CBL-3.31.2014-10Q
Table of Contents

UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
S QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2014
Or
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO _______________
 
COMMISSION FILE NO. 1-12494 (CBL & ASSOCIATES PROPERTIES, INC.)
COMMISSION FILE NO. 333-182515-01 (CBL & ASSOCIATES LIMITED PARTNERSHIP)
______________
CBL & ASSOCIATES PROPERTIES, INC.
CBL & ASSOCIATES LIMITED PARTNERSHIP
(Exact Name of registrant as specified in its charter)
______________
DELAWARE  (CBL & ASSOCIATES PROPERTIES, INC.)
 
   62-1545718
DELAWARE (CBL & ASSOCIATES LIMITED PARTNERSHIP)
 
   62-1542285
(State or other jurisdiction of incorporation or organization)     
 
 (I.R.S. Employer Identification Number)
                       
 2030 Hamilton Place Blvd., Suite 500, Chattanooga,  TN  37421-6000
(Address of principal executive office, including zip code)
423.855.0001
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 
CBL & Associates Properties, Inc.
 
 Yes x   
No o
CBL & Associates Limited Partnership
 
 Yes x   
No o
                      
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
CBL & Associates Properties, Inc.
 
 Yes x   
No o
CBL & Associates Limited Partnership
 
 Yes x   
No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
CBL & Associates Properties, Inc.
Large accelerated filer x
Accelerated filer o
 Non-accelerated filer o 
Smaller Reporting Company o
CBL & Associates Limited Partnership
Large accelerated filer o
Accelerated filer o
Non-accelerated filer x
Smaller Reporting Company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
CBL & Associates Properties, Inc.
 
 Yes o  
No x
CBL & Associates Limited Partnership
 
 Yes o  
No x
As of May 5, 2014, there were 170,268,150 shares of CBL & Associates Properties, Inc.'s common stock, par value $0.01 per share, outstanding.


Table of Contents


EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarter ended March 31, 2014 of CBL & Associates Properties, Inc. and CBL & Associates Limited Partnership. Unless stated otherwise or the context otherwise requires, references to the "Company" mean CBL & Associates Properties, Inc. and its subsidiaries. References to the "Operating Partnership" mean CBL & Associates Limited Partnership and its subsidiaries. The terms "we," "us" and "our" refer to the Company or the Company and the Operating Partnership collectively, as the context requires.

The Company is a real estate investment trust ("REIT") whose stock is traded on the New York Stock Exchange. The Company is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. At March 31, 2014, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.0% general partner interest in the Operating Partnership and CBL Holdings II, Inc. owned an 84.2% limited partner interest for a combined interest held by the Company of 85.2%.

As the sole general partner of the Operating Partnership, the Company's subsidiary, CBL Holdings I, Inc., has exclusive control of the Operating Partnership's activities. Management operates the Company and the Operating Partnership as one business. The management of the Company consists of the same individuals that manage the Operating Partnership. The Company's only material asset is its indirect ownership of partnership interests of the Operating Partnership. As a result, the Company conducts substantially all its business through the Operating Partnership as described in the preceding paragraph. The Company also issues public equity from time to time and guarantees certain debt of the Operating Partnership. The Operating Partnership holds all of the assets and indebtedness of the Company and, through affiliates, retains the ownership interests in the Company's joint ventures. Except for the net proceeds of offerings of equity by the Company, which are contributed to the Operating Partnership in exchange for partnership units on a one-for-one basis, the Operating Partnership generates all remaining capital required by the Company's business through its operations and its incurrence of indebtedness.

We believe that combining the two quarterly reports on Form 10-Q for the Company and the Operating Partnership provides the following benefits:

enhances investors' understanding of the Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner that management views and operates the business;

eliminates duplicative disclosure and provides a more streamlined and readable presentation, since a substantial portion of the disclosure applies to both the Company and the Operating Partnership; and

creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

To help investors understand the differences between the Company and the Operating Partnership, this report provides separate condensed consolidated financial statements for the Company and the Operating Partnership. Noncontrolling interests, shareholders' equity and partners' capital are the main areas of difference between the condensed consolidated financial statements of the Company and those of the Operating Partnership. A single set of notes to condensed consolidated financial statements is presented that includes separate discussions for the Company and the Operating Partnership, when applicable. A combined Management's Discussion and Analysis of Financial Condition and Results of Operations section is also included that presents combined information and discrete information related to each entity, as applicable.

In order to highlight the differences between the Company and the Operating Partnership, this report includes the following sections that provide separate financial information for the Company and the Operating Partnership:

condensed consolidated financial statements;

certain accompanying notes to condensed consolidated financial statements, including Note 5 - Unconsolidated Affiliates, Redeemable Interests, Noncontrolling Interests and Cost Method Investments; Note 6 - Mortgage and Other Indebtedness; Note 7 - Comprehensive Income; and Note 11 - Earnings Per Share and Earnings Per Unit;

controls and procedures in Item 4 of Management's Discussion and Analysis; and

certifications of the Chief Executive Officer and Chief Financial Officer included as Exhibits 31.1 through 32.4.


