DELAWARE (CBL & ASSOCIATES PROPERTIES, INC.) | 62-1545718 | |
DELAWARE (CBL & ASSOCIATES LIMITED PARTNERSHIP) | 62-1542285 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
CBL & Associates Properties, Inc. | Yes x | No o | |
CBL & Associates Limited Partnership | Yes x | No o |
CBL & Associates Properties, Inc. | Yes x | No o | |
CBL & Associates Limited Partnership | Yes x | No o |
CBL & Associates Properties, Inc. | ||
Large accelerated filer x | Accelerated filer o | |
Non-accelerated filer o | Smaller reporting company o | |
Emerging growth company o | ||
CBL & Associates Limited Partnership | ||
Large accelerated filer o | Accelerated filer o | |
Non-accelerated filer x | Smaller reporting company o | |
Emerging growth company o |
CBL & Associates Properties, Inc. | Yes o | No x | |
CBL & Associates Limited Partnership | Yes o | No x |
Title of each Class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 par value | CBL | New York Stock Exchange |
7.375% Series D Cumulative Redeemable Preferred Stock, $0.01 par value | CBLprD | New York Stock Exchange |
6.625% Series E Cumulative Redeemable Preferred Stock, $0.01 par value | CBLprE | New York Stock Exchange |
• | enhances investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner that management views and operates the business; |
• | eliminates duplicative disclosure and provides a more streamlined and readable presentation, since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and |
• | creates time and cost efficiencies through the preparation of one combined report instead of two separate reports. |
• | condensed consolidated financial statements; |
• |
• | controls and procedures in Item 4 of Part I of this report; |
• | information concerning unregistered sales of equity securities and use of proceeds in Item 2 of Part II of this report; and |
• | certifications of the Chief Executive Officer and Chief Financial Officer included as Exhibits 31.1 through 32.4. |
PART I | FINANCIAL INFORMATION | |
CBL & Associates Properties, Inc. | ||
CBL & Associates Limited Partnership | ||
CBL & Associates Properties, Inc. and CBL & Associates Limited Partnership | ||
ASSETS (1) | March 31, 2019 | December 31, 2018 | |||||
Real estate assets: | |||||||
Land | $ | 783,055 | $ | 793,944 | |||
Buildings and improvements | 6,248,286 | 6,414,886 | |||||
7,031,341 | 7,208,830 | ||||||
Accumulated depreciation | (2,478,821 | ) | (2,493,082 | ) | |||
4,552,520 | 4,715,748 | ||||||
Held for sale | 14,171 | 30,971 | |||||
Developments in progress | 56,273 | 38,807 | |||||
Net investment in real estate assets | 4,622,964 | 4,785,526 | |||||
Cash and cash equivalents | 21,055 | 25,138 | |||||
Receivables: | |||||||
Tenant, net of allowance for doubtful accounts of $2,337 in 2018 | 71,358 | 77,788 | |||||
Other, net of allowance for doubtful accounts of $838 in 2018 | 9,855 | 7,511 | |||||
Mortgage and other notes receivable | 7,406 | 7,672 | |||||
Investments in unconsolidated affiliates | 277,357 | 283,553 | |||||
Intangible lease assets and other assets | 151,953 | 153,665 | |||||
$ | 5,161,948 | $ | 5,340,853 | ||||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | |||||||
Mortgage and other indebtedness, net | $ | 3,898,550 | $ | 4,043,180 | |||
Accounts payable and accrued liabilities | 277,256 | 218,217 | |||||
Liabilities related to assets held for sale | 24,653 | 43,716 | |||||
Total liabilities (1) | 4,200,459 | 4,305,113 | |||||
Commitments and contingencies (Note 8 and Note 12) | |||||||
Redeemable noncontrolling interests | 3,017 | 3,575 | |||||
Shareholders' equity: | |||||||
Preferred stock, $.01 par value, 15,000,000 shares authorized: | |||||||
7.375% Series D Cumulative Redeemable Preferred Stock, 1,815,000 shares outstanding | 18 | 18 | |||||
6.625% Series E Cumulative Redeemable Preferred Stock, 690,000 shares outstanding | 7 | 7 | |||||
Common stock, $.01 par value, 350,000,000 shares authorized, 173,461,976 and 172,656,458 issued and outstanding in 2019 and 2018, respectively | 1,735 | 1,727 | |||||
Additional paid-in capital | 1,967,845 | 1,968,280 | |||||
Dividends in excess of cumulative earnings | (1,069,104 | ) | (1,005,895 | ) | |||
Total shareholders' equity | 900,501 | 964,137 | |||||
Noncontrolling interests | 57,971 | 68,028 | |||||
Total equity | 958,472 | 1,032,165 | |||||
$ | 5,161,948 | $ | 5,340,853 |
(1) | As of March 31, 2019, includes $609,856 of assets related to consolidated variable interest entities that can be used only to settle obligations of the consolidated variable interest entities and $406,466 of liabilities of consolidated variable interest entities for which creditors do not have recourse to the general credit of the Company. See Note 7. |
CBL & Associates Properties, Inc. Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
REVENUES: | |||||||
Rental revenues | $ | 190,980 | $ | 212,729 | |||
Management, development and leasing fees | 2,523 | 2,721 | |||||
Other | 4,527 | 4,750 | |||||
Total revenues | 198,030 | 220,200 | |||||
OPERATING EXPENSES: | |||||||
Property operating | (28,980 | ) | (32,826 | ) | |||
Depreciation and amortization | (69,792 | ) | (71,750 | ) | |||
Real estate taxes | (19,919 | ) | (21,848 | ) | |||
Maintenance and repairs | (12,776 | ) | (13,179 | ) | |||
General and administrative | (22,007 | ) | (18,304 | ) | |||
Loss on impairment | (24,825 | ) | (18,061 | ) | |||
Litigation settlement | (88,150 | ) | — | ||||
Other | — | (94 | ) | ||||
Total operating expenses | (266,449 | ) | (176,062 | ) | |||
OTHER INCOME (EXPENSES): | |||||||
Interest and other income | 489 | 213 | |||||
Interest expense | (53,998 | ) | (53,767 | ) | |||
Gain on extinguishment of debt | 71,722 | — | |||||
Gain on sales of real estate assets | 228 | 4,371 | |||||
Income tax benefit (provision) | (139 | ) | 645 | ||||
Equity in earnings of unconsolidated affiliates | 3,308 | 3,739 | |||||
Total other income (expenses) | 21,610 | (44,799 | ) | ||||
Net loss | (46,809 | ) | (661 | ) | |||
Net (income) loss attributable to noncontrolling interests in: | |||||||
Operating Partnership | 7,758 | 1,665 | |||||
Other consolidated subsidiaries | 75 | (101 | ) | ||||
Net income (loss) attributable to the Company | (38,976 | ) | 903 | ||||
Preferred dividends | (11,223 | ) | (11,223 | ) | |||
Net loss attributable to common shareholders | $ | (50,199 | ) | $ | (10,320 | ) | |
Basic and diluted per share data attributable to common shareholders: | |||||||
Net loss attributable to common shareholders | $ | (0.29 | ) | $ | (0.06 | ) | |
Weighted-average common and potential dilutive common shares outstanding | 173,252 | 171,943 |
Equity | |||||||||||||||||||||||||||||||
Shareholders' Equity | |||||||||||||||||||||||||||||||
Redeemable Noncontrolling Interests | Preferred Stock | Common Stock | Additional Paid-in Capital | Dividends in Excess of Cumulative Earnings | Total Shareholders' Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||
Balance, January 1, 2018 | $ | 8,835 | $ | 25 | $ | 1,711 | $ | 1,974,537 | $ | (836,269 | ) | $ | 1,140,004 | $ | 96,474 | $ | 1,236,478 | ||||||||||||||
Net income (loss) | (94 | ) | — | — | — | 903 | 903 | (1,470 | ) | (567 | ) | ||||||||||||||||||||
Cumulative effect of accounting change | — | — | — | — | 70,380 | 70,380 | — | 70,380 | |||||||||||||||||||||||
Dividends declared - common stock ($0.200 per share) | — | — | — | — | (34,531 | ) | (34,531 | ) | — | (34,531 | ) | ||||||||||||||||||||
Dividends declared - preferred stock | — | — | — | — | (11,223 | ) | (11,223 | ) | — | (11,223 | ) | ||||||||||||||||||||
Issuances of 700,534 shares of common stock and restricted common stock | — | — | 7 | 734 | — | 741 | — | 741 | |||||||||||||||||||||||
Conversion of 915,338 Operating Partnership common units into shares of common stock | — | — | 9 | 3,050 | — | 3,059 | (3,059 | ) | — | ||||||||||||||||||||||
Cancellation of 47,867 shares of restricted common stock | — | — | — | (233 | ) | — | (233 | ) | — | (233 | ) | ||||||||||||||||||||
Performance stock units | — | — | — | 419 | — | 419 | — | 419 | |||||||||||||||||||||||
Amortization of deferred compensation | — | — | — | 1,196 | — | 1,196 | — | 1,196 | |||||||||||||||||||||||
Adjustment for noncontrolling interests | 1,399 | — | — | (11,737 | ) | — | (11,737 | ) | 10,338 | (1,399 | ) | ||||||||||||||||||||
Adjustment to record redeemable noncontrolling interests at redemption value | (2,530 | ) | — | — | 2,203 | — | 2,203 | 328 | 2,531 | ||||||||||||||||||||||
Distributions to noncontrolling interests | (1,143 | ) | — | — | — | — | — | (7,804 | ) | (7,804 | ) | ||||||||||||||||||||
Balance, March 31, 2018 | $ | 6,467 | $ | 25 | $ | 1,727 | $ | 1,970,169 | $ | (810,740 | ) | $ | 1,161,181 | $ | 94,807 | $ | 1,255,988 |
Equity | |||||||||||||||||||||||||||||||
Shareholders' Equity | |||||||||||||||||||||||||||||||
Redeemable Noncontrolling Interests | Preferred Stock | Common Stock | Additional Paid-in Capital | Dividends in Excess of Cumulative Earnings | Total Shareholders' Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||
Balance, January 1, 2019 | $ | 3,575 | $ | 25 | $ | 1,727 | $ | 1,968,280 | $ | (1,005,895 | ) | $ | 964,137 | $ | 68,028 | $ | 1,032,165 | ||||||||||||||
Net loss | (453 | ) | — | — | — | (38,976 | ) | (38,976 | ) | (7,380 | ) | (46,356 | ) | ||||||||||||||||||
Dividends declared - common stock ($0.075 per share) | — | — | — | — | (13,010 | ) | (13,010 | ) | — | (13,010 | ) | ||||||||||||||||||||
Dividends declared - preferred stock | — | — | — | — | (11,223 | ) | (11,223 | ) | — | (11,223 | ) | ||||||||||||||||||||
Issuances of 863,174 shares of common stock and restricted common stock | — | — | 9 | 708 | — | 717 | — | 717 | |||||||||||||||||||||||
Cancellation of 57,656 shares of restricted common stock | — | — | (1 | ) | (133 | ) | — | (134 | ) | — | (134 | ) | |||||||||||||||||||
Performance stock units | — | — | — | 313 | — | 313 | — | 313 | |||||||||||||||||||||||
Amortization of deferred compensation | — | — | — | 1,033 | — | 1,033 | — | 1,033 | |||||||||||||||||||||||
Adjustment for noncontrolling interests | 1,038 | — | — | (2,356 | ) | — | (2,356 | ) | 1,318 | (1,038 | ) | ||||||||||||||||||||
Contributions from noncontrolling interests | — | — | — | — | — | — | 455 | 455 | |||||||||||||||||||||||
Distributions to noncontrolling interests | (1,143 | ) | — | — | — | — | — | (4,450 | ) | (4,450 | ) | ||||||||||||||||||||
Balance, March 31, 2019 | $ | 3,017 | $ | 25 | $ | 1,735 | $ | 1,967,845 | $ | (1,069,104 | ) | $ | 900,501 | $ | 57,971 | $ | 958,472 |
CBL & Associates Properties, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net loss | $ | (46,809 | ) | $ | (661 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 69,792 | 71,750 | |||||
Net amortization of deferred financing costs, debt premiums and discounts | 2,304 | 1,709 | |||||
Net amortization of intangible lease assets and liabilities | (551 | ) | (475 | ) | |||
Gain on sales of real estate assets | (228 | ) | (4,371 | ) | |||
Gain on insurance proceeds | (690 | ) | — | ||||
Write-off of development projects | — | 94 | |||||
Share-based compensation expense | 2,043 | 2,314 | |||||
Loss on impairment | 24,825 | 18,061 | |||||
Gain on extinguishment of debt | (71,722 | ) | — | ||||
Equity in earnings of unconsolidated affiliates | (3,308 | ) | (3,739 | ) | |||
Distributions of earnings from unconsolidated affiliates | 5,671 | 4,011 | |||||
Change in estimate of uncollectable rental revenues | 1,540 | 2,041 | |||||
Change in deferred tax accounts | 63 | (629 | ) | ||||
Changes in: | |||||||
Tenant and other receivables | (387 | ) | 1,826 | ||||
Other assets | (3,826 | ) | (2,339 | ) | |||
Accounts payable and accrued liabilities | 76,771 | 8,635 | |||||
Net cash provided by operating activities | 55,488 | 98,227 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Additions to real estate assets | (26,429 | ) | (39,997 | ) | |||
Proceeds from sales of real estate assets | 35,260 | 11,848 | |||||
Proceeds from insurance | 548 | — | |||||
Payments received on mortgage and other notes receivable | 266 | 267 | |||||
Additional investments in and advances to unconsolidated affiliates | (566 | ) | (1,232 | ) | |||
Distributions in excess of equity in earnings of unconsolidated affiliates | 4,979 | 2,859 | |||||
Changes in other assets | (321 | ) | (2,277 | ) | |||
Net cash provided by (used in) investing activities | 13,737 | (28,532 | ) |
CBL & Associates Properties, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) (Continued) | |||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from mortgage and other indebtedness | $ | 941,217 | $ | 99,160 | |||
Principal payments on mortgage and other indebtedness | (978,006 | ) | (123,634 | ) | |||
Additions to deferred financing costs | (15,107 | ) | (98 | ) | |||
Proceeds from issuances of common stock | 17 | 41 | |||||
Contributions from noncontrolling interests | 455 | — | |||||
Payment of tax withholdings for restricted stock awards | (132 | ) | (231 | ) | |||
Distributions to noncontrolling interests | (5,593 | ) | (9,130 | ) | |||
Dividends paid to holders of preferred stock | (11,223 | ) | (11,223 | ) | |||
Dividends paid to common shareholders | (12,949 | ) | (34,217 | ) | |||
Net cash used in financing activities | (81,321 | ) | (79,332 | ) | |||
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (12,096 | ) | (9,637 | ) | |||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | 57,512 | 68,172 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | 45,416 | $ | 58,535 | |||
Reconciliation from condensed consolidated statements of cash flows to condensed consolidated balance sheets: | |||||||
Cash and cash equivalents | $ | 21,055 | $ | 23,346 | |||
Restricted cash (1): | |||||||
Restricted cash | 79 | 3,212 | |||||
Mortgage escrows | 24,282 | 31,977 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | 45,416 | $ | 58,535 | |||
SUPPLEMENTAL INFORMATION: | |||||||
Cash paid for interest, net of amounts capitalized | $ | 35,659 | $ | 34,896 |
(1) | Included in intangible lease assets and other assets in the condensed consolidated balance sheets. |
ASSETS (1) | March 31, 2019 | December 31, 2018 | |||||
Real estate assets: | |||||||
Land | $ | 783,055 | $ | 793,944 | |||
Buildings and improvements | 6,248,286 | 6,414,886 | |||||
7,031,341 | 7,208,830 | ||||||
Accumulated depreciation | (2,478,821 | ) | (2,493,082 | ) | |||
4,552,520 | 4,715,748 | ||||||
Held for sale | 14,171 | 30,971 | |||||
Developments in progress | 56,273 | 38,807 | |||||
Net investment in real estate assets | 4,622,964 | 4,785,526 | |||||
Cash and cash equivalents | 21,054 | 25,138 | |||||
Receivables: | |||||||
Tenant, net of allowance for doubtful accounts of $2,337 in 2018 | 71,358 | 77,788 | |||||
Other, net of allowance for doubtful accounts of $838 in 2018 | 9,807 | 7,462 | |||||
Mortgage and other notes receivable | 7,406 | 7,672 | |||||
Investments in unconsolidated affiliates | 277,890 | 284,086 | |||||
Intangible lease assets and other assets | 151,834 | 153,545 | |||||
$ | 5,162,313 | $ | 5,341,217 | ||||
LIABILITIES, REDEEMABLE INTERESTS AND CAPITAL | |||||||
Mortgage and other indebtedness, net | $ | 3,898,550 | $ | 4,043,180 | |||
Accounts payable and accrued liabilities | 277,328 | 218,288 | |||||
Liabilities related to assets held for sale | 24,653 | 43,716 | |||||
Total liabilities (1) | 4,200,531 | 4,305,184 | |||||
Redeemable common units | 3,017 | 3,575 | |||||
Partners' capital: | |||||||
Preferred units | 565,212 | 565,212 | |||||
Common units: | |||||||
General partner | 3,874 | 4,628 | |||||
Limited partners | 378,600 | 450,507 | |||||
Total partners' capital | 947,686 | 1,020,347 | |||||
Noncontrolling interests | 11,079 | 12,111 | |||||
Total capital | 958,765 | 1,032,458 | |||||
$ | 5,162,313 | $ | 5,341,217 |
(1) | As of March 31, 2019, includes $609,856 of assets related to consolidated variable interest entities that can only be used to settle obligations of the consolidated variable interest entities and $406,466 of liabilities of consolidated variable interest entities for which creditors do not have recourse to the general credit of the Operating Partnership. See Note 7. |
CBL & Associates Limited Partnership Condensed Consolidated Statements of Operations (In thousands, except per unit data) (Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
REVENUES: | |||||||
Rental revenues | $ | 190,980 | $ | 212,729 | |||
Management, development and leasing fees | 2,523 | 2,721 | |||||
Other | 4,527 | 4,750 | |||||
Total revenues | 198,030 | 220,200 | |||||
OPERATING EXPENSES: | |||||||
Property operating | (28,980 | ) | (32,826 | ) | |||
Depreciation and amortization | (69,792 | ) | (71,750 | ) | |||
Real estate taxes | (19,919 | ) | (21,848 | ) | |||
Maintenance and repairs | (12,776 | ) | (13,179 | ) | |||
General and administrative | (22,007 | ) | (18,304 | ) | |||
Loss on impairment | (24,825 | ) | (18,061 | ) | |||
Litigation settlement | (88,150 | ) | — | ||||
Other | — | (94 | ) | ||||
Total operating expenses | (266,449 | ) | (176,062 | ) | |||
OTHER INCOME (EXPENSES): | |||||||
Interest and other income | 489 | 213 | |||||
Interest expense | (53,998 | ) | (53,767 | ) | |||
Gain on extinguishment of debt | 71,722 | — | |||||
Gain on sales of real estate assets | 228 | 4,371 | |||||
Income tax benefit (provision) | (139 | ) | 645 | ||||
Equity in earnings of unconsolidated affiliates | 3,308 | 3,739 | |||||
Total other income (expenses) | 21,610 | (44,799 | ) | ||||
Net loss | (46,809 | ) | (661 | ) | |||
Net (income) loss attributable to noncontrolling interests | 75 | (101 | ) | ||||
Net loss attributable to the Operating Partnership | (46,734 | ) | (762 | ) | |||
Distributions to preferred unitholders | (11,223 | ) | (11,223 | ) | |||
Net loss attributable to common unitholders | $ | (57,957 | ) | $ | (11,985 | ) | |
Basic and diluted per unit data attributable to common unitholders: | |||||||
Net loss attributable to common unitholders | $ | (0.29 | ) | $ | (0.06 | ) | |
Weighted-average common and potential dilutive common units outstanding | 200,010 | 199,694 |
Number of | Common Units | |||||||||||||||||||||||||||||||||
Redeemable Common Units | Preferred Units | Common Units | Preferred Units | General Partner | Limited Partners | Total Partners' Capital | Noncontrolling Interests | Total Capital | ||||||||||||||||||||||||||
Balance, January 1, 2018 | $ | 8,835 | 25,050 | 199,297 | $ | 565,212 | $ | 6,735 | $ | 655,120 | $ | 1,227,067 | $ | 9,701 | $ | 1,236,768 | ||||||||||||||||||
Net income (loss) | (94 | ) | — | — | 11,223 | (122 | ) | (11,769 | ) | (668 | ) | 101 | (567 | ) | ||||||||||||||||||||
Cumulative effect of accounting change | — | — | — | — | 722 | 69,658 | 70,380 | — | 70,380 | |||||||||||||||||||||||||
Distributions declared - common units ($0.209 per unit) | (1,143 | ) | — | — | — | (402 | ) | (40,215 | ) | (40,617 | ) | — | (40,617 | ) | ||||||||||||||||||||
Distributions declared - preferred units | — | — | — | (11,223 | ) | — | — | (11,223 | ) | — | (11,223 | ) | ||||||||||||||||||||||
Issuances of common units | — | — | 701 | — | — | 741 | 741 | — | 741 | |||||||||||||||||||||||||
Cancellation of restricted common stock | — | — | (48 | ) | — | — | (233 | ) | (233 | ) | — | (233 | ) | |||||||||||||||||||||
Performance stock units | — | — | — | — | 4 | 415 | 419 | — | 419 | |||||||||||||||||||||||||
Amortization of deferred compensation | — | — | — | — | 12 | 1,184 | 1,196 | — | 1,196 | |||||||||||||||||||||||||
Allocation of partners' capital | 1,399 | — | — | — | (48 | ) | (1,353 | ) | (1,401 | ) | — | (1,401 | ) | |||||||||||||||||||||
Adjustment to record redeemable interests at redemption value | (2,530 | ) | — | — | — | 26 | 2,505 | 2,531 | — | 2,531 | ||||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | — | (1,718 | ) | (1,718 | ) | |||||||||||||||||||||||
Balance, March 31, 2018 | $ | 6,467 | 25,050 | 199,950 | $ | 565,212 | $ | 6,927 | $ | 676,053 | $ | 1,248,192 | $ | 8,084 | $ | 1,256,276 |
Number of | Common Units | ||||||||||||||||||||||||||||||||
Redeemable Common Units | Preferred Units | Common Units | Preferred Units | General Partner | Limited Partners | Total Partners' Capital | Noncontrolling Interests | Total Capital | |||||||||||||||||||||||||
Balance, January 1, 2019 | $ | 3,575 | 25,050 | 199,415 | $ | 565,212 | $ | 4,628 | $ | 450,507 | $ | 1,020,347 | $ | 12,111 | $ | 1,032,458 | |||||||||||||||||
Net income (loss) | (453 | ) | — | — | 11,223 | (590 | ) | (56,914 | ) | (46,281 | ) | (75 | ) | (46,356 | ) | ||||||||||||||||||
Distributions declared - common units ($0.086 per unit) | (1,143 | ) | — | — | — | (151 | ) | (15,897 | ) | (16,048 | ) | — | (16,048 | ) | |||||||||||||||||||
Distributions declared - preferred units | — | — | — | (11,223 | ) | — | — | (11,223 | ) | — | (11,223 | ) | |||||||||||||||||||||
Issuances of common units | — | — | 863 | — | — | 717 | 717 | — | 717 | ||||||||||||||||||||||||
Cancellation of restricted common stock | — | — | (58 | ) | — | — | (133 | ) | (133 | ) | — | (133 | ) | ||||||||||||||||||||
Performance stock units | — | — | — | — | 3 | 309 | 312 | — | 312 | ||||||||||||||||||||||||
Amortization of deferred compensation | — | — | — | — | 11 | 1,022 | 1,033 | — | 1,033 | ||||||||||||||||||||||||
Allocation of partners' capital | 1,038 | — | — | — | (34 | ) | (1,004 | ) | (1,038 | ) | — | (1,038 | ) | ||||||||||||||||||||
Contributions from noncontrolling interests | — | — | — | — | — | — | — | 455 | 455 | ||||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | — | — | (1,412 | ) | (1,412 | ) | ||||||||||||||||||||||
Balance, March 31, 2019 | $ | 3,017 | 25,050 | 200,220 | $ | 565,212 | $ | 3,867 | $ | 378,607 | $ | 947,686 | $ | 11,079 | $ | 958,765 |
CBL & Associates Limited Partnership Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net loss | $ | (46,809 | ) | $ | (661 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 69,792 | 71,750 | |||||
Net amortization of deferred financing costs, debt premiums and discounts | 2,304 | 1,709 | |||||
Net amortization of intangible lease assets and liabilities | (551 | ) | (475 | ) | |||
Gain on sales of real estate assets | (228 | ) | (4,371 | ) | |||
Gain on insurance proceeds | (690 | ) | — | ||||
Write-off of development projects | — | 94 | |||||
Share-based compensation expense | 2,043 | 2,314 | |||||
Loss on impairment | 24,825 | 18,061 | |||||
Gain on extinguishment of debt | (71,722 | ) | — | ||||
Equity in earnings of unconsolidated affiliates | (3,308 | ) | (3,739 | ) | |||
Distributions of earnings from unconsolidated affiliates | 5,671 | 4,012 | |||||
Change in estimate of uncollectable rental revenues | 1,540 | 2,041 | |||||
Change in deferred tax accounts | 63 | (629 | ) | ||||
Changes in: | |||||||
Tenant and other receivables | (387 | ) | 1,826 | ||||
Other assets | (3,826 | ) | (2,339 | ) | |||
Accounts payable and accrued liabilities | 76,770 | 8,633 | |||||
Net cash provided by operating activities | 55,487 | 98,226 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Additions to real estate assets | (26,429 | ) | (39,997 | ) | |||
Proceeds from sales of real estate assets | 35,260 | 11,848 | |||||
Proceeds from insurance | 548 | — | |||||
Payments received on mortgage and other notes receivable | 266 | 267 | |||||
Additional investments in and advances to unconsolidated affiliates | (566 | ) | (1,232 | ) | |||
Distributions in excess of equity in earnings of unconsolidated affiliates | 4,979 | 2,859 | |||||
Changes in other assets | (321 | ) | (2,277 | ) | |||
Net cash provided by (used in) investing activities | 13,737 | (28,532 | ) |
CBL & Associates Limited Partnership Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) (Continued) | |||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from mortgage and other indebtedness | $ | 941,217 | $ | 99,160 | |||
Principal payments on mortgage and other indebtedness | (978,006 | ) | (123,634 | ) | |||
Additions to deferred financing costs | (15,107 | ) | (98 | ) | |||
Proceeds from issuances of common units | 17 | 41 | |||||
Contributions from noncontrolling interests | 455 | — | |||||
Payment of tax withholdings for restricted stock awards | (132 | ) | (231 | ) | |||
Distributions to noncontrolling interests | (2,554 | ) | (2,861 | ) | |||
Distributions to preferred unitholders | (11,223 | ) | (11,223 | ) | |||
Distributions to common unitholders | (15,988 | ) | (40,486 | ) | |||
Net cash used in financing activities | (81,321 | ) | (79,332 | ) | |||
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (12,097 | ) | (9,638 | ) | |||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | 57,512 | 68,172 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | 45,415 | $ | 58,534 | |||
Reconciliation from condensed consolidated statements of cash flows to condensed consolidated balance sheets: | |||||||
Cash and cash equivalents | $ | 21,054 | $ | 23,345 | |||
Restricted cash (1): | |||||||
Restricted cash | 79 | 3,212 | |||||
Mortgage escrows | 24,282 | 31,977 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | 45,415 | $ | 58,534 | |||
SUPPLEMENTAL INFORMATION: | |||||||
Cash paid for interest, net of amounts capitalized | $ | 35,659 | $ | 34,896 |
(1) | Included in intangible lease assets and other assets in the condensed consolidated balance sheets. |
Other Properties | |||||||||
Malls (1) | Associated Centers | Community Centers | Office Buildings/Other | Total | |||||
Consolidated properties | 57 | 20 | 2 | 5 | (2) | 84 | |||
Unconsolidated properties (3) | 8 | 3 | 5 | 2 | 18 | ||||
Total | 65 | 23 | 7 | 7 | 102 |
(1) | Category consists of regional malls, open-air centers and outlet centers (including one mixed-use center). |
(2) | Includes CBL's two corporate office buildings. |
(3) | The Operating Partnership accounts for these investments using the equity method because one or more of the other partners have substantive participating rights. |
Consolidated Properties | Unconsolidated Properties | ||||||
Malls | All Other | Malls | All Other | ||||
Redevelopments | 6 | — | 1 | — |
Description | Date Adopted & Application Method | Financial Statement Effect and Other Information | ||
ASU 2016-02, Leases, and related subsequent amendments | January 1, 2019 - Modified Retrospective (electing optional transition method to apply at adoption date and record cumulative-effect adjustment as of January 1, 2019) | The objective of the leasing guidance is to increase transparency and comparability by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. Putting nearly all leases on the balance sheet is the biggest change for lessees, as lessees will now be required to recognize a right-of-use (“ROU”) asset and corresponding lease liability for leases with terms greater than 12 months. Under the FASB model, lessees will classify a lease as either a finance lease or an operating lease, while a lessor will classify a lease as either a sales-type, direct financing, or operating lease. A lessee should classify a lease based on whether the arrangement is effectively a purchase of the underlying asset. Leases that transfer control of the underlying asset to a lessee are classified as finance leases for lessees and sales-type leases for lessors, whereas leases where the lessee obtains control of only the use of the underlying asset, but not the underlying asset itself, will be classified as operating leases for both lessees and lessors. A lease may meet the lessee finance lease criteria even when control of the underlying asset is not transferred to the lessee, and in these cases the lease would be classified as an operating lease for the lessee and a direct finance lease by the lessor. The guidance to be applied by lessors is substantially similar to existing GAAP. In order to align lessor accounting with the principles in the revenue recognition guidance in ASC 606, a lessor is precluded from recognizing selling profit or sales revenue at lease commencement for a lease that does not transfer control of the underlying asset to the lessee. As a lessee, the guidance impacted the Company's condensed consolidated financial statements through the recognition of right-of-use ("ROU") assets and corresponding lease liabilities for operating leases as of January 1, 2019. As a lessor, the guidance impacted the Company's condensed consolidated financial statements in regard to the narrowed definition of initial direct costs that can be capitalized, the change in the presentation of rental revenues as one line item and the change in reporting uncollectable operating lease receivables as a reduction of rental revenues instead of property operating expense. The adoption did not result in a cumulative catch-up adjustment to opening equity. See Note 4 for further details. |
Description | Expected Adoption Date & Application Method | Financial Statement Effect and Other Information | ||
ASU 2016-13, Measurement of Credit Losses on Financial Instruments | January 1, 2020 - Modified Retrospective | The guidance replaces the current incurred loss impairment model, which reflects credit events, with a current expected credit loss model, which recognizes an allowance for credit losses based on an entity's estimate of contractual cash flows not expected to be collected. The Company is evaluating the impact that this update may have on its condensed consolidated financial statements and related disclosures. | ||
ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract | January 1, 2020 - Prospective | The guidance addresses diversity in practice in accounting for the costs of implementation activities in a cloud computing arrangement that is a service contract. Under the guidance, the Company is to follow Subtopic 350-40 on internal-use software to determine which implementation costs to capitalize and which to expense. The guidance also requires an entity to expense capitalized implementation costs over the term of the hosting arrangement and include that expense in the same line item as the fees associated with the service element of the arrangement. The Company does not expect the adoption of this guidance will have a material impact on its condensed consolidated financial statements or disclosures. |
Contract Assets | ||||
Balance as of December 31, 2018 | $ | 289 | ||
Tenant openings | (139 | ) | ||
Executed leases | 25 | |||
Balance as of March 31, 2019 | $ | 175 |
Contract Liability | ||||
Balance as of December 31, 2018 | $ | 265 | ||
Completed performance obligation | (4 | ) | ||
Contract obligation | — | |||
Balance as of March 31, 2019 | $ | 261 |
As of March 31, 2019 | Expected Settlement Period | ||||||||||||||||||||||||
Description | Financial Statement Line Item | 2019 | 2020 | 2021 | 2022 | 2023 | |||||||||||||||||||
Contract assets (1) | Management, development and leasing fees | $ | 175 | $ | (167 | ) | $ | (3 | ) | $ | (1 | ) | $ | — | $ | (4 | ) | ||||||||
Contract liability (2) | Other rents | 261 | (99 | ) | (54 | ) | (54 | ) | (54 | ) | — |
(1) | Represents leasing fees recognized as revenue in the period in which the lease is executed. Under third party and unconsolidated affiliates' contracts, the remaining 50% of the commissions are paid when the tenant opens. The tenant typically opens within a year, unless the project is in development. |
(2) | Relates to a contract in which the Company received advance payments in the initial year of the multi-year contract. |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | |||||||
Rental revenues (1) | $ | 190,980 | $ | 212,729 | ||||
Revenues from contracts with customers (ASC 606): | ||||||||
Operating expense reimbursements (2) | 2,143 | 2,343 | ||||||
Management, development and leasing fees (3) | 2,523 | 2,721 | ||||||
Marketing revenues (4) | 874 | 1,295 | ||||||
5,540 | 6,359 | |||||||
Other revenues | 1,510 | 1,112 | ||||||
Total revenues | $ | 198,030 | $ | 220,200 |
(1) | Revenues from leases that commenced subsequent to December 31, 2018 are accounted for in accordance with ASC 842, Leases, whereas all leases existing prior to that date are accounted for in accordance with ASC 840, Leases. See Note 4. |
(2) | Includes $2,192 in the Malls segment and $(49) in the All Other segment for the three months ended March 31, 2019. Includes $2,190 in the Malls segment and $153 in the All Other segment for the three months ended March 31, 2018. See description below. |
(3) | Included in All Other segment. |
(4) | Includes $876 in the Malls segment and $(2) in the All Other segment for the three months ended March 31, 2019. Includes $1,294 in the Malls segment and $1 in the All Other segment for the three months ended March 31, 2018. |
• | Management fees - Management fees are charged as a percentage of revenues (as defined in the contract) and recognized as revenue over time as services are provided. |
• | Leasing fees - Leasing fees are charged for newly executed leases and lease renewals and are recognized as revenue upon lease execution, when the performance obligation is completed. In cases for which the agreement specifies 50% of the leasing commission will be paid upon lease execution with the remainder paid when the tenant opens, the Company estimates the amount of variable consideration it expects to receive by evaluating the likelihood of tenant openings using the most likely amount method and records the amount as an unbilled receivable (contract asset). |
• | Development fees - Development fees may be either set as a fixed rate in a separate agreement or be a variable rate based on a percentage of work costs. Variable consideration related to development fees is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Company's performance in satisfying the performance obligation. Contract estimates are based on various assumptions including the cost and availability of materials, anticipated performance and the complexity of the work to be performed. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. |
Performance obligation | Less than 5 years | 5-20 years | Over 20 years | Total | ||||||||||||
Fixed operating expense reimbursements | $ | 29,101 | $ | 53,781 | $ | 49,866 | $ | 132,748 |
Three Months Ended March 31, 2019 | ||||
Fixed lease payments | $ | 159,278 | ||
Variable lease payments | 31,702 | |||
Total rental revenues | $ | 190,980 |
Years Ending December 31, | Operating Leases | |||
2019 (1) | $ | 423,830 | ||
2020 | 516,103 | |||
2021 | 450,880 | |||
2022 | 370,764 | |||
2023 | 304,864 | |||
2024 | 236,102 | |||
Thereafter | 640,986 | |||
Total undiscounted lease payments | $ | 2,943,529 |
(1) | Reflects rental payments for the fiscal period April 1, 2019 through December 31, 2019. |
Years Ending December 31, | Operating Leases | |||
2019 | $ | 497,014 | ||
2020 | 426,228 | |||
2021 | 363,482 | |||
2022 | 294,441 | |||
2023 | 234,191 | |||
Thereafter | 531,792 | |||
Total | $ | 2,347,148 |
ROU Asset | Lease Liability | |||||||
Balance as of January 1, 2019 | $ | 4,160 | $ | 4,074 | ||||
Cash reduction | (120 | ) | (120 | ) | ||||
Noncash increase | 7 | 70 | ||||||
Balance as of March 31, 2019 | $ | 4,047 | $ | 4,024 |
Three Months Ended March 31, 2019 | ||||
Lease expense: | ||||
Operating lease expense | $ | 218 | ||
Variable lease expense | 32 | |||
Rent Expense | $ | 250 |
Year Ending December 31, | Operating Leases | |||
2019 (1) | $ | 433 | ||
2020 | 560 | |||
2021 | 608 | |||
2022 | 331 | |||
2023 | 284 | |||
2024 | 263 | |||
Thereafter | 12,019 | |||
Total undiscounted lease payments | $ | 14,498 | ||
Less imputed interest | (10,474 | ) | ||
Lease Liability | $ | 4,024 |
(1) | Reflects rental payments for the fiscal period April 1, 2019 through December 31, 2019. |
2019 | $ | 504 | ||
2020 | 610 | |||
2021 | 517 | |||
2022 | 321 | |||
2023 | 281 | |||
Thereafter | 12,297 | |||
$ | 14,530 |
Level 1 – | Inputs represent quoted prices in active markets for identical assets and liabilities as of the measurement date. |
Level 2 – | Inputs, other than those included in Level 1, represent observable measurements for similar instruments in active markets, or identical or similar instruments in markets that are not active, and observable measurements or market data for instruments with substantially the full term of the asset or liability. |
