# CBL & ASSOCIATES PROPERTIES INC (CBL) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from CBL & ASSOCIATES PROPERTIES INC's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/910612/000095017024023267/cbl-20231231.htm
Accession: 0000950170-24-023267
Filing date: 2024-02-29
Report date: 2023-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/CBL/
All MD&A years: /company/CBL/mda/
Previous year: /company/CBL/mda/fy2022/ (FY 2022)
Next year: /company/CBL/mda/fy2024/ (FY 2024)

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes that are included in this annual report. Capitalized terms used, but not defined, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations have the same meanings as defined in the notes to the consolidated financial statements.

This section of this annual report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our annual report on Form 10-K for the year ended December 31, 2022 for a similar discussion and for the financial information for the Successor period from November 1, 2021 through December 31, 2021 and the Predecessor period from January 1, 2021 through October 31, 2021.

Fresh Start Accounting

Upon emergence from bankruptcy, we qualified for and adopted fresh start accounting in accordance with Accounting Standards Codification 852, which resulted in our becoming a new entity for financial reporting purposes. As a result, our financial results for the years ended December 31, 2023 and 2022 and the period from November 1, 2021 through December 31, 2021 are referred to as those of the "Successor." Our financial results for the period from January 1, 2021 through October 31, 2021 are referred to as those of the “Predecessor." Our results of operations as reported in our consolidated financial statements for these periods are prepared in accordance with GAAP. See Note 19 for additional information.

Executive Overview

We are a self-managed, self-administered, fully integrated REIT that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, outlet centers, lifestyle centers, open-air centers and other properties. We own interests in 91 properties, consisting of 47 malls, 29 open-air centers, five outlet centers, five lifestyle centers and five other properties, including single-tenant and multi-tenant outparcels. Our shopping centers are located in 22 states, and are primarily in the southeastern and midwestern United States. We have elected to be taxed as a REIT for federal income tax purposes.

We conduct substantially all our business through the Operating Partnership. 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. See Item 2 for a description of our properties owned and under development as of December 31, 2023.

The following summarizes our net income (loss) and net income (loss) attributable to common shareholders (in thousands):

[[GREPCENT_TABLE]]
[["","","Successor"],["","","Year Ended December 31,"],["","","2023","","","2022"],["Net income (loss)","","$","3,204","","","$","(99,515",")"],["Net income (loss) attributable to common shareholders","","$","5,433","","","$","(96,019",")"]]
[[/GREPCENT_TABLE]]

Significant items that affected comparability between the years include:

•
Items decreasing net income for the year ended December 31, 2023 compared to the prior-year period include:

o
Rental revenues were $28.3 million lower;

o
Equity in earnings was $7.9 million lower;

o
Gain on extinguishment of debt was $4.1 million lower.

•
Items increasing net income for the year ended December 31, 2023 compared to the prior-year period include:

o
Depreciation and amortization was $65.8 million lower;

o
Interest expense was $44.4 million lower;

o
Gain on deconsolidation was $11.6 higher;

o
Interest and other income was $8.3 million higher;

o
General and administrative expense was $3.1 million lower.

45

Our focus is on continuing to execute our strategy to improve occupancy, drive rent growth and transform the offerings available at our diverse portfolio of properties to include a targeted mix of retail, service, dining, entertainment and other non-retail uses, primarily through the re-tenanting of former anchor locations as well as diversification of in-line tenancy. This operational strategy is also supported by our balance sheet strategy. This strategy focuses on reducing overall debt, extending our debt maturity schedule and lowering our overall cost of borrowings to limit maturity risk, as well as improving net cash flow and enhancing enterprise value. While the industry and our Company continue to face challenges, some of which may not be in our control, we believe that the strategies in place to improve occupancy, diversify our tenant mix and redevelop our properties will contribute to stabilization of our portfolio and revenues in future years.

Voluntary Reorganization Under Chapter 11

Beginning on November 1, 2020, CBL and the Operating Partnership, together with the Debtors, filed the Chapter 11 Cases under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Bankruptcy Court authorized the Debtors to continue to operate their businesses and manage their properties as debtors-in-possession pursuant to the Bankruptcy Code.

In connection with the Chapter 11 Cases, on August 11, 2021, the Bankruptcy Court entered an order, Docket No.1397 (Confirmation Order), confirming the Debtors’ Plan.

On the Effective Date, the conditions to effectiveness of the Plan were satisfied and the Debtors emerged from the Chapter 11 Cases. The Company filed a notice of the Effective Date of the Plan with the Bankruptcy Court on November 1, 2021. See Note 18 and Note 19 to our consolidated financial statements for more information.

Results of Operations

Properties that were in operation for the entire year during both 2023 and 2022 are referred to as the “2023 Comparable Properties.” The tables below summarize deconsolidations and dispositions of properties that impact the results of operations of the Successor and Predecessor periods.

Deconsolidations

[[GREPCENT_TABLE]]
[["Property","","Location","","Date of Deconsolidation"],["Greenbrier Mall (1)(2)","","Chesapeake, VA","","March 2022"],["Alamance Crossing East (1)","","Burlington, NC","","February 2023"],["WestGate Mall (1)","","Spartanburg, SC","","September 2023"]]
[[/GREPCENT_TABLE]]

(1)
We deconsolidated the property due to a loss of control when the property was placed into receivership in connection with the foreclosure process.

(2)
The foreclosure process was completed in October 2022.

Comparison of the Results of Operations for the Successor Years Ended December 31, 2023 and 2022

Revenues

(in thousands)

[[GREPCENT_TABLE]]
[["","","Successor"],["","","Year Ended December 31,","","","","","","Comparable Properties"],["","","2023","","","2022","","","Change","","","Core","","","Non-core","","","Deconsolidation","","","Dispositions"],["Rental revenues","","$","513,957","","","$","542,247","","","$","(28,290",")","","$","(18,807",")","","$","66","","","$","(9,182",")","","$","(367",")"],["Management, development and leasing fees","","","7,917","","","","7,158","","","","759","","","","759","","","","\u2014","","","","\u2014","","","","\u2014"],["Other","","","13,412","","","","13,606","","","","(194",")","","","84","","","","\u2014","","","","(273",")","","","(5",")"],["Total revenues","","$","535,286","","","$","563,011","","","$","(27,725",")","","$","(17,964",")","","$","66","","","$","(9,455",")","","$","(372",")"]]
[[/GREPCENT_TABLE]]

Rental revenues from the Comparable Properties were lower primarily due to lower percentage rents and an unfavorable variance in the estimate for uncollectable revenues as compared to the prior year due to recoveries recognized in the prior year.

46

Operating Expenses

(in thousands)

[[GREPCENT_TABLE]]
[["","","Successor"],["","","Year Ended December 31,","","","","","","Comparable Properties"],["","","2023","","","2022","","","Change","","","Core","","","Non-core","","","Deconsolidation","","","Dispositions"],["Property operating","","$","(90,996",")","","$","(92,126",")","","$","1,130","","","$","(740",")","","$","(42",")","","$","1,789","","","$","123"],["Real estate taxes","","","(54,807",")","","","(57,119",")","","","2,312","","","","1,519","","","","(133",")","","","903","","","","23"],["Maintenance and repairs","","","(41,336",")","","","(42,485",")","","","1,149","","","","410","","","","(30",")","","","767","","","","2"],["Property operating expenses","","","(187,139",")","","","(191,730",")","","","4,591","","","","1,189","","","","(205",")","","","3,459","","","","148"],["Depreciation and amortization","","","(190,505",")","","","(256,310",")","","","65,805","","","","62,622","","","","(250",")","","","3,446","","","","(13",")"],["General and administrative","","","(64,066",")","","","(67,215",")","","","3,149","","","","3,149","","","","\u2014","","","","\u2014","","","","\u2014"],["Loss on impairment","","","\u2014","","","","(252",")","","","252","","","","\u2014","","","","\u2014","","","","\u2014","","","","252"],["Litigation settlement","","","2,310","","","","304","","","","2,006","","","","2,006","","","","\u2014","","","","\u2014","","","","\u2014"],["Other","","","(221",")","","","(834",")","","","613","","","","613","","","","\u2014","","","","\u2014","","","","\u2014"],["Total operating expenses","","$","(439,621",")","","$","(516,037",")","","$","76,416","","","$","69,579","","","$","(455",")","","$","6,905","","","$","387"]]
[[/GREPCENT_TABLE]]

Total property operating expenses at the Comparable Properties decreased primarily due to lower real estate taxes, as well as lower utility, janitorial and security costs. The decrease was partially offset by the completion of previously delayed maintenance projects and the timing of certain third-party contracts.