Table of Contents

CBL & Associates Properties, Inc.
CBL & Associates Limited Partnership
Table of Contents
PART I
FINANCIAL INFORMATION
 
 
 
CBL & Associates Properties, Inc.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013
 
 
 
CBL & Associates Limited Partnership
 
 
 
 
 
 
 
 
 
 
 
 
 
Condensed Consolidated Statements of Capital for the Three Months Ended March 31, 2014 and 2013
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013
 
 
 
CBL & Associates Properties, Inc. and CBL & Associates Limited Partnership
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
 
 
 
 
 
 
 
 
 
 


Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1:   Financial Statements

CBL & Associates Properties, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
ASSETS
March 31,
2014
 
December 31,
2013
Real estate assets:
 
 
 
Land
$
854,711

 
$
858,619

Buildings and improvements
7,069,967

 
7,125,512

 
7,924,678

 
7,984,131

Accumulated depreciation
(2,069,964
)
 
(2,056,357
)
 
5,854,714

 
5,927,774

Developments in progress
157,879

 
139,383

Net investment in real estate assets
6,012,593

 
6,067,157

Cash and cash equivalents
56,190

 
65,500

Receivables:
 
 
 
 Tenant, net of allowance for doubtful accounts of $2,251
     and $2,379 in 2014 and 2013, respectively
76,111

 
79,899

 Other, net of allowance for doubtful accounts of $1,249
      and $1,241 in 2014 and 2013, respectively
19,001

 
23,343

Mortgage and other notes receivable
30,201

 
30,424

Investments in unconsolidated affiliates
276,710

 
277,146

Intangible lease assets and other assets
233,043

 
242,502

 
$
6,703,849

 
$
6,785,971

 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
 

 
 

Mortgage and other indebtedness
$
4,799,817

 
$
4,857,523

Accounts payable and accrued liabilities
305,924

 
333,875

Total liabilities
5,105,741

 
5,191,398

Commitments and contingencies (Notes 5 and 12)


 


Redeemable noncontrolling partnership interests
34,881

 
34,639

Shareholders' equity:
 
 
 
Preferred stock, $.01 par value, 15,000,000 shares authorized:
 
 
 
 7.375% Series D Cumulative Redeemable Preferred
     Stock, 1,815,000 shares outstanding
18

 
18

 6.625% Series E Cumulative Redeemable Preferred
     Stock, 690,000 shares outstanding
7

 
7

 Common stock, $.01 par value, 350,000,000 shares
     authorized, 170,266,206 and 170,048,144 issued and
     outstanding in 2014 and 2013, respectively
1,703

 
1,700

Additional paid-in capital
1,967,970

 
1,967,644

Accumulated other comprehensive income
7,754

 
6,325

Dividends in excess of cumulative earnings
(568,426
)
 
(570,781
)
Total shareholders' equity
1,409,026

 
1,404,913

Noncontrolling interests
154,201

 
155,021

Total equity
1,563,227

 
1,559,934

 
$
6,703,849

 
$
6,785,971


The accompanying notes are an integral part of these condensed consolidated statements.

1

Table of Contents

CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)

 
Three Months
Ended March 31,
 
2014
 
2013
REVENUES:
 
 
 
Minimum rents
$
169,277

 
$
165,418

Percentage rents
3,606

 
4,716

Other rents
5,282

 
5,144

Tenant reimbursements
72,218

 
72,282

Management, development and leasing fees
3,135

 
3,075

Other
7,725

 
7,847

Total revenues
261,243

 
258,482

 
 
 
 
OPERATING EXPENSES:
 

 
 

Property operating
40,011

 
39,133

Depreciation and amortization
69,083

 
69,056

Real estate taxes
21,347

 
22,416

Maintenance and repairs
16,165

 
14,190

General and administrative
14,773

 
13,424

Loss on impairment
17,150

 

Other
6,545

 
6,656

Total operating expenses
185,074

 
164,875

Income from operations
76,169

 
93,607

Interest and other income
1,528

 
727

Interest expense
(60,506
)
 
(59,824
)
Gain on extinguishment of debt
42,660

 

Gain on sales of real estate assets
1,154

 
543

Equity in earnings of unconsolidated affiliates
3,684

 
2,619

Income tax (provision) benefit
(397
)
 
174

Income from continuing operations
64,292

 
37,846

Operating income (loss) of discontinued operations
(499
)
 
1,258

Gain (loss) on discontinued operations
(17
)
 
781

Net income
63,776

 
39,885

Net income attributable to noncontrolling interests in:
 

 
 

Operating Partnership
(7,651
)
 
(3,491
)
Other consolidated subsidiaries
(831
)
 
(6,081
)
Net income attributable to the Company
55,294

 
30,313

Preferred dividends
(11,223
)
 
(11,223
)
Net income attributable to common shareholders
$
44,071

 
$
19,090


2

Table of Contents

CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
(Continued)

 
Three Months
Ended March 31,
 
2014
 
2013
Basic and diluted per share data attributable to common shareholders:
 
 

Income from continuing operations, net of preferred dividends
$
0.26

 
$
0.11

Discontinued operations

 
0.01

Net income attributable to common shareholders
$
0.26

 
$
0.12

Weighted-average common and potential dilutive common shares outstanding
170,196

 
161,540

 
 
 
 
Amounts attributable to common shareholders:
 

 
 

Income from continuing operations, net of preferred dividends
$
44,511

 
$
17,366

Discontinued operations
(440
)
 
1,724

Net income attributable to common shareholders
$
44,071

 
$
19,090

 
 
 
 
Dividends declared per common share
$
0.245

 
$
0.230




The accompanying notes are an integral part of these condensed consolidated statements.


3

Table of Contents

CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)

 
Three Months
Ended March 31,
 
2014
 
2013
Net income
$
63,776

 
$
39,885

 
 
 
 
Other comprehensive income:
 
 
 
Unrealized holding gain on available-for-sale securities
1,001

 
764

   Unrealized loss on hedging instruments
(144
)
 
(281
)
   Reclassification to net income of hedging loss
548

 
557

Total other comprehensive income
1,405

 
1,040

 
 
 
 
Comprehensive income
65,181

 
40,925

Comprehensive income attributable to noncontrolling interests in:
 
 
 
Operating Partnership
(7,627
)
 
(3,667
)
Other consolidated subsidiaries
(831
)
 
(6,081
)
Comprehensive income attributable to the Company
$
56,723

 
$
31,177


The accompanying notes are an integral part of these condensed consolidated statements.


