Mall owner Pennsylvania Real Estate Investment Trust (PREIT), known for properties like Capital City Mall in Lower Allen Township, has filed for Chapter 11 bankruptcy protection.
In a statement on Monday, the company announced that this step could cut its debt by about $880 million. PREIT mentioned that all the major lenders who stand to lose money are on board with this strategy.
PREIT Mall Owner files Chapter 11 Bankruptcy Protection Again
The company has secured $135 million in debtor-in-possession (DIP) financing, which is special funding used by bankrupt companies to reorganize.
Despite challenges facing many malls today, Capital City Mall is often seen as a thriving indoor shopping center by standard industry measures.
The spokesperson stated that the strategy is designed to enable PREIT to remain a key community player and a significant employer dedicated to evolving its properties.
They highlighted the recent addition of new stores like BoxLunch, Bonchon, Boba Cha, and Lovisa to Capital City Mall.
PREIT is applying for Chapter 11 for the second time in three years. If everything goes as planned, the company should return as a privately owned business at the end of the process.
The Real Estate had previously sought Chapter 11 bankruptcy protection in November 2020 following prolonged store shutdowns due to government directives during the pandemic. Despite selling some of its less successful malls, the company faced significant debt issues.
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Mall Owner Strategic Move, Let Go of Some Properties
PREIT is making significant changes by planning to sell off some of its less profitable malls. These malls might be handed over to the company's lenders, but PREIT will still run them. This move comes as finding new buyers for these malls is tough, and banks usually don't manage malls themselves.
Meanwhile, Simon Property Group, known for buying high-end malls, might be interested in some of PREIT's better properties.
Joseph F. Coradino, the CEO of PREIT, talked about the company's focus during this time. "We're restructuring to meet our goals and keep improving our malls for the people and businesses that use them," he said. "We plan to get through this quickly and come out stronger financially, ready to keep improving our malls."
While dealing with bankruptcy, PREIT intends to pay all its bills, including what it owes to suppliers and workers.
The bankruptcy plan needs to be approved by the court. PREIT has already filed for bankruptcy under Chapter 11 at the United States Bankruptcy Court for the District of Delaware and wants to move ahead with its plans soon.
The situation for malls is challenging now, as big stores like Macy's are closing some locations. J.C. Penney also faced hard times and was saved from bankruptcy when Simon Property Group and Brookfield Asset Management bought it.
Malls also feel the loss of Sears, which used to be a major store in many malls but now has very few locations. The bankruptcies of other big stores this year, like Bed Bath & Beyond, Tuesday Morning, and Christmas Tree Shops, have mostly affected outdoor shopping areas. However, their closures have put a lot of store spaces up for grabs in the market.
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