UNITED STATES
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): March 12, 2004
CBL & ASSOCIATES PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-12494 62-154718
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Indentification No.)
Suite 500, 2030 Hamilton Place Blvd, Chattanooga, TN 37421
(Address of principal executive office, including zip code)
(423) 855-0001
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.01 Completion of Acquisition or Disposition of Assets
CBL & Associates Properties, Inc. (the "Company') acquired eight malls, two
associated centers and one community center during the year ended December 31,
2004. 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 March 12, 2004, the Company acquired Honey Creek Mall in Terre Haute, IN
for a purchase price, including transaction costs, of $83,114, which consisted
of $50,114 in cash and the assumption of $33,000 of non-recourse debt that bears
interest at a stated rate of 6.95% and matures in May 2009. The Company recorded
a debt premium of $3,146, computed using an estimated market interest rate of
4.75%, since the debt assumed was at an above-market interest rate compared to
similar debt instruments at the date of acquisition.
On March 12, 2004, the Company acquired Volusia Mall in Daytona Beach, FL
for a purchase price, including transaction costs, of $118,493, which consisted
of $63,686 in cash and the assumption of $54,807 of non-recourse debt that bears
interest at a stated rate of 6.70% and matures in March 2009. The Company
recorded a debt premium of $4,615, computed using an estimated market interest
rate of 4.75%, since the debt assumed was at an above-market interest rate
compared to similar debt instruments at the date of acquisition.
On April 8, 2004, the Company acquired Greenbrier Mall in Chesapeake, VA
for a cash purchase price, including transaction costs, of $107,450. The
purchase price was partially financed with a new recourse term loan of $92,650
that bears interest at LIBOR plus 100 basis points, matures in April 2006 and
has three one-year extension options that are at the Company's election.
On April 21, 2004, the Company acquired Fashion Square, a community center
in Orange Park, FL for a cash purchase price, including transaction costs, of
$3,961.
On May 20, 2004, the Company acquired Chapel Hill Mall and its associated
center, Chapel Hill Suburban, in Akron, OH for a cash purchase price of $78,252,
including transaction costs. The purchase price was partially financed with a
new recourse term loan of $66,500 that bears interest at LIBOR plus 100 basis
points, matures in May 2006 and has three one-year extension options that are at
the Company's election.
On June 22, 2004, the Company acquired Park Plaza Mall in Little Rock, AR
for a purchase price, including transaction costs, of $77,526, which consisted
of $36,213 in cash and the assumption of $41,313 of non-recourse debt that bears
interest at a stated rate of 8.69% and matures in May 2010. The Company recorded
a debt premium of $7,737, computed using an estimated market interest rate of
4.90%, since the debt assumed was at an above-market interest rate compared to
similar debt instruments at the date of acquisition.
On July 28, 2004, the Company acquired Monroeville Mall, and its associated
center, the Annex, in the eastern Pittsburgh suburb of Monroeville, PA, for a
purchase price, including transaction costs, of $231, 621, which consisted of
$39,455 in cash, the assumption of $134,004 of non-recourse debt that bears
interest at a stated rate of 5.73% and matures in January 2013, an obligation of
$11,950 to purchase the fee interest in the land underlying the mall and
associated center on or before July 28, 2007, and the issuance of 780,470
special common units in the Operating Partnership with a fair value of $46,212
2
($59.21 per special common unit). The Company recorded a debt premium of $3,270,
computed using an estimated market interest rate of 5.30%, since the debt
assumed was at an above-market interest rate compared to similar debt
instruments at the date of acquisition.
On November 22, 2004, the Company acquired Mall del Norte in Laredo, TX for
a cash purchase price, including transaction costs, of $170,413. The purchase
price was partially financed with a new non-recourse, interest-only loan of
$113,400 that bears interest at 5.04% and matures in December 2014.
On November 22, 2004, the Company acquired Northpark Mall in Joplin, MO for
a purchase price, including transaction costs, of $79,141. The purchase price
consisted of $37,619 in cash and the assumption of $41,522 of non-recourse debt
that bears interest at a stated rate of 5.75% and matures in March 2014. The
Company recorded a debt premium of $687, computed using an estimated market
interest rate of 5.50%, since the debt assumed was at an above-market interest
rate compared to similar debt instruments at the date of acquisition.
