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CBL & Associates has deep roots but isn't afraid of change

When I moved to Douglasville, Ga. -- a suburb 20 miles west of Atlanta -- 10 years ago, the local telephone book listed two department stores: K mart and Wal-Mart. Sure, there was talk of a mall out our way but, like Santa Claus and the Easter Bunny, none ever seemed to materialize, and I resigned myself to being forever denied a "quick" trip to the mall. Then it happened. Sitting in CBL & Associates' Chattanooga, Tenn., office recently, I finally heard what I'd been waiting for: Charles Lebovitz plans to break ground on a regional mall in my town by the end of the year.

The announcement I'd waited a decade to hear was more than 35 years -- and several incarnations -- in the making. It started in the early 1960s, when the Lebovitz family operated a chain of movie theaters in Chattanooga and Atlanta.

The family sold the chain in 1961 and developed what had been one of their drive-in movie theaters into Eastgate, the first mall to be built in Chattanooga.

"Eastgate opened in 1962. That launched us into the shopping center business," says Charles B. Lebovitz, who is chairman, president and CEO of the organization's current incarnation, CBL & Associates Properties Inc. "From that beginning, we started the process of establishing ourselves as a development company in the shopping center industry."

Initially, the company's focus was the Southeast and, more specifically, the middle markets. "We initially did not pursue development activity in the major metropolitan markets," he says, "but rather, markets that we continue to concentrate our development activities in."

Lebovitz points out that the company has a new mall that opened last year in Highpoint, N.C.; one that opened in 1994 in Hattiesburg, Miss.; another currently under construction in Meridian, Miss.; and a newly acquired mall in Spartanburg, S.C., that is being expanded and remodeled.

"Spartanburg is a so-called middle-market, and the beginnings of our business in early the 1960s has remained the primary thrust of our development activity," Lebovitz says.

However, the company also started doing work in the past several years in larger markets. Lebovitz notes that, in 1991, CBL opened the 1.2 million sq. ft. Cool Springs Galleria in Nashville, Term. And, of course, construction is planned to begin this year on Arbor Place in metropolitan Atlanta's Douglasville market, with another planned to open in Atlanta's Peachtree City area in 1999.

"So, in addition to our primary concentration on the so-called middle-markets," he says, "we are also looking at opportunities that might present themselves -- or that we might come about -- in some of the larger markets as well."

A change in venue is not the only change CBL has experienced in its lifetime. It also went from being a private to a public company -- twice.

In 1970, the family business was merged into a public company, Arlen Realty & Development Corp., which, among other activities, had a chain of discount department stores and developed the Olympic Towers on Fifth Avenue in New York as well as the Aventura residential project in North Miami Beach.

"We became the shopping center division of Arlen, headquartered in Chattanooga, and operated from 1970 to 1978 as the shopping center division," Lebovitz says. "We developed, managed and operated about 40 million sq. ft. of shopping centers, all through the Chattanooga of

So we had an introduction to the public marketplace during that eight year period."

In 1978, Lebovitz, along with four "associates" -- James L. Wolford, Jay Wiston, John N. Foy and Ben S. Landress -- left Arlen and organized CBL & Associates Inc. As a private company, CBL grew in size and continued development and management of shopping centers.

Then, after five years as a private company, CBL returned to the public markets.

"With the economy having gone through a significant downcycle," Lebovitz says, "with the transition and consolidation that had occurred and would continue to occur within the financial marketplace, we concluded that converting to a REIT would allow us to have the financial resources to capitalize on the opportunities that were being presented to us and that, as a private company, there were limitations. As a public company, there are certainly still limitations, but we had the opportunity to access both public capital as well as private capital to help fund our ongoing development program. So the conversion to a REIT was done to enable us to facilitate the growth of our company."

CBL & Associates Properties Inc., a real estate investment trust that owns regional malls and community shopping centers primarily in the Southeast and select markets in the Northeast, was formed in the fall of 1993 and made an original public offering of $300 million that October. A secondary offering of roughly $86.5 million was completed in September 1995.

"Even though we converted from a private to a public company," Lebovitz says, "the original management team -- myself, my family and the associates -- retained an approximately 40% ownership interest in the public company. [Now approximately 36% as a result of the secondary offering.] That represents a very major, and a very significant, ownership interest in the long-term commitment that we have to this company."

That commitment is paying off. In May, Lebovitz became the first executive from one of the new generation of retail REITs to serve as chairman of the International Council of Shopping Centers (ICSC).

Lebovitz sees CBL's involvement within the industry as paramount in importance. "The relationships we've established over the years with the retailers and with the lending community really are invaluable and what we value and cherish and strive to preserve," he says.

Today, CBL has a portfolio of 116 shopping centers totaling roughly 22 million sq. ft. in 22 states. Of that, CBL manages 11 properties for third parties, an area Lebovitz says has growth potential.

With its history of embracing change, and the atmosphere of consolidation in the shopping center industry today, would CBL consider further change in that direction?

"Absolutely," says Lebovitz. "We have always been opportunistic. That's the nature of the the real estate industry. It's certainly the nature of the shopping center industry. I think we have grown from the 1960s, as a small, family business, to, in the 1970s, as a division of a public company, to, in the 1980s, as a midsize private company, to today, as one of the leading shopping center, shopping mall REITs. So there's an ongoing evolution within the industry and for our business as well."

"I have no question that there will be future steps," he adds. "And as long as they're positive and as long as they will enable us and our shareholders to achieve increased value, then they'll be something that will be the correct decision for our company."

"As new opportunities continue to be brought to our attention, whether it's in regional mall development or power or community center development or management," Lebovitz says, "that's our business, and we enjoy it, and we're continually looking for those new opportunities to move into."

He has no idea how happy that quest for new opportunities makes one managing editor in Douglasville, Ga.

CBL & Associates at a glance

Headquarters...........Chattanooga, Tenn. Regional office...........Waltham, Mass. NYSE................................CBL


22 million sq. ft. in 22 states 105 properties owned & managed 11 properties managed for third parties

For six months ended June 30, 1996:

FFO...........increased 23.7% to $30,131,000 Net income....increased 86.3% to $17,634,000 Revenues......increased 14.7% to $71,349,000 Total portfolio occupancy..............93.0% Avg. base rents - malls...............$18.21 Avg. base rents - community centers.....$6.74

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