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CBL & Associates Properties Reports Third Quarter 2014 Results and Raises Full Year Guidance

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CBL & Associates Properties, Inc. (NYSE:CBL) :

  • Same-center NOI growth accelerated to 3.0% for the third quarter in the Total Portfolio and 3.3% in the Mall Portfolio.
  • FFO per diluted share, as adjusted, increased 5.8% to $0.55 for the third quarter 2014, over the prior-year period.
  • Average gross rent per square foot for stabilized mall leases signed in the third quarter 2014 increased 17.6% over the prior gross rent per square foot.
  • Same-center Mall occupancy increased 40 basis points to 93.3% in the third quarter 2014 from June 30, 2014.
  • Same-store sales per square foot increased 0.8% during the third quarter 2014.

CBL & Associates Properties, Inc. (NYSE:CBL) announced results for the third quarter ended September 30, 2014. A description of each non-GAAP financial measure and the related reconciliation to the comparable GAAP measure is located at the end of this news release.

Three Months Ended
September 30,

Nine Months Ended
September 30,

2014 2013 2014 2013

Funds from Operations (“FFO”) per diluted share

$ 0.63 $ 0.56 $ 1.91 $ 1.60
FFO, as adjusted, per diluted share (1) $ 0.55 $ 0.52 $ 1.61 $ 1.60

(1) FFO, as adjusted, for the three months ended September 30, 2014 excludes $16.8 million of gain on extinguishment of debt, net of non-cash default interest expense, related to the conveyance of Chapel Hill Mall in Akron, OH to the lender by a deed-in-lieu of foreclosure. FFO, as adjusted for the nine months ended September 30, 2014 excludes $59.4 million primarily related to gain on extinguishment of debt, net of non-cash default interest expense, related to the conveyance of Chapel Hill Mall and the foreclosure of Citadel Mall. It also excludes a partial litigation settlement of $0.8 million. FFO, as adjusted, for the three and nine months ended September 30, 2013 excludes a partial litigation settlement of $8.2 million and for the nine months ended September 30, 2013 also excludes a loss on extinguishment of debt of $9.1 million and a gain on investment of $2.4 million.

CBL’s President and Chief Executive Officer Stephen Lebovitz commented, “We are pleased with the acceleration of our same-center NOI growth and lease spread results in the third quarter. Year-to-date same-center NOI growth is above the top end of our guidance range providing further confirmation of our operating expertise. Our focus on upgrading the quality of our tenant merchandising mix and redeveloping underperforming locations has directly contributed to our improved growth rate across the portfolio.

“We are also making progress upgrading our balance sheet and lowering our cost of capital. This month we executed a 10-year, $300 million offering of senior unsecured notes at an attractive 4.6% coupon and added Mall del Norte, one of our highest productivity assets, to our unencumbered pool. Recent progress on our dispositions includes the completion of a community center sale. We will also execute a non-binding contract for the sale of an additional community center this week. CBL remains fully committed to successfully executing our strategic transformation within the two-to-three year time horizon we have established.”

FFO allocable to common shareholders, as adjusted, for the third quarter 2014 was $93.0 million, or $0.55 per diluted share, compared with $87.3 million, or $0.52 per diluted share, for the third quarter 2013. FFO of the operating partnership, as adjusted, for the third quarter 2014 was $109.1 million compared with $102.5 million, for the third quarter 2013. The increase in adjusted FFO during the quarter was driven by contributions from recent openings of new development projects, increased rental rates on new and renewal leases and lower operating expenses. These improvements were partially offset by lost income from sold properties and higher net interest expense.

Net income attributable to common shareholders for the third quarter 2014 was $38.1 million, or $0.22 per diluted share, compared with net income of $23.1 million, or $0.14 per diluted share, for the third quarter 2013.

