stockholders.
• Transfers of our capital stock to any person in excess of the ownership limits necessary to maintain our status as a REIT would be deemed void ab initio, and those shares would automatically be transferred to a non-affiliated charitable trust.
• We must satisfy minimum distribution requirements to maintain our status as a REIT, which may limit the amount of cash available for use in growing our business.
• Holders of common units and special common units in the Operating Partnership may have income tax liability attributable to their ownership of such units in excess of cash distributions.
Risks Related to Our Organizational Structure
• The ownership limit described above, as well as certain provisions in our certificate of incorporation and bylaws, and certain provisions of Delaware law, may hinder any attempt to acquire us.
• Certain ownership interests held by members of our senior management may tend to create conflicts of interest between such individuals and the interests of the Company and our Operating Partnership.
RISKS RELATED TO OUR VOLUNTARY BANKRUPTCY FILING
Beginning on November 1, 2020, the Debtors filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas, in Houston, TX in order to implement a chapter 11 plan to recapitalize the Company, including restructuring portions of its debt.
The Amended RSA is subject to significant conditions and milestones that may be beyond our control and may be difficult for us to satisfy. If the Amended RSA is terminated, our ability to confirm and consummate the Amended Plan could be materially and adversely affected.
The Amended RSA sets forth certain conditions we must satisfy, including the timely satisfaction of milestones in the Chapter 11 Cases, such as confirmation of the Amended Plan and effectiveness of the Amended Plan. Our ability to timely complete such milestones is subject to risks and uncertainties that may be beyond our control. The Amended RSA gives the Consenting Noteholders and Consenting Bank Lenders the ability to terminate the Amended RSA under certain circumstances, including the failure of certain conditions to be satisfied. Should a termination event occur, all obligations of the parties to the Amended RSA may terminate. A termination of the Amended RSA may result in the loss of support for the Amended Plan, which could adversely affect our ability to confirm and consummate the Amended Plan. If the Amended Plan is not consummated, there can be no assurance that any new plan would be as favorable to holders of claims as the current Plan and our chapter 11 proceedings could become protracted, which could significantly and detrimentally impact our relationships with vendors, suppliers, employees, and tenants.
We will be subject to the risks and uncertainties associated with chapter 11 proceedings.
As a consequence of our filing for relief under chapter 11 of the Bankruptcy Code, our operations and our ability to develop and execute our business plan, and our continuation as a going concern, will be subject to the risks and uncertainties associated with bankruptcy. These risks include the following:
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our ability to prosecute, confirm and consummate the Amended Plan or another plan of reorganization with respect to the chapter 11 proceedings;
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the high costs of bankruptcy proceedings and related fees;
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if required, our ability to obtain sufficient financing to allow us to emerge from bankruptcy and execute our business plan post-emergence;
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our ability to maintain our relationships with our suppliers, service providers, tenants, employees and other third parties;
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our ability to maintain contracts that are critical to our operations;
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our ability to execute our business plan in the current depressed commodity price environment;
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the ability to attract, motivate and retain key employees;
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the ability of third parties to seek and obtain court approval to terminate contracts and other agreements with us;
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the ability of third parties to seek and obtain court approval to convert the chapter 11 proceedings to chapter 7 proceedings; and
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the actions and decisions of our creditors and other third parties who have interests in our chapter 11 proceedings that may be inconsistent with our plans.
These risks and uncertainties could affect our business and operations in various ways. For example, negative events associated with our chapter 11 proceedings could adversely affect our relationships with our suppliers, service providers, tenants, employees, and other third parties, which in turn could adversely affect our operations and financial condition. Also, we need the prior approval of the Bankruptcy Court for transactions outside the ordinary course of business, which may limit our ability to respond timely to certain events or take advantage of certain opportunities. Because of the risks and uncertainties associated with our chapter 11 proceedings, we cannot accurately predict or quantify the ultimate impact of events that occur during our chapter 11 proceedings that may be inconsistent with our plans.
We may not be able to obtain confirmation of the Amended Plan as outlined in the Amended RSA.
There can be no assurance that the Amended Plan as outlined in the Amended RSA (or any other plan of reorganization) will be approved by the Bankruptcy Court, so we urge caution with respect to existing and future investments in our securities.
The success of any reorganization will depend on approval by the Bankruptcy Court and the willingness of existing debt and security holders to agree to the exchange or modification of their interests as outlined in the Amended Plan, and there can be no guarantee of success with respect to the Amended Plan or any other plan of reorganization. We might receive official objections to confirmation of the Amended Plan from the various stakeholders in the chapter 11 proceedings. We cannot predict the impact that any objection might have on the Amended Plan or on a Bankruptcy Court's decision to confirm the Amended Plan. Any objection may cause us to devote significant resources in response which could materially and adversely affect our business, financial condition and results of operations.
If the Amended Plan is not confirmed by the Bankruptcy Court, it is unclear whether we would be able to reorganize our business and what, if any, distributions holders of claims against us, including holders of our secured and unsecured debt and equity, would ultimately receive with respect to their claims. There can be no assurance as to whether we will successfully reorganize and emerge from chapter 11 or, if we do successfully reorganize, as to when we would emerge from chapter 11. If no plan of reorganization can be confirmed, or if the Bankruptcy Court otherwise finds that it would be in the best interest of holders of claims and interests, the chapter 11 cases may be converted to cases under chapter 7 of the Bankruptcy Code, pursuant to which a trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the Bankruptcy Code.
Upon emergence from bankruptcy, our historical financial information may not be indicative of our future financial performance.
Our capital structure will be significantly altered under the Amended Plan. Under fresh-start reporting rules that may apply to us upon the effective date of the Amended Plan (or any alternative plan of reorganization), our assets and liabilities would be adjusted to fair values and our accumulated deficit would be restated to zero. Accordingly, if fresh-start reporting rules apply, our financial condition and results of operations following our emergence from chapter 11 would not be comparable to the financial condition and results of operations reflected in our historical financial statements. Further, a plan of reorganization could materially change the amounts and classifications reported in our consolidated historical financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization.
The pursuit of the Amended RSA has consumed, and the chapter 11 proceedings will continue to consume, a substantial portion of the time and attention of our management, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.
Although the Amended Plan is designed to minimize the length of our chapter 11 proceedings, it is impossible to predict with certainty the amount of time that we may spend in bankruptcy or to assure parties in interest that the Amended Plan will be confirmed. The chapter 11 proceedings will involve additional expense and our management will be required to spend a significant amount of time and effort focusing on the proceedings. This diversion of attention may materially adversely affect the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the chapter 11 proceedings are protracted.
During the pendency of the chapter 11 proceedings, our employees will face considerable distraction and uncertainty and we may experience increased levels of employee attrition. A loss of key personnel or material erosion of
employee morale could have a material adverse effect on our ability to effectively, efficiently and safely conduct our business, and could impair our ability to execute our strategy and implement operational initiatives, thereby having a material adverse effect on our financial condition and results of operations.
If the Amended RSA is terminated, our ability to confirm and consummate the Amended Plan could be materially and adversely affected.
The Amended RSA contains a number of termination events, upon the occurrence of which certain parties to the Amended RSA may terminate the agreement. If the Amended RSA is terminated as to all parties thereto, each of the parties will be released from its obligations in accordance with the terms of the Amended RSA. Such termination may result in the loss of support for the Amended Plan by the parties to the Amended RSA, which could adversely affect our ability to confirm and consummate the Amended Plan. If the Amended Plan is not consummated, there can be no assurance that any new Plan would be as favorable to holders of claims against the Company and its subsidiaries as contemplated by the Amended RSA.
We depend on the continued presence of key personnel for critical management decisions.
Retaining and understanding historical knowledge from our key personnel is critical to allowing the management team to more effectively progress our business plan. As part of the restructuring we anticipate our existing senior management team to remain in place, however there is a risk of loss of key personnel. Anytime personnel are replaced, there is a risk that there may be a loss of service, albeit temporary, that could result in an adverse effect on the business.
Upon our emergence from bankruptcy, the composition of our Board of Directors may change significantly.
Under the Amended Plan, the composition of our Board of Directors may change significantly. Any new directors are likely to have different backgrounds, experiences and perspectives from those individuals who previously served on the Board and, thus, may have different views on the issues that will determine our future. As a result, our future strategy and plans may differ materially from those of the past.
Trading in our securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. It is possible that our equity securities will be cancelled pursuant to the Amended Plan and holders of any such equity securities will receive only such distributions as set forth in the Amended Plan, which may result in such holders being unable to recover their investments.
A significant amount of our indebtedness is senior to the common stock and preferred stock in our capital structure. It is possible that these equity interests may be cancelled and extinguished upon the approval of the Bankruptcy Court and the holders thereof would not be entitled to receive, and would not receive or retain, any property or interest in property on account of such equity interests. In the event of a cancellation of these equity interests, amounts invested by such holders in our outstanding equity securities will not be recoverable. Under the Amended RSA, if holders of our common stock vote to accept the Amended Plan, as a class, each holder will receive its pro rata share of 5.5% of the new common equity interests (subject to dilution). Likewise, if holders of our preferred stock vote to accept the Amended Plan, as a class, each holder will receive its pro rata share of 5.5% of the new common equity interests (subject to dilution). If, however, holders of our preferred stock vote to reject the Amended Plan, as a class, each holder will receive nothing on account of its preferred stock interest. Further, if our plan of reorganization is not approved, our currently outstanding common stock and preferred stock may have no value. Trading prices for our equity securities are very volatile and may bear little or no relationship to the actual recovery, if any, by the holders of such securities in the Chapter 11 Cases. Accordingly, we urge that extreme caution be exercised with respect to existing and future investments in our equity securities and any of our other securities.
Transfers of our equity, or issuances of equity before or in connection with our chapter 11 proceedings, may impair our ability to utilize the existing tax basis in our assets, our federal income tax net operating loss carryforwards and other tax attributes during the current year and in future years.
Under federal income tax law, a corporation is generally permitted to offset net taxable income in a given year with net operating losses carried forward from prior years, and its existing adjusted tax basis in its assets may be used to offset future gains or to generate annual cost recovery deductions. We have significant “net unrealized built-in loss” (NUBIL) (i.e., adjusted tax basis in excess of the fair market value of our assets) and net operating loss carryforwards that are not subject to any section 382 limitations.
Our ability to utilize future tax deductions, net operating loss carryforwards and other tax attributes to offset future taxable income is subject to certain requirements and restrictions. In order to qualify for taxation as a “real estate investment trust,” we must meet various requirements including a requirement to distribute 90% of our taxable income; and, to avoid paying corporate income tax, we must distribute 100% of our taxable income. If we do experience an "ownership change," as defined in section 382 of the Internal Revenue Code, during or in connection with the restructuring process, then our ability to use future tax deductions, net operating loss carryforwards and other tax attributes to offset future taxable income may be substantially limited, which could have a negative impact on our financial position and results of operations. Generally, there is an "ownership change" if one or more stockholders owning 5% or more of a corporation's common stock have aggregate increases in their ownership of such stock of more than 50 percentage points over a prescribed testing period. Under section 382 and section 383 of the Internal Revenue Code, absent an applicable exception, if a corporation undergoes an "ownership change", certain future tax deductions, net operating loss carryforwards and other tax attributes that may be utilized to offset future taxable income generally are subject to an annual limitation (though “recognized built-in losses” arising from our NUBIL will only be subject to limitation if they are recognized within 5 years of the “ownership change”).
Whether or not future tax deductions, net operating loss carryforwards and other tax attributes are subject to limitation under section 382, net operating loss carryforwards and other tax attributes are expected to be further reduced by the amount of discharge of indebtedness arising in our Chapter 11 Cases under section 108 of the Internal Revenue Code.
We have received an order from the Bankruptcy Court approving potential restrictions on certain transfers of our stock to limit the risk of an "ownership change" prior to our emergence from restructuring in our chapter 11 proceedings. We anticipate that the implementation of our plan of reorganization will result in an "ownership change." If so, certain future tax deductions, net operating loss carryforwards and other tax attributes will become impaired, with the extent of such impairment dependent on the impact of special tax law rules under section 382(l)(6) of the Internal Revenue Code, applicable to an "ownership change" that occurs as part of a chapter 11 plan.
We have determined that there is substantial doubt about our ability to continue as a going concern.
In accordance with the accounting guidance related to the presentation of financial statements, when preparing financial statements for each annual and interim reporting period, management evaluates whether there are conditions or events that, when considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. In making its assessment, management considered the Company’s current financial condition and liquidity sources, as well as the status of the Chapter 11 Cases.
As described in Item 1 under Voluntary Reorganization under Chapter 11, the Debtors commenced the Chapter 11 Cases under Chapter 11 of the Bankruptcy Code. The filing of the Chapter 11 Cases constituted an event of default that resulted in certain monetary obligations becoming immediately due and payable with respect to the secured credit facility and the senior unsecured notes. The filing of the Chapter 11 Cases also constituted an event of default with respect to certain property-level debt of the Operating Partnership’s subsidiaries, which may have resulted in automatic acceleration of certain monetary obligations or may give the applicable lender the right to accelerate such amounts.
Given the acceleration of the senior secured credit facility, the senior unsecured notes and certain property-level debt, as well as the inherent risks, unknown results and inherent uncertainties associated with the bankruptcy process and the direct correlation between these matters and our ability to satisfy our financial obligations that may arise, the Company believes that there is substantial doubt that it will continue to operate as a going concern within one year after the date these consolidated financial statements are issued. The Company’s ability to continue as a going concern is contingent upon its ability to successfully implement the Amended Plan set forth in the Amended RSA, which is pending approval of the Bankruptcy Court. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the consolidated financial statements do not reflect any adjustments related to the recoverability of assets and satisfaction of liabilities that might be necessary should the Company be unable to continue as a going concern.
RISKS RELATED TO REAL ESTATE INVESTMENTS AND OUR BUSINESS
The current pandemic of the novel coronavirus, or COVID-19 has, and could continue to, materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance, as could any future outbreak of another highly infectious or contagious disease.
Since being reported in December 2019, COVID-19 spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19.
The COVID-19 pandemic has had, and may continue to have, repercussions across regional and global economies and financial markets. The outbreak of COVID-19 in many countries, including the United States, has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and, as cases of COVID-19 have continued to be identified in additional countries, many - including the United States - have reacted by instituting quarantines, mandating business and school closures and restricting travel.
Certain states and cities, including where we own properties and where our corporate headquarters is located, reacted by instituting quarantines, restrictions on travel, “shelter-in-place” rules, restrictions on types of business that may continue to operate, and/or restrictions on the types of construction projects that may continue. The Company cannot predict if additional states and cities will implement similar restrictions or when any such new restrictions might be lifted. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including the retail industry in which the Company and our tenants operate.
A majority of our tenants implemented temporary closures and/or shortened the operating hours of their stores for a period of time and requested rent deferral or rent abatement during this pandemic or have failed to pay rent. In addition, state, local or industry-initiated efforts, such as tenant rent freezes, or governmental or court-imposed delays in the processing of landlord initiated commercial eviction and collection actions in various jurisdictions in light of the COVID-19 pandemic, may also affect our ability to collect rent or enforce remedies for the failure to pay rent. We believe our tenants do not have a contractual right to cease paying rent due to government-mandated closures and, subject to negotiated resolutions of rent deferral requests that we have entered into, and may continue to enter into with certain tenants, we intend to enforce our rights under our lease agreements. However, COVID-19 and the related governmental orders present fairly novel situations for which the ultimate legal outcome cannot be assured, and it is possible future governmental action could impact our rights under the lease agreements. The extent of tenant requests and actions, and the resulting impact to the Company’s results of operations and cash flows, is uncertain and cannot be predicted.
The COVID-19 pandemic, or a future pandemic, could also have further material and adverse effects on our ability to successfully operate and on our financial condition, results of operations and cash flows due to, among other factors:
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complete or partial closures of, or other operational issues at, one or more of our properties beyond those that have already occurred resulting from government or tenant action;
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the reduced economic activity severely impacts our tenants' businesses, financial condition and liquidity and may cause one or more of our tenants to be unable to meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations;
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the reduced economic activity, as well as any lasting reduction in consumer activity at brick-and-mortar commercial establishments due to changed habits in response to the prolonged existence and threat of the COVID-19 pandemic, could result in a prolonged recession and could negatively impact consumer discretionary spending;
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difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis and our tenants' ability to fund their business operations and meet their obligations to us;
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permitting, inspections and reviews by jurisdictional planning commissions and authorities is also likely to be delayed or postponed which could materially impact the timeline and budgets for completing redevelopments;
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projects in our redevelopment pipeline may not be pursued or may be completed later or with higher costs than anticipated, potentially causing a loss that exceeds our investment in the project;
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the financial impact of the COVID-19 pandemic could negatively impact our future compliance with financial covenants of our credit facility, indentures and other recourse and non-recourse debt agreements and result in a default and potentially an acceleration of indebtedness, which non-compliance could negatively impact our ability to make additional borrowings under our revolving credit facility and pay dividends;
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any additional impairments in value of our tangible assets and intangible lease assets that could be recorded as a result of weaker economic conditions;
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a deterioration in our or our tenants' ability to operate in affected areas or delays in the supply of products or services to us or our tenants from vendors that are needed for our or our tenants' efficient operations could adversely affect our operations and those of our tenants;
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the ability to renew leases or re-lease vacant spaces on favorable terms, or at all; and
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the potential negative impact on the health of our personnel, particularly if a significant number of them are impacted, could result in a deterioration in our ability to ensure business continuity during this disruption.
The extent to which the COVID-19 pandemic impacts our operations and those of our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Additional closures by our tenants of their stores and early terminations by our tenants of their leases could further reduce our cash flows, which could impact our ability to resume paying dividends to our stockholders at any point in the future. The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic. The COVID-19 pandemic presents material uncertainty and risk with respect to our financial condition, results of operations, cash flows and performance.
Real property investments are subject to various risks, many of which are beyond our control, which could cause declines in the operating revenues and/or the underlying value of one or more of our Properties.
A number of factors may decrease the income generated by a retail shopping center property, including:
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national, regional and local economic climates, which may be negatively impacted by loss of jobs, production slowdowns, adverse weather conditions, natural disasters, acts of violence, war, riots or terrorism, declines in residential real estate activity and other factors which tend to reduce consumer spending on retail goods;
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pandemic outbreaks, including COVID-19, or the threat of pandemic outbreaks, which could cause customers of our tenants to avoid public places where large crowds are in attendance, such as shopping centers and related entertainment, hotel, office or restaurant properties operated by our tenants;
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adverse changes in levels of consumer spending, consumer confidence and seasonal spending (especially during the holiday season when many retailers generate a disproportionate amount of their annual profits);
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local real estate conditions, such as an oversupply of, or reduction in demand for, retail space or retail goods, and the availability and creditworthiness of current and prospective tenants;
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increased operating costs, such as increases in repairs and maintenance, real property taxes, utility rates and insurance premiums;
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delays or cost increases associated with the opening of new properties or redevelopment and expansion of properties, due to higher than estimated construction costs, cost overruns, delays in receiving zoning, occupancy or other governmental approvals, lack of availability of materials and labor, weather conditions, and similar factors which may be outside our ability to control;
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perceptions by retailers or shoppers of the safety, convenience and attractiveness of the shopping center; and
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the convenience and quality of competing retail properties and other retailing options, such as the internet and the adverse impact of online sales.
In addition, other factors may adversely affect the value of our Properties without affecting their current revenues, including:
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adverse changes in governmental regulations, such as local zoning and land use laws, environmental regulations or local tax structures that could inhibit our ability to proceed with development, expansion or renovation activities that otherwise would be beneficial to our Properties;
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potential environmental or other legal liabilities that reduce the amount of funds available to us for investment in our Properties;
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any inability to obtain sufficient financing (including construction financing, permanent debt, secured and unsecured notes issuances, lines of credit and term loans), or the inability to obtain such financing on commercially favorable terms, to fund repayment of maturing loans, new developments, acquisitions, and property redevelopments, expansions and renovations which otherwise would benefit our Properties; and
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an environment of rising interest rates, which could negatively impact both the value of commercial real estate such as retail shopping centers and the overall retail climate.
Illiquidity of real estate investments could significantly affect our ability to respond to adverse changes in the performance of our Properties and harm our financial condition.
Substantially all our consolidated assets consist of investments in real properties. Because real estate investments are relatively illiquid, our ability to quickly sell one or more Properties in our portfolio in response to changing economic, financial and investment conditions is limited. The real estate market is affected by many factors, such as general economic
conditions, availability of financing, interest rates and other factors, including supply and demand for space, that are beyond our control. We cannot predict whether we will be able to sell any Property for the price or on the terms we set, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a Property. In addition, current economic and capital market conditions might make it more difficult for us to sell Properties or might adversely affect the price we receive for Properties that we do sell, as prospective buyers might experience increased costs of debt financing or other difficulties in obtaining debt financing.
Moreover, there are some limitations under federal income tax laws applicable to REITs that limit our ability to sell assets. In addition, because many of our Properties are mortgaged to secure our debts, we may not be able to obtain a release of a lien on a mortgaged Property without the payment of the associated debt and/or a substantial prepayment penalty, or transfer of debt to a buyer, which restricts our ability to dispose of a Property, even though the sale might otherwise be desirable. Furthermore, the number of prospective buyers interested in purchasing shopping centers is limited. Therefore, if we want to sell one or more of our Properties, we may not be able to dispose of it in the desired time period and may receive less consideration than we originally invested in the Property.
Before a Property can be sold, we may be required to make expenditures to correct defects or to make improvements. We cannot assure you that we will have funds available to correct those defects or to make those improvements, and if we cannot do so, we might not be able to sell the Property, or might be required to sell the Property on unfavorable terms. In acquiring a property, we might agree to provisions that materially restrict us from selling that property for a period of time or impose other restrictions, such as limitations on the amount of debt that can be placed or repaid on that property. These factors and any others that would impede our ability to respond to adverse changes in the performance of our Properties could adversely affect our financial condition and results of operations.
We may elect not to proceed with certain developments, redevelopments or expansion projects once they have been undertaken, resulting in charges that could have a material adverse effect on our results of operations for the period in which the charge is taken.
We intend to pursue developments, redevelopments and expansion activities as opportunities arise. In connection with any developments, redevelopments or expansion, we will incur various risks, including the risk that developments, redevelopments or expansion opportunities explored by us may be abandoned for various reasons including, but not limited to, credit disruptions that require the Company to conserve its cash until the capital markets stabilize or alternative credit or funding arrangements can be made. Developments, redevelopments or expansions also include the risk that construction costs of a project may exceed original estimates, possibly making the project unprofitable. Other risks include the risk that we may not be able to refinance construction loans which are generally with full recourse to us, the risk that occupancy rates and rents at a completed project will not meet projections and will be insufficient to make the project profitable, and the risk that we will not be able to obtain Anchor, mortgage lender and property partner approvals for certain expansion activities.
When we elect not to proceed with a development opportunity, the development costs ordinarily are charged against income for the then-current period. Any such charge could have a material adverse effect on our results of operations for the period in which the charge is taken.
Certain of our Properties are subject to ownership interests held by third parties, whose interests may conflict with ours and thereby constrain us from taking actions concerning these Properties which otherwise would be in the best interests of the Company and our stockholders.
We own partial interests in 13 malls, 7 associated centers, 6 community centers, 2 office buildings, a hotel development, a residential development and 4 self-storage facilities. We have interests in 5 malls, 1 associated center, 2 community centers, a hotel development, a residential development and four self-storage facilities that are all owned by unconsolidated joint ventures and are managed by a property manager that is affiliated with the third-party partner, which receives a fee for its services. The third-party partner of each of these Properties controls the cash flow distributions, although our approval is required for certain major decisions. We have interests in two malls that are owned by consolidated joint ventures and managed by a property manager that is affiliated with the third-party partner, which receives a fee for its services.
Where we serve as managing general partner (or equivalent) of the entities that own our Properties, we may have certain fiduciary responsibilities to the other owners of those entities. In certain cases, the approval or consent of the other owners is required before we may sell, finance, expand or make other significant changes in the operations of such Properties. To the extent such approvals or consents are required, we may experience difficulty in, or may be prevented from, implementing our plans with respect to expansion, development, financing or other similar transactions with respect to such Properties.
With respect to those Properties for which we do not serve as managing general partner (or equivalent), we do not have day-to-day operational control or control over certain major decisions, including leasing and the timing and amount of distributions, which could result in decisions by the managing entity that do not fully reflect our interests. This includes decisions relating to the requirements that we must satisfy in order to maintain our status as a REIT for tax purposes. However, decisions relating to sales, expansion and disposition of all or substantially all of the assets and financings are subject to approval by the Operating Partnership.
Bankruptcy of joint venture partners could impose delays and costs on us with respect to the jointly owned retail Properties.
In addition to the possible effects on our joint ventures of our bankruptcy filing, the bankruptcy of one of the other investors in any of our jointly owned shopping centers could materially and adversely affect the relevant Property or Properties. Under the bankruptcy laws, we would be precluded from taking some actions affecting the estate of the other investor without prior approval of the bankruptcy court, which would, in most cases, entail prior notice to other parties and a hearing in the bankruptcy court. At a minimum, the requirement to obtain court approval may delay the actions we would or might want to take. If the relevant joint venture through which we have invested in a Property has incurred recourse obligations, the discharge in bankruptcy of one of the other investors might result in our ultimate liability for a greater portion of those obligations than we would otherwise bear.
We may be unable to lease space in our properties on favorable terms, or at all.
Our results of operations depend on our ability to continue to lease space in our properties, including vacant space and re-leasing space in properties where leases are expiring, optimizing our tenant mix, or leasing properties on economically favorable terms. Because we have leases expiring annually, we are continually focused on leasing our properties. Similarly, we are pursuing a strategy of replacing expiring short-term leases with long-term leases. For more information on lease expirations see Mall Lease Expirations and Other Property Type Lease Expirations.
There can be no assurance that our leases will be renewed or that vacant space will be re-let at rates equal to or above the current average net effective rental rates or that substantial rent abatements, tenant improvements, early termination rights or below market renewal options will not be offered to attract new tenants or retain existing tenants. If the rental rates decrease, if our existing tenants do not renew their leases or if we do not re-let a significant portion of our available space and space for which leases will expire, our financial condition and results of operations could be adversely affected.
We identified a material weakness in internal control over financial reporting. We may not remediate this material weakness on a timely basis or may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal control over financial reporting, which may result in material misstatements of our financial statements or cause us to fail to meet our reporting obligations. As a result, stockholders could lose confidence in our financial and other public reporting, which would then be likely to negatively affect our business and the market price of our securities.
A material weakness in internal control over financial reporting has been identified. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. See Part I, Item 4 above for further details. We are planning to remediate the material weakness by hiring additional personnel to enable the Company and the Operating Partnership to meet their financial reporting requirements, and we may utilize outside advisors to assist on a short-term basis. These remediation measures may be time consuming and costly, and might place significant demands on our financial, accounting and operational resources. In addition, there is no assurance that we will be successful in hiring the necessary personnel in a timely manner, or at all.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports and is important in helping to prevent mistakes in our financial statements and financial fraud. Any failure to implement required new or improved controls, or difficulties encountered in our implementation to successfully remediate our existing or any future material weaknesses in our internal control over financial reporting, or identification of any additional material weaknesses that may exist, may adversely affect the accuracy and timing of our financial reporting, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, we may be unable to prevent fraud, investors may lose confidence in our financial reporting, and the price of our securities may decline as a result.
Any testing conducted by us, or any testing conducted by our independent registered public accounting firm, may reveal additional deficiencies in our internal control over financial reporting that are deemed to be new material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention
or improvement. In addition, our reporting obligations as a public company could place a significant strain on our management, operational and financial resources and systems for the foreseeable future and may cause us to fail to timely achieve and maintain the adequacy of its internal control over financial reporting.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. There is no assurance that the measures we are currently undertaking or may take in the future will be sufficient to maintain effective internal controls or to avoid potential future deficiencies in internal control, including material weaknesses.
We may incur significant costs related to compliance with environmental laws, which could have a material adverse effect on our results of operations, cash flows and the funds available to us to pay dividends.
Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal or remediation of petroleum, certain hazardous or toxic substances on, under or in such real estate. Such laws typically impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such substances. The costs of remediation or removal of such substances may be substantial. The presence of such substances, or the failure to promptly remove or remediate such substances, may adversely affect the owner's or operator's ability to lease or sell such real estate or to borrow using such real estate as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at the disposal or treatment facility, regardless of whether such facility is owned or operated by such person. Certain laws also impose requirements on conditions and activities that may affect the environment or the impact of the environment on human health. Failure to comply with such requirements could result in the imposition of monetary penalties (in addition to the costs to achieve compliance) and potential liabilities to third parties. Among other things, certain laws require abatement or removal of friable and certain non-friable asbestos-containing materials in the event of demolition or certain renovations or remodeling. Certain laws regarding asbestos-containing materials require building owners and lessees, among other things, to notify and train certain employees working in areas known or presumed to contain asbestos-containing materials. Certain laws also impose liability for release of asbestos-containing materials into the air and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with asbestos-containing materials. In connection with the ownership and operation of properties, we may be potentially liable for all or a portion of such costs or claims.
All of our Properties (but not properties for which we hold an option to purchase but do not yet own) have been subject to Phase I environmental assessments or updates of existing Phase I environmental assessments. Such assessments generally consisted of a visual inspection of the Properties, review of federal and state environmental databases and certain information regarding historic uses of the Property and adjacent areas and the preparation and issuance of written reports. Some of the Properties contain, or contained, underground storage tanks used for storing petroleum products or wastes typically associated with automobile service or other operations conducted at the Properties. Certain Properties contain, or contained, dry-cleaning establishments utilizing solvents. Where believed to be warranted, samplings of building materials or subsurface investigations were undertaken. At certain Properties, where warranted by the conditions, we have developed and implemented an operations and maintenance program that establishes operating procedures with respect to asbestos-containing materials. The cost associated with the development and implementation of such programs was not material. We have also obtained environmental insurance coverage at certain of our Properties.
We believe that our Properties are in compliance in all material respects with all federal, state and local ordinances and regulations regarding the handling, discharge and emission of hazardous or toxic substances. As of December 31, 2020, we have recorded in our consolidated financial statements a liability of $2.8 million related to potential future asbestos abatement activities at our Properties which are not expected to have a material impact on our financial condition or results of operations. We have not been notified by any governmental authority, and are not otherwise aware, of any material noncompliance, liability or claim relating to hazardous or toxic substances in connection with any of our present or former Properties. Therefore, we have not recorded any liability related to hazardous or toxic substances. Nevertheless, it is possible that the environmental assessments available to us do not reveal all potential environmental liabilities. It is also possible that subsequent investigations will identify material contamination, that adverse environmental conditions have arisen subsequent to the performance of the environmental assessments, or that there are material environmental liabilities of which management is unaware. Moreover, no assurances can be given that (i) future laws, ordinances or regulations will
not impose any material environmental liability or (ii) the current environmental condition of the Properties has not been or will not be affected by tenants and occupants of the Properties, by the condition of properties in the vicinity of the Properties or by third parties unrelated to us, the Operating Partnership or the relevant Property's partnership.
