Washington Prime Group Announces Fourth Quarter and Fiscal Year 2018 Results
- Total leasing volume of 4.2M SF highlighted by a 14% increase for
Enclosed Properties - Replacements announced for seven of 24 department store boxes deemed active by the Company
- Increased visibility allows for meaningful growth outlook in 2020
- Tier One Sales PSF increased
$6 to $399 and occupancy cost decreased to 11.7% - Fully negotiated term sheet for
$180M loan secured by Waterford Lakes Town Center largely satisfying 2020$250M senior unsecured note
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||
(per share amounts) | 2018 | 2017 | 2018 | 2017 | |||
Net income per diluted share | $0.29 | $0.27 | $0.42 | $0.98 | |||
FFO | $0.60 | $0.75 | $1.73 | $2.04 | |||
FFO, as adjusted (AFFO) per diluted share | $0.38 | $0.44 | $1.51 | $1.63 | |||
A description of each non-GAAP financial measure and the related reconciliation to the comparable GAAP financial measure are provided in this press release.
Business Highlights
Improving Operating Metrics
Occupancy for the 41 Tier One assets increased 90 basis points to 94.2% year-over-year (YOY), while the 51 Open Air properties decreased 20 basis points to 95.6% YOY. Combined occupancy exhibited a 50 basis point increase to 94.9%. Tier One sales PSF increased
Robust Leasing Volume and Tenant Diversification Mandate
Leasing continued to be robust with volume totaling 4.2M square feet during 2018. Of the 4.2M square feet, 60% was attributable to lifestyle tenancy which includes food, beverage, entertainment, home furnishings, fitness and professional services in accordance with the Company's tenant diversification mandate.
Net Operating Income Stability and Increased 2020 Visibility
During 2018, Tier One and Open Air comparable net operating income (NOI) decreased YOY 1.8% and 1.7%, respectively. Fourth quarter 2018 comparable NOI for Tier One and Open Air decreased 2.8% and 8.7%, respectively. Note, the Open Air decline is primarily attributable to a timing of reimbursable capital expenditures as well as the
The aforementioned impact has been incorporated into 2019 guidance as negative 2.0% is the expected midpoint for comparable NOI growth for Tier One and Open Air assets. However, when excluding the
As a result of making meaningful progress in addressing lost anchor rents and related cotenancy as well as incremental NOI relating to redevelopment coming online, the Company is able to forecast 2020 comparable NOI growth for Tier One and Open Air assets of between 2.0% and 3.0%.
Reclassification of Tier Two Assets
As over 90% of the Company's total NOI is attributable to Tier One and Open Air properties, as well as the vast majority of capital and corporate resources, going forward, Tier Two assets will be excluded from core operating metrics as of first quarter 2019.
Redevelopment and Department Store Progress
As exhibited within the most recent fourth quarter 2018 supplemental, the Company provides real time updates relating to the 28 department stores within our Tier One and Open Air properties that are currently vacant or those deemed likely to close (
- Dillard's has agreed to open and/or expand within two Tier One assets.
Mesa Mall will receive a newly constructed Dillard's which will be their first location withinGrand Junction, Colorado and will replaceSears which formerly occupied the site. In addition, Dillard's will add a second location replacing former Herberger's (Bon-Ton Stores ) withinSouthgate Mall , illustrating robust demand within theMissoula, Montana catchment; - In March, the Company is scheduled to commence construction at
Grand Central Mall , a Tier One asset located inParkersburg, West Virginia to redevelop the formerSears store by bringing first to market national big box retailers to the property. In addition to previously announced leasing which includesBig Lots ,Ulta Beauty andFive Below , Grand Central Mall replaced in 2018 a former Elder Beerman (Bon-Ton Stores ) with H&M, their first location withinWest Virginia ; - Dunham's Sports has agreed to join the lineup at
Morgantown Mall replacing space previously occupied by Elder Beerman (Bon-Ton Stores).Morgantown Mall , a Tier One asset, is situated inMorgantown, West Virginia ; - The Company has signed a letter of intent with
Columbus based mixed use developer Crawford Hoying for a joint venture of the redevelopment of theSears atPolaris Fashion Place , a Tier One asset situated withinColumbus, Ohio ; - The Company is in the process of obtaining necessary mixed use entitlements for
WestShore Plaza , a Tier One asset situated within a highly dense commercial business district ofTampa, Florida . Discussions are underway regarding a joint venture of this Tier One mixed use redevelopment which will replace aSears department store; and - As previously announced,
The Mall at Fairfield Commons , a Tier One asset located inDayton, Ohio , will replace a formerSears location withThe RoomPlace and Round1 Entertainment .