Depreciation and amortization expense at the Comparable Properties decreased primarily due to assets becoming fully depreciated or amortized since the prior-year period related to the shorter useful lives that were implemented upon the adoption of fresh start accounting when we emerged from bankruptcy.

General and administrative expenses decreased primarily due to professional fees associated with loan modifications and extensions, and fees incurred to obtain credit ratings on our secured term loan in the prior-year period. The decrease was partially offset by higher compensation and share-based compensation expenses as compared to the prior-year period.

Litigation settlement expense decreased during the year ended December 31, 2023 as compared to the prior-year period. The decrease results from a revision to the estimate of amounts to be paid out under the terms of the class action settlement agreement that was executed in 2019.

Other Income and Expenses

Interest and other income increased $8.3 million during the year ended December 31, 2023 as compared to the prior-year period primarily due to holding U.S. Treasury securities that carry higher interest rates in the current-year period.

Interest expense decreased $44.4 million during the year ended December 31, 2023 as compared to the prior-year period. The decrease was primarily due to $87.0 million less accretion of property-level debt discounts as certain discounts became fully accreted since the prior-year period. The property-level debt discounts were recognized in conjunction with recording our property-level debt at fair value upon the adoption of fresh start accounting. Also, the decrease includes $17.3 million of interest expense in the prior-year period on the secured notes that were fully redeemed in 2022. The decrease in interest expense was partially offset by an increase of $38.4 million in the current period related to the open-air centers and outparcels loan that was entered into during the second quarter of 2022 and higher interest expense on the term loan due to increased variable rates. Additionally, default interest was $1.0 million during 2023, which represented an increase of $21.2 million as compared to the prior-year period due to a reversal in 2022 of previously recognized default interest expense when forbearance/waiver agreements were obtained.

For the year ended December 31, 2023, we recorded a $3.3 million gain on extinguishment of debt related to a reduction in the outstanding principal of the loan secured by The Outlet Shoppes at Laredo. For the year ended December 31, 2022, we recorded a $7.3 million gain on extinguishment of debt related to a reduction in the outstanding principal of the loan secured by The Outlet Shoppes at Gettysburg.

For the year ended December 31, 2023, we recorded a $47.9 million gain on deconsolidation related to Alamance Crossing East and WestGate Mall. These properties were deconsolidated due to a loss of control when they were placed into receivership in connection with the foreclosure process. For the year ended December 31, 2022, we recorded a $36.3 million gain on deconsolidation related to Greenbrier Mall that was deconsolidated due to a loss of control when the mall was placed into receivership in connection with the foreclosure process.

47

Equity in earnings of unconsolidated affiliates decreased $7.9 million for the year ended December 31, 2023 as compared to the prior-year period. The decrease primarily relates to an increase in contributions made by us during the current-year period and a decline in distributions as compared to the prior-year period attributable to certain investments in unconsolidated affiliates in which our investment is below zero.

Non-GAAP Measure

Same-center Net Operating Income

NOI is a supplemental non-GAAP measure of the operating performance of our shopping centers and other properties. We define NOI as property operating revenues (rental revenues, tenant reimbursements and other income) less property operating expenses (property operating, real estate taxes and maintenance and repairs). We also exclude the impact of lease termination fees and certain non-cash items such as straight-line rents and reimbursements, write-offs of landlord inducements and net amortization of acquired above and below market leases.

We compute NOI based on the Operating Partnership's pro rata share of both consolidated and unconsolidated properties. We believe that presenting NOI and same-center NOI (described below) based on our Operating Partnership’s pro rata share of both consolidated and unconsolidated properties is useful since we conduct substantially all our business through our Operating Partnership and, therefore, it reflects the performance of our properties in absolute terms regardless of the ratio of ownership interests of our common shareholders and the noncontrolling interest in the Operating Partnership. Our definition of NOI may be different than that used by other companies, and accordingly, our calculation of NOI may not be comparable to that of other companies.

Since NOI includes only those revenues and expenses related to the operations of our shopping center properties, we believe that same-center NOI provides a measure that reflects trends in occupancy rates, rental rates, sales at our properties and operating costs and the impact of those trends on our results of operations. Our calculation of same-center NOI excludes lease termination income, straight-line rent adjustments, and amortization of above- and below-market lease intangibles in order to enhance the comparability of results from one period to another.

We include a property in our same-center pool when we have owned all or a portion of the property since January 1 of the preceding calendar year and it has been in operation for both the entire preceding calendar year ended December 31, 2022 and the current year ended December 31, 2023. New properties are excluded from same-center NOI, until they meet these criteria. Properties excluded from the same-center pool, which would otherwise meet these criteria, are properties where we intend to renegotiate the terms of the debt secured by the related property or return the property to the lender. Alamance Crossing East and WestGate Mall were classified as Excluded Properties as of December 31, 2023.

48

Due to the exclusions noted above, same-center NOI should only be used as a supplemental measure of our performance and not as an alternative to GAAP operating income (loss) or net income (loss). A reconciliation of our same-center NOI to net income (loss) for the years ended December 31, 2023 and 2022 is as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","Successor"],["","","Year Ended December 31,"],["","","2023","","2022"],["Net income (loss)","","$3,204","","$(99,515)"],["Adjustments: (1)"],["Depreciation and amortization, including our share of unconsolidated affiliates and net of noncontrolling interests' share","","205,471","","273,625"],["Interest expense, including our share of unconsolidated affiliates and net of noncontrolling interests' share","","238,616","","297,713"],["Abandoned projects expense","","39","","834"],["Gain on sales of real estate assets, net of taxes and noncontrolling interests' share","","(4,839)","","(5,345)"],["Gain on sales of real estate assets of unconsolidated affiliates","","(768)","","(1,036)"],["Adjustment for unconsolidated affiliates with negative investment","","(7,242)","","(37,645)"],["Gain on extinguishment of debt","","(3,270)","","(7,344)"],["Gain on deconsolidation","","(47,879)","","(36,250)"],["Loss on available-for-sale securities","","\u2014","","39"],["Loss on impairment","","\u2014","","252"],["Litigation settlement","","(2,310)","","(304)"],["Reorganization items, net","","\u2014","","(298)"],["Income tax provision","","894","","3,079"],["Lease termination fees","","(3,504)","","(5,115)"],["Straight-line rent and above- and below-market lease amortization","","13,896","","8,233"],["Net loss attributable to noncontrolling interests in other consolidated subsidiaries","","3,344","","5,999"],["General and administrative expenses","","64,066","","67,215"],["Management fees and non-property level revenues","","(19,087)","","(4,433)"],["Operating Partnership's share of property NOI","","440,631","","459,704"],["Non-comparable NOI","","(2,119)","","(14,328)"],["Total same-center NOI","","$438,512","","$445,376"]]
[[/GREPCENT_TABLE]]

(1) Adjustments are based on our Operating Partnership's pro rata ownership share, including our share of unconsolidated affiliates and excluding noncontrolling interests' share of consolidated properties.

