ITEM 1. BUSINESS.
FORMATION OF THE COMPANY
CBL & Associates Properties, Inc. (the "Company") is a self-managed, self-administered, fully-integrated real estate company which is engaged in the ownership, operation, marketing, management, leasing, expansion, development, redevelopment, acquisition and financing of regional malls and community and neighborhood centers. The Company was incorporated on July 13, 1993 under the laws of the State of Delaware to acquire an interest in substantially all of the real estate properties owned by CBL & Associates, Inc. and its affiliates ("CBL") and to provide a public vehicle for the expansion of CBL's shopping center business.
The Company conducts substantially all of its business through CBL & Associates Limited Partnership, a Delaware Limited Partnership (the "Operating Partnership"), in which the Company owns an indirect 68.0% interest and of which the Company's wholly-owned subsidiary is the sole general partner. To comply with certain technical requirements of the Internal Revenue Code of 1986, as amended (the "Code") applicable to Real Estate Investment Trusts' ("REITs"), the Company's property management and development activities, sales of peripheral land and maintenance and security operations are carried out through CBL & Associates Management, Inc. (the "Management Company").
On November 3, 1993, the Company completed the initial public offering (the "Offering") of 15,400,000 shares of its common stock, par value $.01 per share (the "Common Stock"). Simultaneously with the completion of the Offering, CBL transferred to the Operating Partnership substantially all of CBL's interests in its real estate properties and its management and development operations in exchange for an interest in the Operating Partnership. CBL also acquired an additional interest in the Operating Partnership for a cash payment.
The Offering and the application of proceeds therefrom, including the Operating Partnership's acquisition of certain property interests, and the contribution by CBL of property interests to the Operating Partnership, are referred to herein as the "Formation."
In September 1995, the Company completed a follow-on offering of 4,163,500 shares of its Common Stock at $20.625 per share. CBL purchased 150,000 of these shares.
In January 1997, the Company completed a follow-on offering of 3,000,000 shares of its Common Stock at $26.125 per share. CBL purchased 55,000 of these shares.
In June 1998, the Company completed a public offering of 2,875,000 shares of 9% Series A Cumulative Redeemable Preferred Stock (the "Series A Preferred Stock") at a price to the public of $25.00 per share. The net proceeds of $70 million were used to repay variable rate indebtedness incurred in the Company's development and acquisition programs.
After giving effect to the above transactions, at December 31, 2000 CBL (including interests held by former executives) held a 25.5% limited partner interest in the Operating Partnership, the Company held a 68.0% general and limited partner interest in the Operating Partnership and third parties held a 6.5% limited partner interest. In addition, CBL holds approximately 2.0 million of the outstanding shares of Common Stock for a total ownership share of 30.9%.
On September 25, 2000, the Company entered into a series of agreements with Jacobs Realty Investors Limited Partnership and certain of its affiliates and partners ("Jacobs") pursuant to which the Company agreed to acquire from Jacobs a portfolio of 21 malls and 2 associated centers for an aggregate consideration of approximately $1.3 billion. The transaction closed on January 31, 2001. Additionally, in a separate transaction, the Company acquired the remaining 50% interest in Madison Square Mall as of January 31, 2001. In connection with these transactions, the Operating Partnership issued approximately 12.7 million special common units of the Operating Partnership ("SCUs"), representing in the aggregate a 25.48% limited partner interest in the Operating Partnership. Additionally, in connection with these transactions, the Operating Partnership incurred or assumed an aggregate $ 865.5 million of additional indebtedness. After giving effect to this transaction, CBL (including interests held by former executives) held a total 22.9% ownership interest in the Company and the Operating Partnership, the Company held a 50.8% general and limited partner interest in the Operating Partnership and Richard E. Jacobs and his affiliates held a 23.0% limited partner interest in the Operating Partnership.
GENERAL
The Company owns interests in a portfolio of properties, which as of December 31, 2000 consisted of 30 enclosed regional malls (the "Malls"), 16 associated centers (the "Associated Centers"), each of which is part of a regional shopping mall complex, and 72 independent community and neighborhood shopping centers (the "Community Centers"). Except for eleven Malls, three Associated Centers and four Community Centers which were acquired from third parties, each of these properties were developed by CBL or the Company.
Additionally, as of December 31, 2000 the Company owned two regional Malls, one office building, one neighborhood shopping center and one mall expansion currently under construction (the "Construction Properties"). The Company also owned as of December 31, 2000 options to acquire certain shopping center development sites (the "Development Properties").
The Company also owned, as of December 31, 2000, mortgages (the "Mortgages") on community and neighborhood shopping centers owned by non-CBL affiliates. The Mortgages were granted in connection with sales by CBL of certain properties previously developed by CBL. The Company also owns an interest in a three-story office building in Chattanooga, Tennessee, a portion of which serves as the Company's headquarters (the "Office Building"). The Malls, Associated Centers, Community Centers, Construction Properties, Development Properties, Mortgages and Office Building (but without taking into account any of the properties acquired in the Jacobs transaction) are collectively referred to herein as the "Properties" and individually as a "Property".
As of December 31, 2000 the Company had also entered into standby purchase agreements with third-party developers for the construction, development and potential ownership of two community centers in Texas (the "Co-Development Projects"). The developers have utilized these standby purchase agreements as additional security for their lenders to fund the construction of the Co-Development Projects. The standby purchase agreements for each of the Co-Development Projects require the Company to purchase the related Co-Development Project upon such Co-Development Project meeting certain completion requirements and rental levels. In return for its commitment to purchase a Co-Development Project pursuant to a standby purchase agreement, the Company receives a fee as well as a participation interest in each Co-Development Project. The outstanding amount of standby purchase agreements at December 31, 2000 is $51.4 million.
The Company and the Operating Partnership generally own a 100% interest in the Properties. With two exceptions, where the Company and the Operating Partnership own less than a 100% interest in a Property, the Operating Partnership is the sole general partner, managing general partner or managing member of the property partnership or limited liability company which owns such Property (each a "Property Partnership"). For one Mall and its Associated Center, affiliates of the Operating Partnership are non-managing general partners in the two applicable Property Partnerships.
For a full description of the Properties, see Item 2
ITEM 2. PROPERTIES.
MALLS
Each of the Malls is an enclosed regional shopping complex. Each Mall generally has at least three Anchors which own or lease their stores and numerous non-anchor stores with GLA less than 30,000 square feet ("Mall Stores"), most of which are national or regional retailers, located along enclosed malls connecting the Anchors. At most of the Malls, additional freestanding restaurants and retail stores are located on the periphery of the Mall complex. These freestanding stores are, in most cases, owned by their occupants. As of December 31, 2000, thirteen of the Mall complexes included one or more Associated Centers.
The total GLA of the 30 Malls owned on December 31, 2000 was approximately 22.6 million square feet or an average GLA of approximately 754,000 square feet per Mall. Mall Store GLA was 8,033,000 square feet including leased free-standing buildings at December 31, 2000. The Company wholly owned all but seven of such Malls and managed all but one of them.
In the years ended December 31, 1998, 1999 and 2000, Mall revenues represented approximately 74.9%, 76.9% and 77.3%, respectively, of total revenues from the Company's Properties.
Occupancy of mall stores in the Stabilized Malls ("Stabilized Mall Stores") was 94.5% at December 31, 1999, and at December 31, 2000.
In the years ended December 31, 1998, 1999 and 2000, average Stabilized Mall Store sales per square foot were approximately $272.00, $283.75 and $283.00, respectively (computed using a monthly weighted average).
Average base rent per square foot at the Mall Stores increased from $20.73 at December 31, 1999 to $21.57 at December 31, 2000.
Occupancy costs as a percentage of sales for tenants in the Stabilized Malls (excluding acquisition malls from the year of acquisition) were 11.1%, 11.5% and 11.9% for the years ended December 31, 1998, 1999, and 2000, respectively.
The Malls are generally located in middle-markets. Management believes that the Malls have strong competitive positions because they generally are the only, or the dominant enclosed malls within their respective trade areas. Trade areas have been identified by management based upon a number of sources of information, including the location of other malls, publicly available population information, customer surveys, surveys of customer automobile license plates, as well as ZIP codes and third-party market studies.
The three largest revenue-producing Malls in 2000 were Hamilton Place Mall, Coolsprings Galleria and Burnsville Center. Hamilton Place is located on a 187-acre site in Chattanooga, Tennessee and represented, as of December 31, 2000, 3.4% of the Properties' total GLA, 3.6% of total Mall Store GLA and 4.9% of total revenues from the Company's Properties. Coolsprings Galleria is located on a 150-acre site in Nashville, Tennessee and represented, as of December 31, 2000, 3.4% of the Properties' total GLA, 3.6% of total Mall Store GLA and 4.7% of total revenues from the Company's Properties. Burnsville Center is located in the Suburbs of Minneapolis, Minnesota in Burnsville and represented, as of December 31, 2000, 3.1% of the Properties' total GLA, 3.9% of total Mall Store GLA and 4.7% of total revenues from the Company's Properties.
Twenty-four of the thirty Malls owned on December 31, 2000 had undergone an expansion or remodeling since their opening, and all but four of the Malls were either built, renovated or expanded in the last 10 years one of which, Parkway Place in Huntsville, Alabama is currently scheduled for
demolition and redevelopment. In 2000, the Company renovated and expanded Asheville Mall in Asheville, North Carolina and Meridian Mall in Lansing, Michigan. The Company will complete the expansion of Meridian Mall in 2001 and will begin the renovation of Burnsville Center in Minneapolis (Burnsville), Minnesota and three malls in the Jacobs transaction: Hanes Mall in Winston-Salem, North Carolina, Fashion Square in Saginaw, Michigan and Cary Towne Center in Cary, North Carolina. At December 31, 2000 three of the Malls have available Anchor pads providing expansion potential totaling approximately 405,700 buildable square feet. At December 31, 2000 twenty existing Anchors at eleven Malls have aggregate expansion potential at their existing stores of approximately 473,000 buildable square feet.
The land underlying the Malls owned on December 31, 2000 was owned in fee simple in all cases, except for Walnut Square, WestGate Mall, St. Clair Square, Bonita Lakes Mall, Meridian Mall and Stroud Mall which were each subject to long-term ground leases for all or a portion of their land.
The table on the following page sets forth certain information for each of the Malls as of December 31, 2000.
Anchors. Anchors are a critical factor in a Mall's success because the public's identification with a property typically focuses on its Anchors. Mall Anchors generally are department stores whose merchandise appeals to a broad range of shoppers. Although the Malls derive a smaller percentage of their operating income from Anchor stores than from Mall Stores, strong Anchors play an important part in generating customer traffic and making the Malls desirable locations for Mall Store tenants.
Anchors either own their stores together with the land under them, sometimes with adjacent parking areas, or enter into long-term leases with respect to their stores at rental rates that are significantly lower than the rents charged to tenants of Mall Stores. Anchors account for approximately 7.1% of the total revenues from the Company's Properties. Each Anchor which owns its own store has entered into a reciprocal easement agreement with the Company covering, among other things, operating covenants, reciprocal easements, property operations, initial construction and future expansions.
As of December 31, 2000, the Malls had a total of 135 Anchors and one vacant Anchor store at Asheville Mall. The following table indicates all Mall Anchors and sets forth the aggregate number of square feet owned or leased by Anchors in the Malls as of December 31, 2000.
Mall Anchor Summary Information As of December 31, 2000
MALL STORES. As of December 31, 2000, the Malls had approximately 4,277 Mall Stores. National or regional chains (excluding individually franchised stores) leased approximately 79.6% of the occupied Mall Store GLA. Although Mall Stores occupied only 35.5% of total Mall GLA, the Malls derived approximately 88.3% of their revenue from Mall Stores for the year ended December 31, 2000.
Among the companies with the largest representation among Mall Stores are: The Limited, Inc./Intimate Brands, Inc. stores (The Limited, Limited Too, Express, Lerner New York, Lane Bryant, Structure, Victoria's Secret, and Bath and Body Works) and Venator Group, Inc. (Footlocker, Lady Footlocker and Champs Sports Stores). As of December 31, 2000, The Limited, Inc.'s and Intimate Brands, Inc.'s 121 stores accounted for 10.3% of total mall leased GLA and 6.7% of total revenues from the Company's Properties. As of December 31, 2000 Venator Group, Inc. accounted for 2.9% of total mall leased GLA and 2.5% of total revenues. No single Mall Store retailer accounted for more than 10.3% of total leased GLA and no single Mall Store retailer accounted for more than 6.7% of total revenues from the Company's Properties for the year ended December 31, 2000.