Possible terrorist activity or other acts of violence could adversely affect our financial condition and results of operations.
Future terrorist attacks in the United States, and other acts of violence, including domestic or international terrorism or war, might result in declining consumer confidence and spending, which could harm the demand for goods and services offered by our tenants and the values of our Properties, and might adversely affect an investment in our securities. A decrease in retail demand could make it difficult for us to renew or re-lease our Properties at lease rates equal to or above historical rates and, to the extent our tenants are affected, could adversely affect their ability to continue to meet obligations under their existing leases. Terrorist activities also could directly affect the value of our Properties through damage, destruction or loss. Furthermore, terrorist acts might result in increased volatility in national and international financial markets, which could limit our access to capital or increase our cost of obtaining capital.
We face possible risks associated with climate change.
We cannot determine with certainty whether global warming or cooling is occurring and, if so, at what rate. To the extent climate change causes changes in weather patterns, our properties in certain markets and regions could experience increases in storm intensity and rising sea levels. Over time, these conditions could result in volatile or decreased demand for retail space at certain of our Properties or, in extreme cases, our inability to operate the Properties at all. Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) insurance on favorable terms and increasing the cost of energy and snow removal at our Properties. Moreover, compliance with new laws or regulations related to climate change, including compliance with "green" building codes, may require us to make improvements to our existing Properties or increase taxes and fees assessed on us or our Properties. At this time, there can be no assurance that climate change will not have a material adverse effect on us.
The loss of one or more significant tenants, due to bankruptcies or as a result of consolidations in the retail industry, could adversely affect both the operating revenues and value of our Properties.
We could be adversely affected by the bankruptcy, early termination, sales performance, or closing of tenants and Anchors. Certain of our lease agreements include co-tenancy and/or sales-based kick-out provisions which allow a tenant to pay a reduced rent amount and, in certain instances, terminate the lease, if we fail to maintain certain occupancy levels or retain specified named Anchors, or if the tenant does not achieve certain specified sales targets. If occupancy or tenant sales do not meet or fall below certain thresholds, rents we are entitled to receive from our retail tenants could be reduced. The bankruptcy of a tenant could result in the termination of its lease, which would lower the amount of cash generated by that Property. Replacing tenants with better performing, emerging retailers may take longer than our historical experience of re-tenanting due to their lack of infrastructure and limited experience in opening stores as well as the significant competition for such emerging brands. In addition, if a department store operating as an Anchor at one of our Properties were to cease operating, we may experience difficulty and delay and incur significant expense in replacing the Anchor, re-tenanting, or otherwise re-merchandising the use of the Anchor space. This difficulty could be exacerbated if the Anchor space is owned by a third party and we are not able to acquire the space, if the third party’s plans to lease or redevelop the space do not align with our interests or the third party does not act in a timely manner to lease or redevelop the space. In addition, the Anchor’s closing may lead to reduced customer traffic and lower mall tenant sales. As a result, we may also experience difficulty or delay in leasing spaces in areas adjacent to the vacant Anchor space. The early termination or closing of tenants or Anchors for reasons other than bankruptcy could have a similar impact on the operations of our Properties, although in the case of early terminations we may benefit in the short-term from lease termination income.
Most recently, certain traditional department stores have experienced challenges including limited opportunities for new investment/openings, declining sales, and store closures. Department stores' market share is declining, and their ability to drive traffic has substantially decreased. Despite our Malls traditionally being driven by department store Anchors, in the event of a need for replacement, it has become necessary to consider non-department store Anchors. Certain of these non-department store Anchors may demand higher allowances than a standard mall tenant due to the nature of the services/products they provide.
Clauses in leases with certain tenants in our properties frequently may include inducements, such as reduced rent and tenant allowance payments, which can reduce our rents and Funds From Operations (“FFO”), and adversely impact our financial condition and results of operation.
The leases for a number of the tenants in our properties have co-tenancy clauses that allow those tenants to pay reduced rent until occupancy at the respective property regains certain thresholds and/or certain named co-tenants open stores at the respective property. Additionally, some tenants may have rent abatement clauses that delay rent commencement for a prolonged period of time after initial occupancy. The effect of these clauses reduces our rents and FFO while they are applicable. We expect to continue to offer co-tenancy and rent abatement clauses in the future to attract tenants to our properties. As a result, our financial condition and results of operations may be adversely impacted.
Additionally, the prevalence and volume of such leases is likely to increase at an unpredictable rate in light of the recent proliferation of bankruptcy filings and closures by retailers occupying “big box”, anchor or other traditionally large spaces which can have an adverse impact on our financial condition and results of operations.
We are in a competitive business.
There are numerous shopping facilities that compete with our Properties in attracting retailers to lease space. Our ability to attract tenants to our Properties and lease space is important to our success, and difficulties in doing so can materially impact our Properties' performance. The existence of competing shopping centers could have a material adverse impact on our ability to develop or operate Properties, lease space to desirable Anchors and tenants, and on the level of rents that can be achieved. In addition, retailers at our Properties face continued competition from shopping through various means and channels, including via the internet, lifestyle centers, value and outlet centers, wholesale and discount shopping clubs, and television shopping networks. Competition of this type could adversely affect our revenues and cash available for distribution to shareholders.
As new technologies emerge, the relationship among customers, retailers, and shopping centers are evolving on a rapid basis and we may not be able to adapt to such new technologies and relationships on a timely basis. Our relative size may limit the capital and resources we are willing to allocate to invest in strategic technology to enhance the mall experience, which may make our Malls relatively less desirable to anchors, mall tenants, and consumers. Additionally, a small but increasing number of tenants utilize our Malls as showrooms or as part of an omni-channel strategy (allowing customers to shop seamlessly through various sales channels). As a result, customers may make purchases through other sales channels during or immediately after visiting our Malls, with such sales not being captured currently in our tenant sales figures or monetized in our minimum or overage rents.
We compete with other major real estate investors with significant capital for attractive investment opportunities. These competitors include other REITs, investment banking firms, and private and institutional investors, some of whom have greater financial resources or have different investment criteria than we do. In particular, there is competition to acquire, develop, or redevelop highly productive retail properties. This could become even more severe as competitors gain size and economies of scale as a result of merger and consolidation activity. This competition may impair our ability to acquire, develop, or redevelop suitable properties, and to attract key retailers, on favorable terms in the future.
Increased operating expenses, decreased occupancy rates, tenants converting to gross leases and requesting deferrals and rent abatements may not allow us to recover the majority of our CAM, real estate taxes and other operating expenses from our tenants, which could adversely affect our financial position, results of operations and funds available for future distributions.
Energy costs, repairs, maintenance and capital improvements to common areas of our Properties, janitorial services, administrative, property and liability insurance costs and security costs are typically allocable to our Properties' tenants. Our lease agreements typically provide that the tenant is liable for a portion of the CAM and other operating expenses. While historically our lease agreements provided for variable CAM provisions, the majority of our current leases require an equal periodic tenant reimbursement amount for our cost recoveries which serves to fix our tenants' CAM contributions to us. In these cases, a tenant will pay a fixed amount, or a set expense reimbursement amount, subject to annual increases, regardless of the actual amount of operating expenses. The tenant's payment remains the same regardless of whether operating expenses increase or decrease, causing us to be responsible for any excess amounts or to benefit from any declines. As a result, the CAM and tenant reimbursements that we receive may or may not allow us to recover a substantial portion of these operating costs.
There is also a trend of more tenants moving to gross leases, which provide that the tenant pays a single specified amount, with no additional payments for reimbursements of the tenant's portion of operating expenses. As a result, we are responsible for any increases in operating expenses, and benefit from any decreases in operating expenses.
Additionally, in the event that our Properties are not fully occupied, we would be required to pay the portion of any operating, redevelopment or renovation expenses allocable to the vacant space(s) that would otherwise typically be paid by the residing tenant(s).
Our Properties may be subject to impairment charges, which could impact our compliance with certain debt covenants and could otherwise adversely affect our financial results.
We monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, we assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from our probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, we adjust the carrying value of the long-lived asset to its estimated fair value and recognize an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of our long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that we estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the Property, and the number of years the Property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in our impairment analyses may not be achieved. During 2020, we recorded a loss on impairment of real estate totaling $213.4 million, which primarily related to six malls. See Note 17 to the consolidated financial statements for further details.
Breaches or other adverse cybersecurity incidents on our systems or those of our service providers or business partners could expose us to liability and lead to the loss or compromise of our information, including confidential information, sensitive information and intellectual property, and could result in a material adverse effect on our business and financial condition.
As a regular part of our business operations, we rely on IT systems and network infrastructure, including the Internet, to process, transmit and store electronic information and to manage or support a variety of our business processes, including financial transactions and maintenance of records. We rely on our own systems and also outsource some of our business requirements through service providers and other business partners pursuant to agreements. The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by internal actors, computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems and infrastructure - and those of our providers/partners - are essential to the operation of our business and our ability to perform day-to-day operations (including managing our building systems) and, in some cases, may be critical to the operations of certain of our tenants.
We have experienced adverse security incidents. All incidents experienced to date have been minor in scope and impact, were resolved quickly, had no material impact on the Company’s reputation, financial performance, customer or vendor relationships, and posed no material risk of potential litigation or regulatory investigations or actions. We expect unauthorized parties to continue to attempt to gain access to our systems or information, and/or those of our business partners and service providers. Cyber-attacks targeting our infrastructure could result in a full or partial disruption of our operations, as well as those of our tenants.
A security incident, breach or other significant disruption involving our IT networks and related systems could occur due to a virus or other harmful circumstance, intentional penetration or disruption of our information technology resources by a third party, natural disaster, hardware or software corruption or failure or error or poor product or vendor/developer selection (including a failure of security controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure, intentional or unintentional personnel actions (including the failure to follow our security protocols), or lost connectivity to our networked resources. Such occurrences could disrupt the proper functioning of our networks and systems; result in disruption of business operations and loss of service to our tenants and customers; result in significantly decreased revenues; result in increased costs associated in obtaining and maintaining cybersecurity investigations and testing, as well as implementing protective measures and systems; result in increased insurance premiums and operating costs; result in misstated financial reports and/or missed reporting deadlines; result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT; result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; result in our inability to maintain the building systems relied upon by our tenants for the efficient use of their leased space; require significant management attention and resources to remedy any damages that result; subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; subject us to regulatory investigations and actions; cause harm to our competitive position and business
value; and damage our reputation among our tenants and investors generally. Moreover, cyber-attacks perpetrated against our Anchors and tenants, including unauthorized access to customers’ credit card data and other confidential information, could subject us to significant litigation, liability and costs, adversely impact our reputation, or diminish consumer confidence and consumer spending and negatively impact our business.
The compromise of our or our business partners’ or service providers’ technology systems resulting in the loss, disclosure, misappropriation of, or access to, our information or that of our tenants, employees or business partners or failure to comply with ever-evolving regulatory obligations or contractual obligations with respect to such information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disruption to our operations and damage to our reputation, any or all of which could adversely affect our business. The costs to remediate breaches and similar system compromises that do occur could be material. In addition, as cybercriminals become more sophisticated, the cost of proactive defensive measures continues to increase.
Although we and our service providers/business partners have implemented processes, procedures and controls to help mitigate these risks, there can be no assurance that these measures, as well as our increased awareness of the risk of cyber incidents, will be effective or that attempted or actual security incidents, breaches or system disruptions that could be damaging to us or others will not occur. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to entirely mitigate this risk.
Pending litigation could distract our officers from attending to the Company’s business and could have a material adverse effect on our business, financial condition and results of operation.
The Company and certain of its officers and directors have been named as defendants in a consolidated putative securities class action lawsuit (“Securities Class Action Litigation”) and certain of its former and current directors have been named as defendants in eight shareholder derivative lawsuits (“Derivative Litigation”).
The complaint filed in the Securities Class Action Litigation alleges violations of the securities laws, including, among other things, that the defendants made certain materially false and misleading statements and omissions regarding the Company’s contingent liabilities, business, operations, and prospects. The plaintiffs seek compensatory damages and attorneys’ fees and costs, among other relief, but have not specified the amount of damages sought. The complaints filed in the Derivative Litigation allege, among other things, breaches of fiduciary duties, unjust enrichment, waste of corporate assets, and violations of the federal securities laws. The factual allegations upon which these claims are based are similar to the factual allegations made in the Securities Class Action Litigation described above. The complaints filed in the Derivative Litigation seek, among other things, unspecified damages and restitution for the Company from the individual defendants, the payment of costs and attorneys’ fees, and that the Company be directed to reform certain governance and internal procedures. See Item 3. Legal Proceedings for more information on both the Securities Class Action Litigation and Derivative Litigation.
We cannot assure you as to the outcome of these legal proceedings, including the amount of costs or other liabilities that will be incurred in connection with defending these claims or other claims that may arise in the future. To the extent that we incur material costs in connection with defending or pursuing these claims, or become subject to liability as a result of an adverse judgment or settlement of these claims, our results of operations and liquidity position could be materially and adversely affected. In addition, ongoing litigation may divert management’s attention and resources from the day-to-day operation of our business and cause reputational harm to us, either of which could have a material adverse effect on our business, financial condition and results of operations.
Certain agreements with prior owners of Properties that we have acquired may inhibit our ability to enter into future sale or refinancing transactions affecting such Properties, which otherwise would be in the best interests of the Company and our stockholders.
Certain Properties that we originally acquired from third parties had unrealized gain attributable to the difference between the fair market value of such Properties and the third parties' adjusted tax basis in the Properties immediately prior to their contribution of such Properties to the Operating Partnership pursuant to our acquisition. For this reason, a taxable sale by us of any of such Properties, or a significant reduction in the debt encumbering such Properties, could result in adverse tax consequences to the third parties who contributed these Properties in exchange for interests in the Operating Partnership. Under the terms of these transactions, we have generally agreed that we either will not sell or refinance such an acquired Property for a number of years in any transaction that would trigger adverse tax consequences for the parties from whom we acquired such Property, or else we will reimburse such parties for all or a portion of the additional taxes they are required to pay as a result of the transaction. Accordingly, these agreements may cause us not to engage in future sale or
refinancing transactions affecting such Properties, which otherwise would be in the best interests of the Company and our stockholders, or may increase the costs to us of engaging in such transactions.
Declines in economic conditions, including increased volatility in the capital and credit markets, could adversely affect our business, results of operations and financial condition.
An economic recession can result in extreme volatility and disruption of our capital and credit markets. The resulting economic environment may be affected by dramatic declines in the stock and housing markets, increases in foreclosures, unemployment and costs of living, as well as limited access to credit. This economic situation can, and most often will, impact consumer spending levels, which can result in decreased revenues for our tenants and related decreases in the values of our Properties. A sustained economic downward trend could impact our tenants' ability to meet their lease obligations due to poor operating results, lack of liquidity, bankruptcy or other reasons. Our ability to lease space and negotiate rents at advantageous rates could also be affected in this type of economic environment. Additionally, access to capital and credit markets could be disrupted over an extended period, which may make it difficult to obtain the financing we may need for future growth and/or to meet our debt service obligations as they mature. Any of these events could harm our business, results of operations and financial condition.
Uninsured losses could adversely affect our financial condition, and in the future our insurance may not include coverage for acts of terrorism.
We carry a comprehensive blanket policy for general liability, property casualty (including fire, earthquake and flood) and rental loss covering all of the Properties, with specifications and insured limits customarily carried for similar properties. However, even insured losses could result in a serious disruption to our business and delay our receipt of revenue. Furthermore, there are some types of losses, including lease and other contract claims, as well as some types of environmental losses, that generally are not insured or are not economically insurable. If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a Property, as well as the anticipated future revenues from the Property. If this happens, we, or the applicable Property's partnership, may still remain obligated under guarantees provided to the lender for any mortgage debt or other financial obligations related to the Property.
The general liability and property casualty insurance policies on our Properties currently include coverage for losses resulting from acts of terrorism, as defined by TRIPRA. While we believe that the Properties are adequately insured in accordance with industry standards, the cost of general liability and property casualty insurance policies that include coverage for acts of terrorism has risen significantly subsequent to September 11, 2001. The cost of coverage for acts of terrorism is currently mitigated by the Terrorism Risk Insurance Act (“TRIA”). In January 2015, Congress reinstated TRIA under the Terrorism Risk Insurance Program Reauthorization Act of 2015 ("TRIPRA") and extended the program through December 31, 2020. Under TRIPRA, the amount of terrorism-related insurance losses triggering the federal insurance threshold will be raised from $180 million in 2019 to $200 million in 2020. Additionally, the bill increases insurers' co-payments for losses exceeding their deductibles, in annual steps, from 19% in 2019 to 20% in 2020. Each of these changes may have the effect of increasing the cost to insure against acts of terrorism for property owners, such as the Company, notwithstanding the other provisions of TRIPRA. In December 2019, Congress further extended TRIPRA through December 31, 2027. If TRIPRA is not continued beyond 2027 or is significantly modified, we may incur higher insurance costs and experience greater difficulty in obtaining insurance that covers terrorist-related damages. Our tenants may also have similar difficulties.
RISKS RELATED TO DEBT AND FINANCIAL MARKETS
A deterioration of the capital and credit markets could adversely affect our ability to access funds and the capital needed to refinance debt or obtain new debt.
We are significantly dependent upon external financing to fund the growth of our business and ensure that we meet our debt servicing requirements. Our access to financing depends on the willingness of lending institutions to grant credit to us and conditions in the capital markets in general. An economic recession may cause extreme volatility and disruption in the capital and credit markets. We rely upon our credit facility as a source of funding for numerous transactions. Our access to these funds is dependent upon the ability of each of the participants to the credit facility to meet their funding commitments. When markets are volatile, access to capital and credit markets could be disrupted over an extended period of time and many financial institutions may not have the available capital to meet their previous commitments. The failure of one or more significant participants to our credit facility to meet their funding commitments could have an adverse effect on our financial condition and results of operations. This may make it difficult to obtain the financing we may need for future growth and/or to meet our debt service obligations as they mature. Although, prior to the commencement of our current Chapter 11 Cases, we have successfully obtained debt for refinancings and retirement of our maturing debt, acquisitions and the construction of new developments and redevelopments in the past, we cannot make any assurances as to whether we will be able to obtain debt in the future, or that the financing options available to us will be on favorable or acceptable terms.
Our indebtedness is substantial and could impair our ability to obtain additional financing.
Prior to the filing of the Chapter 11 Cases, we were a highly leveraged company. At December 31, 2020, our pro-rata share of consolidated and unconsolidated debt outstanding was approximately $4,388.7 million, which is net of unamortized deferred financing costs. Our total share of consolidated and unconsolidated debt maturing in 2021, 2022 and 2023 giving effect to all maturity extensions that are available at our election, was approximately $539.2 million, $498.4 million and $1,764.1 million, respectively. Additionally, we had $61.6 million of debt, at our share, which matured in 2019, related to a non-recourse loan that was in default. See Note 8 and Note 9 to the consolidated financial statements for more information.
Our leverage and the limitations imposed on us by our financing arrangements and debt service obligations could have important consequences. For example, it could:
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result in the acceleration of a significant amount of debt for non-compliance with the terms of such debt or, if such debt contains cross-default or cross-acceleration provisions, other debt;
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result in the loss of assets due to foreclosure or sale on unfavorable terms, which could create taxable income without accompanying cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Internal Revenue Code;
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materially impair our ability to borrow unused amounts under existing financing arrangements or to obtain additional financing or refinancing on favorable terms or at all;
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require us to dedicate a substantial portion of our cash flow to paying principal and interest on our indebtedness, reducing the cash flow available to fund our business, to pay dividends, including those necessary to maintain our REIT qualification, or to use for other purposes;
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increase our vulnerability to an economic downturn;
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limit our ability to withstand competitive pressures; or
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reduce our flexibility to respond to changing business and economic conditions.
If any of the foregoing occurs, our business, financial condition, liquidity, results of operations and prospects could be materially and adversely affected, and the trading price of our common stock or other securities could decline significantly.
The filing of the Chapter 11 Cases constituted an event of default that resulted in certain monetary obligations becoming immediately due and payable with respect to the secured credit facility and the senior unsecured notes. The filing of the Chapter 11 Cases also constituted an event of default with respect to certain property-level debt of the Operating Partnership’s subsidiaries, which may have resulted in the automatic acceleration of certain monetary obligations or may give the applicable lender the right to accelerate such amounts. Any efforts to enforce such payment obligations due under our debt instruments are subject to the applicable provisions of the Bankruptcy Code. See Note 2 and Liquidity and Capital Resources for additional information.
We may not be able to raise capital through financing activities.
Many of our assets are encumbered by property-level indebtedness; therefore, we may be limited in our ability to raise additional capital through property level or other financings. In addition, our ability to raise additional capital could be limited to refinancing existing secured mortgages before their maturity date which may result in yield maintenance or other prepayment penalties to the extent that the mortgage is not open for prepayment at par.
Rising interest rates could both increase our borrowing costs, thereby adversely affecting our cash flows and the amounts available for distributions to our stockholders, and decrease our stock price, if investors seek higher yields through other investments.
An environment of rising interest rates could lead holders of our securities to seek higher yields through other investments, which could adversely affect the market price of our stock. As noted above, we currently have suspended all distributions on our outstanding common and preferred stock, as well as on outstanding Operating Partnership Units, which will magnify such adverse impacts. One of the factors that has likely influenced the price of our stock in public markets during prior periods when we were making such distributions is the annual distribution rate we paid as compared with the yields on alternative investments. Further, numerous other factors, such as governmental regulatory action and tax laws, could have a significant impact on the future market price of our stock. In addition, increases in market interest rates could result in increased borrowing costs for us, which could be expected to adversely affect our cash flow and the amounts available for distributions to our stockholders and the Operating Partnership’s unitholders.
As of December 31, 2020, our total share of consolidated and unconsolidated variable-rate debt was $1,304.5 million. Increases in interest rates will increase our cash interest payments on the variable-rate debt we have outstanding from time to time. If we do not have sufficient cash flow from operations, we might not be able to make all required payments of principal and interest on our debt, which could result in a default or have a material adverse effect on our financial condition and results of operations, and which might have further adverse effects on our cash flow and our ability to make distributions to shareholders. These significant debt payment obligations might also require us to use a significant portion of our cash flow from operations to make interest and principal payments on our debt rather than for other purposes such as working capital, capital expenditures or any resumption of distributions to holders of our equity securities.
We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined.
It is also important to note that our variable-rate debt uses LIBOR as a benchmark for establishing the rate. LIBOR is the subject of recent national, international and other regulatory guidance and proposals for reform. These reforms and other pressures may cause LIBOR to disappear entirely or to perform differently than in the past. The consequences of these developments cannot be entirely predicted but could include an increase in the cost of our variable-rate debt.
In July 2017, the Financial Conduct Authority, the authority that regulates LIBOR, announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee (ARRC) has proposed that the Secured Overnight Financing Rate (SOFR) is the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan to SOFR from USD-LIBOR and organizations are currently working on industry wide and company specific transition plans as it relates to derivatives and cash markets exposed to USD-LIBOR. There is no guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions, significant increases in benchmark rates, or financing costs to borrowers. We have material contracts that are indexed to USD-LIBOR and we are monitoring this activity and evaluating the related risks.
The agreements governing our debt, including our senior credit facility and the indentures governing our Notes, contain various covenants that impose restrictions on us that may affect our ability to operate our business.
The filing of the Chapter 11 Cases constituted an event of default that resulted in certain monetary obligations becoming immediately due and payable with respect to the secured credit facility and the Notes. The filing of the Chapter 11 Cases also constituted an event of default with respect to certain property-level debt of the Operating Partnership’s subsidiaries, which may have resulted in the automatic acceleration of certain monetary obligations or may give the applicable lender the right to accelerate such amounts. Due to the Chapter 11 Cases, however, the creditors’ ability to exercise remedies against the Debtors under their respective credit agreements and debt instruments was stayed as of the date of the Chapter 11 petition and continues to be stayed.
Other agreements that we enter into governing our debt, including in connection with the Chapter 11 Cases, have or will contain covenants that impose restrictions on us. These restrictions on our ability to operate our business could harm our business by, among other things, limiting our ability to take advantage of corporate opportunities. Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants. Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions.
We may not be able to generate sufficient cash flow to meet our debt service obligations.
Our ability to meet our debt service obligations on, and to refinance, our indebtedness, and to fund our operations, working capital, acquisitions, capital expenditures and other important business uses, depends on our ability to generate sufficient cash flow in the future. To a certain extent, our cash flow is subject to general economic, industry, financial, competitive, operating, legislative, regulatory and other factors, many of which are beyond our control.
We cannot be certain that our business will generate sufficient cash flow from operations or that future sources of cash will be available to us in an amount sufficient to enable us to meet our debt service obligations on our indebtedness, or to fund our other important business uses. Additionally, if we incur additional indebtedness in connection with future acquisitions or development projects or for any other purpose, our debt service obligations could increase significantly and our ability to meet those obligations could depend, in large part, on the returns from such acquisitions or projects, as to which no assurance can be given.
We may need to refinance all or a portion of our indebtedness, at or prior to maturity. Our ability to refinance our indebtedness or obtain additional financing will depend on, among other things:
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our financial condition, liquidity, results of operations and prospects and market conditions at the time; and
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restrictions in the agreements governing our indebtedness.
As a result, we may not be able to refinance any of our indebtedness, on favorable terms, or at all.
If we do not generate sufficient cash flow from operations, and additional borrowings or refinancings are not available to us, we may be unable to meet all of our debt service obligations. As a result, we would be forced to take other actions to meet those obligations, such as selling Properties, raising equity or delaying capital expenditures, any of which could have a material adverse effect on us. Furthermore, we cannot be certain that we will be able to effect any of these actions on favorable terms, or at all.
Despite our substantial outstanding indebtedness, we may still incur significantly more indebtedness in the future, which would exacerbate any or all of the risks described above.
We may be able to incur substantial additional indebtedness in the future. Although the agreements governing our existing revolving credit facility, term loans, Notes and certain other indebtedness do, and the agreements governing our financing arrangements upon emergence from the Chapter 11 Cases will, limit our ability to incur additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions could be substantial. To the extent that we incur substantial additional indebtedness in the future, the risks associated with our substantial leverage described above, including our inability to meet our debt service obligations, would be exacerbated.
Federal and state statutes allow courts, under specific circumstances, to void guarantees and require holders of indebtedness and lenders to return payments received from guarantors.
Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee, such as the limited guarantee of the Notes provided by CBL or any future guarantee issued by any subsidiary of the Operating Partnership, could be voided and required to be returned to the guarantor, or to a fund for the benefit of the creditors of the guarantor, if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by its guarantee (i) received less than reasonably equivalent value or fair consideration for the incurrence of the guarantee and (ii) one of the following was true with respect to the guarantor:
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the guarantor was insolvent or rendered insolvent by reason of the incurrence of the guarantee;
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the guarantor was engaged in a business or transaction for which the guarantor's remaining assets constituted unreasonably small capital; or
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the guarantor intended to incur, or believed that it would incur, debts beyond its ability to pay those debts as they mature.
In addition, any claims in respect of a guarantee could be subordinated to all other debts of that guarantor under principles of "equitable subordination," which generally require that the claimant must have engaged in some type of inequitable conduct, the misconduct must have resulted in injury to the creditors of the debtor or conferred an unfair advantage on the claimant, and equitable subordination must not be inconsistent with other provisions of the U.S. Bankruptcy Code.
The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, a guarantor would be considered insolvent if:
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the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets;
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the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they became absolute and mature; or
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it could not pay its debts as they become due.
The court might also void such guarantee, without regard to the above factors, if it found that a guarantor entered into its guarantee with actual or deemed intent to hinder, delay, or defraud its creditors.
A court would likely find that a guarantor did not receive reasonably equivalent value or fair consideration for its guarantee unless it benefited directly or indirectly from the issuance or incurrence of such indebtedness. If a court voided such guarantee, holders of the indebtedness and lenders would no longer have a claim against such guarantor or the benefit of the assets of such guarantor constituting collateral that purportedly secured such guarantee. In addition, the court might direct holders of the indebtedness and lenders to repay any amounts already received from a guarantor.
RISKS RELATED TO DIVIDENDS AND OUR STOCK
A delisting of our stock from the NYSE could have materially adverse effects on our business, financial condition and results of operations.
On November 2, 2020, the NYSE announced that it had suspended trading in the Company’s common stock due to its “abnormally low” trading price levels, and had determined to commence proceedings to delist the Company’s common stock, as well as the depositary shares each representing a 1/10th fractional share of the Company’s Series D Preferred Stock and the depositary shares each representing a 1/10th fractional share of the Company’s Series E Preferred Stock. While the Company has appealed this decision in accordance with NYSE rules, and the appeal is still in process, there can be no assurance that an appeal will be successful. In the meantime, the Company’s common stock and the depositary shares are currently trading on the OTC Markets, operated by the OTC Markets Group, Inc., under the symbols “CBLAQ”, “CBLDQ” and “CBLEQ”, respectively. The over-the-counter markets are a more limited market than the NYSE and it is likely that there will be significantly less liquidity in the trading of our common and preferred stock.
The suspension of trading and potential delisting of our common stock could have material adverse effects on our business, financial condition and results of operations due to, among other things:
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reduced trading liquidity and market prices for our common and preferred stock ;
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decreased number of institutional and other investors willing to hold or acquire our stock, coverage by securities analysts, market making activity and information available concerning trading prices and volume, as well as fewer broker-dealers willing to execute trades in our stock, thereby further restricting our ability to obtain equity financing;
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resulting event of default or noncompliance under certain of our debt facilities and other agreements; and
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reduced ability to retain, attract and motivate our directors, officers and employees by means of equity compensation.
Our post-bankruptcy capital structure is yet to be determined, and any changes to our capital structure may have a material adverse effect on existing debt and security holders.
Our post-bankruptcy capital structure has yet to be determined and will likely be set pursuant to a Chapter 11 plan that requires Bankruptcy Court approval. The reorganization of our capital structure may include exchanges of new debt or equity securities for our existing debt, equity securities, and claims against us. Such new debt may be issued at interest rates, payment schedules and maturities different than our existing debt securities. Existing equity securities are subject to a high risk of being cancelled or replaced with new equity securities representing a significantly reduced equity interest in our Company following completion of the reorganization. The success of a reorganization through any such exchanges or modifications will depend on approval by the Bankruptcy Court and the willingness of sufficient numbers of existing debt and security holders holding sufficient amounts of debt to agree to the exchange or modification, subject to the provisions of the Bankruptcy Code, and there can be no guarantee of success. If such exchanges or modifications are successful, holders of our debt or of other claims against us may find their holdings no longer have any value or are materially reduced in value, or they may be converted to equity and be diluted or may be modified or replaced by debt with a principal amount that is less than the outstanding principal amount, longer maturities and reduced interest rates. Holders of our common stock may also find that their holdings no longer have any value and face highly uncertain or no recoveries under a plan. There can be no assurance that any new debt or equity securities will maintain their value at the time of issuance. If existing debt or equity holders are adversely affected by a reorganization, it may adversely affect our ability to issue new debt or equity in the future. Although we cannot predict how the claims and interests of stakeholders in the Chapter 11 Cases, including holders of common stock, will ultimately be resolved, we expect that common stock holders will not receive a recovery through any Chapter 11 plan unless the holders of more senior claims and interests, such as secured and unsecured indebtedness (which indebtedness is currently trading at a significant discount), are paid in full. Consequently, there is a significant risk that the holders of our common stock would receive no recovery in the Chapter 11 Cases and that our common stock will be worthless.
