Washington Prime Group: National Footprint with Local Flavor

Transcription

1 November

2 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 2

3 Washington Prime Group: National Footprint with Local Flavor National Footprint with Local Flavor With 106 retail venues throughout the United States, we are as American as apple pie. As a matter of fact, we are also as American as deep dish pizza in Chicago, Hawaiian poke salad, vegan spring rolls in Malibu, El Paso Tex-Mex, Maryland crab cakes, kimchi in Orange County, Memphis barbeque and a Kansas City porterhouse. 106 Town Centers Satisfying Shoppers across Demographic Continuums Catering from the aspirant to the affluent and Middle America to metropolis, WPG assets capture the socioeconomic continuum via one of the nation s largest retail portfolios. In fact, the demographic constituency of WPG is a representative microcosm of the American consumer. Our 57M SF is comprised of Enclosed and Open Air venues 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 practical and relevant as well as the frivolous and exciting whether it be fashion, food or furniture. 57M Square Feet 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 comprehensive knowledge of the specific locale within which they reside. 3 Satisfying consumers across demographic continuums

4 Critical Mass of Dominant Town Centers within Robust Secondary Catchments o Washington Prime Group (NYSE: WPG) was established MAY 2014 following a spinoff from Simon Property Group and subsequent JAN 2015 merger with Glimcher Realty Trust o National portfolio of Enclosed and Open Air retail venues o 106 core assets comprised of 57M SF as of SEP o Diversified by format, size, geography and tenancy o Experienced leadership team incorporating financial, operational and strategic expertise o Focus upon maintaining investment grade status with current corporate credit ratings as follows: Moody s Baa3, S&P BBB- and Fitch BBB- Assets by Region Total Core NOI (%) 3Q % 9% 10% 27% 36% 15% 31% 63% Northeast West Southwest Southeast Midwest Open Air Tier One Tier Two 4 Combining Open Air and Enclosed components results in a hybrid town center format

5 Stability Best Illustrated by Minimal Variance of Historical Operating Metrics From the onset, it was imperative we demonstrated cash flow stability as we rolled up our sleeves and cleaned up our operational and financial acts. Since 2014, we have had ~2.3M SF, or nearly 10% of inline space (excludes Enclosed anchors), succumb to the black cloaked, scythe wielding, grim reaper known as bankruptcy. In spite of this, we ve evidenced minimal variance as it relates to operating metrics. Between 2014 and 2018, comparable occupancy decreased by less than 150 basis points as of SEP , while comparable NOI is forecasted to be flat and tenant allowances have generally decreased for the core portfolio. YE 2014 Occupancy % as of DEC 31 YE 2015 Occupancy % asof DEC 31 YE 2016 Occupancy% as of DEC 31 YE 2017 Occupancy % asof DEC 31 3Q 2018 Occupancy% as of SEP 30 Core Portfolio 94.4% 94.0% 94.5% 93.5% 93.1% Segment FY 14 Comparable NOI ($000) FY 15 Comparable NOI ($000) FY 16 Comparable NOI ($000) FY 17 Comparable NOI ($000) FY 18 Comparable NOI Proforma($000) Projected 4YR Comp NOI Growth Tier One $329,340 $327,175 $337,127 $336, Tier Two $74,216 $70,621 $67,549 $61, Enclosed Total $403,556 $397,796 $404,676 $398, Open Air $116,554 $121,120 $126,823 $132, Core Portfolio $520,110 $518,916 $531,499 $530,937 ~$520,000¹ 0.0% Core Enclosed FY 2015 FY 2016 FY Q 2018 AVG Lease Term (New) Core Enclosed 2015 Comparable ReleasingSpread 12MO DEC Comparable Releasing Spread 12MO DEC Comparable Releasing Spread 12MO DEC Comparable Releasing Spread 12MO SEP 30 AVG Lease Term(Renewal) Tenant Allowance PSF (New) $43.99 $40.61 $37.10 $36.65 Tier One 1.4% -1.1% -0.2% -7.4% Tier Two -4.1% -6.7% -11.1% -23.4% AVG Rent PSF (New) $23.46 $31.00 $31.03 $27.58 (1) YOY difference primarily due to retailer bankruptcies which includes the Bon-Ton Stores liquidation and resulting store closures in AUG 18 Total 0.2% -2.1% -1.9% -9.9% 5 Exhibiting operational stability as we undertake measures necessary to buttress our secondary marketplace leadership

