Good day and welcome to the CBL & Associates Properties First Quarter 2015 Earnings Conference Call. All participants will be in listen-only-mode. [Operator Instructions]. Please note this event is being recorded on Wednesday, April 29, 2015. I would now like to turn the conference over to Katie Reinsmidt, Senior Vice President of Investor Relations and Corporate Investments. Please go ahead, ma’am.

Thank you, and good morning. We appreciate your participation in the CBL & Associates Properties, Inc. conference call to discuss first quarter results. Joining me today are Stephen Lebovitz, President and CEO; and Farzana Mitchell, Executive Vice President and CFO. I'll begin by reading our Safe Harbor disclosure and then I'll turn it over to Stephen for his remarks. This conference call contains forward-looking statements within the meaning of the federal securities laws. Such statements are inherently subject to risks and uncertainties. Future events and actual results, financial and otherwise, may differ materially from the events and results discussed in the forward-looking statements. We direct you to the company’s various filings with the Securities and Exchange Commission, including without limitation, the company’s most recent Annual Report on Form 10-K. During our discussion today, references made to per share amounts are based on a fully diluted converted share basis. During this call, the company may discuss non-GAAP financial measures as defined by SEC Regulation G. A reconciliation of each non-GAAP financial measure to the comparable GAAP financial measure will be included in today’s earnings release that is furnished on Form 8-K along with the transcript of today’s comments and additional supplemental schedule. This call will also be available for replay on the Internet through a link on our website at cblproperties.com.

Thank you, Katie, and good morning, everyone. Our portfolio demonstrated its strength during the first quarter by producing double-digit leasing spreads and an impressive 7% growth in retail sales. We also generated FFO per share results in-line with the prior year period and a 60 basis point increase in same-center NOI. Retail demand is steady and we'll be opening a number of exciting new stores in our malls throughout the year. Notably, during the first quarter, we opened our portfolio's first Ivivva, Lululemon's children store, and before the end of the year we will open 10 H&M stores, 2 DICK'S Sporting Goods, 4 ULTA stores, as well as our first King's Entertainment venue. While bankruptcy related store closures are impacting our results in 2015, our aggressive leasing strategies and the ongoing retail demand will result in a higher quality merchandizing mix at our centers. In total, the impact from the bankruptcy of Deb Shops, Wet Seal, RadioShack, Cache and Body Central will result in approximately 175 store closures representing over $16 million in annual gross rents. We have made good progress in re-leasing spaces that were returned due to bankruptcy activity. To-date, we have 36 leases executed or out for signature and an additional 57 leases in active negotiations. Our leasing team members have full schedules at RECon next month Las Vegas where they will be pushing to make additional progress. Occupancy was the metric most notably impacted by store closures. In total, during the quarter, 153 stores closed comprising approximately 620,000 square feet. Additionally, there were several Deb Shop and Wet Seal stores that closed in late December. We took several spaces offline at the start of the year as stores are being built out for the box openings I mentioned. As a result, we ended the quarter with…

Thank you, Stephen. Investing in value added redevelopments and select new developments continued to be an important focus for us with over 1.3 million square feet in process across the portfolio. Construction is now underway on several anchor redevelopment projects. The former JCPenney stores at Janesville Mall in Janesville, Wisconsin is being redeveloped for ULTA and DICK'S Sporting Goods, will both open this fall. Harvey Larvey is under construction in the former JCPenney space at Hickory Point in Forsyth, Illinois and will open in the fall as well. Our Sears redevelopment at CoolSprings Galleria is scheduled to open this May featuring American Girl, H&M, Kings, ULTA and two quality restaurants Connors Steakhouse and Connor Grill. Cheesecake Factory opened at The Mall late last year and Belk Home opened their new store in March and is renovating their existing department store into one of their flagship facilities. We are also under construction for a new restaurant district at Brookfield Square in Brookfield, Wisconsin in 21,000 square feet at the Sears store that we were able to lease back. The project will include Blackfinn Ameripub, Luau Burgers, Jason's Deli and one additional restaurant. The project is scheduled to open later this year. At Sunrise Mall in Brownsville, Texas, we are under construction with a new 50,000 square feet DICK'S Sporting Goods. The new store is an expansion of an existing pad attached to the mall and is scheduled to open ahead of the holiday season. We are also adding a 50,000 square feet Gordmans at Meridian Mall in Lansing, Michigan which will open in the third quarter. We recently broke ground on phase 2 projects at two of our outlet centers at The Outlet Shoppes of the Bluegrass we are under construction on a 53,000 square foot expansion with H&M, a limited…