Percentage change in same-center Net Operating Income (“NOI”)(1):

Three Months
Ended
September 30, 2014

Portfolio same-center NOI 3.0%
Mall same-center NOI 3.3%

(1) CBL’s definition of same-center NOI excludes the impact of lease termination fees and certain non-cash items of straight line rents and net amortization of acquired above and below market leases. NOI is for real estate properties and excludes income of the Company’s subsidiary that provides maintenance, janitorial and security services.

MAJOR VARIANCES IMPACTING SAME-CENTER NOI RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 2014

  • Contributions from rent growth, including increased new and renewal lease spreads, resulted in $3.0 million of growth in minimum rent and a $2.2 million increase in tenant reimbursements compared with the prior-year period.
  • Contributions from percentage rents turned positive in the quarter, with an increase of $0.1 million.
  • Operating and maintenance and repair expenses improved by $0.8 million in the quarter primarily as a result of continued expense controls and cost saving measures. This was partially offset by an increase of $0.2 in real estate taxes.

PORTFOLIO OPERATIONAL RESULTS

Occupancy:

As of September 30,
2014 2013
Portfolio occupancy 93.7% 93.8%
Mall portfolio 93.5% 93.5%
Same-center stabilized malls 93.3% 93.6%
Stabilized malls 93.3% 93.4%
Non-stabilized malls 97.4% 97.1%
Associated centers 93.7% 94.6%
Community centers 97.6% 96.1%

New and Renewal Leasing Activity of Same Small Shop Space Less Than 10,000 Square Feet:

% Change in Average Gross Rent Per Square Foot

Three Months Ended
September 30, 2014

Stabilized Malls 17.6%
New leases 23.0%
Renewal leases 15.5%

Same-Store Sales Per Square Foot for Mall Tenants 10,000 Square Feet or Less:

Twelve Months Ended September 30,
2014 2013 % Change
Stabilized mall same-store sales per square foot $ 356 $ 363 (1.9 )%

DEVELOPMENT

On July 31st, the Company celebrated the Grand Opening of The Outlet Shoppes of the Bluegrass in Louisville (Simpsonville), KY. The 375,000-square-foot outlet center opened 100% leased or committed with more than 80 stores, including Michael Kors, Nike, Saks Fifth Avenue off 5th and The North Face.

TRANSACTIONS

During the quarter, CBL closed on the sale of Pemberton Plaza in Vicksburg, MS, for $1.98 million.

FINANCING ACTIVITY

On October 1, CBL retired the $113.4 million loan secured by Mall del Norte in Laredo, TX, adding one of CBL’s most productive properties to the unencumbered pool.

On October 8, CBL closed a $300 million offering of 4.60% Senior Notes Due 2024 under its existing shelf registration statement. The notes mature on October 15, 2024. Net proceeds from the offering were approximately $297.7 million, after deducting the underwriting discount and other offering expenses payable by the Operating Partnership, and were used to reduce amounts outstanding under its unsecured revolving credit facilities and for general business purposes.

BofA Merrill Lynch, J.P. Morgan, RBC Capital Markets, US Bancorp and Wells Fargo Securities served as Joint Book-Running Managers.

During the quarter, the deed for Chapel Hill Mall in Akron, OH, was accepted by the lender in lieu of a foreclosure. As a result, CBL recorded a gain on extinguishment of $18.3 million and non-cash default interest of $1.5 million during the third quarter.

OUTLOOK AND GUIDANCE

Based on its current outlook, the Company is increasing 2014 Adjusted FFO guidance to the range of $2.24 – $2.28 per diluted share. CBL’s guidance also assumes an increased same-center NOI growth range of 1.25-2.25% in 2014.

