CBL & ASSOCIATES PROPERTIES INC 10-Q

ITEM 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and accompanying notes that are included in this Form 10-Q. Capitalized terms used, but not defined, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations have the same meanings as defined in the notes to the condensed consolidated financial statements. Unless stated otherwise or the context otherwise requires, references to the “Company,” “we,” “us” and “our” mean CBL & Associates Properties, Inc. and its subsidiaries. Certain statements made in this section or elsewhere in this report may be deemed “forward-looking statements” within the meaning of the federal securities laws. All statements other than statements of historical fact should be considered to be forward-looking statements. In many cases, these forward-looking statements may be identified by the use of words such as “will,” “may,” “should,” “could,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “projects,” “goals,” “objectives,” “targets,” “predicts,” “plans,” “seeks,” and variations of these words and similar expressions. Any forward-looking statement speaks only as of the date on which it is made and is qualified in its entirety by reference to the factors discussed throughout this report. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance or results and we can give no assurance that these expectations will be attained. It is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of known and unknown risks and uncertainties. Currently, a significant factor that could cause actual outcomes to differ materially from our forward-looking statements is the adverse effect of the COVID-19 pandemic, and state and/or local regulatory responses to control it, on our financial condition, operating results and cash flows, our tenants and their customers, the real estate market in which we operate, the global economy and the financial markets. The extent to which the COVID-19 pandemic impacts us and our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the direct and indirect economic effects of the pandemic and containment measures, and potential changes in consumer behavior, among others. In addition to the risk factors described in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, such known risks and uncertainties include, without limitation: • general industry, economic and business conditions; • interest rate fluctuations; • costs and availability of capital, including debt, and capital requirements; • costs and availability of real estate; • inability to consummate acquisition opportunities and other risks associated with acquisitions; • competition from other companies and retail formats; • changes in retail demand and rental rates in our markets; • shifts in customer demands including the impact of online shopping; • tenant bankruptcies or store closings; • changes in vacancy rates at our properties; • changes in operating expenses; • changes in applicable laws, rules and regulations; • disposition of real property; • uncertainty and economic impact of pandemics, epidemics or other public health emergencies or fear of such events, such as the COVID-19 pandemic and related governmental responses; • cyber-attacks or acts of cyber-terrorism; • the ability to obtain suitable equity and/or debt financing and the continued availability of financing, in the amounts and on the terms necessary to support our future refinancing requirements and business; and • other risks referenced from time to time in filings with the Securities and Exchange Commission (“SEC”) and those factors listed or incorporated by reference into this report. This list of risks and uncertainties is only a summary and is not intended to be exhaustive. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information. 22 Table of Contents Fresh Start Accounting Upon emergence from bankruptcy, we qualified for and adopted fresh start accounting in accordance with Accounting Standards Codification Topic 852 – Reorganizations (“ASC 852”), which resulted in our becoming a new entity for financial reporting purposes. O ur financial results for the three months ended March 31, 2021 are referred to as those of the “Predecessor.” Our financial results for the three months ended March 31, 2022 are referred to as those of the “Successor.” Our results of operations as reported in our condensed consolidated financial statements for these periods are prepared in accordance with GAAP. See Note 3 in the annual report on Form 10-K for the year ended December 31, 2021 for additional information. Executive Overview We are a self-managed, self-administered, fully integrated REIT that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, outlet centers, lifestyle centers, open-air centers and other properties. See Note 1 to the condensed consolidated financial statements for information on our property interests as of March 31, 2022. We have elected to be taxed as a REIT for federal income tax purposes. The first quarter of 2022 demonstrated continued strong improvement operationally with encouraging growth in occupancy as well as strong traffic and positive in-line sales at our centers. For the three months ended March 31, 2022, sales increased 0.9% as compared with the three months ended March 31, 2021. Percentage rents and short-term rents increased during the period due to the continued positive sales growth. Improvements in the leasing environment, including increasing tenant demand and significantly lower bankruptcy-related store closures, drove healthy occupancy growth. We had a net loss for the three months ended March 31, 2022 of $43.2 million, as compared to a net loss for the three months ended March 31, 2021 of $28.3 million. We recorded a net loss attributable to common shareholders for the three months ended March 31, 2022 of $40.7 million, as compared to a net loss attributable to common shareholders for the three months ended March 31, 2021 of $26.8 million. Significant items that affected the comparability between the three-month periods include: ▪ Items increasing net loss for the three months ended March 31, 2022 compared to the prior-year period: • Depreciation and amortization expense was $20.8 million higher; • Interest expense was $66.5 million higher; • Gain on deconsolidation was $18.9 million lower; • General and administrative expense was $5.5 million higher. ▪ Items decreasing net loss for the three months ended March 31, 2022 compared to the prior-year period: • Loss on impairment was $57.2 million lower; • Reorganization items, net, was $21.4 million lower; • Equity in earnings was $11.6 million higher. Our focus is on continuing to execute our strategy to transform our properties into dominant centers that offer a mix of retail, service, dining, entertainment and other