Washington Prime Group Inc. (NYSE: WPG) today reported financial
and operating results for the second quarter ended June 30, 2021.
During the quarter, the Company commenced a voluntary Chapter 11
financial restructuring with a restructuring support agreement (the
“RSA”) supported by over 70% of its holders of secured and
unsecured corporate debt. Due to the pending Chapter 11 cases, the
Company is not providing 2021 guidance and will not host an
earnings conference call this quarter.
Three Months Ended June 30,
Six Months Ended June 30,
2021
2020
2021
2020
Net loss per diluted share
$(4.26)
$(3.88)
$(6.77)
$(3.73)
FFO per diluted share
$(1.74)
$(0.38)
$(1.89)
$1.61
FFO per diluted share, as adjusted
$0.75
$0.07
$1.65
$2.06
A description of each non-GAAP financial measure and the related
reconciliations to the comparable GAAP financial measure are
provided in this press release.
Second Quarter Financial Results
Net loss attributable to common shareholders for the second
quarter of 2021 was $105.5 million, or $(4.26) per diluted share,
compared to net loss of $82.1 million, or $(3.88) per diluted
share, a year ago. The year-over-year (YOY) difference relates
primarily to the impacts of the Company’s Chapter 11 financial
restructuring process, which included prepetition charges of $38.1
million and $24.4 million in reorganization items during the second
quarter of 2021. There were no such charges during the same quarter
a year ago. Interest expense increased $15.1 million during the
second quarter of 2021 compared to a year ago, primarily resulting
from higher interest expense on the Company’s corporate debt as a
result of default.
Partially offsetting these factors was growth of $30.1 million
in comparable NOI from the Company’s Tier One and Open Air
properties as well as lower impairment charges of $35.0
million.
Funds from Operations (FFO) for the second quarter of 2021 was
$(43.7) million, or $(1.74) per diluted share, which compares to
$(9.4) million, or $(0.38) per diluted share, during the same
quarter a year ago. The YOY decrease in FFO is primarily attributed
to the aforementioned prepetition charges and reorganization items
related to the Company’s Chapter 11 financial restructuring
process, which did not occur during the second quarter of 2020,
partially offset by lower impairment charges on non-depreciable
real estate and higher net operating income, compared to the same
quarter a year ago. When adjusting for the impact of the
prepetition charges and reorganization items in the second quarter
of 2021 and the $11.2 million impairment on a note receivable in
the second quarter of 2020, FFO, as adjusted, for the second
quarter of 2021 was $18.8 million, or $0.75 per diluted share,
which compares to $1.8 million, or $0.07 per diluted share, during
the same quarter a year ago.
Operational Highlights
Ending occupancy for the core properties was 92.1% as of June
30, 2021, compared to 92.4% a year ago. Inline store sales at the
Company’s Tier One properties increased 2.1% to $433 per square
foot for the twelve months ended June 30, 2021, compared to $424
per square foot for the same period in 2019. Operating metrics by
asset group can be found in the second quarter 2021 Supplemental
Information report available on the Company’s website.
Financial Restructuring and Chapter 11 Process
On June 13, 2021, the Company and certain of its subsidiaries
(collectively, the “Company Parties”), filed voluntary petitions
for relief (the “Chapter 11 Cases”) under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for
the Southern District of Texas (the “Bankruptcy Court”). The
Company entered Chapter 11 after executing a RSA with creditors
that hold approximately 73% of the principal amount outstanding of
the Company’s secured corporate debt and 67% of the principal
amount outstanding of the Company’s unsecured notes. The Company
Parties commenced the Chapter 11 Cases to implement a comprehensive
financial restructuring of the Company’s corporate debt that will
allow the Company to substantially deleverage its balance
sheet.
In connection with the Chapter 11 Cases, the Company obtained
debtor-in-possession ("DIP") financing in the aggregate principal
amount of $100.0 million under a non-amortizing multiple draw
super-priority secured term loan facility (the "DIP Facility”). The
proceeds of the DIP Facility may be used for, among other things,
general corporate purposes, including working capital,
administrative costs, redevelopment costs, tenant obligations,
expenses and fees of the transactions contemplated by the Chapter
11 Cases, court approved adequate protection obligations and other
such purposes consistent with the documents governing the DIP
Facility. As of June 30, 2021, $50.0 million was outstanding under
the DIP Facility. In addition to the remaining $50 million of
capacity under the DIP Facility, the Company Parties had cash on
hand of $60.7 million at June 30, 2021.
