CoolSprings Galleria Mall, Franklin, TN
Source: CBL Properties
Mall owner CBL & Associates said Friday that its ability to continue as a going concern is in doubt after the retailers in its properties skipped rent payments during the Covid-19 crisis, forcing CBL to miss its own interest payment.
The Chattanooga, Tennessee-based real estate company, which owns 108 properties primarily in the Southeast, had said earlier in the week that it did not pay an $11.8 million interest payment due June 1. It said Friday that it has violated a covenant in its senior secured credit facility. This means its lenders now have the option to accelerate the maturity of its debt, it said.
CBL said it has hired advisors Weil, Gotshal & Manges and Moelis & Company to explore alternatives, which could entail a reorganization of the company.
If CBL were to file for bankruptcy protection, this would mark the first filing by a commercial real estate owner during the pandemic. A number of retailers including J.C. Penney, Stage Stores, Tuesday Morning and J.Crew have already filed. But as retailers skip rent payments and shut stores, tensions between tenants and their landlords are mounting. Mall owners, such as CBL, are not able to pay their own bills.
“Given the impact of the COVID-19 pandemic on the retail and broader markets, the ongoing weakness of the credit markets and significant uncertainties associated with each of these matters, the Company believes that there is substantial doubt that it will continue to operate as a going concern,” it said in a 10-Q filing with the Securities and Exchange Commission.
CBL said the majority of its tenants have requested rent relief during the coronavirus pandemic, as many retailers’ stores were forced temporarily shut.
It said it has put a number of tenants in default for not paying.
For April, CBL said it received roughly 27% of rents. It expects to receive between 25% and 30% of rents in May.
The company specifically called out Penney, which filed for Chapter 11 bankruptcy in mid-May and is planning to close roughly 30% of its stores.
CBL said it has 47 Penney stores in its portfolio, as of March 31, comprising roughly $13.1 million in gross annual rent. CBL said it expects eight of those may close permanently, but that discussions with the bankrupted department store chain are still fluid.
A spokesperson declined to comment further.
CBL shares, which are trading under $1, have fallen more than 72% year to date. The mall owner has a market cap of $56.3 million.
This is a developing story. Please check back for updates.