CBL & Associates Properties' Strategic Real Estate Portfolio Rebalancing: A Pathway to 2026 AFFO Acceleration

CBL & Associates Properties, Inc. (CBL) has embarked on a transformative real estate strategy in 2025, leveraging strategic dispositions and targeted acquisitions to reposition its portfolio for long-term growth. As the retail real estate sector continues to evolve, CBL's disciplined approach to capital allocation and portfolio optimization is setting the stage for a significant acceleration in Adjusted Funds From Operations (AFFO) by 2026. This article examines how CBL's recent transactions are reshaping its financial trajectory and why investors should consider this REIT as a compelling opportunity for AFFO-driven returns.

Strategic Dispositions: Liquidity and Focus

CBL's 2025 portfolio rebalancing began with the sale of non-core assets, generating over $162.7 million in gross proceeds. Key dispositions included:
- The Promenade in D'Iberville, MS, sold for $83.1 million at an 8.5% cap rate.
- Monroeville Mall and Annex in PA for $34.0 million.
- Imperial Valley Mall in CA for $38.1 million.

These sales not only provided liquidity but also allowed CBL to shed underperforming assets, reducing operational complexity and freeing capital for higher-yielding opportunities. By focusing on properties in dynamic middle markets, CBL is aligning its portfolio with areas of stronger consumer demand and demographic growth.

Targeted Acquisitions: Quality Over Quantity

The proceeds from these dispositions were strategically deployed into the acquisition of four dominant enclosed regional malls from Washington Prime Group for $178.9 million. The acquired properties—Ashland Town Center (KY), Mesa Mall (CO), Paddock Mall (FL), and Southgate Mall (MT)—are market-dominant assets in growing communities. These malls are characterized by strong tenant diversity, including anchors like Simon Malls and regional retailers, and are expected to drive higher occupancy and rental income.

CBL's management has emphasized that these acquisitions are accretive to FFO and cash flow per share, with the full impact anticipated in 2026. The properties' locations in middle markets—areas with resilient consumer spending and lower supply-demand imbalances—position them to outperform in a post-pandemic retail landscape.

Financing Flexibility: Strengthening the Balance Sheet

To fund the acquisitions and extend maturity profiles, CBL modified its $333 million loan with Beal Bank USA, increasing the principal to $443 million and extending the maturity to October 2030. The new loan features a fixed interest rate of 7.70% on $368 million, reducing refinancing risk and locking in favorable terms. Additionally, CBL secured a $78 million non-recourse CMBS loan for Cross Creek Mall in NC at a 6.856% fixed rate, further optimizing its debt structure.

These refinancing moves have improved CBL's interest coverage and provided flexibility to navigate potential rate hikes, ensuring that debt costs remain manageable as the company scales its high-quality portfolio.

AFFO Acceleration: The 2026 Outlook

CBL's updated 2025 FFO guidance of $6.98–$7.34 per share already incorporates the partial-year impact of the 2025 acquisitions. With the full-year benefit of these properties expected in 2026, analysts project a meaningful step-up in AFFO per share. Key drivers include:
- Higher occupancy rates: Portfolio occupancy increased to 88.8% in Q2 2025, with strong backfill demand at premium rents.
- Tenant sales growth: Same-center tenant sales per square foot rose 3.5% in Q2, reflecting improved retail performance.
- Dividend confidence: A 12.5% dividend increase to $0.45 per share (annualized $1.80) underscores management's optimism about future cash flow.

Investment Thesis: Why CBL Stands Out

CBL's strategic rebalancing demonstrates a clear focus on capital discipline and long-term value creation. By exiting non-core assets and acquiring high-quality malls, the company is enhancing its portfolio's cash flow stability and growth potential. The extended debt maturities and lower interest rates further insulate CBL from near-term refinancing risks, allowing it to focus on operational improvements.

For investors, CBL offers an attractive combination of dividend growth, portfolio optimization, and AFFO resilience. The REIT's 2026 outlook, supported by its 2025 actions, suggests a path to outperforming peers in a sector still recovering from retail sector disruptions.

Conclusion: A Buy for AFFO-Driven Investors

CBL & Associates Properties is executing a well-structured strategy to position itself for 2026 AFFO acceleration. The recent dispositions and acquisitions have not only improved portfolio quality but also strengthened the balance sheet, creating a solid foundation for sustainable growth. With a dividend yield of ~4.5% (based on current share price) and a clear roadmap for AFFO expansion, CBL is a compelling addition to a diversified real estate portfolio. Historically, CBL's dividend announcements have been accompanied by positive stock price movements, including a notable 1.89% surge following the November 25, 2023, announcement. The consistent 4% yield across past announcements underscores management's commitment to returning value to shareholders, further enhancing the appeal for income-focused investors.

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