Resources for the Company’s stakeholders, and other information
on the Company’s financial restructuring, can be accessed by
visiting the restructuring website at
http://cases.primeclerk.com/washingtonprime. Court filings and
other documents related to the Chapter 11 process are available at
http://cases.primeclerk.com/washingtonprime, by calling the
Company’s claims agent, Prime Clerk, at (877) 329-1913 (toll free)
or (347) 919-5772 (international) or by emailing
washingtonprimeinfo@primeclerk.com.
Kirkland & Ellis LLP is serving as legal counsel to the
Company, and Alvarez & Marsal North America, LLC is serving as
restructuring advisor. Guggenheim Securities, LLC is serving as the
Company’s investment banker.
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 its 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” related
to future events. Forward-looking statements contain words such as
“expect,” “anticipate,” “could,” “should,” “intend,” “plan,”
“believe,” “seek,” “see,” “may,” “will,” “would,” or “target.”
Forward-looking statements are based on management’s current
expectations, beliefs, assumptions and estimates and may include,
for example, statements regarding the Chapter 11 Cases, the
Company’s ability to complete the restructuring and its ability to
continue operating in the ordinary course while the Chapter 11
Cases are pending. These statements are subject to significant
risks, uncertainties, and assumptions that are difficult to predict
and could cause actual results to differ materially and adversely
from those expressed or implied in the forward-looking statements,
including risks and uncertainties regarding the Company’s ability
to successfully complete a restructuring under Chapter 11,
including: consummation of the restructuring; potential adverse
effects of the Chapter 11 Cases on the Company’s liquidity and
results of operations; the Company Parties’ ability to obtain
timely approval by the Bankruptcy Court with respect to the motions
filed in the Chapter 11 Cases; objections to the Company Parties’
recapitalization process or other pleadings filed that could
protract the Chapter 11 Cases; employee attrition and the Company’s
ability to retain senior management and other key personnel due to
the distractions and uncertainties imposed in part by the Chapter
11 Cases; the Company’s ability to comply with financing
arrangements, including the DIP Facility; the Company’s ability to
maintain relationships with its tenants, suppliers, customers,
employees, sponsors, and other third parties and regulatory
authorities as a result of the Chapter 11 Cases; the effects of the
Chapter 11 Cases on the Company and on the interests of various
constituents, including holders of the Company’s common stock and
other equity securities; the Bankruptcy Court’s rulings in the
Chapter 11 Cases, including the approvals of the terms and
conditions of the restructuring and the outcome of the Chapter 11
Cases generally; the length of time that the Company will operate
under Chapter 11 protection and the continued availability of
operating capital during the pendency of the Chapter 11 Cases;
risks associated with third party motions in the Chapter 11 Cases,
which may interfere with the Company’s ability to consummate the
restructuring or an alternative restructuring; increased
administrative and legal costs related to the Chapter 11 process;
potential delays in the Chapter 11 process due to the effects of
the COVID-19 virus; and other litigation and inherent risks
involved in a bankruptcy process. Forward-looking statements are
also subject to the risk factors and cautionary language described
from time to time in the reports the Company files with the U.S.
Securities and Exchange Commission, including those in the
Company’s most recent Annual Report on Form 10-K and any updates
thereto in the Company’s Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K. These risks and uncertainties may cause actual
future results to be materially different than those expressed in
such forward-looking statements. The Company has no obligation to
update or revise these forward-looking statements and does not
undertake to do so.
The Company cautions that trading in the Company’s securities
during the pendency of the Chapter 11 Cases is highly speculative
and poses substantial risks. Trading prices for the Company’s
securities may bear little or no relationship to the actual
recovery, if any, by holders of the Company’s securities in the
Chapter 11 Cases. Holders of shares of the Company’s common stock
and other equity securities could experience a complete loss on
their investment, depending on the outcome of the Chapter 11
Cases.
