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America's Malls Below Stress: CBL, Pennsylvania REIT, Filed For Chapter

CoolSprings Galleria Mall, Franklin, TN

Source: CBL Properties

Mall owners CBL & Associates and the Pennsylvania Real Estate Investment Trust have filed for Chapter 11 bankruptcy protection, highlighting the pressures the retail real estate industry is facing due to the coronavirus pandemic.

Both companies filed on Sunday. The latter, the largest owner of a shopping mall in Philadelphia, filed his application to run a pre-written financial restructuring plan. The company plans to borrow $ 150 million in new loans to recapitalize the business and extend the life of its debt.

CBL operates 107 properties, totaling 66.7 million square feet, in 26 states, including outlet centers.

The Tennessee-based landlord announced in August that it had entered into a restructuring support agreement with a group of bondholders in an attempt to strengthen its balance sheet.

The mall owner struggled during the pandemic with tenants not paying rent or deferring payments. Some of them, like the J.C. Penney, also filed for bankruptcy protection earlier this year.

In its bankruptcy filing, CBL listed its estimated assets and liabilities ranging from $ 1 billion to $ 10 billion.

"After months of discussion and deliberation on a number of alternatives, the management and board of directors of CBL firmly believe that implementing the major restructuring … CBL offers the best plan to become a stronger and more stable company," said CBL- CEO Stephen Lebovitz said in a statement.

CBL operates a number of so-called B- and C-rated shopping malls compared to the largest US mall operator, Simon Property Group, which owns many A-rated properties that generate more revenue per square foot.

Simon's strategy during the pandemic has focused on buying retailers out of bankruptcy, in part to keep those retailers' stores open in Simon shopping malls. With the help of the clothing licensing company Authentic Brands Group, the denim manufacturer Lucky Brand and the men's suit manufacturer Brooks Brothers were taken out of bankruptcy. At the end of the month the terms for the Penney acquisition were set with the help of mall owner Brookfield.

According to its website, PREIT operates 22.5 million square meters of retail space, including 19 shopping centers. Last year, the Philadelphia Fashion District opened, a huge shopping mecca built from the ground up in downtown Philadelphia. In recent years, the company had disposed of above-average malls and invested in adding cinemas, game rooms and grocery stores to its malls to reduce reliance on traditional retail. However, that strategy has come under pressure this year as consumers are largely staying home due to the pandemic.

Mall owners will face yet another test this holiday season, which is usually their tenants' busiest time of the year. But things will look very different during the pandemic as Covid-19 cases in the US are increasing rapidly.

According to a survey by Coresight Research of 419 people, shopping malls and shopping malls are among the most avoided public places among consumers. In the week of October 27, 55.4% of respondents said they avoided shopping centers.

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