Pandemic Continues to Weigh Heavily on Mall REITs — CBL and PREIT Investors May Have FINRA Claims
As reported earlier this week, two major U.S. mall operators structured as real estate investment trusts (REITs) have recently sought bankruptcy protection. Both CBL & Associates Properties, Inc. (NYSE: CBL) and Pennsylvania Real Estate Investment Trust (NYSE: PEI) (a/k/a PREIT) have filed Chapter 11 petitions but intend to remain open during the bankruptcy process. While both CBL and PREIT have been negatively impacted by the COVID-19 pandemic, each of these publicly traded mall REITs have struggled in recent years amidst the pressure on their business model due to the so-called “Amazon Effect” impacting brick and mortar establishments.
Chattanooga-headquartered CBL owns and operates some 107 properties across 26 states, including the EastGate Mall in Cincinnati and the West County Center in St. Louis. As disclosed by CBL, more than 30 of its tenants have themselves recently filed for bankruptcy, including beleaguered retailers JC Penney (OTC: JCPNQ) and Ascena Retail Group (OTC: ASNAQ). As disclosed in its bankruptcy filing in the Southern District of Texas, CBL has about $1 billion in debt on its books and has seen a significant decline in mall foot traffic during the pandemic. Year-to-date, CBL shares are trading down approximately 90%.
Philadelphia-based PREIT owns more than 20 properties, primarily in eastern Pennsylvania, the Washington, D.C. metropolitan area, and Southern New Jersey. In recent years, PREIT has added a number of restaurants, gymnasiums, and movie theaters to various malls under its ownership. As these businesses have been hit particularly hard by the pandemic, PREIT’s revenue has been negatively impacted, down some $20.1 million in the second quarter of 2020. As part of PREIT’s Chapter 11 reorganization package—as filed in the District of Delaware federal court—the company has indicated that its prepackaged $150 million funding will allow for recapitalization of its business while extending “the company’s debt maturity schedule.” Year-to-date, PEI shares are trading down more than 90%.
Investors who were steered into risky shopping mall REITs like CBL or PREIT by their broker or financial advisor may have claims to be pursued before the Financial Industry Regulatory Authority (FINRA), provided the recommendation to invest was unsuitable or otherwise misleading. The attorneys at Giarrusso Law Group LLC have considerable experience working closely with investors in REITs, including non-traded REITs and real estate private placement offerings, to recover their investment losses. Investors who wish to discuss a possible claim are invited to contact us by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost and confidential consultation.