In addition to the above, FieldhouseUSA will join The Outlet Collection® |
Financial Transactions
The Company has a fully negotiated term sheet for the placement of a commercial mortgage loan on
"Stomp. Stomp. Clap...Stomp. Stomp. Clap. What happens when an astrophysicist, dental school dropout, electronics wizard and a Zoroastrian graphic designer with supernumerary incisors (who also possesses a four octave vocal range) join forces? Queen is what happened and they serve as the exemplar of successful interdisciplinary collaboration, talent diversification and unfettered originality.
"Take for instance a recently hired General Manager whose resume includes a previous stint in a professional roller derby league. Or how about one of our legal department professionals who is also the publisher of a magazine championing women empowerment. Did I mention an accounts receivable specialist who is bassist for the jazz ensemble Fo/Mo/Deep? These as well as my other colleagues bring a fresh perspective to our sector and their collective and complementary skill sets are quite formidable when channeled toward improving our assets. This concept of cooperation is further emphasized by the fact nearly 50% of our General Managers have been replaced by who I refer to as Goodwill Ambassadors e.g. proactive individuals who better understand the idiosyncrasies of their demographic constituencies; know how to access corporate resources; and are enfranchised to make real time decisions impacting their assets.
"‘Don't Stop Me Now' best characterizes the fourth quarter as well as 2018 in review. The physical retailing sector continues to find itself ‘Under Pressure' (albeit stabilizing). Sure there'll be ‘Another Hammer (or two) to Fall' as an overleveraged private equity sponsored junior fashion retailer or two cries ‘Save Me' by asking for rental concession when, in fact, they should ‘bite the dust'. Our guests, tenants and sponsors deserve ‘Good Company' and we will continue to perform ‘Some Kind of Magic' by focusing upon those tenants which provide dynamism to our assets.
"We consummated 1.0M SF of leasing during the previous quarter with a yearend tally of 4.2M square feet. As importantly, ~60% is attributable to lifestyle tenancy including food, beverage, entertainment, home furnishings and fitness because sometimes ‘all [our guests] want to do is ride [their stationery] bicycle', ‘Play the Game' as well buy ‘Some Things That Glitter'. We continue to incent our leasing professionals in order to diversify tenancy; 195 leases qualified during 2018.
"Announcing ‘We are the Champions' may be a tad bit premature, when it comes to releasing former department store boxes so I'll keep my Moet et Chandon, cavier and cigarettes in my pretty cabinet. Notwithstanding, we have surpassed our internal projections from a timing standpoint while allocating less dollars than originally anticipated. As of this month, seven of the 28 vacated (or soon to be vacated) department stores, serving as a testament to the feasibility of our assets. This flies in the face of punditry which regarded the demise of these fair to middling department stores as detrimental to the asset in question. In other words, ‘We Can't Live Without You' just isn't true.
"As I have mentioned repeatedly, the focus is upon cash flow stability as we diversify tenancy, activate common area, aesthetically improve and, when warranted, redevelop (primarily department store boxes). This stability is best illustrated by minimal comparable NOI variance of just 90 basis points during a five year period for Tier One and Open Air assets. Rest assured, nobody ‘wants it all' more than myself when it comes to same store NOI growth. The key is to focus on the foundational underpinnings which will result in ‘Staying Power'.