CONSOLIDATED STATEMENTS OF OPERATIONS Washington Prime
Group Inc. (Unaudited, dollars in thousands, except per
share data)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Revenue: Rental income
$
134,134
$
96,757
$
261,925
$
244,168
Other income
4,263
2,007
8,405
7,196
Total revenues
138,397
98,764
270,330
251,364
Expenses: Property operating
(36,567
)
(28,109
)
(76,017
)
(65,389
)
Real estate taxes
(18,885
)
(18,437
)
(37,702
)
(38,689
)
Advertising and promotion
(1,747
)
(1,300
)
(3,396
)
(3,104
)
Total recoverable expenses
(57,199
)
(47,846
)
(117,115
)
(107,182
)
Depreciation and amortization
(55,059
)
(55,380
)
(107,314
)
(115,084
)
General and administrative
(12,954
)
(11,350
)
(26,878
)
(23,614
)
Prepetition charges
(38,078
)
-
(52,529
)
-
Ground rent
(204
)
(209
)
(410
)
(331
)
Impairment loss
-
(23,800
)
-
(25,119
)
Total operating expenses
(163,494
)
(138,585
)
(304,246
)
(271,330
)
Interest expense, net
(52,503
)
(37,445
)
(104,054
)
(76,080
)
Impairment on note receivable
-
(11,237
)
-
(11,237
)
Reorganization items
(24,389
)
-
(24,389
)
-
Gain on disposition of interests in properties, net
-
437
2,462
27,192
Income and other taxes
(544
)
(593
)
(263
)
24
Loss from unconsolidated entities, net
(873
)
(4,754
)
(3,080
)
(5,786
)
Net loss
(103,406
)
(93,413
)
(163,240
)
(85,853
)
Net loss attributable to noncontrolling interests
(1,396
)
(14,871
)
(11,784
)
(14,194
)
Net loss attributable to the Company
(102,010
)
(78,542
)
(151,456
)
(71,659
)
Less: Preferred share dividends declared
-
(3,508
)
-
(7,016
)
Less: Preferred share dividends undeclared
(3,508
)
-
(7,016
)
-
Net loss attributable to common shareholders
$
(105,518
)
$
(82,050
)
$
(158,472
)
$
(78,675
)
Loss per common share, basic and diluted
$
(4.26
)
$
(3.88
)
$
(6.77
)
$
(3.73
)
CONSOLIDATED BALANCE SHEETS Washington Prime Group
Inc. (Unaudited, dollars in thousands)
June 30,
December 31,
2021
2020
Assets: Investment properties at cost
$
5,748,501
$
5,688,526
Construction in progress
171,607
185,275
5,920,108
5,873,801
Less: accumulated depreciation
2,623,765
2,539,745
3,296,343
3,334,056
Cash and cash equivalents
91,318
92,618
Tenant receivables and accrued revenue, net
97,430
132,610
Investment in and advances to unconsolidated entities, at equity
414,665
416,339
Deferred costs and other assets
131,737
129,724
Total assets
$
4,031,493
$
4,105,347
Liabilities: Mortgage notes payable
$
1,029,308
$
1,101,653
Notes payable
-
710,476
Term loans
-
681,563
Revolving credit facility
-
639,976
Debtor in possession financing
50,000
-
Other Indebtedness
91,406
87,807
Accounts payable, accrued expenses, intangibles, and deferred
revenues
145,875
276,086
Distributions payable
-
3,323
Total liabilities not subject to compromise
1,316,589
3,500,884
Total liabilities subject to compromise
2,259,109
-
Total liabilities
3,575,698
3,500,884
Redeemable noncontrolling interests
3,385
3,265
Equity: Stockholders' equity Series H Cumulative
Redeemable Preferred Stock
108,001
104,251
Series I Cumulative Redeemable Preferred Stock
101,591
98,325
Common stock
2
2
Capital in excess of par value
1,310,353
1,262,524
Accumulated deficit
(1,071,600
)
(913,128
)
Accumulated other comprehensive loss
-
(12,124
)
Total stockholders' equity
448,347
539,850
Noncontrolling interests
4,063
61,348
Total equity
452,410
601,198
Total liabilities, redeemable noncontrolling interests and
equity
$
4,031,493
$
4,105,347