We have suspended paying dividends on our common stock and preferred stock and we cannot assure you of our ability to pay dividends in the future or the amount of any dividends.
Prior to the commencement of the Chapter 11 Cases, our board of directors determined to suspend paying a dividend on our common stock and preferred stock, as well as distributions to the Operating Partnership’s outstanding common units, preferred units, Series S special common units (the “S-SCUs”), Series L special common units (the “L-SCUs”) and Series K special common units (the “K-SCUs”) (collectively, the “OP Units”). In making this determination, our board of directors considered a variety of relevant factors, including, without limitations, REIT minimum distribution requirements, the amount of cash available for distribution, restrictions under Delaware law, capital expenditures and reserve requirements and general operational requirements.
The dividend arrearage created by our board of directors’ decision to suspend the dividends that continue to accrue on our outstanding preferred stock (and the Operating Partnership’s distributions to its preferred units of limited partnership underlying our outstanding preferred shares) also require, pursuant to the terms of our relevant governing documents, that we not resume any payment of dividends on our common stock unless full cumulative dividends accrued with respect to our preferred stock (and such underlying preferred units) for all past quarters and the then-current quarter are first declared and paid in cash, or declared with a sum sufficient for the payment thereof having been set apart for such payment in cash. In addition, for so long as this distribution suspension results in the existence of a distribution shortfall (as described in the Partnership Agreement of the Operating Partnership) with respect to any of the S-SCUs, the L-SCUs or the K-SCUs (an “SCU Distribution Shortfall”), the terms of the Operating Partnership Agreement state that we (i) may not cause the Operating Partnership to resume distributions to holders of its outstanding common units of limited partnership until all holders of SCUs have received distributions sufficient to satisfy the SCU Distribution Shortfall for all prior quarters and the then-current quarter (which effectively also would prevent the resumption of common stock dividends, since our common stock dividends are funded by distributions the Company receives on the underlying common units it holds in the Operating Partnership) and (ii) may not elect to settle any exchange requested by a holder of common units of the Operating Partnership in cash, and may only settle any such exchange through the issuance of shares of common stock or other Units of the Operating Partnership ranking junior to any such units as to which a distribution shortfall exists. Our board of directors prospectively approved that, to the extent any partners exercise any or all of their exchange rights while the existence of the SCU Distribution Shortfall requires an exchange to be settled through the issuance of shares of common stock or other units of the Operating Partnership, the consideration paid shall be in the form of shares of common stock. We do not expect to pay any further dividends with respect to the Company’s outstanding common stock and preferred stock, or any distributions with respect to the Operating Partnership’s outstanding units of partnership interest, prior to the conclusion of our reorganization pursuant to the pending Chapter 11 Cases. We also expect our Chapter 11 reorganization to extinguish all claims related to the accrued and unpaid preferred stock dividends (including the currently stayed rights preferred stockholders otherwise would have to elect two additional directors to our board if preferred dividends are in arrears for six or more quarterly periods) and the Operating Partnership’s SCU Distribution Shortfall discussed above. Even if we successfully complete such reorganization, we cannot assure you that we will be able to make distributions in the future with respect to new equity securities issued pursuant to the Chapter 11 Cases. All of the foregoing could adversely affect the market price of our publicly traded securities, even following our pending Chapter 11 reorganization.
As a result of the cumulative, unpaid dividends on our preferred stock we are no longer eligible to register the offer and sale of securities on SEC Form S-3, which will impair our capital raising activities.
We are no longer eligible to use SEC Form S-3 to register offers and sales of our securities under the Securities Act, as a result of the existing dividend arrearage on our preferred stock, which will continue to accumulate following our board of directors’ decision in December 2019 to suspend such dividends. Historically, we have relied on shelf registration statements on Form S-3 for our public capital raising transactions, and also to register the offer and sale of shares of common stock under our DRIP. Our inability to use Form S-3 may harm our ability to raise capital in the future, as we will be required to use a registration statement on Form S-1 to register securities with the SEC, which may be expected to hinder our ability to act quickly in raising capital to take advantage of market conditions and to increase our cost of raising capital.
We may change the dividend policy for our common stock in the future.
Even if our board of directors should, in the future, determine based on the factors described in the preceding Risk Factors and in the paragraph below, that we are able to resume paying distributions on the outstanding equity securities of the Company and the Operating Partnership following the completion of a successful reorganization pursuant to the Chapter 11 Cases, depending upon our liquidity needs, we will still reserve the right to pay any or all of a dividend in a combination of cash and shares of common stock, to the extent permitted by any applicable revenue procedures of the Internal Revenue Service ("IRS"). In the event that we should pay a portion of any future dividends in shares of our common stock pursuant to such procedures, taxable U.S. stockholders would be required to pay tax on the entire amount of the dividend, including the portion paid in shares of common stock, in which case such stockholders may have to use cash from other sources to pay
such tax. If a U.S. stockholder sells any common stock it receives as a dividend in order to pay its taxes, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our common stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold federal tax with respect to any future dividends, including any dividends that are paid in common stock. In addition, if a significant number of our stockholders sell shares of our common stock in order to pay taxes owed on any future dividends, such sales would put downward pressure on the market price of our common stock.
The decision to declare and pay dividends on any outstanding shares of our common stock following the conclusion of the Chapter 11 Cases, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our Board of Directors and will depend on our earnings, taxable income, FFO, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our then-current indebtedness and any outstanding preferred stock, the annual distribution requirements under the REIT provisions of the Internal Revenue Code, Delaware law and such other factors as our Board of Directors deems relevant. Any dividends payable will be determined by our Board of Directors based upon the circumstances at the time of declaration. Any change in our future dividend policy, assuming we are able to complete a successful reorganization pursuant to the Chapter 11 Cases, could have a material adverse effect on the market price of our future outstanding common stock.
Since we conduct substantially all of our operations through our Operating Partnership, our ability to pay dividends on our common and preferred stock depends on the distributions we receive from our Operating Partnership.
Because we conduct substantially all of our operations through our Operating Partnership, our ability to service our debt obligations, as well as our ability to pay any future dividends on our common and preferred stock will depend almost entirely upon the earnings and cash flows of the Operating Partnership and the ability of the Operating Partnership to make distributions to us on our ownership interests in our Operating Partnership. Under the Delaware Revised Uniform Limited Partnership Act, the Operating Partnership is prohibited from making any distribution to us to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the Operating Partnership (other than some non-recourse liabilities and some liabilities to the partners) exceed the fair value of the assets of the Operating Partnership. Further, as described above, the currently existing dividend arrearage with respect to our outstanding shares of preferred stock (and the underlying preferred units of the Operating Partnership), as well as the Operating Partnership’s existing SCU Distribution Shortfall, effectively preclude the Operating Partnership from resuming any distributions to holders of its common units (including distributions with respect to common units held by the Company, which fund our common stock dividend) until such preferred dividend arrearage and SCU Distribution Shortfall have been satisfied through the cash payment of all accumulated amounts due to the holders of such securities.
Additionally, the terms of our secured credit facility provide generally that distributions the Operating Partnership makes to us and the other partners in the Operating Partnership (i) may not exceed the greater of the amount necessary to maintain our status as a REIT or 95% of FFO, so long as there is no event of default (as defined), (ii) in the event of a default, may be restricted to the minimum amount necessary to maintain our status as a REIT and (iii) in the event of default for nonpayment of amounts due under the facility, the Operating Partnership may be prohibited from making any distributions. This in turn may limit our ability to make some types of payments, including payment of dividends to our stockholders. Any inability to make cash distributions from the Operating Partnership could jeopardize our ability to pay any future dividends to our stockholders for one or more dividend periods which, in turn, could jeopardize our ability to maintain qualification as a REIT.
RISKS RELATED TO GEOGRAPHIC CONCENTRATIONS
Since our Properties are located principally in the southeastern and midwestern United States, our financial position, results of operations and funds available for distribution to shareholders are subject generally to economic conditions in these regions and, in particular, to adverse economic developments affecting the operating results of Properties in our five largest markets.
Our Properties are located principally in the southeastern and midwestern United States. Our Properties located in the southeastern United States accounted for approximately 47.3% of our total revenues from all Properties for the year ended December 31, 2020 and currently include 28 malls, 12 associated centers, 6 community centers and 4 office buildings. Our Properties located in the midwestern United States accounted for approximately 25.3% of our total revenues from all Properties for the year ended December 31, 2020 and currently include 16 malls, 2 associated centers and 2 self-storage facilities. Further, the Properties located in our five largest metropolitan area markets - Chattanooga, TN; St. Louis, MO; Lexington, KY; Laredo, TX; and Madison, WI - accounted for approximately 7.0%, 6.1%, 5.1%, 5.0% and 3.8%, respectively, of our total revenues for the year ended December 31, 2020. No other market accounted for more than 3.6% of our total revenues for the year ended December 31, 2020.
Our results of operations and funds available for distribution to shareholders therefore will be impacted generally by economic conditions in the southeastern and midwestern United States, and particularly by the results experienced at Properties located in our five largest market areas. While we already have Properties located in six states across the southwestern, northeastern and western regions, we will continue to look for opportunities to geographically diversify our portfolio in order to minimize dependency on any particular region; however, the expansion of the portfolio through both acquisitions and developments is contingent on many factors including consumer demand, competition and economic conditions.
RISKS RELATED TO FEDERAL INCOME TAX LAWS
We conduct a portion of our business through taxable REIT subsidiaries, which are subject to certain tax risks.
We have established several taxable REIT subsidiaries including our Management Company. Despite our qualification as a REIT, our taxable REIT subsidiaries must pay income tax on their taxable income. In addition, we must comply with various tests to continue to qualify as a REIT for federal income tax purposes, and our income from and investments in our taxable REIT subsidiaries generally do not constitute permissible income and investments for these tests. While we will attempt to ensure that our dealings with our taxable REIT subsidiaries will not adversely affect our REIT qualification, we cannot provide assurance that we will successfully achieve that result. Furthermore, we may be subject to a 100% penalty tax, or our taxable REIT subsidiaries may be denied deductions, to the extent our dealings with our taxable REIT subsidiaries are not deemed to be arm's length in nature.
If we fail to qualify as a REIT in any taxable year, our funds available for distribution to stockholders will be reduced.
We intend to continue to operate so as to qualify as a REIT under the Internal Revenue Code. Although we believe that we are organized and operate in such a manner, no assurance can be given that we currently qualify and, in the future, will continue to qualify as a REIT. Such qualification involves the application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial or administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify. In addition, no assurance can be given that legislation, new regulations, administrative interpretations or court decisions will not significantly change the tax laws with respect to qualification or its corresponding federal income tax consequences. Any such change could have a retroactive effect.
If in any taxable year we were to fail to qualify as a REIT, we would not be allowed a deduction for distributions to stockholders in computing our taxable income and we would be subject to federal income tax on our taxable income at regular corporate rates. Unless entitled to relief under certain statutory provisions, we also would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. As a result, the funds available for distribution to our stockholders would be reduced for each of the years involved. This would likely have a significant adverse effect on the value of our securities and our ability to raise additional capital. In addition, we would no longer be required to make distributions to our stockholders. We currently intend to operate in a manner designed to qualify as a REIT. However, it is possible that future economic, market, legal, tax or other considerations may cause our Board of Directors, with the consent of a majority of our stockholders, to revoke the REIT election.
Any issuance or transfer of our capital stock to any person in excess of the applicable limits on ownership necessary to maintain our status as a REIT would be deemed void ab initio, and those shares would automatically be transferred to a non-affiliated charitable trust.
To maintain our status as a REIT under the Internal Revenue Code, not more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) at any time during the last half of a taxable year. Our certificate of incorporation generally prohibits ownership of more than 6% of the outstanding shares of our capital stock by any single stockholder determined by vote, value or number of shares (other than Charles Lebovitz, Executive Chairman of our Board of Directors and our former Chief Executive Officer, David Jacobs, Richard Jacobs and their affiliates under the Internal Revenue Code's attribution rules). The affirmative vote of 66 2/3% of our outstanding voting stock is required to amend this provision.
Our Board of Directors may, subject to certain conditions, waive the applicable ownership limit upon receipt of a ruling from the IRS or an opinion of counsel to the effect that such ownership will not jeopardize our status as a REIT. Historically, our Board of Directors has granted such waivers to certain institutional investors based upon the receipt of such opinions from the Company’s tax counsel. In connection with the previously disclosed Standstill Agreement entered into effective November 1, 2019 between the Company, Exeter Capital Investors, L.P., Exeter Capital GP LLC, WEM Exeter LLC, and Michael L. Ashner (collectively, the “Exeter Group”), pursuant to which Michael L. Ashner and Carolyn B. Tiffany
also were appointed to the Company’s Board of Directors, the Board (following receipt of an appropriate opinion of tax counsel) approved the granting to the Exeter Group of a similar waiver (the “Exeter Ownership Limitation Waiver”) to enable the Exeter Group to beneficially own up to 9.8% of the Company’s outstanding common stock, subject to the terms of the Exeter Ownership Limitation Waiver. Exeter Capital Investors, L.P. is a single purpose entity controlled by Michael Ashner to acquire common shares in CBL. Absent any such waiver, however, any issuance or transfer of our capital stock to any person in excess of the applicable ownership limit or any issuance or transfer of shares of such stock which would cause us to be beneficially owned by fewer than 100 persons, will be null and void and the intended transferee will acquire no rights to the stock. Instead, such issuance or transfer with respect to that number of shares that would be owned by the transferee in excess of the ownership limit provision would be deemed void ab initio and those shares would automatically be transferred to a trust for the exclusive benefit of a charitable beneficiary to be designated by us, with a trustee designated by us, but who would not be affiliated with us or with the prohibited owner. Any acquisition of our capital stock and continued holding or ownership of our capital stock constitutes, under our certificate of incorporation, a continuous representation of compliance with the applicable ownership limit.
In order to maintain our status as a REIT and avoid the imposition of certain additional taxes under the Internal Revenue Code, we must satisfy minimum requirements for distributions to shareholders, which may limit the amount of cash we might otherwise have been able to retain for use in growing our business.
To maintain our status as a REIT under the Internal Revenue Code, we generally will be required each year to distribute to our stockholders at least 90% of our taxable income after certain adjustments. However, to the extent that we do not distribute all of our net capital gains or distribute at least 90% but less than 100% of our REIT taxable income, as adjusted, we will be subject to tax on the undistributed amount at regular corporate tax rates, as the case may be. Also, our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the payment of expenses and the recognition of income and expenses for federal income tax purposes, or the effect of nondeductible expenditures, such as capital expenditures, payments of compensation for which Section 162(m) of the Code denies a deduction, interest expense deductions limited by Section 163(j) of the Code, the creation of reserves or required debt service or amortization payments. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which certain distributions paid by us during each calendar year are less than the sum of 85% of our ordinary income for such calendar year, 95% of our capital gain net income for the calendar year and any amount of such income that was not distributed in prior years. In the case of property acquisitions, including our initial formation, where individual Properties are contributed to our Operating Partnership for Operating Partnership units, we have assumed the tax basis and depreciation schedules of the entities contributing Properties. The relatively low tax basis of such contributed Properties may have the effect of increasing the cash amounts we are required to distribute as dividends, thereby potentially limiting the amount of cash we might otherwise have been able to retain for use in growing our business. This low tax basis may also have the effect of reducing or eliminating the portion of distributions made by us that are treated as a non-taxable return of capital.
Complying with REIT requirements might cause us to forego otherwise attractive opportunities.
In order to qualify as a REIT for U.S. federal income tax purposes, we must satisfy tests concerning, among other things, our sources of income, the nature of our assets, the amounts we distribute to our shareholders and the ownership of our stock. We may also be required to make distributions to our shareholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with REIT requirements may cause us to forego opportunities we would otherwise pursue. In addition, the REIT provisions of the Internal Revenue Code impose a 100% tax on income from “prohibited transactions.” “Prohibited transactions” generally include sales of assets that constitute inventory or other property held for sale in the ordinary course of business, other than foreclosure property. This 100% tax could impact our desire to sell assets and other investments at otherwise opportune times if we believe such sales could be considered “prohibited transactions.”
Holders of common units and special common units in the Operating Partnership may have income tax liability attributable to their ownership of such units in excess of cash distributions.
It is possible that income taxes payable on taxable income allocated to a holder of common units or special common units in the Operating Partnership will exceed the cash distributions attributable thereto. This may occur because funds received by the Operating Partnership may be taxable income to the Operating Partnership (and thus allocated to holders of Operating Partnership units), while the Operating Partnership may use such funds for nondeductible operating or capital expenses of the Operating Partnership. This also could occur as a result of the voluntary or involuntary sale or other disposition (including a foreclosure sale) of one or more Properties owned by the Operating Partnership or subsidiaries of the Operating Partnership, or the retirement of any of the Operating Partnership’s or its subsidiaries’ debt at a discount. Thus, there may be years in which the tax liability attributable to the allocation of taxable income to holders of the Operating
Partnership’s common units or special common units exceeds the cash distributions from the Operating Partnership attributable to such units. This is particularly true at the present time, as the Operating Partnership currently has suspended all distributions on its common units and special common units until further notice. In such a case, holders of such units would be required to fund (from other sources of funds) any resulting income tax liability on such taxable income allocations in excess of distributions from the Operating Partnership to the holders of such units. Allocations of income or loss to holders of the Operating Partnership’s common units or special common units continue while such holder owns such Operating Partnership units. If a holder of units exercises its right to exchange its Operating Partnership common units or special common units to Company stock (or the cash equivalent thereof, at the Company’s election), gain or loss may be triggered to such exercising holder on such exchange transaction, but such holder will not be allocated taxable income or loss attributable to such units with respect to any time period after the closing of such exchange except as otherwise required under the applicable tax rules.
Partnership tax audit rules could have a material adverse effect on us.
The Bipartisan Budget Act of 2015 changed the rules applicable to U.S. federal income tax audits of partnerships. Under the rules, among other changes and subject to certain exceptions, any audit adjustment to items of income, gain, loss, deduction, or credit of a partnership (and any partner's distributive share thereof) is determined, and taxes, interest, or penalties attributable thereto could be assessed and collected, at the partnership level. Absent available elections, it is possible that a partnership in which we directly or indirectly invest, could be required to pay additional taxes, interest and penalties as a result of an audit adjustment, and we, as a direct or indirect partner of these partnerships, could be required to bear the economic burden of those taxes, interest, and penalties even though we may not otherwise have been required to pay additional taxes had we owned the assets of the partnership directly. The partnership tax audit rules apply to the Operating Partnership and its subsidiaries that are classified as partnerships for U.S. federal income tax purposes. The changes created by these rules are sweeping and, accordingly, there can be no assurance that these rules will not have a material adverse effect on us.
RISKS RELATED TO OUR ORGANIZATIONAL STRUCTURE
The ownership limit described above, as well as certain provisions in our amended and restated certificate of incorporation, amended and restated bylaws, and certain provisions of Delaware law, may hinder any attempt to acquire us.
There are certain provisions of Delaware law, our amended and restated certificate of incorporation, our Third Amended and Restated Bylaws (the "Bylaws"), and other agreements to which we are a party that may have the effect of delaying, deferring or preventing a third party from making an acquisition proposal for us. These provisions may also inhibit a change in control that some, or a majority, of our stockholders might believe to be in their best interest or that could give our stockholders the opportunity to realize a premium over the then-prevailing market prices for their shares. These provisions and agreements are summarized as follows:
•
The Ownership Limit - As described above, to maintain our status as a REIT under the Internal Revenue Code, not more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) during the last half of a taxable year. Our amended and restated certificate of incorporation generally prohibits ownership of more than 6% of the outstanding shares of our capital stock by any single stockholder determined by value (other than Charles Lebovitz, David Jacobs, Richard Jacobs and their affiliates under the Internal Revenue Code's attribution rules), subject to the ability of the Board of Directors to grant waivers in appropriate circumstances, such as the Exeter Ownership Limitation Waiver. In addition to preserving our status as a REIT, the ownership limit may have the effect of precluding an acquisition of control of us without the approval of our Board of Directors.
•
Supermajority Vote Required for Removal of Directors - Our governing documents provide that stockholders can remove directors with or without cause, but only by a vote of 75% of the outstanding voting stock. This provision makes it more difficult to change the composition of our Board of Directors and may have the effect of encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our Board of Directors rather than pursue non-negotiated takeover attempts.
•
Advance Notice Requirements for Stockholder Proposals - Our Bylaws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures generally require advance written notice of any such proposals, containing prescribed information, to be given to our Secretary at our principal executive offices not less than 90 days nor more than 120 days prior to the anniversary date of the prior year’s annual meeting. Alternatively, a stockholder (or group of stockholders) seeking to nominate candidates for election as directors pursuant to the proxy access provisions set forth in Section 2.8 of our Bylaws generally must provide advance written notice to our Secretary, containing information prescribed in the proxy access bylaw, not less than 120 days nor more than 150 days prior to the anniversary date of the prior year’s annual meeting.
•
Vote Required to Amend Bylaws - A vote of 66 2 / 3 % of our outstanding voting stock (in addition to any separate approval that may be required by the holders of any particular class of stock) is necessary for stockholders to amend our Bylaws.
•
Delaware Anti-Takeover Statute - We are a Delaware corporation and are subject to Section 203 of the Delaware General Corporation Law. In general, Section 203 prevents an “interested stockholder” (defined generally as a person owning 15% or more of a company's outstanding voting stock) from engaging in a “business combination” (as defined in Section 203) with us for three years following the date that person becomes an interested stockholder unless:
(a)
before that person became an interested holder, our Board of Directors approved the transaction in which the interested holder became an interested stockholder or approved the business combination;
(b)
upon completion of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owns 85% of our voting stock outstanding at the time the transaction commenced (excluding stock held by directors who are also officers and by employee stock plans that do not provide employees with the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer); or
(c)
following the transaction in which that person became an interested stockholder, the business combination is approved by our Board of Directors and authorized at a meeting of stockholders by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock not owned by the interested stockholder. Under Section 203, these restrictions also do not apply to certain business combinations proposed by an interested stockholder following the announcement or notification of certain extraordinary transactions involving us and a person who was not an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of our directors, if that extraordinary transaction is approved or not opposed by a majority of the directors who were directors before any person became an interested stockholder in the previous three years or who were recommended for election or elected to succeed such directors by a majority of directors then in office.
Certain ownership interests held by members of our senior management may tend to create conflicts of interest between such individuals and the interests of the Company and our Operating Partnership.
Certain Property tenants are affiliated with members of our senior management. Our Bylaws provide that any contract or transaction between us or the Operating Partnership and one or more of our directors or officers, or between us or the Operating Partnership and any other entity in which one or more of our directors or officers are directors or officers or have a financial interest, must be approved by our disinterested directors or stockholders after the material facts of the relationship or interest of the contract or transaction are disclosed or are known to them. Our code of business conduct and ethics also contains provisions governing the approval of certain transactions involving the Company and employees (or immediate family members of employees, as defined therein) that are not subject to the provision of the Bylaws described above. Such transactions are also subject to the Company's related party transactions policy in the manner and to the extent detailed in the proxy statement filed with the SEC for the Company's 2019 annual meeting. Nevertheless, these affiliations could create conflicts between the interests of these members of senior management and the interests of the Company, our shareholders and the Operating Partnership in relation to any transactions between us and any of these entities.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
Refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 for additional information pertaining to the Properties’ performance.
Malls
We owned a controlling interest in 51 Malls and non-controlling interests in 10 Malls as of December 31, 2020. The Malls are primarily located in middle markets and generally have strong competitive positions because they are the only, or the dominant, regional mall in their respective trade areas. The Malls are generally anchored by two or more anchors or junior anchors and a wide variety of mall stores. Anchor and junior anchor tenants own or lease their stores and non-anchor stores lease their locations.
We classify our regional Malls into three categories:
(1)
Stabilized Malls - Malls that have completed their initial lease-up and have been open for more than three complete calendar years.
(2)
Non-stabilized Malls - Malls that are in their initial lease-up phase. After three complete calendar years of operation, they are reclassified on January 1 of the fourth calendar year to the Stabilized Mall category. The Outlet Shoppes at Laredo was classified as a Non-stabilized Mall as of December 31, 2020 and 2019.
(3)
Excluded Malls - We exclude Malls from our core portfolio if they fall in the following categories, for which operational metrics are excluded:
Lender Malls - Properties for which we are working or intend to work with the lender on a restructure of the terms of the loan secured by the Property or convey the secured Property to the lender. Asheville Mall, EastGate Mall, Greenbrier Mall and Park Plaza were classified as Lender Malls as of December 31, 2020. Hickory Point Mall and Greenbrier Mall were classified as Lender Malls as of December 31, 2019. Burnsville Center and Hickory Point Mall were returned to the lenders in December 2020 and August 2020, respectively. Lender Malls are excluded from our same-center pool as decisions made while in discussions with the lender may lead to metrics that do not provide relevant information related to the condition of these Properties or they may be under cash management agreements with the respective servicers.
We own the land underlying each Mall in fee simple interest, except for Brookfield Square, Cross Creek Mall, Dakota Square Mall, EastGate Mall, Meridian Mall, St. Clair Square, Stroud Mall and WestGate Mall. We lease all or a portion of the land at each of these Malls subject to long-term ground leases.