"We continue to address cotenancy, the Beelzebub of landlords, by leasing vacated department stores. As a result, we have estimated a 2020 comparable NOI growth outlook of between 2.0% and 3.0%.
"As it relates to those assets classified as Tier Two and Noncore that comprise less than 10% of total NOI, they will now be excluded from our core operating metrics. The reason behind this action is straightforward: The inordinate amount of time spent discussing these assets is a distraction from our stated objectives. Remember, ~40% of the NOI associated with these assets is encumbered. Hence, we have a ‘put option' which we have not hesitated to exercise upon maturity and if viable execute a discounted payoff. Enough said.
"In closing, my conviction regarding
"If you haven't noticed, I really like like Queen. They refused to settle for the mundane and every song was a beta test (a phrase I use incessantly around the office). Please grant me the poetic license to expand upon one lyric in particular. All of our guests, tenants, sponsors, colleagues, investors and most research analysts regardless of size, shape, gender, age, race, color or creed ‘make the rocking world go round'. One final note, take a look at our website, www.washingtonprime.com, if you'd like to see who auditioned for the Freddy Mercury role albeit in 2005.
Fourth Quarter Financial Results
Net income attributable to common shareholders for the fourth quarter of 2018 was
NAREIT Funds from Operations (FFO) for the fourth quarter of 2018 were
Fiscal Year 2018 Financial Results
Net income attributable to common shareholders for fiscal year 2018 was
The year-over-year decrease was primarily due to:
$100.2 million of lower gains on disposition of assets recognized during 2018 when compared to 2017;$39.2 million of lower gains on debt extinguishment in 2018 when compared to 2017; and- Lower revenues in 2018, compared to in 2017, primarily due to retailer bankruptcies.
- This was partially offset by a
$66.9 million non-cash impairment charges in 2017, when no such charges occurred in 2018.
FFO for fiscal year 2018 were
Financial Activity
Dispositions
In 2018, the Company completed the sale of various tranches of restaurant outparcels to
Mortgage Loans
On
2019 Guidance
The Company is introducing guidance for fiscal 2019 net loss attributable to common shareholders in the range of
Key guidance assumptions for 2019 include the following:
- Total comparable NOI for the Company's Tier One and Open Air portfolios (core properties) of
$454 million - $462 million which represents growth of (3.0%) to (1.0%) over 2018. When neutralizing for the impact of lost rent and related cotenancy from anchor bankruptcies, the NOI growth for 2019 would be 1.5% at the midpoint of the guidance range; - Total comparable NOI of
$30.0 - $32.0 million for the Company's Tier Two properties. The$6 million - $8 million of decrease from the prior year includes approximately$5 million of impact from lost rents and related cotenancy from department stores; - Total comparable NOI of approximately
$9 million - $11 million from the Company's Noncore properties; - Tier classifications for enclosed properties, as well as the list of Noncore properties, can be found in the fourth quarter 2018 supplemental information report available on the Company's website;
- The guidance assumes interest expense savings of approximately
$3.5 million from the planned lender transitions ofTowne West Square inJuly 2019 andWest Ridge Mall inOctober 2019 ; - Corporate overhead and general and administrative expense (excluded from property net operating income) of
$70 million - $74 million , including$16 million - $17 million of internal leasing costs that were deferred under previous accounting standards; - Redevelopment spending, including the pro rata share of joint venture properties, of
$100 million - $125 million ; - Recurring Cap-Ex spending and deferred external leasing costs, including the pro rata share of joint venture properties, of
$55 million - $65 million ; - Non cash adjustments for purchase accounting and straight line rents, including the pro rata share of joint venture properties, of
$13 - $15 million ; - Gain from sale of outparcels of
$15 million - $17 million related primarily to the sale of restaurant outparcels to an affiliate of Four Corners; and - Estimated 2019 dividend per common share of
$1.00 per annum, which is subject to approval quarterly by the Company's Board of Directors.
