Friday, September 4, 2020

PREIT Calls Off Plan to Sell Five Shopping Malls

Pennsylvania Real Estate Investment Trust has terminated an agreement to sell five of its malls — a deal it mentioned earlier this year as one of its efforts to raise needed cash.

PREIT owns and operates a portfolio of enclosed malls and shopping centers that has been hit hard by recent retailer bankruptcies and shutdown orders to curb the COVID-19 pandemic. It was one of the first real estate investment trusts to acknowledge its survival may be in doubt.

In its first-quarter securities filing, the Philadelphia-based company said there is “substantial doubt about our ability to continue as a going concern,” citing its current financial condition, liquidity sources and financial obligations coming due over the next 12 months.

Also in that filing, PREIT disclosed in February it entered into an agreement for the sale-leaseback of five mall properties. The transaction was subject to completion of due diligence.

The outbreak of COVID-19 the following month pushed back due diligence efforts and reduced the availability of financing to complete the deal, PREIT said in a Securities and Exchange Commission filing this week. As a result, PREIT elected not to extend the due diligence period any longer and terminated the agreement.

The sale was expected to gross proceeds of $153.6 million in cash. It was structured as a 99-year lease with an option to repurchase. The agreement also provided for release of outlying land parcels for multifamily development.

The deal was a key component of asset sales PREIT arranged this year expecting to raise $313 million.

Geyser Holdings, based in the Detroit area, was identified in a PREIT federal filing this month as the buyer under the sale-leaseback agreement. Geyser did not respond to a request for comment.

The malls identified as having been under contract for sale were: Moorestown Mall in Moorestown, New Jersey; Jacksonville Mall in Jacksonville, North Carolina; Magnolia Mall in Florence, South Carolina; Valley Mall in Hagerstown, Maryland; and Capital City Mall in Camp Hill, Pennsylvania.

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