ITEM 9.01 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 statement of certain revenues and certain operating expenses
of Volusia Mall and Honey Creek Mall (described under Item 2.01) 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
3
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
--------------------------------------
John N. Foy
Vice Chairman,
Chief Financial Officer and Treasurer
Date: September 19, 2005
4
INDEX TO FINANCIAL STATEMENTS AND
PRO FORMA FINANCIAL INFORMATION
The following historical financial statements and pro forma financial
information are 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 Volusia Mall and Honey Creek Mall, the historical
combined financial statement has been audited only for the most recent fiscal
year preceding the acquisition as these transactions 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. Previously, the Company filed a Form 8-K dated
September 2, 2004, which included audited financial statements for Greenbrier
Mall and Monroeville Mall that were acquired during the year ended December 31,
2004. 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
Volusia Mall and Honey Creek Mall
Independent Auditors' Report 6
Combined Statement of Certain Revenues and Certain Operating
Expenses of Volusia Mall and Honey Creek Mall for the
Year Ended December 31, 2003 7
Notes to the Combined Statement of Certain Revenues and Certain
Operating Expenses of Volusia Mall and Honey Creek Mall 8
CBL & Associates Properties, Inc.
Pro Forma Consolidated Statement of Operations for the
Year Ended December 31, 2004 (Unaudited) 10
Consent of Independent Auditors 11
5
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
CBL & Associates Properties, Inc.:
We have audited the accompanying combined statement of certain revenues and
certain operating expenses of Volusia Mall and Honey Creek Mall (the
"Properties"), both of which are under common ownership and common management,
for the year ended December 31, 2003. This financial statement is the
responsibility of the Properties' management. Our responsibility is to express
an opinion on this financial 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 financial
statement is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The accompanying combined statement of certain revenues and certain operating
expenses 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 by CBL & Associates Properties, Inc. as a result of the
acquisition of the Properties). Material amounts, described in Note 1 to the
combined statement of certain revenues and certain operating expenses that would
not be directly attributable to those resulting from future operations of the
Properties are excluded, and the financial statement is not intended to be a
complete presentation of the Properties' revenues and expenses.
In our opinion, such combined financial statement presents fairly, in all
material respects, certain revenues and certain operating expenses of the
Properties for the year ended December 31, 2003 in conformity with accounting
principles generally accepted in the United States of America.
/s/ DELOITTE & TOUCHE LLP
June 22, 2005
Atlanta, Georgia
6
VOLUSIA MALL AND HONEY CREEK MALL
COMBINED STATEMENT OF CERTAIN REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2003
----------------------------------------------------------------------------
REVENUES:
Rentals:
Minimum $14,056,791
Percentage 1,135,614
Other 123,529
Tenant reimbursements 6,648,442
Other income 207,150
------------------------
Total revenues 22,171,526
------------------------
EXPENSES:
Property operating 3,253,334
Real estate taxes 1,785,526
Maintenance and repairs 1,494,350
------------------------
Total expenses 6,533,210
------------------------
Excess of certain revenues over
certain operating expenses $15,638,316
========================
See accompanying notes to financial statements.
7
VOLUSIA MALL AND HONEY CREEK MALL
NOTES TO COMBINED STATEMENT
OF CERTAIN REVENUES AND CERTAIN OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2003
NOTE 1. ORGANIZATION AND BASIS FOR PRESENTATION
The accompanying combined statement of certain revenues and certain operating
expenses (the "Statement") relates to Volusia Mall, a regional mall in Daytona
Beach, Florida and Honey Creek Mall, a regional mall in Terre Haute, Indiana.
Volusia Mall and Honey Creek Mall are collectively referred to as the
"Properties."
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, as a
result of the acquisitions of the Properties by CBL & Associates Properties,
Inc. Accordingly, the Statements are not representative of the actual combined
operations of the Properties for the period presented as certain revenues and
certain operating expenses have been excluded. Such items include depreciation,
amortization, interest expense, management fees, leasing commissions 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 basis over the initial terms of the related
leases. Tenant reimbursements are recognized in the period that the related
costs are incurred. The Properties account for these leases as operating leases
as they have retained substantially all risks and benefits of property
ownership. Percentage rent 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.
8
NOTE 3. LEASING ACTIVITIES
The Properties have non-cancelable operating leases with tenants requiring
monthly payments of specified minimum rent. The leases generally provide for
minimum rentals, plus percentage rentals based upon the retail stores' sales
volume. A majority of the leases require reimbursement by the tenant of their
proportionate share of real estate taxes and common area expenses. Future
minimum rental commitments under the non-cancelable operating leases at December
31, 2003 are as follows:
Year Ending December 31:
2004 $ 12,765,357
2005 11,634,347
2006 9,404,346
2007 6,976,705
2008 5,999,186
Thereafter 17,205,741
---------------------------
Total $63,985,682
===========================
9
The following unaudited pro forma consolidated financial statement is based
on the historical consolidated financial statements of CBL & Associates
Properties, Inc. (the "Company"), Volusia Mall, Honey Creek Mall and certain
other properties that were acquired during the year ended December 31, 2004,
consolidated and adjusted to give effect to the acquisitions as described in
Item 2.01 of this Current Report on Form 8-K. This statement should be read in
conjunction with and the audited historical financial statements and notes
thereto of the Company for the year ended December 31, 2004, which are included
in the Company's Annual Report on Form 10-K for the year ended December 31,
2004, and the historical combined financial statement of Volusia Mall and Honey
Creek Mall included elsewhere in this Form 8-K. The Company previously filed a
Form 8-K dated September 2, 2004, which included audited financial statements
for Greenbrier Mall and Monroeville Mall that were acquired during the year
ended December 31, 2004.
