Lindale Mall owner Washington Prime Group files for Chapter 11 bankruptcy

In a sweeping financial reorganization involving scores of shopping malls across the country — including Lindale Mall in northeast Cedar Rapids, the only enclosed shopping mall remaining in the city — owner Washington Prime Group has filed for bankruptcy protection that lets it stay in business while it sheds some of its nearly $3.5 billion in debt.

The real estate investment firm filed a Chapter 11 petition late Sunday in Texas and expects its mall operations to continue “uninterrupted” while it reorganizes.

“Throughout the Chapter 11 process, we expect business as usual at our town centers, including Lindale Mall, where our tenants, sponsors and employees will continue operating as normal,“ Washington Prime Group spokeswoman Kim Green said in an email.

Nationwide for the firm, rent collections dried up and tenants filed for bankruptcy or went out of business as the COVID-19 pandemic spread in 2020. The Columbus, Ohio-based company, which has about 100 locations, began negotiating with its creditors last year and skipped a $23 million bond interest payment in February. Creditors had been extending a forbearance agreement as debt talks continued.

The company, with assets estimated at $4 billion, secured a bankruptcy loan of up to $100 million to fund operations during the court proceedings.

Lou Conforti, Washington Prime Group’s chief executive and director, said in a statement that the bankruptcy filing allows the company to “right-size its balance sheet and position the company for success going forward.”

In a Chapter 11 filing, a company asks to restructure its debt so that it pays some but not all of the money owed. Chapter 13 seeks repayment of all debt over an extended period of time, and Chapter 7 involves closing operations.

The restructuring happens as interest rates remain relatively low. A Freddie Mac 30-year fixed-rate mortgage is at 2.96 percent on average, as of June 10. At this time last year, it was at 3.21 percent. Three years ago, it was at 4.54 percent.

U.S. Bank is owed the most money with $720.4 million, followed by Bank of America with $249.3 million and GLAS USA with $85 million, according to bankruptcy documents. None of the 30 companies with the most money owed to them are based in Iowa.

In April 2020, Iowa Gov. Kim Reynolds expanded earlier emergency health orders to include malls, which were ordered closed for more than a month.

Lindale Mall, built in 1960 at First Avenue NE and Collins Road NE, has weathered the pandemic with most storefronts still in business. A walk through the mall Monday showed that over 80 percent of storefronts accessible from inside the mall were occupied.

However, the former Younkers and Sears spaces — major anchors at Lindale that shuttered before the pandemic — remain vacant. Mall executives said in June 2019 an undisclosed retailer had signed a letter of intent to move into the Younkers space, but the property remains vacant.

Thirteen of the 16 spaces in stand-alone “outlier” buildings, including a Hy-Vee grocery store, are occupied, according to the store directory.

The mall’s assessed property value is more than $45 million, according to records from the Cedar Rapids Assessor’s Office.

Washington Prime Group — which also owns another mall in Iowa, the Southern Hills Mall in Sioux City — is not the only shopping center to take this action out of financial distress since the start of the pandemic.

CBL and Associates Properties and Pennsylvania Real Estate Investment Trust both filed for Chapter 11 bankruptcy in November, according to the Wall Street Journal, while other malls have closed permanently during the pandemic.

Across the industry, occupancy rates in malls have dropped from 88.5 percent in 2020 to 84.4 percent in the first quarter of 2021, according to data from the International Council of Shopping Centers.

Cedar Rapids’ other major retail node, the Westdale Town Center on the city’s southwest side, has been made up of exterior-facing storefronts since its redevelopment beginning in 2013 by Frew Development Group.

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Bloomberg contributed to this report.