Washington Prime Forms New JV with O’Connor Capital for 7 Open-Air Properties

Retail REIT Also Planning to Divest Remaining Noncore Properties
November 8, 2016

Washington Prime Group Inc. (NYSE: WPG) has agreed to form a second joint venture with an affiliate of O’Connor Capital Partners, this one involves the ownership of seven open-air retail centers valued at $600 million. The retail REIT said the pricing implies a low 5% capitalization rate on in-place NOI.

O’Connor will have a 49% interest in the joint venture and Washington Prime will retain a 51% non-controlling interest but will continue to lease and manage the properties.

The seven properties being sold to the joint venture are:

  • Arbor Hills in Ann Arbor, Michigan;
  • Classen Curve/Nichols Hills Plaza/The Triangle at Classen Curve in Oklahoma City, Oklahoma;
  • Gateway Center in Austin, Texas;
  • Malibu Lumber Yard in Malibu, California;
  • Palms Crossing in McAllen, Texas;
  • The Arboretum in Austin; and
  • The Shops at Arbor Walk in Austin.

    Washington Prime said it expects net proceeds of $350 million to be used to reduce the company’s outstanding debt. Closing is targeted for the first quarter of 2017.

    Separately, Columbus, Ohio-based Washington Prime reported it entered into purchase agreements to sell its four remaining non-core properties: Gulf View Square in Port Richey, Florida; River Oaks Center in Chicago; Virginia Center Commons in Glen Allen, Virginia; and Richmond Town Square in Cleveland, Ohio.

    It expects approximately $60 million in proceeds from those pending sales. The company recorded an impairment charge of $20.7 million during the three months ended Sept. 30, primarily related to these noncore properties.

    “We’ve been busy grinding it out operationally and financially,” said Lou Conforti, the recently appointed CEO of Washington Prime. “Culling noncore assets was a primary objective and we are now under contract to sell the remaining four. By year end, we will have disposed of all seven noncore assets previously identified.”

    Last year, Washington Prime, formerly known as WP Glimcher, completed its first joint venture with O’Connor Capital Partners involving the ownership and operation of five malls and certain related out-parcels valued at approximately $1.625 billion.

    Similar to the new JV, O’Connor Capital Partners took a 49% ownership interest in the first joint venture and Washington Prime retained a 51% ownership interest. The five malls included in the joint venture are: The Mall at Johnson City in Johnson City, Tennessee; Pearlridge Center in Aiea, Hawaii; Polaris Fashion Place in Columbus, Ohio; Scottsdale Quarter in Scottsdale, Arizona; and Town Center Plaza (which includes Town Center Plaza and the adjacent Town Center Crossing) in Leawood, Kansas.