The following table sets forth certain information for each of the Malls as of December 31, 2020. Due to temporary mall and store closures that occurred related to COVID-19, the majority of our tenants did not report sales for the full reporting period. As a result, we are not able to provide a complete measure of sales per square foot for the year ended December 31, 2020, and instead, presented below under the column Mall Store Sales per Square Foot the 2019 amounts (dollars in thousands, except for sales per square foot amounts):
Mall / Location
Year of
Opening/
Acquisition
Our
Ownership
Total Center
SF (1)
Total
Mall Store
GLA (2)
2019 Mall
Store
Sales per
Square
Foot (3)
Percentage
Mall
Store GLA
Leased (4)
Anchors & Junior
Anchors (5)
TIER 1
Sales ≥ $375 or more per
square foot
Coastal Grand (6)
Myrtle Beach, SC
50%
1,037,502
341,803
$
%
Bed Bath & Beyond, Belk, Cinemark, Dick's Sporting Goods (7), former Dick's Sporting Goods (7), Dillard's, H&M, JC Penney, Sears
CoolSprings Galleria (6)
Nashville, TN
50%
1,166,284
430,938
%
Belk Men's & Kid's, Belk Women's & Home, Dillard's, H&M, JC Penney, King's Dining & Entertainment, Macy's
Cross Creek Mall
Fayetteville, NC
1975/2003
100%
790,582
279,379
%
Belk, H&M, JC Penney, Macy's, Rooms To Go (8)
Fayette Mall
Lexington, KY
1971/2001
100%
1,158,534
460,257
%
Dick's Sporting Goods, Dillard's, H&M, JC Penney, Macy's
Friendly Center and The Shops at Friendly (6)
Greensboro, NC
1957/ 2006/ 2007
50%
1,367,804
603,663
%
Barnes & Noble, Belk, Belk Home Store, Harris Teeter, Macy's, O2 Fitness, Regal Cinemas, REI, Sears, Truist, Whole Foods
Mall / Location
Year of
Opening/
Acquisition
Our
Ownership
Total Center
SF (1)
Total
Mall Store
GLA (2)
2019 Mall
Store
Sales per
Square
Foot (3)
Percentage
Mall
Store GLA
Leased (4)
Anchors & Junior
Anchors (5)
Hamilton Place
Chattanooga, TN
90%
1,160,861
331,240
%
Aloft Hotel (9), Barnes & Noble, Belk for Men, Kids & Home, Belk for Women, Dave & Buster's, Dick's Sporting Goods, Dillard's for Men, Kids & Home, Dillard's for Women, former Forever 21, H&M, JC Penney
Hanes Mall
Winston-Salem, NC
1975/2001
100%
1,435,164
468,462
%
Belk, Dave & Buster's, Dillard's, Encore, H&M, JC Penney, former Macy's (10), Novant Health (11)
Imperial Valley Mall
El Centro, CA
100%
762,695
214,055
%
Cinemark, Dillard's, JC Penney, Macy's, former Sears
Jefferson Mall
Louisville, KY
1978/2001
100%
783,643
225,082
%
Dillard's, H&M, JC Penney, Round1 Bowling & Amusement, Ross Dress for Less, former Sears
Mall del Norte
Laredo, TX
1977/2004
100%
1,219,244
408,251
%
Former Beall's, Cinemark, Dillard's, Foot Locker, H&M, JC Penney, Macy's, Macy's Home Store, Main Event, former Sears, TruFit Athletic Club
Northwoods Mall
North Charleston, SC
1972/2001
100%
748,273
256,025
%
Belk, Books-A-Million, Burlington, Dillard's, JC Penney, Planet Fitness
Oak Park Mall (6)
Overland Park, KS
1974/2005
50%
1,518,420
431,250
%
Barnes & Noble, Dillard's for Women, Dillard's for Men, Children & Home, Forever 21, H&M, JC Penney, Macy's, Nordstrom
Old Hickory Mall
Jackson, TN
1967/2001
100%
538,641
161,546
%
Belk, JC Penney, Macy's, former Sears
The Outlet Shoppes at
Atlanta (6)
Woodstock, GA
50%
405,146
380,339
%
Saks Fifth Ave OFF 5TH
The Outlet Shoppes at
El Paso (6)
El Paso, TX
2007/2012
50%
433,046
411,007
%
H&M
The Outlet Shoppes of the Bluegrass (6)
Simpsonville, KY
65%
428,072
381,372
%
H&M, former Saks Fifth Ave OFF 5TH
Parkway Place
Huntsville, AL
1957/1998
100%
647,808
278,630
%
Belk, Dillard's
Richland Mall
Waco, TX
1980/2002
100%
693,448
191,870
%
Former Beall's, Dick's Sporting Goods, Dillard's for Men, Kids & Home, Dillard's for Women (12), former Dillard's for Women (12), JC Penney
Southpark Mall
Colonial Heights, VA
1989/2003
100%
675,644
212,237
%
Dick's Sporting Goods, H&M, JC Penney, Macy's, Regal Cinemas, former Sears
St. Clair Square (13)
Fairview Heights, IL
1974/1996
100%
1,067,610
290,355
%
Dillard's, JC Penney, Macy's, former Sears
Sunrise Mall
Brownsville, TX
1979/2003
100%
799,379
234,644
%
Former Beall's, Cinemark, Dick's Sporting Goods, Dillard's, JC Penney, former Sears (14), Wave Fashion
West County Center (6)
Des Peres, MO
1969/2007
50%
1,198,304
384,354
%
Barnes & Noble, Dick's Sporting Goods, Forever 21, H&M, JC Penney, Macy's, Nordstrom
Total Tier 1 Malls
20,036,104
7,376,759
$
%
Mall / Location
Year of
Opening/
Acquisition
Our
Ownership
Total Center
SF (1)
Total
Mall Store
GLA (2)
2019 Mall
Store
Sales per
Square
Foot (3)
Percentage
Mall
Store GLA
Leased (4)
Anchors & Junior
Anchors (5)
TIER 2
Sales ≥ $300 to < $375 per
square foot
Arbor Place
Atlanta (Douglasville), GA
100%
1,162,064
307,634
$
%
Bed Bath & Beyond, Belk, Dillard's, Forever 21, H&M, JC Penney, Macy's, Regal Cinemas, former Sears
Dakota Square Mall
Minot, ND
1980/2012
100%
757,513
201,706
%
AMC Theatres, Barnes & Noble, JC Penney, Scheels, former Sears, Sleep Inn & Suites, Target
East Towne Mall
Madison, WI
1971/2001
100%
801,252
211,963
%
Barnes & Noble, former Boston Store, Dick's Sporting Goods, Flix Brewhouse, former Gordman's, H&M, JC Penney, former Sears
Frontier Mall
Cheyenne, WY
100%
523,709
203,589
%
AMC Theatres, Dillard's, former Dillard's (15), Jax Outdoor Gear, JC Penney
Governor's Square (6)
Clarksville, TN
47.5%
696,075
249,193
%
AMC Theatres, Belk, Dick's Sporting Goods, Dillard's, JC Penney, Ross Dress for Less, former Sears
Harford Mall
Bel Air, MD
1973/2003
100%
503,774
179,598
%
Encore, Macy's, former Sears
Kirkwood Mall
Bismarck, ND
1970/2012
100%
820,490
216,626
%
H&M, former Herberger's (16), I. Keating Furniture, JC Penney, Scheels, Target
Layton Hills Mall
Layton, UT
1980/2006
100%
482,120
212,674
%
Dick's Sporting Goods, Dillard's, JC Penney
Mayfaire Town Center
Wilmington, NC
2004/2015
100%
654,345
334,964
%
Barnes & Noble, Belk, Flip N Fly, The Fresh Market, H&M, Michaels, Regal Cinemas
Northpark Mall
Joplin, MO
1972/2004
100%
896,044
278,320
%
Dunham's Sports, H&M, JC Penney, Jo-Ann Fabrics & Crafts, Macy's Children's & Home, Macy's Women & Men's, former Sears, T.J. Maxx, Tilt, Vintage Stock
The Outlet Shoppes at Laredo
Laredo, TX
65%
358,122
315,375
N/A
*
%
H&M, Nike Factory Store
Parkdale Mall
Beaumont, TX
1972/2001
100%
1,151,375
327,092
%
Former Ashley HomeStore, former Beall's, Dick's Sporting Goods, Dillard's, Forever 21, H&M, HomeGoods, JC Penney, former Macy's, former Sears, 2nd & Charles, Tilt Studio
Pearland Town Center (17)
Pearland, TX
100%
663,791
306,204
%
Barnes & Noble, Dick's Sporting Goods, Dillard's, Macy's
Post Oak Mall
College Station, TX
100%
787,554
300,029
%
Former Beall's, Conn's Home Plus, Dillard's Men & Home, Dillard's Women & Children, Encore, JC Penney, Macy's, former Sears
South County Center
St. Louis, MO
1963/2007
100%
1,028,627
316,404
%
Dick's Sporting Goods, Dillard's, JC Penney, Macy's, former Sears
Southaven Towne Center
Southaven, MS
100%
607,529
184,433
%
Bed Bath & Beyond, Dillard's, former Gordman's, JC Penney, Sportsman's Warehouse, Urban Air Adventure Park
Mall / Location
Year of
Opening/
Acquisition
Our
Ownership
Total Center
SF (1)
Total
Mall Store
GLA (2)
2019 Mall
Store
Sales per
Square
Foot (3)
Percentage
Mall
Store GLA
Leased (4)
Anchors & Junior
Anchors (5)
Turtle Creek Mall
Hattiesburg, MS
100%
844,981
191,594
%
At Home, Belk, Dillard's, JC Penney, former Sears, Southwest Theaters, former Stein Mart
Valley View Mall
Roanoke, VA
1985/2003
100%
863,447
336,687
%
Barnes & Noble, Belk, JC Penney, Macy's, Macy's for Home & Children, former Sears
Volusia Mall
Daytona Beach, FL
1974/2004
100%
1,060,283
253,507
%
Dillard's for Men & Home, Dillard's for Women, Dillard's for Juniors & Children, H&M, JC Penney, Macy's, former Sears
West Towne Mall
Madison, WI
1970/2001
100%
829,719
281,768
%
Dave & Buster's, Dick's Sporting Goods, Forever 21, Hobby Lobby (18), JC Penney, Total Wine & More, Von Maur (18), Urban Air Adventure Park
WestGate Mall (19)
Spartanburg, SC
1975/1995
100%
950,781
241,022
%
Bed Bath & Beyond, Belk, Dick's Sporting Goods, Dillard's, H&M, JC Penney, Regal Cinemas, former Sears
Westmoreland Mall
Greensburg, PA
1977/2002
100%
976,671
286,940
%
H&M, JC Penney, Live! Casino Pittsburgh, Macy's, Macy's Home Store, Old Navy, former Sears
York Galleria
York, PA
1989/1999
100%
756,707
225,858
%
former Bon-Ton, Boscov's, Gold's Gym, H&M, Hollywood Casino (20), Marshalls
Total Tier 2 Malls
18,176,973
5,963,180
$
%
TIER 3
Sales < $300 per square foot
Alamance Crossing
Burlington, NC
100%
904,662
255,132
$
%
Barnes & Noble, Belk, BJ's Wholesale Club, Carousel Cinemas, Dick's Sporting Goods, Dillard's, Hobby Lobby, JC Penney, Kohl's
Brookfield Square (21)
Brookfield, WI
1967/2001
100%
864,339
306,306
%
Barnes & Noble, former Boston Store, H&M, JC Penney, Movie Tavern by Marcus, Whirlyball
CherryVale Mall
Rockford, IL
1973/2001
100%
870,655
348,239
%
Barnes & Noble, Choice Home Center, JC Penney, Macy's, Tilt Studio
Eastland Mall
Bloomington, IL
1967/2005
100%
732,651
247,509
%
former Bergner's, Kohl's, former Macy's, Planet Fitness, former Sears
Kentucky Oaks Mall (6)
Paducah, KY
1982/2001
50%
774,764
286,505
%
Best Buy, Burlington, Dick's Sporting Goods, Dillard's, Dillard's Home Store, HomeGoods, JC Penney, Ross Dress for Less, Vertical Jump Park
Laurel Park Place
Livonia, MI
1989/2005
100%
491,215
198,071
%
Dunham Sports, Von Maur
Meridian Mall (22)
Lansing, MI
1969/1998
100%
945,997
267,302
%
Bed Bath & Beyond, Dick's Sporting Goods, H&M, High Caliber Karting, JC Penney, Launch Trampoline Park, Macy's, Planet Fitness, Schuler Books & Music, former Younkers
Mid Rivers Mall
St. Peters, MO
1987/2007
100%
1,035,802
286,685
%
Dick's Sporting Goods, Dillard's, H&M, JC Penney, Macy's, Marcus Theatres, former Sears, V-Stock
Mall / Location
Year of
Opening/
Acquisition
Our
Ownership
Total Center
SF (1)
Total
Mall Store
GLA (2)
2019 Mall
Store
Sales per
Square
Foot (3)
Percentage
Mall
Store GLA
Leased (4)
Anchors & Junior
Anchors (5)
Monroeville Mall
Pittsburgh, PA
1969/2004
100%
985,073
446,576
%
Barnes & Noble, Cinemark, Dick's Sporting Goods, Forever 21, H&M, JC Penney, Macy's
Northgate Mall
Chattanooga, TN
1972/2011
100%
660,790
181,157
%
Belk, Burlington, former JC Penney, former Sears
The Outlet Shoppes at Gettysburg
Gettysburg, PA
2000/2012
50%
249,937
249,937
%
None
Stroud Mall (23)
Stroudsburg, PA
1977/1998
100%
414,441
136,114
%
Cinemark, EFO Furniture Outlet, JC Penney, ShopRite
Total Tier 3 Malls
8,930,326
3,209,533
$
%
Total Mall Portfolio
47,143,403
16,549,472
$
%
Excluded Malls (24)
Lender Malls:
Asheville Mall
Asheville, NC
1972/1998
100%
973,371
265,467
N/A
N/A
Barnes & Noble, Belk, Dillard's for Men, Children & Home, Dillard's for Women, H&M, JC Penney, former Sears
EastGate Mall (25)
Cincinnati, OH
1980/2003
100%
837,554
256,951
N/A
N/A
Dillard's Clearance, JC Penney, Kohl's, former Sears
Greenbrier Mall
Chesapeake, VA
1981/2004
100%
897,040
269,798
N/A
N/A
Dillard's, former Gameworks, H&M, JC Penney, Macy's, former Sears
Park Plaza
Little Rock, AR
1988/2004
100%
543,037
209,892
N/A
N/A
Dillard's for Men & Children, Dillard's for Women & Home, Forever 21, H&M
Total Lender Malls
3,251,002
1,002,108
* Non-stabilized Mall - Mall Store Sales per Square Foot metrics are excluded from Mall Store Sales per Square Foot totals by tier and Mall portfolio totals. The Outlet Shoppes at Laredo is a non-stabilized Mall.
(1)
Total center square footage includes square footage of attached shops, immediately adjacent Anchor and Junior Anchor locations and leased immediately adjacent freestanding locations immediately adjacent to the center.
(2)
Excludes tenants 20,000 square feet and over.
(3)
Due to temporary mall and store closures that occurred related to COVID-19, the majority of our tenants did not report sales for the full reporting period. As a result, we are not able to provide a complete measure of sales per square foot for the year ended December 31, 2020, and instead have presented the 2019 amounts. Totals represent weighted averages.
(4)
Includes tenants under 20,000 square feet with leases in effect as of December 31, 2020.
(5)
Anchors and Junior Anchors listed are immediately adjacent to the Malls or are in freestanding locations immediately adjacent to the Malls.
(6)
This Property is owned in an unconsolidated joint venture.
(7)
Coastal Grand - Dick’s Sporting Goods relocated to a new building near Dillard’s, which includes the addition of Golf Galaxy.
(8)
Cross Creek Mall - Redevelopment plans for this space include Rooms To Go.
(9)
Hamilton Place - Aloft Hotel is scheduled to open June 2021.
(10)
Hanes Mall - The former Macy’s was purchased by Truliant Credit Union for future offices. The timing of construction is still to be determined.
(11)
Hanes Mall - The former Sears was purchased in 2019 by Novant Health, which has indicated plans to redevelop this space for future medical office with the construction start and opening to be determined.
(12)
Richland Mall - Dillard’s relocated to the former Sears space in 2020.
(13)
St. Clair Square - We are the lessee under a ground lease for 20 acres. Assuming the exercise of available renewal options, at our election, the ground lease expires January 31, 2073. The rental amount is $41 per year. In addition to base rent, the landlord receives 0.25% of Dillard's sales in excess of $16,200.
(14)
Sunrise Mall - TruFit is under construction in the former Sears space.
(15)
Frontier Mall - Dillard’s downsized into one store during 2020.
(16)
Kirkwood Mall - The former Herberger’s space will be redeveloped for the addition of restaurants. Construction is expected to begin in 2021.
(17)
Pearland Town Center is a mixed-use center which combines retail, office and residential components. For segment reporting purposes, the retail portion of the center is classified in Malls and the office and residential portions are classified as All Other.
(18)
West Towne Mall - Hobby Lobby is expected to open in 2021 in the former Sears space. Von Maur is expected to open in 2022 in the former Boston Store space.
(19)
WestGate Mall - We are the lessee under several ground leases for approximately 53% of the underlying land. Assuming the exercise of renewal options available, at our election, the ground lease expires October 2044. The rental amount is $130 per year. In addition to base rent, the landlord receives 20% of the percentage rents collected. We have a right of first refusal to purchase the fee interest.
(20)
York Galleria - Construction for a new Hollywood Casino began in 2019 in the former Sears space with the opening scheduled for 2021.
(21)
Brookfield Square - The annual ground rent for 2020 was $59.
(22)
Meridian Mall - We are the lessee under several ground leases in effect through March 2067, with extension options. Fixed rent is $19 per year plus 3% to 4% of all rent.
(23)
Stroud Mall - We are the lessee under a ground lease, which extends through July 2089. The current rental amount is $70 per year, increasing by $10 every ten years through 2045. An additional $100 is paid every ten years.
(24)
Operational metrics are not reported for Excluded Malls.
(25)
EastGate Mall - Ground rent for the Dillard's parcel that extends through January 2022 is $24 per year.
Mall Stores
The Malls have approximately 4,724 Mall stores. National and regional retail chains (excluding local franchises) lease approximately 68.7% of the occupied Mall store GLA. Although Mall stores occupy only 34.8% of the total Mall GLA (the remaining 65.2% is occupied by Anchors and Junior Anchors and a small percentage is vacant), the Malls received 77.7% of their total revenues from Mall stores for the year ended December 31, 2020.
Mall Lease Expirations
The following table summarizes the scheduled lease expirations for mall stores as of December 31, 2020:
Year Ending
December 31,
Number of
Leases
Expiring
Annualized
Gross Rent (1)
GLA of
Expiring
Leases
Average
Annualized
Gross Rent
Per Square
Foot
Expiring
Leases as % of
Total
Annualized
Gross Rent (2)
Expiring
Leases as a %
of Total Leased
GLA (3)
$
67,026,974
1,761,118
$
38.06
13.7
%
13.3
%
91,144,131
2,688,105
33.91
18.6
%
20.2
%
86,986,318
2,315,323
37.57
17.8
%
17.4
%
65,597,570
1,791,488
36.62
13.4
%
13.5
%
51,811,352
1,270,250
40.79
10.6
%
9.6
%
45,640,920
1,215,643
37.54
9.3
%
9.2
%
36,430,710
882,205
41.30
7.5
%
6.6
%
20,255,808
597,014
33.93
4.1
%
4.5
%
13,695,509
485,640
28.20
2.8
%
3.7
%
10,319,901
278,581
37.04
2.1
%
2.1
%
(1)
Total annualized gross rent, including recoverable common area expenses and real estate taxes, in effect at December 31, 2020 for expiring leases that were executed as of December 31, 2020.
(2)
Total annualized gross rent, including recoverable CAM expenses and real estate taxes, of expiring leases as a percentage of the total annualized gross rent of all leases that were executed as of December 31, 2020.
(3)
Total GLA of expiring leases as a percentage of the total GLA of all leases that were executed as of December 31, 2020.
See page 62 for a comparison between rents on leases that expired in the current reporting period compared to rents on new and renewal leases executed in 2020.
Mall Tenant Occupancy Costs
Occupancy cost is a tenant’s total cost of occupying its space, divided by its sales. Mall store sales represent total sales amounts received from reporting tenants with space of less than 10,000 square feet.
The following table summarizes tenant occupancy costs as a percentage of total Mall store sales, excluding license agreements, for each of the past three years:
Year Ended December 31, (1)
Mall store sales (in millions)
N/A (2)
$
4,386
$
4,498
Mall tenant occupancy costs
N/A (2)
12.07
%
12.30
%
(1)
In certain cases, we own less than a 100% interest in the Malls. The information in this table is based on 100% of the applicable amounts and has not been adjusted for our ownership share.
(2)
Due to the temporary mall and store closures that occurred, we do not believe occupancy cost to be an accurate measure for the year ended December 31, 2020.
Debt on Malls
Please see the table entitled “Mortgage Loans Outstanding at December 31, 2020” included herein for information regarding any liens or encumbrances related to our Malls.
Other Property Types
Other property types include the following three categories:
(1)
Associated Centers - Retail properties that are adjacent to a regional mall complex and include one or more Anchors, or big box retailers along with smaller tenants. Anchor tenants typically include tenants such as T.J. Maxx, Michaels, Target and Kohl’s. Associated Centers are located adjacent to one of our Mall properties and are managed by the staff at the Mall.
(2)
Community Centers - Designed to attract local and regional area customers and are typically anchored by a combination of supermarkets, or value-priced stores that attract shoppers to each center’s small shops. The tenants at our Community Centers typically offer necessities, value-oriented and convenience merchandise.
(3)
Office Buildings and Other
See Note 1 to the consolidated financial statements for additional information on the number of consolidated and unconsolidated Properties in each of the above categories related to our other property types. The following tables set forth certain information for each of our other property types at December 31, 2020:
Property / Location
Property
Type
Year of
Opening/ Most
Recent
Expansion
Company's
Ownership
Total
Center
SF (1)
Total
Leasable
GLA (2)
Percentage
GLA
Occupied (3)
Anchors &
Junior
Anchors
840 Greenbrier Circle
Chesapeake, VA
Office
100%
50,665
50,665
100%
None
Ambassador Town Center (4)
Lafayette, LA
Community Center
65%
419,301
265,328
97%
Costco (5), Dick's Sporting Goods, Marshalls, Nordstrom Rack
Annex at Monroeville
Pittsburgh, PA
Associated Center
100%
185,517
185,517
100%
Dick's Sporting Goods, Steel City Indoor Karting
CBL Center (6)
Chattanooga, TN
Office
92%
131,354
131,354
100%
None
CBL Center II (6)
Chattanooga, TN
Office
92%
74,941
74,941
97%
None
Coastal Grand Crossing (4)
Myrtle Beach, SC
Associated Center
50%
37,234
37,234
84%
PetSmart
CoolSprings Crossing
Nashville, TN
Associated Center
100%
366,451
78,810
82%
American Signature Furniture (5), Electronic Express (7), Gabe's (7), Target (5), Urban Air Adventure Park (7)
Courtyard at Hickory Hollow
Nashville, TN
Associated Center
100%
68,468
68,468
100%
AMC Theatres
EastGate Mall Self Storage (4)
Cincinnati, OH
Other
50%
93,501
N/A
N/A
None
Fremaux Town Center (4)
Slidell, LA
Community Center
2014/2015
65%
616,339
488,339
89%
Best Buy, Dick's Sporting Goods, Dillard's (5), Kohl's, LA Fitness, Michaels, T.J. Maxx
Frontier Square
Cheyenne, WY
Associated Center
100%
186,552
16,527
100%
Ross Dress for Less (7), Target (5), T.J. Maxx (7)
Governor's Square Plaza (4)
Clarksville, TN
Associated Center
1985/1988
50%
168,373
71,803
90%
Bed Bath & Beyond, Jo-Ann Fabrics & Crafts, Target (5)
Gunbarrel Pointe
Chattanooga, TN
Associated Center
100%
273,913
147,913
100%
Kohl's, Target (5), Whole Foods
Hamilton Corner
Chattanooga, TN
Associated Center
1990/2005
90%
67,310
67,310
96%
None
Hamilton Crossing
Chattanooga, TN
Associated Center
1987/2005
92%
192,074
98,961
100%
Electronic Express (5), HomeGoods (7), Michaels (7), T.J. Maxx
Hamilton Place Self Storage (4)
Chattanooga, TN
Other
50%
68,875
N/A
N/A
None
Hammock Landing (4)
West Melbourne, FL
Community Center
2009/2015
50%
568,968
345,001
96%
Academy Sports + Outdoors, AMC Theatres, HomeGoods, Kohl's (5), Marshalls, Michaels, Ross Dress for Less, Target (5)
Harford Annex
Bel Air, MD
Associated Center
1973/2003
100%
107,656
107,656
100%
Best Buy, Office Depot, PetSmart
Property / Location
Property
Type
Year of
Opening/ Most
Recent
Expansion
Company's
Ownership
Total
Center
SF (1)
Total
Leasable
GLA (2)
Percentage
GLA
Occupied (3)
Anchors &
Junior
Anchors
The Landing at Arbor Place
Atlanta (Douglasville), GA
Associated Center
100%
162,960
113,719
81%
Ben's Furniture and Antiques, Ollie's Bargain Outlet, former Toys R Us (5)
Layton Hills Convenience Center
Layton, UT
Associated Center
100%
92,942
92,942
76%
Bed Bath & Beyond
Layton Hills Plaza
Layton, UT
Associated Center
100%
18,836
18,836
100%
None
Mid Rivers Mall Self Storage (4)
St. Peters, MO
Other
50%
93,540
N/A
N/A
None
Parkdale Crossing
Beaumont, TX
Associated Center
100%
88,064
88,064
94%
Barnes & Noble
Parkdale Mall Self Storage (4)
Beaumont, TX
Other
50%
100,800
N/A
N/A
None
The Pavilion at Port Orange (4)
Port Orange, FL
Community Center
50%
398,030
398,030
89%
Belk, HomeGoods, Marshalls, Michaels, Regal Cinemas
Pearland Office
Pearland, TX
Office
100%
66,915
66,915
100%
None
The Plaza at Fayette
Lexington, KY
Associated Center
100%
215,745
215,745
84%
Cinemark, former Gordman's
The Promenade
D'Iberville, MS
Community Center
2009/2014
85%
621,448
404,488
98%
Ashley Furniture HomeStore, Bed Bath & Beyond, Best Buy, Dick's Sporting Goods, Kohl's (5), Marshalls, Michaels, Ross Dress for Less, Target (5)
The Shoppes at Eagle Point (4)
Cookeville, TN
Community Center
50%
230,239
230,239
98%
Academy Sports + Outdoors, Publix, Ross Dress for Less
The Shoppes at Hamilton Place
Chattanooga, TN
Associated Center
92%
132,009
132,009
93%
Bed Bath & Beyond, Marshalls, Ross Dress for Less
The Shoppes at St. Clair Square
Fairview Heights, IL
Associated Center
100%
84,383
84,383
88%
Barnes & Noble
Sunrise Commons
Brownsville, TX
Associated Center
100%
205,571
104,126
91%
former Kmart (7), Marshalls, Ross Dress for Less
The Terrace
Chattanooga, TN
Associated Center
92%
158,175
158,175
100%
Academy Sports + Outdoors, Party City
West Towne Crossing
Madison, WI
Associated Center
100%
460,875
168,978
98%
Barnes & Noble, Best Buy, Kohl's (5), Metcalf's Markets (5), Nordstrom Rack, Office Max (7), former Shopko (5), former Stein Mart (7)
WestGate Crossing
Spartanburg, SC
Associated Center
1985/1999
100%
158,262
158,262
91%
Big Air Trampoline Park, Hamricks, Jo-Ann Fabrics & Crafts
Westmoreland Crossing
Greensburg, PA
Associated Center
100%
278,995
278,995
99%
AMC Theatres, Dick's Sporting Goods, Levin Furniture, Michaels (7), T.J. Maxx (7)
York Town Center (4)
York, PA
Associated Center
50%
297,490
247,490
92%
Bed Bath & Beyond, Best Buy, Christmas Tree Shops, Dick's Sporting Goods (5), Ross Dress for Less, Staples
Total Other Property Types
7,542,771
5,197,223
94%
(1)
Total center square footage includes square footage of attached shops, attached and immediately adjacent Anchors and Junior Anchors and leased immediately adjacent freestanding locations.
(2)
All leasable square footage, including Anchors and Junior Anchors.
(3)
Includes all leased Anchors, Junior Anchors and tenants with leases in effect as of December 31, 2020.
(4)
This Property is owned in an unconsolidated joint venture.
(5)
Owned by the tenant.
(6)
We own a 92% interest in the CBL Center office buildings, with an aggregate square footage of approximately 205,000 square feet, where our corporate headquarters is located. As of December 31, 2020, we occupied 45.3% of the total square footage of the buildings.
(7)
Owned by a third party.
Other Property Types Lease Expirations
The following table summarizes the scheduled lease expirations for tenants in occupancy at Other Property Types as of December 31, 2020:
Year Ending
December 31,
Number of
Leases
Expiring
Annualized
Gross
Rent (1)
GLA of
Expiring
Leases
Average
Annualized
Gross Rent
Per Square
Foot
Expiring
Leases
as % of Total
Annualized
Gross
Rent (2)
Expiring
Leases as a
% of Total
Leased
GLA (3)
$
7,450,172
346,177
$
21.52
9.2
%
7.9
%
9,581,251
698,436
13.72
11.8
%
16.0
%
8,771,804
400,863
21.88
10.8
%
9.2
%
12,379,136
623,934
19.84
15.2
%
14.3
%
15,133,409
887,157
17.06
18.6
%
20.3
%
9,678,734
514,267
18.82
11.9
%
11.8
%
6,568,482
295,979
22.19
8.1
%
6.8
%
4,027,142
236,169
17.05
5.0
%
5.4
%
3,605,540
147,778
24.40
4.4
%
3.4
%
4,135,356
223,955
18.47
5.1
%
5.1
%
(1)
Total annualized gross rent, including recoverable common area expenses and real estate taxes, in effect at December 31, 2020 for expiring leases that were executed as of December 31, 2020.
(2)
Total annualized gross rent, including recoverable CAM expenses and real estate taxes, of expiring leases as a percentage of the total annualized gross rent of all leases that were executed as of December 31, 2020.
(3)
Total GLA of expiring leases as a percentage of the total GLA of all leases that were executed as of December 31, 2020.
Debt on Other Property Types
Please see the table entitled “Mortgage Loans Outstanding at December 31, 2020” included herein for information regarding any liens or encumbrances related to our Other Property Types.
Anchors and Junior Anchors
Anchors and Junior Anchors are an important factor in a Property’s successful performance. However, over the past several years the number of traditional department store anchors has declined, providing us the opportunity to redevelop these spaces to attract new uses such as restaurants, entertainment, fitness centers, casinos, grocery stores and lifestyle retailers that engage consumers and encourage them to spend more time at our Properties. Anchors are generally a department store or, increasingly, other large format retailers, whose merchandise appeals to a broad range of shoppers and plays a significant role in generating customer traffic and creating a desirable location for the Property's tenants.
Anchors and Junior Anchors may own their stores and the land underneath, as well as the adjacent parking areas, or may enter into long-term leases with respect to their stores. Rental rates for Anchor tenants are significantly lower than the rents charged to non-anchor tenants. Total rental revenues from Anchors and Junior Anchors accounted for 22.3% of the total revenues from our Properties in 2020. Each Anchor and Junior Anchor that owns its store has entered into an operating and reciprocal easement agreement with us covering items such as operating covenants, reciprocal easements, property operations, initial construction and future expansion.
During 2020, the following Anchors and Junior Anchors were added to our Properties, as listed below:
Name
Property
Location
Dick’s Sporting Goods
Annex at Monroeville
Pittsburgh, PA
Dick’s Sporting Goods/Golf Galaxy
Coastal Grand
Myrtle Beach, SC
Levin Furniture
Westmoreland Crossing
Greensburg, PA
Live! Casino
Westmoreland Mall
Greensburg, PA
Main Event
Mall del Norte
Laredo, TX
Tilt
CherryVale Mall
Rockford, IL
As of December 31, 2020, the Properties had a total of 451 Anchors and Junior Anchors, including 56 vacant Anchor and Junior Anchor locations, and excluding Anchors and Junior Anchors at our Excluded Malls. The Anchors and Junior Anchors and the amount of GLA leased or owned by each as of December 31, 2020 is as follows:
Number of Stores
Gross Leasable Area
Anchor Owned
Anchor Owned
Anchor/Junior Anchor
Leased
Owned
Ground
Leased
Total
Leased
Owned
Ground
Leased
Total Gross Leased Area
JC Penney (1)
1,818,743
2,734,662
586,030
5,139,435
Dillard's
116,376
4,399,709
659,763
5,175,848
Macy's
1,075,483
2,290,257
658,388
4,024,128
Belk
430,017
1,651,861
397,480
2,479,358
Sears (1)
-
-
142,722
147,766
290,488
Academy Sports + Outdoors
-
-
199,091
-
-
199,091
AMC Theatres
-
191,414
-
56,255
247,669
American Signature Furniture
-
-
-
61,620
-
61,620
Ashley HomeStore
-
-
20,000
-
-
20,000
At Home
-
-
-
124,700
-
124,700
Barnes & Noble
-
-
485,305
-
-
485,305
Bed Bath & Beyond Inc.:
Bed Bath & Beyond
-
-
281,868
-
-
281,868
Christmas Tree Shops
-
-
33,992
-
-
33,992
Bed Bath & Beyond Inc.
Subtotal
-
-
315,860
-
-
315,860
Ben's Furniture and Antiques
-
-
35,895
-
-
35,895
Best Buy
-
182,485
-
44,239
226,724
Big Air Trampoline Park
-
-
33,938
-
-
33,938
BJ's Wholesale Club
-
-
85,188
-
-
85,188
Books-A-Million, Inc.:
Books-A-Million
-
-
20,642
-
-
20,642
2nd & Charles
-
-
23,538
-
-
23,538
Books-A-Million, Inc. Subtotal
-
-
44,180
-
-
44,180
Boscov's (1)
-
-
-
150,000
-
150,000
Burlington (2)
-
63,013
94,049
-
157,062
Carousel Cinemas
-
-
52,000
-
-
52,000
Choice Home Center
-
-
128,330
-
-
128,330
Cinemark
-
-
382,506
-
-
382,506
Conn's Home Plus
-
-
-
38,312
-
38,312
Costco
-
-
-
153,973
-
153,973
Dave & Buster's (2)
-
61,316
26,509
-
87,825
Dick's Sporting Goods Inc.:
Dick's Sporting Goods
1,289,529
50,000
80,515
1,420,044
Dick's Warehouse
-
-
77,117
-
-
77,117
Dick's Sporting Goods Inc.