The following table sets forth certain information for executed renewal leases with current tenants or leases of previously occupied space with new tenants at the Malls during the year ended December 31, 2000.
The following table sets forth the total Mall Store GLA, the total square footage of leased Mall Store GLA, the percentage of Mall Store GLA leased, the average base rent per square foot of Mall Store GLA and average Mall Store sales per square foot as of the end of each of the past five years.
Stabilized Mall Store Summary Information
Lease Expirations. The following table shows the scheduled lease expirations for Malls Stores only in the Malls owned on December 31, 2000 (assuming that none of the tenants exercise renewal options).
Mall Lease Expiration
Cost of Occupancy. Management believes that in order to maximize the Company's Funds from Operations, tenants in Mall Stores must be able to operate profitably. A major factor contributing to tenant profitability is the tenant's cost of occupancy.
The following table summarizes for Stabilized Mall Store tenants the occupancy costs under their leases as a percentage of total Mall Store sales for the last three years.
ASSOCIATED CENTERS
The sixteen Associated Centers owned at December 31, 2000 were each part of a Mall complex and generally had one or two Anchor tenants and various smaller tenants. Anchor tenants in these centers included such retailers as Books-A-Million, Target, Toys "R" Us, TJ Maxx, and Goody's, which were category dominant retailers that benefited from the regional draw of the Malls. The Associated Centers also generally increase the draw to the total Mall complex.
Total leasable GLA of the sixteen Associated Centers was approximately 2.5 million square feet, including Anchors, or an average of approximately 156,000 square feet per center. As of December 31, 2000, 94.9% of total leasable GLA at the Associated Centers was occupied. During 2000 the Company opened one Associated Center in Chattanooga, Tennessee.
In the years ended December 31, 1998, 1999, and 2000, revenues from the Associated Centers represented approximately 3.9%, 3.7% and 4.1%, respectively, of total revenues from the Company's Properties.
In the years ended December 31, 1998, 1999 and 2000, average tenant sales per square foot at the Associated Centers were approximately $172, $184 and $185, respectively.
Average base rent per square foot at the Associated Centers increased from $9.78 at December 31, 1999 to $9.88 at December 31, 2000.
Each of the Associated Centers was developed by the Company, except for WestGate Crossing, Village at Rivergate and Courtyard at Hickory Hollow which were acquired in August 1997, July 1998 and July 1998, respectively. All of the land underlying the Associated Centers is owned in fee simple except for Bonita Crossing.
Lease Expirations. The following table shows the scheduled lease expirations for the Associated Centers owned as on December 31, 2000 (assuming that none of the tenants exercise renewal options).
Associated Center Lease Expiration
The following table sets forth certain information for executed renewal leases with current tenants or leases of previously occupied space with new tenants at the Associated Centers during the year ended December 31, 2000.
The following table sets forth certain information for each of the Associated Centers as of December 31, 2000.
COMMUNITY AND POWER CENTERS
In addition to Mall development, the Company's development activities focus on Community Centers, and power centers. Community Centers pose fewer development risks than Malls because they have shorter development timetables and lower up-front costs. Community Centers also afford the Company the opportunity to meet the needs of retailers for whom a "convenience" type of location is more appropriate and the needs of customers whose trade areas cannot support a regional mall. Power centers are larger than other Community Centers, with several large anchor stores which draw shoppers from a wider geographic area.
The Company's Community Center developments in the 1980's were generally anchored by supermarkets, and, in certain cases, by drug stores. Management's current focus has expanded to include the development of larger centers, anchored by mass merchandisers and department stores, while continuing the development of smaller centers anchored by supermarkets and drug stores. Recently completed Community Centers include centers in Richmond Virginia and Spring Hill, Florida. Anchors at these new centers include, Home Depot, Sears, Belk, Goody's and , Wal*Mart. During 2000, the Company sold thirteen Community Centers for total proceeds of $51 million and totaling 799,000 square feet. The proceeds were primarily used to retire debt. The Company also sold one Community Center Jean Ribaut Square in Beaufort, South Carolina in February 2001. The net proceeds of $5.8 million were placed in escrow in anticipation of a like-kind exchange of properties under section 1031 of the Code.
Community Centers, other than power centers, range in size from 25,000 square feet to in excess of 286,000 square feet. Anchors in Community Centers generally lease their store space and occupy 60-85% of a center's GLA. The number of stores in a Community Center ranges from one to sixteen with an average of seven stores per center.
The Company's two power centers, which were completed and opened in 1997 and 1998, average 786,000 square feet and have an average of nine major anchor stores and additional small shop space ranging from 38,000 square feet to 136,000 square feet. The projects include expansion areas for additional major retailers. These power centers are included in the Community Center classification in this report.
Total GLA of the 72 Community Centers is approximately 9.1 million square feet, or an average of approximately 126,000 square feet per center. Excluding power centers the average is 107,000 square feet per center. As of December 31, 2000, 97.8% of total leasable GLA at the Community Centers was leased.
In the years ended December 31, 1998, 1999 and 2000, revenues from the Community Centers represented approximately 19.6%, 17.8% and 17.5%, respectively, of total revenues from the Company's Properties.
Occupancy at the Community Centers increased from 97.7% at December 31, 1999 to 97.8% at December 31, 2000.
Average base rent per square foot at the Community Centers increased from $8.32 at December 31, 1999, to $8.85 at December 31, 2000.
As of December 31, 2000, Food Lion, a major regional supermarket operator with headquarters in North Carolina served as an anchor tenant in 27 of the Company's Community Centers. For the year ended December 31, 2000, Food Lion accounted for approximately 1.7% of the revenues generated by the Company's Properties.
With the exception of Suburban Plaza, Sutton Plaza, Lions Head Village and the Market Place at Flower Mound, which were acquired by the Company in March 1995, January 1997, July 1998 and March 2000, respectively, each of the Community Centers was developed by the Company.
The following table summarizes the percentage of total leasable GLA leased, average base rent per square foot (excluding percentage rent) and tenant sales per square foot at the Community Centers for each of the last five years.
Community Center Summary Information
Lease Expirations. The following table shows the scheduled lease expirations for the Community Centers owned on December 31, 2000 (assuming that none of the tenants exercise renewal options).
Community Center Lease Expiration
The following table sets forth certain information for executed renewal leases with current tenants or leases of previously occupied space with new tenants at the Community Centers during the year ended December 1, 2000.
The following table sets forth certain information for each of the Company's Community Centers at December 31, 2000.
MORTGAGES
The Company owns certain Mortgages which were granted prior to the Offering in connection with sales by CBL of properties which it had previously developed.
The Company holds fee mortgages on seven community centers, which mortgages had, as of December 31, 2000, an aggregate outstanding principal balance of $7.2 million. Such mortgages entitle the Company to receive substantially all of such properties' current cash flow in the form of periodic debt service payments. The encumbered properties all opened between 1981 and 1984 and have one Anchor vacancy.
In the years ended December 31, 1998, 1999, and 2000, revenues from the Mortgages represented approximately 0.7%, 0.6%, and 0.3%, respectively, of total revenues from the Company's Properties.
The following table sets forth certain additional information regarding the Mortgages as of December 31, 2000.
Office Building
The Company owns a 95% interest in a 49,082 square foot office building in Chattanooga, Tennessee in which the Company's headquarters are located. The Company occupies 34,470 square feet or 70% of the total square footage of the Office Building. The Office Building is 100% occupied.
Top 25 Tenants
The following table sets forth the Company's top 25 tenants based upon a percentage of total revenues from the Company's Properties owned on December 31, 2000.
MORTGAGE DEBT AND RATIO TO TOTAL MARKET CAPITALIZATION
As of December 31, 2000, the Operating Partnership's proportionate share of indebtedness of all Properties (whether or not consolidated for financial statement reporting purposes, including the Construction Properties) was approximately $1.452 billion. The Company's total market capitalization (the aggregate market value of the Company's outstanding shares of Common and Preferred Stock, assuming the full exchange of the limited partnership interests in the Operating Partnership for Common Stock, plus the $1.452 billion total debt of the Operating Partnership) as of December 31, 2000 was $2.4 billion. Accordingly, the Company's debt to total market capitalization ratio as of December 31, 2000 was 59.4%. The debt to total market capitalization ratio, which is based upon the Company's proportionate share of consolidated and unconsolidated indebtedness and market values of equity, differs from debt-to-book capitalization ratios, which are based upon consolidated indebtedness and book values.
The following table sets forth certain information regarding the mortgages and secured lines of credit encumbering the Properties.
MORTGAGE DEBT
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
The Company and the Operating Partnership are not currently involved in any material litigation nor, to management's knowledge, is any material litigation currently threatened against the Company, the Operating Partnership, the Property Partnerships or the Properties, other than litigation arising in the ordinary course of business, most of which is expected to be covered under liability insurance policies held by the Company or the Operating Partnership.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On January 19, 2001 the Company held a special meeting of shareholders in connection with the Jacobs transaction, at which special meeting the shareholders:
- approved the issuance by the Operating Partnership to Jacobs of up to 13.94 million special common units (SCUs)(18,343,624 votes were cast for the proposal, 384,048 votes were cast against the proposal and 41,652 votes were withheld).
- adopted an amendment to the Company's certificate of incorporation which, among other things, modified the Company's share ownership limit to permit the Lebovitz Group (as defined in the Company's certificate of incorporation) and the Jacobs Group (as defined in the proposed amendment) to beneficially or constructively own in the aggregate up to 37.99% of the outstanding shares of common stock of the Company (186,311,871 votes were cast for the proposal, 394,981 votes were cast against the proposal and 62,473 votes were withheld).
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
(a) Market Information
The principal United States market in which the Common Stock is traded is the New York Stock Exchange.
The following table sets forth the high and low sales prices for the Common Stock for each quarter of the Company's two most recent fiscal years.
(b) Holders
The approximate number of shareholders of record of the Common Stock was 651 as of March 20, 2001.
(c) Dividends
The following table sets forth the frequency and amounts of dividends declared and paid for each quarter of the Company's two most recent fiscal years.
Future dividend distributions are subject to the Company's actual results of operations, economic conditions and such other factors as the Board of Directors of the Company deems relevant. The Company's actual results of operations will be affected by a number of factors, including the revenues received from the Properties, the operating expenses of the Company, the Operating Partnership and the Property Partnerships, interest expense, the ability of the anchors and tenants at the Properties to meet their obligations and unanticipated capital expenditures.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected fianacial data of the Company, which should be read in conjunction with the finacial statments and notes therto.
Selected Financial Data (In thousands, except per share data)
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and results of operations should be read in conjunction with CBL & Associates Properties, Inc. Consolidated Financial Statements and Notes thereto.
Information included herein may contain "forward-looking statements" within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements. We direct you to the Company's other filings with the Securities and Exchange Commission, and elsewere in this Annual Report on Form 10-K for a discussion of such risks and uncertainties.
GENERAL BACKGROUND
On November 3, 1993, CBL & Associates Properties, Inc. (the "Company") completed an initial public offering of 15,400,000 shares of common stock priced at $19.50 per share (the "Offerings"). In connection with the Offerings, CBL & Associates, Inc. and its affiliates contributed their interests in properties to CBL & Associates Limited Partnership (the "Operating Partnership"). The Company is indirectly the sole general partner and as of December 31, 2000, the majority owner, of the Operating Partnership. As a result, the CBL & Associates Properties, Inc. Consolidated Financial Statements and Notes thereto reflect the consolidated financial results of the Operating Partnership, which included at December 31, 2000, the operations of a portfolio of properties consisting of 26 regional malls, 15 associated centers, two power centers, 70 community centers, an office building, joint venture investments in four regional malls and one associated center, and income from seven mortgages (the"Properties"). As of December 31, 2000, the Operating Partnership had under construction two malls, one community center, one office building, one mall expansion, and owns options to acquire certain shopping center development sites. The consolidated financial statements also include the results of CBL & Associates Management, Inc. (the "Management Company").
The Company classifies its regional malls into two categories - stabilized malls which have completed their initial lease-up and new malls which are in their initial lease-up phase. As of December 31, 2000 the new mall category was comprised of Springdale Mall in Mobile, Alabama, which was acquired in September 1997 and is being redeveloped and retenanted; Bonita Lakes Mall in Meridian, Mississippi, which opened in October 1997; Parkway Place in Huntsville, Alabama, which was acquired in December 1998 and is currently being redeveloped; and Arbor Place Mall in Atlanta (Douglasville), Georgia, which opened in October 1999.
