- Completes acquisition of Southgate Mall, a
dominant town center- Completes acquisition of Sears properties
located at four Tier One properties- Company reaffirms fiscal 2018
guidance
Washington Prime Group Inc. (NYSE:WPG) today
reported financial and operating results for the first quarter
ended March 31, 2018 that reflect continued progress of the
execution of the Company’s financial, operating and strategic
objectives. A description of each non-GAAP financial measure and
the related reconciliation to the comparable GAAP financial measure
are included in this release.
|
|
|
Three Months Ended March 31, |
|
(per
share amounts) |
|
|
2018 |
|
|
2017 |
|
Net
income per share – basic and diluted |
|
$ |
0.07 |
|
$ |
0.05 |
|
FFO per
diluted share¹ |
|
$ |
0.39 |
|
$ |
0.42 |
|
(1) A reconciliation of net income attributable to common
shareholders to funds from operations (FFO) is included in this
release.
Business Highlights
- The Company completed the purchase of Southgate Mall, located
in Missoula, Montana.
- The Company completed the acquisition of four Sears department
stores and adjacent Sears Auto Centers located at Tier One enclosed
assets for future redevelopment.
- Inline sales per square foot were $402 for Tier One enclosed
properties for the twelve months ended March 31, 2018, an increase
of 1.8%, while occupancy cost for Tier One enclosed properties was
11.8%, as of March 31, 2018.
- Leasing continues to be robust with total leasing volume for
the core portfolio totaling 1.1 million square feet in the first
quarter of 2018. Lifestyle tenancy, which includes food,
beverage, entertainment and fitness, accounted for 44% of total new
leasing activity during the first quarter.
- Tenant driven redevelopment remains one of the Company’s most
intriguing value propositions. Redevelopment efforts include
34 projects currently underway ranging between $1 million and $60
million, with an average estimated project yield of 10%, which does
not include the derivative impact of the benefit to adjacent
space.
Lou Conforti, CEO and Director stated: “First
and foremost, we are reaffirming guidance for fiscal 2018 FFO in a
range of $1.48 to $1.56 per diluted share. As I have
emphasized previously, our charter is to provide cash flow
stability e.g. minimal variance as we revitalize our assets.
I’ll put this into perspective. Since 2014, we have had
approximately 2.3 million square feet, or nearly 10% of inline
space, succumb to the black-cloaked, scythe-wielding grim reaper of
bankruptcy. In spite of a tumultuous retail environment, we have
indeed evidenced minimal variance as it relates to financial and
operating metrics. For instance, between 2014 and 2018,
comparable occupancy decreased only 160 basis points as of March
31, 2018, while comparable NOI is forecasted to actually increase
1.0% and tenant allowances generally decreased for the core
portfolio.
“As it relates to operating metrics, I’d
characterize the first quarter of 2018 as continuing the
incremental approach to redefining our assets. Sure, I’d be
as happy as a kid in a Shelby’s Sugar Shop® if comparable NOI
growth was better. The year-over-year difference was
primarily attributable to an increase in bad debt expense of $1.0
million resulting from 2018 bankruptcies, an increase of $1.3
million in snow removal expense from the prior quarter, and
continued negative impact from 2017 bankruptcies. We are
reaffirming our guidance for fiscal 2018 comparable NOI growth of
(1.0%) to 0.0% for the Company’s core properties. In
addition, the decisions we are making not to kowtow to lackluster
tenancy in crowded categories is absolutely the right one.
While this is going to result in a hiccup or two, the benefit to
our guests who seek variety far outweighs the short term agita.
“There is increasing evidence the fruits of our
labor are beginning to manifest. For instance, as it relates
to our core portfolio, inline store sales and occupancy cost both
exhibited improvement. As a matter of fact, inline store
sales for the twelve months ended March 31, 2018 exhibited the
highest year-over-year growth when compared to the previous five
quarters. While occupancy for the core portfolio decreased 50
basis points from the end of the first quarter of 2017, this is a
50-basis-point improvement from the year-over-year occupancy
decline at the end of 2017. The Tier Two portfolio remains
challenging albeit we have whittled this category down to
approximately 11% of our core portfolio NOI. Remember,
approximately 42% of Tier Two properties are encumbered and we have
proven several times we are not averse to handing back keys to
servicers. Also, 77% of Tier One enclosed properties are now hybrid
town centers which incorporate an open air component, and Tier One
enclosed and Open Air properties represent 64% and 25% of core
portfolio NOI, respectively.
