CBL & Associates Properties, Inc. (CBL - Snapshot Report) – a real estate investment trust (REIT) – announced its intention to buy full ownership of an enclosed regional shopping mall – Kirkwood Mall – located in Bismarck from Radiant Partners. The acquisition of this second-biggest mall in North Dakota district will boost CBL’s portfolio of high-quality market-dominant regional malls.
Last month, CBL bought the 49% non-controlling interest in Kirkwood Mall and inked a deal to gain the remaining 51% interest. The company will assume a non-recourse loan worth $40.4 million that was securitized through WFRBS Commercial Mortgage Trust. The debt has a fixed interest rate of 5.75% and matures in April 2018. The company expects the deal to close within 90 days, subject to lenders approval of loan assumption.
Developed in 1971, Kirkwood Mall spans 850,000 square feet and is a premier shopping center. The property is suitably located near Bismarck Expressway and 7th Street with direct access to I-94. The mall is also enjoying significantly increasing revenue mainly due to its proximity to the Bakken Formation oil reserves. In 2012, the sales per square feet at the mal increased over 15% to over $400 per square feet.
As of September 30, 2012, the mall was 87.9% occupied and sheltered some industry-leading tenants such as J. C. Penney Company, Inc. (JCP - Analyst Report) , Target Corp. (TGT - Analyst Report) , Chico's FAS Inc. (CHS - Snapshot Report) , Herberger's and Keating Furniture. Additionally, the mall offers both near and long-term growth opportunities through low occupancy cost as well as lease-up of remaining space.
We remain upbeat regarding the acquisition intended as this will likely benefit the company by capitalizing on the continuous growth opportunities in the Bismarck market. Moreover, the ongoing aggressive expansion plans and existing property extension activity of CBL will prove accretive to its earnings going forward.
Accordingly, in November 2012, CBL inked a joint venture with Horizon Group Properties, Inc. for Grand Opening of a 27,800 square-feet expansion at The Outlet Shoppes at Oklahoma City. Also, last month, the company announced the 46,000 square-feet expansion of Cross Creek Mall in Fayetteville, NC.
CBL is expected to release its fourth-quarter 2012 results on February 5, 2013. The Zacks Consensus Estimate for the company’s fourth quarter FFO is currently pegged at 58 cents per share.
The Earnings ESP (Expected Surprise Prediction), the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for CBL is positive 3.45%. This, combined with its Zacks Rank #3 (Hold), reflects that the company will definitely beat the Zacks Consensus Estimate in the fourth quarter.
We presently have a long-term ‘Neutral’ recommendation on CBL.
Note: FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.