6 Solid Leasing Momentum in 2018 with 3.1M SF of which 63% of new deals was to Lifestyle Tenancy While the following might qualify as master of the obvious, if you want cash flow, lease space. To wit, we have leased 3.1M SF as of SEP (includes anchor and office space as well as leases signed post closing period), an increase of ~6% compared to the same period a year ago, of which 63% of new leasing activity was to lifestyle tenancy including home furnishings. We continue to incent leasing professionals YTD 160 leases qualified as of SEP on top of last year s tally of 220. As of SEP Segment Number of Leases Square Feet (SF) Base Rent PSF Average Term Tenant Allowance ($000s) Tenant Allowance PSF New Renewal Total New Renewal Total New Renewal Total New Renewal New Renewal Core Enclosed , ,143 1,159,828 $27.58 $31.30 $ $13,696 $3,802 $36.65 $4.84 Open Air , , ,959 $17.19 $17.03 $ $5,277 $1,444 $25.57 $5.02 Total Core ,010 1,073,777 1,653,787 $23.87 $27.48 $ $18,973 $5,246 $32.71 $4.89 Segment Base Minimum Rent PSF SEP Base Minimum Rent PSF SEP Core Enclosed $27.43 $28.04 Open Air $13.69 $13.66 Total Core $21.71 $21.75 Note: The supplemental disclosure excerpted above excludes anchor and office space as well as leases signed post closing period for Core Enclosed assets 6 Focus is upon diversifying tenancy while maintaining leasing volume

7 Comparable NOI Growth Relatively Flat During 3Q 18 from Combined Tier One and Open Air assets Combined Tier One and Open Air comparable NOI growth decreased a modest 0.5% during the third quarter demonstrating continued stable performance of these assets which account for 90% of total NOI. Tier One and Tier Two declined 1.4% and 9.5%, respectively, while Open Air increased 1.7%. It is interesting to note absent lost rental income, bad debt expense and co-tenancy impact of Bon-Ton Stores, Toys R Us and Sears, Tier One and Open Air would have actually experienced positive comparable NOI growth this quarter. It s important to address a basic reality. Many of our assets have been neglected for twenty or so years. Nonetheless, we have exhibited cash flow stability for two basic reasons: Our guests continue to shop at Washington Prime Group assets and tenants are able to operate profitably. As we transform assets via such measures as operational enhancement, tenant diversification, common area activation and prudent redevelopment, we will make decisions which serve to strengthen our company over the long haul. If this means flattish e.g. minimally variant cash flow over the short term, then so be it as this strategy will ultimately result in outsized growth. Segment Property Count Leased Occupancy % Store Sales PSF 12 Months Ended Store Occupancy Cost % % oftotal Comp NOI for 3MO Ended Comp NOI Growth for 3MO Ended SEP SEP SEP SEP SEP SEP SEP SEP Tier One % 92.6% $397 $ % 12.3% 63.0% -1.4% Tier Two % 87.1% $287 $ % 13.9% 10.0% -9.5% Total Core Enclosed % 91.3% $376 $ % 12.6% 73.0% -2.6% Open Air % 95.3% % 1.7% Total Core Portfolio % 92.9% % -1.5% 7 Concentrating upon improving Tier One and Open Air assets (~90%) which possess upside potential

8 Diversified Tenancy Increases Traffic and Frequency of Visits Lifestyle tenancy, which includes food, beverage, entertainment, home furnishings, fitness, wellness and services accounted for 63% of our total new leasing square footage through SEP Dining Beverage Grocery Fitness Furniture Beauty Wellness Entertainment 8 Line of demarcation between retail venues blurring as Lifestyle increasingly locating in our dominant town centers which include both Open Air and Enclosed

