SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 30, 2003
CBL & ASSOCIATES PROPERTIES, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 1-12494 62-154718
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(State or Other Jurisdiction of (Commission File Number) I.R.S. Employer
Incorporation) Identification No.)
Suite 500, 2030 Hamilton Place Blvd, Chattanooga, TN 37421
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(Address of principal executive office, including zip code)
(423) 855-0001
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
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ITEM 2. Acquisition or Disposition of Assets
CBL & Associates Properties, Inc. (the "Company') acquired six malls and
two associated centers during the year ended December 31, 2003. Although none of
the properties acquired are individually significant according to the provisions
of Rule 3-14 of Regulation S-X of the Securities and Exchange Commission, they
are significant in the aggregate. This Current Report on Form 8-K is being filed
to provide certain historical and pro forma financial information related to
these acquisitions, which are described below. In this Current Report on Form
8-K, dollars are in thousands, except for per share amounts.
On April 30, 2003, the Company acquired Sunrise Mall and its associated
center, Sunrise Commons, which are located in Brownsville, TX. The total
purchase price, including transaction costs, of $80,686 consisted of $40,686 in
cash and the assumption of $40,000 of variable-rate debt that matured in May
2004.
On September 10, the Company acquired Cross Creek Mall in Fayetteville, NC
for a purchase price, including transaction costs, of $116,729, which consisted
of $52,484 in cash and the assumption of $64,245 of non-recourse debt that bears
interest at a stated rate of 7.4% and matures in April 2012. The Company
recorded a debt premium of $10,209, computed using an estimated market interest
rate of 5.00%, since the debt assumed was at an above-market interest rate
compared to similar debt instruments at the date of acquisition.
On October 1, the Company acquired River Ridge Mall in Lynchburg, VA for a
purchase price, including transaction costs, of $61,933, which consisted of
$38,622 in cash, a short-term note payable of $793 and the assumption of $22,518
of non-recourse debt that bears interest at a stated rate of 8.05% and matures
in January 2007. The Company also recorded a debt premium of $2,724, computed
using an estimated market interest rate of 4.00%, since the debt assumed was at
an above-market interest rate compared to similar debt instruments at the date
of acquisition.
On October 1, the Company acquired Valley View Mall in Roanoke, VA for a
purchase price, including transaction costs, of $86,094, which consisted of
$35,351 in cash, a short-term note payable of $5,708 and the assumption of
$45,035 of non-recourse debt that bears interest at a weighted-average stated
rate of 8.61% and matures in September 2010. The Company also recorded a debt
premium of $8,813, computed using an estimated market interest rate of 5.10%,
since the debt assumed was at an above-market interest rate compared to similar
debt instruments at the date of acquisition.
On December 15, the Company acquired Southpark Mall in Colonial Heights, VA
for a purchase price, including transaction costs, of $78,031, which consisted
of $34,879 in cash, a short-term note payable of $5,116 and the assumption of
$38,036 of non-recourse debt that bears interest at a stated rate of 7.00% and
matures in May 2012. The Company also recorded a debt premium of $4,544,
computed using an estimated market interest rate of 5.10%, since the debt
assumed was at an above-market interest rate compared to similar debt
instruments at the date of acquisition.
Cross Creek Mall, River Ridge Mall, Valley View Mall and Southpark Mall
were all purchased from Faison Enterprises or affiliates of Faison Enterprises.
On December 30, the Company acquired Harford Mall Business Trust, a
Maryland business trust that owns Harford Mall and its associated center,
Harford Annex, in Bel Air, MD for a cash purchase price, including transaction
costs, of $71,110.
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ITEM 7. Financial Statements and Exhibits
Listed below are the financial statements, pro forma financial information
and exhibits filed as part of this report:
(a) Financial Statements of Businesses Acquired
The combined statements of certain revenues and certain operating expenses
of the four regional malls acquired from Faison Enterprises (described
under Item 2) as listed in the accompanying Index to Financial Statements
and Pro Forma Financial Information are filed as part of this Current
Report on Form 8-K.
