The following discussion and analysis of financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes that are included in this Form 10-Q. In this discussion, the terms "we", "us", "our", and the "Company" refer to CBL & Associates Properties, Inc. and its subsidiaries.

Certain statements made in this section or elsewhere in this report may be deemed "forward looking statements" within the meaning of the federal securities laws. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that these expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. In addition to the risk factors described in Part II, Item 1A. of this report, such risks and uncertainties include, without limitation, general industry, economic and business conditions, interest rate fluctuations, costs of capital and capital requirements, availability of real estate properties, inability to consummate acquisition opportunities, competition from other companies and retail formats, changes in retail rental rates in the Company's markets, shifts in customer demands, tenant bankruptcies or store closings, changes in vacancy rates at our properties, changes in operating expenses, changes in applicable laws, rules and regulations, the ability to obtain suitable equity and/or debt financing and the continued availability of financing in the amounts and on the terms necessary to support our future business. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information.

EXECUTIVE OVERVIEW

We are a self-managed, self-administered, fully integrated real estate investment trust ("REIT") that is engaged in the ownership, development, acquisition, leasing, management and operation of regional malls and open-air and community shopping centers. Our shopping center properties are located in 27 states, but primarily in the southeastern and midwestern United States. We have elected to be taxed as a REIT for federal income tax purposes.

As of June 30, 2008, we owned controlling interests in 75 regional malls/open-air centers, 28 associated centers (each adjacent to a regional shopping mall), eight community centers and 13 office buildings, including our corporate office building. We consolidate the financial statements of all entities in which we have a controlling financial interest or where we are the primary beneficiary of a variable interest entity. As of June 30, 2008, we owned noncontrolling interests in nine regional malls/open-air centers, four associated centers, three community centers and six office buildings. Because one or more of the other partners have substantive participating rights, we do not control these partnerships and joint ventures and, accordingly, account for these investments using the equity method. We had five mall

expansions, two associated/lifestyle centers (one of which is owned in a joint venture), one mixed-use center and six community/open-air centers (five of which are owned in joint ventures) under construction at June 30, 2008.

The majority of our revenues is derived from leases with retail tenants and generally includes base minimum rents, percentage rents based on tenants' sales volumes and reimbursements from tenants for expenditures, including property operating expenses, real estate taxes and maintenance and repairs, as well as certain capital expenditures. We also generate revenues from sales of outparcel land at the properties and from sales of operating real estate assets when it is determined that we can realize the maximum value of the assets. Proceeds from such sales are generally used to pay off related construction loans or reduce borrowings on our credit facilities.

We were pleased with the positive growth in Funds From Operations ("FFO") for the three and six months ended June 30, 2008 compared with the respective prior year periods, especially in light of the current retail climate. FFO was positively impacted by the properties acquired in 2007, decreased interest expense on our variable rate debt and higher lease termination fees and outparcel sales. Partially offsetting these increases were higher income tax expense, bad debt expense and abandoned project costs. FFO is a key performance measure for real estate companies. Please see the more detailed discussion of this measure on page 41.

Despite the tight credit markets, in April 2008, we successfully closed on a new, unsecured term facility of $228.0 million. In addition, we have several new developments, redevelopments and expansions in process for which the equity has been funded and construction financing for the balance of each project's cost is already in place.

Store closures and bankruptcies have significantly increased in 2008. During July 2008, Steve & Barry's announced that it had filed for bankruptcy. This tenant represents our largest outstanding bankruptcy exposure. However, overall store closures and tenant bankruptcies through June 30, 2008 have represented less than one percent of total revenues. We have a group dedicated to exploring strategies designed to limit the impact from store closures, including temporary tenants, options for space redevelopment, signing junior anchor replacements, and other alternative uses.

Aside from concerns surrounding the economy and credit markets, our 2008 results are beginning to reflect the benefits from the expansions and enhancements that we made to our existing portfolio in 2007, as well as the properties that we acquired in the latter part of that year. Our new development projects that are scheduled to open in 2008 should serve to maintain the positive momentum. We saw this first-hand at the grand opening of Pearland Town Center in July 2008. This project represents our first mixed-use development combining retail, hotel, office and residential components. The center opened 85% leased and committed and 70% occupied.

