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CBL & Associates Properties (CBL) |
| Revision as of 12:19, June 6, 2008 (edit) Adamfarren - Sr. Director (Talk | contribs) (→'''The liquidity crunch resulting from the Subprime lending crisis could inhibit CBL's ability to finance expansion.''') ← Previous diff |
Revision as of 12:40, June 6, 2008 (edit) (undo) Adamfarren - Sr. Director (Talk | contribs) (→'''The liquidity crunch resulting from the Subprime lending crisis could inhibit CBL's ability to finance expansion.''') Next diff → |
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| ===='''The liquidity crunch resulting from the [[Subprime lending]] crisis could inhibit CBL's ability to finance expansion.'''==== | ===='''The liquidity crunch resulting from the [[Subprime lending]] crisis could inhibit CBL's ability to finance expansion.'''==== | ||
| - | REITs like CBL are especially sensitive to credit availability because Federal tax requirements stipulate that they must return at least 90% of earnings to shareholders. As a result, CBL cannot use cash generated from its operations to fund expansion. Instead, it must obtain financing from the credit markets. In response to the [[credit crisis]] resulting from the subprime mortgage metldown, CBL has expanded its lines of credit from several financial institutions and has refinanced several loans to take advantage of lower interest rates. | + | REITs like CBL are especially sensitive to credit availability because Federal tax requirements stipulate that they must return at least 90% of earnings to shareholders. As a result, CBL cannot use cash generated from its operations to fund expansion. Instead, it must obtain financing from the credit markets. In response to the [[credit crisis]] resulting from the subprime mortgage metldown, CBL has expanded its lines of credit from several financial institutions and has refinanced several loans to take advantage of lower interest rates. However, obtaining financing for future projects may become more difficult with less capital in the hands of lenders and more competition for these loans. |
| ===='''CBL's focus on middle-markets allows it to establish regional dominance and limit competition.'''==== | ===='''CBL's focus on middle-markets allows it to establish regional dominance and limit competition.'''==== | ||
Revision as of 12:40, June 6, 2008
Despite slowing consumer spending, in the first quarter of 2008 CBL increased its Funds From Operation by 2.3%. This can be attributed to the regional dominance CBL achieves by only building or acquiring malls in areas without other major retail centers, which creates stability in its revenue stream. CBL has continued to leverage its assets (securing $400 million in loans in late April) to build and acquire new properties, with recently announced plans for new construction in Florida, Texas, Missouri, and Pennsylvania. Taking advantage of the current economic downturn to start developments at lower prices, CBL will be ready with a number of new malls to take advantage of an economic upturn.
Business Overview
CBL owns a stake in 150 properties in 27 states. This portfolio includes 84 regional malls/open-air shopping centers, 47 mixed commercial and residential centers, and 19 office buildings. These properties total to approximately 72 million sq. ft. of retail space, with an overall average sales per square foot of $364 and an occupancy of 93%. All of CBL's properties are built around one or more "Anchors." Anchors are major national retailers that serve as the primary attraction that brings many shoppers to the mall. CBL's top anchors include: J.C. Penney (JCP), Sears Holdings (SHLD), Dillard's (DDS), Macy's Inc. (M). Other important small store retailers include Foot Locker (FL), Limited Brands (LTD), Abercrombie & Fitch Company (ANF), and the Gap (GPS).
CBL's top 10 Tenants
| Store | % of CBL's Revenue |
|---|---|
| Limited Brands (LTD) | 3.01% |
| Foot Locker (FL) | 2.98% |
| Gap (GPS) | 2.64% |
| Abercrombie & Fitch Company (ANF) | 2.18% |
| AE Outfitters Retail Company | 1.97% |
| Signet Group (SIG) | 1.85% |
| Finish Line (FINL) | 1.65% |
| Zale (ZLC) | 1.56% |
| Luxottica Group, S.p.A. (LUX) | 1.56% |
| Genesco (GCO) | 1.42% |
CBL develops and acquires properties in middle sized markets under-served by existing malls and retailers. CBL does this by building malls in moderate sized cities that are surrounded by rural areas whose residents tend to go to this urban center for major purchases or other needs. Including a major retail "anchor" at every development helps to ensure these migrating shoppers go to CBL's mall.
