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SEC Filings

8-K
WASHINGTON PRIME GROUP INC. filed this Form 8-K on 07/26/2018
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Washington Prime Group has 28 department store boxes in our Tier One and Open Air portfolio which we believe will need to be repositioned. This includes Sears, other than those owned by Seritage, and Bon-Ton department stores. Of the 28 locations, we own all but three spaces, and we are currently in various stages of planning and negotiations to replace or redevelop 23 of these locations. To put this into perspective, revenue derived from the aforementioned 28 boxes equates to only 1.7% of total annualized revenue for the combined Tier One and Open Air portfolio.

“In closing, status quo is not acceptable. The late musician Frank Zappa stated ‘without deviation from the norm, progress is not possible’. I wholeheartedly embrace this notion of ‘thinking outside the box’ and the newfound corporate culture of Washington Prime Group reflects this ideal as we continue to grind it out.”

Second Quarter Results

Net income attributable to common shareholders for the second quarter of 2018 was $10.1 million, or $0.05 per diluted share, compared to $135.5 million, or $0.72 per diluted share, a year ago. The year-over-year difference in net income primarily relates to 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”) for a gain of $126.1 million, as well as a $21.2 million gain recognized in conjunction with the discounted pay-off of a mortgage loan secured by Mesa Mall, a Tier One asset located in Grand Junction, Colorado, both of which were completed during the second quarter of 2017. In connection with 2018 disposition activities, the Company recorded a net gain of $8.1 million for the three months ended June 30, 2018 related to the sale of restaurant outparcels, as further discussed below.

Funds from Operations (FFO) for the second quarter of 2018 were $83.8 million, or $0.37 per diluted share. This compares to $110.6 million, or $0.50 per diluted share, during the same quarter a year ago. Results for the second quarter of 2017 include a gain on the extinguishment of debt of $21.2 million. When excluding this item, adjusted FFO (“AFFO”) for the second quarter of 2017 was $89.4 million, or $0.40 per diluted share. There was no such gain during the second quarter of 2018.

Comparable NOI for the core portfolio decreased 0.7% during the second quarter of 2018, compared to the same period a year ago. Comparable NOI growth for the Company’s 41 Tier One enclosed retail properties increased 0.6% during the second quarter of 2018, compared to a year ago, demonstrating continued stable performance. Comparable NOI growth for the Company’s 51 Open Air properties increased 2.6% during the second quarter of 2018, compared to a year ago.

Operational Highlights

Ending occupancy for the core portfolio was 92.7% as of June 30, 2018, compared to 93.0% a year ago. Base rent per square foot for the core portfolio was $21.68 as of June 30, 2018, compared to $21.73 per square foot a year ago. Inline store sales at core enclosed retail properties were $377 per square foot for the twelve months ended June 30 2018, compared to $375 per square foot a year ago. Operating metrics by asset group can be found in the second quarter 2018 Supplemental Information report available on the Company’s website.

Financial Activity

Acquisitions

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 retail 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 restaurant outparcel sale discussed below, 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 Section 1031 exchange utilizing the proceeds from the Four Corners



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