Same-center NOI decreased 1.5% for the Successor year ended December 31, 2023 as compared to the prior-year period. The $6.9 million decrease for the year ended December 31, 2023 compared to the prior-year period primarily consisted of a $9.9 million decrease in revenues offset by a $3.0 million decrease in operating expenses. Rental revenues were $9.6 million lower primarily due to decreased percentage rents and an unfavorable variance in the estimate for uncollectable revenues in the current-year period as compared to the prior-year period. Property operating expenses decreased primarily due to lower real estate taxes, as well as lower utility, janitorial and security costs. The decrease was partially offset by the completion of previously delayed maintenance projects and the timing of certain third-party contracts.

Operational Review

The shopping center business is, to some extent, seasonal in nature with tenants typically achieving the highest levels of sales during the fourth quarter due to the holiday season, which generally results in higher percentage rents in the fourth quarter. Additionally, the Malls earn a large portion of their rents from short-term tenants during the holiday period. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year.

We derive the majority of our revenues from the Malls. The sources of our revenues by property type were as follows:

[[GREPCENT_TABLE]]
[["","","Successor"],["","","Year Ended December 31,"],["","","2023","","","2022"],["Malls, lifestyle centers and outlet centers","","","85.6","%","","","86.1","%"],["All Other Properties","","","14.4","%","","","13.9","%"]]
[[/GREPCENT_TABLE]]

49

Inline and Adjacent Freestanding Store Sales

Inline and adjacent freestanding store sales include reporting mall, lifestyle center and outlet center tenants of 10,000 square feet or less for the Malls and exclude license agreements, which are retail leases that are temporary or short-term in nature and generally last more than three months but less than twelve months. The following is a comparison of our same-center sales per square foot for mall, lifestyle center and outlet center tenants of 10,000 square feet or less (Excluded Properties are not included in sales metrics):

[[GREPCENT_TABLE]]
[["","","Sales Per Square Foot for the Trailing Twelve Months Ended December 31,"],["","","2023","","","2022","","","% Change"],["Malls, lifestyle centers and outlet centers same-center sales per square foot","","$","416","","","$","435","","","(4.4)%"]]
[[/GREPCENT_TABLE]]

In-Line Store Occupancy

Our portfolio in-line store occupancy is summarized in the below table (Excluded Properties are not included in occupancy metrics). Occupancy for the Malls represents percentage of in-line gross leasable area under 20,000 square feet occupied. Occupancy for open-air centers represents percentage of gross leasable area occupied.

[[GREPCENT_TABLE]]
[["","","As of December 31,"],["","","2023","","2022"],["Total portfolio","","90.9%","","91.0%"],["Malls, lifestyle centers and outlet centers:"],["Total malls","","89.3%","","89.1%"],["Total lifestyle centers","","91.5%","","92.7%"],["Total outlet centers","","91.9%","","90.8%"],["Total same-center malls, lifestyle centers and outlet centers","","89.8%","","89.6%"],["All Other Properties:"],["Total open-air centers","","95.6%","","95.3%"],["Total other","","78.2%","","93.0%"]]
[[/GREPCENT_TABLE]]

Leasing

The following is a summary of the total square feet of leases signed in the year ended December 31, 2023 as compared to the prior year:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","","2022"],["Operating portfolio:"],["New leases","","","1,485,375","","","","1,257,659"],["Renewal leases","","","2,865,969","","","","2,855,587"],["Development portfolio:"],["New leases","","","25,151","","","","15,703"],["Total leased","","","4,376,495","","","","4,128,949"]]
[[/GREPCENT_TABLE]]

50

Average annual base rents per square foot are computed based on contractual rents in effect as of December 31, 2023 and 2022, including the impact of any rent concessions. Average annual base rents per square foot for comparable small shop space of less than 10,000 square feet were as follows for each property type (1):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2023","","","2022"],["Total portfolio (1)","","$","25.56","","","$","25.14"],["Malls, lifestyle centers and outlet centers:"],["Total same-center malls, lifestyle centers and outlet centers","","","30.19","","","","29.58"],["Total malls","","","30.40","","","","30.01"],["Total lifestyle centers","","","30.53","","","","29.30"],["Total outlet centers","","","28.36","","","","26.68"],["All Other Properties:"],["Total open-air centers","","","15.37","","","","15.21"],["Total other","","","20.37","","","","19.22"]]
[[/GREPCENT_TABLE]]

(1)
Excluded Properties are not included in base rent. Average base rents for open-air centers and other include all leased space, regardless of size.

Results from new and renewal leasing of comparable in-line space of less than 10,000 square feet during the year ended December 31, 2023 for spaces that were previously occupied, based on the contractual terms of the related leases inclusive of the impact of any rent concessions, are as follows:

[[GREPCENT_TABLE]]
[["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)","","","2,713,874","","","$","37.36","","","$","36.92","","","","(1.2",")%","","$","37.37","","","","0.0","%"],["Malls, lifestyle centers and outlet centers","","","2,511,082","","","","38.59","","","","37.76","","","","(2.2",")%","","","38.19","","","","(1.0",")%"],["New leases","","","157,325","","","","34.17","","","","41.01","","","","20.0","%","","","43.11","","","","26.2","%"],["Renewal leases","","","2,353,757","","","","38.89","","","","37.54","","","","(3.5",")%","","","37.86","","","","(2.6",")%"]]
[[/GREPCENT_TABLE]]

(1)
Average gross rent does not incorporate allowable future increases for recoverable common area expenses.

(2)
Includes malls, lifestyle centers, outlet centers, open-air centers and other.

New and renewal leasing activity of comparable in-line space of less than 10,000 square feet for the year ended December 31, 2023, based on commencement date inclusive of the impact of any rent concessions, are as follows:

[[GREPCENT_TABLE]]
[["","","Number of Leases","","","Square Feet","","","Term (in years)","","","Initial Rent PSF","","","Average Rent PSF","","","Expiring Rent PSF","","","Initial Rent Spread","","","Average Rent Spread"],["Commencement 2023:"],["New","","","68","","","","197,719","","","","6.56","","","$","39.21","","","$","41.32","","","$","32.74","","","$","6.47","","","","19.8","%","","$","8.58","","","","26.2","%"],["Renewal","","","632","","","","2,030,791","","","","2.68","","","","36.65","","","","37.04","","","","37.22","","","","(0.57",")","","","(1.5",")%","","","(0.18",")","","","(0.5",")%"],["Commencement 2023 Total","","","700","","","","2,228,510","","","","3.06","","","","36.88","","","","37.42","","","","36.82","","","","0.06","","","","0.2","%","","","0.60","","","","1.6","%"],["Commencement 2024:"],["New","","","17","","","","64,786","","","","6.90","","","","30.42","","","","31.82","","","","23.48","","","","6.94","","","","29.6","%","","","8.34","","","","35.5","%"],["Renewal","","","260","","","","862,866","","","","2.70","","","","34.91","","","","35.16","","","","36.59","","","","(1.68",")","","","(4.6",")%","","","(1.43",")","","","(3.9",")%"],["Commencement 2024 Total","","","277","","","","927,652","","","","2.96","","","","34.60","","","","34.92","","","","35.67","","","","(1.07",")","","","(3.0",")%","","","(0.75",")","","","(2.1",")%"],["Total 2023/2024","","","977","","","","3,156,162","","","","3.03","","","$","36.21","","","$","36.69","","","$","36.49","","","$","(0.28",")","","","(0.8",")%","","$","0.20","","","","0.5","%"]]
[[/GREPCENT_TABLE]]

Liquidity and Capital Resources

As of December 31, 2023, we had $296.3 million available in unrestricted cash and U.S. Treasury securities. Our total pro rata share of debt, excluding unamortized deferred financing costs and debt discounts, at December 31, 2023 was $2,656.3 million. We had $50.2 million in restricted cash at December 31, 2023 related to cash held in escrow accounts for insurance, real estate taxes, capital expenditures and tenant allowances as required by the terms of certain mortgage notes payable, as well as amounts related to cash management agreements with lenders of certain property-level mortgage indebtedness, which are designated for debt service and operating expense obligations. We also had restricted cash of $38.7 million related to the properties that secure the corporate term loan and the open-air centers and outparcels loan of which we may receive a portion via distributions semiannually and quarterly in accordance with the provisions of the term loan and the open-air centers and outparcels loan, respectively.

