CBL & Associates Properties Inc. will suspend paying its quarterly dividend for the second and third quarters of 2019 as part of a pending class-action settlement.
The mall real estate investment trust said after market close March 26 that it approved the structure of a settlement with Wave Lengths Hair Salons of Florida Inc., which filed a putative class-action suit against the company for allegedly overcharging tenants for electricity at bulk-metered malls.
CBL & Associates, whose stock price fell about 10% in after-market trading, denied any wrongdoing but said settlement was the practical route for the company.
"CBL denies all allegations of wrongdoing and asserts that its actions have at all times been lawful and proper. However, given the class certification, the accelerated trial schedule, the inherent risk of any trial, and the potential cost of an adverse resolution of the litigation, the Company believes that mediation was the prudent path," the company said.
By suspending the dividend, CBL & Associates will preserve about $26.0 million in cash — at the current quarterly dividend rate — and the company expects to still satisfy REIT distribution requirements for the 2019 taxable year. REITs by law are required to distribute at least 90% of their taxable income as dividends to shareholders.
The dividend set to be paid April 16 will be paid as declared, and the company expects to resume its quarterly distribution in January 2020, subject to board approval.
CBL disclosed in an SEC filing that its petition seeking to appeal the partial grant of a class certification of a nationwide Racketeer Influenced and Corrupt Organizations Act class and a Florida RICO and Florida Deceptive and Unfair Trade Practices Act class was denied March 4. On March 11, the U.S. District Court for the Middle District of Florida set a trial date of April 2. The parties approved the structure of the proposed settlement on March 15.
Under the settlement, CBL will form a common fund with a monetary and nonmonetary value of $90 million to be disbursed to class members per a formula based on aggregate damages of $60 million. Class members include current and former tenants at properties the company owns or owned during the class period, from Jan. 1, 2011, through the date of the preliminary court approval. Former tenants who make claims will receive cash, while current tenants will receive credits against rents and future charges over the coming five years.