On September 25, 2000, the Company entered into a series of agreements with Jacobs Realty Investors Limited Partnership and certain of its affiliates and partners ("Jacobs") pursuant to which the Company agreed to acquire from Jacobs interests in 21 malls and two associated centers for total consideration of approximately $1.3 billion. The transaction closed on January 31, 2001. Additionally, in a separate transaction, the Company acquired the remaining 50% interest in Madison Square Mall in Huntsville, Alabama. The purchase price was comprised of $124.5 million in cash including closing costs of approximately $12 million; the assumption of $745.5 million in non-recourse mortgage debt; and the issuance of approximately 12.2 million special common units (SCUs) in the Operating Partnership. The cash portion was funded from a new $212 million credit facility provided by a consortium of banks led by Wells Fargo. The Company will close on the remainder of the Jacobs transaction in 2002, at which time it will assume an additional $25.7 million of non-recourse mortgage debt and issue an additional 499,733 SCUs.
CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SALES
Mall shop sales, for those tenants who have reported, in the 26 stabilized malls in the Company's portfolio, remained relatively the same on a comparable per square foot basis as shown below:
Total sales volume in the mall portfolio, including new malls, increased 1.9% to $1.690 billion in 2000 from $1.659 billion in 1999.
The weighted average occupancy costs as a percentage of sales for the years ended December 31, 2000, 1999 and 1998, for the stabilized malls (excluding malls acquired in 1999 and 1998 from those years) were 11.9%, 11.5% and 11.1%, respectively.
OCCUPANCY
Occupancy for the Company's overall portfolio increased, with a breakdown by asset category as follows:
AVERAGE BASE RENTS
Average base rents for the Company's three portfolio categories was as follows:
CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LEASE ROLLOVERS
For spaces previously occupied, the Company achieved the following results from rollover leasing for the year ended December 31, 2000, over and above the base and percentage rent paid by the previous tenant:
In 2000 and 1999, revenues from the malls represented 77.3% and 76.9%, respectively, of total revenues from consolidated and unconsolidated properties; revenues from associated centers represented 4.1% and 3.7%; revenues from community centers represented 17.5% and 17.8%; and revenues from mortgages and the office building represented 1.1% and 1.6%. Accordingly, revenues and results of operations are disproportionately impacted by the malls' achievements.
The shopping center business is somewhat seasonal in nature with tenant sales achieving the highest levels during the fourth quarter because of the holiday season. The malls earn most of their "temporary" rents (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 entire year.
COMPARISON OF RESULTS OF OPERATIONS FOR 2000 TO THE RESULTS OF OPERATIONS FOR 1999
Total revenues in 2000 increased by $38.9 million, or 12.2%, to $356.5 million compared with $317.6 million in 1999. Of this increase, minimum rents increased by $22.4 million, or 11.1%, to $225.5 million compared with $203.0 million in 1999, percentage rents increased by $1.4 million, or 19.1%, to $8.8 million compared with $7.4 million in 1999; other rents increased by $0.8 million, or 14.8%, to $6.2 million compared with $5.4 million in 1999; and tenant reimbursements increased by $17.0 million, or 18.9%, to $106.8 million compared with $89.8 million in 1999.
Approximately $22.3 million of the increase in revenues resulted from the ten new centers opened or acquired during 1999 and 2000. The centers opened or acquired in 1999 and contributing to 2000 increases are Arbor Place Mall in Atlanta (Douglasville) Georgia; The Landing at Arbor Place in Atlanta (Douglasville) Georgia; York Galleria, in York, Pennsylvania; Sand Lake Corner in Orlando, Florida; and Fiddler's Run in Morganton, North Carolina, which were sold in 2000. The six new centers opened or acquired in 2000 are fully described in the Developments, Acquisitions and Expansions section of the annual report. Improved occupancies and operations and increased rents in the Company's operating portfolio generated approximately $21.8 million of the increased revenues, with the largest increases derived from Rivergate Mall in Nashville, Tennessee, and Meridian Mall in Lansing, Michigan. These increases were offset by a decrease in revenues of $2.2 million from 13 community centers sold in 2000 and a decrease of $3.1 million in management and development fees relating to a one time fee earned in the Company's co-development program in 1999.
Management, development and leasing fees decreased in 2000 by $3.6 million, or 46.7%, to $4.2 million compared with $7.8 million in 1999. Most of the decrease was due to a one-time fees totaling $3.1 million earned in the co-development program in 1999. The balance of the decrease was due to the reduction in continuing co-development fees. Interest and other income increased in 2000 by $0.9 million, or 21.4%, to $5.1 million compared with $4.2 million in 1999. This increase resulted primarily from the ten new centers opened or acquired over the past 24 months and interest income on the proceeds from community center sales held in escrow during the year.
CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Property operating expenses, including real estate taxes and maintenance and repairs, increased in 2000 by $10.7 million, or 11.1%, to $106.9 million compared with $96.2 million in 1999. This increase is primarily the result of the ten new centers opened or acquired over the past 24 months. The Company's cost recovery ratio, which includes redistribution of utilities, increased to 99.1% in 2000 compared with 93.3% in 1999 due to increases in occupancy at the end of 1999 and continued through calendar year 2000.
Depreciation and amortization increased in 2000 by $7.1 million, or 13.2%, to $60.6 million compared with $53.5 million in 1999. This increase resulted primarily from depreciation and amortization on the ten new centers opened or acquired over the past 24 months and the Company's capital investment in operating properties.
Interest expense increased in 2000 by $12.1 million, or 14.7%, to $94.6 million compared with $82.5 million in 1999. This increase is primarily due to increased interest expense on the ten new centers opened or acquired over the past 24 months offset by reductions in interest expense on debt retired with the proceeds from the sales of properties.
General and administrative expenses increased in 2000 by $1.6 million, or 9.6%, to $17.8 million compared with $16.2 million in 1999. A portion of this increase was due to increases in general overhead in preparation to assume management of The Richard E. Jacobs Group's interest's in 21 malls and two associated centers that were subsequently acquired in January 2001.
Gain on sales of real estate assets was $16.0 million in 2000 compared with $8.4 million in 1999. The majority of the gain in 2000 is from the $10.5 million gain on 13 community centers sold in 2000. The centers sold were: Centerview Plaza in China Grove, North Carolina; Clark's Pond in South Portland, Maine; Dorchester Crossing in Charleston, South Carolina; Fiddler's Run in Morganton, North Carolina; Genesis Square in Crossville, Tennessee; Hollins Plantation in Roanoke, Virginia; Karns Korner in Knoxville, Tennessee; Lakeshore Station in Gainsville, Georgia; Sparta Crossing in Sparta, Tennessee; Sterling Creek Commons in Portsmouth, Virginia; Tyler Square in Radford, Virginia; University Crossing in Pueblo, Colorado; and Wildwood Plaza in Salem, Virginia. Additional gains were generated by outparcel and pad sales at two centers under development in 2000, Creekwood Crossing in Bradenton, Florida and The Lakes Mall in Muskegon, Michigan, as well as outparcel sales at Sand Lake Corners in Orlando, Florida, which opened in 1999.
COMPARISON OF RESULTS OF OPERATIONS FOR 1999 TO THE RESULTS OF OPERATIONS FOR 1998
Total revenues in 1999 increased by $63.0 million, or 24.7%, to $317.6 million compared with $254.6 million in 1998. Of this increase, minimum rents increased by $36.4 million, or 21.8%, to $203.0 million compared with $166.6 million in 1998, percentage rents increased by $2.6 million, or 54.8%, to $7.4 million compared with $4.8 million in 1998, other rents increased by $1.4 million, or 35.8%, to $5.4 million compared with $4.0 million in 1998; and tenant reimbursements increased by $15.9 million, or 21.6%, to $89.8 million compared with $73.8 million in 1998.
Approximately $11.3 million of the increase in revenues resulted from the five new centers opened or acquired during 1999, and $35.9 million of the increase in revenues resulted from the ten new centers opened or acquired during the past 24 months. The centers opened in 1998 and contributing to 1999 increases are Sterling Creek Commons in Portsmouth, Virginia, and 641,000 square feet of expansions. The centers acquired in 1998 and contributing to 1999 increases are Stroud Mall in Stroudsburg, Pennsylvania; Hickory Hollow Mall, Rivergate Mall, Courtyard at Hickory Hollow, Village at Rivergate, and Lions Head Village, all in Nashville, Tennessee; Meridian Mall in Lansing, Michigan; and Janesville Mall in Janesville, Wisconsin. The five new centers opened or acquired in 1999 are Arbor Place Mall in Atlanta (Douglasville), Georgia; The Landing at Arbor Place in Atlanta (Douglasville), Georgia; Sand Lake Corners in Orlando, Florida; and Fiddler's Run in Morganton, North Carolina. Fiddler's Run was sold in March 2000 almost a year after it had opened. Improved occupancies and operations and increased rents in the Company's operating portfolio generated approximately $12.4 million of the increased revenues, with the largest increases from Hamilton Place in Chattanooga, Tennessee, and St. Clair Square in Fairview Heights, Illinois. New revenues of $3.4 million were from one-time fees earned in the Company's co-development program.
CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management, development and leasing fees increased in 1999 by $5.1 million, or 188.9%, to $7.8 million compared with $2.7 million in 1998. Most of the increase was due to one-time fees totaling $3.4 million earned in the co-development program. The balance of the increase was provided from the Company's managed properties and development operations. Interest and other income increased in 1999 by $1.5 million, or 55.0%, to $4.2 million compared with $2.7 million in 1998. This increase resulted primarily from the 15 new centers opened or acquired over the past 24 months.
Property operating expenses, including real estate taxes and maintenance and repairs, increased in 1999 by $16.0 million, or 20.0%, to $96.2 million compared with $80.2 million in 1998. This increase is primarily the result of the 15 new centers opened or acquired over the past 24 months. The Company's cost recovery ratio increased to 93.3% in 1999 compared with 92.1% in 1998.
Depreciation and amortization increased in 1999 by $10.0 million, or 23.0%, to $53.5 million compared with $43.5 million in 1998. This increase resulted primarily from depreciation and amortization on the 15 new centers opened or acquired over the past 24 months.
Interest expense increased in 1999 by $15.2 million, or 22.5%, to $82.5 million compared with $67.3 million in 1998. This increase is primarily due to increased interest expense on the 15 new centers opened or acquired over the past 24 months.
General and administrative expenses increased in 1999 by $4.4 million, or 36.9%, to $16.2 million compared with $11.8 million in 1998. This increase was due to increases in state tax expense, payroll, and general overhead.
Gain on sales of real estate assets was $8.4 million in 1999 compared with $4.2 million in 1998. The majority of the gain in 1999 is from outparcel and pad sales at centers under development in 1999: Chesterfield Crossing in Richmond, Virginia; Arbor Place Mall and The Landing at Arbor Place in Atlanta (Douglasville), Georgia; and Sand Lake Corners in Orlando, Florida. The gain on sales in 1999 also includes gain on the sale of two centers, North Park Plaza in Richmond, Virginia, and a free-standing Regal Cinema in Jacksonville, Florida.
LIQUIDITY AND CAPITAL RESOURCES
The principal uses of the Company's liquidity and capital resources have historically been for property development, acquisitions, expansion and renovation programs, and debt repayment. To maintain its qualification as a real estate investment trust under the Internal Revenue Code, the Company currently is required to distribute to its shareholders at least 90% of its "Real Estate Investment Trust Taxable Income" as defined in the Internal Revenue Code of 1986, as amended (the "Code").
As of December 31, 2000, the Company had $93.6 million available in unfunded construction loans to be used for completion of construction projects and replenishment of working capital previously used for construction. Additionally, as of December 31, 2000, the Company had obtained revolving credit lines and term loans totaling $240 million, of which $99.0 million was available. Also, as a publicly traded company, the Company has access to capital through both the public equity and debt markets. The Company has filed a shelf registration statement authorizing shares of the Company's common stock, preferred stock, and warrants to purchase shares of the Company's common stock with an aggregate public offering price of up to $350 million, with $278 million available as of December 31, 2000. The Company anticipates that the combination of these sources will, for the foreseeable future, provide adequate liquidity to enable it to continue its capital programs substantially as in the past and make distributions to its shareholders in accordance with the Code's requirements applicable to real estate investment trusts.
CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management expects to refinance the majority of the mortgage notes payable maturing over the next five years with replacement loans.
The Company's capital structure at December 31, 2000, included property specific mortgages, which are generally non-recourse, revolving lines of credit, common stock, preferred stock, and a minority interest in the Operating Partnership. The minority interest in the Operating Partnership represented the 25.5% ownership interest in the Operating Partnership held on December 31, 2000 by certain of the Company's current and former executive and senior officers . Additionally, these current and former executive and senior officers and the Company's directors own approximately 2.0 million shares of the outstanding common stock of the Company, for a combined total interest in the Operating Partnership on December 31, 2000 of approximately 30.9%. Ownership interests issued to fund acquisitions in 1998 and 1999 represented on December 31, 2000 a 6.5% interest in the Operating Partnership. Assuming the exchange of all limited partnership interests in the Operating Partnership for common stock, there would have been approximately 36.9 million shares of common stock outstanding with a market value of approximately $933.9 million at December 31, 2000 (based on the closing price of the Company's common stock of $25.3125 per share on December 31, 2000). The Company's total market equity is $992.8 million at December 31, 2000, including 2.9 million shares of preferred stock (based on the closing price of its preferred stock of $20.50 per share on December 31, 2000). The Company's current and former executive and senior officers' ownership interests had a market value of approximately $288.3 million at December 31, 2000.
Mortgage debt consists of debt on certain consolidated properties as well as debt on four properties in which the Company owns non-controlling interests, accounted for under the equity method of accounting. At December 31, 2000, the Company's share of funded mortgage debt on its consolidated properties (adjusted for minority investors' interests in seven properties) was $883.2 million and its pro rata share of mortgage debt on unconsolidated properties (accounted for under the equity method) was $42.8 million for total fixed-rate debt obligations of $926.0 million with a weighted average interest rate of 7.5%. Consolidated and unconsolidated variable-rate debt accounted for $525.6 million with a weighted average interest rate of 7.2% (after application of swap instruments). Total debt obligations amounted to $1.452 billion. Variable-rate debt accounted for approximately 36.2% of the Company's total debt and 21.5% of its total capitalization. Through the execution of interest rate swap agreements, the Company has fixed the interest rates on $473.0 million of variable-rate debt at a weighted average interest rate of 7.1%. Of the Company's remaining variable-rate debt of $52.6 million, interest rate caps in place of $50.0 million leave $2.6 million of debt subject to variable rates on construction properties and no debt subject to variable rates on operating properties. There were no fees charged to the Company related to these swap agreements. The Company's interest rate swap and cap agreements in place at December 31, 2000, are as follows:
Subsequent to year end, the Company executed new interest rate swap agreements totaling $140 million at a weighted-average LIBOR interest rate of 5.051%.
The outstanding balance of $146 million on the Company's credit facilities had a weighted- average interest rate of 7.7% (before applied swap instruments) at December 31, 2000. Each of the credit facilities includes covenants that require the Company to maintain minimum net worth levels, maintain interest and debt coverage ratios, maintain total obligations to capitalized value ratios, and maintain limitations on variable-rate debt. The credit facilities also require that the Company's senior management continue to consist of certain individuals and to
CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
maintain certain levels of minority ownership in the Operating Partnership. The First Tennessee Bank credit facility provides that if the Company completes an offering of its securities, not less than 75% of the net proceeds of any such offering will be applied for the benefit of the Operating Partnership. The following table sets forth the Company's credit facilities at December 31, 2000 (in millions):
During 2000 the Company closed permanent loans of $174 million at a weighted average interest rate of 8.24%. The details of those loans are: in June a $9.9 million loan on Westgate Crossing in Spartanburg, South Carolina, at an interest rate of 8.42%; in July a $5.2 million loan on Plaza Del Sol Mall in Del Rio, Texas, at an interest rate of 9.15% (the Company's share of this loan was $2.6 million); in August a $74.5 million loan on Burnsville Center in Burnsville, Minnesota, at an interest rate of 8.0%; in November a loan of $32.5 million on Stroud Mall in Stroudsburg, Pennsylvania, at an interest rate of 8.42%; and also in November a $52.0 million loan on York Galleria in York, Pennsylvania, at an interest rate of 8.34%. The proceeds of these loans were used to repay existing variable rate indebtedness and to fund distribution to equity partners.
Based on the debt (including construction projects) and the market value of equity described above, the Company's debt to total market capitalization (debt plus market value equity) ratio was 59.4% at December 31, 2000, compared to 63.0% at December 31, 1999.
On January 31, 2001, the Company, assumed in connection with the Jacobs acquisition total debt obligations of $745.5 million, including permanent debt of $661.5 million (adjusted for minority interest in one property); variable-rate debt of $12.5 million; and its pro rata share of mortgage debt on unconsolidated properties (accounted for under the equity method) of $71.5 million. In addition, the Company closed a $212 million unsecured credit facility provided by a consortium of banks led by Wells Fargo. The outstanding balance under this facility was $115 million at February 28, 2001. Of the revolving component of this facility, $97 million is still available and will be used to fund capital improvements in certain of the acquired properties.
DEVELOPMENT, EXPANSIONS AND ACQUISITIONS
During 2000, the Company opened and acquired approximately 1,236,000 square feet of new retail properties consisting of the following:
As of February 28, 2001, the Company had approximately 1,901,000 square feet under construction consisting of:
On January 31, 2001, the Company acquired Jacobs interests in 21 malls and two associated centers. The total gross leasable area of the 23 properties was 19.2 million square feet, or an average gross leasable area of 914,000 square feet per mall. The gross leasable area of the mall stores in the Jacobs properties was approximately 5.9 million square feet. The malls are located in middle markets predominantly in the Southeast and the Midwest. Additionaly, the Company acquired the remaing 50% interest in Madison Square Mall in Huntsville, Alabama.
The Company has also entered into a number of option agreements for the development of future regional malls and community centers. Except for these projects and as further described below, the Company currently has no other capital commitments.
It is management's expectation that the Company will continue to have access to the capital resources necessary to expand and grow its business. Future development and acquisition activities will be undertaken by the Company as suitable opportunities arise. Such activities are not expected to be undertaken unless adequate sources of financing are available and a satisfactory budget with targeted returns on investment has been internally approved.
The Company will fund its major development, expansion and acquisition activity with its traditional sources of construction and permanent debt financing as well as from other debt and equity financings, including public financings, and its credit facilities.
OTHER CAPITAL EXPENDITURES
Management prepares an annual capital expenditures budget for each property which is intended to provide for all necessary recurring capital improvements and maintenance items. Management believes that its annual operating reserve for maintenance and recurring capital improvements as well as reimbursements from tenants will provide the necessary funding for such requirements. The Company intends to distribute approximately 50% to 90% of its funds from operations with the remaining 10% to 50% to be held as a reserve for capital expenditures and continued growth opportunities.
Major tenant finish costs for currently vacant space are expected to be funded with working capital, operating reserves, or revolving lines of credit. Funds invested for tenant finish costs are expected to earn a return on that investment.
CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the year ended December 31, 2000, revenue generating capital expenditures, or tenant allowances for improvements, were $10.0 million. These capital expenditures generate a return through increased rents from these tenants over the term of their leases. Revenue enhancing capital expenditures, or remodeling and renovation costs, were $7.4 million, the majority of which was for the renovation of Asheville Mall in Asheville, North Carolina, and three community centers. Revenue neutral capital expenditures, such as parking lot and roof repairs that are recovered from the tenants, were $9.6 million in 2000.
Environmental Matter
The Company believes that the Properties, with the exception of Parkway Place in Huntsville, Alabama, are in compliance in all material respects with all federal, state and local ordinances and regulations regarding the handling, discharge, and emission of hazardous or toxic substances. At Parkway Place asbestos abatement will occur in portions of the existing mall during demolition which will be completed by the end of the second quarter of 2001. The Company has not been notified by any governmental authority and is not otherwise aware of any material noncompliance, liability, or claim relating to hazardous or toxic substances in connection with any of its present or former properties. The Company has not recorded in its financial statements any material liability in connection with environmental matters.
Cash Flows
Cash flows provided by operating activities for 2000 increased by $3.6 million, or 3.2%, to $117.8 million from $114.2 million in 1999. This increase was primarily due to increases in cash provided from the operations of ten new centers opened or acquired in the last 24 months offset by decreases in cash flow from the sales of properties. Cash flows used in investing activities for 2000 decreased by $85.1 million, or 40.1%, to $127.1 million compared with $212.1 million in 1999. This decrease was primarily due to the smaller number of acquisitions in 2000 compared with the number of acquisitions in 1999. Cash flows provided by financing activities for 2000 decreased by $91.8 million, or 92.6%, to $7.4 million from $99.2 million in 1999. This decrease is primarily due to decreased borrowings related to the acquisition program and the retirement of debt with proceeds from sales of the properties.
Impact of Inflation
In the last three years, inflation has not had a significant impact on the Company because of the relatively low inflation rate. Substantially all tenant leases do, however, contain provisions designed to protect the Company from the impact of inflation. Such provisions include clauses enabling the Company to receive percentage rentals based on tenants' gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases. In addition, many of the leases are for terms of less than ten years which may enable the Company to replace existing leases with new leases at higher base and/or percentage rentals if rents from the existing leases are below the then-existing market rate. Most of the leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation.
New Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended, ("SFAS No. 133") establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement; and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.
CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company has determined that a portion of its derivative instruments (swap agreements and an interest rate cap agreement) in place are ineffective as defined by SFAS No. 133. The terms of ineffective derivative instruments expire in 2001, thus while the Company may experience some volatility in earnings in interim periods, there will be no effect to current earnings in the Company's financial statements for the year ended December 31, 2001. If the Company had implemented SFAS No. 133 as of December 31, 2000, ineffective derivative instruments would have increased total assets by $514,000 and would have increased net income by $514,000. Effective derivative instruments would have increased liabilities by $262,000 and comprehensive income, also recorded on the balance sheet, would have decreased by $262,000.
Funds from Operations
Management believes that Funds from Operations ("FFO") provides an additional indicator of the financial performance of the Properties. FFO is defined by the Company as net income (loss) before depreciation of real estate assets, gains or losses on sales of real estate and gains or losses on investments in marketable securities. FFO also includes the Company's share of FFO in unconsolidated properties and excludes minority interests' share of FFO in consolidated properties other than the Operating Partnership. The Company computes FFO in accordance with the National Association of Real Estate Investment Trusts ("NAREIT") recommendation concerning finance costs and non-real estate depreciation. The Company excludes gains or losses on outparcel sales, even though NAREIT permits their inclusion when calculating FFO. Gains or losses on outparcel sales would have added to FFO $5.4 million in 2000 compared with $8.4 million in 1999.
The use of FFO as an indicator of financial performance is influenced not only by the operations of the Properties, but also by the capital structure of the Operating Partnership and the Company. Accordingly, management expects that FFO will be one of the significant factors considered by the Board of Directors in determining the amount of cash distributions the Operating Partnership will make to its partners (including the Company). Management also believes that FFO is a widely used measure of the operating performance of REITs and provides a relevant basis for comparison among companies. FFO does not represent cash flow from operations as defined by accounting principles generally accepted in the United States ("GAAP"), is not necessarily indicative of cash from operations available to fund all cash flow needs, and should not be considered as an alternative to net income for purposes of evaluating the Company's operating performance or to cash flows as a measure of liquidity.
Effective January 1, 2000, NAREIT clarified FFO to include all operating results - recurring and non-recurring - except those results defined as "extraordinary items" under accounting principles generally accepted in the United States. The Company implemented this clarification in the first quarter of 2000 and no longer adds back to FFO development costs charged to net income. This amount was $127,000 for the year ended December 31, 2000. For comparatice purposes, the Company has recomputed its 1999 FFO herein to exclude the add-back of development costs charged to net income of $1,674,000.
In 2000, FFO increased by $15.8 million, or 13.6%, to $132.0 million compared with $116.3 million in 1999. The increase in FFO was primarily attributable to the continuing increase in revenues and income from operations from ten new developments and acquisitions, and increases in occupancy levels and higher rents in the Company's stabilized portfolio offset by FFO decreases from the sales of thirteen properties.
CBL & ASSOCIATS PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's calculation of FFO is as follows (in thousands):
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has managed the market risk for its variable rate debt with derivative financial instruments. The derivative instruments are described in the Liquidity and Capital Resources section in Item 7 above and in Note 8 to the Financial Statements.