“Washington Prime Group continues to activate
common area via such initiatives as our local craft brewery
rollout; our proprietary eCommerce platform, Tangible; as well as a
host of other offerings including Shelby’s Sugar Shop®. I
would like to address capital spend and commensurate returns for
such initiatives. For instance, capital attributed to our local
craft brewery rollout and Shelby’s per installation is
approximately $290,000 and $200,000, respectively, with anticipated
returns in a range of 10% to 12%. I mention these to make a point
and to elaborate upon of our ‘incremental approach’. Too
often landlords have allowed assets to go to heck in a handbasket
at which point a large scale redevelopment project is deemed
necessary. I truly believe there is so much we can do prior
to a major retrofit especially within the common area and we owe it
to our guests, tenants and shareholders to engage in these cost
contained beta tests.
“As it relates to department stores, WPG
continues to significantly reduce department store exposure. In
fact, since 2015, WPG has completed, commenced or approved 15
department store repositionings ranging between $5.0 million and
$20.0 million. Most importantly, such projects reflect an
average sales volume increase of between two and three times. The
liquidation of Bon-Ton Stores was expected, we planned for it and
we are currently vetting several wholesale solutions for the 16
stores in our portfolio. I’ll mention quickly the opportunity
we considered with a buyout consortium: It was a high-yielding
capital structure investment e.g. we positioned ourselves as
secured real estate lenders and the notional amount was for
approximately $55 million, of which we had potential
syndication participants. We viewed it as an opportunistic
investment characterized as a mid-dated option allowing us
additional time to evaluate adaptive reuse while getting paid to
wait. Regardless, we feel pretty good about addressing these stores
in a comprehensive fashion sooner rather than later.
“I know some of my literary critics are tired of
my team and I using grind it out as our battle cry. Too
bad. It’s what we do. It ain’t easy, we refuse to
tolerate the status quo, our emphasis on revitalizing dominant
secondary assets is resolute, and as always, we continue to grind
it out.”
First Quarter Results
Net income attributable to common shareholders
for the first quarter of 2018 was $14.0 million, or $0.07 per
diluted share, compared to $9.3 million, or $0.05 per diluted
share, a year ago. The year-over-year increase in net income
was primarily attributable to an increase of $8.2 million in net
gains primarily related to the sale of restaurant outparcels to an
affiliate of Four Corners Property Trust, Inc. (“Four Corners”),
which was partially offset by lower operating income of $3.9
million. Operating income includes a favorable variance of $8.5
million in lower impairment charges during the first quarter of
2018, compared to the same quarter a year ago. The remaining
year-over-year decrease in operating income of $12.4 million
primarily relates to lower net operating income from comparable
properties as well as the sale of a 49% interest in six properties
following the formation of the second joint venture with O’Connor
Mall Partners, L.P, an affiliate of O’Connor Capital Partners
(“O’Connor”), in the second quarter of 2017.
Funds from Operations (FFO) for the first
quarter of 2018 were $86.5 million, or $0.39 per diluted
share. This compares to $94.0 million, or $0.42 per diluted
share, during the same quarter a year ago.
Comparable net operating income (NOI) for the
core portfolio decreased 4.0% during the first quarter of 2018,
compared to the same period a year ago. The year-over-year
difference was primarily attributable to an increase in bad debt
expense of $1.0 million resulting from 2018 retailer bankruptcies,
an increase of $1.3 million in snow removal costs from the prior
quarter, and the continued negative impact from 2017 retailer
bankruptcies.
Operational Highlights
Ending occupancy for the core portfolio was
92.8% as of March 31, 2018, compared to 93.3% a year ago. Tier One
enclosed properties ended the quarter at 92.5%, an increase of 10
basis points compared to 92.4% a year ago. Ending occupancy for the
Open Air portfolio was 95.3% as of March 31, 2018.