9 Implementing Incremental Actions prior to Major Capital Spend Diversify Tenancy Redefine General Manager Activate Common Area Embrace Technology Issue Issue Issue Issue Unless four out of ten of us are wearing General Managers are primary interface Dynamism includes bringing exciting There isn t a binary path between junior fashion, the sector needs to for 300M+ annual guests. They should events and activities to assets. WPG physical space and ecommerce. Recall proactively expand categories such as serve as goodwill ambassador acting as also disavows the notion tenant should Maslow s hierarchy of needs social food, beverage, entertainment, fitness, local eyes and ears identifying be confined to four walls which interaction matters unless we're going to home furnishings, etc. regardless of differentiated and relevant goods and demarcate their space. Common area is live in our mother s basement e.g. Will local, national or regional. services for our guests. our quid pro quo when seeking tenants. Ferrell in The Wedding Crashers. Action As of SEP , 63% of new deal SF was attributable to lifestyle tenancy. We have implemented real time incentives for leasing professionals and local management focusing upon deficient categories. Action In addition to recent personnel changes, General Managers are now located front and center to address guest and tenant issues real time e.g. moved from out of the way back office to common area locations. Action Whether for a brand launch, seasonal offering or limited availability product, WPG is collaborating with tenants via trunk shows, product demonstrations, pop up shops, vending machines, etc. as well as digital. Action Tangible, our ecommerce platform, curates internet purveyors on a rotational basis allowing for a treasure hunt experience. We continue to work with Amazon et. al. to arrive at last mile fulfillment solutions. 9 Executing operational measures allows us to better direct major capital spend

10 Goodwill Ambassadors and The Hub a Little Common Sense Goes a Long Way Goodwill Ambassadors Think about it, General Managers serve as the primary interface for our more than 300M annual guests. Hence, they should serve as goodwill ambassadors acting as local eyes and ears by identifying relevant goods and services. As a result, we have increased their revenue generation responsibilities as it relates to procuring local leasing and sponsorship. The Hub We recently installed what we refer to as The Hub. From the overwhelmingly positive responses we ve received, you d have thought we invented the Slurpee. Take a look at our website for examples of this highly sophisticated technological innovation. Wait a minute, it s just a large table with electrical outlets and signage. Bottom line: A little common sense goes a long way. 10 General Managers are the lifeblood of our assets and should be front and center interacting with guests and tenants on a real time basis

11 Embracing innovation provides dynamism within our assets Common area local craft beer installations are WPG formed an association with Cleveland Shelby s Sugar Shops : These sweet shops performing well and we have an additional four Avenue, a venture capital and consulting firm combine bulk candy with local and national either under construction or in planning. These solely focused upon the food and beverage space favorites in creative inline space as well as common area installations offer our guests an and led by the former CEO of one of the world s employing a mobile unit which can be located to adult refuge with comfortable seating, large screen largest restaurant companies. Intent is to beta test hot spots throughout the common area as televisions and interesting food and beverage concepts as we redefine the dining experience. shopper traffic warrants. options. WPG offers self service Amazon Lockers at 50 of Tangible is a concept which curates ecommerce In collaboration with Interscope Records, we are our assets. We are installing digital screens purveyors on a rotational basis providing guests installing Interscope Labs offering guests adjacent to these lockers with electronic with differentiated brands not widely available. We musical venues which feature touring recording couponing and promotional capabilities to drive customer traffic. currently have four Tangible venues open in Columbus, Seattle, Denver and Tampa. artists, customized playlists, continual audio and video as well as related merchandise. 11 Concepts which excite via sensory engagement and provide new product offerings differentiate our assets