The fair value of the Company's long term debt is estimated based on discounted cash flows at interest rates that management believes reflects the risks associated with long term debt of similar risk and duration.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to the Index to Financial statements contained in Item 14 on page 56.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Incorporated herein by reference from the Company's definitive proxy statement filed on March 29, 2001 with the Securities and Exchange Commission (the "Commission") with respect to its Annual Meeting of Stockholders to be held on May 2, 2001.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated herein by reference from the Company's definitive proxy statement filed on March 29, 2001 with the Commission with respect to its Annual Meeting of Stockholders to be held on May 2, 2001.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated herein by reference from the Company's definitive proxy statement filed on March 29, 2001 with the Commission with respect to its Annual Meeting of Stockholders to be held on May 2, 2001.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated herein by reference from the Company's definitive proxy statement filed on March 29, 2001 with the Commission with respect to its Annual Meeting of Stockholders to be held on May 2, 2001.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(1) Financial Statements Page Number
Report of Independent Public Accountants 59 CBL & Associates Properties, Inc. Consolidated Balance Sheets as of December 31, 2000 and 1999. 60
CBL & Associates Properties, Inc. Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998 61
CBL & Associates Properties, Inc. Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998 62
CBL & Associates Properties, Inc. Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 63
Notes to Financial Statements 64
(2) Financial Statement Schedules
Schedule II Allowance For Credit Losses 78 Schedule III Real Estate and Accumulated Depreciation 79 Schedule IV Mortgage Loans on Real Estate 88
Financial Statement Schedules not listed herein are either not required or are not present in amounts sufficient to require submission of the schedule or the information required to be included therein is included in the Company's Consolidated Financial Statements in item 14 or are reported elsewhere.
(3) Exhibits
Exhibit Number Description
3.1 -- Amended and Restated Certificate of Incorporation of the Company(a)
3.2 -- Certificate of Amendment to the Amended & Restated Certificate of Incorporation of the Company (b)
3.3 -- Amended and Restated Bylaws of the Company(a)
4 -- See Amended and Restated Certificate of Incorporation of the Company, relating to the Common Stock(a)
10.1 -- Partnership Agreement of the Operating Partnership(a)
10.2 -- Property Management Agreement between the Operating Partnership and the Management Company(a)
10.3 -- Property Management Agreement relating to Retained Properties(a)
10.4.1 -- CBL & Associates Properties, Inc. 1993 Stock Incentive Plan(a)+
10.4.2 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for Charles B. Lebovitz+
10.4.3 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for John N. Foy+
10.4.4 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for Ben S. Landress+
10.4.5 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for Stephen D. Lebovitz+
10.4.6 -- Stock Restriction Agreement, dated December 28, 1994, for Charles B. Lebovitz+
10.4.7 -- Stock Restriction Agreement, dated December 2, 1994, for John N. Foy+
10.4.8 -- Stock Restriction Agreement, dated December 2, 1994, for Ben S. Landress+
10.4.9 -- Stock Restriction Agreement, dated December 2, 1994, for Stephen D. Lebovitz+
10.5 -- Indemnification Agreements between the Company and the Management Company and their officers and directors(a)
10.6.1 -- Employment Agreement for Charles B. Lebovitz(a)+
10.6.2 -- Employment Agreement for John N. Foy(a)+
10.6.3 -- Employment Agreement for Ben S. Landress(a)+
10.6.4 -- Employment Agreement for Stephen D. Lebovitz(a)+
10.7 -- Subscription Agreement relating to purchase of the Common Stock and Preferred Stock of the Management Company(a)
10.8 -- Option Agreement relating to certain Retained Properties(a)
10.9 -- Option Agreement relating to Outparcels(a)
10.10.1 -- Property Partnership Agreement relating to Hamilton Place(a)
10.10.2 -- Property Partnership Agreement relating to CoolSprings Galleria(a)
10.11.1 -- Acquisition Option Agreement relating to Hamilton Place(a)
10.11.2 -- Acquisition Option Agreement relating to the Hamilton Place Centers(a)
10.12.3 -- Acquisition Option Agreement relating to the Office Building(a)
10.13 -- Loan agreement with South Trust Bank dated January 15 , 1998.(d)
10.14 -- Amended and restated Loan Agreement between CBL & Associates Properties , Inc. and First Tennessee Bank National Association Dated June 12, 1998 (e)
10.15 -- First Amendment To Third Amended And Restated Credit Agreement and Third Amended And Restated Credit Agreement between CBL & Associates Properties, Inc. and Wells Fargo Bank, National Association, dated August 4, 1998 (e)
10.16 -- Master Contribution Agreement, dated as of September 25, 2000, by and among the Registrant, CBL & Associates Limited Partnership, Jacobs Realty Investors Limited Partnership, Richard E. Jacobs, solely as Trustee for the Richard E. Jacobs Revocable Living Trust, and Richard E. Jacobs, Solely as Trustee for the David H. Jacobs Marital Trust. (f)
10.17 -- Press Release of the Registrant, dated January 31, 2001. (g)
10.18 -- First Amendment to Second Amended and Restated Agreement of Limited Partnership of CBL & Associates Limited Partnership. (g)
10.19 -- Terms of Series J Special Common Units of CBL & Associates Limited Partnership, pursuant to Article 4.4 of the Second Amended and Restated Partnership Agreement of CBL & Associates Limited Partnership. (g)
10.20 -- Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant. (g)
10.21 -- Share Ownership Agreement, dated as if January 31, 2001, by and among the Registrant, CBL & Associates, Inc., LebFam, Inc. Charles B. Lebovitz, Stephen D. Lebovitz; Jacobs Realty Investors Limited Partnership, Richard E. Jacobs, solely as trustee for the Richard E. Jacobs Revocable Living Trust and Richard E. Jacobs solely as trustee for the David H. Jacobs Marital Trust. (g)
10.22 -- Registration Rights Agreement, dated as of January 31, 2001 by and between the Registrant and the Holders of SCU's listed on Schedule 1 thereto. (g)
10.23 -- Registration Rights Agreement, dated as of January 31, 2001 by and between the Registrant and Frankel Midland Limited Partnership. (i)
10.24 -- Registration Rights Agreement, dated as of January 31, 2001 by and between the Registrant and Hess Abroms Properties of Huntsville. (g)
10.25 -- Loan Agreement, as of the January 31, 2001, by and between CBL & Associates Limited Partnership, Wells Fargo Bank, National Association, Fleet National Bank, U.S. Bank National Association, Commerzbank AG, New York And Grand Cayman Branches, and Keybank National Association, together certain other lenders parties thereto pursuant to Section 8.6 thereof. (g)
21 -- Subsidiaries of the Company
23 -- Consent of Arthur Andersen LLP
24 -- Power of Attorney
(a) Incorporated by reference to Post-Effective Amendment No. 1 to the Company's Registration Statement on Form S-11(No. 33-67372), as filed with the Commission on January 27, 1994.
(b) Incorporated by reference to Exhibit B to the Company's Definitive Schedule 14A, Dated April 1, 1996.
(c) Incorporated by reference to Amendment No. 2 to the Company's Registration Statement on Form S-11 (No. 33-67372), as filed with the Commission on October 26, 1993.
(d) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
(e) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
(f) Incorporated by reference from the Registrant's Form 8-K, filed on October 27, 2000.
(g) Incorporated by reference to the Company's 8K filed on February 6, 2001.
+ A management contract or compensatory plan or arrangement required to be filed pursuant to Item 14(c) of this report.
(4) Reports on Form 8-K
An 8-K disclosing the results of a special meeting of shareholders, in connection with the Jacobs transaction, (Item 5: other events) was filed on January 19, 2001.
The outline from the Company's February 1, 2001 conference call with analysts regarding earnings (Item 5) was filed on February 1, 2001.
A summary of the Jacobs transaction together with certain of the material agreements associated with the closing of the transaction on January 31, 2001 was filed on February 6, 2001
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CBL & ASSOCIATES PROPERTIES, INC. (Registrant)
By: /s/ Charles B. Lebovitz ------------------------------------------ Charles B. Lebovitz Chairman of the Board, and Chief Executive Officer Dated: April 2, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Charles B. Lebovitz Chairman of the Board April 2, 2001 - ------------------------ and Chief Charles B. Lebovitz Executive Officer (Principal Executive Officer)
/s/ John N. Foy Vice Chairman of the Board, April 2, 2001 - ------------------------ Chief Financial Officer and John N. Foy Treasurer (Principal Financial Officer and Principal Accounting Officer)
/s/ Stephen D. Lebovitz Director, President April 2, 2001 - ------------------------ and Secretary Stephen D. Lebovitz
/s/ Claude M.Ballard Director April 2, 2001 - ------------------------ Claude M. Ballard
/s/ Leo Fields Director April 2, 2001 - ------------------------ Leo Fields
/s/ William J.Poorvu Director April 2, 2001 - ------------------------ William J. Poorvu
/s/ Winston W. Walker Director April 2, 2001 - ------------------------ Winston W. Walker
/s/ Gary L. Bryenton Director April 2, 2001 - ------------------------ Gary L. Bryenton
/s/ Martin J. Cleary Director April 2, 2001 - ------------------------ Martin J. Cleary
*By: /s/ Charles B. Lebovitz ------------------------ Charles B. Lebovitz Attorney-in-Fact April 2, 2001
Report of Independent Public Accountants 59
CBL & Associates Properties, Inc. Consolidated Balance Sheets as of December 31, 2000 and 1999 60
CBL & Associates Properties, Inc. Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998 61
CBL & Associates Properties, Inc. Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998 62
CBL & Associates Properties, Inc. Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 63
Notes to Financial Statements 64
Schedule II Allowance For Credit Losses 78 Schedule III Real Estate and Accumulated Depreciation 79 Schedule IV Mortgage Loans on Real Estate 88
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of CBL & Associates Properties, Inc.:
We have audited the accompanying consolidated balance sheets of CBL & ASSOCIATES PROPERTIES, INC. (a Delaware corporation) and subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CBL & Associates Properties, Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index to financial statements are presented for the purpose of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee January 31, 2001
CBL & Associates Properties, Inc. Consolidated Balance Sheets (In thousands, except share data)
The accompanying notes are an integral part of these balance sheets.
CBL & Associates Properties, Inc.
Consolidated Statements of Operations (In thousands, except per share data)
The accompanying notes are an integral part of these statements.
CBL & Associates Properties, Inc.
Consolidated Statements of Shareholders' Equity (In thousands, except share data)
The accompanying notes are an integral part of these statements.
CBL & Associates Properties, Inc.
Consolidated Statements of Cash Flows (In thousands)
The accompanying notes are an integral part of these statements.
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
CBL & Associates Properties, Inc. (the "Company"), a Delaware corporation, is engaged in the development, acquisition, and operation of regional shopping malls and community centers, primarily in the Southeast and select markets in the Northeast and Midwest regions of the United States. The Company is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc., which are the sole general partner and majority owner, respectively, of CBL & Associates Limited Partnership (the "Operating Partnership"). As a result, the Company conducts its business through the Operating Partnership, which at December 31, 2000, owns controlling interests in a portfolio of properties consisting of 26 regional malls; 15 associated centers, each of which is part of a regional shopping mall complex; two power centers; 70 community centers; and one office building. Additionally, the Operating Partnership owns non-controlling interests in four regional malls and one associated center. The Operating Partnership has two malls and one community center currently under construction and has options to acquire certain development properties owned by third parties. At December 31, 2000, CBL Holdings I, Inc. owned a 2.5% general partnership interest and CBL Holdings II, Inc. owned a 65.4% limited partnership interest in the Operating Partnership for a combined interest held by the Company of 67.9%.
The minority interest in the Operating Partnership is held primarily by CBL & Associates, Inc. and its affiliates (collectively "CBL") who contributed their interests in certain real estate properties and joint ventures to the Operating Partnership in exchange for a limited partnership interest in connection with the formation of the Operating Partnership in November 1993. At December 31, 2000, CBL owns a 25.5% limited partnership interest in the Operating Partnership (Note 10).
To comply with certain technical requirements of the Internal Revenue Code of 1986, as amended (the "Code"), the Operating Partnership carries out the Company's property management and development activities through CBL & Associates Management, Inc. (the "Management Company"). The Operating Partnership holds 100% of the preferred stock and 5% of the common stock of the Management Company, with CBL holding the remaining 95% of the common stock. Through the ownership of the preferred stock, the Operating Partnership receives substantially all of the cash flow and, therefore, enjoys substantially all of the economic benefits of the Management Company's operations. Due to the Company's ability, as sole general partner, to control the Operating Partnership and the Operating Partnership's rights to substantially all of the economic benefits of the Management Company, the accounts of each entity are included in the accompanying consolidated financial statements. The Company, the Operating Partnership, and the Management Company are referred to collectively as the "Company".
