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CBL CBL & Associates Limited Partnership

Filed: 16 Aug 21, 5:09pm

Table of Contents

UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ____________ TO _______________

COMMISSION FILE NO. 1-12494 (CBL & ASSOCIATES PROPERTIES, INC.)

COMMISSION FILE NO. 333-182515-01 (CBL & ASSOCIATES LIMITED PARTNERSHIP)

 

CBL & ASSOCIATES PROPERTIES, INC.

CBL & ASSOCIATES LIMITED PARTNERSHIP

(Exact Name of registrant as specified in its charter)

 

 

Delaware (CBL & ASSOCIATES PROPERTIES, INC.)

 

62-1545718

Delaware (CBL & ASSOCIATES LIMITED PARTNERSHIP)

 

62-1542285

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

2030 Hamilton Place Blvd., Suite 500, Chattanooga, TN  37421-6000

(Address of principal executive office, including zip code)

423-855-0001

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered under Section 12(b) of the Act:

 

Title of each Class

 

Trading

Symbol(s)

 

Name of each exchange on

which registered

Common Stock, $0.01 par value

 

CBLAQ

 

*

7.375% Series D Cumulative Redeemable Preferred Stock, $0.01 par value (represented by depositary shares each representing a 1/10th fractional share)

 

CBLDQ

 

*

6.625% Series E Cumulative Redeemable Preferred Stock, $0.01 par value (represented by depositary shares each representing a 1/10th fractional share)

 

CBLEQ

 

*

*On November 2, 2020, the NYSE announced that (i) it had suspended trading in the Company’s stock and (ii) it 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 7.375% Series D Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”) and the depositary shares each representing a 1/10th fractional share of the Company’s 6.625% Series E Cumulative Redeemable Preferred Stock (“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. Since November 3, 2020, the Company’s common stock and such depositary shares are currently trading on the OTC Markets, operated by the OTC Markets Group, Inc., under the respective trading symbols listed in the preceding table.

CBL & Associates Limited Partnership: None

Securities registered pursuant to Section 12(g) of the Act:

CBL & Associates Properties, Inc.: None

CBL & Associates Limited Partnership: None 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 

 

CBL & Associates Properties, Inc.

 

Yes

No

CBL & Associates Limited Partnership

 

Yes

No

 


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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

CBL & Associates Properties, Inc.

 

Yes

No

CBL & Associates Limited Partnership

 

Yes

No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. 

 

CBL & Associates Properties, Inc.

 

Large accelerated filer

 

Accelerated filer 

Non-accelerated filer

 

Smaller reporting company 

Emerging growth company

 

 

 

 

 

 

 

 

CBL & Associates Limited Partnership

 

Large accelerated filer 

 

Accelerated filer 

Non-accelerated filer

 

Smaller reporting company 

Emerging growth company 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

CBL & Associates Properties, Inc.

 

  Yes     

No 

CBL & Associates Limited Partnership

 

  Yes     

No 

 

As of August 10, 2021, there were 196,443,846 shares of CBL & Associates Properties, Inc.'s common stock, par value $0.01 per share, outstanding.

 


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EXPLANATORY NOTE

(Dollars in thousands, except share data)

This report combines the quarterly reports on Form 10-Q for the quarter ended June 30, 2021 of CBL & Associates Properties, Inc. and CBL & Associates Limited Partnership. Unless stated otherwise or the context otherwise requires, references to the "Company" mean CBL & Associates Properties, Inc. and its subsidiaries. References to the "Operating Partnership" mean CBL & Associates Limited Partnership and its subsidiaries. The terms "we," "us" and "our" refer to the Company or the Company and the Operating Partnership collectively, as the context requires.

As previously disclosed in the Current Report on Form 8-K filed on November 2, 2020 by CBL & Associates Properties, Inc. together with its majority owned subsidiary, CBL & Associates Limited Partnership, together with certain of its direct and indirect subsidiaries (collectively, the “Debtors”), commenced the filing of voluntary petitions (the “Chapter 11 Cases”) under Chapter 11 of title 11 (“Chapter 11”) of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) beginning on November 1, 2020. The Debtors have filed a series of motions with the Bankruptcy Court that, as granted, enable the Debtors to maintain their operations in the ordinary course of business.

The Company is a real estate investment trust ("REIT") whose stock was traded on the New York Stock Exchange (“NYSE”) prior to the NYSE’s announcement on November 2, 2020, that it had suspended trading in the Company’s stock due to “abnormally low” trading price levels and had determined to commence proceedings to delist the Company’s stock. As discussed further under Delisting of Common Stock and Depositary Shares in Note 2 herein, the Company has appealed this decision in accordance with NYSE rules, and in the meantime the Company’s stock is trading on the OTC Markets, operated by the OTC Markets Group, Inc. The Company is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. At June 30, 2021, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.0% general partner interest in the Operating Partnership and CBL Holdings II, Inc. owned a 96.5% limited partner interest for a combined interest held by the Company of 97.5%.

As the sole general partner of the Operating Partnership, the Company's subsidiary, CBL Holdings I, Inc., has exclusive control of the Operating Partnership's activities. Management operates the Company and the Operating Partnership as one business. The management of the Company consists of the same individuals that manage the Operating Partnership. The Company's only material asset is its indirect ownership of partnership interests of the Operating Partnership. As a result, the Company conducts substantially all its business through the Operating Partnership as described in the preceding paragraph. The Company also issues public equity from time to time and guarantees certain debt of the Operating Partnership. The Operating Partnership holds all the assets and indebtedness of the Company and, through affiliates, retains the ownership interests in the Company's joint ventures. Except for the net proceeds of offerings of equity by the Company, which are contributed to the Operating Partnership in exchange for partnership units on a one-for-one basis, the Operating Partnership generates all remaining capital required by the Company's business through its operations and its incurrence of indebtedness.

We believe that combining the two quarterly reports on Form 10-Q for the Company and the Operating Partnership provides the following benefits:

 

enhances investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner that management views and operates the business;

 

eliminates duplicative disclosure and provides a more streamlined and readable presentation, since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and

 

creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

To help investors understand the differences between the Company and the Operating Partnership, this report provides separate condensed consolidated financial statements for the Company and the Operating Partnership. Noncontrolling interests, shareholders' equity and partners' capital are the main areas of difference between the condensed consolidated financial statements of the Company and those of the Operating Partnership. A single set of notes to condensed consolidated financial statements is presented that includes separate discussions for the Company and the Operating Partnership, when applicable. A combined Management's Discussion and Analysis of Financial Condition and Results of Operations section is also included that presents combined information and discrete information related to each entity, as applicable.


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In order to highlight the differences between the Company and the Operating Partnership, this report includes the following sections that provide separate financial and other information for the Company and the Operating Partnership:

 

condensed consolidated financial statements;

 

certain accompanying notes to condensed consolidated financial statements, including Note 8 - Unconsolidated Affiliates and Noncontrolling Interests; Note 9 - Mortgage and Other Indebtedness, Net; and Note 11 - Earnings per Share and Earnings per Unit;

 

controls and procedures in Item 4 of Part I of this report;

 

information concerning unregistered sales of equity securities and use of proceeds in Item 2 of Part II of this report; and

 

certifications of the Chief Executive Officer and Chief Financial Officer included as Exhibits 31.1 through 32.4.

 

 

 

 


Table of Contents

 

CBL & Associates Properties, Inc.

CBL & Associates Limited Partnership

(Debtors-In-Possession)

Table of Contents

 

 

 

 

 

PART I

FINANCIAL INFORMATION

1

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

1

 

 

 

CBL & Associates Properties, Inc.

 

Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

1

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020

2

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020

3

 

Condensed Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2021 and 2020

4

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020

5

 

 

 

CBL & Associates Limited Partnership

 

Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

6

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020

7

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020

8

 

Condensed Consolidated Statements of Capital for the Three and Six Months Ended June 30, 2021 and 2020

9

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020

11

 

 

 

CBL & Associates Properties, Inc. and CBL & Associates Limited Partnership

 

Notes to Unaudited Condensed Consolidated Financial Statements

12

 

 

 

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

39

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

59

Item 4.

Controls and Procedures

60

 

 

 

PART II

OTHER INFORMATION

61

 

 

 

Item 1.

Legal Proceedings

61

Item1A.

Risk Factors

61

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

61

Item 3.

Defaults Upon Senior Securities

61

Item 4.

Mine Safety Disclosures

61

Item 5.

Other Information

61

Item 6.

Exhibits

62

 

 

 

 

SIGNATURES

63

 

 


Table of Contents

 

PART I – FINANCIAL INFORMATION

ITEM 1: Financial Statements

CBL & Associates Properties, Inc.

(Debtors-In-Possession)

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

 

ASSETS (1)

 

June 30,

2021

 

 

December 31,

2020

 

Real estate assets:

 

 

 

 

 

 

 

 

Land

 

$

662,045

 

 

$

695,711

 

Buildings and improvements

 

 

4,978,546

 

 

 

5,135,074

 

 

 

 

5,640,591

 

 

 

5,830,785

 

Accumulated depreciation

 

 

(2,270,736

)

 

 

(2,241,421

)

 

 

 

3,369,855

 

 

 

3,589,364

 

Developments in progress

 

 

15,150

 

 

 

28,327

 

Net investment in real estate assets

 

 

3,385,005

 

 

 

3,617,691

 

Cash and cash equivalents

 

 

143,874

 

 

 

61,781

 

Available-for-sale securities - at fair value (amortized cost of $183,496 and $233,053 as of

    June 30, 2021 and December 31, 2020, respectively)

 

 

183,490

 

 

 

233,071

 

Receivables:

 

 

 

 

 

 

 

 

Tenant

 

 

68,514

 

 

 

103,655

 

Other

 

 

2,727

 

 

 

5,958

 

Mortgage and other notes receivable

 

 

1,912

 

 

 

2,337

 

Investments in unconsolidated affiliates

 

 

261,082

 

 

 

279,355

 

Intangible lease assets and other assets

 

 

217,603

 

 

 

139,892

 

 

 

$

4,264,207

 

 

$

4,443,740

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

 

 

 

 

 

 

 

Mortgage and other indebtedness, net

 

$

987,592

 

 

$

1,184,831

 

Accounts payable and accrued liabilities

 

 

188,368

 

 

 

173,387

 

Total liabilities not subject to compromise (1)

 

 

1,175,960

 

 

 

1,358,218

 

 

 

 

 

 

 

 

 

 

Liabilities subject to compromise

 

 

2,591,706

 

 

 

2,551,490

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 9 and Note 12)

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

(543

)

 

 

(265

)

Shareholders' equity:

 

 

 

 

 

 

 

 

Preferred Stock, $.01 par value, 15,000,000 shares authorized:

 

 

 

 

 

 

 

 

7.375% Series D Cumulative Redeemable Preferred Stock, 1,815,000

   shares outstanding

 

 

18

 

 

 

18

 

6.625% Series E Cumulative Redeemable Preferred Stock, 690,000

   shares outstanding

 

 

7

 

 

 

7

 

Common stock, $.01 par value, 350,000,000 shares authorized, 196,444,452 and

   196,569,917 issued and outstanding in 2021 and 2020, respectively

 

 

1,964

 

 

 

1,966

 

Additional paid-in capital

 

 

1,986,982

 

 

 

1,986,269

 

Accumulated other comprehensive income (loss)

 

 

(6

)

 

 

18

 

Dividends in excess of cumulative earnings

 

 

(1,492,080

)

 

 

(1,456,435

)

Total shareholders' equity

 

 

496,885

 

 

 

531,843

 

Noncontrolling interests

 

 

199

 

 

 

2,454

 

Total equity

 

 

497,084

 

 

 

534,297

 

 

 

$

4,264,207

 

 

$

4,443,740

 

 

(1)

As of June 30, 2021, includes $263,404 of assets related to consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities and $134,578 of liabilities of consolidated variable interest entities for which creditors do not have recourse to the general credit of the Company. See Note 8.

The accompanying notes are an integral part of these condensed consolidated statements.

1


Table of Contents

CBL & Associates Properties, Inc.

(Debtors-In-Possession)

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

131,316

 

 

$

120,222

 

 

$

259,491

 

 

$

281,395

 

Management, development and leasing fees

 

 

1,449

 

 

 

1,055

 

 

 

3,108

 

 

 

3,147

 

Other

 

 

3,796

 

 

 

2,934

 

 

 

7,146

 

 

 

7,243

 

Total revenues

 

 

136,561

 

 

 

124,211

 

 

 

269,745

 

 

 

291,785

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating

 

 

(19,623

)

 

 

(16,906

)

 

 

(41,425

)

 

 

(42,615

)

Depreciation and amortization

 

 

(47,499

)

 

 

(52,663

)

 

 

(95,611

)

 

 

(108,565

)

Real estate taxes

 

 

(15,110

)

 

 

(17,837

)

 

 

(31,661

)

 

 

(36,285

)

Maintenance and repairs

 

 

(8,784

)

 

 

(6,042

)

 

 

(19,565

)

 

 

(17,250

)

General and administrative

 

 

(11,269

)

 

 

(18,727

)

 

 

(23,881

)

 

 

(36,563

)

Loss on impairment

 

 

 

 

 

(13,274

)

 

 

(57,182

)

 

 

(146,918

)

Litigation settlement

 

 

(57

)

 

 

 

 

 

801

 

 

 

 

Other

 

 

(287

)

 

 

(242

)

 

 

(287

)

 

 

(400

)

Total expenses

 

 

(102,629

)

 

 

(125,691

)

 

 

(268,811

)

 

 

(388,596

)

OTHER INCOME (EXPENSES):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

752

 

 

 

891

 

 

 

1,528

 

 

 

3,288

 

Interest expense (unrecognized contractual interest expense was $45,279 and $90,043 for the three and six months ended June 30, 2021, respectively)

 

 

(22,299

)

 

 

(52,631

)

 

 

(46,429

)

 

 

(99,623

)

Gain on deconsolidation

 

 

 

 

 

 

 

 

55,131

 

 

 

 

Gain (loss) on sales of real estate assets

 

 

107

 

 

 

2,623

 

 

 

(192

)

 

 

2,763

 

Reorganization items

 

 

(17,073

)

 

 

 

 

 

(40,006

)

 

 

 

Income tax provision

 

 

(705

)

 

 

(16,117

)

 

 

(1,456

)

 

 

(16,643

)

Equity in losses of unconsolidated affiliates

 

 

(4,275

)

 

 

(6,079

)

 

 

(7,351

)

 

 

(5,061

)

Total other expenses

 

 

(43,493

)

 

 

(71,313

)

 

 

(38,775

)

 

 

(115,276

)

Net loss

 

 

(9,561

)

 

 

(72,793

)

 

 

(37,841

)

 

 

(212,087

)

Net loss attributable to noncontrolling interests in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Partnership

 

 

230

 

 

 

2,077

 

 

 

928

 

 

 

18,491

 

Other consolidated subsidiaries

 

 

449

 

 

 

487

 

 

 

1,268

 

 

 

694

 

Net loss attributable to the Company

 

 

(8,882

)

 

 

(70,229

)

 

 

(35,645

)

 

 

(192,902

)

Preferred dividends undeclared

 

 

 

 

 

(11,223

)

 

 

 

 

 

(22,446

)

Net loss attributable to common shareholders

 

$

(8,882

)

 

$

(81,452

)

 

$

(35,645

)

 

$

(215,348

)

Basic and diluted per share data attributable to common shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common shareholders

 

$

(0.05

)

 

$

(0.42

)

 

$

(0.18

)

 

$

(1.16

)

Weighted-average common and potential dilutive common shares outstanding

 

 

196,458

 

 

 

191,962

 

 

 

196,484

 

 

 

185,547

 

 

The accompanying notes are an integral part of these condensed consolidated statements.

2


Table of Contents

CBL & Associates Properties, Inc.

(Debtors-In-Possession)

Condensed Consolidated Statements of Comprehensive Loss

(In thousands, except share data)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss

 

$

(9,561

)

 

$

(72,793

)

 

$

(37,841

)

 

$

(212,087

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available-for-sale securities

 

 

(27

)

 

 

(64

)

 

 

(24

)

 

 

(42

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

 

(9,588

)

 

 

(72,857

)

 

 

(37,865

)

 

 

(212,129

)

Comprehensive loss attributable to noncontrolling interests in:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    Operating Partnership

 

 

230

 

 

 

2,080

 

 

 

928

 

 

 

18,494

 

    Other consolidated subsidiaries

 

 

449

 

 

 

487

 

 

 

1,268

 

 

 

694

 

Comprehensive loss attributable to the Company:

 

$

(8,909

)

 

$

(70,290

)

 

$

(35,669

)

 

$

(192,941

)

 

The accompanying notes are an integral part of these condensed consolidated statements.

3


Table of Contents

CBL & Associates Properties, Inc.

