Oak Court Mall owner could file for bankruptcy, agency says
The real estate investor who owns Oak Court Shopping Center in Memphis could file for bankruptcy next year, according to a rating agency.
The East Memphis Mall, home to Macy’s and Dillard’s department stores, has been a Poplar Corridor landmark since it opened in 1988 and would most likely remain in business if the owner proceeded with a bankruptcy reorganization, analysts said. retail.
The owner, Washington Prime Group Inc. of Columbus, Ohio, owes payments on debt accumulated to buy 110 malls, including Oak Court, in a single transaction in 2017. Company officials did not respond to questions about the mall or the business.
Oak Court officials did not respond to questions about the property’s future plans.
Hammered in the past year as malls struggled and 30 major retail chains declared bankruptcy amid the pandemic, Washington Prime lost $ 133.9 million in the first nine months of 2020 and missed an interest payment on February 15 to lenders.
Fitch Ratings, a New York-based credit agency, announced on February 17 that it expected “the deterioration in the Ohio company’s operating performance will require a debt swap or bankruptcy before the deadline. its credit facility in December 2022 “.
The maturity of the credit facility refers to maturing loans. Fitch analysts said they didn’t expect Washington Prime to liquidate – the mass sale of shopping malls – to pay off debts.
“I don’t know if they go bankrupt or if they can get a prepackaged deal,” said retail industry analyst Jan Kniffen, referring to a possible deal to reduce debt payments. “Who knows what they can do? They were clearly in trouble before COVID. They didn’t have the strongest malls.
Kniffen, director of J. Rogers Kniffen Worldwide Enterprises LLC in Greenwich, Connecticut, said Oak Court appears to be one of the best performing shopping centers in the Ohio company. Oak Court could continue with its current strategy even if creditors restructure Washington Prime.
Oak Court has already lost chain stores
Even before the pandemic, chain stores were struggling. Oak Court has lost major clothing retailers including The Gap and Joseph A. Banks. Managers have found new retailers to come in and take up most of the empty space. Rather than well-known national chains filling the mall, Oak Court retailers include lesser-known brands such as Girl Next Door of Rocky River, Ohio, and local entrepreneurs such as Love Factory lingerie boutique, Sharon’s Platinum Stylz hairstyle and Love Krush beauty bar. .
“This trend will accelerate,” Kniffen said, referring to the integration of more local entrepreneurs. “Retail chains have closed left and right. Now malls are looking to fill the space. You will see more open premises and more pop-up shops. Shopping centers are going to take risks (on retailers) that they never had to take before.
One of Oak Court’s biggest vacancies right now is Dillard’s former standalone menswear department. Retailer Little Rock has consolidated the men’s boutique into its main store at the west end of the mall. Dillard officials did not respond to questions about the property’s future plans.
What’s next for Washington Prime?
Washington Prime, whose only Memphis-area mall is Oak Court, recently announced that it had brought in advisers to help it figure out what to do. The advisers are Chicago law firm Kirkland & Ellis LLP and New York investment banker Guggenheim Securities LLC.
Analysts say a debt swap deal could result in a new round of loans to pay off current debts. Or the business could reorganize under bankruptcy laws. This could restructure debts to reduce loan repayments and could also give control to the major creditors of the Ohio company. If creditors took over, it’s unclear who would run Oak Court.
Financial strain dates back to Washington Prime’s purchase of 110 underperforming malls created by rival Simon Property Group of Indianapolis, the country’s largest mall operator. At the time, Washington Prime was a three-year real estate investment trust led by Louis Conforti, former head of global strategy at Colony Capital LLC, a Los Angeles-area real estate investor led by Thomas Barrack, who would lead the former President Donald. Trump’s inaugural committee in 2016.
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Washington Prime, with malls located across the country, saw its revenue drop in the first nine months of 2020 to $ 375 million, down 24% from the same months of 2019. So same As the pandemic was cutting retail sales, Conforti assured lenders and shareholders of the company’s financial strength, noting that it owned considerable real estate and had collected 87% of all rents owed by retailers in the third trimester.
Traders have always sensed a possible bankruptcy, which wipes out the entire value of a stock, and lowers the company’s stock price. The New York Stock Exchange warned that Washington Prime would be delisted if the price was less than $ 1 per share.
The company achieved a 1-for-9 reverse split at the end of last year, which helped push the stock price up to $ 13.65 per share in early February, but the price has since followed a downward trend. On Wednesday, the stock was trading at around $ 6.30 per share.