51

During the year ended December 31, 2023, we continued to reinvest the cash from maturing U.S. Treasury securities into new U.S. Treasury securities. We designated our U.S. Treasury securities as available-for-sale. As of December 31, 2023, our U.S. Treasury securities have maturities through July 2024. Subsequent to December 31, 2023, we redeemed U.S. Treasury securities. See Note 20 for additional information.

During the year ended December 31, 2023, we extended the maturity dates on five loans, which had a combined outstanding balance of $339.8 million at our share as of December 31, 2023. In April 2023, the Company and its joint venture partner entered into a new $148.0 million loan secured by Friendly Center and The Shops at Friendly Center and the $7.2 million loan secured by The Outlet Shoppes of the Bluegrass - Phase II was paid off. In October 2023, the loans secured by The Outlet Shoppes at Atlanta were paid off using proceeds from a new $79.3 million, ten-year, 7.85% fixed interest rate, non-recourse loan. In October 2023, the Company and its joint venture partner modified the loan secured by The Outlet Shoppes at Laredo. The principal balance was reduced to $34.0 million, the interest rate remains unchanged at SOFR plus 325 basis points and the maturity date was extended to June 2025. In November 2023, the limited guaranty provided by the Operating Partnership on the secured term loan was eliminated pursuant to the terms of the loan agreement. See Note 7 and Note 8 for additional information. Subsequent to December 31, 2023, the loan secured by Brookfield Square Anchor Redevelopment was paid off. See Note 20 for additional information.

In May 2023, the Operating Partnership entered into an interest rate swap with a notional amount of $32.0 million to fix the interest rate at 7.3975% on $32.0 million of the variable rate portion of the open-air centers and outparcels loan. The swap has a maturity date of June 7, 2027. We designated the swap as a cash flow hedge on our variable rate debt. See Note 8 for more information.

In February 2023, we deconsolidated Alamance Crossing East as a result of losing control when the property was placed in receivership. The loan secured by Alamance Crossing East had an outstanding balance of $41.1 million as of December 31, 2023. In September 2023, we deconsolidated WestGate Mall as a result of losing control when the property was placed in receivership. The loan secured by WestGate Mall had an outstanding balance of $28.7 million as of December 31, 2023.

We paid common stock dividends of $0.375 per share in all four quarters of 2023. Additionally, our board of directors declared a special dividend of $2.20 per share of common stock, which was paid in cash on January 18, 2023, to stockholders of record as of the close of business on December 12, 2022. The special dividend was made to ensure that we met the minimum requirement for 2022 to maintain our status as a REIT. Subsequent to December 31, 2023, our board of directors declared a $0.40 per share regular quarterly dividend for the first quarter of 2024. See Note 20.

During the year ended December 31, 2023, we sold eight land parcels which generated approximately $9.6 million in gross proceeds at our share.

We extended, refinanced or retired all loans that were set to mature during 2023. Our total share of consolidated, unconsolidated and other outstanding debt, excluding debt discounts and deferred financing costs, that matured prior to 2023, which remains outstanding at December 31, 2023, is $69.8 million, consisting of two property loans that are in receivership.

Unconsolidated Affiliates

We have ownership interests in 26 unconsolidated affiliates as of December 31, 2023. See Note 7 to the consolidated financial statements for more information. The unconsolidated affiliates are accounted for using the equity method of accounting and are reflected in the accompanying consolidated balance sheets as investments in unconsolidated affiliates.

The following are circumstances when we may consider entering into a joint venture with a third party:

•
Third parties may approach us with opportunities in which they have obtained land and performed some pre-development activities, but they may not have sufficient access to the capital resources or the development and leasing expertise to bring the project to fruition. We enter into such arrangements when we determine such a project is viable and we can achieve a satisfactory return on our investment. We typically earn development fees from the joint venture and provide management and leasing services to the property for a fee once the property is placed in operation.

•
We determine that we may have the opportunity to capitalize on the value we have created in a property by selling an interest in the property to a third party. This provides us with an additional source of capital that can be used to develop or acquire additional real estate assets that we believe will provide greater potential for growth. When we retain an interest in an asset rather than selling a 100% interest, it is typically because this allows us to continue to manage the property, which provides us the ability to earn fees for management, leasing, development and financing services provided to the joint venture.

52

•
We also pursue opportunities to contribute available land at our properties into joint venture partnerships for development of primarily non-retail uses such as hotels, office, self-storage and multifamily. We typically partner with developers who have expertise in the non-retail property types.

Guarantees

We may guarantee the debt of a joint venture primarily because it allows the joint venture to obtain funding at a lower cost than could be obtained otherwise. This results in a higher return for the joint venture on its investment, and a higher return on our investment in the joint venture. We may receive a fee from the joint venture for providing the guaranty. Additionally, when we issue a guaranty, the terms of the joint venture agreement typically provide that we may receive indemnification from the joint venture partner or have the ability to increase our ownership interest.

See Note 14 to the consolidated financial statements for information related to our guarantees of unconsolidated affiliates' debt as of December 31, 2023 and 2022.

Material Cash Requirements

The following table summarizes our material cash requirements as of December 31, 2023 (in thousands):

[[GREPCENT_TABLE]]
[["","","Payments Due By Period"],["","","Total","","","Less Than 1 Year","","","1-3 Years","","","3-5 Years","","","More Than 5 Years"],["Long-term debt:"],["Consolidated debt service (1)","","$","2,247,917","","","$","312,596","","","$","1,480,343","","","$","380,764","","","$","74,214"],["Noncontrolling interests' share in other consolidated subsidiaries","","","(42,794",")","","","(3,026",")","","","(32,668",")","","","(783",")","","","(6,317",")"],["Other debt (2)","","","69,783","","","","69,783","","","","\u2014","","","","\u2014","","","","\u2014"],["Our share of unconsolidated affiliates debt service (3)","","","791,843","","","","224,933","","","","273,701","","","","193,557","","","","99,652"],["Our share of total debt service obligations","","","3,066,749","","","","604,286","","","","1,721,376","","","","573,538","","","","167,549"],["Operating leases: (4)"],["Ground leases on properties","","","15,721","","","","364","","","","741","","","","750","","","","13,866"],["Purchase obligations: (5)"],["Construction contracts on consolidated properties","","","726","","","","726","","","","\u2014","","","","\u2014","","","","\u2014"],["Our share of construction contracts on unconsolidated properties","","","1,895","","","","1,895","","","","\u2014","","","","\u2014","","","","\u2014"],["Our share of total purchase obligations","","","2,621","","","","2,621","","","","\u2014","","","","\u2014","","","","\u2014"],["Other contractual obligations: (6)","","","82,668","","","","33,067","","","","49,601","","","","\u2014","","","","\u2014"],["Total material cash requirements","","$","3,167,759","","","$","640,338","","","$","1,771,718","","","$","574,288","","","$","181,415"]]
[[/GREPCENT_TABLE]]

(1)
Represents principal and interest payments due under the terms of mortgage and other indebtedness, net, and includes $905,882 of variable-rate debt service related to the secured term loan, $246,858 of variable-rate debt service related to the open-air centers and outparcels loan and $53,254 of variable-rate debt service on two operating properties. The future interest payments on variable-rate loans are projected based on the interest rates that were in effect at December 31, 2023. See Note 8 to the consolidated financial statements for additional information regarding the terms of long-term debt.

(2)
Represents the outstanding loan balances for Alamance Crossing East and WestGate Mall which were deconsolidated due to a loss of control when the properties were placed into receivership in connection with the foreclosure process.

(3)
Includes $125,107 of variable-rate debt service. Future contractual obligations have been projected using the same assumptions as used in (1) above.