The guidance also assumes the following:

  • $2-3 million increase in annual interest expense (net of non-cash default interest)
  • $2.0 million to $4.0 million of outparcel sales
  • 0-25 basis point increase in total portfolio occupancy as well as stabilized mall occupancy at year-end
  • No additional unannounced acquisition or disposition activity
  • No unannounced capital markets activity – equity or debt
Low High
Expected diluted earnings per common share $ 0.99 $ 1.03
Adjust to fully converted shares from common shares (0.14 ) (0.15 )
Expected earnings per diluted, fully converted common share 0.85 0.88
Depreciation and amortization 1.64 1.64
Noncontrolling interest in earnings of Operating Partnership 0.14 0.15
Impairment of real estate 0.09 0.09
Expected FFO per diluted, fully converted common share $ 2.72 $ 2.76
Net gain on debt extinguishment and litigation settlement (1) (0.48 ) (0.48 )
Expected adjusted FFO per diluted, fully converted common share $ 2.24 $ 2.28
(1) CBL anticipates receiving a $6.2 million partial insurance settlement in the fourth quarter 2014. This settlement is excluded from adjusted FFO.

INVESTOR CONFERENCE CALL AND WEBCAST

CBL & Associates Properties, Inc. will conduct a conference call at 11:00 a.m. ET on Thursday, October 30, 2014, to discuss its third quarter results. The number to call for this interactive teleconference is (800) 736-4594 or (212) 231-2902. A replay of the conference call will be available through November 6, 2014, by dialing (800) 633-8284 or (402) 977-9140 and entering the confirmation number, 21706210. A transcript of the Company’s prepared remarks will be furnished on a Form 8-K following the conference call.

To receive the CBL & Associates Properties, Inc., third quarter earnings release and supplemental information please visit our website at cblproperties.com or contact Investor Relations at 423-490-8312.

The Company will also provide an online webcast and rebroadcast of its 2014 third quarter earnings release conference call. The live broadcast of the quarterly conference call will be available online at cblproperties.com on Thursday, October 30, 2014 beginning at 11:00 a.m. ET. The online replay will follow shortly after the call and continue for one year.

ABOUT CBL & ASSOCIATES PROPERTIES, INC.

CBL is one of the largest and most active owners and developers of malls and shopping centers in the United States. CBL owns, holds interests in or manages 148 properties, including 89 regional malls/open-air centers. The properties are located in 30 states and total 84.2 million square feet including 6.5 million square feet of non-owned shopping centers managed for third parties. Headquartered in Chattanooga, TN, CBL has regional offices in Boston (Waltham), MA, Dallas (Irving), TX, and St. Louis, MO. Additional information can be found at cblproperties.com.

NON-GAAP FINANCIAL MEASURES

Funds From Operations

FFO is a widely used 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 allocable to common shareholders as defined above by NAREIT less dividends on preferred stock. The Company’s method of calculating FFO allocable to its common shareholders may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

The Company believes that FFO provides an additional indicator of the operating performance of its 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 well-maintained real estate assets have historically risen with market conditions, the Company believes that FFO enhances investors’ understanding of its operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of the Company’s properties and interest rates, but also by its capital structure. The Company presents both FFO of its operating partnership and FFO allocable to its common shareholders, as it believes that both are useful performance measures. The Company believes FFO of its operating partnership is a useful performance measure since it conducts substantially all of its business through its operating partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of the Company’s common shareholders and the noncontrolling interest in the operating partnership. The Company believes FFO allocable to its common shareholders is a useful performance measure because it is the performance measure that is most directly comparable to net income (loss) attributable to its common shareholders.

In the reconciliation of net income attributable to the Company’s common shareholders to FFO allocable to its common shareholders, located in this earnings release, the Company makes an adjustment to add back noncontrolling interest in income (loss) of its operating partnership in order to arrive at FFO of its operating partnership. The Company then applies a percentage to FFO of its operating partnership to arrive at FFO allocable to its common shareholders. The percentage is computed by taking the weighted average number of common shares outstanding for the period and dividing it by the sum of the weighted average number of common shares and the weighted average number of operating partnership units outstanding during the period.

FFO does not represent cash flows from operations as defined by accounting principles generally accepted in the United States, 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 the Company’s operating performance or to cash flow as a measure of liquidity.

