Washington Prime Group Inc. (NYSE: WPG) today reported financial
and operating results for the fourth quarter and fiscal year ended
December 31, 2020. The Company’s financial statements have been
prepared assuming that the Company will continue as a going
concern. The Company’s management has stated that there exists
substantial doubt about the Company’s ability to continue as a
going concern as defined by generally accepted accounting
principles.
Three Months Ended December
31,
Twelve Months Ended December
31,
2020
2019
2020
2019
Net (loss) income per diluted share
$(5.24)
$0.81
$(11.04)
$(0.47)
FFO per diluted share
$1.69
$3.74
$3.96
$13.08
FFO per diluted share, as adjusted
$1.69
$2.81
$4.41
$10.59
A description of each non-GAAP financial measure and the related
reconciliations to the comparable GAAP financial measure are
provided in this press release.
Fourth Quarter Financial Results
Net loss attributable to common shareholders for the fourth
quarter of 2020 was $111.4 million, or $(5.24) per diluted share,
compared to a net income of $17.1 million, or $0.81 per diluted
share, a year ago. The year-over-year (YOY) difference relates
primarily to the significant impacts of tenant lease modifications
and increased bad debt expense related to delinquent receivables
during the fourth quarter of 2020 due to the ongoing COVID-19
pandemic resulting in lower YOY revenue of $20.7 million partially
offset by lower recoverable operating expenses of $5.0 million.
Results for the fourth quarter of 2020 include a non-cash
impairment loss of $109.0 million, which compares to $6.3 million
of such charges in the same quarter a year ago. Other items
contributing to the YOY change include a reduction in gain on sales
of outparcels of $9.2 million, as well as a reduction in gain on
extinguishment of debt of $24.7 million, from the same quarter a
year ago.
Funds from Operations (FFO) for the fourth quarter of 2020 was
$42.3 million, or $1.69 per diluted share, which compares to $93.2
million, or $3.74 per diluted share, during the same quarter a year
ago. The YOY decrease in FFO is primarily attributed to reductions
in comparable net operating income (NOI) of $17.7 million for the
portfolio primarily from the negative impact of COVID-19, a $23.1
million gain on debt extinguishment in 2019 (net of default
interest), as well as a decreases in non-cash straight-line income,
fee income and reductions in gains on sales of depreciable real
estate.
Included in FFO during the fourth quarter of 2019 is the
aforementioned net gain on extinguishment of debt of $23.1 million.
When adjusting for this gain, FFO, as adjusted, for the fourth
quarter of 2019 was $70.1 million, or $2.81 per diluted share.
There was no such gain during the fourth quarter of 2020.
Balance Sheet Update
As reported on February 16, 2021, Washington Prime Group, L.P.
(“WPG L.P.”), the operating partnership of the Company, elected to
withhold the $23.2 million interest payment that was due on
February 15, 2021 (the “Interest Payment”) with respect to WPG
L.P.’s Senior Notes due 2024 (the “Notes”) and, as provided for in
the indenture governing the Notes, to enter the 30-day grace period
to make such payment. WPG L.P. does not expect to make the Interest
Payment on the last day of such 30-day grace period. WPG L.P.’s
failure to make the Interest Payment will result in an “event of
default” on March 17, 2021 with respect to the Notes, which will
result in a cross default under each of its corporate credit
facilities (together, the “Credit Agreements”). While the event of
default is continuing under the indenture governing the Notes, the
Trustee or the holders of at least 25% in principal amount of the
Notes may declare the Notes to be due and payable immediately.
While the event of default is continuing under each of the Credit
Agreements, the applicable administrative agent may, and shall upon
the direction of the requisite lenders, declare the loans
thereunder to be immediately due and payable.
On March 16, 2021, WPG L.P. entered into a forbearance agreement
(the “Notes Forbearance Agreement”) with certain beneficial owners
(the “Forbearing Noteholders”) of more than 67% of the aggregate
principal amount of WPG L.P.’s Notes. Pursuant to the Notes
Forbearance Agreement, among other things, the Forbearing
Noteholders have agreed to forbear from exercising any rights and
remedies under the indenture governing the Notes with respect to
the default or event of default resulting from the nonpayment of
the Interest Payment, including the failure to pay the Interest
Payment by the end of the 30-day grace period (the “Interest
Default”). The forbearance period under the Notes Forbearance
Agreement ends on the earlier of March 31, 2021 and the occurrence
of any of the specified early termination events described
therein.