non-retail uses, primarily through the re-tenanting of former anchor locations as well as diversification of in-line tenancy. This operational strategy is also supported by our balance sheet strategy focused on reducing overall debt, extending our debt maturity schedule and lowering our overall cost of borrowings to limit maturity risk, improve net cash flow and enhance enterprise value. While the industry and our Company continue to face challenges, some of which may not be under our control, we believe that the strategies in place to redevelop our properties and diversify our tenant mix will contribute to stabilization of our portfolio and revenues in future years. Same-center NOI and FFO are non-GAAP measures. For a description of same-center NOI, a reconciliation from net income (loss) to same-center NOI, and an explanation of why we believe this is a useful performance measure, see Non-GAAP Measure - Same-center Net Operating Income in Results of Operations . For a description of FFO, a reconciliation from net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders, and an explanation of why we believe this is a useful performance measure, see Non-GAAP Measure - Funds from Operations . COVID-19 On March 11, 2020, the World Health Organization classified COVID-19 as a pandemic. In response to COVID-19, we initially implemented strict procedures and guidelines for our employees, tenants and property visitors based on CDC and other health agency recommendations. Our properties continue to update these policies and procedures, following any new mandates and regulations, as required. The safety and health of our customers, employees and tenants remains a top priority. 23 Table of Contents R esults of Operations Properties that were in operation for the entire year during 2021 and the three months ended March 31, 2022 are referred to as the “Comparable Properties.” Since January 1, 2021, we have deconsolidated four properties and disposed of six properties: Deconsolidations Property Location Date of Deconsolidation Asheville Mall (1) Asheville, NC January 2021 Park Plaza (1) (2) Little Rock, AR March 2021 EastGate Mall (1) Cincinnati, OH December 2021 Greenbrier Mall (1) Chesapeake, VA March 2022 (1) We deconsolidated the property due to a loss of control when the property was placed into receivership in connection with the foreclosure process. ( 2 ) In October 2021, the foreclosure process was completed. Dispositions Property Location Sales Date The Residences at Pearland Town Center Pearland, TX October 2021 EastGate Mall Self Storage (1) Cincinnati, OH November 2021 Hamilton Place Self Storage (1) Chattanooga, TN November 2021 Mid Rivers Mall Self Storage (1) St. Peters, MO November 2021 Parkdale Mall Self Storage (1) Beaumont, TX November 2021 Springs at Port Orange (1) Port Orange, FL December 2021 (1) The property was owned by a joint venture that was accounted for using the equity method of accounting. Comparison of the Three Months Ended March 31, 2022 to the Three Months Ended March 31, 2021 Revenues Successor Predecessor Three Months Ended March 31, Three Months Ended March 31, Comparable Properties 2022 2021 Change Core Non-core Deconsolidation Dispositions Rental revenues $ 135,332 $ 128,175 $ 7,157 $ 11,641 $ (30 ) $ (4,320 ) $ (134 ) Management, development and leasing fees 1,769 1,659 110 110 — — — Other 3,001 3,350 (349 ) (239 ) 7 (89 ) (28 ) Total revenues $ 140,102 $ 133,184 $ 6,918 $ 11,512 $ (23 ) $ (4,409 ) $ (162 ) Rental revenues from the Comparable Properties increased primarily due to a significantly higher estimate of uncollectable revenues in the prior year period due to the impacts of the COVID-19 pandemic, as well as prior year rent concessions to tenants in bankruptcy or that were struggling financially due to the impacts of the COVID-19 pandemic. The increase was partially offset by higher amortization of net above market leases due to the adoption of fresh start accounting upon our emergence from bankruptcy. Percentage rent increased due to higher sales in the current period as sales and traffic have improved as vaccination rates increased and government restrictions were lessened. 24 Table of Contents Operating Expenses Successor Predecessor Three Months Ended March 31, Three Months Ended March 31, Comparable Properties 2022 2021 Change Core Non-core Deconsolidation Dispositions Property operating $ (23,344 ) $ (21,802 ) $ (1,542 ) $ (2,889 ) $ 73 $ 1,137 $ 137 Real estate taxes (14,435 ) (16,551 ) 2,116 1,474 64 514 64 Maintenance and repairs (10,566 ) (10,781 ) 215 (133 ) 1 340 7 Property operating expenses (48,345 ) (49,134 ) 789 (1,548 ) 138 1,991 208 Depreciation and amortization (68,943 ) (48,112 ) (20,831 ) (21,155 ) (105 ) 541 (112 ) General and administrative (18,074 ) (12,612 ) (5,462 ) (5,462 ) — — — Loss on impairment — (57,182 ) 57,182 56,888 294 — — Litigation settlement 81 858 (777 ) (777 ) — — — Total operating expenses $ (135,281 ) $ (166,182 ) $ 30,901 $ 27,946 $ 327 $ 2,532 $ 96 Property operating expenses at the Comparable Properties increased primarily due to the actions taken in the prior year period to reduce operating expenses to mitigate the impact of mandated property closures and the effects of the COVID-19 pandemic, including a reduction-in-force and other operating expense initiatives. The increase in depreciation and amortization expense related to the Comparable Properties primarily relates to a new basis in depreciable assets and intangible in-place lease assets resulting from the adoption of fresh start accounting upon our emergence from bankruptcy. General and administrative expenses increased primarily due to an increase in compensation expense, including share-based compensation expense, as we got back to normal operations following the early impacts of COVID-19, as well as our emergence from bankruptcy. In the first quarter of 2021, we recognized $57.2 million of loss on impairment of real estate to write down the book value of three malls. See Note 5 to the condensed consolidated financial statements for more information. Other Income and Expenses Interest expense increased $66.5 million during the three months ended March 31, 2022 compared to the prior-year period primarily due to the recognition of debt discount accretion of $62.7 million on property-level debt that is approaching maturity and an increase in interest expense on the secured term loan, the exchangeable notes and the secured notes due to not recognizing interest expense on corporate debt in the prior-year period subsequent to the bankruptcy filing. The increase was partially offset by a decrease of $12.9 million related to the reversal of previously recognized default interest expense. The property-level debt discounts were recognized in conjunction with recording our property-level