CBL's 5 largest markets
| City | % of CBL's Revenue Earned in this market |
|---|---|
| Nashville, TN | 5.2% |
| Pittsburgh, PA | 4.5% |
| Overland Park, KS | 3.5% |
| Madison, WI | 3.0% |
| Chattanooga, TN | 3.0% |
In November of 2007, CBL paid $184.2 million to acquire 8 shopping centers and 12 office buildings in North Carolina from Starmount. CBL has also begun investing internationally by establishing joint ventures to build and acquire malls in the rapidly growing economies of China and Brazil.[5] Additionally, CBL has taken advantage of lower building costs during the recent economic downturn to begin construction on several new shopping centers in fast-growing regions where the company previously had not owned properties, such as Texas and Florida. Total investment in "new and expanded properties opened in 2007 was $323.4 million and the total investment upon completion in the Properties under construction as of December 31, 2007 is projected to be $427.6 million."[6]
Property Expansions Completed in 2007 and 2008
| Property: type of expansion | Location | Sq. Feet | Opening Date |
|---|---|---|---|
| The District at Valley View: shops | Roanoke, VA | 61,200 | July 2007 |
| Hartford Mall: lifestyle expansion | Bel Air, MD | 39,222 | September 2007 |
| The District at CherryVale | Rockford, IL | 84,541 | Fall 2007 |
| Brookfield Square: Mitchell's Fish Market | Brookfield, WI | 7,500 | April 2007 |
| Brookfield Square: Fresh Market | Brookfield, WI | 57,500 | August 2007 |
| Southpark Mall: Regal Cinema | Colonial Heights, VA | 68,242 | July 2007 |
| Coastal Grand: Old Navy | Myrtle Beach, SC | 23,269 | October 2007 |
| Gulf Coast Town Center: shops/Costco | Ft. Myers, FL | 595,990 | Spring 2007 |
| Southpark Mall: Foodcourt | Colonial Heights, VA | 17,150 | Spring 2008 |
| Coastal Grand: JCPenny | Myrtle Beach, SC | 103,395 | Spring 2008 |
| Coastal Grand: Ulta Cosmetics | Myrtle Beach, SC | 10,000 | Spring 2008 |
| Cary Towne Center: Mimi's Cafe | Cary, NC | 6,674 | Spring 2008 |
| Brookfield Square: Claim Jumpers | Brookfield, WI | 10,000 | Fall 2008 |
| Alamance Crossing: Theater/Shops | Burlington, NC | 82,997 | Summer 2008 |
CBL's Property Portfolio
| Property: Location | CBL's Ownership | Mall Sales per Sq. Ft. ($/sq.ft) | Percentage of mall store space leased |
|---|---|---|---|
| Alamance Crossing: Burlington, NC | 100% | 94 | 80% |
| Coastal Grand: Myrtle Beach, SC | 50% | 366 | 97% |
| Gulf Coast Town Center: Ft. Myers, FL | 50% | 182 | 78% |
| Imperial Valley Mall: El Centro, CA | 60% | 353 | 95% |
| Southaven Towne Center: Southaven, MS | 100% | 299 | 100% |
| Arbor Place: Atlanta, GA | 100% | 370 | 99% |
| Asheville Mall: Asheville, NC | 100% | 360 | 95% |
| Bonita Lakes Mall: Meridian, MS | 100% | 264 | 97% |
| Brookfield Square: Brookfield, WI | 100% | 428 | 99% |
| Burnsville Center: Burnsville, MN | 100% | 372 | 97% |
| Cary Towne Center: Cary, NC | 100% | 292 | 95% |
| Chapel Hill Mall: Akron, OH | 56.5% | 302 | 96% |
| CherryVale Mall: Rockford, IL | 100% | 373 | 95% |
| Chesterfield Mall: Chesterfield, MO | 100% | 327 | 84% |
| Citadel Mall: Charleston, SC | 100% | 236 | 93% |
| College Square: Morristown, TN | 100% | 261 | 99% |
| Columbia Place: Columbia, SC | 100% | 232 | 96% |
| CoolSprings Galleria: Nashville, TN | 100% | 458 | 99% |
| Cross Creek Mall: Fayetteville, NC | 100% | 488 | 96% |
| East Towne Mall: Madison, WI | 100% | 338 | 95% |
| Eastgate Mall: Cincinnati, OH | 100% | 308 | 93% |