(b) Pro Forma Financial Information
The pro forma financial information of CBL & Associates Properties, Inc.
listed in the accompanying Index to Financial Statements and Pro Forma
Financial Information are filed as part of this Current Report on Form 8-K.
(c) Exhibits
23 Consent of Deloitte & Touche LLP
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CBL & ASSOCIATES PROPERTIES, INC.
/s/ John N. Foy
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John N. Foy
Vice Chairman,
Chief Financial Officer and Treasurer
(Authorized Officer of the Registrant,
Principal Financial Officer and
Principal Accounting Officer)
Date: July 7, 2004
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INDEX TO FINANCIAL STATEMENTS AND
PRO FORMA FINANCIAL INFORMATION
The following historical financial statements and pro forma financial
information is presented in accordance with Rule 3-14 and Article 11,
respectively, of Regulation S-X of the Securities and Exchange Commission. The
historical financial statements have been audited only for certain properties
acquired. With respect to the properties acquired from Faison Enterprises, the
historical combined financial statement has been audited only for the most
recent fiscal year as the transaction did not involve a related party and the
registrant, after reasonable inquiry, is not aware of any material factors
related to the acquired properties not otherwise disclosed that would cause the
reported financial information to not be necessarily indicative of future
operating results. In accordance with Rule 3-14 of Regulation S-X of the
Securities and Exchange Commission, certain unaudited financial information for
properties acquired during 2003 that are not individually significant has also
been presented. In addition, as the properties will be directly or indirectly
owned by entities that will elect or have elected to be treated as real estate
investment trusts (as specified under sections 856-860 of the Internal Revenue
Code of 1986) for Federal income tax purposes, a presentation of estimated
taxable operating results is not applicable.
Page
Number
FAISON PROPERTIES
Independent Auditors' Report 6
Combined Statement of Certain Revenues and Certain Operating
Expenses of Faison Properties for the Year Ended December 31, 2002 7
Notes to the Combined Statements of Certain Revenues and Certain
Operating Expenses of Faison Properties 8
CBL & ASSOCIATES PROPERTIES, INC.
Unaudited Pro Forma Consolidated Statement of Operations for the
Year Ended December 31, 2003 10
Consent of Independent Registered Public Accounting Firm 11
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors of CBL & Associates Properties, Inc.:
We have audited the accompanying combined statement of certain revenues and
certain operating expenses (the "Statement") of Valley View Mall, Cross Creek
Mall, Southpark Mall and River Ridge Mall (the "Faison Properties") for the year
ended December 31, 2002. This Statement is the responsibility of the management
of CBL & Associates Properties, Inc. (the "Company"). Our responsibility is to
express an opinion on the Statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the Statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the Statement.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in the filing of a Form 8-K of the Company) as described in Note 1 to the
Statement, and is not intended to be a complete presentation of the Faison
Properties' revenues and expenses.
In our opinion, such Statement presents fairly, in all material respects, the
certain revenues and certain operating expenses described in Note 1 to the
Statement for the year ended December 31, 2002 in conformity with accounting
principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
May 13, 2004
Atlanta, Georgia
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FAISON PROPERTIES
COMBINED STATEMENTS OF CERTAIN REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2002 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 2003 (UNAUDITED)
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Nine Months Ended
September 30, 2003 Year Ended
(unaudited) December 31, 2002
REVENUES:
Rentals:
Minimum $ 16,805,041 $ 22,642,509
Percentage 48,468 1,214,982
Other 3,813 4,931
Tenant reimbursements 14,211,878 19,588,800
Other income 133,829 661,119
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Total revenues 31,203,029 44,112,341
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EXPENSES:
Property operating 6,713,557 8,054,629
Real estate taxes 1,975,614 2,682,024
Maintenance and repairs 5,273,254 6,966,974
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Total expenses 13,962,425 17,703,627
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Excess of certain revenues over
certain operating expenses $ 17,240,604 $ 26,408,714
=========================================================
See accompanying notes to financial statements.