RESULTS OF OPERATIONS

We have acquired or opened five malls/open-air centers, one associated center, 13 community centers and 19 office buildings since January 1, 2007 (collectively referred to as the "New Properties"). These transactions impact the comparison of the results of operations for the three and six months ended June 30, 2008 to the results of operations for the comparable periods ended June 30, 2007. Properties that were in operation as of January 1, 2007 and June 30, 2008 are referred to as the "Comparable Properties." We do not consider a property to be one of the Comparable Properties until it has been owned or open for one complete calendar year. Any reference to the New Properties in this section excludes those properties that are accounted for using the equity method of accounting or that are included in Discontinued Operations. The New Properties are as follows:

                                                                     Date Acquired /
                    Property                           Location          Opened
------------------------------------------------    --------------   ---------------
Acquisitions:
Chesterfield Mall                                   St. Louis, MO             Oct-07
Mid Rivers Mall                                     St. Peters, MO            Oct-07
South County Center                                 St. Louis, MO             Oct-07
West County Center                                  St. Louis, MO             Oct-07
Friendly Center and The Shops at Friendly (50/50    Greensboro, NC
joint venture) (1)                                                            Nov-07
Brassfield Square (2) (3)                           Greensboro, NC            Nov-07
Caldwell Court (2) (3)                              Greensboro, NC            Nov-07
Garden Square (2) (3)                               Greensboro, NC            Nov-07
Hunt Village (2) (3)                                Greensboro, NC            Nov-07
New Garden Center (2)                               Greensboro, NC            Nov-07
Northwest Centre (2) (3)                            Greensboro, NC            Nov-07
Oak Hollow Square (2)                               High Point, NC            Nov-07
Westridge Square (2)                                Greensboro, NC            Nov-07
1500 Sunday Drive Office Building (2)               Raleigh, NC               Nov-07
Portfolio of Five Office Buildings (2) (4)          Greensboro, NC            Nov-07
Portfolio of Two Office Buildings (2)               Chesapeake, VA            Nov-07
Portfolio of Four Office Buildings (2)              Newport News,
                                                    VA                        Nov-07
Portfolio of Six Office Buildings (50/50 joint      Greensboro, NC
venture) (1)                                                                  Nov-07
CBL Center II                                       Chattanooga,
                                                    TN                        Jan-08
Renaissance Center (50/50 joint venture) (1)        Durham, NC                Feb-08

New Developments:
The Shoppes at St. Clair Square                     Fairview
                                                    Heights, IL               Mar-07
Alamance Crossing East                              Burlington, NC            Aug-07
York Town Center (50/50 joint venture) (1)          York, PA                  Sep-07
Cobblestone Village at Palm Coast                   Palm Coast, FL            Oct-07
Milford Marketplace                                 Milford, CT               Oct-07

(1) These properties are held in entities that are accounted for using the equity method of accounting. Therefore, the results of operations for these properties are included in Equity in Earnings of Unconsolidated Affiliates in the accompanying condense consolidated statements of operations.

(2) These properties are included in Discontinued Operations for the three and six months ended June 30, 2008.

(3) These properties were sold in April 2008.

(4) One office building was sold in June 2008.

Comparison of the Three Months Ended June 30, 2008 to the Three Months Ended June 30, 2007

Revenues

The $23.2 million increase in rental revenues and tenant reimbursements was attributable to an increase of $23.0 million from the New Properties and an increase of $0.2 million from the Comparable Properties. The increase in revenues of the Comparable Properties was driven by higher lease termination fees of $1.4 million and base rents of $1.0 million, partially offset by decreases in percentage rents and tenant reimbursements of $0.5 million and $0.5 million, respectively, and a decrease in below-market lease amortization of $1.1 million. The lease termination fees were primarily attributable to a tenant who recently closed their remaining nine locations with us. We have already executed leases on six of these nine locations. Base rents have increased for new and renewal leases. As of June 30, 2008 base rents increased to $29.17 per square foot for stabilized malls, compared to $28.00 per square foot as of June 30, 2007. Percentage rents decreased during the current quarter due to lower sales. Below-market lease amortization decreased due to a higher amount of write-offs in the prior year quarter combined with an increasing number of tenant leases becoming fully amortized in the piror year.