In addition, WPG L.P. and certain of its subsidiaries entered
into Forbearance Agreements (the “Bank Forbearance Agreements,” and
together with the Notes Forbearance Agreements, the “Forbearance
Agreements”) with respect to the Credit Agreements. Pursuant to the
Bank Forbearance Agreements, among other things, each of the
forbearing lenders under the applicable Credit Agreement has agreed
to forbear from exercising any rights and remedies under the
applicable Credit Agreements with respect to the Forbearance
Defaults (in each case, as defined in the Bank Forbearance
Agreements), including the cross-default resulting from the
Interest Default. The forbearance period under each of the Bank
Forbearance Agreements ends on the earlier of March 31, 2021 and
the occurrence of any of the specified early termination events as
described therein. WPG L.P. and certain of its subsidiaries also
agreed to additional restrictions in connection with the
Forbearance Agreements.
The Company is continuing to engage in negotiations and
discussions to restructure its capital structure. The uncertainty
associated with the Company’s ability to meet these obligations as
they become due raises substantial doubt about the Company’s
ability to continue as a going concern as defined by generally
accepted accounting principles.
The aforementioned discussions have included negotiations of the
terms and conditions of a financial restructuring (the
"Restructuring") of the existing debt of, existing equity interests
in, and certain other obligations of the Company and certain of its
direct and indirect subsidiaries. The Restructuring may need to be
implemented in cases commenced under chapter 11 of the United
States Bankruptcy Code. Although the Company continues to be open
to all discussions with the holders of the Notes and its other
stakeholders regarding a potential Restructuring, there can be no
assurance the Company will reach an agreement regarding a
Restructuring in a timely manner, on terms that are attractive to
the Company, or at all. The Company expects to continue to provide
quality service to its customers without interruption and work with
its business partners as usual during the course of these
discussions and any potential transaction.
The Company’s Board of Directors has made the decision to
suspend the first quarter dividends on its common shares and
operating partnership units as well as with respect to Series H
preferred shares of beneficial interest and Series I-1 preferred
units of Preferred Limited Partnership Interest. The dividends will
be reviewed quarterly by the Board of Directors.
Due to the aforementioned actions, the Company is not providing
2021 guidance. In addition, the Company will not host an earnings
conference call this quarter.
The Company ended 2020 with $111M of cash and cash equivalents
including its share of unconsolidated properties.
Supplemental Information
For 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 press 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 Group
Washington 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.
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 Statements
This press 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; the Company
has determined that there is substantial doubt about its ability to
continue as a going concern; there is no assurance that the Company
will be able to reach an agreement in principle regarding a
restructuring, comply with the terms of any such agreement or
successfully complete a restructuring contemplated thereby,
creating substantial doubt about our ability to continue as a going
concern; the Company may seek the protection of the Bankruptcy
Court, which would subject it to the risks and uncertainties
associated with bankruptcy and may harm the Company’s business and
place its equity holders at significant risk of losing all of their
investment in the Company; the Company’s limited liquidity could
materially and adversely affect its business operations; 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.
