Add CBL & Associates Properties to the list of REITs looking for quality over quantity.
As I wrote in December, a number of REITs are selling off assets that no longer fit their core portfolio, and in fact CBL announced last week that it had found a buyer for Lakeshore Mall in Sebring, FL.
“We as a management team and organization are fully committed to a strategic plan that transforms the CBL portfolio to a higher level of sustainable growth,” said Stephen D. Lebovitz, president and CEO, in a conference call and presentation regarding its future plans. The goal is not to shrink the portfolio, he added, but to refocus on higher-producing centers.
The company has grouped its 80 centers into three tiers, based on sales per square foot: Tier 1, with sales above of $375 per square foot and up; Tier 2, with sales between $300 per square foot and $375 per square foot; and Tier 3, with sales below $300 per square foot. CBL's goal is to have 90 percent of NOI from upper tier properties, and increase overall sales per square foot from $356 today to more than $400. Divesting some 21 centers valued at $1.0 billion to $1.25 billion in that last tier will be a major focus over the next 24 to 36 months. The company is targeting cap rates in the high single digits.
“It is at the top of our list of corporate priorities,” Lebovitz added. “While most of our Tier 3 malls are solid, their growth is more appropriate for a privately owned portfolio with a focus on yield.”
Other factors that determined the combination of factors including the strength of competing big boxes and lifestyle centers, demographics including population density and employment levels, and realistic prospects for growth.
The company sold $220 million of lower growth assets last year, reinvesting $200 million of the proceeds into redevelopments and expansions. Currently being marketed through traditional broker channels are York (PA) Galleria; Stroud Mall in Stroudsburg, PA; and Randolph Mall in Asheboro, NC. A portfolio of some seven centers is being shopped privately. In addition, the company is in discussion with lenders about restructuring or foreclosing five malls.
Leasing also is a focus, with tenants such as Athleta and Cheesecake Factory joining the portfolio. Big boxes also are looking to enter the centers, CBL says.
“We are fully committed to the transformation of CBL into a stronger, higher-growth company with an even brighter future,” Lebovitz said. “This will generate even more value for our stakeholders in the future.”
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