CBL looks to diversify space uses at its malls

More than two-thirds of new leases executed by shopping mall operator CBL Properties in the first quarter of 2018 are with non-apparel tenants as the company moves to broaden its offerings.

Restaurants, fitness centers and offices are among new uses, with hotels, apartments and even self-storage units eyed for the outskirts of some of the company’s centers, officials said Friday.

Stephen Lebovitz, the Chattanooga-based company’s chief executive, said the changes are a result of an evolution of its properties into suburban town centers.

“We’re targeting more outparcel and non-retail uses,” Lebovitz said during a conference call with analysts.

Still, Lebovitz said he expects “a difficult year” for CBL in 2018 as it works to improve financial results in the wake of store bankruptcies and rent reductions.

On Thursday, the company that operates Hamilton Place and Northgate malls in Chattanooga, posted first quarter earnings that were lower than a year ago.

The company reported that funds from operations per diluted share, as adjusted, totaled $72.2 million, or 42 cents in the

first quarter, down from $88.4 million, or 52 cents, a year ago.

Lebovitz said that while results were in line with company and analysts’ expectations, officials aren’t satisfied.

Katie Reinsmidt, a CBL executive vice president, said 2018 is slated as “an active redevelopment year” for the company that has 117 properties in its portfolio across 26 states.

For example, she said, CBL is replacing former JCPenney and Sears locations with new users that “bring new life and energy for our properties and position them for success.”

Reinsmidt cited the tear-down of a former Sears auto store next to Northgate Mall where CBL plans to open a couple of restaurants, Panda Express and Aubrey’s, later this year.

But the company is dealing with more expected store closings, such as 16 Bon-Ton units and 36 Best Buy Mobile stores.

“We expect the second quarter to be the weakest from an occupancy standpoint,” Reinsmidt said.

Christy McElroy, an analyst for Citi, noted that the company is using money from the sale of some properties to pay down debt. She questioned what kind of properties CBL is marketing.

Lebovitz said the company is looking at community centers along with office buildings. He said CBL officials “feel like there is a good market today and a good probability of executing successfully.”

“It’s not an easy market for dispositions by any means,” he added. “We’ll look at the best ways to raise capital.”

CBL’s shares closed Friday on the New York Stock Exchange at $4.16, up 9 cents, or 2.09 percent.