12 Mixed use becoming increasingly important to town centers Currently, 34% of our Tier One properties have a mixed use component, which includes nonretail uses such as office, residential, hotel and medical services. Tier One Enclosed Mixed Use Percentage Mixed Use Components 50% 40% 34% 9% 30% 23% 45% 20% 23% 10% 0% Office Residential Hotel Medical 12 Dominant town centers serve as a hub for daily life and commerce especially in secondary catchments

13 Washington Prime Group Providing Relevant Goods and Services TOWN CENTER OF THE FUTURE Shopping Fulfillment and Logistics Town Center as Hub of Daily Life Community Gathering Discovery and Recreation Food and Entertainment 13 Town centers satisfy one stop shopping preference

14 Redeveloping Hybrid Town Centers Redevelopment is our most intriguing value propositions as our development and construction expertise, as well as our robust operating infrastructure, has allowed us to profitably execute upon a hybrid town center mandate of combining open air and enclosed formats. o We have allocated approximately $300M-$350M of capital necessary to redevelop 28 department store spaces situated at Tier One and Open Air properties over a three to five year period; o The costs mentioned above are included in our previously anticipated redevelopment spend of approximately $100M-$125M per annum; o Redevelopment capital allocation excludes spaces owned by non-retailers including Seritage Growth Properties; o WPG has allocated ~90% of redevelopment capital to Open Air and Tier One assets since the beginning of 2016; o Vast majority of redevelopment is tenant driven e.g. signed leases prior to commencement; and o Nearly $0.5 billion of liquidity anticipated by year end, along with free cash flow after the payment of our dividend, allows us to fully commit to our redevelopment pipeline, which we believe represents our best and most strategic use of capital today. Jefferson Valley Mall Yorktown Heights, NY Oklahoma City Collection Oklahoma City, OK Pearlridge Center Aiea, HI Westminster Mall Westminster, CA 14 WPG has the development expertise and capital to deliver hybrid town centers to our guests and tenants

15 WPG Proactive in Addressing Traditional Department Store Decline Resolving department stores provides us with increased visibility and allows us to further our dominant secondary town center mandate. Furthermore, Washington Prime Group has allocated ~$300M-$350M of capital necessary to retrofit the aforementioned 28 spaces over a three to five year period which is included within the Company's previously announced redevelopment spend of ~$100M-$125M per annum. Revenue derived from Sears as of September 30, 2018, equates to a paltry 0.8% of total annualized minimum rent for the total portfolio. The actual impact of a Sears or Bon-Ton Stores closing is a far cry from the Draconian scenario of punditry. Further, these locations were generally unproductive and resulted in detrimentally impacting adjacent space. As previously announced, co-tenancy is expected to negatively impact NOI growth by approximately $1.5M in 2018 and an additional $7M- $8M in 2019, which we believe will prove conservative as replacements address co-tenancy; amendments to current co-tenancy language; and potential for Sears stores to stay open into Our co-tenancy estimates reflect announced closings to date and include the assumption the remaining Sears stores currently open are all closed by DEC MAR 2015 Number of Stores SEP 2018 Number of Stores Going Forward Number of Stores Sears 60 JCPenney 49 Macy s 36 Dillard s 28 Bon-Ton Stores 19 Belk 13 Total 205 Sears 39 JCPenney 37 Macy s 26 Dillard s 22 Bon-Ton Stores 0 Belk 11 Total 135 Sears 0 JCPenney 37 Macy s 26 Dillard s 22 Bon-Ton Stores 0 Belk 11 Total Going Forward store counts excludes closings and announced closings as of NOV as well as assumption that all Sears storesare closed. 15 Over one third of WPG NOI is attributable to assets without a traditional department store anchor

