Item 1. Financial Statements
ITEM 1: Financial Statements
CBL & Associates Properties, Inc.
(Debtors-In-Possession)
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
ASSETS (1)
March 31,
2021
December 31,
2020
Real estate assets:
Land
$
662,045
$
695,711
Buildings and improvements
4,966,381
5,135,074
5,628,426
5,830,785
Accumulated depreciation
( 2,229,137
)
( 2,241,421
)
3,399,289
3,589,364
Developments in progress
31,284
28,327
Net investment in real estate assets
3,430,573
3,617,691
Cash and cash equivalents
84,655
61,781
Available-for-sale securities - at fair value (amortized cost of $ 232,774 and $ 233,053 as of
March 31, 2021 and December 31, 2020, respectively)
232,795
233,071
Receivables:
Tenant
80,590
103,655
Other
8,026
5,958
Mortgage and other notes receivable
2,113
2,337
Investments in unconsolidated affiliates
271,764
279,355
Intangible lease assets and other assets
169,671
139,892
$
4,280,187
$
4,443,740
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Mortgage and other indebtedness, net
$
1,036,970
$
1,184,831
Accounts payable and accrued liabilities
185,723
173,387
Total liabilities not subject to compromise (1)
1,222,693
1,358,218
Liabilities subject to compromise
2,551,354
2,551,490
Commitments and contingencies (Note 9 and Note 12)
Redeemable noncontrolling interests
( 478
)
( 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, 196,458,778 and
196,569,917 issued and outstanding in 2021 and 2020, respectively
1,965
1,966
Additional paid-in capital
1,986,666
1,986,269
Accumulated other comprehensive income
21
18
Dividends in excess of cumulative earnings
( 1,483,198
)
( 1,456,435
)
Total shareholders' equity
505,479
531,843
Noncontrolling interests
1,139
2,454
Total equity
506,618
534,297
$
4,280,187
$
4,443,740
(1)
As of March 31, 2021, includes $ 266,669 of assets related to consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities and $ 132,762 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
March 31,
2021
2020
REVENUES:
Rental revenues
$
128,175
$
161,173
Management, development and leasing fees
1,659
2,092
Other
3,350
4,309
Total revenues
133,184
167,574
EXPENSES:
Property operating
( 21,802
)
( 25,709
)
Depreciation and amortization
( 48,112
)
( 55,902
)
Real estate taxes
( 16,551
)
( 18,448
)
Maintenance and repairs
( 10,781
)
( 11,208
)
General and administrative
( 12,612
)
( 17,836
)
Loss on impairment
( 57,182
)
( 133,644
)
Litigation settlement
858
—
Other
—
( 158
)
Total expenses
( 166,182
)
( 262,905
)
OTHER INCOME (EXPENSES):
Interest and other income
776
2,397
Interest expense (unrecognized contractual interest expense was $ 44,764 for the three months ended March 31, 2021)
( 24,130
)
( 46,992
)
Gain on deconsolidation
55,131
—
Gain (loss) on sales of real estate assets
( 299
)
140
Reorganization items
( 22,933
)
—
Income tax provision
( 751
)
( 526
)
Equity in earnings (losses) of unconsolidated affiliates
( 3,076
)
1,018
Total other income (expenses)
4,718
( 43,963
)
Net loss
( 28,280
)
( 139,294
)
Net loss attributable to noncontrolling interests in:
Operating Partnership
698
16,414
Other consolidated subsidiaries
819
207
Net loss attributable to the Company
( 26,763
)
( 122,673
)
Preferred dividends undeclared
—
( 11,223
)
Net loss attributable to common shareholders
$
( 26,763
)
$
( 133,896
)
Basic and diluted per share data attributable to common shareholders:
Net loss attributable to common shareholders
$
( 0.14
)
$
( 0.75
)
Weighted-average common and potential dilutive common shares outstanding
196,509
179,133
The accompanying notes are an integral part of these condensed consolidated statements.
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CBL & Associates Properties, Inc.
(Debtors-In-Possession)
Condensed Consolidated Statements of Comprehensive Loss
(In thousands, except share data)
(Unaudited)
Three Months Ended March 31,
2021
2020
Net loss
$
( 28,280
)
$
( 139,294
)
Other comprehensive income:
Unrealized gain on available-for-sale securities
21
22
Comprehensive loss
( 28,259
)
( 139,272
)
Comprehensive loss attributable to noncontrolling interests in:
Operating Partnership
698
16,412
Other consolidated subsidiaries
819
207
Comprehensive loss attributable to the Company:
$
( 26,742
)
$
( 122,653
)
The accompanying notes are an integral part of these condensed consolidated statements.