Subtotal
1,366,646
50,000
80,515
1,497,161
Dunham's Sports
-
-
125,551
-
-
125,551
EFO Furniture & Mattress Outlet
-
-
92,732
-
-
92,732
Electronic Express (1)
-
-
-
87,573
-
87,573
Encore
-
-
76,096
-
-
76,096
Flip N Fly
-
-
27,972
-
-
27,972
Flix Brewhouse
-
-
39,150
-
-
39,150
Foot Locker
-
-
22,847
-
-
22,847
Forever 21
-
-
157,141
-
-
157,141
The Fresh Market
-
-
21,442
-
-
21,442
Gabe's (1)
-
-
-
29,596
-
29,596
Gold's Gym
-
-
30,664
-
-
30,664
Number of Stores
Gross Leasable Area
Anchor Owned
Anchor Owned
Anchor/Junior Anchor
Leased
Owned
Ground
Leased
Total
Leased
Owned
Ground
Leased
Total Gross Leased Area
H&M
-
-
615,342
-
-
615,342
Hamrick's
-
-
40,000
-
-
40,000
Harris Teeter
-
-
-
-
72,757
72,757
High Caliber Karting
-
-
75,077
-
-
75,077
Hobby Lobby
-
-
52,500
-
-
52,500
I. Keating Furniture
-
-
103,994
-
-
103,994
Jax Outdoor Gear (1)
-
-
-
83,055
-
83,055
Jo-Ann Fabrics & Crafts
-
-
73,738
-
-
73,738
Kings Dining & Entertainment
-
-
22,678
-
-
22,678
Kohl's
142,205
312,731
83,000
537,936
LA Fitness
-
-
41,000
-
-
41,000
Launch Trampoline Park
-
-
31,989
-
-
31,989
Levin Furniture
-
-
55,314
-
-
55,314
Live! Casino Pittsburgh
-
-
129,552
-
-
129,552
LIVE Ventures, Inc.:
V-Stock
-
-
23,058
-
-
23,058
Vintage Stock
-
-
46,108
-
-
46,108
LIVE Ventures, Inc. Subtotal
-
-
69,166
-
-
69,166
Main Event
-
-
61,844
-
-
61,844
Marcus Theatres
-
-
57,500
-
-
57,500
Metcalfe's Market (1)
-
-
-
67,365
-
67,365
Michaels (1)
-
132,595
23,645
-
156,240
Movie Tavern by Marcus
-
-
40,585
-
-
40,585
Nickles and Dimes, Inc.:
Tilt
-
-
64,658
-
-
64,658
Tilt Studio
-
-
121,949
-
-
121,949
Nickles and Dimes, Inc. Subtotal
-
-
186,607
-
-
186,607
Nike Factory Store
-
-
22,479
-
-
22,479
Nordstrom
-
-
-
-
385,000
385,000
Nordstrom Rack
-
-
56,053
-
-
56,053
O2 Fitness
-
-
27,048
-
-
27,048
Office Depot
-
-
23,425
-
-
23,425
OfficeMax (1)
-
-
-
24,606
-
24,606
Old Navy
-
-
20,257
-
-
20,257
Ollie's Bargain Outlet
-
-
28,446
-
-
28,446
Party City
-
-
20,841
-
-
20,841
PetSmart
-
-
46,248
-
-
46,248
Planet Fitness
-
-
63,509
-
-
63,509
Publix
-
-
45,600
-
-
45,600
Regal Cinemas
211,725
57,854
60,400
329,979
REI
-
-
24,427
-
-
24,427
Ross Dress for Less (1)(2)
-
215,747
71,034
-
286,781
Round1 Bowling & Amusement
-
-
50,000
-
-
50,000
Saks Fifth Avenue OFF 5TH
-
-
24,807
-
-
24,807
Scheel's
-
-
200,536
-
-
200,536
Schuler Books & Music
-
-
24,116
-
-
24,116
ShopRite
-
-
87,381
-
-
87,381
Sleep Inn & Suites
-
-
-
-
123,506
123,506
Southwest Theaters
-
-
29,830
-
-
29,830
Sportsman's Warehouse (1)
-
-
-
48,171
-
48,171
Staples
-
-
20,388
-
-
20,388
Steel City Indoor Karting
-
-
64,135
-
-
64,135
Number of Stores
Gross Leasable Area
Anchor Owned
Anchor Owned
Anchor/Junior Anchor
Leased
Owned
Ground
Leased
Total
Leased
Owned
Ground
Leased
Total Gross Leased Area
Target
-
-
-
948,730
-
948,730
The TJX Companies, Inc.:
HomeGoods (1)
-
97,277
26,355
-
123,632
Marshalls
-
-
207,050
-
-
207,050
T.J. Maxx (1)
-
109,031
28,081
-
137,112
The TJX Companies, Inc. Subtotal
413,358
54,436
-
467,794
Total Wine and More (2)
-
-
-
28,350
-
28,350
TruFit Athletic Club
-
-
45,179
-
-
45,179
Truist
-
-
-
-
60,000
60,000
Urban Air Adventure Park (1)
-
82,498
30,404
-
112,902
Vertical Trampoline Park
-
-
24,972
-
-
24,972
Von Maur (1)
-
-
-
150,000
-
150,000
Wave Fashion
-
-
27,978
-
-
27,978
WhirlyBall
-
-
43,440
-
-
43,440
Whole Foods (1)
-
26,841
-
34,320
61,161
Vacant Anchor/Junior Anchor:
Vacant - former Ashley HomeStore
-
-
20,487
-
-
20,487
Vacant - former Bealls
-
-
151,209
-
-
151,209
Vacant - former Bergner's
-
-
131,616
-
-
131,616
Vacant - former The Bon-Ton (1)
-
-
-
131,915
-
131,915
Vacant - former Boston Store (1)
-
-
-
354,205
-
354,205
Vacant - former Dick's Sporting Goods
-
-
52,054
-
-
52,054
Vacant - former Dillard's (1)
-
-
-
159,142
-
159,142
Vacant - former Forever 21 (3)
-
-
-
57,500
-
57,500
Vacant - former Gordman's
-
-
209,303
-
-
209,303
Vacant - former Herberger's (4)
-
-
92,500
-
-
92,500
Vacant - former JC Penney (1)
-
-
-
173,124
-
173,124
Vacant - former Kmart (1)
-
-
-
101,445
-
101,445
Vacant - former Macy's (1)
-
69,974
271,678
-
341,652
Vacant - former Saks Fifth Avenue OFF 5TH
-
-
24,558
-
-
24,558
Vacant - former Sears (1)(2)
983,134
1,942,952
476,059
3,402,145
Vacant - former Shopko
-
-
-
97,773
-
97,773
Vacant - former Stein Mart (1)
-
30,463
21,200
-
51,663
Vacant - former Toys "R" Us (1)
-
-
-
49,241
-
49,241
Vacant - former Younkers
-
-
93,597
-
-
93,597
Current Developments:
Hollywood Casino (5)
-
-
79,500
-
-
79,500
Rooms To Go (6)
-
-
45,000
-
-
45,000
Von Maur (7)
-
-
-
85,000
-
85,000
Total Anchors/Junior Anchors
13,567,726
17,381,099
3,925,478
34,874,303
(1)
The following Anchors/Junior Anchors are owned by third parties: the former The Bon-Ton at York Galleria, Boscov’s at York Galleria, the former Boston Store at Brookfield Square, the former Boston Store at East Towne Mall, the former Dillard’s for Women at Richland Mall, Electronic Express at Hamilton Crossing, Gabe’s at CoolSprings Crossing, HomeGoods at Hamilton Crossing, Jax Outdoor Gear at Frontier Mall, JC Penney at Frontier Mall, the former JC Penney at Northgate Mall, the former Kmart at Sunrise Commons, the former Macy’s at Hanes Mall, Metcalfe’s Market at West Towne Crossing, Michaels at Hamilton Crossing, Michaels at Westmoreland Crossing, OfficeMax at West Towne Crossing, Ross Dress for Less at Frontier Square, Sears at Coastal Grand, the former Sears at Hanes Mall, the former Sears at Mall del Norte, the former Sears at Mid Rivers Mall, the former Sears at Northgate Mall, the former Sears at Parkdale Mall, the former Sears at Richland Mall, the former Sears at Sunrise Mall, the former Sears at Turtle Creek Mall, Sportsman’s Warehouse at Southaven Towne Center, the former Stein Mart at West Towne Crossing, T.J. Maxx at Frontier Square, T.J. Maxx at Westmoreland Crossing, the former Toys “R” Us at The Landing at Arbor Place, Urban Air Adventure Park at CoolSprings Crossing, Von Maur at West Towne Mall and Whole Foods at Friendly Center.
(2)
The following are owned by Seritage Growth Properties: Burlington at Kentucky Oaks Mall, Burlington at Northwoods Mall, Dave & Buster’s at West Towne Mall, Ross Dress for Less at Kentucky Oaks Mall, the former Sears at Imperial Valley Mall, the former Sears at West Towne Mall and Total Wine and More at West Towne Mall.
(3)
The upper floor of Belk for Men at Hamilton Place Mall was formerly subleased by Belk to Forever 21 and is now vacant.
(4)
The former Herberger’s space at Kirkwood Mall will be redeveloped for the addition of restaurants. Construction is expected to begin in 2021.
(5)
Hollywood Casino operates in the lower level of the former Sears at York Galleria. The upper level remains vacant.
(6)
The former Sears at Cross Creek Mall will be demolished and replaced with Rooms To Go.
(7)
A portion of the former Boston Store at West Towne Mall is being redeveloped into a Von Maur. The remainder remains vacant.
Mortgages Notes Receivable
We own one mortgage, which is collateralized by assignment of 100% of the ownership interests in the underlying real estate and related improvements. The mortgage is more fully described on Schedule IV in Part IV of this report.
Mortgage Loans Outstanding at December 31, 2020 (in thousands):
Property
Our
Ownership
Interest
Stated
Interest
Rate
Principal
Balance as
of
12/31/20 (1)
Annual
Debt
Service (2)
Maturity
Date
Optional
Extended
Maturity
Date
Balloon
Payment
Due
on
Maturity (2)
Open to
Prepayment
Date (3)
Footnote
Consolidated Debt
Malls:
Alamance Crossing
%
5.83
%
$
43,563
$
2,003
Jul-21
-
$
43,046
Open
(4)
Arbor Place
%
5.10
%
104,384
7,948
May-22
-
100,861
Open
(4)
Asheville Mall
%
5.80
%
62,121
6,115
Sep-21
-
60,582
Open
(5)
Brookfield Square Anchor Redevelopment
%
3.05
%
27,461
Oct-21
Oct-22
27,461
Open
(4)
(6)
Cross Creek Mall
%
4.54
%
106,883
9,931
Jan-22
-
101,688
Open
EastGate Mall
%
5.83
%
31,181
1,373
Apr-21
-
30,724
Open
(5)
Fayette Mall
%
5.42
%
141,393
5,613
May-21
-
138,943
Open
(4)
Greenbrier Mall
%
5.41
%
61,647
5,425
Dec-19
-
58,722
Open
(5)
Hamilton Place
%
4.36
%
98,396
6,400
Jun-26
-
85,535
Open
(4)
Jefferson Mall
%
4.75
%
60,852
3,974
Jun-26
-
51,868
Open
(4)
Northwoods Mall
%
5.08
%
62,284
4,743
Apr-22
-
60,292
Open
(4)
The Outlet Shoppes at Gettysburg
%
4.80
%
36,774
2,422
Oct-25
-
33,285
Open
(4)
The Outlet Shoppes at Laredo
%
5.80
%
40,600
1,258
May-21
-
39,850
Open
(4)(7)
(8)
Park Plaza
%
5.28
%
76,805
2,890
Apr-21
-
76,024
Open
(5)
Parkdale Mall & Crossing
%
5.85
%
74,406
1,567
Mar-21
-
73,923
Open
(4)
Southpark Mall
%
4.85
%
57,039
4,240
Jun-22
-
54,924
Open
(4)
Volusia Mall
%
4.56
%
46,510
4,608
May-24
-
37,573
Open
(4)
WestGate Mall
%
4.99
%
31,578
2,803
Jul-22
-
29,670
Open
(4)
1,163,877
74,296
1,104,971
Other Properties:
CBL Center
%
5.00
%
16,182
1,651
Jun-22
-
14,949
Open
(9)
Hamilton Crossing & Expansion
%
5.99
%
8,205
Apr-21
-
8,122
Open
(4)
(10)
24,387
1,896
23,071
Operating Partnership Debt:
Secured credit facility:
Secured line of credit (drawn to capacity)
%
9.50
%
675,926
24,223
Jul-23
-
675,926
Open
(11)
Secured term loan
%
9.50
%
438,750
47,665
Jul-23
-
368,750
Open
(11)
Senior unsecured Notes:
2023 Notes
%
5.25
%
450,000
23,468
Dec-23
-
450,000
Open
(12)
2024 Notes
%
4.60
%
300,000
13,752
Oct-24
-
300,000
Open
(12)
2026 Notes
%
5.95
%
625,000
36,580
Dec-26
-
625,000
Open
(12)
1,375,000
73,800
1,375,000
Total Consolidated Debt
$
3,677,940
$
221,880
$
3,547,718
Unconsolidated Debt
Malls:
Coastal Grand
%
4.09
%
$
106,746
$
6,742
Aug-24
-
$
96,995
Open
(4)
CoolSprings Galleria
%
4.84
%
148,678
9,803
May-28
-
125,774
Feb-28
(4)
Friendly Shopping Center
%
3.48
%
90,412
5,375
Apr-23
-
85,203
Open
(4)
Oak Park Mall
%
3.97
%
262,971
10,865
Oct-25
-
247,061
Open
The Outlet Shoppes at Atlanta
%
4.90
%
70,074
5,095
Nov-23
-
65,036
Open
(4)
Property
Our
Ownership
Interest
Stated
Interest
Rate
Principal
Balance as
of
12/31/20 (1)
Annual
Debt
Service (2)
Maturity
Date
Optional
Extended
Maturity
Date
Balloon
Payment
Due
on
Maturity (2)
Open to
Prepayment
Date (3)
Footnote
The Outlet Shoppes at Atlanta - Phase II
%
3.00
%
4,601
Nov-23
-
4,256
Open
(4)
(13)
The Outlet Shoppes at El Paso
%
5.10
%
72,575
4,888
Oct-28
-
61,342
Jul-28
(4)
The Outlet Shoppes of the Bluegrass
%
4.05
%
68,491
4,464
Dec-24
-
61,316
Open
(4)
The Outlet Shoppes of the Bluegrass - Phase II
%
3.64
%
8,872
Oct-21
-
8,472
Open
(13)
The Shops at Friendly Center
%
3.34
%
60,000
2,004
Apr-23
-
60,000
Feb-19
West County Center
%
3.40
%
170,632
10,111
Dec-22
-
162,270
Open
(4)
1,064,052
60,220
977,725
Other Properties:
Ambassador Town Center
%
3.22
%
42,654
2,207
Jun-23
-
39,189
Open
(14)
(15)
Ambassador Town Center Infrastructure Improvements
%
3.74
%
9,360
Jan-21
-
9,360
Open
(4)(16)
(17)
Coastal Grand Outparcel
%
4.09
%
5,151
Aug-24
-
4,680
Open
(4)
(17)
EastGate Mall Self Storage
%
2.90
%
6,500
Dec-22
-
6,500
Open
(4)(7)
(17)(18)
Fremaux Town Center (Phase I)
%
3.70
%
64,487
4,480
Jun-26
-
52,130
Open
(4)
(17)
Hammock Landing - Phase I
%
5.40
%
40,177
Feb-21
Feb-23
40,047
Open
(4)(14)
(19)(20)
Hammock Landing - Phase II
%
5.40
%
14,423
Feb-21
Feb-23
14,363
Open
(4)(14)
(19)(20)
The Pavilion at Port Orange
%
5.40
%
53,233
Feb-21
Feb-23
53,048
Open
(4)(14)
(19)(20)
The Shoppes at Eagle Point
%
2.90
%
34,585
1,412
Oct-21
Oct-22
34,085
Open
(7)
(14)
York Town Center
%
4.90
%
29,904
2,879
Feb-22
-
28,605
Open
(4)
York Town Center - Pier 1
%
2.90
%
1,157
Feb-22
-
1,097
Open
(4)(7)
(17)
301,631
12,681
283,104
Construction Loans:
Coastal Grand - Dick's Sporting Goods
%
5.05
%
6,811
Nov-24
-
6,497
Open
(4)
(21)
Hamilton Place Aloft Hotel
%
2.60
%
9,360
Nov-24
-
15,871
Open
(7)(17)
(22)
Hamilton Place Self Storage
%
2.90
%
6,564
Sep-24
-
6,312
Open
(4)(17)
(19)(23)
Mid Rivers Mall Self Storage
%
2.90
%
5,896
Apr-23
-
5,677
Open
(4)(17)
(19)(24)
Parkdale Mall Self Storage
%
5.25
%
6,160
Jul-24
-
5,875
Jul-22
(4)(7)(13)
(17)(25)
Springs at Port Orange
%
2.50
%
36,527
Dec-21
-
36,527
Open
(7)
(17)
71,318
2,329
76,759
Total Unconsolidated Debt
$
1,437,001
$
75,230
$
1,337,588
Total Consolidated and
Unconsolidated Debt
$
5,114,941
$
297,110
$
4,885,306
Company's Pro-Rata Share of
Total Debt
$
4,394,720
$
259,083
(26)
(1)
The amount listed includes 100% of the loan amount even though the Operating Partnership may have less than a 100% ownership interest in the Property.
(2)
Assumes extension option will be exercised, if applicable.
(3)
Prepayment premium is based on yield maintenance or defeasance.
(4)
The filing of the Chapter 11 Cases constituted an event of default with respect to the loan.
(5)
The loan secured by this mall is in default as of December 31, 2020.
(6)
Brookfield Square Anchor Redevelopment - The $29,400 loan closed in October 2018 to fund the redevelopment of a former Sears location at Brookfield Square. The loan is interest only at a variable rate of LIBOR plus 2.90%. The loan matures October 2021, and had a one-year extension option, at our election, which was contingent on meeting specific debt and operational metrics. The Company is in discussions with the lender regarding the extension option because the filing of the Chapter 11 Cases constituted an event of default under the loan agreement.
(7)
The interest rate is variable at various spreads over LIBOR priced at the rates in effect at December 31, 2020. The note is prepayable at any time without prepayment penalty.
(8)
The Outlet Shoppes at Laredo - The interest rate will be reduced to LIBOR plus 2.25% once certain debt and operational metrics are met. The Operating Partnership owns less than 100% of the Property but guarantees 100% of the debt.
(9)
CBL Center consists of our two corporate office buildings.
(10)
Property type is an associated center.
(11)
Secured credit facility - The administrative agent informed the Company that interest will accrue on all outstanding obligations at the post-default rate, which is equal to the rate that otherwise would be in effect plus 5.0%. The post-default interest rate at December 31, 2020 was 9.50%. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 852 - Reorganizations (“ASC 852”), which limits the recognition of interest expense during a bankruptcy proceeding to only amounts that will be paid during the bankruptcy proceeding or that are probable of becoming allowed claims, interest has not been accrued on the secured credit facility subsequent to the filing of the Chapter 11 Cases. Amount is included in liabilities subject to compromise in the accompanying consolidated balance sheets as of December 31, 2020, and as the expected maturity date is subject to the outcome of the Chapter 11 Cases, the original, legal maturity date is reflected in this table. In accordance with ASC 852, unamortized deferred financing costs of $4,098, previously included in mortgage and other indebtedness, net, related to the secured term loan and unamortized deferred financing costs of $6,965, previously included in intangible lease assets and other assets, related to the secured line of credit were both charged to reorganization items in the accompanying consolidated statements of operations as part of the Company’s reorganization.
(12)
In accordance with ASC 852, unamortized deferred financing costs and debt discounts of $14,231, previously included in mortgage and other indebtedness, net, related to the senior unsecured notes were charged to reorganization items in the accompanying consolidated statements of operations as part of the Company’s reorganization. Also, in accordance with ASC 852, which limits the recognition of interest expense during a bankruptcy proceeding to only amounts that will be paid during the bankruptcy proceeding or that are probable of becoming allowed claims, interest has not been accrued subsequent to the filing of the Chapter 11 Cases. Amount is included in liabilities subject to compromise in the accompanying consolidated balance sheets as of December 31, 2020, and as the expected maturity date is subject to the outcome of the Chapter 11 Cases, the original, legal maturity date is reflected in this table.
(13)
The Operating Partnership owns less than 100% of the Property but guarantees 100% of the debt.
(14)
Property type is a community center.
(15)
Ambassador Town Center - The unconsolidated affiliate has an interest rate swap on a notional amount of $42,654, amortizing to $38,866 over the term of the swap, to effectively fix the interest rate on the variable-rate loan. Therefore, this amount is currently reflected as having a fixed rate. The swap terminates in June 2023.
(16)
Ambassador Town Center Infrastructure Improvements - The joint venture has an interest rate swap on a notional amount of $9,360, amortizing to $9,360 over the term of the swap, to effectively fix the interest rate on the variable rate loan. Therefore, this amount is currently reflected as having a fixed rate. The swap terminates in January 2021. The Operating Partnership owns less than 100% of the Property but guarantees 100% of the debt. Subsequent to December 31, 2020, the loan was extended for an additional four years. See Note 20.
(17)
Property type is Other.
(18)
EastGate Mall Self Storage - The loan is interest-only through November 2020. Thereafter, monthly payments of $10, in addition to interest, will be due. The interest rate will be reduced to a variable rate of LIBOR plus 2.35% once construction is complete and certain debt and operational metrics are met.
(19)
The interest rate is variable at various spreads over LIBOR priced at the rates in effect at December 31, 2020. However, the lender notified the Company that the loan is considered in default and will accrue interest at post-default rate.
(20)
The loan was extended subsequent to December 31, 2020. See Note 20 for more information.
(21)
Coastal Grand - Dick's Sporting Goods -The $7,959 construction loan bears interest at fixed rate of 5.05%.
(22)
Hamilton Place Aloft Hotel - The $16,800 construction loan bears interest rate at various spreads over LIBOR priced at the rates in effect at December 31, 2020.
(23)
Hamilton Place Self Storage - The $7,002 construction loan bears interest at LIBOR plus 2.75%.
(24)
Mid Rivers Mall Self Storage - The $5,987 construction loan is interest only through May 2021.
(25)
Parkdale Mall Self Storage - The $6,500 construction loan bears interest at the greater of 5.25% or LIBOR plus 2.80%.
(26)
Represents the Company's pro rata share of debt, including our share of unconsolidated affiliates' debt and excluding noncontrolling interests' share of consolidated debt on shopping center properties.
The following is a reconciliation of consolidated debt to our pro rata share of total debt, including unamortized deferred financing costs (in thousands):
Total consolidated debt
$
3,677,940
Noncontrolling interests' share of consolidated debt
(30,177
)
Company's share of unconsolidated debt
746,957
Unamortized deferred financing costs
(6,012
)
Company's pro rata share of total debt
$
4,388,708
Other than our property-specific mortgage or construction loans, there are no material liens or encumbrances on our Properties. See Note 8 and Note 9 to the consolidated financial statements for additional information regarding property-specific indebtedness and construction loans.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
The information in this Item 3 is incorporated by reference herein from Note 16. Contingencies.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is currently traded on the over-the-counter market, operated by OTC Markets Group, Inc., under the ticker symbol “CBLAQ.” Over-the-counter market quotations for our common stock reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. There were approximately 794 shareholders of record for our common stock as of April 1, 2021.
During 2019, our board of directors suspended all future dividends with respect to the Company’s outstanding common stock and preferred stock, as well as distributions with respect to the Operating Partnership’s outstanding units of partnership interest, subject to quarterly review. We do not expect to pay any further dividends with respect to the Company’s outstanding common stock and preferred stock, or any distributions with respect to the Operating Partnership’s outstanding units of partnership interest, prior to the conclusion of our reorganization pursuant to the pending Chapter 11 Cases. If we successfully complete such reorganization, future dividend distributions with respect to new equity securities issued pursuant to the Chapter 11 Cases will be subject to our actual results of operations, taxable income, economic conditions, issuances of common stock and such other factors as our board of directors deems relevant. For additional information, see discussion presented under the subheading “Dividends - CBL” in Note 10 of this report. Our actual results of operations will be affected by a number of factors, including the revenues received from the Properties, our operating expenses, interest expense, unanticipated capital expenditures and the ability of the Anchors and tenants at the Properties to meet their obligations for payment of rents and tenant reimbursements.
See Part III, Item 12 contained herein for information regarding securities authorized for issuance under equity compensation plans. There were no repurchases of common stock made by us during the three months ended December 31, 2020.
Operating Partnership Units
There is no established public trading market for the Operating Partnership’s common units. On April 1, 2021, the Operating Partnership had 5,117,856 common units outstanding (comprised of 3,001,463 special common units and 2,116,393 common units) held by 29 holders of record, excluding the 196,458,778 common units held by the Company.
During the three months ended December 31, 2020, in addition to the 658,880 shares of common stock issued to holders of 658,880 common units of limited partnership interest in the Operating Partnership as previously reported in the Company’s Current Report on Form 8-K dated October 16, 2020 and filed with the SEC on October 22, 2020, the Company issued 148,554 additional shares of common stock to a holder of 148,554 common units of limited partnership interest in the Operating Partnership in connection with the exercise of the holder’s contractual exchange rights. We believe the issuance of these shares was exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof, because this issuance did not involve a public offering or sale. No underwriters, brokers or finders were involved in these transactions.

---

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA
Pursuant to Release No. 33-10890 (including the transition guidance therein), which was adopted by the SEC on November 19, 2020, the Company has elected to exclude the disclosures formerly required by this Item 6.

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes that are included in this annual report. Capitalized terms used, but not defined, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations have the same meanings as defined in the notes to the consolidated financial statements.
Executive Overview
We are a self-managed, self-administered, fully integrated REIT that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Our shopping centers are located in 24 states, and are primarily in the southeastern and midwestern United States. We have elected to be taxed as a REIT for federal income tax purposes.
We conduct substantially all of our business through the Operating Partnership. The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. See Item 2 for a description of our Properties owned and under development as of December 31, 2020.
On March 11, 2020, the World Health Organization classified COVID-19 as a pandemic. Due to the extraordinary governmental actions taken to contain COVID-19, we were unable to predict the full extent of the pandemic’s impact on our results of operations for 2020 and its ongoing impact in 2021. As a result, we previously withdrew our full-year 2020 same-center NOI and FFO per share, as adjusted, guidance and underlying assumptions and do not expect to provide guidance going forward until future results can be more accurately predicted.
In response to local and state mandated closures, our entire portfolio, except for a few properties, closed in March 2020. Beginning in late April, government agencies began allowing the re-opening of properties with specified health and safety restrictions. By the close of the third quarter 2020, all our mall properties were able to reopen. As local mandates were lifted and properties reopened, stores within the properties followed suit with the majority of stores reopening by the close of the third quarter. We have implemented strict procedures and guidelines for our employees, tenants and property visitors based on CDC and other health agency recommendations. Our properties continue to update these policies and procedures, following any new mandates and regulations, as required. The safety and health of our customers, employees and tenants remains a top priority.
Our financial and operating results during 2020 reflect the ongoing impact of the temporary closure of our portfolio for a significant period due to government mandates and operating restrictions. While all properties were able to reopen by the close of the third quarter, many state and local markets continue to impose occupancy and other restrictions. These additional restrictions may have the effect of restricting traffic and sales for our tenants and have put additional pressure on our tenants’ financial health. We have worked with our tenants to enhance customer reach despite the restrictions, including offering curbside pickup, delivery and opening buy-online-pick-up-in-store locations. Revenues for the year were impacted by a substantial increase in the estimate for uncollectable revenues related to rents due from tenants that filed for bankruptcy or are struggling financially. Store closures and rent loss from pre-pandemic tenant bankruptcies, rent abatements granted and lower percentage rent related to lower retail sales also impacted revenues. We offset a portion of this decline through aggressive actions to reduce costs both at the property and corporate levels, including company-wide salary reductions, furloughs, reductions-in-force and other expense reduction initiatives. However, as properties reopened during the third quarter, certain expenses necessarily resumed.
The mandated closures resulted in nearly all our tenants closing for a period of time and/or shortening operating hours. As a result, we experienced an increased level of requests for rent deferrals and abatements, as well as defaults on rent obligations. While, in general, we believe that tenants have a clear contractual obligation to pay rent, we have been working with our tenants to address rent deferral and abatement requests. We granted rent abatements of approximately $25.4 million and deferrals of approximately $30.6 million during the year ended December 31, 2020.
We implemented a full financial COVID-19 response to improve liquidity and reduce costs. These significant actions included drawing $280 million on our secured line of credit, eliminating all non-essential expenditures, implementing a company-wide furlough and salary reduction program, implementing a permanent reduction in force and delaying and suspending capital expenditures, including redevelopment investments. See the "Liquidity and Capital Resources" section for more information.
As discussed under Voluntary Reorganization under Chapter 11 below, the Debtors commenced the filing of the Chapter 11 Cases. The filing of the Chapter 11 Cases constituted an event of default that resulted in certain monetary obligations becoming immediately due and payable with respect to the secured credit facility and the senior unsecured notes. The filing of the Chapter 11 Cases also constituted an event of default with respect to certain property-level debt of the Operating Partnership’s subsidiaries, which may result in acceleration of the outstanding principal and other sums due. See Note 2 and Liquidity and Capital Resources for additional information.
We had a net loss for the year ended December 31, 2020 of $335.5 million as compared to a net loss of $131.7 million in the prior-year period. In addition to the impact of the government mandated closures and the ongoing impact of the COVID-19 pandemic, significant items that affected the comparability between the year ended December 31, 2020 and the year ended December 31, 2019 include:
•
$36.0 million of costs related to our reorganization efforts;
•
Loss on impairment that is $26.2 million lower in 2020 than in 2019;
•
Litigation settlement expense in 2020 that is $69.6 million lower;
•
Gain on extinguishment of debt that is $39.2 million lower;
•
$67.2 million less of gain on investments/deconsolidation related to deconsolidating two outlet centers in the third and fourth quarters of 2019;
•
Gain on sales of real estate assets that is $11.6 million lower in 2020 than in 2019; and
•
Equity in losses of unconsolidated affiliates of $14.9 million in 2020 compared to equity in earnings of unconsolidated affiliates of $4.9 million in 2019.
Our focus is on continuing to execute our strategy to transform our properties into suburban town centers, primarily through the re-tenanting of former anchor locations as well as diversification of in-line tenancy. This operational strategy is also supported by our balance sheet strategy focused on reducing overall debt, extending our debt maturity schedule and lowering our overall cost of borrowings to limit maturity risk, improve net cash flow and enhance enterprise value. As discussed further below under Voluntary Reorganization under Chapter 11, we are pursuing a plan to recapitalize the Company, including restructuring portions of its debt, through the Chapter 11 Cases. While the industry and our Company continue to face challenges, some of which may not be in our control, we believe that the strategies in place to redevelop our Properties and diversify our tenant mix will contribute to stabilization of our portfolio and revenues in future years.
Same-center NOI and FFO are non-GAAP measures. For a description of same-center NOI, a reconciliation from net income to same-center NOI, and an explanation of why we believe this is a useful performance measure, see Non-GAAP Measure - Same-center Net Operating Income in “Results of Operations.” For a description of FFO and FFO, as adjusted, a reconciliation from net income attributable to common shareholders to FFO allocable to Operating Partnership common unitholders, and an explanation of why we believe this is a useful performance measure, see Non-GAAP Measure - Funds from Operations within the "Liquidity and Capital Resources" section.