(Debtors-In-Possession)

Condensed Consolidated Statements of Equity

(In thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

Redeemable

Noncontrolling

Interests

 

 

Preferred

Stock

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Dividends

in

Excess of

Cumulative

Earnings

 

 

Total

Shareholders'

Equity

 

 

Noncontrolling

Interests

 

 

Total

Equity

 

Balance, December 31, 2019

 

$

2,160

 

 

$

25

 

 

$

1,741

 

 

$

1,965,897

 

 

$

 

 

$

(1,161,351

)

 

$

806,312

 

 

$

55,553

 

 

$

861,865

 

Net loss

 

 

(1,158

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(122,673

)

 

 

(122,673

)

 

 

(15,463

)

 

 

(138,136

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22

 

 

 

 

 

 

22

 

 

 

 

 

 

22

 

Conversion of 16,333,947 Operating Partnership common units into shares of common stock

 

 

 

 

 

 

 

 

163

 

 

 

20,888

 

 

 

 

 

 

 

 

 

21,051

 

 

 

(21,051

)

 

 

 

Issuance of 1,633,345 shares of common stock and restricted common stock

 

 

 

 

 

 

 

 

17

 

 

 

520

 

 

 

 

 

 

 

 

 

537

 

 

 

 

 

 

537

 

Cancellation of 116,781 shares of restricted common stock

 

 

 

 

 

 

 

 

(1

)

 

 

(96

)

 

 

 

 

 

 

 

 

(97

)

 

 

 

 

 

(97

)

Amortization of deferred compensation

 

 

 

 

 

 

 

 

 

 

 

633

 

 

 

 

 

 

 

 

 

633

 

 

 

 

 

 

633

 

Performance stock units

 

 

 

 

 

 

 

 

 

 

 

390

 

 

 

 

 

 

 

 

 

390

 

 

 

 

 

 

390

 

Adjustment for noncontrolling interests

 

 

60

 

 

 

 

 

 

 

 

 

(10,341

)

 

 

 

 

 

 

 

 

(10,341

)

 

 

10,281

 

 

 

(60

)

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(731

)

 

 

(731

)

Contributions from noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

668

 

 

 

668

 

Balance, March 31, 2020

 

 

1,062

 

 

 

25

 

 

 

1,920

 

 

 

1,977,891

 

 

 

22

 

 

 

(1,284,024

)

 

 

695,834

 

 

 

29,257

 

 

 

725,091

 

Net loss

 

 

(654

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(70,229

)

 

 

(70,229

)

 

 

(1,910

)

 

 

(72,139

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(64

)

 

 

 

 

 

(64

)

 

 

 

 

 

(64

)

Issuance of 5,891 shares of common stock and restricted common stock

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Cancellation of 20,059 shares of restricted common stock

 

 

 

 

 

 

 

 

 

 

 

(14

)

 

 

 

 

 

 

 

 

(14

)

 

 

 

 

 

(14

)

Performance stock units

 

 

 

 

 

 

 

 

 

 

 

379

 

 

 

 

 

 

 

 

 

379

 

 

 

 

 

 

379

 

Amortization of deferred compensation

 

 

 

 

 

 

 

 

 

 

 

384

 

 

 

 

 

 

 

 

 

384

 

 

 

 

 

 

384

 

Adjustment for noncontrolling interests

 

 

117

 

 

 

 

 

 

 

 

 

3,812

 

 

 

 

 

 

 

 

 

 

3,812

 

 

 

(3,929

)

 

 

(117

)

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(94

)

 

 

(94

)

Contributions from noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25

 

 

 

25

 

Balance, June 30, 2020

 

$

525

 

 

$

25

 

 

$

1,920

 

 

$

1,982,454

 

 

$

(42

)

 

$

(1,354,253

)

 

$

630,104

 

 

$

23,349

 

 

$

653,453

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

Redeemable

Noncontrolling

Interests

 

 

Preferred

Stock

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Dividends

in

Excess of

Cumulative

Earnings

 

 

Total

Shareholders'

Equity

 

 

Noncontrolling

Interests

 

 

Total

Equity

 

Balance, December 31, 2020

 

$

(265

)

 

$

25

 

 

$

1,966

 

 

$

1,986,269

 

 

$

18

 

 

$

(1,456,435

)

 

$

531,843

 

 

$

2,454

 

 

$

534,297

 

Net loss

 

 

(213

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,763

)

 

 

(26,763

)

 

 

(1,304

)

 

 

(28,067

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

 

 

 

 

 

3

 

Cancellation of 111,139 shares of restricted common stock

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Amortization of deferred compensation

 

 

 

 

 

 

 

 

 

 

 

304

 

 

 

 

 

 

 

 

 

304

 

 

 

 

 

 

304

 

Performance stock units

 

 

 

 

 

 

 

 

 

 

 

93

 

 

 

 

 

 

 

 

 

93

 

 

 

 

 

 

93

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

(11

)

Balance, March 31, 2021

 

 

(478

)

 

 

25

 

 

 

1,965

 

 

 

1,986,666

 

 

 

21

 

 

 

(1,483,198

)

 

 

505,479

 

 

 

1,139

 

 

 

506,618

 

Net loss

 

 

(70

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,882

)

 

 

(8,882

)

 

 

(609

)

 

 

(9,491

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27

)

 

 

 

 

 

(27

)

 

 

 

 

 

(27

)

Cancellation of 14,326 shares of restricted common stock

 

 

 

 

 

 

 

 

(1

)

 

 

(17

)

 

 

 

 

 

 

 

 

(18

)

 

 

 

 

 

(18

)

Amortization of deferred compensation

 

 

 

 

 

 

 

 

 

 

 

256

 

 

 

 

 

 

 

 

 

256

 

 

 

 

 

 

256

 

Performance stock units

 

 

 

 

 

 

 

 

 

 

 

94

 

 

 

 

 

 

 

 

 

94

 

 

 

 

 

 

94

 

Adjustment for noncontrolling interests

 

 

5

 

 

 

 

 

 

 

 

 

(17

)

 

 

 

 

 

 

 

 

(17

)

 

 

12

 

 

 

(5

)

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(343

)

 

 

(343

)

Balance, June 30, 2021

 

$

(543

)

 

$

25

 

 

$

1,964

 

 

$

1,986,982

 

 

$

(6

)

 

$

(1,492,080

)

 

$

496,885

 

 

$

199

 

 

$

497,084

 

 

The accompanying notes are an integral part of these condensed consolidated statements.

 

 

4


Table of Contents

 

CBL & Associates Properties, Inc.

(Debtors-In-Possession)

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(37,841

)

 

$

(212,087

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

95,611

 

 

 

108,565

 

Net amortization of deferred financing costs, premiums on available-for-sale securities and debt premiums and discounts

 

 

1,496

 

 

 

4,595

 

Net amortization of intangible lease assets and liabilities

 

 

385

 

 

 

(753

)

(Gain) loss on sales of real estate assets

 

 

192

 

 

 

(2,763

)

Gain on insurance proceeds

 

 

 

 

 

(511

)

Gain on deconsolidation

 

 

(55,131

)

 

 

 

Write-off of development projects

 

 

287

 

 

 

400

 

Share-based compensation expense

 

 

739

 

 

 

2,293

 

Loss on impairment

 

 

57,182

 

 

 

146,918

 

Equity in losses of unconsolidated affiliates

 

 

7,351

 

 

 

5,061

 

Distributions of earnings from unconsolidated affiliates

 

 

6,676

 

 

 

3,797

 

Change in estimate of uncollectable revenues

 

 

15,525

 

 

 

41,955

 

Change in deferred tax accounts

 

 

 

 

 

15,596

 

Changes in:

 

 

 

 

 

 

 

 

Tenant and other receivables

 

 

19,352

 

 

 

(87,298

)

Other assets

 

 

(2,111

)

 

 

753

 

Accounts payable and accrued liabilities

 

 

20,784

 

 

 

11,849

 

Net cash provided by operating activities

 

 

130,497

 

 

 

38,370

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Additions to real estate assets

 

 

(13,836

)

 

 

(36,413

)

Proceeds from sales of real estate assets

 

 

5,612

 

 

 

3,579

 

Purchases of available-for-sale securities

 

 

(319,887

)

 

 

(153,193

)

Redemptions of available-for-sale securities

 

 

368,380

 

 

 

 

Proceeds from insurance

 

 

 

 

 

600

 

Payments received on mortgage and other notes receivable

 

 

425

 

 

 

703

 

Additional investments in and advances to unconsolidated affiliates

 

 

124

 

 

 

(10,990

)

Distributions in excess of equity in earnings of unconsolidated affiliates

 

 

4,790

 

 

 

5,255

 

Changes in other assets

 

 

(1,420

)

 

 

(920

)

Net cash provided by (used in) investing activities

 

 

44,188

 

 

 

(191,379

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from mortgage and other indebtedness

 

 

 

 

 

365,000

 

Principal payments on mortgage and other indebtedness

 

 

(23,854

)

 

 

(120,467

)

Additions to deferred financing costs

 

 

(1

)

 

 

(240

)

Proceeds from issuances of common stock

 

 

 

 

 

5

 

Contributions from noncontrolling interests

 

 

 

 

 

693

 

Payment of tax withholdings for restricted stock awards

 

 

(11

)

 

 

(87

)

Distributions to noncontrolling interests

 

 

(354

)

 

 

(825

)

Net cash provided by (used in) financing activities

 

 

(24,220

)

 

 

244,079

 

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

150,465

 

 

 

91,070

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

 

 

121,722

 

 

 

59,058

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

 

$

272,187

 

 

$

150,128

 

Reconciliation from condensed consolidated statements of cash flows to

   condensed consolidated balance sheets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

143,874

 

 

$

123,388

 

Restricted cash (1):

 

 

 

 

 

 

 

 

Restricted cash

 

 

100,626

 

 

 

249

 

Mortgage escrows

 

 

27,687

 

 

 

26,491

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

 

$

272,187

 

 

$

150,128

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION

 

 

 

 

 

 

 

 

Cash paid for interest, net of amounts capitalized

 

$

26,755

 

 

$

51,703

 

Cash paid for reorganization items

 

$

35,602

 

 

$

 

(1)

Included in intangible lease assets and other assets in the condensed consolidated balance sheets.

The accompanying notes are an integral part of these condensed consolidated statements.

5


Table of Contents

CBL & Associates Limited Partnership

(Debtors-In-Possession)

Condensed Consolidated Balance Sheets

(In thousands, except unit data)

(Unaudited)

 

ASSETS (1)

 

June 30,

2021

 

 

December 31,

2020

 

Real estate assets:

 

 

 

 

 

 

 

 

Land

 

$

662,045

 

 

$

695,711

 

Buildings and improvements

 

 

4,978,546

 

 

 

5,135,074

 

 

 

 

5,640,591

 

 

 

5,830,785

 

Accumulated depreciation

 

 

(2,270,736

)

 

 

(2,241,421

)

 

 

 

3,369,855

 

 

 

3,589,364

 

Developments in progress

 

 

15,150

 

 

 

28,327

 

Net investment in real estate assets

 

 

3,385,005

 

 

 

3,617,691

 

Cash and cash equivalents

 

 

143,866

 

 

 

61,772

 

Available-for-sale securities - at fair value (amortized cost of $183,496 and $233,053 as of

    June 30, 2021 and December 31, 2020, respectively)

 

 

183,490

 

 

 

233,071

 

Receivables:

 

 

 

 

 

 

 

 

Tenant

 

 

68,514

 

 

 

103,655

 

Other

 

 

2,679

 

 

 

5,910

 

Mortgage and other notes receivable

 

 

1,912

 

 

 

2,337

 

Investments in unconsolidated affiliates

 

 

261,609

 

 

 

279,884

 

Intangible lease assets and other assets

 

 

217,482

 

 

 

139,772

 

 

 

$

4,264,557

 

 

$

4,444,092

 

LIABILITIES, REDEEMABLE INTERESTS AND CAPITAL

 

 

 

 

 

 

 

 

Mortgage and other indebtedness, net

 

$

987,592

 

 

$

1,184,831

 

Accounts payable and accrued liabilities

 

 

188,439

 

 

 

173,458

 

Total liabilities not subject to compromise (1)

 

 

1,176,031

 

 

 

1,358,289

 

 

 

 

 

 

 

 

 

 

Liabilities subject to compromise

 

 

2,591,706

 

 

 

2,551,490

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 9 and Note 12)

 

 

 

 

 

 

 

 

Redeemable common units

 

 

(543

)

 

 

(265

)

Partners' capital:

 

 

 

 

 

 

 

 

Preferred units

 

 

565,212

 

 

 

565,212

 

Common units:

 

 

 

 

 

 

 

 

General partner

 

 

(697

)

 

 

(339

)

Limited partners

 

 

(68,582

)

 

 

(33,371

)

Accumulated other comprehensive income (loss)

 

 

(6

)

 

 

18

 

Total partners' capital

 

 

495,927

 

 

 

531,520

 

Noncontrolling interests

 

 

1,436

 

 

 

3,058

 

Total capital

 

 

497,363

 

 

 

534,578

 

 

 

$

4,264,557

 

 

$

4,444,092

 

 

(1)

As of June 30, 2021, includes $263,404 of assets related to consolidated variable interest entities that can only be used to settle obligations of the consolidated variable interest entities and $134,578 of liabilities of consolidated variable interest entities for which creditors do not have recourse to the general credit of the Operating Partnership. See Note 8.

The accompanying notes are an integral part of these condensed consolidated statements.

6


Table of Contents

CBL & Associates Limited Partnership

(Debtors-In-Possession)

Condensed Consolidated Statements of Operations

(In thousands, except per unit data)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

131,316

 

 

$

120,222

 

 

$

259,491

 

 

$

281,395

 

Management, development and leasing fees

 

 

1,449

 

 

 

1,055

 

 

 

3,108

 

 

 

3,147

 

Other

 

 

3,796

 

 

 

2,934

 

 

 

7,146

 

 

 

7,243

 

Total revenues

 

 

136,561

 

 

 

124,211

 

 

 

269,745

 

 

 

291,785

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property operating

 

 

(19,623

)

 

 

(16,906

)

 

 

(41,425

)

 

 

(42,615

)

Depreciation and amortization

 

 

(47,499

)

 

 

(52,663

)

 

 

(95,611

)

 

 

(108,565

)

Real estate taxes

 

 

(15,110

)

 

 

(17,837

)

 

 

(31,661

)

 

 

(36,285

)

Maintenance and repairs

 

 

(8,784

)

 

 

(6,042

)

 

 

(19,565

)

 

 

(17,250

)

General and administrative

 

 

(11,269

)

 

 

(18,727

)

 

 

(23,881

)

 

 

(36,563

)

Loss on impairment

 

 

 

 

 

(13,274

)

 

 

(57,182

)

 

 

(146,918

)

Litigation settlement

 

 

(57

)

 

 

 

 

 

801

 

 

 

 

Other

 

 

(287

)

 

 

(242

)

 

 

(287

)

 

 

(400

)

Total expenses

 

 

(102,629

)

 

 

(125,691

)

 

 

(268,811

)

 

 

(388,596

)

OTHER INCOME (EXPENSES):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and other income

 

 

752

 

 

 

891

 

 

 

1,528

 

 

 

3,288

 

Interest expense (unrecognized contractual interest expense was $45,279 and $90,043 for the three and six months ended June 30, 2021, respectively)

 

 

(22,299

)

 

 

(52,631

)

 

 

(46,429

)

 

 

(99,623

)

Gain on deconsolidation

 

 

 

 

 

 

 

 

55,131

 

 

 

 

Gain (loss) on sales of real estate assets

 

 

107

 

 

 

2,623

 

 

 

(192

)

 

 

2,763

 

Reorganization items

 

 

(17,073

)

 

 

 

 

 

(40,006

)

 

 

 

Income tax provision

 

 

(705

)

 

 

(16,117

)

 

 

(1,456

)

 

 

(16,643

)

Equity in losses of unconsolidated affiliates

 

 

(4,275

)

 

 

(6,079

)

 

 

(7,351

)

 

 

(5,061

)

Total other expenses

 

 

(43,493

)

 

 

(71,313

)

 

 

(38,775

)

 

 

(115,276

)

Net loss

 

 

(9,561

)

 

 

(72,793

)

 

 

(37,841

)

 

 

(212,087

)

Net loss attributable to noncontrolling interests

 

 

449

 

 

 

487

 

 

 

1,268

 

 

 

694

 

Net loss attributable to the Operating Partnership

 

 

(9,112

)

 

 

(72,306

)

 

 

(36,573

)

 

 

(211,393

)

Distributions to preferred unitholders undeclared

 

 

 

 

 

(11,223

)

 

 

 

 

 

(22,446

)

Net loss attributable to common unitholders

 

$

(9,112

)

 

$

(83,529

)

 

$

(36,573

)

 

$

(233,839

)

Basic and diluted per unit data attributable to common unitholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common unitholders

 

$

(0.05

)

 

$

(0.41

)

 

$

(0.18

)

 

$

(1.16

)

Weighted-average common and potential dilutive common units outstanding

 

 

201,576

 

 

 

201,702

 

 

 

201,601

 

 

 

201,480

 

 

 

The accompanying notes are an integral part of these condensed consolidated statements.

7


Table of Contents

CBL & Associates Limited Partnership

(Debtors-In-Possession)

Condensed Consolidated Statements of Comprehensive Loss

(In thousands, except per unit data)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss

 

$

(9,561

)

 

$

(72,793

)

 

$

(37,841

)

 

$

(212,087

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available-for-sale securities

 

 

(27

)

 

 

(64

)

 

 

(24

)

 

 

(42

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

 

(9,588

)

 

 

(72,857

)

 

 

(37,865

)

 

 

(212,129

)

Comprehensive loss attributable to noncontrolling interests

 

 

449

 

 

 

487

 

 

 

1,268

 

 

 

694

 

Comprehensive loss attributable to the Operating Partnership:

 

$

(9,139

)

 

$

(72,370

)

 

$

(36,597

)

 

$

(211,435

)

 

The accompanying notes are an integral part of these condensed consolidated statements.