4

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CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Equity
(In thousands, except share data)
 (Unaudited)
 
 
 
Equity
 
 
 
Shareholders' Equity
 
 
 
 
 
Redeemable
Noncontrolling
Partnership
Interests
 
Preferred
 Stock
 
Common
 Stock
 
Additional
 Paid-in
 Capital
 
Accumulated
 Other
 Comprehensive
 Income
 
Dividends in Excess of Cumulative Earnings
 
Total
Shareholders'
Equity
 
Noncontrolling Interests
 
Total
 Equity
Balance, January 1, 2013
$
40,248

 
$
25

 
$
1,613

 
$
1,773,630

 
$
6,986

 
$
(453,561
)
 
$
1,328,693

 
$
192,404

 
$
1,521,097

Net income
788

 

 

 

 

 
30,313

 
30,313

 
3,698

 
34,011

Other comprehensive income
10

 

 

 

 
864

 

 
864

 
166

 
1,030

Dividends declared - common stock

 

 

 

 

 
(37,713
)
 
(37,713
)
 

 
(37,713
)
Dividends declared - preferred stock

 

 

 

 

 
(11,223
)
 
(11,223
)
 

 
(11,223
)
Issuances of 2,096,655 shares of common stock
     and restricted common stock

 

 
21

 
43,848

 

 

 
43,869

 

 
43,869

Cancellation of 20,644 shares of restricted
     common stock

 

 

 
(402
)
 

 

 
(402
)
 

 
(402
)
Amortization of deferred compensation

 

 

 
1,464

 

 

 
1,464

 

 
1,464

Distributions to noncontrolling interests
(1,744
)
 

 

 

 

 

 

 
(8,544
)
 
(8,544
)
Adjustment for noncontrolling interests
157

 

 

 
(10,909
)
 

 

 
(10,909
)
 
10,752

 
(157
)
Adjustment to record redeemable
     noncontrolling interests at redemption value
4,156

 

 

 
(3,523
)
 

 

 
(3,523
)
 
(633
)
 
(4,156
)
Balance, March 31, 2013
$
43,615

 
$
25

 
$
1,634

 
$
1,804,108

 
$
7,850

 
$
(472,184
)
 
$
1,341,433

 
$
197,843

 
$
1,539,276





5

Table of Contents

CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Equity
(In thousands, except share data)
(Unaudited)
(Continued)
 
 
 
Equity
 
 
 
Shareholders' Equity
 
 
 
 
 
Redeemable
Noncontrolling
Partnership
Interests
 
Preferred
 Stock
 
Common
 Stock
 
Additional
 Paid-in
 Capital
 
Accumulated
Other
Comprehensive
Income
 
Dividends in Excess of Cumulative Earnings
 
Total
Shareholders'
Equity
 
Noncontrolling
 Interests
 
Total
 Equity
Balance, January 1, 2014
$
34,639

 
$
25

 
$
1,700

 
$
1,967,644

 
$
6,325

 
$
(570,781
)
 
$
1,404,913

 
$
155,021

 
$
1,559,934

Net income
1,146

 

 

 

 

 
55,294

 
55,294

 
7,336

 
62,630

Other comprehensive income (loss)
(1
)
 

 

 

 
1,429

 

 
1,429

 
(23
)
 
1,406

Dividends declared - common stock

 

 

 

 

 
(41,716
)
 
(41,716
)
 

 
(41,716
)
Dividends declared - preferred stock

 

 

 

 

 
(11,223
)
 
(11,223
)
 

 
(11,223
)
Issuances of 238,693 shares of common stock
     and restricted common stock

 

 
3

 
540

 

 

 
543

 

 
543

Cancellation of 20,631 shares of restricted
     common stock

 

 

 
(347
)
 

 

 
(347
)
 

 
(347
)
Amortization of deferred compensation

 

 

 
1,467

 

 

 
1,467

 

 
1,467

Distributions to noncontrolling interests
(1,593
)
 

 

 

 

 

 

 
(8,778
)
 
(8,778
)
Adjustment for noncontrolling interests
756

 

 

 
(1,350
)
 

 

 
(1,350
)
 
594

 
(756
)
Adjustment to record redeemable
     noncontrolling interests at redemption value
(66
)
 

 

 
16

 

 

 
16

 
51

 
67

Balance, March 31, 2014
$
34,881

 
$
25

 
$
1,703

 
$
1,967,970

 
$
7,754

 
$
(568,426
)
 
$
1,409,026

 
$
154,201

 
$
1,563,227


The accompanying notes are an integral part of these condensed consolidated statements.


6

Table of Contents


CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

 
Three Months Ended
March 31,
 
2014
 
2013
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 
Net income
$
63,776

 
$
39,885

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 

Depreciation and amortization
69,083

 
71,662

Net amortization of deferred finance costs and debt premiums
2,234

 
1,586

Net amortization of intangible lease assets and liabilities
129

 
(314
)
Gain on sales of real estate assets
(1,154
)
 
(543
)
(Gain) loss on sale of discontinued operations
17

 
(781
)
Write-off of development projects
1

 
2

Share-based compensation expense
1,974

 
1,464

Loss on impairment
17,150

 

Loss on impairment from discontinued operations
681

 

Gain on extinguishment of debt
(42,660
)
 

Equity in earnings of unconsolidated affiliates
(3,684
)
 
(2,619
)
Distributions of earnings from unconsolidated affiliates
3,035

 
4,465

Provision for doubtful accounts
1,206

 
698

Change in deferred tax accounts
449

 
2,661

Changes in:
 