Level 3 – | Inputs represent unobservable measurements, supported by little, if any, market activity, and require considerable assumptions that are significant to the fair value of the asset or liability. Market valuations must often be determined using discounted cash flow methodologies, pricing models or similar techniques based on the Company’s assumptions and best judgment. |
Fair Value Measurements at Reporting Date Using | |||||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Loss on Impairment | |||||||||||||||
Long-lived assets | $ | 70,800 | $ | — | $ | — | $ | 70,800 | $ | 24,825 |
Impairment Date | Property | Location | Segment Classification | Loss on Impairment | Fair Value | |||||||||
January/March | Other adjustments (1) | Various | Malls | (229 | ) | $ | — | |||||||
March | Greenbrier Mall (2) | Chesapeake, VA | Malls | 22,770 | $ | 56,300 | ||||||||
March | Honey Creek Mall (3) | Terre Haute, IN | Malls | 2,284 | 14,500 | |||||||||
$ | 24,825 | $ | 70,800 |
(1) | Relates to closing costs incurred for the sale of properties during the three months ended March 31, 2019, that were impaired in prior periods. |
(2) | In accordance with the Company's quarterly impairment process, the Company wrote down the book value of the mall to its estimated fair value of $56,300. The mall has experienced a decline of NOI due to store closures and rent reductions. Additionally, one anchor was vacant as of March 31, 2019. Management determined the fair value of Greenbrier Mall using a discounted cash flow methodology. The discounted cash flow used assumptions including a holding period of ten years, with a sale at the end of the holding period, a capitalization rate of 11.0% and a discount rate 11.5%. |
(3) | The Company adjusted the book value of the mall to the net sales price of $14,500 based on a signed contract with a third party buyer, adjusted to reflect estimated disposition costs. |
Fair Value Measurements at Reporting Date Using | |||||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Loss on Impairment | |||||||||||||||
Long-lived assets | $ | — | $ | — | $ | — | $ | — | $ | 18,061 |
Impairment Date | Property | Location | Segment Classification | Loss on Impairment | Fair Value | ||||||||||
March | Janesville Mall (1) | Janesville, WI | Malls | $ | 18,061 | $ | — | (2) |
(1) | The Company adjusted the book value of the mall to the net sales price of $17,640 in a signed contract with a third party buyer, adjusted to reflect estimated disposition costs. The mall was sold in July 2018. See Note 6 for additional information. |
(2) | The long-lived asset was not included in the Company's consolidated balance sheets at December 31, 2018 as the Company no longer had an interest in the property. |
Sale/Transfer Date | Balance of Non-recourse Debt | Gain on Extinguishment of Debt | ||||||||||||
Property | Property Type | Location | ||||||||||||
January | Acadiana Mall (1) | Mall | Lafayette, LA | $ | 119,760 | $ | 61,796 | |||||||
January | Cary Towne Center (2) | Mall | Cary, NC | 43,716 | 9,926 | |||||||||
$ | 163,476 | $ | 71,722 |
(1) | The Company transferred title to the mall to the mortgage holder in satisfaction of the non-recourse debt secured by the property. A loss on impairment of real estate of $43,007 was recorded in 2017 to write down the book value of the mall to its then estimated fair value. The Company also recorded $305 of aggregate non-cash default interest expense during the first quarter of 2019. |
(2) | The Company sold the mall for $31,500 and the net proceeds from the sale were used to satisfy a portion of the loan secured by the mall. The remaining principal balance was forgiven. The Company recorded a loss on impairment of real estate of $54,678 during 2018 to write down the book value of the mall to its then estimated fair value. The Company also recorded $237 of aggregate non-cash default interest expense during the first quarter of 2019. |
• | the pro forma for the development and construction of the project and any material deviations or modifications thereto; |
• | the site plan and any material deviations or modifications thereto; |
• | the conceptual design of the project and the initial plans and specifications for the project and any material deviations or modifications thereto; |
• | any acquisition/construction loans or any permanent financings/refinancings; |
• | the annual operating budgets and any material deviations or modifications thereto; |
• | the initial leasing plan and leasing parameters and any material deviations or modifications thereto; and |
• | any material acquisitions or dispositions with respect to the project. |
March 31, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Investment in real estate assets | $ | 2,100,828 | $ | 2,097,088 | |||
Accumulated depreciation | (687,230 | ) | (674,275 | ) | |||
1,413,598 | 1,422,813 | ||||||
Developments in progress | 16,961 | 12,569 | |||||
Net investment in real estate assets | 1,430,559 | 1,435,382 | |||||
Other assets | 178,916 | 188,521 | |||||
Total assets | $ | 1,609,475 | $ | 1,623,903 | |||
March 31, 2019 | December 31, 2018 | ||||||
LIABILITIES | |||||||
Mortgage and other indebtedness, net | $ | 1,318,685 | $ | 1,319,949 | |||
Other liabilities | 33,695 | 39,777 | |||||
Total liabilities | 1,352,380 | 1,359,726 | |||||
OWNERS' EQUITY | |||||||
The Company | 185,123 | 191,050 | |||||
Other investors | 71,972 | 73,127 | |||||
Total owners' equity | 257,095 | 264,177 | |||||
Total liabilities and owners' equity | $ | 1,609,475 | $ | 1,623,903 |
Total for the Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Total revenues | $ | 55,867 | $ | 57,181 | |||
Net income (1) | $ | 6,010 | $ | 5,309 |
(1) | The Company's share of net income is $3,308 and $3,739 for the three months ended March 31, 2019 and 2018, respectively. |
As of | ||||||||
March 31, 2019 | December 31, 2018 | |||||||
Noncontrolling interests: | ||||||||
Operating Partnership | $ | 46,892 | $ | 55,917 | ||||
Other consolidated subsidiaries | 11,079 | 12,111 | ||||||
$ | 57,971 | $ | 68,028 |
Investment in Real Estate Joint Ventures and Partnerships | Maximum Risk of Loss | |||||||
Ambassador Infrastructure, LLC (1) | $ | — | $ | 10,605 | ||||
EastGate Storage, LLC (1) | 1,052 | 6,500 | ||||||
G&I VIII CBL Triangle LLC (2) | — | — | ||||||
Self Storage at Mid Rivers, LLC (1) | 1,022 | 5,987 | ||||||
Shoppes at Eagle Point, LLC (1) | 16,295 | 12,740 |
(1) | The debt is guaranteed by the Operating Partnership at 100%. See Note 12 for more information. |
(2) | In conjunction with a loss on impairment recorded in September 2018, the Company wrote down its investment in the unconsolidated 90/10 joint venture to zero. The maximum risk of loss is limited to the basis, which is zero. |
March 31, 2019 | December 31, 2018 | ||||||||||
Amount | Weighted- Average Interest Rate (1) | Amount | Weighted- Average Interest Rate (1) | ||||||||
Fixed-rate debt: | |||||||||||
Non-recourse loans on operating properties | $ | 1,607,494 | 5.34% | $ | 1,783,097 | 5.33% | |||||
Senior unsecured notes due 2023 (2) | 447,539 | 5.25% | 447,423 | 5.25% | |||||||
Senior unsecured notes due 2024 (3) | 299,955 | 4.60% | 299,953 | 4.60% | |||||||
Senior unsecured notes due 2026 (4) | 616,842 | 5.95% | 616,635 | 5.95% | |||||||
Total fixed-rate debt | 2,971,830 | 5.38% | 3,147,108 | 5.37% |
March 31, 2019 | December 31, 2018 | ||||||||||
Amount | Weighted- Average Interest Rate (1) | Amount | Weighted- Average Interest Rate (1) | ||||||||
Variable-rate debt: | |||||||||||
Recourse loans on operating properties | 68,063 | 5.11% | 68,607 | 4.97% | |||||||
Construction loan | 12,390 | 5.38% | 8,172 | 5.25% | |||||||
Secured line of credit | 390,000 | 4.74% | — | —% | |||||||
Unsecured lines of credit | — | —% | 183,972 | 3.90% | |||||||
Secured term loan | 500,000 | 4.74% | — | —% | |||||||
Unsecured term loans | — | —% | 695,000 | 4.21% | |||||||
Total variable-rate debt | 970,453 | 4.77% | 955,751 | 4.21% | |||||||
Total fixed-rate and variable-rate debt | 3,942,283 | 5.23% | 4,102,859 | 5.10% | |||||||
Unamortized deferred financing costs | (20,071 | ) | (15,963 | ) | |||||||
Liabilities related to assets held for sale (5) | (23,662 | ) | (43,716 | ) | |||||||
Total mortgage and other indebtedness, net | $ | 3,898,550 | $ | 4,043,180 |
(1) | Weighted-average interest rate includes the effect of debt premiums and discounts, but excludes amortization of deferred financing costs. |
(2) | The balance is net of an unamortized discount of $2,461 and $2,577 as of March 31, 2019 and December 31, 2018, respectively. |
(3) | The balance is net of an unamortized discount of $45 and $47 as of March 31, 2019 and December 31, 2018, respectively. |
(4) | The balance is net of an unamortized discount of $8,158 and $8,365 as of March 31, 2019 and December 31, 2018, respectively. |
(5) | Represents, respectively, a non-recourse loan secured by Honey Creek Mall that was classified on the condensed consolidated balance sheet as liabilities related to assets held for sale as of March 31, 2019, and a non-recourse mortgage loan secured by Cary Towne Center that is classified on the consolidated balance sheet as liabilities related to assets held for sale as of December 31, 2018. |
Description | Issued (1) | Amount | Interest Rate (2) | Maturity Date (3) | ||||||
2023 Notes | November 2013 | $ | 450,000 | 5.25% | December 2023 | |||||
2024 Notes | October 2014 | 300,000 | 4.60% | October 2024 | ||||||
2026 Notes | December 2016 / September 2017 | 625,000 | 5.95% | December 2026 |
(1) | Issued by the Operating Partnership. CBL is a limited guarantor of the Operating Partnership's obligations under the Notes as described above. |
(2) | Interest is payable semiannually in arrears. The interest rate for the 2024 Notes and the 2023 Notes is subject to an increase ranging from 0.25% to 1.00% from time to time if, on or after January 1, 2016 and prior to January 1, 2020, the ratio of secured debt to total assets of the Company, as defined, is greater than 40% but less than 45%. The required ratio of secured debt to total assets for the 2026 Notes is 40% or less. As of March 31, 2019, this ratio was 35% as shown below. |
(3) | The Notes are redeemable at the Operating Partnership's election, in whole or in part from time to time, on not less than 30 days and not more than 60 days' notice to the holders of the Notes to be redeemed. The 2026 Notes, the 2024 Notes and the 2023 Notes may be redeemed prior to September 15, 2026, July 15, 2024, and September 1, 2023, respectively, for cash at a redemption price equal to the aggregate principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date and a make-whole premium calculated in accordance with the indenture. On or after the respective dates noted above, the Notes are redeemable for cash at a redemption price equal to the aggregate principal amount of the Notes to be redeemed plus accrued and unpaid interest. If redeemed prior to the respective dates noted above, each issuance of Notes is redeemable at the treasury rate plus 0.50%, 0.35% and 0.40% for the 2026 Notes, the 2024 Notes and the 2023 Notes, respectively. |
Ratio | Required | Actual | ||
Total debt to total assets | < 60% | 52% | ||
Secured debt to total assets | < 40% (1) | 35% | ||
Total unencumbered assets to unsecured debt | > 150% | 194% | ||
Consolidated income available for debt service to annual debt service charge | > 1.5x | 2.3x |
(1) | Secured debt to total assets must be less than 45% for the 2023 Notes and the 2024 Notes until January 1, 2020. |
Transfer Date | Interest Rate at Repayment Date | Scheduled Maturity Date | Balance of Non-recourse Debt | Gain on Extinguishment of Debt | ||||||||||
Property | ||||||||||||||
January | Acadiana Mall (1) | 5.67% | April 2017 | $ | 119,760 | $ | 61,795 | |||||||
January | Cary Towne Center (2) | 4.00% | June 2018 | 43,716 | 9,927 | |||||||||
$ | 163,476 | $ | 71,722 |
(1) | The Company transferred title to the mall to the mortgage holder in satisfaction of the non-recourse debt secured by the property. |
(2) | The Company sold the mall for $31,500 and the net proceeds from the sale were used to satisfy a portion of the loan secured by the mall. The remaining principal balance was forgiven. |
2019 (1) | $ | 217,655 | ||
2020 | 175,486 | |||
2021 | 474,912 | |||
2022 | 461,585 | |||
2023 | 1,412,855 | |||
2024 | 371,347 | |||
Thereafter | 839,107 | |||
3,952,947 | ||||
Unamortized discounts | (10,664 | ) | ||
Unamortized deferred financing costs | (20,071 | ) | ||
Total mortgage and other indebtedness, net | $ | 3,922,212 |
(1) | Reflects payments for the fiscal period April 1, 2019 through December 31, 2019. |
As of March 31, 2019 | As of December 31, 2018 | |||||||||||||
Maturity Date | Interest Rate | Balance | Interest Rate | Balance | ||||||||||
Mortgages: | ||||||||||||||
Columbia Place Outparcel | Feb 2022 | 5.00% | $ | 277 | 5.00% | $ | 283 | |||||||
One Park Place | May 2022 | 5.00% | 728 | 5.00% | 783 | |||||||||
Village Square (1) | Mar 2019 | 4.00% | 1,290 | 4.00% | 1,308 | |||||||||
Other (2) | Dec 2016 - Jan 2047 | 5.01% - 9.50% | 2,512 | 5.01% - 9.50% | 2,510 | |||||||||
4,807 | 4,884 | |||||||||||||
Other Notes Receivable: | ||||||||||||||
ERMC | Sep 2021 | 4.00% | 2,011 | 4.00% | 2,183 | |||||||||
Southwest Theaters LLC | Apr 2026 | 5.00% | 588 | 5.00% | 605 | |||||||||
2,599 | 2,788 | |||||||||||||
$ | 7,406 | $ | 7,672 |
(1) | The note was amended to extend the maturity date and restructure the monthly payment amount subsequent to March 31, 2019. See Note 15 for more information. |
(2) | The $1,100 note with D'Iberville Promenade, LLC, with a maturity date of December 2016, is in default. |
Three Months Ended March 31, 2019 | Malls | All Other (1) | Total | |||||||||
Revenues (2) | $ | 183,864 | $ | 14,166 | $ | 198,030 | ||||||
Property operating expenses (3) | (57,181 | ) | (4,494 | ) | (61,675 | ) | ||||||
Interest expense | (23,190 | ) | (30,808 | ) | (53,998 | ) | ||||||
Gain on sales of real estate assets | — | 228 | 228 | |||||||||
Segment profit (loss) | $ | 103,493 | $ | (20,908 | ) | 82,585 | ||||||
Depreciation and amortization expense | (69,792 | ) | ||||||||||
General and administrative expense | (22,007 | ) | ||||||||||
Litigation settlement | (88,150 | ) | ||||||||||
Interest and other income | 489 | |||||||||||
Gain on extinguishment of debt | 71,722 | |||||||||||
Loss on impairment | (24,825 | ) | ||||||||||
Income tax provision | (139 | ) | ||||||||||
Equity in earnings of unconsolidated affiliates | 3,308 | |||||||||||
Net loss | $ | (46,809 | ) | |||||||||
Capital expenditures (4) | $ | 28,024 | $ | 115 | $ | 28,139 |
Three Months Ended March 31, 2018 | Malls | All Other (1) | Total | |||||||||
Revenues (2) | $ | 200,715 | $ | 19,485 | $ | 220,200 | ||||||
Property operating expenses (3) | (63,829 | ) | (4,024 | ) | (67,853 | ) | ||||||
Interest expense | (25,774 | ) | (27,993 | ) | (53,767 | ) | ||||||
Other expense | (49 | ) | (45 | ) | (94 | ) | ||||||
Gain on sales of real estate assets | — | 4,371 | 4,371 | |||||||||
Segment profit (loss) | $ | 111,063 | $ | (8,206 | ) | 102,857 | ||||||
Depreciation and amortization expense | (71,750 | ) | ||||||||||
General and administrative expense | (18,304 | ) | ||||||||||
Interest and other income | 213 | |||||||||||
Loss on impairment | (18,061 | ) | ||||||||||
Income tax benefit | 645 | |||||||||||
Equity in earnings of unconsolidated affiliates | 3,739 | |||||||||||
Net loss | $ | (661 | ) | |||||||||
Capital expenditures (4) | $ | 34,302 | $ | 2,349 | $ | 36,651 |
Total Assets | Malls | All Other (1) | Total | |||||||||
March 31, 2019 | $ | 4,691,869 | $ | 470,079 | $ | 5,161,948 | ||||||
December 31, 2018 | $ | 4,868,141 | $ | 472,712 | $ | 5,340,853 | ||||||
(1) | The All Other category includes associated centers, community centers, mortgage and other notes receivable, office buildings, self-storage facilities and the Management Company. |
(2) | Management, development and leasing fees are included in the All Other category. See Note 3 for information on the Company's revenues disaggregated by revenue source for each of the above segments. |
(3) | Property operating expenses include property operating, real estate taxes and maintenance and repairs. |
(4) | Amounts include acquisitions of real estate assets and investments in unconsolidated affiliates. Developments in progress are included in the All Other category. |
As of March 31, 2019 | Obligation Recorded to Reflect Guaranty | ||||||||||||||||||||||||
Unconsolidated Affiliate | Company's Ownership Interest | Outstanding Balance | Percentage Guaranteed by the Operating Partnership | Maximum Guaranteed Amount | Debt Maturity Date (1) | 3/31/2019 | 12/31/2018 | ||||||||||||||||||
West Melbourne I, LLC - Phase I (2) | 50% | $ | 40,392 | 50 | % | $ | 20,196 | Feb-2021 | $ | 202 | $ | 203 | |||||||||||||
West Melbourne I, LLC - Phase II (2) | 50% | 15,917 | 50 | % | 7,959 | Feb-2021 | 80 | 80 | |||||||||||||||||
Port Orange I, LLC | 50% | 54,908 | 50 | % | 27,454 | Feb-2021 | 275 | 280 | |||||||||||||||||
Ambassador Infrastructure, LLC | 65% | 10,050 | 100 | % | 10,050 | Aug-2020 | 101 | 106 | |||||||||||||||||
Shoppes at Eagle Point, LLC | 50% | 35,189 | 35 | % | (3) | 12,740 | Oct-2020 | (4) | 127 | 364 | |||||||||||||||
EastGate Storage, LLC | 50% | 5,920 | 100 | % | (5) | 6,500 | Dec-2022 | 65 | 65 | ||||||||||||||||
Self Storage at Mid Rivers, LLC | 50% | 4,662 | 100 | % | (6) | 5,987 | Apr-2023 | 60 | 60 | ||||||||||||||||
Total guaranty liability | $ | 910 | $ | 1,158 |
(1) | Excludes any extension options. |
(2) | The loan is secured by Hammock Landing - Phase I and Hammock Landing - Phase II, respectively. |
(3) | The guaranty was reduced to 35% once construction was completed during the first quarter of 2019. |
(4) | The loan has one two-year extension option, at the joint venture's election, for an outside maturity date of October 2022. |
(5) | Once construction is complete, the guaranty will be reduced to 50%. The guaranty will be further reduced to 25% once certain debt and operational metrics are met. |
(6) | The Company received a 1% fee for the guaranty when the loan was issued in April 2018. The guaranty will be reduced to 50% once construction is complete. The guaranty will be further reduced to 25% once certain debt and operational metrics are met. |
Shares | Weighted-Average Grant Date Fair Value | |||||
Nonvested at January 1, 2019 | 875,497 | $ | 7.99 | |||
Granted | 855,681 | $ | 2.23 | |||
Vested | (743,574 | ) | $ | 5.11 | ||
Forfeited | (2,501 | ) | $ | 6.57 | ||
Nonvested at March 31, 2019 | 985,103 | $ | 5.17 |
PSUs | Weighted-Average Grant Date Fair Value | |||||
Outstanding at January 1, 2019 | 910,911 | $ | 4.67 | |||
2019 PSUs granted (1) | 1,103,537 | $ | 2.40 | |||
Outstanding at March 31, 2019 (2) | 2,014,448 | $ | 3.42 |
(1) | Includes 566,862 shares classified as a liability due to the potential cash component described above. |
(2) | None of the PSUs outstanding at March 31, 2019 were vested. |
2019 PSUs | 2018 PSUs | 2017 PSUs | ||||||||||||
Grant date | February 11, 2019 | February 12, 2018 | February 7, 2017 | |||||||||||
Fair value per share on valuation date (1) | $ | 4.74 | $ | 4.76 | $ | 6.86 | ||||||||
Risk-free interest rate (2) | 2.54 | % | 2.36 | % | 1.53 | % | ||||||||
Expected share price volatility (3) | 60.99 | % | 42.02 | % | 32.85 | % |
(1) | The value of the PSU awards is estimated on the date of grant using a Monte Carlo simulation model. The valuation consists of computing the fair value using CBL's simulated stock price as well as TSR over a three-year performance period. The award is modeled as a contingent claim in that the expected return on the underlying shares is risk-free and the rate of discounting the payoff of the award is also risk-free. The weighted-average fair value per share related to the 2019 PSUs classified as equity consists of 357,800 shares at a fair value of $2.45 (which relate to relative TSR) and 178,875 shares at a fair value of $2.29 per share (which relate to absolute TSR). The weighted-average fair value per share related to the 2018 PSUs classified as equity consists of 240,164 shares at a fair value of $3.13 per share (which relate to relative TSR) and $120,064 shares at a fair value of $1.63 per share (which relate to absolute TSR). |
(2) | The risk-free interest rate was based on the yield curve on zero-coupon U.S. Treasury securities in effect as of the valuation date, which is the respective grant date listed above. |
(3) | The computation of expected volatility was based on a blend of the historical volatility of CBL's shares of common stock based on annualized daily total continuous returns over a three-year period and implied volatility data based on the trailing month average of daily implied volatilities implied by stock call option contracts that were both closest to the terms shown and closest to the money. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Accrued dividends and distributions payable | $ | 17,191 | $ | 41,759 | |||
Additions to real estate assets accrued but not yet paid | 19,757 | 2,071 | |||||
Conversion of Operating Partnership units for common stock | — | 3,059 | |||||
Lease liabilities arising from obtaining right-of-use assets | 4,024 | — | |||||
Transfer of real estate assets in settlement of mortgage debt obligation: | |||||||
Decrease in real estate assets | (60,059 | ) | — | ||||
Decrease in mortgage and other indebtedness | 124,111 | — | |||||
Decrease in operating assets and liabilities | 9,333 | — | |||||
Decrease in intangible lease and other assets | (1,663 | ) | — |
• | general industry, economic and business conditions; |
• | interest rate fluctuations; |
• | costs and availability of capital, including debt, and capital requirements; |
• | costs and availability of real estate; |
• | inability to consummate acquisition opportunities and other risks associated with acquisitions; |
• | competition from other companies and retail formats; |
• | changes in retail demand and rental rates in our markets; |
• | shifts in customer demands including the impact of online shopping; |
• | tenant bankruptcies or store closings; |
• | changes in vacancy rates at our properties; |
• | changes in operating expenses; |
• | changes in applicable laws, rules and regulations; |
• | sales of real property; |
• | cyber-attacks or acts of cyber-terrorism; |
• | changes in the credit ratings of the Operating Partnership's senior unsecured long-term indebtedness; |
• | the ability to obtain suitable equity and/or debt financing and the continued availability of financing, in the amounts and on the terms necessary to support our future refinancing requirements and business; and |
• | other risks referenced from time to time in filings with the SEC and those factors listed or incorporated by reference into this report. |
Property | Location | Date Opened | ||
EastGate Mall - CubeSmart Self-storage (1) | Cincinnati, OH | September 2018 | ||
The Shoppes at Eagle Point (1) | Cookeville, TN | November 2018 | ||
Mid Rivers Mall - CubeSmart Self-storage (1) | St. Peters, MO | January 2019 |
(1) | Each of these properties is owned by a 50/50 joint venture that is accounted for using the equity method of accounting and is included in equity in earnings of unconsolidated affiliates in the accompanying condensed consolidated statements of operations. |
Total for the Three Months Ended March 31, | Comparable Properties | |||||||||||||||||||||||||||
2019 | 2018 | Change | Core | Non-core | Dispositions | Change | ||||||||||||||||||||||
Rental revenues | $ | 190,980 | $ | 212,729 | $ | (21,749 | ) | $ | (14,720 | ) | $ | 79 | $ | (7,108 | ) | $ | (21,749 | ) | ||||||||||
Management, development and leasing fees | 2,523 | 2,721 | (198 | ) | (198 | ) | — | — | (198 | ) | ||||||||||||||||||
Other | 4,527 | 4,750 | (223 | ) | (245 | ) | 14 | 8 | (223 | ) | ||||||||||||||||||
Total revenues | $ | 198,030 | $ | 220,200 | $ | (22,170 | ) | $ | (15,163 | ) | $ | 93 | $ | (7,100 | ) | $ | (22,170 | ) |
Total for the Three Months Ended March 31, | Comparable Properties | |||||||||||||||||||||||||||
2019 | 2018 | Change | Core | Non-core | Dispositions | Change | ||||||||||||||||||||||
Property operating | $ | (28,980 | ) | $ | (32,826 | ) | $ | 3,846 | $ | 2,811 | $ | 37 | $ | 998 | $ | 3,846 | ||||||||||||
Real estate taxes | (19,919 | ) | (21,848 | ) | 1,929 | 1,494 | 39 | 396 | 1,929 | |||||||||||||||||||
Maintenance and repairs | (12,776 | ) | (13,179 | ) | 403 | (283 | ) | 183 | 503 | 403 | ||||||||||||||||||
Property operating expenses | (61,675 | ) | (67,853 | ) | 6,178 | 4,022 | 259 | 1,897 | 6,178 | |||||||||||||||||||
Depreciation and amortization | (69,792 | ) | (71,750 | ) | 1,958 | 939 | (1,816 | ) | 2,835 | 1,958 | ||||||||||||||||||
General and administrative | (22,007 | ) | (18,304 | ) | (3,703 | ) | (3,710 | ) | — | 7 | (3,703 | ) | ||||||||||||||||
Loss on impairment | (24,825 | ) | (18,061 | ) | (6,764 | ) | (2,284 | ) | (22,770 | ) | 18,290 | (6,764 | ) | |||||||||||||||
Litigation settlement | (88,150 | ) | — | (88,150 | ) | (88,150 | ) | — | — | (88,150 | ) | |||||||||||||||||
Other | — | (94 | ) | 94 | 94 | — | — | 94 | ||||||||||||||||||||
Total operating expenses | $ | (266,449 | ) | $ | (176,062 | ) | $ | (90,387 | ) | $ | (89,089 | ) | $ | (24,327 | ) | $ | 23,029 | $ | (90,387 | ) |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Net loss | $ | (46,809 | ) | $ | (661 | ) | |
Adjustments: (1) | |||||||
Depreciation and amortization | 78,301 | 79,985 | |||||
Interest expense | 58,802 | 57,870 | |||||
Abandoned projects expense | — | 94 | |||||
Gain on sales of real estate assets | (858 | ) | (4,371 | ) | |||
Gain on extinguishment of debt | (71,722 | ) | — | ||||
Loss on impairment | 24,825 | 18,061 | |||||
Litigation settlement | 88,150 | — | |||||
Income tax (benefit) provision | 139 | (645 | ) | ||||
Lease termination fees | (1,017 | ) | (6,261 | ) | |||
Straight-line rent and above- and below-market lease amortization | (1,045 | ) | 2,828 | ||||
Net income attributable to noncontrolling interests in other consolidated subsidiaries | 75 | (101 | ) | ||||
General and administrative expenses | 22,007 | 18,304 | |||||
Management fees and non-property level revenues | (2,666 | ) | (3,818 | ) | |||
Operating Partnership's share of property NOI | 148,182 | 161,285 | |||||
Non-comparable NOI | (5,041 | ) | (10,105 | ) | |||
Total same-center NOI | $ | 143,141 | $ | 151,180 |
(1) | Adjustments are based on our Operating Partnership's pro rata ownership share, including our share of unconsolidated affiliates and excluding noncontrolling interests' share of consolidated properties. |
(1) | Stabilized Malls – Malls that have completed their initial lease-up and have been open for more than three complete calendar years. |
(2) | Non-stabilized Malls - Malls that are in their initial lease-up phase. After three complete calendar years of operation, they are reclassified on January 1 of the fourth calendar year to the stabilized mall category. The Outlet Shoppes at Laredo was classified as a non-stabilized mall as of March 31, 2019 and 2018. |
(3) | Excluded Malls - We exclude malls from our core portfolio if they fall in the following categories, for which operational metrics are excluded: |
a. | Lender Malls - Malls for which we are working or intend to work with the lender on a restructure of the terms of the loan secured by the property or convey the secured property to the lender. Triangle Town Center, Hickory Point Mall and Greenbrier Mall were classified as Lender Malls as of March 31, 2019, and Acadiana Mall was classified as a Lender Mall as of March 31, 2018. Lender Malls are excluded from our same-center pool as decisions made while in discussions with the lender may lead to metrics that do not provide relevant information related to the condition of these properties or they may be under cash management agreements with the respective servicers. |
b. | Repositioning Malls - Malls that are currently being repositioned or where we have determined that the current format of the mall no longer represents the best use of the mall and we are in the process of evaluating alternative strategies for the mall. This may include major redevelopment or an alternative retail or non-retail format, or after evaluating alternative strategies for the mall, we may determine that the mall no longer meets our criteria for long-term investment. The steps taken to reposition these malls, such as signing tenants to short-term leases, which are not included in occupancy percentages, or leasing to regional or local tenants, which typically do not report sales, may lead to metrics which do not provide relevant information related to the condition of these malls. Therefore, traditional performance measures, such as occupancy percentages and leasing metrics, exclude Repositioning Malls. There were no malls classified as Repositioning Malls as of March 31, 2019. Cary Towne Center and Hickory Point Mall were classified as Repositioning Malls as of March 31, 2018. |
c. | Minority Interest Malls - Malls in which we have a 25% or less ownership interest. There were no malls classified as Minority Interest Malls as of March 31, 2019. Triangle Town Center was classified as a Minority Interest Mall as of March 31, 2018. |
Three Months Ended March 31, | |||
2019 | 2018 | ||
Malls | 92.8% | 91.2% | |
Other properties | 7.2% | 8.8% |
Twelve Months Ended March 31, | |||||
2019 | 2018 | % Change | |||
Stabilized mall same-center sales per square foot | $377 | $377 | —% | ||
Stabilized mall sales per square foot | $377 | $373 | 1.1% |
As of March 31, | |||
2019 | 2018 | ||
Total portfolio | 91.3% | 91.1% | |
Malls: | |||
Total mall portfolio | 89.4% | 89.3% | |
Same-center malls | 89.7% | 89.5% | |
Stabilized malls | 89.7% | 89.5% | |
Non-stabilized malls (2) | 76.4% | 77.0% | |
Other properties: | 97.3% | 97.4% | |
Associated centers | 96.9% | 97.8% | |
Community centers | 97.6% | 97.4% |
(1) | As noted above, excluded properties are not included in occupancy metrics. Occupancy for malls represents percentage of mall store gross leasable area occupied under 20,000 square feet. Occupancy for other properties represents percentage of gross leasable area occupied. |
(2) | Represents occupancy for The Outlet Shoppes at Laredo as of March 31, 2019 and 2018. |
Three Months Ended March 31, | ||
2019 | ||
Operating portfolio: | ||
New leases | 271,813 | |
Renewal leases | 692,127 | |
Development portfolio: | ||
New leases | 149,737 | |
Total leased | 1,113,677 |
As of March 31, | ||||||||
2019 | 2018 | |||||||
Malls: | $ | 32.37 | $ | 32.59 | ||||
Same-center stabilized malls | 32.45 | 32.86 | ||||||
Stabilized malls | 32.45 | 32.66 | ||||||
Non-stabilized malls (2) | 25.21 | 26.14 | ||||||
Other properties: | 15.34 | 15.13 | ||||||
Associated centers | 13.80 | 13.74 | ||||||
Community centers | 16.82 | 15.99 | ||||||
Office buildings | 17.32 | 19.39 |
(1) | As noted above, excluded properties are not included. Average base rents for associated centers, community centers and office buildings include all leased space, regardless of size. |
(2) | Represents average annual base rents for The Outlet Shoppes at Laredo as of March 31, 2019 and 2018. |
Property Type | Square Feet | Prior Gross Rent PSF | New Initial Gross Rent PSF | % Change Initial | New Average Gross Rent PSF (1) | % Change Average | |||||||||||||||
All Property Types (2) | 568,714 | $ | 38.88 | $ | 34.54 | (11.2 | )% | $ | 35.18 | (9.5 | )% | ||||||||||
Stabilized malls | 496,998 | 40.41 | 35.97 | (11.0 | )% | 36.60 | (9.4 | )% | |||||||||||||
New leases | 47,740 | 55.48 | 57.67 | 3.9 | % | 60.62 | 9.3 | % | |||||||||||||
Renewal leases | 449,258 | 38.81 | 33.66 | (13.3 | )% | 34.04 | (12.3 | )% |
(1) | Average gross rent does not incorporate allowable future increases for recoverable common area expenses. |
(2) | Includes stabilized malls, associated centers, community centers and office buildings. |
Number of Leases | Square Feet | Term (in years) | Initial Rent PSF | Average Rent PSF | Expiring Rent PSF | Initial Rent Spread | Average Rent Spread | |||||||||||||||||||||||||||
Commencement 2019: | ||||||||||||||||||||||||||||||||||
New | 52 | 106,720 | 7.33 | $ | 48.84 | $ | 51.49 | $ | 48.10 | $ | 0.74 | 1.5 | % | $ | 3.39 | 7.0 | % | |||||||||||||||||
Renewal | 326 | 1,125,918 | 2.84 | 29.69 | 29.93 | 34.37 | (4.68 | ) | (13.6 | )% | (4.44 | ) | (12.9 | )% | ||||||||||||||||||||
Commencement 2019 Total | 378 | 1,232,638 | 3.46 | 31.35 | 31.80 | 35.56 | (4.21 | ) | (11.8 | )% | (3.76 | ) | (10.6 | )% | ||||||||||||||||||||
Commencement 2020: | ||||||||||||||||||||||||||||||||||
New | 2 | 1,151 | 6.00 | 232.61 | 245.67 | 225.19 | 7.42 | 3.3 | % | 20.48 | 9.1 | % | ||||||||||||||||||||||
Renewal | 34 | 95,924 | 3.35 | 41.68 | 42.33 | 41.89 | (0.21 | ) | (0.5 | )% | 0.44 | 1.1 | % | |||||||||||||||||||||
Commencement 2020 Total | 36 | 97,075 | 3.49 | 43.94 | 44.74 | 44.06 | (0.12 | ) | (0.3 | )% | 0.68 | 1.5 | % | |||||||||||||||||||||
Total 2019/2020 | 414 | 1,329,713 | 3.46 | $ | 32.27 | $ | 32.74 | $ | 36.18 | $ | (3.91 | ) | (10.8 | )% | $ | (3.44 | ) | (9.5 | )% |
Three Months Ended March 31, | |||||||||||
2019 | 2018 | Change | |||||||||
Net cash provided by operating activities | $ | 55,488 | $ | 98,227 | $ | (42,739 | ) | ||||
Net cash provided by (used in) investing activities | 13,737 | (28,532 | ) | 42,269 | |||||||
Net cash used in financing activities | (81,321 | ) | (79,332 | ) | (1,989 | ) | |||||
Net cash flows | $ | (12,096 | ) | $ | (9,637 | ) | $ | (2,459 | ) |
March 31, 2019 | Consolidated | Noncontrolling Interests | Unconsolidated Affiliates | Total | Weighted- Average Interest Rate (1) | |||||||||||||
Fixed-rate debt: | ||||||||||||||||||
Non-recourse loans on operating properties (2) | $ | 1,607,494 | $ | (93,909 | ) | $ | 537,444 | $ | 2,051,029 | 4.99% | ||||||||
Recourse loan on operating property (3) | — | — | 10,050 | 10,050 | 3.74% | |||||||||||||
Senior unsecured notes due 2023 (4) | 447,539 | — | — | 447,539 | 5.25% | |||||||||||||
Senior unsecured notes due 2024 (5) | 299,955 | — | — | 299,955 | 4.60% | |||||||||||||
Senior unsecured notes due 2026 (6) | 616,842 | — | — | 616,842 | 5.95% | |||||||||||||
Total fixed-rate debt | 2,971,830 | (93,909 | ) | 547,494 | 3,425,415 | 5.16% | ||||||||||||
Variable-rate debt: | ||||||||||||||||||
Recourse loans on operating properties | 68,063 | — | 84,404 | 152,467 | 5.00% | |||||||||||||
Construction loans | 12,390 | — | 12,390 | 5.38% | ||||||||||||||
Secured line of credit (7) | 390,000 | — | — | 390,000 | 4.74% | |||||||||||||
Secured term loan (7) | 500,000 | — | — | 500,000 | 4.74% | |||||||||||||
Total variable-rate debt | 970,453 | — | 84,404 | 1,054,857 | 4.78% | |||||||||||||
Total fixed-rate and variable-rate debt | 3,942,283 | (93,909 | ) | 631,898 | 4,480,272 | 5.07% | ||||||||||||
Unamortized deferred financing costs | (20,071 | ) | 775 | (2,529 | ) | (21,825 | ) | |||||||||||
Liabilities related to assets held for sale (8) | (23,662 | ) | — | — | (23,662 | ) | ||||||||||||
Mortgage and other indebtedness, net | $ | 3,898,550 | $ | (93,134 | ) | $ | 629,369 | $ | 4,434,785 |
December 31, 2018 | Consolidated | Noncontrolling Interests | Unconsolidated Affiliates | Total | Weighted- Average Interest Rate (1) | |||||||||||||
Fixed-rate debt: | ||||||||||||||||||
Non-recourse loans on operating properties (2) | $ | 1,783,097 | $ | (94,361 | ) | $ | 540,068 | $ | 2,228,804 | 5.01% | ||||||||
Recourse loans on operating properties (3) | — | — | 10,605 | 10,605 | 3.74% | |||||||||||||
Senior unsecured notes due 2023 (4) | 447,423 | — | — | 447,423 | 5.25% | |||||||||||||
Senior unsecured notes due 2024 (5) | 299,953 | — | — | 299,953 | 4.60% | |||||||||||||
Senior unsecured notes due 2026 (6) | 616,635 | — | — | 616,635 | 5.95% | |||||||||||||
Total fixed-rate debt | 3,147,108 | (94,361 | ) | 550,673 | 3,603,420 | 5.16% | ||||||||||||
Variable-rate debt: | ||||||||||||||||||
Recourse loans on operating properties | 68,607 | — | 96,012 | 164,619 | 4.91% | |||||||||||||