debt at fair value upon the adoption of fresh start accounting. For the three months ended March 31, 2022, we recorded a $36.3 million gain on deconsolidation related to a mall that was deconsolidated due to a loss of control when the mall was placed into receivership in connection with the foreclosure process. For the three months ended March 31, 2021, we recorded a $55.1 million gain on deconsolidation related to two malls that were deconsolidated due to a loss of control when each mall was placed into receivership in connection with the foreclosure process. For the three months ended March 31, 2022, we recorded $1.6 million of reorganization items, net, which mostly consisted of professional fees and U.S. Trustee fees directly related to the bankruptcy filing. For the three months ended March 31, 2021, we recorded $22.9 million of reorganization items, which consisted of professional and legal fees directly related to the bankruptcy filing. Equity in earnings of unconsolidated affiliates improved $11.6 million during the three months ended March 31, 2022 compared to the prior-year period. The improvement was primarily due to the application of fresh start accounting and recognizing equity in earnings on unconsolidated affiliates that had equity in losses in the prior-year period. Non-GAAP Measure Same-center Net Operating Income NOI is a supplemental non-GAAP measure of the operating performance of our shopping centers and other properties. We define NOI as property operating revenues (rental revenues and other income) less property operating expenses (property operating, real estate taxes and maintenance and repairs). 25 Table of Contents We compute NOI based on the Operating Partnership's pro rata share of both consolidated and unconsolidated p roperties. We believe that presenting NOI and same-center NOI (described below) based on our Operating Partnership’s pro rata share of both consolidated and unconsolidated p roperties is useful since we conduct substantially all our business through our Operating Partnership and, therefore, it reflects the performance of the p roperties in absolute terms regardless of the ratio of ownership interests of our common shareholders and the noncontrolling interest in the Operating Partnership. Our definition of NOI may be different than that used by other companies, and accordingly, our calculation of NOI may not be comparable to that of other companies. Since NOI includes only those revenues and expenses related to the operations of our shopping center properties, we believe that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates, sales at our properties and operating costs and the impact of those trends on our results of operations. Our calculation of same-center NOI excludes lease termination income, straight-line rent adjustments, amortization of above and below market lease intangibles and write-offs of landlord inducement assets in order to enhance the comparability of results from one period to another. We include a property in our same-center pool when we have owned all or a portion of the property since January 1 of the preceding calendar year and it has been in operation for both the entire preceding calendar year and current year-to-date period. New properties are excluded from same-center NOI until they meet these criteria. Properties excluded from the same-center pool that would otherwise meet these criteria are categorized as excluded properties. We exclude properties for which we are working or intend to work with the lender on a restructure of the terms of the loan secured by the property or convey the secured property to the lender (“Excluded Properties”). Due to the exclusions noted above, same-center NOI should only be used as a supplemental measure of our performance and not as an alternative to GAAP operating income (loss) or net income (loss). A reconciliation of our same-center NOI to net loss for the three-month periods ended March 31, 2022 and 2021 is as follows (in thousands): Successor Predecessor Three Months Ended March 31, Three Months Ended March 31, 2022 2021 Net loss $ (43,223 ) $ (28,280 ) Adjustments: (1) Depreciation and amortization 76,564 61,061 Interest expense 106,586 33,012 (Gain) loss on sales of real estate assets (16 ) 299 Gain on sales of real estate assets of unconsolidated affiliates (629 ) — Adjustment for unconsolidated affiliates with negative investment (12,547 ) — Gain on deconsolidation (36,250 ) (55,131 ) Loss on impairment — 57,182 Litigation settlement (81 ) (858 ) Reorganization items, net 1,571 22,933 Income tax provision 801 751 Lease termination fees (1,395 ) (1,111 ) Straight-line rent and above- and below-market lease amortization 3,240 3,211 Net loss attributable to noncontrolling interests in other consolidated subsidiaries 2,486 819 General and administrative expenses 18,074 12,612 Management fees and non-property level revenues (1,086 ) (2,580 ) Operating Partnership's share of property NOI 114,095 103,920 Non-comparable NOI (2,979 ) (3,569 ) Total same-center NOI $ 111,116 $ 100,351 (1) Adjustments are based on our Operating Partnership's pro rata ownership share, including our share of unconsolidated affiliates and excluding noncontrolling interests' share of consolidated properties. Same-center NOI increased 10.7% for the three months ended March 31, 2022 as compared to the prior-year period. The $10.8 million increase for the three months ended March 31, 2022 compared to the same period in 2021 primarily consisted of a $12.8 million increase in revenues offset by a $2.0 million increase in operating expenses. Rental revenues increased $12.3 million during the quarter primarily due to a positive variance in uncollectable revenues in the current period as compared to the prior year period, as well as prior year rent concessions to tenants that are in bankruptcy or were struggling financially due to the impacts of the COVID-19 pandemic. Percentage rent increased due to higher sales in the current period as sales and traffic have improved as vaccination rates increased and government restrictions were lessened. 26 Table of Contents Operational Review The shopping center business is, to some extent, seasonal in nature with tenants typically achieving the highest levels of sales during the fourth quarter due to the holiday season, which generally results in higher percentage rents in the fourth quarter. Additionally, malls, lifestyle centers and outlet centers earn a large portion of their rents from short-term tenants during the holiday period. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. We derive the majority of our revenues from the malls, lifestyle centers and outlet centers. The sources of our revenues by property type were as follows: Successor Predecessor Three Months Ended March 31, Three Months Ended March 31, 2022 2021 Malls, Lifestyle Centers and Outlet Centers 86.7 % 89.6 % All Other 13.3 % 10.4 % Inline and Adjacent Freestanding Store Sales Inline and adjacent freestanding store sales include reporting mall, lifestyle center and outlet center tenants of 10,000 square feet or less and exclude license agreements, which are retail leases that are temporary or short-term in nature and generally last more than three months but less than twelve months. The following is a comparison of our same-center sales per square foot for mall, lifestyle center and outlet center tenants of 10,000 square feet or less (Excluded Properties are not included in sales metrics): Successor Predecessor Sales Per Square Foot for the Trailing Twelve Months Ended March 31, Sales Per Square Foot for the Trailing Twelve Months Ended March 31, 2022 2021 (1) % Change Mall, Lifestyle Center and Outlet Center same-center sales per square foot $ 447 $ 397 12.6% (1) Due to the temporary property and store closures that occurred during 2020 related to COVID-19, the majority of our tenants did not report sales for the full reporting period. As a result, we are not able to provide a complete measure of sales per square foot for periods in the year ended December 31, 2020. Sales per square foot for the trailing twelve months ended March 31, 2021 is comprised of sales reported for the periods April through December 2019 and January through March 31, 2021. Occupancy Our portfolio occupancy is summarized in the following table (Excluded Properties are not included in occupancy metrics): Successor Predecessor Three Months Ended March 31, Three Months Ended March 31, 2022 2021 Total portfolio 88.3% 85.4% Malls, Lifestyle Centers and Outlet Centers: Total malls 86.4% 83.0% Total lifestyle centers 86.3% 82.8% Total outlet centers 87.0% 85.4% Total same-center malls, lifestyle centers and outlet centers 86.5% 83.2% All Other: Total open-air centers 94.4% 92.0% Total other 89.0% 98.7% 27 Table of Contents Bankruptcy-related store closures impacted March 31, 2022 occupancy by approximately 11 basis points or 17,000 square feet. Leasing The following is a summary of the total square feet of leases signed in the three-month periods ended March 31, 2022 and 2021: Successor Predecessor Three Months Ended March 31, Three Months Ended March 31, 2022 2021 Operating portfolio: New leases 234,890 144,197 Renewal leases 816,806 594,582 Development portfolio: New leases — 3,300 Total leased 1,051,696 742,079 Average annual base rents per square foot are based on contractual rents in effect as of March 31, 2022 and 2021, including the impact of any rent concessions. Average annual base rents per square foot for comparable small shop space of less than 10,000 square feet were as follows for each property type: Successor Predecessor Three Months Ended March 31, Three Months Ended March 31, 2022 2021 Total portfolio $ 24.98 $ 25.97 Malls, Lifestyle Centers and Outlet Centers (1) : Total same-center malls, lifestyle centers and outlet centers 29.43 30.99 Total malls 30.16 31.98 Total lifestyle centers 27.25 27.29 Total outlet centers 26.22 26.92 All Other: Total open-air centers 15.03 15.08 Total other 19.20 19.25 (1) Excluded Properties are not included. Results from new and renewal leasing of comparable small shop space of less than 10,000 square feet during the three-month period ended March 31, 2022 for spaces that were previously occupied, based on the contractual terms of the related leases inclusive of the impact of any rent concessions, are as follows: Property Type Square Feet Prior Gross Rent PSF New Initial Gross Rent PSF % Change Initial New Average Gross Rent PSF (1) % Change Average Quarter-to-Date: All Property Types (2) 552,514 $ 33.30 $ 29.11 (12.6 )% $ 29.55 (11.3 )% Malls, Lifestyle Centers & Outlet Centers 537,896 33.66 29.32 (12.9 )% 29.77 (11.6 )% New leases 62,569 47.78 39.55 (17.2 )% 42.94 (10.1 )% Renewal leases 475,327 31.80 27.98 (12.0 )% 28.04 (11.8 )% (1) Average gross rent does not incorporate allowable future increases for recoverable common area expenses. (2) Includes malls, lifestyle centers, outlet centers, open-air centers and other. 28 Table of Contents New and renewal leasing activity of comparable small shop space of less than 10,000 square feet based on the lease commencement date is as follows: Number of Leases Square Feet Term (in years) Initial Rent PSF Average Rent PSF Expiring Rent PSF Initial Rent Spread Average Rent Spread Commencement 2022: New 51 135,676 6.64 $ 38.49 $ 41.36 $ 41.64 $ (3.15 ) (7.6 )% $ (0.28 ) (0.7 )% Renewal 313 972,148 2.53 29.99 30.15 32.78 (2.79 ) (8.5 )% (2.63 ) (8.0 )% Commencement 2022 Total 364 1,107,824 3.10 31.03 31.52 33.87 (2.84 ) (8.4 )% (2.35 ) (6.9 )% Commencement 2023: New 2 6,286 5.46 31.82 33.58 45.87 (14.05 ) (30.6 )% (12.29 ) (26.8 )% Renewal 58 138,436 2.69 53.55 53.81 53.52 0.03 0.1 % 0.29 0.5 % Commencement 2023 Total 60 144,722 2.78 52.61 52.93 53.18 (0.57 ) (1.1 )% (0.25 ) (0.5 )% Total 2022/2023 424 1,252,546 3.06 $ 33.53 $ 33.99 $ 36.10 $ (2.57 ) (7.1 )% $ (2.11 ) (5.8 )% Liquidity and Capital Resources In February 2022, we issued 10,982,795 shares of common stock to holders of the exchangeable notes in satisfaction of principal, accrued interest and the makewhole payment, and all the exchangeable notes were cancelled in accordance with the terms of the indenture. As of March 31, 2022, we had $335.7 million available in unrestricted cash and U.S. Treasury securities. Our total pro rata share of debt, excluding unamortized deferred financing costs and debt discounts, at March 31, 2022 was $2,982.3 million. We had $59.4 million in restricted cash at March 31, 2022 related to cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable, as well as amounts related to cash management agreements with lenders of certain property-level mortgage indebtedness, which are designated for debt service and operating expense obligations. During the three months ended March 31, 2022, we continued to reinvest the cash from maturing U.S. Treasury securities into new U.S. Treasury securities. We designated our U.S. Treasury securities as available-for-sale. As of March 31, 2022, our U.S. Treasury securities have maturities through May 2022. Subsequent to March 31, 2022, we reinvested proceeds from matured U.S. Treasury securities into new U.S. Treasury securities. See Note 14 to the condensed consolidated financial statements for additional information. In February 2022, the loan secured by Fayette Mall was modified to reduce the fixed interest rate to 4.25% and extend the maturity date through May 2023, with three one-year extension options, subject to certain requirements. As part of the modification, two ground leased outparcels were released from the collateral in exchange for the addition of the