Pushed by Pandemic, 2 Mall Owners File Chapter 11

New York—Mall operators CBL Properties and the Pennsylvania Real Estate Investment Trust both filed for Chapter 11 bankruptcy protection Sunday, another sign of the toll COVID-19 is taking on already struggling sectors of physical retail.

Chattanooga, Tennessee-headquartered CBL operates 107 malls and outlet centers in 26 states, primarily in the Midwest and Southeast.

Jewelry giant Signet Jewelers Ltd. is the company’s second-largest retailer, with 138 stores accounting for 3 percent of its total revenues, according to court papers included in the bankruptcy filing. (Its largest tenant is L Brands Inc., owner of Victoria’s Secret and Bath & Body Works.)

CBL’s shopping centers have been grappling with myriad issues in recent years, with decreasing foot traffic to Class B and C malls pushing tenants to shed stores.

COVID-19 accelerated the decline, as it forced stores to close for an extended period and has made consumers hesitant to resume shopping in large, enclosed spaces.

Many retailers are unable to pay the rent, even if they wish to remain open, while others—like Signet—are further rethinking their physical footprint.

Still other CBL tenants, including J.C. Penney and Ann Taylor owner Ascena Retail Group, have also filed for bankruptcy.

CBL said in court papers that in 2020 alone, more than 30 of its retail tenants commenced their own Chapter 11 cases.

The mall operator entered into a restructuring support agreement with lenders back in August, with an eye on reducing debt and other obligations by $1.5 billion and increasing liquidity while keeping its shopping centers open.

It warned then a bankruptcy filing may be imminent.

In a statement released Monday, CEO Stephen D. Lebovitz said after months of discussion, the company came to the decision that a Chapter 11 filing was the best option.

“CBL’s management and the board of directors firmly believe that implementing the comprehensive restructuring as outlined in the RSA through a Chapter 11 voluntary bankruptcy filing will provide CBL with the best plan to emerge as a stronger and more stable company,” he said.

“Upon emergence, CBL will be in a better position to execute on our strategies and move forward as a stable and profitable business.”

CBL & Associates Properties Inc., along with CBL & Associates Limited Partnership and other related entities, filed Chapter 11 in U.S. Bankruptcy Court in Houston.

The company said its customers, tenants and partners can expect “business as usual” throughout the Chapter 11 proceedings.