CBL & Associates Properties Inc. has gone into forbearance.
In a filing with the Securities and Exchange Commission, the mall owner announced that it had entered into such an agreement with its lenders over a skipped interest payment following a 30-day grace period that expired this week. It becomes the first major retail landlord to go into default during the coronavirus pandemic.
The $11.8 million it owed bondholders was initially due on June 1, but CBL was unable to make the payment as it said the majority of its retail tenants failed to pay rent for the months of April and May. Now, the lenders of at least 25% of those unsecured notes can declare them immediately due and payable ahead of the 2023 deadline.
“The company is continuing to engage in negotiations and discussions with the holders and lenders of the company’s indebtedness,” CBL wrote. “There can be no assurance, however, that the company will be able to negotiate acceptable terms or to reach any agreement with respect to its indebtedness.”
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Tensions between landlords and their tenants have reached a fever pitch in recent weeks: Amid financial pressures stemming from the COVID-19 pandemic, many retailers have sought to boost their cash flow by skipping out on rent payments, particularly for stores they were forced to shutter due to government orders aimed at stemming the spread of the novel virus. At the same time, commercial owners that need to meet their own mortgage terms have said they are forced to take legal action against their tenants in order to recoup payments and keep their own businesses afloat.
In a filing on June 5, CBL noted that most of its occupants have requested rent relief: In April, it collected about 27% of rent payments and expected to receive roughly 25% to 30% of rents in May. It had also put a number of tenants in default for not making their payments.
CBL also did not make an $18.6 million interest payment due on June 15, triggering another grace period that expires in mid-July.
The Chattanooga, Tenn.-based company — owner of 108 properties — warned last month that it could go out of business and raised substantial doubt over its ability to operate as a going concern. It has hired advisors Weil, Gotshal & Manges and Moelis & Co. to explore alternatives, which include bankruptcy. If CBL were to file for Chapter 11 protection, it would mark the first commercial retail real estate casualty amid the outbreak.