3
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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
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
Equity
Shareholders' Equity
Redeemable
Noncontrolling
Interests
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income
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
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)
Three Months Ended March 31,
2021
2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
( 28,280
)
$
( 139,294
)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
48,112
55,902
Net amortization of deferred financing costs, premiums on available-for-sale securities and debt premiums and discounts
923
1,990
Net amortization of intangible lease assets and liabilities
58
( 687
)
(Gain) loss on sales of real estate assets
299
( 140
)
Gain on insurance proceeds
—
( 511
)
Gain on deconsolidation
( 55,131
)
—
Write-off of development projects
—
158
Share-based compensation expense
395
1,545
Loss on impairment
57,182
133,644
Equity in (earnings) losses of unconsolidated affiliates
3,076
( 1,018
)
Distributions of earnings from unconsolidated affiliates
2,566
4,235
Change in estimate of uncollectable revenues
6,486
2,312
Change in deferred tax accounts
—
( 239
)
Changes in:
Tenant and other receivables
11,017
1,424
Other assets
( 8,115
)
( 3,746
)
Accounts payable and accrued liabilities
24,181
( 16,847
)
Net cash provided by operating activities
62,769
38,728
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate assets
( 6,865
)
( 22,760
)
Proceeds from sales of real estate assets
2,510
520
Purchase of available-for-sale securities
( 136,392
)
( 153,193
)
Redemption of available-for-sale securities
135,987
—
Proceeds from insurance
—
600
Payments received on mortgage and other notes receivable
224
503
Additional investments in and advances to unconsolidated affiliates
57
( 2,679
)
Distributions in excess of equity in earnings of unconsolidated affiliates
2,279
4,668
Changes in other assets
( 364
)
( 290
)
Net cash used in investing activities
( 2,564
)
( 172,631
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage and other indebtedness
—
365,000
Principal payments on mortgage and other indebtedness
( 13,732
)
( 103,582
)
Additions to deferred financing costs
( 16
)
( 1,300
)
Proceeds from issuances of common stock
—
3
Contributions from noncontrolling interests
—
668
Payment of tax withholdings for restricted stock awards
( 1
)
( 87
)
Distributions to noncontrolling interests
( 11
)
( 731
)
Net cash provided by (used in) financing activities
( 13,760
)
259,971
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
46,445
126,068
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period
121,722
59,058
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period
$
168,167
$
185,126
Reconciliation from condensed consolidated statements of cash flows to
condensed consolidated balance sheets:
Cash and cash equivalents
$
84,655
$
159,117
Restricted cash (1) :
Restricted cash
61,146
175
Mortgage escrows
22,366
25,834
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period
$
168,167
$
185,126
SUPPLEMENTAL INFORMATION
Cash paid for interest, net of amounts capitalized
$
14,055
$
25,321
Cash paid for reorganization items
$
12,044
$
—
(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.
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Table of Contents
CBL & Associates Limited Partnership
(Debtors-In-Possession)
Condensed Consolidated Balance Sheets
(In thousands, except unit data)
(Unaudited)
ASSETS (1)
March 31,
2021
December 31,
2020
Real estate assets:
Land
$
662,045
$
695,711
Buildings and improvements
4,966,381
5,135,074
5,628,426
5,830,785
Accumulated depreciation
( 2,229,137
)
( 2,241,421
)
3,399,289
3,589,364
Developments in progress
31,284
28,327
Net investment in real estate assets
3,430,573
3,617,691
Cash and cash equivalents
84,646
61,772
Available-for-sale securities - at fair value (amortized cost of $ 232,774 and $ 233,053 as of
March 31, 2021 and December 31, 2020, respectively)
232,795
233,071
Receivables:
Tenant
80,590
103,655
Other
7,977
5,910
Mortgage and other notes receivable
2,113
2,337
Investments in unconsolidated affiliates
272,291
279,884
Intangible lease assets and other assets
169,552
139,772
$
4,280,537
$
4,444,092
LIABILITIES, REDEEMABLE INTERESTS AND CAPITAL
Mortgage and other indebtedness, net
$
1,036,970
$
1,184,831
Accounts payable and accrued liabilities
185,795
173,458
Total liabilities not subject to compromise (1)
1,222,765
1,358,289
Liabilities subject to compromise
2,551,354
2,551,490
Commitments and contingencies (Note 9 and Note 12)
Redeemable common units
( 478
)
( 265
)
Partners' capital:
Preferred units
565,212
565,212
Common units:
General partner
( 609
)
( 339
)
Limited partners
( 59,956
)
( 33,371
)
Accumulated other comprehensive income
21
18
Total partners' capital
504,668
531,520
Noncontrolling interests
2,228
3,058
Total capital
506,896
534,578
$
4,280,537
$
4,444,092
(1)
As of March 31, 2021, includes $ 266,669 of assets related to consolidated variable interest entities that can only be used to settle obligations of the consolidated variable interest entities and $ 132,762 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
March 31,
2021
2020
REVENUES:
Rental revenues
$
128,175
$
161,173
Management, development and leasing fees
1,659
2,092
Other
3,350
4,309
Total revenues
133,184
167,574
EXPENSES:
Property operating
( 21,802
)
( 25,709
)
Depreciation and amortization
( 48,112
)
( 55,902
)
Real estate taxes
( 16,551
)
( 18,448
)
Maintenance and repairs
( 10,781
)
( 11,208
)
General and administrative
( 12,612
)
( 17,836
)
Loss on impairment
( 57,182
)
( 133,644
)
Litigation settlement
858
—
Other
—
( 158
)
Total expenses
( 166,182
)
( 262,905
)
OTHER INCOME (EXPENSES):
Interest and other income
776
2,397
Interest expense (unrecognized contractual interest expense was $ 44,764 for the three months ended March 31, 2021)
( 24,130
)
( 46,992
)
Gain on deconsolidation
55,131
—
Gain (loss) on sales of real estate assets
( 299
)
140
Reorganization items
( 22,933
)
—
Income tax provision
( 751
)
( 526
)
Equity in earnings (losses) of unconsolidated affiliates
( 3,076
)
1,018
Total other income (expenses)
4,718
( 43,963
)
Net loss
( 28,280
)
( 139,294
)
Net loss attributable to noncontrolling interests
819
207
Net loss attributable to the Operating Partnership
( 27,461
)
( 139,087
)
Distributions to preferred unitholders undeclared
—
( 11,223
)
Net loss attributable to common unitholders
$
( 27,461
)
$
( 150,310
)
Basic and diluted per unit data attributable to common unitholders:
Net loss attributable to common unitholders
$
( 0.14
)
$
( 0.75
)
Weighted-average common and potential dilutive common units outstanding
201,627
201,258
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 March 31,
2021
2020
Net loss
$
( 28,280
)
$
( 139,294
)
Other comprehensive income:
Unrealized gain on available-for-sale securities
21
22
Comprehensive loss
( 28,259
)
( 139,272
)
Comprehensive loss attributable to noncontrolling interests
819
207
Comprehensive loss attributable to the Operating Partnership:
$
( 27,440
)
$
( 139,065
)
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
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
Number of
Common Units
Redeemable
Common
Units
Preferred
Units
Common
Units
Preferred
Units
General
Partner
Limited
Partners
Accumulated Other Comprehensive Income
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
The accompanying notes are an integral part of these condensed consolidated statements.