CONSOLIDATED STATEMENTS OF OPERATIONS Washington Prime
Group Inc. (Unaudited, dollars in thousands, except per
share data) Three Months EndedDecember 31,
Twelve Months EndedDecember 31,
2020
2019
2020
2019
Revenue: Rental income
$
143,261
$
159,519
$
506,682
$
633,633
Other income
6,111
10,504
17,736
27,851
Total revenues
149,372
170,023
524,418
661,484
Expenses: Property operating
(36,323
)
(39,460
)
(137,779
)
(154,328
)
Real estate taxes
(20,079
)
(21,133
)
(78,379
)
(82,139
)
Advertising and promotion
(2,418
)
(3,272
)
(7,333
)
(9,513
)
Total recoverable expenses
(58,820
)
(63,865
)
(223,491
)
(245,980
)
Depreciation and amortization
(55,917
)
(62,178
)
(229,064
)
(271,320
)
General and administrative
(13,398
)
(11,728
)
(48,119
)
(51,187
)
Ground rent
(204
)
(224
)
(778
)
(837
)
Impairment loss
(108,965
)
(6,320
)
(135,151
)
(35,256
)
Total operating expenses
(237,304
)
(144,315
)
(636,603
)
(604,580
)
Interest expense, net
(40,947
)
(38,576
)
(156,752
)
(153,382
)
Impairment on note receivable
-
-
(11,237
)
-
Gain on disposition of interests in properties, net
3,133
12,317
31,945
38,373
Gain on extinguishment of debt, net
-
24,747
-
63,660
Income and other taxes
1,228
(831
)
1,098
(1,296
)
(Loss) income from unconsolidated entities, net
(3,392
)
503
(14,693
)
(1,499
)
Net (loss) income
(127,910
)
23,868
(261,824
)
2,760
Net (loss) income attributable to noncontrolling interests
(20,012
)
3,260
(42,038
)
(1,514
)
Net (loss) income attributable to the Company
(107,898
)
20,608
(219,786
)
4,274
Less: Preferred share dividends
(3,508
)
(3,508
)
(14,032
)
(14,032
)
Net (loss) income attributable to common shareholders
$
(111,406
)
$
17,100
$
(233,818
)
$
(9,758
)
(Loss) income per common share, basic and diluted
$
(5.24
)
$
0.81
$
(11.04
)
$
(0.47
)
CONSOLIDATED BALANCE SHEETS Washington Prime Group
Inc. (Unaudited, dollars in thousands) December
31, December 31,
2020
2019
Assets: Investment properties at cost
$
5,688,526
$
5,787,126
Construction in progress
185,275
115,280
5,873,801
5,902,406
Less: accumulated depreciation
2,539,745
2,397,736
3,334,056
3,504,670
Cash and cash equivalents
92,618
41,421
Tenant receivables and accrued revenue, net
132,610
82,762
Investment in and advances to unconsolidated entities, at equity
416,339
417,092
Deferred costs and other assets
129,724
205,034
Total assets
$
4,105,347
$
4,250,979
Liabilities: Mortgage notes payable
$
1,101,653
$
1,115,608
Notes payable
710,476
957,566
Term loans
681,563
686,642
Revolving credit facility
639,976
204,145
Other Indebtedness
87,807
97,601
Accounts payable, accrued expenses, intangibles, and deferred
revenues
276,086
260,904
Distributions payable
3,323
3,252
Cash distributions and losses in unconsolidated entities, at equity
-
15,421
Total liabilities
3,500,884
3,341,139
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
2
2
Capital in excess of par value
1,262,524
1,254,788
Accumulated deficit
(913,128
)
(655,492
)
Accumulated other comprehensive loss
(12,124
)
(5,525
)
Total stockholders' equity
539,850
796,349
Noncontrolling interests
61,348
110,226
Total equity
601,198
906,575
Total liabilities, redeemable noncontrolling interests and
equity
$
4,105,347
$
4,250,979
RECONCILIATION OF FUNDS FROM OPERATIONS Including
Pro-Rata Share of Unconsolidated Properties Washington Prime
Group Inc. (unaudited, dollars in thousands, except per
share data) Three Months EndedDecember 31, Twelve
Months EndedDecember 31,
2020
2019
2020
2019
Funds from Operations ("FFO"): Net (loss) income
$
(127,910
)
$
23,868
$
(261,824
)
$
2,760
Less: Preferred dividends and distributions on preferred operating
partnership units
