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CBL & Associates Properties: Anytime Mall REIT Apocalypse


  • Over the last several weeks, I have walked around Westgate Mall attempting to rationalize the new reality in which the word apocalypse seems appropriate.
  • CBL expects to collect a "significant" portion of April and May rents later in 2020 and into 2021, but can't estimate a recovery.
  • It's hard to see more than a dime in recovery rate once the firm eventually runs out of cash and defaults on its bonds and credit facilities.
  • This idea was discussed in more depth with members of my private investing community, iREIT on Alpha. Get started today »

This article was co-produced with Williams Equity Research and edited by Brad Thomas.

Since mid-March, I have woken up almost every single day at 5:30 am to go walking around my local mall, owned by CBL & Associates Properties (NYSE:CBL). This massive parking lot, filled with mostly vacant stores has become my all new gym - replacing my Anytime Fitness with my "anytime mall REIT apocalypse".

Along these same lines, a few weeks ago I wrote an article titled, The Retail Apocalypse Is Knocking At Our Door, that generated over 600 comments. The article was actually published on April Fool's Day, but it's clearly no laughing matter that "given the stream of bad news, we’ve become increasingly defensive in our portfolio positioning."

Over the last several weeks, I have walked around Westgate Mall attempting to rationalize the new reality in which the word apocalypse seems appropriate. A quick search on Merriam-Webster.com offers the following synonyms for the word apocalypse:

  • calamity
  • cataclysm
  • catastrophe
  • debacle
  • disaster
  • tragedy

A full circle around the Westgate Mall is around one mile, so my daily workout consists of a glimpse of the dark Sears and J.C. Penney stores, while Dillard's and Belk recently opened.

Recently, Penney said that it had "reopened 304 stores during the COVID-19 crisis" with plans to open "nearly 500 shops by June 3rd". That means that if my local J.C. Penney store does not open by June 3rd, it will most likely be on the store closure list.

Note: The closest J.C. Penney store in Greenville, SC (owned by SPG) is open.

That's definitely something to watch for, as the struggling department store said earlier "this month that it plans to permanently shut almost 30% of its 846 stores, as part of its restructuring."

In addition to the two closed department

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This article was written by

Brad Thomas profile picture

Brad Thomas is the CEO of Wide Moat Research ("WMR"), a subscription-based publisher of financial information, serving over 175,000 investors around the world. WMR has a team of experienced multi-disciplined analysts covering all dividend categories, including REITs, MLPs, BDCs, and traditional C-Corps.

The WMR brands include: (1) iREIT on Alpha (Seeking Alpha), and (2) The Dividend Kings (Seeking Alpha), and (3) Wide Moat Research. He is also the editor of The Forbes Real Estate Investor

Thomas has also been featured in Barron's, Forbes Magazine, Kiplinger’s, US News & World Report, Money, NPR, Institutional Investor, GlobeStreet, CNN, Newsmax, and Fox. 

He is the #1 contributing analyst on Seeking Alpha in 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022 and 2023 (based on page views) and has over 111,000 followers (on Seeking Alpha). Thomas is also the author of The Intelligent REIT Investor Guide (Wiley) and is writing a new book, REITs For Dummies (Wiley/Amazon).  

Thomas received a Bachelor of Science degree in Business/Economics from Presbyterian College, and he is married with 5 wonderful kids. He has over 30 years of real estate investing experience and is one of the most prolific writers on Seeking Alpha. To learn more about Brad visit HERE.

Analyst’s Disclosure: I am/we are long SPG. 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.

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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Comments (122)

Brad Thomas profile picture
The First REIT Bankruptcy Since 2009, A New Institutional Data Source, & Our Updated Sector Outlook seekingalpha.com/...
I see where Sycamore Partners wants to buy out J.C. Penney's. Wonder if it has occurred to them to pay their rent (Belk), along with other private equity retailers to malls like CBL?
Conner M urphy profile picture
Always looking to blame a PE fund and others for your own poor performance and subpar investment analysis. How sad.
Brad Thomas profile picture
Latest JCP store closure list (I see a few PEI deal in the mix): companyblog.jcpnewsroom.com/...
BRAAD, the chief enabler (along with the SA toadys) for the syndicates in the NJ/Connnecticut corridor may get his wish, the demise of this reit. Its a shame a 40 year old company that has done much that is good in retail commerce. NAREIT and the regulators should investigate how the wolves have driven this fine company in the ground. CBL isn't the first and most certainly won't be the last. Having received the Morris award in commercial bank lending, this has been a travesty.

Yes, CBLs demise has absolutely nothing to do with the closing-up of scads of Sears, JC Pennies, & Macy's anchors, along with dozens and dozens of in-line tenants.

Blame the lenders, not the company defaulting on the interest payments.
Conner M urphy profile picture
The Lebovitz family drove this company into the ground with their horrendous management and poor capital allocation. Should the regulators investigate them?
Conner M urphy profile picture
bondsmoker, yea good point.

This bogus notion that lenders can manufacture the demise of a company is pure hogwash. If a company pays its debts, the lenders have no power whatsoever, and that in fact is the scenario that lenders prefer. Companies create their own demise through poor management, plain and simple.
Brad Thomas profile picture
REIT Preferreds: Higher-Yield Without Excess Risk seekingalpha.com/...
theheckwithtech profile picture
Putting $500/each into the Preferred D and E's today, just because I feel like a little bit of gambling. 23 Red, 7 Black.
Brad Thomas profile picture
@theheckwithtech I like 23 but I think its important to spread the bets.... I like 0 and 00 too ;)
The bet was they'd avoid Ch-11.

