The Pennsylvania Real Estate Investment Trust has filed for Chapter 11 bankruptcy, the second time it has taken this step since the pandemic in 2020.
The REIT owns several malls in the Philadelphia region that will stay open as the company works to restructure itself and reduce its debt load by about $880 million. It also said that only "first lien lenders," who have priority, will be paid back in full.
"Following the pandemic disruption, PREIT has worked tirelessly to enhance the portfolio, dramatically improve occupancy and diversify its tenancy," said chairman and CEO Joseph F. Coradino in prepared remarks. "However, unusual economic conditions have limited the company's options with respect to its debt obligations as meaningful achievements on the operating front were met with inflation and rising interest rates."
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In legal filings, the company said it expected to complete the bankruptcy process quickly, and that tenants, vendors, and employees would not be affected, according to the Philadelphia Inquirer.
PREIT's new plan relies on the "second lien lenders exchanging their debt for an equity interest in the company," spokesperson Heather Cromwell told the publication in an email.
PREIT retained investment bank PJT Partners to develop a plan for the almost $1 billion in debt coming due at the end of this year and the firm did try to market some of its malls to sell but did not find any buyers. But ultimately it concluded that bankruptcy was the best option.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