9
Table of Contents
CBL & Associates Limited Partnership
(Debtors-In-Possession)
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended March 31,
2021
2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
( 28,280
)
$
( 139,294
)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
48,112
55,902
Net amortization of deferred financing costs, premiums on available-for-sale securities and debt premiums and discounts
923
1,990
Net amortization of intangible lease assets and liabilities
58
( 687
)
(Gain) loss on sales of real estate assets
299
( 140
)
Gain on insurance proceeds
—
( 511
)
Gain on deconsolidation
( 55,131
)
—
Write-off of development projects
—
158
Share-based compensation expense
395
1,545
Loss on impairment
57,182
133,644
Equity in (earnings) losses of unconsolidated affiliates
3,076
( 1,018
)
Distributions of earnings from unconsolidated affiliates
2,566
4,235
Change in estimate of uncollectable revenues
6,486
2,312
Change in deferred tax accounts
—
( 239
)
Changes in:
Tenant and other receivables
11,017
1,424
Other assets
( 8,115
)
( 3,746
)
Accounts payable and accrued liabilities
24,181
( 16,851
)
Net cash provided by operating activities
62,769
38,724
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate assets
( 6,865
)
( 22,760
)
Proceeds from sales of real estate assets
2,510
520
Purchase of available-for-sale securities
( 136,392
)
( 153,193
)
Redemption of available-for-sale securities
135,987
—
Proceeds from insurance
—
600
Payments received on mortgage and other notes receivable
224
503
Additional investments in and advances to unconsolidated affiliates
57
( 2,679
)
Distributions in excess of equity in earnings of unconsolidated affiliates
2,279
4,668
Changes in other assets
( 364
)
( 290
)
Net cash used in investing activities
( 2,564
)
( 172,631
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage and other indebtedness
—
365,000
Principal payments on mortgage and other indebtedness
( 13,732
)
( 103,582
)
Additions to deferred financing costs
( 16
)
( 1,300
)
Proceeds from issuances of common units
—
3
Contributions from noncontrolling interests
—
668
Payment of tax withholdings for restricted stock awards
( 1
)
( 87
)
Distributions to noncontrolling interests
( 11
)
( 731
)
Net cash provided by (used in) financing activities
( 13,760
)
259,971
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
46,445
126,064
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period
121,713
59,055
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period
$
168,158
$
185,119
Reconciliation from condensed consolidated statements of cash flows to
condensed consolidated balance sheets:
Cash and cash equivalents
$
84,646
$
159,110
Restricted cash (1) :
Restricted cash
61,146
175
Mortgage escrows
22,366
25,834
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period
$
168,158
$
185,119
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized
$
14,055
$
25,321
Cash paid for reorganization items
$
12,044
$
—
(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.
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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 March 31, 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
49
20
1
4
(2)
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)
Includes CBL's two corporate office buildings.
(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, All Other Properties ("Associated Centers, Community Centers, Office Buildings and Other") and the Construction Properties are collectively referred to as the “Properties” and individually as a “Property.”
CBL is the 100 % owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. At March 31, 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 March 31, 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 March 31, 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.
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
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“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. 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 .
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
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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 (the “Amended Plan”).
The Amended RSA requires that the Company file the Amended Plan and related disclosure statement no later than 25 days following the Agreement Effective Date and under the Amended RSA the Company must seek to have the Amended Plan confirmed and declared effective no later than November 1, 2021. On April 15, 2021, the Company filed an amended Chapter 11 plan of reorganization (the “Proposed Plan”) and accompanying disclosure statement (the “Proposed Disclosure Statement”) with the Bankruptcy Court to implement the restructuring transactions. Before the Bankruptcy Court will confirm the Proposed Plan, the Bankruptcy Code requires that at least one “impaired” class of claims vote to accept the Proposed Plan. A class of claims votes to “accept” the Proposed Plan if voting creditors that hold a majority in number and two-thirds in amount of claims in that class approve the Proposed Plan. The Amended RSA requires the Consenting Stakeholders vote in favor of and support the Proposed Plan. As of the date hereof, the Consenting Bank Lenders and Consenting Noteholders each represent the requisite amount of claims necessary to accept the Proposed Plan in each of their respective classes. For the foregoing reasons, among others, the Debtors believe that they will be able to confirm the Proposed Plan in the Chapter 11 Cases. 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 Bankruptcy Court’s confirmation of the Proposed Plan.
