CBL Properties Chief Executive Stephen Lebovitz recalls the daunting early days of the coronavirus pandemic last year, when retailers closed stores in droves and many shoppers quit coming to its malls.
"No one ever lived through anything like that," he says. "We never anticipated shutting down our properties in a six-week period. That really forced us to think how to operate in an environment that had obstacles thrown at us that we'd never seen before."
While a bankruptcy for Chattanooga-based CBL followed late in 2020, the company spent a year restructuring and emerged on Nov. 1 from what Lebovitz termed "a journey." But with a court-approved exit plan, the attitude moving ahead is positive and officials are energized by a recovery in mall traffic, consumer spending and sales, he says.
CBL, which operates 105 shopping centers across 24 states, today is executing its suburban town center approach to its properties. While retail is still key, Lebovitz says CBL is diversifying the uses of its properties and drawing more interest from nontraditional operators.
"Entertainment has come back," he says. "When it comes to residential multi-family, that market is so strong. That's definitely still the strategy we expect to continue."
Hamilton Place mall, CBL's flagship in Chattanooga, is an example of those efforts, according to the company. On space occupied by former anchor department store Sears, the company joint ventured with Chattanooga-based Vision Hospitality Group for an Aloft Hotel.
Also, a Dick's Sporting Goods store relocated from across Gunbarrel Road to newly built space. Above Dick's, a Dave & Buster's entertainment complex debuted. Also, a Cheesecake Factory opened in an adjacent parking lot, and CBL officials see potential office space on the former Sears site as well.
In some markets, CBL has attracted casinos to backfill former department store locations.
"I see a bright future for the company and for the properties," Lebovitz says. He says the company exited bankruptcy with a stronger balance sheet and has capital available for investing in its properties and in its strategy for redevelopment.
"This transformation started 10 years ago," the CEO adds. "It's not like it started one or two years ago. Certain parts were accelerated by the pandemic. Others had more of a pause."
Alex Goldfarb, a senior analyst who covers the retail sector for investment bank Piper Sandler, says malls will be transformed moving forward.
"We have too much retail real estate in the U.S.," he says.
Successful retail centers will remain open while others will close, Goldfarb says.
"What you'll see is a consolidation. Unfortunately for malls, they take a lot of capital to fix up. If a mall loses its position in the marketplace, it starts to slip. Once it goes past a certain point, it's basically unsalvagable."
Goldfarb says he expects over a very long period to time to see the number of malls in America fall from about 1,100 to 300 or 400. "This is glacial," he adds.
For malls that lose their competitiveness, they'll be turned into other uses such as housing, Goldfarb says. But oftentimes, it comes down to how much capital does a company have to invest, he says.
In Chattanooga, while Hamilton Place is a regional shopping center, Northgate Mall in Hixson has struggled. It has lost both Penney's and Sears stores. While redevelopment groups have purchased both those properties, nothing aside from temporary users has gone into the former department stores.
In mid-2020, the Hamilton County school board looked at possibly purchasing the former stores at Northgate as part of a new Chattanooga School for the Liberal Arts.
But not all board members were happy with the proposal and the panel eventually agreed to move in a different direction.
Also, the idea of converting the Penney's into a 300-unit multi-family housing complex has been raised. Chattanooga investor Bassam Issa has said the housing proposal is preliminary. Issa says there's no final decision on what will go at either former store.
Meet Us at the Mall
As part of its emergence from bankruptcy and its new focus on mall as community gathering places, CBL launched its “Meet Us at the Mall” brand refresh. In a social media post announcing the shift, Stacey Keating, vice president of Corporate Communcations for CBL, explained the change. “We knew that upon emergence, CBL Properties would be in a better position financially, providing us with a fresh start, but we also knew that fresh start had to be reinforced in other ways, especially in the outward presentation of our brand. And so, “Meet Us at the Mall” was born.”
"We're taking our time," he says.
Lebovitz says the transition of its malls will continue.
"That conversion of traditional enclosed malls only for shopping will continue to move across the portfolio to having mixed uses and more of a town center feel," he says.
Changes also occurred inside the longtime Chattanooga company. CBL Properties has a new board of directors though Lebovitz and his father, company co-founder Charles Lebovitz, are continuing to serve.
Jonathan Heller, partner and head of the New York office of Canyon Partners who joined the CBL board on Oct. 15, is chairman.
Charles Lebovitz, who helped formed the company in 1978, is chairman emeritus on the new board. It's the first time since the company went public in 1993 that he hasn't served as chairman, according to CBL.