(4)
Obligations where we own the buildings and improvements, but lease the underlying land under long-term ground leases. The maturities of these leases range from 2044 to 2089 and generally provide for renewal options.

(5)
Represents our share of the remaining balance to be incurred under construction contracts that had been entered into as of December 31, 2023, but were not complete. The contracts are primarily for redevelopment of our properties.

(6)
Represents agreements for maintenance, security, and janitorial services at our properties that expire in June 2026.

53

Liquidity Sources

We derive the majority of our revenues from leases with retail tenants, which have historically been the primary source for funding short-term liquidity and capital needs such as operating expenses, debt service, tenant construction allowances, recurring capital expenditures, dividends and distributions. We believe that the combination of cash flows generated from our operations, combined with cash on hand and our investment in U.S. Treasury securities will, for the foreseeable future, provide adequate liquidity to meet our cash needs. In addition to these factors, we have options available to us to generate additional liquidity, including but not limited to, joint venture investments, financing of currently unencumbered properties and decreasing expenditures related to tenant construction allowances and other capital expenditures. We also generate revenues from sales of peripheral land at our properties and from sales of real estate assets when it is determined that we can realize an optimal value for the assets.

Cash Flows - Operating, Investing and Financing Activities

There was $123.1 million of cash, cash equivalents and restricted cash as of December 31, 2023, a decrease of $18.9 million from December 31, 2022. Of this amount, $34.2 million was unrestricted cash as of December 31, 2023. Also, at December 31, 2023, we had $262.1 million in U.S. Treasuries with maturities through July 2024. Our net cash flows are summarized as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","Successor"],["","","Year Ended December 31,"],["","","2023","","","2022"],["Net cash provided by operating activities","","$","183,516","","","$","208,234"],["Net cash provided by (used in) investing activities","","","1,701","","","","(156,685",")"],["Net cash used in financing activities","","","(204,090",")","","","(145,798",")"],["Net cash flows","","$","(18,873",")","","$","(94,249",")"]]
[[/GREPCENT_TABLE]]

Cash Provided by Operating Activities

Cash provided by operating activities decreased primarily due to lower percentage rents and higher interest expense resulting from rising variable interest rates.

Cash Provided by (Used in) Investing Activities

Cash provided by investing activities increased primarily due to more net redemptions of U.S. Treasury securities during the current-year period as compared to the prior-year period. The increase was partially offset by a decrease in distributions from unconsolidated affiliates.

Cash Used in Financing Activities

Cash used in financing activities increased primarily due to the payment of a first, second, third and fourth quarter 2023 common stock dividend and the special dividend that was declared during the fourth quarter of 2022. There were no dividends paid during the first quarter of 2022. Also, the increase was attributable to a reduction in net proceeds from new loans during the current-year period as compared to the prior-year period. The increase was partially offset by a reduction in principal payments during the current-year period as compared to the prior-year period.

Debt

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 our debt, substantially all of which is secured by real estate assets.

54

The following tables summarize debt based on our pro rata ownership share, including our pro rata share of unconsolidated affiliates and excluding noncontrolling investors’ share of consolidated properties. Prior to consideration of unamortized deferred financing costs or debt discounts, of our $2,656.3 million in outstanding debt at December 31, 2023, $2,588.3 million constituted non-recourse debt obligations and $68.0 million constituted recourse debt obligations. We believe the tables below provide investors and lenders a clearer understanding of our total debt obligations and liquidity (in thousands):

[[GREPCENT_TABLE]]
[["December 31, 2023:","","Consolidated","","","Noncontrolling Interests","","","Other Debt (1)","","","Unconsolidated Affiliates","","","Total","","","Weighted- Average Interest Rate (2)"],["Fixed-rate debt:"],["Non-recourse loans on operating properties","","$","736,573","","","$","(25,021",")","","$","69,783","","","$","616,337","","","$","1,397,672","","","5.05%"],["Open-air centers and outparcels loan","","","179,180","","","","\u2014","","","","\u2014","","","","\u2014","","","","179,180","","","6.95%","(3)"],["Recourse loans on operating properties","","","\u2014","","","","\u2014","","","","\u2014","","","","5,832","","","","5,832","","","3.04%"],["Total fixed-rate debt","","","915,753","","","","(25,021",")","","","69,783","","","","622,169","","","","1,582,684","","","5.26%"],["Variable-rate debt:"],["Non-recourse loans on operating properties","","","33,780","","","","(11,823",")","","","\u2014","","","","10,478","","","","32,435","","","8.56%"],["Recourse loans on operating properties","","","15,339","","","","\u2014","","","","\u2014","","","","46,796","","","","62,135","","","8.13%"],["Open-air centers and outparcels loan","","","179,180","","","","\u2014","","","","\u2014","","","","\u2014","","","","179,180","","","9.44%","(3)"],["Secured term loan","","","799,914","","","","\u2014","","","","\u2014","","","","\u2014","","","","799,914","","","8.21%"],["Total variable-rate debt","","","1,028,213","","","","(11,823",")","","","\u2014","","","","57,274","","","","1,073,664","","","8.42%"],["Total fixed-rate and variable-rate debt","","","1,943,966","","","","(36,844",")","","","69,783","","","","679,443","","","","2,656,348","","","6.54%"],["Unamortized deferred financing costs","","","(13,221",")","","","249","","","","\u2014","","","","(3,197",")","","","(16,169",")"],["Debt discounts (4)","","","(41,942",")","","","3,706","","","","\u2014","","","","\u2014","","","","(38,236",")"],["Total mortgage and other indebtedness, net","","$","1,888,803","","","$","(32,889",")","","$","69,783","","","$","676,246","","","$","2,601,943"]]
[[/GREPCENT_TABLE]]

(1)
Represents the outstanding loan balances for Alamance Crossing East and WestGate Mall which were deconsolidated due to a loss of control when the properties were placed into receivership in connection with the foreclosure process.

(2)
Weighted-average interest rate excludes amortization of deferred financing costs.

(3)
The interest rate is a fixed 6.95% for half of the outstanding loan balance, with the other half of the loan bearing a variable interest rate based on the 30-day SOFR plus 4.10%. The Operating Partnership has an interest rate swap on a notional amount of $32,000 related to the variable portion of the loan to effectively fix the interest rate at 7.3975%.

(4)
In conjunction with fresh start accounting, the Company estimated the fair value of its mortgage notes and recognized debt discounts upon emergence from bankruptcy on November 1, 2021. The debt discounts are accreted over the term of the respective debt using the effective interest method.

[[GREPCENT_TABLE]]
[["December 31, 2022:","","Consolidated","","","Noncontrolling Interests","","","Unconsolidated Affiliates","","","Total","","","Weighted- Average Interest Rate (1)"],["Fixed-rate debt:"],["Non-recourse loans on operating properties","","$","843,634","","","$","(25,420",")","","$","611,215","","","$","1,429,429","","","4.57%"],["Open-air centers and outparcels loan","","","180,000","","","","\u2014","","","","\u2014","","","","180,000","","","6.95%","(2)"],["Recourse loans on operating properties","","","\u2014","","","","\u2014","","","","10,427","","","","10,427","","","3.67%"],["Total fixed-rate debt","","","1,023,634","","","","(25,420",")","","","621,642","","","","1,619,856","","","4.83%"],["Variable-rate debt:"],["Non-recourse loans on operating properties","","","38,250","","","","(13,387",")","","","2,393","","","","27,256","","","7.36%"],["Recourse loans on operating properties (3)","","","18,240","","","","\u2014","","","","69,191","","","","87,431","","","6.92%"],["Open-air centers and outparcels loan","","","180,000","","","","\u2014","","","","\u2014","","","","180,000","","","8.22%","(2)"],["Secured term loan","","","829,452","","","","\u2014","","","","\u2014","","","","829,452","","","6.87%"],["Total variable-rate debt","","","1,065,942","","","","(13,387",")","","","71,584","","","","1,124,139","","","7.10%"],["Total fixed-rate and variable-rate debt","","","2,089,576","","","","(38,807",")","","","693,226","","","","2,743,995","","","5.76%"],["Unamortized deferred financing costs","","","(17,101",")","","","317","","","","(2,142",")","","","(18,926",")"],["Debt discounts (4)","","","(72,289",")","","","7,448","","","","\u2014","","","","(64,841",")"],["Total mortgage and other indebtedness, net","","$","2,000,186","","","$","(31,042",")","","$","691,084","","","$","2,660,228"]]
[[/GREPCENT_TABLE]]

(1)
Weighted-average interest rate excludes amortization of deferred financing costs.