Construction loan | 8,172 | — | 3,892 | 12,064 | 5.20% | |||||||||||||
Unsecured lines of credit (7) | 183,972 | — | — | 183,972 | 3.90% | |||||||||||||
Unsecured term loans (7) | 695,000 | — | — | 695,000 | 4.21% | |||||||||||||
Total variable-rate debt | 955,751 | — | 99,904 | 1,055,655 | 4.28% | |||||||||||||
Total fixed-rate and variable-rate debt | 4,102,859 | (94,361 | ) | 650,577 | 4,659,075 | 4.96% | ||||||||||||
Unamortized deferred financing costs | (15,963 | ) | 804 | (2,687 | ) | (17,846 | ) | |||||||||||
Liabilities related to assets held for sale (8) | (43,716 | ) | — | — | (43,716 | ) | ||||||||||||
Mortgage and other indebtedness, net | $ | 4,043,180 | $ | (93,557 | ) | $ | 647,890 | $ | 4,597,513 |
(1) | Weighted-average interest rate includes the effect of debt premiums and discounts, but excludes amortization of deferred financing costs. |
(2) | An unconsolidated affiliate has an interest rate swap on a notional amount outstanding of $44,558 as of March 31, 2019 and $44,863 as of December 31, 2018 related to a variable-rate loan on Ambassador Town Center to effectively fix the interest rate on this loan to a fixed-rate of 3.22%. |
(3) | The unconsolidated affiliate has an interest rate swap on a notional amount outstanding of $10,050 as of March 31, 2019 and $10,605 as of December 31, 2018 related to a variable-rate loan on Ambassador Town Center - Infrastructure Improvements to effectively fix the interest rate on this loan to a fixed-rate of 3.74%. |
(4) | The balance is net of an unamortized discount of $2,461 and $2,577 as of March 31, 2019 and December 31, 2018, respectively. |
(5) | The balance is net of an unamortized discount of $45 and $47 as of March 31, 2019 and December 31, 2018, respectively. |
(6) | The balance is net of an unamortized discount of $8,158 and $8,365 as of March 31, 2019 and December 31, 2018, respectively. |
(7) | We replaced our unsecured lines of credit and unsecured term loans in January 2019 with a new secured senior credit facility. |
(8) | Represents a $23,662 non-recourse loan secured by Honey Creek Mall that was classified on the condensed consolidated balance sheet as liabilities related to assets held for sale. Represents a $43,716 non-recourse mortgage loan secured by Cary Towne Center that was classified on the consolidated balance sheet as liabilities related to assets held for sale. |
Rating Agency | Rating | Outlook | ||
Fitch | BB- | Negative | ||
Moody's | B1 | Stable | ||
S&P | BB- | Negative |
Sales Per Square Foot for the Twelve Months Ended (1) (2) | Occupancy (2) | % of Consolidated Unencumbered NOI for the Three Months Ended 3/31/19 (3) | |||||||||||||||||
03/31/19 | 03/31/18 | 03/31/19 | 03/31/18 | ||||||||||||||||
Unencumbered consolidated properties: | |||||||||||||||||||
Tier 1 Malls | N/A | N/A | N/A | N/A | 6.1 | % | (4) | ||||||||||||
Tier 2 Malls | $ | 332 | $ | 339 | 84.4 | % | 86.4 | % | 43.6 | % | |||||||||
Tier 3 Malls | 275 | 288 | 87.4 | % | 86.7 | % | 26.3 | % | |||||||||||
Total Malls | $ | 308 | $ | 318 | 85.7 | % | 86.5 | % | 76.0 | % | |||||||||
Total Associated Centers | N/A | N/A | 96.9 | % | 97.4 | % | 15.4 | % | |||||||||||
Total Community Centers | N/A | N/A | 99.4 | % | 97.0 | % | 6.9 | % | |||||||||||
Total Office Buildings and Other | N/A | N/A | 94.9 | % | 83.4 | % | 1.7 | % | |||||||||||
Total Unencumbered Consolidated Portfolio | $ | 308 | $ | 318 | 90.4 | % | 90.5 | % | 100.0 | % |
(1) | Represents same-center sales per square foot for mall tenants 10,000 square feet or less for stabilized malls. |
(2) | Operating metrics are included for unencumbered operating properties and do not include sales or occupancy of unencumbered parcels. |
(3) | Our consolidated unencumbered properties generated approximately 27.0% of total consolidated NOI of $127,077 (which excludes NOI related to dispositions) for the three months ended March 31, 2019. |
(4) | NOI is derived from unencumbered portions of Tier One properties, including outparcels, anchors and former anchors that have been redeveloped, that are otherwise secured by a loan. |
Period | Dividend Amount | Declaration Date | Date Paid | |||
First Quarter | $0.075 | February 25, 2019 | April 16, 2019 |
Shares Outstanding | Stock Price (1) | Value | ||||||||
Common stock and operating partnership units | 200,220 | $ | 1.55 | $ | 310,341 | |||||
7.375% Series D Cumulative Redeemable Preferred Stock | 1,815 | 250.00 | 453,750 | |||||||
6.625% Series E Cumulative Redeemable Preferred Stock | 690 | 250.00 | 172,500 | |||||||
Total market equity | 936,591 | |||||||||
Company’s share of total debt, excluding unamortized deferred financing costs | 4,480,272 | |||||||||
Total market capitalization | $ | 5,416,863 |
(1) | Stock price for common stock and Operating Partnership units equals the closing price of CBL's common stock on March 29, 2019. The stock prices for the preferred stock represent the liquidation preference of each respective series of preferred stock. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Tenant allowances (1) | $ | 2,254 | $ | 15,124 | |||
Renovations | — | 563 | |||||
Deferred maintenance: | |||||||
Parking lot and parking lot lighting | 88 | 344 | |||||
Roof repairs and replacements | 62 | 1,625 | |||||
Other capital expenditures | 3,586 | 5,878 | |||||
Total deferred maintenance | 3,736 | 7,847 | |||||
Capitalized overhead | 947 | 1,419 | |||||
Capitalized interest | 563 | 587 | |||||
Total capital expenditures | $ | 7,500 | $ | 25,540 |
(1) | Tenant allowances primarily relate to new leases. Tenant allowances related to renewal leases were not material for the periods presented. |
CBL's Share of | |||||||||||||||||||||||
Property | Location | CBL Ownership Interest | Total Project Square Feet | Total Cost (1) | Cost to Date (2) | 2019 YTD Cost | Opening Date | Initial Unleveraged Yield | |||||||||||||||
Other - Outparcel Development: | |||||||||||||||||||||||
Mid Rivers Mall - CubeSmart Self- storage (3) (4) | St. Peters, MO | 50% | 93,540 | $ | 4,122 | $ | 3,235 | $ | 653 | Jan-19 | 9.0% | ||||||||||||
(1) Total Cost is presented net of reimbursements to be received. | |||||||||||||||||||||||
(2) Cost to Date does not reflect reimbursements until they are received. | |||||||||||||||||||||||
(3) Outparcel development adjacent to the mall. | |||||||||||||||||||||||
(4) Yield is based on the expected yield of the stabilized project. |
CBL's Share of | |||||||||||||||||||||||
Property | Location | CBL Ownership Interest | Total Project Square Feet | Total Cost (1) | Cost to Date (2) | 2019 YTD Cost | Opening Date | Initial Unleveraged Yield | |||||||||||||||
Mall Redevelopments: | |||||||||||||||||||||||
East Towne Mall - Portillo's | Madison, WI | 100% | 9,000 | $ | 2,956 | $ | 2,487 | $ | 71 | Feb-19 | 8.0% | ||||||||||||
Northgate Mall - Sears Auto Center Redevelopment (Aubrey's/Panda Express) | Chattanooga, TN | 100% | 10,000 | 1,797 | 513 | — | Feb-19 | 7.6% | |||||||||||||||
Total Redevelopments Completed | 19,000 | $ | 4,753 | $ | 3,000 | $ | 71 | ||||||||||||||||
(1) Total Cost is presented net of reimbursements to be received. | |||||||||||||||||||||||
(2) Cost to Date does not reflect reimbursements until they are received. |
CBL's Share of | |||||||||||||||||||||||
Property | Location | CBL Ownership Interest | Total Project Square Feet | Total Cost (1) | Cost to Date (2) | 2019 YTD Cost | Expected Opening Date | Initial Unleveraged Yield | |||||||||||||||
Mall Redevelopments: | |||||||||||||||||||||||
Brookfield Square - Sears Redevelopment (Whirlyball/Marcus Theaters) (3) | Brookfield, WI | 100% | 126,710 | $ | 26,627 | $ | 16,556 | $ | 4,116 | Fall-19 | 10.7% | ||||||||||||
Dakota Square Mall - HomeGoods | Minot, ND | 100% | 28,406 | 2,478 | 2,288 | 1,310 | Spring-19 | 14.4% | |||||||||||||||
Friendly Center - O2 Fitness | Greensboro, NC | 50% | 27,048 | 2,285 | 1,694 | 287 | Spring-19 | 10.3% |
CBL's Share of | |||||||||||||||||||||||
Property | Location | CBL Ownership Interest | Total Project Square Feet | Total Cost (1) | Cost to Date (2) | 2019 YTD Cost | Expected Opening Date | Initial Unleveraged Yield | |||||||||||||||
Hamilton Place - Sears Redevelopment (Cheesecake Factory/Dick's Sporting Goods/Dave & Buster's/Hotel/Office) (3) | Chattanooga, TN | 90% | 197,683 | 38,674 | 11,270 | 2,055 | Spring/Fall-20 | 7.1% | |||||||||||||||
Hanes Mall - Dave & Buster's | Winston-Salem, NC | 100% | 44,922 | 5,932 | 2,180 | 35 | Spring-19 | 11.0% | |||||||||||||||
Parkdale Mall - Macy's Redevelopment (Dick's Sporting Goods/Five Below/HomeGoods) (3) | Beaumont, TX | 100% | 86,136 | 20,899 | 16,738 | 10,259 | Spring-19 | 6.4% | |||||||||||||||
Volusia Mall - Sears Auto Center Redevelopment (Bonefish Grill/Metro Diner) | Daytona Beach, FL | 100% | 23,341 | 9,795 | 5,500 | 86 | Spring-19 | 8.0% | |||||||||||||||
Total Properties Under Redevelopment | 534,246 | $ | 106,690 | $ | 56,226 | $ | 18,148 | ||||||||||||||||
(1) Total Cost is presented net of reimbursements to be received. | |||||||||||||||||||||||
(2) Cost to Date does not reflect reimbursements until they are received. | |||||||||||||||||||||||
(3) The return reflected represents a pro forma incremental return as Total Cost excludes the cost related to the acquisition of the Sears (Brookfield Square and Hamilton Place) and Macy's (Parkdale Mall) buildings in 2017. |
Property | Location | CBL Ownership Interest | Total Project Square Feet | CBL's Share of Estimated Total Cost (1) | Expected Opening Date | Initial Unleveraged Yield | ||||||
Other - Outparcel Development: | ||||||||||||
Parkdale Mall - Self-storage (2) | Beaumont, TX | 50% | 68,000 - 70,000 | $4,000 - $5,000 | Winter-19 | 10.0% - 11.0% | ||||||
(1) Total Cost is presented net of reimbursements to be received. | ||||||||||||
(2) Yield is based on expected yield once project stabilizes. |
• | Third parties may approach us with opportunities in which they have obtained land and performed some pre-development activities, but they may not have sufficient access to the capital resources or the development and leasing expertise to bring the project to fruition. We enter into such arrangements when we determine such a project is viable and we can achieve a satisfactory return on our investment. We typically earn development fees from the joint venture and provide management and leasing services to the property for a fee once the property is placed in operation. |
• | We determine that we may have the opportunity to capitalize on the value we have created in a property by selling an interest in the property to a third party. This provides us with an additional source of capital that can |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Net loss attributable to common shareholders | $ | (50,199 | ) | $ | (10,320 | ) | |
Noncontrolling interest in loss of Operating Partnership | (7,758 | ) | (1,665 | ) | |||
Depreciation and amortization expense of: | |||||||
Consolidated properties | 69,792 | 71,750 | |||||
Unconsolidated affiliates | 10,666 | 10,401 | |||||
Non-real estate assets | (897 | ) | (921 | ) | |||
Noncontrolling interests' share of depreciation and amortization | (2,157 | ) | (2,166 | ) | |||
Loss on impairment | 24,825 | 18,061 | |||||
Gain on depreciable property | (242 | ) | (2,236 | ) | |||
FFO allocable to Operating Partnership common unitholders | 44,030 | 82,904 | |||||
Litigation settlement, net of taxes (1) | 87,667 | — | |||||
Non-cash default interest expense (2) | 542 | 916 | |||||
Gain on extinguishment of debt (3) | (71,722 | ) | — | ||||
FFO allocable to Operating Partnership common unitholders, as adjusted | $ | 60,517 | $ | 83,820 | |||
FFO per diluted share | $ | 0.22 | $ | 0.42 | |||
FFO, as adjusted, per diluted share | $ | 0.30 | $ | 0.42 | |||
Weighted-average common and potential dilutive common shares outstanding with Operating Partnership units fully converted | 200,010 | 199,694 | |||||
(1) The three months ended March 31, 2019 is comprised of the accrued maximum expense of $88.2 million related to the proposed settlement of a class action lawsuit. | |||||||
(2) The three months ended March 31, 2019 includes default interest expense related to Acadiana Mall and Cary Towne Center. The three months ended March 31, 2018 includes default interest expense related to Acadiana Mall. | |||||||
(3) The three months ended March 31, 2019 includes a gain on extinguishment of debt related to the non-recourse loan secured by Acadiana Mall, which was conveyed to the lender in the first quarter of 2019, and a gain on extinguishment of debt related to the non-recourse loan secured by Cary Towne Center, which was sold in the first quarter of 2019. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Diluted EPS attributable to common shareholders | $ | (0.29 | ) | $ | (0.06 | ) | |
Eliminate amounts per share excluded from FFO: | |||||||
Depreciation and amortization expense, including amounts from consolidated properties, unconsolidated affiliates, non-real estate assets and excluding amounts allocated to noncontrolling interests | 0.39 | 0.40 | |||||
Loss on impairment, net of taxes | 0.12 | 0.09 | |||||
Gain on depreciable property, net of taxes and noncontrolling interests' share | — | (0.01 | ) | ||||
FFO per diluted share | $ | 0.22 | $ | 0.42 |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
FFO allocable to Operating Partnership common unitholders | $ | 44,030 | $ | 82,904 | |||
Percentage allocable to common shareholders (1) | 86.62 | % | 86.10 | % | |||
FFO allocable to common shareholders | $ | 38,139 | $ | 71,380 | |||
FFO allocable to Operating Partnership common unitholders, as adjusted | $ | 60,517 | $ | 83,820 | |||
Percentage allocable to common shareholders (1) | 86.62 | % | 86.10 | % | |||
FFO allocable to common shareholders, as adjusted | $ | 52,420 | $ | 72,169 |
(1) | Represents the weighted-average number of common shares outstanding for the period divided by the sum of the weighted-average number of common shares and the weighted-average number of Operating Partnership units held by noncontrolling interests during the period. |
Period | Total Number of Shares Purchased (1) | Average Price Paid per Share (2) | Total Number of Shares Purchased as Part of a Publicly Announced Plan | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan | ||||||||||||||
January 1 – 31, 2019 | — | $ | — | — | $ | — | ||||||||||||
February 1 - 28, 2019 | 55,215 | 2.39 | — | — | ||||||||||||||
March 1 - 31, 2019 | — | — | — | — | ||||||||||||||
Total | 55,215 | $ | 2.39 | — | $ | — |
(1) | Represents shares surrendered to the Company by employees to satisfy federal and state income tax requirements related to the vesting of shares of restricted stock. |
(2) | Represents the market value of the common stock on the vesting date for the shares of restricted stock, which was used to determine the number of shares required to be surrendered to satisfy income tax withholding requirements. |
Exhibit Number | Description | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document |
(1) | I have reviewed this quarterly report on Form 10-Q of CBL & Associates Properties, Inc.; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(5) | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
(1) | I have reviewed this quarterly report on Form 10-Q of CBL & Associates Properties, Inc.; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(5) | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
(1) | I have reviewed this quarterly report on Form 10-Q of CBL & Associates Limited Partnership; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(5) | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
(1) | I have reviewed this quarterly report on Form 10-Q of CBL & Associates Limited Partnership; |
(2) | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
(3) | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
(4) | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
(5) | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Combined Guarantor Subsidiaries | ||
ASSETS | March 31, 2019 | December 31, 2018 | |||||
Real estate assets: | |||||||
Land | $ | 221,773 | $ | 232,813 | |||
Buildings and improvements | 2,218,595 | 2,361,707 | |||||
2,440,368 | 2,594,520 | ||||||
Accumulated depreciation | (880,724 | ) | (921,562 | ) | |||
1,559,644 | 1,672,958 | ||||||
Developments in progress | 8,083 | 6,582 | |||||
Net investment in real estate assets | 1,567,727 | 1,679,540 | |||||
Cash and cash equivalents | 8,057 | 5,880 | |||||
Receivables: | |||||||
Tenant, net of allowance for doubtful accounts of $260 in 2018 | 28,302 | 30,553 | |||||
Other | 1,063 | 1,007 | |||||
Mortgage and other notes receivable | 76,729 | 76,747 | |||||
Intangible lease assets and other assets | 42,218 | 48,133 | |||||
$ | 1,724,096 | $ | 1,841,860 | ||||
LIABILITIES AND OWNERS EQUITY | |||||||
Mortgage notes payable, net | $ | 256,078 | $ | 377,996 | |||
Accounts payable and accrued liabilities | 34,416 | 59,241 | |||||
Total liabilities | 290,494 | 437,237 | |||||
Owners' equity | 1,433,602 | 1,404,623 | |||||
$ | 1,724,096 | $ | 1,841,860 |
The Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Operations (In thousands) (Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
REVENUES: | |||||||
Rental revenues | $ | 71,272 | $ | 78,706 | |||
Other | 1,720 | 1,732 | |||||
Total revenues | 72,992 | 80,438 | |||||
OPERATING EXPENSES: | |||||||
Property operating | (11,208 | ) | (12,308 | ) | |||
Depreciation and amortization | (24,101 | ) | (24,499 | ) | |||
Real estate taxes | (6,801 | ) | (7,159 | ) | |||
Maintenance and repairs | (4,756 | ) | (4,718 | ) | |||
Loss on impairment | (22,770 | ) | — | ||||
Total operating expenses | (69,636 | ) | (48,684 | ) | |||
OTHER INCOME (EXPENSES): | |||||||
Interest and other income | 942 | 2,133 | |||||
Interest expense | (3,985 | ) | (5,990 | ) | |||
Gain on extinguishment of debt | 61,796 | — | |||||
Gain on sales of real estate assets | — | 1,718 | |||||
Total other income (expenses) | 58,753 | (2,139 | ) | ||||
Net income | $ | 62,109 | $ | 29,615 |
Balance, January 1, 2018 | $ | 1,486,164 | ||
Net income | 29,615 | |||
Contributions | 50,514 | |||
Distributions | (56,447 | ) | ||
Balance, March 31, 2018 | $ | 1,509,846 |
Balance, January 1, 2019 | $ | 1,404,623 | ||
Net income | 62,109 | |||
Contributions | 17,363 | |||
Distributions | (41,658 | ) | ||
Noncash distributions | (8,835 | ) | ||
Balance, March 31, 2019 | $ | 1,433,602 |
The Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Cash Flows (In thousands) (Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 62,109 | $ | 29,615 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 24,101 | 24,499 | |||||
Net amortization of deferred financing costs, debt premiums and discounts | 62 | (122 | ) | ||||
Net amortization of intangible lease assets and liabilities | (611 | ) | (568 | ) | |||
Gain on sales of real estate assets | — | (1,718 | ) | ||||
Loss on insurance proceeds | 64 | — | |||||
Loss on impairment | 22,770 | — | |||||
Gain on extinguishment of debt | (61,796 | ) | — | ||||
Change in estimate of uncollectable rental revenues | 584 | 476 | |||||
Changes in: | |||||||
Tenant and other receivables | (367 | ) | (844 | ) | |||
Other assets | (632 | ) | (883 | ) | |||
Accounts payable and accrued liabilities | (10,251 | ) | (3,016 | ) | |||
Net cash provided by operating activities | 36,033 | 47,439 | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Additions to real estate assets | (6,207 | ) | (13,032 | ) | |||
Proceeds from sales of real estate assets | — | 2,547 | |||||
Proceeds from insurance | 367 | — | |||||
Payments received on mortgage and other notes receivable | 17 | 4,457 | |||||
Changes in other assets | (313 | ) | (142 | ) | |||
Net cash used in investing activities | (6,136 | ) | (6,170 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Principal payments on mortgage and other indebtedness | (6,709 | ) | (39,516 | ) | |||
Distributions to owners | (41,658 | ) | (56,447 | ) | |||
Contributions from owners | 17,363 | 50,514 | |||||
Net cash used in financing activities | (31,004 | ) | (45,449 | ) | |||
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (1,107 | ) | (4,180 | ) | |||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | 13,020 | 14,544 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | 11,913 | $ | 10,364 | |||
Reconciliation from combined statements of cash flows to combined balance sheets: | |||||||
Cash and cash equivalents | $ | 8,057 | $ | 5,085 | |||
Restricted cash (1): | |||||||
Restricted cash | — | 2,309 | |||||
Mortgage escrows | 3,856 | 2,970 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | 11,913 | $ | 10,364 | |||
SUPPLEMENTAL INFORMATION: | |||||||
Cash paid for interest, net of amounts capitalized | $ | 3,375 | $ | 4,217 |
(1) | Included in intangible lease assets and other assets in the combined balance sheets. |
Combined Guarantor Subsidiaries | Guarantor Properties | Location |
CW Joint Venture, LLC Arbor Place Limited Partnership Multi-GP Holdings, LLC | Acadiana Mall(1) Arbor Place(1) Greenbrier Mall(1) Park Plaza(1) Shoppes at St. Claire Square(1) St. Claire Square(1) | Lafayette, LA Douglasville, GA Chesapeake, VA Little Rock, AR Fairview Heights, IL Fairview Heights, IL |
CBL/Westmoreland, L.P. CBL/Westmoreland I, LLC CBL/Westmoreland II, LLC CW Joint Venture, LLC Arbor Place Limited Partnership Multi-GP Holdings, LLC | Westmoreland Mall Westmoreland Crossing | Greensburg, PA Greensburg, PA |
Cherryvale Mall, LLC | CherryVale Mall | Rockford, IL |
Madison/East Towne, LLC Madison Joint Venture CBL/Madison I, LLC | East Towne Mall | Madison, WI |
Frontier Mall Associates Limited Partnership Mortgage Holdings LLC | Frontier Mall | Cheyenne, WY |
JG Winston-Salem, LLC | Hanes Mall | Winston-Salem, NC |
Imperial Valley Mall II, L.P. Imperial Valley Mall GP, LLC Imperial Valley Mall, L.P. CBL/Imperial Valley, GP, LLC | Imperial Valley Mall | El Centro, CA |
Kirkwood Mall Acquisition LLC Kirkwood Mall Mezz LLC CBL/Kirkwood Mall, LLC | Kirkwood Mall | Bismarck, ND |
Combined Guarantor Subsidiaries | Guarantor Properties | Location |
Layton Hills Mall CMBS, LLC | Layton Hills Mall and Cinema Layton Hills Plaza Layton Hills Convenience Center | Layton, UT Layton, UT Layton, UT |
Mall del Norte, LLC MDN/Laredo GP, LLC | Mall del Norte and Cinema | Laredo, TX |
Mayfaire Town Center, LP Mayfaire GP, LLC | Mayfaire Town Center | Wilmington, NC |
Mortgage Holdings, LLC | Four mortgage notes receivable (1) | Chattanooga, TN |
Hixson Mall, LLC | Northgate Mall | Chattanooga, TN |
Pearland Town Center Limited Partnership Pearl Ground, LLC Pearland Town Center GP, LLC | Pearland Town Center - Retail Pearland Town Center - Office | Pearland, TX |
POM-College Station, LLC | Post Oak Mall | College Station, TX |
CBL RM-Waco, LLC CBL/Richland G.P., LLC | Richland Mall | Waco, TX |
CBL SM - Brownsville, LLC CBL/Sunrise GP, LLC | Sunrise Mall | Brownsville, TX |
Turtle Creek Limited Partnership Mortgage Holdings, LLC | Turtle Creek Mall | Hattiesburg, MS |
Madison/West Towne, LLC Madison Joint Venture CBL/Madison I, LLC | West Towne Mall | Madison, WI |
Madison Joint Venture CBL/Madison I, LLC | West Town Crossing (1) | Madison, WI |
(1) | Property/asset is not collateral on the secured credit facility. |
Description | Date Adopted & Application Method | Financial Statement Effect and Other Information | ||
ASU 2016-02, Leases, and related subsequent amendments | January 1, 2019 - Modified Retrospective (electing optional transition method to apply at adoption date and record cumulative-effect adjustment as of January 1, 2019) | The objective of the leasing guidance is to increase transparency and comparability by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. Putting nearly all leases on the balance sheet is the biggest change for lessees, as lessees will now be required to recognize a right-of-use (“ROU”) asset and corresponding lease liability for assets with terms greater than 12 months. Under the FASB model, lessees will classify a lease as either a finance lease or an operating lease, while a lessor will classify a lease as either a sales-type, direct financing, or operating lease. A lessee should classify a lease based on whether the arrangement is effectively a purchase of the underlying asset. Leases that transfer control of the underlying asset to a lessee are classified as finance leases for lessees and sales-type leases for lessors, whereas leases where the lessee obtains control of only the use of the underlying asset, but not the underlying asset itself, will be classified as operating leases for both lessees and lessors. A lease may meet the lessee finance lease criteria even when control of the underlying asset is not transferred to the lessee, and in these cases the lease would be classified as an operating lease for the lessee and a direct finance lease by the lessor. The guidance to be applied by lessors is substantially similar to existing GAAP. In order to align lessor accounting with the principles in the revenue recognition guidance in ASC 606, a lessor is precluded from recognizing selling profit or sales revenue at lease commencement for a lease that does not transfer control of the underlying asset to the lessee. As a lessee, the guidance impacted the Combined Guarantor Subsidiaries' combined financial statements through the recognition of right-of-use ("ROU") assets and corresponding lease liabilities for operating leases as of January 1, 2019. As a lessor, the guidance impacted the Combined Guarantor Subsidiaries' combined financial statements in regard to the narrowed definition of initial direct costs that can be capitalized, the change in the presentation of rental revenues as one line item and the change in reporting uncollectable operating lease receivables as a reduction of rental revenues instead of property operating expense. The adoption did not result in a cumulative catch-up adjustment to opening equity. See Note 4 for further details. |
Description | Expected Adoption Date & Application Method | Financial Statement Effect and Other Information | ||
ASU 2016-13, Measurement of Credit Losses on Financial Instruments | January 1, 2020 - Modified Retrospective | The guidance replaces the current incurred loss impairment model, which reflects credit events, with a current expected credit loss model, which recognizes an allowance for credit losses based on an entity's estimate of contractual cash flows not expected to be collected. The Combined Guarantor Subsidiaries are evaluating the impact that this update may have on the combined financial statements and related disclosures. |
March 31, 2019 | December 31, 2018 | ||||||||||||||
Cost | Accumulated Amortization | Cost | Accumulated Amortization | ||||||||||||
Intangible lease assets and other assets: | |||||||||||||||
Above-market leases | $ | 12,064 | $ | (11,124 | ) | $ | 12,307 | $ | (11,198 | ) | |||||
In-place leases | 44,321 | (36,547 | ) | 46,229 | (37,381 | ) | |||||||||
Tenant relationships | 25,818 | (4,455 | ) | 27,866 | (4,880 | ) | |||||||||
Accounts payable and accrued liabilities: | |||||||||||||||
Below-market leases | 27,975 | (21,683 | ) | 28,942 | (21,805 | ) |
Contract Liability | ||||
Balance as of December 31, 2018 | $ | 79 | ||
Completed performance obligation | — | |||
Contract obligation | — | |||
Balance as of March 31, 2019 | $ | 79 |
As of March 31, 2019 | Expected Settlement Period | |||||||||||||||
Description | Financial Statement Line Item | 2019 | 2020 | 2021 | 2022 | |||||||||||
Contract liability (1) | Other rents | 79 | (19 | ) | (20 | ) | (20 | ) | (20 | ) |
(1) | Relates to a contract in which the Combined Guarantor Subsidiaries received advance payments in the initial year of the multi-year contract. |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | |||||||
Rental revenues (1) | $ | 71,272 | $ | 78,706 | ||||
Revenues from contracts with customers (ASC 606): | ||||||||
Operating expense reimbursements (2) | 1,151 | 1,168 | ||||||
Marketing revenues (3) | 437 | 508 | ||||||
1,588 | 1,676 | |||||||
Other revenues | 132 | 56 | ||||||
Total revenues | $ | 72,992 | $ | 80,438 |
(1) | Revenues from leases that commenced subsequent to December 31, 2018 are accounted for in accordance with ASC 842, Leases, whereas all leases existing prior to that date are accounted for in accordance with ASC 840, Leases. See Note 4. |
(2) | Includes $1,151 in the Malls segment for the three months ended March 31, 2019. Includes $1,168 in the Malls segment for the three months ended March 31, 2018. See description below. |
(3) | Includes $437 in the Malls segment for the three months ended March 31, 2019. Includes $508 in the Malls segment for the three months ended March 31, 2018. |
Performance obligation | Less than 5 years | 5-20 years | Over 20 years | Total | ||||||||||||
Fixed operating expense reimbursements | $ | 15,263 | $ | 27,709 | $ | 34,288 | $ | 77,260 |
Three Months Ended March 31, 2019 | ||||
Fixed lease payments | $ | 60,247 | ||
Variable lease payments | 11,025 | |||
Total rental revenues | $ | 71,272 |
Year Ending December 31, | Operating Leases | |||
2019 (1) | $ | 155,169 | ||
2020 | 185,745 | |||
2021 | 164,309 | |||
2022 | 134,017 | |||
2023 | 112,541 | |||
2024 | 85,865 | |||
Thereafter | 248,223 | |||
Total undiscounted lease payments | $ | 1,085,869 |
(1) | Reflects rental payments for the fiscal period April 1, 2019 through December 31, 2019. |
Years Ending December 31, | Operating Leases | ||
2019 | $ | 184,923 | |
2020 | 154,944 | ||
2021 | 133,093 | ||
2022 | 107,092 | ||
2023 | 86,957 | ||
Thereafter | 193,324 | ||
Total | $ | 860,333 |
ROU Asset | Lease Liability | |||||||
Balance as of January 1, 2019 | $ | 493 | $ | 490 | ||||
Cash reduction | (10 | ) | (10 | ) | ||||
Noncash increase | 7 | 10 | ||||||
Balance as of March 31, 2019 | $ | 490 | $ | 490 |
Year Ending December 31, | Operating Lease | |||
2019 (1) | $ | 30 | ||
2020 | 41 | |||
2021 | 41 | |||
2022 | 41 | |||
2023 | 41 | |||
2024 | 41 | |||
Thereafter | 1,949 | |||
Total undiscounted lease payments | $ | 2,184 | ||
Less imputed interest | (1,694 | ) | ||
Lease Liability | $ | 490 |
(1) | Reflects rental payments for the fiscal period April 1, 2019 through December 31, 2019. |
2019 | $ | 41 | ||
2020 | 41 | |||
2021 | 41 | |||
2022 | 41 | |||
2023 | 41 | |||
Thereafter | 1,990 | |||
$ | 2,195 |
Level 1 – | Inputs represent quoted prices in active markets for identical assets and liabilities as of the measurement date. |
Level 2 – | Inputs, other than those included in Level 1, represent observable measurements for similar instruments in active markets, or identical or similar instruments in markets that are not active, and observable measurements or market data for instruments with substantially the full term of the asset or liability. |
Level 3 – | Inputs represent unobservable measurements, supported by little, if any, market activity, and require considerable assumptions that are significant to the fair value of the asset or liability. Market valuations must often be determined using discounted cash flow methodologies, pricing models or similar techniques based on the Combined Guarantor Subsidiaries' assumptions and best judgment. |
Fair Value Measurements at Reporting Date Using | |||||||||||||||||||
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total Loss on Impairment | |||||||||||||||
Long-lived assets | $ | 56,300 | $ | — | $ | — | $ | 56,300 | $ | 22,770 |
Impairment Date | Property | Location | Segment Classification | Loss on Impairment | Fair Value | |||||||||
March | Greenbrier Mall (1) | Chesapeake, VA | Malls | $ | 22,770 | $ | 56,300 |
(1) | In accordance with the Combined Guarantor Subsidiaries' quarterly impairment process, the Combined Guarantor Subsidiaries wrote down the book value of the mall to its estimated fair value of $56,300. The mall has experienced a decline of NOI due to store closures and rent reductions. Additionally, one anchor was vacant as of March 31, 2019. Management determined the fair value of Greenbrier Mall using a |
Transfer Date | Balance of Non-recourse Debt | Gain on Extinguishment of Debt | ||||||||||||
Property | Property Type | Location | ||||||||||||
January | Acadiana Mall (1) | Mall | Lafayette, LA | $ | 119,760 | $ | 61,796 |
(1) | The Combined Guarantor Subsidiaries transferred title to the mall to the mortgage holder in satisfaction of the non-recourse debt secured by the property. A loss on impairment of real estate of $43,007 was recorded in 2017 to write down the book value of the mall to its then estimated fair value. The Combined Guarantor Subsidiaries also recorded $305 of aggregate non-cash default interest expense during the first quarter of 2019. |
Interest Rate (1) | Maturity Date | March 31, 2019 | December 31, 2018 | ||||||||
Property | |||||||||||
Acadiana Mall (2) | 5.67% | Apr-17 | $ | — | $ | 119,760 | |||||
Greenbrier Mall | 5.41% | Dec-19 | 67,201 | 68,101 | |||||||
Park Plaza Mall | 5.28% | Apr-21 | 80,564 | 81,287 | |||||||
Arbor Place Mall | 5.10% | May-22 | 108,612 | 109,209 | |||||||
Total mortgage notes payable | 5.24% | 256,377 | 378,357 | ||||||||
Unamortized deferred financing costs | (299 | ) | (361 | ) | |||||||
Total mortgage notes payable, net | $ | 256,078 | $ | 377,996 |
(1) | Weighted-average interest rate includes the effect of debt premiums and discounts, but excludes amortization of deferred financing costs. |
(2) | See Note 6 related to the retirement of this loan. |
2019 | $ | 71,187 | ||
2020 | 5,574 | |||
2021 | 77,844 | |||
2022 | 101,772 | |||
256,377 | ||||
Unamortized deferred financing costs | (299 | ) | ||
Total mortgage notes payable, net | $ | 256,078 |
As of March 31, 2019 | As of December 31, 2018 | |||||||||||||
Maturity Date | Interest Rate | Balance | Interest Rate | Balance | ||||||||||
Mortgages: | ||||||||||||||
The Promenade (1) | Jun 2019 | 5.00% | $ | 47,514 | 5.00% | $ | 47,514 | |||||||
Hamilton Corner (1) | Aug 2019 | 5.67% | 14,295 | 5.67% | 14,295 | |||||||||
Forum at Grandview (1) | Sep 2023 | 5.25% | 12,400 | 5.25% | 12,400 | |||||||||
Village Square (2) | Mar 2019 | 4.00% | 1,290 | 4.00% | 1,308 | |||||||||
75,499 | 75,517 | |||||||||||||
Other Notes Receivable: | ||||||||||||||
Community improvement district | Aug 2028 | 7.50% | 1,230 | 7.50% | 1,230 | |||||||||
1,230 | 1,230 | |||||||||||||
$ | 76,729 | $ | 76,747 |
(1) | The mortgaged property is owned by an entity that is controlled by the Operating Partnership and included in the Operating Partnership's condensed consolidated financials statements. The mortgage note receivable is interest only. |
(2) | The note was amended subsequent to March 31, 2019 to extend the maturity date and restructure the monthly payment amount. |
Three Months Ended March 31, 2019 | Malls | All Other (1) | Total | |||||||||
Revenues | $ | 70,400 | $ | 2,592 | $ | 72,992 | ||||||
Property operating expenses (2) | (22,169 | ) | (596 | ) | (22,765 | ) | ||||||
Interest expense | (3,985 | ) | — | (3,985 | ) | |||||||
Segment profit | $ | 44,246 | $ | 1,996 | 46,242 |
Depreciation and amortization expense | (24,101 | ) | ||||||||||
Interest and other income | 942 | |||||||||||
Gain on extinguishment of debt | 61,796 | |||||||||||
Loss on impairment | (22,770 | ) | ||||||||||
Net income | $ | 62,109 | ||||||||||
Capital expenditures (3) | $ | 2,618 | $ | — | $ | 2,618 |
Three Months Ended March 31, 2018 | Malls | All Other (1) | Total | |||||||||
Revenues | $ | 77,661 | $ | 2,777 | $ | 80,438 | ||||||
Property operating expenses (2) | (23,553 | ) | (632 | ) | (24,185 | ) | ||||||
Interest expense | (5,990 | ) | — | (5,990 | ) | |||||||
Gain on sales of real estate assets | 1,718 | — | 1,718 | |||||||||
Segment profit | $ | 49,836 | $ | 2,145 | 51,981 | |||||||
Depreciation and amortization expense | (24,499 | ) | ||||||||||
Interest and other income | 2,133 | |||||||||||
Net income | $ | 29,615 | ||||||||||
Capital expenditures (3) | $ | 9,163 | $ | 186 | $ | 9,349 |
Total Assets | Malls | All Other (1) | Total | |||||||||
March 31, 2019 | $ | 1,578,912 | $ | 145,184 | $ | 1,724,096 | ||||||
December 31, 2018 | $ | 1,697,211 | $ | 144,649 | $ | 1,841,860 |
