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Mall-owner PREIT files for bankruptcy in restructuring bid amid COVID-19 headwinds

PREIT, which owns Center City’s Fashion District Philadelphia and other malls, said it will continue business operations while it obtains approvals for its restructuring plan.

A masked pedestrian walks a dog past an advertisement at the Fashion District Philadelphia, one of PREIT's malls.
A masked pedestrian walks a dog past an advertisement at the Fashion District Philadelphia, one of PREIT's malls.Read moreYONG KIM / Staff Photographer

PREIT, the troubled owner of malls throughout the region, including Center City’s Fashion District Philadelphia, filed for Chapter 11 bankruptcy Sunday in what it describes as a prepackaged restructuring plan aimed at unlocking $150 million in new borrowing.

PREIT, whose initials stand for Pennsylvania Real Estate Investment Trust, said in a news release that it will continue operations without interruption while it obtains necessary approvals for the plan.

The Chapter 11 petition comes about two weeks after the company first outlined the restructuring plan, saying it aimed to avoid a bankruptcy filing by persuading all of its lenders to back the proposal. It ultimately received support from 95% of its creditors, it said in the release.

“With the overwhelming support of our lenders, we look forward to quickly emerging from this process as a financially stronger company with the resources and support to continue creating diverse, multiuse ecosystems throughout our portfolio,” PREIT chief executive Joseph F. Coradino said.

Under the deal, PREIT would put up properties that it owns free and clear as collateral for its $919 million in existing unsecured debt and the $150 million in new borrowing. That would mean PREIT’s lenders could foreclose on those properties if it defaulted.

PREIT is the biggest mall owner in Philadelphia and its surrounding counties, with 4.7 million square feet of space under management in the region, according to market tracker CoStar Group.

Its 21 malls in nine states include the Fashion District in Center City (formerly the Gallery at Market East); Willow Grove Park and the Plymouth Meeting Mall in Montgomery County; and the Cherry Hill Mall, Moorestown Mall, and Cumberland Mall in South Jersey.

The company had been in a years-long struggle to reinvent itself for the e-commerce age by selling off its lesser-performing malls while working to upgrade its remaining properties with new movie theaters and other entertainment venues, supermarkets, and on-site apartment buildings.

Then the coronavirus pandemic hit, shuttering its properties for months and leaving many of its tenants unable or unwilling to pay rent.

PREIT disclosed in October that it was in danger of being delisted from the New York Stock Exchange because its stock had, on average, fallen to less than $1 a share over 30 consecutive days, breaching an exchange requirement. It closed at $0.50 on Friday.

Coradino said Sunday that PREIT was “pleased to be moving forward with strengthening the company’s balance sheet and positioning it for long-term success through our prepackaged plan."