8


Table of Contents

CBL & Associates Limited Partnership

(Debtors-In-Possession)

Condensed Consolidated Statements of Capital

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

Number of

 

 

 

 

 

 

Common Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

Common

Units

 

 

Preferred

Units

 

 

Common

Units

 

 

Preferred

Units

 

 

General

Partner

 

 

Limited

Partners

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Total

Partner's

Capital

 

 

Noncontrolling

Interests

 

 

Total

Capital

 

Balance, December 31, 2019

 

$

2,160

 

 

 

25,050

 

 

 

200,189

 

 

$

565,212

 

 

$

2,765

 

 

$

270,216

 

 

$

 

 

$

838,193

 

 

$

23,961

 

 

$

862,154

 

Net loss

 

 

(1,158

)

 

 

 

 

 

 

 

 

 

 

 

(1,406

)

 

 

(136,523

)

 

 

 

 

 

(137,929

)

 

 

(207

)

 

 

(138,136

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22

 

 

 

22

 

 

 

 

 

 

22

 

Issuances of common units

 

 

 

 

 

 

 

 

1,633

 

 

 

 

 

 

 

 

 

536

 

 

 

 

 

 

536

 

 

 

 

 

 

536

 

Cancellation of restricted common units

 

 

 

 

 

 

 

 

(116

)

 

 

 

 

 

 

 

 

(97

)

 

 

 

 

 

(97

)

 

 

 

 

 

(97

)

Performance stock units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

386

 

 

 

 

 

 

390

 

 

 

 

 

 

390

 

Amortization of deferred compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18

 

 

 

615

 

 

 

 

 

 

633

 

 

 

 

 

 

633

 

Allocation of partners' capital

 

 

60

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(64

)

 

 

 

 

 

(65

)

 

 

 

 

 

(65

)

Adjustment to record redeemable interests at redemption value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(731

)

 

 

(731

)

Contributions from noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

668

 

 

 

668

 

Balance, March 31, 2020

 

 

1,062

 

 

 

25,050

 

 

 

201,706

 

 

 

565,212

 

 

 

1,372

 

 

 

135,077

 

 

 

22

 

 

 

701,683

 

 

 

23,691

 

 

 

725,374

 

Net loss

 

 

(654

)

 

 

 

 

 

 

 

 

 

 

 

(728

)

 

 

(70,924

)

 

 

 

 

 

(71,652

)

 

 

(487

)

 

 

(72,139

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(64

)

 

 

(64

)

 

 

 

 

 

(64

)

Issuances of common units

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Cancellation of restricted common units

 

 

 

 

 

 

 

 

(21

)

 

 

 

 

 

 

 

 

(14

)

 

 

 

 

 

(14

)

 

 

 

 

 

(14

)

Performance stock units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

375

 

 

 

 

 

 

379

 

 

 

 

 

 

379

 

Amortization of deferred compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

 

 

373

 

 

 

 

 

 

384

 

 

 

 

 

 

384

 

Allocation of partners' capital

 

 

117

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(117

)

 

 

 

 

 

(118

)

 

 

 

 

 

(118

)

Contributions from noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25

 

 

 

25

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(94

)

 

 

(94

)

Balance, June 30, 2020

 

$

525

 

 

 

25,050

 

 

 

201,691

 

 

$

565,212

 

 

$

658

 

 

$

64,772

 

 

$

(42

)

 

$

630,600

 

 

$

23,135

 

 

$

653,735

 

 

 

 

9


Table of Contents

 

CBL & Associates Limited Partnership

(Debtors-In-Possession)

Condensed Consolidated Statements of Capital

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

Number of

 

 

 

 

 

 

Common Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

Common

Units

 

 

Preferred

Units

 

 

Common

Units

 

 

Preferred

Units

 

 

General

Partner

 

 

Limited

Partners

 

 

Accumulated Other Comprehensive Income (Loss)

 

 

Total Partner's

Capital

 

 

Noncontrolling

Interests

 

 

Total

Capital

 

Balance, December 31, 2020

 

$

(265

)

 

 

25,050

 

 

 

201,688

 

 

$

565,212

 

 

$

(339

)

 

$

(33,371

)

 

$

18

 

 

$

531,520

 

 

$

3,058

 

 

$

534,578

 

Net loss

 

 

(213

)

 

 

 

 

 

 

 

 

 

 

 

(277

)

 

 

(26,971

)

 

 

 

 

 

(27,248

)

 

 

(819

)

 

 

(28,067

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

3

 

 

 

 

 

 

3

 

Cancellation of restricted common units

 

 

 

 

 

 

 

 

(111

)

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Amortization of deferred compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

300

 

 

 

 

 

 

303

 

 

 

 

 

 

303

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

(11

)

Performance stock units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

87

 

 

 

 

 

 

91

 

 

 

 

 

 

91

 

Balance, March 31, 2021

 

 

(478

)

 

 

25,050

 

 

 

201,577

 

 

 

565,212

 

 

 

(609

)

 

 

(59,956

)

 

 

21

 

 

 

504,668

 

 

 

2,228

 

 

 

506,896

 

Net loss

 

 

(70

)

 

 

 

 

 

 

 

 

 

 

 

(92

)

 

 

(8,950

)

 

 

 

 

 

(9,042

)

 

 

(449

)

 

 

(9,491

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27

)

 

 

(27

)

 

 

 

 

 

(27

)

Cancellation of restricted common units

 

 

 

 

 

 

 

 

(14

)

 

 

 

 

 

 

 

 

(17

)

 

 

 

 

 

(17

)

 

 

 

 

 

(17

)

Allocation of partners' capital

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

Amortization of deferred compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

254

 

 

 

 

 

 

257

 

 

 

 

 

 

257

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(343

)

 

 

(343

)

Performance stock units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

94

 

 

 

 

 

 

95

 

 

 

 

 

 

95

 

Balance, June 30, 2021

 

$

(543

)

 

 

25,050

 

 

 

201,563

 

 

$

565,212

 

 

$

(697

)

 

$

(68,582

)

 

$

(6

)

 

$

495,927

 

 

$

1,436

 

 

$

497,363

 

The accompanying notes are an integral part of these condensed consolidated statements.

 

 

 

10


Table of Contents

 

CBL & Associates Limited Partnership

(Debtors-In-Possession)

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(37,841

)

 

$

(212,087

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

95,611

 

 

 

108,565

 

Net amortization of deferred financing costs, premiums on available-for-sale securities and debt premiums and discounts

 

 

1,496

 

 

 

4,595

 

Net amortization of intangible lease assets and liabilities

 

 

385

 

 

 

(753

)

(Gain) loss on sales of real estate assets

 

 

192

 

 

 

(2,763

)

Gain on insurance proceeds

 

 

 

 

 

(511

)

Gain on deconsolidation

 

 

(55,131

)

 

 

 

Write-off of development projects

 

 

287

 

 

 

400

 

Share-based compensation expense

 

 

739

 

 

 

2,293

 

Loss on impairment

 

 

57,182

 

 

 

146,918

 

Equity in losses of unconsolidated affiliates

 

 

7,351

 

 

 

5,061

 

Distributions of earnings from unconsolidated affiliates

 

 

6,676

 

 

 

3,797

 

Change in estimate of uncollectable revenues

 

 

15,525

 

 

 

41,955

 

Change in deferred tax accounts

 

 

 

 

 

15,596

 

Changes in:

 

 

 

 

 

 

 

 

Tenant and other receivables

 

 

19,352

 

 

 

(87,298

)

Other assets

 

 

(2,111

)

 

 

753

 

Accounts payable and accrued liabilities

 

 

20,785

 

 

 

11,845

 

Net cash provided by operating activities

 

 

130,498

 

 

 

38,366

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Additions to real estate assets

 

 

(13,836

)

 

 

(36,413

)

Proceeds from sales of real estate assets

 

 

5,612

 

 

 

3,579

 

Purchases of available-for-sale securities

 

 

(319,887

)

 

 

(153,193

)

Redemptions of available-for-sale securities

 

 

368,380

 

 

 

 

Proceeds from insurance

 

 

 

 

 

600

 

Payments received on mortgage and other notes receivable

 

 

425

 

 

 

703

 

Additional investments in and advances to unconsolidated affiliates

 

 

124

 

 

 

(10,990

)

Distributions in excess of equity in earnings of unconsolidated affiliates

 

 

4,790

 

 

 

5,255

 

Changes in other assets

 

 

(1,420

)

 

 

(920

)

Net cash provided by (used in) investing activities

 

 

44,188

 

 

 

(191,379

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from mortgage and other indebtedness

 

 

 

 

 

365,000

 

Principal payments on mortgage and other indebtedness

 

 

(23,854

)

 

 

(120,467

)

Additions to deferred financing costs

 

 

(1

)

 

 

(240

)

Proceeds from issuances of common units

 

 

 

 

 

5

 

Contributions from noncontrolling interests

 

 

 

 

 

693

 

Payment of tax withholdings for restricted stock awards

 

 

(11

)

 

 

(87

)

Distributions to noncontrolling interests

 

 

(354

)

 

 

(825

)

Net cash provided by (used in) financing activities

 

 

(24,220

)

 

 

244,079

 

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

150,466

 

 

 

91,066

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

 

 

121,713

 

 

 

59,054

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

 

$

272,179

 

 

$

150,120

 

Reconciliation from condensed consolidated statements of cash flows to

   condensed consolidated balance sheets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

143,866

 

 

$

123,380

 

Restricted cash (1):

 

 

 

 

 

 

 

 

Restricted cash

 

 

100,626

 

 

 

249

 

Mortgage escrows

 

 

27,687

 

 

 

26,491

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

 

$

272,179

 

 

$

150,120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION:

 

 

 

 

 

 

 

 

Cash paid for interest, net of amounts capitalized

 

$

26,755

 

 

$

51,703

 

Cash paid for reorganization items

 

$

35,602

 

 

$

 

(1)

Included in intangible lease assets and other assets in the condensed consolidated balance sheets.

The accompanying notes are an integral part of these condensed consolidated statements.

 

11


Table of Contents

 

CBL & Associates Properties, Inc.

CBL & Associates Limited Partnership

(Debtors-In-Possession)

Notes to Unaudited Condensed Consolidated Financial Statements

(Dollars in thousands, except per share and per unit data)

Note 1 – Organization and Basis of Presentation

Unless stated otherwise or the context otherwise requires, references to the "Company" mean CBL & Associates Properties, Inc. and its subsidiaries. References to the "Operating Partnership" mean CBL & Associates Limited Partnership and its subsidiaries.

CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“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. Its properties are located in 24 states, but are primarily in the southeastern and midwestern United States.

CBL conducts substantially all its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). 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.

As of June 30, 2021, the Operating Partnership owned interests in the following properties:

 

 

 

 

 

 

 

All Other Properties

 

 

 

 

 

 

 

Malls (1)

 

 

Associated

Centers

 

 

Community

Centers

 

 

Office

Buildings

and Other

 

 

Total

 

Consolidated Properties (2)

 

 

49

 

 

 

20

 

 

 

1

 

 

 

4

 

 

 

74

 

Unconsolidated Properties (3)

 

 

12

 

 

 

3

 

 

 

5

 

 

 

4

 

 

 

24

 

Total

 

 

61

 

 

 

23

 

 

 

6

 

 

 

8

 

 

 

98

 

 

(1)

Category consists of regional malls, open-air centers and outlet centers (including one mixed-use center).

(2)

CBL's 2 corporate office buildings are included within the Office Buildings and Other category.

(3)

The Operating Partnership accounts for these investments using the equity method because one or more of the other partners have substantive participating rights.

The Malls and All Other Properties ("Associated Centers, Community Centers, Office Buildings and Other") are collectively referred to as the “Properties” and individually as a “Property.”

CBL is the 100% owner of 2 qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. At June 30, 2021, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.0% general partner interest in the Operating Partnership and CBL Holdings II, Inc. owned a 96.5% limited partner interest for a combined interest held by CBL of 97.5%.

Historically, the noncontrolling interest in the Operating Partnership has been held by CBL & Associates, Inc., its shareholders and affiliates and certain senior officers of the Company (collectively "CBL's Predecessor"), all of which contributed their interests in certain real estate properties and joint ventures to the Operating Partnership in exchange for a limited partner interest when the Operating Partnership was formed in November 1993, and by various third parties. At June 30, 2021, CBL’s Predecessor no longer owned any limited partner interest and third parties owned a 2.5% limited partner interest in the Operating Partnership. CBL's Predecessor owned 20.0 million shares of CBL’s common stock at June 30, 2021, for a total effective interest of 10.0% in the Operating Partnership.

As used herein, the term "Company" includes CBL & Associates Properties, Inc. and its subsidiaries, including CBL & Associates Limited Partnership and its subsidiaries, unless the context indicates otherwise. The term "Operating Partnership" refers to CBL & Associates Limited Partnership and its subsidiaries.

The Operating Partnership conducts the Company's property management and development activities through its wholly owned subsidiary, CBL & Associates Management, Inc. (the “Management Company"), to comply with certain requirements of the Internal Revenue Code.

12


Table of Contents

Bankruptcy Accounting

The condensed consolidated financial statements included herein have been prepared as if the Company were a going concern and in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 852 – Reorganizations (“ASC 852”). See Note 2 for additional details regarding the bankruptcy. As a result, the Company has segregated prepetition unsecured or under secured liabilities and obligations whose treatment and satisfaction are dependent on the outcome of the Chapter 11 proceedings and have classified these items as “Liabilities subject to compromise” on the Company’s condensed consolidated balance sheets. In addition, the Company has classified all expenses that were incurred as a result of the Chapter 11 proceedings since filing as “Reorganization items” in the Company’s condensed consolidated statements of operations. In addition to expenses, reorganization items can include realized gains or losses.

COVID-19

The COVID-19 pandemic has had, and likely will continue to have, repercussions across local, national and global economies and financial markets. COVID-19 has impacted all states where the Company’s tenants operate their businesses or where the Company’s properties are located and measures taken to prevent or remediate COVID-19, including “shelter-in place” or “stay-at-home” orders or other quarantine mandates issued by local, state or federal authorities, have had an adverse effect on its business and the businesses of its tenants. The full extent of the adverse impact on, among other things, the Company’s results of operations, liquidity (including its ability to access capital markets), the possibility of future impairments of long-lived assets or its investments in unconsolidated joint ventures, its compliance with debt covenants, its ability to renew and re-lease its leased space, the outlook for the retail environment, potential bankruptcies or other store closings and its ability to develop, acquire, dispose or lease properties, is unknown and will depend on future developments, which are highly uncertain and cannot be predicted. While the majority of the most restrictive mandates have been lifted, state and local governments and other authorities are in varying stages of lifting or modifying some of the measures used to mitigate or control the spread of the virus. Even though vaccines have started to be administered, the COVID-19 pandemic could worsen at any time, which could cause new or more restrictive measures to be implemented to prevent the spread of the virus. In fact, certain markets have implemented new restrictions as a result of break-through cases and the increased spread of variants of COVID-19, including the Delta variant. Tenants and customers have gradually adapted to current conditions with services such as curbside pickup and increased consumer risk-tolerance, but there is no guarantee that retail will return to levels seen prior to the pandemic. The Company has experienced, and expects to continue to experience, a material adverse impact on its revenues, results of operations, and cash flows throughout 2021. The situation is unpredictable and additional impacts to the business may arise that the Company is not aware of currently.

Note 2 - Chapter 11 Cases and Ability to Continue as a Going Concern

Voluntary Reorganization under Chapter 11

On August 18, 2020, the Company entered into a Restructuring Support Agreement, (the “Original 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”) representing in excess of 62%, including joining noteholders pursuant to joinder agreements, of the aggregate principal amount of the $450,000 of senior unsecured notes issued by the Operating Partnership in November 2013 that bear interest at 5.25% and mature on December 1, 2023 (the “2023 Notes”), the $300,000 of senior unsecured notes issued by the Operating Partnership in October 2014 that bear interest at 4.60% and mature on October 15, 2024 (the “2024 Notes”) and the $625,000 of senior unsecured notes issued by the Operating Partnership in December 2016 and September 2017 that bear interest at 5.95% and mature on December 15, 2026 (the “2026 Notes” and, collectively with the 2023 Notes and 2024 Notes, the "Notes").

On October 28, 2020, the Operating Partnership was notified by the administrative agent and lenders that they elected to exercise their rights pursuant to the terms of the secured credit facility to (i) require that rents payable by tenants at the properties that are collateral to the secured credit facility be paid directly to the administrative agent and (ii) exercise all voting rights and other ownership rights in respect of all the equity interests in the subsidiaries of the Operating Partnership that are guarantors of the secured credit facility.

Beginning on November 1, 2020 (the “Commencement Date”), CBL and the Operating Partnership, together with certain of its direct and indirect subsidiaries (collectively, the “Debtors”), filed voluntary petitions (the “Chapter 11 Cases”) under chapter 11 of title 11 (“Chapter 11”) of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Debtors are authorized to continue to operate their businesses and manage their properties as debtors-in-possession pursuant to the Bankruptcy Code. 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

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The filing of the Chapter 11 Cases constituted an event of default that results in the automatic acceleration of certain monetary obligations to be immediately due and payable with respect to the secured credit facility and the senior unsecured notes. On November 2, 2020, the Company filed an adversary proceeding in the Bankruptcy Court seeking among other things, a temporary restraining order (the “Order”) and for a preliminary injunction to enjoin, pending a determination of the parties’ rights, the administrative agent or any of its officers, agents, servants, attorneys and successors from taking any action to exercise any and all remedies under the terms of the secured credit facility or other agreements as a result of the events of default asserted by the administrative agent, or any other right or remedy that would otherwise accompany the occurrence of an event of default, including without limitation, any rights of acceleration under the terms of the secured credit facility, rights flowing from the notice of acceleration, rights exercised pursuant to the Notice of Exercise or any other rights or remedies properly exercisable solely upon an actual or determined event of default. On November 2, 2020, the Bankruptcy Court granted the Order, and the Bankruptcy Court took up the other pending claims during the adversarial proceeding, which has now been stayed pending the confirmation of the Company’s plan, discussed below.

Following the Commencement Date, the Bankruptcy Court entered certain interim and final orders facilitating the Debtors’ operational transition into Chapter 11. These orders authorized the Debtors to, among other things, pay certain prepetition employee expenses and benefits, use their existing cash management system, maintain and administer customer programs, pay certain critical service providers, honor insurance-related obligations, and pay certain prepetition taxes and related fees on a final basis.

After engaging in negotiations in a Bankruptcy Court-ordered mediation, on March 21, 2021 (the “Agreement Effective Date”), the Company entered into the First Amended and Restated Restructuring Support Agreement (the “Amended RSA”), with the Consenting Noteholders in excess of 69% (including joinders) of the aggregate principal amount of 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 the Original RSA 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.

As required by the Amended RSA, (i) on April 15, 2021, the Company filed an amended Chapter 11 plan of reorganization and accompanying disclosure statement with the Bankruptcy Court; (ii) on May 18, 2021, the Company filed the second amended Chapter 11 plan of reorganization and accompanying disclosure statement, as further amended on May 19, 2021; and (iii) on May 25, 2021, the Company filed the third amended Chapter 11 plan of reorganization and, on August 9, 2021, filed technical modifications thereto (the “Plan”) and accompanying disclosure statement (the “Disclosure Statement”), to implement the restructuring transactions. In addition, on May 26, 2021, the Bankruptcy Court entered an order that among other things, approved the Company’s Disclosure Statement and established dates and deadlines related to solicitation of, voting on, and confirmation of the Plan. The Amended RSA provides that the ongoing litigation between the Company and the lenders of the Company’s secured credit facility (the “Bank Lenders”) arising from the prepetition enforcement actions taken by the Bank Lenders is stayed and is to be dismissed upon the order confirming the Plan becoming a “Final Order” (as defined in the Plan).

