Mall Bankruptcies Continue With PREIT And CBL

Another wheel has fallen off in the troubled mall sector, as two real estate trusts have filed for Chapter 11 bankruptcy. The filings, both announced Sunday night (Nov. 1), came from Philadelphia-based PREIT and Tennessee-based CBL & Associates.

PREIT, with 19 properties, had scored points as one of the companies focused on adding small businesses to their mall concepts in the Northeast, including the Fashion District in downtown Philadelphia. It has also been a proponent of experiential retailing, but the pandemic has hit the company hard.

The filing is the next step in an agreement announced on Oct. 14, as PREIT entered into a new financial agreement with its bank lenders. “The banks have committed to providing an additional $150 million to recapitalize PREIT’s business and extend the company’s debt maturity schedule, supporting PREIT’s operations and the continued execution of its strategic priorities,” according to the company. “The filing means PREIT can continue business operations without interruption while it obtains approvals of its new financial restructuring plan.”

“We are pleased to be moving forward with strengthening the company’s balance sheet and positioning it for long-term success through our prepackaged plan. We are grateful for the significant support we have received from a substantial majority of our lenders, which we expect will enable us to complete our financial restructuring on an expedited basis,” said Joseph F. Coradino, CEO of PREIT. “Today’s announcement has no impact on our operations – our employees, tenants, vendors and the communities we serve – and we remain committed to continuing to deliver top-tier experiences and improving our portfolio. With the overwhelming support of our lenders, we look forward to quickly emerging from this process as a financially stronger company with the resources and support to continue creating diverse, multi-use ecosystems throughout our portfolio.”

CBL owns 107 properties. It also is following up on a previous, less formal agreement. It says it will provide the company with a stronger balance sheet by reducing total debt by approximately $1.5 billion.

“After months of discussions and consideration of a number of alternatives, CBL’s management and the Board of Directors firmly believe that implementing the comprehensive restructuring as outlined in the RSA through a Chapter 11 voluntary bankruptcy filing will provide CBL with the best plan to emerge as a stronger and more stable company,” said Stephen D. Lebovitz, CEO of CBL, in a statement. “With an aggregate of approximately $1.5 billion in unsecured debt and preferred obligations eliminated and a significant increase to net cash flow, upon emergence, CBL will be in a better position to execute on our strategies and move forward as a stable and profitable business.”

While the REITs may actually be able to recover from the pandemic, the ripple effect from the retail and mall bankruptcies is starting to spread. Malls represent tax revenue for a lot of towns, and that impact is just starting to be recognized.

“Potentially the community is impacted, because now a mall isn’t generating nearly as much sales tax revenue as it used to produce,” said Dan Sheridan at the Hoffman Strategy Group, per a report in Marketplace. “When a town gets less tax revenue, it might not be able to hire as many people or clean the streets as often.”