CBL & ASSOCIATES PROPERTIES INC

Results of Operations

Properties that were in operation for the entire year during 2023 and the nine months ended September 30, 2024 are referred to as the "Comparable Properties." Since January 2023, we have opened, deconsolidated and disposed of the following properties:

Properties Opened

(1)

The property is owned by a joint venture that is accounted for using the equity method of accounting and is included in equity in earnings of unconsolidated affiliates in the accompanying condensed consolidated statements of operations.

Deconsolidations

(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 May 2024.

Dispositions

We consider properties undergoing major redevelopment or being considered for repositioning as non-core. As of September 30, 2024, Harford Mall was designated as non-core.

Comparison of the Three Months Ended September 30, 2024 to the Three Months Ended September 30, 2023

Rental revenues from the Comparable Properties decreased primarily due to lower minimum rents and percentage rents in the current-year period. Minimum rents were lower due to tenant closures and tenants that converted to percentage in lieu of rent. The decline in percentage rents corresponds to the decline in tenant sales as compared to the prior-year period.

Operating Expenses

Total property operating expenses at the Comparable Properties increased primarily due to higher insurance and non-contract exterior maintenance costs.

Depreciation and amortization expense at the Comparable Properties decreased primarily due to tenant improvement and intangible in-place lease assets recognized upon the adoption of fresh start accounting on November 1, 2021 becoming fully depreciated or amortized since the prior-year period.

General and administrative expenses increased as compared to the prior-year period primarily due to higher compensation expense related to annual compensation increases and higher share-based compensation expenses related to awards granted since the prior-year period.

Litigation settlement expense increased during the three months ended September 30, 2024 as compared to the prior-year period. The increase results from a revision to the estimate in the prior-year period related to amounts to be paid out under the terms of the class action settlement agreement that was executed in 2019.

Other Income and Expenses

Interest expense decreased $4.0 million during the three months ended September 30, 2024 as compared to the prior-year period. The decrease was primarily due to less accretion on property-level debt discounts as certain discounts became fully accreted since the prior year period. Also, the decrease is attributable to amortization of principal balances, which has resulted in a reduction in interest expense as compared to the prior-year period.

For the three months ended September 30, 2023, we recorded a $19.7 million gain on deconsolidation related to WestGate Mall. The property was deconsolidated due to a loss of control when it was placed into receivership in connection with the foreclosure process.

Equity in earnings of unconsolidated affiliates increased $3.8 million for the three months ended September 30, 2024 as compared to the prior-year period. The increase primarily relates to distributions received in the current-year period as compared to the prior-year period attributable to certain investments in unconsolidated affiliates in which our investment is below zero.

During the three months ended September 30, 2024, we recognized $12.8 million of gain on sales of real estate assets related to the sales of Layton Hills Mall, Layton Hills Convenience Center, Layton Hills Plaza, 10 outparcels, of which 9 outparcels were associated with the Layton Hills properties, and a land parcel. During the three months ended September 30, 2023, we recognized $3.4 million of gain on sales of real estate assets primarily related to the sale of two land parcels.

Comparison of the Nine Months Ended September 30, 2024 to the Nine Months Ended September 30, 2023

Rental revenues from the Comparable Properties decreased primarily due to lower tenant reimbursements and percentage rents. Tenant reimbursements were lower due to the accrual of credits to tenants at certain properties related to reduced assessments and refunds received from successful appeals of real estate taxes at certain properties. The decline in percentage rents corresponds to the decline in tenant sales as compared to the prior-year period.

Operating Expenses

Total property operating expenses at the Comparable Properties decreased primarily due to a state franchise tax rebate related to prior years, as well as lower real estate taxes and janitorial and security costs.

Depreciation and amortization expense at the Comparable Properties decreased primarily due to tenant improvement and intangible in-place lease assets recognized upon the adoption of fresh start accounting on November 1, 2021 becoming fully depreciated or amortized since the prior-year period.

Litigation settlement expense increased during the nine months ended September 30, 2024 as compared to the prior-year period. The increase results from a revision to the estimate in the prior-year period related to 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 $2.8 million during the nine months ended September 30, 2024 as compared to the prior-year period primarily due to holding U.S. Treasury securities that carried higher interest rates in the current-year period.

Interest expense decreased $12.5 million during the nine months ended September 30, 2024 as compared to the prior-year period. The decrease was primarily due to $10.2 million less accretion on property-level debt discounts as certain discounts became fully accreted since the prior year period. Also, the decrease in interest expense was impacted by higher default interest expense in the prior-year period. The decrease in interest expense was partially offset by an increase of $1.4 million in the current year period related to the term loan and open-air centers and outparcels loan due to increased variable rates.

For the nine months ended September 30, 2023, we recorded a $47.9 million gain on deconsolidation related to Alamance Crossing East and WestGate Mall. The properties were deconsolidated due to a loss of control when they were placed into receivership in connection with the foreclosure process.

Equity in earnings of unconsolidated affiliates increased $16.0 million for the nine months ended September 30, 2024 as compared to the prior-year period. The increase primarily relates to distributions received in the current-year period as compared to contributions made in the prior-year period attributable to certain investments in unconsolidated affiliates in which our investment is below zero.

During the nine months ended September 30, 2024 we recognized a $16.5 million gain on sales of real estate assets related to the sales of Layton Hills Mall, Layton Hills Convenience Center, Layton Hills Plaza, 10 outparcels, of which 9 outparcels were associated with the Layton Hills properties, a land parcel and an anchor parcel. During the nine months ended September 30, 2023 we recognized $4.9 million of gain on sales of real estate assets related to the sale of seven land parcels.

Non-GAAP Measure