Base rent per square foot for the core portfolio
was $21.75 as of March 31, 2018, an increase of 0.2% compared to
$21.70 per square foot a year ago. Inline store sales at Tier
One enclosed properties increased to $402 per square foot for the
twelve months ended March 31, 2018, compared to $395 per square
foot a year ago. For the quarter ended March 31, 2018, comparable
inline store sales for Tier One enclosed properties increased 4.1%,
compared to the first quarter a year ago.
Operating metrics by asset group can be found in
the first quarter 2018 Supplemental Information report available on
the Company’s website.
Financial Activity
Revolving Credit and Term Loan
Facility
On January 22, 2018, the Company’s operating
partnership, Washington Prime Group, L.P., amended and restated its
existing revolving credit and term loan facility that was set to
mature with extension options on May 30, 2019. The newly recast $1
billion facility includes a $650 million revolver and $350 million
term loan. When considering extension options, the facility will
mature on December 30, 2022. The current pricing on the facility
remains substantially consistent at LIBOR plus 1.25% on the
revolver and LIBOR plus 1.45% on the term loan.
Borrowings of approximately $155 million from
the recast facility were used to refinance the outstanding balance
on the existing revolving credit facility. The $350 million term
loan was fully funded at closing. The Company applied those
proceeds to fully satisfy the existing June 2015 term loan with an
outstanding balance of $270 million, with the remainder used to
reduce the outstanding balance on the revolving credit
facility.
Acquisition
On April 11, 2018 the Company completed the
acquisition of four Sears department stores and adjacent Sears Auto
Centers for $28.5 million through a sale-leaseback transaction. The
Sears properties are located at the following Tier One enclosed
properties: Longview Mall, located in Longview, Texas; Polaris
Fashion Place®, located in Columbus, Ohio; Southern Hills Mall,
located in Sioux City, Iowa; and Town Center at Aurora, located in
Aurora, Colorado. The purchase was funded by a combination of $13.4
million from the Company’s credit facility, $9.7 million in
proceeds from the aforementioned restaurant outparcel sale and $5.4
million from the Company’s joint venture partner O’Connor.
On April 24, 2018, the Company completed the
purchase of Southgate Mall, located in Missoula, Montana, for $58.0
million in conjunction with a planned reverse 1031 exchange
utilizing the remaining proceeds from the Four Corners transaction
as detailed below. Southgate Mall is a dominant hybrid town center
which features specialty grocer Lucky’s Market and a nine-screen
dine-in AMC theatre – both newly built.
Dispositions
On January 12, 2018, the Company completed the
sale of the first tranche of restaurant outparcels to an affiliate
of Four Corners. The sale consisted of 10 outparcels for an
allocated purchase price of approximately $13.7 million. The
Company expects to close on the remainder of the outparcels in the
second half of 2018, subject to due diligence and closing
conditions.
Mortgage Loans
On January 19, 2018, the Company repaid the
$86.5 million mortgage loan secured by The Outlet Collection® |
Seattle, located in Auburn, Washington. This repayment was
funded by borrowings on the Revolver. The Company’s high quality
unencumbered pool of assets comprised nearly 60% of total portfolio
NOI as of March 31, 2018.
Redevelopment Highlights
The Company continues to make progress on its
major redevelopment projects. Anchor repositioning remains among
the Company’s most attractive uses of capital given the returns and
benefit to a center’s longer term competitive positioning.
Recent redevelopment highlights include:
- Great Lakes Mall, a Tier One property located in Mentor, Ohio –
Round 1, a state-of-the-art entertainment center, opened on March
30, 2018, replacing a former traditional department store.
New retailers, including Hobby Lobby, and dining options, including
Outback Steakhouse, are also planned.
- Cottonwood Mall, a Tier One property located in Albuquerque,
New Mexico – The Company previously acquired a former traditional
department store space for a planned redevelopment at the
property. The Company plans to add a mix of new retail
options, including Hobby Lobby and home furnishings retail.
- Southern Park Mall, a Tier One property located in Youngstown,
Ohio – The Company is in discussions with new tenants, which will
be announced in the future, for the high visibility anchor space
currently occupied by Sears. The Company proactively negotiated an
early termination of the lease to gain control of the real estate
and commence future redevelopment efforts.
