Washington Prime Group Inc. (NYSE: WPG) today provided an update on
previously announced strategic transactions, demonstrating
continued ability to access capital to reduce corporate debt and
satisfy ongoing redevelopment efforts. In addition to approximately
$68.1 million of net loan proceeds raised during the third quarter
of 2019 from the refinancing of four open air assets, Washington
Prime Group (the “Company”) received approximately $42.4 million of
net proceeds from the sale leaseback transaction during the fourth
quarter of 2019.
Lou Conforti, CEO and Director stated: “Whether
it’s via traditional or more creative capital markets execution,
Washington Prime Group continues to debunk those pundits who
question our ability to access capital. Such measures allow us to
continue our mandate as we transform our assets into the dominant
town center within their respective catchments.
“Let’s first take a look at a traditional
source. We refinanced a portfolio of four Open Air assets replacing
a $47.6M mortgage loan with $117.0M. As the collateral is the same
in both instances, it doesn’t take a rocket scientist to figure out
the value proposition as new proceeds are 2.46 times higher. By the
way, the new fixed rate of interest is 3.67%, replacing a 7.5%
coupon.
“Turning to a more creative financing
alternative, WPG entered into a sale leaseback whereby we sold land
fee interest and simultaneously entered into a 99-year master
ground lease. Collateralized by the underlying land of four of our
enclosed assets, we received $42.4M of proceeds. WPG has the option
to repurchase the fee interest during the 30th year of the master
ground lease. In addition, WPG provided a $55.0M bridge loan
maturing in five years which provides WPG interest income of 4.0%
per annum.
“In laymen’s terms, we are obligated to make an
initial annual fixed payment of 7.4%, which when adjusted for
predetermined escalators and the redemption price, averages an
implied cost of capital in the mid 8% range over the 30 year term.
Last time I looked, there ain’t a lot of thirty year money out
there. Almost forgot...the bridge loan provides us with sequential
preference safety upon its maturity in year five, and if those
reading this press release are really clever they just might net
the 4.0% we receive from the 7.4% payment. Capiche?”
Refinancing of Four Open Air
Assets On September 16, 2019, the Company repaid the $47.6
million mortgage loan previously secured by four open air assets,
which was scheduled to mature on October 16, 2019 at a fixed rate
of 7.5%. Simultaneously, the Company closed on a new $117.0 million
loan secured by the same four assets. The interest-only loan bears
interest at a fixed rate of 3.67%. The loan will mature on October
1, 2029.
The open air assets are: Forest Plaza located in
Rockford, Illinois; Lakeline Plaza, located in Cedar Park, Texas;
Muncie Towne Plaza, located in Muncie, Indiana; and White Oaks
Plaza, located in Springfield, Illinois.
Closing of Sale Leaseback for Fee
Interest in Land at Four Enclosed AssetsThe Company
completed the sale and leaseback of four enclosed assets
(collectively, the “Properties”). Under the master ground lease
agreement, an affiliate of Kawa Capital Partners (the “Lessor”), in
conjunction with Perennial Fee Investors, has acquired a fee
interest in the land at the Properties for a price of $98.9
million. The Company received approximately $42.4 million in
proceeds upon closing, net of $55.0 million in bridge financing
provided by the Company and closing costs. The bridge financing has
a maximum five-year term, which can be pre-paid without penalty, at
an interest rate of 4.00%.
The Company’s property-level affiliates (the
“Lessees”) entered into a new 99-year master ground lease for a
leasehold interest in the land at the Properties. The respective
Lessees retained the fee interest in the improvements and
development rights. The master ground lease includes fixed
annual payments to Lessor at an initial annualized rate of 7.4% and
contains annual rent escalators over the term. The agreement
includes an option for the Lessees to repurchase the fee interest
in the land at a fixed price in year 30 of the master ground lease.
If the Lessees do not exercise this option, then Lessor will retain
the fee interest in the land, and the fee interest in the
improvements and development rights will transfer to Lessor at the
end of the 99-year ground lease term.
As previously announced, in addition to Lessees
continuing to own a fee interest in the improvements and
development rights through the term of the aforementioned master
ground lease, Lessees will continue to manage, lease and develop
the Properties, offering the same exceptional guest experience. It
will be business as usual to guests and Property employees.
The Company will continue to maintain full control over the
leasehold interest in the land and fee interest in the improvements
and development rights at the respective Properties.
The Properties, which represent an aggregate
3.9M square feet of productive retail space, are: Edison Mall,
located in Fort Myers, Florida; Great Lakes Mall, located in
Mentor, Ohio; Irving Mall, located in Irving, Texas; and Jefferson
Valley Mall, located in Yorktown Heights, New York.
About Kawa Capital PartnersKawa
Capital Partners, an independent asset manager based near Miami,
Florida, was founded in 2007 by Daniel Ades and Alexandre Saverin.
As of September 2019, Kawa and its affiliates manage approximately
$1.3B in assets, and since 2010, invested in over 50 different
private opportunities alongside its clients. Kawa’s capital
solutions side focuses on real estate financing, including bridge
lending, mezzanine financing, structured credit, net leased real
estate equity, ground leases and credit tenant leases. With 10
ground lease transactions executed in the last three years with a
total transaction value in excess of $500M, Kawa is active in
structuring, purchasing, and financing ground leases across the
U.S. in various subsectors including hospitality, office, retail,
malls and solar. Learn more at www.kawa.com.
About Perennial Investment and Advisors,
LLCPerennial is a Chicago-based commercial real estate
investment and advisory business founded in 2004. The company's
principals previously held senior level positions within some of
the largest institutional U.S. investment firms. Perennial and its
clients have acquired over $700M in institutional quality assets
over the past four years with a focus on investor cash yields.
Perennial's investment management affiliate currently manages over
$900M in assets across the U.S. Learn more at
www.perennialroi.com.
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 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® is a registered
trademark of the Company. Learn more at
www.washingtonprime.com.
ContactsLisa A. Indest, CAO
& EVP, Finance, 614.887.5844 or lisa.indest@washingtonprime.com
Kimberly A. Green, VP, Investor Relations & Corporate
Communications, 614.887.5647 or kim.green@washingtonprime.com
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 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,” “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 mall store occupancy and
same-mall operating income; risks associated with the acquisition,
(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 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 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.
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