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Basch Report
Jax Daily Record Thursday, Jun. 24, 202105:10 AM EST

Analyst: Washington Prime considered mall sales

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As the company works through bankruptcy reorganization, it will continue to operate its properties, which include Orange Park Mall.
by: Mark Basch Contributing Writer

Before filing a petition for Chapter 11 bankruptcy reorganization last week, Washington Prime Group Inc. was considering selling its smaller malls, according to one analyst.

The Orange Park Mall is a core asset in the company’s portfolio of 101 properties, but the Westland Park Plaza on the Westside is one of a group of smaller strip malls that have been considered for sale, said Compass Point analyst Floris van Dijkum.

“We understand from debt investors that WPG is marketing its strip assets, likely to test appetite and provide the bulk of capital required to reduce its $2 billion of unsecured bonds and credit facility,” van Dijkum said in a May 28 research note.

Instead of reaching an agreement to raise cash by selling properties, Washington Prime filed a prearranged Chapter 11 bankruptcy petition June 13 in U.S. Bankruptcy Court for the Southern District of Texas.

The company said it expects to continue operations of its malls as normal as it restructures with the support of its major creditors. But it could sell some or all of its properties to settle its debts.

The restructuring support agreement with its creditors “outlines a path to allow WPG to substantially deleverage its balance sheet either through a conversion of its unsecured notes to equity or an alternative value-maximizing transaction that would repay the Company’s corporate level debt in cash,” Truist Securities analyst Ki Bin Kim said in a research note after the Chapter 11 filing.

In its first quarter report, Washington Prime listed the 952,725-square-foot Orange Park Mall as one of 36 “tier 1” enclosed malls in its portfolio. It also classified nine enclosed malls as “tier 2” and nine others as “non-core.”

Westland Park is one of 47 smaller open-air malls that the company was considering for sale, according to van Dijkum’s report. He estimated its value at $30.9 million.

The 163,259-square-foot mall, with stores including Burlington and Guitar Center, is at 6000 Lake Gray Blvd., northwest of the intersection of Interstate 295 and Blanding Boulevard.

“We would expect several REITs to look closely at WPG’s open air portfolio given the scale and market exposures to Austin, Chicago, and Washington DC,” van Dijkum said.

However, “proceeds of the open air portfolio sale, even at full value, would not be sufficient to pay down WPG’s outstanding $1.4 billion of unsecured bonds and $647 million credit facility,” he said.

Now that the company is in bankruptcy, Washington Prime could pay off its debt by issuing stock to its creditors.

“A full equitization of the Company’s unsecured notes will likely result in a cancelation of existing common and preferred WPG equity,” Kim said.

“Common and preferred shareholders will obtain a right to receive either a certain portion of cash or equity in the reorganized Company,” he said.

If the debt is converted to equity in the Chapter 11 process, Kim speculated that existing stockholders could receive about 79 cents per existing share in cash.

Washington Prime was created as a spinoff of mall operator Simon Property Group Inc. in 2014, with Simon’s strip malls and smaller enclosed malls put into the new company.

Simon’s portfolio of larger properties includes part ownership of The Avenues mall and the St. Johns Town Center in Jacksonville.

Washington Prime’s stock had been falling steadily since 2016 and it enacted a reverse one-for-nine split in December 2020 to raise the trading price.

Washington Prime’s stock was trading near $5 before the bankruptcy filing and it lost half of its value last week after the filing, closing June 18 at $2.51.

Although Washington Prime had an agreement with creditors before it filed for Chapter 11, no documents have been filed in court indicating what its plan might be.

“During the financial restructuring, we will continue to work toward maximizing the value of our assets and our operating infrastructure,” CEO Lou Conforti said in a news release.

Acquired Sales expands business

Jacksonville-based cannabinoid products company Acquired Sales Corp. announced two deals that would significantly expand its business.

Acquired Sales announced an agreement June 16 to buy a California-based THC product company that said it has generated $13 million in revenue so far this year.

It also announced a deal June 21 with a West Palm Beach company to distribute products that it said could generate nearly $20 million in revenue over three years.

Acquired Sales reported revenue of $3.35 million in the first quarter this year.

Acquired Sales moved its headquarters in January from Lake Forest, Illinois, to a home office space in Jacksonville provided by CEO Gerard Jacobs.

Its main business is a Kenosha, Wisconsin, company called Lifted Made, which makes hemp-derived cannabinoid products.

Acquired Sales bought Lifted Made in early 2020 and has said it will change its corporate name to LFTD Partners Inc. to reflect its main operating business.

The company said June 16 it agreed to buy Irvine, California-based Savage Enterprises for $15.84 million in cash and about 8.7 million shares of Acquired Sales stock, making the total value of the deal $44 million.

“We are laser-focused on identifying the best entrepreneurs with fast-growing and profitable cannabis and related companies who are enthusiastic about partnering with us,” said President Jake Jacobs, son of the CEO, in a news release.

The company hopes its distribution agreement with West Palm Beach-based Nepa Wholesale Inc. will help it complete the deal with Savage.

Under that agreement, Nepa will become the exclusive Florida distributor for some Lifted Made products.

“This enormous distribution agreement with Nepa Wholesale should significantly assist Acquired Sales Corp. in completing its upcoming capital raise to finance the cash portion of our exciting planned merger with Savage Enterprises that was announced last week,” Jake Jacobs said in the June 21 release.

The company said it needs to raise $30 million in capital before it can close the Savage deal.

Fuse Science moves to Jacksonville

Acquired Sales is not the only public company to move its headquarters because its top executive lives in Jacksonville.

Fuse Science Inc. said in a Securities and Exchange Commission filing it appointed David Delke as president and it officially moved to Jacksonville after the appointment.

The company made two SEC filings this month related to Delke’s appointment but those were its first filings since 2016.

Its last filing in 2016 listed its headquarters in Massapequa, New York.

The latest filings say Delke runs a customer relationship management software platform that will be part of Fuse Science, and the company intends to change its name to reflect the new business.

The software platform recently changed its name from jumbbble to kustomeroo, according to the filings.

PS27 registers Rhea Fund

Jacksonville-based PS27 Ventures filed an SEC registration statement June 16 for its PS27 Rhea Fund, which was formed to invest in early-stage technology companies.

The company, which has been assisting entrepreneurs since it was formed eight years ago, announced the $20 million fund June 2. 

The SEC filing said it has so far sold $8 million of the $20 million and is accepting investments in the fund at a minimum price of $1 million. 

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