Pennsylvania Real Estate Investment Trust (PREIT), a major mall in the Eastern U.S., has declared bankruptcy once again. It marks the second time in just three years that PREIT has faced such financial challenges, underlining the persistent difficulties mall owners are encountering in today's rapidly evolving retail environment.
The firm, known for its 18 shopping centers across the East Coast and Midwest, sought Chapter 11 bankruptcy protection again. Despite this financial setback, the company assures it will keep its doors open while reorganizing to manage its debts.
They emphasized their commitment to staying in business, with all malls continuing to operate as usual during this period of restructuring.
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Major Mall Declares Bankruptcy to Clear out Debts
The mall owner, attempting to settle its large debts, had explored selling some of its properties. However, according to Retail Dive, they could not secure a buyer for these assets. Bankruptcy is often a strategy employed to sell off properties in order to repay significant debts.
The company is trying to get rid of $880 million in debt, which is getting more complex because of inflation, rising interest rates, and problems its tenants are having, as Bloomberg reported on Tuesday (Dec. 12). This comes after PREIT restructured its loans in late 2020.
PREIT runs more than a dozen malls in the eastern U.S., and the closing of stores and changes in how people shop has significantly impacted the company. People used to like its regional stores, but now they're less popular.
The commercial real estate market is expected to be affected by PREIT's bankruptcy. Experts say that other real estate investment trusts (REITs) and private property owners will face problems like higher capital costs, lower property values, and less financial freedom.
Despite these problems, PREIT still thinks that paying down its debt will allow it to keep running, as noted.
"PREIT has worked tirelessly to enhance the portfolio, dramatically improve occupancy, and diversify its tenancy," Joseph F. Coradino, Chairman and CEO of PREIT, said in the press release.
The statement also mentioned that only "first lien lenders" will receive full repayment. It added that tenants, vendors, and employees will likely not experience any impact from the company's restructuring process.
PREIT's Second Bankruptcy in Three Years
PREIT has filed for Chapter 11 bankruptcy again, marking its second filing within three years, with the first instance occurring in 2020 during the coronavirus pandemic.
The company's portfolio includes prominent shopping centers such as the Capital City Mall, Exton Square Mall in Exton, and Viewmont Mall in Scranton, and it shares ownership of the Lehigh Valley Mall in Whitehall and the Fashion District shopping center in Philadelphia.
Meanwhile, The company has announced its anticipation of exiting bankruptcy by February 2024. While the long-term outlook for its malls remains uncertain, they will continue operating as usual for now.
Numerous shopping malls have faced difficulties recently as more consumers shift to online shopping. Located away from city centers and residential neighborhoods, these malls experience fluctuating foot traffic based on the health of the retail economy.
Retailers across the country are grappling with challenges posed by the rise of online shopping, the impacts of the pandemic, and rising inflation.
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