Our cost recovery ratio declined to 96.7% for the three months ended June 30, 2008 from 102.8% for the prior year quarter. We are in the process of converting tenants to a fixed common area maintenance ("CAM") charge as compared to a pro rata charge that was applicable to more tenants in the prior year quarter. Approximately 75% of our leases have been converted to fixed CAM. Due to the conversion, the recovery ratio will fluctuate during the year as seasonal items impact the ratio. The decline in the current quarter is primarily the result of increased bad debt expense.

The decrease in management, development and leasing fees of $1.5 million was mainly attributable to a decrease of $0.5 million in each of development fees, leasing fees and financing fees primarily related to our joint ventures. We received one-time fees during the prior year quarter from Triangle Town Center and Gulf Coast Town Center.

Operating Expenses

Property operating expenses, including real estate taxes and maintenance and repairs, increased $9.7 million as a result of $8.1 million of expenses attributable to the New Properties and $1.6 million related to the Comparable Properties. The increase in property operating expenses of the Comparable Properties is primarily attributable to increases in bad debt expense and real estate tax expense.

The increase in depreciation and amortization expense of $12.6 million resulted from an increase of $13.3 million from the New Properties and a decrease of $0.7 million from the Comparable Properties. The decrease attributable to the Comparable Properties is due to a reduction in amortization expense related to tenant allowances.

General and administrative expenses increased $0.5 million primarily as a result of increases in state taxes. As a percentage of revenues, general and administrative expenses decreased to 4.1% for the second quarter of 2008 compared with 4.3% for the prior year quarter.

Other expenses increased $1.7 million primarily due to increased expenses of $1.1 million related to our subsidiary that provides security and maintenance services to third parties and due to an increase of $0.6 million in abandoned projects expense.

Other Income and Expenses

Interest expense increased $7.6 million primarily due to the debt on the New Properties, the refinancings that were completed in the prior year on the Comparable Properties and borrowings outstanding that were used to redeem our 8.75% Series B Cumulative Redeemable Preferred Stock (the "Series B Preferred Stock") in June 2007. While we experienced a decrease in the weighted average fixed and variable interest rates as compared to the second quarter of 2007, the total outstanding principal amounts have increased.

During the second quarter of 2008, we recognized gain on sales of real estate assets of $4.3 million related to the sale of five parcels of land during the quarter and one parcel of land for which the gain had previously been deferred. The gain of $2.7 million in the second quarter of 2007 related to the recognition of gain on one parcel of land for which the gain had previously been deferred.

Equity in earnings of unconsolidated affiliates decreased by $1.3 million during the second quarter of 2008 compared to the prior year quarter, primarily due to higher interest expense on debt, the write-off of an above-market lease intangible and higher depreciation expense from the acquisition of new properties by CBL-TRS Joint Venture, LLC.

The income tax provision of $3.8 million for the three months ended June 30, 2008 relates to the earnings of our taxable REIT subsidiary. The income tax provision increased by $2.9 million primarily due to the significantly larger amount of gains in the current year period related to sales of outparcels and discontinued operations. The provision consists of current and deferred income taxes of $2.2 million and $1.6 million, respectively. During the three months ended June 30, 2007, we recorded an income tax provision of $1.0 million, consisting of a provision for deferred income taxes of $1.2 million, partially offset by a current tax benefit of $0.2 million. We have cumulative share-based compensation deductions that can be used to offset the current income tax payable; therefore, the payable for current income taxes has been reduced to zero by recognizing a portion of the benefit of the cumulative share-based compensation deductions.

We recognized income from discontinued operations of $3.3 million during the second quarter of 2008, compared to $0.6 million during the second quarter of 2007. Discontinued operations for the three months ended June 30, 2008 reflect the operating results of 19 retail and office properties that meet the criteria for held-for-sale classification. These properties were originally acquired in the fourth quarter of 2007. Discontinued operations for the 2008 quarter also include the results of Chicopee Marketplace III, a community center located in Chicopee, MA. Discontinued operations for the three months ended June 30, 2007 reflect the results of operations of Twin Peaks Mall and The Shops at Pineda Ridge, plus the true up of estimated expenses to actual amounts for properties sold during previous years.