Under the Amended RSA, the Proposed Plan provides for the elimination of more than $ 1,681,900 of debt and preferred obligations 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 and other noteholders 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. 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 Amended RSA will be implemented in the Chapter 11 Cases and pursuant to the Proposed Plan. The Amended RSA 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 stakeholders are expected to receive up to 11 % of common equity in the newly reorganized company. On April 29, 2021, the Company received court approval to perform under the Amended RSA.
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.
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
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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 Proposed Plan, set forth in the Amended RSA, which is pending confirmation by the Bankruptcy Court. 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.
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 March 31, 2021, the $ 22,933 of reorganization items consists of $ 22,230 in professional fees and $ 703 of U.S. Trustee fees.
Liabilities Subject to Compromise
As of March 31, 2021 and December 31, 2020, the Company has reclassified $ 2,551,354 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 March 31, 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 and $ 4,034 of prepetition unsecured or under secured liabilities. As
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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 senior unsecured notes and secured credit facility is in excess of recorded interest expense by $ 44,764 for the three months ended March 31, 2021. This excess contractual interest expense is not included as interest expense in the condensed consolidated statements of operations for the three months ended March 31, 2021 because the Company discontinued accruing interest on 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.
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Condensed combined financial statement information of the Debtors is as follows:
Condensed Combined Financial Statements – Debtors (Debtors-In-Possession)
Condensed Combined Balance Sheet
March 31, 2021
December 31, 2020
ASSETS:
Investment in real estate assets
$
3,946,604
$
4,056,257
Accumulated depreciation
( 1,527,017
)
( 1,544,800
)
2,419,587
2,511,457
Developments in progress
30,526
27,853
Net investment in real estate assets
2,450,113
2,539,310
Available-for-sale securities - at fair value (amortized cost of $232,774 and $233,053 as of March 31, 2021 and December 31, 2020, respectively)
232,795
233,071
Cash and cash equivalents
67,279
46,346
Restricted Cash
56,116
29,834
Intercompany due from non-debtor entities
76,648
76,095
Other assets
132,814
140,241
Total assets
$
3,015,765
$
3,064,897
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY:
Other liabilities
$
114,374
$
102,910
Intercompany due to non-debtor entities
5,253
5,062
Total liabilities not subject to compromise
119,627
107,972
Liabilities subject to compromise
2,551,354
2,551,490
Redeemable noncontrolling interests
( 2,786
)
( 2,786
)
Shareholders' equity
350,954
411,605
Noncontrolling interests
( 3,384
)
( 3,384
)
Total liabilities and owners’ equity
$
3,015,765
$
3,064,897
Condensed Combined Statement of Operations
Three Months Ended March 31, 2021
Total revenues
$
88,473
Depreciation and amortization
( 34,154
)
Loss on impairment
( 57,182
)
Expenses
( 45,391
)
Interest and other income
1,788
Interest expense (unrecognized contractual interest expense was $44,764 for the three months ended March 31, 2021)
( 632
)
Reorganization items
( 22,933
)
Loss on sales of real estate assets
( 299
)
Income tax provision
( 751
)
Net loss
$
( 71,081
)
Condensed Combined Statement of Cash Flows
CASH FLOWS FROM OPERATING ACTIVITIES:
Three Months Ended March 31, 2021
Net loss
$
( 71,081
)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss on impairment
57,182
Other assets and liabilities, net
53,954
Net cash provided by operating activities
40,055
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale securities
( 136,392
)
Redemption of available-for-sale securities
135,987
Changes in other assets
( 2,889
)
Net cash used in investing activities
( 3,294
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net distributions from non-Debtor subsidiaries
10,428
Other financing activities
26
Net cash provided by financing activities
10,454
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
47,215
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period
76,180
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period
$
123,395
Reconciliation from condensed combined statement of cash flows to
condensed combined balance sheet:
Cash and cash equivalents
$
67,279
Restricted cash
56,116
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period
$
123,395
SUPPLEMENTAL INFORMATION
Cash paid for reorganization items
$
12,044
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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 March 31, 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.
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 periods ended March 31, 2021 and 2020, revenues were reduced by $ 6,486 and $ 3,780 , respectively, associated with uncollectable revenues, which includes the write-off of $ 1,679 and $ 1,469 for straight line rent receivables for the periods ended March 31, 2021 and 2020, respectively.
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 worsening market and economic conditions resulting from the COVID-19 pandemic.
As of March 31, 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 March 31, 2021, the Company recorded impairment charges of $ 57,182 related to three of its malls. As of March 31, 2021, six other properties had
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impairment indicators; however, no additional impairment charges were recorded . For the period ended March 31, 2020, the Company recorded $ 133,644 of impairment charges for two of its malls and six other properties had impairment indicators as of March 31, 2020 . No additional impairment charges were recorded.
As of March 31, 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. No impairments of investments in unconsolidated affiliates were recorded in the three-month periods ended March 31, 2021 and 2020.
