PREIT, the troubled major owner of malls in the region, is closing in on an agreement to borrow $150 million more from its lenders to keep itself afloat, but it may require a trip to bankruptcy court to seal the deal, the firm said Wednesday.
PREIT, which owns Center City’s Fashion District Philadelphia and other malls, said 80% of its creditors have endorsed the deal and that it’s working to bring the rest on board by the end of this month.
Under the deal, the company, whose initials stand for Pennsylvania Real Estate Investment Trust, would put up its debt-free assets 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.
If PREIT can’t get support for this arrangement from all of its creditors, “it may need to complete this restructuring through a prepackaged reorganization under Chapter 11 of the United States Bankruptcy Code,” it said.
“Given the significant support we have already received from a substantial majority of our lenders, we are confident in our ability to implement the recapitalization agreement quickly and efficiently,” PREIT chief executive Joseph F. Coradino said in the release.
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.
Early this month, PREIT disclosed that it was in danger of being delisted from the New York Stock Exchange because its stock had on average fallen at less than $1 s share over 30 consecutive days, breaching an exchange requirement. It closed at $0.58 on Wednesday.
Coradino said in the release that the deal being sought with its lenders would enable it to continue “on the path we have charted to create diverse multi-use ecosystems at our properties marked by a healthy mix of multifamily housing, health-care services, fulfillment centers, and other uses alongside our robust retail, dining and entertainment lineups.”