We recognized a gain on the sale of discontinued operations of $3.1 million during the three months ended June 30, 2008. During this time, we sold five community centers and an office property, all located in Greensboro, NC, for an aggregate sales price of $25.5 million and recognized a gain of $1.6 million. We also sold Chicopee Marketplace III for an aggregate sales price of $7.5 million and recognized a gain of $1.5 million.

Preferred dividends decreased $5.8 million during the three months ended June 30, 2008 due to the redemption of 2,000,000 shares of Series B Preferred Stock in June 2007. In connection with the 2007 redemption, we incurred a charge of $3.6 million to write off direct issuance costs that were recorded as a reduction of additional paid-in-capital when the preferred stock was issued. This charge was recorded as additional preferred dividends.

Comparison of the Six Months Ended June 30, 2008 to the Six Months Ended June 30, 2007

Revenues

The $50.4 million increase in rental revenues and tenant reimbursements was attributable to an increase of $51.4 million from the New Properties, partially offset by a decrease of $1.0 million from the Comparable Properties. The decrease in revenues of the Comparable Properties was driven by a decline in percentage rents of $2.2 million, partially offset by an increase in tenant reimbursements of $1.1 million. Percentage rents declined due to reduced sales. The current period tenant reimbursements reflect increases in reimbursements for real estate taxes and central utilities expenses which had increased in the latter part of the previous fiscal year.

Our cost recovery ratio declined to 96.4% for the six months ended June 30, 2008 from 100.7% for the prior-year period. The decline in the current period results primarily from increases of $3.2 million in bad debt expense and $1.0 million in snow removal expense.

Other revenues increased by $1.6 million primarily due to increased income related to our subsidiary that provides security and maintenance services to third parties.

Operating Expenses

Property operating expenses, including real estate taxes and maintenance and repairs, increased $20.3 million as a result of $15.8 million of expenses attributable to the New Properties and $4.5 million related to the Comparable Properties. The increase in property operating expenses of the Comparable Properties is attributable to increases in annual compensation for property management personnel, bad debt expense and real estate tax expense.

The increase in depreciation and amortization expense of $29.6 million resulted from increases of $25.3 million from the New Properties and $4.3 million from the Comparable Properties. The increase attributable to the Comparable Properties is due to ongoing capital expenditures for renovations, expansions, tenant allowances and deferred maintenance and for the write-off of certain tenant allowances related to early lease terminations.

General and administrative expenses increased $2.9 million primarily as a result of increases in payroll and due to certain benefits related to the retirement of our Senior Vice President and Director of Corporate Leasing during the first quarter of 2008. As a percentage of revenues, general and administrative expenses increased to 4.3% for the six months ended June 30, 2008 compared with 4.2% for the prior year period.

Other expenses increased $5.1 million primarily due to increased expenses of $2.8 million related to our subsidiary that provides security and maintenance services to third parties and due to an increase of $2.3 million in abandoned projects expense.

Other Income and Expenses

Interest expense increased $21.7 million primarily due to the debt on the New Properties, the refinancings that were completed in the prior year on the Comparable Properties and borrowings outstanding that were used to redeem our Series B preferred stock in June 2007. While we experienced a decrease in the weighted average fixed and variable interest rates as compared to the comparable period of 2007, the total outstanding principal amounts have increased.

During the six months ended June 30, 2008, we recognized gain on sales of real estate assets of $7.3 million related to the sale of nine parcels of land during the period and one parcel of land for which the gain had previously been deferred. The gain of $6.2 million in the six months ended June 30, 2007 related to the sale of seven land parcels and two parcels of land for which the gains had previously been deferred.

Equity in earnings of unconsolidated affiliates decreased by $0.9 million during the six months ended June 30, 2008, primarily due to higher interest expense on debt, the write-off of an above-market lease intangible and higher depreciation expense from the acquisition of new properties by CBL-TRS Joint Venture, LLC. In addition, Gulf Coast Town Center has experienced losses due to interest and depreciation expense. These are partially offset by improvements at various of our other joint venture properties.

