CBL & Associates, which has a 10% interest in the joint venture, is in the process of selling 90% of its ownership interest in 51 power and community centers to Galileo America REIT for total consideration of $516 million. The $355-million first phase of the transaction, which just closed, transferred 90% ownership of 41 centers to the new REIT. The more closings, scheduled for January 2004 and January 2005, will transfer the remaining properties, of which four are under construction or redevelopment.

CBL says the sale of the first 41 properties generated gains (on a GAAP basis) of approximately $72 million that will be recorded in the fourth quarter of 2003. In the transaction, Galileo America REIT assumed approximately $93 million of existing debt on eight of the properties, and CBL retired $24.9 million in debt associated with one of the properties. The 41 properties generated net operating income of $32.5 million in 2002. During the first six months from closing, CBL says it may earn up to $8 million in additional consideration based upon certain leasing goals achieved.

When all three transactions are complete, Galileo America REIT will have assumed about $99 million of existing debt on 10 of the properties and CBL will have retired $53 million in loans associated with two properties. Galileo America REIT will obtain additional debt financing of approximately $160 million at the closing of the first two tranches. Total gains will be $99 million, but the taxable gain should be much less, as the company plans to reinvest net proceeds in new developments, future mall acquisitions and other retail real estate opportunities.