Park Plaza owner hits deal with lenders
Chattanooga-based CBL Properties, owner of Little Rock’s Park Plaza, recently entered a restructuring agreement with a group of lenders to strengthen its balance sheet and keep open the more than 100 malls, plazas and shopping centers it owns.
The mall owner on Wednesday outlined plans to file for bankruptcy protection under Chapter 11 as part of the agreement. If approved by a judge, the deal is expected to eliminate nearly $900 million of CBL’s debt and $600 million in other obligations. It also would lengthen the landlord’s debt maturity schedule and simplify its capital structure.
“CBL Properties will be strengthened through this process,” chief executive Stephen Lebovitz said in a statement. CBL should be able to keep all 108 of its malls and shopping centers open through the restructuring, he said. It has roughly $220 million in cash and securities to do so.
In general, shopping malls haven’t been doing well for quite a while. While popular in the ’80s, malls struggled when Amazon.com and ecommerce retailers began taking customers from department stores, said Alan Ellstrand, associate dean of the Walton College of Business at the University of Arkansas.
That challenging retail environment, combined with the ongoing coronavirus pandemic, created a “perfect storm” for malls, he said.
As the coronavirus pandemic took hold, restaurants, businesses and stores were forced to close and some have fallen behind on rent payments. CBL and other landlords took on extra costs to meet their own mortgage terms as mall tenants filed for bankruptcy or struggled financially. Simon Property Group, which owns McCain Mall, sued Gap Stores in June over missed rent payments.
There is hope, however. CBL’s Lebovitz told shareholders that there were im
proved traffic levels at its properties. According to S&P Market Research, people are visiting shopping centers nearly as much as they did before the pandemic, particularly at outlet centers and plazas where people can walk outside. Retailers have adopted safety protocols and started doing curbside pickup, online orders, in-store pickup and other programs to alleviate concerns, Lebovitz said. McCain Mall and Park Plaza reopened with reduced hours in May.
The restructuring of CBL should begin no later than the first of October. The bankruptcy plan would eliminate roughly $1.4 billion in debt in exchange for $500 million due June 2028, about $50 million in cash and 90% of CBL’s new common equity to lenders. More than 57% of CBL’s lenders approved the deal.
Shopping mall owners are looking for new ways to attract business. Simon has been in talks with Amazon to convert vacant department stores once filled by Sears and J.C. Penney stores into warehouse distribution hubs, The Wall Street Journal reported. A tricky move considering anchor stores are vital for attracting shoppers to other stores. Some locations are luring people to their parking lots with drive-in movies and other entertainment.
“The last few times I’ve been to the mall I’ve seen a lot of empty stores,” Ellstrand said. He also has seen a lot of mall-walkers who don’t shop but rather walk down long corridors as a form of exercise.
“I don’t think malls have really figured it out yet,” he said.