CBL Properties May Turn in Keys to Some Regional Malls

The COVID-19 pandemic and the related economic downturn is putting more pressure on the financial performance of lower-quality regional malls, with one mall operator  announcing it will cooperate with lenders on foreclosures or turn in keys to some malls.

Fitch Ratings expects the financial performance of malls with already weak fundamentals will worsen due to the social distancing to slow the spread of the coronavirus, store closings and bankruptcies by a growing number of retailers.

“Operators of such malls, facing declining operating performance and weak liquidity positions, are having difficulty navigating the additional stresses brought on by the pandemic,” according to Fitch.

The malls will face additional occupancy issues and lower cash flows as rent collections slow and retailers request rent deferrals.

Fitch reports that CBL Properties, which has a “high concentration” of class  B regional malls in its portfolio, is the first mall operator since the coronavirus crisis to announce it would cooperate with its lenders in foreclosure proceedings or return keys on some properties.

Three of the CBL properties are in CMBS transactions that are rated by Fitch—Park Plaza Mall in Little Rock, AR; Eastgate Mall in Cincinnati; and Hickory Point in Forsyth, IL. In all three cases, Fitch has already classified the loans as Fitch Loans of Concern (FLOCs.)

CBL operates malls with 16 loans totaling $1,06 billion that are Fitch-rated CMBS loans. As of May, six of the loans totaling $389 million were already with the special servicer and a forbearance request is currently being reviewed by the servicer for the $63 million Asheville Mall loan, according to Fitch.

The $77.1 million loan for the Park Plaza mall, which is anchored by two Dillard’s stores, was transferred to special servicing in June 2019 due to imminent default because of tenant bankruptcies and expected upcoming vacancies. The loan was reported 30 days delinquent in May, according to the press release.

Fitch reports that the $31.1 million Eastgate Mall loan was transferred to special servicing in April at the request of the borrower due to “imminent monetary default stemming from the coronavirus pandemic.” The loan was reported 30 days delinquent in May. The mall is anchored by J.C. Penney, Dillard’s and Kohl’s.

The $24.5 million Hickory Point mall loan transferred back to the special servicer for the second time in June 2019 due to imminent default. That loan is now categorized in foreclosure. The mall is anchored by Von Maur and Kohl’s.

The servicer for the $63 million loan for the Asheville Mall has requested forbearance, because the borrower has requested coronavirus relief. Anchor tenants include Belk, J.C. Penney, Dillard’s, H&M and Barnes and Noble, but the mall has continued to experience “downward trending occupancy,” and sales at some anchor tenants are lower in 2019 than in 2015.

Other CBL loans in Fitch-rated transactions that Fitch already classifies as loans of concern are a $105.6 million loan for Arbor Place Mall in Douglasville, GA; a $54.6 million loan for West County Center in Des Peres, MO; and a $99.6 million loan for Hamilton Place mall in Chattanooga, TN.