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 Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Funds from Operations ("FFO"): Net loss
$
(103,406
)
$
(93,413
)
$
(163,240
)
$
(85,853
)
Less: Preferred dividends and distributions on preferred operating
partnership units
(3,568
)
(3,568
)
(7,136
)
(7,136
)
Real estate depreciation and amortization, including joint venture
impact
63,262
63,732
124,226
133,501
Impairment loss, including (gain) on disposition of interests in
properties, net
-
23,817
(1,304
)
(293
)
FFO
$
(43,712
)
$
(9,432
)
$
(47,454
)
$
40,219
Adjusted Funds from Operations: FFO
$
(43,712
)
$
(9,432
)
$
(47,454
)
$
40,219
Impairment on note receivable
-
11,237
-
11,237
Prepetition charges
38,078
-
52,529
-
Reorganization items
24,389
-
24,389
-
Reclassification of accumulated other comprehensive loss upon
discontinuation of hedge accounting
-
-
12,124
-
Adjusted FFO
$
18,755
$
1,805
$
41,588
$
51,456
Weighted average common shares outstanding - diluted
25,121
25,003
25,161
24,931
FFO per diluted share
$
(1.74
)
$
(0.38
)
$
(1.89
)
$
1.61
Total adjustments
$
2.49
$
0.45
$
3.54
$
0.45
Adjusted FFO per diluted share
$
0.75
$
0.07
$
1.65
$
2.06
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 June
30,
Six Months Ended June
30,
2021
2020
Variance $
2021
2020
Variance $
Reconciliation of Comp NOI to Net
Loss: Net loss
$
(103,406
)
$
(93,413
)
$
(9,993
)
$
(163,240
)
$
(85,853
)
$
(77,387
)
Loss from unconsolidated entities
873
4,754
(3,881
)
3,080
5,786
(2,706
)
Income and other taxes
544
593
(49
)
263
(24
)
287
Impairment on note receivable
-
11,237
(11,237
)
-
11,237
(11,237
)
Gain on disposition of interests in properties, net
-
(437
)
437
(2,462
)
(27,192
)
24,730
Reorganizational items
24,389
-
24,389
24,389
-
24,389
Interest expense, net
52,503
37,445
15,058
104,054
76,080
27,974
Operating Loss
(25,097
)
(39,821
)
14,724
(33,916
)
(19,966
)
(13,950
)
Depreciation and amortization
55,059
55,380
(321
)
107,314
115,084
(7,770
)
Impairment loss
-
23,800
(23,800
)
-
25,119
(25,119
)
General and administrative
12,954
11,350
1,604
26,878
23,614
3,264
Prepetition charges
38,078
-
38,078
52,529
-
52,529
Fee income
(2,562
)
(1,230
)
(1,332
)
(5,043
)
(3,417
)
(1,626
)
Management fee allocation
96
36
60
147
36
111
Pro-rata share of unconsolidated joint ventures in comp NOI
15,466
10,577
4,889
30,300
27,936
2,364
Property allocated corporate expense
5,343
4,727
616
10,766
10,106
660
Non-comparable properties and other (1)
367
(237
)
604
339
(1,474
)
1,813
NOI from sold properties
(36
)
(4
)
(32
)
-
(100
)
100
Termination income
(918
)
(27
)
(891
)
(1,472
)
(106
)
(1,366
)
Straight-line rents, net of change in assessment of collectibility
(216
)
(128
)
(88
)
(414
)
1,493
(1,907
)
Ground lease adjustments for straight-line and fair market value
13
5
8
20
10
10
Fair market value and inducement adjustments to base rents
(1,057
)
(1,647
)
590
(1,990
)
(2,632
)
642
Less: Tier 2 and noncore properties (2)
(10,359
)
(5,729
)
(4,630
)
(18,866
)
(22,415
)
3,549
Comparable NOI - Tier 1 and Open Air properties
$
87,131
$
57,052
$
30,079
$
166,592
$
153,288
$
13,304
Comparable NOI percentage change - Tier 1 and Open Air
properties
52.7
%
8.7
%
(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 and
from unmanaged properties. (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/20210809005773/en/
Investors: Investor.Relations@washingtonprime.com
Media: Media.Relations@washingtonprime.com
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