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CHATTANOOGA, TN-CBL & Associates Properties Inc. is acquiring three malls in the Midwest for $516.9 million. The locally based mall REIT says it has agreed to acquire Oak Park Mall in the Kansas City area, Hickory Point Mall in Decatur, IL and Eastland Mall in Bloomington, IL. The transaction is expected to close in November.

Oak Park Mall is located near Interstates 35 and 435 in Overland Park, one of Kansas City’s fastest growing suburbs. The 1.5-million-sf, two-level, super-regional mall has 470,000 sf of shop space and is 96.8% occupied. It was built in 1974, expended in 1998 and fully renovated in 2001. Anchor tenants include Dillard’s North, Dillard’s South, Nordstrom, J.C. Penney, The Jones Store and a freestanding AMC Theater. Shop tenants include Ann Taylor, Aveda, Banana Republic, Crabtree & Evelyn and J. Crew. Restaurants include Rain Forest Cafe, Mimi’s Cafe, Outback Steakhouse, Ruby Tuesday’s and T.G.I. Friday’s. Average mall shop sales were $455 per sf in 2004.

Eastland Mall is a 737,000-sf, single-level mall located at the intersection of Business I-55 and East Empire Street in Bloomington, home of Illinois State University. The mall was built in 1967 and renovated in 2000. The mall is anchored by Bergner’s, Famous Barr, Kohl’s, J.C. Penney and Sears. The 225,000 sf of non-anchor space produces sales of $322 per sf in 2004 and is currently 85.8% occupied.

Hickory Point Mall is a 743,000-sf mall located near US Route 51 and Interstate 72 in Forsyth, a suburb of Decatur. The mall was originally built in 1977 and was last renovated in 2000. Hickory Point’s five anchors are Bergner’s, J.C. Penney, Kohl’s, Sears, and Von Maur. The mall has about 243,000 sf of non-anchor shops that are 68% leased.

“Oak Park has a reputation as one of the premier malls in the United States and both Hickory Point and Eastland draw from very impressive trade areas with their nearest competition over 40 miles away,” says CBL chief executive Charles Lebovitz. “The prospects for near-term and long-term income growth at the properties include increases in occupancy, enhancement of the current specialty leasing program, and redevelopment and expansion opportunities.”

The initial blended cap rate, based on income in place and after management fees and a structural reserve, is estimated at 5.7%. The company expects to fund the acquisition with $79.3 million of cash, the assumption of approximately $386 million of new long-term, fixed-rate non-recourse mortgage debt, and the issuance of $51.7 million in Special Common Units of the company’s operating partnership.

CBL expects to issue approximately 1.09 million units at a value of $47.50 per unit. The units will pay a dividend at a rate of 6.0% of the issue price for the first two years following the close of the transaction and 6.25% thereafter.

CBL is the fourth largest mall REIT in North America and the largest owner of malls and shopping centers in the Southeast, ranked by gross leasable area. CBL owns, holds interests in or manages 68 million sf in 124 properties in 24 states, and has another 1.1 million sf under construction in three new centers and two expansions.

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