On August 11, 2021, following the confirmation hearing, the Bankruptcy Court entered an order confirming the Plan. Pursuant to the Amended RSA, the Company is required to have the Plan become effective no later than November 1, 2021. The Company cannot predict the ultimate outcome of its Chapter 11 Cases at this time. For the duration of the Company’s 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.

Once effective, the Plan provides for the elimination of more than $1,681,900 of debt and preferred obligations, including an aggregate cash payment of $195,000 as noted below, as well as a significant reduction in interest expense. In exchange for their approximately $1,375,000 in principal amount of senior unsecured notes and $133,000 in principal amount of the secured credit facility, Consenting Noteholders, other noteholders, and certain holders of unsecured claims against the Company will receive, in the aggregate, $95,000 in cash, $555,000 of new senior secured notes, of which up to $100,000, 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 (subject to dilution, as set forth in the Plan). Certain Consenting Noteholders will also provide up to $50,000 of new money in exchange for additional convertible secured notes. The transactions outlined in the Plan will be implemented in the Chapter 11 Cases. The Plan provides that the remaining Bank

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Lenders, holding $983,700 in principal amount under the secured credit facility, will receive $100,000 in cash and a new $883,700 secured term loan. Existing common and preferred shareholders are expected to receive up to 11% of common equity in the newly reorganized company.

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 quarterly 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 the Company has 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.

Liquidity and Going Concern Considerations

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.

The filing of the Chapter 11 Cases by the Debtors constituted an event of default that results in the automatic acceleration of certain monetary obligations to be 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 8 and Note 9 for further discussion.

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 the Company’s ability to satisfy its 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 condensed consolidated financial statements are issued. The Company’s ability to continue as a going concern is contingent upon its ability to successfully implement the Plan. The accompanying condensed 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 condensed 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 the Company’s stock and (ii) it 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 7.375% Series D Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”) and the depositary shares each representing a 1/10th fractional share of the Company’s 6.625% Series E Cumulative Redeemable Preferred Stock (“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. The Company has appealed this decision in accordance with NYSE rules, and the appeal is still in process. In the meantime, effective November 3, 2020, the Company’s common stock and the depositary shares representing fractional interests in its 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 the Company’s common stock from the NYSE could negatively impact it by, among other things, reducing the trading liquidity of, and the market price for, its common stock.

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Reorganization Items

Any expenses, gains and losses that are realized or incurred as of or subsequent to November 1, 2020, the Commencement Date, and as a direct result of the Chapter 11 Cases, are recorded in the line item “Reorganization items” in the Company’s condensed consolidated statements of operations. For the three months ended June 30, 2021, the $17,073 of reorganization items consists of $15,480 in professional fees, $1,072 in compensation associated with reorganization efforts and $521 of U.S. Trustee fees. For the six months ended June 30, 2021, the $40,006 of reorganization items consists of $37,709 in professional fees, $1,072 in compensation associated with reorganization efforts and $1,225 of U.S. Trustee fees.

Liabilities Subject to Compromise

As of June 30, 2021 and December 31, 2020, the Company has reclassified $2,591,706 and $2,551,490, respectively, to the line item “Liabilities subject to compromise” in the Company’s condensed consolidated balance sheets. These liabilities are reported at the amounts expected to be allowed as claims by the Bankruptcy Court, although they may be settled for less. As of June 30, 2021, the liabilities subject to compromise consisted of $1,375,000 related to the senior unsecured notes, $675,926 related to the secured line of credit, $438,750 related to the secured term loan, $57,644 in unpaid accrued interest as of the Commencement Date, $39,462 related to the loan secured by The Outlet Shoppes at Laredo, $726 of unpaid accrued interest related to the loan secured by The Outlet Shoppes at Laredo as of May 26, 2021 and $4,198 of prepetition unsecured or under secured liabilities. As of December 31, 2020, the liabilities subject to compromise consisted of $1,375,000 related to the senior unsecured notes, $675,926 related to the secured line of credit, $438,750 related to the secured term loan, $57,644 in unpaid accrued interest as of the Commencement Date and $4,170 of prepetition unsecured or under secured liabilities.

The contractual interest expense on the loan secured by The Outlet Shoppes at Laredo, the senior unsecured notes and secured credit facility is in excess of recorded interest expense by $45,279 and $90,043 for the three and six months ended June 30, 2021, respectively. This excess contractual interest expense is not included as interest expense in the condensed consolidated statements of operations for the three and six months ended June 30, 2021 because the Company discontinued accruing interest on the loan secured by The Outlet Shoppes at Laredo as of May 26, 2021, and the senior unsecured notes and the secured credit facility subsequent to the Commencement Date 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. The Company has not made any interest payments on its senior unsecured notes or its secured credit facility since the Chapter 11 Cases commenced on November 1, 2020 and did not make any interest payments on the loan secured by The Outlet Shoppes at Laredo subsequent to its petition date on May 26, 2021.

Condensed combined financial statement information of the Debtors is as follows:

Condensed Combined Financial Statements – Debtors (Debtors-In-Possession)

Condensed Combined Balance Sheets

 

 

June 30, 2021

 

 

December 31, 2020

 

ASSETS:

 

 

 

 

 

 

 

 

Investment in real estate assets

 

$

4,000,429

 

 

$

4,056,257

 

Accumulated depreciation

 

 

(1,557,473

)

 

 

(1,544,800

)

 

 

 

2,442,956

 

 

 

2,511,457

 

Developments in progress

 

 

14,215

 

 

 

27,853

 

Net investment in real estate assets

 

 

2,457,171

 

 

 

2,539,310

 

Available-for-sale securities - at fair value (amortized cost of $183,496 and $233,053 as of

    June 30, 2021 and December 31, 2020, respectively)

 

 

183,490

 

 

 

233,071

 

Cash and cash equivalents

 

 

131,713

 

 

 

46,346

 

Restricted cash

 

 

88,810

 

 

 

29,834

 

Intercompany due from non-debtor entities

 

 

76,365

 

 

 

76,095

 

Intangible lease assets and other assets

 

 

126,035

 

 

 

140,241

 

Total assets

 

$

3,063,584

 

 

$

3,064,897

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY:

 

 

 

 

 

 

 

 

Other liabilities

 

$

113,173

 

 

$

102,910

 

Intercompany due to non-debtor entities

 

 

5,771

 

 

 

5,062

 

Total liabilities not subject to compromise

 

 

118,944

 

 

 

107,972

 

Liabilities subject to compromise

 

 

2,591,706

 

 

 

2,551,490

 

Shareholders' equity and noncontrolling interests of the Debtors

 

 

352,934

 

 

 

405,435

 

Total liabilities and equity

 

$

3,063,584

 

 

$

3,064,897

 

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Condensed Combined Statements of Operations

 

 

Three Months Ended June 30, 2021

 

 

Six Months Ended June 30, 2021

 

Total revenues

 

$

90,191

 

 

$

178,664

 

Depreciation and amortization

 

 

(34,228

)

 

 

(68,382

)

Loss on impairment

 

 

 

 

 

(57,182

)

Expenses

 

 

(41,448

)

 

 

(86,839

)

Interest and other income

 

 

1,568

 

 

 

3,356

 

Interest expense (unrecognized contractual interest expense was $45,279 and $90,043 for the three and six months ended June 30, 2021, respectively)

 

 

(395

)

 

 

(1,027

)

Reorganization items

 

 

(17,073

)

 

 

(40,006

)

Gain (loss) on sales of real estate assets

 

 

107

 

 

 

(192

)

Income tax provision

 

 

(705

)

 

 

(1,456

)

Net loss

 

$

(1,983

)

 

$

(73,064

)

Condensed Combined Statements of Cash Flows

CASH FLOWS FROM OPERATING ACTIVITIES:

 

Six Months Ended June 30, 2021

 

Net loss

 

$

(73,064

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

Loss on impairment

 

 

57,182

 

Other assets and liabilities, net

 

 

96,277

 

Net cash provided by operating activities

 

 

80,395

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Purchases of available-for-sale securities

 

 

(319,887

)

Redemptions of available-for-sale securities

 

 

368,380

 

Changes in other assets

 

 

(5,437

)

Net cash provided by investing activities

 

 

43,056

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Net distributions from non-Debtor subsidiaries

 

 

20,845

 

Other financing activities

 

 

47

 

Net cash provided by financing activities

 

 

20,892

 

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

144,343

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

 

 

76,180

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

 

$

220,523

 

Reconciliation from condensed combined statement of cash flows to

   condensed combined balance sheet:

 

 

 

 

Cash and cash equivalents

 

$

131,713

 

Restricted cash

 

 

88,810

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

 

$

220,523

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION

 

 

 

 

Cash paid for reorganization items

 

$

35,602

 

 

Note 3 – Summary of Significant Accounting Policies

Accounting Guidance Not Yet Adopted

 

Description

 

Expected

Adoption Date &

Application

Method

 

Financial Statement Effect and Other Information

ASU 2020-04, Reference Rate Reform

 

 

On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or other reference rates expected to be discontinued because of reference rate reform. This ASU is effective as of March 12, 2020 through December 31, 2022. The Company has not adopted any of the optional expedients or exceptions as of June 30, 2021, but will continue to evaluate the possible adoption of any such expedients or exceptions during the effective period to determine the impact on its condensed consolidated financial statements.

 

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Accounts Receivable

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.

The duration of the COVID-19 pandemic and its impact on the Company’s tenants’ ability to pay rents has caused uncertainty in the Company’s ongoing ability to collect rents when due. Considering the potential impact of these uncertainties, management’s collection assessment also took into consideration the type of retailer, billing disputes, lease negotiation status and executed deferral or abatement agreements, as well as recent rent collection experience and tenant bankruptcies based on the best information available to management at the time of evaluation. For the three months ended June 30, 2021 and 2020, revenues were reduced by $6,704 and $36,912, respectively, associated with uncollectable revenues, which includes the write-off of $2,623 and $1,088, respectively, for straight line rent receivables. For the six months ended June 30, 2021 and 2020, revenues were reduced by $15,525 and $40,692, respectively, associated with uncollectable revenues, which includes the write-off of $4,302 and $2,557, respectively, for straight line rent receivables.

Carrying Value of Long-Lived Assets and Investment in Unconsolidated Affiliates

The Company evaluates its real estate assets and investment in unconsolidated affiliates for impairment indicators whenever events or changes in circumstances indicate that the carrying value of any of its long-lived assets or investment in unconsolidated affiliates may not be recoverable. 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 during 2020, 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 market and economic conditions resulting from the COVID-19 pandemic.

As of June 30, 2021, 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 three months ended June 30, 2021, the Company did 0t record any impairment charges. For the six months ended June 30, 2021, the Company recorded impairment charges of $57,182 related to 3 malls. For the three months ended June 30, 2020, the Company recorded an impairment charge of $13,274 related to 1 mall. For the six months ended June 30, 2020, the Company recorded impairment charges of $146,918 related to 3 malls.

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As of June 30, 2021, the Company’s estimates of fair value for each investment are based on a number of assumptions that are subject to economic and market uncertainties including, but not limited to, demand for space, competition for tenants, changes in market rental rates, and operating costs. Future declines in the fair value of the Company’s investments in unconsolidated affiliates, including those resulting from the adverse impact of the COVID-19 pandemic on the real estate assets owned by the unconsolidated affiliates, could result in the recognition of substantial impairment charges on its investments in unconsolidated affiliates to the extent such declines are determined to be other-than-temporary. NaN impairments of investments in unconsolidated affiliates were recorded in the three and six-month periods ended June 30, 2021 and 2020.

Note 4 – Revenues

Revenues

The following table presents the Company's revenues disaggregated by revenue source:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Rental revenues

 

$

131,316

 

 

$

120,222

 

 

$

259,491

 

 

$

281,395

 

Revenues from contracts with customers (ASC 606):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expense reimbursements (1)

 

 

1,674

 

 

 

2,103

 

 

 

3,830

 

 

 

4,492

 

Management, development and leasing fees (2)

 

 

1,449

 

 

 

1,055

 

 

 

3,108

 

 

 

3,147

 

Marketing revenues (3)

 

 

520

 

 

 

351

 

 

 

821

 

 

 

1,094

 

 

 

 

3,643

 

 

 

3,509

 

 

 

7,759

 

 

 

8,733

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other revenues

 

 

1,602

 

 

 

480

 

 

 

2,495

 

 

 

1,657

 

Total revenues (4)

 

$

136,561

 

 

$

124,211

 

 

$

269,745

 

 

$

291,785

 

(1)

Includes $1,582 in the Malls segment and $92 in the All Other segment for the three months ended June 30, 2021, and includes $2,024 in the Malls segment and $79 in the All Other segment for the three months ended June 30, 2020. Includes $3,651 in the Malls segment and $179 in the All Other segment for the six months ended June 30, 2021, and includes $4,345 in the Malls segment and $147 in the All Other segment for the six months ended June 30, 2020.

(2)

Included in All Other segment.

(3)

Marketing revenues solely relate to the Malls segment for all periods presented.

(4)

Sales taxes are excluded from revenues.

See Note 10 for information on the Company's segments.

Revenues from Contracts with Customers

Outstanding Performance Obligations

The Company has outstanding performance obligations related to certain noncancellable contracts with customers for which it will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of June 30, 2021, the Company expects to recognize these amounts as revenue over the following periods:

Performance obligation

 

Less than 5

years

 

 

5-20 years

 

 

Over 20

years

 

 

Total

 

Fixed operating expense reimbursements

 

$

23,568

 

 

$

46,093

 

 

$

48,128

 

 

$

117,789

 

 

The Company evaluates its performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration, which is based on sales, are constrained.

Note 5 – Leases

The components of rental revenues are as follows:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Fixed lease payments

 

$

69,543

 

 

$

99,150

 

 

$

140,770

 

 

$

236,544

 

Variable lease payments

 

 

61,773

 

 

 

21,072

 

 

 

118,721

 

 

 

44,851

 

Total rental revenues

 

$

131,316

 

 

$

120,222

 

 

$

259,491

 

 

$

281,395

 

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The undiscounted future fixed lease payments to be received under the Company's operating leases as of June 30, 2021, are as follows:

 

Years Ending December 31,

 

Operating Leases

 

2021 (1)

 

$

181,159

 

2022

 

 

322,208

 

2023

 

 

270,898

 

2024

 

 

217,637

 

2025

 

 

167,910

 

2026

 

 

120,955

 

Thereafter

 

 

272,145

 

Total undiscounted lease payments

 

$

1,552,912

 

(1)

Reflects rental payments for the fiscal period July 1, 2021 to December 31, 2021.

Note 6 – Fair Value Measurements

The Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:

Level 1 –

Inputs represent quoted prices in active markets for identical assets and liabilities as of the measurement date.

Level 2 –

Inputs, other than those included in Level 1, represent observable measurements for similar instruments in active markets, or identical or similar instruments in markets that are not active, and observable measurements or market data for instruments with substantially the full term of the asset or liability.

Level 3 –

Inputs represent unobservable measurements, supported by little, if any, market activity, and require considerable assumptions that are significant to the fair value of the asset or liability. Market valuations must often be determined using discounted cash flow methodologies, pricing models or similar techniques based on the Company’s assumptions and best judgment.

The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance.

Fair Value Measurements on a Recurring Basis

The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of mortgage and other notes receivable is a reasonable estimate of fair value. The estimated fair value of mortgage and other indebtedness was $941,440 and $1,091,745 at June 30, 2021 and December 31, 2020, respectively. The estimated fair value of liabilities subject to compromise was $1,890,020 and $1,606,959 at June 30, 2021 and December 31, 2020, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage and other indebtedness using estimated market rates at which similar loans would be made currently.

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Table of Contents

During the three and six months ended June 30, 2021, the Company has continued to reinvest in U.S. Treasury securities using the cash that was drawn on the secured line of credit to preserve liquidity at the beginning of the COVID-19 pandemic. The Company designated the U.S. Treasury securities purchased as available-for-sale (“AFS”). The following table sets forth information regarding the Company’s AFS securities that were measured at fair value for the six months ended June 30, 2021:

AFS Security

 

Amortized

Cost (1)

 

 

Allowance

for credit

losses (2)

 

 

Total unrealized loss

 

 

Fair value as of June 30, 2021

 

U.S. Treasury securities

 

$

183,496

 

 

$

 

 

$

(6

)

 

$

183,490

 

(1)

The U.S. Treasury securities have maturities ranging from July 2021 through September 2021.

(2)

U.S Treasury securities have a long history with no credit losses. Additionally, the Company notes that U.S Treasury securities are explicitly fully guaranteed by a sovereign entity that can print its own currency and that the sovereign entity’s currency is routinely held by central banks and other major financial institutions, is used in international commerce, and commonly viewed as a reserve currency, all of which qualitatively indicate that historical credit loss information should be minimally affected by current conditions and reasonable and supportable forecasts. Therefore, the Company did not record expected credit losses for its U.S Treasury securities for the six months ended June 30, 2021.

Subsequent to June 30, 2021, the Company reinvested proceeds from matured U.S. Treasury securities into additional U.S. Treasury securities. See Note 15 for more information.