(2)
The interest rate is a fixed 6.95% for $180,000 of the $360,000 loan, with the other half of the loan bearing a variable interest rate based on the 30-day SOFR plus 4.10%.

(3)
Includes $67,386 that was reclassified from non-recourse loans on operating properties to conform to the current year presentation as a result of the Operating Partnership's guarantees of the related loans.

(4)
In conjunction with fresh start accounting, the Company estimated the fair value of its mortgage notes and recognized debt discounts upon emergence from bankruptcy on November 1, 2021. The debt discounts are accreted over the term of the respective debt using the effective interest method.

55

The following table presents our pro rata share of consolidated and unconsolidated debt as of December 31, 2023, excluding unamortized deferred financing costs and debt discounts, that is scheduled to mature in 2024 based on the original maturity date (in thousands):

[[GREPCENT_TABLE]]
[["","","Balance"],["Consolidated Properties:"],["Fayette Mall","","$","119,303","","(1)"],["Brookfield Square Anchor Redevelopment","","","15,339","","(2)"],["","","","134,642"],["Unconsolidated Properties:"],["Coastal Grand Mall","","","48,507"],["Coastal Grand Mall Outparcel","","","2,341"],["Coastal Grand Mall - Dick's Sporting Goods","","","3,374"],["Hamilton Place Aloft Hotel","","","8,085"],["The Outlet Shoppes of the Bluegrass","","","41,014"],["West County Center","","","76,192","","(3)"],["","","","179,513"],["Total 2024 maturities at our pro rata share","","$","314,155"]]
[[/GREPCENT_TABLE]]

(1)
The loan has two one-year extension options for a fully extended maturity date of May 2026.

(2)
Subsequent to December 31, 2023, the loan was paid off.

(3)
The loan has a two-year extension option for a fully extended maturity date of December 2026.

Additionally, we have two loans, with an aggregate principal balance of $69.8 million at our share as of December 31, 2023, secured by Alamance Crossing East and WestGate Mall that are past their maturity dates. Both properties have been placed into receivership in connection with the foreclosure process.

The weighted-average remaining term of our total share of consolidated and unconsolidated debt, excluding debt discounts and deferred financing costs, was 2.4 years at both December 31, 2023 and December 31, 2022. The weighted-average remaining term of our pro rata share of fixed-rate debt, excluding debt discounts and deferred financing costs, was 2.7 years and 2.3 years at December 31, 2023 and December 31, 2022, respectively.

As of December 31, 2023, our pro rata share of consolidated and unconsolidated variable-rate debt, excluding debt discounts and deferred financing costs, represented 40.4% of our total pro rata share of debt, excluding debt discounts and deferred financing costs. As of December 31, 2022, our pro rata share of consolidated and unconsolidated variable-rate debt, excluding debt discounts and deferred financing costs, represented 41.0% of our total pro rata share of debt, excluding debt discounts and deferred financing costs.

See Note 7 and Note 8 to the consolidated financial statements for additional information concerning the amount and terms of our outstanding indebtedness as of December 31, 2023.

Equity

We paid common stock dividends of $0.375 per share in each quarter of 2023. Additionally, our board of directors declared a special dividend of $2.20 per share of common stock, which was paid in cash on January 18, 2023, to stockholders of record as of the close of business on December 12, 2022. The decision to declare and pay dividends on any outstanding shares of our common stock, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our board of directors and will depend on our earnings, taxable income, FFO, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our then-current indebtedness, the annual distribution requirements under the REIT provisions of the Internal Revenue Code, Delaware law and such other factors as our board of directors deems relevant. Any dividends payable will be determined by our board of directors based upon the circumstances at the time of declaration. For additional information, see discussion presented under the subheading “Dividends” in Note 9 of this report. Our actual results of operations will be affected by a number of factors, including the revenues received from our properties, our operating expenses, interest expense, capital expenditures and the ability of the anchors and tenants at our properties to meet their obligations for payment of rents and tenant reimbursements. Subsequent to December 31, 2023, our board of directors declared a $0.40 per share regular quarterly dividend for the first quarter of 2024. See Note 20.

In August 2023, our board of directors authorized the repurchase of up to $25.0 million of our outstanding common stock. See Part II, Item 5 for additional information regarding our repurchases of common stock during 2023.

On September 8, 2022, our board of directors adopted a short-term rights plan (the “Rights Plan”). Pursuant to the Rights Plan, the board of directors authorized a dividend of one share purchase right (a “Right”) for each outstanding share of our common stock. If a person or group of affiliated or associated persons acquired beneficial ownership of 10.0% or more of our outstanding common shares, subject to certain exceptions (including exceptions for existing holders who do

56

not increase their holdings as provided in the Rights Plan), each Right would effectively entitle its holder (other than the acquiring person or group of affiliated or associated persons) to purchase additional common shares at a substantial discount to the public market price. In addition, under certain circumstances, we could exchange the Rights (other than Rights beneficially owned by the acquiring person or group of affiliated or associated persons), in whole or in part, for common shares on a one-for-one basis, or we could redeem the Rights for cash at a price of $0.001 per Right. On September 8, 2023, the Rights Plan expired pursuant to its terms.

Capital Expenditures

The following table, which excludes expenditures for developments and expansions, summarizes capital expenditures, including our share of unconsolidated affiliates' capital expenditures, for the years ended December 31, 2023 and 2022, (in thousands):

[[GREPCENT_TABLE]]
[["","","Successor"],["","","Year Ended December 31,"],["","","2023","","","2022"],["Tenant allowances","","$","17,079","","","$","19,885"],["Maintenance capital expenditures:"],["Parking area and parking area lighting","","","5,331","","","","5,528"],["Roof replacements","","","3,319","","","","1,048"],["Other capital expenditures","","","16,246","","","","10,839"],["Total maintenance capital expenditures","","","24,896","","","","17,415"],["Capitalized overhead","","","1,797","","","","1,599"],["Capitalized interest","","","453","","","","618"],["Total capital expenditures","","$","44,225","","","$","39,517"]]
[[/GREPCENT_TABLE]]

Annual capital expenditures budgets are prepared for each of our properties that are intended to provide for all necessary recurring and non-recurring capital expenditures. We believe that property operating cash flows, which include reimbursements from tenants for certain expenses, will provide the necessary funding for these expenditures.

Developments and Redevelopments

Developments Completed During the Year Ended December 31, 2023

(Dollars in thousands)

[[GREPCENT_TABLE]]
[["","","","","","","","","","CBL's Share of"],["Property","","Location","","CBL Ownership Interest","","Total Project Square Feet","","","Total Cost (1)","","","Cost to Date (2)","","","2023 Cost","","","Opening Date","","Initial Unleveraged Yield"],["Mall Expansion:"],["Sunrise Mall - Bubba's 33","","Brownsville, TX","","100%","","","7,575","","","$","1,049","","","$","1,252","","","$","1,052","","","Q3 '23","","18.0%"],["Redevelopments:"],["Kirkwood Mall - Five Below","","Bismarck, ND","","100%","","","19,478","","","","2,323","","","","1,694","","","","1,691","","","Q3 '23","","16.3%"],["The Terrace - Nordstrom Rack (former Staples)","","Chattanooga, TN","","92%","","","24,155","","","","2,513","","","","1,841","","","","219","","","Q2 '23","","13.0%"],["York Town Center - Burlington (former Bed Bath & Beyond)","","York, PA","","50%","","","28,000","","","","1,247","","","","1,266","","","","279","","","Q1 '23","","18.5%"],["","","","","","","","71,633","","","","6,083","","","","4,801","","","","2,189"],["Open-Air Center:"],["Fremaux Town Center - Marshall's","","Slidell, LA","","65%","","","22,132","","","","2,356","","","","2,688","","","","2,625","","","Q4 '23","","10.5%"],["Total Properties Completed","","","","","","","101,340","","","$","9,488","","","$","8,741","","","$","5,866"]]
[[/GREPCENT_TABLE]]

(1)
Total Cost is presented net of reimbursements to be received.