Thank you, Katie. Adjusted FFO for the quarter was $0.52 per share flat from the prior year period. FFO as adjusted in the current quarter excluded at $16.6 million gain on investment recorded for the sale of marketable securities as well as a $4.7 million litigation settlement net of related expenses. Our consolidated performance for the first quarter 2015 reflects results from opening two new centers and properties sold or returned to the lender in 2014. Top-line growth from new properties and rent increases during the first quarter were muted by lost income from store closures. A strong first quarter sales growth resulted in an increase in percentage rents of $0.5 million. Interest expense declined as a result of interest rates savings achieved as we retired secured loans and replaced them with unsecured bonds. Property operating expenses and maintenance and repairs compared favorably with the prior year. These expense improvements were offset by an increase in real estate taxes and G&A expense. G&A as a percentage of total revenues was 6.6% for the quarter, compared with 5.7% in the prior year. G&A increased in the quarter, primarily due to a one-time company-wide bonus paid to CBL employees for significantly exceeding NOI budgets in 2014. We expect G&A expense to moderate throughout the remainder of the year. Our cost recovery ratio for the first quarter was 95%, compared with 93.2% in the prior year period, primarily due to lower snow removal expense in the current quarter. Same-center NOI growth in the quarter increased 60 basis points for the total portfolio and was flat in the mall portfolio. Our growth in same-center NOI would have been over 2.5% as we lost $3.6 million from recent bankruptcy activity. For the same-center portfolio, we experienced top-line revenue growth of $2.9 million, which included a…

Thank you, Farzana. Thank you again for joining us this morning. Our entire organization is focused on executing the strategic initiatives we have set forth for our portfolio and our company. We are confident that the opportunity to upgrade our tenant mix by replacing the vacancies created from bankruptcies will prove to be in that positive to long-term growth. We are now happy to answer any questions you may have.

We will now begin the question-and-answer session. [Operator Instructions]. And our first question comes from Craig Schmidt, Bank of America. Please go ahead.

The significant lift in first quarter sales, I mean, it sounds like some of it was the benefit of early Easter and other events, but what's your sense the sales could grow in the second, third and fourth quarter?

Yes. Good morning, Craig. Yes, we are looking at consistent gains in sales, not as high as the first quarter, because the first quarter definitely had the calendar shift in January, which helped us and also the early Easter like you say. But we still have the benefit of lower gas prices and that's helping us. So we are looking in the 3% to 4% range going forward for the rest of the year. And we feel that with the stability in the economy that that should be a number that retailers should be able to meet.

Great. And then just thoughts on possible JV with Sears Holding and your involvement in the past, sort of GGP and SPG, are you contemplating that or for any reasons are you not?

No, we're taking to Sears; we continue to talk to Sears. We actually had seven stores in our portfolio that are going into the REIT. So we had a lot fewer stores than GGP and Simon. And I know, just from conversation with Sears that their focus was doing some larger deals like 10 stores, like they did with those two companies. And we would have significantly fewer that we would be soon doing a JV with them. So we're talking with them and I think we'll see how the timings goes. But there are stores that are both going into the REIT and office stores that aren't going into the REIT that we have identified that have excellent redevelopment prospects. And we continue to think that we'll be able to partner with them and have a good redevelopment program with those stores going forward.

Okay. Thank you.

Thank you, Craig.

And the next question comes from Christy McElroy, Citi. Please go ahead.

Just trying to get a handle on the math around NOI growth. We'll say, it sounds like a $3.6 million NOI impact in Q1 from the bankruptcy, I think Farzana you mentioned that. And given that the full impact of the bankruptcy is $16 million annually, it sounds like there could be a little bit of a modest additional residual impact on lost rents in Q2. So if same-store NOI growth was sort of flattish in Q1, would you expect that Q2 same-store NOI growth to potentially dip into negative territory; can you may be walk through that math a little bit?