16 Department Store Action Plan Underway As mentioned, WPG has 28 department store boxes in Tier One and Open Air which need to be repositioned. This includes Sears (other than those owned by Seritage) and space formerly occupied by Bon-Ton Stores. Of the 28 locations, we own all but three and we are currently in various stages of active planning and negotiations or commitments to replace or redevelop 24 of these locations. As of SEPT Boxes Tier One and Open Air $300M-$350M Anticipated Capital Spend WPG Department Store Repositioning Snapshot Tier One and Open Air In terms of the capital spend required to address 28 department store boxes in Tier Evaluating Active Committed* Construction Completed One and Open Air, we are estimating our share of additional capital to be $300M $350M over a three to five year investment horizon. 28 Projects in Progress (Tier One and Open Air) *Committed projects have tenant commitments for the majority of the space 16 The demise of certain non differentiated department stores should be regarded as an opportunity to further our dominant town center objective

17 Department Store Repositioning Scorecard Count Property City Former Department Store Owner Closing Date Planned Replacement Status 1 Cottonwood Mall Albuquerque, NM Sears Sears Aug-18 Sears owns box Evaluating Options 2 Grand Central Mall Parkersburg, WV Sears Lease Scheduled close Dec-18 Big box retail Pro-active termination, Active Planning 3 Lindale Mall Cedar Rapids, IA Younkers Lease Aug-18 Retail concepts Active Planning 4 Longview Mall Longview, TX Sears Lease Big Box Retail Pro-active termination, Active Planning Pro-active termination, Replacement 5 Mall at Fairfield Commons Dayton, OH Sears Lease Scheduled close Dec-18 The RoomPlace / Round1 leases executed 6 Mall at Fairfield Commons Dayton, OH Elder-Beerman Lease Aug-18 Retail concepts Active Planning 7 Mall at Johnson City Johnson City, TN Sears Lease Big box retail Active Planning 8 Markland Mall Kokomo, IN Carsons Pirie Scott Lease Aug-18 Retail concepts Active Planning 9 Mesa Mall Grand Junction, CO Sears Lease Scheduled close Nov-18 Mixed use Active Planning 10 Mesa Mall Grand Junction, CO Herberger's Lease Aug-18 Retail concepts Active Planning 11 Morgantown Mall Morgantown, WV Belk Lease Mar-18 Big box retail Active Planning 12 Morgantown Mall Morgantown, WV Sears Lease Scheduled close Nov-18 Evaluating options Evaluating Options 13 Morgantown Mall Morgantown, WV Elder-Beerman Lease Aug-18 Big box retail Active Planning 14 Northtown Mall Blaine, MN Herberger's Lease Aug-18 Entertainment/Big box retail Active Planning 15 Northwoods Mall Peoria, IL Sears Sears Sears owns box Active Planning 16 Orange Park Mall Orange Park, FL Sears Sears Sears owns box Evaluating Options 17 Pearlridge Center Aiea, HI Sears Lease Entertainment / Dining Evaluating Options 18 Polaris Fashion Place Columbus, OH Sears Lease Mixed use Pro-active termination, Active Planning 19 Port Charlotte Town Center Port Charlotte, FL Sears Lease Big box retail Active Planning 20 Southern Hills Mall Sioux City, IA Sears Lease Retail concepts Pro-active termination, Active Planning 21 Southern Hills Mall Sioux City, IA Younkers Lease Aug-18 Retail concepts Active Planning 22 Southern Park Mall Youngstown, OH Sears Lease Jul-18 Big box retail Pro-active termination, Active Planning 23 Southgate Mall Missoula, MT Herberger's Lease Aug-18 Mixed use Active Planning 24 Southgate Mall Missoula, MT Herberger's Men Lease Aug-18 Dining Active Planning 25 Town Center Aurora Aurora, CO Sears Lease Mixed use Pro-active termination, Active Planning 26 Weberstown Mall Stocktown, CA Sears Ground lease Mixed use Active Planning 27 WestShore Plaza Tampa, FL Sears Lease Mixed use Pro-active termination, Active Planning 28 Whitehall Mall Whitehall, PA Sears Lease Big box and small shop retail Active Planning 17 WPG ready to take advantage of adaptive reuse opportunity

