Washington Prime Turning Over Set of Shopping malls to Lenders; Will Buyback One

Experts Wonder if CMBS Market will Stay Viable Alternative for Lower-Productivity Malls

Washington Prime Group will repurchase Southern Hills Mall in Sioux City, IA, from the lender after turning it over.
Washington Prime Group will buy Southern Hills Mall in Sioux City, IA, from the lender after turning it over. WashingtonPrime Group Inc. (NYSE: WPG) continued its portfolio re-construction accepting turn two malls over to lenders however with strategies to buyback one of them. It also offered an additional shopping mall and paid back the debt on a fourth.

“As formerly stated, within our Tier 2 portfolio there are specific properties which, save for that they are overleveraged, display Tier 1 qualities,” stated Lou Conforti, CEO of Columbus, OH-based Washington Prime. “We have resolved all 2017 home loan debt maturities and now have almost $316 million of net operating income being created from our unencumbered homes, or roughly 57% of overall property NOI.”

Only 15% of the REIT’s net operating earnings is now represented by Tier 2 assets, which about half are unencumbered, Conforti included.

Washington Prime consented to transfer the Southern Hills Shopping mall in Sioux City, IA, to the loan provider. Presently overloaded with the $99.7 million home loan, it is currently expected that a wholly-owned affiliate of Washington Prime Group will repurchase the 571,465-square-foot property from the lender for $55 million or about $96/square foot. Washington Prime will acknowledge a $45 million in gain on financial obligation extinguishment.

The financial obligation yield on the present mortgage loan is around 7.5% with a yield on the anticipated purchase of roughly 13.5%. The deal is expected to close this month, subject to due diligence and traditional closing conditions, the company said.

In note talking about the deal, experts at Morgan Stanley Research stated, “We concur that it an engaging method to minimize debt loads, but we wonder if the CMBS market will stay a viable lending alternative for lower productivity shopping malls if it eventually leads to a ‘heads I win, tails you lose’ outcome in favor of the borrower.”

As previously revealed, Washington Prime also surrendered Valle Vista Shopping mall in Harlingen, TX, to its lending institution on today. The business will recognize a $27 million in gain on debt extinguishment.

Also today, the REIT consented to sell the 738,798-square-foot Colonial Park Shopping center in Harrisburg, PA, to an as-of-yet unidentified personal real estate investor for $15 million or about $20/square foot. The business expects to record a non-cash problems charge of $20.9 million on the sale.

Lastly this week, Washington Prime paid back a $99.6 million mortgage loan on WestShore Plaza in Tampa, adding the Tier 1 confined property to its unencumbered pool of properties.

After the completion of these tactical transactions, over 85% of the unencumbered NOI for the REIT is from outdoors and Tier 1 confined properties, inning accordance with the business.

“Our strategic efforts to lower utilize has actually placed WPG as one of the very best within the U.S. local shopping center REIT sector from a leverage viewpoint, terrific progress from where take advantage of levels were a year earlier,” Conforti stated.

Separately this week, Washington Prime revealed the resignation of Butch Knerr, its executive vice president and chief running officer.

“As it is our continued objective to simplify the company and improve corporate efficacy, we will not be changing the chief operating officer position,” Conforti stated.

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