| Eastland Mall: Bloomington, IN | 100% | 328 | 92% |
| Fashion Square: Saginaw, MI | 100% | 291 | 95% |
| Fayette Mall: Lexington, KY | 100% | 505 | 98% |
| Foothills Mall: Maryville, TN | 95% | 262 | 93% |
| Friendly Shopping Center: Greensboro, NC | 50% | 418 | 82% |
| Frontier Mall: Cheyenne, WY | 100% | 271 | 97% |
| Georgia Square: Athens, GA | 100% | 264 | 97% |
| Governor's Square: Clarksville, TN | 47.5% | 325 | 90% |
| Greenbrier Mall: Chesapeake, VA | 100% | 362 | 92% |
| Hamilton Place: Chattanooga, TN | 90% | 398 | 99% |
| Hanes Mall: Winston-Salem, NC | 100% | 342 | 98% |
| Harford Mall: Bel Air, MD | 100% | 397 | 88% |
| Hickory Hollow Mall: Nashville, TN | 100% | 226 | 84% |
| Hickory Point Mall: Decatur, IL | 100% | 225 | 89% |
| Honey Creek Mall: Terre Haute, IN | 100% | 344 | 97% |
| Janesville Mall: Janesville, WI | 100% | 329 | 95% |
| Jefferson Mall: Louisville, KY | 100% | 339 | 98% |
| Kentucky Oaks Mall: Paducah, KY | 50% | 283 | 94% |
| The Lakes Mall: Muskegon, MI | 90% | 265 | 96% |
| Lakeshore Mall: Sebring, FL | 100% | 261 | 97% |
| Laurel Park Place: Livonia, MI | 70% | 384 | 96% |
| Layton Hills Mall: Layton, UT | 100% | 418 | 100% |
| Madison Square: Huntsville, AL | 100% | 293 | 86% |
| Mall del Norte: Laredo, TX | 100% | 477 | 95% |
| Mall of Acadiana: Lafayette, LA | 56.5% | 438 | 99% |
| Meridian Mall: Lansing, MI | 100% | 276 | 92% |
| Mid Rivers Mall: St. Peters, MO | 56.5% | 344 | 89% |
| Midland Mall: Midland, MI | 100% | 298 | 98% |
| Monroeville Mall: Pittsburgh, PA | 100% | 318 | 96% |
| Northpark Mall: Joplin, MO | 100% | 297 | 85% |
| Northwoods Mall: Charleston, SC | 100% | 320 | 98% |
| Oak Hollow Mall: High Point, NC | 75% | 182 | 77% |
| Oak Park Mall: Overland Park, KS | 100% | 451 | 99% |
| Old Hickory Mall: Jackson, TN | 100% | 325 | 92% |
| Panama City Mall: Panama City, FL | 100% | 283 | 90% |
| Park Plaza: Little Rock, AR | 56.5% | 470 | 95% |
| Parkdale Mall: Beaumont, TX | 100% | 313 | 93% |
| Parkway Place Mall: Huntsville, AL | 45% | 324 | 93% |
| Pemberton Square: Vicksburg, MS | 100% | 153 | 51% |
| Plaza del Sol: Del Rio, TX | 50.6% | 173 | 92% |
| Post Oak Mall: College Station, TX | 100% | 332 | 92% |
| Randolph Mall: Asheboro, NC | 100% | 220 | 94% |
| Regency Mall: Racine, WI | 100% | 283 | 90% |
| Richland Mall: Waco, TX | 100% | 305 | 88% |
| River Ridge Mall: Lynchburg, VA | 100% | 315 | 99% |
| Rivergate Mall: Nashville, TN | 100% | 320 | 97% |
| South County Center: St. Louis, MO | 56.5% | 378 | 94% |
| Southpark Mall: Colonial Heights, VA | 100% | 311 | 99% |
| St. Clair Sqaure: Fairview Heights, IL | 56.5% | 404 | 99% |
| Stroud Mall: Stroudsburg, PA | 100% | 314 | 96% |
| Sunrise Mall: Brownsville, TX | 100% | 413 | 95% |
| Towne Mall: Franklin, OH | 100% | 217 | 62% |
| Triangle Town Center: Raleigh, NC | 50% | 350 | 95% |
| Turtle Creek Mall: Hattiesburg, MS | 100% | 357 | 97% |
| Valley View Mall: Roanoke, VA | 100% | 364 | 91% |
| Volusia Mall: Daytona Beach, FL | 100% | 406 | 98% |
| Walnut Square: Dalton, GA | 100% | 252 | 100% |
| Wausau Center: Wausau, WI | 100% | 272 | 86% |
| West County Center: Dos Peres, MO | 56.5% | 478 | 97% |
| West Towne Mall: Madison, WI | 100% | 454 | 99% |
| WestGate Mall: Spartanburg, SC | 100% | 285 | 97% |
| Westmoreland Mall: Greensburg, PA | 56.5% | 320 | 96% |
| York Galleria: York, PA | 100% | 332 | 99% |
Trends and Forces
The liquidity crunch resulting from the Subprime lending crisis could inhibit CBL's ability to finance expansion.