Hi, Christy. Good question. Yes, we did have approximately $3.6 million impact in the first quarter that's net of bankrupt -- net of bad debt expense that we had related to those revenues. However, second, third and fourth quarter, we think that that impact to NOI will moderate as we bring in specialty leasing and temporary leasing, as well as some permanent leasing will happen, the stores will open. However, we should see a negative same-center NOI next quarter. So I don't necessarily think that over the entire period of time we should end up somewhere between the 0% and 2% that we have indicated.

Okay. So it should sort of start to improve from here as opposed to get further and then improve.

Yes.

Okay. And then just turning to the three assets, the sell through, Stephen, maybe you could provide a little bit more color on what went wrong, to what extent were the three assets maybe impacted by the bankruptcy closings in the quarter and did that play a role? Are the servicers becoming more wary about loan transfers on malls in this environment of heavier retailer bankruptcies? And then given that much of the buyer pool for this lower productivity malls are local, does that setback, have you concerned about the future efforts to sell [indiscernible] malls?

Yes. Hi, Christy. Let me try to answer those different questions, although I'm not sure I got them all. But as far as this specific transaction, this was a regional buyer. We hadn't formally marketed; they come to us off market. All three properties had CMBS loans in place. And we went to the servicer and they came back and said that the buyer wouldn't meet their criteria for minimum network; we didn't know upfront what that criteria was. It was different servicers for different properties. And like I said, we were disappointed. We obviously tried to do we could, but the servicers are not easy to deal with. I don't think they are any more difficult than they have been in the past. They are -- they are representing the CMBS owners as part of this and doing what they think their job is. So with this specific transaction, I don't think I would read too much into it. It doesn't set any tends or mean anything beyond what happened. It just didn't go forward. And we still feel like each of these properties are viable sales candidates and there will be buyers for them, that we have flexibility with the loans as they come due, two of them one of them matures this year; one of them matures next year. So there is flexibility to either pay them off or try if we can, and we'll be more conservative with the next buyer obviously to make sure that they would satisfy network to us now that we have a better idea of what that would be if they want to try to assume the loans. So we are continuing to push forward on these three as we are with all the ones in the portfolio for disposition.

And just remind me, these three assets were not part of the original sort of 10 that you set out with a year ago, that you started at, different degrees, to actively marketing?

That's right. These were part of the group at 21 and we have this buyer come to us really without marketing the properties. And we were hoping the transaction would go through and unfortunately it didn't.

Thank you.

Thank you.

The next question comes from Jeremy Metz of UBS. Please go ahead.

Just following up a little bit on Christy's question, just with the recent sales, the three mall package falling out of contract, can you just give us some color today as you sit here one year later just how the transformation process has gone versus your expectations last year when you announced? And do you still feel confident to be able to achieve all the remaining sales in the next 12 to 24 months?

Well, we knew upfront that it wasn't going to be easy. We said it was going to take two or three years, and it's been exactly what we thought it would be. I mean, we have got two of the malls we have sold, one of them we eventually sold it to the fourth buyer after going under contract three times. Madison Square was the third buyer after going under contract twice. So it's - we never thought it was going to be easy, we never said it was going to be easy. But we are fully committed to getting it done and we are confident that we will get it done in that three year timeframe, two to three year timeframe that we said we would. And we've got discussions going on other malls like I said, during my remarks but we are not going to announce anything until we feel like it's real. And at that point, we will communicate more details as to the next group of transactions.

And so it's not necessarily then been harder than maybe your expectations where it's maybe as difficult as you thought it could be when you started out?

I mean, look, you always hope that things will go easier and smoother but that's -- we also didn't expect it would be easy. And we are not the only ones that have gone through this or are going through this. And it's just the -- the market is out there and there are buyers that are interested in these properties, but it's a lot of work to get through the process.

Okay. And then just one for Farzana. You mentioned paying out some of the secured loans coming to with an unsecured. Can you just talk about where an unsecured deal with price today? And then just as we think about absolute levels of proceeds versus paying off versus the bond offering, do you expect that to generally be neutral?

