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CBL's Recent Impairments

AvoidingBigLosses profile picture


  • CBL has suffered several asset impairments in recent years.
  • I'm concerned by their timing.
  • This may not be an encouraging sign for some of CBL's other assets.
  • CBL may be in danger of breaching debt covenants.
  • I suggest buying low-strike, long-dated puts. The senior notes may also be attractive if they get cheap enough.

A less-discussed detail

CBL & Associates Properties (NYSE:CBL) has long been a battleground stock. Bulls talk about the dividend, the need for retail locations in less-affluent and/or more rural locations, as well as the company's low price/book value. Bears talk about the company's high cost of capital and struggling rents.

Yet there are two risks for CBL that have not gotten sufficient examination: The true value of the assets, and what those values may indicate for its debt covenants. I have noticed, anecdotally, a few questionable impairments and losses and want to get some idea of how big a concern they may be.

A few notes of caution

Of course, I do not have access to CBL's internal data, which might tell me in which month some particular improvement was placed into service. Also, CBL only shares some data as a year-end snapshot and not at quarter-end. As such, I will be relying slightly on estimates (indicated with a "~"), particularly for any mid-year carrying values.

However, if my concerns prove valid, I expect my use of estimates will not prevent an unfortunate pattern from recurring.

With that, let's examine these recent impairments and losses.

1. Acadiana Mall

Let's start with Acadiana Mall in Lafayette, LA. On 12/31/16, it had a historical cost (2005 land, 2005 buildings, subsequent improvements) of $179.5 million and $70.2 million of accumulated depreciation for an unimpaired carrying value of about $109.3 million (2016 10-K, p148).

Around the end of Q1 2017, the unimpaired value was ~$110 million (presumably after some minor improvement or other capitalized cost) and CBL recorded no impairment for the asset (Q1 2017 10-Q, p19). However, they were unable to refinance the $122 million mortgage in April (one month later). In June, they wrote the asset down $43 million (~38%) to $67.3 million

This article was written by

AvoidingBigLosses profile picture
I'm an individual investor with a fairly concentrated portfolio of (mostly) lower-risk companies. I hope my writing encourages respectful discussion and debate so we can all try to avoid confirmation bias.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I was long CBL puts earlier this year, but closed my position months ago (for a modest gain). I may buy the unsecured senior notes if they get cheap enough.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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