Park Plaza Mall owner CBL & Associates Properties Inc. of Chattanooga, Tennessee, on Sunday filed Chapter 11 bankruptcy, seeking to restructure its debt and survive amid rising e-commerce and declining in-store traffic.
The real estate investment trust is the largest owner and manager of shopping centers in the Southeast. Its Park Plaza Mall began as an open-air shopping center in 1960, but reopened in 1988 as Little Rock's biggest enclosed mall with 660,000 SF of retail space.
CBL's filing in the U.S. Bankruptcy Court for the Southern District of Texas lists assets and debt of between about $1 billion and $10 billion. Its biggest creditor is Delaware Trust Company of Wilmington, Delaware, as indentured trustee for nearly $1.4 billion in unsecured notes.
Arkansas Business reported in July that CBL had been at risk of foreclosure over loans secured by Park Plaza for $77.6 million and a mall in Illinois for $27.5 million. Meanwhile, a CBL company, Park Plaza Mall CMBS LLC, had challenged Pulaski County's $63 million valuation of the mall, saying it should be valued at a third of that, about $20.8 million. That case is still pending.
The bankruptcy filing comes as shoppers have drifted away from brick-and-mortar retailers to online retailers, such as Amazon. The brick-and-mortar retailers felt the shift as they saw their foot traffic decline.
At Park Plaza, the retailers, excluding Dillard’s, had sales of $330.30 per SF in 2017, according to a report by Dinan Real Estate Advisors Inc. of St. Louis, which was filed as part of an exhibit in the mall’s valuation appeal. In 2018, sales fell to $318.72 per SF. Sales were also expected to decline in 2019 and 2020, the report said.
The situation worsened for brick-and-mortar retailers in 2019. Major U.S. retailers announced nearly 10,000 store closures, which was a record at the time, and just about 4,700 store openings last year, according to Coresight Research. In the first half of 2019, 10 major retailers filed for bankruptcy protection. Through the end of May 2020, 15 retailers filed for bankruptcy protection.
Starting in mid-March, COVID-19 concerns and stay-at-home orders kept shoppers out of malls for weeks. Coresight Research said the temporary closure of nonessential stores "looks to have accelerated the shift to e-commerce."
Some of CBL's biggest tenants, like J.C. Penney Co. of Plano, Texas, have filed bankruptcy themselves. Other tenants have had trouble paying the rent amid COVID-19.