Washington Prime Group (WPG), an owner of 102 malls and shopping centers, declared bankruptcy on Monday after a pandemic in which its restaurant and retail tenants couldn’t pay their rent.
Washington Prime has $2.8 billion in secured debt and $3.9 billion in total funded debt, according to court documents.
The Columbus, Ohio-based company has deals with most of its debt holders on a restructuring plan that will cut the amount of debt. Washington Prime will also market itself for sale as part of the bankruptcy process.
It is the latest indication of the challenge mall owners have faced over the past 15 months even as the economy recovers and people start eating out again. “Despite significant progress implementing its business plan, the COVID-19 pandemic proved insurmountable,” Mark Yale, Washington Prime’s chief financial officer, said in a court filing.
Washington Prime is the third major mall owner that has filed for bankruptcy since November, when CBL and Pennsylvania Real Estate Investment Trust declared Chapter 11.
Shopping centers have been evolving in recent years amid a dramatically shifting retail environment as consumers shifted more of their shopping from visiting retailers to buying clothes and electronics online. That shifting environment has hit restaurants that rely on that traffic for their business—leading many of them, such as Auntie Anne’s, to look elsewhere for expansion opportunities.
WPG has been changing its centers for mixed-use, replacing retailers with hotels and offices. It also sold 21 of its properties over the past five years.
The pandemic made matters worse.
WPG, a real estate investment trust spun off of Simon Property Group in 2014, said that the pandemic forced it to provide tenants with rent deferrals and abatement to keep them from filing for bankruptcy and abandoning their leases last year.
The efforts kept its malls occupied but hammered revenues. Rental income at WGB plunged by $127 million last year, according to the company’s annual report. In the first three months of the year, rental revenues remained $36 million lower than they were in the same period in 2019.
WPG has been negotiating with lenders on a restructuring for several months and a deal fell through in December. The landlord deferred an interest payment on its debt in February and continued negotiating.
The easing of the pandemic helped those talks along, however. The agreement between the company and its lenders allows WPG to restructure its debt while testing the market to find a buyer. The landlord has secured $100 million in financing to carry it through the bankruptcy process.
“The company’s financial restructuring will enable WPG to right size its balance sheet and position the company for success going forward,” Lou Conforti, WPG’s CEO, said in a statement. “During the financial restructuring, we will continue to work toward maximizing the value of our assets and our operating infrastructure.”
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