(1) | The All Other category includes associated centers and notes receivable. |
(2) | Property operating expenses include property operating, real estate taxes and maintenance and repairs. |
(3) | Amounts include acquisitions of real estate assets. Developments in progress are included in the All Other category. |
Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
Additions to real estate assets accrued but not yet paid | $ | 2,583 | $ | 6,024 | |||
Distribution of properties to owners | 8,835 | — | |||||
Lease liabilities arising from obtaining right-of-use assets | 490 | — | |||||
Transfer of real estate assets in settlement of mortgage debt obligation: | |||||||
Decrease in real estate assets | (60,058 | ) | — | ||||
Decrease in mortgage and other indebtedness | 115,271 | — | |||||
Decrease in operating assets and liabilities | 8,246 | — | |||||
Decrease in intangible lease and other assets | (1,663 | ) | — |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
May 07, 2019 |
|
Entity Information [Line Items] | ||
Entity Registrant Name | CBL & ASSOCIATES PROPERTIES INC | |
Entity Central Index Key | 0000910612 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Emerging Growth Company | false | |
Small Business | false | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 173,475,641 | |
CBL & Associates Limited Partnership | ||
Entity Information [Line Items] | ||
Entity Registrant Name | CBL & Associates Limited Partnership | |
Entity Central Index Key | 0000915140 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Tenant receivables allowance for doubtful accounts | $ 2,337 | |
Other receivables allowance for doubtful accounts | $ 838 | |
Preferred stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Preferred stock authorized (shares) | 15,000,000 | 15,000,000 |
Common stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Common stock authorized (shares) | 350,000,000 | 350,000,000 |
Common stock issued (shares) | 173,461,976 | 172,656,458 |
Common stock outstanding (shares) | 173,461,976 | 172,656,458 |
Assets related to consolidated variable interest entities | $ 609,856 | |
Liabilities related to consolidated variable interest entities | $ 406,466 | |
Series D Preferred Stock | ||
Dividend rate of preferred stock (as a percent) | 7.375% | 7.375% |
Preferred stock outstanding (shares) | 1,815,000 | 1,815,000 |
Series E Preferred Stock | ||
Dividend rate of preferred stock (as a percent) | 6.625% | 6.625% |
Preferred stock outstanding (shares) | 690,000 | 690,000 |
CBL & Associates Limited Partnership | ||
Tenant receivables allowance for doubtful accounts | $ 2,337 | |
Other receivables allowance for doubtful accounts | $ 838 | |
Assets related to consolidated variable interest entities | $ 609,856 | |
Liabilities related to consolidated variable interest entities | $ 406,466 |
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
REVENUES: | ||
Rental revenues | $ 190,980 | $ 212,729 |
Management, development and leasing fees | 5,540 | 6,359 |
Other | 4,527 | 4,750 |
Total revenues | 198,030 | 220,200 |
OPERATING EXPENSES: | ||
Property operating | (28,980) | (32,826) |
Depreciation and amortization | (69,792) | (71,750) |
Real estate taxes | (19,919) | (21,848) |
Maintenance and repairs | (12,776) | (13,179) |
General and administrative | (22,007) | (18,304) |
Loss on impairment | (24,825) | (18,061) |
Litigation settlement | (88,150) | 0 |
Other | 0 | (94) |
Total operating expenses | (266,449) | (176,062) |
OTHER INCOME (EXPENSES): | ||
Interest and other income | 489 | 213 |
Interest expense | (53,998) | (53,767) |
Gain on extinguishment of debt | 71,722 | 0 |
Gain on sales of real estate assets | 228 | 4,371 |
Income tax benefit (provision) | (139) | 645 |
Equity in earnings of unconsolidated affiliates | 3,308 | 3,739 |
Total other income (expenses) | 21,610 | (44,799) |
Net loss | (46,809) | (661) |
Net (income) loss attributable to noncontrolling interests in: | ||
Operating Partnership | 7,758 | 1,665 |
Other consolidated subsidiaries | 75 | (101) |
Net income (loss) attributable to the Company | (38,976) | 903 |
Preferred dividends | (11,223) | (11,223) |
Net loss attributable to common shareholders | $ (50,199) | $ (10,320) |
Basic and diluted per share data attributable to common shareholders: | ||
Net loss attributable to common shareholders/ unitholders (USD per share) | $ (0.29) | $ (0.06) |
Weighted-average common and potential dilutive common shares/units outstanding (shares) | 173,252 | 171,943 |
CBL & Associates Limited Partnership | ||
REVENUES: | ||
Rental revenues | $ 190,980 | $ 212,729 |
Other | 4,527 | 4,750 |
Total revenues | 198,030 | 220,200 |
OPERATING EXPENSES: | ||
Property operating | (28,980) | (32,826) |
Depreciation and amortization | (69,792) | (71,750) |
Real estate taxes | (19,919) | (21,848) |
Maintenance and repairs | (12,776) | (13,179) |
General and administrative | (22,007) | (18,304) |
Loss on impairment | (24,825) | (18,061) |
Litigation settlement | (88,150) | 0 |
Other | 0 | (94) |
Total operating expenses | (266,449) | (176,062) |
OTHER INCOME (EXPENSES): | ||
Interest and other income | 489 | 213 |
Interest expense | (53,998) | (53,767) |
Gain on extinguishment of debt | 71,722 | 0 |
Gain on sales of real estate assets | 228 | 4,371 |
Income tax benefit (provision) | (139) | 645 |
Equity in earnings of unconsolidated affiliates | 3,308 | 3,739 |
Total other income (expenses) | 21,610 | (44,799) |
Net loss | (46,809) | (661) |
Net (income) loss attributable to noncontrolling interests in: | ||
Other consolidated subsidiaries | 75 | (101) |
Net income (loss) attributable to the Company | (46,734) | (762) |
Preferred dividends | (11,223) | (11,223) |
Net loss attributable to common shareholders | $ (57,957) | $ (11,985) |
Basic and diluted per share data attributable to common shareholders: | ||
Net loss attributable to common shareholders/ unitholders (USD per share) | $ (0.29) | $ (0.06) |
Weighted-average common and potential dilutive common shares/units outstanding (shares) | 200,010 | 199,694 |
Management, development and leasing fees | ||
REVENUES: | ||
Management, development and leasing fees | $ 2,523 | $ 2,721 |
Management, development and leasing fees | CBL & Associates Limited Partnership | ||
REVENUES: | ||
Management, development and leasing fees | $ 2,523 | $ 2,721 |
Condensed Consolidated Statements of Equity/Capital - USD ($) $ in Thousands |
Total |
Preferred Stock |
Common Stock |
Additional Paid-in Capital |
Dividends in Excess of Cumulative Earnings |
Total Shareholders' Equity/Partners' Capital |
Noncontrolling Interests |
Redeemable Noncontrolling Interests |
CBL & Associates Limited Partnership |
CBL & Associates Limited Partnership
Preferred Units
|
CBL & Associates Limited Partnership
Common Units
|
CBL & Associates Limited Partnership
General Partner
|
CBL & Associates Limited Partnership
Limited Partners
|
CBL & Associates Limited Partnership
Total Shareholders' Equity/Partners' Capital
|
CBL & Associates Limited Partnership
Noncontrolling Interests
|
CBL & Associates Limited Partnership
Redeemable Common Units
|
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Beginning balance of redeemable noncontrolling partnership interests at Dec. 31, 2017 | $ 8,835 | $ 8,835 | ||||||||||||||
Redeemable Noncontrolling Interests | ||||||||||||||||
Net income (loss) | (94) | (94) | ||||||||||||||
Distributions declared - common units | $ (34,531) | $ (34,531) | $ (34,531) | $ (40,617) | $ (402) | $ (40,215) | $ (40,617) | (1,143) | ||||||||
Adjustment for noncontrolling interests | (1,399) | $ (11,737) | (11,737) | $ 10,338 | 1,399 | |||||||||||
Adjustment to record redeemable interests at redemption value | 2,531 | 2,203 | 2,203 | 328 | (2,530) | 2,531 | 26 | 2,505 | 2,531 | (2,530) | ||||||
Distributions to noncontrolling interests | (7,804) | (7,804) | (1,143) | (1,718) | $ (1,718) | |||||||||||
Allocation of partners' capital | (1,401) | (48) | (1,353) | (1,401) | 1,399 | |||||||||||
Ending balance of redeemable noncontrolling partnership interests at Mar. 31, 2018 | 6,467 | 6,467 | ||||||||||||||
Beginning balance at Dec. 31, 2017 | 1,236,478 | $ 25 | $ 1,711 | 1,974,537 | (836,269) | 1,140,004 | 96,474 | |||||||||
Beginning balance of units (shares) at Dec. 31, 2017 | 25,050,000 | 199,297,000 | ||||||||||||||
Beginning balance partners capital at Dec. 31, 2017 | 1,236,768 | $ 565,212 | 6,735 | 655,120 | 1,227,067 | 9,701 | ||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
Net income (loss) | (567) | 903 | 903 | (1,470) | (567) | 11,223 | (122) | (11,769) | (668) | 101 | ||||||
Dividends declared - common stock | (34,531) | (34,531) | (34,531) | (40,617) | (402) | (40,215) | (40,617) | (1,143) | ||||||||
Dividends declared - preferred stock | (11,223) | (11,223) | (11,223) | (11,223) | $ (11,223) | (11,223) | ||||||||||
Issuances of shares of common stock and restricted common stock | 741 | 7 | 734 | 741 | ||||||||||||
Conversion of Operating Partnership common units into shares of common stock | 9 | 3,050 | 3,059 | (3,059) | ||||||||||||
Cancellation of restricted common stock | (233) | (233) | (233) | (233) | (233) | (233) | ||||||||||
Performance stock units | $ 419 | 419 | 419 | 419 | 4 | 415 | 419 | |||||||||
Issuances of common units (shares) | 700,534 | 701,000 | ||||||||||||||
Issuances of common units | 741 | 741 | 741 | |||||||||||||
Amortization of deferred compensation | $ 1,196 | 1,196 | 1,196 | 1,196 | 12 | 1,184 | 1,196 | |||||||||
Cancellation of restricted common stock/units (shares) | (47,867) | (48,000) | ||||||||||||||
Allocation of partners' capital | (1,401) | (48) | (1,353) | (1,401) | 1,399 | |||||||||||
Adjustment for noncontrolling interests | $ (1,399) | (11,737) | (11,737) | 10,338 | 1,399 | |||||||||||
Adjustment to record redeemable noncontrolling interests at redemption value | 2,531 | 2,203 | 2,203 | 328 | (2,530) | 2,531 | 26 | 2,505 | 2,531 | (2,530) | ||||||
Distributions to noncontrolling interests | (7,804) | (7,804) | (1,143) | (1,718) | (1,718) | |||||||||||
Ending balance at Mar. 31, 2018 | 1,255,988 | 25 | 1,727 | 1,970,169 | (810,740) | 1,161,181 | 94,807 | |||||||||
Ending balance of units (shares) at Mar. 31, 2018 | 25,050,000 | 199,950,000 | ||||||||||||||
Ending balance partners capital at Mar. 31, 2018 | 1,256,276 | $ 565,212 | 6,927 | 676,053 | 1,248,192 | 8,084 | ||||||||||
Beginning balance of redeemable noncontrolling partnership interests at Dec. 31, 2018 | 3,575 | 3,575 | 3,575 | 3,575 | ||||||||||||
Redeemable Noncontrolling Interests | ||||||||||||||||
Net income (loss) | (453) | (453) | ||||||||||||||
Distributions declared - common units | (13,010) | (13,010) | (13,010) | (16,048) | (151) | (15,897) | (16,048) | (1,143) | ||||||||
Adjustment for noncontrolling interests | (1,038) | (2,356) | (2,356) | 1,318 | 1,038 | |||||||||||
Distributions to noncontrolling interests | (4,450) | (4,450) | (1,143) | (1,412) | (1,412) | |||||||||||
Allocation of partners' capital | (1,038) | (34) | (1,004) | (1,038) | 1,038 | |||||||||||
Ending balance of redeemable noncontrolling partnership interests at Mar. 31, 2019 | 3,017 | 3,017 | 3,017 | 3,017 | ||||||||||||
Beginning balance at Dec. 31, 2018 | 1,032,165 | 25 | 1,727 | 1,968,280 | (1,005,895) | 964,137 | 68,028 | |||||||||
Beginning balance of units (shares) at Dec. 31, 2018 | 25,050,000 | 199,415,000 | ||||||||||||||
Beginning balance partners capital at Dec. 31, 2018 | 1,032,458 | $ 565,212 | 4,628 | 450,507 | 1,020,347 | 12,111 | ||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
Net income (loss) | (46,356) | (38,976) | (38,976) | (7,380) | (46,356) | 11,223 | (590) | (56,914) | (46,281) | (75) | ||||||
Dividends declared - common stock | (13,010) | (13,010) | (13,010) | (16,048) | (151) | (15,897) | (16,048) | (1,143) | ||||||||
Dividends declared - preferred stock | (11,223) | (11,223) | (11,223) | (11,223) | $ (11,223) | (11,223) | ||||||||||
Issuances of shares of common stock and restricted common stock | 717 | 9 | 708 | 717 | ||||||||||||
Cancellation of restricted common stock | (134) | (1) | (133) | (134) | (133) | (133) | (133) | |||||||||
Performance stock units | $ 313 | 313 | 313 | 312 | 3 | 309 | 312 | |||||||||
Issuances of common units (shares) | 863,174 | 863,000 | ||||||||||||||
Issuances of common units | 717 | 717 | 717 | |||||||||||||
Amortization of deferred compensation | $ 1,033 | 1,033 | 1,033 | 1,033 | 11 | 1,022 | 1,033 | |||||||||
Cancellation of restricted common stock/units (shares) | (57,656) | (58,000) | ||||||||||||||
Allocation of partners' capital | (1,038) | (34) | (1,004) | (1,038) | $ 1,038 | |||||||||||
Adjustment for noncontrolling interests | $ (1,038) | (2,356) | (2,356) | 1,318 | 1,038 | |||||||||||
Contributions from noncontrolling interests | 455 | 455 | 455 | 455 | ||||||||||||
Distributions to noncontrolling interests | (4,450) | (4,450) | $ (1,143) | (1,412) | (1,412) | |||||||||||
Ending balance at Mar. 31, 2019 | $ 958,472 | $ 25 | $ 1,735 | $ 1,967,845 | $ (1,069,104) | $ 900,501 | $ 57,971 | |||||||||
Ending balance of units (shares) at Mar. 31, 2019 | 25,050,000 | 200,220,000 | ||||||||||||||
Ending balance partners capital at Mar. 31, 2019 | $ 958,765 | $ 565,212 | $ 3,867 | $ 378,607 | $ 947,686 | $ 11,079 |
Condensed Consolidated Statements of Equity/Capital (Parenthetical) - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Issuance of common and restricted stock (shares) | 863,174 | 700,534 |
Cancellation of restricted common stock/units (shares/units) | 57,656 | 47,867 |
Stock converted (shares) | 915,338 | |
Dividends/distributions declared - common stock/unit (USD per share/unit) | $ 75.000 | $ 200.000 |
CBL & Associates Limited Partnership | ||
Dividends/distributions declared - common stock/unit (USD per share/unit) | $ 0.086 | $ 0.209 |
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||
Net loss | $ (46,809) | $ (661) | |||||||||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 69,792 | 71,750 | |||||||||||||
Net amortization of deferred financing costs, debt premiums and discounts | 2,304 | 1,709 | |||||||||||||
Net amortization of intangible lease assets and liabilities | (551) | (475) | |||||||||||||
Gain on sales of real estate assets | (228) | (4,371) | |||||||||||||
Gain on insurance proceeds | (690) | 0 | |||||||||||||
Write-off of development projects | 0 | 94 | |||||||||||||
Share-based compensation expense | 2,043 | 2,314 | |||||||||||||
Loss on impairment | 24,825 | 18,061 | |||||||||||||
Gain on extinguishment of debt | (71,722) | 0 | |||||||||||||
Equity in earnings of unconsolidated affiliates | (3,308) | (3,739) | |||||||||||||
Distributions of earnings from unconsolidated affiliates | 5,671 | 4,011 | |||||||||||||
Change in estimate of uncollectable rental revenues | 1,540 | 2,041 | |||||||||||||
Change in deferred tax accounts | 63 | (629) | |||||||||||||
Changes in: | |||||||||||||||
Tenant and other receivables | (387) | 1,826 | |||||||||||||
Other assets | (3,826) | (2,339) | |||||||||||||
Accounts payable and accrued liabilities | 76,771 | 8,635 | |||||||||||||
Net cash provided by operating activities | 55,488 | 98,227 | |||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||
Additions to real estate assets | (26,429) | (39,997) | |||||||||||||
Proceeds from sales of real estate assets | 35,260 | 11,848 | |||||||||||||
Proceeds from insurance | 548 | 0 | |||||||||||||
Payments received on mortgage and other notes receivable | 266 | 267 | |||||||||||||
Additional investments in and advances to unconsolidated affiliates | (566) | (1,232) | |||||||||||||
Distributions in excess of equity in earnings of unconsolidated affiliates | 4,979 | 2,859 | |||||||||||||
Changes in other assets | (321) | (2,277) | |||||||||||||
Net cash provided by (used in) investing activities | 13,737 | (28,532) | |||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||
Proceeds from mortgage and other indebtedness | 941,217 | 99,160 | |||||||||||||
Principal payments on mortgage and other indebtedness | (978,006) | (123,634) | |||||||||||||
Additions to deferred financing costs | (15,107) | (98) | |||||||||||||
Proceeds from issuances of common stock | 17 | 41 | |||||||||||||
Contributions from noncontrolling interests | 455 | 0 | |||||||||||||
Payment of tax withholdings for restricted stock awards | (132) | (231) | |||||||||||||
Distributions to noncontrolling interests | (5,593) | (9,130) | |||||||||||||
Dividends paid to holders of preferred stock | (11,223) | (11,223) | |||||||||||||
Dividends paid to common shareholders | (12,949) | (34,217) | |||||||||||||
Net cash used in financing activities | (81,321) | (79,332) | |||||||||||||
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (12,096) | (9,637) | |||||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | 57,512 | 68,172 | $ 68,172 | ||||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | 45,416 | 58,535 | 57,512 | ||||||||||||
Reconciliation from condensed consolidated statements of cash flows to condensed consolidated balance sheets: | |||||||||||||||
Cash and cash equivalents | 21,055 | 23,346 | 25,138 | [1] | |||||||||||
Restricted cash | |||||||||||||||
Restricted cash | [2] | $ 79 | $ 3,212 | ||||||||||||
Mortgage escrows | [2] | 24,282 | 31,977 | ||||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | 57,512 | 68,172 | 68,172 | 45,416 | 58,535 | ||||||||||
SUPPLEMENTAL INFORMATION: | |||||||||||||||
Cash paid for interest, net of amounts capitalized | 35,659 | 34,896 | |||||||||||||
CBL & Associates Limited Partnership | |||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||
Net loss | (46,809) | (661) | |||||||||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 69,792 | 71,750 | |||||||||||||
Net amortization of deferred financing costs, debt premiums and discounts | 2,304 | 1,709 | |||||||||||||
Net amortization of intangible lease assets and liabilities | (551) | (475) | |||||||||||||
Gain on sales of real estate assets | (228) | (4,371) | |||||||||||||
Gain on insurance proceeds | (690) | 0 | |||||||||||||
Write-off of development projects | 0 | 94 | |||||||||||||
Share-based compensation expense | 2,043 | 2,314 | |||||||||||||
Loss on impairment | 24,825 | 18,061 | |||||||||||||
Gain on extinguishment of debt | (71,722) | 0 | |||||||||||||
Equity in earnings of unconsolidated affiliates | (3,308) | (3,739) | |||||||||||||
Distributions of earnings from unconsolidated affiliates | 5,671 | 4,012 | |||||||||||||
Change in estimate of uncollectable rental revenues | 1,540 | 2,041 | |||||||||||||
Change in deferred tax accounts | 63 | (629) | |||||||||||||
Changes in: | |||||||||||||||
Tenant and other receivables | (387) | 1,826 | |||||||||||||
Other assets | (3,826) | (2,339) | |||||||||||||
Accounts payable and accrued liabilities | 76,770 | 8,633 | |||||||||||||
Net cash provided by operating activities | 55,487 | 98,226 | |||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||
Additions to real estate assets | (26,429) | (39,997) | |||||||||||||
Proceeds from sales of real estate assets | 35,260 | 11,848 | |||||||||||||
Proceeds from insurance | 548 | 0 | |||||||||||||
Payments received on mortgage and other notes receivable | 266 | 267 | |||||||||||||
Additional investments in and advances to unconsolidated affiliates | (566) | (1,232) | |||||||||||||
Distributions in excess of equity in earnings of unconsolidated affiliates | 4,979 | 2,859 | |||||||||||||
Changes in other assets | (321) | (2,277) | |||||||||||||
Net cash provided by (used in) investing activities | 13,737 | (28,532) | |||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||
Proceeds from mortgage and other indebtedness | 941,217 | 99,160 | |||||||||||||
Principal payments on mortgage and other indebtedness | (978,006) | (123,634) | |||||||||||||
Additions to deferred financing costs | (15,107) | (98) | |||||||||||||
Proceeds from issuances of common stock | 17 | 41 | |||||||||||||
Contributions from noncontrolling interests | 455 | 0 | |||||||||||||
Payment of tax withholdings for restricted stock awards | (132) | (231) | |||||||||||||
Distributions to noncontrolling interests | (2,554) | (2,861) | |||||||||||||
Dividends paid to holders of preferred stock | (11,223) | (11,223) | |||||||||||||
Dividends paid to common shareholders | (15,988) | (40,486) | |||||||||||||
Net cash used in financing activities | (81,321) | (79,332) | |||||||||||||
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (12,097) | (9,638) | |||||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | 57,512 | 68,172 | 68,172 | ||||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | 45,415 | 58,534 | 57,512 | ||||||||||||
Reconciliation from condensed consolidated statements of cash flows to condensed consolidated balance sheets: | |||||||||||||||
Cash and cash equivalents | 21,054 | 23,345 | 25,138 | [3] | |||||||||||
Restricted cash | |||||||||||||||
Restricted cash | [4] | 79 | 3,212 | ||||||||||||
Mortgage escrows | [4] | 24,282 | 31,977 | ||||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | 57,512 | 68,172 | $ 68,172 | $ 45,415 | $ 58,534 | ||||||||||
SUPPLEMENTAL INFORMATION: | |||||||||||||||
Cash paid for interest, net of amounts capitalized | $ 35,659 | $ 34,896 | |||||||||||||
|
Organization and Basis of Presentation |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Basis of Presentation | Organization and Basis of Presentation Unless stated otherwise or the context otherwise requires, references to the "Company" mean CBL & Associates Properties, Inc. and its subsidiaries. References to the "Operating Partnership" mean CBL & Associates Limited Partnership and its subsidiaries. CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. As of March 31, 2019, the Operating Partnership owned interests in the following properties:
At March 31, 2019, the Operating Partnership had interests in the following properties under development:
CBL is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. At March 31, 2019, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.0% general partner interest in the Operating Partnership and CBL Holdings II, Inc. owned an 85.6% limited partner interest for a combined interest held by CBL of 86.6%. The noncontrolling interest in the Operating Partnership is held by CBL & Associates, Inc., its shareholders and affiliates and certain senior officers of the Company (collectively "CBL's Predecessor"), all of which contributed their interests in certain real estate properties and joint ventures to the Operating Partnership in exchange for a limited partner interest when the Operating Partnership was formed in November 1993, and by various third parties. At March 31, 2019, CBL’s Predecessor owned a 9.1% limited partner interest and third parties owned a 4.3% limited partner interest in the Operating Partnership. CBL's Predecessor also owned 4.3 million shares of CBL’s common stock at March 31, 2019, for a total combined effective interest of 11.2% in the Operating Partnership. The Operating Partnership conducts the Company’s property management and development activities through its wholly owned subsidiary, CBL & Associates Management, Inc. (the “Management Company”), to comply with certain requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The accompanying condensed consolidated financial statements are unaudited; however, they have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. All intercompany transactions have been eliminated. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2018. Reclassifications Certain reclassifications have been made to amounts in the Company's prior-year financial statements to conform to the current period presentation. The Company reclassified certain amounts related to operating expense reimbursements in its condensed consolidated statements of operations for the three months ended March 31, 2018 related to the adoption of ASC 606. As a result, operating expense reimbursements of $2,343, previously included in tenant reimbursements, were reclassified to other revenues for the three months ended March 31, 2018. Additionally, the Company reclassified minimum rents, percentage rents, other rents and tenant reimbursements into one line item, rental revenues, for the three months ended March 31, 2018 related to the adoption of ASC 842. |
Recent Accounting Pronouncements |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Recent Accounting Pronouncements | Recent Accounting Pronouncements Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
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Revenues |
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Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | Revenues Contract Balances A summary of the Company's contract assets activity during the three months ended March 31, 2019 is presented below:
A summary of the Company's contract liability activity during the three months ended March 31, 2019 is presented below:
The Company has the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Company's revenues disaggregated by revenue source:
See Note 10 for information on the Company's segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Company's properties and pay no rent, the Company receives reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Company's performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Management, development and leasing fees The Company earns revenue from contracts with third parties and unconsolidated affiliates for property management, leasing, development and other services. These contracts are accounted for on a month-to-month basis if the agreement does not contain substantive penalties for termination. The majority of the Company's contracts with customers are accounted for on a month-to-month basis. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. These contracts generally are for the following:
Development and leasing fees received from an unconsolidated affiliate are recognized as revenue only to the extent of the third-party partner’s ownership interest. The Company's share of such fees are recorded as a reduction to the Company’s investment in the unconsolidated affiliate. Marketing revenues The Company earns marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Company provides advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Company allocates the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Company’s expected cost plus margin. Revenue is recognized as the Company’s performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Company has not fully or has partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Company’s performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Company does not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Company recognizes revenue at the amount to which the Company has the right to invoice, which primarily relate to services performed for certain operating expense reimbursements and management, leasing and development activities, as described above. Performance obligations related to pro rata operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Company has outstanding performance obligations related to certain noncancellable contracts with customers for which it will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Company expects to recognize these amounts as revenue over the following periods:
The Company evaluates its performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. |
Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases Adoption of ASU 2016-02, and all related subsequent amendments The Company adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Company evaluated its contracts and verified that there was an identified asset and that the Company, or the tenant, has the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Company is the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Company is the lessor. After determining that the contract contains a lease, the Company identified the lease component and any nonlease components associated with that lease component, and through the Company’s election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease where the Company is the lessor. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Company’s revenues are earned through the lease of space at its properties. All of the Company's leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Company's leases contain penalties for early termination. The Company doesn't have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Company receives reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. Additionally, ASU 2018-19 clarifies that operating lease receivables are within the scope of ASC 842. Therefore, in conjunction with our adoption of ASC 842 on January 1, 2019, the Company began recognizing changes in the collectability assessment of its operating lease receivables as a reduction of rental revenues, rather than as a property operating expense. As a result, the Company recognized $1,540 of uncollectable operating lease receivables as a reduction of rental revenues for the three months ended March 31, 2019, and recognized $2,041 of uncollectable operating lease receivables as a property operating expense for the three months ended March 31, 2018. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Company's operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Company's future minimum rental income from lessees under non-cancellable operating leases where the Company is the lessor as of December 31, 2018 is also presented below:
Lessee The Company has eight ground leases and one office lease in which it is a lessee. The maturities of these leases range from 2021 to 2089 and generally provide for renewal options ranging from five to ten years. We included the renewal options in our lease terms for purposes of calculating our lease liability and ROU asset because we have no plans to cease operating our assets associated with each ground lease. The ground leases relate to properties where the Company owns the buildings and improvements, but leases the underlying land. The lease payments on the majority of the ground leases are fixed, but in the instances where they are variable they are either based on the CPI index or a percentage of sales. The one office lease is subleased as of March 2019. As of March 31, 2019, these leases have a weighted-average remaining lease term of 38.8 years and a weighted-average discount rate of 8.1%. The Company's ROU asset and lease liability are presented in the condensed consolidated balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Company's ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The components of lease expense are presented below:
The undiscounted future lease payments to be paid under the Company's operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Company's future obligations to be paid under the Company's operating leases where the Company is the lessee as of December 31, 2018 is also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Company elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Company also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Company elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Company made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Company has elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. |
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Leases | Leases Adoption of ASU 2016-02, and all related subsequent amendments The Company adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Company evaluated its contracts and verified that there was an identified asset and that the Company, or the tenant, has the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Company is the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Company is the lessor. After determining that the contract contains a lease, the Company identified the lease component and any nonlease components associated with that lease component, and through the Company’s election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease where the Company is the lessor. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Company’s revenues are earned through the lease of space at its properties. All of the Company's leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Company's leases contain penalties for early termination. The Company doesn't have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Company receives reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. Additionally, ASU 2018-19 clarifies that operating lease receivables are within the scope of ASC 842. Therefore, in conjunction with our adoption of ASC 842 on January 1, 2019, the Company began recognizing changes in the collectability assessment of its operating lease receivables as a reduction of rental revenues, rather than as a property operating expense. As a result, the Company recognized $1,540 of uncollectable operating lease receivables as a reduction of rental revenues for the three months ended March 31, 2019, and recognized $2,041 of uncollectable operating lease receivables as a property operating expense for the three months ended March 31, 2018. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Company's operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Company's future minimum rental income from lessees under non-cancellable operating leases where the Company is the lessor as of December 31, 2018 is also presented below:
Lessee The Company has eight ground leases and one office lease in which it is a lessee. The maturities of these leases range from 2021 to 2089 and generally provide for renewal options ranging from five to ten years. We included the renewal options in our lease terms for purposes of calculating our lease liability and ROU asset because we have no plans to cease operating our assets associated with each ground lease. The ground leases relate to properties where the Company owns the buildings and improvements, but leases the underlying land. The lease payments on the majority of the ground leases are fixed, but in the instances where they are variable they are either based on the CPI index or a percentage of sales. The one office lease is subleased as of March 2019. As of March 31, 2019, these leases have a weighted-average remaining lease term of 38.8 years and a weighted-average discount rate of 8.1%. The Company's ROU asset and lease liability are presented in the condensed consolidated balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Company's ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The components of lease expense are presented below:
The undiscounted future lease payments to be paid under the Company's operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Company's future obligations to be paid under the Company's operating leases where the Company is the lessee as of December 31, 2018 is also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Company elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Company also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Company elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Company made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Company has elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. |
Fair Value Measurements |
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Fair Value Measurements | Fair Value Measurements The Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of mortgage and other notes receivable is a reasonable estimate of fair value. The estimated fair value of mortgage and other indebtedness was $3,556,573 and $3,740,431 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage and other indebtedness using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Company measures the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company considers both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Company classifies such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Company's assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Company recognized an impairment total of $25,054 related to two malls.