 
 

Tenant and other receivables
6,444

 
102

Other assets
(6,931
)
 

Accounts payable and accrued liabilities
(24,804
)
 
(50,763
)
Net cash provided by operating activities
86,946

 
67,505

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Additions to real estate assets
(53,091
)
 
(42,567
)
Reductions to restricted cash
7,669

 
1,697

Proceeds from sales of real estate assets
2,127

 
44,328

Payments received on mortgage and other notes receivable
224

 
3,630

Proceeds from sales of investments and available-for-sale securities

 
11,002

Additional investments in and advances to unconsolidated affiliates
(3,449
)
 
(20,588
)
Distributions in excess of equity in earnings of unconsolidated affiliates
5,414

 
4,343

Changes in other assets
(1,702
)
 
(1,816
)
Net cash (used in) provided by investing activities
(42,808
)
 
29


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Table of Contents

CBL & Associates Properties, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
(Continued)

 
Three Months Ended
March 31,
 
2014
 
2013
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from mortgage and other indebtedness
$
219,836

 
$
247,209

Principal payments on mortgage and other indebtedness
(208,752
)
 
(307,697
)
Additions to deferred financing costs
(62
)
 
(651
)
Prepayment fees on extinguishment of debt
(1,249
)
 

Proceeds from issuances of common stock
35

 
43,869

Distributions to noncontrolling interests
(10,371
)
 
(15,224
)
Dividends paid to holders of preferred stock
(11,223
)
 
(11,223
)
Dividends paid to common shareholders
(41,662
)
 
(35,485
)
Net cash used in financing activities
(53,448
)
 
(79,202
)
 
 
 
 
NET CHANGE IN CASH AND CASH EQUIVALENTS
(9,310
)
 
(11,668
)
CASH AND CASH EQUIVALENTS, beginning of period
65,500

 
78,248

CASH AND CASH EQUIVALENTS, end of period
$
56,190

 
$
66,580

 
 
 
 
SUPPLEMENTAL INFORMATION:
 

 
 

Cash paid for interest, net of amounts capitalized
$
53,722

 
$
57,775


 
The accompanying notes are an integral part of these condensed consolidated statements.


8

Table of Contents

CBL & Associates Limited Partnership
Condensed Consolidated Balance Sheets
(In thousands, except unit data)
(Unaudited)
ASSETS
March 31,
2014
 
December 31,
2013
Real estate assets:
 
 
 
Land
$
854,711

 
$
858,619

Buildings and improvements
7,069,967

 
7,125,512

 
7,924,678

 
7,984,131

Accumulated depreciation
(2,069,964
)
 
(2,056,357
)
 
5,854,714

 
5,927,774

Developments in progress
157,879

 
139,383

Net investment in real estate assets
6,012,593

 
6,067,157

Cash and cash equivalents
56,168

 
65,486

Receivables:
 

 
 

 Tenant, net of allowance for doubtful accounts of $2,251
     and $2,379 in 2014 and 2013, respectively
76,111

 
79,899

 Other, net of allowance for doubtful accounts of $1,249
      and $1,241 in 2014 and 2013, respectively
19,001

 
23,343

Mortgage and other notes receivable
30,201

 
30,424

Investments in unconsolidated affiliates
277,267

 
277,701

Intangible lease assets and other assets
232,923

 
242,383

 
$
6,704,264

 
$
6,786,393

 
 
 
 
 
 
 
 
LIABILITIES, REDEEMABLE INTERESTS AND CAPITAL
 

 
 

Mortgage and other indebtedness
$
4,799,817

 
$
4,857,523

Accounts payable and accrued liabilities
305,876

 
333,876

Total liabilities
5,105,693

 
5,191,399

Commitments and contingencies (Notes 5 and 12)


 


Redeemable interests:  
 

 
 

Redeemable noncontrolling interests  
6,454

 
5,883

Redeemable common units  
28,427

 
28,756

Total redeemable interests
34,881

 
34,639

Partners' capital:
 

 
 

Preferred units
565,212

 
565,212

Common units:
 
 
 
 General partner
9,885

 
9,866

 Limited partners
964,054

 
961,175

Accumulated other comprehensive income
6,331

 
4,923

Total partners' capital
1,545,482

 
1,541,176

Noncontrolling interests
18,208

 
19,179

Total capital
1,563,690

 
1,560,355

 
$
6,704,264

 
$
6,786,393


The accompanying notes are an integral part of these condensed consolidated statements.


9

Table of Contents


CBL & Associates Limited Partnership
Condensed Consolidated Statements of Operations
(In thousands, except per unit data)
(Unaudited)

 
Three Months
Ended March 31,
 
2014
 
2013
REVENUES:
 
 
 
Minimum rents
$
169,277

 
$
165,418

Percentage rents
3,606

 
4,716

Other rents
5,282

 
5,144

Tenant reimbursements
72,218

 
72,282

Management, development and leasing fees
3,135

 
3,075

Other
7,725

 
7,847

Total revenues
261,243

 
258,482

 
 
 
 
OPERATING EXPENSES:
 

 
 

Property operating
40,011

 
39,133

Depreciation and amortization
69,083

 
69,056

Real estate taxes
21,347

 
22,416

Maintenance and repairs
16,165

 
14,190

General and administrative
14,773

 
13,424

Loss on impairment
17,150

 

Other
6,545

 
6,656

Total operating expenses
185,074

 
164,875

Income from operations
76,169

 
93,607

Interest and other income
1,528

 
727

Interest expense
(60,506
)
 
(59,824
)
Gain on extinguishment of debt
42,660

 

Gain on sales of real estate assets
1,154

 
543

Equity in earnings of unconsolidated affiliates
3,684

 
2,619

Income tax (provision) benefit
(397
)
 