2018 Guidance
The Company reaffirms guidance for fiscal 2018
net income attributable to common shareholders in the range of
$0.26 to $0.36 per diluted share and fiscal 2018 FFO in a range of
$1.48 to $1.56 per diluted share. Key guidance assumptions
for 2018 remain unchanged and can be found in the first quarter
2018 Supplemental Information report available on the Company’s
website.
The following table provides the reconciliation
for the expected range of estimated net income attributable to
common shareholders per diluted share to estimated FFO per diluted
share, as adjusted, for the year ending December 31, 2018:
|
|
|
LowEnd |
|
HighEnd |
Estimated
net income attributable to common shareholders per diluted
share |
|
$ |
0.26 |
|
$ |
0.36 |
|
|
|
|
|
Depreciation and amortization including share of unconsolidated
entities |
|
|
1.22 |
|
|
1.20 |
Estimated
FFO per diluted share |
|
$ |
1.48 |
|
$ |
1.56 |
|
|
|
|
|
The Company reaffirms guidance for fiscal 2018
comparable NOI growth of (1.0%) to 0.0% for the core
properties. The following table provides a reconciliation of
the expected range of net income from GAAP financial statements to
the Company’s NOI projections for the year:
(Dollars in thousands) |
|
|
|
|
|
|
LowEnd |
|
HighEnd |
Operating
income |
|
$ |
198,040 |
|
|
$ |
201,230 |
|
Depreciation and amortization |
|
|
235,000 |
|
|
|
234,000 |
|
General
and administrative |
|
|
35,000 |
|
|
|
37,000 |
|
Management fees and property allocated corporate expense |
|
|
21,000 |
|
|
|
23,000 |
|
Pro-rata
share of unconsolidated joint venture in comp NOI |
|
|
71,000 |
|
|
|
73,000 |
|
Non-comparable properties and other (1) |
|
|
(21,240 |
) |
|
|
(23,130 |
) |
Noncore
properties |
|
|
(14,000 |
) |
|
|
(15,000 |
) |
Projected
comparable NOI |
|
$ |
524,800 |
|
|
$ |
530,100 |
|
Projected
comparable NOI year-over-year growth (2) |
|
|
(1.0 |
%) |
|
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
(1) Includes fee income, termination and outparcel sales
projections, straight line rents, fair market adjustments and NOI
for non-comparable properties.(2) Reported 2017 comparable NOI
adjusted for actual and projected property dispositions was $530.1
million.
For the second quarter of 2018, the Company
estimates net income attributable to common shareholders to be in
the range of $0.05 to $0.08 per diluted share and FFO to be in the
range of $0.35 to $0.38 per diluted share.
A reconciliation of the range of estimated net
income per diluted share to estimated FFO per diluted share for the
second quarter of 2018 follows:
|
|
|
LowEnd |
|
HighEnd |
Estimated
net income attributable to common shareholders per diluted
share |
|
$ |
0.05 |
|
$ |
0.08 |
Depreciation and amortization including share of unconsolidated
entities |
|
|
0.30 |
|
|
0.30 |
Estimated
FFO per diluted share |
|
$ |
0.35 |
|
$ |
0.38 |
|
Earnings Call and Webcast on April
26Washington Prime Group will host a conference call at
11:00 a.m. ET on Thursday, April 26, 2018, to discuss the Company’s
results and future outlook. Live streaming audio of the conference
call will be accessible from the investor relations section of the
Company’s website.
The dial-in number for the conference call is
844.646.4463 (or +1.615.247.0256 for international callers), and
the participant passcode is 8775677. The live audio webcast of the
call will be available on the investor relations section of the
Company’s website at www.washingtonprime.com.
A replay of the call will be available on the
Company’s website, or by calling 855.859.2056 (or +1.404.537.3406
for international callers), passcode is 8775677, beginning on
Thursday, April 26, 2018, at approximately 1 p.m. Eastern Time
through midnight on Thursday, May 10, 2018.
Supplemental InformationFor
additional details on the Company’s results and properties, please
refer to the Supplemental Information report on the investor
relations section of the Company’s website. This release as
well as the supplemental information have been furnished to the
Securities and Exchange Commission (SEC) in a Form 8-K.