Long-lived Assets Measured at Fair Value in 2018 The following table sets forth information regarding the Company's assets that were measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2018:
During the three months ended March 31, 2018, the Company recognized an impairment of real estate of $18,061 related to one mall:
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Business Combinations, Discontinued Operations and Disposal Groups [Abstract] [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dispositions and Held for Sale | Dispositions and Held for Sale The Company evaluates its disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on its analysis, the Company determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Company recognized a gain on extinguishment of debt for the properties listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 8 for more information. The following is a summary of the Company's 2019 dispositions:
In a separate transaction, the Company also sold an anchor store parcel and vacant land at Acadiana Mall, which were not collateral on the loan, for a cash price of $4.0 million. A loss on impairment of real estate of $1,593 was recorded in 2018 to write down the book value of the anchor store parcel and vacant land to its then estimated fair value. |
Unconsolidated Affiliates and Noncontrolling Interests |
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Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unconsolidated Affiliates and Noncontrolling Interests | Unconsolidated Affiliates and Noncontrolling Interests Unconsolidated Affiliates Although the Company had majority ownership of certain joint ventures during 2019 and 2018, it evaluated the investments and concluded that the other partners or owners in these joint ventures had substantive participating rights, such as approvals of:
As a result of the joint control over these joint ventures, the Company accounts for these investments using the equity method of accounting. At March 31, 2019, the Company had investments in 21 entities, which are accounted for using the equity method of accounting. The Company's ownership interest in these unconsolidated affiliates ranges from 10.0% to 65.0%. Of these entities, 15 are owned in 50/50 joint ventures. 2019 Activity - Unconsolidated Affiliates Bullseye, LLC In September 2018, the Company entered into a joint venture, Bullseye, LLC, to develop a vacant land parcel adjacent to Hamilton Corner in Chattanooga, TN. During January 2019, the joint venture closed on the purchase of the land parcel for a gross purchase price of $3,310. The Company has a 20% membership interest in the joint venture and no funding obligations. The unconsolidated affiliate is a variable interest entity. Condensed Combined Financial Statements - Unconsolidated Affiliates Condensed combined financial statement information of the unconsolidated affiliates is as follows:
Financings - Unconsolidated Affiliates All of the debt on the properties owned by the unconsolidated affiliates is non-recourse, except for debt secured by Ambassador Infrastructure, Hammock Landing, The Pavilion at Port Orange, The Shoppes at Eagle Point and the self-storage developments adjacent to EastGate Mall and Mid Rivers Mall. See Note 12 for a description of guarantees the Operating Partnership has issued related to these unconsolidated affiliates. Noncontrolling Interests Noncontrolling interests consist of the following:
Variable Interest Entities In accordance with the guidance in ASU 2015-02, Amendments to the Consolidation Analysis, and ASU 2016-17, Interests Held Through Related Parties That Are under Common Control, the Operating Partnership and certain of its subsidiaries are deemed to have the characteristics of a VIE primarily because the limited partners of these entities do not collectively possess substantive kick-out or participating rights. The Company consolidates the Operating Partnership, which is a VIE, for which the Company is the primary beneficiary. The Company, through the Operating Partnership, consolidates all VIEs for which it is the primary beneficiary. Generally, a VIE is a legal entity in which the equity investors do not have the characteristics of a controlling financial interest or the equity investors lack sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. A limited partnership is considered a VIE when the majority of the limited partners unrelated to the general partner possess neither the right to remove the general partner without cause, nor certain rights to participate in the decisions that most significantly affect the financial results of the partnership. In determining whether the Company is the primary beneficiary of a VIE, the Company considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Company's investment; the obligation or likelihood for the Company or other investors to provide financial support; and the similarity with and significance to the Company's business activities and the business activities of the other investors. Consolidated VIEs As of March 31, 2019, the Company had investments in 19 consolidated VIEs with ownership interests ranging from 50% to 95%. Unconsolidated VIEs The table below lists the Company's unconsolidated VIEs as of March 31, 2019:
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Mortgage and Other Indebtedness, Net |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage and Other Indebtedness, Net | Mortgage and Other Indebtedness, Net Debt of the Company CBL has no indebtedness. Either the Operating Partnership or one of its consolidated subsidiaries, that it has a direct or indirect ownership interest in, is the borrower on all of the Company's debt. CBL is a limited guarantor of the Senior Unsecured Notes (the "Notes"), as described below, for losses suffered solely by reason of fraud or willful misrepresentation by the Operating Partnership or its affiliates. The Company also provides a similar limited guarantee of the Operating Partnership's obligations with respect to its secured credit facility and secured term loan as of March 31, 2019. Debt of the Operating Partnership Net mortgage and other indebtedness consisted of the following:
Senior Unsecured Notes
Senior Secured Credit Facility In January 2019, we entered into a new $1,185,000 senior secured credit facility, which includes a fully-funded $500,000 term loan and a revolving line of credit with a borrowing capacity of $685,000. The facility replaces all of the Company's prior unsecured bank facilities, which included three unsecured term loans with an aggregate balance of $695,000 and three unsecured revolving lines of credit with an aggregate capacity of $1,100,000. At closing, we utilized the line of credit to reduce the principal balance of the unsecured term loan from $695,000 to $500,000. The facility matures in July 2023 and bears interest at a variable rate of LIBOR plus 225 basis points. The facility had an interest rate of 4.74% at March 31, 2019. The Operating Partnership is required to pay an annual facility fee, to be paid quarterly, which ranges from 0.25% to 0.35%, based on the unused capacity of the line of credit. The principal balance on the term loan will be reduced by $35,000 per year in quarterly installments. The secured line of credit had an outstanding balance of $390,000 as of March 31, 2019. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. The terms of the Notes provide that, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered into a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership's condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to this quarterly report on Form 10-Q for ease of reference. Financial Covenants and Restrictions The agreements for the Notes and the senior secured credit facility contain, among other restrictions, certain financial covenants including the maintenance of certain financial coverage ratios, minimum unencumbered asset and interest ratios, maximum secured indebtedness ratios, maximum total indebtedness ratios and limitations on cash flow distributions. The Company believes that it was in compliance with all financial covenants and restrictions at March 31, 2019. The following presents the Company's compliance with key covenant ratios, as defined, of the Notes and the senior secured credit facility as of March 31, 2019:
The agreements for the Notes and senior secured credit facility described above contain default provisions customary for transactions of this nature (with applicable customary grace periods). Additionally, any default in the payment of any recourse indebtedness greater than or equal to $50,000 of the Operating Partnership will constitute an event of default under the Notes. Mortgages on Operating Properties The following is a summary of the Company's 2019 dispositions for which the fixed-rate loan secured by the mall was extinguished:
Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Company’s consolidated debt, excluding extensions available at the Company’s option, on all mortgage and other indebtedness, including construction loans and lines of credit, are as follows:
The $217,655 of scheduled principal payments in 2019 relates to the principal balance of six operating property loans. The Company’s mortgage and other indebtedness had a weighted-average maturity of 4.4 years as of March 31, 2019 and 3.7 years as of December 31, 2018. |
Mortgage and Other Notes Receivable |
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Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgage and Other Notes Receivable | Mortgage and Other Notes Receivable Each of the Company’s mortgage notes receivable is collateralized by either a first mortgage, a second mortgage, or by an assignment of 100% of the partnership interests that own the real estate assets. Other notes receivable include amounts due from tenants or government-sponsored districts and unsecured notes received from third parties as whole or partial consideration for property or investments. Mortgage and other notes receivable consist of the following:
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Segment Information |
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Segment Information | Segment Information The Company measures performance and allocates resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Company’s segments is presented as follows:
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Earnings per Share and Earnings per Unit |
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Earnings Per Share [Abstract] | |
Earnings per Share and Earnings per Unit | Earnings per Share and Earnings per Unit Earnings per Share of the Company Basic earnings per share (“EPS”) is computed by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS assumes the issuance of common stock for all potential dilutive common shares outstanding. The limited partners’ rights to convert their noncontrolling interests in the Operating Partnership into shares of common stock are not dilutive. There were no potential dilutive common shares and there were no anti-dilutive shares for the three month periods ended March 31, 2019 and 2018. Earnings per Unit of the Operating Partnership Basic earnings per unit (“EPU”) is computed by dividing net income (loss) attributable to common unitholders by the weighted-average number of common units outstanding for the period. Diluted EPU assumes the issuance of common units for all potential dilutive common units outstanding. There were no potential dilutive common units and there were no anti-dilutive units for the three month periods ended March 31, 2019 and 2018. |
Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contingencies | Contingencies Litigation In April 2019, the Company entered into a settlement agreement and release with respect to the class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The settlement agreement states that the Company is to set aside a common fund with a monetary and non-monetary value of $90,000 to be disbursed to class members in accordance with an agreed-upon formula that is based upon aggregate damages of $60,000. Class members will be comprised of past and current tenants at certain of the Company's shopping centers that it owns or formerly owned during the class period, which will extend from January 1, 2011 through the date of court preliminary approval. Class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges, beginning no earlier than January 1, 2020 and continuing for the following five years. Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Company, including tenants which have declared bankruptcy or declare bankruptcy over the relevant period, will first be deducted from the amounts owed to the Company. All attorney’s fees and associated costs to be paid to class counsel (up to a maximum of $28,000), any incentive award to the class representative (up to a maximum of $50), and class administration costs (which are expected to not exceed $100), will be funded by the common fund, but must be approved by the court. Under the terms of the settlement agreement, the Company will not pay any dividends to holders of its common shares payable in the third and fourth quarters of 2019. The settlement agreement does not restrict the Company's ability to declare dividends payable in 2020 or in subsequent years. The Company recorded an accrued liability and corresponding litigation settlement expense of $88,150 in the three months ended March 31, 2019 related to the settlement agreement. The Company is currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Company records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Company accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Company discloses the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Company. Environmental Contingencies The Company evaluates potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Company believes its maximum potential exposure to loss would not be material to its results of operations or financial condition. The Company has a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Guarantees The Operating Partnership may guarantee the debt of a joint venture primarily because it allows the joint venture to obtain funding at a lower cost than could be obtained otherwise. This results in a higher return for the joint venture on its investment, and a higher return on the Operating Partnership’s investment in the joint venture. The Operating Partnership may receive a fee from the joint venture for providing the guaranty. Additionally, when the Operating Partnership issues a guaranty, the terms of the joint venture agreement typically provide that the Operating Partnership may receive indemnification from the joint venture partner or have the ability to increase its ownership interest. The guarantees expire upon repayment of the debt, unless noted otherwise. The following table represents the Operating Partnership's guarantees of unconsolidated affiliates' debt as reflected in the accompanying condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018:
The Company has guaranteed the lease performance of York Town Center, LP ("YTC"), an unconsolidated affiliate in which the Company owns a 50% interest, under the terms of an agreement with a third party that owns property as part of York Town Center. Under the terms of that agreement, YTC is obligated to cause performance of the third party’s obligations as landlord under its lease with its sole tenant, including, but not limited to, provisions such as co-tenancy and exclusivity requirements. Should YTC fail to cause performance, then the tenant under the third party landlord’s lease may pursue certain remedies ranging from rights to terminate its lease to receiving reductions in rent. The Company has guaranteed YTC’s performance under this agreement up to a maximum of $22,000, which decreases by $800 annually until the guaranteed amount is reduced to $10,000. The guaranty expires on December 31, 2020. The maximum guaranteed obligation was $12,400 as of March 31, 2019. The Company entered into an agreement with its joint venture partner under which the joint venture partner has agreed to reimburse the Company 50% of any amounts it is obligated to fund under the guaranty. The Company did not include an obligation for this guaranty because it determined that the fair value of the guaranty was not material as of March 31, 2019 and December 31, 2018. Performance Bonds The Company has issued various bonds that it would have to satisfy in the event of non-performance. The total amount outstanding on these bonds was $16,097 and $16,003 at March 31, 2019 and December 31, 2018, respectively. |
Share-Based Compensation |
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Share-based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | Share-Based Compensation As of March 31, 2019, the Company has outstanding awards under the CBL & Associates Properties, Inc. 2012 Stock Incentive Plan ("the 2012 Plan"), which was approved by the Company's shareholders in May 2012. The 2012 Plan permits the Company to issue stock options and common stock to selected officers, employees and non-employee directors of the Company up to a total of 10,400,000 shares. As the primary operating subsidiary of the Company, the Operating Partnership participates in and bears the compensation expense associated with the Company's share-based compensation plan. Restricted Stock Awards The Company may make restricted stock awards to independent directors, officers and its employees under the 2012 Plan. These awards are generally granted based on the performance of the Company and its employees. None of these awards have performance requirements other than a service condition of continued employment, unless otherwise provided. Compensation expense is recognized on a straight-line basis over the requisite service period. Share-based compensation expense related to the restricted stock awards was $1,713 and $1,767 for the three months ended March 31, 2019 and 2018, respectively. Share-based compensation cost capitalized as part of real estate assets was $14 and $122 for the three months ended March 31, 2019 and 2018, respectively. A summary of the status of the Company’s nonvested restricted stock awards as of March 31, 2019, and changes during the three months ended March 31, 2019, is presented below:
As of March 31, 2019, there was $4,760 of total unrecognized compensation cost related to nonvested stock awards granted under the plans, which is expected to be recognized over a weighted-average period of 2.8 years. Long-Term Incentive Program In 2015, the Company adopted a long-term incentive program ("LTIP") for its named executive officers, which consists of performance stock unit ("PSU") awards and annual restricted stock awards, that may be issued under the 2012 Plan. The number of shares related to the PSU awards that each named executive officer may receive upon the conclusion of a three-year performance period is determined based on the Company's achievement of specified levels of long-term total stockholder return ("TSR") performance relative to the National Association of Real Estate Investment Trusts ("NAREIT") Retail Index, provided that at least a "Threshold" level must be attained for any shares to be earned. Beginning with the 2018 PSUs, two-thirds of the quantitative portion of the award over the performance period will be based on the achievement of TSR relative to the NAREIT Retail Index while the remaining one-third will be based on the achievement of absolute TSR metrics for the Company. To maintain compliance with the 200,000 share annual equity grant limit under the 2012 Plan, beginning with the 2018 PSU grant, to the extent that a grant of PSUs could result in the issuance of a number of shares of common stock at the conclusion of the performance period that, when coupled with the number of shares of time-vesting restricted stock granted in the same year the PSUs were granted, would exceed the annual limit, any such excess will be converted to a cash bonus award with a value equivalent to the number of shares of common stock constituting such excess times the average of the high and low trading prices reported for CBL's common stock on the date such shares would otherwise have been issuable. Any such portion of the value of the 2018 PSUs or the 2019 PSUs earned payable as a cash bonus will be subject to the same vesting provisions as the issuance of common stock pursuant to the PSUs and is not expected to be significant. In addition, to the extent any cash is to be paid, the cash will be paid first relative to the vesting schedule, ahead of the issuance of shares of common stock with respect to the balance of PSUs earned. Annual Restricted Stock Awards Under the LTIP, annual restricted stock awards consist of shares of time-vested restricted stock awarded based on a qualitative evaluation of the performance of the Company and the named executive officer during the fiscal year. Annual restricted stock awards under the LTIP, which are included in the totals reflected in the preceding table, vest 20% on the date of grant with the remainder vesting in four equal annual installments. Performance Stock Units A summary of the status of the Company’s PSU activity as of March 31, 2019, and changes during the three months ended March 31, 2019, is presented below:
Shares earned pursuant to the PSU awards vest 60% at the conclusion of the performance period while the remaining 40% of the PSU award vests 20% on each of the first two anniversaries thereafter. Compensation cost is recognized on a tranche-by-tranche basis using the accelerated attribution method. The resulting expense, for awards classified as equity, is recorded regardless of whether any PSU awards are earned as long as the required service period is met. The fair value of the potential cash component related to the 2019 PSUs is measured at each reporting period, using the same methodology as was used at the initial grant date, and classified as a liability on the condensed consolidated balance sheet as of March 31, 2019 with an adjustment to compensation expense. If the performance criterion is not satisfied at the end of the performance period for the 2019 PSUs, previously recognized compensation expense related to the liability-classified awards would be reversed as there would be no value at the settlement date. Share-based compensation expense related to the PSUs was $426 and $419 for the three months ended March 31, 2019 and 2018, respectively. Unrecognized compensation costs related to the PSUs was $3,864 as of March 31, 2019, which is expected to be recognized over a weighted-average period of 4.1 years. The following table summarizes the assumptions used in the Monte Carlo simulation pricing model related to the PSUs:
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Noncash Investing and Financing Activities |
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Noncash Investing and Financing Activities | Noncash Investing and Financing Activities The Company’s noncash investing and financing activities were as follows:
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Subsequent Events |
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Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events In April 2019, the loan secured by Volusia Mall was refinanced to increase the principal balance to $50,000. In addition, the maturity date was extended to April 2024 and the fixed interest rate was reduced from 8.00% to 4.56%. The net proceeds from the new loan were used to retire the $41,000 existing loan. In April 2019, the Company closed on the sale of Honey Creek Mall, located in Terre Haute, IN. The mall sold for a gross price of $14,600. In conjunction with the sale and combined with the increased proceeds from the refinancing of the loan secured by Volusia Mall, the $23,700 loan secured by Honey Creek Mall was retired. In April 2019, the Village Square note receivable was amended to extend the maturity date to July 31, 2019. The interest rate has been increased to 5.0%, with payments of $60 due at the beginning of each month starting on April 1, 2019. In April 2019, the Company closed on the sale of The Shoppes at Hickory Point, located in Forsyth, IL. The associated center was sold for a gross price of $2,508. |
Combined Guarantor Subsidiaries - Combined Balance Sheets |
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Condensed Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries - Combined Statements of Operations |
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Condensed Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries - Organization and Basis of Presentation |
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Condensed Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries - Summary of Significant Accounting Policies |
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Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries - Leases |
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Condensed Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries - Mortgage Notes Payable, Net |
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Condensed Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiary - Segment Information |
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Condensed Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Combined Guarantor Subsidiaries | Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Balance Sheets (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Combined Guarantor Subsidiaries of CBL & Associates Limited Partnership Combined Statements of Owners' Equity (In thousands) (Unaudited)
The accompanying notes are an integral part of these combined statements.
The accompanying notes are an integral part of these combined statements. Note 1 – Organization and Basis of Presentation CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air and mixed-use centers, outlet centers, associated centers, community centers and office properties. Its properties are located in 26 states, but are primarily in the southeastern and midwestern United States. CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. In January 2019, the Operating Partnership entered into a new $1,185,000 senior secured credit facility which replaced all of the Operating Partnership’s prior unsecured bank facilities. The secured credit facility is secured by 17 malls and 3 associated centers that are owned by 36 wholly owned subsidiaries of the Operating Partnership (collectively the “Combined Guarantor Subsidiaries”). The Combined Guarantor Subsidiaries own an additional five malls, two associated centers and four mortgage notes receivable that are not collateral for the secured credit facility. The properties that are collateral for the secured credit facility and the properties and mortgage notes receivable that are not collateral are collectively referred to as the “Guarantor Properties”. In addition to the secured credit facility, the Operating Partnership’s debt includes three separate series of senior unsecured notes (the “Notes”). Based on the terms of the Notes, to the extent that any subsidiary of the Operating Partnership executes and delivers a guarantee to another debt facility, the Operating Partnership shall also cause the subsidiary to guarantee the Operating Partnership’s obligations under the Notes on a senior basis. In January 2019, the Combined Guarantor Subsidiaries entered a guarantee agreement with the issuer of the Notes to satisfy the guaranty requirement. The Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
Each of the Combined Guarantor Subsidiaries meet the criteria in Rule 3-10(f) of SEC Regulation S-X to provide condensed consolidating financial information as additional disclosure in the notes to the Operating Partnership’s condensed consolidated financial statements because each Combined Guarantor Subsidiary is 100% owned by the Operating Partnership, the guaranty issued by each Combined Guarantor Subsidiary is full and unconditional and the guaranty issued by each Combined Guarantor Subsidiary is joint and several. However, the Operating Partnership has elected to provide these combined financial statements and accompanying notes for the Combined Guarantor Subsidiaries in lieu of including the condensed consolidating financial information in the notes to its condensed consolidated financial statements. These combined financial statements and notes are presented as an exhibit to the Operating Partnership's quarterly report on Form 10-Q for ease of reference. The accompanying combined financial statements are unaudited. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. Note 2 – Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements represent the combined financial statements of the Combined Guarantor Subsidiaries on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. All intercompany transactions have been eliminated. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year. Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
Real Estate Assets The Combined Guarantor Subsidiaries capitalize predevelopment project costs paid to third parties. All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed. Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized. Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. Ordinary repairs and maintenance are expensed as incurred. Major replacements and improvements are capitalized and depreciated over their estimated useful lives. All acquired real estate assets have been accounted for using the acquisition method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition. The Combined Guarantor Subsidiaries allocate the purchase price to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements, and (ii) identifiable intangible assets and liabilities, generally consisting of above-market leases, in-place leases and tenant relationships, which are included in other assets, and below-market leases, which are included in accounts payable and accrued liabilities. The Combined Guarantor Subsidiaries use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation techniques to allocate the purchase price to the acquired tangible and intangible assets. Liabilities assumed generally consist of mortgage debt on the real estate assets acquired. Assumed debt is recorded at its fair value based on estimated market interest rates at the date of acquisition. The Combined Guarantor Subsidiaries expect future acquisitions will be accounted for as acquisitions of assets in which related transaction costs will be capitalized. Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease. Lease-related intangibles from acquisitions of real estate assets are generally amortized over the remaining terms of the related leases. The amortization of above- and below-market leases is recorded as an adjustment to rental revenues, while the amortization of all other lease-related intangibles is recorded as amortization expense. Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method. The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
These intangibles are related to specific tenant leases. Should a termination occur earlier than the date indicated in the lease, the related unamortized intangible assets or liabilities, if any, related to the lease are recorded as expense or income, as applicable. The total net amortization expense of the above intangibles was $626 and $726 for the three months ended March 31, 2019 and 2018, respectively. The estimated total net amortization expense for the nine remaining months of 2019 and the following five succeeding years is $1,255 for the remainder of 2019, $1,195 in 2020, $1,241 in 2021, $1,020 in 2022, $706 in 2023 and $620 in 2024. Total interest expense capitalized was $95 and $188 for the three months ended March 31, 2019 and 2018, respectively. Carrying Value of Long-Lived Assets The Combined Guarantor Subsidiaries monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, the Combined Guarantor Subsidiaries assess the recoverability of the asset by determining whether the asset’s carrying value will be recovered through the estimated undiscounted future cash flows expected from the Combined Guarantor Subsidiaries' probability weighted use of the asset and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, the Combined Guarantor Subsidiaries adjust the carrying value of the long-lived asset to its estimated fair value and recognizes an impairment loss. The estimated fair value is calculated based on the following information, in order of preference, depending upon availability: (Level 1) recently quoted market prices, (Level 2) market prices for comparable properties, or (Level 3) the present value of future cash flows, including estimated salvage value. Certain of the Combined Guarantor Subsidiaries' long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. Projections of expected future operating cash flows require that the Combined Guarantor Subsidiaries estimate future market rental income amounts subsequent to expiration of current lease agreements, property operating expenses, the number of months it takes to re-lease the property, and the number of years the property is held for investment, among other factors. As these assumptions are subject to economic and market uncertainties, they are difficult to predict and are subject to future events that may alter the assumptions used or management’s estimates of future possible outcomes. Therefore, the future cash flows estimated in the Combined Guarantor Subsidiaries' impairment analyses may not be achieved. See Note 5 for information related to the impairment of long-lived assets for 2019 and 2018. Cash and Cash Equivalents The Combined Guarantor Subsidiaries consider all highly liquid investments with original maturities of three months or less as cash equivalents. Restricted Cash Restricted cash of $3,856 and $7,139 was included in intangible lease assets and other assets at March 31, 2019 and December 31, 2018, respectively. Restricted cash consists primarily of cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable. Deferred Financing Costs Net deferred financing costs related to the Combined Guarantor Subsidiaries' indebtedness of $299 and $361 were included in mortgage notes payable at March 31, 2019 and December 31, 2018, respectively. Deferred financing costs include fees and costs incurred to obtain financing and are amortized on a straight-line basis to interest expense over the terms of the related indebtedness. Amortization expense related to deferred financing costs was $62 and $77 for the three months ended March 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $1,154 and $1,092 as of March 31, 2019 and December 31, 2018, respectively. Gain on Sales of Real Estate Assets Gains on the sale of real estate assets, like all non-lease related revenue, are subject to a five-step model requiring that the Combined Guarantor Subsidiaries identify the contract with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue upon satisfaction of the performance obligations. In circumstances where the Combined Guarantor Subsidiaries contract to sell a property with material post-sale involvement, such involvement must be accounted for as a separate performance obligation in the contract and a portion of the sales price allocated to each performance obligation. When the post-sale involvement performance obligation is satisfied, the portion of the sales price allocated to it will be recognized as gain on sale of real estate assets. Property dispositions with no continuing involvement will continue to be recognized upon closing of the sale. Income Taxes No provision has been made for federal and state income taxes since these taxes are the responsibility of the owners. As of March 31, 2019, tax years that generally remain subject to examination by the Combined Guarantor Subsidiaries' major tax jurisdictions include 2018, 2017, 2016 and 2015. Concentration of Credit Risk The Combined Guarantor Subsidiaries tenants include national, regional and local retailers. Financial instruments that subject the Combined Guarantor Subsidiaries to concentrations of credit risk consist primarily of tenant receivables. The Combined Guarantor Subsidiaries generally do not obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of tenants. The Combined Guarantor Subsidiaries derive a substantial portion of rental income from various national and regional retail companies; however, no single tenant collectively accounted for more than 4.1% of the Combined Guarantor Subsidiaries' total combined revenues in the three months ended March 31, 2019 and 2018. Use of Estimates The preparation of financial statements in conformity with GAAP 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. Note 3 – Revenues Contract Balances A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
Revenues Sales taxes are excluded from revenues. The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
See Note 10 for information on the Combined Guarantor Subsidiaries' segments. Revenue from Contracts with Customers Operating expense reimbursements Under operating and other agreements with third parties that own anchor or outparcel buildings at the Combined Guarantor Subsidiaries' properties and pay no rent, the Combined Guarantor Subsidiaries receive reimbursements for certain operating expenses such as ring road and parking lot maintenance, landscaping and other fees. These arrangements are primarily either set at a fixed rate with rate increases typically every five years or are on a variable (pro rata) basis, typically as a percentage of costs allocated based on square footage or sales. The majority of these contracts have an initial term and one or more extension options, which cumulatively approximate 50 or more years as historically the initial term and any extension options are reasonably certain of being executed by the third party. The standalone selling price of each performance obligation is determined based on the terms of the contract, which typically assign a price to each performance obligation that directly relates to the value the customer receives for the services being provided. Revenue is recognized as services are transferred to the customer. Variable consideration is based on historical experience and is generally recognized over time using the cost-to-cost method of measurement because it most accurately depicts the Combined Guarantor Subsidiaries' performance in satisfying the performance obligation. The cumulative catch-up method is used to recognize any adjustments in variable consideration estimates. Under this method, any adjustment is recognized in the period it is identified. Marketing revenues The Combined Guarantor Subsidiaries earn marketing revenues from advertising and sponsorship agreements. These fees may be for tangible items in which the Combined Guarantor Subsidiaries provide advertising services and creates signs and other promotional materials for the tenant or may be arrangements in which the customer sponsors a play area or event and receives specified brand recognition and other benefits over a set period of time. Revenue related to advertising services is recognized as goods and services are provided to the customer. Sponsorship revenue is recognized on a straight-line basis over the time period specified in the contract. Performance obligations A performance obligation is a promise in a contract to transfer a distinct good or service to a customer. If the contract does not specify the revenue by performance obligation, the Combined Guarantor Subsidiaries allocate the transaction price to each performance obligation based on its relative standalone selling price. Such prices are generally determined using prices charged to customers or using the Combined Guarantor Subsidiaries' expected cost plus margin. Revenue is recognized as the Combined Guarantor Subsidiaries' performance obligations are satisfied over time, as services are provided, or at a point in time, such as leasing a space to earn a commission. Open performance obligations are those in which the Combined Guarantor Subsidiaries have not fully or have partially provided the applicable good or services to the customer as specified in the contract. If consideration is received in advance of the Combined Guarantor Subsidiaries' performance, including amounts which are refundable, recognition of revenue is deferred until the performance obligation is satisfied or amounts are no longer refundable. Practical Expedients The Combined Guarantor Subsidiaries do not disclose the value of open performance obligations for (1) contracts with an original expected duration of one year or less and (2) contracts for which the Combined Guarantor Subsidiaries recognize revenue at the amount to which they have the right to invoice, which primarily relate to services performed for certain operating expense reimbursements, as described above. Performance obligations related to fixed operating expense reimbursements for certain noncancellable contracts are disclosed below. Outstanding Performance Obligations The Combined Guarantor Subsidiaries have outstanding performance obligations related to certain noncancellable contracts with customers for which they will receive fixed operating expense reimbursements for providing certain maintenance and other services as described above. As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
