Staff File Photo by Robin Rudd / The Hamilton Place mall parking lot is empty after closing hours in this file photo.

Business as usual is the plan for mall owner CBL & Associates Properties Inc. while it winds its way through bankruptcy court, but the company may eventually close or sell some shopping centers, experts say.

The longtime Chattanooga- based operator that runs 107 locations in 26 states, including Hamilton Place and Northgate malls in the city, could also be bought by a competitor.

"It's also possible it could be acquired by another player in the industry," said Nick Shields, senior analyst for the investment research firm Third Bridge. "Consolidation in the mall operator industry is probably inevitable."

The company, hit by coronavirus- driven lock downs and store closings and the shift by many shoppers to online buying, filed for Chapter 11 bankruptcy protection last week.

Started 42 years ago as one of the nation's earliest large-scale builders of shopping malls, CBL said its centers will remain open as it restructures its huge debt load in bankruptcy court. A bankruptcy court filing showed the company had total debts of $2.58 billion as of Sept. 30.

Company officials hope it can eliminate at least $1.5 billion in debt and preferred obligations. Also, Chapter 11 will lengthen debt maturity and improve CBL's net cash flow, the company said.

Chris Kuiper, vice president of equity research at the firm CFRA Research, said Chapter 11 is an orderly bankruptcy process enabling the business to continue opening its centers on time and paying vendors in the immediate term.

But, he said, the company will look at what can be done to the business moving forward.

"What does it need to sell or close? What expenses to trim back?" Kuiper said company officials will ask.

Shields said that shoppers walking in and out of CBL's centers in the short-term won't notice anything different. But, he said, it's reasonable to expect the company eventually will close some properties.

"If it closes malls, that could be a big deal," Shields said.

A CBL spokeswoman said that, as the company previously stated, it won't be impacted by this restructuring process and customers can continue to expect business as usual.

"Through this restructuring we are focused on improving CBL's balance sheet to reduce debt and flatten the capital structure, which will better position CBL to invest in the strategies we have in place," said Stacey Keating, senior director of public relations. "We have a signed Restructuring Support Agreement with over 60% of our bondholders that provides a clear path forward for the company in its current state. As part of this balance sheet restructuring, we have also categorically stated that CBL is not for sale and that our properties are not for sale."



When the company leaves Chapter 11, CBL will still face some of the nagging issues which have plagued it this year and even before then, the experts said.

Kuiper said that while the retail sector has come off its low point earlier in the year, stores aren't out of the woods yet. Fears are mounting that a second wave of infections is rising even as retailers enter the holidays, which typically are the stores' best time of the year, he said.

"It's still very concerning how it plays out," Kuiper said.

Even if the coronavirus hadn't stricken the economy, CBL was grappling with changing buyer attitudes about malls and online shopping.

Six years ago, CBL officials decided to sell off about 21 of its shopping centers to boost operating income and upgrade its remaining properties. The plan was to generate more from its upper-tier properties, with the money from the sales used for redevelopment and expansion opportunities.

Earlier this year, just before the pandemic hit, CBL Chief Executive Stephen Lebovitz cited the revamp of the Sears space at Hamilton Place mall is "a prime example" of its strategy to reinvent its shopping centers into suburban town centers.

"We'll get more sales and traffic from new users," he said, noting the addition of Dick's Sporting Goods, Dave & Buster's, Cheesecake Factory and other nameplates to boost sales by at least three or four times.



Kuiper said the town center concept makes sense, though its success depends on the location of the real estate and tenants. He said department stores and apparel retailers are troubled, but the shopping centers could hold more restaurants, bars and experiential venues such as Dave & Buster's.

"I see the appeal. It makes sense pre-COVID," Kuiper said. "Now, even that strategy has questions."

Kuiper wondered if CBL has "enough good locations" in its portfolio to make that strategy work.

"It has to have been in a good area or something compelling to draw people out there," he said.

Shields said that when the mall sector started seeing challenges years ago, CBL became "uniquely vulnerable" with a number of its centers located in areas which were not economically thriving.

"It was just the nature of their portfolio," he said, adding that CBL officials may not have taken enough steps to spruce up its locations to drive more foot traffic or attract tenants which could deliver added value.

"It was a downward spiral," Shields said.

Still, he said, CBL's strategy is a workable one, but there are "a lot of ifs."



CBL had its earliest origins out of a company called Independent Enterprises, started in the 1960s by Charles Lebovitz, who is the company's chairman, his father, Moses, and a cousin, Jay Solomon. That company developed shopping centers in small and midsize markets.

About 1970, Independent Enterprises merged with New York-based Arlen Realty and became that company's shopping center division.

In 1978, privately held CBL & Associates was spun out of Arlen by Lebovitz, John Foy, Ben Landress, Bucky Wolford, Jay Wiston and Mark Greenberg. That company had one shopping center open in Texas, another under construction in Dalton, Georgia, and a third on the drawing board in Athens, Georgia, said Charles Lebovitz.

While starting relatively small, the company experienced growth to eventually boast 100 centers and it had expanded from the Southeast to the Southwest. Hamilton Place mall, Cool Springs Galleria in Nashville and Walnut Square Mall in Dalton, were among those in its portfolio.

Contact Mike Pare at Follow him on Twitter @MikePareTFP.