Hi, Jeremy. Yes, we should -- all bonds are trading less than 4.5% today. So -- but the 10-year treasury is moving up and down, depending on however that treasury is up. We hope that we would be around 4.5%, 4.6% in that range, that's our expectation. And anywhere from $350 million to $400 million would be our expectation for new bond proceeds and should pretty much clear the secured debt that we expect to pay off. And we will be better in terms of interest rates, weighted average interest rate, the amount that we are paying off at 5.2%. If we take 50 basis points, 60 basis points that will be positive.

And on the unconsolidated, do you see any issues that they will refi those with similar proceeds for what is coming up?

No worries, because we have old part that's coming up and that is a phenomenal asset for us. We should be able to save quite a bit interest savings on that; it's at 5.85% and we should do much better on that one.

Okay. Thank you for the color.

Thank you, Jeremy.

You're welcome.

And the next question comes from Carol Kemple from Hilliard Lyons. Please go ahead.

Good morning. What was the cap rate on the Madison Square Mall sale?

Yes. Good morning, Carol. It wasn't sold on a cap rate basis just given the declines in NOI that it seen and the vacant anchors. It was really sold as a redevelopment by the buyer that purchased it.

And then I know last year you talked about wanting to announce a couple of new outlet projects. This year, are you close to having any new construction besides expansions in the outlet space?

We are getting closer. We are not there yet in terms of the pre-leasing. And yes, it just -- as a reminder, we look to have in the 50% to 60% pre-leasing range before we announce the project and formalize the partnership with Horizon. So we're getting there. We have got the convention in Las Vegas coming up in a couple weeks, and that's a great opportunity to work with retailers and trying to push the deals that we need to across the finish line. So we feel like we're going to have some announcements to make. And then like I said, we have the outlet expansions that we've been able to go forward with the two of projects that are under construction and leasing demand continues strong in the outlook sector.

Okay. Thank you.

And the next question comes from Mike Mueller from JPMorgan. Please go ahead.

Yes, hi. I apologize if I missed this earlier in the call. But where do you see occupancy ending 2015, relative to where it ended 2014?

Yes. Oh Mike, it will be -- this is Katie. It will be down year-over-year. We didn't get a projection because we're still waiting, as Farzana mentioned in her comments, which we might -- I think you might missed it. We are waiting for some of the leases to solidly to see whether they are going to be taking occupancy this year or it will all hit in first quarter. So that really -- will we have little bit more clarity after second quarter results come in?

Okay. I mean do your guys tell you at that point that you will make up half of the vacancy or half of the gap, the year-over-year gap that we are seeing in Q1; do you think to at least make that much of a year end? A – Katie Reinsmidt: Yes. I think we are probably -- we are estimating at this point maybe a 100 to 150 basis points down. But again, it is very early for us to tell.

Okay. That was it. Thank you.

Thanks.

And the next question comes from Jeff Donnelly from Wells Fargo. Please go ahead.

Good morning, guys. Actually, if I could circle back, just question on Madison Square. I know it's not a representative asset. And like you said, it wasn't sold on a cap rate basis. But do you have a sense of what the new owner specific plans were or are I should say? And is it fair to say that was sold of something close to land value; I'm just trying to pull something from this that maybe that’s applicable to other assets out there?

Yes, it's -- yes, good morning, Jeff. The Madison Square, we own the mall portion but there were also this four other owners of properties there. So the buyer has closed on the mall from us. Now they’re talking to the other department stores or former department store owners to aggregate their parcels. And their plan is to work on a redevelopment. We don’t know what their plans are; the mall is located right across from the Research Park in Huntsville which has a lot of defense companies that are based there that do research around the space program. They partner with the city and we've worked with the city over the years too. But given that location I would expect that there would be some extension of in terms of office there and it's not going forward a retail location from a malls point of view there might be some service retail, but that was really the primary reason that we sold it versus just doing a redevelopment.

It's helpful. And switch gears I mean just with ICFE coming up around the -- coming up on us. I'm just curious I mean do you -- are you guys going into that with any sort of specific plans or goals or objectives and you're saying to your leasing people or your transactions people that we need to achieve sort of X going into this event or is that maybe that's not so much of a focus?

