Mall owner PREIT on verge of another bankruptcy, with over $1B debt

Three years after entering and exiting Chapter 11 bankruptcy protection, the Pennsylvania Real Estate Investment Trust may have to do it all over again.

The shopping mall operator is on the verge of bankruptcy for the second time since the start of the pandemic, according to Bisnow. PREIT is on the hunt for funding to weave through a Chapter 11 reorganization.

Bloomberg Law was first to report on the impending bankruptcy. PREIT did not immediately offer comment in response to a request from The Real Deal.

The biggest storm cloud hovering over PREIT is $1 billion in credit facilities, primarily held by Wells Fargo. The maturity date on those facilities is Dec. 10 and the company doesn’t have any more options to extend the deadline.

This matches the rest of the company’s financial picture. In the third quarter, PREIT posted a net loss of $63.9 million. Same-store net operating income dropped 5.3 percent year-over-year, while core mall total occupancy and core mall non-anchor occupancy also decreased annually.

The New York Stock Exchange booted PREIT from its trading platform last year after the mall owner failed to maintain a market capitalization of at least $15 million. PREIT regained compliance early this year, but has been trading as a penny stock since May and peaked at 25 cents on Monday.

The Philadelphia-based company’s stock traded for more than $700 per share at its height in 2005. Even before the pandemic, the stock was trading for more than $100 per share.

By 2020, PREIT was already in a difficult position as online shopping and changing consumer trends pressured lower-tier shopping centers. But when the pandemic came, malls were shut down, and PREIT’s centers bore the brunt of it.

During its month-long bankruptcy foray, the company took on more loans and kicked the proverbial can down the road by extending its maturities, rather than reducing its debt. It emerged from bankruptcy in December 2020 with $130 million in new financing.

Problems kept cropping up, however, including turmoil in the firm’s board of directors. After shareholders voted for no confidence this summer, board members attempting to resign rejected each other’s exits out of fear of destabilizing the firm, according to Bisnow.

PREIT has roughly two dozen assets in its portfolio, largely contained to the Mid-Atlantic region. Its notable holdings include malls in Cherry Hill, Grand Rapids and Pennsylvania’s Lehigh Valley.

— Holden Walter-Warner