All significant intercompany balances and transactions have been eliminated in the consolidated presentation.
On January 31, 2001, the Company completed the first stage of the acquisition of The Richard E. Jacobs Group's interests in 21 malls and two associated centers for total consideration of approximately $1.26 billion, including the acquisition of minority interests in certain properties. The purchase price is comprised of $124.5 million in cash including closing costs of approximately $12 million; the assumption of $745.5million in non-recourse mortgage debt; and the issuance of 12,056,692 special common units of the Operating Partnership with a face value of $32.25 per unit and a fair value of $27.25 per unit. The cash portion was funded from a new $212 million unsecured credit facility provided by a consortium of banks led by Wells Fargo. The Company will close on the second stage in 2002, which will consist of cash of $0.3 million, the assumption of $25.7 million in non-recourse mortgage debt, and the issuance of 499,733 special common units of the Operating Partnership with a face value of $32.25 per unit. In a separate transaction, the Company issued an additional 603,344 special common units of the Operating Partnership to purchase the remaining 50% interest in Madison Square Mall in Huntsville, Alabama.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Real Estate Assets
Costs directly related to the development of real estate assets, including overhead costs directly attributable to property development, are capitalized. Interest costs incurred during the development and construction period are capitalized.
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis generally over 40 years for buildings and improvements and seven to ten years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the life of the related lease.
Long-Lived Assets
The Company periodically evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when the projected undiscounted future cash flow of such asset is less than its carrying value. Management believes that no material impairment existed at December 31, 2000, and accordingly, no loss was recognized.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and cash equivalent investments with original maturities of three months or less, primarily consisting of demand deposits in banks.
Deferred Financing Costs
Deferred financing costs are included in other assets in the accompanying consolidated balance sheets, include fees and costs incurred to obtain long-term financing, and are being amortized over the terms of the respective mortgage notes payable. Unamortized deferred financing costs are written off when mortgage notes payable are retired before the maturity date.
Deferred Transaction Costs
Deferred transaction costs of $5.4 million are included in other assets in the accompanying consolidated balance sheet at December 31, 2000, and include fees and costs incurred in connection with the acquisition of The Richard E. Jacobs Group's interests in 21 malls and two associated centers. These costs will be capitalized as part of the value assigned to these assets.
Revenue Recognition
Rental revenue attributable to operating leases is recognized on a straight-line basis over the initial term of the related leases. Certain tenants are required to pay additional rent if sales volume exceeds specified amounts. The Company recognizes this additional rent as revenue when such amounts become determinable. A substantial portion of the Company's rental income is derived from various national and regional retail companies.
Tenant Reimbursements
The Company receives reimbursements from tenants for certain costs as provided in the lease agreements. These costs consist of real estate taxes, common area maintenance, and other recoverable costs. Tenant reimbursements are recognized as revenue in the period the costs are incurred.
Management, Development and Leasing Fees
Management fees are charged as a percentage of rentals and are recognized as revenue as they are earned. Leasing fees are charged for newly executed leases. These fees are recognized as revenues as they are earned. Development fees are recognized as revenue on a pro rata basis over the development period.
Gain on Sales of Real Estate Assets
Gain on sales of real estate assets is recognized at the time title to the asset is transferred to the buyer, subject to the adequacy of the buyer's initial and continuing investment and the assumption by the buyer of all future ownership risks of the asset.
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
The Company is qualified as a real estate investment trust under Sections 856 through 860 of the Code and applicable treasury regulations. In order to maintain qualification as a real estate investment trust, the Company is currently required to distribute at least 90% of its taxable income to shareholders and meet certain other asset and income tests as well as other requirements. As a real estate investment trust, the Company will generally not be liable for federal corporate income taxes. Thus, no provision for federal income taxes has been included in the accompanying consolidated financial statements. If the Company fails to qualify as a real estate investment trust in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate tax rates. Even if the Company maintains its qualification for taxation as a real estate investment trust, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed income. State income taxes were not significant in 2000, 1999 and 1998.
Derivative Financial Instruments
Interest rate cap and swap agreements, which are principally used by the Company in the management of interest rate exposure, are accounted for on an accrual basis. Amounts to be paid or received under interest rate cap and swap agreements are recorded in interest expense in the period in which they accrue. See Note 8 for additional information.
Concentration of Credit Risk
The Company's tenants consist of national, regional and local retailers. Financial instruments which subject the Company to concentrations of credit risk consist primarily of tenant leases. The Company does not generally obtain collateral or other security to support financial instruments subject to credit risk but monitors the credit standing of tenants.
Earnings Per Share
Basic earnings per share ("EPS") excludes dilution and is computed by dividing earnings available to common shareholders by the weighted-average number of unrestricted 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 minority interest in the Operating Partnership into shares of common stock are not dilutive (Note 10). The difference in basic and diluted EPS is due to the assumed exercise of outstanding stock options and restricted stock resulting in 140,000, 187,000 and 261,000 additional potential dilutive common shares in 2000, 1999 and 1998, respectively.
Stock-Based Compensation
The Company accounts for its stock-based compensation plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25). Effective in 1996, the Company adopted the disclosure option of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 requires companies that do not choose to account for stock-based compensation as prescribed by the statement to disclose the pro forma effects on net income and earnings per share as if SFAS No. 123 had been adopted. Additionally, certain other disclosures are required with respect to stock-based compensation and the assumptions used to determine the pro forma effects of SFAS No. 123. See Note 12 for the required disclosures.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. UNCONSOLIDATED AFFILIATES
The Company has investments in five partnerships and joint ventures, all of which are reflected on the equity method of accounting in the accompanying consolidated financial statements and consist of the following at December 31, 2000:
Condensed combined financial statement information of the partnerships and joint ventures is presented as follows (in thousands):
In general, contributions and distributions of capital or cash flows and allocations of income and expense are made on a pro rata basis in proportion to the equity interest held by each general or limited partner.
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. MORTGAGE AND OTHER NOTES PAYABLE
Mortgage and other notes payable consist of the following at December 31, 2000 and 1999 (in thousands):
Permanent Loans
Permanent loans consist of loans secured by properties held by the Company at December 31, 2000, with an asset carrying amount of $1,891,446,000. At December 31, 2000, permanent loans totaling $904,357,000 bear interest at fixed rates ranging from 6.65% to 10.625%. Permanent loans totaling $289,328,000 bear interest at variable interest rates indexed to the prime lending rate or London Interbank Offered Rate ("LIBOR") (7.56% to 9.50% at December 31, 2000). Permanent loans mature at various dates from 2001 through 2016.
Construction Loans
At December 31, 2000, the Company had construction loans on seven properties. The total commitment under the construction loans is $156,104,000, of which $84,652,000 is outstanding at December 31, 2000. The construction loans mature in 2002 and 2003, and bear interest at variable interest rates indexed to the prime lending rate or LIBOR (7.74% to 8.14% at December 31, 2000).
Lines of Credit
The Company maintains line of credit agreements with banks for construction, acquisition, and working capital purposes. At December 31, 2000, the Company had $240,000,000 available under its line of credit agreements, of which $146,000,000 was outstanding. The lines expire at various dates from 2002 through 2004 and bear interest at variable rates indexed to the prime lending rate or LIBOR (weighted average interest rate 7.70% at December 31, 2000). At December 31, 2000, outstanding letters of credit total approximately $1,235,000. The line of credit agreements contain, among other restrictions, certain restrictive covenants including the maintenance of certain coverage ratios and a minimum net worth and limitations on distributions. The Company was in compliance with all debt covenants on its lines of credit at December 31, 2000.
Debt Maturities
As of December 31, 2000, the scheduled principal payments on all mortgage and other notes payable, including construction loans and lines of credit, are as follows (in thousands):
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. MORTGAGE NOTES RECEIVABLE
Substantially all mortgage notes receivable are collateralized by wrap-around mortgages which are first mortgages on the underlying real estate and related improvements. Interest rates on these notes receivable range from 8.0% to 11.0% at December 31, 2000.
6. MINIMUM RENTS
Tenant leases are usually for 5 to 20 year periods and generally provide for renewals and annual rentals which are subject to upward adjustments based on tenant sales volume. Future minimum rents are scheduled to be received under noncancellable tenant leases at December 31, 2000, as follows (in thousands):
No single tenant collectively accounts for more than 10% of the Company's total revenues.
7. SHAREHOLDERS' EQUITY
In June 1998, the Company completed a public offering of 2,875,000 shares of 9% Series A Cumulative Redeemable Preferred Stock (the "Series A Preferred Stock") at a price to the public of $25.00 per share, including 715,875 shares purchased by an affiliate of Wells Fargo Bank. The net proceeds of $69.8 million were used to repay variable-rate indebtedness incurred in the Company's development and acquisition programs. The dividends on the Series A Preferred Stock are cumulative and accrue from the date of issue and are payable quarterly in arrears commencing on September 30, 1998, at a rate of $2.25 per share per annum. The Series A Preferred Stock has no stated maturity, is not subject to any sinking fund or mandatory redemption and is not redeemable prior to July 1, 2003. On or after July 1, 2003, the Company may redeem the Series A Preferred Stock, in whole or in part, at any time for a cash redemption price of $25.00 per share, plus dividends accrued and unpaid.
8. DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. They are used to manage well defined interest rate risks.
Under interest rate swap agreements, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed rate and variable rate interest amounts calculated by reference to an agreed-upon notional amount. Under these agreements, the Company receives interest payments at a rate equal to LIBOR (6.56% at December 31, 2000) and pays interest at fixed rates shown below.
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has the following interest rate swaps in place at December 31, 2000, totaling $423 million:
The Company has a $50 million interest rate cap on LIBOR based variable rate debt at 7.5% terminating October 1, 2001. The Company also obtained a $50 million interest rate swap with a fixed LIBOR component of 5.737% effective January 3, 2001, and expiring June 1, 2002.
The Company is exposed to credit losses in the event of nonperformance by the counterparties to its interest rate swap and cap agreements and nonderivative financial assets but has no off-balance sheet credit risk of accounting loss. The Company anticipates, however, that counterparties will be able to fully satisfy their obligations under the contracts. The Company does not obtain collateral or other security to support financial instruments subject to credit risk but monitors the credit standing of counterparties.
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended, ("SFAS No. 133") establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.
The Company will implement SFAS No.133 beginning January 1, 2001, and it will recognize as separate assets and liabilities only those derivatives embedded in hybrid instruments issued, acquired, or substantively modified by the entity on or after the selected transition date.
The Company has determined that a portion of its derivative instruments (swap agreements and an interest rate cap agreement) in place are ineffective as defined by SFAS No. 133. The terms of ineffective derivative instruments expire in 2001; thus, while the Company may experience some volatility in earnings in interim periods, there will be no effect to current earnings in the Company's financial statements for the year ended December 31, 2001. If the Company had implemented SFAS No. 133 as of December 31, 2000, ineffective derivative instruments would have increased total assets by $514,000 and would have increased net income by $514,000. Effective derivative instruments would have increased liabilities by $262,000 and comprehensive income, also recorded on the balance sheet, would have decreased by $262,000.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
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 maturity of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of mortgage notes receivable is a reasonable estimation of fair value. The carrying value of mortgage and other notes payable, based on borrowing rates currently available to the Company, is a reasonable estimation of fair value at December 31, 2000 and 1999. The fair value of the interest rate swap and cap agreements, which represents the cash requirement if the existing agreements had been settled at year end, was not significant at December 31, 2000 and 1999.
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. CONVERSION RIGHTS
Pursuant to the Operating Partnership agreement, the limited partners were granted rights to convert their partnership interests in the Operating Partnership into shares of common stock, subject to certain limits, and to sell to the Company after November 3, 1996, part or all of their partnership interest in the Operating Partnership in exchange for shares of common stock or their cash equivalent at the Company's election, as defined.
The Operating Partnership acquired properties from CBL in exchange for 1,336 and 63,904 limited partnership units in the Operating Partnership during 2000 and 1998, respectively. In October 1999 the Company issued 79,715 limited partnership units valued at $1,928,000 to a third party in exchange for land. During 1998, the Operating Partnership issued 2,749,888 limited partnership units in the Operating Partnership valued at $68.3 million to third parties in exchange for seven properties.