Note 4 – Revenues
Revenues
The following table presents the Company's revenues disaggregated by revenue source:
Three Months Ended March 31, 2021
Three Months Ended March 31, 2020
Rental revenues (1)
$
128,175
$
161,173
Revenues from contracts with customers (ASC 606):
Operating expense reimbursements (2)
2,156
2,389
Management, development and leasing fees (3)
1,659
2,092
Marketing revenues (4)
301
743
4,116
5,224
Other revenues
893
1,177
Total revenues (5)
$
133,184
$
167,574
(1)
Revenues from leases that commenced subsequent to December 31, 2018 are accounted for in accordance with ASC 842, Leases , whereas all leases existing prior to that date are accounted for in accordance with ASC 840.
( 2 )
Includes $ 2,069 in the Malls segment and $ 87 in the All Other segment for the three months ended March 31, 2021, and includes $ 2,321 in the Malls segment and $ 68 in the All Other segment for the three months ended March 31, 2020.
( 3 )
Included in All Other segment.
( 4 )
Marketing revenues solely relate to the Malls segment for all periods presented.
( 5 )
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 March 31, 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
$
24,292
$
49,420
$
45,113
$
118,825
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 March 31,
2021
2020
Fixed lease payments
$
71,227
$
137,394
Variable lease payments
56,948
23,779
Total rental revenues
$
128,175
$
161,173
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The undiscounted future fixed lease payments to be received under the Company's operating leases as of March 31, 2021, are as follows:
Years Ending December 31,
Operating Leases
2021 (1)
$
280,554
2022
333,159
2023
280,432
2024
225,734
2025
174,939
2026
128,599
Thereafter
283,197
Total undiscounted lease payments
$
1,706,614
(1)
Reflects rental payments for the fiscal period April 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 $ 988,773 and $ 1,091,745 at March 31, 2021 and December 31, 2020, respectively. The estimated fair value of liabilities subject to compromise was $ 1,862,147 and $ 1,606,959 at March 31, 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.
During January 2021, the Company purchased $ 21,999 in U.S. Treasury securities that matured in February 2021 . During February 2021, the Company purchased $ 31,999 in U.S. Treasury securities that matured in March 2021 . During March 2021, the Company purchased $ 82,393 in U.S. Treasury securities that are scheduled to mature in June 2021 . The Company designated the U.S. Treasury securities purchased in these transactions 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 three months ended March 31, 2021 :
AFS Security
Amortized
Cost
Allowance
for credit
losses (1)
Total unrealized gain
Fair Value as of March 31, 2021
U.S. Treasury securities
$
232,774
$
—
$
21
$
232,795
(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
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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 three months ended March 31, 2021 .
During March 2020, the Company purchased U.S. Treasury securities that are scheduled to mature between April 2021 and June 2021. The Company has 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 has 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.
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Long-lived Assets Measured at Fair Value in 20 2 1
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 three months ended March 31, 2021:
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 three months ended March 31, 2021, the Company recognized impairments of real estate of $ 57,182 related to three 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 three months ended March 31, 2021, the Company adjusted the combined negative equity in Asheville Mall and Park Plaza to zero 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 three months ended March 31, 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
$
114,300
$
—
$
—
$
114,300
$
133,644
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During the three months ended March 31, 2020, the Company recognized impairments of real estate of $ 133,644 related to two malls:
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
$
133,644
$
114,300
(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 %.
Note 7 – Dispositions and Held for Sale
The Company evaluates its disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity . 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.
2021 Dispositions
The Company realized a loss of $ 299 related to the sale of an outparcel during the three months ended March 31, 2021.
2020 Dispositions
The Company realized a gain of $ 140 related to the sale of an outparcel during the three months ended March 31, 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 March 31, 2021, the Company had investments in 29 entities, which are accounted for using the equity method of accounting. The Company's ownership interest in these unconsolidated affiliates ranges from 20 % to 65 %. Of these entities, 17 are owned in 50/50 joint ventures.
2021 Activity - Unconsolidated Affiliates
Asheville Mall CBMS, LLC and Park Plaza Mall CBMS, LLC
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During the three months ended March 31, 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 zero , which represents the estimated fair value of the Company’s investments in these properties, and recognized a gain on deconsolidation of $ 55,131 .
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 $ 54,260 at March 31, 2021.
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 $ 52,898 at March 31, 2021.
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 March 31, 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.
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 $ 689,695 at March 31, 2021.
Condensed Combined Financial Statements - Unconsolidated Affiliates
Condensed combined financial statement information of the unconsolidated affiliates is as follows:
March 31,
2021
December 31, 2020
ASSETS:
Investment in real estate assets
$
2,433,766
$
2,346,124
Accumulated depreciation
( 885,045
)
( 862,435
)
1,548,721
1,483,689
Developments in progress
32,780
28,138
Net investment in real estate assets
1,581,501
1,511,827
Other assets
187,993
174,966
Total assets
$
1,769,494
$
1,686,793
LIABILITIES:
Mortgage and other indebtedness, net
$
1,574,879
$
1,439,454
Other liabilities
60,101
45,280
Total liabilities
1,634,980
1,484,734
OWNERS' EQUITY:
The Company
126,301
132,350
Other investors
8,213
69,709
Total owners' equity
134,514
202,059
Total liabilities and owners’ equity
$
1,769,494
$
1,686,793
Three Months Ended March 31,
2021
2020
Total revenues
$
58,756
$
60,514
Net income (loss) (1)
$
( 3,321
)
$
5,043
(1)
The Company's pro rata share of net income (loss) is $( 3,076 ) and $ 1,018 for the three months ended March 31, 2021 and 2020, respectively.