Voluntary Reorganization under Chapter 11
On the Commencement Date, the Debtors, commenced the Chapter 11 Cases by filing voluntary petitions under Chapter 11 of the Bankruptcy Code with the Bankruptcy Court. The Debtors are authorized to continue to operate their businesses and manage their properties as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. Pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure, the Debtors’ Chapter 11 Cases are being jointly administered for procedural purposes only under the caption In re CBL & Associates Properties, Inc., et al., Case No. 20-35226. Documents filed on the docket of and other information related to the Chapter 11 Cases are available free of charge online at https://dm.epiq11.com/case/cblproperties/dockets.
We are currently operating our business as debtors-in-possession in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. After we filed our Chapter 11 petitions, the Bankruptcy Court granted certain relief requested by the Debtors enabling us to conduct our business activities in the ordinary course, including, among other things and subject to the terms and conditions of such orders, authorizing us to pay employee wages and benefits, to pay taxes and certain governmental fees and charges, to continue to operate our cash management system in the ordinary course, and to pay the prepetition claims of certain of our service providers. For goods and services provided following the Commencement Date, we intend to pay service providers in the ordinary course.
Subject to certain exceptions, under the Bankruptcy Code, the filing of the Chapter 11 Cases automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the Commencement Date. Accordingly,
although the filing of the Chapter 11 Cases triggered defaults under the Debtors’ funded debt obligations, creditors are stayed from taking any actions against the Debtors as a result of such defaults, subject to certain limited exceptions permitted by the Bankruptcy Code. Absent an order of the Bankruptcy Court, substantially all of the Debtors’ prepetition liabilities are subject to settlement under the Bankruptcy Code.
The filing of the Chapter 11 Cases constituted an event of default that resulted in certain monetary obligations becoming immediately due and payable with respect to the secured credit facility and the senior unsecured notes. The filing of the Chapter 11 Cases also constituted an event of default with respect to certain property-level debt of the Operating Partnership’s subsidiaries, which may have resulted in the automatic acceleration of certain monetary obligations or may give the applicable lender the right to accelerate such amounts. Due to the Chapter 11 Cases, however, the creditors’ ability to exercise remedies against the Debtors under their respective credit agreements and debt instruments was stayed as of the date of the Chapter 11 petition and continues to be stayed.
After engaging in negotiations in a Bankruptcy Court-ordered mediation, on March 21, 2021, the Company entered into the Amended RSA, with the Consenting Noteholders in excess of 69% (including joinders) of the aggregate principal amount of the senior unsecured notes and the Consenting Bank Lenders party to the Company’s secured credit facility who hold in the aggregate in excess of 96% (including joinders) of the aggregate outstanding principal amount of debt under the secured credit facility. The Amended RSA amends and restates the Original RSA, dated as of August 18, 2020, and sets forth, subject to certain conditions, the commitments to and obligations of, on the one hand, the Company, and on the other hand, the Consenting Noteholders and Consenting Bank Lenders, in connection with the Restructuring Transactions set forth in the Amended RSA and the Plan Term Sheet. The Amended RSA contemplates that the restructuring and recapitalization of the Debtors will occur through a joint plan of reorganization in the Chapter 11 Cases.
The Amended RSA requires that the Company file the Amended Plan and related disclosure statement no later than 25 days after the Agreement Effective Date and under the Amended RSA we must seek to have the Amended Plan confirmed and declared effective no later than November 1, 2021. Before a Bankruptcy Court will confirm the Amended Plan, the Bankruptcy Code requires at least one “impaired” class of claims votes to accept the Amended Plan. A class of claims votes to “accept” the Amended Plan if voting creditors that hold a majority in number and two-thirds in amount of claims in that class approve the Amended Plan. The Amended RSA requires the Consenting Stakeholders vote in favor of and support the Amended Plan. As of the date hereof, the Consenting Bank Lenders and Consenting Noteholders each represent the requisite amount of claims necessary to accept the Amended Plan in each of their respective classes. For the foregoing reasons, among others, the Debtors believe that they will be able to confirm the Amended Plan in the Chapter 11 Cases.
Under the Amended RSA, the proposed Amended Plan will provide for the elimination of more than $1.6 billion of debt and preferred obligations as well as a significant reduction in interest expense. In exchange for their approximately $1.375 billion in principal amount of senior unsecured notes and $133 million in principal amount of the secured credit facility, Consenting Noteholders and other noteholders will receive, in the aggregate, $95 million in cash, $555 million of new senior secured notes, of which up to $100 million, upon election by the Consenting Noteholders, may be received in the form of new convertible secured notes and 89% in common equity of the newly reorganized Company. Certain Consenting Noteholders will also provide up to $50 million of new money in exchange for additional convertible secured notes. The Amended RSA provides that the remaining Bank Lenders, holding $983.7 million in principal amount under the secured credit facility, will receive $100 million in cash and a new $883.7 million secured term loan. Existing common and preferred stakeholders are expected to receive up to 11% of common equity in the newly reorganized company. The Amended RSA is subject to Bankruptcy Court approval, which the Company will seek in accordance with the terms of the Amended RSA.
We cannot predict the ultimate outcome of our Chapter 11 Cases at this time. For the duration of the Chapter 11 proceedings, our operations and ability to develop and execute our business plan are subject to the risks and uncertainties associated with the chapter 11 process. As a result of these risks and uncertainties, the amount and composition of our assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 proceedings, and the description of our operations, properties and liquidity and capital resources included in this annual report may not accurately reflect our operations, properties and liquidity and capital resources following the Chapter 11 process.
In particular, subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assume and assign or reject executory contracts and unexpired leases subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a prepetition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to a prepetition general unsecured claim for damages caused by such deemed breach subject, in the case of the rejection of unexpired leases of real property, to certain caps on damages. Counterparties to such rejected contracts or leases may
assert unsecured claims in the Bankruptcy Court against the applicable Debtor’s estate for such damages. Generally, the assumption or assumption and assignment of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance thereunder. Accordingly, any description of an executory contract or unexpired lease with the Debtors in this annual report, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease with the Debtors is qualified by any overriding rights we have under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the assumption, assumption and assignment or rejection of any executory contract or unexpired lease and the Debtors expressly preserve all of their rights with respect thereto.
Given the acceleration of the secured credit facility, the senior unsecured notes and certain property-level debt, as well as the inherent risks, unknown results and inherent uncertainties associated with the bankruptcy process and the direct correlation between these matters and our ability to satisfy our financial obligations that may arise, we believe that there is substantial doubt that we will continue to operate as a going concern within one year after the date our consolidated financial statements are issued. Our ability to continue as a going concern is contingent upon our ability to successfully implement the Amended Plan set forth in the Amended RSA, which is pending approval of the Bankruptcy Court. See Note 2 to the consolidated financial statements for additional information.
Results of Operations
Comparison of the Year Ended December 31, 2020 to the Year Ended December 31, 2019
Properties that were in operation for the entire year during both 2020 and 2019 are referred to as the “2020 Comparable Properties.” Since January 1, 2019, we have opened three self-storage facilities, deconsolidated three outlet centers and disposed of twelve properties:
Properties Opened
Property
Location
Date Opened
Mid Rivers Mall - Self-storage (1)
St. Peters, MO
January 2019
Parkdale Mall - Self Storage (1)
Beaumont, TX
April 2020
Hamilton Place - Self Storage (1)
Chattanooga, TN
July 2020
(1)
The property is owned by a joint venture that is accounted for using the equity method of accounting and is included in equity in earnings of unconsolidated affiliates in the accompanying consolidated statements of operations.
Deconsolidations
Property
Location
Date of Deconsolidation
The Outlet Shoppes at Atlanta (1)
Woodstock, GA
December 2019
The Outlet Shoppes at El Paso (1)
El Paso, TX
August 2019
The Outlet Shoppes of the Bluegrass (1)
Simpsonville, KY
November 2019
(1)
The property is owned by a joint venture that is accounted for using the equity method of accounting and is included in equity in earnings of unconsolidated affiliates in the accompanying consolidated statements of operations from the date of deconsolidation.
Dispositions
Property
Location
Sales Date
850 Greenbrier Circle
Chesapeake, VA
July 2019
Acadiana Mall (1)
Lafayette, LA
January 2019
Barnes & Noble parcel
High Point, NC
July 2019
Cary Towne Center
Cary, NC
January 2019
Courtyard by Marriott at Pearland Town Center
Pearland, TX
June 2019
Dick’s Sporting Goods at Hanes Mall
Winston-Salem, NC
September 2019
The Forum at Grandview
Madison, MS
July 2019
Honey Creek Mall
Terre Haute, IN
April 2019
Kroger at Foothills Plaza
Maryville, TN
July 2019
The Shoppes at Hickory Point
Forsyth, IL
April 2019
Hickory Point Mall (1)
Forsyth, IL
August 2020
Burnsville Center (1)
Burnsville, MN
December 2020
(1)
Title to the property was transferred to the mortgage holder in satisfaction of the non-recourse debt secured by the property.
Revenues
Total for the
Years
Ended December 31,
Comparable
Properties
Change
Core
Non-core
Deconsolidation
Dispositions
Total Change
Rental revenues
$
554,064
$
736,878
$
(182,814
)
$
(120,453
)
$
(10,089
)
$
(35,571
)
$
(16,701
)
$
(182,814
)
Management, development and leasing fees
6,800
9,350
(2,550
)
(2,550
)
-
-
-
(2,550
)
Other
14,997
22,468
(7,471
)
(6,276
)
(252
)
(358
)
(585
)
(7,471
)
Total revenues
$
575,861
$
768,696
$
(192,835
)
$
(129,279
)
$
(10,341
)
$
(35,929
)
$
(17,286
)
$
(192,835
)
Rental revenues from the Comparable Properties declined due to (i) store closures and rent concessions that were in effect prior to the COVID-19 pandemic for tenants with high occupancy cost levels and tenants that closed in 2019 due to bankruptcy and (ii) rent concessions to tenants that are in bankruptcy or are struggling financially primarily due to the impacts of the COVID-19 pandemic, including $25.4 million of rent abatements and $48.2 million in uncollectable revenues for past due rents. Percentage rent declined $7.6 million as a result of store closures and lower retail sales due to mandated property closures and reduced traffic.
Operating Expenses
Total for the
Years
Ended December 31,
Comparable
Properties
Change
Core
Non-core
Deconsolidation
Dispositions
Total Change
Property operating
$
(84,061
)
$
(108,905
)
$
24,844
$
11,182
$
1,877
$
8,741
$
3,044
$
24,844
Real estate taxes
(69,686
)
(75,465
)
5,779
(76
)
2,456
2,445
5,779
Maintenance and repairs
(34,132
)
(46,282
)
12,150
8,447
1,119
2,169
12,150
Property operating expenses
(187,879
)
(230,652
)
42,773
20,583
2,216
12,316
7,658
42,773
Depreciation and amortization
(215,030
)
(257,746
)
42,716
22,051
4,606
11,563
4,496
42,716
General and administrative
(53,425
)
(64,181
)
10,756
10,756
-
-
-
10,756
Loss on impairment
(213,358
)
(239,521
)
26,163
(22,552
)
65,343
-
(16,628
)
26,163
Litigation settlement
7,855
(61,754
)
69,609
69,609
-
-
-
69,609
Prepetition charges
(23,883
)
-
(23,883
)
(23,883
)
-
-
-
(23,883
)
Other
(953
)
(91
)
(862
)
(862
)
-
-
-
(862
)
Total operating expenses
$
(686,673
)
$
(853,945
)
$
167,272
$
75,702
$
72,165
$
23,879
$
(4,474
)
$
167,272
Property operating expenses at the Comparable Properties decreased primarily due to the implementation of comprehensive programs to reduce operating expenses to mitigate the impact of the COVID-19 pandemic, including salary reductions, furloughs, reductions-in-force and other operating expense initiatives.
The decrease in depreciation and amortization expense related to the Comparable Properties primarily relates to a lower basis in depreciable assets resulting from impairments recorded in 2019 and 2020, as well as write-offs of tenant improvements and intangible lease assets related to store closings that occurred in 2019 and 2020.
General and administrative expenses decreased $10.8 million due to the implementation of comprehensive programs to reduce expenses, including salary reductions, furloughs and a reduction-in-force, as well lower legal expenses as compared to the prior year period related to the litigation settlement and the new secured credit facility that closed in January 2019.
For the year ended December 31, 2020, we recognized $213.4 million of loss on impairment of real estate to write down the book value of six malls. For the year ended December 31, 2019, we recognized $239.5 million of loss on impairment of real estate to write down the book value of six malls and one community center. See Note 17 to the consolidated financial statements for more information.
For the year ended December 31, 2020, we recorded $23.9 million of prepetition charges representing professional fees related to our negotiations with the administrative agent and lenders under the secured credit facility and certain holders of our senior unsecured notes regarding a restructure of such indebtedness prior to the filing of the Chapter 11 Cases beginning on November 1, 2020.
For the year ended December 31, 2019, we recognized $61.8 million of litigation settlement expense related to the settlement of a class action lawsuit, net of amounts that were released. For the year ended December 31, 2020, we recognized a credit to litigation settlement expense of $7.9 million related to claim amounts that were released pursuant to the terms of the settlement agreement. See Note 16 to the consolidated financial statements for more information.
Other Income and Expenses
Interest and other income increased $3.6 million during the year ended December 31, 2020 compared to the prior-year period primarily due to additional interest income related to the U.S. Treasury securities that we invested in using a significant portion of the $280 million we drew on our secured line of credit in March 2020 to increase liquidity and preserve financial flexibility in light of the uncertainty surrounding the impact of the COVID-19 pandemic. Also, insurance settlements increased from the prior year due to an increase in weather related incidents at certain properties.
Interest expense decreased $5.6 million compared to the prior-year period. The decrease was primarily due to elimination of interest expense on the senior unsecured notes and the secured credit facility subsequent to filing the Chapter 11 Cases beginning on November 1, 2020. Also, the decrease was impacted by a $9.4 million reduction in property-level interest expense from the deconsolidation of three encumbered properties late in 2019, as well as the retirement of three
property-level loans. The decrease was partially offset by (i) a higher outstanding balance on the secured line of credit as a result of the $280 million we drew in March 2020 to increase liquidity and preserve financial flexibility, (ii) the accrual of additional interest on the secured credit facility at a higher interest rate imposed as a result of notices of default received from the administrative agent and (iii) an increase of $11.4 million of default interest expense related to property-level non-recourse loans that are in default, which may not be payable depending on the outcome of negotiations with the lenders. In accordance with ASC 852, which limits the recognition of interest expense during a bankruptcy proceeding to only amounts that will be paid during the bankruptcy proceeding or that are probable of becoming allowed claims, interest has not been accrued on the secured credit facility or the senior unsecured notes subsequent to the filing of the Chapter 11 Cases.
For the year ended December 31, 2020, we recorded a $32.5 million gain on extinguishment of debt related to two malls, Burnsville Center and Hickory Point Mall, that were transferred to the lenders in satisfaction of the non-recourse debt secured by the properties. For the year ended December 31, 2019, we recorded $71.7 million of gain on extinguishment of debt related to two malls. We transferred Acadiana Mall to the lender in satisfaction of the non-recourse debt secured by the property. We sold Cary Towne Center and used the net proceeds from the sale to satisfy a portion of the non-recourse loan that secured the property. The remaining principal balance was forgiven.
During 2019, we recorded $67.2 million of gain on deconsolidation related to The Outlet Shoppes at El Paso and The Outlet Shoppes at Atlanta.
Gain on sales of real estate assets decreased $11.6 million compared to the prior-year period. In 2020, we recognized $4.7 million of gain on sales of real estate assets primarily related to the sale of eight outparcels. In 2019, we recognized $16.3 million of gain on sales of real estate assets primarily related to the sale of two centers, a hotel, an office building and seven outparcels.
For the year ended December 31, 2020, we recorded $36.0 million of reorganization items, which consists of professional fees directly related to the Chapter 11 Cases, as well as unamortized deferred financing costs and unamortized debt discounts expensed in accordance with ASC 852.
The income tax provision of $16.8 million in 2020 relates to the Management Company, which is a taxable REIT subsidiary, and consist of a current tax provision of $2.3 million and a deferred tax provision of $14.5 million, which reflects a full valuation allowance on our deferred tax assets. The full valuation allowance was recorded due to management’s evaluation of positive and negative indicators and determination that the deferred tax assets would not be realized. The income tax provision of $3.2 million in 2019 consists of a current tax provision of $0.5 million and a deferred tax provision of $2.7 million.
Equity in earnings (losses) of unconsolidated affiliates decreased by $19.8 million during the year ended December 31, 2020 compared to the prior-year period. The decrease was primarily due to lower earnings of our unconsolidated affiliates due to the impacts of the mandated property closures during 2020 as a result of COVID-19, including an increase in estimates of uncollectable rental revenues and abatements of rent, as well as an increase in the amortization of our inside/outside basis difference related to the three properties that were deconsolidated late in 2019.
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December 31, 2019, as amended, for a comparison of the year ended December 31, 2019 to the year ended December 31, 2018.
Non-GAAP Measure
Same-center Net Operating Income
NOI is a supplemental non-GAAP measure of the operating performance of our shopping centers and other Properties. We define NOI as property operating revenues (rental revenues, tenant reimbursements and other income) less property operating expenses (property operating, real estate taxes and maintenance and repairs).
We compute NOI based on the Operating Partnership's pro rata share of both consolidated and unconsolidated Properties. We believe that presenting NOI and same-center NOI (described below) based on our Operating Partnership’s pro rata share of both consolidated and unconsolidated Properties is useful since we conduct substantially all of our business through our Operating Partnership and, therefore, it reflects the performance of the Properties in absolute terms regardless of the ratio of ownership interests of our common shareholders and the noncontrolling interest in the Operating Partnership. Our definition of NOI may be different than that used by other companies, and accordingly, our calculation of NOI may not be comparable to that of other companies.
Since NOI includes only those revenues and expenses related to the operations of our shopping center Properties, we believe that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates, sales at the malls and operating costs and the impact of those trends on our results of operations. Our calculation of same-center NOI excludes lease termination income, straight-line rent adjustments, and amortization of above and below market lease intangibles in order to enhance the comparability of results from one period to another.
We include a Property in our same-center pool when we have owned all or a portion of the Property since January 1 of the preceding calendar year and it has been in operation for both the entire preceding calendar year ended December 31, 2019 and the current year ended December 31, 2020. New Properties are excluded from same-center NOI, until they meet these criteria. Properties excluded from the same-center pool, which would otherwise meet these criteria, are Properties that are being repositioned or Properties where we are considering alternatives for repositioning, where we intend to renegotiate the terms of the debt secured by the related Property or return the Property to the lender. Asheville Mall, EastGate Mall, Greenbrier Mall and Park Plaza were classified as Lender Malls as of December 31, 2020.
Due to the exclusions noted above, same-center NOI should only be used as a supplemental measure of our performance and not as an alternative to GAAP operating income (loss) or net income (loss). A reconciliation of our same-center NOI to net loss for the years ended December 31, 2020 and 2019 is as follows (in thousands):
Year Ended December 31,
Net loss
$
(335,529
)
$
(131,721
)
Adjustments: (1)
Depreciation and amortization
268,126
298,989
Interest expense
231,309
227,151
Abandoned projects expense
Gain on sales of real estate assets
(4,696
)
(16,901
)
Gain on investment/deconsolidation
-
(67,242
)
Gain on extinguishment of debt
(32,521
)
(71,722
)
Loss on impairment, net of noncontrolling interest
195,336
239,521
Litigation settlement
(7,855
)
61,754
Prepetition charges
23,883
-
Reorganization items
35,977
-
Income tax provision
16,836
3,153
Lease termination fees
(6,076
)
(3,794
)
Straight-line rent and above- and below-market rent
(115
)
(6,781
)
Net (income) loss attributable to noncontrolling interests
in other consolidated subsidiaries
20,683
(739
)
General and administrative expenses
53,425
64,181
Management fees and non-property level revenues
(13,467
)
(12,202
)
Operating Partnership's share of property NOI
446,268
583,738
Non-comparable NOI
(25,935
)
(48,392
)
Total same-center NOI
$
420,333
$
535,346
(1)
Adjustments are based on our Operating Partnership's pro rata ownership share, including our share of unconsolidated affiliates and excluding noncontrolling interests' share of consolidated Properties.
Same-center NOI decreased $115.0 million for the year ended December 31, 2020 compared to 2019. The NOI decline of 21.5% for 2020 was driven by a decline in total revenue of $139.0 million partially offset by a $23.7 million decline in total operating expenses. Rental revenues declined $134.1 million during 2020 due to (i) store closures and rent concessions that were in effect prior to the COVID-19 pandemic for tenants with high occupancy cost levels and tenants that closed in 2019 due to bankruptcy and (ii) rent concessions to tenants that are in bankruptcy or are struggling financially due
to the impacts of the COVID-19 pandemic. The $23.7 million decrease in total operating expenses was primarily due to the implementation of comprehensive programs to reduce operating expenses to mitigate the impact of the COVID-19 pandemic, including salary reductions, furloughs, reductions-in-force and other operating expense initiatives.
Operational Review
The shopping center business is, to some extent, seasonal in nature with tenants typically achieving the highest levels of sales during the fourth quarter due to the holiday season, which generally results in higher percentage rents in the fourth quarter. Additionally, the malls earn most of their rents from short-term tenants during the holiday period. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year.
We derive the majority of our revenues from the Mall Properties. The sources of our revenues by property type were as follows:
Year Ended December 31,
Malls
90.4
%
91.0
%
Other Properties
9.6
%
9.0
%
Mall Store Sales
Mall store sales include reporting mall tenants of 10,000 square feet or less for Stabilized Malls and exclude license agreements, which are retail contracts that are temporary or short-term in nature and generally last more than three months but less than twelve months. The following is a comparison of our same-center sales per square foot for Mall tenants of 10,000 square feet or less (excluded Properties are not included in sales metrics):
Twelve Months Ended
December 31, 2020
Twelve Months Ended
December 31, 2019
% Change
Stabilized mall same-center sales per square foot
N/A
(1)
$
N/A
(1)
Due to the temporary mall and store closures that occurred, the majority of our tenants did not report sales for the full reporting period. As a result, we are not able to provide a complete measure of sales per square foot for the trailing twelve months.
Occupancy
Our portfolio occupancy is summarized in the following table (excluded Properties are not included in occupancy metrics):
As of December 31,
Total portfolio
87.5
%
91.2
%
Malls:
Total Mall portfolio
85.5
%
89.8
%
Same-center Malls
85.5
%
90.1
%
Stabilized Malls
85.8
%
90.0
%
Non-stabilized Malls (1)
74.4
%
83.8
%
Other Properties:
Associated centers
93.2
%
95.6
%
Community centers
93.6
%
96.0
%
(1)
Represents occupancy for The Outlet Shoppes at Laredo.
Bankruptcy-related store closures impacted 2020 occupancy by approximately 331 basis points or 550,000 square feet.
Leasing
The following is a summary of the total square feet of leases signed in the year ended December 31, 2020 as compared to the prior-year period:
Year Ended December 31,
Operating portfolio:
New leases
542,500
1,054,336
Renewal leases
2,062,536
2,502,001
Development portfolio:
New leases
63,550
306,688
Total leased
2,668,586
3,863,025
Average annual base rents per square foot are computed based on contractual rents in effect as of December 31, 2020 and 2019, including the impact of any rent concessions. Average annual base rents per square foot for comparable small shop space of less than 10,000 square feet were as follows for each Property type (1):
December 31,
Malls (1):
Same-center Stabilized Malls
$
29.34
$
31.97
Stabilized Malls
29.41
32.06
Non-stabilized Malls (2)
24.45
24.25
Other Properties (3):
15.03
15.51
Associated centers
13.23
13.84
Community centers
16.65
17.04
Office buildings
19.28
19.04
(1)
As noted in Item 2. Properties, excluded Properties are not included.
(2)
Represents average annual base rents for The Outlet Shoppes at Laredo.
(3)
Average base rents for associated centers, community centers and office buildings include all leased space, regardless of size.
Results from new and renewal leasing of comparable small shop space of less than 10,000 square feet during the year ended December 31, 2020 for spaces that were previously occupied, based on the contractual terms of the related leases inclusive of the impact of any rent concessions, are as follows:
Property Type
Square
Feet
Prior Gross
Rent PSF
New Initial
Gross Rent
PSF
% Change
Initial
New Average
Gross Rent
PSF (2)
% Change
Average
All Property Types (1)
1,590,494
$
33.57
$
28.54
(15.0
)%
$
28.98
(13.7
)%
Stabilized Malls
1,443,733
34.16
28.84
(15.6
)%
29.26
(14.3
)%
New leases
105,128
32.01
30.72
(4.0
)%
32.62
1.9
%
Renewal leases
1,338,605
34.32
28.69
(16.4
)%
28.99
(15.5
)%
(1)
Includes Stabilized Malls, associated centers, community centers and other.
(2)
Average gross rent does not incorporate allowable future increases for recoverable CAM expenses.
New and renewal leasing activity of comparable small shop space of less than 10,000 square feet for the year ended December 31, 2020, based on commencement date inclusive of the impact of any rent concessions, are as follows:
Number
of
Leases
Square
Feet
Term
(in
years)
Initial
Rent
PSF
Average
Rent
PSF
Expiring
Rent
PSF
Initial Rent
Spread
Average Rent
Spread
Commencement 2020:
New
239,162
6.94
$
28.65
$
30.30
$
28.09
$
0.56
2.0
%
$
2.21
7.9
%
Renewal
1,318,397
2.57
26.09
27.26
32.00
(5.91
)
(18.5
)%
(4.74
)
(14.8
)%
Commencement 2020 Total
1,557,559
3.27
26.48
27.73
31.40
(4.92
)
(15.7
)%
(3.67
)
(11.7
)%
Commencement 2021:
New
56,143
7.32
31.51
34.11
29.78
1.73
5.8
%
4.33
14.5
%
Renewal
564,190
2.02
27.98
27.96
34.28
(6.30
)
(18.4
)%
(6.32
)
(18.4
)%
Commencement 2021 Total
620,333
2.55
28.30
28.52
33.87
(5.57
)
(16.4
)%
(5.35
)
(15.8
)%
Total 2020/2021
2,177,892
3.06
$
27.00
$
27.95
$
32.10
$
(5.10
)
(15.9
)%
$
(4.15
)
(12.9
)%
Liquidity and Capital Resources
As of December 31, 2020, we had $294.9 million available in unrestricted cash and U.S. Treasury securities and we had $1,114.7 million outstanding on our secured credit facility. Our total pro rata share of debt at December 31, 2020 was $4,388.7 million. The $59.9 million in restricted cash at December 31, 2020 related to cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable, as well as amounts related to cash management agreements with our lenders that are designated for debt service and operating expense obligations.
In February 2020, we utilized our secured credit facility to pay off two loans secured by Parkway Place and Valley View Mall totaling $84.5 million. Also, we closed on a new loan secured by The Outlet Shoppes at Atlanta - Phase II in the amount of $4.7 million, with an interest rate of LIBOR plus 2.5% and a maturity date of November 2023. Proceeds were used to retire the $4.4 million existing loan. In March 2020, we drew $280.0 million on our secured line of credit to increase liquidity and preserve financial flexibility in light of the uncertainty surrounding the impact of the COVID-19 pandemic. We purchased $154.2 million, including accrued interest, of U.S. Treasury securities with a portion of the borrowings on our secured line of credit. In December 2020, we purchased an additional $82.0 million of U.S. Treasury securities with a portion of the borrowings on our secured line of credit. We recorded a $32.5 million gain on extinguishment of debt related to returning Hickory Point Mall and Burnsville Center to the lenders in August 2020 and December 2020, respectively.
In response to the COVID-19 pandemic, we implemented comprehensive programs to halt all non-essential expenditures, to reduce operating and overhead expenses and to reduce, defer or suspend capital expenditures, including redevelopment investments. These programs include a temporary reduction of up to 50% to the compensation of our Chairman of the Board, our CEO and our President as well as independent director fees, a temporary reduction of up to 20% to the compensation of our other named executive officers, salary reductions to all staff, a broad-based furlough program, a permanent reduction in workforce and 2020 capital expenditure reductions or postponements of approximately $60.0 million. While we have paused several major projects, we are pursuing capital lite solutions for backfilling many of our remaining available anchors, including joint venture partnerships, favorable lease structures and third-party arrangements - all of which benefit our portfolio while preserving capital. Additionally, we were able to achieve debt service payment deferrals for a portion of our secured loans. Securitized lenders in general have shown minimal flexibility in amending loan payments.
We elected to not make the $6.9 million interest payment (the “2024 Notes Interest Payment”) due and payable on October 15, 2020, with respect to the 2024 Notes. Under the indenture governing the 2024 Notes, we had a 30-day grace period to make the 2024 Notes Interest Payment before the nonpayment was considered an “event of default” with respect to the 2024 Notes. We filed the Chapter 11 Cases prior to the end of the 30-day grace period.
The filing of the Chapter 11 Cases constituted an event of default that resulted in certain monetary obligations becoming immediately due and payable with respect to the secured credit facility and the senior unsecured notes. We anticipate restructuring our unsecured debt maturities through the Chapter 11 bankruptcy filing.
Our total share of consolidated and unconsolidated outstanding debt maturing in 2021, assuming all extension options are elected, is $539.2 million, and we are in discussions with existing lenders. We anticipate restructuring our unsecured debt maturities through the recent Chapter 11 bankruptcy filing. The filing of the Chapter 11 Cases also constituted an event of default with respect to certain property-level debt of the Operating Partnership’s subsidiaries, which may have resulted in the automatic acceleration of certain monetary obligations or may give the applicable lender the right to accelerate such amounts. See Note 8 and Note 9 for more information.
We derive the majority of our revenues from leases with retail tenants, which have historically been the primary source for funding short-term liquidity and capital needs such as operating expenses, debt service, tenant construction allowances, recurring capital expenditures, dividends and distributions. We believe that the combination of cash flows generated from our operations, combined with cash on hand and our investment in U.S. Treasury securities will, for the foreseeable future, provide adequate liquidity to meet our cash needs assuming we continue to operate as a going concern within twelve months of the date our consolidated financial statements are issued. In addition to these factors, we have options available to us to generate additional liquidity, including but not limited to, joint venture investments and decreasing expenditures related to tenant construction allowances and other capital expenditures. We also generate revenues from sales of peripheral land at our properties and from sales of real estate assets when it is determined that we can realize an optimal value for the assets.
