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This Mall REIT Says it’s Collecting More Rent—Are Shopping Centers Out of the Woods?

Malls crashed into a liquidity crunch amid the tumult of the Covid-19 pandemic, but one REIT has good news on the cash-flow front.

Philadelphia Real Estate Investment Trust (PREIT), a mall operator serving Pennsylvania’s largest metropolitan area, reported “sequential improvement in collection levels and recouping deferred rents from prior periods.”

“Our commitment to restoring a strong liquidity position is generating results. It’s clear that there is pent-up appetite fueling consumer demand with half of comparable properties last week posting traffic results in excess of the same period in 2019,” said Joseph F. Coradino, chairman and CEO of PREIT, which operates the three-city-block Fashion District mall, a shopping, dining and entertainment destination in Philadelphia’s Center City, among other properties. “The strong return of the customer coupled with our planned multifamily land sales is expected to form the basis for continued improvement in the company’s balance sheet.”

The REIT said it received 119 percent of billed rents during the first quarter of 2021, versus 112 percent and 99 percent in the fourth and third quarters of 2020, respectively.

Those numbers reflect a significant improvement after scores of retailers either stopped paying rent and sought deferments or tried to renegotiate lease terms with their landlords while measures to curb the pandemic closed their stores. And a number eventually succumbed to bankruptcy.

Retail landlords were hard hit by the shift in the retail landscape, and both CBL & Associates Properties and PREIT filed for Chapter 11 protection in November. PREIT was able hammer out a lender-approved financial restructuring that recapitalized its balance sheet and reworked some debts, subsequently exiting Chapter 11 in December with a $130 million revolving line of credit.

The REIT said on Monday that it has drawn down $55 million, leaving $75 million available.

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“In returning to a positive cash flow profile with improved collections exceeding 100 percent of billed rents, we now have over $30 million of cash on hand, improving our current liquidity position to over $100 million,” PREIT added.

In February, the National Retail Federation estimated a 6.5 to 8.2 percent jump in annual retail sales this year, with much of the growth in the second half of the year when vaccinations permit a broader reopening. And just last week, U.S. retail sales rocketed a seasonally adjusted 9.8 percent in March from the month prior. Consumers appear ready to shop for new threads, fueled by pent-up demand boosted by federal stimulus money and a growing confidence in heading back into physical stores after getting vaccinated.