Mall owners CBL & Associates and Pennsylvania Real Estate Investment Trust (PREIT) have each filed for Chapter 11 bankruptcy protection, according to CNBC. Mall owners have faced financial pressure stemming from low foot traffic, but while some have been forced into bankruptcy, others have been acquiring struggling retailers to help maintain rents.
PREIT, the largest mall owner in Philadelphia, filed its petition to undergo a prepackaged financial restructuring plan. The firm aims to utilize $150 million in new borrowing to recapitalize its business and extend debt maturities. PREIT operates 22.5 million square feet of retail space, including 19 malls.
In August, CBL entered into a restructuring support agreement with a group of bondholders to try to turn its business around. The mall owner has been struggling with tenants either not paying or delaying rent payments, and major occupants like JCPenney have filed for bankruptcy. CBL operates 107 properties, totaling 66.7 million square feet across 26 states.
CBL runs many B- and C-rated malls, which The Motley Fool defines as having $300 to $500 in sales per square-foot (B-rated) or less than $300 per square-foot (C-rated). In comparison, Simon Property Group owns many A-rated properties with $500 or more in sales per square-foot, providing it with a stronger financial base to weather the pandemic.
This has enabled Simon to engage in a strategy of buying retailers out of bankruptcy, which helps keep their stores in its malls open. Recent deals have included the acquisitions of Lucky Brand with Authentic Brands Group (ABG), JCPenney with Brookfield Property Partners and Forever 21 with both ABG and Brookfield.