As described above, during third quarter 2014, the Company recognized an $18.3 million gain on the extinguishment of debt and $1.5 million of non-cash default interest expense in connection with the conveyance of Chapel Hill Mall to the lender. During first quarter 2014, the Company recognized a $42.7 million net gain on the extinguishment of debt in connection with the foreclosure of the mortgage loan encumbering Citadel Mall and the early retirement of the mortgage loan encumbering St. Clair Square. Additionally, the Company received income of $0.8 million as a partial settlement of ongoing litigation. During the three and nine month periods ended September 30, 2013, the Company recorded $2.4 million of gains on investment, $9.1 million of loss on extinguishment of debt and a partial legal settlement of $8.2 million. Considering the significance and nature of these items, the Company believes it is important to identify their impact on 2014 FFO measures for readers to have a complete understanding on the Company’s results of operations. Therefore, the Company has also presented adjusted FFO measures for 2014, excluding these items.

Same-Center Net Operating Income

NOI is a supplemental measure of the operating performance of the Company’s shopping centers and other properties. The Company defines 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).

Similar to FFO, the Company computes NOI based on its pro rata share of both consolidated and unconsolidated properties. The Company’s definition of NOI may be different than that used by other companies and, accordingly, the Company’s NOI may not be comparable to that of other companies.

As described above, during the three months ended September 30, 2014, the Company recognized a $16.8 million gain on the extinguishment of debt net of default interest upon the transfer of the deed for Chapel Hill Mall to the lender in lieu of foreclosure. During first quarter 2014, the Company recognized a $42.7 million net gain on the extinguishment of debt in connection with the foreclosure of the mortgage loan encumbering Citadel Mall and the early retirement of the mortgage loan encumbering St. Clair Square and received $0.8 million as a partial settlement of ongoing litigation. During the three and nine month periods ended September 30, 2013, the Company recorded $2.4 million of gain on investment, $9.1 million of loss on extinguishment of debt and a partial legal settlement of $8.2 million. Considering the significance and nature of these items, the Company believes it is important to identify their impact on 2014 FFO measures for readers to have a complete understanding on the Company’s results of operations. Therefore, the Company has also presented adjusted FFO measures for 2014, excluding these items.

Pro Rata Share of Debt

The Company presents debt based on its pro rata ownership share (including the Company’s pro rata share of unconsolidated affiliates and excluding noncontrolling interests’ share of consolidated properties) because it believes this provides investors a clearer understanding of the Company’s total debt obligations which affect the Company’s liquidity. A reconciliation of the Company’s pro rata share of debt to the amount of debt on the Company’s consolidated balance sheet is located at the end of this earnings release.

Information included herein contains “forward looking statements” within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual events, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements. The reader is directed to the Company’s various filings with the Securities and Exchange Commission, including without limitation the Company’s Annual Report on Form 10-K, and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included therein, for a discussion of such risks and uncertainties.

