Item 2.03
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On May 11, 2017 (the “
Effective Date
”)
, affiliates of Washington Prime Group
™
Inc., an Indiana corporation (the “
Company
,” “
WPG
” or “
Registrant
”) completed mortgage financing transactions for retail properties which are the subject of a then pending joint venture transaction more fully described and discussed in Item 8.01 below. The completion of these financing transactions are closing conditions for the aforementioned joint venture transaction.
A.
|
Classen Curve and The Triangle at Classen Curve – Oklahoma City, OK
|
On the Effective Date, OKC Curve Triangle LLC (the “
Borrowe
r”), an affiliate of Registrant, executed a loan agreement with Teachers Insurance and Annuity Association of America (“
Teachers
” or “
Lender
”) for a mortgage financing transaction secured by Classen Curve and certain parcels at The Triangle at Classen Curve (Classen Curve together with such parcels, the “
OKC Land
”), each located in Oklahoma City, OK and to which Borrower, as of the Effective Date, owns fee title.
The aggregate amount of the aforementioned loan (the “
OKC
Loan
”) is Fifty-Two Million Seven Hundred Seventy-Nine Thousand Dollars ($52,779,000) of which the Borrower received Forty-Three Million Two Hundred Seventy-Nine Thousand Dollars ($43,279,000) on the Effective Date with the remaining Nine Million Five Hundred Thousand ($9,500,000) to be funded by Lender on or before December 31, 2017, subject to the satisfaction by Borrower of certain conditions related to the construction of two new multi-tenant buildings at Classen Curve and the leasing of such buildings (the “
Improvements
”). The OKC Loan has a fixed interest rate of 3.90% per annum and a scheduled maturity date of June 1, 2027 (the “
Maturity Date
”). Monthly payments under the promissory note and loan agreement shall consist of interest-only payments on the outstanding principal until June 1, 2022 and from July 1, 2022 monthly payments under the promissory note and loan agreement shall consist of interest and principal until the Maturity Date at which time all accrued interest and outstanding principal shall be due. The loan agreement prohibits any prepayment of the OKC Loan balance before June 1, 2020 at which time the Borrower shall have the right to prepay the full principal amount of the OKC Loan, all accrued but unpaid interest and any necessary fees or premiums. Commencing on March 1, 2027, the OKC Loan may be prepaid in full without payment of any fees or premiums.
Under the promissory note for the OKC Loan, in the event the Borrower fails to timely pay the outstanding indebtedness under the OKC Loan or commits any other default under the loan agreement then the Lender may accelerate the maturity of the OKC Loan and declare the entire unpaid balance due and payable. The OKC Loan is secured by a mortgage and assignment of leases and rents, each dated as of the Effective Date, which encumber the OKC Land. The loan agreement has default provisions customary for commercial mortgage loans of this nature. The OKC Loan is non-recourse to Borrower, except with respect to, among other things, certain intentional misrepresentations, malfeasance, fraud and misappropriations (the “
Recourse Liabilities
”) set forth under the loan agreement for which Lender may seek to recover from Borrower, the guarantor of the OKC Loan, or Borrower’s general partners, if any
.
As part of the OKC Loan transaction, the Registrant’s affiliate, Washington Prime Group, L.P. (“
WPGLP
”), executed a limited guaranty in favor of Lender of payment and performance, but not collection as it relates to Borrower’s Recourse Liabilities. Additionally, WPGLP executed a completion guaranty in favor of Lender for the payment and prompt performance of the construction of the Improvements by Borrower and payment of all amounts required to be paid in connection with the construction of the Improvements. Lastly, WPGLP executed an Environmental Indemnity Agreement to indemnify Lender against losses or costs to remediate damage to the OKC Land caused by the presence or release of hazardous materials.
B.
|
The Arboretum – Austin, TX
|
On the Effective Date, Arboretum Mall LLC (the “
Mall Borrower
”), an affiliate of Registrant, executed a loan agreement with Teachers for a mortgage financing transaction secured by The Arboretum (“
Arboretum
”), located in Austin, TX and to which the Mall Borrower, as of the Effective Date, owns fee title.
The aggregate amount of the aforementioned loan (the “
Arboretum
Loan
”) is Fifty-Nine Million Four Hundred Thousand Dollars ($59,400,000). The Arboretum Loan has a fixed interest rate of 4.13% per annum and is scheduled to mature on the Maturity Date. Monthly payments under the promissory note and loan agreement shall consist of interest-only payments on the outstanding principal until June 1, 2021 and from July 1, 2021 monthly payments under the promissory note and loan agreement shall consist of interest and principal until the Maturity Date at which time all accrued interest and outstanding principal shall be due. The loan agreement prohibits any prepayment of the Arboretum Loan balance before June 1, 2020 at which time the Mall Borrower shall have the right to prepay the full principal amount of the Arboretum Loan, all accrued but unpaid interest and any necessary fees or premiums. Commencing on March 1, 2027, the Arboretum Loan may be prepaid in full without payment of any fees or premiums.