The following table provides the reconciliation for the expected range of estimated net loss attributable to common shareholders per diluted share to estimated FFO per diluted share, as adjusted, for the year ending
Low End | High End | |||||
Estimated net loss attributable to common shareholders per diluted share | $(0.09 | ) | $(0.02 | ) | ||
Depreciation and amortization including share of unconsolidated entities | 1.25 | 1.26 | ||||
Estimated FFO per diluted share | $1.16 | $1.24 | ||||
The following table provides a reconciliation of the expected range of net loss from GAAP financial statements to the Company's NOI projections for the year:
(Dollars in thousands) | ||||||
Low End | High End | |||||
Net loss | $(21,000 | ) | $(4,000 | ) | ||
Depreciation and amortization | 246,000 | 245,000 | ||||
General and administrative and corporate overhead | 74,000 | 70,000 | ||||
Interest Expense | 152,000 | 150,000 | ||||
Gains from sales of outparcels | (15,000 | ) | (17,000 | ) | ||
Pro-rata share of unconsolidated joint venture in comp NOI | 69,000 | 71,000 | ||||
Non comparable properties and other (1) | (12,000 | ) | (10,000 | ) | ||
Tier Two and Noncore properties | (39,000 | ) | (43,000 | ) | ||
Projected comparable NOI – Tier One and Open Air | $454,000 | $462,000 | ||||
Projected comparable NOI year-over-year growth (2) | (3.0 | %) | (1.0 | %) | ||
(1) Includes fee income, lease termination fees, income from unconsolidated entities, straight line rents, fair market adjustments and non-comparable properties.
(2) Reported 2018 comparable NOI for Tier One and Open Air properties adjusted for actual and projected property dispositions was
For the first quarter of 2019, the Company estimates net (loss) attributable to common shareholders to be in the range of
A reconciliation of the range of estimated net (loss) per diluted share to estimated FFO per diluted share for the first quarter of 2019 follows:
Low End | High End | |||||
Estimated net (loss) attributable to common shareholders per diluted share | $(0.02 | ) | $0.00 | |||
Depreciation and amortization including share of unconsolidated entities | 0.30 | 0.30 | ||||
Estimated FFO per diluted share | $0.28 | $0.30 | ||||
Earnings Call and Webcast on
The live webcast will be available in listen-only mode from the investor relations section of the Company's website at www.washingtonprime.com. Listeners can also access the call by dialing 844.646.4463 (or +1.615.247.0256 for international callers), and the conference ID for the call is 1855527.
An audio 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). The replay passcode is 1855527, beginning on
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 release as well as the supplemental information have been furnished to the
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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 Company uses FFO in addition to net income to report operating results. We determine FFO based on the definition set forth by the
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,
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
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||
Washington Prime Group Inc. | |||||||||||||||