During March 2020, the Company purchased U.S. Treasury securities that were scheduled to mature between April 2021 and June 2021. The Company designated these securities as AFS. The fair value of these securities was calculated based on quoted market prices in active markets and are included in the Level 1 fair value hierarchy. The Company believes the market for U.S. Treasury securities is an actively traded market given the high level of daily trading volume. In December 2020, the Company purchased additional U.S Treasury securities. The U.S. Treasury securities purchased in December 2020 matured between January 2021 and March 2021, and the Company subsequently reinvested in additional U.S. Treasury securities. The Company also designated these as AFS. The following table sets forth information regarding the Company’s AFS securities that were measured at fair value for the year ended December 31, 2020:

AFS Security

 

Amortized

Cost

 

 

Allowance

for credit

losses (1)

 

 

Total unrealized gain

 

 

Fair value as of December 31, 2020

 

U.S. Treasury securities

 

$

233,053

 

 

$

 

 

$

18

 

 

$

233,071

 

(1)

U.S Treasury securities have a long history with no credit losses. Additionally, the Company notes that U.S Treasury securities are explicitly fully guaranteed by a sovereign entity that can print its own currency and that the sovereign entity’s currency is routinely held by central banks and other major financial institutions, is used in international commerce, and commonly viewed as a reserve currency, all of which qualitatively indicate that historical credit loss information should be minimally affected by current conditions and reasonable and supportable forecasts. Therefore, the Company did not record expected credit losses for its U.S Treasury securities for the year ended December 31, 2020.

Fair Value Measurements on a Nonrecurring Basis

The Company measures the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company’s evaluation of the recoverability of long-lived assets involves the comparison of undiscounted future cash flows expected to be generated by each property over the Company’s expected remaining holding period to the respective carrying amount. The determination of whether the carrying value is recoverable also requires management to make estimates related to probability weighted scenarios impacting undiscounted cash flow models. The Company considers both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each Property such as NOI, occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the Property and tenant mix. The quantitative and qualitative factors impact the selection of the terminal capitalization rate which is used in both an undiscounted and discounted cash flow model and the discount rate used in a discounted cash flow model. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Company classifies such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. See below for a description of the estimates and assumptions the Company used in its impairment analysis. See Note 3 for additional information describing the Company's impairment review process.

Long-lived Assets Measured at Fair Value in 2021

The following table sets forth information regarding the Company's assets that are measured at fair value on a nonrecurring basis and related impairment charges for the six months ended June 30, 2021:

 

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Fair Value Measurements at Reporting Date Using

 

 

 

 

 

 

 

Total

 

 

Quoted Prices in

Active Markets

for Identical

Assets (Level 1)

 

 

Significant

Other

Observable

Inputs (Level 2)

 

 

Significant

Unobservable

Inputs (Level 3)

 

 

Total Loss

on Impairment

 

2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-lived assets

 

$

38,500

 

 

$

 

 

$

 

 

$

38,500

 

 

$

57,182

 

 

During the six months ended June 30, 2021, the Company recognized impairments of real estate of $57,182 related to 3 malls.

 

Impairment

Date

 

Property

 

Location

 

Segment

Classification

 

Loss on

Impairment

 

 

Fair

Value

 

 

March

 

Eastland Mall (1)

 

Bloomington, IL

 

Malls

 

$

13,243

 

 

$

10,700

 

 

March

 

Old Hickory Mall (2)

 

Jackson, TN

 

Malls

 

 

20,149

 

 

 

12,400

 

 

March

 

Stroud Mall (3)

 

Stroudsburg, PA

 

Malls

 

 

23,790

 

 

 

15,400

 

 

 

 

 

 

 

 

 

 

$

57,182

 

 

$

38,500

 

 

(1)

In accordance with the Company's quarterly impairment process, the Company wrote down the book value of the mall to its estimated fair value of $10,700. The mall had experienced a decline in cash flows due to store closures and rent reductions. Management determined the fair value of Eastland Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of nine years, with a sale at the end of the holding period, a capitalization rate of 14.0% and a discount rate of 15.0%.

(2)

In accordance with the Company's quarterly impairment process, the Company wrote down the book value of the mall to its estimated fair value of $12,400. The mall had experienced a decline in cash flows due to store closures and rent reductions. Management determined the fair value of Old Hickory Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of nine years, with a sale at the end of the holding period, a capitalization rate of 13.0% and a discount rate of 14.0%.

(3)

In accordance with the Company's quarterly impairment process, the Company wrote down the book value of the mall to its estimated fair value of $15,400. The mall had experienced a decline in cash flows due to store closures and rent reductions. Management determined the fair value of Stroud Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of nine years, with a sale at the end of the holding period, a capitalization rate of 11.75% and a discount rate of 12.5%.

During the six months ended June 30, 2021, the Company adjusted the combined negative equity in Asheville Mall and Park Plaza to 0 upon deconsolidation, which represents the estimated fair values of the Company’s investments in these properties. See Note 8 for additional information.

Long-lived Assets Measured at Fair Value in 2020

The following table sets forth information regarding the Company's assets that were measured at fair value on a nonrecurring basis and related impairment charges for the six months ended June 30, 2020:

 

 

 

 

 

 

 

Fair Value Measurements at Reporting Date Using

 

 

 

 

 

 

 

Total

 

 

Quoted Prices in

Active Markets

for Identical

Assets (Level 1)

 

 

Significant

Other

Observable

Inputs (Level 2)

 

 

Significant

Unobservable

Inputs (Level 3)

 

 

Total Loss

on Impairment

 

2020:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-lived assets

 

$

166,900

 

 

$

 

 

$

 

 

$

166,900

 

 

$

146,918

 

 

During the six months ended June 30, 2020, the Company recognized impairments of real estate of $146,918 related to 3 malls:

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Table of Contents

 

Impairment

Date

 

Property

 

Location

 

Segment

Classification

 

Loss on

Impairment

 

 

Fair

Value

 

 

March

 

Burnsville Center (1)

 

Burnsville, MN

 

Malls

 

$

26,562

 

 

$

47,300

 

 

March

 

Monroeville Mall (2)

 

Pittsburgh, PA

 

Malls

 

 

107,082

 

 

 

67,000

 

 

June

 

Asheville Mall (3)

 

Asheville, NC

 

Malls

 

 

13,274

 

 

 

52,600

 

 

 

 

 

 

 

 

 

 

$

146,918

 

 

$

166,900

 

 

(1)

In accordance with the Company's quarterly impairment process, the Company wrote down the book value of the mall to its estimated fair value of $47,300. The mall had experienced a decline in cash flows due to store closures and rent reductions. These factors resulted in a reduction of the expected hold period for this asset based on Management’s assessment that there was an increased likelihood that the loan secured by the mall may not be successfully restructured or refinanced. Management determined the fair value of Burnsville Center using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of ten years, with a sale at the end of the holding period, a capitalization rate of 14.5% and a discount rate of 15.5%.

(2)

In accordance with the Company’s quarterly impairment process, the Company wrote down the book value of the mall to its estimated fair value of $67,000. The mall had experienced a decline in cash flows due to store closures and rent reductions. Management determined the fair value of Monroeville Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of ten years, with a sale at the end of the holding period, a capitalization rate of 14.0% and a discount rate of 14.5%.

(3)

In accordance with the Company’s quarterly impairment process, the Company wrote down the book value of the mall to its estimated fair value of $52,600. The mall had experienced a decline in cash flows due to store closures and rent reductions. These factors resulted in a reduction of the expected hold period for this asset based on Management’s assessment that there was an increased likelihood that the loan secured by the mall may not be successfully restructured or refinanced. Management determined the fair value of Asheville Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of ten years, with a sale at the end of the holding period, a capitalization rate of 13.25% and a discount rate of 14.0%.

Note 7 – Dispositions and Held for Sale

Based on its analysis, the Company determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net loss for all periods presented, as applicable.

2020 Dispositions

The Company realized a gain of $2,623 related to the sale of 2 outparcels during the three months ended June 30, 2020; and, realized a gain of $2,763 related to the sale of 3 outparcels during the six months ended June 30, 2020.

Note 8 – Unconsolidated Affiliates and Noncontrolling Interests

Unconsolidated Affiliates

Although the Company had majority ownership of certain joint ventures during 2021 and 2020, it evaluated the investments and concluded that the other partners or owners in these joint ventures had substantive participating rights, such as approvals of:

 

 

the pro forma for the development and construction of the project and any material deviations or modifications thereto;

 

the site plan and any material deviations or modifications thereto;

 

the conceptual design of the project and the initial plans and specifications for the project and any material deviations or modifications thereto;

 

any acquisition/construction loans or any permanent financings/refinancings;

 

the annual operating budgets and any material deviations or modifications thereto;

 

the initial leasing plan and leasing parameters and any material deviations or modifications thereto; and

 

any material acquisitions or dispositions with respect to the project.

As a result of the joint control over these joint ventures, the Company accounts for these investments using the equity method of accounting.

At June 30, 2021, the Company had investments in 31 entities, which are accounted for using the equity method of accounting. The Company's ownership interest in these unconsolidated affiliates ranges from 20% to 100%. Of these entities, 17 are owned in 50/50 joint ventures.

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Table of Contents

2021 Activity - Unconsolidated Affiliates

Ambassador Infrastructure, LLC

The Company reached an agreement with the lender to modify the loan secured by Ambassador Infrastructure. The agreement provides an additional four-year term with a fixed interest rate of 3.0%. The extended loan, maturing in March 2025, had an outstanding balance of $8,250 at June 30, 2021, as $1,110 was paid down in conjunction with the modification. Additionally, the agreement provides a waiver related to the default triggered as a result of the Chapter 11 Cases.

Asheville Mall CBMS, LLC and Park Plaza Mall CBMS, LLC

During the six months ended June 30, 2021, the Company deconsolidated Asheville Mall and Park Plaza as a result of the Company losing control of these properties when each was placed in receivership as part of the foreclosure process. The Company evaluated the loss of control of each property and determined that it was no longer the primary beneficiary of the respective wholly owned subsidiaries that own these properties. As a result, the Company adjusted the combined negative equity in the two entities to 0, which represents the estimated fair value of the Company’s investments in these properties, and recognized a gain on deconsolidation of $55,131.

Continental 425 Fund LLC

Subsequent to June 30, 2021, Continental 425 Fund LLC reached an agreement with the lender to amend to the construction loan secured by Springs at Port Orange. See Note 15 for more information.

Port Orange I, LLC

In March 2021, the Company reached an agreement with the lender to modify the loan secured by The Pavilion at Port Orange. The agreement provides an additional four-year term, with a one-year extension option, for a fully extended maturity date of February 2026. Additionally, the agreement provides forbearance related to the default triggered as a result of the Chapter 11 Cases. This loan had an outstanding balance of $52,448 at June 30, 2021.

West Melbourne I, LLC

In March 2021, the Company reached agreements with the lender to modify the loans secured by Hammock Landing Phases I & II. Each agreement provides an additional four-year term, with a one-year extension option, for a fully extended maturity date of February 2026. Additionally, the agreements provide forbearance related to the default triggered as a result of the Chapter 11 Cases. These loans had a combined outstanding loan balance of $53,810 at June 30, 2021.

Impact of Chapter 11 Proceedings

As described in Note 2, 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. The loans have an aggregate outstanding balance of $685,875 at June 30, 2021.

Condensed Combined Financial Statements - Unconsolidated Affiliates

Condensed combined financial statement information of the unconsolidated affiliates is as follows:

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Table of Contents

 

 

 

June 30,

2021

 

 

December 31,

2020

 

ASSETS:

 

 

 

 

 

 

 

 

Investment in real estate assets

 

$

2,457,025

 

 

$

2,346,124

 

Accumulated depreciation

 

 

(905,055

)

 

 

(862,435

)

 

 

 

1,551,970

 

 

 

1,483,689

 

Developments in progress

 

 

15,222

 

 

 

28,138

 

Net investment in real estate assets

 

 

1,567,192

 

 

 

1,511,827

 

Other assets

 

 

190,859

 

 

 

174,966

 

Total assets

 

$

1,758,051

 

 

$

1,686,793

 

LIABILITIES:

 

 

 

 

 

 

 

 

Mortgage and other indebtedness, net

 

$

1,573,118

 

 

$

1,439,454

 

Other liabilities

 

 

73,164

 

 

 

45,280

 

Total liabilities

 

 

1,646,282

 

 

 

1,484,734

 

OWNERS' EQUITY:

 

 

 

 

 

 

 

 

The Company

 

 

117,267

 

 

 

132,350

 

Other investors

 

 

(5,498

)

 

 

69,709

 

Total owners' equity

 

 

111,769

 

 

 

202,059

 

Total liabilities and owners’ equity

 

$

1,758,051

 

 

$

1,686,793

 

 

 

 

Three Months Ended June 30,

 

 

 

2021

 

 

2020

 

Total revenues

 

$

57,747

 

 

$

46,661

 

Net loss (1)

 

$

(9,698

)

 

$

(6,511

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Total revenues

 

$

116,503

 

 

$

107,175

 

Net loss (1)

 

$

(13,019

)

 

$

(1,468

)

(1)

The Company's pro rata share of net loss is $(4,275) and $(6,079) for the three months ended June 30, 2021 and 2020, respectively; and, $(7,351) and $(5,061) for the six months ended June 30, 2021 and 2020, respectively.

 

Variable Interest Entities

The Operating Partnership and certain of its subsidiaries are deemed to have the characteristics of a VIE primarily because the limited partners of these entities do not collectively possess substantive kick-out or participating rights.

The Company consolidates the Operating Partnership, which is a VIE, for which the Company is the primary beneficiary. The Company, through the Operating Partnership, consolidates all VIEs for which it is the primary beneficiary. Generally, a VIE is a legal entity in which the equity investors do not have the characteristics of a controlling financial interest or the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. A limited partnership is considered a VIE when the majority of the limited partners unrelated to the general partner possess neither the right to remove the general partner without cause, nor certain rights to participate in the decisions that most significantly affect the financial results of the partnership. In determining whether the Company is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Company's investment; the obligation or likelihood for the Company or other investors to provide financial support; and the similarity with and significance to the Company's business activities and the business activities of the other investors.

Consolidated VIEs

As of June 30, 2021, the Company had investments in 12 consolidated VIEs with ownership interests ranging from 50% to 92%.

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Table of Contents

Unconsolidated VIEs

The table below lists the Company's unconsolidated VIEs as of June 30, 2021:

 

Unconsolidated VIEs:

 

Investment in

Real Estate

Joint

Ventures

and

Partnerships

 

 

Maximum

Risk of Loss

 

Ambassador Infrastructure, LLC (1)

 

$

(11

)

 

$

8,250

 

Asheville Mall CBMS, LLC

 

 

 

 

 

 

Atlanta Outlet JV, LLC (1)

 

 

24,537

 

 

 

29,073

 

CBL-T/C, LLC

 

 

64,342

 

 

 

64,342

 

CBL-TRS Joint Venture, LLC

 

 

18,938

 

 

 

18,938

 

Continental 425 Fund LLC

 

 

4,681

 

 

 

4,681

 

EastGate Storage, LLC (1)

 

 

476

 

 

 

3,721

 

El Paso Outlet Center Holding, LLC

 

 

9,126

 

 

 

9,126

 

Fremaux Town Center JV, LLC

 

 

6,306

 

 

 

6,306

 

Hamilton Place Self Storage (1)

 

 

994

 

 

 

4,495

 

Louisville Outlet Shoppes, LLC (1)

 

 

(11,103

)

 

 

8,632

 

Mall of South Carolina L.P.

 

 

(13,863

)

 

 

 

Mall of South Carolina Outparcel L.P.

 

 

(2,143

)

 

 

 

Park Plaza Mall CBMS, LLC

 

 

 

 

 

 

Parkdale Self Storage, LLC (1)

 

 

604

 

 

 

7,104

 

PHG-CBL Lexington, LLC

 

 

35

 

 

 

35

 

Self Storage at Mid Rivers, LLC (1)

 

 

510

 

 

 

3,504

 

Shoppes at Eagle Point, LLC (1)

 

 

17,887

 

 

 

30,627

 

Vision - CBL Hamilton Place, LLC

 

 

3,804

 

 

 

3,804

 

 

 

$

125,120

 

 

$

202,638

 

(1)

The Operating Partnership has guaranteed all or a portion of the debt of each of these VIEs. See Note 12 for more information.

Note 9 – Mortgage and Other Indebtedness, Net

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 the Company's debt. CBL is a limited guarantor of the senior unsecured notes (the "Notes"), as described below, for losses suffered solely by reason of fraud or willful misrepresentation by the Operating Partnership or its affiliates.

The Company also provides a similar limited guarantee of the Operating Partnership's obligations with respect to its secured credit facility and secured term loan as of June 30, 2021.

Debt of the Operating Partnership

Mortgage and other indebtedness, net, consisted of the following:

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

Amount

 

 

Weighted-

Average

Interest

Rate (1)

 

 

Amount

 

 

Weighted-

Average

Interest

Rate (1)

 

Fixed-rate debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-recourse loans on operating Properties

 

$

963,118

 

 

 

5.07

%

 

$

1,120,203

 

 

 

5.12

%

Total fixed-rate debt

 

 

963,118

 

 

 

5.07

%

 

 

1,120,203

 

 

 

5.12

%

Variable-rate debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Recourse loans on operating Properties

 

 

27,461

 

 

 

2.99

%

 

 

68,061

 

 

 

4.69

%

Total variable-rate debt

 

 

27,461

 

 

 

2.99

%

 

 

68,061

 

 

 

4.69

%

Total fixed-rate and variable-rate debt

 

 

990,579

 

 

 

5.01

%

 

 

1,188,264

 

 

 

5.10

%

Unamortized deferred financing costs (2)

 

 

(2,987

)

 

 

 

 

 

 

(3,433

)

 

 

 

 

Total mortgage and other indebtedness, net

 

$

987,592

 

 

 

 

 

 

$

1,184,831

 

 

 

 

 

Mortgage and other indebtedness included in liabilities subject to compromise consisted of the following:

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Table of Contents

 

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

Amount

 

 

Weighted-

Average

Interest

Rate (1)

 

 

Amount

 

 

Weighted-

Average

Interest

Rate (1)

 

Fixed-rate debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Senior unsecured notes due 2023 (3)

 

$

450,000

 

 

 

5.25

%

 

$

450,000

 

 

 

5.25

%

Senior unsecured notes due 2024 (3)

 

 

300,000

 

 

 

4.60

%

 

 

300,000

 

 

 

4.60

%

Senior unsecured notes due 2026 (3)

 

 

625,000

 

 

 

5.95

%

 

 

625,000

 

 

 

5.95

%

Total fixed-rate debt

 

 

1,375,000

 

 

 

5.43

%

 

 

1,375,000

 

 

 

5.43

%

Variable-rate debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured line of credit (4)

 

 

675,926

 

 

 

9.50

%

 

 

675,926

 

 

 

9.50

%

Secured term loan (4)

 

 

438,750

 

 

 

9.50

%

 

 

438,750

 

 

 

9.50

%

Recourse loan on operating Property (5)

 

 

39,462

 

 

 

5.76

%

 

 

 

 

 

 

Total variable-rate debt

 

 

1,154,138

 

 

 

9.37

%

 

 

1,114,676

 

 

 

9.50

%

Total fixed-rate and variable-rate debt

 

 

2,529,138

 

 

 

7.23

%

 

 

2,489,676

 

 

 

7.25

%

Unpaid accrued interest (6)

 

 

58,370

 

 

 

 

 

 

 

57,644

 

 

 

 

 

Prepetition unsecured or under secured liabilities

 

 

4,198

 

 

 

 

 

 

 

4,170

 

 

 

 

 

Total liabilities subject to compromise

 

$

2,591,706

 

 

 

 

 

 

$

2,551,490

 

 

 

 

 

(1)

Weighted-average interest rate excludes amortization of deferred financing costs.