18 Sears Resolution Provides Increased Visibility Cottonwood Mall¹ Fairfield Commons² ³ Grand Central Mall² ³ Longview Mall³ Johnson City Mesa Mall² Morgantown Mall² Northwoods Mall Orange Park Mall Pearlridge Center Polaris Fashion Place³ Port Charlotte Southern Hills³ Town Center Aurora³ Weberstown Mall WestShore Plaza³ Whitehall Mall Bowie Town Center Dayton Mall² Edison Mall Great Lakes Mall¹ 11 Irving Mall² Jefferson Valley² Maplewood Mall¹ Paddock Mall² Richardson Square University Town Plaza¹ Westminster Mall¹ West Ridge Mall 1 Anderson Mall¹ Chautauqua Mall Lima Mall¹ Muncie Mall¹ Seminole Town Center¹ 5 Boynton Beach Charlottesville Fashion Indian Mound Mall Rolling Oaks Mall Sunland Park Mall 5 0 3Q 18 Supplemental Tier One and Open Air Identified Redevelopment Third Party Owned (including Seritage) Noncore Assets Tier Two Closed or Scheduled to Close Tier Two Not Yet Announced to Close 1. Space is currently vacant although Sears remains financially obligated as of SEP Sears has announced these locations will close by year end WPG proactively gained control of eight Sears space for future redevelopment; the Sears space at Southern Park Mall is excluded from above as it is currently vacant *Note: Seritage Growth Properties owns 11 anchor boxes in WPG s portfolio, ten of which are included above as they contribute towards operating expense reimbursements 18 WPG ready to take advantage of adaptive reuse opportunity

19 Financial Improvement Evidenced via Extended Maturity Profile and Increase of Unencumbered Assets 8.0 Net Indebtedness: EBITDA¹ 7.9 Debt Service Coverage Ratio² 65.0% High Quality Unencumbered Pool Q 15 3Q ~ Long Term Target 2.0 1Q 15 3Q 18 Long Term Target 55.0% 45.0% 35.0% 25.0% 15.0% 5.0% Debt Maturities as of SEP (carrying amounts, including pro rata share of joint ventures)³ -5.0% Est. Open Air Tier One Enclosed Tier Two Enclosed o Solid debt service coverage with reasonable overall leverage o Ample liquidity to execute business plan $ in millions o 60% of 2018 core NOI from unencumbered assets o Manageable long term debt maturities o Well covered dividend with payout rate of ~80% 4 o Stable free cash flow of $50M to $55M in 2018 o Fixed interest rate on ~90% of total indebtedness 1. Reflects the recent transition of Rushmore Mall to the servicer 2. Debt service includes interest expense plus principal amortization. 3. Excludes mortgage debt for Noncore properties 4. Represents the delta between FFO, as adjusted, and annual distributions of $1.00 per share on the Company s common shares and OP units 19 WPG has exhibited prudent financial decision making with positive long term implications

20 Financial Strengthening Allows for Strategic and Operational Execution Added over $25M of NOI to the unencumbered pool which now comprises ~60% of total NOI from the end of 2016; We only have $50M of secured indebtedness maturing through year end of 2019 and no unsecured maturities until 2020; As of SEP , we have $430M of available liquidity between LOC availability and cash on hand; and With an additional $40M of proceeds from the remaining Four Corners transactions, we will have nearly $0.5B of liquidity at year end between LOC availability and cash on-hand. Specific progress made during the past 18 months: o Formed the second O Connor joint venture in May 2017; o Issued $750M of 7YR unsecured senior notes in AUG 2017; o Disposed of six Noncore assets including Valle Vista and Colonial Park during 4Q 2017; o Identified three additional noncore assets in 2018, and transitioned one to special servicer with two probable transitions within the first half of 2019; o Upon aforementioned transitions, Net Indebtedness: EBITDA of ~6.5 times; o Executed discounted loan payoff of Southern Hills and Mesa Mall mortgage loans during 2017; o Unencumbered WestShore Plaza (OCT 2017) and The Outlet Collection Seattle (JAN 2018), both of which are Tier One Enclosed properties; and o Closed JAN 2018 on restated facility and related term loan and recast over $1B with no change in current pricing extending term through YE WPG has sound capital structure and ample liquidity to execute upon our business plan

