The “Pall on the Malls” which we have long forecast, will continually worsen, as tenants flee and mall owners go bust.
Last week, CBL & Associates Properties, which owns 106 malls in 28 states, became the first major retail landlord to miss a bond payment as a result of the economic shutdown.
The $11.8-million interest payment was due 1 June.
The failure to pay triggered a 30-day grace period during which CBL can make the payment and not be considered in default.
CBL said it collected only 27 percent of rents due in April and might take in no more than 30 percent of those due in May.
Dozens of mall owners have missed mortgage or debt payments on individual properties since the shutdown began. CBL is the first mall owner to miss a payment that could sink the entire corporation.
Neiman Marcus Restructuring Plan Hits Obstacle
Neiman Marcus, the upscale clothier with 44 stores in 18 states and the District of Columbia, has stumbled in its plan to restructure after declaring Chapter 11 bankruptcy on 7 May.
Deutsche Bank, to which the chain owes $760 million, noted in a 5 June court filing that the company admitted overvaluing the inventory backing the loan by $159 million, technically placing Neiman in default.
When it declared bankruptcy, Neiman’s creditors opened a $675-million credit line for the company so it could keep operating as it restructures. Now Deutsche Bank is asking for Neiman to replace the missing $159 million before the bankruptcy court allows the company further access to the credit line.
TREND FORECAST: Bankruptcies will continue to escalate, as will retail real estate values, as mall traffic, which already was in long steady decline, slumps lower.
Beyond the malls, with prime city streets such as those in NYC having been plastered with “For Rent” signs before the COVID lockdowns, both rental prices and real estate values will continue to drop much lower.