The Combined Guarantor Subsidiaries evaluate performance obligations each period and makes adjustments to reflect any known additions or cancellations. Performance obligations related to variable consideration which is based on sales is constrained. Note 4 – Leases Adoption of ASU 2016-02, and all related subsequent amendments The Combined Guarantor Subsidiaries adopted ASC 842 (which includes ASU 2016-02 and all related subsequent amendments) on January 1, 2019 and applied the guidance to leases that commenced on or after January 1, 2019. Historical amounts for prior periods were not adjusted and will continue to be reported using the guidance in ASC 840, Leases. To determine whether a contract contains a lease, the Combined Guarantor Subsidiaries evaluated contracts and verified that there was an identified asset and that the Combined Guarantor Subsidiaries, or the tenant, have the right to obtain substantially all the economic benefits from the use of the asset throughout the contract term. If a contract is determined to contain a lease, the lease is evaluated to determine whether it is an operating or financing lease, if the Combined Guarantor Subsidiaries are the lessee, or the lease is evaluated to determine whether it is an operating, direct financing or sales-type lease, if the Combined Guarantor Subsidiaries are the lessor. After determining that the contract contains a lease, the Combined Guarantor Subsidiaries identified the lease component and any nonlease components associated with that lease component, and through the Combined Guarantor Subsidiaries' election to combine lease and nonlease components for all asset classes, combined the components into a single lease component within each applicable lease. The discount rate to be used for each lease was determined by assessing the Company’s debt information, assessing the credit rating of the Company and the Company’s debt, estimating a synthetic “secured” credit rating for the Company and estimating an appropriate incremental borrowing rate. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term. See Note 2 for additional information about these accounting standards. Lessor Rental Revenues The majority of the Combined Guarantor Subsidiaries' revenues are earned through the lease of space at its properties. All of the Combined Guarantor Subsidiaries' leases with tenants for the use of space at our properties are classified as operating leases. Rental revenues include minimum rent, percentage rent, other rents and reimbursements from tenants for real estate taxes, insurance, common area maintenance ("CAM") and other operating expenses as provided in the lease agreements. The option to extend or terminate our leases is specific to each underlying tenant agreement. Typically, the Combined Guarantor Subsidiaries' leases contain penalties for early termination. The Combined Guarantor Subsidiaries do not have any leases that convey the right for the lessee to purchase the leased asset. Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases. Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements. Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable. The Combined Guarantor Subsidiaries receive reimbursements from tenants for real estate taxes, insurance, CAM and other recoverable operating expenses as provided in the lease agreements. Any tenant reimbursements that require fixed payments are recognized on a straight-line basis over the initial terms of the related leases, whereas any variable payments are recognized when earned in accordance with the tenant lease agreements. Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years. The components of rental revenues are as follows:
The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
Lessee The Combined Guarantor Subsidiaries have one ground lease where they own the buildings and improvements, but lease the underlying land. The maturity of the lease is January 1, 2073 and provides for five year renewal options. The Combined Guarantor Subsidiaries included the renewal options in the lease term for purposes of calculating the lease liability and ROU asset because they have no plans to cease operating the asset associated with this ground lease. The lease payments on the ground lease are fixed. The Combined Guarantor Subsidiaries' ROU asset and lease liability are presented in the combined balance sheets within intangible lease assets and other assets and accounts payable and accrued liabilities, respectively. A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries' incurred $10 of lease expense for the three months ended March 31, 2019. The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
Practical Expedients In regard to leases that commenced before January 1, 2019, the Combined Guarantor Subsidiaries elected to use a package of practical expedients to not reassess whether any expired or existing contracts are or contain a lease, to not reassess lease classification for any expired or existing leases, and to not reassess initial direct costs for any existing leases. The Combined Guarantor Subsidiaries also elected a practical expedient to not assess whether existing or expired land easements that were not previously accounted for as leases under ASC 840 are or contain a lease under ASC 842. Additionally, the Combined Guarantor Subsidiaries elected a practical expedient by class of underlying asset applied to all leases to elect not to separate lease and nonlease components as long as the lease and at least one nonlease component have the same timing and pattern of transfer and the lease is classified as an operating lease. The combined component is being accounted for under ASC 842. The Combined Guarantor Subsidiaries made an accounting policy election to exclude sales and other similar taxes from revenues, and instead account for them as costs of the lessee. Lastly, the Combined Guarantor Subsidiaries have elected not to apply the recognition requirements of ASC 842 to short-term leases. See Note 2 for additional information about these accounting standards. Note 5 – Fair Value Measurements The Combined Guarantor Subsidiaries have categorized financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. Fair Value Measurements on a Recurring Basis The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments. Based on the interest rates for similar financial instruments, the carrying value of the note receivable is a reasonable estimate of fair value. The estimated fair value of mortgage notes payable was $257,032 and $319,222 at March 31, 2019 and December 31, 2018, respectively. The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage notes payable using estimated market rates at which similar loans would be made currently. Fair Value Measurements on a Nonrecurring Basis The Combined Guarantor Subsidiaries measure the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Combined Guarantor Subsidiaries consider both quantitative and qualitative factors in its impairment analysis of long-lived assets. Significant quantitative factors include historical and forecasted information for each property such as net operating income ("NOI"), occupancy statistics and sales levels. Significant qualitative factors used include market conditions, age and condition of the property and tenant mix. Due to the significant unobservable estimates and assumptions used in the valuation of long-lived assets that experience impairment, the Combined Guarantor Subsidiaries classify such long-lived assets under Level 3 in the fair value hierarchy. Level 3 inputs primarily consist of sales and market data, independent valuations and discounted cash flow models. Long-lived Assets Measured at Fair Value in 2019 The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
Note 6 – Dispositions The Combined Guarantor Subsidiaries evaluate disposals utilizing the guidance in ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Based on analysis, the Combined Guarantor Subsidiaries determined that the dispositions described below do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation. Thus, the results of operations of the properties described below, as well as any related gains or losses, are included in net income for all periods presented, as applicable. 2019 Dispositions The Combined Guarantor Subsidiaries recognized a gain on extinguishment of debt for the property listed below, which represented the amount by which the outstanding debt balance exceeded the net book value of the property as of the transfer date. See Note 7 for more information. The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
2018 Dispositions The Combined Guarantor Subsidiaries realized a gain of $1,718 primarily related to the sale of four outparcels during the three months ended March 31, 2018. Note 7 – Mortgage Notes Payable, Net Mortgage notes payable, net, consisted of the following:
2018 Loan Repayments In January 2018, the Combined Guarantor Subsidiaries repaid the outstanding balance of $37,295 on the fixed-rate loan secured by Kirkwood Mall with cash contributed by the Operating Partnership. The loan had a maturity date of April 2018 and bore interest at 5.75%. Scheduled Principal Payments As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
Of the $71,187 of scheduled principal payments in 2019, $67,201 relates to the principal balance of Greenbrier Mall and $3,986 relates to scheduled principal amortization. The Combined Guarantor Subsidiaries' mortgage notes payable had a weighted-average maturity of 2.11 years as of March 31, 2019 and 1.08 years as of December 31, 2018. Note 8 – Mortgage and Other Notes Receivable Each of the mortgage notes receivable is collateralized by a first mortgage. Other notes receivable include amounts due from a government sponsored district for reimbursable costs pursuant to an agreement with the district. The Combined Guarantor Subsidiaries review the mortgage and other notes receivable to determine if the balances are realizable based on factors affecting the collectability of those balances. Mortgage and other notes receivable consist of the following:
Note 9 – Related Party Transactions The Combined Guarantor Subsidiaries are party to management agreements with CBL & Associates Management, Inc. (“CBL Management”), which is controlled by the Operating Partnership, to manage the Guarantor Properties. The agreements provide that the Guarantor Properties pay management fees equal to a percentage of gross revenues as defined by the respective management agreements. The management fee percentage ranges from 2.5% to 3.5% based on the agreements. Management fee expense was $1,491 and $1,551 for the three months ended March 31, 2019 and 2018, respectively. Amounts payable to CBL Management for management fees were $167 and $176 as of March 31, 2019 and December 31, 2018. Note 10 – Segment Information The Combined Guarantor Subsidiaries measure performance and allocate resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
Note 11 – Contingencies Litigation On March 20, 2019, the board of directors of CBL, the parent of the Operating Partnership, approved the structure of a settlement of a class action lawsuit filed on March 16, 2016 in the United States District Court for the Middle District of Florida (the “Court”) by Wave Lengths Hair Salons of Florida, Inc. d/b/a Salon Adrian. The CBL entities that were the defendants in the action (and which are responsible for payments under the settlement) are CBL & Associates Properties, Inc., CBL & Associates Limited Partnership, CBL & Associates Management, Inc. and JG Gulf Coast Town Center, LLC (collectively, the “CBL Defendant Entities”). In its action, plaintiff sought unspecified monetary damages as well as costs and attorneys’ fees, based on allegations that the CBL Defendant Entities overcharged tenants at bulk metered malls for electricity. Under the terms of the proposed settlement, the CBL Defendant Entities have denied all allegations of wrongdoing and have asserted that their actions have at all times been lawful and proper. No Combined Guarantor Subsidiary is a CBL Defendant Entity and no Combined Guarantor Subsidiary is responsible for payment of amounts under the above-referenced settlement. Class members will include past and current tenants of certain Guarantor Properties (the “Guarantor Class Subsidiaries”) during the class period, which will extend from January 1, 2011 through the date of the Court's preliminary approval of the settlement. Under the terms of the proposed settlement, class members who are past tenants and make a claim will receive payment of their claims in cash. Class members who are current tenants will receive monthly credits against rents and future charges for a five-year period that will begin at a time determined in conjunction with the final settlement agreement (the “credit period”). Any amounts under the settlement allocated to tenants with outstanding amounts payable to the Guarantor Class Subsidiaries, the CBL Defendant Entities or any other affiliate of those entities, including tenants which have declared bankruptcy or declare bankruptcy over the credit period, will first be deducted from the amounts owed to the Guarantor Class Subsidiaries, the CBL Defendant Entities, or any other affiliate of those entities. CBL Defendant Entities will be responsible for directly paying all cash payments that are made to past tenants who have made a claim. CBL Defendant Entities will be responsible for directly funding to the Guarantor Class Subsidiaries an amount equal to any credits that are due to and taken by current tenants of the Guarantor Class Subsidiaries during the credit period. CBL Defendant Entities intend to fund all amounts due to past and current tenants under the settlement such that the Guarantor Class Subsidiaries' cash flows and results of operations are not impacted by the settlement. The Combined Guarantor Subsidiaries are currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Combined Guarantor Subsidiaries record a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Combined Guarantor Subsidiaries accrue the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Combined Guarantor Subsidiaries accrue the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Combined Guarantor Subsidiaries disclose the nature of the litigation and indicate that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Combined Guarantor Subsidiaries disclose the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Combined Guarantor Subsidiaries. Environmental Contingencies The Combined Guarantor Subsidiaries evaluate potential loss contingencies related to environmental matters using the same criteria described above related to litigation matters. Based on current information, an unfavorable outcome concerning such environmental matters, both individually and in the aggregate, is considered to be reasonably possible. However, the Combined Guarantor Subsidiaries believe the maximum potential exposure to loss would not be material to results of operations or financial condition. The Combined Guarantor Subsidiaries have a master insurance policy that provides coverage through 2022 for certain environmental claims up to $10,000 per occurrence and up to $50,000 in the aggregate, subject to deductibles and certain exclusions. At certain locations, individual policies are in place. Note 12 – Noncash Investing and Financing Activities The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
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Recent Accounting Pronouncements (Policies) |
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Consolidation of Variable Interest Entity | CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”), which is a variable interest entity ("VIE"). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a VIE. |
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Basis of Presentation | The accompanying condensed consolidated financial statements are unaudited; however, they have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. All intercompany transactions have been eliminated. The results for the interim period ended March 31, 2019 are not necessarily indicative of the results to be obtained for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2018. |
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Recent Accounting Pronouncements | Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
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Fair Value Measurements | The Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with ASC 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable. The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:
The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date and under current market conditions. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions and risk of nonperformance. |
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Commitments and Contingencies | The Company is currently involved in certain other litigation that arises in the ordinary course of business, most of which is expected to be covered by liability insurance. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters using the latest information available. The Company records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, the Company accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, the Company discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, the Company discloses the nature and estimate of the possible loss of the litigation. Based on current expectations, such matters, both individually and in the aggregate, are not expected to have a material adverse effect on the liquidity, results of operations, business or financial condition of the Company. |
Organization and Basis of Presentation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Properties Owned by Operating Partnership | As of March 31, 2019, the Operating Partnership owned interests in the following properties:
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Schedule of Properties under Development | At March 31, 2019, the Operating Partnership had interests in the following properties under development:
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Recent Accounting Pronouncements (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
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Revenues (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Contract Assets and Liabilities | The Company has the following contract balances as of March 31, 2019:
A summary of the Company's contract assets activity during the three months ended March 31, 2019 is presented below:
A summary of the Company's contract liability activity during the three months ended March 31, 2019 is presented below:
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Schedule of Disaggregation of Revenue | The following table presents the Company's revenues disaggregated by revenue source:
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Schedule of Expected Recognition of Remaining Performance Obligation | As of March 31, 2019, the Company expects to recognize these amounts as revenue over the following periods:
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Leases (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Lease Revenue | The components of rental revenues are as follows:
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Schedule of Undiscounted Future Lease Payments to be Received | The undiscounted future fixed lease payments to be received under the Company's operating leases as of March 31, 2019, are as follows:
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Schedule of Future Minimum Rental Payments Receivable for Operating Leases | As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Company's future minimum rental income from lessees under non-cancellable operating leases where the Company is the lessor as of December 31, 2018 is also presented below:
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Schedule of Right-of-Use Asset and Lease Liability Activity | A summary of the Company's ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
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Schedule of Lease Expense | The components of lease expense are presented below:
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Schedule of Undiscounted Future Lease Payments under Operating Leases | The undiscounted future lease payments to be paid under the Company's operating leases as of March 31, 2019, are as follows:
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Schedule of Future Minimum Rental Payments for Operating Leases | As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Company's future obligations to be paid under the Company's operating leases where the Company is the lessee as of December 31, 2018 is also presented below:
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Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets Measured on a Nonrecurring Basis | The following table sets forth information regarding the Company's assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
The following table sets forth information regarding the Company's assets that were measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2018:
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Schedule of Impairment on Real Estate Properties | During the three months ended March 31, 2019, the Company recognized an impairment total of $25,054 related to two malls.
During the three months ended March 31, 2018, the Company recognized an impairment of real estate of $18,061 related to one mall:
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Dispositions and Held for Sale (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations, Discontinued Operations and Disposal Groups [Abstract] [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Dispositions | The following is a summary of the Company's 2019 dispositions:
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Unconsolidated Affiliates and Noncontrolling Interests (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments and Joint Ventures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Condensed Combined Financial Statements of Unconsolidated Affiliates | Condensed combined financial statement information of the unconsolidated affiliates is as follows:
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Schedule of Limited Partners' Capital Account by Class | Noncontrolling interests consist of the following:
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Schedule of Variable Interest Entities | The table below lists the Company's unconsolidated VIEs as of March 31, 2019:
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Mortgage and Other Indebtedness, Net (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Mortgage and Other Indebtedness | Net mortgage and other indebtedness consisted of the following:
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Schedule of Covenant Compliance | The following presents the Company's compliance with key covenant ratios, as defined, of the Notes and the senior secured credit facility as of March 31, 2019:
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Schedule of Fixed Rate Loans | The following is a summary of the Company's 2019 dispositions for which the fixed-rate loan secured by the mall was extinguished:
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Schedule of Principal Repayments | As of March 31, 2019, the scheduled principal amortization and balloon payments of the Company’s consolidated debt, excluding extensions available at the Company’s option, on all mortgage and other indebtedness, including construction loans and lines of credit, are as follows:
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Mortgage and Other Notes Receivable (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Mortgage and Other Notes Receivable | Mortgage and other notes receivable consist of the following:
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Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Information on Reportable Segments | Information on the Company’s segments is presented as follows:
|
Contingencies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Guarantees | The following table represents the Operating Partnership's guarantees of unconsolidated affiliates' debt as reflected in the accompanying condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018:
|
Share-Based Compensation (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Company Stock Award | A summary of the status of the Company’s nonvested restricted stock awards as of March 31, 2019, and changes during the three months ended March 31, 2019, is presented below:
A summary of the status of the Company’s PSU activity as of March 31, 2019, and changes during the three months ended March 31, 2019, is presented below:
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assumptions Used in the Monte Carlo Simulation Pricing Model | The following table summarizes the assumptions used in the Monte Carlo simulation pricing model related to the PSUs:
|
Noncash Investing and Financing Activities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Noncash Investing and Financing Activities | The Company’s noncash investing and financing activities were as follows:
|
Combined Guarantor Subsidiaries - Combined Balance Sheets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Combined Balance Sheets - Guarantor Subsidiaries |
|
Combined Guarantor Subsidiaries - Combined Statements of Operations (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Combined Statements of Operations - Guarantor Subsidiaries |
|
Combined Guarantor Subsidiaries - Combined Statements of Owners' Equity (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor Subsidiaries | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Combined Statements of Owners' Equity - Guarantor Subsidiaries |
|
Combined Guarantor Subsidiiaries - Combined Statements of Cash Flows (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Combined Statements of Cash Flows - Guarantor Subsidiaries |
|
Combined Guarantor Subsidiaries - Organization and Basis of Presentation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Guarantor Subsidiaries and Guarantor Properties | he Combined Guarantor Subsidiaries and Guarantor Properties consisted of the following:
|
Combined Guarantor Subsidiaries - Summary of Significant Accounting Policies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | Accounting Guidance Adopted
Accounting Guidance Not Yet Effective
|
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Schedule of Guarantor Subsidiaries' Intangibles and Balance Sheet Classifications | The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Below Market Leases | The Combined Guarantor Subsidiaries' intangibles and their balance sheet classifications as of March 31, 2019 and December 31, 2018, are summarized as follows:
|
Combined Guarantor Subsidiaries - Revenues (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Contract Assets and Liabilities | The Company has the following contract balances as of March 31, 2019:
A summary of the Company's contract assets activity during the three months ended March 31, 2019 is presented below:
A summary of the Company's contract liability activity during the three months ended March 31, 2019 is presented below:
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Schedule of Disaggregation of Revenue | The following table presents the Company's revenues disaggregated by revenue source:
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Schedule of Expected Recognition of Remaining Performance Obligation | As of March 31, 2019, the Company expects to recognize these amounts as revenue over the following periods:
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Guarantor Subsidiaries | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Contract Assets and Liabilities | A summary of the Combined Guarantor Subsidiaries' contract liability activity during the three months ended March 31, 2019 is presented below:
The Combined Guarantor Subsidiaries have the following contract balances as of March 31, 2019:
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Schedule of Disaggregation of Revenue | The following table presents the Combined Guarantor Subsidiaries' revenues disaggregated by revenue source:
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Schedule of Expected Recognition of Remaining Performance Obligation | As of March 31, 2019, the Combined Guarantor Subsidiaries expect to recognize these amounts as revenue over the following periods:
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Combined Guarantor Subsidiaries - Leases (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Lease Revenue | The components of rental revenues are as follows:
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Schedule of Undiscounted Future Lease Payments to be Received | The undiscounted future fixed lease payments to be received under the Company's operating leases as of March 31, 2019, are as follows:
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Schedule of Future Minimum Rental Payments Receivable for Operating Leases | As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Company's future minimum rental income from lessees under non-cancellable operating leases where the Company is the lessor as of December 31, 2018 is also presented below:
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Schedule of Right-of-Use Asset and Lease Liability Activity | A summary of the Company's ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
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Schedule of Undiscounted Future Lease Payments under Operating Leases | The undiscounted future lease payments to be paid under the Company's operating leases as of March 31, 2019, are as follows:
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Schedule of Future Minimum Rental Payments for Operating Leases | As required by the Comparative Under ASC 840 Option, which is a transitional amendment that allows for the presentation of comparative periods in the year of adoption under ASC 840 (the former leasing guidance), the Company's future obligations to be paid under the Company's operating leases where the Company is the lessee as of December 31, 2018 is also presented below:
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Guarantor Subsidiaries | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Components of Lease Revenue | The components of rental revenues are as follows:
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Schedule of Undiscounted Future Lease Payments to be Received | The undiscounted future fixed lease payments to be received under the Combined Guarantor Subsidiaries' operating leases as of March 31, 2019, are as follows:
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Schedule of Future Minimum Rental Payments Receivable for Operating Leases | , the Combined Guarantor Subsidiaries' future minimum rental income from lessees under non-cancellable operating leases where the Combined Guarantor Subsidiaries are the lessor as of December 31, 2018 is also presented below:
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Schedule of Right-of-Use Asset and Lease Liability Activity | A summary of the Combined Guarantor Subsidiaries' ROU asset and lease liability activity during the three months ended March 31, 2019 is presented below:
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Schedule of Undiscounted Future Lease Payments under Operating Leases | The undiscounted future lease payments to be paid under the Combined Guarantor Subsidiaries' operating lease as of March 31, 2019, are as follows:
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Schedule of Future Minimum Rental Payments for Operating Leases | , the Combined Guarantor Subsidiaries' future obligations to be paid under the Combined Guarantor Subsidiaries' operating leases where the Combined Guarantor Subsidiaries are the lessee as of December 31, 2018 are also presented below:
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Combined Guarantor Subsidiaries - Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets Measured on a Nonrecurring Basis | The following table sets forth information regarding the Company's assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
The following table sets forth information regarding the Company's assets that were measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2018:
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Schedule of Impairment on Real Estate Properties | During the three months ended March 31, 2019, the Company recognized an impairment total of $25,054 related to two malls.
During the three months ended March 31, 2018, the Company recognized an impairment of real estate of $18,061 related to one mall:
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Guarantor Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets Measured on a Nonrecurring Basis | The following table sets forth information regarding the Combined Guarantor Subsidiaries' assets that are measured at fair value on a nonrecurring basis and related impairment charges for the three months ended March 31, 2019:
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Schedule of Impairment on Real Estate Properties | During the three months ended March 31, 2019, the Combined Guarantor Subsidiaries recognized an impairment of $22,770 related to one mall.
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Combined Guarantor Subsidiaries - Dispositions (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Dispositions | The following is a summary of the Company's 2019 dispositions:
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Guarantor Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Dispositions | The following is a summary of the Combined Guarantor Subsidiaries' 2019 dispositions:
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Combined Guarantor Subsidiaries - Mortgage Notes Payable, Net (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Mortgage Notes Payable | Net mortgage and other indebtedness consisted of the following:
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Schedule of Principal Repayments | As of March 31, 2019, the scheduled principal amortization and balloon payments of the Company’s consolidated debt, excluding extensions available at the Company’s option, on all mortgage and other indebtedness, including construction loans and lines of credit, are as follows:
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Guarantor Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Mortgage Notes Payable | Mortgage notes payable, net, consisted of the following:
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Schedule of Principal Repayments | As of March 31, 2019, the scheduled principal amortization and balloon payments of the Combined Guarantor Subsidiaries' mortgage notes payable, excluding extensions available at the Combined Guarantor Subsidiaries' option, are as follows:
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Combined Guarantor Subsidiaries - Mortgage and Other Notes Receivable (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Mortgage and Other Notes Receivable | Mortgage and other notes receivable consist of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Mortgage and Other Notes Receivable | Mortgage and other notes receivable consist of the following:
|
Combined Guarantor Subsidiary - Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Information on Reportable Segments | Information on the Company’s segments is presented as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Information on Reportable Segments | Information on the Combined Guarantor Subsidiaries' segments is presented as follows:
|
Combined Guarantor Subsidiary - Noncash Investing and Financing Activities (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Noncash Investing and Financing Activities | The Company’s noncash investing and financing activities were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guarantor Subsidiaries | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Financial Statements, Captions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Noncash Investing and Financing Activities | The Combined Guarantor Subsidiaries' noncash investing and financing activities were as follows:
|
Organization and Basis of Presentation - Narrative (Details) $ in Thousands, shares in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
subsidiary
state
shares
|
Mar. 31, 2018
USD ($)
|
|
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||
Number of states in which entity operates | state | 26 | |
Number of wholly owned subsidiaries | 36 | |
Operating expense reimbursements | $ | $ 2,343 | |
CBL & Associates Limited Partnership | ||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||
Number of wholly owned subsidiaries | 2 | |
Ownership of the sole general partner in partnership (as a percent) | 1.00% | |
Limited partnership interest owned by CBL Holdings II, Inc. in the operating partnership (as a percent) | 85.60% | |
Combined ownership by the subsidiaries in operating partnership (as a percent) | 86.60% | |
Consolidated Properties | ||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||
Non-controlling limited partner interest ownership of CBL's Predecessor in the Operating Partnership (as a percent) | 9.10% | |
Non-controlling limited partner interest of third parties in Operating partnership (as a percent) | 4.30% | |
Common stock owned by CBL's Predecessor (shares) | shares | 4.3 | |
Total combined effective interest of CBL's Predecessor in Operating Partnership (as a percent) | 11.20% | |
CBL Holdings | Consolidated Properties | ||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||
Ownership interest in qualified subsidiaries (as a percent) | 100.00% |
Organization and Basis of Presentation - Properties Owned by Operating Partnership (Details) |
Mar. 31, 2019
property
associated_center
office_building
mall
community_center
mixed_use_center
|
---|---|
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |
Malls | mall | 65 |
Associated Centers | associated_center | 23 |
Community Centers | community_center | 7 |
Office Buildings/Other | 7 |
Total Properties | property | 102 |
Consolidated Properties | |
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |
Malls | mall | 57 |
Associated Centers | associated_center | 20 |
Community Centers | community_center | 2 |
Office Buildings/Other | 5 |
Total Properties | property | 84 |
Number of mixed-use centers owned | mixed_use_center | 1 |
Consolidated Properties | CBL & Associates Limited Partnership | |
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |
Office Buildings/Other | 2 |
Unconsolidated Properties | |
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |
Malls | mall | 8 |
Associated Centers | associated_center | 3 |
Community Centers | community_center | 5 |
Office Buildings/Other | 2 |
Total Properties | property | 18 |
Organization and Basis of Presentation - Interest Held in Properties (Details) |
Mar. 31, 2019
other_property
mall
|
---|---|
Consolidated Properties | |
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |
Redevelopments, Malls | mall | 6 |
Redevelopments, All Other | other_property | 0 |
Unconsolidated Properties | |
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |
Redevelopments, Malls | mall | 1 |
Redevelopments, All Other | other_property | 0 |
Revenues - Contract Balances (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2019 |
|
Contract Assets Activity [Roll Forward] | ||
Balance at beginning of period | $ 289 | |
Tenant openings | (139) | |
Executed leases | 25 | |
Balance at end of period | 175 | |
Change in Contract with Customer, Liability [Roll Forward] | ||
Contract liability | 265 | |
Completed performance obligation | (4) | |
Contract obligation | 0 | |
Contract liability | 261 | |
Contract with Customer, Asset, Net [Abstract] | ||
Contract assets | 289 | $ 175 |
Expected Settlement Period | ||
2019 | (167) | |
2020 | (3) | |
2021 | (1) | |
2022 | 0 | |
2023 | (4) | |
Contract with Customer, Liability [Abstract] | ||
Contract liability | $ 265 | 261 |
Expected Settlement Period | ||
2019 | (99) | |
2020 | (54) | |
2021 | (54) | |
2022 | $ (54) | |
Lease commission recognized upon tenant opening (as a percent) | 50.00% |
Revenues - Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Disaggregation of Revenue [Line Items] | ||
Rental revenues | $ 190,980 | $ 212,729 |