21 Strategic Actions The following are representative of strategic actions accomplished during the first nine months of 2018: o Completed the sale of three tranches of restaurant outparcels to FCPT Acquisitions, LLC ("Four Corners") pursuant to the purchase and sale agreement executed in SEPT 2017 between WPG and Four Corners. The first tranche, which was completed during 1Q 2018, consisted of 10 outparcels, with an allocated purchase price of ~$13.7M. A portion of the net proceeds of ~$13.5M was used to partially fund the acquisition of four Sears parcels, as discussed below, and for general corporate purposes. Additionally, on JUNE , we completed the sale of the second tranche, which consisted of five outparcels, for an allocated purchase price of ~$9.5M. We expect to close on the majority of the remaining outparcel sales of ~$44.1M during 4Q 2018, subject to due diligence and closing conditions; o Completed the acquisition of four Sears department stores and adjacent Sears Auto Centers for $28.5M through a sale-leaseback of which all are slated for future redevelopment. The Sears properties are located at the following Tier One properties: Longview Mall, located in Longview, TX; Polaris Fashion Place, located in Columbus, OH; Southern Hills Mall, located in Sioux City, IA; and Town Center at Aurora, located in Aurora, CO. The purchase was funded by a combination of $13.4M from our credit facility, $9.7M in proceeds from the restaurant outparcel sale, and $5.4M from our joint venture partner O'Connor; o Proactively gained control of four additional Sears department store spaces located at Tier One properties for future redevelopment efforts; o Completed the purchase of Southgate Mall, located in Missoula, MT, for $58.0M in conjunction with a planned reverse Section 1031 exchange utilizing the proceeds from the Four Corners transaction. Southgate Mall, a Tier One asset, is a dominant hybrid town center which features specialty grocer Lucky's Market and a ninescreen dine-in AMC theatre. Its diverse tenancy mix exemplifies our dominant secondary market focus as the asset captures a catchment of over 130 miles and is within close proximity to the University of Montana; and o Completed the transition of Rushmore Mall back to its lender affiliate in exchange for a complete satisfaction of the $94.0M non-recourse mortgage loan, and began the process to transition two additional Noncore properties in early Above transactions reflect emphasis upon improving asset quality

22 Tier One and Open Air Focus o Tier One and Open Air assets exhibited relatively steady operating metrics in 2017 and the nine months ended SEP o Tier Two represented closer to 25% of comparable NOI just two years ago. Tier Two now represents ~10% of core comparable NOI with an indebtedness yield of 11.9%. Contrary to popular belief, these assets make money. o We have sold to third parties or gave back to lenders 14 assets during the previous 36 months and have two additional assets currently classified as Noncore. o As previously emphasized, there is intrinsic volatility within the Tier Two portfolio. Accordingly, these assets are subject to a much higher risk adjusted ROIC threshold before we would even consider allocating a marginal unit. 3Q 2018 Core Portfolio Comparable NOI by Segmentation Tier Two Encumbered Assets as of SEP Fat Part of the Bell Curve Location Mortgage Balance (000s) Indebtedness Yield² Anderson Mall Anderson, SC $18,034 - Charlottesville Fashion Square Charlottesville, VA $46,332 - Lincolnwood Town Center Lincolnwood, IL $48,919 - Muncie Mall Muncie, IN $34,116 - Oak Court Mall Memphis, TN $37,178 - Opportunistic Assets 10% 90% Seminole Town Center Orlando, FL $12,055¹ - Total $196, % Tier Two Unencumbered Encumbered Tier One and Open Air* 1. Represents WPG s pro rata share of indebtedness 2. Tier One and Open Air encumbered assets have a indebtedness yield of 12.2% and 19.2% respectively, based on on pro forma NOI for WPG employs normal distribution approach to rank order assets via multivariate factor model ultimately determining capital spend

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