Washington Prime Group Secures Amendments to Its Credit Facilities

Pressed like its retail sector peers by COVID-19 fallout, the company arranged covenant relief through the third quarter of next year.
Lou Conforti, CEO & Director, Washington Prime Group. Image courtesy of Washington Prime Group

Town center retail specialist Washington Prime Group Inc. has entered into amendments to its credit facilities that will provide certain covenant relief through the third quarter of 2021.

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The amendments will be partially collateralized by properties making up about half of the company’s previously unencumbered net operating income. WPG will be able to release the security starting in the third quarter, if certain financial conditions are met. The all-in interest rate, depending on total leverage levels, will range from LIBOR plus 2.35 percent to 2.60 percent, with a LIBOR floor of 50 basis points.

In a prepared statement, WPG CEO and Director Lou Conforti acknowledged a technical breach by the company but asserted that the modification of the credit facilities neither reduced their size nor changed their maturity dates.

Polaris Fashion Place. Image courtesy of Washington Prime Group

Conforti added that the sole culprit behind the amendments was the fallout from the ongoing pandemic and noted that WPG’s interest coverage remains above mandated thresholds. The pandemic’s second-quarter impact, he said, “was unlike anything I’ve certainly ever experienced.”

In response, according to Conforti, the company worked with tenants to negotiate “reasonable deferral payment plans,” rather than becoming confrontational in the hope of boosting its second-quarter metrics.

He asserted that this strategy has been successful, yielding a 71.3 percent collection rate in July. Better, Conforti added, WPG leased 2.2 million square feet of space in the first half of 2020, 1.3 million of it since March, after the pandemic’s potential dimensions became evident.

Conforti also pointed to continued lease commitments from the company’s adaptive reuse tenants (such as department store replacements) and initial leasing progress with WPG’s last-mile fulfillment initiative, Fulventory, as reasons for optimism. He emphasized the need for mall operators to pursue “tenant diversification, common area activation, relevant adaptive reuse, and eCommerce capabilities.”

Solvent but struggling

WPG has not been the best-positioned of the major mall operators in this time of unprecedented pressure on the industry. In April, a DBRS Morningstar report categorized WPG along with CBL Properties and The Pyramid Cos. as the weaker sponsors, in its analysis of $4.6 billion in mall-backed CMBS loans maturing this year. And in June, an S&P Global Market Intelligence evaluation of discounts to the net asset value of public U.S. equity REITs put WPG near the bottom of the list, with a 121.1 percent discount.