Revenues from contracts with customers (ASC 606): | 5,540 | 6,359 |
Total revenues | 198,030 | 220,200 |
Malls | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 183,864 | 200,715 |
All Other | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 14,166 | 19,485 |
Operating expense reimbursements | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | 2,143 | 2,343 |
Operating expense reimbursements | Malls | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | 2,192 | 2,190 |
Operating expense reimbursements | All Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | (49) | 153 |
Management, development and leasing fees | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | 2,523 | 2,721 |
Marketing revenues | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | 874 | 1,295 |
Marketing revenues | Malls | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | 876 | 1,294 |
Marketing revenues | All Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | (2) | 1 |
Other revenues | ||
Disaggregation of Revenue [Line Items] | ||
Other revenues | $ 1,510 | $ 1,112 |
Revenues - Narrative (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
extension_option
| |
Revenue from Contract with Customer [Abstract] | |
Period between increases in fixed rate of arrangements | 5 years |
Number of extension options (one or more) | 1 |
Period of extension option (50 or more years) | 50 years |
Lease commission recognized upon lease execution (as a percent) | 50.00% |
Revenues - Remaining Performance Obligations (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-04-01 | |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligation | $ 29,101 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Expected timing of satisfaction of remaining performance obligation | 5 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-01 | |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligation | $ 53,781 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Expected timing of satisfaction of remaining performance obligation | 15 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2039-04-01 | |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligation | $ 49,866 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Expected timing of satisfaction of remaining performance obligation | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: (nil) | |
Revenue from Contract with Customer [Abstract] | |
Remaining performance obligation | $ 132,748 |
Leases - Narrative (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
office_lease
ground_lease
|
Mar. 31, 2018
USD ($)
|
|
Lessee, Lease, Description [Line Items] | ||
Tenant reimbursements period related to certain capital expenditure minimum | 5 years | |
Tenant reimbursements period related to certain capital expenditure maximum | 15 years | |
Uncollectable operating lease receivables | $ | $ 1,540 | $ 2,041 |
Number of ground leases | ground_lease | 8 | |
Number of office leases | office_lease | 1 | |
Weighted-average remaining term of operating leases | 38 years 9 months 18 days | |
Weighted-average discount rate of operating leases (as a percent) | 8.10% | |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease renewal term | 5 years | |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Operating lease renewal term | 10 years |
Leases - Components of Rental Revenue (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Leases [Abstract] | |
Fixed lease payments | $ 159,278 |
Variable lease payments | 31,702 |
Total rental revenues | $ 190,980 |
Leases - Future Minimum Lease Payments to be Received (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Operating Lease Payments to be Received after Adoption of ASC 842 | ||
2019 | $ 423,830 | |
2020 | 516,103 | |
2021 | 450,880 | |
2022 | 370,764 | |
2023 | 304,864 | |
2024 | 236,102 | |
Thereafter | 640,986 | |
Total undiscounted lease payments | $ 2,943,529 | |
Operating Lease Payments Receivable before Adoption of ASC 842 | ||
2019 | $ 497,014 | |
2020 | 426,228 | |
2021 | 363,482 | |
2022 | 294,441 | |
2023 | 234,191 | |
Thereafter | 531,792 | |
Total | $ 2,347,148 |
Leases - Right-of-Use Asset and Lease Liability Activity (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
ROU Asset | |
Balance as of January 1, 2019 | $ 4,160 |
Cash reduction | (120) |
Noncash increase | 7 |
Balance as of March 31, 2019 | 4,047 |
Lease Liability | |
Balance as of January 1, 2019 | 4,074 |
Cash reduction | (120) |
Noncash increase | 70 |
Balance as of March 31, 2019 | $ 4,024 |
Leases - Components of Lease Expense (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Lease expense: | |
Operating lease expense | $ 218 |
Variable lease expense | 32 |
Rent Expense | $ 250 |
Leases - Maturities of Operating Lease Payments (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
---|---|---|---|
Undiscounted Future Operating Lease Payments after Adoption of ASC 842 | |||
2019 | $ 433 | ||
2020 | 560 | ||
2021 | 608 | ||
2022 | 331 | ||
2023 | 284 | ||
2024 | 263 | ||
Thereafter | 12,019 | ||
Total undiscounted lease payments | 14,498 | ||
Less imputed interest | (10,474) | ||
Lease Liability | $ 4,024 | $ 4,074 | $ 0 |
Future Minimum Payments Due under Operating Leases before Adoption of ASC 842 | |||
2019 | 504 | ||
2020 | 610 | ||
2021 | 517 | ||
2022 | 321 | ||
2023 | 281 | ||
Thereafter | 12,297 | ||
Future minimum payments due under operating leases | $ 14,530 |
Fair Value Measurements - Narrative (Details) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019
USD ($)
mall
|
Mar. 31, 2018
USD ($)
mall
|
Dec. 31, 2018
USD ($)
|
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Fair value of long-term debt | $ 3,556,573 | $ 3,740,431 | |
Loss on impairment | $ 24,825 | $ 18,061 | |
Number of malls with impairment | mall | 2 | ||
Greenbrier Mall and Honey Creek Mall | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Loss on impairment | $ 25,054 | ||
Outlet Mall and Outparcel Sale | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Loss on impairment | $ 18,061 | ||
Number of malls with impairment | mall | 1 |
Fair Value Measurements - Assets Measured at Fair Value on Nonrecurring Basis (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-lived assets | $ 70,800 | $ 0 |
Total Loss on Impairment | 24,825 | 18,061 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-lived assets | 0 | 0 |
Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-lived assets | 0 | 0 |
Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-lived assets | $ 70,800 | $ 0 |
Fair Value Measurements - Impairment of Real Estate Properties (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
|
Mar. 31, 2018
USD ($)
|
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Loss on Impairment | $ 24,825 | $ 18,061 |
Fair Value | 70,800 | 0 |
Prior period adjustments | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Loss on Impairment | (229) | |
Fair Value | 0 | |
Greenbrier Mall | Malls | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Loss on Impairment | 22,770 | |
Fair Value | 56,300 | |
Equity method investments at fair value | 56,300 | |
Honey Creek Mall | Malls | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Loss on Impairment | 2,284 | |
Fair Value | 14,500 | |
Equity method investments at fair value | $ 14,500 | |
Janesville Mall | Malls | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Loss on Impairment | 18,061 | |
Fair Value | 0 | |
Equity method investments at fair value | $ 17,640 | |
Expected Term | Greenbrier Mall | Malls | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Holding period | 10 years | |
Cap Rate | Greenbrier Mall | Malls | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value measurement input | 0.110 | |
Discount Rate | Greenbrier Mall | Malls | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value measurement input | 0.115 |
Dispositions and Held for Sale - Summary (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | 24 Months Ended | |
---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
Dec. 31, 2018 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Gain on Extinguishment of Debt | $ 71,722 | $ 0 | ||
Loss on impairment | 24,825 | $ 18,061 | ||
Acadania Mall | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Loss on impairment | $ 1,593 | $ 43,007 | ||
Non-cash default interest expense | 305 | |||
Proceeds from sale of real estate | 4,000 | |||
Cary Towne Center | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Loss on impairment | $ 54,678 | |||
Non-cash default interest expense | 237 | |||
Proceeds from sale of real estate | 31,500 | |||
Non-recourse loans on operating properties | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Balance of Non-recourse Debt | 163,476 | |||
Gain on Extinguishment of Debt | 71,722 | |||
Non-recourse loans on operating properties | Malls | Acadania Mall | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Balance of Non-recourse Debt | 119,760 | |||
Gain on Extinguishment of Debt | 61,796 | |||
Non-recourse loans on operating properties | Malls | Cary Towne Center | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Balance of Non-recourse Debt | 43,716 | |||
Gain on Extinguishment of Debt | $ 9,926 |
Unconsolidated Affiliates and Noncontrolling Interests - Narrative (Details) $ in Thousands |
1 Months Ended | 3 Months Ended |
---|---|---|
Jan. 31, 2019
USD ($)
|
Mar. 31, 2019
entity
|
|
Schedule of Equity Method Investments [Line Items] | ||
Number of equity method investment entities | 21 | |
Number of joint ventures | 15 | |
Number of variable interest entities | 19 | |
Minimum | ||
Schedule of Equity Method Investments [Line Items] | ||
Equity interest in real estate property (as a percent) | 10.00% | |
Ownership in variable interest entity (as a percent) | 50.00% | |
Maximum | ||
Schedule of Equity Method Investments [Line Items] | ||
Equity interest in real estate property (as a percent) | 65.00% | |
Ownership in variable interest entity (as a percent) | 95.00% | |
Bullseye, LLC | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership in variable interest entity (as a percent) | 20.00% | |
Bullseye, LLC | ||
Schedule of Equity Method Investments [Line Items] | ||
Payments to acquire land | $ | $ 3,310 |
Unconsolidated Affiliates and Noncontrolling Interests - Unconsolidated Affiliates (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
ASSETS | |||
Investment in real estate assets | $ 2,100,828 | $ 2,097,088 | |
Accumulated depreciation | (687,230) | (674,275) | |
Real estate investment net, before development in process | 1,413,598 | 1,422,813 | |
Developments in progress | 16,961 | 12,569 | |
Net investment in real estate assets | 1,430,559 | 1,435,382 | |
Other assets | 178,916 | 188,521 | |
Total assets | 1,609,475 | 1,623,903 | |
LIABILITIES | |||
Mortgage and other indebtedness, net | 1,318,685 | 1,319,949 | |
Other liabilities | 33,695 | 39,777 | |
Total liabilities | 1,352,380 | 1,359,726 | |
OWNERS' EQUITY | |||
The Company | 185,123 | 191,050 | |
Other investors | 71,972 | 73,127 | |
Total owners' equity | 257,095 | 264,177 | |
Total liabilities and owners' equity | 1,609,475 | $ 1,623,903 | |
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract] | |||
Total revenues | 55,867 | $ 57,181 | |
Net income (loss) | 6,010 | 5,309 | |
Parent Company | |||
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract] | |||
Net income (loss) | $ 3,308 | $ 3,739 |
Unconsolidated Affiliates and Noncontrolling Interests - Noncontrolling Interests (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Operating Partnership | ||
Schedule of Equity Method Investments [Line Items] | ||
Noncontrolling interests | $ 46,892 | $ 55,917 |
Other consolidated subsidiaries | ||
Schedule of Equity Method Investments [Line Items] | ||
Noncontrolling interests | 11,079 | 12,111 |
Unconsolidated Properties | ||
Schedule of Equity Method Investments [Line Items] | ||
Noncontrolling interests | $ 57,971 | $ 68,028 |
Unconsolidated Affiliates and Noncontrolling Interests - Variable Interest Entities (Details) - USD ($) |
Mar. 31, 2019 |
Sep. 30, 2018 |
---|---|---|
Ambassador Infrastructure, LLC | ||
Noncontrolling Interest [Line Items] | ||
Investment in Real Estate Joint Ventures and Partnerships | $ 0 | |
Maximum Risk of Loss | $ 10,605,000 | |
Debt guaranteed (as a percent) | 100.00% | |
EastGate Storage, LLC | ||
Noncontrolling Interest [Line Items] | ||
Investment in Real Estate Joint Ventures and Partnerships | $ 1,052,000 | |
Maximum Risk of Loss | 6,500,000 | |
G&I VIII CBL Triangle LLC | ||
Noncontrolling Interest [Line Items] | ||
Investment in Real Estate Joint Ventures and Partnerships | 0 | |
Maximum Risk of Loss | 0 | |
Equity interest in real estate property (as a percent) | 90.00% | |
Self Storage at Mid Rivers, LLC | ||
Noncontrolling Interest [Line Items] | ||
Investment in Real Estate Joint Ventures and Partnerships | 1,022,000 | |
Maximum Risk of Loss | 5,987,000 | |
Shoppes at Eagle Point, LLC | ||
Noncontrolling Interest [Line Items] | ||
Investment in Real Estate Joint Ventures and Partnerships | 16,295,000 | |
Maximum Risk of Loss | $ 12,740,000 |
Mortgage and Other Indebtedness, Net - Narrative (Details) |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2019
USD ($)
associated_center
mall
subsidiary
mortgage_note_receivable
|
Dec. 31, 2018
USD ($)
unsecured_term_loan
|
Jan. 31, 2019
USD ($)
|
Jan. 01, 2019
USD ($)
|
|
Debt Instrument [Line Items] | ||||
Number of malls securing the credit facility | mall | 17 | |||
Number of associated centers securing the credit facility | associated_center | 3 | |||
Number of wholly owned subsidiaries | subsidiary | 36 | |||
Ownership interest in guarantor subsidiaries by Operating Partnership (as a percent) | 100.00% | |||
Principal maturities for remainder of fiscal year | $ 217,655,000 | |||
Weighted-average maturity period | 4 years 5 months | 3 years 8 months | ||
Unsecured lines of credit | ||||
Debt Instrument [Line Items] | ||||
Number of debt instruments | unsecured_term_loan | 3 | |||
Maximum borrowing capacity | $ 1,100,000,000 | |||
Variable-rate debt | $ 390,000,000 | |||
Unsecured term loans | ||||
Debt Instrument [Line Items] | ||||
Total Outstanding | $ 695,000,000 | $ 500,000,000 | ||
Number of debt instruments | unsecured_term_loan | 3 | |||
Non-recourse loans on operating properties | ||||
Debt Instrument [Line Items] | ||||
Total Outstanding | 163,476,000 | |||
Default minimum of debt instrument | $ 50,000,000 | |||
Secured Debt | Line of Credit | ||||
Debt Instrument [Line Items] | ||||
Total Outstanding | $ 1,185,000,000 | |||
Interest rate (as a percent) | 4.74% | |||
Quarterly installment payments on debt | 35,000,000 | |||
Secured Debt | Line of Credit | Minimum | ||||
Debt Instrument [Line Items] | ||||
Annual facility fee (as a percent) | 0.25% | |||
Secured Debt | Line of Credit | Maximum | ||||
Debt Instrument [Line Items] | ||||
Annual facility fee (as a percent) | 0.35% | |||
Secured Debt | Revolving Credit Facility | ||||
Debt Instrument [Line Items] | ||||
Total Outstanding | 685,000,000 | |||
Secured Debt | Unsecured term loans | ||||
Debt Instrument [Line Items] | ||||
Total Outstanding | 500,000,000 | |||
LIBOR | Unsecured Term Loan 1 | ||||
Debt Instrument [Line Items] | ||||
Basis spread on variable rate (as a percent) | 2.25% | |||
Guarantor Subsidiaries | ||||
Debt Instrument [Line Items] | ||||
Number of malls securing the credit facility | mall | 17 | |||
Number of associated centers securing the credit facility | associated_center | 3 | |||
Number of wholly owned subsidiaries | subsidiary | 36 | |||
Number of malls not classified as collateral for the secured credit facility | mall | 5 | |||
Number of associated centers not classified as collateral for the secured credit facility | associated_center | 2 | |||
Number of mortgage notes receivable not classified as collateral for the secured credit facility | mortgage_note_receivable | 4 | |||
Principal maturities for remainder of fiscal year | $ 71,187,000 | |||
Weighted-average maturity period | 2 years 1 month 10 days | 1 year 29 days | ||
Guarantor Subsidiaries | Secured Debt | Line of Credit | ||||
Debt Instrument [Line Items] | ||||
Total Outstanding | $ 1,185,000 |
Mortgage and Other Indebtedness, Net - Summary (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 5.23% | 5.10% |
Unamortized deferred financing costs | $ (20,071) | |
Total mortgage and other indebtedness, net | $ 3,922,212 | |
Fixed Rate Interest | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 5.38% | 5.37% |
Variable Rate Interest | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 4.77% | 4.21% |
Non-recourse loans on operating properties | Fixed Rate Interest | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 5.34% | 5.33% |
Senior Unsecured Notes Due 2023 | ||
Debt Instrument [Line Items] | ||
Unamortized Discount | $ 2,461 | $ 2,577 |
Senior Unsecured Notes Due 2023 | Fixed Rate Interest | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 5.25% | 5.25% |
Senior Unsecured Notes Due 2024 | ||
Debt Instrument [Line Items] | ||
Unamortized Discount | $ 45 | $ 47 |
Senior Unsecured Notes Due 2024 | Fixed Rate Interest | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 4.60% | 4.60% |
Senior Unsecured Notes Due 2026 | ||
Debt Instrument [Line Items] | ||
Unamortized Discount | $ 8,158 | $ 8,365 |
Senior Unsecured Notes Due 2026 | Fixed Rate Interest | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 5.95% | 5.95% |
Recourse loans on operating properties | Variable Rate Interest | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 5.11% | 4.97% |
Construction Loans | Variable Rate Interest | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 5.38% | 5.25% |
Secured line of credit | Variable Rate Interest | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 4.74% | 0.00% |
Unsecured lines of credit | Variable Rate Interest | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 0.00% | 3.90% |
Secured term loan | Variable Rate Interest | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 4.74% | 0.00% |
Unsecured term loans | Variable Rate Interest | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 0.00% | 4.21% |
CBL & Associates Properties, Inc. | ||
Debt Instrument [Line Items] | ||
Fixed rate debt, amount | $ 2,971,830 | $ 3,147,108 |
Variable-rate debt | 970,453 | 955,751 |
Total fixed-rate and variable-rate debt | 3,942,283 | 4,102,859 |
Unamortized deferred financing costs | (20,071) | (15,963) |
Liabilities related to assets held for sale | (23,662) | (43,716) |
Total mortgage and other indebtedness, net | 3,898,550 | 4,043,180 |
CBL & Associates Properties, Inc. | Non-recourse loans on operating properties | ||
Debt Instrument [Line Items] | ||
Fixed rate debt, amount | 1,607,494 | 1,783,097 |
CBL & Associates Properties, Inc. | Senior Unsecured Notes Due 2023 | ||
Debt Instrument [Line Items] | ||
Fixed rate debt, amount | 447,539 | 447,423 |
CBL & Associates Properties, Inc. | Senior Unsecured Notes Due 2024 | ||
Debt Instrument [Line Items] | ||
Fixed rate debt, amount | 299,955 | 299,953 |
CBL & Associates Properties, Inc. | Senior Unsecured Notes Due 2026 | ||
Debt Instrument [Line Items] | ||
Fixed rate debt, amount | 616,842 | 616,635 |
CBL & Associates Properties, Inc. | Recourse loans on operating properties | ||
Debt Instrument [Line Items] | ||
Variable-rate debt | 68,063 | 68,607 |
CBL & Associates Properties, Inc. | Construction Loans | ||
Debt Instrument [Line Items] | ||
Variable-rate debt | 12,390 | 8,172 |
CBL & Associates Properties, Inc. | Secured line of credit | ||
Debt Instrument [Line Items] | ||
Variable-rate debt | 390,000 | 0 |
CBL & Associates Properties, Inc. | Unsecured lines of credit | ||
Debt Instrument [Line Items] | ||
Variable-rate debt | 0 | 183,972 |
CBL & Associates Properties, Inc. | Secured term loan | ||
Debt Instrument [Line Items] | ||
Variable-rate debt | 500,000 | 0 |
CBL & Associates Properties, Inc. | Unsecured term loans | ||
Debt Instrument [Line Items] | ||
Variable-rate debt | $ 0 | $ 695,000 |
Mortgage and Other Indebtedness, Net - Senior Unsecured Notes (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Debt Instrument [Line Items] | ||
Interest rate | 5.23% | 5.10% |
Minimum | ||
Debt Instrument [Line Items] | ||
Notice period required to redeem debt | 30 days | |
Maximum | ||
Debt Instrument [Line Items] | ||
Notice period required to redeem debt | 60 days | |
Interest Rate | ||
Debt Instrument [Line Items] | ||
Interest rate | 5.38% | 5.37% |
Senior Unsecured Notes Due 2023 | ||
Debt Instrument [Line Items] | ||
Amount | $ 450,000,000 | |
Senior Unsecured Notes Due 2023 | Treasury Rate | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate (as a percent) | 0.40% | |
Senior Unsecured Notes Due 2023 | Interest Rate | ||
Debt Instrument [Line Items] | ||
Interest rate | 5.25% | 5.25% |
Senior Unsecured Notes Due 2024 | ||
Debt Instrument [Line Items] | ||
Amount | $ 300,000,000 | |
Senior Unsecured Notes Due 2024 | Treasury Rate | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate (as a percent) | 0.35% | |
Senior Unsecured Notes Due 2024 | Interest Rate | ||
Debt Instrument [Line Items] | ||
Interest rate | 4.60% | 4.60% |
Senior Unsecured Notes Due 2026 | ||
Debt Instrument [Line Items] | ||
Amount | $ 625,000,000 | |
Senior Unsecured Notes Due 2026 | Treasury Rate | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate (as a percent) | 0.50% | |
Senior Unsecured Notes Due 2026 | Minimum | ||
Debt Instrument [Line Items] | ||
Secured debt to total assets (as a percent) | 40.00% | |
Senior Unsecured Notes Due 2026 | Interest Rate | ||
Debt Instrument [Line Items] | ||
Interest rate | 5.95% | 5.95% |
Senior Notes Due 2023 and 2024 | Minimum | ||
Debt Instrument [Line Items] | ||
Secured debt to total assets (as a percent) | 40.00% | |
Senior Notes Due 2023 and 2024 | Maximum | ||
Debt Instrument [Line Items] | ||
Secured debt to total assets (as a percent) | 45.00% | |
Senior Notes Due 2023 and 2024 | Interest Rate | Minimum | ||
Debt Instrument [Line Items] | ||
Increase in variable interest rate (as a percent) | 0.25% | |
Senior Notes Due 2023 and 2024 | Interest Rate | Maximum | ||
Debt Instrument [Line Items] | ||
Increase in variable interest rate (as a percent) | 1.00% | |
Senior Unsecured Notes | Actual | ||
Debt Instrument [Line Items] | ||
Secured debt to total assets (as a percent) | 35.00% |
Mortgage and Other Indebtedness, Net - Compliance with Key Covenant Ratios (Details) |
Mar. 31, 2019 |
---|---|
Required | Senior Unsecured Notes | |
Debt Instrument [Line Items] | |
Total debt to total assets (as a percent) | 60.00% |
Secured debt to total assets (as a percent) | 40.00% |
Total unencumbered assets to unsecured debt (as a percent) | 150.00% |
Consolidated income available for debt service to annual debt service charge (as a percent) | 150.00% |
Actual | Senior Unsecured Notes | |
Debt Instrument [Line Items] | |
Total debt to total assets (as a percent) | 52.00% |
Secured debt to total assets (as a percent) | 35.00% |
Total unencumbered assets to unsecured debt (as a percent) | 194.00% |
Consolidated income available for debt service to annual debt service charge (as a percent) | 230.00% |
Maximum | Senior Notes Due 2023 and 2024 | |
Debt Instrument [Line Items] | |
Secured debt to total assets (as a percent) | 45.00% |
Mortgage and Other Indebtedness, Net - Dispositions (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
Jan. 31, 2019 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Debt Instrument [Line Items] | |||
Gain on extinguishment of debt | $ 71,722 | $ 0 | |
Mortgages | |||
Debt Instrument [Line Items] | |||
Balance of Non-recourse Debt | 163,476 | ||
Gain on extinguishment of debt | 71,722 | ||
Acadiana Mall | Mortgages | |||
Debt Instrument [Line Items] | |||
Interest rate (as a percent) | 5.67% | ||
Balance of Non-recourse Debt | $ 119,760 | ||
Gain on extinguishment of debt | $ 61,795 | ||
Cary Towne Center | |||
Debt Instrument [Line Items] | |||
Proceeds from sale of real estate | $ 31,500 | ||
Cary Towne Center | Mortgages | |||
Debt Instrument [Line Items] | |||
Interest rate (as a percent) | 4.00% | ||
Balance of Non-recourse Debt | $ 43,716 | ||
Gain on extinguishment of debt | $ 9,927 |
Mortgage and Other Indebtedness, Net - Principal Payments (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
2019 | $ 217,655 |
2020 | 175,486 |
2021 | 474,912 |
2022 | 461,585 |
2023 | 1,412,855 |
2024 | 371,347 |
Thereafter | 839,107 |
Mortgage and other indebtedness | 3,952,947 |
Unamortized discounts | (10,664) |
Unamortized deferred financing costs | (20,071) |
Total mortgage and other indebtedness, net | $ 3,922,212 |
Mortgage and Other Notes Receivable - Summary (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|||
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] | ||||
Assignment of the partnership interest (as a percent) | 100.00% | |||
Mortgage and Other Notes Receivable [Line Items] | ||||
Balance | [1] | $ 7,406 | $ 7,672 | |
Mortgages | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Balance | $ 4,807 | $ 4,884 | ||
Mortgages | Columbia Place Outparcel | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Interest Rate (as a percent) | 5.00% | 5.00% | ||
Balance | $ 277 | $ 283 | ||
Mortgages | One Park Place | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Interest Rate (as a percent) | 5.00% | 5.00% | ||
Balance | $ 728 | $ 783 | ||
Mortgages | Village Square | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Interest Rate (as a percent) | 4.00% | 4.00% | ||
Balance | $ 1,290 | $ 1,308 | ||
Mortgages | Other | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Balance | $ 2,512 | $ 2,510 | ||
Mortgages | Other | Minimum | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Interest Rate (as a percent) | 5.01% | 5.01% | ||
Mortgages | Other | Maximum | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Interest Rate (as a percent) | 9.50% | 9.50% | ||
Mortgages | The Promenade at Dlberville | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Balance | $ 1,100 | |||
Other Notes Receivable | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Balance | $ 2,599 | $ 2,788 | ||
Other Notes Receivable | ERMC | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Interest Rate (as a percent) | 4.00% | 4.00% | ||
Balance | $ 2,011 | $ 2,183 | ||
Other Notes Receivable | Southwest Theaters LLC | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Interest Rate (as a percent) | 5.00% | 5.00% | ||
Balance | $ 588 | $ 605 | ||
|
Segment Information - Summary (Details) - USD ($) $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|||
Segment Reporting Information [Line Items] | |||||
Revenues | $ 198,030 | $ 220,200 | |||
Property operating expenses | (61,675) | (67,853) | |||
Interest expense | (53,998) | (53,767) | |||
Other expense | 0 | (94) | |||
Gain on sales of real estate assets | 228 | 4,371 | |||
Segment profit (loss) | 82,585 | 102,857 | |||
Depreciation and amortization expense | (69,792) | (71,750) | |||
General and administrative expense | (22,007) | (18,304) | |||
Litigation settlement | (88,150) | 0 | |||
Interest and other income | 489 | 213 | |||
Gain on extinguishment of debt | 71,722 | 0 | |||
Loss on impairment | (24,825) | (18,061) | |||
Income tax benefit (provision) | (139) | 645 | |||
Equity in earnings of unconsolidated affiliates | 3,308 | 3,739 | |||
Net loss | (46,809) | (661) | |||
Capital expenditures | 28,139 | 36,651 | |||
Total Assets | [1] | 5,161,948 | $ 5,340,853 | ||
Malls | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 183,864 | 200,715 | |||
Property operating expenses | (57,181) | (63,829) | |||
Interest expense | (23,190) | (25,774) | |||
Other expense | (49) | ||||
Gain on sales of real estate assets | 0 | 0 | |||
Segment profit (loss) | 103,493 | 111,063 | |||
Capital expenditures | 28,024 | 34,302 | |||
Total Assets | 4,691,869 | 4,868,141 | |||
All Other | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 14,166 | 19,485 | |||
Property operating expenses | (4,494) | (4,024) | |||
Interest expense | (30,808) | (27,993) | |||
Other expense | (45) | ||||
Gain on sales of real estate assets | 228 | 4,371 | |||
Segment profit (loss) | (20,908) | (8,206) | |||
Capital expenditures | 115 | $ 2,349 | |||
Total Assets | $ 470,079 | $ 472,712 | |||
|
Earnings per Share and Earnings per Unit - Narrative (Details) - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Common Units | ||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | ||
Potentially dilutive securities excluded from the computation of EPS (shares) | 0 | 0 |
Antidilutive securities excluded from the computation of EPS (shares) | 0 | 0 |
Common Stock | ||
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | ||
Potentially dilutive securities excluded from the computation of EPS (shares) | 0 | 0 |
Antidilutive securities excluded from the computation of EPS (shares) | 0 | 0 |
Contingencies - Litigation (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended |
---|---|---|
Apr. 30, 2019 |
Mar. 31, 2019 |
|
Loss Contingencies [Line Items] | ||
Litigation settlement expense | $ 88,150 | |
Wave Lengths Hair Salons Of Florida Inc. | ||
Loss Contingencies [Line Items] | ||
Loss contingency accrual | $ 88,150 | |
Wave Lengths Hair Salons Of Florida Inc. | Subsequent Event | ||
Loss Contingencies [Line Items] | ||
Required amount reserved | $ 90,000 | |
Amount awarded to other party | $ 60,000 | |
Period of settlement payments of monthly rent credits | 5 years | |
Wave Lengths Hair Salons Of Florida Inc. | Subsequent Event | Maximum | ||
Loss Contingencies [Line Items] | ||
Attorney fees and associated costs | $ 28,000 | |
Incentive award costs | 50 | |
Class administration costs | $ 100 |
Contingencies - Environmental Contingencies (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Commitments and Contingencies Disclosure [Abstract] | |
Environmental liability insurance, maximum coverage per incident (up to) | $ 10,000,000 |
Environmental liability insurance, annual coverage limit (up to) | $ 50,000,000 |
Contingencies - Guarantees (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
extension_option
|
Dec. 31, 2018
USD ($)
|
|
Guarantor Obligations [Line Items] | ||
Obligation Recorded to Reflect Guaranty | $ 910,000 | $ 1,158,000 |
Number of extension options available | extension_option | 1 | |
West Melbourne I, LLC - Phase I | ||
Guarantor Obligations [Line Items] | ||
Company's Ownership Interest (as a percent) | 50.00% | |
Outstanding Balance | $ 40,392,000 | |
Percentage Guaranteed by the Operating Partnership (as a percent) | 50.00% | |
Maximum Guaranteed Amount | $ 20,196,000 | |
Obligation Recorded to Reflect Guaranty | $ 202,000 | 203,000 |
West Melbourne I, LLC - Phase II | ||
Guarantor Obligations [Line Items] | ||
Company's Ownership Interest (as a percent) | 50.00% | |
Outstanding Balance | $ 15,917,000 | |
Percentage Guaranteed by the Operating Partnership (as a percent) | 50.00% | |
Maximum Guaranteed Amount | $ 7,959,000 | |
Obligation Recorded to Reflect Guaranty | $ 80,000 | 80,000 |
Port Orange I, LLC | ||
Guarantor Obligations [Line Items] | ||
Company's Ownership Interest (as a percent) | 50.00% | |
Outstanding Balance | $ 54,908,000 | |
Percentage Guaranteed by the Operating Partnership (as a percent) | 50.00% | |
Maximum Guaranteed Amount | $ 27,454,000 | |
Obligation Recorded to Reflect Guaranty | $ 275,000 | 280,000 |
Ambassador Infrastructure, LLC | ||
Guarantor Obligations [Line Items] | ||
Company's Ownership Interest (as a percent) | 65.00% | |
Outstanding Balance | $ 10,050,000 | |
Percentage Guaranteed by the Operating Partnership (as a percent) | 100.00% | |
Maximum Guaranteed Amount | $ 10,050,000 | |
Obligation Recorded to Reflect Guaranty | $ 101,000 | 106,000 |
Shoppes at Eagle Point, LLC | ||
Guarantor Obligations [Line Items] | ||
Company's Ownership Interest (as a percent) | 50.00% | |
Outstanding Balance | $ 35,189,000 | |
Percentage Guaranteed by the Operating Partnership (as a percent) | 35.00% | |
Maximum Guaranteed Amount | $ 12,740,000 | |
Obligation Recorded to Reflect Guaranty | $ 127,000 | 364,000 |
Reduction of guarantor obligations once construction is complete (as a percent) | 35.00% | |
Number of extension options available | extension_option | 1 | |
Option extension term of debt instrument | 2 years | |
EastGate Storage, LLC | ||
Guarantor Obligations [Line Items] | ||
Company's Ownership Interest (as a percent) | 50.00% | |
Outstanding Balance | $ 5,920,000 | |
Percentage Guaranteed by the Operating Partnership (as a percent) | 100.00% | |
Maximum Guaranteed Amount | $ 6,500,000 | |
Obligation Recorded to Reflect Guaranty | $ 65,000 | 65,000 |
Reduction of guarantor obligations once construction is complete (as a percent) | 50.00% | |
Reduction of guarantor obligations once certain debt and operational metrics are met (as a percent) | 25.00% | |
Self Storage at Mid Rivers, LLC | ||
Guarantor Obligations [Line Items] | ||
Company's Ownership Interest (as a percent) | 50.00% | |
Outstanding Balance | $ 4,662,000 | |
Percentage Guaranteed by the Operating Partnership (as a percent) | 100.00% | |
Maximum Guaranteed Amount | $ 5,987,000 | |
Obligation Recorded to Reflect Guaranty | $ 60,000 | $ 60,000 |
Reduction of guarantor obligations once construction is complete (as a percent) | 50.00% | |
Reduction of guarantor obligations once certain debt and operational metrics are met (as a percent) | 25.00% | |
Guaranty fee (as a percent) | 1.00% | |
York Town Center Lp | ||
Guarantor Obligations [Line Items] | ||
Company's Ownership Interest (as a percent) | 50.00% | |
Undiscounted maximum exposure | $ 22,000,000 | |
Annual reductions to guarantors obligations | 800,000 | |
Guaranteed minimum exposure amount | 10,000,000 | |
Guaranteed amount of the outstanding loan based on percentage | $ 12,400,000 | |
Guarantor obligations recoverable | 50.00% |
Contingencies - Performance Bonds (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Malpractice loss contingency, letters of credit and surety bonds | $ 16,097 | $ 16,003 |
Share-Based Compensation - Summary (Details) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||
---|---|---|---|---|---|---|---|
Feb. 11, 2019
$ / shares
shares
|
Feb. 12, 2018
$ / shares
shares
|
Feb. 07, 2017
$ / shares
|
Mar. 31, 2019
USD ($)
installment
$ / shares
shares
|
Mar. 31, 2018
USD ($)
|
Dec. 31, 2015 |
Mar. 31, 2019
USD ($)
$ / shares
shares
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of shares authorized under plan (shares) | shares | 10,400,000 | ||||||
Share-based compensation cost capitalized as part of real estate assets | $ | $ 14 | $ 122 | |||||
Weighted-Average Grant Date Fair Value | |||||||
Unrecognized compensation cost related to nonvested stock awards | $ | $ 4,760 | ||||||
Compensation cost to be recognized over a weighted-average period | 2 years 9 months | ||||||
Number of shares authorized to be granted annually (shares) | shares | 200,000 | ||||||
Vested at conclusion of performance period | |||||||
Weighted-Average Grant Date Fair Value | |||||||
Vesting rate (as a percent) | 60.00% | ||||||
Remaining percentage after performance period | |||||||
Weighted-Average Grant Date Fair Value | |||||||
Vesting rate (as a percent) | 40.00% | ||||||
Vested each year for the first two anniversaries after conclusion of performance period | |||||||
Weighted-Average Grant Date Fair Value | |||||||
Vesting rate (as a percent) | 20.00% | ||||||
Restricted Stock Awards | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Share-based compensation expense | $ | $ 1,713 | 1,767 | |||||
Shares | |||||||
Nonvested, beginning of period (shares) | shares | 875,497 | ||||||
Granted (shares) | shares | 855,681 | ||||||
Vested (shares) | shares | (743,574) | ||||||
Forfeited (shares) | shares | (2,501) | ||||||
Nonvested, end of period (shares) | shares | 985,103 | ||||||
Weighted-Average Grant Date Fair Value | |||||||
Weighted-average grant date fair value, nonvested, beginning of period (USD per share) | $ / shares | $ 7.99 | ||||||
Weighted-average grant date fair value, granted (USD per share) | $ / shares | 2.23 | ||||||
Weighted-average grant date fair value, vested (USD per share) | $ / shares | 5.11 | ||||||
Weighted-average grant date fair value, forfeited (USD per share) | $ / shares | 6.57 | ||||||
Weighted-average grant date fair value, nonvested, end of period (USD per share) | $ / shares | $ 5.17 | ||||||
Number of annual installment for awards to vest (installment) | installment | 4 | ||||||
Fair value per share on valuation date (USD per share) | $ / shares | $ 7.99 | $ 5.17 | |||||
Restricted Stock Awards | Vested on date of grant | |||||||
Weighted-Average Grant Date Fair Value | |||||||
Vesting rate (as a percent) | 20.00% | ||||||
Performance Stock Units | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Share-based compensation expense | $ | $ 426 | $ 419 | |||||
Shares | |||||||
Nonvested, beginning of period (shares) | shares | 910,911 | ||||||
Granted (shares) | shares | 1,103,537 | ||||||
Vested (shares) | shares | 0 | ||||||
Nonvested, end of period (shares) | shares | 2,014,448 | ||||||
Weighted-Average Grant Date Fair Value | |||||||
Weighted-average grant date fair value, nonvested, beginning of period (USD per share) | $ / shares | $ 4.67 | ||||||
Weighted-average grant date fair value, granted (USD per share) | $ / shares | 2.40 | ||||||
Weighted-average grant date fair value, nonvested, end of period (USD per share) | $ / shares | $ 4.74 | $ 4.76 | $ 6.86 | $ 3.42 | |||
Unrecognized compensation cost related to nonvested stock awards | $ | $ 3,864 | ||||||
Compensation cost to be recognized over a weighted-average period | 4 years 1 month | ||||||
Performance period | 3 years | 3 years | |||||
Vesting rate based on achievement of TSR relative to the NAREIT retail index (as a percent) | 66.67% | ||||||
Vesting rate based on the achievement of absolute TSR metrics (as a percent) | 33.33% | ||||||
Stock classified as a liability due to the potential cash component (shares) | shares | 566,862 | ||||||
Fair value per share on valuation date (USD per share) | $ / shares | $ 4.74 | $ 4.76 | $ 6.86 | $ 4.67 | $ 3.42 | ||
Risk-free interest rate (as a percent) | 2.54% | 2.36% | 1.53% | ||||
Expected share price volatility (as a percent) | 60.99% | 42.02% | 32.85% | ||||
Performance Stock Units | Chief Executive Officer | |||||||
Shares | |||||||
Granted (shares) | shares | 357,800 | 240,164,000 | |||||
Weighted-Average Grant Date Fair Value | |||||||
Weighted-average grant date fair value, nonvested, end of period (USD per share) | $ / shares | $ 2.45 | $ 3.13 | |||||
Fair value per share on valuation date (USD per share) | $ / shares | $ 2.45 | $ 3.13 | |||||
Performance Stock Units | Officer | |||||||
Shares | |||||||
Granted (shares) | shares | 178,875 | 120,064,000 | |||||
Weighted-Average Grant Date Fair Value | |||||||
Weighted-average grant date fair value, nonvested, end of period (USD per share) | $ / shares | $ 2.29 | $ 1.63 | |||||
Fair value per share on valuation date (USD per share) | $ / shares | $ 2.29 | $ 1.63 |
Noncash Investing and Financing Activities - Summary (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Real Estate Investments, Net [Abstract] | |||
Accrued dividends and distributions payable | $ 17,191 | $ 41,759 | |
Additions to real estate assets accrued but not yet paid | 19,757 | 2,071 | |
Conversion of Operating Partnership units for common stock | 0 | 3,059 | |
Lease liabilities arising from obtaining right-of-use assets | 4,024 | 0 | $ 4,074 |
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation Disclosure [Abstract] | |||
Decrease in real estate assets | (60,059) | 0 | |
Decrease in mortgage and other indebtedness | 124,111 | 0 | |
Decrease in operating assets and liabilities | 9,333 | 0 | |
Decrease in intangible lease and other assets | $ (1,663) | $ 0 |
Subsequent Events - Narrative (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 12 Months Ended |
---|---|---|---|
Apr. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Non-recourse loans on operating properties | |||
Subsequent Event [Line Items] | |||
Balance of Non-recourse Debt | $ 163,476 | ||
Volusia Mall | Non-recourse loans on operating properties | |||
Subsequent Event [Line Items] | |||
Interest rate (as a percent) | 8.00% | ||
Volusia Mall | Non-recourse loans on operating properties | Subsequent Event | |||
Subsequent Event [Line Items] | |||
Interest rate (as a percent) | 4.56% | ||
Volusia Mall | Non-recourse loans on operating properties | Malls | |||
Subsequent Event [Line Items] | |||
Balance of Non-recourse Debt | $ 41,000 | ||
Volusia Mall | Non-recourse loans on operating properties | Malls | Subsequent Event | |||
Subsequent Event [Line Items] | |||
Balance of Non-recourse Debt | $ 50,000 | ||
Honey Creek Mall | Subsequent Event | |||
Subsequent Event [Line Items] | |||
Proceeds from sale of real estate | 14,600 | ||
Honey Creek Mall | Non-recourse loans on operating properties | Malls | |||
Subsequent Event [Line Items] | |||
Balance of Non-recourse Debt | $ 23,700 | ||
The Shoppes at Hickory Point | Subsequent Event | |||