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FAISON PROPERTIES
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2002 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 2003 (UNAUDITED)
NOTE 1. ORGANIZATION AND BASIS FOR PRESENTATION
The accompanying combined statements of certain revenues and certain operating
expenses (the "Statements") relate to Valley View Mall, Cross Creek Mall,
Southpark Mall, and River Ridge Mall (the "Faison Properties"). The Faison
Properties are affiliated through common ownership and common property
management.
Valley View Mall is an approximately 787,255-square-foot, two-level regional
mall in Roanoke, Virginia. Cross Creek Mall is an approximately
1,054,034-square-foot, super regional mall in Fayetteville, North Carolina.
Southpark Mall is an approximately 626,806-square-foot regional mall in Colonial
Heights, Virginia. River Ridge Mall is an approximately 784,775-square-foot,
one-level regional mall in Lynchburg, Virginia.
CBL Associates Properties, Inc., ("CBL") purchased the Faison Properties in four
separate transactions, all of which occurred during 2003. The results of
operations of the Faison Properties from the dates they were acquired by CBL
through December 31, 2003, are included in CBL's historical results of
operations for the year ended December 31, 2003.
The Statement is prepared for the purpose of complying with Rule 3-14 of
Regulation S-X promulgated under the Securities Act of 1933, as amended.
Accordingly, the Statements are not representative of the actual operations of
the Faison Properties for the periods presented as certain revenues and certain
operating expenses have been excluded. Such items include depreciation,
amortization, interest expense, management fees and interest income.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition - Rental income comprises minimum rents, expense
reimbursements and percentage rent payments. Minimum Rents with fixed increases
are recognized on a straight-line bases over the initial terms of the related
leases. Expense reimbursements are recognized in the period that the applicable
costs are incurred. The Faison Properties account for these leases as operating
leases as the Properties have retained substantially all risks and benefits of
property ownership. Percentage rent income is recognized when the tenant's
reported sales have reached certain levels specified in the respective lease.
Use of Estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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 reporting period. Actual results could differ
from those estimates.
The accompanying combined financial statements for the nine months ended
September 30, 2003 are unaudited; however, they have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial information and in conjunction with the rules and
regulations of the U.S. Securities and Exchange Commission. Accordingly, they do
not include all of the disclosures required by accounting principles generally
accepted in the United States of America for complete financial statements. In
the opinion of management of Faison Properties, all adjustments (consisting
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solely of normal recurring matters) necessary for a fair presentation for the
interim period have been included. The results for the interim period ended
September 30, 2003, are not necessarily indicative of the results that may be
expected for the full year.
NOTE 3. LEASING ACTIVITIES
The Faison Properties have non-cancelable operating leases with tenants
requiring monthly payments of specified minimum rent. A majority of the leases
require reimbursement by the tenant of substantially all operating expenses of
the Properties. Future minimum rental commitments under the non-cancelable
operating leases at December 31, 2002 are as follows:
Year Ending December 31:
2003 $ 24,044,417
2004 22,185,716
2005 19,259,763
2006 16,375,278
2007 13,007,451
Thereafter 36,866,948
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Total $131,739,573
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CBL & Associates Properties, Inc.
