What happened

Mall and shopping center real estate investment trust CBL & Associates Properties (OTC:CBL) reported earnings that disappointed investors, sending shares plummeting. As of 11:30am EST on Friday, shares are down by more than 13%.

So what

CBL & Associates' funds from operation (FFO) -- the REIT version of "earnings" -- fell by 17.6% year-over-year. Retail bankruptcies cost the company $0.09 in FFO for the year. Same-center NOI declined by 2.9% in 2017, and by 6.7% during the key fourth quarter.

Businessman watching red arrow crash through the floor.

Image source: Getty Images.

In addition, portfolio occupancy fell by 160 basis points to 93.2%, and average gross rent per square foot dropped by 5.4%.

Looking forward, CBL & Associates is expecting 2018 FFO in the range of $1.70 to $1.80. At the midpoint, that would represent a 15.9% drop from 2017's full-year FFO, which was already a 13.7% decline from 2016. So not only is FFO declining, but the decline is accelerating, a particularly troubling sign.

CBL's management seems surprisingly optimistic, pointing out the stronger-than-expected 2017 holiday shopping season and some redevelopment projects that could increase traffic at the company's properties. Still, the numbers are what investors seem to be focused on.

Now what

Today's decline is just the latest for CBL & Associates. The stock has lost 59% over the past year and 79% over the past three years as retail-sector headwinds have put pressure on the company's profitability and outlook.

While operators of top-notch, so-called "A" malls such as Simon Property Group and General Growth Properties are having little trouble filling their properties and increasing rental income, the same cannot be said for operators of lower-level malls and shopping centers like CBL & Associates. Sales have been declining and vacancies have been rising.

After the recent decline, CBL & Associates trades for just 2.5 times its 2018 FFO guidance, a ridiculously low multiple. Even so, until we see CBL take significant steps to redevelop its properties and see compelling evidence that it will be able to turn itself around, it's tough to imagine a big rebound anytime soon.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.