Washington Prime Group Secures $99M in Sale Leasebacks
Washington Prime was able to arbitrage the unproductive land component of the properties by securing 30-year capital while still maintaining control, according to CEO Lou Conforti.
COLUMBUS, OHIO—Local REIT Washington Prime Group has agreed to a sale leaseback at four properties for $98.9 million. An affiliate of Perennial Investments & Advisors, an institutional fee investor, will acquire a fee interest in the land at the properties, which are Edison Mall, located in Fort Myers, FL; Great Lakes Mall, located in Mentor, Ohio; Irving Mall, located in Irving, Texas; and Jefferson Valley Mall, located in Yorktown Heights, NY.
Washington Prime Group will enter into a new 99-year master ground lease for a leasehold interest in the land at the properties. The REIT will, however, continue to own a fee interest in the improvements through the term of the master ground lease and continue to manage, lease and develop the properties.
The master ground lease includes fixed annual payments to the ground lessor and contains annual rent escalators over the term. The agreement includes an option for the company to repurchase the fee interest in the land at a fixed price in year 30 of the master ground lease. If Washington Prime does not exercise this option, then the fee interest in both the land and improvements will transfer to the ground lessor at the end of the 99-year ground lease term.
The deal is a win for Washington Prime, according to CEO Lou Conforti, who notes that it was able to arbitrage the unproductive land component of the properties by securing 30-year capital while still maintaining operational and financial control.
So far Washington Prime has source $206 million in new capital, satisfying 40% of its previously announced department store repositioning plan, according to Conforti.
Washington Prime expects to complete the sale leaseback transaction in the second half of 2019, subject to due diligence and customary closing conditions.
In a separate transaction Washington Prime Group has also agreed to sell 20 additional outparcels to Four Corners Property Trust, for $37.8 million. These outparcels are located in Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kentucky, Maryland, New Jersey, Ohio, Pennsylvania, Texas and Virginia.