Pro Forma Consolidated Statements of Operations
For The Year Ended December 31, 2003
(Unaudited and in thousands, except per share amounts)
CBL Faison Other Pro Forma CBL
Historical Properties(a) Acquisitions(a) Adjustments(b) Pro Forma
---------- ----------- ------------ -------------- ----------
REVENUES:
Minimum rents $428,678 $ 18,190 $ 8,244 $ 1,376(c) $456,488
Percentage rents 12,925 192 833 - 13,950
Other rents 12,635 4 23 - 12,662
Tenant reimbursements 193,592 14,857 4,081 - 212,530
Management, development and leasing fees 5,525 - - - 5,525
Other 14,176 175 141 - 14,492
---------- ---------- ---------- ---------- ----------
Total revenues $667,531 $ 33,418 $ 13,322 $ 1,376 $715,647
---------- ---------- ---------- ---------- ----------
EXPENSES:
Property operating 103,540 7,265 3,255 - 114,060
Depreciation and amortization 113,481 - - 15,178(d) 128,659
Real estate taxes 51,717 2,107 708 - 54,532
Maintenance and repairs 39,830 5,383 685 - 45,898
General and administrative 30,395 - - - 30,395
Other 11,489 - 136 - 11,625
---------- ---------- ---------- ---------- ----------
Total expenses 350,452 14,755 4,784 15,178 385,169
---------- ---------- ---------- ---------- ----------
Income from operations 317,079 18,663 8,538 (13,802) 330,478
Interest income 2,485 - - - 2,485
Interest expense (153,373) - - (12,229)(e) (165,602)
Loss on extinguishment of debt (167) - - - (167)
Gain on sales of real estate assets 77,775 - - - 77,775
Equity in earnings of unconsolidated affiliates 4,941 - - - 4,941
Minority interest in earnings:
Operating partnership (106,532) - - (539)(f) (107,071)
Shopping center properties (2,799) - - - (2,799)
---------- ---------- ---------- ---------- ----------
Income before discontinued operations 139,409 18,663 8,538 (26,570) 140,040
Operating income of discontinued operations 688 - - - 688
Gain on discontinued operations 4,042 - - - 4,042
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Net income 144,139 18,663 8,538 (26,570) 144,770
Preferred dividends (19,633) - - - (19,633)
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Net income available to common shareholders $124,506 $ 18,663 $ 8,538 $(26,570) $125,137
========== ========== ========== ========== ==========
Basic per share data:
Income before discontinued operations, net of preferred
dividends $ 4.00 $ 4.02
Discontinued operations 0.16 0.16
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Net income available to common shareholders $ 4.16 $ 4.18
========== ==========
Weighted average common shares outstanding 29,936 29,936
Diluted per share data:
Income before discontinued operations, net of preferred
dividends $ 3.84 $ 3.86
Discontinued operations 0.15 0.15
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Net income available to common shareholders $ 3.99 $ 4.01
========== ==========
Weighted average common and potential dilutive common
shares outstanding 31,193 31,193
(a) Represents historical results of operations of the acquired properties from
January 1, 2003 through the respective date of acquisition of each acquired
property. The results of operations for each acquired property are included
in CBL's historical results of operations from its respective date of
acquisition through December 31, 2003.
(b) The pro forma adjustments related to each acquired property have been
computed from January 1, 2003 through each property's respective date of
acquisition.
(c) Reflects the amortization of acquired above- and below-market leases, which
are amortized over the remaining terms of the related leases.
(d) Represents depreciation and amortization expense related to land, buildings
and improvements, tenant improvements and in-place leases. Depreciation is
computed on a straight-line basic over estimated lines of 40 years for
buildings, 10 to 20 years for certain improvements and 7 to 10 years for
equipment and fixtures. Tenant improvements and in-place leases are
depreciated over the terms of the related leases.
(e) Reflects interest expense on the $169,834 of debt assumed in connection
with the properties acquired during 2003, which had a weighted average
interest rate of 7.72%. The pro forma adjustment is net of amortization of
debt premiums in the amount of $2,656.
(f) Reflects the allocation of earnings to the minority interest in the
Operating Partnership as a result of the acquired properties.
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Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements Nos.
33-73376, 333-04295, 333-41768, and 333-88914 on Form S-8 and Registration
Statements Nos. 33-62830, 333-90395, 333-47041, and 333-97831 on Form S-3 of CBL
& Associates Properties, Inc. of our report dated May 13, 2004, on the Combined
Statement of Certain Revenues and Certain Operating Expenses of the Faison
Properties for the year ended December 31, 2002, appearing in this Current
Report on Form 8-K of CBL & Associates Properties, Inc. dated July 7, 2004.
/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
July 7, 2004
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