From his office overlooking the parking lot of Hamilton Place mall, Stephen Lebovitz sees the empty shell of a former Sears store, acres of striped asphalt parking lots and the early signs of what comes next.
"You can look at Hamilton Place as a canvas," said Lebovitz, the CEO of CBL Properties and son of company co-founder Charles B. Lebovitz. "Look at that parking lot. It's huge."
It's also busy. A new Cheesecake Factory restaurant opened adjacent to the old Sears in December 2018. An Aloft Hotel, a Dave & Buster's, and a new location for Dick's Sporting Goods are also under construction just outside Lebovitz's window.
The work is a snapshot of CBL's broad push to redefine the role of the suburban mall in an age when retail has been upended, killing off old-school mainstays such as Sears and leaving other stores struggling to make their brick-and-mortar locations work.
"We had all these retailers that don't exist anymore," Lebovitz said. "There have been all kinds of transitions, there has always been change, but clearly that's been accelerated in the last 10 years — and in the last five more drastically."
The cost of those changes to CBL's value has been considerable. In 2007, the company's stock traded at an all-time high of just over $50 a share. In August 2019, the stock fell below $1 share, and the company had to consider measures to keep it from being delisted from the New York Stock Exchange. In December, CBL leadership announced they would suspend dividend payments to investors in 2020 in anticipation of lower net operating income.
"It's been a tough few years," said Lebovitz, whose family owns about 11% of CBL. "We've been out of favor, our product has been out of favor. Our most important use of capital is to invest in our properties. We are going through this transition, and we are not going to go through it overnight."
The company spent several years shedding low-performing properties, going from 147 properties in 30 states in December 2015 to 108 in 26 states today. The redevelopment at Hamilton Place is the largest in the 30-year history of the mall, and it mirrors similar projects the company has completed in other markets.
"We think of evolving from enclosed malls to suburban town centers," Lebovitz said. "Getting Sears back gave us 20 acres to work with."
Across the U.S., the rate of store closures overall picked up considerably in 2019, with more than 9,300 stores permanently shutting their doors, according to Coresight Research. In 2018, the number of closures was 5,844. Store closures are an everyday reality of retail, but the pace of change now makes this a time to rethink some fundamentals, Lebovitz said.
"We've added so much retail, and the population has grown, but supply has exceeded demand so there has to be a rationalization of that," he said. "In 2019, 75% of our new leasing was non-apparel."
New mall development is focused on offering experiences and services over the things shoppers can carry out of a store, with restaurants, hotels and entertainment venues playing a key role.
Thirty years after Hamilton Place mall opened, the age of the mega-mall anchored by department stores and surrounded by ring roads is at an end, Lebovitz said. The redevelopment of the space around Sears will have an outdoor focus, favoring sidewalks, lighting and landscaping over stark expanses of asphalt.
Multiple businesses will fill the 145,000 square feet that once housed Sears, which is 65%-70% leased. Next door, the new Aloft expected to open in early 2021 will have a rooftop bar and a Mean Mug coffeehouse on the ground floor.
Mitch Patel, president and CEO of Vision Hospitality Group, expects the hotel to become a draw for locals as well as out-of-town guests/
"It isn't downtown or the river, but is a pretty nice view when you get 75 or 80 feet in the air," he said during a tour of the site on Tuesday.
Reinvention is a challenging process, but it's one that comes with significant potential, Lebovitz said. More than 40 anchor stores in the CBL portfolio of properties have closed, but their replacements will move the properties and the company in a stronger direction, he said.
"It's short-term pain, but from a long-term perspective it's a great opportunity for us," he said. "I'm so happy not to look at Sears anymore. It makes my day."
Contact Mary Fortune at email@example.com or 423-757-6653. Follow her on Twitter at @maryfortune.