In November 2000, the Company purchased 34,463 limited partnerships units valued at $761,000 from a third party. In July 1998, the Company purchased 122,008 limited partnership units valued at $3.0 million from a former executive and minority investor in the Operating Partnership. Also during 1998, a third party converted 388,022 limited partnership units to common stock.
At December 31, 2000 and 1999, there remained outstanding rights to convert CBL's minority interest in the Operating Partnership to 9,419,088 and 9,417,752 shares of common stock, respectively. At December 31, 2000 and 1999, there remained outstanding rights to convert third parties' minority interests in the Operating Partnership to 2,407,000 and 2,442,000 shares of common stock, respectively.
11. 401(K) PROFIT SHARING PLAN
The Management Company maintains a 401(k) profit sharing plan, which is qualified under Section 401(a) and Section 401(k) of the Code to cover employees of the Management Company. All employees who have attained the age of 21 and have completed at least one year of service are eligible to participate in the plan. The plan provides for employer matching contributions on behalf of each participant equal to 50% of the portion of such participant's contribution which does not exceed 2.5% of such participant's compensation for the plan year. Additionally, the Management Company has the discretion to make additional profit-sharing-type contributions not related to participant elective contributions. Total contributions by the Management Company were not significant for 2000, 1999, and 1998.
12. STOCK INCENTIVE PLAN
The Company maintains the CBL & Associates Properties, Inc. 1993 Stock Incentive Plan, as amended (the "Plan") which permits the issuance of stock options and common stock to selected officers, employees and directors of the Company, up to 2,800,000 shares of common stock. The Plan is administered by the Compensation Committee of the Board of Directors (the "Committee").
Stock options issued under the Plan allow for the purchase of common stock at the fair market value of the stock at the date of grant. Stock options granted to officers and employees under the Plan vest and become exercisable in installments on each of the first five anniversaries of the date of grant and expire ten years after the date of grant. Stock options granted to directors are fully vested upon grant, but may not be sold, pledged or otherwise transferred in any manner during the director's term or for one year thereafter.
The Company accounts for its stock-based compensation plans under APB No. 25, under which no compensation expense has been recognized for stock options granted as all employee options have been granted with an exercise price equal to the fair value of the Company's common stock on the date of grant. For SFAS No. 123 purposes, the fair value of each employee option grant has been estimated as of the date of grant using the Black-Sholes option pricing model and the following weighted average assumptions for 2000, 1999 and 1998, respectively:
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Using these assumptions, the fair value of the employee stock options granted in 2000, 1999 and 1998 is $500,000, $468,000 and $468,000, respectively, which would be amortized as compensation expense over the vesting period of the options. Had compensation cost for the plan been determined in accordance with SFAS No. 123, utilizing the assumptions detailed above, the Company's pro forma net income and net income per share would have been as follows for the years ended December 31, 2000, 1999, and 1998, respectively (in thousands, except per share data):
The pro forma effect on net income in this disclosure is not representative of the pro forma effect on net income in future years because it does not take into consideration pro forma compensation expense related to grants made prior to 1995.
A summary of the Company's stock option activity for 2000, 1999 and 1998 is as follows: Weighted- Average Shares Option Price Exercise Price
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted-average fair value of options granted during 2000, 1999, and 1998 was $1.54, $1.22 and $1.49, respectively.
Shares subject to options outstanding at December 31, 2000, have a weighted-average remaining contractual life of 6.6 years. Of the options outstanding at December 31, 2000, 1,284,067 are currently exercisable with a weighted-average exercise price of $21.47 per share.
Under the Plan, common stock may be awarded either alone, in addition to, or in tandem with other stock awards granted under the Plan. The Committee has the authority to determine eligible persons to whom common stock will be awarded, the number of shares to be awarded, and the duration of the vesting period, as defined.
During 2000, the Company issued 72,329 shares of common stock under the Plan with a weighted-average grant-date fair value of $22.59 per share, of which 36,606 shares of common stock were immediately vested. The remaining 35,723 shares of common stock vest at various dates from 2001 to 2005.
During 1999, the Company issued 38,989 shares of common stock under the Plan with a weighted-average grant-date fair value of $23.44 per share, of which 6,533 shares of common stock were immediately vested. The remaining 32,456 shares of common stock vest at various dates from 2000 to 2006.
During 1998, the Company issued 37,333 shares of common stock under the Plan with a weighted-average grant-date fair value of $25.19 per share, of which 10,789 shares of common stock were immediately vested. The remaining 26,544 shares of common stock vest at various dates from 1999 to 2003.
13. RELATED PARTY TRANSACTIONS
CBL and certain officers of the Company have a significant minority interest in the construction company that has been engaged by the Company in the building of substantially all of the Company's properties.
The Management Company provides management and leasing services to affiliated partnerships and joint ventures not controlled by the Company. Revenue recognized for these services amounted to $1,166,000, $1,086,000 and $1,034,000 in 2000, 1999 and 1998, respectively.
14. COMMITMENTS AND CONTINGENCIES
The Company is currently involved in certain litigation arising in the ordinary course of business. In the opinion of management, the pending litigation will not materially affect the financial statements of the Company. Additionally, based on environmental studies completed to date on the real estate properties, management believes exposure related to environmental cleanup will be immaterial to the consolidated financial position and consolidated results of operations of the Company.
The Company has entered into standby purchase agreements with third-party developers (the "Developers") for the construction, development and potential ownership of two community centers in Texas (the "Co-Development Projects"). The Developers have utilized these standby purchase agreements to assist in obtaining financing to fund the construction of the Co-Development Projects. The standby purchase agreements, which expire in 2001, are dependent upon certain completion requirements, rental levels, the inability of the Developers to obtain adequate permanent financing, and the inability to sell the Co-Development Project before the Company has to fund its equity contribution or purchase the Co-Development Project. In return for its commitment to purchase a Co-Development Project pursuant to a standby purchase agreement, the Company receives a fee as well as a participation interest in each Co-Development Project. The outstanding amount of standby purchase agreements at December 31, 2000, is $51.4 million.
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. DIVIDENDS
The allocations of dividends declared and paid for income tax purposes are as follows:
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. SEGMENT INFORMATION
Management of the Company measures performance and allocates resources according to property type, which are determined based on differences such as nature of tenants, capital requirements, economic risks, and leasing terms. Rent income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on management's reportable segments is presented as follows (in thousands):
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. OPERATING PARTNERSHIP
Condensed consolidated financial statement information for the Operating Partnership is presented as follows (in thousands):
CBL & ASSOCIATS PROPERTIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. QUARTERLY INFORMATION (UNAUDITED) (in thousands, except per share amounts)
CBL & Associates Properties, Inc. Schedule II Allowance for Credit Losses (in thousands)
CBL & ASSOCIATES PROPERTIES, INC. SCHEDULE III REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (Dollars in Thousands)
CBL & ASSOCIATES PROPERTIES, INC.
REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION
The changes in real estate assets and accumulated depreciation for the years ending December 31, 2000, 1999, and 1998 (dollars in thousands).
EXHIBIT INDEX
Exhibit Number Description
3.1 -- Amended and Restated Certificate of Incorporation of the Company(a)
3.2 -- Certificate of Amendment to the Amended & Restated Certificate of Incorporation of the Company (b)
3.3 -- Amended and Restated Bylaws of the Company(a)
4 -- See Amended and Restated Certificate of Incorporation of the Company, relating to the Common Stock(a)
10.1 -- Partnership Agreement of the Operating Partnership(a)
10.2 -- Property Management Agreement between the Operating Partnership and the Management Company(a)
10.3 -- Property Management Agreement relating to Retained Properties(a)
10.4.1 -- CBL & Associates Properties, Inc. 1993 Stock Incentive Plan(a)+
10.4.2 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for Charles B. Lebovitz+
10.4.3 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for John N. Foy+
10.4.4 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for Ben S. Landress+
10.4.5 -- Non-Qualified Stock Option Agreement, dated May 10, 1994, for Stephen D. Lebovitz+
10.4.6 -- Stock Restriction Agreement, dated December 28, 1994, for Charles B. Lebovitz+
10.4.7 -- Stock Restriction Agreement, dated December 2, 1994, for John N. Foy+
10.4.8 -- Stock Restriction Agreement, dated December 2, 1994, for Ben S. Landress+
10.4.9 -- Stock Restriction Agreement, dated December 2, 1994, for Stephen D. Lebovitz+
10.5 -- Indemnification Agreements between the Company and the Management Company and their officers and directors(a)
10.6.1 -- Employment Agreement for Charles B. Lebovitz(a)+
10.6.2 -- Employment Agreement for John N. Foy(a)+
10.6.3 -- Employment Agreement for Ben S. Landress(a)+
10.6.4 -- Employment Agreement for Stephen D. Lebovitz(a)+
10.7 -- Subscription Agreement relating to purchase of the Common Stock and Preferred Stock of the Management Company(a)
10.8 -- Option Agreement relating to certain Retained Properties(a)
10.9 -- Option Agreement relating to Outparcels(a)
10.10.1 -- Property Partnership Agreement relating to Hamilton Place(a)
10.10.2 -- Property Partnership Agreement relating to CoolSprings Galleria(a)
10.11.1 -- Acquisition Option Agreement relating to Hamilton Place(a)
10.11.2 -- Acquisition Option Agreement relating to the Hamilton Place Centers(a)
10.12.3 -- Acquisition Option Agreement relating to the Office Building(a)
10.13 -- Loan agreement with South Trust Bank dated January 15 , 1998.(d)
10.14 -- Amended and restated Loan Agreement between CBL & Associates Properties , Inc. and First Tennessee Bank National Association Dated June 12, 1998 (e)
10.15 -- First Amendment To Third Amended And Restated Credit Agreement and Third Amended And Restated Credit Agreement between CBL & Associates Properties, Inc. and Wells Fargo Bank, National Association, dated August 4, 1998 (e)
10.16 -- Master Contribution Agreement, dated as of September 25, 2000, by and among the Registrant, CBL & Associates Limited Partnership, Jacobs Realty Investors Limited Partnership, Richard E. Jacobs, solely as Trustee for the Richard E. Jacobs Revocable Living Trust, and Richard E. Jacobs, Solely as Trustee for the David H. Jacobs Marital Trust. (f)
10.17 -- Press Release of the Registrant, dated January 31, 2001. (g)
10.18 -- First Amendment to Second Amended and Restated Agreement of Limited Partnership of CBL & Associates Limited Partnership. (g)
10.19 -- Terms of Series J Special Common Units of CBL & Associates Limited Partnership, pursuant to Article 4.4 of the Second Amended and Restated Partnership Agreement of CBL & Associates Limited Partnership. (g)
10.20 -- Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant. (g)
10.21 -- Share Ownership Agreement, dated as if January 31, 2001, by and among the Registrant, CBL & Associates, Inc., LebFam, Inc. Charles B. Lebovitz, Stephen D. Lebovitz; Jacobs Realty Investors Limited Partnership, Richard E. Jacobs, solely as trustee for the Richard E. Jacobs Revocable Living Trust and Richard E. Jacobs solely as trustee for the David H. Jacobs Marital Trust. (g)
10.22 -- Registration Rights Agreement, dated as of January 31, 2001 by and between the Registrant and the Holders of SCU's listed on Schedule 1 thereto. (g)
10.23 -- Registration Rights Agreement, dated as of January 31, 2001 by and between the Registrant and Frankel Midland Limited Partnership. (g)
10.24 -- Registration Rights Agreement, dated as of January 31, 2001 by and between the Registrant and Hess Abroms Properties of Huntsville. (g)
10.25 -- Loan Agreement, as of the January 31, 2001, by and between CBL & Associates Limited Partnership, Wells Fargo Bank, National Association, Fleet National Bank, U.S. Bank National Association, Commerzbank AG, New York And Grand Cayman Branches, and Keybank National Association, together certain other lenders parties thereto pursuant to Section 8.6 thereof. (g)
21 -- Subsidiaries of the Company 91
23 -- Consent of Arthur Andersen LLP 96
24 -- Power of Attorney 97
(a) Incorporated by reference to Post-Effective Amendment No. 1 to the Company's Registration Statement on Form S-11(No. 33-67372), as filed with the Commission on January 27, 1994.
(b) Incorporated by reference to Exhibit B to the Company's Definitive Schedule 14A, Dated April 1, 1996.