(Unaudited, dollars in thousands, except per share data) | |||||||||||||||
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue: | |||||||||||||||
Minimum rent | $ | 123,221 | $ | 126,895 | $ | 492,169 | $ | 516,386 | |||||||
Overage rent | 4,062 | 3,297 | 9,313 | 9,115 | |||||||||||
Tenant reimbursements | 45,976 | 49,140 | 191,319 | 208,290 | |||||||||||
Other income | 11,062 | 7,905 | 30,504 | 24,331 | |||||||||||
Total revenues | 184,321 | 187,237 | 723,305 | 758,122 | |||||||||||
Expenses: | |||||||||||||||
Property operating | (38,237 | ) | (37,023 | ) | (148,433 | ) | (146,529 | ) | |||||||
Real estate taxes | (21,385 | ) | (19,956 | ) | (86,665 | ) | (89,617 | ) | |||||||
Advertising and promotion | (3,184 | ) | (2,568 | ) | (9,070 | ) | (9,107 | ) | |||||||
Total recoverable expenses | (62,806 | ) | (59,547 | ) | (244,168 | ) | (245,253 | ) | |||||||
Depreciation and amortization | (61,696 | ) | (59,226 | ) | (257,796 | ) | (258,740 | ) | |||||||
Provision for credit losses | (1,372 | ) | (788 | ) | (5,826 | ) | (5,068 | ) | |||||||
General and administrative | (9,121 | ) | (8,865 | ) | (39,090 | ) | (34,892 | ) | |||||||
Ground rent | (197 | ) | (174 | ) | (789 | ) | (2,438 | ) | |||||||
Impairment loss | - | (37,524 | ) | - | (66,925 | ) | |||||||||
Total operating expenses | (135,192 | ) | (166,124 | ) | (547,669 | ) | (613,316 | ) | |||||||
Interest expense, net | (36,360 | ) | (28,428 | ) | (141,987 | ) | (126,541 | ) | |||||||
Gain (loss) on disposition of interests in properties, net | 4,494 | (665 | ) | 24,602 | 124,771 | ||||||||||
Gain on extinguishment of debt, net | 51,395 | 69,358 | 51,395 | 90,579 | |||||||||||
Income and other taxes | (673 | ) | (421 | ) | (1,532 | ) | (3,417 | ) | |||||||
Income from unconsolidated entities, net | 851 | 2,176 | 541 | 1,395 | |||||||||||
Net income | 68,836 | 63,133 | 108,655 | 231,593 | |||||||||||
Net income attributable to noncontrolling interests | 10,321 | 9,460 | 15,051 | 34,530 | |||||||||||
Net income attributable to the Company | 58,515 | 53,673 | 93,604 | 197,063 | |||||||||||
Less: Preferred share dividends | (3,508 | ) | (3,508 | ) | (14,032 | ) | (14,032 | ) | |||||||
Net income attributable to common shareholders | $ | 55,007 | $ | 50,165 | $ | 79,572 | $ | 183,031 | |||||||
Earnings per common share, basic and diluted | $ | 0.29 | $ | 0.27 | $ | 0.42 | $ | 0.98 | |||||||
CONSOLIDATED BALANCE SHEETS | |||||||
Washington Prime Group Inc. | |||||||
(Unaudited, dollars in thousands) | |||||||
December 31, | December 31, | ||||||
2018 | 2017 | ||||||
Assets: | |||||||
Investment properties at cost | $ | 5,879,637 | $ | 5,761,714 | |||
Construction in progress | 35,068 | 46,046 | |||||
5,914,705 | 5,807,760 | ||||||
Less: accumulated depreciation | 2,283,764 | 2,139,620 | |||||
3,630,941 | 3,668,140 | ||||||
Cash and cash equivalents | 42,542 | 52,019 | |||||
Tenant receivables and accrued revenue, net | 85,463 | 90,314 | |||||
Investment in and advances to unconsolidated entities, at equity | 433,207 | 451,839 | |||||
Deferred costs and other assets | 169,135 | 189,095 | |||||
Total assets | $ | 4,361,288 | $ | 4,451,407 | |||
Liabilities: | |||||||
Mortgage notes payable | $ | 983,269 | $ | 1,157,082 | |||
Notes payable | 982,697 | 979,372 | |||||