(2)
Cost to Date does not reflect reimbursements until they are received.

57

Properties under Development at December 31, 2023

(Dollars in thousands)

[[GREPCENT_TABLE]]
[["","","","","","","","","","CBL's Share of"],["Property","","Location","","CBL Ownership Interest","","Total Project Square Feet","","","Total Cost (1)","","","Cost to Date (2)","","","2023 Cost","","","Expected Opening Date","","Initial Unleveraged Yield"],["Outparcel Development:"],["Mayfaire Town Center - hotel development","","Wilmington, NC","","49%","","","83,021","","","$","15,435","","","$","3,197","","","$","2,025","","","Summer '25","","11.0%"],["Redevelopments:"],["Hamilton Place - Crunch Fitness","","Chattanooga, TN","","100%","","","36,640","","","","2,648","","","","1,855","","","","1,837","","","Winter '24","","23.3%"],["Total Properties Under Development","","","","","","","119,661","","","$","18,083","","","$","5,052","","","$","3,862"]]
[[/GREPCENT_TABLE]]

(1)
Total Cost is presented net of reimbursements to be received.

(2)
Cost to Date does not reflect reimbursements until they are received.

We are continually pursuing new redevelopment opportunities and have projects in various stages of pre-development. Except for the projects presented above, we did not have any other material capital commitments as of December 31, 2023.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP. In preparing our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenues, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made and if different estimates that are reasonably likely to occur could materially impact the financial statements. Management believes that the following critical accounting policies discussed in this section reflect its more significant estimates and assumptions used in preparation of the consolidated financial statements. We have reviewed these critical accounting estimates and related disclosures with the audit committee of our board of directors. See Note 2 of the consolidated financial statements, included in Item 8 of this Annual Report on Form 10-K for a discussion of our significant accounting policies.

Revenue Recognition and Accounts Receivable

Receivables include amounts billed and currently due from tenants pursuant to lease agreements and receivables attributable to straight-line rents associated with those lease agreements. Individual leases where the collection of rents is in dispute are assessed for collectability based on management’s best estimate of collection considering the anticipated outcome of the dispute. Individual leases that are not in dispute are assessed for collectability and upon the determination that the collection of rents over the remaining lease term is not probable, accounts receivable are reduced as an adjustment to rental revenues. Revenue from leases where collection is deemed to be less than probable is recorded on a cash basis until collectability is determined to be probable. Further, management assesses whether operating lease receivables, at a portfolio level, are appropriately valued based upon an analysis of balances outstanding, historical collection levels and current economic trends. An allowance for the uncollectable portion of the portfolio is recorded as an adjustment to rental revenues.

We review current economic considerations each reporting period, including the effects of tenant bankruptcies. Additionally, our assessment also takes into consideration the type of tenant and current discussions with the tenants regarding matters such as billing disputes, lease negotiations and executed deferrals or abatements, as well as recent rent payment and credit history. Evaluating and estimating uncollectable lease payments and related receivables requires a significant amount of judgment by management and is based on the best information available to management at the time of evaluation.

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Carrying Value of Long-Lived Assets

We monitor events or changes in circumstances that could indicate the carrying value of a long-lived asset may not be recoverable. We use significant judgement in assessing events or circumstances which might indicate impairment, including but not limited to, changes in our intent to hold a long-lived asset over its previously estimated useful life. Changes in our intent to hold a long-lived asset have a significant impact on the estimated undiscounted cash flows expected to result from the use and eventual disposition of a long-lived asset and whether a potential impairment loss shall be measured. When indicators of potential impairment are present that suggest that the carrying amounts of a long-lived asset may not be recoverable, we 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 our use and its eventual disposition. In the event that such undiscounted future cash flows do not exceed the carrying value, we adjust the carrying value of the long-lived asset to its estimated fair value and recognize 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 our long-lived assets may be carried at more than an amount that could be realized in a current disposition transaction. We estimate future operating cash flows, the terminal capitalization rate and the discount rate, 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 our impairment analyses may not be achieved.

Investments in Unconsolidated Affiliates

On a periodic basis, we assess whether there are any indicators that the fair value of our investments in unconsolidated affiliates may be impaired. An investment is impaired only if our estimate of the fair value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over the fair value of the investment. Our estimates of fair value for each investment are based on a number of assumptions such as future leasing expectations, operating forecasts, discount rates and capitalization rates, among others. These assumptions are subject to economic and market uncertainties including, but not limited to, demand for space, competition for tenants, changes in market rental rates, and operating costs. As these factors are difficult to predict and are subject to future events that may alter our assumptions, the fair values estimated in the impairment analyses may not be realized.

Application of Fresh Start Accounting

As described in Note 19 to the consolidated financial statements, we applied Financial Accounting Standards Board (“FASB”) ASC 852 in preparing the consolidated financial statements. For periods subsequent to the filing of the Chapter 11 Cases and before emergence, ASC 852 requires distinguishing transactions associated with the reorganization separate from activities related to the ongoing operations of the business. Upon the effectiveness of the Plan and the emergence of the Debtors from the Chapter 11 Cases, the Company determined it qualified for fresh start accounting under ASC 852, which resulted in the Company becoming a new entity for financial reporting purposes on the Effective Date. We elected to apply fresh start accounting using a convenience date of October 31, 2021. We evaluated and concluded that the events on November 1, 2021 were not material to our financial reporting on both a quantitative and qualitative basis.

Enterprise Value

With the assistance of third-party valuation advisors, we determined the enterprise and corresponding equity value of the Successor using a calculation of the present value of future cash flows based on our financial projections. The enterprise value and corresponding equity value are dependent upon achieving the future financial results set forth in our valuations, as well as the realization of certain other assumptions. All estimates, assumptions, valuations and financial projections, including the fair value adjustments, the financial projections, the enterprise value and equity value projections, are inherently subject to significant uncertainties and the resolution of contingencies beyond our control. Accordingly, we cannot assure you that the estimates, assumptions, valuations or financial projections will be realized, and actual results could vary materially.

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Real Estate Assets

In developing the fair value estimates for the portfolio of our retail properties, all three traditional approaches to valuation were considered including the income approach, the sales comparison (market) approach and the cost approach. These valuation approaches have long been recognized as acceptable in the appropriate circumstances and in valuations of this type. Accordingly, all applicable properties were identified, investigated and examined by the valuation provider along with all intangible assets and liabilities associated with our properties. Furthermore, the valuation provider estimated the fair values and remaining useful lives ("RUL") of the related intangible assets and liabilities at the property-level, as applicable. In most cases, our properties included the following intangible assets/liabilities:

·
Above/below-market leases

·
In-place leases

·
Avoided lease origination costs (leasing commissions, tenant improvements, etc.)