174

Income from continuing operations
64,292

 
37,846

Operating income (loss) of discontinued operations
(499
)
 
1,258

Gain (loss) on discontinued operations
(17
)
 
781

Net income
63,776

 
39,885

Net income attributable to noncontrolling interests
(831
)
 
(6,081
)
Net income attributable to the Operating Partnership
62,945

 
33,804

Distributions to preferred unitholders
(11,223
)
 
(11,223
)
Net income attributable to common unitholders
$
51,722

 
$
22,581


10

Table of Contents

CBL & Associates Limited Partnership
Condensed Consolidated Statements of Operations
(In thousands, except per unit data)
(Unaudited)
(Continued)

 
Three Months
Ended March 31,
 
2014
 
2013
Basic and diluted per unit data attributable to common unitholders:
 
 

Income from continuing operations, net of preferred distributions
$
0.26

 
$
0.11

Discontinued operations

 
0.01

Net income attributable to common unitholders
$
0.26

 
$
0.12

Weighted-average common and potential dilutive common units outstanding
199,741

 
191,085

 
 
 
 
Amounts attributable to common unitholders:
 

 
 

Income from continuing operations, net of preferred distributions
$
52,162

 
$
20,857

Discontinued operations
(440
)
 
1,724

Net income attributable to common unitholders
$
51,722

 
$
22,581

 
 
 
 
Distributions declared per common unit
$
0.253

 
$
0.239






The accompanying notes are an integral part of these condensed consolidated statements.


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Table of Contents

CBL & Associates Limited Partnership
Condensed Consolidated Statements of Comprehensive Income
(In thousands)
(Unaudited)

 
Three Months
Ended March 31,
 
2014
 
2013
Net income
$
63,776

 
$
39,885

 
 
 
 
Other comprehensive income:
 
 
 
Unrealized holding gain on available-for-sale securities
1,003

 
764

   Unrealized loss on hedging instruments
(144
)
 
(281
)
Reclassification to net income of hedging loss
548

 
557

Total other comprehensive income
1,407

 
1,040

 
 
 
 
Comprehensive income
65,183

 
40,925

Comprehensive income attributable to noncontrolling interests
(831
)
 
(6,081
)
Comprehensive income of the Operating Partnership
$
64,352

 
$
34,844


The accompanying notes are an integral part of these condensed consolidated statements.


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Table of Contents

CBL & Associates Limited Partnership
Condensed Consolidated Statements of Capital
(in thousands, except unit data)
 (Unaudited)
 
Redeemable Interests
 
Number of
 
 
 
Common Units
 
 
 
 
 
 
 
 
 
Redeemable Noncontrolling Interests
 
Redeemable Common Units
 
Total Redeemable
Interests
 
Preferred
Units
 
Common
Units
 
Preferred
Units
 
General
Partner
 
Limited
Partners
 
Accumulated
Other
Comprehensive Income
 
Total Partners' Capital
 
Noncontrolling Interests
 
Total Capital
Balance, January 1, 2013
$
6,413

 
$
33,835

 
$
40,248

 
25,050

 
190,855

 
$
565,212

 
$
9,904

 
$
877,363

 
$
5,685

 
$
1,458,164

 
$
63,496

 
$
1,521,660

Net income
604

 
184

 
788

 

 

 
11,223

 
240

 
22,157

 

 
33,620

 
391

 
34,011

Other comprehensive income

 
10

 
10

 

 

 

 

 

 
1,030

 
1,030

 

 
1,030

Distributions declared - common units

 
(1,145
)
 
(1,145
)
 

 

 

 
(463
)
 
(44,469
)
 

 
(44,932
)
 

 
(44,932
)
Distributions declared - preferred units

 

 

 

 

 
(11,223
)
 

 

 

 
(11,223
)
 

 
(11,223
)
Issuances of common units

 

 

 

 
2,099

 

 

 
43,869

 

 
43,869

 

 
43,869

Cancellation of restricted common units

 

 

 

 
(21
)
 

 

 
(402
)
 

 
(402
)
 

 
(402
)
Amortization of deferred compensation

 

 

 

 

 

 


 
1,464

 

 
1,464

 

 
1,464

Distributions to noncontrolling interests
(599
)
 

 
(599
)
 

 

 

 

 

 

 

 
(1,325
)
 
(1,325
)
Allocation of partners' capital

 
157

 
157

 

 

 

 
(124
)
 
(706
)
 

 
(830
)
 

 
(830
)
Adjustment to record redeemable
     interests at redemption value
(376
)
 
4,532

 
4,156

 

 

 

 
(44
)
 
(4,112
)
 

 
(4,156
)
 

 
(4,156
)
Balance, March 31, 2013
$
6,042

 
$
37,573

 
$
43,615

 
25,050

 
192,933

 
$
565,212

 
$
9,513

 
$
895,164

 
$
6,715

 
$
1,476,604

 
$
62,562

 
$
1,539,166





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Table of Contents

CBL & Associates Limited Partnership
Condensed Consolidated Statements of Capital
(in thousands, except unit data)
(Unaudited)
(Continued)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Redeemable Interests
 
Number of
 
 
 
Common Units
 
 
 
 
 
 
 
 
 
Redeemable Noncontrolling Interests
 
Redeemable Common Units
 
Total Redeemable
Interests
 
Preferred
Units
 
Common
Units
 
Preferred
Units
 
General
Partner
 
Limited
Partners
 
Accumulated
Other
Comprehensive Income
 
Total Partners' Capital
 
Noncontrolling Interests
 
Total Capital
Balance, January 1, 2014
$
5,883

 
$
28,756

 
$
34,639

 
25,050

 
199,593

 
$
565,212

 
$
9,866

 
$
961,175

 
$
4,923

 
$
1,541,176

 
$
19,179

 
$
1,560,355

Net income
742

 
404

 
1,146

 

