Editor’s note: This story has been updated with additional comments from PREIT.
GRAND RAPIDS — Woodland Mall owner Pennsylvania Real Estate Investment Trust (PREIT) has filed for Chapter 11 bankruptcy as mall tenants across the company’s portfolio have struggled to pay rent during the COVID-19 pandemic.
PREIT (NYSE:PEI) and CBL & Associates Properties Inc., which owns Laurel Park Place in Livonia and Meridian Mall in Okemos, both filed for Chapter 11 bankruptcy on Nov. 2. The companies will continue business operations without interruption throughout the restructuring process, according to company officials.
The two bankruptcies come just ahead of the holiday shopping season. Mall owners, tenants and commercial real estate companies are eyeing the end of 2020 to see if the holiday season can make up for this year’s lost sales caused by the pandemic. Sales in November and December have averaged about 19 percent of annual retail sales over the last five years, but can be higher for some retailers, according to the National Retail Federation.
The bankruptcy filing will have “no impact” on PREIT’s employees, tenants or vendors, PREIT CEO Joseph Coradino said in a statement. PREIT filed in the U.S. Bankruptcy Court for the District of Delaware.
“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,” Coradino said. “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.”
PREIT announced last month that it had entered into a restructuring support agreement with its bank lenders, which committed an additional $150 million to recapitalize the business and extend PREIT’s debt maturity schedule. The company received 95 percent lender support for a new credit facility.
Heather Crowell, PREIT executive vice president of strategy and communications, said the company expects to “emerge from this process expeditiously and in a stronger position with an additional $150 million in capital and a two to three years of additional term.”
Woodland Mall officials told MiBiz last month the mall had lower foot traffic when it first reopened on June 1. The mall had been closed since March 23 except for some retailers and restaurants offering limited curbside pickup.
“The news has no impact on the mall or our operations,” Crowell said in a statement. “As you know, the pandemic has taken a toll on many businesses. PREIT’s case is somewhat unique in that we came to terms with an overwhelming majority of our lenders, but needed agreement from one remaining bank.”
CBL, based in Chattanooga, Tenn., filed for Chapter 11 bankruptcy in order to recapitalize the company and restructure portions of its debt.
“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,” CBL CEO Stephen Lebovitz said in a statement.