Cash Flows - Operating, Investing and Financing Activities
There was $121.7 million of cash, cash equivalents and restricted cash as of December 31, 2020, an increase of $62.7 million from December 31, 2019. Of this amount, $61.8 million was unrestricted cash as of December 31, 2020. Our net cash flows are summarized as follows (in thousands):
Year Ended December 31,
Change
Net cash provided by operating activities
$
133,365
$
273,408
$
(140,043
)
Net cash provided by (used in) investing activities
(280,397
)
24,586
(304,983
)
Net cash provided by (used in) financing activities
209,696
(296,448
)
506,144
Net cash flows
$
62,664
$
1,546
$
61,118
Cash Provided by Operating Activities
•
Cash provided by operating activities during 2020 decreased primarily due to a decline in rental revenues from tenants due to the closure of most of our malls for a period of time in response to government mandates that began in March. Operating cash flows have also been impacted by rent deferrals and abatements that have been granted to tenants experiencing financial difficulties due to the COVID-19 pandemic. Rental revenues also decreased due to store closures and rent concessions for tenants with high occupancy cost levels, including tenants that closed in 2019 and 2020 due to bankruptcy prior to the COVID-19 pandemic, as well as a decline in rental revenues related to dispositions. The decrease in rental revenues was partially offset by savings in property operating expenses and general and administrative expenses from the implementation of comprehensive programs to reduce operating expenses to mitigate the impact of the COVID-19 pandemic, including salary reductions, furloughs, reductions-in-force and other operating expense initiatives. Prepetition charges related to our efforts to restructure our corporate-level debt also contributed to the decline in cash provided by operating activities.
Cash Provided by (Used in) Investing Activities
•
Net cash used in investing activities for 2020 was primarily related to the purchase of U.S. Treasury securities for $235.2 million using a significant portion of the $280.0 million that we drew on our secured line of credit. We also expended $53.5 million on additions to real estate assets, primarily related to redevelopment projects. Net cash provided by investing activities for 2019 was primarily related to a greater amount of proceeds from sales, partially offset by higher cash paid for capital expenditures.
Cash Used in Financing Activities
•
The net cash inflow for 2020 is primarily due to the $280.0 million draw on our secured credit facility in order to increase liquidity and preserve financial flexibility in light of the uncertainty surrounding the impact of the COVID-19 pandemic. Additionally, there were no common or preferred stock dividends paid in 2020, as
compared to $26.0 million in dividends paid to holders of common stock and $33.7 million in dividends paid to holders of preferred stock in 2019.
See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December 31, 2019, as amended, for a comparison of the year ended December 31, 2019 to the year ended December 31, 2018.
Debt of the Company
CBL has no indebtedness. Either the Operating Partnership or one of its consolidated subsidiaries, that it has a direct or indirect ownership interest in, is the borrower on all our debt.
CBL is a limited guarantor of the Notes, as described in Note 9 to the consolidated financial statements, for losses suffered solely by reason of fraud or willful misrepresentation by the Operating Partnership or its affiliates. We also provide a similar limited guarantee of the Operating Partnership's obligations with respect to our secured credit facility as of December 31, 2020.
Debt of the Operating Partnership
The following tables summarize debt based on our pro rata ownership share, including our pro rata share of unconsolidated affiliates and excluding noncontrolling investors’ share of consolidated Properties, because we believe this provides investors and lenders a clearer understanding of our total debt obligations and liquidity (in thousands):
December 31, 2020:
Consolidated
Noncontrolling
Interests
Unconsolidated
Affiliates
Total
Weighted-
Average
Interest
Rate (1)
Fixed-rate debt:
Non-recourse loans on operating Properties (2)
$
1,120,203
$
(30,177
)
$
612,458
$
1,702,484
4.74
%
Recourse loans on operating Properties (3)
-
-
9,360
9,360
3.74
%
Construction loans
-
-
3,406
3,406
5.05
%
Total fixed-rate debt
1,120,203
(30,177
)
625,224
1,715,250
4.74
%
Variable-rate debt:
Recourse loans on operating Properties
68,061
-
88,511
156,572
4.59
%
Construction loans
-
-
33,222
33,222
3.11
%
Total variable-rate debt
68,061
-
121,733
189,794
4.33
%
Total fixed-rate and variable-rate debt
1,188,264
(30,177
)
746,957
1,905,044
4.70
%
Unamortized deferred financing costs (4)
(3,433
)
(2,844
)
(6,012
)
Total mortgage and other indebtedness, net
$
1,184,831
$
(29,912
)
$
744,113
$
1,899,032
December 31, 2020:
Consolidated
Noncontrolling
Interests
Unconsolidated
Affiliates
Total
Weighted-
Average
Interest
Rate (1)
Fixed-rate debt:
Senior unsecured notes due 2023 (5)
450,000
-
-
450,000
5.25
%
Senior unsecured notes due 2024 (5)
300,000
-
-
300,000
4.60
%
Senior unsecured notes due 2026 (5)
625,000
-
-
625,000
5.95
%
Total fixed-rate debt
1,375,000
-
-
1,375,000
5.43
%
Variable-rate debt:
Secured line of credit (6)
675,926
-
-
675,926
9.50
%
Secured term loan (6)
438,750
-
-
438,750
9.50
%
Total variable-rate debt
1,114,676
-
-
1,114,676
9.50
%
Total fixed-rate and variable-rate debt
2,489,676
-
-
2,489,676
7.25
%
Unpaid accrued interest (7)
57,644
-
-
57,644
Prepetition unsecured or under secured liabilities
4,170
-
-
4,170
Total liabilities subject to compromise
$
2,551,490
$
-
$
-
$
2,551,490
December 31, 2019:
Consolidated
Noncontrolling
Interests
Unconsolidated
Affiliates
Total
Weighted-
Average
Interest
Rate (1)
Fixed-rate debt:
Non-recourse loans on operating Properties (2)
$
1,330,561
$
(30,658
)
$
623,193
$
1,923,096
4.88
%
Recourse loans on operating Properties (3)
-
-
10,050
10,050
3.74
%
Senior unsecured notes due 2023 (8)
447,894
-
-
447,894
5.25
%
Senior unsecured notes due 2024 (9)
299,960
-
-
299,960
4.60
%
Senior unsecured notes due 2026 (10)
617,473
-
-
617,473
5.95
%
Total fixed-rate debt
2,695,888
(30,658
)
633,243
3,298,473
5.10
%
Variable-rate debt:
Recourse loans on operating Properties
41,950
-
69,046
110,996
4.13
%
Construction loans
29,400
-
35,362
64,762
4.45
%
Secured line of credit
310,925
-
-
310,925
3.94
%
Secured term loan
465,000
-
-
465,000
3.94
%
Total variable-rate debt
847,275
-
104,408
951,683
4.00
%
Total fixed-rate and variable-rate debt
3,543,163
(30,658
)
737,651
4,250,156
4.86
%
Unamortized deferred financing costs
(16,148
)
(2,851
)
(18,681
)
Total mortgage and other indebtedness, net
$
3,527,015
$
(30,340
)
$
734,800
$
4,231,475
(1)
Weighted-average interest rate includes the effect of debt premiums and discounts but excludes amortization of deferred financing costs.
(2)
An unconsolidated affiliate has an interest rate swap on a notional amount outstanding of $42,654 as of December 31, 2020 and $43,623 as of December 31, 2019 related to a variable-rate loan on Ambassador Town Center to effectively fix the interest rate on this loan to a fixed-rate of 3.22%.
(3)
The unconsolidated affiliate has an interest rate swap on a notional amount outstanding of $9,360 as of December 31, 2020 and $10,050 as of December 31, 2019 related to a variable-rate loan on Ambassador Town Center - Infrastructure Improvements to effectively fix the interest rate on this loan to a fixed-rate of 3.74%. Subsequent to December 31, 2020, the loan was extended for an additional four years. See Note 20.
(4)
Unamortized deferred financing costs amounting to $3,106 and $2,099 for certain consolidated and unconsolidated property-level, non-recourse mortgage loans, respectively, may be required to be written off in the event that a waiver or restructuring of terms cannot be negotiated and the debt is either redeemed or otherwise extinguished.
(5)
In accordance with ASC 852, which limits the recognition of interest expense during a bankruptcy proceeding to only amounts that will be paid during the bankruptcy proceeding or that are probable of becoming allowed claims, interest has not been accrued on the senior unsecured notes subsequent to the filing of the Chapter 11 Cases. In accordance with ASC 852, unamortized deferred financing costs and debt discounts of $14,231, previously included in mortgage and other indebtedness, net in the Company’s consolidated balance sheets, related to the senior unsecured notes were charged to reorganization items in the accompanying consolidated statement of operations as part of the Company’s reorganization (see Note 2). The outstanding amount of the senior unsecured notes is included in liabilities subject to compromise in the accompanying consolidated balance sheets as of December 31, 2020.
(6)
The administrative agent informed the Company that interest will accrue on all outstanding obligations at the post-default rate, which is equal to the rate that otherwise would be in effect plus 5.0%. The post-default interest rate at December 31, 2020 was 9.50%. In accordance with ASC 852, which limits the recognition of interest expense during a bankruptcy proceeding to only amounts that will be paid during the bankruptcy proceeding or that are probable of becoming allowed claims, interest has not been accrued on the secured credit facility subsequent to the filing of the Chapter 11 Cases. In accordance with ASC 852, unamortized deferred financing costs of $4,098, previously included in mortgage and other indebtedness, net in the Company’s consolidated balance sheets, related to the secured term loan were charged to reorganization items in the accompanying consolidated statement of operations as part of the Company’s reorganization. Additionally, unamortized deferred financing costs amounting to $6,965, previously included in intangible lease assets and other assets in the Company’s consolidated balance sheets, related to the secured line of credit were charged to reorganization items in the accompanying consolidated statement of operations as part of the Company’s reorganization. The outstanding amount of the secured credit facility is included in liabilities subject to compromise in the accompanying consolidated balance sheets as of December 31, 2020.
(7)
Represents interest accrued on the secured credit facility and senior unsecured notes prior to the filing of the Chapter 11 Cases.
(8)
The balance is net of an unamortized discount of $2,106 as of December 31, 2019.
(9)
The balance is net of an unamortized discount of $40 as of December 31, 2019.
(10)
The balance is net of an unamortized discount of $7,527 as of December 31, 2019.
The following table presents our pro rata share of consolidated and unconsolidated debt as of December 31, 2020, excluding debt premiums and discounts, that is scheduled to mature in 2021 (in thousands):
Balance
Consolidated Properties:
Parkdale Mall & Crossing
$
74,406
EastGate Mall
31,181
(1)
Hamilton Crossing & Expansion
7,549
Park Plaza
76,805
(1)
Fayette Mall
141,393
The Outlet Shoppes at Laredo
40,600
Alamance Crossing
43,563
Asheville Mall
62,121
(1)
Brookfield Square Anchor Redevelopment
27,461
(2)
505,079
Unconsolidated Properties:
Ambassador Town Center - Infrastructure Improvements
9,360
(3)
Hammock Landing - Phase I & II
27,299
(3)
The Pavilion at Port Orange
26,617
(3)
The Shoppes at Eagle Point
17,293
(4)
The Outlet Shoppes of the Bluegrass - Phase II
8,872
Springs at Port Orange
15,889
105,330
Total 2021 Maturities at pro rata share
$
610,409
(1)
Loan is in the process of foreclosure.
(2)
The Company is in discussions with the lender regarding the ability to exercise the extension option as a result of the Chapter 11 Cases.
(3)
Loan was extended subsequent to December 31, 2020. See Note 20.
(4)
Loan has a one-year extension option.
In addition, $231.8 million of our pro rata share of consolidated and unconsolidated debt is related to four operating property loans, Asheville Mall, EastGate Mall, Greenbrier Mall and Park Plaza, that are in default. We anticipate cooperating with the lenders on the loans secured by Asheville Mall, EastGate Mall and Park Plaza to either convey the property to the lender in satisfaction of the loan or complete a foreclosure. We are in discussions with the lender regarding the loan secured by Greenbrier Mall.
The weighted-average remaining term of our total share of consolidated and unconsolidated debt was 3.1 years and 3.9 years at December 31, 2020 and 2019, respectively. The weighted-average remaining term of our pro rata share of fixed-rate debt was 3.4 years and 4.1 years at December 31, 2020 and 2019, respectively.
As of December 31, 2020 and 2019, our pro rata share of consolidated and unconsolidated variable-rate debt represented 29.7% and 22.5%, respectively, of our total pro rata share of debt.
See Note 8 and Note 9 to the consolidated financial statements for additional information concerning the amount and terms of our outstanding indebtedness as of December 31, 2020.
Issuer and Guarantor Subsidiaries of Guaranteed Securities
In March 2020, the SEC issued Rule Release No. 33-10762, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities ("Release 33-10762”). Release 33-10762 simplifies the disclosure requirements related to certain registered securities under Rules 3-10 and 3-16 of SEC Regulation S-X, permitting registrants to provide certain alternative financial disclosures and non-financial disclosures in lieu of separate consolidating financial statements for subsidiary issuers and guarantors of registered debt securities if certain conditions are met. The amendments in Release 33-10762 are generally effective for filings on or after January 4, 2021, with early application permitted. We adopted the new disclosure requirements permitted under Release 33-10762 effective for the year ended December 31, 2020.
The Operating Partnership’s senior secured credit facility is secured by 17 malls and 3 associated centers that are directly or indirectly owned by 36 wholly owned subsidiaries of the Operating Partnership (the “Guarantor Subsidiaries”). The Guarantor Subsidiaries own an additional four malls, two associated centers and four mortgage notes receivable that
are not collateral for the secured credit facility. The Guarantor Subsidiaries also entered into agreements to guarantee the Operating Partnership’s obligations under the senior secured credit facility.
Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In connection with entering the guarantee agreements related to the senior secured credit facility, the Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement.
The guarantees of the Guarantor Subsidiaries are joint and several and full and unconditional. The guarantees are unsecured and effectively subordinated to any existing and future secured debt that a Guarantor Subsidiary may have to the extent of the value of the assets securing such debt. Each Guarantor Property’s obligation will remain until the earlier of such time as (i) all guaranteed obligations have been paid in full in cash and each guaranteed obligation has been terminated or cancelled in accordance with its terms or (ii) any such Guarantor Subsidiary ceases to be a guarantor under the senior secured credit facility. The Guarantor Subsidiaries’ maximum guarantee related to the secured credit facility is $1,114.7 million as of December 31, 2020, and the maximum guarantee related to the Notes is $1,375.0 million as of December 31, 2020.
The following tables present summarized financial information for the Operating Partnership and the Guarantor Subsidiaries on a combined basis. The summarized financial information does not include the Operating Partnership’s investments in non-guarantor subsidiaries nor the earnings from non-guarantor subsidiaries. Intercompany transactions between the Operating Partnership and the Guarantor Subsidiaries have been eliminated. The summarized balance sheet information is as of December 31, 2020 and December 31, 2019 and the summarized statement of operations information is for the year ended December 31, 2020 and the year ended December 31, 2019. Amounts are presented in thousands.
December 31, 2020
December 31, 2019
Net investment in real estate assets
$
1,428,482
$
1,505,668
Total assets (1)
1,673,179
1,696,190
Total liabilities (2)
2,884,808
2,503,005
Year Ended December 31, 2020
Year Ended December 31, 2019
Total revenues (3)
$
230,676
$
292,540
Total expenses (4)
400,267
476,202
Net loss
(166,692
)
(117,325
)
(1)
Total assets include an intercompany note receivable with a non-guarantor subsidiary of $4,698 and $4,194 as of December 31, 2020 and 2019, respectively.
(2)
Total liabilities include intercompany liabilities of $3,490 as of December 31, 2020.
(3)
Total revenues include revenues derived from non-guarantor subsidiaries of $229 and $1,255 for the year ended December 31, 2020 and 2019, respectively.
(4)
Total expenses include expenses incurred with non-guarantor subsidiaries of $29,755 and $16,749 for the year ended December 31, 2020 and 2019, respectively.
Financial Covenants and Restrictions
As discussed in Note 9 to the consolidated financial statements, the filing of the Chapter 11 Cases constituted an event of default that resulted in certain monetary obligations becoming immediately due and payable with respect to the secured credit facility and the senior unsecured notes. The filing of the Chapter 11 Cases also constituted an event of default with respect to certain property-level debt of the Operating Partnership’s subsidiaries, which may have resulted in the automatic acceleration of certain monetary obligations or may give the applicable lender the right to accelerate such amounts.
Unencumbered Consolidated Portfolio Statistics
Sales Per Square
Foot for the Twelve Months
Ended (1) (2)
Occupancy (2)
% of Consolidated
Unencumbered
NOI for
the Year Ended
12/31/20
(3)
12/31/19
12/31/20
12/31/19
12/31/20
(4
)
Unencumbered consolidated Properties:
Tier 1 Malls
N/A
$
86.3
%
88.7
%
19.6
%
(5
)
Tier 2 Malls
N/A
82.1
%
87.2
%
34.4
%
Tier 3 Malls
N/A
81.1
%
86.9
%
23.3
%
Total Malls
N/A
82.3
%
87.3
%
77.3
%
Total Associated Centers
N/A
N/A
93.3
%
96.0
%
16.6
%
Total Community Centers
N/A
N/A
97.7
%
96.8
%
5.4
%
Total Office Buildings & Other
N/A
N/A
100.0
%
100.0
%
0.7
%
Total Unencumbered Consolidated Portfolio
N/A
$
86.4
%
90.4
%
100.0
%
(1)
Represents same-center sales per square foot for mall tenants 10,000 square feet or less for stabilized malls.
(2)
Operating metrics are included for unencumbered operating properties and do not include sales or occupancy of unencumbered parcels.
(3)
Due to temporary mall and store closures that occurred, the majority of CBL’s tenants did not report sales for the full reporting period. As a result, CBL is not able to provide a complete measure of sales per square foot for the quarter or trailing twelve months.
(4)
Our consolidated unencumbered properties generated approximately 35.8% of total consolidated NOI of $350,628,628 (which excludes NOI related to dispositions or lender properties) for the year ended December 31, 2020.
(5)
NOI is derived from unencumbered portions of Tier One properties that are otherwise secured by a loan. The unencumbered portions include outparcels, anchors and former anchors that have been redeveloped.
Mortgages on Operating Properties
2020 Loan Activity
In 2020, we utilized our secured credit facility to pay off two loans secured by Parkway Place and Valley View Mall totaling $84.5 million. Also, we closed on a new loan secured by The Outlet Shoppes at Atlanta - Phase II in the amount of $4.7 million, with an interest rate of LIBOR plus 2.5% and a maturity date of November 2023. Proceeds were used to retire the $4.4 million existing loan. In August, we modified the fixed-rate loan secured by Jefferson Mall. The modification consisted of extending the maturity date from June 1, 2022 to June 1, 2026, and the loan will be interest only through March 2021 when monthly payments of principal and interest will be made through the maturity date. The loan secured by Jefferson Mall had an outstanding balance of $60.9 million as of December 31, 2020. In September, we completed a modification and extension of the loan secured by the second phase of The Outlet Shoppes of the Bluegrass in Louisville, KY, which extended the maturity date to October 2021 with a variable interest rate of LIBOR plus 350 basis points. The loan secured by the second phase of The Outlet Shoppes of the Bluegrass had an outstanding balance of $8.9 million as of December 31, 2020. In October, the Company completed a modification and extension of the loan secured by The Shoppes at Eagle Point, which extended the maturity date to October 2022. The loan secured by The Shoppes at Eagle Point had an outstanding balance of $34.6 million, $17.3 million at our pro-rata share, as of December 31, 2020. Lastly, we recognized a $32.5 million gain on extinguishment of debt related to two consolidated malls. See Note 8 and Note 9 to the consolidated financial statements for more information on 2020 loan activity.
Equity
In 2019, we suspended all future dividends on our common stock and preferred stock, as well as distributions to all noncontrolling interest investors in our Operating Partnership. The dividend arrearage created by our board of directors’ decision to suspend the dividends that continue to accrue on our outstanding preferred stock currently makes us ineligible to use the abbreviated, and less costly, SEC Form S-3 registration statement to register our securities for sale. This means we will be required to use a registration statement on Form S-1 to register additional securities for sale with the SEC, which we expect to hinder our ability to act quickly in relation to, and raise our costs incurred in, future capital raising activities. This preferred dividend arrearage (and the Operating Partnership’s related arrearage in distributions to its preferred units of
limited partnership underlying our outstanding preferred shares), under the terms of our preferred stock, also require that we not resume any payment of dividends on our common stock unless full cumulative dividends accrued with respect to our preferred stock (and such underlying preferred units) for all past quarters and the then-current quarter are first declared and paid in cash, or declared with a sum sufficient for the payment thereof having been set apart for such payment in cash. In addition, for so long as this distribution suspension results in the existence of an SCU Distribution Shortfall, the terms of the Operating Partnership Agreement state that we (i) may not cause the Operating Partnership to resume distributions to holders of its outstanding common units of limited partnership until all holders of SCUs have received distributions sufficient to satisfy the SCU Distribution Shortfall for all prior quarters and the then-current quarter (which effectively would also prevent the resumption of common stock dividends, since our common stock dividends are funded by distributions the Company receives on the underlying common units it holds in the Operating Partnership) and (ii) may not elect to settle any exchange requested by a holder of common units of the Operating Partnership in cash, and may only settle any such exchange through the issuance of shares of common stock or other units of the Operating Partnership ranking junior to any such units as to which a distribution shortfall exists. Our board of directors prospectively approved that, to the extent any partners exercise any or all of their exchange rights while the existence of the SCU Distribution Shortfall requires an exchange to be settled through the issuance of shares of common stock or other units of the Operating Partnership, the consideration paid shall be in the form of shares of common stock. We do not expect to pay any further dividends with respect to the Company’s outstanding common stock and preferred stock, or any distributions with respect to the Operating Partnership’s outstanding units of partnership interest, prior to the conclusion of our reorganization pursuant to the pending Chapter 11 Cases, which reorganization we also expect will extinguish all claims related to the accrued and unpaid preferred stock dividends and the Operating Partnership unit SCU Distribution Shortfall discussed above. If we successfully complete such reorganization, in connection with future dividend distributions with respect to new equity securities issued pursuant to the Chapter 11 Cases, we will review taxable income on a regular basis and take measures, if necessary, to ensure that we meet the minimum distribution requirements to maintain our status as a REIT.
See Listing Criteria in Note 2 to the consolidated financial statements for additional information regarding a notice we received from the NYSE regarding our non-compliance with the NYSE Listing Standards and our plans to address this non-compliance.
As a publicly traded company, and as a subsidiary of a publicly traded company, we previously accessed capital through both the public equity and debt markets. We have a shelf registration statement on Form S-3 on file with the SEC that previously authorized us to publicly issue unspecified amounts of senior and/or subordinated debt securities, shares of preferred stock (or depositary shares representing fractional interests therein), shares of common stock, warrants or rights to purchase any of the foregoing securities, and units consisting of two or more of these classes or series of securities and limited guarantees of debt securities issued by the Operating Partnership. This shelf registration statement also authorized the Operating Partnership to publicly issue unsubordinated debt securities. This shelf registration statement was due to expire in July 2021. However, as a result of both (i) the fact that the Company no longer qualifies as a well-known seasoned issuer under SEC rules and (ii) our loss of eligibility to use Form S-3 to register offers and sales of securities as described above, we are unable to use this shelf registration statement.
Additionally, while we had previously suspended quarterly dividend payments on our common stock during 2019, a very small amount of monthly “cash option” investments in shares continued into May 2020, pursuant to the terms of the Company’s dividend reinvestment plan (“DRIP”). Due in part to impacts on the Company’s operations and staffing resulting from ongoing efforts to address the COVID-19 pandemic, we inadvertently failed to suspend the operation of these “cash option” investments during the months of March, April and May 2020, after we lost the ability to use the Form S-3 registration statement for the DRIP, effective with the filing of our Annual Report on Form 10-K in March, due to the dividend arrearage with respect to our preferred stock. We have now fully suspended the operation of our DRIP, including the cash option feature but, as a result of this oversight, we issued a total of 6,134 shares of common stock that were not registered under the Securities Act of 1933, as amended (the “Securities Act”) for aggregate consideration of $1,346.94 prior to such suspension. The purchasers of these shares, issued pursuant to our DRIP when we were not eligible to issue shares on Form S-3, could bring claims against us for rescission and other damages under federal or state securities laws.
Our common and preferred stock outstanding at December 31, 2020 was as follows (in thousands, except stock prices):
Shares
Outstanding
Stock
Price (1)
Common stock and operating partnership units
201,688
$
0.04
7.375% Series D Cumulative Redeemable Preferred Stock
1,815
250.00
6.625% Series E Cumulative Redeemable Preferred Stock
250.00
(1)
Stock price for common stock and Operating Partnership units equals the closing price of our common stock on December 31, 2020. The stock prices for the preferred stock represent the liquidation preference of each respective series of preferred stock.
Contractual Obligations
The following table summarizes our significant contractual obligations as of December 31, 2020 (in thousands):
Payments Due By Period
Total
Less Than 1
Year
1-3
Years
3-5
Years
More Than 5
Years
Long-term debt:
Consolidated debt service (1)
$
1,282,166
$
633,591
$
407,417
$
98,701
$
142,457
Debt service on liabilities subject to compromise (2)
2,912,194
$
145,689
$
1,718,012
$
386,913
$
661,580
Noncontrolling interests' share in other consolidated
subsidiaries
(36,570
)
(2,653
)
(4,958
)
(20,108
)
(8,851
)
Our share of unconsolidated affiliates debt service (3)
861,639
143,696
305,028
265,609
147,306
Our share of total debt service obligations
5,019,429
920,323
2,425,499
731,115
942,492
Operating leases: (4)
Ground leases on consolidated Properties
13,242
11,747
Purchase obligations: (5)
Construction contracts on consolidated Properties
31,501
31,501
-
-
-
Our share of construction contracts on
unconsolidated Properties
8,097
8,097
-
-
-
Our share of total purchase obligations
39,598
39,598
-
-
-
Other Contractual Obligations: (6)
Master Services Agreements
92,975
33,809
59,166
-
-
Total contractual obligations
$
5,165,244
$
994,109
$
2,485,248
$
731,648
$
954,239
(1)
Represents principal and interest payments due under the terms of mortgage and other indebtedness, net and includes $69,552 of variable-rate debt service on two operating Properties. The future interest payments are projected based on the interest rates that were in effect at December 31, 2020. See Note 9 to the consolidated financial statements for additional information regarding the terms of long-term debt. The total consolidated debt service includes four loans, with an aggregate principal balance of $231,754 as of December 31, 2020, secured by Asheville Mall, EastGate Mall, Greenbrier Mall and Park Plaza, that are in default. The Company is in discussion with the lenders regarding restructuring or foreclosure actions.
(2)
Represents principal and interest payments due under the terms of liabilities subject to compromise and includes $1,192,299 of variable-rate debt service on the secured line of credit and the secured term loan. The secured line of credit does not require scheduled principal payments. The future interest payments are projected based on the interest rates that were in effect at December 31, 2020. See Note 9 to the consolidated financial statements for additional information regarding the terms of long-term debt. Includes $2,489,676 related to the secured credit facility and senior unsecured notes included in liabilities subject to compromise in the accompanying consolidated balance sheets as of December 31, 2020, and as the expected maturity date is subject to the outcome of the Chapter 11 Cases, the original, legal maturity dates are reflected in this table. In accordance with ASC 852, which limits the recognition of interest expense during a bankruptcy proceeding to only amounts that will be paid during the bankruptcy proceeding or that are probable of becoming allowed claims, interest has not been accrued on the secured credit facility or the senior unsecured notes subsequent to the filing of the Chapter 11 Cases. See Note 2 for more information
(3)
Includes $162,597 of variable-rate debt service. Future contractual obligations have been projected using the same assumptions as used in (1) above.
(4)
Obligations where we own the buildings and improvements, but lease the underlying land under long-term ground leases. The maturities of these leases range from 2021 to 2089 and generally provide for renewal options.
(5)
Represents the remaining balance to be incurred under construction contracts that had been entered into as of December 31, 2020, but were not complete. The contracts are primarily for redevelopment of Properties.
(6)
Represents the remainder of an agreement for maintenance, security, and janitorial services at our Properties that expires in September 2023.
Capital Expenditures
Deferred maintenance expenditures are generally billed to tenants as CAM expense, and most are recovered over a 5 to 15-year period. Renovation expenditures are primarily for remodeling and upgrades of Malls, of which a portion is recovered from tenants over a 5 to 15-year period. We recover these costs through fixed amounts with annual increases or pro rata cost reimbursements based on the tenant’s occupied space.
The following table, which excludes expenditures for developments and expansions, summarizes these capital expenditures, including our share of unconsolidated affiliates' capital expenditures, for the year ended December 31, 2020 compared to 2019 (in thousands):
Year Ended December 31,
Tenant allowances (1)
$
11,971
$
36,325
Deferred maintenance:
Parking area and parking area lighting
4,223
Roof repairs and replacements
2,373
5,787
Other capital expenditures
5,279
20,722
Total deferred maintenance
7,979
30,732
Capitalized overhead
1,108
2,294
Capitalized interest
1,954
2,661
Total capital expenditures
$
23,012
$
72,012
(1)
Tenant allowances primarily relate to new leases. Tenant allowances related to renewal leases were not material for the periods presented.
Annual capital expenditures budgets are prepared for each of our Properties that are intended to provide for all necessary recurring and non-recurring capital expenditures. We believe that property operating cash flows, which include reimbursements from tenants for certain expenses, will provide the necessary funding for these expenditures.
Developments and Redevelopments
Properties Opened During the Year Ended December 31, 2020
(Dollars in thousands)
CBL's Share of
Property
Location
CBL
Ownership
Interest
Total
Project
Square Feet
Total
Cost (1)
Cost to
Date (2)
Cost
Opening
Date
Initial
Unleveraged
Yield
Outparcel Development:
Fremaux Town Center - Old Navy
Slidell, LA
90%
12,467
$
1,918
$
1,553
$
May-20
9.2%
Hamilton Place - Self Storage (3) (4)
Chattanooga, TN
54%
68,875
5,824
4,416
3,297
Jul-20
8.7%
Mayfaire Town Center - First Watch
Wilmington, NC
100%
6,300
2,267
1,500
1,134
Oct-20
10.1%
Parkdale Mall - Self Storage (3) (4)
Beaumont, TX
50%
69,341
4,435
3,543
1,039
Apr-20
10.2%
Total Outparcel Developments Completed
156,983
$
14,444
$
11,012
$
5,570
(1)
Total Cost is presented net of reimbursements to be received.
(2)
Cost to Date does not reflect reimbursements until they are received.
(3)
Yield is based on the expected yield upon stabilization.
(4)
Total cost includes an allocated value for the Company’s land contribution and amounts funded by construction loans.