REITs like CBL are especially sensitive to credit availability because Federal tax requirements stipulate that they must return at least 90% of earnings to shareholders. As a result, CBL cannot use cash generated from its operations to fund expansion. Instead, it must obtain financing from the credit markets. In response to the credit crisis resulting from the subprime mortgage metldown, CBL has expanded its lines of credit from several financial institutions and has refinanced several loans to take advantage of lower interest rates. However, obtaining financing for future projects may become more difficult with less capital in the hands of lenders and more competition for these loans.
CBL's focus on middle-markets allows it to establish regional dominance and limit competition.
When developing or acquiring malls, CBL usually selects areas with few malls or retail stores. This allows it to become the dominant retail space for a large region in which there is little competition. However, such areas usually experience less economic growth than more competitive markets, and as a result, CBL increases its rents more slowly than its competitors in these markets. This is partially evidenced by CBL's mediocre earnings growth over the past five years, with no clear growth trend.[9]
CBL's business is affected by demographic changes in the Sun-belt and Rust-belt.
CBL's malls are almost exclusively in the Midwest and Southeastern United States. Demographic and economic trends affecting these regions will have a strong influence on the success of CBL's business. The sunbelt is experiencing a period of sustained economic and population growth as many individuals leave the northern states for the south's more moderate climate and companies relocate production there due to less regulation and a smaller union presence. Conversely, the Midwest is experiencing a period of economic readjustment as many manufacturers there have struggled with high labor costs, heavy regulation, and antiquated facilities. This will prove challenging for CBL's malls in this area as higher unemployment will reduce consumer spending and job opportunities in other parts of the country will continue to reduce the population of potential shoppers in this region.
Popularity of mixed use properties provides opportunity for growth.
Over the past several years, CBL's developments have more frequently included not only malls with space for stores, but a combination of retail and residential structures mingled together. This had been advantageous for two reasons. First, the ability to sell the residential structures early in the construction process helps to offset the costs of construction. Second, the proximity of residential properties helps ensure a steady flow of customers into the nearby retail space.
Competition
CBL generally seeks to have its malls serve as the primary retail facility for an entire region. This strategy has been successful in that most of CBL's properties have are in places with few other malls. Nevertheless, as other types of retailing such as discount/wholesale stores, online/television shopping, and outlet centers become more popular they have begun to compete with CBL's middle-market malls. Additionally CBL competes with the following companies, which are also national owners and operators of retail space. Like CBL several are beginning to acquire properties outside of the United States in such countries as China and Brazil. Whereas CBL is cautiously approaching these countries through joint ventures with local firms, if CBL management gains an understanding for these markets they should provide excellent opportunities for growth in the coming years.
| Company | Operating Cash Flow | Total Debt | Total Cash | Dividend Yield | Square Feet in Portfolio | Major Markets | Property Occupancy |
|---|---|---|---|---|---|---|---|
| CBL & Associates Properties (CBL) | $470.28 m | $5.87 B | $65.83 m | 9.10% | 72 m | Midwest and Southeast of U.S. with a focus on smaller regional markets | 93% |
| Taubman Centers (TCO) | $257.84 m | $2.70 B | $47.17 m | 3.10% | 24,584,000 | 11 states including major metropolitan centers: Los Angeles, San Francisco, Denver, Detroit, Phoenix, Miami, Dallas, Tampa, Orlando, and Wash D.C. | 93.8% |
| Simon Property Group (SPG) | $1.46 B | $17.22 B | $501.98 m | 3.90% | 256 m | SPG owns properties throughout North America, Europe, and Asia | 93.2% |
| General Growth Properties (GGP) | $707.42 m | $24.30 B | $99.53 m | 6.10% | 200 m | 200 regional shopping centers in 44 states | 93.8% |
Market Share
In 2007 CBL's market share among global Retail REITs was just 2%. Market share is listed by Funds From Operations (FFO), a metric that takes into account earnings from existing properties but not cash from acquisitions or sales of assets. Globally there are 38 REITs focusing on retail properties producing an aggregate $10.0B in FFO.[11][12]] Most of those were small companies, only 9 Retail REITs are listed in the Russell 1000.