Unsecured term loans | 685,509 | 606,695 | |||||
Revolving credit facility | 286,002 | 154,460 | |||||
Accounts payable, accrued expenses, intangibles, and deferred revenues | 253,862 | 264,998 | |||||
Distributions payable | 2,992 | 2,992 | |||||
Cash distributions and losses in unconsolidated entities, at equity | 15,421 | 15,421 | |||||
Total liabilities | 3,209,752 | 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 | 1,247,639 | 1,240,483 | |||||
Accumulated deficit | (456,924 | ) | (350,594 | ) | |||
Accumulated other comprehensive income | 6,400 | 6,920 | |||||
Total stockholders' equity | 999,710 | 1,099,404 | |||||
Noncontrolling interests | 148,561 | 167,718 | |||||
Total equity | 1,148,271 | 1,267,122 | |||||
Total liabilities, redeemable noncontrolling interests and equity | $ | 4,361,288 | $ | 4,451,407 | |||
RECONCILIATION 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 December 31, | Twelve Months Ended December 31, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Funds from Operations ("FFO"): | |||||||||||||||
Net income | $ | 68,836 | $ | 63,133 | $ | 108,655 | $ | 231,593 | |||||||
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 | 70,821 | 68,310 | 295,900 | 292,748 | |||||||||||
Noncontrolling interests portion of depreciation and amortization | (35 | ) | (27 | ) | (35 | ) | (27 | ) | |||||||
Net income attributable to noncontrolling interest holders in properties | (76 | ) | (68 | ) | (76 | ) | (68 | ) | |||||||
(Gain) loss on disposition of interests in properties, net including impairment loss | (1,598 | ) | 38,189 | (3,353 | ) | (57,846 | ) | ||||||||
FFO | $ | 134,380 | $ | 165,969 | $ | 386,819 | $ | 452,128 | |||||||
Adjusted Funds from Operations: | |||||||||||||||
FFO | $ | 134,380 | $ | 165,969 | $ | 386,819 | $ | 452,128 | |||||||
Gain on extinguishment of debt, net of default interest | (50,422 | ) | (69,358 | ) | (50,422 | ) | (90,579 | ) | |||||||
Adjusted FFO | $ | 83,958 | $ | 96,611 | $ | 336,397 | $ | 361,549 | |||||||
Weighted average common shares outstanding - diluted | 223,145 | 222,036 | 223,004 | 221,976 | |||||||||||
FFO per diluted share | $ | 0.60 | $ | 0.75 | $ | 1.73 | $ | 2.04 | |||||||
Total adjustments | $ | (0.22 | ) | $ | (0.31 | ) | $ | (0.22 | ) | $ | (0.41 | ) | |||
Adjusted FFO per diluted share | $ | 0.38 | $ | 0.44 | $ | 1.51 | $ | 1.63 | |||||||
Non-cash items included in FFO: | |||||||||||||||
Non-cash stock compensation expense | $ | 2,012 | $ | 1,587 | $ | 8,322 | $ | 6,402 | |||||||
Straight-line adjustment as an increase to minimum rents (1) | $ | 791 | $ | 1,873 | $ | 4,945 | $ | 4,134 | |||||||
Straight-line and fair market value adjustment recorded as an increase to ground lease expense (1) | $ | 556 | $ | 387 | $ | 2,232 | $ | 1,702 | |||||||
Fair value of debt amortized as a decrease to interest expense (1) | $ | 952 | $ | 979 | $ | 3,971 | $ | 4,855 | |||||||
Loan fee amortization and bond discount (1) | $ | 1,798 | $ | 1,849 | $ | 8,436 | $ | 7,043 | |||||||
Mark-to-market/inducement adjustment as a net increase to base rents (1) | $ | 1,647 | $ | 1,904 | $ | 12,173 | $ | 11,569 | |||||||
Non-real estate depreciation (1) | $ | 2,402 | $ | 2,523 | $ | 9,814 | $ | 9,681 | |||||||
Hedge ineffectiveness as a decrease to interest expense (2) | $ | - | $ | 219 | $ | - | $ | 295 | |||||||