Well we have the approximately 175 spaces that are vacant now that weren't at the beginning of the year. And like I said we've made some progress but that's really priority one is backfilling those spaces and working with retailers to backfill as many of those as possible and I'm not -- we don't have a goal necessarily of 100%, and we haven't said, it's at least 50% of those but that's the focus is backfilling those spaces with good quality retailers. And it's interesting of the spaces that we've done leases with, it’s been spread across a broad variety of retailers and users. So like I said in my comments, we’ll end up ahead of the game through this, it’s definitely painful from a short-term perspective but down the road we feel like we'll have positive leasing spreads and also a better quality mix going forward.

The next question comes from Todd Thomas from KeyBanc. Please go ahead.

First, following up quickly on the trajectory of NOI, I just want to clarify something just I guess sort of help manage expectations going forward. Farzana, you're comfortable with the 0% to 2% range for the year but next quarter it could get a little worse with same center growth heading in the negative territory or you're not anticipating that. I just wasn’t clear on what you’re thinking for the second quarter?

Todd, hi, we look at full year it’s not a quarter-by-quarter business. So it just depends on how our re-leasing efforts come into play we are backfilling with temporary leasing and we are expecting, we don’t know where the opening dates would be for the executed leases for permanent leasing. So depending on how the cash flow comes in from all of this -- that might be on a quarter, on a second quarter it might be an impact. But I think our goal is for the full-year. We’re looking at the full-year from 0% to 2%. So that’s what we are hoping to get to the higher end as supposed to being at the lower end.

Okay, got it. Just looking for a sense of what the trajectory might sort of look like. And then in terms of Sears just sort of curious what you think their REIT spinoff really means for your business overall. I mean how do you think it impacts both the stores going into the REIT that are going to be contributed and the stores not going in, I mean what are your thoughts overall?

I think it’s a real positive because I think it indicates that Sears is willing to redevelop most of their locations. The ones that are going into the REIT are going in for I think financial reasons they can maximize their productivity so their rates include the REIT and then leasing them back. But I think it’s just signals a willingness on the part of Eddie Lampert in the Sears Organization to tap into the real estate value. And from our point of view we are happy to do it as a venture with them or happy to do it on our own. We’ve bought two stores, we've leased out portion to stores, were flexible, the most important thing is to have more traffic and more sales coming from that portion to mall and that’s a good positive in that direction.

Okay. And then just last question on page 25 the commencement schedule that you provide. In the 2016 commencement bucket, what's driving the big growth trends there, the mid $70 numbers is that attributable partially to the CoolSprings redevelopment or is there a mall or two that’s impacting that. I'm just curious those are pretty big numbers much higher than the portfolio average, I was wondering if you could talk about that?

Todd, we'll get a list of the stores that are in there. I think there is a couple of; its only eight leases and I think it’s a couple of restaurants and higher dollar square foot. I mean its only 13,000 square feet too so that’s playing into it as well as small space.

The next question comes from Tayo Okusanya from Jefferies. Please go ahead.

My question is just focused around retailers. First of all I'm trying to get a sense for retailers interested in taking some of the vacated space. Just a general sense of the profile of those kind of retailers, are they generally new retailers that simply go you’re your markets, are there people who have existing relationships with looking to expand into the markets -- trying to get a general sense of that. And then second of all if there are any new tenants that potentially could be on the "watch list".

Just as far as your first question, it’s really a wide range of tenants and it’s not just retailers that we're working with as far as replacements. For example we’ve got hopefully another cheese cake factory that we'll take part of one of the bankrupt spaces that we were able to get back. Several of them are going into H&M deals that we’re working on. Some of them actually we took out of this year’s budget because they were part of the 2015 H&M deals. And then there is some companies that we haven’t done a lot with in the portfolio but we’re doing more like Windsor Fashion, bands, a couple of juniors that are expanding and doing well like Kelly's and Zumiez. There is some women’s fashion stores like Apricot Lane, fitness is a use that we’re adding depending on the location and we have a couple of Planet Fitness location. So it’s really a combination of different retailers and different users and for the most part there are companies that we do have in the portfolio but we’re growing our presence with them.

Thank you. And then also on the watch list side, anything new?