- General Growth Properties (GGP) has ownership interests in and/or management responsibility across regional shopping malls totaling over 200 million square feet of retail space with 24,000 retail stores and anchor department stores, as well as theaters, sit-down restaurants, ice skating rinks, and other forms of family entertainment.[15]
- Westfield Group ((WDC) is the largest retail property group is the world with a portfolio of 119 shopping centers across Australia, the U.S., New Zealand, and the United Kingdom, valued at $53.2 billion.[16]
- Kimco Realty (KIM) is largest publicly traded owner and operator of neighborhood and community shopping centers in the U.S., with more than 1,519 properties comprising 180 million square feet of leasable space across 45 states, Puerto Rico, Canada, Mexico and Chile.[17]
- Simon Property Group (SPG) develops and leases regional malls, shopping centers and strip malls. Simon Property Group owns or has an interest in over 379 properties comprising over 256 million square feet of gross leasable area across investments in the U.S., Europe, and Asia,[18] making it the largest public U.S. real estate company.[19] Simon Property Group's investments tend to be in large metropolitan areas with very high consumer traffic and are comprised of anchor department stores alongside smaller retailers.
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References
- ↑ http://www.cblproperties.com/cbl.nsf/abo_com_foc
- ↑ http://www.cblproperties.com/cbl.nsf/inv_sec_fil
- ↑ http://library.corporate-ir.net/library/10/106/106929/items/278831/FebCBL4Q07Supp.pdf CBL 2007 Q4 Supplemental
- ↑ http://www.cblproperties.com/cbl.nsf/inv_sec_fil
- ↑ http://phx.corporate-ir.net/phoenix.zhtml?c=106929&p=irol-SECText&TEXT=aHR0cDovL2NjYm4uMTBrd2l6YXJkLmNvbS94bWwvZmlsaW5nLnhtbD9yZXBvPXRlbmsmaXBhZ2U9NTUwNDc3MiZhdHRhY2g9T04%3d CBL's 2007 Annual Report
- ↑ http://phx.corporate-ir.net/phoenix.zhtml?c=106929&p=irol-SECText&TEXT=aHR0cDovL2NjYm4uMTBrd2l6YXJkLmNvbS94bWwvZmlsaW5nLnhtbD9yZXBvPXRlbmsmaXBhZ2U9NTUwNDc3MiZhdHRhY2g9T04%3d CBL's 2007 Annual Report
- ↑ http://phx.corporate-ir.net/phoenix.zhtml?c=106929&p=irol-SECText&TEXT=aHR0cDovL2NjYm4uMTBrd2l6YXJkLmNvbS94bWwvZmlsaW5nLnhtbD9yZXBvPXRlbmsmaXBhZ2U9NTUwNDc3MiZhdHRhY2g9T04%3d CBL's 2007 Annual Report
- ↑ http://phx.corporate-ir.net/phoenix.zhtml?c=106929&p=irol-SECText&TEXT=aHR0cDovL2NjYm4uMTBrd2l6YXJkLmNvbS94bWwvZmlsaW5nLnhtbD9yZXBvPXRlbmsmaXBhZ2U9NTUwNDc3MiZhdHRhY2g9T04%3d CBL's 2007 Annual Report
- ↑ CBL 2007 Annual Report http://phx.corporate-ir.net/phoenix.zhtml?c=106929&p=irol-SECText&TEXT=aHR0cDovL2NjYm4uMTBrd2l6YXJkLmNvbS94bWwvZmlsaW5nLnhtbD9yZXBvPXRlbmsmaXBhZ2U9NTUwNDc3MiZhdHRhY2g9T04%3d
- ↑ All data from 2007 Annual Reports of respective companies and yahoofinance.
- ↑ U.S. Global REITs
- ↑ [2007 Company Annual Reports]
- ↑ Datamonitor Industry Market Research: Global - Retail REIT's
- ↑ [2007 Company Annual Reports]
- ↑ VNO Company Site - About Us
- ↑ Westfield Group company website - Company Profile
- ↑ Kimco Company Website - About Kimco
- ↑ Simon Property Group company website - About Us
- ↑ Simon Property Group company website - About Us
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