(2)

Unamortized deferred financing costs of $2,624 for certain property-level, non-recourse mortgage loans may be required to be written off in the event a waiver or restructuring of terms cannot be negotiated and the debt is either redeemed or otherwise extinguished.

(3)

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. The outstanding amount of the senior unsecured notes is included in liabilities subject to compromise in the accompanying condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020.

(4)

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 June 30, 2021 and 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. The outstanding amount of the secured credit facility is included in liabilities subject to compromise in the accompanying condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020.

(5)

On May 26, 2021, the subsidiary that owns The Outlet Shoppes at Laredo filed for bankruptcy.

(6)

As of June 30, 2021, represents interest accrued on the loan secured by The Outlet Shoppes at Laredo prior to May 26, 2021, and the secured credit facility and senior unsecured notes prior to the filing of the Chapter 11 Cases. As of December 31, 2020, represents interest accrued on the secured credit facility and senior unsecured notes prior to the filing of the Chapter 11 Cases.

Non-recourse term loans, recourse term loans, the secured line of credit and the secured term loan include loans that are secured by Properties owned by the Company that have a net carrying value of $2,154,326 at June 30, 2021.

Senior Unsecured Notes (1)

 

Description

 

Issued (2)

 

Amount

 

 

Interest

Rate

 

 

Maturity

Date

2023 Notes

 

November 2013

 

$

450,000

 

 

 

5.25

%

 

December 2023

2024 Notes

 

October 2014

 

 

300,000

 

 

 

4.60

%

 

October 2024

2026 Notes

 

December 2016 / September 2017

 

 

625,000

 

 

 

5.95

%

 

December 2026

(1)

In March 2021, the Company entered into an amended and restated Restructuring Support Agreement with its secured credit facility lenders and senior unsecured noteholders that provides for a fully consensual comprehensive restructuring.

(2)

Issued by the Operating Partnership. CBL is a limited guarantor of the Operating Partnership’s obligations under the Notes.

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Senior Secured Credit Facility

The Company has a $1,185,000 senior secured credit facility, which includes a revolving line of credit drawn to its maximum borrowing capacity of $675,926 and a term loan with an outstanding balance of $438,750 at June 30, 2021. As further described in Note 2 and in Financial Covenants and Restrictions below, 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. In March 2020, the Company drew $280,000 on its secured credit facility to increase liquidity and preserve financial flexibility in light of the uncertainty surrounding the impact of the COVID-19 pandemic. As a result of the events of default described under Financial Covenants and Restrictions below, the Operating Partnership cannot borrow any additional amounts under the secured line of credit.

The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional 4 malls, 2 associated centers and 4 mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties.” The terms of the Notes provide that, 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.

See Financial Covenants and Restrictions below and Liquidity and Going Concern Considerations and Voluntary Reorganization under Chapter 11 in Note 2 for information on the event of default resulting from the filing of the Chapter 11 Cases.

Financial Covenants and Restrictions

The agreements for the Notes and senior secured credit facility contain default provisions customary for transactions of this nature (with applicable customary grace periods). Any default in the payment of any recourse indebtedness of the Operating Partnership greater than or equal to $50,000 will constitute an event of default under the Notes and the senior secured credit facility. Additionally, the secured credit facility contains a provision that any default on a payment of non-recourse indebtedness in excess of $150,000 is also a default of the senior secured credit facility.

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.

Certain of the Company’s properties that are pledged as collateral on non-recourse mortgage loans and the secured credit facility are subject to cash management agreements with the lenders, which restrict the cash balances associated with those properties to only be used for debt service, capital items and operating expense obligations.

Loans in Default

As of June 30, 2021, 2 non-recourse loans that are each secured by one of the Company’s malls were in default. The default of the two non-recourse loans occurred prior to the filing of the Chapter 11 Cases. As of June 2021, the lenders under each of these loans accelerated the outstanding amounts due and payable on the loans. The foreclosure process has not yet commenced for EastGate Mall. The Company is in discussions with the lender regarding a restructure of the loan secured by Greenbrier Mall. Management has previously impaired the mall that secures each loan due to a shortened expected hold period resulting from management’s assessment that there is an increased likelihood that the loan secured by each mall may not be successfully restructured or refinanced. The non-recourse loans that are in default at June 30, 2021 are as follows:

Property

 

Location

 

Interest Rate

 

 

Scheduled Maturity Date

 

Loan Amount

 

Greenbrier Mall

 

Chesapeake, VA

 

5.41%

 

 

Dec-19

 

$

61,647

 

EastGate Mall

 

Cincinnati, OH

 

5.83%

 

 

Apr-21

 

 

30,281

 

As described in Note 2, 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. The loans have an aggregate outstanding balance of $817,757 at June 30, 2021. On May 26, 2021, the subsidiary that owns The Outlet Shoppes at Laredo filed for bankruptcy. Subsequent to June 30, 2021, the Company entered into a forbearance agreement with the lender regarding the loan secured by Fayette Mall. See Note 15 for more information.

In conjunction with the deconsolidation of Asheville Mall and Park Plaza, the Company deconsolidated the loan securing each property, which represented $138,926 of previously consolidated debt. See Note 8 for additional information.

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Table of Contents

Scheduled Principal Payments

As of June 30, 2021, the scheduled principal amortization and balloon payments of the Company’s consolidated debt, excluding extensions available at the Company’s option, on all mortgage and other indebtedness, including the secured line of credit, are as follows: 

 

2021 (1)

 

$

97,868

 

2022

 

 

408,410

 

2023

 

 

1,519,979

 

2024

 

 

343,409

 

2025

 

 

37,624

 

2026

 

 

763,533

 

Total (2)

 

 

3,170,823

 

Principal balance of loans with maturity date prior to June 30, 2021 (3)

 

 

348,894

 

Total mortgage and other indebtedness, net

 

$

3,519,717

 

(1)

Reflects scheduled principal amortization and balloon payments for the fiscal period July 1, 2021 through December 31, 2021.

(2)

Includes $2,529,138 of liabilities subject to compromise in the accompanying condensed consolidated balance sheets as of June 30, 2021, 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.

(3)

Represents the aggregate principal balance as of June 30, 2021 of the loans secured by EastGate Mall, Fayette Mall, Hamilton Crossing, Greenbrier Mall, Parkdale Mall & Crossing and The Outlet Shoppes at Laredo, which are in default. The Company is in discussions with the lender regarding the loans secured by these properties. The loan secured by Greenbrier Mall matured in December 2019 and had a balance of $61,647 as of June 30, 2021. The loan secured by Parkdale Mall & Crossing matured in March 2021 and had a balance of $71,278 as of June 30, 2021. The loan secured by EastGate Mall matured in April 2021 and had a balance of $30,281 as of June 30, 2021. The loan secured by Hamilton Crossing matured in April 2021 and had a balance of $8,039 as of June 30, 2021. The loan secured by Fayette Mall matured in May 2021 and had a balance of $138,187 as of June 30, 2021. Subsequent to June 30, 2021, the Company entered into a forbearance agreement with the lender regarding the loan secured by Fayette Mall (see Note 15). The loan secured by The Outlet Shoppes at Laredo matured in May 2021 and had a balance of $39,462 as of June 30, 2021.

Of the $97,868 of scheduled principal payments for the remainder of 2021, $70,507 relates to the maturing principal balance of 2 operating Property loans. The loan secured by Alamance Crossing matured in July 2021 and is currently in default. The Company is in discussions with the lender regarding a loan extension.

The Company’s mortgage and other indebtedness had a weighted-average maturity of 2.6 years as of June 30, 2021 and 3.0 years as of December 31, 2020.

Note 10 – Segment Information

The Company measures performance and allocates resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments.

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Table of Contents

Information on the Company’s segments is presented as follows:

 

Three Months Ended June 30, 2021

 

Malls

 

 

All

Other (1)

 

 

Total

 

Revenues (2)

 

$

125,504

 

 

$

11,057

 

 

$

136,561

 

Property operating expenses (3)

 

 

(41,132

)

 

 

(2,385

)

 

 

(43,517

)

Interest expense

 

 

(21,584

)

 

 

(715

)

 

 

(22,299

)

Gain on sales of real estate assets

 

 

 

 

 

107

 

 

 

107

 

Other expense

 

 

(64

)

 

 

(223

)

 

 

(287

)

Segment profit

 

$

62,724

 

 

$

7,841

 

 

 

70,565

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(47,499

)

General and administrative expense

 

 

 

 

 

 

 

 

 

 

(11,269

)

Litigation settlement

 

 

 

 

 

 

 

 

 

 

(57

)

Interest and other income

 

 

 

 

 

 

 

 

 

 

752

 

Reorganization items

 

 

 

 

 

 

 

 

 

 

(17,073

)

Income tax provision

 

 

 

 

 

 

 

 

 

 

(705

)

Equity in losses of unconsolidated affiliates

 

 

 

 

 

 

 

 

 

 

(4,275

)

Net loss

 

 

 

 

 

 

 

 

 

$

(9,561

)

Capital expenditures (4)

 

$

10,308

 

 

$

1,979

 

 

$

12,287

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020

 

Malls

 

 

All

Other (1)

 

 

Total

 

Revenues (2)

 

$

112,002

 

 

$

12,209

 

 

$

124,211

 

Property operating expenses (3)

 

 

(38,385

)

 

 

(2,400

)

 

 

(40,785

)

Interest expense

 

 

(18,960

)

 

 

(33,671

)

 

 

(52,631

)

Other expense

 

 

 

 

 

(242

)

 

 

(242

)

Gain on sales of real estate assets

 

 

 

 

 

2,623

 

 

 

2,623

 

Segment profit (loss)

 

$

54,657

 

 

$

(21,481

)

 

 

33,176

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(52,663

)

General and administrative expense

 

 

 

 

 

 

 

 

 

 

(18,727

)

Interest and other income

 

 

 

 

 

 

 

 

 

 

891

 

Loss on impairment

 

 

 

 

 

 

 

 

 

 

(13,274

)

Income tax provision

 

 

 

 

 

 

 

 

 

 

(16,117

)

Equity in losses of unconsolidated affiliates

 

 

 

 

 

 

 

 

 

 

(6,079

)

Net loss

 

 

 

 

 

 

 

 

 

$

(72,793

)

Capital expenditures (4)

 

$

9,754

 

 

$

1,377

 

 

$

11,131

 

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Table of Contents

 

 

Six Months Ended June 30, 2021

 

Malls

 

 

All

Other (1)

 

 

Total

 

Revenues (2)

 

$

244,832

 

 

$

24,913

 

 

$

269,745

 

Property operating expenses (3)

 

 

(86,727

)

 

 

(5,924

)

 

 

(92,651

)

Interest expense

 

 

(44,754

)

 

 

(1,675

)

 

 

(46,429

)

Other expense

 

 

(64

)

 

 

(223

)

 

 

(287

)

Loss on sales of real estate assets

 

 

 

 

 

(192

)

 

 

(192

)

Segment profit

 

$

113,287

 

 

$

16,899

 

 

 

130,186

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(95,611

)

General and administrative expense

 

 

 

 

 

 

 

 

 

 

(23,881

)

Litigation settlement

 

 

 

 

 

 

 

 

 

 

801

 

Interest and other income

 

 

 

 

 

 

 

 

 

 

1,528

 

Reorganization items

 

 

 

 

 

 

 

 

 

 

(40,006

)

Loss on impairment

 

 

 

 

 

 

 

 

 

 

(57,182

)

Gain on deconsolidation

 

 

 

 

 

 

 

 

 

 

55,131

 

Income tax provision

 

 

 

 

 

 

 

 

 

 

(1,456

)

Equity in losses of unconsolidated affiliates

 

 

 

 

 

 

 

 

 

 

(7,351

)

Net loss

 

 

 

 

 

 

 

 

 

$

(37,841

)

Capital expenditures (4)

 

$

13,799

 

 

$

2,616

 

 

$

16,415

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2020

 

Malls

 

 

All

Other (1)

 

 

Total

 

Revenues (2)

 

$

265,353

 

 

$

26,432

 

 

$

291,785

 

Property operating expenses (3)

 

 

(90,483

)

 

 

(5,667

)

 

 

(96,150

)

Interest expense

 

 

(37,107

)

 

 

(62,516

)

 

 

(99,623

)

Other expense

 

 

 

 

 

(400

)

 

 

(400

)

Gain (loss) on sales of real estate assets

 

 

(25

)

 

 

2,788

 

 

 

2,763

 

Segment profit (loss)

 

$

137,738

 

 

$

(39,363

)

 

 

98,375

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

(108,565

)

General and administrative expense

 

 

 

 

 

 

 

 

 

 

(36,563

)

Interest and other income

 

 

 

 

 

 

 

 

 

 

3,288

 

Loss on impairment

 

 

 

 

 

 

 

 

 

 

(146,918

)

Income tax provision

 

 

 

 

 

 

 

 

 

 

(16,643

)

Equity in losses of unconsolidated affiliates

 

 

 

 

 

 

 

 

 

 

(5,061

)

Net loss

 

 

 

 

 

 

 

 

 

$

(212,087

)

Capital expenditures (4)

 

$

27,810

 

 

$

3,653

 

 

$

31,463

 

 

Total assets

 

Malls

 

 

All

Other (1)

 

 

Total

 

June 30, 2021

 

$

3,546,596

 

 

$

717,611

 

 

$

4,264,207

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

$

3,702,523

 

 

$

741,217

 

 

$

4,443,740

 

 

(1)

The All Other category includes associated centers, community centers, mortgage and other notes receivable, office buildings, self-storage facilities, corporate-level debt and the Management Company.

(2)

Management, development and leasing fees are included in the All Other category. See Note 4 for information on the Company's revenues disaggregated by revenue source for each of the above segments.

(3)

Property operating expenses include property operating, real estate taxes and maintenance and repairs.

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Table of Contents

 

(4)

Includes additions to and acquisitions of real estate assets and investments in unconsolidated affiliates. Developments in progress are included in the All Other category.

Note 11 – Earnings per Share and Earnings per Unit

Earnings per Share of the Company

Basic earnings per share (“EPS”) is computed by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS assumes the issuance of common stock for all potential dilutive common shares outstanding. The limited partners’ rights to convert their noncontrolling interests in the Operating Partnership into shares of common stock are not dilutive. There were 0 potential dilutive common shares and there were 0 anti-dilutive shares for the three- and six- month periods ended June 30, 2021 and 2020.

Earnings per Unit of the Operating Partnership

Basic earnings per unit (“EPU”) is computed using the two-class method. The two-class method is required when either (i) participating securities or (ii) multiple classes of common stock exists. The Operating Partnership’s special common units, and common units issued upon the conversion or redemption of special common units, meet the definition of participating securities as these units have the contractual right and obligation to share in the Operating Partnership’s net income (loss) and distributions. Under this approach net income (loss) attributable to common unitholders is reduced by the amount of distributions made (declared) to all common unitholders and by the amount of distributions that are required to be made (declared and undeclared) to special common unitholders. Distributed and undistributed earnings is subsequently divided by the weighted-average number of common and special common units outstanding for the period to compute basic EPU for each unit. Undistributed losses are allocated 100 percent to common units, other than common units issued upon the conversion or redemption of special common units. The special common units, and common units issued upon the conversion or redemption of special common units, only participate in undistributed losses in the event of a liquidation. Diluted EPU is computed by considering either the two-class method or the if-converted method, whichever results in more dilution. The if-converted method assumes the issuance of common units for all potential dilutive special common units outstanding. Due to the loss position (negative earnings) of the Operating Partnership for the three and six months ended June 30, 2021 and 2020 all special common units, and common units issued upon the conversion or redemption of special common units, are antidilutive. The calculation of diluted EPU through the if-converted method would reduce the loss per share (as a result of an increase number of shares in the denominator) for the common units. Therefore, in a loss position diluted EPU is equal to basic EPU. There were 0 potential dilutive common units and there were 0 anti-dilutive units other than the special common units, and common units issued upon the conversion or redemption of special common units, outstanding for the three- and six- month periods ended June 30, 2021 and 2020.

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Table of Contents

The following table presents basic and diluted EPU for common and special common units for the three and six months ended June 30, 2021 and 2020.

