Presentation Includes Forward Looking Statements
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Citi Global Property CEO Conference 1 March 2020 Safe Harbor Some of the information contained in this presentation includes forward looking statements. Such statements are subject to a number of risks and uncertainties which could cause actual results in the future to differ materially and adversely from those described in the forward looking statements. Investors should consult the Company’s filings with the Securities and Exchange Commission (SEC) for a description of the various risks and uncertainties which could cause such a difference before deciding whether to invest. This presentation also contains non GAAP financial measures and comparable net operating income (NOI). Reconciliation of this non GAAP financial measure to the most directly comparable GAAP measure can be found within the Company’s quarterly supplemental information package and in filings made with the SEC, which are available on the investor relations section of its website at www.washingtonprime.com. 2 Washington Prime Group: National Footprint with Local Flavor National Footprint with Local Flavor Satisfying Shoppers across Demographic Continuums With 104 town centers throughout the US, we are as American as apple pie. Catering from the aspirant to the affluent and Middle America to metropolis, As a matter of fact, we are also as American as deep dish pizza in Chicago, WPG assets capture the socioeconomic continuum via one of the nation’s Hawaiian poke salad, vegan spring rolls in Malibu, El Paso Tex-Mex, Maryland largest retail portfolios. crab cakes, kimchi in Orange County, Memphis barbeque and a Kansas City porterhouse. In fact, the demographic constituency of WPG is a representative microcosm of the American consumer. Our 56M SF is comprised of Tier One Enclosed and Open Air venues 104104104 Town Centers including Lifestyle, Factory Outlet and increasingly a hybrid format which includes a diversified mix of products, goods and services. This fluidity allows WPG to beta test across demographic, socioeconomic and geographic constituencies in order to better provide our guests with the 56M56M56M practical and relevant as well as the frivolous and exciting whether it be Square Feet fashion, food or furniture. Our well regarded national infrastructure, from Hawaii to Connecticut and everywhere in between, allows our tenant and sponsor partners to benefit from corporate operating efficacy and local management who possesses 3 comprehensive knowledge of the specific locale within which they reside. Company Snapshot o National portfolio of Enclosed and Open Air retail venues o Comprised of 104 assets consisting of 56M SF as of DEC 31 2019 o Tier One and Open Air assets account for 93% of total NOI as a result of Noncore assets having been reduced by 21% o Diversified by product, size, geography and tenancy o Increasing mixed use component (lodging, residential, office and medical) component via adaptive reuse o Recognized as innovation leader within industry regarding events, activities and installations o Experienced leadership team incorporating financial, operational and strategic expertise o Readily available corporate resources allow for real time decision making by General Managers and local management o Current corporate credit ratings as follows: Moody’s B1, S&P BB- and Fitch B Assets Total NOI (%) GLAGLAGLA Tier One Enclosed by Region 4Q 2019 by Tenancy Mixed Use Percentage 9% 7% 50%50%50% 9% 27% 36% 26% 40%40%40% 34% 15% 7% 30%30%30% 66% 64% 31% 20%20%20% 3% 10%10%10% 0%0%0% Northeast West Southwest 4 Open Air Tier One Tier Two National Local Regional Anchor >25,000 SF Southeast Midwest Earning Release LGC Quote Excerpt “My colleagues and I have worked hard and smart to differentiate WPG by diversifying tenancy, activating common area and unundertakingdertaking value added adaptive reusereuse. In addition, we have made soundsound financial and strategic decisions as well as demonstratingdemonstrating the ability to access traditional as well as more resourceful capitalcapital. Take for instance our decision during the previous fourfour years to dispose of seventeen assets (not including outparcel sales) which we considered incongruous to our dominant town center objectiveobjective. Regardless of short term dilution, this action has proved more than prudent allowing us to devote our time and money to those assets most able to benefit from focused adaptive reuse. Our progress to date illustrates we’ve made the right choices. Notwithstanding, there continues to exist skepticism as it relates to the necessary capital required to accomplish this adaptive reuse mandate. The reset of the dividend is intended to alleviate any such doubt whatsoeverwhatsoever. As opposed to acting out of weakness, the Board proactively made this decision at our earliest available opportunity. Our fiduciary responsibility is to allocate capital accordinglyaccordingly and this decision to enhance our liquidity was only logical. (Dollars in thousands) Midpoint The adjacent table clearly illustrates this improved free cash of 2020 