CBL & Associates Properties, Inc.
Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2014 2013 2014 2013
REVENUES:
Minimum rents $ 169,097 $ 167,703 $ 506,005 $ 498,632
Percentage rents 3,060 2,797 8,490 9,847
Other rents 3,813 3,837 13,708 13,503
Tenant reimbursements 71,330 70,576 214,322 213,524
Management, development and leasing fees 3,228 3,118 9,176 9,042
Other 8,186 9,518 25,189 27,067
Total revenues 258,714 257,549 776,890 771,615
OPERATING EXPENSES:
Property operating 36,668 38,375 112,206 111,170
Depreciation and amortization 72,488 68,941 212,180 206,115
Real estate taxes 22,202 22,607 65,638 66,411
Maintenance and repairs 12,603 13,387 41,391 40,808
General and administrative 9,474 10,160 35,583 36,459
Loss on impairment 497 17,753 21,038
Other 7,396 6,371 21,331 21,217
Total operating expenses 161,328 159,841 506,082 503,218
Income from operations 97,386 97,708 270,808 268,397
Interest and other income 463 8,809 3,535 10,197
Interest expense (60,214 ) (56,341 ) (179,997 ) (173,374 )
Gain (loss) on extinguishment of debt 18,282 60,942 (9,108 )
Gain on sales of real estate assets 434 58 3,513 1,058
Gain on investment - - 2,400
Equity in earnings of unconsolidated affiliates 3,936 2,270 11,038 7,618
Income tax provision (3,083 ) (271 ) (4,266 ) (854 )
Income from continuing operations 57,204 52,233 165,573 106,334
Operating income (loss) of discontinued operations 78 (8,346 ) (480 ) (5,195 )
Gain on discontinued operations (2 ) 290 88 1,162
Net income 57,280 44,177 165,181 102,301
Net income attributable to noncontrolling interests in:
Operating Partnership (6,576 ) (4,075 ) (18,847 ) (7,602 )
Other consolidated subsidiaries (1,362 ) (5,778 ) (3,740 ) (18,338 )
Net income attributable to the Company 49,342 34,324 142,594 76,361
Preferred dividends (11,223 ) (11,223 ) (33,669 ) (33,669 )
Net income attributable to common shareholders $ 38,119 $ 23,101 $ 108,925 $ 42,692
Basic and diluted per share data attributable to common shareholders:
Income from continuing operations, net of preferred dividends $ 0.22 $ 0.18 $ 0.64 $ 0.28
Discontinued operations 0.00 (0.04 ) 0.00 (0.02 )
Net income attributable to common shareholders $ 0.22 $ 0.14 $ 0.64 $ 0.26
Weighted-average common and potential dilutive common shares outstanding 170,262 169,906 170,242 166,048
Amounts attributable to common shareholders:
Income from continuing operations, net of preferred dividends $ 38,054 $ 29,965 $ 109,259 $ 46,116
Discontinued operations 65 (6,864 ) (334 ) (3,424 )
Net income attributable to common shareholders $ 38,119 $ 23,101 $ 108,925 $ 42,692

The Company’s calculation of FFO allocable to Company shareholders is as follows:
(in thousands, except per share data)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2014 2013 2014 2013
Net income attributable to common shareholders $ 38,119 $ 23,101 $ 108,925 $ 42,692
Noncontrolling interest in income of Operating Partnership 6,576 4,075 18,847 7,602
Depreciation and amortization expense of:
Consolidated properties 72,488 68,941 212,180 206,115
Unconsolidated affiliates 10,537 9,877 30,654 29,748
Discontinued operations - 1,634 - 6,638
Non-real estate assets (628 ) (572 ) (1,825 ) (1,530 )

Noncontrolling interests’ share of depreciation and amortization

(1,729 ) (1,403 ) (4,831 ) (4,292 )
Loss on impairment, net of tax benefit 497 5,234 18,434 26,051
Gain on depreciable property (3 ) (8 ) (937 ) (10 )
Gain on discontinued operations, net of taxes 1 (174 ) (86 ) (714 )
Funds from operations of the Operating Partnership 125,858 110,705 381,361 312,300
Litigation settlement - (8,240 ) (800 ) (8,240 )
Gain on investment - - (2,400 )
Non cash default interest expense 1,514 1,514
(Gain) loss on extinguishment of debt (18,282 ) (60,942 ) 9,108
Funds from operations of the Operating Partnership, as adjusted $ 109,090 $ 102,465 $ 321,133 $ 310,768
Funds from operations per diluted share $ 0.63 $ 0.56 $ 1.91 $ 1.60
Funds from operations, as adjusted, per diluted share $ 0.55 $ 0.52 $ 1.61 $ 1.60

Weighted average common and potential dilutive common shares outstanding with Operating Partnership units fully converted

199,631 199,451 199,699 195,594

Reconciliation of FFO of the Operating Partnership to FFO allocable to common shareholders:

Funds from operations of the Operating Partnership $ 125,858 $ 110,705 $ 381,361 $ 312,300
Percentage allocable to common shareholders (1) 85.29 % 85.19 % 85.25 % 84.89 %
Funds from operations allocable to common shareholders $ 107,344 $ 94,310 $ 325,110 $ 265,111
Funds from operations of the Operating Partnership, as adjusted $ 109,090 $ 102,465 $ 321,133 $ 310,768
Percentage allocable to common shareholders (1) 85.29 % 85.19 % 85.25 % 84.89 %
Funds from operations allocable to common shareholders, as adjusted $ 93,043 $ 87,290 $ 273,766 $ 263,811
(1) Represents the weighted average number of common shares outstanding for the period divided by the sum of the weighted average number of common shares and the weighted average number of Operating Partnership units outstanding during the period. See the reconciliation of shares and Operating Partnership units outstanding on page 12.

SUPPLEMENTAL FFO INFORMATION:
Lease termination fees $ 1,044 $ 887 $ 2,395 $ 3,425
Lease termination fees per share $ 0.01 $ $ 0.01 $ 0.02
Straight-line rental income $ 1,201 $ (2,755 ) $ 2,484 $ 81
Straight-line rental income per share $ 0.01 $ (0.01 ) $ 0.01 $
Gains on outparcel sales $ 316 $ 35 $ 2,461 $ 1,035
Gains on outparcel sales per share $ - $ $ 0.01 $ 0.01
Net amortization of acquired above- and below-market leases $ 139 $ 642 $ 544 $ 1,271
Net amortization of acquired above- and below-market leases per share $ - $ $ - $ 0.01
Net amortization of debt premiums and discounts $ 545 $ 639 $ 1,625 $ 1,715
Net amortization of debt premiums and discounts per share $ - $ $ 0.01 $ 0.01
Income tax provision $ (3,083 ) $ (271 ) $ (4,266 ) $ (854 )
Income tax provision per share $ (0.02 ) $ $ (0.02 ) $
Loss on impairment from continuing operations $ (497 ) $ $ (17,753 ) $ (21,038 )
Loss on impairment from continuing operations per share $ - $ $ (0.09 ) $ (0.11 )
Loss on impairment from discontinued operations $ - $ (5,234 ) $ (681 ) $ (5,234 )
Loss on impairment from discontinued operations per share $ - $ (0.03 ) $ - $ (0.03 )
Gain (loss) on extinguishment of debt $ 18,282 $ $ 60,942 $ (9,108 )
Gain (loss) on extinguishment of debt per share $ 0.09 $ $ 0.31 $ (0.05 )
Gain on investment $ - $ $ - $ 2,400
Gain on investment per share $ - $ $ - $ 0.01
Interest capitalized $ 1,672 $ 1,277 $ 4,538 $ 3,206
Interest capitalized per share $ 0.01 $ 0.01 $ 0.02 $ 0.02
Litigation settlement $ - $ 8,240 $ 800 $ 8,240
Litigation settlement per share $ - $ 0.04 $ - $ 0.04

As of September 30,

2014

2013

Straight-line rent receivable

$

64,123

$

61,640

Same-Center Net Operating Income
(Dollars in thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2014 2013 2014 2013
Net income attributable to the Company $ 49,342 $ 34,324 $ 142,594 $ 76,361
Adjustments:
Depreciation and amortization 72,488 68,941 212,180 206,115
Depreciation and amortization from unconsolidated affiliates 10,537 9,877 30,654 29,748
Depreciation and amortization from discontinued operations - 1,634 - 6,638

Noncontrolling interests’ share of depreciation and amortization in other consolidated subsidiaries

(1,729 ) (1,403 ) (4,831 ) (4,292 )
Interest expense 60,214 56,341 179,997 173,374
Interest expense from unconsolidated affiliates 9,719 9,840 28,872 29,677
Interest expense from discontinued operations - - 1

Noncontrolling interests’ share of interest expense in other consolidated subsidiaries