 

 
11,223

 
526

 
50,792

 

 
62,541

 
89

 
62,630

Other comprehensive income (loss)

 
(1
)
 
(1
)
 

 

 

 

 

 
1,408

 
1,408

 

 
1,408

Distributions declared - common units

 
(1,143
)
 
(1,143
)
 

 

 

 
(493
)
 
(48,953
)
 

 
(49,446
)
 

 
(49,446
)
Distributions declared - preferred units

 

 

 

 

 
(11,223
)
 

 

 

 
(11,223
)
 

 
(11,223
)
Issuances of common units

 

 

 

 
240

 

 
5

 
538

 

 
543

 

 
543

Cancellation of common units

 

 

 

 
(21
)
 

 

 
(347
)
 

 
(347
)
 

 
(347
)
Amortization of deferred compensation

 

 

 

 

 

 

 
1,467

 

 
1,467

 

 
1,467

Distributions to noncontrolling interests
(450
)
 

 
(450
)
 

 

 

 

 

 

 

 
(1,060
)
 
(1,060
)
Allocation of partners' capital

 
756

 
756

 

 

 

 
(20
)
 
(684
)
 

 
(704
)
 

 
(704
)
Adjustment to record redeemable
     interests at redemption value
279

 
(345
)
 
(66
)
 

 

 

 
1

 
66

 

 
67

 

 
67

Balance, March 31, 2014
$
6,454

 
$
28,427

 
$
34,881

 
25,050

 
199,812

 
$
565,212

 
$
9,885

 
$
964,054

 
$
6,331

 
$
1,545,482

 
$
18,208

 
$
1,563,690


The accompanying notes are an integral part of these condensed consolidated statements.


14

Table of Contents


CBL & Associates Limited Partnership
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

 
Three Months Ended
March 31,
 
2014
 
2013
CASH FLOWS FROM OPERATING ACTIVITIES:
 

 
 
Net income
$
63,776

 
$
39,885

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 

Depreciation and amortization
69,083

 
71,662

Net amortization of deferred finance costs and debt premiums
2,234

 
1,586

Net amortization of intangible lease assets and liabilities
129

 
(314
)
Gain on sales of real estate assets
(1,154
)
 
(543
)
(Gain) loss on sale of discontinued operations
17

 
(781
)
Write-off of development projects
1

 
2

Share-based compensation expense
1,974

 
1,464

Loss on impairment
17,150

 

Loss on impairment from discontinued operations
681

 

Gain on extinguishment of debt
(42,660
)
 

Equity in earnings of unconsolidated affiliates
(3,684
)
 
(2,619
)
Distributions of earnings from unconsolidated affiliates
3,035

 
4,465

Provision for doubtful accounts
1,206

 
698

Change in deferred tax accounts
449

 
2,661

Changes in:
 

 
 

Tenant and other receivables
6,444

 
102

Other assets
(6,931
)
 
61

Accounts payable and accrued liabilities
(24,812
)
 
(50,852
)
Net cash provided by operating activities
86,938

 
67,477

CASH FLOWS FROM INVESTING ACTIVITIES:
 

 
 

Additions to real estate assets
(53,091
)
 
(42,567
)
Reductions to restricted cash
7,669

 
1,697

Proceeds from sales of real estate assets
2,127

 
44,328

Payments received on mortgage and other notes receivable
224

 
3,630

Proceeds from sales of investments and available-for-sale securities

 
11,002

Additional investments in and advances to unconsolidated affiliates
(3,449
)
 
(20,590
)
Distributions in excess of equity in earnings of unconsolidated affiliates
5,414

 
4,343

Changes in other assets
(1,702
)
 
(1,816
)
Net cash (used in) provided by investing activities
(42,808
)
 
27


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Table of Contents

CBL & Associates Limited Partnership
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
(Continued)

 
Three Months Ended
March 31,
 
2014
 
2013
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from mortgage and other indebtedness
$
219,836

 
$
247,209

Principal payments on mortgage and other indebtedness
(208,752
)
 
(307,697
)
Additions to deferred financing costs
(62
)
 
(651
)
Prepayment fees on extinguishment of debt
(1,249
)
 

Proceeds from issuances of common units
35

 
43,869

Distributions to noncontrolling interests
(1,510
)
 
(7,125
)
Distributions to preferred unitholders
(11,223
)
 
(11,223
)
Distributions to common unitholders
(50,523
)
 
(43,584
)
Net cash used in financing activities
(53,448
)
 
(79,202
)
 
 
 
 
NET CHANGE IN CASH AND CASH EQUIVALENTS
(9,318
)
 
(11,698
)
CASH AND CASH EQUIVALENTS, beginning of period
65,486

 
78,244

CASH AND CASH EQUIVALENTS, end of period
$
56,168

 
$
66,546

 
 
 
 
SUPPLEMENTAL INFORMATION:
 

 
 

Cash paid for interest, net of amounts capitalized
$
53,722

 
$
57,775


 
The accompanying notes are an integral part of these condensed consolidated statements.


