By Jennifer D. Duell

Recognized as one of the pioneers in the mall industry, Charles B. Lebovitz has steered the course of CBL & Associates Properties, Inc. (NYSE: CBL) and its predecessor companies since the late 1970s. Under his leadership as chairman and chief executive officer, CBL has become a far different company than when it went public 13 years ago with a portfolio of fewer than 20 malls in the Southeast.

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AGE: 69 EDUCATION: Undergraduate from Vanderbilt University FAMILY: Married to wife, Betty. Four children: Stephen, Michael, Alan, Beth. Thirteen grandchildren. MOST RECENTLY READ BOOK: "The DaVinci Code" FAVORITE SPORTING ACTIVITIES: Tennis and fitness workout FAVORITE SPORTS TEAM: Vanderbilt Commodores FAVORITE VACATION SPOT: The Caribbean COMMUNITY ACTIVITIES: National vice chairman of the United Jewish Appeal; board member of Maccabi USA Sports for Israel OTHER PROFESSIONAL ACTIVITIES: Member of NAREIT's Board of Governors; Advisory Director of First Tennessee Bank, N.A.; Past Chairman of International Council of Shopping Centers

Today, CBL is one of the largest mall REITs and holds interest in or manages more than 130 properties, including 79 market-dominant enclosed malls and open-air centers. Approximately 53 percent of the company's total revenue still comes from the Southeast. However, CBL continues to expand its portfolio both in terms of geography and holdings, but the company stays true to its key strategy of owning and operating the dominant mall in underserved markets. In addition, CBL is an active developer and continues to grow its business by adding other uses to its centers.

Recently, Portfolio sat down with Lebovitz to talk about what's next for the company and where he expects to find growth.

Portfolio: CBL recently opened its first mall in California. Why did the company choose to expand into this market now, and what other markets will the company expand into over the next few years?

Lebovitz: When we opened our first mall in California (El Centro), it broadened our geographic horizons and went along with our objective of becoming a national developer. It's a good example of the type of developments that we've done over the years.

El Centro is located in the rich Imperial Valley area about 90 miles east of San Diego and just six miles north of the Mexican border. Just across the border is Mexicali, which has a population of more than 1 million. On the U.S. side, you have the entire Imperial Valley region, with a population of 250,000, that has no major shopping centers, and it represents the type of market-dominant position that we strive to achieve with our malls. In this case, we're strategically located to serve that entire region.

Another example of our current expansion plans includes construction of Gulf Coast Town Center in Fort Myers, Fla. The first phase, encompassing 450,000 square feet, opened last fall, and the second phase will open this fall, and the third in 2007, bringing the center's total area to 1.7 million square feet. We think it will become that dominant retail complex to serve that rapidly growing area.

Portfolio: Many regional mall REITs, Simon Property Group Inc. (NYSE: SPG), for example, are adding residential components to their existing centers and incorporating rental or for-sale housing into new projects. Where does CBL stand on mixed-use projects?

Lebovitz: We think the mixed-use approach in certain locations is a wonderful opportunity to provide additional dimensions to retail projects and to make the retail property a central place for working, dining, entertaining and living.

A good example is our open-air project that is scheduled to open in 2008 in the Pearland, a growing suburb of Houston. It's in the planning stages right now, but upon completion we will have approximately 700,000 square feet of retail space anchored by Macy's and Dillard's plus two additional anchors, Barnes & Noble, and more than 60 specialty retailers and restaurants. We are receiving tremendous interest from retailers to join the project and believe it will serve as that market's dominant retail complex. In addition to the retail, this center will include a mixed-use component including office, hotels and residential. Furthermore, there is interest from the city to include an arena and arts center. When the local community is supportive of a mixed-use component, it really gains a lot of merit. Our expertise is retail development. If we incorporate office and residential space then our intention is to involve partners with expertise in those specific areas.

The consolidation within the department store industry has played a significant role in requiring creative uses to reutilize that space. I think office and residential are good types of uses that could replace a department store. There's a lot of debate on whether to replace retail with retail or replace it with other uses. I'm certain we'll be reworking some existing retail space for other uses.

Portfolio: Several of CBL's new projects are power centers with big box anchors rather than regional malls. What has compelled the company to move into this shopping center segment, and how much of your development pipeline is power center versus regional malls?

Lebovitz: CBL has traditionally been a developer of all shapes and sizes of shopping center. So, in addition to the regional malls, we've always been active in development of power centers and neighborhood centers. Last year, we opened 2.5 million square feet. In 2006, we have already announced 1.7 million square feet to open this year, the largest will be phase two of the Fort Myers project and three community centers—one in Stillwater, Okla., one in Harrisburg, Pa. and one in Melbourne, Fla.

We're recognized as a regional mall REIT, and malls do represent about 90 percent of our revenues, but the other types of retail centers are equally important to our business and add a great deal to our company.

Portfolio: Joint ventures are another avenue many REITs have used to expand their portfolio and diversify into new markets. What kind of view does CBL have on joint ventures?

Lebovitz: We've done a number of joint ventures. For example, we're working with the Jacobs Group on the Fort Myers project and the Triangle Town Center in Raleigh, N.C. Joint ventures are a strong avenue for us to grow and to expand our development pipeline.

Just recently we ended a joint venture with Galileo America LLC where we generated $100 million by selling our ownership interest in the partnership to Galileo and transferring our exclusive management contracts with Galileo to New Plan (NYSE: NXL). We had formed the JV in late 2003 as a way to monetize the community center portfolio and generate fee income by selling a 90 percent interest in 51 properties to Galileo. We think it was really quite an innovative transaction by our company.

Portfolio: There are some analysts who view 2006 as a year in which retail REITs will struggle to outperform. In fact, several analysts have downgraded their ratings for CBL to neutral rather than overweight. What is your outlook for this year, and what factors should investors be aware of that might help CBL stay ahead of the pack?

Lebovitz: In my opinion, I think 2006 and 2007 will be terrific years for retailers. You always have some companies that do better than others. The new stores are a good sign, a way of keeping the retail area fresh and there are so many new concepts and formats that retailers are opening. That's indicative of retailers' confidence, and I think retailers speak with a lot more credibility than others who are speculating on the health of the industry.

I really think that this will be another strong year for our company. We had five consecutive years of returns of more than 30 percent before 2005, when we still posted a return of more than 8 percent. If you look at FFO, our compound annual growth rate since 1994 is right at 13 percent. We are quite proud of the returns and growth we've achieved.

The analysts can have their point of view, but our point of view is that we have a terrific management team that has a major stake and investment in the ongoing success and future of this company. The most important point that I can make is that our properties are located in markets that are not as susceptible to the major booms and busts. We are in secondary markets where our properties can achieve the true dominant position where we're not third fiddle.

Take a market like Huntsville, Ala., where the economy revolves around NASA and there's an influx of companies supporting NASA. We own the only two malls in the Huntsville market; the stability of that market ensures the success of our centers.