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

Net Loss Attributable to Common Unitholders

 

$

(9,112

)

 

$

(83,529

)

 

$

(36,573

)

 

$

(233,839

)

Distributions to Common Unitholders - Declared Only

 

 

 

 

 

 

 

 

 

 

 

 

Distributions to Special Common Unitholders - Declared and Undeclared

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units issued on conversion of SCUs

 

 

 

 

 

 

 

 

 

 

 

 

S-SCUs

 

 

 

 

 

(1,143

)

 

 

 

 

 

(2,286

)

L-SCUs

 

 

 

 

 

 

 

 

 

 

 

(433

)

K-SCUs

 

 

 

 

 

(844

)

 

 

 

 

 

(1,687

)

Total Undistributed Loss Available to Common and Special Common Unitholders

 

$

(9,112

)

 

$

(85,516

)

 

$

(36,573

)

 

$

(238,245

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributed Earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units issued on conversion of SCUs

 

 

 

 

 

 

 

 

 

 

 

 

S-SCUs

 

 

 

 

 

1,143

 

 

 

 

 

 

2,286

 

L-SCUs

 

 

 

 

 

433

 

 

 

 

 

 

433

 

K-SCUs

 

 

 

 

 

844

 

 

 

 

 

 

1,687

 

Common Units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Undistributed Loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units issued on conversion of SCUs

 

$

 

 

$

 

 

$

 

 

$

 

S-SCUs

 

 

 

 

 

 

 

 

 

 

 

 

L-SCUs

 

 

 

 

 

 

 

 

 

 

 

 

K-SCUs

 

 

 

 

 

 

 

 

 

 

 

 

Common Units

 

 

(9,112

)

 

 

(85,513

)

 

 

(36,573

)

 

 

(238,243

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units issued on conversion of SCUs

 

 

936

 

 

 

1,697

 

 

 

936

 

 

 

1,697

 

S-SCUs

 

 

1,561

 

 

 

1,561

 

 

 

1,561

 

 

 

1,561

 

L-SCUs

 

 

572

 

 

 

572

 

 

 

572

 

 

 

572

 

K-SCUs

 

 

869

 

 

 

1,137

 

 

 

869

 

 

 

1,137

 

Common Units

 

 

197,624

 

 

 

196,736

 

 

 

197,639

 

 

 

196,513

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic EPU:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units issued on conversion of SCUs

 

$

 

 

$

 

 

$

 

 

$

 

S-SCUs

 

 

 

 

 

0.73

 

 

 

 

 

 

1.46

 

L-SCUs

 

 

 

 

 

0.76

 

 

 

 

 

 

0.76

 

K-SCUs

 

 

 

 

 

0.74

 

 

 

 

 

 

1.48

 

Common Units

 

 

(0.05

)

 

 

(0.43

)

 

 

(0.18

)

 

 

(1.21

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Basic EPU

 

$

(0.05

)

 

$

(0.41

)

 

$

(0.18

)

 

$

(1.16

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted EPU:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common units issued on conversion of SCUs

 

$

 

 

$

 

 

$

 

 

$

-

 

S-SCUs

 

 

 

 

 

0.73

 

 

 

 

 

 

1.46

 

L-SCUs

 

 

 

 

 

0.76

 

 

 

 

 

 

0.76

 

K-SCUs

 

 

 

 

 

0.74

 

 

 

 

 

 

1.48

 

Common Units

 

 

(0.05

)

 

 

(0.43

)

 

 

(0.18

)

 

 

(1.21

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Diluted EPU

 

$

(0.05

)

 

$

(0.41

)

 

$

(0.18

)

 

$

(1.16

)

 

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For additional information regarding the participation rights and minimum distributions relating to the common and special common units, see Note 10. Shareholders’ Equity and Partners’ Capital and Note 11. Redeemable Interests and Noncontrolling Interests of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Pursuant to the terms of the Series L special common units of limited partnership interest, the Series L special common units began receiving distributions equal to those on the common units beginning on June 1, 2020. The undeclared distributions on the preferred units and special common units ceased to cumulate as of the Commencement Date as a result of the Chapter 11 Cases.

Note 12 – Contingencies

Securities Litigation

The Company and certain of its officers and directors were named as defendants in three putative securities class action lawsuits (collectively, the “Securities Class Action Litigation”), each filed in the United States District Court for the Eastern District of Tennessee, on behalf of all persons who purchased or otherwise acquired the Company’s securities during a specified period of time. Those cases were consolidated on July 17, 2019, under the caption In re CBL & Associates Properties, Inc. Securities Litigation, 1:19-cv-00149-JRG-CHS.

The complaints filed in the Securities Class Action Litigation allege 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 during the periods of time specified above. The plaintiffs seek compensatory damages and attorneys’ fees and costs, among other relief, but have not specified the amount of damages sought. The outcome of these legal proceedings cannot be predicted with certainty. A notice of suggestion of bankruptcy was filed by the Company in this litigation on November 9, 2020.

Certain of the Company’s current and former directors and officers were named as defendants in nine shareholder derivative lawsuits (collectively, the “Derivative Litigation”). On June 4, 2019, a shareholder filed a putative derivative complaint captioned Robert Garfield v. Stephen D. Lebovitz et al., 1:19-cv-01038-LPS, in the United States District Court for the District of Delaware (the “Garfield Derivative Action”), purportedly on behalf of the Company against certain of its officers and directors. On June 24, 2019, September 5, 2019 and September 25, 2019, respectively, other shareholders filed three additional putative derivative complaints, each in the United States District Court for the District of Delaware, captioned as follows: Robert Cohen v. Stephen D. Lebovitz et al., 1:19-cv-01185-LPS (the “Cohen Derivative Action”); Travis Lore v. Stephen D. Lebovitz et al., 1:19-cv-01665-LPS (the “Lore Derivative Action”), and City of Gainesville Cons. Police Officers’ and Firefighters Retirement Plan v. Stephen D. Lebovitz et al., 1:19-cv-01800 (the “Gainesville Derivative Action”), each asserting substantially similar claims purportedly on behalf of the Company against similar defendants. The Court consolidated the Garfield Derivative Action and the Cohen Derivative Action on July 17, 2019, under the caption In re CBL & Associates Properties, Inc. Derivative Litigation, 1:19-cv-01038-LPS (the "Consolidated Derivative Action"). On July 25, 2019, the Court stayed proceedings in the Consolidated Derivative Action pending resolution of an eventual motion to dismiss in the Securities Class Action Litigation. On October 14, 2019, the parties to the Gainesville Derivative Action and the Lore Derivative Action filed a joint stipulation and proposed order confirming that each of those cases is subject to the consolidation order previously entered by the Court in the Consolidated Derivative Action and that further proceedings in those cases are stayed pending resolution of an eventual motion to dismiss in the Securities Class Action Litigation. On July 22, 2019, a shareholder filed a putative derivative complaint captioned Shebitz v. Lebovitz et al., 1:19-cv-00213, in the United States District Court for the Eastern District of Tennessee (the “Shebitz Derivative Action”); on January 10, 2020, a shareholder filed a putative derivative complaint captioned Chatman v. Lebovitz, et al., 2020-0011-JTL, in the Delaware Chancery Court (the “Chatman Derivative Action”); on February 12, 2020, a shareholder filed a putative derivative complaint captioned Kurup v. Lebovitz, et al., 2020-0070-JTL, in the Delaware Chancery Court (the “Kurup Derivative Action”); on February 26, 2020, a shareholder filed a putative derivative complaint captioned Kemmer v. Lebovitz, et al., 1:20-cv-00052, in the United States District Court for the Eastern District of Tennessee (the “Kemmer Derivative Action”); and on April 14, 2020, a shareholder filed a putative derivative complaint captioned Hebig v. Lebovitz, et al., 1:19-cv-00149-JRG-CHS, in the United States District Court for the Eastern District of Tennessee (the “Hebig Derivative Action”), each asserting substantially similar claims purportedly on behalf of the Company against similar defendants. The actions pending in Delaware Chancery Court have been consolidated into one case, and likewise, the actions pending in Delaware federal court have been consolidated into one case. The Tennessee actions have not been consolidated. On October 7, 2019, the Court stayed the Shebitz Derivative Action, pending resolution of an eventual motion to dismiss in the related Securities Class Action Litigation; the Company expects the other Derivative Actions to be stayed as well.

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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. The outcome of these legal proceedings cannot be predicted with certainty. A notice of suggestion of bankruptcy was filed by the Company in this litigation on November 9, 2020. On November 12, 2020, the Court in the various Delaware actions entered an order staying these matters in light of the Suggestion of Bankruptcy, as did the Court in the Tennessee actions on December 8, 2020.

The Company's insurance carriers have been placed on notice of these matters.

The Company is currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Company records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Company accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Company discloses the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Company.

Environmental Contingencies

The Company evaluates potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Company believes its maximum potential exposure to loss would not be material to its results of operations or financial condition. The Company has a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place.

Guarantees

The Operating Partnership may guaranty 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 the Operating Partnership's investment in the joint venture. The Operating Partnership may receive a fee from the joint venture for providing the guaranty. Additionally, when the Operating Partnership issues a guaranty, the terms of the joint venture agreement typically provide that the Operating Partnership may receive indemnification from the joint venture partner or have the ability to increase its ownership interest. The guarantees expire upon repayment of the debt, unless noted otherwise.

The following table represents the Operating Partnership's guarantees of unconsolidated affiliates' debt as reflected in the accompanying condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020:

 

 

 

As of June 30, 2021

 

 

Obligation

recorded to reflect

guaranty

 

Unconsolidated Affiliate

 

Company's

Ownership

Interest

 

 

Outstanding

Balance

 

 

Percentage

Guaranteed

by the

Operating

Partnership

 

 

 

Maximum

Guaranteed

Amount

 

 

Debt

Maturity

Date (1)

 

 

June 30, 2021

 

 

December 31, 2020

 

West Melbourne I, LLC - Phase I

 

50%

 

 

$

39,635

 

 

50%

 

 

 

$

19,818

 

 

Feb-2025

(2)

 

$

198

 

 

$

201

 

West Melbourne I, LLC - Phase II

 

50%

 

 

 

14,175

 

 

50%

 

 

 

 

7,088

 

 

Feb-2025

(2)

 

 

71

 

 

 

72

 

Port Orange I, LLC

 

50%

 

 

 

52,448

 

 

50%

 

 

 

 

26,224

 

 

Feb-2025

(2)

 

 

262

 

 

 

266

 

Ambassador Infrastructure, LLC

 

65%

 

 

 

8,250

 

 

100%

 

 

 

 

8,250

 

 

Mar-2025

 

 

 

83

 

 

 

94

 

Shoppes at Eagle Point, LLC

 

50%

 

 

 

34,285

 

 

35%

 

(3)

 

 

12,740

 

 

Oct-2021

 

 

 

127

 

 

 

127

 

EastGate Storage, LLC

 

50%

 

 

 

6,490

 

 

50%

 

(4)

 

 

3,245

 

 

Dec-2022

 

 

 

32

 

 

 

33

 

Self Storage at Mid Rivers, LLC

 

50%

 

 

 

5,955

 

 

50%

 

(4)

 

 

2,994

 

 

Apr-2023

 

 

 

30

 

 

 

30

 

Parkdale Self Storage, LLC

 

50%

 

 

 

6,392

 

 

100%

 

(5)

 

 

6,500

 

 

Jul-2024

 

 

 

65

 

 

 

65

 

Hamilton Place Self Storage, LLC

 

54%

 

 

 

6,770

 

 

50%

 

(4)

 

 

3,501

 

 

Sep-2024

 

 

 

35

 

 

 

35

 

Atlanta Outlet JV, LLC

 

50%

 

 

 

4,536

 

 

100%

 

 

 

 

4,536

 

 

Nov-2023

 

 

 

 

 

 

 

Louisville Outlet Shoppes, LLC

 

50%

 

 

 

8,632

 

 

100%

 

 

 

 

8,632

 

 

Oct-2021

 

 

 

 

 

 

 

Total guaranty liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

903

 

 

$

923

 

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(1)

Excludes any extension options.

(2)

These loans have a one-year extension option at the joint venture’s election.

(3)

The guaranty is for a fixed amount of $12,740 throughout the term of the loan, including any extensions. The loan has a one-year extension option, at the joint venture’s election, for an outside maturity date of October 2022.

(4)

Subject to the bankruptcy default being waived, the guaranty may be reduced to 25% once certain debt and operational metrics are met.

(5)

The guaranty was increased to 100% as a result of the Chapter 11 Cases filed by the Company.

As described in Note 2, 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. As of June 30, 2021, there is a default under each of the following guaranteed loans as a result of the filing of the Chapter 11 Cases: EastGate Storage, LLC; Self Storage at Mid Rivers, LLC; Parkdale Self Storage, LLC; Hamilton Place Self Storage, LLC and Atlanta Outlet JV, LLC.

The Company has guaranteed the lease performance of York Town Center, LP ("YTC"), an unconsolidated affiliate in which the Company owns a 50% interest, under the terms of an agreement with a third party that owns property as part of York Town Center. Under the terms of that agreement, YTC is obligated to cause performance of the third party’s obligations as landlord under its lease with its sole tenant, including, but not limited to, provisions such as co-tenancy and exclusivity requirements. Should YTC fail to cause performance, then the tenant under the third-party landlord’s lease may pursue certain remedies ranging from rights to terminate its lease to receiving reductions in rent. The Company has guaranteed YTC’s performance under this agreement up to a maximum of $10,000. The Company entered into an agreement with its joint venture partner under which the joint venture partner has agreed to reimburse the Company 50% of any amounts it is obligated to fund under the guaranty. The Company did not record a credit loss related to this guaranty for the three and six months ended June 30, 2021 and June 30, 2020.

For the three and six months ended June 30, 2021 and June 30, 2020, the Company evaluated each guaranty, listed in the table above, individually by evaluating the debt service ratio, cash flow forecasts, the performance of each loan and, where applicable, the collateral value in relation to the outstanding amount of the loan. The result of the analysis was that each loan is current, performing and, where applicable, the collateral value was greater than the outstanding amount of the loan. The Company did not record a credit loss related to the guarantees listed in the table above for the three and six months ended June 30, 2021 and June 30, 2020.

Note 13 – Share-Based Compensation

As of June 30, 2021, the Company has outstanding awards under the CBL & Associates Properties, Inc. 2012 Stock Incentive Plan (the “2012 Plan"), which was approved by the Company's shareholders in May 2012. The 2012 Plan permits the Company to issue stock options and common stock to selected officers, employees and non-employee directors of the Company up to a total of 10,400,000 shares. As the primary operating subsidiary of the Company, the Operating Partnership participates in and bears the compensation expense associated with the Company's share-based compensation plan. The Compensation Committee of the Board of Directors (the “Committee”) administers the 2012 Plan.

Restricted Stock Awards

Share-based compensation expense related to the restricted stock awards was $246 and $361 for the three months ended June 30, 2021 and 2020, respectively; and $543 and $1,505 for the six months ended June 30, 2021 and 2020, respectively. Share-based compensation cost capitalized as part of real estate assets was $2 and $5 for the three months ended June 30, 2021 and 2020, respectively; and, $6 and $12 for the six months ended June 30, 2021 and 2020, respectively.

A summary of the status of the Company’s nonvested restricted stock awards as of June 30, 2021, and changes during the six months ended June 30, 2021, is presented below: 

 

 

Shares

 

 

Weighted-

Average

Grant-Date

Fair Value

 

Nonvested at January 1, 2021

 

 

1,519,606

 

 

$

2.15

 

Granted

 

 

 

 

$

 

Vested

 

 

(480,463

)

 

$

3.11

 

Forfeited

 

 

(15,844

)

 

$

2.51

 

Nonvested at June 30, 2021

 

 

1,023,299

 

 

$

1.70

 

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As of June 30, 2021, there was $1,352 of total unrecognized compensation cost related to nonvested stock awards granted under the plans, which is expected to be recognized over a weighted-average period of 1.9 years.

Long-Term Incentive Program

A summary of the Company’s long-term incentive program (“LTIP”) is disclosed in Note 18 to the consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020. Outstanding restricted stock, and related grant/vesting/forfeiture activity during 2021 for awards made to named executive officers under the LTIP, is included in the information presented in the table above.

Performance Stock Units

There were 0 PSUs granted in 2021. The 1,103,537 outstanding PSUs at June 30, 2021 were granted in the first quarter of 2019. Of that amount, 566,862 PSUs are classified as a liability due to the potential cash component, which is described in the summary of the Company’s LTIP program set forth in Note 18 to the consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2020. NaN of the PSUs outstanding at June 30, 2021 were vested.

Compensation cost is recognized on a tranche-by-tranche basis using the accelerated attribution method. The resulting expense, for awards classified as equity, is recorded regardless of whether any PSU awards are earned as long as the required service period is met.

Share-based compensation expense related to the PSUs was $94 and $(60) for the three months ended June 30, 2021 and 2020, respectively; and $189 and $418 for the six months ended June 30, 2021 and 2020, respectively. Unrecognized compensation costs related to the PSUs was $453 as of June 30, 2021, which is expected to be recognized over a weighted-average period of 1.6 years.

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Note 14 – Noncash Investing and Financing Activities

The Company’s noncash investing and financing activities were as follows:

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Additions to real estate assets accrued but not yet paid

 

$

8,332

 

 

$

14,130

 

Deconsolidation upon loss of control (1):

 

 

 

 

 

 

 

 

Decrease in real estate assets

 

 

(84,860

)

 

 

 

Decrease in mortgage and other indebtedness

 

 

134,354

 

 

 

 

Decrease in operating assets and liabilities

 

 

5,808

 

 

 

 

Decrease in intangible lease and other assets

 

 

(171

)

 

 

 

Conversion of Operating Partnership units to common stock

 

 

 

 

 

21,051

 

(1)

See Note 7 for additional information.

Note 15 – Subsequent Events

In July 2021, the Company reached an agreement with the lender to amend the loan secured by Springs at Port Orange, which extends the term of the note to December 31, 2021, increases the principal amount of the loan to $44,400, or $19,314 at the Company’s share, and provides an interest rate of LIBOR plus 2.0%.

In July 2021, the Company used funds from its matured U.S. Treasury securities to purchase $149,985 in U.S. Treasury securities with maturities that range from September 2021 to October 2021.

In August 2021, the Company entered into a forbearance agreement with the lender regarding the loan secured by Fayette Mall. The forbearance agreement provides for a modified loan contingent upon the Debtors' emergence from bankruptcy and final approval from the lender.

On August 11, 2021, following the confirmation hearing, the Bankruptcy Court entered an order confirming the Plan. Pursuant to the Amended RSA, the Company is required to have the Plan become effective no later than November 1, 2021.