Subsequent Event [Line Items] | |||
Proceeds from sale of real estate | $ 2,508 | ||
Village Square | Mortgages | |||
Subsequent Event [Line Items] | |||
Interest Rate (as a percent) | 4.00% | 4.00% | |
Village Square | Mortgages | Subsequent Event | |||
Subsequent Event [Line Items] | |||
Interest Rate (as a percent) | 5.00% | ||
Monthly payment amount | $ 60 |
Combined Guarantor Subsidiaries - Combined Balance Sheets - Summary (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
||||
---|---|---|---|---|---|---|---|---|
Real estate assets: | ||||||||
Land | [1] | $ 783,055 | $ 793,944 | |||||
Buildings and improvements | [1] | 6,248,286 | 6,414,886 | |||||
Real estate assets | [1] | 7,031,341 | 7,208,830 | |||||
Accumulated depreciation | [1] | (2,478,821) | (2,493,082) | |||||
Real estate investment property, net, before developments in progress | [1] | 4,552,520 | 4,715,748 | |||||
Developments in progress | [1] | 56,273 | 38,807 | |||||
Net investment in real estate assets | [1] | 4,622,964 | 4,785,526 | |||||
Cash and cash equivalents | 21,055 | 25,138 | [1] | $ 23,346 | ||||
Receivables: | ||||||||
Tenant, net of allowance for doubtful accounts of $2,337 in 2018 | [1] | 71,358 | 77,788 | |||||
Other, net of allowance for doubtful accounts of $838 in 2018 | [1] | 9,855 | 7,511 | |||||
Mortgage and other notes receivable | [1] | 7,406 | 7,672 | |||||
Intangible lease assets and other assets | [1] | 151,953 | 153,665 | |||||
Total assets | [1] | 5,161,948 | 5,340,853 | |||||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | ||||||||
Mortgage notes payable, net | 3,898,550 | 4,043,180 | ||||||
Accounts payable and accrued liabilities | 277,256 | 218,217 | ||||||
Total liabilities | [1] | 4,200,459 | 4,305,113 | |||||
Commitments and contingencies (Note 7 and Note 11) | ||||||||
Total liabilities, redeemable noncontrolling interests and equity | 5,161,948 | 5,340,853 | ||||||
Guarantor Subsidiaries | ||||||||
Real estate assets: | ||||||||
Land | 221,773 | 232,813 | ||||||
Buildings and improvements | 2,218,595 | 2,361,707 | ||||||
Real estate assets | 2,440,368 | 2,594,520 | ||||||
Accumulated depreciation | (880,724) | (921,562) | ||||||
Real estate investment property, net, before developments in progress | 1,559,644 | 1,672,958 | ||||||
Developments in progress | 8,083 | 6,582 | ||||||
Net investment in real estate assets | 1,567,727 | 1,679,540 | ||||||
Cash and cash equivalents | 8,057 | 5,880 | 5,085 | |||||
Receivables: | ||||||||
Tenant, net of allowance for doubtful accounts of $2,337 in 2018 | 28,302 | 30,553 | ||||||
Other, net of allowance for doubtful accounts of $838 in 2018 | 1,063 | 1,007 | ||||||
Mortgage and other notes receivable | 76,729 | 76,747 | ||||||
Intangible lease assets and other assets | 42,218 | 48,133 | ||||||
Total assets | 1,724,096 | 1,841,860 | ||||||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | ||||||||
Mortgage notes payable, net | 256,078 | 377,996 | ||||||
Accounts payable and accrued liabilities | 34,416 | 59,241 | ||||||
Total liabilities | 290,494 | 437,237 | ||||||
Commitments and contingencies (Note 7 and Note 11) | ||||||||
Owners' equity | 1,433,602 | 1,404,623 | $ 1,509,846 | $ 1,486,164 | ||||
Total liabilities, redeemable noncontrolling interests and equity | $ 1,724,096 | $ 1,841,860 | ||||||
|
Combined Guarantor Subsidiaries - Combined Balance Sheets - Parenthetical (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Condensed Financial Statements, Captions [Line Items] | |
Tenant receivables allowance for doubtful accounts | $ 2,337 |
Guarantor Subsidiaries | |
Condensed Financial Statements, Captions [Line Items] | |
Tenant receivables allowance for doubtful accounts | $ 260 |
Combined Guarantor Subsidiaries - Combined Statements of Operations - Summary (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
REVENUES: | ||
Rental revenues | $ 190,980 | $ 212,729 |
Other | 4,527 | 4,750 |
Total revenues | 198,030 | 220,200 |
OPERATING EXPENSES: | ||
Property operating | (28,980) | (32,826) |
Depreciation and amortization | (69,792) | (71,750) |
Real estate taxes | (19,919) | (21,848) |
Maintenance and repairs | (12,776) | (13,179) |
Loss on impairment | (24,825) | (18,061) |
Total operating expenses | (266,449) | (176,062) |
OTHER INCOME (EXPENSES): | ||
Interest and other income | 489 | 213 |
Interest expense | (53,998) | (53,767) |
Gain on extinguishment of debt | 71,722 | 0 |
Gain on sales of real estate assets | 228 | 4,371 |
Total other income (expenses) | 21,610 | (44,799) |
Net loss | (46,809) | (661) |
Guarantor Subsidiaries | ||
REVENUES: | ||
Rental revenues | 71,272 | 78,706 |
Other | 1,720 | 1,732 |
Total revenues | 72,992 | 80,438 |
OPERATING EXPENSES: | ||
Property operating | (11,208) | (12,308) |
Depreciation and amortization | (24,101) | (24,499) |
Real estate taxes | (6,801) | (7,159) |
Maintenance and repairs | (4,756) | (4,718) |
Loss on impairment | (22,770) | 0 |
Total operating expenses | (69,636) | (48,684) |
OTHER INCOME (EXPENSES): | ||
Interest and other income | 942 | 2,133 |
Interest expense | (3,985) | (5,990) |
Gain on extinguishment of debt | 61,796 | 0 |
Gain on sales of real estate assets | 0 | 1,718 |
Total other income (expenses) | 58,753 | (2,139) |
Net loss | $ 62,109 | $ 29,615 |
Combined Guarantor Subsidiaries - Combined Statements of Owners' Equity - Summary (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Increase (Decrease) in Partners' Capital [Roll Forward] | ||
Net loss | $ (46,809) | $ (661) |
Guarantor Subsidiaries | ||
Increase (Decrease) in Partners' Capital [Roll Forward] | ||
Beginning balance | 1,404,623 | 1,486,164 |
Net loss | 62,109 | 29,615 |
Contributions | 17,363 | 50,514 |
Distributions | (41,658) | (56,447) |
Noncash distributions | (8,835) | |
Ending balance | $ 1,433,602 | $ 1,509,846 |
Combined Guarantor Subsidiiaries - Combined Statements of Cash Flows - Summary (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net loss | $ (46,809) | $ (661) | ||||||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 69,792 | 71,750 | ||||||||||
Net amortization of deferred financing costs, debt premiums and discounts | 2,304 | 1,709 | ||||||||||
Net amortization of intangible lease assets and liabilities | (551) | (475) | ||||||||||
Gain on sales of real estate assets | (228) | (4,371) | ||||||||||
Loss on insurance proceeds | (690) | 0 | ||||||||||
Loss on impairment | 24,825 | 18,061 | ||||||||||
Gain on extinguishment of debt | (71,722) | 0 | ||||||||||
Change in estimate of uncollectable rental revenues | 1,540 | 2,041 | ||||||||||
Changes in: | ||||||||||||
Tenant and other receivables | (387) | 1,826 | ||||||||||
Other assets | (3,826) | (2,339) | ||||||||||
Accounts payable and accrued liabilities | 76,771 | 8,635 | ||||||||||
Net cash provided by operating activities | 55,488 | 98,227 | ||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Additions to real estate assets | (26,429) | (39,997) | ||||||||||
Proceeds from sales of real estate assets | 35,260 | 11,848 | ||||||||||
Proceeds from insurance | 548 | 0 | ||||||||||
Payments received on mortgage and other notes receivable | 266 | 267 | ||||||||||
Changes in other assets | (321) | (2,277) | ||||||||||
Net cash provided by (used in) investing activities | 13,737 | (28,532) | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Principal payments on mortgage and other indebtedness | (978,006) | (123,634) | ||||||||||
Net cash used in financing activities | (81,321) | (79,332) | ||||||||||
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (12,096) | (9,637) | ||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | 57,512 | 68,172 | $ 68,172 | |||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | 45,416 | 58,535 | 57,512 | |||||||||
Reconciliation from condensed consolidated statements of cash flows to condensed consolidated balance sheets: | ||||||||||||
Cash and cash equivalents | 21,055 | 23,346 | 25,138 | [1] | ||||||||
Restricted cash | ||||||||||||
Restricted cash | [2] | $ 79 | $ 3,212 | |||||||||
Mortgage escrows | [2] | 24,282 | 31,977 | |||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | 57,512 | 68,172 | 68,172 | 45,416 | $ 57,512 | 58,535 | ||||||
SUPPLEMENTAL INFORMATION: | ||||||||||||
Cash paid for interest, net of amounts capitalized | 35,659 | 34,896 | ||||||||||
Guarantor Subsidiaries | ||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net loss | 62,109 | 29,615 | ||||||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 24,101 | 24,499 | ||||||||||
Net amortization of deferred financing costs, debt premiums and discounts | 62 | (122) | ||||||||||
Net amortization of intangible lease assets and liabilities | (611) | (568) | ||||||||||
Gain on sales of real estate assets | 0 | (1,718) | ||||||||||
Loss on insurance proceeds | 64 | 0 | ||||||||||
Loss on impairment | 22,770 | 0 | ||||||||||
Gain on extinguishment of debt | (61,796) | 0 | ||||||||||
Change in estimate of uncollectable rental revenues | 584 | 476 | ||||||||||
Changes in: | ||||||||||||
Tenant and other receivables | (367) | (844) | ||||||||||
Other assets | (632) | (883) | ||||||||||
Accounts payable and accrued liabilities | (10,251) | (3,016) | ||||||||||
Net cash provided by operating activities | 36,033 | 47,439 | ||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Additions to real estate assets | (6,207) | (13,032) | ||||||||||
Proceeds from sales of real estate assets | 0 | 2,547 | ||||||||||
Proceeds from insurance | 367 | 0 | ||||||||||
Payments received on mortgage and other notes receivable | 17 | 4,457 | ||||||||||
Changes in other assets | (313) | (142) | ||||||||||
Net cash provided by (used in) investing activities | (6,136) | (6,170) | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Principal payments on mortgage and other indebtedness | (6,709) | (39,516) | ||||||||||
Distributions to owners | (41,658) | (56,447) | ||||||||||
Contributions from owners | 17,363 | 50,514 | ||||||||||
Net cash used in financing activities | (31,004) | (45,449) | ||||||||||
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (1,107) | (4,180) | ||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | 13,020 | 14,544 | 14,544 | |||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | 11,913 | 10,364 | 13,020 | |||||||||
Reconciliation from condensed consolidated statements of cash flows to condensed consolidated balance sheets: | ||||||||||||
Cash and cash equivalents | 8,057 | 5,085 | 5,880 | |||||||||
Restricted cash | ||||||||||||
Restricted cash | 0 | 2,309 | ||||||||||
Mortgage escrows | 3,856 | 7,139 | 2,970 | |||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | 13,020 | 14,544 | $ 14,544 | $ 11,913 | $ 13,020 | $ 10,364 | ||||||
SUPPLEMENTAL INFORMATION: | ||||||||||||
Cash paid for interest, net of amounts capitalized | $ 3,375 | $ 4,217 | ||||||||||
|
Combined Guarantor Subsidiaries - Organization and Basis of Presentation - Narrative (Details) |
Mar. 31, 2019
associated_center
mall
subsidiary
state
mortgage_note_receivable
senior_unsecured_note
|
Jan. 01, 2019
USD ($)
|
---|---|---|
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||
Number of states in which entity operates | state | 26 | |
Number of malls securing the credit facility | mall | 17 | |
Number of associated centers securing the credit facility | associated_center | 3 | |
Number of wholly owned subsidiaries | subsidiary | 36 | |
Guarantor Subsidiaries | ||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||
Number of states in which entity operates | state | 26 | |
Number of malls securing the credit facility | mall | 17 | |
Number of associated centers securing the credit facility | associated_center | 3 | |
Number of wholly owned subsidiaries | subsidiary | 36 | |
Number of malls not classified as collateral for the secured credit facility | mall | 5 | |
Number of associated centers not classified as collateral for the secured credit facility | associated_center | 2 | |
Number of mortgage notes receivable not classified as collateral for the secured credit facility | mortgage_note_receivable | 4 | |
Line of Credit | Secured Debt | ||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||
Balance of Non-recourse Debt | $ | $ 1,185,000,000 | |
Line of Credit | Secured Debt | Guarantor Subsidiaries | ||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||
Balance of Non-recourse Debt | $ | $ 1,185,000 | |
Senior Unsecured Notes | Guarantor Subsidiaries | ||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | ||
Number of debt instruments | senior_unsecured_note | 3 |
Combined Guarantor Subsidiaries - Summary of Significant Accounting Policies - Narrative (Details) - USD ($) |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|||
Condensed Financial Statements, Captions [Line Items] | |||||
Restricted cash related to mortgage escrows | [1] | $ 24,282,000 | $ 31,977,000 | ||
Net deferred financing costs | 20,071,000 | ||||
Guarantor Subsidiaries | |||||
Condensed Financial Statements, Captions [Line Items] | |||||
Amortization of intangible assets | 626,000 | 726,000 | |||
Estimated total net amortization expense of intangible assets for remainder of 2019 | 1,255,000 | ||||
Estimated total net amortization expense of intangible assets in 2020 | 1,195,000 | ||||
Estimated total net amortization expense of intangible assets in 2021 | 1,241,000 | ||||
Estimated total net amortization expense of intangible assets in 2022 | 1,020,000 | ||||
Estimated total net amortization expense of intangible assets in 2023 | 706,000 | ||||
Estimated total net amortization expense of intangible assets in 2024 | 620,000 | ||||
Interest expense capitalized | 95,000 | 188,000 | |||
Restricted cash related to mortgage escrows | 3,856,000 | 2,970,000 | $ 7,139,000 | ||
Net deferred financing costs | 299,000 | 361,000 | |||
Amortization expense related to deferred financing costs | 62,000 | $ 77,000 | |||
Accumulated amortization of deferred financing costs | 1,154,000 | $ 1,092,000 | |||
Income tax provision | $ 0 | ||||
Concentration risk (less than) | 4.40% | ||||
Building | Guarantor Subsidiaries | |||||
Condensed Financial Statements, Captions [Line Items] | |||||
Useful life of property, plant and equipment | 40 years | ||||
Minimum | Improvements | Guarantor Subsidiaries | |||||
Condensed Financial Statements, Captions [Line Items] | |||||
Useful life of property, plant and equipment | 10 years | ||||
Minimum | Equipment and Fixtures | Guarantor Subsidiaries | |||||
Condensed Financial Statements, Captions [Line Items] | |||||
Useful life of property, plant and equipment | 7 years | ||||
Maximum | Improvements | Guarantor Subsidiaries | |||||
Condensed Financial Statements, Captions [Line Items] | |||||
Useful life of property, plant and equipment | 20 years | ||||
Maximum | Equipment and Fixtures | Guarantor Subsidiaries | |||||
Condensed Financial Statements, Captions [Line Items] | |||||
Useful life of property, plant and equipment | 10 years | ||||
Customer Concentration Risk | Sales Revenue, Net | Guarantor Subsidiaries | |||||
Condensed Financial Statements, Captions [Line Items] | |||||
Concentration risk (less than) | 4.10% | ||||
|
Combined Guarantor Subsidiaries - Summary of Significant Accounting Policies - Intangibles and Balance Sheet Classifications (Details) - Guarantor Subsidiaries - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Accounts payable and accrued liabilities: | ||
Cost | $ 27,975 | $ 28,942 |
Accumulated Amortization | (21,683) | (21,805) |
Above-market leases | ||
Intangible lease assets and other assets: | ||
Cost | 12,064 | 12,307 |
Accumulated Amortization | (11,124) | (11,198) |
In-place leases | ||
Intangible lease assets and other assets: | ||
Cost | 44,321 | 46,229 |
Accumulated Amortization | (36,547) | (37,381) |
Tenant relationships | ||
Intangible lease assets and other assets: | ||
Cost | 25,818 | 27,866 |
Accumulated Amortization | $ (4,455) | $ (4,880) |
Combined Guarantor Subsidiaries - Revenues - Contract Balances (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2019 |
|
Change in Contract with Customer, Liability [Roll Forward] | ||
Contract liability | $ 265 | |
Completed performance obligation | (4) | |
Contract obligation | 0 | |
Contract liability | 261 | |
Contract with Customer, Liability [Abstract] | ||
Contract liability | 265 | $ 261 |
Expected Settlement Period | ||
2019 | (99) | |
2020 | (54) | |
2021 | (54) | |
2022 | (54) | |
Guarantor Subsidiaries | ||
Change in Contract with Customer, Liability [Roll Forward] | ||
Contract liability | 79 | |
Completed performance obligation | 0 | |
Contract obligation | 0 | |
Contract liability | 79 | |
Contract with Customer, Liability [Abstract] | ||
Contract liability | $ 79 | 79 |
Expected Settlement Period | ||
2019 | (19) | |
2020 | (20) | |
2021 | (20) | |
2022 | $ (20) |
Combined Guarantor Subsidiaries - Revenues - Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Disaggregation of Revenue [Line Items] | ||
Rental revenues | $ 190,980 | $ 212,729 |
Revenues from contracts with customers (ASC 606): | 5,540 | 6,359 |
Total revenues | 198,030 | 220,200 |
Malls | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 183,864 | 200,715 |
Operating expense reimbursements | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | 2,143 | 2,343 |
Operating expense reimbursements | Malls | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | 2,192 | 2,190 |
Marketing revenues | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | 874 | 1,295 |
Marketing revenues | Malls | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | 876 | 1,294 |
Other revenues | ||
Disaggregation of Revenue [Line Items] | ||
Other revenues | 1,510 | 1,112 |
Guarantor Subsidiaries | ||
Disaggregation of Revenue [Line Items] | ||
Rental revenues | 71,272 | 78,706 |
Revenues from contracts with customers (ASC 606): | 1,588 | 1,676 |
Total revenues | 72,992 | 80,438 |
Guarantor Subsidiaries | Malls | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | 70,400 | 77,661 |
Guarantor Subsidiaries | Operating expense reimbursements | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | 1,151 | 1,168 |
Guarantor Subsidiaries | Operating expense reimbursements | Malls | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | 1,151 | 1,168 |
Guarantor Subsidiaries | Marketing revenues | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | 437 | 508 |
Guarantor Subsidiaries | Marketing revenues | Malls | ||
Disaggregation of Revenue [Line Items] | ||
Revenues from contracts with customers (ASC 606): | 437 | 508 |
Guarantor Subsidiaries | Other revenues | ||
Disaggregation of Revenue [Line Items] | ||
Other revenues | $ 132 | $ 56 |
Combined Guarantor Subsidiaries - Revenues - Remaining Performance Obligations (Details) $ in Thousands |
Mar. 31, 2019
USD ($)
|
---|---|
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 29,101 |
Expected timing of satisfaction of remaining performance obligation | 5 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 53,781 |
Expected timing of satisfaction of remaining performance obligation | 15 years |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2039-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 49,866 |
Expected timing of satisfaction of remaining performance obligation | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: (nil) | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 132,748 |
Guarantor Subsidiaries | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 15,263 |
Expected timing of satisfaction of remaining performance obligation | 5 years |
Guarantor Subsidiaries | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 27,709 |
Expected timing of satisfaction of remaining performance obligation | 15 years |
Guarantor Subsidiaries | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2039-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 34,288 |
Expected timing of satisfaction of remaining performance obligation | |
Guarantor Subsidiaries | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: (nil) | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation | $ 77,260 |
Combined Guarantor Subsidiaries - Revenues - Narrative (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
extension_option
| |
Condensed Financial Statements, Captions [Line Items] | |
Period between increases in fixed rate of arrangements | 5 years |
Number of extension options available (one or more) | 1 |
Period of extension option (50 or more years) | 50 years |
Guarantor Subsidiaries | |
Condensed Financial Statements, Captions [Line Items] | |
Period between increases in fixed rate of arrangements | 5 years |
Number of extension options available (one or more) | 1 |
Period of extension option (50 or more years) | 50 years |
Combined Guarantor Subsidiaries - Leases - Narrative (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
ground_lease
| |
Lessee, Lease, Description [Line Items] | |
Tenant reimbursements period related to certain capital expenditure minimum | 5 years |
Tenant reimbursements period related to certain capital expenditure maximum | 15 years |
Number of ground leases | 8 |
Guarantor Subsidiaries | |
Lessee, Lease, Description [Line Items] | |
Tenant reimbursements period related to certain capital expenditure minimum | 5 years |
Tenant reimbursements period related to certain capital expenditure maximum | 15 years |
Number of ground leases | 1 |
Operating lease renewal term | 5 years |
Lease expense | $ | $ 10 |
Combined Guarantor Subsidiaries - Leases - Components of Rental Revenue (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Rental revenues: | |
Fixed lease payments | $ 159,278 |
Variable lease payments | 31,702 |
Total rental revenues | 190,980 |
Guarantor Subsidiaries | |
Rental revenues: | |
Fixed lease payments | 60,247 |
Variable lease payments | 11,025 |
Total rental revenues | $ 71,272 |
Combined Guarantor Subsidiaries - Leases - Future Minimum Lease Payments to be Received (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Operating Lease Payments to be Received after Adoption of ASC 842 | ||
2019 | $ 423,830 | |
2020 | 516,103 | |
2021 | 450,880 | |
2022 | 370,764 | |
2023 | 304,864 | |
2024 | 236,102 | |
Thereafter | 640,986 | |
Total undiscounted lease payments | 2,943,529 | |
Operating Lease Payments Receivable before Adoption of ASC 842 | ||
2019 | $ 497,014 | |
2020 | 426,228 | |
2021 | 363,482 | |
2022 | 294,441 | |
2023 | 234,191 | |
Thereafter | 531,792 | |
Total | 2,347,148 | |
Guarantor Subsidiaries | ||
Operating Lease Payments to be Received after Adoption of ASC 842 | ||
2019 | 155,169 | |
2020 | 185,745 | |
2021 | 164,309 | |
2022 | 134,017 | |
2023 | 112,541 | |
2024 | 85,865 | |
Thereafter | 248,223 | |
Total undiscounted lease payments | $ 1,085,869 | |
Operating Lease Payments Receivable before Adoption of ASC 842 | ||
2019 | 184,923 | |
2020 | 154,944 | |
2021 | 133,093 | |
2022 | 107,092 | |
2023 | 86,957 | |
Thereafter | 193,324 | |
Total | $ 860,333 |
Combined Guarantor Subsidiaries - Leases - Right-of-Use Asset and Lease Liability Activity (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
ROU Asset | |
Balance as of January 1, 2019 | $ 4,160 |
Cash reduction | (120) |
Noncash increase | 7 |
Balance as of March 31, 2019 | 4,047 |
Lease Liability | |
Balance as of January 1, 2019 | 4,074 |
Cash reduction | (120) |
Noncash increase | 70 |
Balance as of March 31, 2019 | 4,024 |
Guarantor Subsidiaries | |
ROU Asset | |
Balance as of January 1, 2019 | 493 |
Cash reduction | (10) |
Noncash increase | 7 |
Balance as of March 31, 2019 | 490 |
Lease Liability | |
Balance as of January 1, 2019 | 490 |
Cash reduction | (10) |
Noncash increase | 10 |
Balance as of March 31, 2019 | $ 490 |
Combined Guarantor Subsidiaries - Leases - Maturities of Operating Lease Payments (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
---|---|---|---|
Undiscounted Future Operating Lease Payments after Adoption of ASC 842 | |||
2019 | $ 433 | ||
2020 | 560 | ||
2021 | 608 | ||
2022 | 331 | ||
2023 | 284 | ||
2024 | 263 | ||
Thereafter | 12,019 | ||
Total undiscounted lease payments | 14,498 | ||
Less imputed interest | (10,474) | ||
Lease Liability | 4,024 | $ 4,074 | $ 0 |
Future Minimum Payments Due under Operating Leases before Adoption of ASC 842 | |||
2019 | 504 | ||
2020 | 610 | ||
2021 | 517 | ||
2022 | 321 | ||
2023 | 281 | ||
Thereafter | 12,297 | ||
Future minimum payments due under operating leases | 14,530 | ||
Guarantor Subsidiaries | |||
Undiscounted Future Operating Lease Payments after Adoption of ASC 842 | |||
2019 | 30 | ||
2020 | 41 | ||
2021 | 41 | ||
2022 | 41 | ||
2023 | 41 | ||
2024 | 41 | ||
Thereafter | 1,949 | ||
Total undiscounted lease payments | 2,184 | ||
Less imputed interest | (1,694) | ||
Lease Liability | $ 490 | 490 | $ 0 |
Future Minimum Payments Due under Operating Leases before Adoption of ASC 842 | |||
2019 | 41 | ||
2020 | 41 | ||
2021 | 41 | ||
2022 | 41 | ||
2023 | 41 | ||
Thereafter | 1,990 | ||
Future minimum payments due under operating leases | $ 2,195 |
Combined Guarantor Subsidiaries - Fair Value Measurements - Narrative (Details) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019
USD ($)
mall
|
Mar. 31, 2018
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Fair value of long-term debt | $ 3,556,573 | $ 3,740,431 | |
Loss on impairment | $ 24,825 | $ 18,061 | |
Number of malls with impairment | mall | 2 | ||
Guarantor Subsidiaries | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Fair value of long-term debt | $ 257,032 | $ 319,222 | |
Loss on impairment | $ 22,770 | $ 0 | |
Number of malls with impairment | mall | 1 |
Combined Guarantor Subsidiaries - Fair Value Measurements - Assets Measured at Fair Value on Nonrecurring Basis (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-lived assets | $ 70,800 | $ 0 |
Total Loss on Impairment | 24,825 | 18,061 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-lived assets | 0 | 0 |
Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-lived assets | 0 | 0 |
Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-lived assets | 70,800 | 0 |
Guarantor Subsidiaries | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-lived assets | 56,300 | |
Total Loss on Impairment | 22,770 | $ 0 |
Guarantor Subsidiaries | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-lived assets | 0 | |
Guarantor Subsidiaries | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-lived assets | 0 | |
Guarantor Subsidiaries | Significant Unobservable Inputs (Level 3) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Long-lived assets | $ 56,300 |
Combined Guarantor Subsidiaries - Fair Value Measurements - Impairment of Real Estate Properties (Details) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
|
Mar. 31, 2018
USD ($)
|
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Loss on Impairment | $ 24,825 | $ 18,061 |
Fair Value | 70,800 | 0 |
Greenbrier Mall | Malls | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Loss on Impairment | 22,770 | |
Fair Value | 56,300 | |
Equity method investments at fair value | $ 56,300 | |
Cap Rate | Greenbrier Mall | Malls | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value measurement input | 0.110 | |
Discount Rate | Greenbrier Mall | Malls | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value measurement input | 0.115 | |
Guarantor Subsidiaries | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Loss on Impairment | $ 22,770 | $ 0 |
Fair Value | 56,300 | |
Guarantor Subsidiaries | Greenbrier Mall | Malls | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Loss on Impairment | 22,770 | |
Fair Value | 56,300 | |
Equity method investments at fair value | $ 56,300 | |
Holding period | 10 years | |
Guarantor Subsidiaries | Cap Rate | Greenbrier Mall | Malls | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value measurement input | 0.110 | |
Guarantor Subsidiaries | Discount Rate | Greenbrier Mall | Malls | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Fair value measurement input | 0.115 |
Combined Guarantor Subsidiaries - Dispositions - Summary (Details) $ in Thousands |
3 Months Ended | 12 Months Ended | 24 Months Ended | ||
---|---|---|---|---|---|
Mar. 31, 2019
USD ($)
|
Mar. 31, 2018
USD ($)
outparcel
|
Dec. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Gain on Extinguishment of Debt | $ 71,722 | $ 0 | |||
Loss on impairment | 24,825 | 18,061 | |||
Gain on sales of real estate assets | 228 | 4,371 | |||
Acadania Mall | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Loss on impairment | $ 1,593 | $ 43,007 | |||
Non-cash default interest expense | 305 | ||||
Non-recourse loans on operating properties | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Balance of Non-recourse Debt | 163,476 | ||||
Gain on Extinguishment of Debt | 71,722 | ||||
Non-recourse loans on operating properties | Malls | Acadania Mall | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Balance of Non-recourse Debt | 119,760 | ||||
Gain on Extinguishment of Debt | 61,796 | ||||
Guarantor Subsidiaries | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Gain on Extinguishment of Debt | 61,796 | 0 | |||
Loss on impairment | 22,770 | 0 | |||
Gain on sales of real estate assets | 0 | $ 1,718 | |||
Number of outparcels sold | outparcel | 4 | ||||
Guarantor Subsidiaries | Acadania Mall | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Loss on impairment | $ 43,007 | ||||
Non-cash default interest expense | 305 | ||||
Guarantor Subsidiaries | Non-recourse loans on operating properties | Malls | Acadania Mall | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Balance of Non-recourse Debt | 119,760 | ||||
Gain on Extinguishment of Debt | $ 61,796 |
Combined Guarantor Subsidiaries - Mortgage Notes Payable, Net - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Debt Instrument [Line Items] | |||
Principal maturities for remainder of fiscal year | $ 217,655 | ||
Weighted-average maturity period | 4 years 5 months | 3 years 8 months | |
Guarantor Subsidiaries | |||
Debt Instrument [Line Items] | |||
Principal maturities for remainder of fiscal year | $ 71,187 | ||
Weighted-average maturity period | 2 years 1 month 10 days | 1 year 29 days | |
Guarantor Subsidiaries | Greenbrier Mall | |||
Debt Instrument [Line Items] | |||
Principal maturities for remainder of fiscal year | $ 67,201 | ||
Guarantor Subsidiaries | Principal Amortization | |||
Debt Instrument [Line Items] | |||
Principal maturities for remainder of fiscal year | $ 3,986 | ||
Guarantor Subsidiaries | Mortgages | |||
Debt Instrument [Line Items] | |||
Total Outstanding | $ 37,295 | ||
Interest rate (as a percent) | 5.75% |
Combined Guarantor Subsidiaries - Mortgage Notes Payable, Net - Net Mortgage Notes Payable (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 5.23% | 5.10% |
Unamortized deferred financing costs | $ (20,071) | |
Total mortgage and other indebtedness, net | 3,922,212 | |
Guarantor Subsidiaries | ||
Debt Instrument [Line Items] | ||
Unamortized deferred financing costs | (299) | $ (361) |
Total mortgage and other indebtedness, net | $ 256,078 | 377,996 |
Guarantor Subsidiaries | Mortgages | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 5.24% | |
Mortgage notes payable | $ 256,377 | 378,357 |
Acadiana Mall | Guarantor Subsidiaries | Mortgages | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 5.67% | |
Mortgage notes payable | $ 0 | 119,760 |
Greenbrier Mall | Guarantor Subsidiaries | Mortgages | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 5.41% | |
Mortgage notes payable | $ 67,201 | 68,101 |
Park Plaza Mall | Guarantor Subsidiaries | Mortgages | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 5.28% | |
Mortgage notes payable | $ 80,564 | 81,287 |
Arbor Place Mall | Guarantor Subsidiaries | Mortgages | ||
Debt Instrument [Line Items] | ||
Weighted-average interest rate (as a percent) | 5.10% | |
Mortgage notes payable | $ 108,612 | $ 109,209 |
Combined Guarantor Subsidiaries - Mortgage Notes Payable, Net - Scheduled Principal Amortization and Balloon Payments (Details) - USD ($) $ in Thousands |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Condensed Financial Statements, Captions [Line Items] | ||
2019 | $ 217,655 | |
2020 | 175,486 | |
2021 | 474,912 | |
2022 | 461,585 | |
Mortgage and other indebtedness | 3,952,947 | |
Unamortized deferred financing costs | (20,071) | |
Total mortgage and other indebtedness, net | 3,922,212 | |
Guarantor Subsidiaries | ||
Condensed Financial Statements, Captions [Line Items] | ||
2019 | 71,187 | |
2020 | 5,574 | |
2021 | 77,844 | |
2022 | 101,772 | |
Mortgage and other indebtedness | 256,377 | |
Unamortized deferred financing costs | (299) | $ (361) |
Total mortgage and other indebtedness, net | $ 256,078 | $ 377,996 |
Combined Guarantor Subsidiaries - Mortgage and Other Notes Receivable - Summary (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|||
Mortgage and Other Notes Receivable [Line Items] | ||||
Mortgage and other notes receivable | [1] | $ 7,406 | $ 7,672 | |
Mortgages | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Mortgage and other notes receivable | 4,807 | 4,884 | ||
Other Notes Receivable | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Mortgage and other notes receivable | 2,599 | 2,788 | ||
Guarantor Subsidiaries | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Mortgage and other notes receivable | 76,729 | 76,747 | ||
Guarantor Subsidiaries | Mortgages | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Mortgage and other notes receivable | $ 75,499 | $ 75,517 | ||
Guarantor Subsidiaries | Mortgages | The Promenade | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Interest rate (as a percent) | 5.00% | 5.00% | ||
Mortgage and other notes receivable | $ 47,514 | $ 47,514 | ||
Guarantor Subsidiaries | Mortgages | Hamilton Corner | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Interest rate (as a percent) | 5.67% | 5.67% | ||
Mortgage and other notes receivable | $ 14,295 | $ 14,295 | ||
Guarantor Subsidiaries | Mortgages | Forum at Grandview | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Interest rate (as a percent) | 5.25% | 5.25% | ||
Mortgage and other notes receivable | $ 12,400 | $ 12,400 | ||
Guarantor Subsidiaries | Mortgages | Village Square | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Interest rate (as a percent) | 4.00% | 4.00% | ||
Mortgage and other notes receivable | $ 1,290 | $ 1,308 | ||
Guarantor Subsidiaries | Other Notes Receivable | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Mortgage and other notes receivable | $ 1,230 | $ 1,230 | ||
Guarantor Subsidiaries | Other Notes Receivable | Community improvement district | ||||
Mortgage and Other Notes Receivable [Line Items] | ||||
Interest rate (as a percent) | 7.50% | 7.50% | ||
Mortgage and other notes receivable | $ 1,230 | $ 1,230 | ||
|
Combined Guarantor Subsidiary - Related Party Transactions - Narrative (Details) - CBL Management - Guarantor Subsidiaries - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Condensed Financial Statements, Captions [Line Items] | |||
Management fee expense | $ 1,491 | $ 1,551 | |
Amounts payable for management fees | $ 167 | $ 176 | |
Minimum | |||
Condensed Financial Statements, Captions [Line Items] | |||
Management fee (as a percent) | 2.50% | ||
Maximum | |||
Condensed Financial Statements, Captions [Line Items] | |||
Management fee (as a percent) | 3.50% |
Combined Guarantor Subsidiary - Segment Information - Summary (Details) - USD ($) $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|||
Segment Reporting Information [Line Items] | |||||
Revenues | $ 198,030 | $ 220,200 | |||
Property operating expenses | (61,675) | (67,853) | |||
Interest expense | (53,998) | (53,767) | |||
Gain on sales of real estate assets | 228 | 4,371 | |||
Segment profit (loss) | 82,585 | 102,857 | |||
Depreciation and amortization expense | (69,792) | (71,750) | |||
Interest and other income | 489 | 213 | |||
Gain on extinguishment of debt | 71,722 | 0 | |||
Loss on impairment | (24,825) | (18,061) | |||
Net income | (46,809) | (661) | |||
Capital expenditures | 28,139 | 36,651 | |||
Total Assets | [1] | 5,161,948 | $ 5,340,853 | ||
Malls | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 183,864 | 200,715 | |||
Property operating expenses | (57,181) | (63,829) | |||
Interest expense | (23,190) | (25,774) | |||
Gain on sales of real estate assets | 0 | 0 | |||
Segment profit (loss) | 103,493 | 111,063 | |||
Capital expenditures | 28,024 | 34,302 | |||
Total Assets | 4,691,869 | 4,868,141 | |||
All Other | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 14,166 | 19,485 | |||
Property operating expenses | (4,494) | (4,024) | |||
Interest expense | (30,808) | (27,993) | |||
Gain on sales of real estate assets | 228 | 4,371 | |||
Segment profit (loss) | (20,908) | (8,206) | |||
Capital expenditures | 115 | 2,349 | |||
Total Assets | 470,079 | 472,712 | |||
Guarantor Subsidiaries | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 72,992 | 80,438 | |||
Property operating expenses | (22,765) | (24,185) | |||
Interest expense | (3,985) | (5,990) | |||
Gain on sales of real estate assets | 0 | 1,718 | |||
Segment profit (loss) | 46,242 | 51,981 | |||
Depreciation and amortization expense | (24,101) | (24,499) | |||
Interest and other income | 942 | 2,133 | |||
Gain on extinguishment of debt | 61,796 | 0 | |||
Loss on impairment | (22,770) | 0 | |||
Net income | 62,109 | 29,615 | |||
Capital expenditures | 2,618 | 9,349 | |||
Total Assets | 1,724,096 | 1,841,860 | |||
Guarantor Subsidiaries | Malls | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 70,400 | 77,661 | |||
Property operating expenses | (22,169) | (23,553) | |||
Interest expense | (3,985) | (5,990) | |||
Gain on sales of real estate assets | 1,718 | ||||
Segment profit (loss) | 44,246 | 49,836 | |||
Capital expenditures | 2,618 | 9,163 | |||
Total Assets | 1,578,912 | 1,697,211 | |||
Guarantor Subsidiaries | All Other | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 2,592 | 2,777 | |||
Property operating expenses | (596) | (632) | |||
Interest expense | 0 | 0 | |||
Gain on sales of real estate assets | 0 | ||||
Segment profit (loss) | 1,996 | 2,145 | |||
Capital expenditures | 0 | $ 186 | |||
Total Assets | $ 145,184 | $ 144,649 | |||
|
Combined Guarantor Subsidiary - Contingencies - Narrative (Details) |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Condensed Financial Statements, Captions [Line Items] | |
Environmental liability insurance, maximum coverage per incident (up to) | $ 10,000,000 |
Environmental liability insurance, annual coverage limit (up to) | 50,000,000 |
Guarantor Subsidiaries | |
Condensed Financial Statements, Captions [Line Items] | |
Environmental liability insurance, maximum coverage per incident (up to) | 10,000,000 |
Environmental liability insurance, annual coverage limit (up to) | $ 50,000,000 |
Combined Guarantor Subsidiary - Noncash Investing and Financing Activities - Summary (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Real Estate Investments, Net [Abstract] | |||
Additions to real estate assets accrued but not yet paid | $ 19,757 | $ 2,071 | |
Lease liabilities arising from obtaining right-of-use assets | 4,024 | 0 | $ 4,074 |
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation Disclosure [Abstract] | |||
Decrease in real estate assets | (60,059) | 0 | |
Decrease in mortgage and other indebtedness | 124,111 | 0 | |
Decrease in operating assets and liabilities | 9,333 | 0 | |
Decrease in intangible lease and other assets | (1,663) | 0 | |
Guarantor Subsidiaries | |||
Real Estate Investments, Net [Abstract] | |||
Additions to real estate assets accrued but not yet paid | 2,583 | 6,024 | |
Distribution of properties to owners | 8,835 | 0 | |
Lease liabilities arising from obtaining right-of-use assets | 490 | 0 | $ 490 |
SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation Disclosure [Abstract] | |||
Decrease in real estate assets | (60,058) | 0 | |
Decrease in mortgage and other indebtedness | 115,271 | 0 | |
Decrease in operating assets and liabilities | 8,246 | 0 | |
Decrease in intangible lease and other assets | $ (1,663) | $ 0 |
Label | Element | Value |
---|---|---|
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | ||
Contract with Customer, Liability, Expected Revenue Recognized, Year Five | cbl_ContractwithCustomerLiabilityExpectedRevenueRecognizedYearFive | $ 0 |
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 70,380,000 |
CBL & Associates Limited Partnership [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 70,380,000 |
CBL & Associates Limited Partnership [Member] | Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 70,380,000 |
CBL & Associates Limited Partnership [Member] | General Partner [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 722,000 |
CBL & Associates Limited Partnership [Member] | Limited Partner [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 69,658,000 |
Parent [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | 70,380,000 |
Accumulated Distributions in Excess of Net Income [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 70,380,000 |
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