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Variable Interest Entities
In accordance with the guidance in ASU 2015-02, Amendments to the Consolidation Analysis , and ASU 2016-17, Interests Held Through Related Parties That Are under Common Control, 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 March 31, 2021, the Company had investments in 12 consolidated VIEs with ownership interests ranging from 50 % to 92 %.
Unconsolidated VIEs
The table below lists the Company's unconsolidated VIEs as of March 31, 2021:
Unconsolidated VIEs:
Investment in
Real Estate
Joint
Ventures
and
Partnerships
Maximum
Risk of Loss
Ambassador Infrastructure, LLC (1)
$
—
$
8,250
Asheville Mall CBMS, LLC
—
—
Atlanta Outlet JV, LLC (1)
25,567
30,135
CBL-T/C, LLC
69,478
69,478
CBL-TRS Joint Venture, LLC
19,667
19,667
Continental 425 Fund LLC
4,878
4,878
EastGate Storage, LLC (1)
507
3,757
El Paso Outlet Center Holding, LLC
10,315
10,315
Fremaux Town Center JV, LLC
7,180
7,180
Hamilton Place Self Storage (1)
1,092
4,593
Louisville Outlet Shoppes, LLC (1)
( 10,891
)
8,752
Mall of South Carolina L.P.
( 13,827
)
—
Mall of South Carolina Outparcel L.P.
( 2,222
)
—
Park Plaza Mall CBMS, LLC
—
—
Parkdale Self Storage, LLC (1)
711
7,211
PHG-CBL Lexington, LLC
35
35
Self Storage at Mid Rivers, LLC (1)
524
3,518
Shoppes at Eagle Point, LLC (1)
17,605
30,345
Vision - CBL Hamilton Place, LLC
3,800
3,800
$
134,419
$
211,914
(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.
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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 March 31, 2021 .
Debt of the Operating Partnership
M ortgage and other indebtedness, net, consisted of the following:
March 31, 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
$
972,553
5.07
%
$
1,120,203
5.12
%
Total fixed-rate debt
972,553
5.07
%
1,120,203
5.12
%
Variable-rate debt:
Recourse loans on operating Properties
67,611
4.65
%
68,061
4.69
%
Total variable-rate debt
67,611
4.65
%
68,061
4.69
%
Total fixed-rate and variable-rate debt
1,040,164
5.04
%
1,188,264
5.10
%
Unamortized deferred financing costs (2)
( 3,194
)
( 3,433
)
Total mortgage and other indebtedness, net
$
1,036,970
$
1,184,831
Mortgage and other indebtedness included in liabilities subject to compromise consisted of the following:
March 31, 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
%
Total variable-rate debt
1,114,676
9.50
%
1,114,676
9.50
%
Total fixed-rate and variable-rate debt
2,489,676
7.25
%
2,489,676
7.25
%
Unpaid accrued interest (5)
57,644
57,644
Prepetition unsecured or under secured liabilities
4,034
4,170
Total liabilities subject to compromise
$
2,551,354
$
2,551,490
(1)
Weighted-average interest rate excludes amortization of deferred financing costs.
( 2 )
Unamortized deferred financing costs of $ 2,841 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 March 31, 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 March 31, 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 March 31, 2021 and December 31, 2020.
(5)
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 $ 2,085,230 at March 31, 2021.
Senior Unsecured Notes (1)
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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.
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 March 31, 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 .
The Operating Partnership is required to pay an annual facility fee, to be paid quarterly, which ranges from 0.25 % to 0.35 %, based on the unused capacity of the line of credit. The terms of the facility also require the principal balance on the term loan to be reduced by $ 35,000 per year in quarterly installments. 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. At March 31, 2021, the secured line of credit had an outstanding balance of $ 675,926 . 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 four malls, two associated centers and four 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. In January 2019, the Combined Guarantor Subsidiaries entered into a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement.
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 greater than or equal to $ 50,000 of the Operating Partnership 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 and operating expense obligations.
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Loans in Default
As of March 31, 2021, two 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 March 2021, the lenders under each of these loans accelerated the outstanding amount 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 March 31, 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
30,942
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 $ 825,856 at March 31, 2021.
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.
Scheduled Principal Payments
As of March 31, 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)
$
330,456
2022
408,399
2023
1,511,219
2024
343,397
2025
37,612
Thereafter
763,796
Total (2)
3,394,879
Principal balance of loans with maturity date prior to March 31, 2021 (3)
134,960
Total mortgage and other indebtedness, net
$
3,529,839
(1)
Reflects scheduled principal amortization and balloon payments for the fiscal period April 1, 2021 through December 31, 2021.
(2)
Includes $ 2,489,676 of liabilities subject to compromise in the accompanying condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020, and as the expected maturity date is subject to the outcome of the Chapter 11 Cases, the original, legal maturity dates are reflected in this table.
( 3 )
Represents the aggregate principal balance as of March 31, 2021 of the loans secured by Greenbrier Mall and Parkdale Mall & Crossing, which are both in default. The Company is in discussions with the lender regarding the loan secured by Parkdale Mall & Crossing. The loan secured by Greenbrier Mall matured in December 2019 and had a balance of $ 61,647 as of March 31, 2021. The loan secured by Parkdale Mall & Crossing matured in March 2021 and had a balance of $ 73,313 as of March 31, 2021.
Of the $ 330,456 of scheduled principal payments for the remainder of 2021, $ 289,657 relates to the maturing principal balances of six operating Property loans.