About Washington Prime
GroupWashington Prime Group Inc. is a retail REIT and a
recognized leader in the ownership, management, acquisition and
development of retail properties. The Company combines a national
real estate portfolio with an investment grade balance sheet,
leveraging its expertise across the entire shopping center sector
to increase cash flow through rigorous management of assets and
provide new opportunities to retailers looking for growth
throughout the U.S. Washington Prime Group® and Shelby’s Sugar
Shop® are registered trademarks of the Company. Trademark and
patent registrations for Tangible™ are currently pending. Learn
more at www.washingtonprime.com.
ContactsLisa A. Indest, CAO
& Senior VP, Finance, 614.887.5844 or
lisa.indest@washingtonprime.comKimberly A. Green, VP, Investor
Relations & Corporate Communications, 614.887.5647 or
kim.green@washingtonprime.com
Non-GAAP Financial Measures
This press release includes FFO and NOI, including same property
NOI growth, which are financial performance measures not defined by
generally accepted accounting principles in the United States
(GAAP). Reconciliations of these non-GAAP financial measures to the
most directly comparable GAAP measures are included in this press
release. FFO and comparable NOI growth are financial performance
measures widely used by securities analysts, investors and other
interested parties in the evaluation of REITs. The Company believes
that FFO provides investors with additional information regarding
operating performance and a basis to compare the Company’s
performance with that of other REITs.
The Company uses FFO in addition to net income
to report operating results. We determine FFO based on the
definition set forth by the National Association of Real Estate
Investment Trusts (NAREIT) as net income computed in accordance
with GAAP, excluding real estate related depreciation and
amortization, excluding gains and losses from extraordinary items
and cumulative effects of accounting changes, excluding gains and
losses from the sales or disposals of previously depreciated retail
operating properties, excluding impairment charges of depreciable
real estate, plus the allocable portion of FFO of unconsolidated
entities accounted for under the equity method of accounting based
upon economic ownership interest.
NOI is used by industry analysts, investors and
Company management to measure operating performance of the
Company’s properties. NOI represents total property revenues less
property operating and maintenance expenses. Accordingly, NOI
excludes certain expenses included in the determination of net
income such as corporate general and administrative expense and
other indirect operating expenses, interest expense, impairment
charges and depreciation and amortization expense. These items are
excluded from NOI in order to provide results that are more closely
related to a property’s results of operations. In addition, the
Company’s computation of same property NOI excludes termination
income and income from outparcel sales. The Company also adjusts
for other miscellaneous items in order to enhance the comparability
of results from one period to another. Certain items, such as
interest expense, while included in FFO and net income, do not
affect the operating performance of a real estate asset and are
often incurred at the corporate level as opposed to the property
level. As a result, management uses only those income and expense
items that are incurred at the property level to evaluate a
property’s performance. Real estate asset related depreciation and
amortization, as well as impairment charges, are excluded from NOI
for the same reasons that they are excluded from FFO pursuant to
NAREIT’s definition.
Non-GAAP financial measures have limitations as
they do not include all items of income and expense that affect
operations, and accordingly, should always be considered as
supplemental to financial results presented in accordance with
GAAP. Investors should understand that the Company’s computation of
these non-GAAP measures might not be comparable to similar measures
reported by other REITs and that these non-GAAP measures do not
represent cash flow from operations as defined by GAAP, should not
be considered as alternatives to net income determined in
accordance with GAAP as a measure of operating performance and are
not alternatives to cash flows as a measure of liquidity. Investors
are cautioned that items excluded from these measures are
significant components in understanding and addressing financial
performance. Reconciliations of these measures are included in the
press release.
Regulation Fair Disclosure
(FD)The Company routinely posts important information
online on the investor relations section of the corporate website.
The Company uses this website, press releases, SEC filings,
conference calls, presentations and webcasts to disclose material,
non-public information in accordance with Regulation FD. The
Company encourages members of the investment community to monitor
these distribution channels for material disclosures. Any
information accessed through the Company’s website is not
incorporated by reference into, and is not a part of, this
document.