redeveloped former middle anchor location. In February 2022, we entered into a forbearance agreement with the lender regarding the default triggered by the bankruptcy filing related to the loan secured by The Outlet Shoppes at Atlanta. In March 2022, the loan secured by Cross Creek Mall was extended through May 2022. We remain in discussions with the lender regarding a long-term extension. As of March 31, 2022, the loan had an outstanding balance of $101.1 million. In March 2022, we deconsolidated Greenbrier Mall as a result of losing control when the property was placed in receivership. As of March 31, 2022, the loan secured by Greenbrier Mall had an outstanding balance of $61.6 million. In March 2022, we entered into a new $30.0 million non-recourse mortgage note payable, secured by York Town Center, that provides for a three-year term and a fixed interest rate of 4.75%. The monthly debt service is interest only for the first eighteen months. In March 2022, we entered into a forbearance agreement with the respective lenders regarding the default triggered by the bankruptcy filing related to the loans secured by Coastal Grand and Fremaux Town Center. Subsequent to March 31, 2022, we delivered a conditional notice of redemption to holders of the secured notes, pursuant to the terms of the indenture governing the secured notes, to redeem $60.0 million aggregate principal amount of the secured notes on May 26, 2022. The redemption is conditioned upon our receipt of cash proceeds from a new debt financing. There can be no assurances as to when or if such condition will be satisfied and we may waive the condition at our discretion. Subsequent to March 31, 2022, we closed on a new $40.0 million, ten-year, non-recourse loan secured by The Shoppes at Eagle Point. See Note 14 to the condensed consolidated financial statements for additional information. 29 Table of Contents Subsequent to March 31, 2022, the loan secured by Arbor Place was extended for an additional four years, with a new maturity date of May 2026. The interest rate will remain at the current fixed rate of 5.1%. See Note 14 to the condensed consolidated financial statements. Subsequent to March 31, 2022, we entered into a forbearance agreement with the lender regarding the default triggered by the bankruptcy filing related to the loan secured by The Outlet Shoppes of the Bluegrass. See Note 14 to the condensed consolidated financial statements. Our total share of consolidated, unconsolidated and other outstanding debt, excluding debt discounts and deferred financing costs, maturing during 2022, assuming all extension options are elected, is $444.1 million, and our total share of consolidated, unconsolidated and other outstanding debt, excluding debt discounts and deferred financing costs, that matured prior to 2022, which remains outstanding at March 31, 2022, is $271.8 million. We are in discussions with the existing lenders to modify and extend or otherwise refinance the loans. As of March 31, 2022, we had $1.15 billion of property-level debt and related obligations maturing or callable within the next 12 months from the issuance of the financial statements. Subsequent to March 31, 2022 and through the issuance of the financial statements, we obtained certain waivers and/or refinanced and extended the maturity dates for $0.2 billion of mortgage debt obligations. Accordingly, we still had $0.9 billion of property-level debt and related obligations maturing or callable within the next 12 months from the issuance of the financial statements, including $474 million reported within mortgage debt payable and $474 million related to unconsolidated affiliates, a portion of which is guaranteed by us as disclosed in Note 11 to the condensed consolidated financial statements. Such properties serving as collateral for this property-level debt and related obligations represent approximately 10-12% of our projected annual operating cash flows. We currently do not have sufficient liquidity to meet these obligations as they become due, which raises substantial doubt about our ability to continue as a going concern. Management intends to refinance and/or extend the maturity dates for such mortgage notes payable. In such instances where a refinancing and/or extension of maturity dates is unsuccessful we will repay certain of the mortgage notes based on the availability of liquidity and convey certain properties to the lender to satisfy the debt obligation. As a result, we have concluded that management’s plans are probable of being achieved to alleviate substantial doubt about our ability to continue as a going concern. We have prepared our financial statements in conformity with accounting principles generally accepted in the United States of America applicable to a going concern. The financial statements do not reflect any adjustments related to the recoverability of assets and satisfaction of liabilities that might be necessary should we be unable to continue as a going concern. Cash Flows - Operating, Investing and Financing Activities There was $245.2 million of cash, cash equivalents and restricted cash as of March 31, 2022, an increase of $9.0 million from December 31, 2021. Of this amount, $185.7 million was unrestricted cash and cash equivalents as of March 31, 2022. Also, at March 31, 2022, we had $150.0 million in U.S. Treasuries with maturities through May 2022. Our net cash flows are summarized as follows (in thousands): Successor Predecessor Three Months Ended March 31, Three Months Ended March 31, 2022 2021 Change Net cash provided by operating activities $ 42,429 $ 62,769 $ (20,340 ) Net cash used in investing activities (2,442 ) (2,564 ) 122 Net cash used in financing activities (31,025 ) (13,760 ) (17,265 ) Net cash flows $ 8,962 $ 46,445 $ (37,483 ) Cash Provided By Operating Activities Cash provided by operating activities decreased primarily because we did not pay interest in the prior-year period on the secured credit facility and senior unsecured notes as a result of the bankruptcy filing, but we did incur interest expense on our new corporate debt during the three months ended March 31, 2022. Cash Used In Investing Activities During the three months ended March 31, 2022, net cash used in investing activities decreased primarily due to an increase in distributions from unconsolidated affiliates as compared to the prior-year period. The decrease was partially 30 Table of Contents offset by lower proceeds from sales of real estate assets during the three months ended March 31, 2022 as compared to the prior-year period. Cash Used In Financing Activities During the three months ended March 31, 2022, net cash used in financing activities increased primarily due to principal payments on the secured term loan and mortgage notes payable . Debt The following tables