(1,375 ) (1,076 ) (3,993 ) (3,029 )
Abandoned projects expense 47 140 81 141
Gain on sales of real estate assets (434 ) (58 ) (3,513 ) (1,058 )
Gain on sales of real estate assets of unconsolidated affiliates (698 ) (11 ) (698 ) (11 )
Gain on investment - - (2,400 )
(Gain) loss on extinguishment of debt (18,282 ) (60,942 ) 9,108
Loss on impairment 497 17,753 21,038
Loss on impairment from discontinued operations - 5,234 681 5,234
Income tax provision 3,083 271 4,266 854
Lease termination fees (1,044 ) (887 ) (2,395 ) (3,425 )
Straight-line rent and above- and below-market lease amortization (1,340 ) 2,113 (3,028 ) (1,352 )

Net income attributable to noncontrolling interest in earnings of Operating Partnership

6,576 4,075 18,847 7,602
Gain on discontinued operations 2 (290 ) (88 ) (1,162 )
General and administrative expenses 9,474 10,160 35,583 36,459
Management fees and non-property level revenues (4,284 ) (10,270 ) (18,736 ) (14,027 )

Company’s share of property NOI

192,793 188,955 573,284 571,594
Non-comparable NOI (17,570 ) (18,838 ) (49,942 ) (59,415 )
Total same-center NOI (1) $ 175,223 $ 170,117 $ 523,342 $ 512,179
Total same-center NOI percentage change 3.0 % 2.2 %
Malls $ 160,369 $ 155,211 $ 479,020 $ 468,787
Associated centers 7,988 7,576 23,742 23,232
Community centers 4,928 5,539 14,585 14,615
Offices and other 1,938 1,791 5,995 5,545
Total same-center NOI (1) $ 175,223 $ 170,117 $ 523,342 $ 512,179
Percentage Change:
Malls 3.3 % 2.2 %
Associated centers 5.4 % 2.2 %
Community centers (11.0 )% (0.2 )%
Offices and other 8.2 % 8.1 %
Total same-center NOI (1) 3.0 % 2.2 %

(1) CBL defines 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). Same-center NOI excludes lease termination income, straight-line rent adjustments, and amortization of above and below market lease intangibles. Same-center NOI is for real estate properties and does not include the results of operations of the Company’s subsidiary that provides janitorial, security and maintenance services. We include a property in our same-center pool when we own all or a portion of the property as of September 30, 2014, and we owned it and it was in operation for both the entire preceding calendar year and the current year-to-date reporting period ending September 30, 2014. New properties are excluded from same-center NOI, until they meet this criteria. The only properties excluded from the same-center pool that would otherwise meet this criteria are non-core properties, properties under major redevelopment, properties where we intend to renegotiate the terms of the debt secured by the related property and properties included in discontinued operations.

Company’s Share of Consolidated and Unconsolidated Debt
(Dollars in thousands)

As of September 30, 2014
Fixed Rate Variable Rate Total
Consolidated debt $ 3,788,890 $ 922,531 $ 4,711,421

Noncontrolling interests’ share of consolidated debt

(89,065 ) (7,109 ) (96,174 )

Company’s share of unconsolidated affiliates’ debt

673,412 89,220 762,632

Company’s share of consolidated and unconsolidated debt

$ 4,373,237 $ 1,004,642 $ 5,377,879
Weighted average interest rate 5.44 % 1.74 % 4.74 %
As of September 30, 2013
Fixed Rate Variable Rate Total
Consolidated debt $ 3,517,089 $ 1,350,628 $ 4,867,717

Noncontrolling interests’ share of consolidated debt

(67,828 ) (5,684 ) (73,512 )

Company’s share of unconsolidated affiliates’ debt

655,340 138,042 793,382

Company’s share of consolidated and unconsolidated debt

$ 4,104,601 $ 1,482,986 $ 5,587,587
Weighted average interest rate 5.52 % 2.01 % 4.59 %