Forward-Looking StatementsThis
news release contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995
which represent the current expectations and beliefs of management
of Washington Prime Group Inc. (“WPG”) concerning the proposed
transactions, the anticipated consequences and benefits of the
transactions and the targeted close date for the transactions, and
other future events and their potential effects on WPG, including,
but not limited to, statements relating to anticipated financial
and operating results, the Company’s plans, objectives,
expectations and intentions, cost savings and other statements,
including words such as “anticipate,” “believe,” “confident,”
“plan,” “estimate,” “expect,” “intend,” “will,” “should,” “may,”
and other similar expressions. Such statements are based upon the
current beliefs and expectations of WPG’s management, and involve
known and unknown risks, uncertainties, and other factors which may
cause the actual results, performance, or achievements of WPG to be
materially different from future results, performance or
achievements expressed or implied by such forward-looking
statements. Such factors include, without limitation: changes in
asset quality and credit risk; ability to sustain revenue and
earnings growth; changes in political, economic or market
conditions generally and the real estate and capital markets
specifically; the impact of increased competition; the availability
of capital and financing; tenant or joint venture partner(s)
bankruptcies; the failure to increase store occupancy and
same-store operating income; risks associated with the acquisition,
disposition, (re)development, expansion, leasing and management of
properties; changes in market rental rates; trends in the retail
industry; relationships with anchor tenants; risks relating to
joint venture properties; costs of common area maintenance;
competitive market forces; the level and volatility of interest
rates; the rate of revenue increases as compared to expense
increases; the financial stability of tenants within the retail
industry; the restrictions in current financing arrangements or the
failure to comply with such arrangements; the liquidity of real
estate investments; the impact of changes to tax legislation and
WPG’s tax positions; failure to qualify as a real estate investment
trust; the failure to refinance debt at favorable terms and
conditions; loss of key personnel; material changes in the dividend
rates on securities or the ability to pay dividends on common
shares or other securities; possible restrictions on the ability to
operate or dispose of any partially-owned properties; the failure
to achieve earnings/funds from operations targets or estimates; the
failure to achieve projected returns or yields on (re)development
and investment properties (including joint ventures); expected
gains on debt extinguishment; changes in generally accepted
accounting principles or interpretations thereof; terrorist
activities and international hostilities; the unfavorable
resolution of legal or regulatory proceedings; the impact of future
acquisitions and divestitures; assets that may be subject to
impairment charges; significant costs related to environmental
issues; and other risks and uncertainties, including those detailed
from time to time in WPG’s statements and periodic reports filed
with the Securities and Exchange Commission, including those
described under “Risk Factors.” The forward-looking statements in
this communication are qualified by these risk factors. Each
statement speaks only as of the date of this press release and WPG
undertakes no obligation to update or revise any forward-looking
statements to reflect new information, subsequent events or
circumstances. Actual results may differ materially from current