The unaudited pro forma consolidated statement of operations for the year
ended December 31, 2004 presents the results for the Company and the acquired
properties as if the acquisitions had occurred on January 1, 2004.
10
CBL & Associates Properties, Inc.
Pro Forma Consolidated Statements of Operations
For the Year Ended December 31, 2004
(Unaudited and in thousands, except per share amounts)
Volusia Mall
CBL and Honey Other Pro Forma CBL
Historical Creek Mall Acquisitions Adjustments Pro Forma
------------- ------------- -------------- ------------- -----------
REVENUES:
Minimum rents $ 478,011 $ 2,828 $ 30,010 $ 2,107(a) $ 512,956
Percentage rents 15,957 397 1,876 - 18,230
Other rents 16,102 6 55 - 16,163
Tenant reimbursements 219,205 1,300 16,228 - 236,733
Management, development and leasing fees 9,791 - - - 9,791
Other 20,098 104 583 - 20,785
------------- ------------- -------------- ------------- -----------
Total revenues 759,164 4,635 48,752 2,107 814,658
------------- ------------- -------------- ------------- -----------
EXPENSES:
Property operating 115,345 615 8,223 - 124,183
Depreciation and amortization 142,509 - - 15,103(b) 157,612
Real estate taxes 58,301 345 3,905 - 62,551
Maintenance and repairs 43,726 312 4,009 - 48,047
General and administrative 35,338 - - - 35,338
Loss on impairment of real estate assets 3,080 - - - 3,080
Other 16,373 - - - 16,373
------------- ------------- -------------- ------------- -----------
Total expenses 414,672 1,272 16,137 15,103 447,184
------------- ------------- -------------- ------------- -----------
Income from operations 344,492 3,363 32,615 (12,996) 367,474
Interest income 3,355 - - - 3,355
Interest expense (177,219) - - (17,564)(c) (194,783)
Gain on sales of real estate assets 29,272 - - - 29,272
Equity in earnings of unconsolidated affiliates 10,308 - - - 10,308
Minority interest in earnings:
Operating partnership (85,186) - - (2,841)(d) (88,027)
Shopping center properties (5,365) - - - (5,365)
------------- ------------- -------------- ------------- -----------
Income before discontinued operations 119,657 3,363 32,615 (33,401) 122,234
Operating income of discontinued operations 609 - - - 609
Gain on discontinued operations 845 - - - 845
------------- ------------- -------------- ------------- -----------
Net income 121,111 3,363 32,615 (33,401) 123,688
Preferred dividends (18,309) - - - (18,309)
------------- ------------- -------------- ------------- -----------
Net income available to common shareholders $ 102,802 $ 3,363 $ 32,615 $ (33,401) $ 105,379
============= ============= ============== ============= ===========
Basic per share data:
Income before discontinued operations,
net of preferred dividends $ 1.65 $ 1.69
Discontinued operations 0.02 0.02
------------- -----------
Net income available to common shareholders $ 1.67 $ 1.71
============= ===========
Weighted average common shares outstanding 61,602 61,602
Diluted per share data:
Income before discontinued operations,
net of preferred dividends $ 1.58 $ 1.62
Discontinued operations 0.03 0.03
------------- -----------
Net income available to common shareholders $ 1.61 $ 1.65
============= ===========
Weighted average common and potential dilutive
common shares outstanding 64,004 64,004
(a) Reflects the amortization of acquired above- and below-market leases.
(a) Represents depreciation and amortization expense related to buildings and
improvements, tenant improvements and in-place leases of the acuired
properties.
(c) Reflects interest expense on the $909,209 of debt assumed or borrowed
(including debt premiums) in connection with the properties acquired during
2004, which had a weighted average effective interest rate of 3.69%. This
amount includes the cash portion of the purchase price of each property
acquired totaling $312,551, which is assumed to have been borrowed at the
Company's borrowing rate under its lines of credit.
(d) Reflects the allocation of earnings to the minority interest in the
Operating Partnership as a result of the acquired properties.
11
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
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. 33-92218, 333-62830, 333-90395, 333-47041, 333-97831, 333-104882
and 333-108947 on Form S-3 of CBL & Associates Properties, Inc. of our report
dated June 22, 2005 (which report includes an explanatory paragraph relating to
the purpose of such financial statements) on the Combined Statement of Certain
Revenues and Certain Operating Expenses of Volusia Mall and Honey Creek Mall for
the year ended December 31, 2003, appearing in this Current Report on Form 8-K
of CBL & Associates Properties, Inc. dated September 19, 2005.
/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
September 16, 2005