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Table of Contents

CBL & Associates Properties, Inc.
CBL & Associates Limited Partnership
Notes to Unaudited Condensed Consolidated Financial Statements
(Dollars in thousands, except per share and per unit data)

Note 1 – Organization and Basis of Presentation
CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully-integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air centers, outlet centers, associated centers, community centers and office properties.  Its properties are located in 27 states, but are primarily in the southeastern and midwestern United States.
CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”). The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a variable interest entity ("VIE").  As of March 31, 2014, the Operating Partnership owned interests in the following properties:
 
 
Malls (1)
 
Associated
Centers
 
Community
Centers
 
Office
Buildings (2)
Controlling interests
 
74

 
25

 
7

 
8

Noncontrolling interests (3)
 
9

 
4

 
5

 
5

Total
 
83

 
29

 
12

 
13

(1)
Category consists of regional malls, open-air centers and outlet centers (including one mixed use center).
(2)
Includes CBL's corporate office building.
(3)
The Operating Partnership accounts for these investments using the equity method because one or more of the other partners have substantive participating rights.
At March 31, 2014, the Operating Partnership had interests in the following properties under development:
 
 
Controlling Interests
 
Noncontrolling Interests
 
 
Malls
 
Associated
Centers
 
Community
Centers
Development
 
1

 

 

Expansions
 
3

 

 
1

Redevelopment
 
4

 
1

 

The Operating Partnership also holds options to acquire certain development properties owned by third parties.
CBL is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. At March 31, 2014, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.0% general partner interest in the Operating Partnership and CBL Holdings II, Inc. owned an 84.2% limited partner interest for a combined interest held by CBL of 85.2%.
As used herein, the term "Company" includes CBL & Associates Properties, Inc. and its subsidiaries, including CBL & Associates Limited Partnership and its subsidiaries, unless the context indicates otherwise. The term "Operating Partnership" refers to CBL & Associates Limited Partnership and its subsidiaries.
The noncontrolling interest in the Operating Partnership is held by CBL & Associates, Inc., its shareholders and affiliates and certain senior officers of the Company (collectively "CBL's Predecessor"), all of which contributed their interests in certain real estate properties and joint ventures to the Operating Partnership in exchange for a limited partner interest when the Operating Partnership was formed in November 1993, and by various third parties. At March 31, 2014, CBL’s Predecessor owned a 9.1% limited partner interest and third parties owned a 5.7% limited partner interest in the Operating Partnership.  CBL's Predecessor also owned 3.5 million shares of CBL’s common stock at March 31, 2014, for a total combined effective interest of 10.8% in the Operating Partnership.
The Operating Partnership conducts the Company’s property management and development activities through its wholly-owned subsidiary, CBL & Associates Management, Inc. (the “Management Company”), to comply with certain requirements of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).

17

Table of Contents

The accompanying condensed consolidated financial statements are unaudited; however, they have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. All intercompany transactions have been eliminated. The results for the interim period ended March 31, 2014 are not necessarily indicative of the results to be obtained for the full fiscal year.
Certain historical amounts have been reclassified to conform to the current year's presentation. The financial results of certain properties that met the criteria for classification as discontinued operations, prior to the adoption of Accounting Standards Update ("ASU") 2014-08, Reporting Discontinued Operations and Disclosures of Components of an Entity ("ASU 2014-08") in the first quarter of 2014, had been classified in continuing operations have been reclassified to discontinued operations in the condensed consolidated financial statements for all periods presented herein. Except where noted, the information presented in the Notes to Unaudited Condensed Consolidated Financial Statements excludes discontinued operations.
These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2013.
Note 2 – Recent Accounting Pronouncements
 Accounting Guidance Adopted
In February 2013, the Financial Accounting Standards Board ("FASB") issued ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date ("ASU 2013-04"). ASU 2013-04 addresses the diversity in practice related to the recognition, measurement and disclosure of certain obligations which are not addressed within existing GAAP guidance. Such obligations under the scope of ASU 2013-04 include debt arrangements, other contractual obligations, settled litigation and judicial rulings. The guidance requires an entity to measure these joint and several obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors as well as any additional amount the reporting entity expects to pay on behalf of its co-obligors. ASU 2013-04 also requires an entity to disclose information about the nature and amount of these obligations. For public companies, ASU 2013-04 was effective on a retrospective basis for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of ASU 2013-04 did not have an impact on the Company's condensed consolidated financial statements.
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ("ASU 2013-11"). The objective of this update is to reduce the diversity in practice related to the presentation of certain unrecognized tax benefits. ASU 2013-11 provides that unrecognized tax benefits are to be presented as a reduction of a deferred tax asset for a net operating loss ("NOL") carryforward, a similar tax loss or a tax credit carryforward when settlement in this manner is available under the governing tax law. To the extent such an NOL carryforward, a similar tax loss or a tax credit carryforward is not available at the reporting date under the governing tax law to settle taxes that would result from the disallowance of the tax position or the entity does not intend to use the deferred tax asset for this purpose, the unrecognized tax benefit is to be recorded as a liability in the financial statements and should not be netted with a deferred tax asset. ASU 2013-11 was effective for public companies for fiscal years beginning after December 15, 2013 and interim periods within those years. The guidance is applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application was permitted. The adoption of ASU 2013-11 did not have an impact on the Company's condensed consolidated financial statements.
In April 2014, the FASB issued ASU 2014-08. This update changes the criteria for reporting discontinued operations and provides enhanced disclosures about the financial effects of discontinued operations. The intent of the guidance is to require an entity to classify disposals as discontinued operations only when they clearly represent a major strategic business shift such as a disposal of a line of business, significant geographical area or major equity method investment. For significant disposals not classified as discontinued operations, ASU 2014-08 requires the disclosure of the pre-tax income or loss attributable to the disposal for the period in which it is disposed of (or is classified as held for sale) and for all prior periods that are presented. If a significant disposal not classified as discontinued operations includes a noncontrolling interest, the pre-tax income or loss attributable to the parent for the period in which it is disposed of or is classified as held for sale is disclosed. For public companies, ASU 2014-08 is effective on a prospective basis for all disposals (or classifications as held for sale) that occur within annual periods beginning on or after December 15, 2014 and interim periods within those years. Early adoption is permitted, but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. The Company elected to adopt this guidance in the first quarter of 2014. The Company expects the majority of its disposals in the future will not meet the criteria under ASU 2014-08 to be classified as discontinued operations, which will reduce the requirement to reclassify discontinued operations for both the period of disposal (or classification as held for sale) and for comparative periods.