projections, expectations, and plans, if any. Investors, potential
investors and others should give careful consideration to these
risks and uncertainties.
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
|
|
Washington Prime Group Inc. |
|
|
|
(Unaudited, dollars in thousands, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
Revenue: |
|
|
|
Minimum rent |
$ |
123,339 |
|
|
$ |
137,116 |
|
Overage rent |
|
2,014 |
|
|
|
2,832 |
|
Tenant
reimbursements |
|
48,644 |
|
|
|
56,790 |
|
Other income |
|
6,343 |
|
|
|
5,656 |
|
Total revenues |
|
180,340 |
|
|
|
202,394 |
|
|
|
|
|
Expenses: |
|
|
|
Property
operating |
|
(36,366 |
) |
|
|
(37,244 |
) |
Real estate taxes |
|
(22,041 |
) |
|
|
(26,007 |
) |
Advertising and
promotion |
|
(1,771 |
) |
|
|
(2,152 |
) |
Total recoverable
expenses |
|
(60,178 |
) |
|
|
(65,403 |
) |
Depreciation and
amortization |
|
(61,294 |
) |
|
|
(67,511 |
) |
Provision for credit
losses |
|
(3,346 |
) |
|
|
(1,581 |
) |
General and
administrative |
|
(9,654 |
) |
|
|
(8,828 |
) |
Ground rent |
|
(197 |
) |
|
|
(1,031 |
) |
Impairment loss |
|
- |
|
|
|
(8,509 |
) |
Total operating
expenses |
|
(134,669 |
) |
|
|
(152,863 |
) |
|
|
|
|
Operating
Income |
|
45,671 |
|
|
|
49,531 |
|
|
|
|
|
Interest expense,
net |
|
(34,344 |
) |
|
|
(32,488 |
) |
Income and other
taxes |
|
(485 |
) |
|
|
(2,026 |
) |
Income (loss) from
unconsolidated entities, net |
|
1,162 |
|
|
|
(444 |
) |
Gain on disposition of
interests in properties, net |
|
8,181 |
|
|
|
51 |
|
|
|
|
|
Net income |
|
20,185 |
|
|
|
14,624 |
|
|
|
|
|
Net income attributable
to noncontrolling interests |
|
2,661 |
|
|
|
1,814 |
|
Net income attributable
to the Company |
|
17,524 |
|
|
|
12,810 |
|
Less: Preferred share
dividends |
|
(3,508 |
) |
|
|
(3,508 |
) |
Net income attributable
to common shareholders |
$ |
14,016 |
|
|
$ |
9,302 |
|
|
|
|
|
Earnings Per
Share: |
|
|
|
Earnings per common
share - basic and diluted |
$ |
0.07 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
CONSOLIDATED
BALANCE SHEETS |
|
|
|
|
|
Washington Prime Group Inc. |
|
|
|
|
|
(Unaudited, dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
|
|
2018 |
|
|
|
2017 |
|
|
Assets: |
|
|
|
|
|
Investment properties at cost |
|
$ |
5,773,522 |
|
|
$ |
5,761,714 |
|
|
Construction in progress |
|
|
46,765 |
|
|
|
46,046 |
|
|
|
|
|
5,820,287 |
|
|
|
5,807,760 |
|
|
Less:
accumulated depreciation |
|
|
2,182,114 |
|
|
|
2,139,620 |
|
|
|
|
|
3,638,173 |
|
|
|
3,668,140 |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
45,871 |
|
|
|
52,019 |
|
|
Tenant
receivables and accrued revenue, net |
|
|
86,650 |
|
|
|
90,314 |
|
|
Investment in and advances to unconsolidated entities, at
equity |
|
|
441,580 |
|
|
|
451,839 |
|
|
Deferred
costs and other assets |
|
|
205,245 |
|
|
|
189,095 |
|
|
Total assets |
|
$ |
4,417,519 |
|
|
$ |
4,451,407 |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
Mortgage
notes payable |
|
$ |
1,065,595 |
|
|
$ |
1,157,082 |
|
|
Notes
payable |
|
|
980,196 |
|
|
|
979,372 |
|
|
Unsecured term loans |
|
|
684,701 |
|
|
|
606,695 |
|
|
Revolving credit facility |
|
|
195,155 |
|
|
|
154,460 |
|
|
Accounts
payable, accrued expenses, intangibles, and deferred revenues |
|
|
232,673 |
|
|
|
264,998 |
|
|
Distributions payable |
|
|
2,992 |
|
|
|
2,992 |
|
|
Cash
distributions and losses in unconsolidated entities, at equity |
|
|
15,421 |
|
|
|
15,421 |
|
|
Total liabilities |
|
|
3,176,733 |
|
|
|
3,181,020 |
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests |
|
|
3,265 |
|
|
|
3,265 |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
Stockholders' equity |
|
|
|
|
|
Series H
cumulative redeemable preferred stock |
|
|
104,251 |
|
|
|
104,251 |
|
|
Series I
cumulative redeemable preferred stock |
|
|
98,325 |
|
|
|
98,325 |
|
|
Common stock |
|
|
19 |
|
