CBL & Associates, a large US mall owner, has fallen into bankruptcy after shoppers deserted its properties during the pandemic, prompting its tenants to withhold millions of dollars’ worth of rent.

The company, which has more than 100 properties across 26 states, is trying to convince creditors to wipe out $1.5bn of liabilities through a Chapter 11 restructuring.

The bankruptcy filing in the Southern District of Texas from CBL, which has a substantial presence in the south-east and Midwest, is the latest sign of the pain the coronavirus crisis is inflicting on commercial property.

Pennsylvania Real Estate Investment Trust, a smaller retail landlord, also filed for Chapter 11 protection over the weekend.

Several of CBL’s biggest tenants include retailers that have themselves filed for bankruptcy in recent months. Department store chain JCPenney and Ann Taylor-owner Ascena Retail alone occupied 6m square feet in its malls and accounted for $18.5m of CBL’s annual revenue.

Other tenants that had filed for bankruptcy in recent months, including Pier 1 Imports, GNC, StageStores, New York & Co and Chuck E Cheese, accounted for another $22m.

Cinema closures have also added to the pressure on the Tennessee-based real estate investment trust. CBL had 27 movie theatres in its portfolio, generating $22m in annual rent.

Stores in CBL malls were closed for six to eight weeks at the start of the crisis in the spring, and most of the company’s tenants asked it to defer or abate rents. CBL collected just 27 per cent of the rent it was due in April and a third in May.

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Restrictions on non-essential retail have since been lifted, but shoppers concerned about a surge in coronavirus cases remain reluctant to visit bricks and mortar stores. At CBL’s Asheville Mall in North Carolina, for instance, foot traffic in September was 30 per cent lower than a year ago.

While rent collection rates have improved — by August CBL received nearly all the rent it was owed for that month — the company still faces a shortfall from previous months. Adjusting for past due payments, CBL collected just 58 per cent of rent in September.

CBL was struggling long before coronavirus, as many of its properties were hard hit by the rise of online shopping.

The company, founded in 1978, had been expected for months to seek bankruptcy protection. As of Monday, its market capitalisation had collapsed to $30m, compared with total liabilities as of the end of June of $4bn.

Stephen Lebovitz, CBL’s chief executive, said that implementing the proposed restructuring plan would allow the group to become a “stable and profitable business”.

PREIT said its “pre-packaged” restructuring would recapitalise the company and extend its debt maturities. Joseph Coradino, PREIT’s chief executive, said the plan would position it “for long-term success”.

Via Financial Times