summarize debt based on our pro rata ownership share, including our pro rata share of unconsolidated affiliates and excluding noncontrolling investors’ share of consolidated properties. Prior to consideration of unamortized deferred financing costs or debt discounts, of our $2,982.3 million outstanding debt at March 31, 2022, $1,674.7 million constituted non-recourse debt obligations and $1,307.6 million constituted recourse debt obligations. We believe the tables below provide investors and lenders a clearer understanding of our total debt obligations and liquidity (in thousands): March 31, 2022: Consolidated Noncontrolling Interests Other Debt (1) Unconsolidated Affiliates Total Weighted- Average Interest Rate (2) Fixed-rate debt: Non-recourse loans on operating properties (3) $ 847,208 $ (29,212 ) $ 153,719 $ 598,521 $ 1,570,236 4.61% Senior secured notes - at carrying value (fair value of $395,593 as of March 31, 2022) 395,000 — — — 395,000 10.00% Recourse loans on operating properties — — — 10,463 10,463 3.68% Total fixed-rate debt 1,242,208 (29,212 ) 153,719 608,984 1,975,699 5.68% Variable-rate debt: Non-recourse loans on operating properties 66,386 (13,703 ) — 51,753 104,436 3.09% Recourse loans on operating properties — — — 37,577 37,577 3.27% Secured term loan 864,611 — — — 864,611 3.75% Total variable-rate debt 930,997 (13,703 ) — 89,330 1,006,624 3.66% Total fixed-rate and variable-rate debt 2,173,205 (42,915 ) 153,719 698,314 2,982,323 5.00% Unamortized deferred financing costs (2,928 ) (5 ) — (2,012 ) (4,945 ) Debt discounts (4) (135,808 ) 17,276 — — (118,532 ) Total mortgage and other indebtedness, net $ 2,034,469 $ (25,644 ) $ 153,719 $ 696,302 $ 2,858,846 Mortgage and other indebtedness, net, consisted of the following: December 31, 2021: Consolidated Noncontrolling Interests Other Debt (1) Unconsolidated Affiliates Total Weighted- Average Interest Rate (2) Fixed-rate debt: Non-recourse loans on operating properties (3) $ 916,927 $ (29,381 ) $ 92,072 $ 600,598 $ 1,580,216 4.37% Senior secured notes - at carrying value (fair value of $395,395 as of December 31, 2021) 395,000 — — — 395,000 10.00% Exchangeable senior secured notes 150,000 — — — 150,000 7.00% Recourse loans on operating properties — — — 11,724 11,724 3.61% Total fixed-rate debt 1,461,927 (29,381 ) 92,072 612,322 2,136,940 5.84% Variable-rate debt: Recourse loans on operating properties 66,911 — — 90,691 157,602 2.97% Secured term loan 880,091 — — — 880,091 3.75% Total variable-rate debt 947,002 — — 90,691 1,037,693 3.63% Total fixed-rate and variable-rate debt 2,408,929 (29,381 ) 92,072 703,013 3,174,633 5.12% Unamortized deferred financing costs (1,567 ) — — (1,971 ) (3,538 ) Debt discounts (4) (199,153 ) 13,519 — — (185,634 ) Total mortgage and other indebtedness, net $ 2,208,209 $ (15,862 ) $ 92,072 $ 701,042 $ 2,985,461 (1) Represents the outstanding loan balance for properties that were deconsolidated due to a loss of control when the properties were placed into receivership in connection with the foreclosure process. ( 2 ) Weighted-average interest rate excludes amortization of deferred financing costs. ( 3 ) An unconsolidated affiliate has an interest rate swap on a notional amount outstanding of $40,965 as of March 31, 2022 and $41,310 as of December 31, 2021 related to a variable-rate loan on Ambassador Town Center to effectively fix the interest rate on this loan to a fixed-rate of 3.22%. ( 4 ) In conjunction with fresh start accounting, the Company estimated the fair value of its mortgage notes with the assistance of a third-party valuation advisor. This resulted in recognizing a debt discount upon emergence from bankruptcy on November 1, 2021. The debt discount is accreted over the term of the respective debt using the effective interest method. 31 Table of Contents The weighted-average remaining term of our total share of consolidated, unconsolidated and other debt, excluding debt discounts and deferred financing costs, was 3.1 years and 3.3 years at March 31, 2022 and December 31, 2021, respectively. The weighted-average remaining term of our pro rata share of consolidated, unconsolidated and other fixed-rate debt, excluding debt discounts and deferred financing costs, was 2.8 years and 3.2 years at March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022 and December 31, 2021, our pro rata share of consolidated and unconsolidated variable-rate debt, excluding debt discounts and deferred financing costs, represented 33.8% and 32.8%, respectively, of our total pro rata share of debt, excluding debt discounts and deferred financing costs. See Note 7 to the condensed consolidated financial statements for information concerning activity related to unconsolidated affiliates. Equity In February 2022, we issued 10,982,795 shares of common stock to holders of the exchangeable notes in satisfaction of principal, accrued interest and the makewhole payment, and all the exchangeable notes were cancelled in accordance with the terms of the indenture. The decision to declare and pay dividends on any outstanding shares of our common stock, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our board of directors and will depend on our earnings, taxable income, FFO, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our then-current indebtedness, the annual distribution requirements under the REIT provisions of the Internal Revenue Code, Delaware law and such other factors as our board of directors deems relevant. Any dividends payable will be determined by our board of directors based upon the circumstances at the time of declaration. Our actual results of operations will be affected by a number of factors, including the revenues received from our properties, our operating expenses, interest expense, unanticipated capital expenditures and the ability of our anchors and tenants at our properties to meet their obligations for payment of rents and tenant reimbursements. As a publicly traded company, we previously accessed capital through both the public equity and debt markets. We had a shelf registration statement on Form S-3 on file with the Securities and Exchange Commission (“SEC”) that expired in July 2021. Until we regain Form S-3 eligibility, we will be required to use a registration statement on Form S-11 to register securities with the SEC. On May 6, 2022, we filed a resale registration statement on Form S-11 covering the offer and sale, from time to time, of up to 12,380,260 shares of common stock by the selling shareholders named therein, pursuant to the requirements of the registration rights agreement. We will not receive any proceeds from resales of share of common stock by the selling shareholders pursuant to this registration statement. Capital Expenditures The following table, which excludes expenditures for developments, redevelopments and expansions, summarizes our capital expenditures, including our share of unconsolidated affiliates' capital expenditures, for the three months ended March 31, 2022 compared to the same period in 2021 (in thousands): Successor Predecessor Three Months Ended March 31, Three Months Ended March 31, 2022 2021 Tenant allowances (1) $ 2,867 $ 877 Deferred maintenance: Parking area and parking area lighting 533 — Roof replacements 124 — Other capital expenditures 1,822 459 Total deferred maintenance 2,479 459 Capitalized overhead 449 258 Capitalized interest 228 19 Total capital expenditures $ 6,023 $ 1,613 (1) Tenant allowances primarily relate to new leases. Tenant allowances related to renewal leases were not material for the periods presented. 