·
Property-level debt

For the valuation of the tangible assets of each property, all pertinent information such as blueprints and drawings, property tax statements, prior appraisals and cost segregation reports were utilized. In terms of methodology, our properties were valued via the income approach in order to estimate building values. Separate values for the underlying land and site improvements were developed via the cost approach. As part of the allocation process, the fair value of the following tangible components was estimated:

·
Land

·
Building(s)

·
Site Improvements

Investment in Unconsolidated Affiliates

The fair value of our investment in unconsolidated affiliates for fresh start accounting was determined by valuing the underlying real estate assets associated with each unconsolidated joint venture in the same manner as all real estate assets, described above. We then calculated the net asset or liability value of each joint venture by applying the net working capital balance to the fair value of the real estate assets and the amount outstanding under any associated mortgage notes. The percentage of ownership interest in each joint venture was applied to the net asset or liability value which resulted in the fair value of each unconsolidated affiliate. See Note 2 for further information related to the equity method of accounting.

Right-of-Use Assets and Lease Liabilities

The fair value of lease liabilities was measured as the present value of the remaining lease payments, as if the lease were a new lease as of the Effective Date. We used our incremental borrowing rate (“IBR”) as the discount rate in determining the present value of the remaining lease payments, which was determined by a third-party valuation advisor using a fundamental credit rating analysis and an implied market yield analysis based on the newly issued secured notes. Based upon the corresponding lease term, the IBR was approximately 12%.

Mortgage Notes Payable

The fair value of the mortgage notes payable was estimated by a third-party valuation advisor based on an analysis of the Company’s collateral coverage, financial metrics and interest rate for each mortgage note payable relative to market rates. If there is a reasonable expectation that the debtor will be able to meet the financial obligations of the mortgage note payable, or the mortgage note payable is a recourse loan, then the value of the mortgage note is equal to the present value of the future mortgage note payments discounted at a rate of return commensurate with the risk associated with the mortgage note payments. If the debtor is unable, or if there is uncertainty if the debtor will be able, to meet the financial obligations of the mortgage note, then the value of the mortgage note payable is equal to the expected proceeds to be received through a liquidation of the underlying property at fair value.

Recent Accounting Pronouncements

See Note 2 to the consolidated financial statements for information on recently issued accounting pronouncements.

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Non-GAAP Measures

Funds from Operations

FFO is a widely used non-GAAP measure of the operating performance of real estate companies that supplements net income (loss) determined in accordance with GAAP. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) (computed in accordance with GAAP) excluding gains or losses on sales of depreciable operating properties and impairment losses of depreciable properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests. Adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests are calculated on the same basis. We define FFO as defined above by NAREIT. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

We believe that FFO provides an additional indicator of the operating performance of our properties without giving effect to real estate depreciation and amortization, which assumes the value of real estate assets declines predictably over time. Since values of real estate assets have historically risen or fallen with market conditions, we believe that FFO enhances investors’ understanding of our operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of our properties and interest rates, but also by our capital structure.

We believe FFO allocable to Operating Partnership common unitholders is a useful performance measure since we conduct substantially all our business through our Operating Partnership and, therefore, it reflects the performance of our properties in absolute terms regardless of the ratio of ownership interests of our common shareholders and the noncontrolling interest in our Operating Partnership.

In our reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders that is presented below, we make an adjustment to add back noncontrolling interest in income (loss) of our Operating Partnership in order to arrive at FFO of the Operating Partnership common unitholders.

FFO does not represent cash flows from operations as defined by GAAP, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income (loss) for purposes of evaluating our operating performance or to cash flow as a measure of liquidity.

We believe that it is important to identify the impact of certain significant items on our FFO measures for a reader to have a complete understanding of our results of operations. Therefore, we have also presented adjusted FFO measures excluding these significant items from the applicable periods. Please refer to the reconciliation of net loss attributable to common shareholders to FFO allocable to Operating Partnership common unitholders below for a description of these adjustments.

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The reconciliation of net income (loss) attributable to common shareholders to FFO allocable to Operating Partnership common unitholders is as follows (in thousands):

[[GREPCENT_TABLE]]
[["","","Successor"],["","","Year Ended December 31,"],["","","2023","","","2022"],["Net income (loss) attributable to common shareholders","","$","5,433","","","$","(96,019",")"],["Noncontrolling interest in income (loss) of Operating Partnership","","","2","","","","(34",")"],["Earnings allocable to unvested restricted stock","","","1,113","","","","2,537"],["Depreciation and amortization expense of:"],["Consolidated properties","","","190,505","","","","256,310"],["Unconsolidated affiliates","","","17,408","","","","20,813"],["Non-real estate assets","","","(905",")","","","(1,050",")"],["Noncontrolling interests' share of depreciation and amortization in other consolidated subsidiaries","","","(2,442",")","","","(3,498",")"],["Loss on impairment, net of taxes","","","\u2014","","","","186"],["Gain on depreciable property","","","\u2014","","","","(629",")"],["FFO allocable to Operating Partnership common unitholders","","","211,114","","","","178,616"],["Debt discount accretion, including our share of unconsolidated affiliates and net of noncontrolling interests' share (1)","","","61,788","","","","176,055"],["Adjustment for unconsolidated affiliates with negative investment (2)","","","(7,242",")","","","(37,645",")"],["Senior secured notes fair value adjustment (3)","","","\u2014","","","","(395",")"],["Litigation settlement (4)","","","(2,310",")","","","(304",")"],["Non-cash default interest expense (5)","","","972","","","","(28,953",")"],["Gain on deconsolidation (6)","","","(47,879",")","","","(36,250",")"],["Loss on available-for-sale securities","","","\u2014","","","","39"],["Reorganization items, net (7)","","","\u2014","","","","(298",")"],["Gain on extinguishment of debt (8)","","","(3,270",")","","","(7,344",")"],["FFO allocable to Operating Partnership common unitholders, as adjusted","","$","213,173","","","$","243,521"]]
[[/GREPCENT_TABLE]]

(1)
In conjunction with fresh start accounting upon emergence from bankruptcy, we recognized debt discounts equal to the difference between the outstanding balance of mortgage notes payable and the estimated fair value of such mortgage notes payable. The debt discounts are accreted as additional interest expense over the terms of the respective mortgage notes payable using the effective interest method.

(2)
Represents our share of the earnings (losses) before depreciation and amortization expense of unconsolidated affiliates where we are not recognizing equity in earnings (losses) because our investment in the unconsolidated affiliate is below zero.

(3)
Represents the fair value adjustment recorded on the secured notes as interest expense.

(4)
Represents a credit to litigation settlement expense related to claim amounts that were released pursuant to the terms of the settlement agreement related to the settlement of a class action lawsuit.

(5)
The year ended December 31, 2023 includes default interest on loans past their maturity dates. The year ended December 31, 2022 includes the reversal of default interest expense when waivers or forbearance agreements were obtained.

(6)
For the year ended December 31, 2023, we deconsolidated Alamance Crossing East and WestGate Mall due to a loss of control when the properties were placed into receivership in connection with the foreclosure process. For the year ended December 31, 2022, we deconsolidated Greenbrier Mall due to a loss of control when the property was placed into receivership in connection with the foreclosure process.

(7)
Represents costs incurred subsequent to the Company filing the Chapter 11 Cases associated with the Company's reorganization efforts, which consists of professional fees, legal fees and U.S. Trustee fees.

(8)
The year ended December 31, 2023 includes a gain on extinguishment of debt related to the loan secured by The Outlet Shoppes at Laredo. The year ended December 31, 2022 includes a gain on extinguishment of debt related to the loan secured by The Outlet Shoppes at Gettysburg.

FFO of the Operating Partnership increased to $211.1 million for the Successor year ended December 31, 2023 from $178.6 million for the prior-year period. Excluding the adjustments noted above, FFO of the Operating Partnership, as adjusted, decreased to $213.2 million for the Successor year ended December 31, 2023 from $243.5 million for the prior-year period. The decrease in FFO, as adjusted, for the Successor year ended December 31, 2023 was primarily driven by lower percentage rents, an unfavorable variance in the estimate for uncollectable revenues in the current-year period as compared to the prior-year period and higher interest expense due to rising variable interest rates. The decrease was partially offset by increased interest income on our U.S. Treasury securities and lower real estate taxes, as well as lower utility, janitorial and security costs.

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