We've -- I mean the benefit of the bankruptcy is it cleared to a lot of our watch list. We’re still working with a couple of juniors Aeropostale and A&F are the ones whose sales have been suffering the most. We don’t think there are necessarily a bankruptcy risk, but they have indicated that they are continuing to close stores. Arrow closed 19 stores in our portfolio in January and we knew that was coming but that was something that lowered our exposure to them across the board. And then we’ve also been watching some of the children stores that that haven't had -- didn’t have a great year in 2014 Jamboree in children place. But they Jamboree at least has bounced back. And also in Juniors American Eagle which had sales decreases the past couple of years has had a nice rebound in seeing some good results. So I’ll just give you some color on that.

And the next question comes from DJ Busch of Green Street Advisors. Please go ahead.

Thank you. Stephen, I think Macy has recently announced that it entertaining the idea of introducing an outlet concept or an off-price concept and it one that's showed in new location but in current locations also I think in Ralph Lauren has sort of the idea of opening some of its outlets in traditional centers. Are you having these types of negotiations or conversations and is it something that would make sense at may be some of your only gaming town assets that may not have radius restriction type issues to deal with?

Well we’ve seen a little bit -- hey, DJ, we’ve seen a little bit with a few of the specialty stores. We opened J. Crew Factory in Chattanooga and Hamilton Place and it's done really well. And [indiscernible] added a couple of different properties. Express has opened there outlet concept in some traditional malls just to see how that did and tested and according to them it's doing well. My understanding for the boxes is for the most part those are going and open air centers and not in the malls but that’s something as we look at series redevelopments and areas like that that definitely an opportunity, we talked to Macy's, we talked to Nordstrom Rack, and we are talking to the other users. And they are not just looking at outlets definitely, they even Saks Fifth started an outlets but mostly their expansion now is non-outlets because they see a real opportunity there.

And how careful are the retailers being or how careful as a landlord do you have to be as far as kind of mixing those two channels together under one roof?

I mean you have to be careful especially with the department stores that you're not cannibalizing their brand from a price point of view but it's still so early and so small I think it's more of an experimentation phase right now.

The next question comes from Collin Mings from Raymond James. Please go ahead.

Just two quick follow-ups here just on as it relates to backfilling some of it the new vacancy have you noticed the discernable difference across your different productivity tiers as it relates to either the success attracting new tenants or on rent spreads?

Yes, good morning. We do see stronger lead spreads at the tier-1 centers compared to tier-2 and tier-3. So that’s going to be the trend with the replacements as well. But we’ve seen activity across the board it really just depends on the types of uses. I mean the Cheesecake is in the tier-1 mall but some of the other users are interested in the tier-3 malls and the rents are lower and as long as they're getting the right actually cost feel then it's attractive for the retailer.

Okay. I mean is there particular, I mean, as you think about the tradeoff between may be but just backfilling the space to get the occupancy versus trying to hold out for a higher quality tenant or a potentially above positive leasing spread. How are thinking about that trade-off?

I mean that’s definitely a trade-off where we do have a really active specialty leasing program that puts in temporaries and that’s a part of this that I haven’t talked about. But that’s really the best way to bridge the gap this year because like Farzana was saying most of the retailers, the permanent replacements are going to come online until fourth quarter or even first quarter next year. But where we are looking at quality and upgrading as part of this. And it's not just about filling the space with any living breathing retailer. So that’s a part of this. We want to get also positive lead spreads and get the right economics if we have to invest TI we're going to make sure it’s a strong company going forward. So that’s an important part of this and we're adequate point in the cycle in terms of retail demand it's still really no real new construction on the mall front. And so we’re seeing good demand and we think like I said that will be ahead of the game at the end of this.

Okay. And then, just clarification as it relates to Sears are you looking at potentially doing a direct investment in the REIT like some of your peers or just looking at potentially JV deals it's an asset.

Jut potential JV deals on assets

Okay. All right thanks good luck in the quarter.

This concludes our question-and-answer session. I would like to turn the conference back over to Stephen Lebovitz, for any closing remarks. Please go ahead.

Thank you again for your participation this morning. We look forward to seeing many of you out in Las Vegas at RECA and then at NAREIT in June. Thank you and have a good day.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.