Debt-To-Total-Market Capitalization Ratio as of September 30, 2014
(In thousands, except stock price)

Shares
Outstanding

Stock
Price (1)

Value
Common stock and operating partnership units 199,544 $ 17.90 $ 3,571,838
7.375% Series D Cumulative Redeemable Preferred Stock 1,815 250.00 453,750
6.625% Series E Cumulative Redeemable Preferred Stock 690 250.00 172,500
Total market equity 4,198,088

Company’s share of total debt

5,377,879
Total market capitalization $ 9,575,967
Debt-to-total-market capitalization ratio 56.2 %

(1) Stock price for common stock and operating partnership units equals the closing price of the common stock on September 30, 2014. The stock prices for the preferred stocks represent the liquidation preference of each respective series.

Reconciliation of Shares and Operating Partnership Units Outstanding
(In thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2014: Basic Diluted Basic Diluted
Weighted average shares – EPS 170,262 170,262 170,242 170,242
Weighted average Operating Partnership units 29,369 29,369 29,457 29,457
Weighted average shares- FFO 199,631 199,631 199,699 199,699
2013:
Weighted average shares – EPS 169,906 169,906 166,048 166,048
Weighted average Operating Partnership units 29,545 29,545 29,546 29,546
Weighted average shares- FFO 199,451 199,451 195,594 195,594

Dividend Payout Ratio

Three Months Ended
September 30,

Nine Months Ended
September 30,

2014 2013 2014 2013
Weighted average cash dividend per share $ 0.25313 $ 0.23838 $ 0.75938 $ 0.71540
FFO as adjusted, per diluted fully converted share $ 0.55 $ 0.52 $ 1.61 $ 1.60
Dividend payout ratio 46.0 % 45.8 % 47.2 % 44.7 %

Consolidated Balance Sheets
(Unaudited; in thousands, except share data)

As of

September 30, 2014

December 31, 2013
ASSETS
Real estate assets:
Land $ 848,596 $ 858,619
Buildings and improvements 7,138,545 7,125,512
7,987,141 7,984,131
Accumulated depreciation (2,183,912 ) (2,056,357 )
5,803,229 5,927,774
Developments in progress 151,670 139,383
Net investment in real estate assets 5,954,899 6,067,157
Cash and cash equivalents 45,071 65,500
Receivables:

Tenant, net of allowance for doubtful accounts of $2,412 and $2,379 in 2014 and 2013, respectively

79,960 79,899

Other, net of allowance for doubtful accounts of $1,158 and $1,241 in 2014 and 2013, respectively

24,412 23,343
Mortgage and other notes receivable 19,513 30,424
Investments in unconsolidated affiliates 269,964 277,146
Intangible lease assets and other assets 238,892 242,502
$ 6,632,711 $ 6,785,971
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Mortgage and other indebtedness $ 4,711,421 $ 4,857,523
Accounts payable and accrued liabilities 347,382 333,875
Total liabilities 5,058,803 5,191,398
Commitments and contingencies
Redeemable noncontrolling partnership interests 34,843 34,639

Shareholders’ equity:

Preferred stock, $.01 par value, 15,000,000 shares authorized:

7.375% Series D Cumulative Redeemable Preferred Stock, 1,815,000 shares outstanding

18 18

6.625% Series E Cumulative Redeemable Preferred Stock, 690,000 shares outstanding

7 7

Common stock, $.01 par value, 350,000,000 shares authorized, 170,260,669 and 170,048,144 issued and outstanding in 2014 and 2013, respectively

1,703 1,700
Additional paid-in capital 1,962,187 1,967,644
Accumulated other comprehensive income 12,805 6,325
Dividends in excess of cumulative earnings (587,000 ) (570,781 )

Total shareholders’ equity

1,389,720 1,404,913
Noncontrolling interests 149,345 155,021
Total equity 1,539,065 1,559,934
$ 6,632,711 $ 6,785,971

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