The loan secured by Hamilton Crossing matured in April 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 2.8 years as of March 31, 2021 and 3.0 years as of December 31, 2020.
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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.
Information on the Company’s segments is presented as follows:
Three Months Ended March 31, 2021
Malls
All
Other (1)
Total
Revenues (2)
$
119,328
$
13,856
$
133,184
Property operating expenses (3)
( 45,595
)
( 3,539
)
( 49,134
)
Interest expense
( 23,170
)
( 960
)
( 24,130
)
Loss on sales of real estate assets
—
( 299
)
( 299
)
Segment profit
$
50,563
$
9,058
59,621
Depreciation and amortization
( 48,112
)
General and administrative expense
( 12,612
)
Litigation settlement
858
Interest and other income
776
Loss on impairment
( 57,182
)
Gain on deconsolidation
55,131
Reorganization items
( 22,933
)
Income tax provision
( 751
)
Equity in losses of unconsolidated affiliates
( 3,076
)
Net loss
$
( 28,280
)
Capital expenditures (4)
$
3,491
$
637
$
4,128
Three Months Ended March 31, 2020
Malls
All
Other (1)
Total
Revenues (2)
$
153,351
$
14,223
$
167,574
Property operating expenses (3)
( 52,098
)
( 3,267
)
( 55,365
)
Interest expense
( 18,147
)
( 28,845
)
( 46,992
)
Other expense
—
( 158
)
( 158
)
Gain (loss) on sales of real estate assets
( 25
)
165
140
Segment profit (loss)
$
83,081
$
( 17,882
)
65,199
Depreciation and amortization
( 55,902
)
General and administrative expense
( 17,836
)
Interest and other income
2,397
Loss on impairment
( 133,644
)
Income tax provision
( 526
)
Equity in earnings of unconsolidated affiliates
1,018
Net loss
$
( 139,294
)
Capital expenditures (4)
$
18,056
$
2,276
$
20,332
Total assets
Malls
All
Other (1)
Total
March 31, 2021
$
3,497,709
$
782,478
$
4,280,187
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.
(4)
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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 no potential dilutive common shares and there were no anti-dilutive shares for the three months ended March 31, 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 months ended March 31, 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 no potential dilutive common units and there were no 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 months ended March 31, 2021 and 2020.
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The following table presents basic and diluted EPU for common and special common units for the three months ended March 31, 2021 and 2020.
Three Months Ended March 31,
2021
2020
Net Loss Attributable to Common Unitholders
$
( 27,461
)
$
( 150,310
)
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
)
L-SCUs
—
( 433
)
K-SCUs
—
( 844
)
Total Undistributed Loss Available to Common and Special Common Unitholders
$
( 27,461
)
$
( 152,730
)
Distributed Earnings:
Common units issued on conversion of SCUs
$
—
$
—
S-SCUs
—
1,143
L-SCUs
—
433
K-SCUs
—
844
Common Units
—
—
Undistributed Loss:
Common units issued on conversion of SCUs
$
—
$
—
S-SCUs
—
—
L-SCUs
—
—
K-SCUs
—
—
Common Units
( 27,461
)
( 152,730
)
Weighted Average:
Common units issued on conversion of SCUs
$
936
$
2,300
S-SCUs
1,561
1,561
L-SCUs
572
572
K-SCUs
869
1,137
Common Units
197,689
195,688
Basic EPU:
Common units issued on conversion of SCUs
$
—
$
—
S-SCUs
—
0.73
L-SCUs
—
0.76
K-SCUs
—
0.74
Common Units
( 0.14
)
( 0.78
)
Total Basic EPU
$
( 0.14
)
$
( 0.75
)
Diluted EPU:
Common units issued on conversion of SCUs
$
—
$
—
S-SCUs
—
0.73
L-SCUs
—
0.76
K-SCUs
—
0.74
Common Units
( 0.14
)
( 0.78
)
Total Diluted EPU
$
( 0.14
)
$
( 0.75
)
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.
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Note 12 – Contingencies
Litigation
In April 2019, the Company entered into a settlement agreement and release with respect to the class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. As of May 4, 2021, $ 8,422 in tenant credits related to the settlement agreement remain outstanding and are expected to expire on or before December 31, 2024. The Company received document requests in the third quarter of 2019, in the form of subpoenas, from the Securities and Exchange Commission and the Department of Justice regarding the Wave Lengths Hair Salons of Florida, Inc. litigation and other related matters. The Company cooperated in these matters and has been advised by the Securities and Exchange Commission and the Department of Justice that the agencies have closed their investigations.
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.
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
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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 .
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 March 31, 2021 and December 31, 2020:
As of March 31, 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)
March 31, 2021
December 31, 2020
West Melbourne I, LLC - Phase I
50 %
$
39,944
50 %
$
19,972
Feb-2025
(2)
$
200
$
201
West Melbourne I, LLC - Phase II
50 %
14,316
50 %
7,158
Feb-2025
(2)
72
72
Port Orange I, LLC
50 %
52,898
50 %
26,449
Feb-2025
(2)
264
266
Ambassador Infrastructure, LLC
65 %
8,250
100 %
8,250
Mar-2025
83
94
Shoppes at Eagle Point, LLC
50 %
34,435
35 %
(3)
12,740
Oct-2021
127
127
EastGate Storage, LLC
50 %
6,500
50 %
(4)
3,250
Dec-2022
33
33
Self Storage at Mid Rivers, LLC
50 %
5,939
50 %
(4)
2,994
Apr-2023
30
30
Parkdale Self Storage, LLC
50 %
6,318
100 %
(5)
6,500
Jul-2024
65
65
Hamilton Place Self Storage, LLC
54 %
6,668
50 %
(4)
3,501
Sep-2024
35
35
Atlanta Outlet JV, LLC
50 %
4,568
100 %
4,568
Nov-2023
—
—
Louisville Outlet Shoppes, LLC
50 %
8,752
100 %
8,752
Oct-2021
—
—
Total guaranty liability
$
909
$
923
(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.