(c) Incorporated by reference to Amendment No. 2 to the Company's Registration Statement on Form S-11 (No. 33-67372), as filed with the Commission on October 26, 1993.
(d) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
(e) Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998.
(f) Incorporated by reference to the Company's Form 8-K, filed on October 27, 2000.
(g) Incorporated by reference to the Company's Form 8-K filed on February 6, 2001.
+ A management contract or compensatory plan or arrangement required to be filed pursuant to Item 14(c) of this report.
(4) Reports on Form 8-K
An 8-K disclosing the results of a special meeting of shareholders, in connection with the Jacobs transaction, (Item 5: other events) was filed on January 19, 2001.
The outline from the Company's February 1, 2001 conference call with analysts regarding earnings (Item 5) was filed on February 1, 2001.
A summary of the Jacobs transaction together with certain of the material agreements associated with the closing of the transaction on January 31, 2001 was filed on February 6, 2001
SUBSIDIARIES OF THE COMPANY
STATE OF INCORPORATION OR SUBSIDIARY FORMATION
Albemarle Partners Limited Partnership North Carolina
APWM, LLC Georgia
Arbor Place GP, Inc. Georgia
Arbor Place Limited Partnership Georgia
Asheville, LLC North Carolina
BJ/Portland Limited Partnership Maine
Bonita Lakes Mall Limited Partnership Mississippi
Bursnville Minnesota, LLC Minnesota
Cadillac Associates Limited Partnership Tennessee
Capital Crossing Limited Partnership North Carolina
Cary Limited Partnership North Carolina
CBL & Associates Limited Partnership Delaware
CBL & Associates Management, Inc. Delaware
CBL/34th Street St. Petersburg Limited Partnership Florida
CBL/Bartow Limited Partnership Florida
CBL/Brushy Creek Limited Partnership Florida
CBL/Buena Vista Limited Partnership Georgia
CBL/Cedar Bluff Crossing Limited Partnership Tennessee
CBL/Foothills Plaza Partnership Tennessee
CBL/GP, Inc. Wyoming
CBL/GP I, Inc. Tennessee
CBL/GP II, Inc. Wyoming
CBL/GP III, Inc. Mississippi
CBL/GP V, Inc. Tennessee
CBL/GP VI, Inc. Tennessee
CBL/GP Cary, Inc. North Carolina
CBL Holdings I, Inc. Delaware
CBL Holdings II, Inc. Delaware
CBL/Karns Corner Limited Partnership Tennessee
CBL/Low Limited Partnership Wyoming
CBL Morristown, LTD. Tennessee
CBL/Nashua Limited Partnership New Hampshire
CBL/North Haven, Inc. Connecticut
CBL/Perimeter Place Limited Partnership Tennessee
CBL/Plant City Limited Partnership Florida
CBL/Plantation Plaza, L.P. Virginia
CBL/Rawlinson Place Limited Partnership Tennessee
CBL/Springs Crossing Limited Partnership Tennessee
CBL/Stroud, Inc. Pennsylvania
CBL/Suburban, Inc. Tennessee
STATE OF INCORPORATION OR SUBSIDIARY FORMATION
CBL/Tampa Keystone Limited Partnership Florida
CBL Terrace Limited Partnership Tennessee
CBL/Uvalde, Ltd. Texas
CBL/York, Inc. Pennsylvania
Chester Square Limited Partnership Virginia
Chesterfield Crossing, LLC Virginia
Coastal Way, L.C. Florida
Cobblestone Village at St. Augustine, LLC Florida
College Station Partners, Ltd. Texas
CoolSprings Crossing Limited Partnership Tennessee
Cortlandt Town Center, Inc. New York
Cortlandt Town Center Limited Partnership New York
Cosby Station Limited Partnership Georgia
Courtyard at Hickory Hollow Limited Partnership Delaware
Creekwood Gateway, LLC Florida
Crossville Associates Limited Partnership Tennessee
CV at North Columbus, LLC Georgia
Development Options, Inc. Wyoming
East Ridge Partners, L.P. Tennessee
East Towne Crossing Limited Partnership Tennessee
ERMC II Tennessee
ERMC IV Tennessee
ERMC V Tennessee
Fifty-Eight Partners, L.P. Tennessee
Foothills Mall, Inc. Tennessee
Foothills Mall Associates, LP Tennessee
Frontier Mall Associates Limited Partnership Wyoming
Georgia Square Associates, Ltd. Georgia
Georgia Square Partnership Georgia
Governor's Square Company Ohio
Governor's Square Company IB Ohio
Gunbarrel Commons, LLC Tennessee
Henderson Square Limited Partnership North Carolina
Hickory Hollow Courtyard, Inc. Delaware
Hickory Hollow Mall, Inc. Delaware
Hickory Hollow Mall Limited Partnership Delaware
High Point Development Limited Partnership North Carolina
High Point Development Limited Partnership II North Carolina
Hudson Plaza Limited Partnership New York
Houston Willowbrook LLC Texas
Jarnigan Road Limited Partnership Tennessee
Janesville Mall Limited Partnership Wisconsin
Janesville Wisconsin, Inc. Wisconsin
STATE OF INCORPORATION OR SUBSIDIARY FORMATION
Joplin-Low Limited Partnership Missouri
Kingston Overlook Limited Partnership Tennessee
LaGrange Commons Limited Partnership New York
Lakeshore Gainesville Limited Partnership Georgia
Lakeshore/Sebring Limited Partnership Florida
Leaseco, Inc. New York
Lebcon Associates Tennessee
Lebcon I, Ltd. Tennessee
Lee Partners Tennessee
Lion's Head Limited Partnership Tennessee
Longview Associates Limited Partnership North Carolina
Lunenburg Crossing Limited Partnership Massachusetts
Madison Plaza Associates, Ltd. Alabama
Madison Square Associates, Ltd. Alabama
Mall Shopping Center Company, L.P. Texas
Maryville Department Stores Associates Tennessee
Maryville Partners, L.P. Tennessee
Meridian Mall Company, Inc. Michigan
Meridian Mall Limited Partnership Michigan
Montgomery Partners, L.P. Tennessee
Massard Crossing Limited Partnership Arkansas
NewLease Corp. Tennessee
North Haven Crossing Limited Partnership Connecticut
Oak Ridge Associates Limited Partnership Tennessee
Park Village Limited Partnership Florida
Parkway Place, Inc. Alabama
Parkway Place Limited Parntership Alabama
Portland/HQ Limited Partnership Maine
Post Oak Mall Associates Limited Partnership Texas
Property Taxperts, LLC Nevada
RC Jacksonville, LC Florida
RC Strawbridge Limited Partnership Virginia
Rivergate Mall, Inc. Delaware
Rivergate Mall Limited Partnership Delaware
Salem Crossing Limited Partnership Virginia
Sand Lake Corners, LC Florida
Sand Lake Corners Limited Partnership Florida
Scottsboro Associates, Ltd. Alabama
Seacoast Shopping Center Limited Partnership New Hampshire
Shopping Center Finance Corp. Wyoming
Springdale/Mobile GP, Inc. Alabama
Springdale/Mobile GP II, Inc. Alabama
Springdale/Mobile Limited Partnership Alabama
STATE OF INCORPORATION OR SUBSIDIARY FORMATION
Springdale/Mobile Limited Partnership II Alabama
Springhurst Limited Partnership Kentucky
St. Clair Square GP, Inc. Illinois
St. Clair Square Limited Partnership Illinois
Sterling Creek Commons Limited Partnership Virginia
Stone East Partners, Ltd. Tennessee
Stoney Brook Landing LLC Kentucky
Stroud Mall LLC Pennsylvania
Suburban Plaza Limited Partnership Tennessee
Sutton Plaza GP, Inc. New Jersey
Sutton Plaza Limited Partnership New Jersey
The Marketplace at Mill Creek, LLC Georgia
The Lakes Mall, LLC Michigan
The Landing at Arbor Place Limited Partnership Georgia
The Galleria Associates, L.P. Tennessee
Turtle Creek Limited Partnership Mississippi
Twin Peaks Mall Associates, Ltd. Colorado
Valley Crossing Associates Limited Partnership North Carolina
Vicksburg Mall Associates, Ltd. Mississippi
Village at Rivergate, Inc. Delaware
Village at Rivergate Limited Partnership Delaware
Walnut Square Associates Limited Partnership Wyoming
Westgate Crossing Limited Partnership North Carolina
Westgate Mall Limited Partnership South Carolina
York Galleria Limited Partnership Virginia
Brookfield Square Joint Venture Ohio
Cary Venture Limited Partnership Delaware
CBL/Brookfield I, LLC Delaware
CBL/Brookfield II, LLC Delaware
CBL/Cary I, LLC Delaware
CBL/Cary II, LLC Delaware
CBL/Cherryvale I, LLC Delaware
CBL/Citadel I, LLC Delaware
CBL/Citadel II, LLC Delaware
CBL/Columbia I, LLC Delaware
CBL/Columbia II, LLC Delaware
CBL/Eastgate I, LLC Delaware
CBL/Eastgate II, LLC Delaware
CBL/Fayette I, LLC Delaware
CBL/Fayette II, LLC Delaware
CBL/J I, LLC Delaware
CBL/J II, LLC Delaware
STATE OF INCORPORATION OR SUBSIDIARY FORMATION
CBL/ Jefferson I, LLC Delaware
CBL/Jefferson II, LLC Delaware
CBL/Kentucky Oaks, LLC Delaware
CBL/Madison I, LLC Delaware
CBL/Midland I, LLC Delaware
CBL/Midland II, LLC Delaware
CBL/Northwoods I, LLC Delaware
CBL/Northwoods II, LLC Delaware
CBL/Old Hickory I, LLC Delaware
CBL/Old Hickory II, LLC Delaware
CBL/Parkdale, LLC Texas
CBL/Regency I, LLC Delaware
CBL/Regency II, LLC Delaware
CBL/Towne Mall I, LLC Delaware
CBL/Towne Mall II, LLC Delaware
CBL/Wausau I, LLC Delaware
CBL/Wausau II, LLC Delaware
CBL/Wausau III, LLC Delaware
CBL/Wausau IV, LLC Delaware
CBL/Weston I, LLC Delaware
CBL/Weston II, LLC Delaware
Charleston Joint Venture Ohio
Columbia Joint Venture Ohio
Eastgate Company Ohio
JC Randolph, LLC Ohio
JG Saginaw, LLC Ohio
JG Winston-Salem, LLC Ohio
Jefferson Mall Company Ohio
Kentucky Oaks Mall Company Ohio
Lexington Joint Venture Ohio
Madison Joint Venture Ohio
Midland Joint Venture Michigan
North Charleston Joint Venture Ohio
Old Hickory Mall Venture Tennessee
Parkdale Mall Associates Texas
Racine Joint Venture Ohio
Towne Mall Ohio
Wausau Joint Venture Ohio
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into CBL & Associates Properties, Inc.'s previously filed Registration Statements on Form S-3 (File No. 333-47041) and Form S-8 (File No. 33-73376).
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee March 29, 2001
Exhibit 24 POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Charles B. Lebovitz, John N. Foy and Stephen D. Lebovitz and each of them, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report of CBL & Associates Properties, Inc. on Form 10-K for the fiscal year ended December 31, 2000, including one or more amendments to such Form 10-K, which amendments may make such changes as such person deems appropriate, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary fully to all intents and purposes as he might or could do in person thereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power-of-Attorney on the date set opposite his respective name.
Signature Title Date
/s/ Charles B. Lebovitz Chairman of the Board March 29, 2001 - ------------------------ and Chief Charles B. Lebovitz Executive Officer (Principal Executive Officer)
/s/ John N. Foy Vice Chairman of the Board, March 29, 2001 - ------------------------ Chief Financial Officer and John N. Foy Treasurer (Principal Financial Officer and Principal Accounting Officer)
/s/ Stephen D. Lebovitz Director, President March 29, 2001 - ------------------------ and Secretary Stephen D. Lebovitz
/s/ Claude M.Ballard Director March 29, 2001 - ------------------------ Claude M. Ballard
/s/ Leo Fields Director March 29, 2001 - ------------------------ Leo Fields
/s/ William J.Poorvu Director March 29, 2001 - ------------------------ William J. Poorvu
/s/ Winston W. Walker Director March 29, 2001 - ------------------------ Winston W. Walker
/s/ Gary L. Bryenton Director March 29, 2001 - ------------------------ Gary L. Bryenton
/s/ Martin J. Cleary Director March 29, 2001 - ------------------------ Martin J. Cleary