(1) Includes the pro-rata share of the joint venture properties. | |||||||||||||||
(2) On January 1, 2018, the Company adopted accounting policy ASU 2017-12 that eliminates the requirement to separately measure and record hedge ineffectiveness. | |||||||||||||||
RECONCILIATION OF 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 December 31, | Twelve Months Ended December 31, | ||||||||||||||||||||||
2018 | 2017 | Variance $ | 2018 | 2017 | Variance $ | ||||||||||||||||||
Reconciliation of Comp NOI to Net Income: | |||||||||||||||||||||||
Net Income | $ | 68,836 | $ | 63,133 | $ | 5,703 | $ | 108,655 | $ | 231,593 | $ | (122,938 | ) | ||||||||||
Income from unconsolidated entities | (851 | ) | (2,176 | ) | 1,325 | (541 | ) | (1,395 | ) | 854 | |||||||||||||
Income and other taxes | 673 | 421 | 252 | 1,532 | 3,417 | (1,885 | ) | ||||||||||||||||
Gain on extinguishment of debt, net | (51,395 | ) | (69,358 | ) | 17,963 | (51,395 | ) | (90,579 | ) | 39,184 | |||||||||||||
(Gain) loss on disposition of interests in properties, net | (4,494 | ) | 665 | (5,159 | ) | (24,602 | ) | (124,771 | ) | 100,169 | |||||||||||||
Interest expense, net | 36,360 | 28,428 | 7,932 | 141,987 | 126,541 | 15,446 | |||||||||||||||||
Operating Income | 49,129 | 21,113 | 28,016 | 175,636 | 144,806 | 30,830 | |||||||||||||||||
Depreciation and amortization | 61,696 | 59,226 | 2,470 | 257,796 | 258,740 | (944 | ) | ||||||||||||||||
General and administrative | 9,121 | 8,865 | 256 | 39,090 | 34,892 | 4,198 | |||||||||||||||||
Impairment loss | - | 37,524 | (37,524 | ) | - | 66,925 | (66,925 | ) | |||||||||||||||
Fee income | (2,483 | ) | (2,136 | ) | (347 | ) | (9,527 | ) | (7,906 | ) | (1,621 | ) | |||||||||||
Management fee allocation | 152 | 45 | 107 | 157 | 612 | (455 | ) | ||||||||||||||||
Pro-rata share of unconsolidated joint ventures in comp NOI | 18,893 | 18,926 | (33 | ) | 73,109 | 58,197 | 14,912 | ||||||||||||||||
Property allocated corporate expense | 3,833 | 3,484 | 349 | 14,591 | 13,683 | 908 | |||||||||||||||||
Non-comparable properties and other (1) | (3,536 | ) | (573 | ) | (2,963 | ) | (7,644 | ) | (1,464 | ) | (6,180 | ) | |||||||||||
NOI from sold properties | (274 | ) | (2,246 | ) | 1,972 | (5,387 | ) | (16,143 | ) | 10,756 | |||||||||||||
Termination income | (1,236 | ) | (315 | ) | (921 | ) | (3,457 | ) | (3,492 | ) | 35 | ||||||||||||
Straight-line rents | (475 | ) | (1,123 | ) | 648 | (3,629 | ) | (2,122 | ) | (1,507 | ) | ||||||||||||
Ground lease adjustments for straight-line and fair market value | 12 | 15 | (3 | ) | 50 | 65 | (15 | ) | |||||||||||||||
Fair market value and inducement adjustments to base rents | (991 | ) | (972 | ) | (19 | ) | (8,952 | ) | (7,290 | ) | (1,662 | ) | |||||||||||
Less: noncore properties (2) | (1,797 | ) | (2,344 | ) | 547 | (6,613 | ) | (8,300 | ) | 1,687 | |||||||||||||
Comparable NOI - core properties | $ | 132,044 | $ | 139,489 | $ | (7,445 | ) | $ | 515,220 | $ | 531,203 | $ | (15,983 | ) | |||||||||
Comparable NOI percentage change - core properties | -5.3% | -3.0% | |||||||||||||||||||||
(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 noncore properties held in each period presented. | |||||||||||||||||||||||