Washington Prime Group Inc. (NYSE: WPG) today announced that the
Company has entered into amendments with respect to its credit
facilities, which will provide certain covenant relief through the
third quarter of 2021 (the “Amendments”), further strengthening and
supporting the Company’s execution of its long term business
plan.
Lou Conforti, CEO and Director of Washington Prime Group stated:
“I’m pleased to announce the successful modification of our credit
facilities without any reduction of their size or change to
maturity dates. The quid pro quo is temporary partial collateral
which still leaves approximately half of our previously
unencumbered net operating income free and clear of mortgage liens.
It’s important to point out, the breach was entirely related to the
COVID-19 pandemic. It was technical in nature and was limited to
leverage based financial covenants. Plain and simple, it’s the
result of what happens when a pandemic reduces your numerator e.g.
rental income by nearly one half during a quarter. Furthermore,
interest coverage was and is still in excess of required thresholds
and our ability to service our mortgages and unsecured notes was
never in question.
“We structured a favorable modification with our lending
partners which allows us to continue to execute our dominant town
center mandate. In other words, it’s business as usual and I’d like
to thank our lending partners who adamantly believe in our focus of
serving midsize cities and their respective demographic
constituencies. Their cooperation and support is greatly
appreciated.
“As it relates to the second quarter, instead of ‘beefing up’
rental collections for short term results, we steadfastly
maintained our policy whereby we regard our tenants as partners.
Accordingly, we entered into constructive negotiations in order to
resolve amounts owed via reasonable deferral payment plans. We
quickly realized if we adopted a confrontational approach with the
intent to overemphasize second quarter operating metrics, this
would serve as a detriment to longstanding relationships we have
worked hard to nurture as well as send a less than friendly message
to those tenants we are actively courting.
“In addition, while we substantially reduced corporate overhead
and operating expenses, this national crisis served as the catalyst
by which we could further our town centers’ standing as a community
resource. We opted not to sacrifice our meaningful presence and
goodwill by reducing our local management teams to a skeleton crew.
As a result, they worked diligently during the pandemic and
continue to do so as exhibited by our hosting of 900 community
service projects nationwide.
“Our strategy worked. July exhibited a healthy 71.3% collection
rate and we believe these trends will only improve throughout the
remainder of the year. Furthermore, and this is not a typo, we
leased 2.2M SF of space during the first half of 2020, and during
the height of the pandemic (March, April, May and June), 182 leases
were signed totaling 1.3M SF. At the risk of being Machiavellian,
we also instituted an incentive program which resulted in
discontented local entrepreneurs relocating to our assets from
competitors and brand new NOI from this program currently stands at
$1.2M. Also, every single one of our adaptive reuse tenants e.g.
department store replacements, have reaffirmed their lease
commitments. Finally, our last mile fulfillment initiative,
Fulventory, has been met with an enthusiastic response as evidenced
by the initial leasing we have executed to date and discussions are
underway with several tenants and logistics providers to address
portfolio wide fulfillment solutions.
“While the second quarter impact of the COVID-19 pandemic was
unlike anything I’ve certainly ever experienced, it only
strengthened our conviction regarding the necessity of tenant
diversification, common area activation, relevant adaptive reuse,
and eCommerce capabilities. The importance of midsize cities where
the vast majority of our dominant town centers are situated has
also been recently reinforced as larger MSAs have been
disproportionately impacted by recent events. The affirmation of
all those with whom we interact whether lender, tenant, sponsor,
guest, etc. during these crazy times is why we continue to grind it
out.”
The Amendments will be partially collateralized by properties
making up approximately half of the Company’s previously
unencumbered net operating income, with the Company having the
ability to release the security starting in the third quarter of
2021 if certain financial conditions are met. The all-in interest
rate, depending on total leverage levels, will range from LIBOR
plus 2.35% to 2.60% with a LIBOR floor of 50 basis points.
Based upon the amended financial covenant requirements and
internal estimates, the Company projects that it will remain in
compliance with these revised financial covenants along with other
unsecured debt covenants. As previously announced, the Company was
in compliance with these covenants as of the end of most recently
completed fiscal quarter that ended June 30, 2020.
Please refer to the Company’s Current Report on Form 8-K for
additional details on the Amendments.
About Washington Prime Group
Washington Prime Group: National footprint with local flavor.
With about 100 town centers throughout the US, we’re as American as
apple pie. As a matter of fact, we are also as American as deep
dish pizza in Chicago, Hawaiian poke salad, vegan spring rolls in
Malibu, El Paso Tex-Mex, Maryland crab cakes, kimchi in Orange
County, Memphis barbeque and a Kansas City porterhouse. Our well
regarded infrastructure, from Hawaii to Connecticut, and pretty
much everywhere else in between, allows our tenant and sponsor
partners to benefit from the operating efficacy and economies of
scale at a large national real estate company, alongside local
management who possess comprehensive knowledge of the specific
locale within which they reside. Washington Prime Group® is a
registered trademark of the Company. Learn more at
www.washingtonprime.com or on Instagram or on LinkedIn.
Forward-Looking Statements
This 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 Amendments,
the anticipated consequences and benefits of the Amendments, and
other future events and their potential effects on WPG, including,
but not limited to, statements relating to anticipated financial
and operating results, including its covenant compliance, 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; losses associated with
closures, failures and stoppages associated with the spread and
proliferation of the coronavirus (COVID-19) pandemic; 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; changes in LIBOR reporting
practices or the method in which LIBOR is determined; 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20200817005168/en/
Kimberly A. Green, VP, Investor Relations & Corporate
Communications, 614.887.5647 or Kim.Green@washingtonprime.com
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