18

Table of Contents

Note 3 – Fair Value Measurements

The Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy in accordance with Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosure, ("ASC 820") based on whether the inputs to valuation techniques are observable or unobservable.  The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:

Level 1 – Inputs represent quoted prices in active markets for identical assets and liabilities as of the measurement date.

Level 2 – Inputs, other than those included in Level 1, represent observable measurements for similar instruments in active markets, or identical or similar instruments in markets that are not active, and observable measurements or market data for instruments with substantially the full term of the asset or liability.

Level 3 – Inputs represent unobservable measurements, supported by little, if any, market activity, and require considerable assumptions that are significant to the fair value of the asset or liability.  Market valuations must often be determined using discounted cash flow methodologies, pricing models or similar techniques based on the Company’s assumptions and best judgment.

The asset or liability's fair value within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Under ASC 820, fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability in an orderly transaction at the measurement date. Valuation techniques used maximize the use of observable inputs and minimize the use of unobservable inputs and consider assumptions such as inherent risk, transfer restrictions, and risk of nonperformance.
Fair Value Measurements on a Recurring Basis
The following tables set forth information regarding the Company’s financial instruments that are measured at fair value on a recurring basis in the accompanying condensed consolidated balance sheets as of March 31, 2014 and December 31, 2013:
 
 
 
Fair Value Measurements at Reporting Date Using
 
Fair Value at
March 31, 2014
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Available-for-sale securities
$
14,974

 
$
14,974

 
$

 
$

 
 
 
 
 
 
 
 
Liabilities:
 

 
 

 
 

 
 

Interest rate swaps
$
3,603

 
$

 
$
3,603

 
$

 
 

 
Fair Value Measurements at Reporting Date Using
 
Fair Value at
December 31, 2013
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets:
 

 
 

 
 

 
 

Available-for-sale securities
$
13,973

 
$
13,973

 
$

 
$

Interest rate cap

 

 

 

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Interest rate swaps
$
4,007

 

 
$
4,007

 
$

The Company recognizes transfers in and out of every level at the end of each reporting period. There were no transfers between Levels 1, 2, or 3 for any periods presented.

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Table of Contents

Intangible lease assets and other assets in the condensed consolidated balance sheets include marketable securities consisting of corporate equity securities that are classified as available-for-sale.  Net unrealized gains and losses on available-for-sale securities that are deemed to be temporary in nature are recorded as a component of AOCI in redeemable noncontrolling interests, shareholders’ equity and partners' capital, and noncontrolling interests.  If a decline in the value of an investment is deemed to be other than temporary, the investment is written down to fair value and an impairment loss is recognized in the current period to the extent of the decline in value. During the three month periods ended March 31, 2014 and 2013, the Company did not record any write-downs related to other-than-temporary impairments.  The Company did not recognize any realized gains or losses related to sales of marketable securities during the three month periods ended March 31, 2014 and 2013. The fair values of the Company’s available-for-sale securities are based on quoted market prices and are classified under Level 1.
The following is a summary of the available-for-sale securities held by the Company as of March 31, 2014 and December 31, 2013:
 
 
 
Gross Unrealized
 
 
 
Adjusted
Cost
 
Gains
 
Losses
 
Fair
Value
March 31, 2014:
 
 
 
 
 
 
 
Common stocks
$
4,195

 
$
10,779

 
$

 
$
14,974

 
 

 
Gross Unrealized
 
 

 
Adjusted
Cost
 
Gains
 
Losses
 
Fair
Value
December 31, 2013:
 

 
 

 
 

 
 

Common stocks
$
4,195

 
$
9,778

 
$

 
$
13,973

The Company uses interest rate swaps and caps to mitigate the effect of interest rate movements on its variable-rate debt.  The Company had four interest rate swaps as of March 31, 2014 and four interest rate swaps and one interest rate cap at December 31, 2013, that qualified as hedging instruments and were designated as cash flow hedges.  The interest rate cap is included in intangible lease assets and other assets and the interest rate swaps are reflected in accounts payable and accrued liabilities in the accompanying condensed consolidated balance sheets.  The swaps and cap have met the effectiveness test criteria since inception and changes in their fair values are, thus, reported in other comprehensive income (loss) ("OCI/L") and are reclassified into earnings in the same period or periods during which the hedged items affect earnings.  The fair values of the Company’s interest rate hedges, classified under Level 2, are determined based on prevailing market data for contracts with matching durations, current and anticipated LIBOR information, consideration of the Company’s credit standing, credit risk of the counterparties and reasonable estimates about relevant future market conditions.  See Note 6 for further information regarding the Company’s interest rate hedging instruments.
The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments.  Based on the interest rates for similar financial instruments, the carrying value of mortgage and other notes receivable is a reasonable estimate of fair value.  The estimated fair value of mortgage and other indebtedness was $5,070,485 and $5,126,300 at March 31, 2014 and December 31, 2013, respectively.  The fair value was calculated using Level 2 inputs by discounting future cash flows for mortgage and other indebtedness using estimated market rates at which similar loans would be made currently. The carrying amount of mortgage and other indebtedness was $4,799,817 and $4,857,523 at March 31, 2014 and December 31, 2013, respectively.    
Fair Value Measurements on a Nonrecurring Basis
The Company measures the fair value of certain long-lived assets on a nonrecurring basis, through quarterly impairment testing