Leasing up, NOI down at CBL in the second quarter

One of America’s biggest mall operators executed leases for 875,000 sq. ft. in the second quarter, half of which were signed at rents 9% higher than the prior leases. But net operating income declined by just under one percentage point and same-center sales per sq. ft. dipped by 7%.

In the 12 months ending June 30, 2023, average sales per sq. ft. of $425 were posted across CBL’s portfolio of 94 properties—56 of them enclosed malls—compared with an average of $442 in the previous period.

"Leasing metrics were the strongest in several years, with healthy positive new and renewal lease spreads and year-over-year occupancy growth, providing solid evidence of the constructive environment,” said the company’s CEO Stephen D. Lebovitz in the company’s Q2 2023 report.

Lebovitz noted that the 7% NOI decline was at the high-end of CBL’s full-year guidance range and that, as a result, the company raised the low-end of its funds from operations and adjusted its same-center guidance ranges.

“Leasing-led revenue gains were offset by an expected reduction in percentage rent,” he said. “We successfully managed inflationary pressure on costs, generating a modest reduction in operating expense for the quarter on a same-center basis.”

CBL declared a regular cash dividend for the second quarter of $0.375 per share, representing an annualized dividend of $1.50 per share.

Year-to-date, the Chattanooga, Tenn.-based company reported completing more than $400 million in financing activity. CBL and its joint venture partner closed on the extension and modification of the $161.9 million loan secured by West County Center, a high-performing mall in St. Louis, Mo. With another joint venture partner, it closed on a new $148 million loan secured by Friendly Center and The Shops at Friendly Center, a lifestyle center in Greensboro, N.C.

Occupancy levels increased across all sectors of CBL’s portfolio, with lifestyle centers experiencing the biggest annual bump of more than three percentage points to 92.7%. Malls (88%) and outlet centers (88.4%) both edged forward by less than a full percentage point.

“While the financing markets remain challenging, we are encouraged by the reception we are seeing in the market,” Lebovitz said.  “As we move into the second half of 2023, we remain focused on achieving further operational improvement, generating greater free cash flow and maintaining a disciplined approach to capital allocation."