I sold the last of my CBL preferreds today.

Any new money should go into the bonds, if anything.
theheckwithtech profile picture
You're forgetting about the DCB! That's what I'm going after.
get to see some more videos of "Abandoned Places" in maybe a decade or 2 when the rot solidifies.
No payment on 2023 unsecured.

pref are now toast. but we all knew that..They may try a DDE but more likely bonds take the equity and we go home. A quick equitization makes sense.
Interesting they engaged advisors in January - at a time they were laughing at analysts asking if they might consider bankruptcy.
@RealEstateAdvisor Thanks for posting.
Other than getting exercise I have no idea why you are wasting your time following this company. Maybe you are getting paid to write these articles but why anyone would want to get involved with any of their securities is hard to understand.
Brad Thomas profile picture
@dennis rfm from the looks of it, CBL may not be a REIT much longer, so don't worry ;)
@Brad Thomas Thanks for your concern/today's post. Cronyism doesn't help to boost EPS. 4 people with same last name on the management team. 2 people working in Finance with same last names. I still don't get how/why a family run REIT would go downhill like this one.
This company is so poorly run I am amazed they are still in business.
Brad Thomas profile picture
@froger Thanks for reading and all the best - Brad
For what its worth, CBL made their interest payment on the 2023 bonds today
@user 44890606 Hopefully that will translate into them also paying their interest payment on the 2026 bond due 6/15 (that's the one I'm holding the bag on). That being said, I would wait 3 days to verify. Sometimes distressed companies "claw back" their interest payments a few days later (like Diamond Offshore's April 2020 payment).
@Dr0Doom You were right. The payment was reversed
UndiversifyBC profile picture
Always looking for value, retail reits are often tempting. So a couple/few years ago went with three that looked very good value if things would just stabilize. CBL was one.

The end result was terrible, bad, and not good for the three when I had to finally admit that the fundamentals were just too daunting. CBL in particular appeared to have weak locations and even weaker tenants. Now days I have to call for a family/ friends intervention if I even start looking at a retail reit.

Maybe well placed strip malls can hold some value but overall the minefield is still probably too dangerous when other decent opportunities are available.
Brad Thomas profile picture
@UndiversifyBC Thanks for reading and I would argue that supply/demand has a lot to do with the performance (or lack of it) today. There are just way too many malls built in the US and that rooster is now coming to roost. All the best - Brad
Maybe the looters and rioters will burn them down and the insurance companies will bail them out.
Many insurance policies don't cover "civil unrest".

A real nightmare for many of the small businesses getting ran-sacked, which either have no insurance, or insurance which won't cover civil-unrest.
Beyond Saving profile picture
CBL is going to be a very interesting case study- it is really the first time that a public REIT in a very dire situation is forced into bankruptcy- GGP was in pretty good shape and was a victim of bank failures, and the resulting inability to refinance anything, more than their own quality. If CBL goes into restructuring, there will be a lot of firsts.

I put $1k in YOLO money on the preferred. More lottery ticket than investment, but a fun lottery ticket and the casino was closed. An interesting one to follow, but not an investment for widows, orphans, or those who respect money.
Brad Thomas profile picture
@Beyond Saving Thanks for stopping over.... have a great week - Brad
While broadly, yes, you've proven CBL's solvency is in question - I'm not seeing the analysis to come to the conclusion of 10 cent recovery on the bonds in a default scenario.
Williams Equity Research profile picture
@bondsmoker the details weren't included and it includes a lot of subjective analysis. This is already well beyond what we normally provide in free articles. We thought that number would still be helpful for those looking for a barometer. Thank you for reading. -WER
twajetgod profile picture
one of your best articles
D.S. Leach & C.E. Leach profile picture
I don't think much more beyond looking at the CBL capital structure and current bond pricing is required to understand that it is very likely going down for the count. CBL may hang on for awhile but is already essentially not suitable for investment by mere mortals.

Brad Thomas profile picture
@D.S. Leach & C.E. Leach Thanks for reading and commenting - All the best - Brad
Brad -
Do you think it matters at all that most of these stores you mention that are long gone were behemoths SO POORLY RUN they could have had sales out the wazoo and still probably gone bankrupt?

Sears especially was an extreme disappoint in our local area; it's like "no one was at the helm" for a LONG TIME.

People still like to shop in person (especially women) - touch things, try them on, get ice cream afterward.

I can't see everyone shopping from home on everything, all the time.

Besides, recent changes at Amazon have not ALL been for the better. (including the fact you can't skip sales tax anymore)

The problem with the "people like so shop in person" argument is that its the same argument that's been made since CBL was $9, and the preferreds were near par.
Brad Thomas profile picture
@DeltaRoger I would argue that management is part of the problem, but the other part are the greedy developers who continued to build, and build, and build....over supply remains the biggest issue IMO - all the best. Brad
@bondsmoker - I completely understand that; that was NOT the question.
hello---not sure why you would waste your time analyzing a company with a share price of a quarter-----more value add may have been looking at the specific real estate which you appear to know intimately and determining what the opportunity is to de mall it and what the #s look like upon redevelopment and then extrapolating to cbl portfolio
Williams Equity Research profile picture
@jack420 a good portion of our content is request driven. One man's "waste of time" is another's "exactly what I wanted."
good point---my bad
No mention of Ashman. Why is he buying?
To be honest Brad, you are one of the first authors asking investors to stay away from $CBL 
I was in denial early but ultimately sold my shares based on your insight. I lost only 5% at that time when I sold @0.98
Just imagine if I were still in that denial!

Thanks Brad, I owe you one!
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