flow. Several relevant factors should be noted includingincluding $70 Guidance Estimated funds available for distribution (FAD)¹ $177,700 million of tenant allowance and CapCap----ExEx deducted from FAD, Estimated common share and operating partnership unit dividend distribution (111,700) nor does it need any additional credit facility borrowingrowing. In Estimated free cash flow 66,000 addition to the six projects commenced in 2019, we Estimated proceeds from outparcel and other non -income producing sales 50,000 anticipate starting twelve, four and eight department store Estimated cash available for department store adaptive reuse adaptive reuse projects during 2020, 2021 and 20222022, and redevelopment 116,000 respectively. Simple extrapolation illustrates plentyplenty of free Planned spend on department store adaptive reuse (80,000) 5 Estimated net cash surplus $36,000 cash flow during these years to deliver these projectscts.” Estimated FAD payout ratio 63% Earning Release LGC Quote Excerpt “Take a hard look at the adjacent financial metrics and see how we stack Representative Financial Metrics: Unencumbered NOI: Total NOI 56% up against our sector peers. Furthermore, when it comes to leasing Open Air NOI: Total NOI 27% volume and resolving department store vacancy, while it’s difficult to EBITDA: Interest Expense (including share of glean comparable information from some of our peers, I’d take the unconsolidated entities) 2.61x over we are leaders on a relative size basis in both endeavorsendeavors. Combined Tier One and Open Air NOI: Total NOI 93% Occupancy Cost 11.2% One other point, as it relates to Open Air NOI of 27%, when you include nine assets we classify as Tier One but have an open air format (Arbor Hills, The Arboretum, Bowie Town Center, Clay Terrace, Malibu Lumber Yard, Oklahoma City Properties, Scottsdale Quarter, Town Center Plaza & Crossing, and Waterford Lakes Town Center) our open air portfolio increases to 40% of totaltotal NONOIII. During last quarter’s earnings release and conference call, we provided a summary of incremental Net Asset Value (NAV) potential of ~~$2.00$2.00 per share for three redevelopment assetsassets. This analysis assumes we sell fully entitled land parcels to developers of residential, lodging and office product while retail remains the responsibility of WPG. Note, the capital investment required to deliver this fully entitled land parcels is deducted from NAV. In this light, we are pleased to announce the first of the three redevelopments is underway at Clay TerraceTerrace. This redevelopment will be comprised of a ~290 unit multifamily rental project, a ~140 guest room hotel, new office space totaling 200,000 SF and an additional ~70,000 SF of spaspacece intended for lifestyle and food and beverage tenancytenancy. In closing, Washington Prime Group will continue to improve its assets via differentiated tenancy and dynamic activations. Our Company is also increasingly embracing the fact we are an essential participant regarding the logistics, distribution and delivery of goods and services, which speak to an omnichannel perspective. As the dominant town center within our respective tradtradee areas, it is imperative we provide convenience in addition to interestininterestingg ag ala llltttteeeerrrrnnnnaaaattttiiiivvvveeeessss wwwhwhhheeeerrrreeee ooououuurrrr ggguguuueeeessssttttssss 6 can eat, shop, work, play and livelive. With this in mind, my colleagues and I are going to get back to our jobs and continue to grind it out.” 4Q 19 and YE 2019 Highlights Stable Operating Metrics o Tier One sales PSF increased 4.0% YOY to $413 as of December 31, 2019; o New leasing spreads increased 1.6% during the trailing 12 months ended December 31, 2019 for Tier One and Open Air assets; o Tier One occupancy cost improved 60 basis points to sector leading 11.2% as of December 31, 2019; o As of December 31, 2019, combined Tier One and Open Air occupancy decreased 130 basis points YOY to 93.4%93.4% of which 120 basis points was attributable to the bankruptcies of Charlotte Russe, Gymboree, and Payless ShoeSource; o Sequentially from the third quarter,, Open Air comparablecomparable NOI improved by 250 basis poipointsnts to 5.1%, TierTier One comparable NOI improved by 90 basis points to (7.9%)(7.9%), and combined Tier One and Open Air comparable NOI improved by 90 basis points to (4.6%) for the fourth quarter; o Open Air and Tier One represent 27% and 66%, respectively, of total NOI as of December 31, 2019; o YOY 2019 comparable NOI increased 2.1% for Open Air and decreased 8.0% for Tier One, resulting in a combined decrease of 5.25.2%%%%; o The combined decrease in YOY 2019 comparable NOI of $24.5M is primarily attributable to $14.8M of cotenancy and rental income loss from 2019 bankruptcies (Bon-Ton Stores, Sears and Toys R Us) and $6.1M from the bankruptcies of Charlotte Russe, Gymboree, and Payless ShoeSource; and o Excluding the aforementioned cotenancy impact and rentalrental incoincomeme lossloss,, YOY comparable NOI for combined Tier One and Open AAirir would have been (2.2%) and (0.8%) for the fourth quarter and full year 2019, respectively.