Under the promissory note for the Arboretum Loan, in the event the Mall Borrower fails to timely pay the outstanding indebtedness under the Arboretum Loan or commits any other default under the loan agreement then Teachers may accelerate the maturity of the Arboretum Loan and declare the entire unpaid balance due and payable
. Additionally, a default of the Arboretum Loan shall occur if the Gateway Borrower (defined below) is in default beyond any applicable grace and cure period for the Gateway Loan (defined below).
The loan agreement for the Arboretum Loan has other default provisions customary for commercial mortgage loans of this nature. The Arboretum Loan is secured by a deed of trust and assignment of leases and rents, each dated as of the Effective Date, which encumber Arboretum. The Arboretum Loan is cross-collateralized with the Gateway Loan (defined below). The Arboretum Loan is non-recourse to the Mall Borrower, except with respect to, among other things, certain intentional misrepresentations, malfeasance, fraud and misappropriations (the “
Liabilities
”) set forth under the loan agreement for which Teachers may seek to recover from the Mall Borrower, the guarantor of the Arboretum Loan, or the Mall Borrower’s general partners, if any
.
As part of the Arboretum Loan transaction, WPGLP, executed a limited guaranty in favor of Teachers for payment and performance, but not collection as it relates to Mall Borrower’s Liabilities. Additionally, WPGLP executed an Environmental Indemnity Agreement to indemnify Teachers against losses or costs to remediate damage to Arboretum caused by the presence or release of hazardous materials.
C.
|
Gateway Center – Austin, TX
|
On the Effective Date, Gateway Square LLC (the “
Gateway Borrower
”), an affiliate of Registrant, executed a loan agreement with Teachers for a mortgage financing transaction secured by Gateway Centers (“
Gateway
”), located in Austin, TX and to which the Gateway Borrower, as of the Effective Date, owns fee title.
The aggregate amount of the aforementioned loan (the “
Gateway
Loan
”) is One Hundred Twelve Million Five Hundred Thousand Dollars ($112,500,000). The Gateway Loan has a fixed interest rate of 4.03% per annum and is scheduled to mature on the Maturity Date. Monthly payments under the promissory note and loan agreement shall consist of interest-only payments on the outstanding principal until
June 1, 2021 and from July 1, 2021 monthly payments under the promissory note and loan agreement shall consist of interest and principal until the Maturity Date at which time all accrued interest and outstanding principal shall be due. The loan agreement prohibits any prepayment of the Gateway Loan balance before June 1, 2020 at which time the Gateway Borrower shall have the right to prepay the full principal amount of the Gateway Loan, all accrued but unpaid interest and any necessary fees or premiums. Commencing on March 1, 2027, the Gateway Loan may be prepaid in full without payment of any fees or premiums.
Under the promissory note for the Gateway Loan, in the event the Gateway Borrower fails to timely pay the outstanding indebtedness under the Gateway Loan or commits any other default under the loan agreement then Teachers may accelerate the maturity of the Gateway Loan and declare the entire unpaid balance due and payable. Additionally, a default of the Gateway Loan shall occur if the Mall Borrower is in default beyond any applicable grace and cure period for the Arboretum Loan.
The loan agreement for the Gateway Loan has other default provisions customary for commercial mortgage loans of this nature. The Gateway Loan is secured by a deed of trust and assignment of leases and rents, each dated as of the Effective Date, which encumber Gateway. The Gateway Loan is cross-collateralized with the Arboretum Loan.
The Gateway Loan is non-recourse to the Gateway Borrower, except with respect to, among other things, certain intentional misrepresentations, malfeasance, fraud and misappropriations (the “
Excepted Liabilities
”) set forth under the loan agreement for which Teachers may seek to recover from the Gateway Borrower, the guarantor of the Gateway Loan, or the Gateway Borrower’s general partners, if any
.
As part of the Gateway Loan transaction, WPGLP, executed a limited guaranty in favor of Teachers for payment and performance, but not collection as it relates to Gateway Borrower’s Excepted Liabilities. Additionally, WPGLP executed an Environmental Indemnity Agreement to indemnify Teachers against losses or costs to remediate damage to Gateway caused by the presence or release of hazardous materials.