Redevelopments Completed During the Year Ended December 31, 2020
(Dollars in thousands)
CBL's Share of
Property
Location
CBL
Ownership
Interest
Total
Project
Square Feet
Total
Cost (1)
Cost to
Date (2)
Cost
Opening
Date
Initial
Unleveraged
Yield
Mall Redevelopments:
CherryVale Mall Sears Redevelopment - Tilt
Rockford, IL
100%
114,118
$
3,508
$
3,281
$
Jun-20
8.3%
Coastal Grand Dick's Sporting Goods Redevelopment - Dick's Sporting Goods/Golf Galaxy (3)
Myrtle Beach, SC
50%
132,727
7,050
6,166
5,040
Sep-20
11.6%
Dakota Square Mall Herbergers Redevelopment - Ross, T-Mobile, Retail Shops
Minot, ND
100%
30,096
6,410
4,537
Jan-20
7.2%
Hamilton Place Sears Redevelopment - Cheesecake Factory, Dave & Busters, Dicks Sporting Goods (4)
Chattanooga, TN
100%
195,166
38,715
31,001
5,145
Mar-20
7.8%
Mall del Norte Forever 21 Redevelopment - Main Event
Laredo, TX
100%
81,242
10,514
6,819
1,160
Sep-19/Feb-20
9.3%
The Promenade Redevelopment - Carter's, Five Below
D'Iberville, MS
100%
14,007
2,832
2,457
Feb-20/Apr-20
11.4%
Westmoreland Mall JC Penney Redevelopment - Chipotle
Greensburg, PA
100%
2,300
1,017
1,161
Nov-20
9.4%
Total Redevelopments Completed
569,656
$
70,046
$
55,422
$
13,274
(1)
Total Cost is presented net of reimbursements to be received.
(2)
Cost to Date does not reflect reimbursements until they are received.
(3)
Total cost includes amounts funded by a construction loan.
(4)
The return reflected represents a pro forma incremental return as Total Cost excludes the cost related to the acquisition of the Sears building in 2017.
Properties under Development at December 31, 2020
(Dollars in thousands)
CBL's Share of
Property
Location
CBL
Ownership
Interest
Total
Project
Square Feet
Total
Cost (1)
Cost to
Date (2)
Cost
Expected
Opening
Date (3)
Initial
Unleveraged
Yield
Outparcel Developments:
Hamilton Place Development - Aloft Hotel (4) (5)
Chattanooga, TN
50%
89,674
$
12,000
$
8,827
$
8,184
Q2 '21
9.2%
Pearland Town Center - HCA Offices
Pearland, TX
100%
48,416
14,186
7,422
6,565
Q2 '21
11.8%
Total Properties Under
Development
138,090
$
26,186
$
16,249
$
14,749
(1)
Total Cost is presented net of reimbursements to be received.
(2)
Cost to Date does not reflect reimbursements until they are received.
(3)
As a result of government mandated construction halts due to the COVID-19 pandemic, opening dates may change from what is currently reflected.
(4)
Yield is based on expected yield upon stabilization.
(5)
Total cost includes a non-cash allocated value for the Company’s land contribution and amounts funded by a construction loan.
We are continually pursuing new redevelopment opportunities and have projects in various stages of pre-development. Our shadow pipeline consists of projects for Properties on which we have completed initial project analysis and design, but which have not commenced construction as of December 31, 2020. Except for the projects presented above, we did not have any other material capital commitments as of December 31, 2020.
Off-Balance Sheet Arrangements
Unconsolidated Affiliates
We have ownership interests in 29 unconsolidated affiliates as of December 31, 2020. See Note 8 to the consolidated financial statements for more information. The unconsolidated affiliates are accounted for using the equity method of accounting and are reflected in the accompanying consolidated balance sheets as investments in unconsolidated affiliates.
The following are circumstances when we may consider entering into a joint venture with a third party:
o
Third parties may approach us with opportunities in which they have obtained land and performed some pre-development activities, but they may not have sufficient access to the capital resources or the development and leasing expertise to bring the project to fruition. We enter into such arrangements when we determine such a project is viable and we can achieve a satisfactory return on our investment. We typically earn development fees from the joint venture and provide management and leasing services to the property for a fee once the property is placed in operation.
o
We determine that we may have the opportunity to capitalize on the value we have created in a property by selling an interest in the property to a third party. This provides us with an additional source of capital that can be used to develop or acquire additional real estate assets that we believe will provide greater potential for growth. When we retain an interest in an asset rather than selling a 100% interest, it is typically because this allows us to continue to manage the property, which provides us the ability to earn fees for management, leasing, development and financing services provided to the joint venture.
o
We also have the ability to contribute land into a joint venture partnership with diverse uses, such as hotels, self-storage and multifamily. We typically partner with developers who have expertise in the diverse property types.
Guarantees
We may guarantee the debt of a joint venture primarily because it allows the joint venture to obtain funding at a lower cost than could be obtained otherwise. This results in a higher return for the joint venture on its investment, and a higher return on our investment in the joint venture. We may receive a fee from the joint venture for providing the guaranty. Additionally, when we issue a guaranty, the terms of the joint venture agreement typically provide that we may receive indemnification from the joint venture partner or have the ability to increase our ownership interest.
See Note 16 to the consolidated financial statements for information related to our guarantees of unconsolidated affiliates' debt as of December 31, 2020 and 2019.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP. In preparing our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made and if different estimates that are reasonably likely to occur could materially impact the financial statements. Management believes that the following critical accounting policies discussed in this section reflect its more significant estimates and assumptions used in preparation of the consolidated financial statements. We have reviewed these critical accounting estimates and related disclosures with the Audit Committee of our board of directors. See Note 3 of the consolidated financial statements, included in Item 8 of this Annual Report on Form 10-K for a discussion of our significant accounting policies.
Revenue Recognition and Accounts Receivable
Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable.
We receive reimbursements from tenants for real estate taxes, insurance, CAM, and other recoverable operating expenses as provided in the lease agreements. Tenant reimbursements are recognized as revenue in the period the related operating expenses are incurred. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years and are recognized as revenue in accordance with underlying lease terms.
We receive management, leasing and development fees from third parties and unconsolidated affiliates. Management fees are charged as a percentage of revenues (as defined in the management agreement) and are recognized as revenue when earned. Development fees are recognized as revenue on a pro rata basis over the development period. Leasing fees are charged for newly executed leases and lease renewals and are recognized as revenue when earned. Development and leasing fees received from unconsolidated affiliates during the development period are recognized as revenue to the extent of the third-party partners’ ownership interest. Fees to the extent of our ownership interest are recorded as a reduction to our investment in the unconsolidated affiliate.
Gains on sales of real estate assets are recognized when it is determined that the sale has been consummated, the buyer’s initial and continuing investment is adequate, our receivable, if any, is not subject to future subordination, and the buyer has assumed the usual risks and rewards of ownership of the asset. When we have an ownership interest in the buyer, gain is recognized to the extent of the third-party partner’s ownership interest and the portion of the gain attributable to our ownership interest is deferred.
Receivables include amounts billed and currently due from tenants pursuant to lease agreements and receivables attributable to straight-line rents associated with those lease agreements. Individual leases where the collection of rents is in dispute are assessed for collectability based on management’s best estimate of collection considering the anticipated outcome of the dispute. Individual leases that are not in dispute are assessed for collectability and upon the determination that the collection of rents over the remaining lease term is not probable, accounts receivable are reduced as an adjustment to rental revenues. Revenue from leases where collection is deemed to be less than probable is recorded on a cash basis until collectability is determined to be probable. Further, management assesses whether operating lease receivables, at a portfolio level, are appropriately valued based upon an analysis of balances outstanding, historical collection levels and current economic trends. An allowance for the uncollectable portion of the portfolio is recorded as an adjustment to rental revenues. Management’s estimate of the collectability of accounts receivable from tenants is based on the best information available to management at the time of evaluation.
We review current economic considerations each reporting period, including the effects of tenant bankruptcies. Additionally, with the uncertainties regarding COVID-19, our assessment also took into consideration the type of tenant and current discussions with the tenants regarding matters such as billing disputes, lease negotiations and executed deferrals or abatements, as well as recent rent payment and credit history. Evaluating and estimating uncollectable lease payments and related receivables requires a significant amount of judgment by management and is based on the best information available to management at the time of evaluation. For the year ended December 31, 2020, we reduced rental revenue by $48.2 million, due to lease-related reserves and write-offs, which includes $5.6 million for straight-line rent receivables. Actual results could differ from these estimates and such differences could be material to our consolidated financial statements.
Lease Modifications
In April 2020, the FASB issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance related to lease concessions provided as a result of COVID-19. Under existing lease guidance, we would have to determine, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant (treated within the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A clarifies that entities may elect to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of COVID-19 on lessees is a lease modification under Topic 842, Leases. Instead, an entity that elects not to evaluate whether a concession directly related to COVID-19 is a modification can then elect whether to apply the modification guidance (i.e. assume the relief was always contemplated by the contract or assume the relief was not contemplated by the contract). Both lessees and lessors may make this election.
We have elected to apply the relief provided under the Lease Modification Q&A and will avail ourselves of the election to avoid performing a lease by lease analysis for the lease concessions that were (1) granted as relief due to the COVID-19 pandemic and (2) result in the cash flows remaining substantially the same or less than the original contract. The Lease Modification Q&A had a material impact on our consolidated financial statements for the year ended December 31, 2020. However, its future impact to us is dependent upon the extent of lease concessions granted to tenants as a result of the COVID-19 pandemic in future periods and the elections made by us at the time of entering such concessions.
The Lease Modification Q&A allows us to determine accounting policy elections at a disaggregated level, and the elections should be applied consistently by either the type of concession, underlying asset class or on another reasonable basis. As a result, we have made the following policy elections based on the type of concession agreed to with the respective tenant.
Rent Deferrals
We will account for rental deferrals using the receivables model as described within the Lease Modification Q&A. Under the receivables model, we will continue to recognize lease revenue in a manner that is unchanged from the original lease agreement and continue to recognize lease receivables and rental revenue during deferral period.
Rent Abatements
We will account for rental abatements using the negative variable income model as described within the Lease Modification Q&A. Under the negative variable income model, we will recognize negative variable rent for the current period reduction of rental revenue associated with any lease concessions we provide.
At December 31, 2020, our receivables include $18.5 million related to receivables that have been deferred and are to be repaid over periods generally starting in late 2020 and extending for some portion of 2021. We granted abatements of $25.4 million for the year ended December 31, 2020. We continue to assess rent relief requests from our tenants but are unable to predict the resolution or impact of these discussions. For agreements that are in currently under negotiation, we do not expect the impact to be material.
Real Estate Assets
All acquired real estate assets are accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The purchase price is allocated to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements and (ii) identifiable intangible assets and liabilities generally consisting of above- and below-market leases and in-place leases. We use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation methods to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt with a stated interest rate that is significantly different from market interest rates is recorded at its fair value based on estimated market interest rates at the date of acquisition. Following our adoption of Accounting Standards Update 2017-01, Clarifying the Definition of a Business, on a prospective basis in January 2017, we expect our future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized.
Carrying Value of Long-Lived Assets
The Company evaluates its real estate assets for impairment indicators whenever events or changes in circumstances indicate that recoverability of its investment in the asset is not reasonably assured. Furthermore, this evaluation is conducted no less frequently than quarterly, irrespective of changes in circumstances. The prolonged outbreak of the COVID-19 pandemic resulted in sustained closure of the Company’s properties for a period of time, as well as the cessation of the operations of certain of its tenants, which has resulted and will likely continue to result in a reduction in the revenues and cash flows of many of its properties due to the adverse financial impacts on its tenants, as well as reductions in other sources of income generated by its properties. In addition to reduced revenues, the Company’s ability to obtain sufficient financing for such properties may be impaired as well as its ability to lease or re-lease properties as a result of worsening market and economic conditions resulting from the COVID-19 pandemic.
As of December 31, 2020, the Company’s evaluation of impairment of real estate assets considered its estimate of cash flow declines caused by the COVID-19 pandemic, but its other assumptions, including estimated hold period, were generally unchanged given the highly uncertain environment. The worsening of estimated future cash flows due to a change in the Company’s plans, policies, or views of market and economic conditions as it relates to one or more of its properties adversely impacted by the COVID-19 pandemic could result in the recognition of substantial impairment charges on its assets, which could adversely impact its financial results. For the year ended December 31, 2020, the Company recorded impairment charges of $213.4 related to six of its malls. As of December 31, 2020, seven other properties had impairment indicators; however, based on the Company’s plans with respect to those properties and the economic environment as of December 31, 2020, no additional impairment charges were recorded.
Investments in Unconsolidated Affiliates
We evaluate our investment in unconsolidated affiliates for impairment indicators whenever events or changes in circumstances indicate that recoverability of its investment in the asset is not reasonably assured. Furthermore, this evaluation is conducted no less frequently than quarterly, irrespective of changes in circumstances. The prolonged outbreak of the COVID-19 pandemic resulted in sustained closure of our properties for a period of time, as well as the cessation of the operations of certain of its tenants, which has resulted and will likely continue to result in a reduction in the revenues and cash flows of many of its properties due to the adverse financial impacts on its tenants, as well as reductions in other
sources of income generated by its properties. In addition to reduced revenues, the Company’s ability to obtain sufficient financing for such properties may be impaired as well as its ability to lease or re-lease properties as a result of worsening market and economic conditions resulting from the COVID-19 pandemic.
In 2018, an unconsolidated affiliate recognized an impairment of $89.8 million related to a mall. We recorded $1.0 million as our share of the loss on impairment, which reduced the carrying value of our investment in the joint venture to zero. See Note 8 to the consolidated financial statements for additional information about this impairment loss. No impairments of investments in unconsolidated affiliates were incurred during 2020 and 2019.
Recent Accounting Pronouncements
See Note 3 to the consolidated financial statements for information on recently issued accounting pronouncements.
Non-GAAP Measure
Funds from Operations
FFO is a widely used non-GAAP measure of the operating performance of real estate companies that supplements net income (loss) determined in accordance with GAAP. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) (computed in accordance with GAAP) excluding gains or losses on sales of depreciable operating properties and impairment losses of depreciable properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests. Adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests are calculated on the same basis. We define FFO as defined above by NAREIT less dividends on preferred stock of the Company or distributions on preferred units of the Operating Partnership, as applicable. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
We believe that FFO provides an additional indicator of the operating performance of our Properties without giving effect to real estate depreciation and amortization, which assumes the value of real estate assets declines predictably over time. Since values of real estate assets have historically risen or fallen with market conditions, we believe that FFO enhances investors’ understanding of our operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of our Properties and interest rates, but also by our capital structure.
We present both FFO allocable to Operating Partnership common unitholders and FFO allocable to common shareholders, as we believe that both are useful performance measures. We believe FFO allocable to Operating Partnership common unitholders is a useful performance measure since we conduct substantially all of our business through our Operating Partnership and, therefore, it reflects the performance of the Properties in absolute terms regardless of the ratio of ownership interests of our common shareholders and the noncontrolling interest in our Operating Partnership. We believe FFO allocable to common shareholders is a useful performance measure because it is the performance measure that is most directly comparable to net income (loss) attributable to common shareholders.
In our reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders that is presented below, we make an adjustment to add back noncontrolling interest in income (loss) of our Operating Partnership in order to arrive at FFO of the Operating Partnership common unitholders. We then apply a percentage to FFO of our Operating Partnership common unitholders to arrive at FFO allocable to common shareholders. The percentage is computed by taking the weighted-average number of common shares outstanding for the period and dividing it by the sum of the weighted-average number of common shares and the weighted-average number of Operating Partnership units held by noncontrolling interests during the period.
FFO does not represent cash flows from operations as defined by GAAP, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income (loss) for purposes of evaluating our operating performance or to cash flow as a measure of liquidity.
We believe that it is important to identify the impact of certain significant items on our FFO measures for a reader to have a complete understanding of our results of operations. Therefore, we have also presented adjusted FFO measures excluding these significant items from the applicable periods. Please refer to the reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders below for a description of these adjustments.
FFO allocable to Operating Partnership common unitholders decreased 61.4% to $108.2 million for the year ended December 31, 2020 compared to $280.3 million for the prior year. After making the adjustments noted below, FFO of the Operating Partnership, as adjusted, decreased 48.2% for the year ending December 31, 2020 to $140.8 million compared
to $271.5 million in 2019. The decreases in FFO were primarily driven by lower property-level NOI, which includes the estimate for uncollectable revenues and bad debt expense of $49.3 million and rent abatements of $25.4 million due to the mandated property closures as a result of the COVID-19 pandemic. The reduction in rental revenues was partially offset by lower operating expenses from the program we put in place to eliminate all non-essential expenditures and the company-wide furlough and salary reduction program.
The reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders is as follows (in thousands):
Year Ended December 31,
Net loss attributable to common shareholders
$
(332,494
)
$
(153,669
)
$
(123,460
)
Noncontrolling interest in loss of Operating Partnership
(19,762
)
(23,683
)
(19,688
)
Depreciation and amortization expense of:
Consolidated Properties
215,030
257,746
285,401
Unconsolidated affiliates
56,734
49,434
41,858
Non-real estate assets
(3,056
)
(3,650
)
(3,661
)
Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries
(3,638
)
(8,191
)
(8,601
)
Loss on impairment, net of taxes and noncontrolling interest
195,336
239,521
174,416
Loss on impairment of unconsolidated affiliates
-
-
1,022
(Gain) loss on depreciable property, net of taxes
(77,250
)
(7,484
)
FFO allocable to Operating Partnership common unitholders
108,175
280,258
339,803
Prepetition charges (1)
23,883
-
-
Litigation settlement, net of taxes (2)
(7,855
)
61,271
-
Non-cash default interest expense (3)
13,096
1,688
5,285
Gain on extinguishment of debt (4)
(32,521
)
(71,722
)
-
Reorganization items (5)
35,977
-
-
FFO allocable to Operating Partnership common
unitholders, as adjusted
$
140,755
$
271,495
$
345,088
FFO per diluted share
$
0.54
$
1.40
$
1.70
FFO, as adjusted, per diluted share
$
0.70
$
1.36
$
1.73
(1)
Represents professional fees related to the Company's negotiations with the administrative agent and lenders under the secured credit facility and certain holders of the Company's senior unsecured notes regarding a restructure of such indebtedness prior to the filing of the Chapter 11 Cases.
(2)
Represents the accrued expense related to settlement of a class action lawsuit.
(3)
The year ended December 31, 2020 includes non-cash default interest expense related to loans secured by properties classified as Lender Malls, as well as loans secured by properties that are in default due to the filing of the Chapter 11 Cases. The year ended December 31, 2019 includes non-cash default interest expense related to Acadiana Mall, Cary Towne Center, Greenbrier Mall and Hickory Point Mall. The year ended December 31, 2018 includes non-cash default interest expense related to Acadiana Mall, Cary Towne Center and Triangle Town Center.
(4)
The year ended December 31, 2020 includes a gain on extinguishment of debt related to the non-recourse loans secured by Hickory Point Mall and Burnsville Center, which were conveyed to the lender in the third quarter of 2020 and the fourth quarter of 2020, respectively. The year ended December 31, 2019 includes a gain on extinguishment of debt related to the non-recourse loan secured by Acadiana Mall, which was conveyed to the lender in the first quarter of 2019, and a gain on extinguishment of debt related to the non-recourse loan secured by Cary Towne Center, which was sold in the first quarter of 2019.
(5)
Represents costs incurred subsequent to the filing of the Chapter 11 Cases associated with the Company’s reorganization efforts, which consists of professional fees, as well as unamortized deferred financing costs and unamortized debt discounts expensed in accordance with ASC 852.
The reconciliation of diluted EPS attributable to common shareholders to FFO per diluted share is as follows:
Year Ended December 31,
Diluted EPS attributable to common shareholders
$
(1.75
)
$
(0.89
)
$
(0.72
)
Eliminate amounts per share excluded from FFO:
Depreciation and amortization expense, including
amounts from consolidated Properties,
unconsolidated affiliates, non-real estate
assets and excluding amounts allocated to
noncontrolling interests
1.32
1.48
1.58
Loss on impairment, net of taxes and noncontrolling interest
0.97
1.19
0.88
Gain on depreciable property, net of taxes
-
(0.38
)
(0.04
)
FFO per diluted share
$
0.54
$
1.40
$
1.70
The reconciliations of FFO allocable to Operating Partnership common unitholders to FFO allocable to common shareholders, including and excluding the adjustments noted above are as follows (in thousands):
Year Ended December 31,
FFO of the Operating Partnership
$
108,175
$
280,258
$
339,803
Percentage allocable to common shareholders (1)
94.39
%
86.65
%
86.42
%
FFO allocable to common shareholders
$
102,107
$
242,844
$
293,658
FFO allocable to Operating Partnership common
unitholders, as adjusted
$
140,755
$
271,495
$
345,088
Percentage allocable to common shareholders (1)
94.39
%
86.65
%
86.42
%
FFO allocable to common shareholders, as adjusted
$
132,859
$
235,250
$
298,225
(1)
Represents the weighted-average number of common shares outstanding for the period divided by the sum of the weighted-average number of common shares and the weighted-average number of Operating Partnership units held by noncontrolling interests during the period.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various market risk exposures, including interest rate risk. The following discussion regarding our risk management activities includes forward-looking statements that involve risk and uncertainties. Estimates of future performance and economic conditions are reflected assuming certain changes in interest rates. Caution should be used in evaluating our overall market risk from the information presented below, as actual results may differ.
Interest Rate Risk
Based on our proportionate share of consolidated and unconsolidated variable-rate debt at December 31, 2020, and excluding the secured credit facility, which is included in liabilities subject to compromise in the accompanying consolidated balance sheets due to the Chapter 11 Cases, a 0.5% increase or decrease in interest rates on variable rate debt would result in annual cash flows of approximately $9.2 million and $7.3 million, respectively, and increase or decrease annual interest expense, after the effect of capitalized interest, by approximately $0.9 million.
Based on our proportionate share of consolidated and unconsolidated variable-rate debt at December 31, 2020, and including the secured credit facility, which is included in liabilities subject to compromise in the accompanying consolidated balance sheets due to the Chapter 11 Cases, a 0.5% increase or decrease in interest rates on variable rate debt would result in annual cash flows of approximately $120.6 million and $107.6 million, respectively, and increase or decrease annual interest expense, after the effect of capitalized interest, by approximately $6.5 million.
Based on our proportionate share of total consolidated and unconsolidated debt at December 31, 2020, and excluding the secured credit facility and senior unsecured notes which are included in liabilities subject to compromise in the accompanying consolidated balance sheets due to the Chapter 11 Cases, a 0.5% increase in interest rates would decrease the fair value of debt by approximately $17.9 million, while a 0.5% decrease in interest rates would increase the fair value of debt by approximately $16.0 million.
Based on our proportionate share of total consolidated and unconsolidated debt at December 31, 2020, and including the secured credit facility and senior unsecured notes which are included in liabilities subject to compromise in the accompanying consolidated balance sheets due to the Chapter 11 Cases, a 0.5% increase in interest rates would decrease
the fair value of debt by approximately $27.4 million, while a 0.5% decrease in interest rates would increase the fair value of debt by approximately $24.0 million.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Index to Financial Statements and Schedules contained in Item 15 on page 85.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Controls and Procedures with Respect to the Company
Conclusion Regarding Effectiveness of Disclosure Controls and Procedures
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of its effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report, to ensure that the information required to be disclosed by the Company in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and is accumulated and communicated to our management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as a result of the material weakness described below.
Management's Report on Internal Control over Financial Reporting
Material Weakness in Internal Control over Financial Reporting
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting, management of the Company determined that there was a control deficiency that constituted a material weakness, as described below.
As a result of turnover, the Company did not maintain a sufficient complement of personnel commensurate with their accounting and financial reporting requirements in accordance with U.S. GAAP and SEC regulations.
The control deficiency described above created a reasonable possibility that a material misstatement of the annual or interim financial statements would not be prevented or detected on a timely basis and therefore we concluded that the deficiency represents a material weakness in the Company’s internal control over financial reporting and that the Company did not maintain effective internal control over financial reporting based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (the “2013 Framework”).
Notwithstanding the identified material weakness, management believes that the Consolidated Financial Statements and related financial information included in this Form 10-K fairly present, in all material respects, the Company’s balance sheets, statements of operations, comprehensive loss and cash flows as of and for the periods presented.
Remediation Plan
The Company plans to remediate this material weakness by hiring additional personnel to enable them to meet their financial reporting requirements. The Company may also utilize outside advisors to assist on a short-term basis.
Report of Management on Internal Control over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
Management recognizes that there are inherent limitations in the effectiveness of internal control over financial reporting, including the potential for human error or the circumvention or overriding of internal controls. Accordingly, even effective internal control over financial reporting cannot provide absolute assurance with respect to financial statement preparation. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. In addition, any projection of the evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the polices or procedures may deteriorate.
Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in the 2013 Framework and concluded that, as of December 31, 2020, the Company did not maintain effective internal control over financial reporting for the reasons described above.
Changes in Internal Control over Financial Reporting
We have continued to address the effects of the COVID-19 pandemic on our control structure, including modifications to business modeling, forecasting and estimations, lease modifications, and accounts receivable collectability, as well as for the consequences of reductions in headcount and remote working arrangements. We are continually monitoring and assessing the COVID-19 pandemic’s effect on our internal control processes in order to minimize the impact to their design and operating effectiveness. There were no other changes in the Company’s internal control over financial reporting during our most recent fiscal quarter ended December 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Controls and Procedures with Respect to the Operating Partnership
Conclusion Regarding Effectiveness of Disclosure Controls and Procedures
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of its effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, whose subsidiary CBL Holdings I is the sole general partner of the Operating Partnership, the Operating Partnership has evaluated the effectiveness of its disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on that evaluation, as a result of the material weakness described above these officers concluded that the Operating Partnership's disclosure controls and procedures were not effective to ensure that the information required to be disclosed by the Operating Partnership in the reports that the Operating Partnership files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and is accumulated and communicated to management of the Company, acting on behalf of the Operating Partnership in its capacity as the general partner of the Operating Partnership, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Management's Report on Internal Control over Financial Reporting
Material Weakness in Internal Control over Financial Reporting
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Operating Partnership’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting, management of the Operating Partnership determined that there was a control deficiency that constituted a material weakness, as described below.
As a result of turnover, the Operating Partnership did not maintain a sufficient complement of personnel commensurate with their accounting and financial reporting requirements in accordance with U.S. GAAP and SEC regulations.
The control deficiency described above created a reasonable possibility that a material misstatement of the annual or interim financial statements would not be prevented or detected on a timely basis and therefore we concluded that the deficiency represents a material weakness in the Operating Partnership’s internal control over financial reporting and that the Operating Partnership did not maintain effective internal control over financial reporting based on criteria established in the 2013 Framework.
Notwithstanding the identified material weakness, management believes that the Consolidated Financial Statements and related financial information included in this Form 10-K fairly present, in all material respects, the Company’s balance sheets, statements of operations, comprehensive loss and cash flows as of and for the periods presented.
Remediation Plan
The Operating Partnership plans to remediate this material weakness by hiring additional personnel to enable them to meet their financial reporting requirements. The Operating Partnership may also utilize outside advisors to assist on a short-term basis.
Report of Management on Internal Control over Financial Reporting
Management of the Operating Partnership is responsible for establishing and maintaining adequate internal control over financial reporting. The Operating Partnership’s internal control over financial reporting is a process designed under the supervision of the Operating Partnership’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
Management recognizes that there are inherent limitations in the effectiveness of internal control over financial reporting, including the potential for human error or the circumvention or overriding of internal controls. Accordingly, even effective internal control over financial reporting cannot provide absolute assurance with respect to financial statement preparation. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a
timely basis by internal control over financial reporting. In addition, any projection of the evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the polices or procedures may deteriorate.
The Company's management, whose subsidiary CBL Holdings I is the sole general partner of the Operating Partnership, conducted an assessment of the effectiveness of the Operating Partnership’s internal control over financial reporting based on the framework established in the 2013 Framework and concluded that, as of December 31, 2020, the Operating Partnership did not maintain effective internal control over financial reporting for the reasons described above.
Changes in Internal Control over Financial Reporting
We have continued to address the effects of the COVID-19 pandemic on our control structure, including modifications to business modeling, forecasting and estimations, lease modifications, and accounts receivable collectability, as well as for the consequences of reductions in headcount and remote working arrangements. We are continually monitoring and assessing the COVID-19 pandemic’s effect on our internal control processes in order to minimize the impact to their design and operating effectiveness. There were no other changes in the Operating Partnership’s internal control over financial reporting during our most recent fiscal quarter ended December 31, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated herein by reference to the sections entitled “ELECTION OF DIRECTORS-General,” “ELECTION OF DIRECTORS-Impact of Our Voluntary Reorganization Under Chapter 11,” “ELECTION OF DIRECTORS-Director Nominees," "ELECTION OF DIRECTORS-Additional Executive Officers,” “-CORPORATE GOVERNANCE MATTERS-Code of Business Conduct and Ethics,” “CORPORATE GOVERNANCE MATTERS-Board of Directors’ Meetings and Committees - The Audit Committee,” and “Delinquent Section 16(a) Reports” in our definitive proxy statement filed with the SEC with respect to our Annual Meeting of Stockholders to be held on May 25, 2021.
Our Board of Directors has determined that each of A. Larry Chapman, an independent director and chairman of the audit committee, Matthew S. Dominski and Carolyn B. Tiffany, each, an independent director and member of the audit committee, qualifies as an “audit committee financial expert” as such term is defined by the rules of the Commission.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the sections entitled “DIRECTOR COMPENSATION,” “EXECUTIVE COMPENSATION,” “REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS” and “Compensation Committee Interlocks and Insider Participation” in our definitive proxy statement filed with the Commission with respect to our Annual Meeting of Stockholders to be held on May 25, 2021.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Incorporated herein by reference to the sections entitled “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT” and “Equity Compensation Plan Information as of December 31, 2020”, in our definitive proxy statement filed with the Commission with respect to our Annual Meeting of Stockholders to be held on May 25, 2021.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Incorporated herein by reference to the sections entitled “CORPORATE GOVERNANCE MATTERS-Director Independence” and “CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS”, in our definitive proxy statement filed with the Commission with respect to our Annual Meeting of Stockholders to be held on May 25, 2021.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Incorporated herein by reference to the section entitled “Independent Registered Public Accountants’ Fees and Services” under “RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS” in our definitive proxy statement filed with the Commission with respect to our Annual Meeting of Stockholders to be held on May 25, 2021.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(1)
Consolidated Financial Statements
Page
Number
CBL & Associates Properties, Inc.
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Operations for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Equity for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
CBL & Associates Limited Partnership
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Operations for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Capital for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018
CBL & Associates Properties, Inc. and CBL & Associates Limited Partnership
Notes to Consolidated Financial Statements
(2)
Consolidated Financial Statement Schedules
Schedule III Real Estate and Accumulated Depreciation
Schedule IV Mortgage Loans on Real Estate
Financial statement schedules not listed herein are either not required or are not present in amounts sufficient to require submission of the schedule or the information required to be included therein is included in our consolidated financial statements in Item 15 or are reported elsewhere.
(3)
Exhibits
The Exhibit Index preceding the Signature pages to this report is incorporated by reference into this Item 15(a)(3).