32 Table of Contents Annual capital expenditures budgets are prepared for each of our properties that are intended to provide for all necessary recurring and non-recurring capital expenditures. We believe that property operating cash flows, which include reimbursements from tenants for certain expenses, and readily available cash on hand will provide the necessary funding for these expenditures. Developments Properties Under Development at March 31, 2022 (Dollars in thousands) CBL's Share of Property Location CBL Ownership Interest Total Project Square Feet Total Cost (1) Cost to Date (2) 2022 Cost Expected Opening Date Initial Unleveraged Yield Outparcel Developments: Kirkwood Mall - Five Guys, Blaze Pizza, Thrifty White, Pancheros, Chick-fil-A Bismarck, ND 100% 15,275 $ 7,976 $ 6,233 $ 1,875 Q2 '22 8.9% (1) Total Cost is presented net of reimbursements to be received. Represents total cost incurred by the Predecessor and the Successor company. (2) Cost to Date does not reflect reimbursements until they are received. Represents total cost to date incurred by the Predecessor and the Successor. Off-Balance Sheet Arrangements Unconsolidated Affiliates We have ownership interests in 27 unconsolidated affiliates as of March 31, 2022 that are described in Note 7 to the condensed consolidated financial statements. The unconsolidated affiliates are accounted for using the equity method of accounting and are reflected in the condensed consolidated balance sheets as investments in unconsolidated affiliates. The following are circumstances when we may consider entering into a joint venture with a third party: • Third parties may approach us with opportunities in which they have obtained land and performed some pre-development activities, but they may not have sufficient access to the capital resources or the development and leasing expertise to bring the project to fruition. We enter into such arrangements when we determine such a project is viable and we can achieve a satisfactory return on our investment. We typically earn development fees from the joint venture and provide management and leasing services to the property for a fee once the property is placed in operation. • We determine that we may have the opportunity to capitalize on the value we have created in a property by selling an interest in the property to a third party. This provides us with an additional source of capital that can be used to develop or acquire additional real estate assets that we believe will provide greater potential for growth. When we retain an interest in an asset rather than selling a 100% interest, it is typically because this allows us to continue to manage the property, which provides us the ability to earn fees for management, leasing, development and financing services provided to the joint venture. • We also pursue opportunities to contribute available land at our properties into joint venture partnerships for development of primarily non-retail uses such as hotels, office, self-storage and multifamily. We typically partner with developers who have expertise in the non-retail property types. Guarantees We may guarantee the debt of a joint venture primarily because it allows the joint venture to obtain funding at a lower cost than could be obtained otherwise. This results in a higher return for the joint venture on its investment, and a higher return on our investment in the joint venture. We may receive a fee from the joint venture for providing the guaranty. Additionally, when we issue a guaranty, the terms of the joint venture agreement typically provide that we may receive indemnification from the joint venture or have the ability to increase our ownership interest. See Note 11 to the condensed consolidated financial statements for information related to our guarantees of unconsolidated affiliates' debt as of March 31, 2022 and December 31, 2021. 33 Table of Contents C ritical Accounting Policies Our discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the financial statements and disclosures. Some of these estimates and assumptions require application of difficult, subjective, and/or complex judgment about the effect of matters that are inherently uncertain and that may change in subsequent periods. We evaluate our estimates and assumptions on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our Annual Report on Form 10-K for the year ended December 31, 2021 contains a discussion of our critical accounting policies and estimates in the Management's Discussion and Analysis of Financial Condition and Results of Operations section. There have been no material changes to these policies and estimates during the three months ended March 31, 2022. Our significant accounting policies are disclosed in Note 4 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. Recent Accounting Pronouncements See Note 2 to the condensed consolidated financial statements for information on recently issued accounting pronouncements. Non-GAAP Measure Funds from Operations FFO is a widely used non-GAAP measure of the operating performance of real estate companies that supplements net income (loss) determined in accordance with GAAP. NAREIT defines FFO as net income (loss) (computed in accordance with GAAP) excluding gains or losses on sales of depreciable operating properties and impairment losses of depreciable properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests. Adjustments for unconsolidated partnerships, joint ventures and noncontrolling interests are calculated on the same basis. We define FFO as defined above by NAREIT. