In order to get out from under an onerous debt load, PREIT has ceded control of its flagship asset: the $420M Fashion District Philadelphia mall.
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The Macerich Co. will run the operations for the mall starting Jan. 1 as part of an agreement wherein the California-based retail REIT will pay $100M of PREIT's debt on the property, according to an 8-K filing with the Securities and Exchange Commission and first reported by The Philadelphia Inquirer.
Macerich and PREIT will continue to own equal halves of the equity for the Center City mall, PREIT CEO Joe Coradino told the Inquirer.
There is now $201M in principal remaining on the loan Wells Fargo provided for the 800K SF Fashion District, which is separate from the $913M unsecured loan to PREIT itself that Wells Fargo holds. Wells Fargo is the primary creditor for both Fashion District and PREIT, which owes about $2B in debt overall against assets valued at $2.4B, the Philadelphia Business Journal reports.
PREIT emerged from Chapter 11 bankruptcy protection on Dec. 11 as part of a deal that allowed it more time to pay back $1B of its debt and access $130M in new capital, PBJ reports. PREIT filed for bankruptcy on Nov. 2 with a plan that was pre-approved by 95% of its creditors, which included putting up properties that PREIT owns free of debt as collateral for $891M of previously unsecured debt.
When PREIT opened Fashion District in the fall of 2019, the REIT was already in troubled waters due to the sagging popularity of indoor malls and a series of bankruptcies among its tenants. The first full year of operation for Fashion District was supposed to drive a return to glory for PREIT after a multi-year slide in value.
Instead, the coronavirus pandemic forced the closure of Fashion District and every other mall in PREIT's portfolio in March. Even after reopening, business never fully recovered as safety concerns and capacity limits on indoor shopping lingered through the summer and have yet to abate.
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