The income tax provision of $4.2 million for the six months ended June 30, 2008 relates to the earnings of our taxable REIT subsidiary. The income tax provision increased by $2.4 million primarily due to the significantly larger amount of gains in the current year period related to sales of outparcels and discontinued operations. The provision consists of current and deferred income taxes of $3.7 million and $0.5 million, respectively. During the six months ended June 30, 2007, we recorded an income tax provision of $1.8 million, consisting of a provision for current and deferred income taxes of $0.8 million and $0.8 million, respectively. We have cumulative share-based

compensation deductions that can be used to offset the current income tax payable; therefore, the payable for current income taxes has been reduced to zero by recognizing a portion of the benefit of the cumulative share-based compensation deductions.

We recognized income from discontinued operations of $4.2 million during the six months ended June 30, 2008, compared to $0.7 million during the six months ended June 30, 2007. Discontinued operations for the six months ended June 30, 2008 reflect the operating results of 19 retail and office properties that meet the criteria for held-for-sale classification. These properties were originally acquired in the fourth quarter of 2007. Discontinued operations for 2008 also include the results of Chicopee Marketplace III, a community center located in Chicopee, MA. Discontinued operations for the three months ended June 30, 2007 reflect the results of operations of Twin Peaks Mall and The Shops at Pineda Ridge, plus the true up of estimated expenses to actual amounts for properties sold during previous years.

We recognized a gain on the sale of discontinued operations of $3.1 million during the six months ended June 30, 2008, compared to a $0.1 million loss during the six months ended June 30, 2007. During the six months ended June 30, 2008, we sold five community centers and an office property, all located in Greensboro, NC, for an aggregate sales price of $25.5 million and recognized a gain of $1.6 million. We also sold Chicopee Marketplace III for an aggregate sales price of $7.5 million and recognized a gain of $1.5 million.

Preferred dividends decreased $8.0 million during the six months ended June 30, 2008 due to the redemption of 2,000,000 shares of Series B Preferred Stock in June 2007. In connection with the 2007 redemption, we incurred a charge of $3.6 million to write off direct issuance costs that were recorded as a reduction of additional paid-in-capital when the preferred stock was issued. This charge was recorded as additional preferred dividends.

Operational Review

The shopping center business is, to some extent, seasonal in nature with tenants achieving the highest levels of sales during the fourth quarter because of the holiday season, which generally results in higher percentage rent income in the fourth quarter. Additionally, the malls earn most of their "temporary" rents (rents from short-term tenants) during the holiday period. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year.

We classify our regional malls into two categories - malls that have completed their initial lease-up are referred to as stabilized malls and malls that are in their initial lease-up phase and have not been open for three calendar years are referred to as non-stabilized malls. The non-stabilized malls currently include Imperial Valley Mall in El Centro, CA, which opened in March 2005; Southaven Towne Center in Southaven, MS, which opened in October 2005; Gulf Coast Town Center in Ft. Myers, FL, which opened in November 2005; and Alamance Crossing East in Burlington, NC which opened in August 2007.

We derive a significant amount of our revenues from the mall properties. The sources of our revenues by property type were as follows:

                                           Six Months Ended June 30,
                                            2008               2007
                                       --------------     --------------
Malls                                            91.2 %             91.8 %
Associated centers                                4.0 %              4.2 %
Community centers                                 1.2 %              0.8 %
Mortgages, office building and other              3.6 %              3.2 %

Mall store sales for the trailing twelve months ended June 30, 2008 on a comparable per square foot basis were $341 per square foot compared with $349 per square foot in the prior year period, a decline of 2.3%. Current year sales numbers have been impacted by the general weakness in the economy and a reduction in our mall occupancy.

Our portfolio occupancy, including centers acquired in 2007, is summarized in the following table:

                              At June 30,
                            ---------------
                             2008     2007
                            ------   ------
Total portfolio occupancy     91.4 %   91.6 %
Total mall portfolio          90.9 %   91.7 %
Stabilized malls              91.0 %   92.2 %
Non-stabilized malls          89.5 %   82.1 %
Associated centers            94.1 %   92.3 %
Community centers             92.4 %   82.7 %
. . .