(3,568
)
(3,568
)
(14,272
)
(14,272
)
Real estate depreciation and amortization, including joint venture
impact
65,184
71,370
265,868
310,430
Noncontrolling interests portion of depreciation and amortization
(75
)
(67
)
(75
)
(67
)
Net income attributable to noncontrolling interest holders in
properties
(63
)
(45
)
(63
)
(45
)
Impairment loss, including (gain) on disposition of interests in
properties, net
108,714
1,594
109,488
26,586
FFO
$
42,282
$
93,152
$
99,122
$
325,392
Adjusted Funds from Operations: FFO
$
42,282
$
93,152
$
99,122
$
325,392
Impairment on note receivable
-
-
11,237
-
Gain on extinguishment of debt, net of default interest
-
(23,098
)
-
(62,011
)
Adjusted FFO
$
42,282
$
70,054
$
110,359
$
263,381
Weighted average common shares outstanding - diluted
25,092
24,914
25,008
24,868
FFO per diluted share
$
1.69
$
3.74
$
3.96
$
13.08
Total adjustments
$
-
$
(0.93
)
$
0.45
$
(2.49
)
Adjusted FFO per diluted share
$
1.69
$
2.81
$
4.41
$
10.59
RECONCILIATION OF NET OPERATING INCOME GROWTH FOR COMPARABLE
PROPERTIES Including Pro-Rata Share of Unconsolidated
Properties Washington Prime Group Inc. (unaudited,
dollars in thousands) Three Months Ended
December 31, Twelve Months Ended December 31,
2020
2019
Variance $
2020
2019
Variance $
Reconciliation of Comp NOI to Net
(Loss) Income: Net (loss) income
$
(127,910
)
$
23,868
$
(151,778
)
$
(261,824
)
$
2,760
$
(264,584
)
Loss (income) from unconsolidated entities
3,392
(503
)
3,895
14,693
1,499
13,194
Income and other taxes
(1,228
)
831
(2,059
)
(1,098
)
1,296
(2,394
)
Gain on extinguishment of debt, net
-
(24,747
)
24,747
-
(63,660
)
63,660
Impairment on note receivable
-
-
-
11,237
-
11,237
Gain on disposition of interests in properties, net
(3,133
)
(12,317
)
9,184
(31,945
)
(38,373
)
6,428
Interest expense, net
40,947
38,576
2,371
156,752
153,382
3,370
Operating (Loss) Income
(87,932
)
25,708
(113,640
)
(112,185
)
56,904
(169,089
)
Depreciation and amortization
55,917
62,178
(6,261
)
229,064
271,320
(42,256
)
Impairment loss
108,965
6,320
102,645
135,151
35,256
99,895
General and administrative
13,398
11,728
1,670
48,119
51,187
(3,068
)
Fee income
(2,040
)
(3,013
)
973
(7,544
)
(11,682
)
4,138
Management fee allocation
34
17
17
149
140
9
Pro-rata share of unconsolidated joint ventures in comp NOI
14,405
18,022
(3,617
)
53,776
70,469
(16,693
)
Property allocated corporate expense
4,125
4,893
(768
)
19,053
19,055
(2
)
Non-comparable properties and other (1)
749
104
645
3,771
(685
)
4,456
NOI from sold properties
(23
)
(817
)
794
(91
)
(5,718
)
5,627
Termination income
(1,438
)
(118
)
(1,320
)
(1,716
)
(1,630
)
(86
)
Straight-line rents, net
202
(1,270
)
1,472
266
(4,213
)
4,479
Ground lease adjustments for straight-line and fair market value
5
5
-
20
20
-
Fair market value and inducement adjustments to base rents
(1,240
)
(893
)
(347
)
(8,647
)
(6,194
)
(2,453
)
Less: Tier 2 and noncore properties (2)
(7,245
)
(10,396
)
3,151
(24,975
)
(40,260
)
15,285
Comparable NOI - Tier 1 and Open Air properties
$
97,882
$
112,468
$
(14,586
)
$
334,211
$
433,969
$
(99,758
)
Comparable NOI percentage change - Tier 1 and Open Air
properties
-13.0
%
-23.0
%
(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 and other non-recurring income
received in the periods presented. This also includes adjustments
related to the rents from the outparcels sold to Four Corners. (2)
NOI from the Tier 2 and noncore properties held in each period
presented.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210316006065/en/
Lisa 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
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