 

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ITEM 2: 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 condensed consolidated financial statements and accompanying notes that are included in this Form 10-Q. 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 condensed consolidated financial statements. In this discussion, the terms “we,” ”us” and “our” refer to the Company or the Company and the Operating Partnership collectively, as the text requires.

Certain statements made in this section or elsewhere in this report may be deemed “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical fact should be considered to be forward-looking statements. In many cases, these forward-looking statements may be identified by the use of words such as “will,” “may,” “should,” “could,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “projects,” “goals,” “objectives,” “targets,” “predicts,” “plans,” “seeks,” and variations of these words and similar expressions. Any forward-looking statement speaks only as of the date on which it is made and is qualified in its entirety by reference to the factors discussed throughout this report.

Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance or results and we can give no assurance that these expectations will be attained. It is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of known and unknown risks and uncertainties. Currently, a significant factor that could cause actual outcomes to differ materially from our forward-looking statements is the impact of the risks and uncertainties associated with the Chapter 11 process on our operations and ability to develop and execute our business plans, and to satisfy the conditions and milestones applicable under the third amended Chapter 11 plan of reorganization (with technical modifications) (the “Plan”) that was confirmed by the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) on August 11, 2021. Another significant factor that could cause actual outcomes to differ materially from our forward-looking statements is the adverse effect of the COVID-19 pandemic, and state and/or local regulatory responses to control it, on our financial condition, operating results and cash flows, our tenants and their customers, the real estate market in which we operate, the global economy and the financial markets. The extent to which the COVID-19 pandemic impacts us and 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 direct and indirect economic effects of the pandemic and containment measures, and potential changes in consumer behavior, among others. In addition to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020, such known risks and uncertainties, many of which may be influenced by the COVID-19 pandemic, include, without limitation:

 

general industry, economic and business conditions;

 

the impact of the risks and uncertainties associated with the Chapter 11 process on our operations and ability to develop and execute our business plans, and to satisfy the conditions and milestones applicable under the Plan, for the duration of the Chapter 11 Cases;

 

interest rate fluctuations;

 

costs and availability of capital, including debt, and capital requirements;

 

the ongoing suspension of trading, and potential delisting, of our common stock and depositary shares representing interests in our Series D Preferred Stock and Series E Preferred Stock, from the NYSE, which has resulted in our common stock and the depositary shares representing interests in our Series D Preferred Stock and Series E Preferred Stock currently trading on the OTC Markets, operated by the OTC Markets Group, Inc.;

 

costs and availability of real estate;

 

inability to consummate acquisition opportunities and other risks associated with acquisitions;

 

competition from other companies and retail formats;

 

changes in retail demand and rental rates in our markets;

 

shifts in customer demands including the impact of online shopping;

 

tenant bankruptcies or store closings;

 

changes in vacancy rates at our Properties;

 

changes in operating expenses;

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changes in applicable laws, rules and regulations;

 

disposition of real property;

 

uncertainty and economic impact of pandemics, epidemics or other public health emergencies or fear of such events, such as the recent COVID-19 pandemic;

 

cyber-attacks or acts of cyber-terrorism;

 

the withdrawal that occurred during 2020 of the credit ratings of the Operating Partnership's senior unsecured long-term indebtedness;

 

the ability to obtain suitable equity and/or debt financing and the continued availability of financing, in the amounts and on the terms necessary to support our future refinancing requirements and business; and

 

other risks referenced from time to time in filings with the SEC and those factors listed or incorporated by reference into this report.

This list of risks and uncertainties is only a summary and is not intended to be exhaustive. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information. 

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, office and other properties. See Note 1 to the condensed consolidated financial statements for information on our property interests as of June 30, 2021. We have elected to be taxed as a REIT for federal income tax purposes.

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 are unable to predict the full extent of the pandemic’s impact on our results of operations for 2021. As a result, we did not issue full-year 2021 guidance.

In response to COVID-19, 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 for the second quarter reflect the ongoing impact of COVID-19. While all properties are open, many state and local markets continue to impose occupancy and other restrictions, as well as imposing new restrictions as the spread of COVID-19 variants increases. These additional restrictions may have the effect of restricting traffic and sales for our tenants and may put additional pressure on our tenants’ financial health. We have worked with our tenants to enhance customer reach despite the restrictions, including offering curbside, delivery and opening buy-online-pick-up-instore locations. We have experienced encouraging improvements in sales and traffic at our centers as vaccination rates increased and government restrictions were lessened, but uncertainty remains as variants of the virus cause further outbreaks. For the six months ended June 30, 2021, same-center sales increased more than 17% as compared with the six months ended June 30, 2019, which, if sustained, bodes well for future leasing efforts. Percentage rents and short-term rents increased significantly during the quarter as a result of the sales rebound. However, revenues for the quarter continue to be impacted by declines in occupancy and rental rates from tenants that filed for bankruptcy or are struggling financially. The pandemic accelerated a number of tenant bankruptcies, resulting in a heightened level of store closures and lost rent in 2020, the impact of which has carried forward into 2021.

The mandated property closures in 2020 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 have granted rent deferrals of $40.5 million since the COVID-19 pandemic began. We also granted rent abatements of approximately $4.7 million and $10.7 million during the three and six months ended June 30, 2021, respectively.

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.

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We had a net loss for the three and six months ended June 30, 2021 of $9.6 million and $37.8 million, respectively, as compared to a net loss for the three and six months ended June 30, 2020 of $72.8 million and $212.1 million, respectively. We recorded a net loss attributable to common shareholders for the three and six months ended June 30, 2021 of $8.9 million and $35.6 million, respectively, as compared to a net loss attributable to common shareholders for the three and six months ended June 30, 2020 of $81.5 million and $215.3 million, respectively. In addition to the ongoing impact of the COVID-19 pandemic, significant items that affected the comparability between the three and six-month periods include:

 

Loss on impairment for the three and six months ended June 30, 2021 that is $13.3 million and $89.7 million lower, respectively;

 

Gain on deconsolidation of $55.1 million for the six months ended June 30, 2021;

 

Interest expense for the three and six months ended June 30, 2021 that is $30.3 million and $53.2 million lower, respectively;

 

Reorganization items for the three and six months ended June 30, 2021 of $17.1 million and $40.0 million, respectively;

 

Income tax provision for the three and six months ended June 30, 2021 that is $15.4 million and $15.2 million lower, respectively.

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 within 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 (loss) 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, a reconciliation from net income (loss) 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.

Voluntary Reorganization under Chapter 11

Beginning on November 1, 2020 (the “Commencement Date”), CBL & Associates Properties, Inc. together with its majority owned subsidiary, CBL & Associates Limited Partnership, together with certain of its direct and indirect subsidiaries (collectively, the “Debtors”), commenced voluntary chapter 11 cases (the “Chapter 11 Cases”) by filing voluntary petitions for reorganization under chapter 11 of title 11 (“Chapter 11”) of the United States Code (the “Bankruptcy Code”) with the United States Bankruptcy Court for the Southern District of Texas (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. 20-35226Documents 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.

The filing of the Chapter 11 Cases constituted an event of default that results in the automatic acceleration of certain monetary obligations to be immediately due and payable with respect to the secured credit facility and the senior unsecured notes. On November 2, 2020, we filed an adversary proceeding in the Bankruptcy Court seeking among other things, a temporary restraining order (the “Order”) and for a preliminary injunction to enjoin, pending a determination of the parties’ rights, the administrative agent or any of its officers, agents, servants, attorneys and successors from taking any action to exercise any and all remedies under the terms of the secured credit facility or other agreements as a result of the events of default asserted by the administrative agent, or any other right or remedy that would otherwise accompany the occurrence of an event of default, including without limitation, any rights of acceleration under the terms of the secured credit facility, rights flowing from the notice of acceleration, rights exercised pursuant to the Notice of Exercise or any other rights or remedies properly exercisable solely upon an actual or determined event of default. On November 2, 2020, the Bankruptcy Court granted the Order, and the Bankruptcy Court took up the other pending claims during the adversarial proceeding, which has now been stayed pending the confirmation our plan, discussed below.

Following the Commencement Date, the Bankruptcy Court entered certain interim and final orders facilitating the Debtors’ operational transition into Chapter 11. These orders authorized the Debtors to, among other things, pay certain prepetition employee expenses and benefits, use their existing cash management system, maintain and administer

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customer programs, pay certain critical service providers, honor insurance-related obligations, and pay certain prepetition taxes and related fees on a final basis.

After engaging in negotiations in a Bankruptcy Court-ordered mediation, on March 21, 2021 (the “Agreement Effective Date”), we entered into the First Amended and Restated Restructuring Support Agreement (the “Amended RSA”), with the Consenting Noteholders in excess of 69% (including joinders) of the aggregate principal amount of the Notes and certain lenders party to our 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 the Original RSA 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.

As required by the Amended RSA, (i) on April 15, 2021, we filed an amended Chapter 11 plan of reorganization and accompanying disclosure statement with the Bankruptcy Court; (ii) on May 18, 2021, we filed the second amended Chapter 11 plan of reorganization and accompanying disclosure statement, as further amended on May 19, 2021; and (iii) on May 25, 2021, the Company filed the Plan and accompanying disclosure statement (the “Disclosure Statement”), to implement the restructuring transactions. In addition, on May 26, 2021, the Bankruptcy Court entered an order that among other things, approved our Disclosure Statement and established dates and deadlines related to solicitation of, voting on, and confirmation of the Plan. We filed technical modifications to the Plan on August 9, 2021. The Amended RSA provides that the ongoing litigation between us and the lenders of our secured credit facility (the “Bank Lenders”) arising from the prepetition enforcement actions taken by the Bank Lenders is stayed and is to be dismissed upon the order confirming the Plan becoming a “Final Order” (as defined in the Plan).

On August 11, 2021, following the confirmation hearing, the Bankruptcy Court entered an order confirming the Plan. Pursuant to the Amended RSA, we are required to have the Plan become effective no later than November 1, 2021. We cannot predict the ultimate outcome of the Chapter 11 Cases at this time. For the duration of our Chapter 11 proceedings, our operations and ability to develop and execute our business plan is 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 quarterly report may not accurately reflect our operations, properties and liquidity and capital resources following the Chapter 11 process.

Once effective, the Plan provides for the elimination of more than $1,681,900 of debt and preferred obligations, including an aggregate cash payment of $195,000 as noted below, as well as a significant reduction in interest expense. In exchange for their approximately $1,375,000 in principal amount of senior unsecured notes and $133,000 in principal amount of the secured credit facility, Consenting Noteholders, other noteholders, and certain holders of unsecured claims against the Company will receive, in the aggregate, $95,000 in cash, $555,000 of new senior secured notes, of which up to $100,000, 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 (subject to dilution, as set forth in the Plan). Certain Consenting Noteholders will also provide up to $50,000 of new money in exchange for additional convertible secured notes. The transactions outlined in the Plan will be implemented in the Chapter 11 Cases. The Plan provides that the remaining Bank Lenders, holding $983,700 in principal amount under the secured credit facility, will receive $100,000 in cash and a new $883,700 secured term loan. Existing common and preferred shareholders are expected to receive up to 11% of common equity in the newly reorganized company.

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 quarterly report, including where applicable a quantification of our 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.

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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 condensed consolidated financial statements are issued. Our ability to continue as a going concern is contingent upon our ability to successfully implement the Plan. See Note 2 to the condensed consolidated financial statements for additional information.

Results of Operations

Properties that were in operation for the entire year during 2020 and the six months ended June 30, 2021 are referred to as the “Comparable Properties.” Since January 1, 2020, we have opened two self-storage facilities, deconsolidated two properties and disposed of two properties: 

Properties Opened

Property

 

Location

 

Date Opened

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 50/50 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 condensed consolidated statements of operations.

Deconsolidations

Property

 

Location

 

Date of Deconsolidation

Asheville Mall (1)

 

Asheville, NC

 

January 2021

Park Plaza (1)

 

Little Rock, AR

 

March 2021

(1)

We deconsolidated the property due to a loss of control when the property was placed into receivership in connection with the foreclosure process.

Dispositions

Property

 

Location

 

Sales Date

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.

Comparison of the Three Months Ended June 30, 2021 to the Three Months Ended June 30, 2020

Revenues

 

 

 

Total for the

Three Months

Ended June 30,

 

 

 

 

 

 

Comparable

Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

Core

 

 

Non-core

 

 

Deconsolidation

 

 

Dispositions

 

 

Total Change

 

Rental revenues

 

$

131,316

 

 

$

120,222

 

 

$

11,094

 

 

$

17,227

 

 

$

476

 

 

$

(3,765

)

 

$

(2,844

)

 

$

11,094

 

Management, development and leasing fees

 

 

1,449

 

 

 

1,055

 

 

 

394

 

 

 

394

 

 

 

 

 

 

 

 

 

 

 

 

394

 

Other

 

 

3,796

 

 

 

2,934

 

 

 

862

 

 

 

773

 

 

 

329

 

 

 

(85

)

 

 

(155

)

 

 

862

 

Total revenues

 

$

136,561

 

 

$

124,211

 

 

$

12,350

 

 

$

18,394

 

 

$

805

 

 

$

(3,850

)

 

$

(2,999

)

 

$

12,350

 

Rental revenues from the Comparable Properties increased primarily due to prior year rent concessions to tenants that are in bankruptcy or are struggling financially due to the impacts of the COVID-19 pandemic. Percentage rent increased due to higher sales in the current period, as the COVID-19 pandemic had a significant impact on sales and traffic in the prior-year period.

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Table of Contents

Operating Expenses

 

 

 

Total for the

Three Months

Ended June 30,

 

 

 

 

 

 

Comparable

Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

Core

 

 

Non-core

 

 

Deconsolidation

 

 

Dispositions

 

 

Total Change

 

Property operating

 

$

(19,623

)

 

$

(16,906

)

 

$

(2,717

)

 

$

(3,656

)

 

$

(364

)

 

$

653

 

 

$

650

 

 

$

(2,717

)

Real estate taxes

 

 

(15,110

)

 

 

(17,837

)

 

 

2,727

 

 

 

1,552

 

 

 

(36

)

 

 

434

 

 

 

777

 

 

 

2,727

 

Maintenance and repairs

 

 

(8,784

)

 

 

(6,042

)

 

 

(2,742

)

 

 

(3,031

)

 

 

(119

)

 

 

254

 

 

 

154

 

 

 

(2,742

)

Property operating expenses

 

 

(43,517

)

 

 

(40,785

)

 

 

(2,732

)

 

 

(5,135

)

 

 

(519

)

 

 

1,341

 

 

 

1,581

 

 

 

(2,732

)

Depreciation and amortization

 

 

(47,499

)

 

 

(52,663

)

 

 

5,164

 

 

 

1,658

 

 

 

890

 

 

 

1,799

 

 

 

817

 

 

 

5,164

 

General and administrative

 

 

(11,269

)

 

 

(18,727

)

 

 

7,458

 

 

 

7,458

 

 

 

 

 

 

 

 

 

 

 

 

7,458

 

Loss on impairment

 

 

 

 

 

(13,274

)

 

 

13,274

 

 

 

 

 

 

 

 

 

13,274

 

 

 

 

 

 

13,274

 

Litigation settlement

 

 

(57

)

 

 

 

 

 

(57

)

 

 

(57

)

 

 

 

 

 

 

 

 

 

 

 

(57

)

Other

 

 

(287

)

 

 

(242

)

 

 

(45

)

 

 

(45

)

 

 

 

 

 

 

 

 

 

 

 

(45

)

Total operating expenses

 

$

(102,629

)

 

$

(125,691

)

 

$

23,062

 

 

$

3,879

 

 

$

371

 

 

$

16,414

 

 

$

2,398

 

 

$

23,062

 

Property operating expenses at the Comparable Properties increased primarily due to lessening restrictions that allowed for the reopening of properties related to the COVID-19 pandemic and the actions taken in the prior year period to reduce operating expenses to mitigate the impact of mandated property closures and the effects of the COVID-19 pandemic, including a reduction-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 since the prior-year period.

General and administrative expenses decreased primarily due to prepetition professional and legal fees incurred in the prior-year period related to our restructuring efforts.

In the second quarter of 2020, we recognized $13.3 million of loss on impairment of real estate to write down the book value of one mall. See Note 6 to the condensed consolidated financial statements for more information.

Other Income and Expenses

Interest expense decreased $30.3 million primarily due to not recognizing interest expense on the senior unsecured notes and the secured credit facility subsequent to the filing of the Chapter 11 Cases. The decrease was partially offset by an increase 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.

The income tax provision decreased $15.4 million as compared to the prior-year period due to a full valuation allowance of $16.8 million that was recorded on our deferred tax assets in the prior-year period.

For the three months ended June 30, 2021 we recorded $17.1 million of reorganization items, which consists of professional fees, legal fees, retention bonuses and U.S. Trustee fees directly related to the Chapter 11 Cases.

Comparison of the Six Months Ended June 30, 2021 to the Six Months Ended June 30, 2020

Revenues

 

 

Total for the

Six Months

Ended June 30,

 

 

 

 

 

 

Comparable

Properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

Core

 

 

Non-core

 

 

Deconsolidation

 

 

Dispositions

 

 

Total Change

 

Rental revenues

 

$

259,491

 

 

$

281,395

 

 

$

(21,904

)

 

$

(7,985

)

 

$

(247

)

 

$

(6,949

)

 

$

(6,723

)

 

$

(21,904

)

Management, development and leasing fees

 

 

3,108

 

 

 

3,147

 

 

 

(39

)

 

 

(39

)

 

 

 

 

 

 

 

 

 

 

 

(39

)

Other

 

 

7,146

 

 

 

7,243

 

 

 

(97

)

 

 

199

 

 

 

194

 

 

 

(175

)

 

 

(315

)

 

 

(97

)

Total revenues

 

$

269,745

 

 

$

291,785

 

 

$

(22,040

)

 

$

(7,825

)

 

$

(53

)

 

$

(7,124

)

 

$

(7,038

)

 

$

(22,040

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues from the Comparable