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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 March 31, 2021,there is a default under each of the guaranteed loans above as a result of the filing of the Chapter 11 Cases, except for Ambassador Infrastructure, LLC, Louisville Outlet Shoppes, LLC, Port Orange I, LLC, Shoppes at Eagle Point, LLC, West Melbourne I, LLC – Phase I and West Melbourne I, LLC – Phase II.
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 $ 22,000 , which decreases by $ 800 annually until the guaranteed amount is reduced to $ 10,000 . The maximum guaranteed obligation was $ 10,800 as of March 31, 2021. 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 months ended March 31, 2021 and March 31, 2020.
For the three months ended March 31, 2021 and March 31, 2020, the Company evaluated each guaranty, listed in the table above, individually by looking at 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 months ended March 31, 2021 and March 31, 2020.
Performance Bonds
The Company has issued various bonds that it would have to satisfy in the event of non-performance. The total amount outstanding on these bonds was $ 412 at March 31, 2021 and December 31, 2020.
Note 13 – Share-Based Compensation
As of March 31, 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 2021 Plan.
Restricted Stock Awards
Share-based compensation expense related to the restricted stock awards was $ 297 and $ 1,144 for the three months ended March 31, 2021 and 2020, respectively. Share-based compensation cost capitalized as part of real estate assets was $ 4 and $ 7 for the three months ended March 31, 2021 and 2020, respectively.
A summary of the status of the Company’s nonvested restricted stock awards as of March 31, 2021, and changes during the three months ended March 31, 2021, is presented below:
Shares
Weighted-
Average
Grant-Date
Fair Value
Nonvested at January 1, 2021
1,519,606
$
2.15
Vested
( 480,463
)
$
3.11
Forfeited
( 1,518
)
$
4.41
Nonvested at March 31, 2021
1,037,625
$
1.71
As of March 31, 2021, there was $ 1,634 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 2.0 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.
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Annual Restricted Stock Awards
Under the LTIP, annual restricted stock awards consist of shares of time-vested restricted stock awarded based on a qualitative evaluation of the performance of the Company and the named executive officer during the fiscal year. Annual restricted stock awards under the LTIP, which are included in the totals reflected in the preceding table, vest 20 % on the date of grant with the remainder vesting in four equal annual installments. 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 no PSUs granted in the first quarter of 2021. The outstanding PSUs at March 31, 2021 was 1,103,537 , which solely relates to the PSUs granted in the first quarter of 2019. Of that amount, 566,862 shares 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. None of the PSUs outstanding at March 31, 2021 were vested.
Shares earned pursuant to the PSU awards vest 60 % at the conclusion of the performance period while the remaining 40 % of the PSU award vests 20 % on each of the first two anniversaries thereafter.
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 $ 478 for the three months ended March 31, 2021 and 2020. Unrecognized compensation costs related to the PSUs was $ 453 as of March 31, 2021, which is expected to be recognized over a weighted-average period of 1.6 years.
The following table summarizes the assumptions used in the Monte Carlo simulation pricing model related to the PSUs:
2019 PSUs
Grant date
February 11, 2019
Fair value per share on valuation date (1)
$
4.74
Risk-free interest rate (2)
2.54
%
Expected share price volatility (3)
60.99
%
( 1 )
The value of the PSU awards is estimated on the date of grant using a Monte Carlo simulation model. The valuation consists of computing the fair value using CBL's simulated stock price as well as TSR over a three-year performance period. The award is modeled as a contingent claim in that the expected return on the underlying shares is risk-free and the rate of discounting the payoff of the award is also risk-free. The weighted-average fair value per share related to the 2019 PSUs classified as equity consists of 357,800 shares at a fair value of $ 2.45 per share (which relate to relative TSR) and 178,875 shares at a fair value of $ 2.29 per share (which relate to absolute TSR).
( 2 )
The risk-free interest rate was based on the yield curve on zero-coupon U.S. Treasury securities in effect as of the valuation date, which is the grant date listed above.
( 3 )
The computation of expected volatility was based on a blend of the historical volatility of CBL's shares of common stock based on annualized daily total continuous returns over a three-year period for the 2019 PSUs and implied volatility data based on the trailing month average of daily implied volatilities implied by stock call option contracts that were both closest to the terms shown and closest to the money.
Note 14 – Noncash Investing and Financing Activities
The Company’s noncash investing and financing activities were as follows:
Three Months Ended March 31,
2021
2020
Additions to real estate assets accrued but not yet paid
$
3,190
$
19,478
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 April 2021, the Company filed the Proposed Plan and the Proposed Disclosure Statement with the Bankruptcy Court to implement the restructuring transactions. See Note 2 for additional information.
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During April 2021, the Company purchased $ 49,998 in U.S. Treasury securities that mature in July 2021 . The Company designated the U.S. Treasury securities purchased as AFS.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.