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. We believe that FFO provides an additional indicator of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes the value of real estate assets declines predictably over time. Since values of real estate assets have historically risen or fallen with market conditions, we believe that FFO, which excludes historical cost depreciation and amortization, enhances investors’ understanding of our operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of our properties and interest rates, but also by our capital structure. We present both FFO allocable to Operating Partnership common unitholders and FFO allocable to common shareholders, as we believe that both are useful performance measures. We believe FFO allocable to Operating Partnership common unitholders is a useful performance measure since we conduct substantially all our business through our Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of our common shareholders and the noncontrolling interest in our Operating Partnership. We believe FFO allocable to common shareholders is a useful performance measure because it is the performance measure that is most directly comparable to net income (loss) attributable to common shareholders. In our reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders that is presented below, we make an adjustment to add back noncontrolling interest in loss of our Operating Partnership in order to arrive at FFO of the Operating Partnership common unitholders. We then apply a percentage to FFO of the Operating Partnership common unitholders to arrive at FFO allocable to common shareholders. The percentage is computed by taking the weighted-average number of common shares outstanding for the period and dividing it by the sum of the weighted-average number of common shares and the weighted-average number of Operating Partnership units held by noncontrolling interests during the period. FFO does not represent cash flows from operations as defined by GAAP, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income (loss) for purposes of evaluating our operating performance or to cash flow as a measure of liquidity. We believe that it is important to identify the impact of certain significant items on our FFO measures for a reader to have a complete understanding of our results of operations. Therefore, we have also presented adjusted FFO measures excluding these significant items from the applicable periods. Please refer to the reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders below for a description of these adjustments. 34 Table of Contents FFO of the Operating Partnership de creased to $ 3 5.0 million for the three months ended March 31, 2022 from $ 90.2 million for the prior-year period . Excluding the adjustments noted below, FFO of the Operating Partnership, as adjusted, de creased to $ 57.5 million for the three months ended March 31, 2022 from $ 68.7 million for the same period in 20 2 1 . The de crease in FFO, as adjusted, w as primarily driven by the recognition of interest expense in the current period on the secured term loan, the e xchangeable n otes and the s ecured n otes . We did not recogniz e interest expense in the prior-year period on the senior unsecured notes and the secured credit facility due to the bankruptcy filing . The reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders is as follows (in thousands): Successor Predecessor Three Months Ended March 31, Three Months Ended March 31, 2022 2021 Net loss attributable to common shareholders $ (40,722 ) $ (26,763 ) Noncontrolling interest in loss of Operating Partnership (15 ) (698 ) Depreciation and amortization expense of: Consolidated properties 68,943 48,112 Unconsolidated affiliates 8,520 13,530 Non-real estate assets (198 ) (541 ) Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries (899 ) (581 ) Loss on impairment — 57,182 Gain on depreciable property (629 ) — FFO allocable to Operating Partnership common unitholders 35,000 90,241 Debt discount accretion, net of noncontrolling interests' share (1) 78,463 — Adjustment for unconsolidated affiliates with negative investment (2) (12,547 ) — Senior secured notes fair value adjustment (3) 198 — Litigation settlement (4) (81 ) (858 ) Non-cash default interest expense (5) (8,876 ) 11,470 Gain on deconsolidation (6) (36,250 ) (55,131 ) Reorganization items, net (7) 1,571 22,933 FFO allocable to Operating Partnership common unitholders, as adjusted $ 57,478 $ 68,655 (1) In conjunction with fresh start accounting upon emergence from bankruptcy, we recognized debt discounts equal to the difference between the outstanding balance of mortgage notes payable and the estimated fair value of such mortgage notes payable. The debt discounts are accreted over the terms of the respective mortgage notes payable using the effective interest method. (2) Represents our share of the earnings (losses) before depreciation and amortization expense of unconsolidated affiliates where we are not recognizing equity in earnings (losses) because our investment in the unconsolidated affiliate is below zero. ( 3 ) Represents the fair value adjustment recorded on the secured notes as interest expense for the three months ended March 31, 2022. We elected the fair value option in conjunction with the issuance of the secured notes. ( 4 ) Represents a credit to litigation settlement expense in each of the three-month periods ended March 31, 2022 and 2021 related to claim amounts that were released pursuant to the terms of the settlement agreement related to the settlement of a class action lawsuit. ( 5 ) The three months ended March 31, 2022 includes the reversal of default interest expense when waivers or forbearance agreements were obtained. The three months ended March 31, 2021 includes default interest expense related to loans secured by properties that were in default prior to the bankruptcy filing, as well as loans secured by properties that were in default due to the bankruptcy filing. ( 6 ) For the three months ended March 31, 2022, the Successor Company deconsolidated Greenbrier Mall due to a loss of control when the property was placed into receivership in connection with the foreclosure process. For the three months ended March 31, 2021, the Predecessor Company deconsolidated Asheville Mall and Park Plaza due to a loss of control when the properties were placed into receivership in connection with the foreclosure process. ( 7 ) Represents costs incurred subsequent to the bankruptcy filing, which consists of professional fees, legal fees, retention bonuses, U.S. Trustee fees and debt discounts expensed in accordance with ASC 852. 35 Table of Contents The reconciliation of diluted EPS to FFO per diluted share is as follows: Successor Predecessor Three Months Ended March 31, Three Months Ended March 31, 2022 2021 Diluted EPS attributable to common shareholders $ (1.45 ) $ (0.14 ) Eliminate amounts per share excluded from FFO: Depreciation and amortization expense, including amounts from consolidated properties, unconsolidated affiliates, non-real estate assets and excluding amounts allocated to noncontrolling interests 2.72 0.30 Loss on impairment — 0.29 Gain on depreciable property (0.02 ) — FFO per diluted share $ 1.25 $ 0.45