|
|
19 |
|
|
Capital
in excess of par value |
|
|
1,241,978 |
|
|
|
1,240,483 |
|
|
Accumulated deficit |
|
|
(381,597 |
) |
|
|
(350,594 |
) |
|
Accumulated other comprehensive income |
|
|
11,900 |
|
|
|
6,920 |
|
|
Total
stockholders' equity |
|
|
1,074,876 |
|
|
|
1,099,404 |
|
|
Noncontrolling interests |
|
|
162,645 |
|
|
|
167,718 |
|
|
Total equity |
|
|
1,237,521 |
|
|
|
1,267,122 |
|
|
Total liabilities, redeemable noncontrolling interests and
equity |
|
$ |
4,417,519 |
|
|
$ |
4,451,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CALCULATION OF FUNDS FROM OPERATIONS |
|
|
|
|
|
|
Washington Prime Group Inc. |
|
|
|
|
|
|
(INCLUDING PRO-RATA SHARE OF UNCONSOLIDATED
PROPERTIES) |
|
|
|
|
|
|
(Unaudited, dollars in thousands, except per share
data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
2018 |
|
|
|
2017 |
|
Funds from
Operations ("FFO"): |
|
|
|
|
|
|
Net income |
|
|
|
$ |
20,185 |
|
|
$ |
14,624 |
|
Less: Preferred
dividends and distributions on preferred operating partnership
units |
|
|
|
|
(3,568 |
) |
|
|
(3,568 |
) |
Real estate
depreciation and amortization, including joint venture impact |
|
|
|
|
70,199 |
|
|
|
74,521 |
|
(Gain) on disposition
of interests in properties, net including impairment loss on
depreciable real estate |
|
|
|
|
(295 |
) |
|
|
8,458 |
|
FFO |
|
|
|
$ |
86,521 |
|
|
$ |
94,035 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding - diluted |
|
|
|
|
223,278 |
|
|
|
221,791 |
|
|
|
|
|
|
|
|
FFO per diluted
share |
|
|
|
$ |
0.39 |
|
|
$ |
0.42 |
|
|
|
|
|
|
|
|
|
NET OPERATING INCOME GROWTH FOR COMPARABLE
PROPERTIES |
Washington Prime Group Inc. |
|
|
|
|
|
(INCLUDING PRO-RATA SHARE OF UNCONSOLIDATED
PROPERTIES) |
|
|
|
(Unaudited, dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2018 |
|
|
|
2017 |
|
|
Variance $ |
|
|
|
|
|
|
|
|
Reconciliation
of Comp NOI to Operating Income: |
|
|
|
|
|
|
Operating
income |
$ |
45,671 |
|
|
$ |
49,531 |
|
|
$ |
(3,860 |
) |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
61,294 |
|
|
|
67,511 |
|
|
|
(6,217 |
) |
|
General
and administrative |
|
9,654 |
|
|
|
8,828 |
|
|
|
826 |
|
|
Impairment loss |
|
- |
|
|
|
8,509 |
|
|
|
(8,509 |
) |
|
Fee
income |
|
(2,342 |
) |
|
|
(1,582 |
) |
|
|
(760 |
) |
|
Management fee allocation |
|
(16 |
) |
|
|
476 |
|
|
|
(492 |
) |
|
Pro-rata
share of unconsolidated joint ventures in comp NOI |
|
16,880 |
|
|
|
7,937 |
|
|
|
8,943 |
|
|
Property
allocated corporate expense |
|
2,756 |
|
|
|
1,826 |
|
|
|
930 |
|
|
Non-comparable properties and other (1) |
|
1,713 |
|
|
|
706 |
|
|
|
1,007 |
|
|
NOI from
sold properties |
|
(13 |
) |
|
|
(3,936 |
) |
|
|
3,923 |
|
|
Termination income and outparcel sales |
|
(1,766 |
) |
|
|
(1,109 |
) |
|
|
(657 |
) |
|
Straight-line rents |
|
(859 |
) |
|
|
(454 |
) |
|
|
(405 |
) |
|
Ground
lease adjustments for straight-line and fair market value |
|
13 |
|
|
|
5 |
|
|
|
8 |
|
|
Fair
market value and inducement adjustments to base rents |
|
(3,042 |
) |
|
|
(2,200 |
) |
|
|
(842 |
) |
|
Less:
Noncore properties (2) |
|
(3,566 |
) |
|
|
(4,343 |
) |
|
|
777 |
|
|
Comparable NOI
- core portfolio |
$ |
126,377 |
|
|
$ |
131,705 |
|
|
$ |
(5,328 |
) |
|
Comparable NOI percentage change - core
portfolio |
|
|
|
|
|
-4.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
Represents an adjustment to remove the NOI amounts from
properties not owned and operated in all periods presented, certain
non-recurring expenses (such as hurricane related expenses), as
well as material insurance proceeds received in the periods
presented. This also includes adjustments related to the rents from
the outparcels sold to Four Corners. |
|
|
|
|
(2 |
) |
NOI from the three noncore properties held in each period
presented. |
|
|
|
|
|
|
|
|
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